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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED
For the fiscal year ended August 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
Commission file number 0-17051
TUSCARORA INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1119372
(State or other jurisdiction of (IRS employer
incorporation or organization) Identification No.)
800 Fifth Avenue
New Brighton, Pennsylvania 15066
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-843-8200
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been subject to
such filing requirements for at least the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The registrant estimates that as of October 25, 1996, the
aggregate market value of the shares of its Common Stock held by non-affiliates
of the registrant was approximately $101,796,900.
As of October 25, 1996, 6,285,817 shares of Common Stock of
the registrant were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's Annual Report to Shareholders
for its fiscal year ended August 31, 1996 are incorporated by reference into
Parts I and II of this annual report.
Portions of the Proxy Statement for the registrant's Annual
Meeting of Shareholders to be held on December 18, 1996 are incorporated by
reference into Part III of this annual report.
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PART I
ITEM 1. BUSINESS.
Tuscarora Incorporated (the "Company") was incorporated in 1962 as
Tuscarora Plastics, Inc. The corporate name was changed in 1992 to reflect
changes in the Company's business.
The Company custom designs and manufactures interior protective
packaging and material handling solutions for a broad range of manufactured
products. The Company also supplies customers with components for industrial
and consumer product applications. In each of the Company's markets, the focus
is on engineering practical, cost effective solutions to meet each customer's
specific end-use requirements.
A variety of materials are used in the manufacture of the Company's
products. The Company is the largest manufacturer of custom molded products
made from expanded foam plastic materials in the United States, and as a result
of an acquisition in October 1996, has become the largest manufacturer of such
products in the United Kingdom (see "Business Acquisitions" below). The Company
also manufactures products using materials, including corrugated paperboard,
molded and/or die-cut foam plastic shapes, thermoformed plastic shapes and
wood, either alone or in various combinations. The range of material options
offered enables the Company to be competitive vis-a-vis companies which offer
only a single material capability.
For the 1996, 1995 and 1994 fiscal years, the interior protective
packaging and material handling products contributed approximately 86%, 88% and
87%, respectively, of the Company's net sales. The remainder has been accounted
for by the components.
The Company's major markets are the high technology, consumer
electronics, major appliance and automotive industries, but the Company
competes in many other market segments as well. For the 1996, 1995 and 1994
fiscal years, the four major markets combined accounted for approximately 65%,
63% and 60%, respectively, of the Company's net sales.
The Company serves more than 2,500 customers located in the United
States, Mexico, Canada and the United Kingdom from over 30 manufacturing
locations. For the 1996 fiscal year, no customer accounted for 10% or more, and
the Company's ten largest customers accounted for 32.7%, of the Company's net
sales.
The Company has four manufacturing locations in the United Kingdom and
one in Mexico. All the other manufacturing facilities are located in the United
States. All these are east of the Mississippi River except for facilities in
Colorado and New Mexico.
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INTERIOR PROTECTIVE PACKAGING AND MATERIAL HANDLING PRODUCTS
The interior protective packaging products are used to protect a wide
range of finished consumer and industrial goods during shipment. The products
are designed to reduce or eliminate damage that may occur during shipment and
handling as a result of shock, vibration or wide temperature fluctuations. Goods
packaged in the Company's protective packaging include such items as:
Computers and computer peripherals Water heaters and air conditioners
Televisions and VCRs Refrigerators
Satellite dishes Microwave ovens
Office equipment Coffee makers and other kitchen
Vaccine containers appliances
Liquid chemicals Toys
Pharmaceuticals Outboard motors
Military equipment Office furniture
These goods, together with the Company's interior protective packaging, are
generally placed inside exterior shipping containers prior to shipment.
The material handling products generally serve the same purposes and
functions as the packaging products but are used primarily in intra-plant and
inter-plant movement of parts and components rather than shipment of finished
goods. For example, automobile manufacturers and their suppliers transport
parts to assembly plants using foam dunnage trays made by the Company. Material
handling products also frequently serve as carriers to position parts for
automated assembly. The Company also manufactures insulated shippers which
transport temperature-sensitive materials for the chemical and pharmaceutical
industries. The material handling products are generally more durable than the
interior protective packaging products and are usually reusable, providing a
cost-effective means of transporting materials that are sensitive or difficult
to handle.
The interior protective packaging products are foam plastic shapes
manufactured at the Company's custom molding facilities or products
manufactured at the Company's integrated materials facilities. Most of the
material handling products are also foam plastic shapes manufactured at the
Company's custom molding facilities; however, in addition certain material
handling products, such as durable returnable material handling pallets and
trays, are made from rigid plastic materials and are manufactured at the
Company's rigid plastic facilities.
The packaging and material handling products manufactured at the
Company's custom molding facilities possess an unusual combination of useful
properties such as exceptional lightness, impact resistance and shock
absorbency, toughness and strength, thermal insulating efficiency, temperature
tolerance, buoyancy and chemical biological neutrality. The cost of the
products to the customer is often less than alternative types of
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materials because, pound for pound, less material is required to provide equal
or better protection. These products can also be easily and quickly handled
thus reducing the customer's labor costs. Because foam plastic packaging shapes
frequently require less space and are lighter than most other packaging
materials, the customer is often able to reduce its product shipping costs.
Similarly, properly designed foam plastic material handling devices often
increase total yield per transportation container, thus reducing intra-plant or
inter-plant freight cost.
The Company's integrated material facilities often combine foam
plastics with other materials such as corrugated paperboard to produce
protective packaging products with properties superior to those provided by a
single material.
For the 1996, 1995 and 1994 fiscal years, sales of products
manufactured by the Company's integrated materials facilities accounted for
approximately 21%, 19% and 13%, respectively, of the Company's net sales,
reflecting growth in the integrated materials business.
COMPONENTS
The Company manufactures foam plastic shapes which are used as
components in automobiles, watercraft and recreational vehicles. Due to their
light weight and high energy-absorbing properties, molded foam shapes are used
as bumper cores and are positioned in door panels, steering wheels and
dashboards to provide added passenger protection. Flotation and/or seating
assemblies are made for the watercraft and recreational vehicles.
The Company manufactures thermal insulation components which are foam
plastic shapes used by the appliance industries to provide insulation in
products such as home and commercial refrigerators, freezers, air conditioners
and water coolers. The construction industry also uses these shapes as
insulation in poured concrete or block walls, in prefabricated metal buildings
and as core material for factory-manufactured steel exterior doors.
In the high tech area, during the 1996 fiscal year the Company
obtained a license for E-PAC, a design-for-assembly technology, utilizing foam
plastic shapes, developed by Hewlett Packard in Germany. E-PAC is a concept for
the internal assembly of electronic components that enables electronic device
manufacturers to reduce both material cost and assembly time by bundling
delicate electronic componentry into a lightweight, protective carrier that is
placed inside an exterior housing.
The Company makes components such as garage door panels and motor
vehicle trim from rigid plastic materials.
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CUSTOM DESIGN
All the Company's products are custom designed. The Company has six
design and testing centers which support the Company's custom molding and
integrated materials operations in the United States and Mexico and are
strategically located throughout the United States. A separate design and
testing center supports the Company's rigid plastics operations; and a separate
design and testing center supports the manufacturing operations in the United
Kingdom. The centers are staffed by design and engineering personnel who study
and evaluate the requirements of the Company's customers. Four of the centers
are certified International Safe Transit Association (ISTA) testing
laboratories. The Company's customers make extensive use of the design and
testing centers.
With respect to the custom molding operations, prototype foam shapes
are developed at the design and testing centers. After a shape is approved by
the customer, one or more aluminum production molds are made and then shipped
to a custom molding facility, generally the one nearest the customer, for
production. The Company makes most of the production molds for its
manufacturing operations in the United States and Mexico at a single mold
making facility in the United States. In the United Kingdom, the building of
the production molds is outsourced to a third party.
The design and technical centers and mold making facility are equipped
with computer-aided design (CAD) and computer-aided manufacturing (CAM)
systems.
Sales offices are located at each of the design and testing centers.
MANUFACTURING
The Company has 22 custom molding facilities and seven integrated
materials facilities and manufactures rigid plastic products at three
locations. The facilities are generally strategically situated near
manufacturing facilities of the Company's customers. The location of all the
Company's manufacturing facilities, as well as the design and testing centers
and related sales offices and the mold making facility, is set forth under Item
2 of this annual report.
Custom molded foam plastic products are produced by causing plastic
beads to be blown into an aluminum production mold inserted in an automatic
molding machine. Time and pressure controlled heat (in the form of steam) is
applied to the beads in the mold, causing the beads to further expand, soften
and fuse together to form the shape of the product which is then stabilized
before removal from the molding machine. Significant capital expenditures for
molding machines and other process equipment are required to manufacture custom
molded products. Process equipment includes air compressors, steam boilers,
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cooling towers, conveyors, drying equipment and a wide variety of other standard
industrial machinery items. The major items of expense in the manufacture of the
custom molded products are the plastic resins from which the products are made,
labor and the utilities needed to operate the process equipment.
The manufacture of the integrated materials products and rigid plastic
products is less capital intensive. In the integrated materials operations, the
machinery and equipment consists primarily of machining and fabricating
equipment for forming foam plastic and corrugated paperboard products.
Fabrication of foam plastic involves the cutting of shapes from billets or
planks of foam plastic using specialized cutting tools and hot wire equipment.
Fabrication of corrugated paperboard involves slitting, die-cutting, folding
and gluing the paperboard.
The rigid plastic products are made primarily by thermoforming which
is the process of taking a rigid sheet of hard thermoplastic such as ABS or
high density polyethylene, heating it and then vacuum and/or pressure forming
it around a mold.
Molded foam plastic shapes and thermoformed shapes used in the
integrated materials products are shipped from the facility where these shapes
are made to the appropriate integrated materials facility for integration with
other materials.
The major items of expense in the manufacture of the integrated
materials products and rigid plastic products are the materials from which the
products are made and labor.
The location of the Company's manufacturing facilities ensures timely
delivery of products to customers and enables the Company to provide products
at a lower shipping cost than more distant competitors. Significant production
flexibility exists among the Company's facilities since molds and/or molding
machines and other manufacturing equipment can be moved quickly from one
facility to another to facilitate production and assure supply to customers.
All the Company's manufacturing facilities have warehousing capacity
for inventories of finished goods. This enables the Company to respond quickly
to the delivery needs of customers. Distribution of products is made from the
Company's manufacturing facilities and warehouses to customers by Company
operated tractor-trailers and by common carrier. Most of the Company operated
tractor-trailers are leased.
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SALES
Sales are made primarily by the Company's own sales force which,
including supporting technical personnel at the Company's design and testing
centers, consists of approximately 76 salaried employees. Sales in certain
geographic areas are handled by sales representatives paid on a commission
basis who are assisted and supported by Company personnel.
In general, the Company receives blanket purchase orders from its
customers which do not specify release quantities and delivery dates. Actual
shipments against these orders are determined by the customers' production
schedules with the result that the products are generally required to be
delivered on short notice. Accordingly, production and inventory levels are
generally determined by customer release patterns rather than the backlog of
purchase orders.
FOREIGN OPERATIONS
The Company commenced doing business in the United Kingdom during the
1995 fiscal year as a result of its acquisition of a custom molding business in
Northampton, England and Glasgow, Scotland (see "Business Acquisitions" below).
This business was expanded during the 1996 fiscal year as the Company
established an additional custom molding facility in Spennymoor, England (see
"New Site Development" below). In October 1996, the Company acquired another
custom molding business in Livingston, Scotland (see "Business Acquisitions"
below).
The Company's manufacturing facility in Mexico is located in Juarez.
This facility and a facility in New Mexico enable the Company to serve domestic
customers that have opened "Maquiladora" operations across the U.S. Mexican
border. Maquiladora programs enable domestic companies to ship component parts
in bond into Mexico, assemble them and then ship them back in bond to the
United States. To a limited extent, the facilities in Juarez also serve
customers manufacturing and selling their products in Mexico.
The Company's operations in the United Kingdom and Mexico are
conducted through subsidiaries. The Company has no other subsidiaries which
play an important role in the Company's business.
RAW MATERIALS
The materials from which the Company's custom molded products are made
are expandable polystyrene ("EPS"), expanded polypropylene ("EPP"), expanded
polyethylene ("EPE"), ARCEL(TM) and high heat-resistant styrene-based resins.
All the resins are petroleum based. EPP and EPE are polyolefin resins and
ARCEL(TM) is a co-polymer of polyethylene and polystyrene.
EPS is received by the Company in an unexpanded state and in its raw
form has an appearance much like table salt. ARCEL(TM) and the high
heat-resistant resins are also received by the Company in an unexpanded state.
Under conditions of time and pressure controlled heat, the raw material beads
can be expanded to many times their original size with no increase in weight.
The Company expands the beads to various densities depending upon the
properties desired and stores the expanded beads until the final products are
molded. In contrast, the EPP and EPE beads
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are already expanded when received by the Company and do not require further
expansion before molding.
Most of the Company's custom molded products are made from EPS. The
other resins are particularly suitable for certain applications and are
significantly more expensive. Accordingly, the products made from the other
resins sell at higher prices than the products made from EPS. During the 1996,
1995 and 1994 fiscal years, approximately 22%, 20% and 22%, respectively, of
the Company's net sales of custom molded products were attributable to products
made from the premium resins.
The Company has never experienced a shortage of the resins used in the
manufacture of the custom molded products and does not foresee that any
shortage will occur. EPS, EPP and EPE are generally available from a number of
suppliers who will sell to any prospective purchaser. The high heat-resistant
resins and ARCEL(TM) are each sold by a single supplier but are also generally
available.
The materials used in the manufacture of the integrated materials
products (including corrugated paperboard and foam billets and planks) and
rigid plastic products are also readily available.
COMPETITION
The Company's interior protective packaging and material handling
products compete with similar products made by others as well as with other
types of protective products. A majority of the similar products is produced by
independent manufacturers who generally market their products in a particular
geographic area from a single or limited number of facilities. While the
Company is considerably larger than most of the manufacturers of similar
products, the Company's penetration in the total interior protective packaging
market is still relatively small. A number of the companies which produce
competing products, particularly paper and corrugated packaging products, are
well established and have substantially greater financial resources than the
Company.
The components manufactured by the Company for thermal insulation
represent a small portion of the overall market for insulation products.
Because of the specialized nature of this market, the Company competes
primarily with other manufacturers of similar foam plastic products, rather
than with manufacturers of alternate insulation products. With the exception of
E-PAC which is licensed technology, the other components manufactured by the
Company can be provided by other vendors using similar or alternative
materials.
Competition between the Company and manufacturers of similar products
is based primarily on product engineering, price and customer service.
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CAPITAL EXPENDITURES
Capital Expenditures for property, plant and equipment during the
1996, 1995 and 1994 fiscal years (not including expenditures in connection with
business acquisitions) amounted to $23,129,000, $20,689,000 and $12,433,000,
respectively.
Capital expenditures for land, buildings and improvements during the
1996, 1995 and 1994 fiscal years (not including expenditures in connection with
business acquisitions) amounted to $5,029,000, $3,841,000 and $3,265,000,
respectively. The 1996 fiscal year expenditures included $615,000 to purchase
the Company's custom molding facility in Tupelo, Mississippi, which was
formerly leased, and $1,019,000 in connection with the establishment of new
custom molding facilities in Spennymoor, England and Storm Lake, Iowa (see "New
Site Development" below).
Capital expenditures for machinery and equipment during the 1996, 1995
and 1994 fiscal years (not including expenditures in connection with business
acquisitions) amounted to $18,100,000, $16,848,000 and $9,479,000,
respectively. During the 1996 fiscal year, $8,512,000 of these expenditures
was for automatic molding machines, $6,350,000 for other process equipment used
in the manufacture of custom molded products, $1,452,000 for machinery and
equipment used to manufacture the Company's integrated materials and rigid
plastic products and $848,000 for environmental control equipment (see
"Environmental Considerations" below).
BUSINESS ACQUISITIONS
In December 1995, the Company purchased all the outstanding capital
stock of Alpine Packaging, Inc., a custom designer and manufacturer of
specialty corrugated and technical/military specification packaging and wood
pallets with a facility in Colorado Springs, Colorado. The Company issued
51,177 shares of its Common Stock and paid cash having an aggregate value of
approximately $1,300,000 at the closing.
During the 1995 fiscal year, the Company made two business
acquisitions. In February 1995, the Company purchased the custom molding
business of M.Y. Trondex Ltd. with facilities in Northampton, England and
Glasgow, Scotland; and in September 1994, the Company purchased the specialty
corrugated and foam packaging business of Astrofoam, Inc. with a facility in
Holden, Massachusetts. An aggregate of approximately $5,100,000 was paid at the
closings of these acquisitions.
Two business acquisitions were also made during the 1994 fiscal year.
In April 1994, the Company purchased the custom molding and fabricating
business of Styro-Molders Corporation with a facility in Colorado Springs,
Colorado; and in September 1993 the Company purchased the corrugated packaging
business of Box Pack Incorporated with a facility in Greeneville,
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Tennessee. An aggregate of approximately $2,900,000 was paid at the closings of
these acquisitions.
Approximately 38% of the increase in net sales during the 1996 fiscal
year was attributable to the M.Y. Trondex Ltd. and Alpine Packaging, Inc.
acquisitions in February 1995 and December 1995, respectively. For purposes of
this calculation, the net sales from the business acquired in the M.Y. Trondex
Ltd. acquisition during the first five months of the 1996 fiscal year were
included.
In its business acquisitions, the Company generally agrees to pay
additional consideration to the seller based on the sales realized by, or the
operating performance of, the business acquired over a specified period after
the acquisition. The aggregate amount of such additional consideration paid in
cash and shares of the Company's Common Stock and recorded as additional
purchase price or charged against selling and administrative expense during the
1996 fiscal year amounted to $1,238,000, of which $1,033,000 was recorded as
additional purchase price.
Two business acquisitions have also occurred since the end of the 1996
fiscal year. In September 1996, the Company purchased the custom thermoforming
business of FormPac Corporation with a facility in Sandusky, Ohio, and in
October 1996 the Company purchased all the outstanding capital stock of EPS
(Moulders) Ltd., a company with a custom molding facility in Livingston,
Scotland. As a result of the acquisition of EPS (Moulders) Ltd., the Company
has become the largest manufacturer of custom molded products made from
expanded foam plastic materials in the United Kingdom.
For further information with respect to the above acquisitions, see
Notes 8 and 11 of the Notes to Consolidated Financial Statements included in
the Company's Annual Report to Shareholders for the 1996 fiscal year. Such
Notes 8 and 11 are incorporated in this Item by reference.
The Company will continue to look for acquisitions which mesh well
with the Company's business.
NEW SITE DEVELOPMENT
The Company also acquires new manufacturing facilities through new
site development. During the 1996 fiscal year, the Company completely renovated
a leased property in Spennymoor, England and established a new custom molding
facility where production commenced in June 1996. A new custom molding facility
is also being constructed at Storm Lake, Iowa where production is expected to
commence by the end of 1996. In addition, in August 1996 the Company announced
plans to build a new custom molding facility in Brenham, Texas which it expects
will become operational in the spring of 1997.
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The Company will continue to develop new production sites to meet the
needs of its customers.
SEASONALITY
The Company's net sales and net income are subject to some seasonal
variation. The Company's business generally declines in December due to a
reduction in manufacturing activity by its customers, and this usually
adversely affects the Company's net sales and net income during the second
quarter of the fiscal year. Net income in the second fiscal quarter is also
adversely affected by higher operating costs during the winter months. See Note
12 of the Notes to Consolidated Financial Statements included in the Company's
Annual Report to Shareholders for the 1996 fiscal year. Said Note 12 is
incorporated in this item by reference.
EMPLOYEES
As of August 31, 1996, the Company had 1,668 employees, of which 1,593
were full time employees and 1,294 were paid on an hourly basis. Of the hourly
employees, 241 at six manufacturing facilities are covered by collective
bargaining agreements with six different unions. The agreements expire at
various dates from March 1998 through August 1999. The Company considers its
labor relations to be good and has never suffered a work stoppage as a result
of a labor conflict.
ENVIRONMENTAL CONSIDERATIONS
The Company has obtained air quality permits for all its custom
molding facilities except its facilities in the United Kingdom where air
quality permits are not required. Certain of the permits restrict the amount of
pentane (a blowing agent contained in the Company's foam plastic resins) which
may be released during the manufacturing process and have resulted in capital
expenditures for batch pre-expanders which allow the Company to use low pentane
content EPS. Air quality permits have not been required in connection with the
manufacture of the Company's integrated materials and rigid plastics products.
Where required, water permits have been obtained for all process related waste
water and storm water discharges.
The Company has acquired recycling equipment for all its custom
molding and integrated materials facilities. The equipment includes (i)
regrinders which enable the Company to reuse in-house scrap and products
returned by customers, (ii) EPS densifiers which enable the Company to compact
in-house scrap and products returned by customers for reprocessing in the
polystyrene recylcing market and (iii) balers which enable the Company to
compact in-house corrugated paperboard scrap for reprocessing. In-house scrap
resulting from the manufacture of rigid plastic products is returned to the raw
material suppliers of these materials for recycling.
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The Company's foam plastic products may also be safely landfilled or
incinerated. The Company's integrated materials products may be recycled,
safely landfilled or incinerated and the rigid plastic products may also be
recycled.
During the 1996, 1995 and 1994 fiscal years, the Company's capital
expenditures for environmental matters, including batch pre-expanders and
recycling equipment, amounted to $848,000, $1,742,000 and $1,064,000,
respectively. Capital expenditures for environmental matters during the 1997
fiscal year are expected to amount to approximately $1,000,000.
In September 1994, the Company commenced a program under which
environmental compliance audits will be conducted at all the Company's
manufacturing facilities in the United States. At the end of the 1996 fiscal
year, 10 audits had been completed. The audits have been conducted by an
independent environmental consulting firm and have not resulted in plans for
any significant additional expenditures for environmental matters.
There has been public concern that using chloro-fluoro-carbons
("CFCs") in the manufacture of plastic products may deplete the Earth's upper
atmospheric ozone layer. The Company does not use, nor has it ever used, CFCs
in the manufacture of any of its products.
[This space intentionally left blank.]
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ITEM 2. PROPERTIES.
The Company's headquarters are located at 800 Fifth Avenue, New
Brighton, Pennsylvania 15066.
The Company has custom molding facilities at the following locations:
Colorado Springs, Colorado New Brighton, Pennsylvania
Putnam, Connecticut Greeneville, Tennessee
Conyers, Georgia Lewisburg, Tennessee
Streator, Illinois (two facilities)
Martinsville, Indiana Sterling, Virginia
Chesaning, Michigan Pardeeville, Wisconsin
Tupelo, Mississippi Juarez, Mexico
Las Cruces, New Mexico Northampton, England
Cortland, New York Spennymoor, England
Butner, North Carolina Glasgow, Scotland
Marion, Ohio Livingston, Scotland
The Company purchased the custom molding facility in Tupelo,
Mississippi which was previously leased in November 1995, completed the
construction of the custom molding facility in Spennymoor, England in June 1996
(see "New Site Development" under Item 1) and acquired the custom molding
facility in Livingston, Scotland in a business acquisition in October 1996 (see
"Business Acquisitions" under Item 1). See also "New Site Development" under
Item 1 for information with respect to additional custom molding facilities
under construction and to be constructed.
The Company manufactures products from EPS at all its custom molding
facilities except one of the facilities in Lewisburg, Tennessee which is a
dedicated polyolefins plant. Products are also made from one or more of the
Company's premium raw material resins at a majority of the custom molding
facilities.
The Company has integrated materials facilities at the following
locations:
Colorado Springs, Colorado Beaver, Pennsylvania
Conyers, Georgia Greeneville, Tennessee
Holden, Massachusetts Burlington, Wisconsin
Saginaw, Michigan
The integrated materials facilities in Colorado Springs, Colorado,
Conyers, Georgia and Greeneville, Tennessee are at different sites from the
custom molding facilities at these locations. Some integrated materials
operations are also conducted at the Company's custom molding facilities in
Tupelo,
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Mississippi, Butner, North Carolina, Juarez, Mexico and Northampton, England.
The Company acquired the integrated materials facility in Colorado
Springs, Colorado in a business acquisition in December 1995 (see "Business
Acquisitions" under Item 1). After this acquisition, the Company transferred
its integrated materials operations at its custom molding plant in Colorado
Springs to the new integrated materials facility.
The Company acquired a custom thermoforming facility in Sandusky, Ohio
in a business acquisition in September 1996 (see "Business Acquisitions" under
Item 1). After this acquisition, the Company transferred its rigid plastic
operations in Beaver, Pennsylvania to the new thermoforming facility in
Sandusky, Ohio and to the Company's other existing facilities where rigid
plastic products are manufactured in Conyers, Georgia and Burlington,
Wisconsin. In Conyers, Georgia and Burlington, Wisconsin, the rigid plastic
products are manufactured at the same sites where integrated materials products
are manufactured.
The Company's mold making facility is in Sun Prairie, Wisconsin. This
facility is considered a manufacturing facility because most of the aluminum
production molds that are made by the Company at this facility are sold to and
owned by the Company's customers.
All the custom molding facilities in the United States are owned by
the Company except the facility in Colorado Springs, Colorado and the EPS
facility in Lewisburg, Tennessee. The Company has options to purchase these
facilities. All the Company's other manufacturing facilities are leased
(except for the custom molding facility in Livingston, Scotland and the
integrated materials facility in Saginaw, Michigan), but the Company also has
options to purchase many of these leased facilities. The Company generally
makes substantial leasehold improvements to, and exercises its options to
purchase, the leased facilities. The leases for the manufacturing facilities
expire at various dates from June 1997 through November 2006. In many cases,
the leases may be extended at the Company's option.
The Company's custom molding and integrated materials operations are
supported by design and testing centers located at the Company's headquarters
in New Brighton, Pennsylvania, at the custom molding facility in Colorado
Springs, Colorado, at the manufacturing facilities in Holden, Massachusetts,
Burlington, Wisconsin and Northampton, England and at separate facilities in
Conyers, Georgia and Holly, Michigan. The Company's rigid plastic operations
are supported by a design and testing center at the new custom thermoforming
facility in Sandusky, Ohio. Sales offices are located at each of the design and
testing centers.
The Company has warehouse facilities at each manufacturing location as
well as in other locations. The
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Company continues to own properties in Essex, Connecticut, Louisville, Kentucky,
Baltimore, Maryland and Durham, North Carolina where former manufacturing
operations have been discontinued. All but one of these properties is leased to
a third party.
The Company believes that its facilities are generally well suited for
their respective uses and that they are generally adequately sized and designed
to provide the operating efficiencies necessary for the Company to be
competitive. The Company continually expands and modernizes its existing
facilities and establishes new facilities as necessary to meet the demand for
its products.
Information with respect to the machinery and equipment used in the
Company's manufacturing operations and with respect to the Company's
transportation equipment provided in Item 1 of this annual report is also
incorporated by reference in this Item 2.
ITEM 3. LEGAL PROCEEDINGS.
In June 1995, a Complaint was filed against the Company in Edwina
Wilhoit v. Tuscarora, Inc., a civil action in the United States District Court
for the Eastern District of Tennessee in Greeneville, Tennessee. The plaintiff,
an employee at one of the Company's manufacturing facilities in Greeneville,
Tennessee, alleged sexual harassment and assault by the Company's former plant
manager in violation of Title VII of the 1964 Federal Civil Rights Act, as
amended, the Tennessee Human Rights Act and Tennessee common law; and alleged a
past pattern of sexual assault by the former plant manager. Substantial
compensatory and punitive damages were sought. This matter, which was first
reported in the annual report on Form 10-K for the 1995 fiscal year, was
settled in July 1996 under a confidential agreement between the plaintiff and
the Company.
In October 1995, a Complaint was filed against the Company in L. Marie
Roberts v. Tuscarora Incorporated, et al., a civil action in the State Court of
Rockdale County, Georgia. The plaintiff, a former employee at one of the
Company's manufacturing facilities in Conyers, Georgia, alleged sexual
harassment by the plaintiff's supervisor and the Company's plant manager,
respectively, and sexual assault by the plaintiff's supervisor. The plaintiff
alleged various causes of action under Georgia law and seeks an unspecified
amount of compensatory and punitive damages. After investigation, the Company
terminated the employment of the supervisor but determined that the plant
manager was not at fault. On the basis that the plaintiff alleged a cause of
action under Title VII of the 1964 Federal Civil Rights Act, as amended, the
Company removed the action to the United States District Court for the Northern
District of Georgia, Atlanta Division. In October 1996, a Motion for Summary
Judgment filed by the Company was granted and the action in the United States
District Court was dismissed as to plaintiff's
-15-
<PAGE> 16
federal claims, but the District Court remanded any remaining state law claims
to the State Court. The Company will continue to vigorously contest this
proceeding which was also first reported in the annual report on Form 10-K for
the 1995 fiscal year. Among other arguments, the Company will argue on res
judicata and collateral estoppel grounds that the federal court action disposed
of any state law claims against the Company.
Since 1992, the Company has been involved in cost recovery litigation
with the United States Environmental Protection Agency (the "USEPA") and other
parties over clean up costs at the Smith's Farm Superfund Site in Bullitt
County, Kentucky. The litigation was commenced in February 1992 in the United
States District Court for the Western District of Kentucky under the caption
AKZO Coatings, Inc., et al. v. AC&S, Inc., et al. In 1988, the Company may have
generated small amounts of scrap product and warehouse demolition waste debris
that were transported to the site from the Company's custom molding facility in
Louisville, Kentucky where operations have since been discontinued. The Company
denies that either the scrap product or the demolition debris contained
hazardous substances. In May 1996, the USEPA, as part of a global settlement,
offered a settlement to certain de minimis parties, including the Company,
under which the Company's share of the clean up costs would be approximately
$70,000. The Company has notified the USEPA that the settlement proposed is
acceptable. A Consent Order, which will contain a covenant not-to-sue and
contribution protection, is being negotiated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company
during the fiscal quarter ended August 31, 1996.
EXECUTIVE OFFICERS OF THE COMPANY
In accordance with Instruction 3 to Item 401(b) of Regulation S-K,
information with respect to the executive officers of the Company is set forth
below.
<TABLE>
<CAPTION>
Name Age Office with the Company
---- --- -----------------------
<S> <C> <C>
John P. O'Leary, Jr. 49 President and Chief Executive Officer
Brian C. Mullins 55 Vice President and Treasurer
James H. Brakebill 59 Vice President, Manufacturing
David C. O'Leary 47 Vice President, Sales and Marketing
</TABLE>
John P. O'Leary, Jr. has been President and Chief Executive Officer of
the Company since prior to September 1991. He has been a director of the
Company since 1974 and became Chairman of the Board of Directors in August
1994.
Brian C. Mullins has been Vice President and Treasurer of the Company
since prior to September 1991. Mr. Mullins is the Company's chief financial and
accounting officer.
-16-
<PAGE> 17
James H. Brakebill has been Vice President, Manufacturing of the
Company since April 1994; he was Vice President of Technology from prior to
September 1991 to April 1994. Mr. Brakebill is responsible for all
manufacturing operations of the Company.
David C. O'Leary has been Vice President, Sales and Marketing of the
Company since April 1994; he was Vice President-Southern Division from prior to
September 1991 to April 1994. Mr. O'Leary is responsible for all sales and
marketing activities of the Company.
John P. O'Leary, Jr. and David C. O'Leary are brothers.
The executive officers are elected annually by the Board of Directors
at an organization meeting which is held immediately after each Annual Meeting
of Shareholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter market on
the National Market System of the National Association of Securities Dealers
("NASDAQ"). The Common Stock trades under the NASDAQ symbol TUSC. As of August
31, 1996, there were 824 holders of record of the Company's Common Stock.
Information with respect to the market prices of, and the cash
dividends paid with respect to, the Company's Common Stock during the fiscal
years ended August 31, 1996 and 1995 appears under Note 12 Quarterly Financial
Data (unaudited) of the Notes to Consolidated Financial Statements on page 19
of the Company's Annual Report to Shareholders for the fiscal year ended August
31, 1996 and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data required by this Item 6 is furnished by
the "Eleven Year Consolidated Financial Summary" which appears on the bottom
half of the inside front cover of the Company's Annual Report to Shareholders
for the fiscal year ended August 31, 1996 and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The Management's Discussion and Analysis of Results of Operations and
Financial Condition required by this Item 7 appears on pages 19 through 21 of
the Company's Annual Report to Shareholders for the fiscal year ended August
31, 1996 and is incorporated herein by reference.
-17-
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements and related notes and report appear
on the pages indicated in the Company's Annual Report to Shareholders for the
fiscal year ended August 31, 1996 and are incorporated herein by reference:
<TABLE>
<CAPTION>
Page(s) in
Annual Report
Financial Statements and Related Report to Shareholders
--------------------------------------- ---------------
<S> <C>
Consolidated Statements of Income for the
fiscal years ended August 31, 1996,
1995 and 1994........................................................................... 8
Consolidated Balance Sheets at August 31,
1996 and 1995........................................................................... 9
Consolidated Statements of Cash Flows
for the fiscal years ended August 31,
1996, 1995 and 1994..................................................................... 10
Consolidated Statements of Shareholders'
Equity for the fiscal years ended
August 31, 1996, 1995 and 1994.......................................................... 11
Notes to Consolidated Financial Statements....................................................... 12-18
Report of Independent Accountants................................................................ 19
</TABLE>
The supplementary financial information required by this Item 8 is
included in Note 12--Quarterly Financial Data (unaudited) of the Notes to
Consolidated Financial Statements and is also incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information required by this Item 9 was included in current
reports on Form 8-K filed by the Company with the Commission on February 15,
1996 and November 14, 1996.
PART III
ITEMS 10 THROUGH 13.
In accordance with the provisions of General Instruction G to Form
10-K, the information required by Item 10 (Directors and Executive Officers of
the Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership
of Certain Beneficial Owners and Management) and Item 13 (Certain Relationships
and Related Transactions) is not set forth herein (except for the information
concerning "Executive Officers of the Company" which appears at the end of Part
I of this annual report) because the Company has already filed its definitive
Proxy Statement for its Annual Meeting of Shareholders to be held on December
18, 1996, which includes such information, with the Commission. Such
information is incorporated herein by reference, except for the information
required to be included in the Proxy Statement by paragraphs (i), (k) and (l)
of Item 402 of Regulation S-K.
-18-
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The financial statements, financial statement schedules and exhibits
listed below are filed as part of this annual report:
(a)(1) Financial Statements:
The consolidated financial statements of the Company and its
subsidiaries, together with the report of S.R. Snodgrass, A.C., dated October
11, 1996, appearing on pages 8 through 19 of the Company's Annual Report to
Shareholders for the fiscal year ended August 31, 1996, are incorporated herein
by reference (see Item 8 above).
(a)(2) Financial Statement Schedules:
<TABLE>
<CAPTION>
Page in this
Schedules and Related Report Annual Report
---------------------------- -------------
<S> <C>
Schedule II - Valuation Account for the fiscal
years ended August 31, 1996,
1995 and 1994 S-1
Report of Independent Accountants on Schedules S-2
</TABLE>
All other Financial Statement Schedules are omitted either because
they are not applicable or are not material, or the information required
therein is contained in the consolidated financial statements or notes thereto
set forth in the Company's Annual Report to Shareholders for its fiscal year
ended August 31, 1996.
(a)(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- --------
<S> <C>
3(i) Restated Articles of Incorporation, filed as Exhibit 3(i) to
the Company's annual report on Form 10-K for the fiscal year
ended August 31, 1995 and incorporated herein by reference.
3(ii) By-Laws, as Amended and Restated effective December 15, 1994,
filed as Exhibit 3(ii) to the Company's quarterly report on
Form 10-Q for the fiscal quarter ended February 28, 1995 and
incorporated herein by reference.
</TABLE>
-19-
<PAGE> 20
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- --------
<S> <C>
4 Loan Agreement, dated as of August 14, 1996, between the
Company and Mellon Bank, N.A., with Revolving Credit Note and
Term Note attached, filed herewith.
10.1 1985 Incentive Stock Option Plan, as adopted by the
Company's Board of Directors on August 22, 1985 and approved
by the Company's shareholders on October 31, 1985, filed on
June 20, 1988 as part of Exhibit 10.1 to Amendment No. 1 to
Registration Statement No. 33-17138 on Form S-1 and
incorporated herein by reference.*
10.2 1985 Incentive Stock Option Plan, as amended by the
Company's Board of Directors on October 29, 1987, filed on
June 20, 1988 as part of Exhibit 10.2 to Amendment No. 1 to
Registration Statement No. 33-17138 on Form S-1 and
incorporated herein by reference.*
10.3 1989 Stock Incentive Plan, as amended by the Company's Board
of Directors on October 13, 1994 and approved by the Company's
shareholders on December 15, 1994, filed as Exhibit 10.3 of the
Company's annual report on Form 10-K for the fiscal year ended
August 31, 1995 and incorporated herein by reference.*
10.4 1989 Stock Incentive Plan, as amended by the Company's Board
of Directors effective August 31, 1996, filed herewith.*
10.5 Common Stock Purchase Plan for Salaried Employees, as
amended by the Company's Board of Directors on October 11,
1996, filed herewith.*
10.6 Deferred Compensation Plan for Non-Employee Directors, as
adopted by the Company's Board of Directors on December 14,
1994, filed as Exhibit 10.6 to the Company's quarterly
report on Form 10-Q for the fiscal quarter ended February
28, 1995 and incorporated herein by reference.*
10.7 Retirement Policy and Plan for Non-Employee Directors, as
amended by the Company's Board of Directors on December 14,
1994, filed as Exhibit 10.7 to the Company's quarterly
report on Form 10-Q for the fiscal quarter ended February
28, 1995 and incorporated herein by reference.*
10.8 Written description of supplemental retirement benefit for
Thomas P. Woolaway, filed as Exhibit 10.7 to the Company's
annual report on Form 10-K for the fiscal year ended August
31, 1995 and incorporated herein by reference.*
</TABLE>
-20-
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- --------
<S> <C>
10.9 First Amendment to the Tuscarora Incorporated and Subsidiary
Companies Salaried Employees' Money Purchase Pension Plan, as
adopted by the Company's Board of Directors on October 11,
1996, providing for additional employer contributions for
certain of the Company's executive officers, filed herewith.*
10.10 Tuscarora Incorporated Supplemental Executive Retirement Plan,
as adopted by the Company's Board of Directors on February 9,
1996, and related Consent of the Company's Compensation
Committee, dated October 11, 1996, designating certain of the
Company's executive officers as Plan participants, and form of
Participation Agreement, filed herewith.*
10.11 Indemnification and Insurance Agreement, dated August 12,
1988, between the Company and John P. O'Leary, Sr.
(substantially identical agreements have been entered into
with all the Company's directors), filed as Exhibit 10.3 to
the Company's annual report on Form 10-K for the fiscal year
ended August 31, 1988 and incorporated herein by reference.
11 Statement re Computation of Earnings Per Share, filed herewith.
13 Those portions of the Annual Report to Shareholders for the
fiscal year ended August 31, 1996 which are expressly
incorporated in this annual report by reference, filed
herewith.
21 List of subsidiaries of the Company, filed herewith.
23 Consent of S.R. Snodgrass, A.C., filed herewith.
24 Powers of Attorney, filed herewith.
27 Financial Data Schedule, filed herewith.
</TABLE>
- ---------------
* Management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) of Regulation S-K.
The Company agrees to furnish to the Commission upon request copies of
all instruments defining the rights of holders of long-term debt of the Company
and its subsidiaries which are not filed as a part of this annual report.
-21-
<PAGE> 22
Copies of the exhibits filed as a part of this annual report are
available at a cost of $.20 per page to any shareholder of record upon written
request to Brian C. Mullins, Vice President and Treasurer, Tuscarora
Incorporated, 800 Fifth Avenue, New Brighton, Pennsylvania 15066.
(b)Reports on Form 8-K:
No current reports on Form 8-K were filed during the fiscal quarter
ended August 31, 1996.
[This space intentionally left blank.]
-22-
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Tuscarora Incorporated
By /s/ JOHN P. O'LEARY, JR.
----------------------------------
John P. O'Leary, Jr., President
and Chief Executive Officer
Date: November 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company in the capacities indicated on November 27, 1996:
/s/ JOHN P. O'LEARY, JR. /s/ BRIAN C. MULLINS
- ------------------------- -----------------------
John P. O'Leary, Jr. Brian C. Mullins
(Director and Chief (Principal Financial
Executive Officer) Officer and Principal
Accounting Officer)
Thomas S. Blair
David I. Cohen
Abe Farkas
Karen L. Farkas
Robert W. Kampmeinert
David C. O'Leary
Harold F. Reed, Jr.
James I. Wallover
Thomas P. Woolaway
By /s/ BRIAN C. MULLINS
---------------------
Brian C. Mullins,
Attorney-in-Fact
-23-
<PAGE> 24
TUSCARORA INCORPORATED
Schedule II - Valuation Account
Years Ended August 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions(1) of Period
----------- --------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts
Year Ended
August 31, 1996 $694,675 $381,196 $288,696 $787,175
Year Ended
August 31, 1995 646,991 287,782 240,098 694,675
Year Ended
August 31, 1994 643,386 180,000 176,395 646,991
</TABLE>
- ---------------
(1) Uncollected receivables written off, net of recoveries.
S-1
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE
Tuscarora Incorporated
New Brighton, Pennsylvania
Our report on the consolidated financial statements of Tuscarora
Incorporated and subsidiaries has been incorporated by reference in this Form
10-K from the Company's 1996 Annual Report to Shareholders and appears on page
19 therein. In connection with our audits of such financial statements, we have
also audited the related financial statement schedule which appears on page S-1
of this annual report on Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly the information required to be included therein.
/s/ S.R. SNODGRASS, A.C.
---------------------------
Beaver Falls, Pennsylvania S.R. SNODGRASS, A.C.,
October 11, 1996 Certified Public Accountants
S-2
<PAGE> 26
TUSCARORA INCORPORATED
FORM 10-K FOR FISCAL YEAR ENDED AUGUST 31, 1996
EXHIBIT INDEX
The following exhibits are required to be filed with this annual report
on Form 10-K. Exhibits are incorporated herein by reference to other documents
pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended,
as indicated in the index. Exhibits not incorporated herein by reference follow
the index.
<TABLE>
<CAPTION>
Exhibit
No. Document
- ------- ---------------------------------------------------------------
<S> <C>
3(i) Restated Articles of Incorporation, filed as Exhibit 3(i) to
the Company's annual report on Form 10-K for the fiscal year
ended August 31, 1995 and incorporated herein by reference.
3(ii) By-Laws, as Amended and Restated effective December 15, 1994,
filed as Exhibit 3(ii) to the Company's quarterly report on
Form 10-Q for the fiscal quarter ended February 28, 1995 and
incorporated herein by reference.
4 Loan Agreement, dated as of August 14, 1996, between the
Company and Mellon Bank, N.A., with Revolving Credit Note and
Term Note attached, filed herewith.
10.1 1985 Incentive Stock Option Plan, as adopted by the Company's
Board of Directors on August 22, 1985 and approved by the
Company's shareholders on October 31, 1985, filed on June 20,
1988 as part of Exhibit 10.1 to Amendment No. 1 to Registration
Statement No. 33-17138 on Form S-1 and incorporated herein by
reference.*
10.2 1985 Incentive Stock Option Plan, as amended by the Company's
Board of Directors on October 29, 1987, filed on June 20, 1988
as part of Exhibit 10.2 to Amendment No. 1 to Registration
Statement No. 33-17138 on Form S-1 and incorporated herein by
reference.*
10.3 1989 Stock Incentive Plan, as amended by the Company's Board of
Directors on October 13, 1994 and approved by the Company's
shareholders on December 15, 1994, filed as Exhibit 10.3 to the
Company's annual report on Form 10-K for the fiscal year ended
August 31, 1995 and incorporated herein by reference.*
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit
No. Document
- ------- ---------------------------------------------------------------
<S> <C>
10.4 1989 Stock Incentive Plan, as amended by the Company's Board of
Directors effective August 31, 1996, filed herewith.*
10.5 Common Stock Purchase Plan for Salaried Employees, as amended
by the Company's Board of Directors on October 11, 1996, filed
herewith.*
10.6 Deferred Compensation Plan for Non-Employee Directors, as
adopted by the Company's Board of Directors on December 14,
1994, filed as Exhibit 10.6 to the Company's quarterly report on
Form 10-Q for the fiscal quarter ended February 28, 1995 and
incorporated herein by reference.*
10.7 Retirement Policy and Plan for Non-Employee Directors, as
amended by the Company's Board of Directors on December 14,
1994, filed as Exhibit 10.7 to the Company's quarterly report on
Form 10-Q for the fiscal quarter ended February 28, 1995 and
incorporated herein by reference.*
10.8 Written description of supplemental retirement benefit for
Thomas P. Woolaway, filed as Exhibit 10.7 to the Company's
annual report on Form 10-K for the Company's fiscal year ended
August 31, 1995 and incorporated herein by reference.*
10.9 First Amendment to the Tuscarora Incorporated and Subsidiary
Companies Salaried Employee's Money Purchase Pension Plan, as
adopted by the Company's Board of Directors on October 11, 1996,
providing for additional employer contributions for certain of
the Company's executive officers, filed herewith.*
10.10 Tuscarora Incorporated Supplemental Executive Retirement Plan,
as adopted by the Company's Board of Directors on February 9,
1996, and related Consent of the Company's Compensation
Committee, dated October 11, 1996, designating certain of the
Company's executive officers as Plan participants, and form of
Participation Agreement, filed herewith.*
10.11 Indemnification and Insurance Agreement, dated August 12, 1988,
between the Company and John P. O'Leary, Sr. (substantially
identical agreements have been entered into with all the
Company's directors), filed as Exhibit 10.3 to the Company's
annual report on Form 10-K for the fiscal year ended August 31,
1988 and incorporated herein by reference.
</TABLE>
2
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit
No. Document
- ------- ---------------------------------------------------------------
<S> <C>
11 Statement re Computation of Earnings Per Share, filed herewith.
13 Those portions of the Annual Report to Shareholders for the
fiscal year ended August 31, 1996 which are expressly
incorporated in this annual report by reference, filed herewith.
21 List of subsidiaries of the Company, filed herewith.
23 Consent of S.R. Snodgrass, A.C., filed herewith.
24 Powers of Attorney, filed herewith.
27 Financial Data Schedule, filed herewith.
</TABLE>
- -----------
* Management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) or Regulation S-K.
-3-
<PAGE> 1
EXHIBIT 4
LOAN AGREEMENT
Agreement, dated the 14th day of August, 1996, by and between Tuscarora
Incorporated, a Pennsylvania corporation (the "Borrower"), and Mellon Bank,
N.A., a national banking association (the "Bank") ("Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the Secured Term Loan, Revolving Credit and Line of
Credit Agreement, dated July 27, 1983, by and between the Borrower (under its
former name, Tuscarora Plastics, Inc.) and Bank, as amended by (i) the First
Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement,
dated September 4, 1984, (ii) the Second Amendment to Secured Term Loan,
Revolving Credit and Line of Credit Agreement, dated October 2, 1985, (iii) the
Third Amendment to Secured Term Loan, Revolving Credit and Line of Credit
Agreement, dated January 30, 1987, (iv) the Fourth Amendment to Secured Term
Loan, Revolving Credit and Line of Credit Agreement, dated August 31, 1987, (v)
the Fifth Amendment to Secured Term Loan, Revolving Credit and Line of Credit
Agreement, dated February 29, 1988, (vi) the Sixth Amendment to Secured Term
Loan, Revolving Credit and Line of Credit Agreement, dated August 1, 1989,
(vii) the Seventh Amendment to Secured Term Loan, Revolving Credit and Line of
Credit Agreement, dated May 31, 1990, (viii) the Eighth Amendment to Secured
Term Loan, Revolving Credit and Line of Credit Agreement, dated August 1, 1991,
(ix) the Ninth Amendment to Secured Term Loan, Revolving Credit and Line of
Credit Agreement, dated December 18, 1991, (x) the Tenth Amendment to Secured
Term Loan, Revolving Credit and Line of Credit Agreement, dated August 18,
1992, (xi) the Eleventh Amendment to Secured Term Loan, Revolving Credit and
Line of Credit Agreement, dated February 26, 1993, (xii) the Twelfth Amendment
to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated June
30, 1994 and (xiii) the Thirteenth Amendment to Secured Term Loan, Revolving
Credit and Line of Credit Agreement, dated May 31, 1995 (as amended, the "Prior
Loan Agreement"), the Bank has, among other things, extended credit to the
Borrower in the form of (a) a revolving credit loan facility in an aggregate
principal amount not to exceed Fourteen Million and 00/100 Dollars
($14,000,000.00) and (b) four (4) separate term loans (defined in the Prior
Loan Agreement as Term Loan No. 7, Term Loan No. 8, Term Loan No. 9 and Term
Loan No. 10) in an original principal amount of Forty Million Eight Hundred
Thousand and 00/100 Dollars ($40,800,000.00); and
WHEREAS, the Borrower has requested the Bank (i) to provide a revolving
credit facility to the Borrower in an aggregate principal amount not to exceed
Forty Million and 00/100 Dollars
<PAGE> 2
($40,000,000.00), the proceeds of which will be used for general corporate
purposes and acquisitions and (ii) to extend a term loan to the Borrower in the
original principal amount of Thirty Seven Million and 00/100 Dollars
($37,000,000.00), the proceeds of which will be used to pay to the Bank all
amounts due to it under the Prior Loan Agreement; and
WHEREAS, the Bank is willing to extend such credit to Borrower pursuant to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.01 CERTAIN DEFINITIONS. In addition to other words
and terms defined elsewhere in this Agreement, the following words and terms
have the following meanings, respectively, unless the context otherwise clearly
requires:
"Affiliate" shall mean, as of the date hereof or any time
during the term of this Agreement, any Person which directly or indirectly
controls, is controlled by or is under common control with Borrower. The term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Loan Agreement as amended,
modified or supplemented from time to time.
"As Offered Rate" shall mean, for any Interest Period for any
As Offered Rate Loan, the fixed interest rate per annum offered by the Bank to
the Borrower in Bank's sole discretion.
"As Offered Rate Loan" shall mean any Loan that bears interest
with reference to the As Offered Rate.
"Assessment Rate" shall mean, for any day of any Interest
Period for a CD Rate Loan, the fixed rate per annum (rounded upward to the next
higher whole multiple of 1/100% if such rate is not such a multiple) determined
in good faith by the Bank in accordance with its usual procedures (which
determination shall be conclusive
2
<PAGE> 3
absent manifest error) as representing for such day the maximum effective rate
per annum payable by the Bank to the Federal Deposit Insurance Corporation (or
any successor) for such day for insurance on dollar time deposits in an amount
and for a maturity equal to such CD Rate Loan and such Interest Period,
exclusive of any credit allowed against such annual assessment on account of
assessment payments made or to be made by Bank. The CD Rate shall be adjusted
automatically as of the effective date of each change in the Assessment Rate.
"Bank" means Mellon Bank, N.A., a national banking association
with its main office located at Two Mellon Bank Center, Pittsburgh,
Pennsylvania 15259.
"Borrower" shall mean Tuscarora Incorporated, a Pennsylvania
corporation, with its chief executive office at 800 Fifth Avenue, New Brighton,
Pennsylvania 15066.
"Business Day" shall mean a day of the year on which banks are
not required or authorized to close in Pittsburgh, Pennsylvania and, if the
applicable Business Day relates to any Libor Rate Loan, a day on which dealings
are carried on in the London interbank eurodollar market.
"Capital Expenditure" shall mean any expenditure made or
liability incurred which is, in accordance with GAAP, treated as a capital
expenditure and not as an expense item for the year in which it was made or
incurred, as the case may be.
"Capitalized Lease Obligations" shall mean any amount payable
with respect to any lease of any tangible or intangible property (whether real,
personal or mixed), however denoted, which is required by GAAP to be reflected
as a liability on the balance sheet of the lessee.
"Cash Flow" shall mean, for the period of determination, (i)
Net Income, (ii) plus depreciation, depletion and amortization, (iii) minus
Eight Million Dollars ($8,000,000.00), (iv) minus Distributions, in each case
determined and Consolidated for the Borrower and its Subsidiaries in accordance
with GAAP.
"CD Rate" shall mean, for any Interest Period for any CD Rate
Loan, the interest rate per annum determined by Bank by adding:
(A) the rate per annum (rounded upwards to the next
higher whole multiple of 1/100% if such rate is
not such a multiple) equal at all times during
3
<PAGE> 4
such Interest Period to the quotient of (i) the
rate of interest estimated in good faith by the
Bank (which determination shall be conclusive) to
be the average of the secondary market bid rates
at or about 11:00 a.m., Pittsburgh, Pennsylvania
time, on the first day of such Interest Period by
dealers of recognized standing for negotiable
certificates of deposit of major money center
banks for delivery on such day in an amount and
for a maturity equal to such CD Rate Loan and
such Interest Period, divided by (ii) a number
equal to 1.00 minus the CD Reserve Requirement
and
(B) the Assessment Rate for such date.
"CD Rate Loan" shall mean any Loan that bears interest with
reference to the CD Rate.
"CD Reserve Requirement" shall mean, for any day of any
Interest Period for a CD Rate Loan, the percentage (rounded upward to the next
higher whole multiple of 1/100% if such rate is not such a multiple),
determined in good faith by Bank in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) as representing for
such day the maximum effective reserve requirement (whether basic,
supplemental, marginal, emergency or otherwise) prescribed by the Board of
Governors of the Federal Reserve System (or any successor) with respect to
liabilities or assets consisting of non-personal time deposits in dollars of
the United States in an amount and for a maturity equal to such CD Rate Loan
and such Interest Period. The CD Rate shall be adjusted automatically as of
the effective date of such change and the CD Reserve Requirement.
"Change of Control" shall mean (i) any Person or group within
the meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as
amended, as in effect on the date of this Agreement, has become the owner of,
directly or indirectly, beneficially or of record, shares representing more
than 35% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Borrower; or (ii) the Continuing Directors
have ceased to occupy a majority of the seats (excluding vacant seats) on the
Board of Directors of the Borrower.
"Closing" shall mean the closing of the transactions provided
for in this Agreement on the Closing Date.
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"Closing Date" shall mean August 14, 1996 or such other date
upon which the parties may agree.
"Code" shall mean the Internal Revenue Code of 1986 as amended
along with the rules, regulations, decisions and other official interpretations
in connection therewith.
"Consolidated" shall mean the resulted consolidation of the
financial statements of the Borrower and each of its Subsidiaries in accordance
with GAAP, including principles of consolidation consistent with those applied
in preparation of the Consolidated financial statements referred to in Section
6.1 herein.
"Continuing Directors" shall mean, collectively, (i) all
members of the Board of Directors of the Borrower who have held office
continuously since the date of this Agreement and (ii) all members of the Board
of Directors of the Borrower who assume office after the date of this Agreement
and whose election and nomination for election by the Borrower's shareholders
was approved by a vote of two-thirds of the then Continuing Directors.
"Distributions" shall mean, for the period of determination,
(a) all distributions of cash, securities or other property (other than capital
stock) on or in respect of any shares of any class of capital stock of the
Borrower; and (b) all purchases, redemptions or other acquisitions by Borrower
of any shares of any class of capital stock of the Borrower other than in
connection with the exercise of stock options granted by the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as in effect as of the date of this Agreement and as amended from time
to time in the future.
"ERISA Affiliate" shall mean a Person which is under common
control with Borrower within the meaning of Section 414(b) of the Code
including, but not limited to, a Subsidiary of the Borrower.
"Event of Default" means any of the Events of Default
described in Section 7.01 of this Agreement.
"Expiry Date" shall mean, with respect to the Revolving Credit
Loans, the Revolving Credit Expiry Date and, with respect to the Term Loan, the
Term Loan Expiry Date.
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<PAGE> 6
"Fixed Rate" shall mean, for any Interest Period for any Fixed
Rate Loan, the sum of (A) the interest rate per annum (rounded upward to the
next higher whole multiple of 1/100% if such rate is not such a multiple)
determined in good faith by Bank in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the rate of
interest which the Bank is required to pay (or will offer to pay) on a
liability in an amount and for a maturity equal to such Fixed Rate Loan and
such Interest Period as adjusted at the time it is being determined by Bank for
reserve requirements and such other requirements as may be imposed by any
Official Body, together with fees assessed by Bank's money management
department plus (B) one and one quarter of one percent (1.25%).
"Fixed Rate Loan" shall mean any Loan that bears interest with
reference to the Fixed Rate.
"Funded Debt" shall mean, as of the date of determination, (i)
all Indebtedness which would as of such date be classified in whole or in part
as a long-term liability in accordance with GAAP (including the current portion
thereof), all Indebtedness having a final maturity more than one (1) year from
the date of creation of such Indebtedness and all Indebtedness, regardless of
its term, which is renewable or extendable (pursuant to the terms thereof or
otherwise) to a date more than one year from the date of the creation of such
Indebtedness, and (ii) all Indebtedness which would as of such date be
classified in whole or in part as a current liability in accordance with GAAP,
in each case determined and Consolidated for the Borrower and its Subsidiaries
in accordance with GAAP.
"Funded Debt to Cash Flow Ratio" shall mean, as of the date of
determination, the ratio of Funded Debt to Cash Flow for the preceding twelve
(12) month period.
"Funding Breakage Date" shall mean as set forth in Section
2.09(c) hereof.
"Funding Breakage Indemnity" shall mean as set forth in
Section 2.09(c) hereof.
"GAAP" means generally accepted accounting principles (as such
principles may change from time to time) applied on a consistent basis (except
for changes in application in which the Borrower's independent certified public
accountants concur).
"Indebtedness" shall mean (i) all obligations for borrowed
money (including, without limitation, all notes payable
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<PAGE> 7
and drafts accepted representing extensions of credit, all obligations
evidenced by bonds, debentures, notes or similar instruments, all obligations
on which interest charges are customarily paid, all obligations under
conditional sale or other title retention agreements and all obligations issued
or assumed as full or partial payment for property whether or not any such
notes, drafts or obligations are obligations for borrowed money), (ii) all
obligations secured by any Lien existing on property owned or acquired subject
thereto, whether or not the obligations secured thereby shall have been
assumed, (iii) all obligations to repay amounts drawn down by beneficiaries of
letters of credit and (iv) indebtedness represented by obligations under a
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP and the amount of such indebtedness shall be the
capitalized amount of such obligations as determined in accordance with such
principles; provided, however, that obligations of the Borrower to pay
supplemental pension benefits, deferred compensation or deferred income taxes
shall not in any event be deemed to constitute Indebtedness for purposes of
this Agreement.
"Interest Coverage Ratio" shall mean, for the period of
determination, the ratio of Operating Earnings to Interest Expense.
"Interest Expense" shall mean, for the period of
determination, all interest accruing during such period on Indebtedness,
including without limitation, all interest required under GAAP to be
capitalized during such period, in each case determined and Consolidated for
the Borrower and its Subsidiaries in accordance with GAAP.
"Interest Period" shall mean, with respect to any Libor Rate
Loan, As Offered Rate Loan, CD Rate Loan, or Fixed Rate Loan, the period
commencing on the date such Loan is made or converted and ending on the last
day of such period as selected by the Borrower pursuant to the provisions below
and, thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of such period
as selected by the Borrower pursuant to the provisions below. The duration of
each Interest Period for any Libor Rate Loan, As Offered Rate Loan, CD Rate
Loan or Fixed Rate Loan shall be for the number of days, months or years
selected by Borrower upon notice, in accordance with Sections 2.01(c) or
2.02(c) provided that:
(i) the Interest Period for any Libor Rate
Loan or CD Rate Loan shall be one (1), two (2), three (3), four (4) five (5),
six (6), nine (9) or twelve (12) months or such other period as may be agreed
upon by Borrower and Bank;
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<PAGE> 8
(ii) the Interest Period for any As Offered
Rate Loan shall be one (1), two (2), three (3), four (4), five (5) or six (6)
months or such other period as may be agreed upon by Borrower and Bank;
(iii) the Interest Period for any Fixed Rate
Loan shall be for one (1), two (2), three (3), four (4), five (5), six (6),
seven (7) or eight (8) years or such other period as may be agreed upon by
Borrower and Bank;
(iv) Interest Periods shall be selected in a
manner which will insure that Borrower shall be able to make scheduled payments
of principal under the Notes without incurring liability under Section 2.09(c)
hereof; provided, however, that in the event the Borrower is required to prepay
any Libor Rate Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan in
order to make a scheduled payment of principal under the Notes, the Borrower
shall indemnify the Bank as provided in Section 2.09(c) hereof;
(v) whenever the last day of any Interest
Period would otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall occur on the next succeeding Business Day,
provided that if such extension of time would cause the last day of such
Interest Period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day;
(vi) if the Borrower fails to so select the
duration of any Interest Period for an As Offered Rate Loan, Libor Rate Loan or
CD Rate Loan, the duration of such Interest Period shall be one (1) month;
(vii) if the Borrower fails to so select the
duration of an Interest Period for a Fixed Rate Loan, the Borrower shall be
deemed to have selected a Prime Rate Loan; and
(viii) the last day of any Interest Period
shall not occur after the Expiry Date of the facility under which such Loan is
made.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree
or award of any Official Body.
"Libor Rate" shall mean, for any Interest Period for any Libor
Rate Loan, a fixed rate per annum (rounded upwards to the next higher whole
multiple of 1/100% if such rate is not such a multiple) equal at all times
during such Interest Period to the
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<PAGE> 9
quotient of (a) the rate determined in good faith by the Bank in accordance
with its usual procedures (such determination to be conclusive absent manifest
error) to be the average of the rates per annum (rounded upwards to the next
higher whole multiple of 1/100% if such rate is not such a multiple) at which
deposits in United States Dollars are offered at 11:00 a.m. (London, England
Time) (or as soon thereafter as is reasonably practicable) by prime banks in
the London interbank eurodollar market two (2) Business Days prior to the first
day of such Interest Period in an amount and maturity equal to the amount and
maturity of such Libor Rate Loan, divided by (b) a number equal to 1.00 minus
the aggregate (without duplication) of the rates (expressed as a decimal
fraction) of the Libor Reserve Requirements.
"Libor Rate Loan" shall mean any Loan that bears interest with
reference to the Libor Rate.
"Libor Reserve Requirements" shall mean, for any day of any
Interest Period for a Libor Rate Loan, the percentage (rounded upward to the
next higher whole multiple of 1/100% if such rate is not such a multiple) as
determined in good faith by the Bank in accordance with its usual procedures
(which determination shall be conclusive absent manifest error) as representing
the maximum reserves (whether basic, supplemental, marginal, emergency or
otherwise) prescribed by the Board of Governors of the Federal Reserve System
(or any successor) with respect to liabilities or assets consisting of or
including "Eurocurrency Liabilities" (as defined in Regulation D of the Board
of Governors of the Federal Reserve System) in an amount and for a maturity
equal to such Libor Rate Loan and such Interest Period. The Libor Rate shall
be adjusted automatically as of the effective date of each change in the Libor
Reserve Requirement.
"Lien" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature including, but not limited to, any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
"Loan" or "Loans" shall mean the Revolving Credit Loans, the
Term Loan (whether made as or converted to Prime Rate Loans, Libor Rate Loans,
As Offered Rate Loans, CD Rate Loans or Fixed Rate Loans) and any other credit
to the Borrower extended by the Bank in accordance with Article II hereof as
evidenced by the Notes, as the case may be.
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"Loan Document" or "Loan Documents" mean, singularly or
collectively as the context may require, this Agreement, the Notes and any and
all other documents, instruments, certificates and agreements executed and
delivered in connection with this Agreement, as any of them may be amended,
modified, extended or supplemented from time to time.
"Material Adverse Change" shall mean a material adverse change
in the business, operations, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect
on the business, operations, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole.
"Net Income" means, for the period of determination, net
income (after taxes), excluding, however, extraordinary gains, in each case
determined and Consolidated for the Borrower and its Subsidiaries in accordance
with GAAP.
"Notes" shall collectively mean the Revolving Credit Note, the
Term Note and any other note of the Borrower executed and delivered pursuant to
this Agreement, together with all extensions, renewals, refinancings or
refundings in whole or in part.
"Office", when used in connection with the Bank, means its
designated office located at Two Mellon Bank Center, Pittsburgh, Pennsylvania
15259 or such other office of the Bank as the Bank may designate in writing
from time to time.
"Official Body" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Operating Earnings" shall mean, for the period of
determination, Net Income, plus Interest Expense plus all income taxes included
in Net Income.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Title IV of ERISA.
"Person" shall mean an individual, corporation, partnership,
joint venture, trust, or unincorporated organization or government or agency or
political subdivision thereof.
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"Plan" means any deferred compensation program, including both
single and multi-employer plans, subject to Title IV of ERISA and established
and maintained for employees of the Borrower or any Subsidiary or any ERISA
Affiliate.
"Potential Default" shall mean any event or condition which
with notice, passage of time or determination by Bank, or any combination of
the foregoing, would constitute an Event of Default.
"Prime Rate" shall mean that rate of interest per annum
announced by Bank from time to time as its Prime Rate which may not represent
the lowest rate charged by Bank to other borrowers at any time or from time to
time.
"Prime Rate Loan" shall mean any Loan that bears interest with
reference to the Prime Rate.
"Prior Loan Agreement" shall have the meaning assigned to such
term in the preamble hereof.
"Prior Security Documents" shall have the meaning assigned to
such term in Section 2.14 hereof.
"Prohibited Transaction" shall mean any transaction which is
prohibited under Section 4975 of the Code or Section 406 of ERISA and not
exempt under Section 4975 of the Code or Section 408 of ERISA.
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, except any such event
as to which the provision for thirty (30) days notice to the PBGC is waived
under applicable regulations.
"Revolving Credit Expiry Date" shall mean August 31, 1999, or
such earlier date on which the Revolving Credit Facility Commitment shall have
been terminated pursuant to this Agreement.
"Revolving Credit Facility Commitment" shall mean as set forth
in Section 2.01(a) hereof.
"Revolving Credit Loans" shall mean as set forth in Section
2.01(a) hereof.
"Revolving Credit Note" means the Revolving Credit Note of
Borrower executed and delivered pursuant to Section 2.01(b) of this Agreement,
as the same may be amended, modified or supplemented from time to time,
together with all extensions, renewals, refinancings or refundings, in whole or
in part.
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"Subsidiary" of Borrower at any time means (i) any corporation
more than fifty percent (50%) of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the directors of
such corporation is owned (directly or indirectly) by the Borrower and/or one
or more Subsidiaries of the Borrower and (ii) any partnership, association,
joint venture or other entity in which the Borrower and/or one or more
Subsidiaries of the Borrower has more than a fifty percent (50%) equity
interest.
"Tangible Net Worth" means, as of the date of determination,
net worth less all intangible assets, in each case determined and Consolidated
for the Borrower and its Subsidiaries in accordance with GAAP.
"Termination Event" shall mean (i) a Reportable Event, (ii)
the termination of a single employer Plan or the treatment of a single employer
Plan amendment as the termination of such Plan under Section 4041 of ERISA, or
the filing of a notice of intent to terminate a single employer Plan, or (iii)
the institution of proceedings to terminate a single employer Plan by the PBGC
under Section 4042 of ERISA, or (iv) the appointment of a trustee to administer
any single employer Plan.
"Term Loan" shall mean as set forth in Section 2.02(a) hereof.
"Term Loan Expiry Date" shall mean August 31, 2004.
"Term Note" means the Term Note of Borrower executed and
delivered pursuant to Section 2.02(b) of this Agreement, as may be amended,
modified or supplemented from time to time, together with all extensions,
renewals, refinancings or refundings, in whole or in part.
"Treasury Rate" as of any Funding Breakage Date shall mean the
rate per annum determined by the Bank in accordance with its usual procedures
(which determination shall be conclusive absent manifest error) to be the
semiannual equivalent yield to maturity (expressed as a semiannual equivalent
and decimal and, in the case of United States Treasury bills, converted to a
bond equivalent yield) for United States Treasury securities maturing on the
last day of the corresponding Interest Period and trading in the secondary
market in reasonable volume (or if no such securities mature on such date, the
rate determined by standard securities interpolation methods as applied to the
series of securities maturing as close as possible to, but earlier than, such
date, and
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the series of such securities maturing as close as possible to, but later than,
such date).
ARTICLE II
THE CREDIT FACILITIES
2.01 Revolving Credit Facility Commitment.
-------------------------------------
(a) REVOLVING CREDIT LOANS. Subject to the
terms and conditions and relying upon the representations and warranties set
forth in this Agreement and the other Loan Documents, the Bank agrees to make,
continue or convert loans (the "Revolving Credit Loans") to the Borrower at any
time or from time to time on or after the Closing Date and to and including the
day immediately preceding the Revolving Credit Expiry Date, in an aggregate
principal amount not exceeding at any one time outstanding Forty Million and
00/100 Dollars ($40,000,000.00) (the "Revolving Credit Facility Commitment").
Within the limits of time and amount set forth in this Section 2.01, and
subject to the provisions of this Agreement including, without limitation, the
Bank's right to demand repayment of the Revolving Credit Loans upon the
occurrence of an Event of Default, Borrower may borrow, repay and reborrow
under this Section 2.01; provided, however, that Borrower may prepay any Libor
Rate Loan, As Offered Rate Loan or CD Rate Loan only on the last day of the
applicable Interest Period for such Libor Rate Loan, As Offered Rate Loan or CD
Rate Loan.
(b) REVOLVING CREDIT NOTE. The obligation
of Borrower to repay the unpaid principal amount of the Revolving Credit Loans
made to Borrower by the Bank and to pay interest on the unpaid principal amount
thereof will be evidenced in part by the Revolving Credit Note of Borrower
dated the Closing Date, in substantially the form attached as Exhibit "A" to
this Agreement with the blanks appropriately filled. The executed Revolving
Credit Note will be delivered by Borrower to the Bank on the Closing Date.
(c) MAKING, CONTINUING OR CONVERTING OF
REVOLVING CREDIT LOANS. Subject to the terms and conditions set forth in this
Agreement and the other Loan Documents, and provided that the Borrower has
satisfied all applicable conditions specified in Article IV hereof, the Bank
shall make Revolving Credit Loans to the Borrower which, as selected by the
Borrower pursuant to this Section 2.01(c), shall be Prime Rate Loans, Libor
Rate Loans, As Offered Rate Loans or CD Rate Loans.
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(i) Each Revolving Credit Loan that is made as
or converted into a Prime Rate Loan shall be made or converted on such Business
Day and in such amount as Borrower shall request by written notice received by
the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the
Business Day requested by the Borrower to be the date of disbursement of the
requested Prime Rate Loan. On each borrowing date, the Bank shall make the
proceeds of the Prime Rate Loan available to Borrower at the Bank's Office in
immediately available funds not later than 12:00 noon (Pittsburgh,
Pennsylvania, time).
(ii) Each Revolving Credit Loan that is made
as, continued or converted into a Libor Rate Loan shall be made on such
Business Day, in such amount (greater than or equal to Five Hundred Thousand
Dollars ($500,000) provided, however, that any amount in excess of Five Hundred
Thousand Dollars ($500,000) may only be in increments of One Hundred Thousand
Dollars ($100,000)), and with such an Interest Period as Borrower shall request
by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh,
Pennsylvania time) on the Second (2nd) Business Day prior to the date of
disbursement of the requested Libor Rate Loan. On each borrowing date, the
Bank shall make the proceeds of the Libor Rate Loan available to Borrower at
the Bank's Office in immediately available funds, no later than 12:00 noon
(Pittsburgh, Pennsylvania time). In addition, in the event that Borrower
desires to continue a Libor Rate Loan for an additional Interest Period,
Borrower shall provide Bank with written notice thereof on the Second (2nd)
Business Day prior to the expiration of the applicable Interest Period. In the
event that Borrower fails to provide the Bank with the required written notice
on the Second (2nd) Business Day prior to the expiration of the applicable
Interest Period for a Libor Rate Loan, Borrower shall be deemed to have given
written notice that such Loan shall be converted to a Prime Rate Loan on the
last day of the applicable Interest Period. Each written notice of any Libor
Rate Loan shall be irrevocable and binding on Borrower and Borrower shall
indemnify the Bank against any loss or expense incurred by the Bank as a result
of any failure by Borrower to consummate such transaction calculated as set
forth in Section 2.09(c) hereof.
(iii) Each Revolving Credit Loan that is made
as, continued or converted into an As Offered Rate Loan shall be made on such
Business Day, in such amount (greater than or equal to One Million Dollars
($1,000,000), provided, however, that any amount in excess of One Million
Dollars ($1,000,000) may only be in increments of One Hundred Thousand Dollars
($100,000)), and with such Interest Period as Borrower shall request by written
notice received by the Bank no later than 10:00 a.m. (Pittsburgh,
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Pennsylvania time) on the Second (2nd) Business Day prior to the date of
requested disbursement of the requested As Offered Rate Loan. On each
borrowing date, the Bank shall make the proceeds of the As Offered Rate Loan
available to Borrower at the Bank's Office in immediately available funds not
later than 12:00 noon (Pittsburgh, Pennsylvania time). In addition, in the
event that Borrower desires to continue an As Offered Rate Loan for an
additional Interest Period, Borrower shall provide Bank with written notice
thereof on the Second (2nd) Business Day prior to the expiration of the
applicable Interest Period. In the event that Borrower fails to provide the
Bank with the required written notice on the Second (2nd) Business Day prior to
the expiration of the applicable Interest Period for an As Offered Rate Loan,
Borrower shall be deemed to have given written notice that such Loan shall be
converted to a Prime Rate Loan on the last day of the applicable Interest
Period. Each written notice of any As Offered Rate Loan shall be irrevocable
and binding on Borrower and Borrower shall indemnify the Bank against any loss
or expense incurred by the Bank as a result of any failure by Borrower to
consummate such transaction calculated as set forth in Section 2.09(c) hereof.
(iv) Each Revolving Credit Line that is made
as, continued or converted into a CD Rate Loan shall be made on such Business
Day, in such amount (greater than or equal to One Million Dollars ($1,000,000),
provided, however, that any amount in excess of One Million Dollars
($1,000,000) may only be in increments of One Hundred Thousand Dollars
($100,000)), and with such Interest Period as Borrower shall request by written
notice received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania
time) on the Second (2nd) Business Day prior to the date of requested
disbursement of the requested CD Rate Loan. On each borrowing date, the Bank
shall make the proceeds of the CD Rate Loan available to Borrower at the Bank's
office in immediately available funds, no later than 12:00 noon (Pittsburgh,
Pennsylvania time). In addition, in the event that Borrower desires to
continue a CD Rate Loan for an additional Interest Period, Borrower shall
provide Bank with written notice thereof on the Second (2nd) Business Day prior
to the expiration of the applicable Interest Period. In the event that
Borrower fails to provide the Bank with the required written notice on the
Second (2nd) Business Day prior to the expiration of the applicable Interest
Period for a CD Rate Loan, Borrower shall be deemed to have given written
notice that such Loan shall be converted to a Prime Rate Loan on the last day
of the applicable Interest Period. Each written notice of any CD Rate Loan
shall be irrevocable and binding on Borrower and Borrower shall indemnify the
Bank against any loss or expense incurred by
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the Bank as the result of any failure by Borrower to consummate such
transaction calculated as set forth in Section 2.09(c) hereof.
(d) MAXIMUM PRINCIPAL BALANCE OF REVOLVING
CREDIT LOANS. The aggregate principal amount of all Revolving Credit Loans
outstanding shall not exceed the Revolving Credit Facility Commitment. The
Borrower agrees that if at any time the aggregate principal amount of all
Revolving Credit Loans outstanding exceeds the Revolving Credit Facility
Commitment ("Over Advance"), the Borrower shall promptly pay to the Bank such
amount as may be necessary to eliminate such Over Advance. If not sooner paid,
all of the Revolving Credit Loans, all unpaid accrued interest thereon, and all
other sums and costs incurred by Bank pursuant to this Agreement with respect
to the Revolving Credit Loans, shall be immediately due and payable on the
Revolving Credit Expiry Date, without notice, presentment or demand.
(e) EXTENSION OF REVOLVING CREDIT EXPIRY
DATE. On or before each annual anniversary of the date of this Agreement and
so long as no Event of Default has occurred and is continuing, the Bank will,
in the ordinary course of its business and in its sole and absolute discretion,
(i) determine whether to extend the Revolving Credit Expiry Date by one (1)
additional year, and (ii) advise the Borrower in writing of its decision. The
Borrower acknowledges that the Bank has no obligation whatsoever to the
Borrower to extend the Revolving Credit Expiry Date.
2.02 Term Loan.
----------
(a) TERM LOAN. Subject to the terms and
conditions of, and relying upon the representations and warranties set forth
in, this Agreement and the other Loan Documents, the Bank agrees to make a term
loan ("Term Loan") to the Borrower on the Closing Date in an aggregate
principal amount of Thirty Seven Million Dollars ($37,000,000).
(b) TERM LOAN NOTE. The obligation of the
Borrower to repay the unpaid principal amount of the Term Loan made to the
Borrower by the Bank and to pay interest on the unpaid principal amount thereof
shall be evidenced in part by the Term Loan Note of the Borrower, dated the
Closing Date, in substantially the form attached as Exhibit "B" to this
Agreement, with the blanks appropriately filled. The executed Term Loan Note
shall be delivered by the Borrower to the Bank on the Closing Date.
(c) MAKING THE TERM LOAN AND TERM LOAN RATE
OPTIONS.
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(i) On or before 10:00 a.m. (Pittsburgh,
Pennsylvania time) on the Second (2nd) Business Day prior to the Closing Date,
the Borrower shall advise the Bank of the portion of the Term Loan which shall
be made as a Libor Rate Loan(s) and the Interest Period(s) with respect
thereto; provided, however, that such Libor Rate Loan(s) shall only be made in
such amount(s) greater than or equal to Five Hundred Thousand Dollars
($500,000) and, provided further, that any amounts in excess of Five Hundred
Thousand Dollars ($500,000) may only be in increments of One Hundred Thousand
Dollars ($100,000). After the Closing Date, the Borrower may, subject to the
terms and conditions of this Agreement, convert all or a portion of the Term
Loan which is a Libor Rate Loan(s) to a Prime Rate Loan, As Offered Rate Loan
or Fixed Rate Loan as set forth in this Section 2.02(c). Any portion of the
Term Loan that is converted from either a Prime Rate Loan, As Offered Rate Loan
or Fixed Rate Loan into a Libor Rate Loan shall be converted, and shall begin
to accrue interest with reference to the Libor Rate, on such Business Day, in
such amount (greater than or equal to Five Hundred Thousand Dollars
($500,000.00) provided, however, that any amount in excess of Five Hundred
Thousand Dollars ($500,000) may only be in increments of One Hundred Thousand
Dollars ($100,000)), and with such Interest Period as the Borrower shall
request by written notice received by the Bank no later than 10:00 a.m.
(Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the
requested date of conversion into such Libor Rate Loan. In addition, in the
event that the Borrower desires to continue the portion of the Term Loan which
is a Libor Rate Loan for an additional Interest Period, the Borrower shall
provide the Bank with written notice thereof on or before 10:00 a.m.
(Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the
expiration of the applicable Interest Period. In the event that the Borrower
fails to provide the Bank with the required written notice prior to 10:00 a.m.
(Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the
expiration of the applicable Interest Period for a Libor Rate Loan, the
Borrower shall be deemed to have given notice that such portion of the Term
Loan shall be converted to a Prime Rate Loan on the last day of the applicable
Interest Period. Each written notice of any Libor Rate Loan shall be
irrevocable and binding on the Borrower and the Borrower shall indemnify the
Bank against any loss or expense incurred by the Bank as a result of any
failure by the Borrower to consummate such transaction calculated as set forth
in Section 2.09(c) hereof.
(ii) On or before 10:00 a.m. (Pittsburgh,
Pennsylvania time) on the Second (2nd) Business Day prior to the Closing Date,
the Borrower shall advise the Bank of the portion of the Term Loan which shall
be made as an As Offered Rate Loan(s) and
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the Interest Period(s) with respect thereto; provided, however, that such As
Offered Rate Loan(s) shall only be made in such amount(s) greater than or equal
to One Million Dollars ($1,000,000) and, provided further, that any amounts in
excess of One Million and 00/100 Dollars ($1,000,000.00) may only be in
increments of One Hundred Thousand Dollars ($100,000). After the Closing Date,
the Borrower may, subject to the terms and conditions of this Agreement,
convert all or a portion of the Term Loan which is an As Offered Rate Loan(s)
to a Prime Rate Loan, Libor Rate Loan, or Fixed Rate Loan as set forth in this
Section 2.02(c). Any portion of the Term Loan that is converted from either a
Prime Rate Loan, Libor Rate Loan, or Fixed Rate Loan into an As Offered Rate
Loan shall be converted, and shall begin to accrue interest with reference to
the As Offered Rate, on such Business Day, in such amount (greater than or
equal to One Million Dollars ($1,000,000) provided, however, that any amount in
excess of One Million Dollars ($1,000,000) may only be in increments of One
Hundred Thousand Dollars ($100,000)), and with such Interest Period as the
Borrower shall request by written notice received by the Bank no later than
10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day
prior to the requested date of conversion into such As Offered Rate Loan. In
addition, in the event that the Borrower desires to continue the portion of the
Term Loan which is an As Offered Rate Loan for an additional Interest Period,
the Borrower shall provide the Bank with written notice thereof on or before
10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day
prior to the expiration of the applicable Interest Period. In the event that
the Borrower fails to provide the Bank with the required written notice prior
to 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day
prior to the expiration of the applicable Interest Period for an As Offered
Rate Loan, the Borrower shall be deemed to have given notice that such portion
of the Term Loan shall be converted to a Prime Rate Loan on the last day of the
applicable Interest Period. Each written notice of any As Offered Rate Loan
shall be irrevocable and binding on the Borrower and the Borrower shall
indemnify the Bank against any loss or expense incurred by the Bank as a result
of any failure by the Borrower to consummate such transaction calculated as set
forth in Section 2.09(c) hereof.
(iii) On or before 10:00 a.m. (Pittsburgh,
Pennsylvania time) on the Second (2nd) Business Day prior to the Closing Date,
the Borrower shall advise the Bank of the portion of the Term Loan which shall
be made as a Fixed Rate Loan(s) and the Interest Period(s) with respect
thereto; provided, however, that such Fixed Rate Loan(s) shall only be made in
such amount(s) greater than or equal to One Million Dollars ($1,000,000) and,
provided further, that any amounts in excess of One Million Dollars
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($1,000,000) may only be in increments of One Hundred Thousand Dollars
($100,000). After the Closing Date, the Borrower may, subject to the terms and
conditions of this Agreement, convert all or a portion of the Term Loan which
is a Fixed Rate Loan(s) to a Prime Rate Loan, Libor Rate Loan or As Offered
Rate Loan as set forth in this Section 2.02(c). Any portion of the Term Loan
that is converted from either a Prime Rate Loan, Libor Rate Loan or As Offered
Rate Loan into a Fixed Rate Loan shall be converted, and shall begin to accrue
interest with reference to the Fixed Rate, on such Business Day, in such amount
(greater than or equal to One Million Dollars ($1,000,000) provided, however,
that any amount in excess of One Million Dollars ($1,000,000) may only be in
increments of One Hundred Thousand Dollars ($100,000)), and with such Interest
Period as the Borrower shall request by written notice received by the Bank no
later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd)
Business Day prior to the requested date of conversion into such Fixed Rate
Loan. In addition, in the event that the Borrower desires to continue the
portion of the Term Loan which is a Fixed Rate Loan for an additional Interest
Period, the Borrower shall provide the Bank with written notice thereof on or
before 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business
Day prior to the expiration of the applicable Interest Period. In the event
that the Borrower fails to provide the Bank with the required written notice
prior to 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Business Day prior
to the expiration of the applicable Interest Period for a Fixed Rate Loan, the
Borrower shall be deemed to have given notice that such portion of the Term
Loan shall be converted to a Prime Rate Loan on the last day of the applicable
Interest Period. Each written notice of any Fixed Rate Loan shall be
irrevocable and binding on the Borrower and the Borrower shall indemnify the
Bank against any loss or expense incurred by the Bank as a result of any
failure by the Borrower to consummate such transaction calculated as set forth
in Section 2.09(c) hereof.
(iv) On the Closing Date and until conversion,
if any, pursuant to the terms and conditions of this Agreement, the portion of
the Term Loan which is not a Libor Rate Loan, As Offered Rate Loan or Fixed
Rate Loan shall be a Prime Rate Loan. After the Closing Date, the Borrower
shall have the option, subject to the terms and conditions of this Agreement,
to convert a portion of the Term Loan which is a Prime Rate Loan to a Libor
Rate Loan, As Offered Rate Loan or Fixed Rate Loan as set forth in this Section
2.02(c). Any portion of the Term Loan that is converted from a Libor Rate
Loan, As Offered Rate Loan or Fixed Rate Loan into a Prime Rate Loan shall be
converted, and shall begin to accrue interest with reference to the Prime Rate,
on such Business Day and in such amount as the Borrower shall request by
written notice
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received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time)
on the Business Day of the requested conversion of such portion of the Term
Loan into a Prime Rate Loan.
(d) PAYMENTS OF PRINCIPAL AND MATURITY.
Commencing on October 1, 1996, and continuing on the first day of each January,
April, July and October thereafter through and including the Term Loan Expiry
Date, the Borrower shall make a principal payment in the amount of One Million
One Hundred Fifty Six Thousand Two Hundred Fifty and 00/100 Dollars
($1,156,250.00). All remaining unpaid principal, accrued interest and all
other sums and costs incurred by the Bank pursuant to this Agreement with
respect to the Term Loan shall be immediately due and payable on the Term Loan
Expiry Date without notice, presentment or demand.
2.03 Interest Rates.
---------------
(a) Subject to the terms and conditions of this Agreement,
the aggregate outstanding principal balance of the Revolving Credit Loans shall
be, at the option of Borrower, as selected pursuant to Section 2.01(c), (i)
Prime Rate Loans which shall bear interest at a rate per annum equal to the
Prime Rate, (ii) Libor Rate Loans which shall bear interest during each
Interest Period at a rate per annum equal to one percent (1.00%) in excess of
the Libor Rate for such Interest Period, (iii) As Offered Rate Loans which
shall bear interest during each Interest Period at a rate per annum equal to
the As Offered Rate for such Interest Period, or (iv) CD Rate Loans which shall
bear interest during each Interest Period at a rate per annum equal to one
percent (1.00%) in excess of the CD Rate for such Interest Period.
(b) Subject to the terms and conditions of this Agreement,
the aggregate outstanding principal balance of the Term Loan shall be, at the
option of Borrower, as selected pursuant to Section 2.02(c), (i) Prime Rate
Loans which shall bear interest at a rate per annum equal to the Prime Rate,
(ii) Libor Rate Loans which shall bear interest during each Interest Period at
a rate per annum equal to one and one quarter of one percent (1.25%) in excess
of the Libor Rate for such Interest Period, (iii) As Offered Rate Loans which
shall bear interest during each Interest Period at a rate per annum equal to
the As Offered Rate for such Interest Period or (iv) Fixed Rate Loans which
shall bear interest during each Interest Period at a rate per annum equal to
the Fixed Rate for such Interest Period.
2.04 INTEREST PAYMENTS. The Borrower shall pay to
the Bank interest on the unpaid principal balance of the aggregate outstanding
balance of the Revolving Credit Loans which are Prime
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Rate Loans on the first (1st) day of each January, April, July and October
during the period from the Closing Date to and including the Revolving Credit
Expiry Date. The Borrower shall pay to the Bank interest on the unpaid
principal balance of the Revolving Credit Loans which are Libor Rate Loans, As
Offered Rate Loans or CD Rate Loans on the earlier of (i) the last day of the
applicable Interest Period for such Loan or (ii) for such Loans with an
applicable Interest Period exceeding three (3) months, on the three (3) month
anniversary of each Loan during the period from the Closing Date to and
including the Revolving Credit Expiry Date. The Borrower shall pay to the Bank
interest on the portion of the unpaid principal balance of the Term Loan which
is a Prime Rate Loan, in arrears, on the first (1st) day of each January,
April, July and October during the period from the Closing Date to and
including the Term Loan Expiry Date. The Borrower shall pay to the Bank
interest on the portions of the unpaid principal balance of the Term Loan which
are Libor Rate Loans, As Offered Rate Loans or Fixed Rate Loans, in arrears, on
the earlier of (i) the last day of the applicable Interest Period for each such
Loan or (ii) for such Loans with an applicable Interest Period exceeding three
(3) months, on the three (3) month anniversary of each Loan during the period
from the Closing Date to and including the Term Loan Expiry Date. After
maturity of any part of the Loans (whether by acceleration or otherwise),
interest on such part of the Loans shall be immediately due and payable without
notice, presentment, or demand.
2.05 INTEREST AFTER DEFAULT; USURY. Whenever the
unpaid principal amount of the Loans or any portion thereof, accrued interest
thereon, any fees, or any other sums payable hereunder shall become due and
payable and remain unpaid (whether at maturity, upon the occurrence of an Event
of Default, by acceleration or otherwise) the amount thereof shall thereafter
until paid in full bear interest: (i) in the case of principal on a Prime Rate
Loan, at a rate per annum equal to two percent (2.00%) above the Prime Rate
then in effect, such interest rate to change automatically from time to time
effective as of the effective date of each change in the Prime Rate; and (ii)
in the case of principal on Libor Rate Loans, As Offered Rate Loans, CD Rate
Loans or Fixed Rate Loans, at a rate per annum equal to two percent (2.00%)
above the then current interest rate with respect to each such Loan during the
remainder of the Interest Period applicable to such Loan and, thereafter, in
accordance with clause (i) of this Section 2.05. In the event the rates of
interest provided for in this Section 2.05, or any other section of this
Agreement, are finally determined by any Official Body to exceed the maximum
rate of interest permitted by applicable usury or similar laws, their or
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its application will be suspended and there will be charged instead the maximum
rate of interest permitted by such laws.
2.06 LATE CHARGE. Upon the occurrence of an Event of
Default with respect to the payment of any installment of interest or principal
on the Notes for more than five (5) days after said installment becomes due, in
addition to making a payment of the installment due and any interest thereon at
the applicable default interest rate, the Borrower shall pay to Bank a late
charge in an amount equal to five percent (5%) of any such overdue installment.
2.07 FEES. The Borrower shall pay to Bank a
commitment fee on the unused portion of the Revolving Credit Facility
Commitment during the period from the Closing Date to the Revolving Credit
Expiry Date, payable quarterly in arrears beginning on October 1, 1996 and
continuing on the first (1st) day of each January, April, July and October
thereafter and on the Revolving Credit Expiry Date. Such fee shall be equal to
the amount by which Forty Million and 00/100 Dollars ($40,000,000.00) has
exceeded the average daily closing principal balance of the Revolving Credit
Loans during the preceding calendar quarter, multiplied by one-eighth of one
percent (0.125%), multiplied by a fraction, the numerator of which is the
actual number of days in such calendar quarter and the denominator of which is
360. In addition, the Borrower shall, on the Closing Date, pay to the Bank a
restructuring fee in the amount of Twenty-Five Thousand and 00/100 Dollars
($25,000.00).
2.08 ADJUSTMENT TO PRIME RATE; COMPUTATION OF
INTEREST AND FEES. In the event of any change in the Prime Rate, the rate of
interest upon each Prime Rate Loan shall be adjusted to immediately correspond
with such change; except any interest rate charged hereunder shall not exceed
the highest rate permitted by law. Interest on Loans, unpaid fees and other
sums payable hereunder shall be computed on the basis of a year of three
hundred sixty (360) days and paid for the actual number of days elapsed.
2.09 Additional Costs.
-----------------
(a) If, due to either (i) the introduction of, or any change
in, or in the interpretation of, any law or regulation or (ii) the compliance
with any guideline or request from any central bank or other governmental
authority (whether or not having the force of law), there shall be any increase
in the cost to, or reduction in income receivable by, the Bank of making,
funding or maintaining Loans (or commitments to make the Loans), then the
Borrower shall from time to time, upon demand by the Bank, pay to the Bank
additional amounts sufficient to reimburse such Bank for
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any such additional costs or reduction in income. A certificate of the Bank
submitted to the Borrower on or before the date such demand is made in good
faith as to the amount of such additional costs shall be conclusive and binding
for all purposes, absent manifest error. Upon notice from the Bank to the
Borrower within five (5) Business Days after the Bank notifies the Borrower of
any such additional costs pursuant to this Section 2.09(a), the Borrower may
either (A) prepay in full all Loans of any types so affected then outstanding,
together with interest accrued thereon to the date of such prepayment, or (B)
convert all Loans of any types so affected then outstanding into Loans of any
other type not so affected upon not less than four (4) Business Days' notice to
the Bank. If any such prepayment or conversion of any Libor Rate Loan, As
Offered Rate Loan, CD Rate Loan or Fixed Rate Loan occurs on any day other than
the last day of the applicable Interest Period for such Loan, the Borrower also
shall pay to the Bank such additional amounts as set forth in Section 2.09(c).
(b) If either (i) the introduction of, or any change in, or
in the interpretation of, any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and the Bank determines in good faith that the amount of
such capital is increased by or based upon the existence of the Loans (or
commitment to make the Loans) and other extensions of credit (or commitments to
extend credit) of similar type, then, upon demand by the Bank, the Borrower
shall pay to the Bank from time to time as specified by the Bank additional
amounts sufficient to compensate the Bank in the light of such circumstances,
to the extent that the Bank reasonably determines such increase in capital to
be allocable to the existence of the Bank's Loans (or commitment to make the
Loans). A certificate of the Bank in good faith submitted to the Borrower on
or before the date such demand is made as to such amounts shall be conclusive
and binding for all purposes, absent manifest error. Upon notice from the
Borrower to the Bank within five (5) Business Days after the Bank notifies the
Borrower of any such additional costs pursuant to this Section 2.09(b), the
Borrower may either (A) prepay in full all Loans of any types so affected then
outstanding, together with interest accrued thereon to the date of such
prepayment, or (B) convert all Loans of any types so affected then outstanding
into Loans of any other type not so affected upon not less than four (4)
Business Days' notice to the Bank. If any such prepayment or conversion of any
Libor Rate Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan occurs
on any day other than the last day of the applicable Interest Period for such
Loan, the Borrower also shall
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pay to the Bank such additional amounts as set forth in Section 2.09(c).
(c) If the Borrower shall prepay any Libor Rate
Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan on a day other than
the last day of the applicable Interest Period for such Loan (whether such
prepayment is permitted by Section 2.09 or 2.10, as a result of the failure by
Borrower to consummate a transaction after providing notice as set forth in
Sections 2.01(c)(ii), (iii) and (iv) and 2.02(c)(i,) (ii) and (iii), or
otherwise permitted by Bank or otherwise required under the terms of this
Agreement) (a "Funding Breakage Date"), the Borrower shall pay to the Bank an
amount (the "Funding Breakage Indemnity") determined by the Bank as follows:
(i) first, calculate the following amount: (A)
the principal amount of such Loans owing to the Bank which
shall be prepaid times (B) the greater of (x) zero or (y) the
rate of interest applicable to such principal amount on the
Funding Breakage Date minus the Treasury Rate as of the
Funding Breakage Date, times (c) the number of days from and
including the Funding Breakage Date to, but not including, the
last day of such Interest Period, times (d) 1/360;
(ii) the Funding Breakage Indemnity to be paid
by the Borrower to the Bank shall be the amount equal to the
present value as of the Funding Breakage Date (discounted at
the Treasury Rate as of such Funding Breakage Date, and
calculated on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed) of the amount described
in the preceding clause (i) (which amount described in the
preceding clause (i) is assumed for purposes of such present
value calculation to be payable on the last day of the
corresponding Interest Period).
Such Funding Breakage Indemnity shall be due and payable on demand, and the
Bank shall, upon making such demand, notify the Borrower of the amount so
demanded. In addition, the Borrower shall, on the due date for payment of any
Funding Breakage Indemnity, pay to the Bank an additional amount equal to
interest on such Funding Breakage Indemnity from the Funding Breakage Date to,
but not including, such date at the Prime Rate (calculated on the basis of a
year of 360 days and actual days elapsed). The amount payable to the Bank
under this Section 2.09(c) shall be determined in good faith by the Bank, and
such determination shall be conclusive absent manifest error.
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2.10 ILLEGALITY; IMPRACTICABILITY. Notwithstanding
any other provision contained in this Agreement, if on any date on which a
Libor Rateor CD Rate, as the case may be, would otherwise be set, the Bank
shall have in good faith determined (which determination shall be conclusive
absent manifest error) that (i) adequate and reasonable means do not exist for
ascertaining a Libor Rateor CD Rate, as the case may be, (ii) a contingency has
occurred which materially and adversely affects the interbank markets, or (iii)
the effective cost to the Bank of funding a proposed Libor Rate Loan or CD Rate
Loan exceeds the Libor Rate or CD Rate respectively, then (y) on notice thereof
by the Bank to the Borrower, the obligation of the Bank to make or continue a
Loan of a type so affected or to convert any type of Loan into a Loan of a type
so affected shall terminate and the Bank shall thereafter be obligated to make
Prime Rate Loans whenever any written notice requests any type of Loans so
affected and (z) upon demand therefor by the Bank to the Borrower, the Borrower
shall either (i) forthwith prepay in full all Loans of the type so affected
then outstanding, together with interest accrued thereon or (ii) request that
the Bank, upon four (4) Business Days' notice, convert all Loans of the type so
affected then outstanding into Loans of a type not so affected. If any such
prepayment or conversion of any Libor Rate Loan or CD Rate Loan, as the case
may be, occurs on any day other than the last day of the applicable Interest
Period for such Loan, the Borrower also shall pay to the Bank such additional
amounts as set forth in Section 2.09(c).
2.11 PAYMENTS. All payments to be made with respect
to principal, interest, fees or other amounts due from the Borrower under this
Agreement or under the Notes are payable at 12:00 noon (Pittsburgh,
Pennsylvania time), on the day when due, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived, and an action
for the payments will accrue immediately. All such payments must be made to
the Bank at its Office in U.S. Dollars and in funds immediately available at
such Office, without setoff, counterclaim or other deduction of any nature.
The Bank may in its discretion deduct such payments from the Borrower's demand
or deposit accounts with Bank on the due date. All such payments shall be
applied at the option of the Bank to accrued and unpaid interest, outstanding
principal and other sums due under this Agreement in such order as the Bank, in
its sole discretion, shall elect. All such payments shall be made net of,
without deduction or offset, and free and clear of any and all present and
future taxes, levies, deductions, charges, and withholdings and all liabilities
with respect thereto, excluding income and franchise taxes imposed on the Bank
under the laws of the United States or any state or political subdivision
thereof. If the Borrower is compelled by law to deduct any such taxes or
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levies (other than such excluded taxes) or to make any such other deductions,
charges, or withholdings, it will pay such additional amounts as may be
necessary in order that the net payments after such deduction, and after giving
effect to any United States federal or state income taxes required to be paid
by the Bank in respect of such additional amounts, shall equal the amount of
such payment without such tax, deduction or withholding.
2.12 OPTIONAL PREPAYMENTS OF TERM LOAN. Subject to
the provisions of this Section 2.12, the Borrower shall have the right, at its
option, to prepay the Term Loan in whole or in part at any time; provided,
however, that any portion of the Term Loan which is a Libor Rate Loan or an As
Offered Rate Loan may only be converted or prepaid hereunder at the end of the
Interest Period for such Loan. All prepayments of any portion of the Term Loan
shall be applied to the unpaid installments of principal in the reverse order
of their scheduled maturities. For any prepayment of any portion of the Term
Loan, the Borrower shall give the Bank written notice (which shall be
irrevocable) of each prepayment not later than 10:00 a.m. (Pittsburgh,
Pennsylvania time) on the Second (2nd) Business Day immediately preceding the
date of prepayment, specifying the aggregate amount of principal to be prepaid
and the prepayment date. Following receipt of the notice as specified in the
preceding sentence, the principal amount specified therein, together with
accrued unpaid interest thereon to the date of such prepayment, shall be due
and payable on such prepayment date without notice, presentment or demand. In
addition, in the event that any portion of the Term Note which is being prepaid
is a Fixed Rate Loan, the Bank may deliver to the Borrower written notice of
the amount determined by the Bank to be the difference between (a) the present
value of the interest payments that would have been paid in the future to the
Bank by the Borrower on such prepaid portion of principal accruing at the Fixed
Rate, but for such prepayment and (b) the present value of the interest
payments that would be paid in the future to the Bank at the United States
Treasury Rate if, on or about the date of prepayment, the Bank made a
hypothetical investment of the prepaid portion of principal accruing at the
Fixed Rate in United States Treasury Securities maturing on or about the date
that the prepaid portion of principal would have matured but for such
prepayment and bearing interest accruing from the date of prepayment, payable
on each date on which Borrower, but for such prepayment, would have paid
interest on the prepaid portion of principal. As used herein, "United States
Treasury Rate" shall mean a rate of interest per annum (rounded upward to the
next higher whole multiple of 1/100% if such rate is not such a multiple),
equal to the annual yield the Bank could obtain by purchasing on the date of
prepayment United States Treasury Securities with semi-annual interest
payments, maturing on
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or about the date on which the prepaid portion of principal would have matured
in amounts approximately equal to the prepaid portion. The amounts specified
in such notice shall be due and payable by the Borrower to the Bank upon
delivery of such notice.
2.13 LOAN ACCOUNT. The Bank will open and maintain
on its books a loan account (the "Loan Account") for the Borrower with respect
to Loans made, repayments, prepayments, the computation and payment of interest
and fees and the computation and final payment of all other amounts due and
sums paid to the Bank under this Agreement. Except in the case of manifest
error in computation, the Loan Account for the Borrower will be conclusive and
binding on the Borrower as to the amount at any time due to the Bank from the
Borrower under this Agreement or the Notes.
2.14 SECURITY. The Bank hereby releases, discharges
and terminates all security interests, liens and other encumbrances created
pursuant to the security documents listed on Schedule 2.14 to this Agreement
(the "Prior Security Documents"), and such Prior Security Documents are hereby
terminated and are of no further force and effect. Notwithstanding anything to
the contrary contained in the preceding sentence, all indemnity and expense
obligations contained in the Prior Security Documents shall survive the
termination of, and the release of the security interests and mortgages created
under, the Prior Security Documents. The Bank agrees to, within thirty (30)
days after appropriate UCC-3 termination statements and mortgage satisfaction
pieces are prepared by the Borrower's counsel and received by the Bank, execute
appropriate UCC-3 termination statements and mortgage satisfaction pieces to,
at Borrower's sole cost and expense and upon the appropriate filing by the
Borrower or its counsel, release, discharge and terminate of record all Liens
created under the Prior Security Documents. Bank acknowledges that, as of the
Closing Date, it is not aware of any indemnity or expense obligation due and
payable by the Borrower under the Prior Security Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank that:
3.01 ORGANIZATION AND QUALIFICATION. The Borrower
and each of its United States Subsidiaries are corporations, partnerships or
limited partnerships, as the case may be, duly organized, validly existing and
in good standing under their
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respective jurisdictions of incorporation. The Borrower and each of its United
States Subsidiaries are duly qualified or licensed to do business as a foreign
corporation and are in good standing in all jurisdictions in which the
ownership of their properties or the nature of their activities or both makes
such qualification or licensing necessary, except only to the extent that the
failure to be so qualified or licensed would not have a Material Adverse
Effect.
3.02 POWER TO CARRY ON BUSINESS; LICENSES. The
Borrower and each of its United States Subsidiaries have all requisite
corporate power and authority to own and operate their properties and to carry
on their business as now conducted and as presently planned to be conducted.
The Borrower and each of its United States Subsidiaries have all licenses,
permits, consents and governmental approvals or authorizations necessary to
carry on their business as now conducted or as presently planned to be
conducted except only for such licenses, permits, consents and governmental
approvals or authorizations the failure of which to obtain would not have a
Material Adverse Effect.
3.03 EXECUTION AND BINDING EFFECT. This Agreement,
the Notes, and the other Loan Documents to which the Borrower is a party have
been duly authorized by all appropriate corporation action of the Borrowerand
have been duly and validly executed and delivered by the Borrower, and each
such agreement constitutes a legal, valid and binding obligation of the
Borrower, enforceable against Borrower in accordance with its terms.
3.04 ABSENCE OF CONFLICTS. Neither the execution and
delivery of this Agreement or the other Loan Documents by the Borrower, nor the
consummation of the transactions contemplated in any of them by the Borrower,
nor the performance of or compliance with their terms and conditions by the
Borrower will (a) violate any Law, (b) conflict with or result in a breach of
or a default under the articles of incorporation or by-laws of the Borrower,
(c) conflict with or result in a breach or a default under any material
agreement or instrument to which the Borrower or any of its Subsidiaries is a
party or by which any of them or any of their material properties (now owned or
acquired in the future) may be subject or bound or (d) result in the creation
or imposition of any Lien upon any property (owned or leased) of the Borrower
or any of its Subsidiaries.
3.05 AUTHORIZATIONS AND FILINGS. No authorization,
consent, approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Official Body is or
will be necessary or advisable in
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connection with the execution and delivery of this Agreement or the other Loan
Documents by the Borrower, the consummation by the Borrower of the transactions
contemplated in any of them, or the performance of or compliance by the
Borrower with the terms and conditions of this Agreement or the other Loan
Documents.
3.06 TITLE TO PROPERTY. The Borrower and each of its
Subsidiaries has good and marketable title in fee simple to all real property
and good and marketable title to all other property purported to be owned by
them, including that reflected in the most recent balance sheet referred to in
Section 3.07 of this Agreement or submitted pursuant to Section 5.01(a) of this
Agreement (except as sold or otherwise disposed of in the ordinary course of
business), subject only to Liens not forbidden by Section 6.01 of this
Agreement.
3.07 Financial Statements.
---------------------
(a) The Borrower has delivered to the Bank a
Consolidated balance sheet and related statements of income, cash flow and
shareholders' equity of the Borrower and its Subsidiaries for the fiscal year
ending August 31, 1995, as audited by S.R. Snodgrass A.C. without
qualification. Such financial statements (including the notes) present fairly
the Consolidated financial position of the Borrower and its Subsidiaries as of
the end of such fiscal period and the results of their operations and their
cash flow for the fiscal period then ended, all in accordance with GAAP applied
consistently with the audited financial statements for the preceding fiscal
year.
(b) The Borrower has delivered to the Bank
internally prepared Consolidated balance sheets and related statements of
income and cash flow of the Borrower and its Subsidiaries for the fiscal
quarters ending November 30, 1995, February 29, 1996 and May 31, 1996. Such
financial statements provided by the Borrower present fairly the financial
position of the Borrower and its Subsidiaries as of the end of each period and
the results of their operations and their cash flow for each period, all in
conformity with GAAP (except that such financial statements do not contain all
of the footnote disclosure required by GAAP), subject to year end adjustments,
applied on a basis consistent with that of the preceding fiscal year's audited
financial statements.
3.08 TAXES. All tax returns required to be filed by
the Borrower and each Subsidiary have been properly prepared, executed and
filed. All taxes, assessments, fees and other governmental charges upon the
Borrower, its Subsidiaries or upon
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any of their properties, income, sales or franchises which are due and payable
have been paid other than those not yet payable without premium or penalty and
those contested with due diligence in good faith without the incurrence of any
Lien against the Borrower which would have a Material Adverse Effect. The
reserves and provisions for taxes on the books of the Borrower and its
Subsidiaries are adequate for all open years and for their current fiscal
period. Neither the Borrower nor any Subsidiary knows of any proposed
additional assessment or basis for any assessment for additional taxes (whether
or not reserved against).
3.09 LITIGATION. Except as set forth in the
Borrower's annual report on Form 10-K for the fiscal year ended August 31, 1995
(the "1995 Form 10-K"), there is no pending, or to the best knowledge of
Borrower and its Subsidiaries, contemplated or threatened, action, suit or
proceeding by or before any Official Body against or affecting the Borrower or
its Subsidiaries, at law or equity, which, if adversely decided, would have a
Material Adverse Effect.
3.10 COMPLIANCE WITH LAWS. Neither the Borrower nor
any Subsidiary is subject to any material contingent liability on account of
any Law or in violation of any Law which would have a Material Adverse Effect.
3.11 PENSION PLANS. (a) Each Plan has been and will
be maintained and funded in accordance with its terms and with all provisions
of ERISA and other applicable laws; (b) no Reportable Event as defined in ERISA
has occurred and is continuing with respect to any Plan; (c) no liability to
the PBGC has been incurred with respect to any Plan, other than for premiums
due and payable; (d) no Plan has been terminated, no proceedings have been
instituted to terminate any Plan, and there exists no intent to terminate or
institute proceedings to terminate any Plan; (e) no withdrawal, either complete
or partial, has occurred or commenced with respect to any multi-employer Plan,
and there exists no intent to withdraw either completely or partially from any
multi-employer Plan; and (f) there has been no cessation of, and there is no
intent to cease, operations at a facility or facilities where such cessation
could reasonably be expected to result in a separation from employment of more
than 20% of the total number of employees who are participants under a Plan.
3.12 PATENTS, LICENSES, FRANCHISES. The Borrower and
each Subsidiary owns or possesses the right to use all of the material patents,
trademarks, service marks, trade names, copyrights, licenses, franchises and
permits and rights with respect to the foregoing necessary to own and operate
their
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properties and to carry on their business as presently conducted and presently
planned to be conducted without conflict with the rights of others.
3.13 ENVIRONMENTAL MATTERS. Except as set forth in
Schedule 3.13 hereof, (a) neither the Borrower nor any of its United States
Subsidiaries are in violation of The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, The Resource Conservation and Recovery Act of
1976, as amended by the Hazardous and Solid Waste Amendments of 1984, The Clean
Water Act, The Toxic Substances Control Act and The Clean Air Act or any rule
or regulation promulgated pursuant to any of the foregoing statutes, or any
other federal, state or local environmental law, statute, rule, regulation or
ordinance applicable to the Borrower, any Subsidiary or their respective
properties (all of the foregoing are sometimes collectively referred to in this
Section 3.13 as the "Environmental Laws") which would have a Material Adverse
Effect;
(b) Neither the Borrower, its United States
Subsidiaries nor any of their Affiliates, directors, officers, employees,
agents or independent contractors have arranged, by contract, agreement or
otherwise, (i) for the disposal or treatment of, or (ii) with a transporter for
the transport, disposal or treatment of, any Hazardous Substance (as defined by
CERCLA, as amended), owned, used or possessed by the Borrower or any
Subsidiary, whether or not to a location identified by the Environmental
Protection Agency (the "EPA") on the National Priorities List, 40 C.F.R. Part
300, (or proposed by the EPA in the Federal Register for listing on such
National Priorities List) or identified under any corresponding state statute
or regulation concerning cleanup of waste disposal sites (a "State Superfund
Law") in violation of any applicable Environmental Laws which would have a
Material Adverse Effect;
(c) To the best knowledge of the Borrower,
no predecessor of the Borrower has arranged by contract, agreement or
otherwise, (i) for the disposal or treatment of, or (ii) with a transporter for
the transport, disposal or treatment of, any Hazardous Substance, owned, used
or possessed by the predecessor in violation of any applicable Environmental
Laws which would have a Material Adverse Effect;
(d) To the best knowledge of the Borrower,
neither the Borrower, its United States Subsidiaries nor any of their
Affiliates "owned" or "operated" any "facility" at the time any waste
containing Hazardous Substances was disposed of at such
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facility within the meaning of CERCLA, as amended, or any State Superfund Law
in violation of any applicable Environmental Laws which would have a Material
Adverse Effect.
3.14 PROCEEDS. The Borrower will use the proceeds of
the Revolving Credit Loans for general corporate purposes and for acquisitions
of businesses operating in lines of business similar to those described in the
1995 Form 10-K. The Borrower will use the proceeds of the Term Loan to repay
Indebtedness of the Borrower to the Bank under the Prior Loan Agreement.
3.15 MARGIN STOCK. The Borrower will make no
borrowing under this Agreement for the purpose of buying or carrying any
"margin stock", as such term is used in Regulation U and related regulations of
the Board of Governors of the Federal Reserve System, as amended from time to
time. Neither the Borrower nor any Subsidiary owns any "margin stock".
Neither the Borrower nor any Subsidiary is engaged in the business of extending
credit to others for such purpose, and no part of the proceeds of any borrowing
under this Agreement will be used to purchase or carry any "margin stock" or to
extend credit to others for the purpose of purchasing or carrying any "margin
stock".
3.16 NO EVENT OF DEFAULT: COMPLIANCE WITH MATERIAL
AGREEMENTS. Except as set forth on Schedule 3.16 to this Agreement, no event
has occurred and is continuing and no condition exists which constitutes an
Event of Default or Potential Default. Neither the Borrower nor any of its
Subsidiaries are (i) in violation of any term of any charter instrument or
bylaw or (ii) in default under any material agreement, lease or instrument to
which the Borrower or its Subsidiaries are a party or by which they or any of
their properties (owned or leased) may be subject or bound.
3.17 NO MATERIAL ADVERSE CHANGE. Since May 31, 1996,
there has been no Material Adverse Change.
3.18 SUBSIDIARIES. Schedule 3.18 to this Agreement
sets forth each Subsidiary of the Borrower, the authorized and outstanding
capital stock (or other equity interest) of such Subsidiary and the outstanding
capital stock (or other equity interest) of such Subsidiary which is owned by
the Borrower or any of its Subsidiaries.
3.19 LABOR CONTROVERSIES. There are no labor
controversies pending or, to the best knowledge of the Borrower, threatened,
against the Borrower or any of its Subsidiaries which, if adversely determined,
would have a Material Adverse Effect.
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3.20 SOLVENCY. After the making of the Loans, the
Borrower (a) will be able to pay its debts as they become due, (b) will have
funds and capital sufficient to carry on its business and all businesses in
which it is about to engage, and (c) will own property having a value at both
fair valuation and at fair saleable value in the ordinary course of Borrower's
business greater than the amount required to pay its debts as they become due.
The Borrower was not insolvent immediately prior to the date of this Agreement
and will not be rendered insolvent by the execution and delivery of this
Agreement, the borrowing hereunder and/or the consummation of any transactions
contemplated by this Agreement.
3.21 ACCURATE AND COMPLETE DISCLOSURE. No
representation or warranty made by the Borrower under this Agreement, the other
Loan Documents or the schedules and exhibits attached thereto, and no statement
made by the Borrower in any financial statement (furnished pursuant to Sections
3.07 or 5.01 or otherwise), certificate, report, exhibit or document furnished
by the Borrower to the Bank pursuant to or in connection with this Agreement is
false or misleading in any material respect (including by omission of material
information necessary to make such representation, warranty or statement not
misleading). The Borrower is not aware of any facts which it has not disclosed
to the Bank in writing which materially and adversely affects, or would
materially and adversely affect, the assets, business, operations or financial
condition of the Borrower or any Subsidiary or the ability of the Borrower to
perform its obligations under this Agreement and the other Loan Documents.
ARTICLE IV
CONDITIONS OF LENDING
The obligation of the Bank to make any Loan is subject to the
satisfaction of the following conditions:
4.01 REPRESENTATIONS AND WARRANTIES: EVENTS OF
DEFAULT AND POTENTIAL DEFAULTS. The representations and warranties contained
in Article III shall be true and correct on and as of the date of each Loan
with the same effect as though made on and as of each such date, except to the
extent that any such representation or warranty (including any Schedule
referred to therein) relates specifically to a prior date and except to the
extent that any such representation and warranty (including any Schedule
referred to therein) is not true and correct in any material respect as a
result of activities or actions permitted to be taken by the Borrower or any of
its Subsidiaries pursuant to Article VI hereof.
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On the date of each Loan, no Event of Default and no Potential Default shall
have occurred and be continuing or exist or shall occur or exist after giving
effect to the Loan to be made on such date. Each request by the Borrower for
any Loan shall constitute a representation and warranty by the Borrower that
the conditions set forth in this Section 4.01 have been satisfied as of the
date of such request. Failure of the Bank to receive notice from the Borrower
to the contrary before such Loan is made shall constitute a further
representation and warranty by the Borrower that the conditions referred to in
this Section 4.01 have been satisfied as of the date such Loan is made.
4.02 PROCEEDINGS AND INCUMBENCY. On the Closing
Date, the Borrower shall have delivered to the Bank a certificate, in form and
substance reasonably satisfactory to the Bank, dated the Closing Date and
signed on behalf of the Borrower by the Secretary or an Assistant Secretary of
the Borrower, certifying as to (a) true copies of the articles of incorporation
and bylaws of the Borrower as in effect on such date, (b) true copies of all
corporate action taken by the Borrower relative to this Agreement, the Notes
and the other Loan Documents including, but not limited to, that described in
Section 3.03 of this Agreement, and (c) the names, true signatures and
incumbency of the officers of the Borrower authorized to execute and deliver
this Agreement, the Notes and the other Loan Documents. The Bank may
conclusively rely on each such certificate unless and until a later certificate
revising the prior certificate has been furnished to the Bank.
4.03 AGREEMENT AND NOTES. On the Closing Date, this
Agreement and the Notes, satisfactory in terms, form and substance to the Bank,
shall have been executed and delivered by the Borrower to the Bank.
4.04 OPINION OF COUNSEL. On the Closing Date, there
shall have been delivered to the Bank a written opinion, dated the Closing
Date, of counsel to the Borrower, in form and substance reasonably satisfactory
to Bank and its counsel.
4.05 OTHER DOCUMENTS AND CONDITIONS. On or before the
Closing Date, the following documents and conditions shall have been delivered
to Bank or satisfied by or on behalf of the Borrower:
(a) GOOD STANDING AND TAX LIEN CERTIFICATES.
A good standing certificate of the Borrower certifying to the good standing and
corporate status of the Borrower, good standing/foreign qualification
certificates from other jurisdictions in which the Borrower is qualified to do
business and
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tax lien certificates of the Borrower from each jurisdiction in which the
Borrower is qualified to do business.
(b) FINANCIAL STATEMENTS. Financial
statements as described in Section 3.07 of this Agreement.
(c) INSURANCE. Evidence, in form and
substance satisfactory to the Bank, that the business and all assets of the
Borrower and each of its Subsidiaries are adequately insured and that the Bank
is entitled to thirty (30) days notice of cancellation and modification of such
insurance policies.
(d) LIEN SEARCH. Copies of record searches
(including UCC searches, judgment, tax and other lien searches) evidencing that
no Liens exist against the Borrower or any of its Subsidiaries except those
Liens permitted by Section 6.01 of this Agreement.
(e) NO MATERIAL ADVERSE CHANGE. No Material
Adverse Change shall have occurred with respect to the Borrower since May 31,
1996.
(f) OTHER DOCUMENTS AND CONDITIONS. Such
other documents and conditions as may be required to be submitted to the Bank
by the terms of this Agreement or of any Loan Document or set forth on the
Closing Checklist with respect to the transaction contemplated by this
Agreement.
4.06 DETAILS PROCEEDINGS AND DOCUMENTS. All legal
details and proceedings in connection with the transactions contemplated by
this Agreement shall be satisfactory to the Bank and the Bank shall have
received all such counterpart originals or certified or other copies of such
documents and proceedings in connection with such transactions, in form and
substance reasonably satisfactory to the Bank, as the Bank may from time to
time reasonably request.
4.07 FEES AND EXPENSES. The Borrower shall have paid
all reasonable fees and charges as required for the Closing and relating to the
Closing, including reasonable legal fees, closing costs, filing and notary fees
and any other similar matters pertinent to the Closing.
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ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants to the Bank as follows:
5.01 Reporting and Information Requirements.
---------------------------------------
(a) ANNUAL AUDITED REPORTS. As soon as
practicable, and in any event within one hundred twenty (120) days after the
close of each fiscal year of the Borrower, the Borrower will furnish to the
Bank Consolidated audited statements of income, cash flow and shareholders'
equity of the Borrower and its Subsidiaries for such fiscal year and a
Consolidated audited balance sheet of the Borrower and its Subsidiaries as of
the close of such fiscal year, and notes to each, all in reasonable detail,
setting forth in comparative form the corresponding figures for the preceding
fiscal year, prepared in accordance with GAAP applied on a basis consistent
with that of the preceding fiscal year (except for changes in application in
which such accountants concur) with such statements and balance sheet to be
certified by independent certified public accountants of recognized standing
selected by the Borrower and satisfactory to the Bank. The certificate or
report of such accountants shall be free of exceptions or qualifications not
acceptable to the Bank and shall in any event contain a written statement of
such accountants substantially to the effect that such accountants examined
such statements and balance sheet in accordance with generally accepted
auditing standards.
(b) QUARTERLY REPORTS. As soon as
practicable, and in any event within sixty (60) days after the close of each
fiscal quarter of the Borrower during the term of this Agreement, the Borrower
will furnish to the Bank Consolidated statements of income and cash flow for
the Borrower and its Subsidiaries for such quarter and for the portion of the
fiscal year to the end of such quarter, and a Consolidated balance sheet of the
Borrower and its Subsidiaries as of the close of such quarter, all in
reasonable detail. All such statements and balance sheets shall be prepared by
the Borrower and certified by the President or the Chief Financial Officer of
the Borrower as presenting fairly the financial position of the Borrower and
its Subsidiaries as of the end of such quarter and the results of their
operations for such periods, subject to year end adjustment, in conformity with
GAAP (except that such financial statements do not contain all footnote
disclosure required by GAAP) applied in a manner consistent with that of the
most recent audited financial statements furnished to the Bank.
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(c) QUARTERLY COMPLIANCE CERTIFICATE. Each
set of statements and balance sheets delivered pursuant to Sections 5.01(a) and
5.01(b) of this Agreement shall be accompanied by a compliance certificate,
substantially in the form of Exhibit C attached hereto, executed by the
President or Chief Financial Officer of the Borrower, stating that no Event of
Default or Potential Default exists and that the Borrower is in compliance with
the financial covenants set forth in Section 5.13 of this Agreement. Such
certificate shall include all figures necessary to calculate the Borrower's
compliance with such financial covenants. If an Event of Default or Potential
Default has occurred and is continuing or exists, such certificate shall
specify in detail the nature and period of existence of the Event of Default or
Potential Default and any action taken or contemplated to be taken by the
Borrower.
(d) FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. As soon as practicable, and in any event within ten (10) days
after the filing thereof, the Borrower shall furnish to the Bank a copy of (i)
each proxy statement or report filed by the Borrower with the United States
Securities and Exchange Commission (the "SEC") under the Securities Exchange
Act of 1934, as amended, and (ii) each registration statement (except
registration statements on Form S-8) filed by the Borrower with the SEC under
the Securities Act of 1933, as amended.
(e) AUDIT REPORTS. Promptly upon receipt
thereof, the Borrower will deliver to the Bank one copy of each other report
submitted to the Borrower by its independent accountants, including comment or
management letters, in connection with any annual, interim or special audit
report made by them of the Borrower or its books and records.
(f) VISITATION: AUDITS. The Borrower will
permit such persons as the Bank may designate to visit and inspect any of the
properties of the Borrower or its Subsidiaries, to examine, and to make copies
and extracts from, the books and records of the Borrower and its Subsidiaries
and to discuss their affairs with their officers, employees and independent
accountants upon reasonable prior notice and during normal business hours. The
Borrower authorizes the officers, employees and independent accountants for the
Borrower and its Subsidiaries to discuss with the Bank the affairs of the
Borrower and its Subsidiaries. The Bank agrees to enter into customary
confidentiality agreements in form and substance reasonably satisfactory to
Bank in connection therewith.
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(g) NOTICE OF EVENT OF DEFAULT. Promptly
upon becoming aware of an Event of Default or Potential Default, the Borrower
will give the Bank notice of the Event of Default or Potential Default,
together with a written statement of the President or Chief Financial Officer
of the Borrower setting forth the details of the Event of Default or Potential
Default and any action taken or contemplated to be taken by the Borrower.
(h) NOTICE OF MATERIAL ADVERSE CHANGE.
Promptly upon becoming aware thereof, the Borrower will give the Bank notice by
telephone or telecopier (with written confirmation sent on the same or next
Business Day) with respect to any Material Adverse Change or any development or
occurrence which would have a Material Adverse Effect.
(i) FURTHER INFORMATION. The Borrower will
promptly furnish to the Bank such other information relating to the Borrower
and its Subsidiaries, and in such form, as the Bank may reasonably request from
time to time.
5.02 PRESERVATION OF EXISTENCE AND FRANCHISES. The
Borrower and each of its Subsidiaries will maintain their respective corporate
existences, rights and franchises in full force and effect in their respective
jurisdictions of incorporation. The Borrower and each of its Subsidiaries will
qualify and remain qualified as a foreign corporation in each jurisdiction in
which the ownership of their properties or the nature of their activities or
both makes such qualification necessary except only to the extent that the
failure to be so qualified would not have a Material Adverse Effect.
5.03 INSURANCE. The Borrower and each of its
Subsidiaries will maintain with financially sound and reputable insurers
insurance with respect to their properties and business and against such
liabilities, casualties and contingencies and of such types and in such amounts
as is reasonably satisfactory to the Bank and as is customary in the case of
corporations or other entities engaged in the same or similar business or
having similar properties similarly situated. The Borrower and each of its
Subsidiaries will cause the Bank to be provided with thirty (30) days advance
notice of the termination of any such policy of insurance.
5.04 MAINTENANCE OF PROPERTIES. The Borrower and
each of its Subsidiaries will maintain or cause to be maintained in good
repair, working order and condition, the properties now or in the future owned,
leased or otherwise possessed by each of them and shall make or cause to be
made all needful and proper repairs,
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renewals, replacements and improvements to the properties so that the business
carried on in connection with the properties may be properly and advantageously
conducted at all times except only to the extent that the failure to do so
would not have a Material Adverse Effect.
5.05 PAYMENT OF LIABILITIES. The Borrower and each
of its Subsidiaries will pay or discharge:
(a) on or prior to the date on which a
premium or penalty attaches, all taxes, assessments, fees and other
governmental charges or levies imposed upon them or any of their respective
properties, income, sales or franchises other than those contested with due
diligence in good faith without the incurrence of any Lien which would have a
Material Adverse Effect;
(b) on or prior to the date when due, all
lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and
other like persons which, if unpaid, would result in the creation of a Lien
upon any of their property which would have a Material Adverse Effect;
(c) on or prior to the date when due, all
other lawful claims which, if unpaid, would result in the creation of a Lien
upon any of their property which would have a Material Adverse Effect; and
(d) all other current liabilities so that
none is due more than one hundred twenty (120) days after the due date for each
liability, except current liabilities which are subject to good faith dispute
and as to which the Borrower or such Subsidiary has created adequate reserves
on its books.
5.06 FINANCIAL ACCOUNTING PRACTICES. The Borrower
and each of its Subsidiaries will make and keep books, records and accounts
which, in reasonable detail, accurately and fairly reflect their respective
transactions and dispositions of assets and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with management's general or specific
authorization, (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP and (ii) to
maintain accountability for assets, (c) to ensure access to assets is permitted
only in accordance with management's general or specific authorization and (d)
to ensure the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
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5.07 COMPLIANCE WITH LAWS. The Borrower and each of
its Subsidiaries shall comply with all applicable Laws except only to the
extent that the failure to do so would not have a Material Adverse Effect.
5.08 PENSION PLANS. The Borrower and each of its
Subsidiaries shall (a) keep in full force and effect any and all Plans which
are presently in existence or may, from time to time, come into existence under
ERISA, unless such Plans can be terminated without material liability to the
Borrower or any Subsidiary in connection with such termination; (b) make
contributions to each of their Plans in a timely manner and in a sufficient
amount to comply with the requirements of ERISA; (c) comply with all material
requirements of ERISA which relate to such Plans so as to preclude the
occurrence of any Reportable Event, Prohibited Transaction (other than a
Prohibited Transaction subject to an exemption under ERISA) or material
accumulated funding deficiency as such term is defined in ERISA; and (d) notify
the Bank immediately upon receipt by the Borrower or any Subsidiary of any
notice of the institution of any proceeding or other action which may result in
the termination of any Plan. The Borrower shall deliver to the Bank, promptly
after the filing or receipt thereof, copies of all reports or notices which the
Borrower or any Subsidiary files or receives under ERISA with respect to the
Plans with or from the Internal Revenue Service, the PBGC, or the U.S.
Department of Labor, other than reports or notices which do not materially or
adversely affect the Borrower, any Subsidiary, their businesses, assets,
financial condition, or the ability of the Borrower to perform its respective
obligations under this Agreement.
5.09 USE OF PROCEEDS. Borrower shall use the
proceeds of the Loans for the purposes set forth in Section 3.14 hereof.
5.10 CONTINUATION OF AND CHANGE IN BUSINESS. The
Borrower and its Subsidiaries will continue to engage in the business and
activities described in the 1995 Form 10-K and the Borrower and its
Subsidiaries will not engage in any other business or activity without the
prior written consent of the Bank, which consent shall not be unreasonably
withheld or delayed.
5.11 LIEN SEARCHES. The Bank may, but shall not be
obligated to, conduct lien searches of the Borrower and its Subsidiaries and
their assets and properties on an annual basis and at such other times as the
Bank, in its reasonable discretion, may determine to be necessary. The
Borrower shall reimburse the Bank for the Bank's reasonable out-of-pocket costs
and expenses in connection with such lien searches.
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5.11 FURTHER ASSURANCES. The Borrower, at its own
cost and expense, will cause to be promptly and duly taken, executed,
acknowledged and delivered all further acts, documents and assurances as the
Bank may from time to time reasonably request in order to more effectively
carry out the intent and purposes of this Agreement and the transactions
contemplated by this Agreement.
5.12 OWNERSHIP OF STOCK IN SUBSIDIARIES. The
Borrower shall, directly or through its Subsidiaries, maintain an ownership
interest in each of its Subsidiaries equal to the percentage ownership interest
set forth on Schedule 3.18 hereto except as otherwise permitted by Sections
6.04 and 6.05 hereof.
5.13 FINANCIAL COVENANTS. The following financial
covenants with respect to the Borrower shall apply:
(a) TANGIBLE NET WORTH. From the date
hereof until August 31, 1996, the Borrower shall maintain a Tangible Net Worth
not less than Forty Five Million and 00/100 Dollars ($45,000,000.00). On
September 1, 1996 and, at all times thereafter, during the term of this
Agreement, the Borrower shall maintain a Tangible Net Worth not less than (a)
Forty Five Million and 00/100 Dollars ($45,000,000.00) plus (b) fifty percent
(50%) of the Net Income of the Borrower for the fiscal year ending August 31,
1996 and each fiscal year thereafter (excluding any net loss in any such fiscal
year) plus (c) the proceeds to the Borrower from the sale by the Borrower of
its capital stock after August 31, 1996 as reflected in the Borrower's
Consolidated cash flow statements.
(b) FUNDED DEBT TO CASH FLOW RATIO. The
Borrower's Funded Debt to Cash Flow Ratio shall be less than or equal to 6.00
to 1.00 for the period equal to the four (4) most recently ended consecutive
fiscal quarters during the term of this Agreement.
(c) INTEREST COVERAGE RATIO. The Borrower's
Interest Coverage Ratio shall be greater than or equal to 3.50 to 1.00 for the
period equal to the four (4) most recently ended consecutive fiscal quarters
during the term of this Agreement.
5.14 ACQUISITIONS FINANCED BY REVOLVING CREDIT LOANS.
On or prior to the date on which any Revolving Credit Loan is made to the
Borrower for the purposes of completing any acquisition of all or substantially
all of the property, assets or equity interest of any Person, Borrower shall
deliver to Bank historical financial information and all other information
reasonably requested by the Bank with respect to the Person to be acquired. In
addition, if the purchase price for any such acquisition is in excess of Seven
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Million Five Hundred Dollars ($7,500,000), Borrower will provide Bank with pro
forma financial statements and a certificate from the President or Chief
Financial Officer of the Borrower which certifies that the Borrower is, and
following such acquisition, will be, in compliance with all financial covenants
set forth in Section 5.13 of this Agreement.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants to the Bank as follows:
6.01 LIENS. The Borrower will not, and will not
permit any Subsidiary to, at any time, incur, create, assume or permit to
exist, any Lien on any of its property or assets, tangible or intangible, now
or hereafter owned, or agree to become liable to do so, except:
(a) Liens existing on the Closing Date and
set forth on Schedule 6.01 to this Agreement;
(b) Liens granted in favor of the Bank;
(c) pledges or deposits under workers
compensation, unemployment insurance and social security laws, or to secure the
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases or to secure statutory obligations or surety or
similar bonds used in the ordinary course of business;
(d) Liens arising from taxes, assessments,
fees, charges, levies or claims described in Section 5.05 of this Agreement;
(e) purchase money security interests for
purchases of equipment permitted under Section 6.02(d) of this Agreement;
(f) unfiled materialmen's, mechanics,
workmen's and repairmen's liens (provided, that if such a lien shall be filed
or perfected, it shall be discharged of record promptly by payment, bond or
otherwise); and
(g) zoning restrictions, easements, minor
restrictions on the use of real property, minor irregularities in title thereto
and other minor Liens that do not secure the payment
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of money or the performance of an obligation and that do not in the aggregate
materially detract from the value of a property or asset to, or materially
impair its use in the business of, the Borrower or any Subsidiary.
6.02 INDEBTEDNESS. The Borrower will not, and will
not permit any Subsidiary to, at any time, create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness existing on the Closing
Date, and set forth on Schedule 6.02 to this Agreement, provided, however, that
none of such Indebtedness shall be extended, renewed or refinanced without the
prior written consent of the Bank;
(b) Indebtedness under this Agreement, the
Notes, the other Loan Documents or under any other document, instrument or
agreement between the Borrower or a Subsidiary and the Bank or Mellon Europe
Limited;
(c) current accounts payable, accrued taxes
reflected as current liabilities and other current items arising out of
transactions (other than borrowings) in the ordinary course of business;
(d) purchase money Indebtedness for
purchases of equipment in the ordinary course of business and in amounts which
shall not exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00) as to
any one purchase of equipment or One Million and 00/100 Dollars ($1,000,000.00)
as to the aggregate of all such purchases in each case in any one fiscal year;
(e) Indebtedness represented by unsecured
short term trade notes with suppliers provided that such Indebtedness shall not
exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) as to any
one transaction or One Million and 00/100 Dollars ($1,000,000.00) as to the
aggregate of all outstanding unsecured trade notes with suppliers;
(f) Capitalized Lease Obligations in amounts
less than Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) for any
single Capitalized Lease Obligation and One Million and 00/100 Dollars
($1,000,000.00) as to the aggregate of all such Capitalized Lease Obligations;
(g) Indebtedness constituting loans and
advances permitted by Section 6.04 of this Agreement; and
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(h) Indebtedness under interest rate or
currency protection agreements, interest rate or currency futures, interest
rate or currency options, interest rate or currency swap or cap agreements or
other interest rate or currency hedge agreements incurred in the ordinary
course of business, provided that (i) such Indebtedness is incurred with the
Bank as counterparty and (ii) such Indebtedness shall not be entered into for
speculative purposes.
6.03 GUARANTEES AND CONTINGENT LIABILITIES. The
Borrower will not, and will not permit any Subsidiary to, at any time directly
or indirectly assume, guarantee, endorse or otherwise agree, become or remain
directly or contingently liable upon or with respect to any obligation or
liability of any other Person, except:
(a) those guarantees existing on the Closing
Date and set forth on Schedule 6.03 to this Agreement;
(b) endorsements on negotiable or other
instruments in any amount for deposit or collection or similar transactions in
the ordinary course of their businesses;
(c) guarantees by the Borrower of obligations or
liabilities of any Subsidiary to the Bank or Mellon Europe Limited;
(d) the indemnity obligations of the Borrower to
its directors and officers under the articles of incorporation of the Borrower
and to its directors under indemnification agreements entered into between the
Borrower and each of its directors; and
(e) indemnities by the Borrower or any
Subsidiary arising from or under contracts and agreements with unrelated
Persons entered into by the Borrower or such Subsidiary in the ordinary course
of business.
6.04 LOANS AND INVESTMENTS; CERTAIN BUSINESS
TRANSACTIONS. The Borrower will not and will not permit any Subsidiary to,
purchase, own, invest in or otherwise acquire, directly or indirectly, any
stock or other securities of any Person, or all or substantially all of the
assets of any Person (whether in a single or series of related transactions) or
make or permit to exist any investment or capital contribution to or acquire
any interest whatsoever in any other Person or permit to exist any loans or
advances for such purposes except:
(a) loans and investments existing on the
Closing Date and set forth on Schedule 6.04 to this Agreement;
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(b) additional loans to and investments in
the Subsidiaries named on Schedule 3.18 to this Agreement;
(c) acquisitions of the stock, equity or
assets of Persons in businesses similar to those described in the 1995 10-K
provided, however, that the total amount of all such acquisitions shall not, in
any fiscal year, exceed Twenty Five Million and 00/100 Dollars ($25,000,000) in
the aggregate;
(d) investments in direct obligations of the
United States of America or any agency thereof and in obligations guaranteed by
the United States of America or the Bank or other reputable financial
institution, each of which is organized under the laws of the United States;
(e) certificates of deposit issued by the
Bank or Century National Bank and investments in money market mutual funds or
other money market accounts with the Bank or Century National Bank; and
(f) other loans and investments after the
Closing Date reflected on the Consolidated balance sheet from time to time of
an amount not in excess of One Million Dollars ($1,000,000.00).
6.05 MERGER OR CONSOLIDATION; OTHER BUSINESS
TRANSACTIONS. Borrower will not, and will not permit any Subsidiary to, form a
partnership or a joint venture or merge or consolidate with or into any other
Person, or agree to do any of the foregoing, except that the Borrower may
permit any Subsidiary to, merge or consolidate with or into, the Borrower or
any Subsidiary.
6.06 DISPOSITIONS OF ASSETS. The Borrower will not,
and will not permit any Subsidiary to, sell, convey, pledge, assign, lease,
abandon or otherwise transfer or dispose of, voluntarily or involuntarily any
of its respective properties or assets, tangible or intangible (including stock
of Subsidiaries) except in the ordinary course of business and except that the
Borrower may permit any Subsidiary to transfer assets or stock to the Borrower
or any other Subsidiary.
6.07 CAPITAL EXPENDITURES. The Borrower will not,
and will not permit any Subsidiary to, make or commit to make, Capital
Expenditures in any fiscal year aggregating more than the sum of (i) Twenty
Five Million and 00/100 Dollars ($25,000,000.00). For purposes of this Section
6.07, amounts paid in transactions accounted for as business acquisitions shall
not be considered as Capital Expenditures.
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6.08 NEGATIVE PLEDGE. Except for Section 4.02(d) of
the Reimbursement Agreement, dated as of December 1, 1991, by and between the
Borrower and NCNB National Bank of North Carolina, the Borrower will not, and
will not permit any of its Subsidiaries to, enter into or suffer to exist any
agreement with any Person other than in connection with this Agreement, which
prohibits or limits the ability of the Borrower or any Subsidiary to create,
incur, assume or suffer to exist any Lien upon or with respect to any property
or assets of any kind (real or personal, tangible or intangible) of the
Borrower or any Subsidiary, whether now owned or hereafter acquired or created.
6.09 CONTINUATION OF BUSINESS. The Borrower will
not, and will not permit any Subsidiary to, engage in any business not
substantially similar to those conducted as of the Closing Date and described
in the 1995 Form 10-K.
6.10 MARGIN STOCK. The Borrower will not use the
proceeds of any Loans directly or indirectly to purchase or carry any "margin
stock" (within the meaning of Regulations U, G, T, or X of the Board of
Governors of the Federal Reserve System) or to extend credit to others for the
purpose of purchasing or carrying, directly or indirectly, any margin stock.
6.11 SELF-DEALING. The Borrower and its Subsidiaries
will not enter into or carry out any loan, advance or other transaction
(including, without limitation, purchasing property or services or selling
property or services) with any shareholder, director, officer or partner,
except that any such Person may render services to the Borrower for
compensation at rates substantially similar to those generally paid by
corporations or partnerships engaged in the same or similar businesses for the
same or similar services.
6.12 LEASES. The Borrower and its Subsidiaries will
not at any time enter into or suffer to remain in effect any agreement to
lease, as lessee, any real or personal property except leases of real and
personal property in the ordinary course of business.
ARTICLE VII
DEFAULTS
7.01 EVENTS OF DEFAULT. An Event of Default means
the occurrence or existence of one or more of the following events or
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conditions (whatever the reason for such Event of Default and whether
voluntary, involuntary or effected by operation of Law):
(a) The Borrower shall fail to pay principal
on any of the Noteswithin five (5) Business Days after the date principal on
any of the Notes is due; or
(b) The Borrower shall fail to pay interest
on the Loans or any fees payable pursuant to Article II of this Agreement
within five (5) Business Days after the date such interest or fees are due; or
(c) The Borrower shall fail to pay any other
fee, or other amount payable pursuant to this Agreement, the Notes or any of
the other Loan Documents when due and such failure shall continue for a period
of five (5) Business Days after notice thereof is given to the Borrower; or
(d) Any representation or warranty made by
the Borrower under this Agreement, the Notes or any of the other Loan Documents
or any statement made by the Borrower in any financial statement, certificate,
report, exhibit or document furnished by the Borrower to the Bank pursuant to
this Agreement or the other Loan Documents shall prove to have been false or
misleading in any material respect as of the time when made; or
(e) The Borrower shall be in default in the
performance or observance of any covenant contained in Articles V and VI of
this Agreement; or
(f) The Borrower shall be in default in the
performance or observance of any other covenant, agreement or duty under this
Agreement, the Notes or the other Loan Documents (not constituting an Event of
Default under any other provisions of this Section 7.01) and such default shall
continue for a period of thirty (30) days after notice thereof is given to the
Borrower; or
(g) The Borrower or any Subsidiary shall (i)
default (as principal or guarantor or other surety) in any payment of principal
of or interest on any obligation (or set of related obligations) for borrowed
money in excess of $250,000, beyond any period of grace with respect to the
payment or, if an obligation for borrowed money (or set of related obligations)
in excess of $250,000 is or are payable or repayable on demand, the Borrower or
such Subsidiary fails to pay or repay such obligation or obligations when
demanded, or (ii) default in the observance of any other covenant, term or
condition contained in any agreement or instrument by which an obligation for
borrowed money (or set of
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related obligations) in excess of $250,000 is or are created, secured or
evidenced, if the effect of such default is to cause all or part of such
obligation or obligations to become due before its or their otherwise stated
maturity; or
(h) One or more judgments for the payment of
money in excess of $1,000,000 shall have been entered against the Borrower or
any Subsidiary; or
(i) A writ or warrant of attachment,
garnishment, execution, distraint or similar process shall have been issued
against the Borrower or any Subsidiary or any of their respective properties
and the same shall remain undischarged or unstayed for a period of thirty (30)
consecutive days; or
(j) Bank has determined in good faith that a
Material Adverse Change has occurred or that the prospect of payment or
performance of any covenant, agreement or duty under this Agreement, the Notes
or the other Loan Documents is impaired or that the Bank is insecure; or
(k) A Change of Control shall occur; or
(l) (i) A Termination Event with respect to a
Plan shall occur, (ii) any Person shall engage in any prohibited transaction
involving any Plan, (iii) an accumulated funding deficiency, whether or not
waived, shall exist with respect to any Plan, (iv) either of the Borrowers or
any ERISA Affiliate shall be in "Default" (as defined in Section 4219(c)(5) of
ERISA with respect to payments due to a multi-employer Plan resulting from such
Borrower's or any ERISA affiliate's, complete or partial withdrawal (as
described in Section 4203 or 4205 of ERISA) from such Plan, or (v) any other
event or condition shall occur or exist with respect to a single employer Plan,
except that no such event or condition shall constitute an Event of Default if
it, together with all other events or conditions at the time existing, would
not subject the Borrower or any of its Subsidiaries to any tax, penalty, debt
or liability which, alone or in the aggregate, would have a material adverse
effect on the Borrower or any Subsidiary; or
(m) A proceeding shall be instituted in
respect of the Borrower or any Subsidiary:
(i) seeking to have an order for relief
entered in respect of the Borrower or
any Subsidiary, or seeking a declaration
or entailing a finding that the Borrower
or
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any Subsidiary is insolvent or a similar
declaration or finding, or seeking
dissolution, winding-up, charter
revocation or forfeiture, liquidation,
reorganization, arrangement, adjustment,
composition or other similar relief with
respect to the Borrower or any
Subsidiary, their assets or debts under
any law relating to bankruptcy,
insolvency, relief of debtors or
protection of creditors, termination of
legal entities or any other similar law
now or in the future which shall not have
been dismissed or stayed within sixty
(60) days after such proceedings were
instituted; or
(ii) seeking appointment of a receiver,
trustee, custodian, liquidator,
assignee, sequestrator or other similar
official for the Borrower or any
Subsidiary or for all or any substantial
part of their property which shall not
have been dismissed or stayed within
sixty (60) days after such proceedings
were instituted; or
(n) The Borrower or any Subsidiary shall
become insolvent, shall become generally unable to pay their debts as they
become due, shall voluntarily suspend transaction of their businesses, shall
make a general assignment for the benefit of creditors, shall institute a
proceeding described in Section 7.01(m)(i) of this Agreement or shall consent
to any order for relief, declaration, finding or relief described in Section
7.01(m)(i) of this Agreement, shall institute a proceeding described in Section
7.01(m)(ii) of this Agreement or shall consent to the appointment or to the
taking of possession by any such official of all or any substantial part of
their property whether or not any proceeding is instituted, dissolve, wind-up
or liquidate themselves or any substantial part of their property, or shall
take any action in furtherance of any of the foregoing.
7.02 Consequences of an Event of Default.
------------------------------------
(a) If an Event of Default specified in
subsections (a) through (l) of Section 7.01 of this Agreement occurs, the Bank
will be under no further obligation to make Loans and may at its option demand
the unpaid principal amount of the Notes, interest accrued on the unpaid
principal amount and all other amounts owing by the Borrower under this
Agreement, the Notes and the other Loan Documents to be immediately due and
payable
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without presentment, demand, protest or further notice of any kind, all of
which are expressly waived, and an action for any amounts due shall accrue
immediately.
(b) If an Event of Default specified in
subsections (m) or (n) of Section 7.01 of this Agreement occurs and continues
or exists, the Bank will be under no further obligation to make Loans and the
unpaid principal amount of the Notes, interest accrued on the unpaid principal
amount of the Notes and all other amounts owing by the Borrowers under this
Agreement, the Notes and the other Loan Documents shall automatically become
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which are expressly waived, and an action for any amounts due
shall accrue immediately.
7.03 SET-OFF. If the unpaid principal amount of the
Notes, interest accrued on the unpaid principal amount of the Notes or other
amount owing by the Borrowers under this Agreement, the Notes or the other Loan
Documents shall have become due and payable (at maturity, by acceleration or
otherwise), the Bank and any assignee of the Bank will each have the right, in
addition to all other rights and remedies available to it, without notice to
the Borrower, to set-off against and to appropriate and apply to such due and
payable amounts any debt owing to, and any other funds held in any manner for
the account of, the Borrower by the Bank or by such assignee including, without
limitation, all funds in all deposit accounts (whether time or demand, general
or special, provisionally credited or finally credited, or otherwise) now or in
the future maintained by the Borrower with the Bank or such assignee. The
Borrower consents to and confirms the foregoing arrangements and confirms the
Bank's rights and such assignee's rights of banker's lien and set-off. Nothing
in this Agreement will be deemed a waiver or prohibition of or restriction on
the Bank's rights or any such assignee's rights of banker's lien or set-off.
ARTICLE VIII
MISCELLANEOUS
8.01 BUSINESS DAYS. Except as otherwise provided in
this Agreement, whenever any payment or action to be made or taken under this
Agreement, or under the Notes or under any of the other Loan Documents is
stated to be due on a day which is not a Business Day, such payment or action
will be made or taken on the next following Business Day and such extension of
time will be included in computing interest or fees, if any, in connection with
such payment or action.
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8.02 RECORDS. The unpaid principal amount of the
Notes, the unpaid interest accrued thereon, the interest rate or rates
applicable to such unpaid principal amount and the duration of such
applicability shall at all times be ascertained from the records of the Bank,
which shall be conclusive absent manifest error.
8.03 AMENDMENTS AND WAIVERS. The Bank and the
Borrower may from time to time enter into agreements amending, modifying or
supplementing this Agreement, the Notes or any other Loan Document or changing
the rights of the Bank or of the Borrower under this Agreement, under the Notes
or under any other Loan Document and the Bank may from time to time grant
waivers or consents to a departure from the due performance of the obligations
of the Borrower under this Agreement, under the Notes or under any other Loan
Document. Any such agreement, waiver or consent must be in writing and will be
effective only to the extent specifically set forth in such writing. In the
case of any such waiver or consent relating to any provision of this Agreement,
any Event of Default or Potential Default so waived or consented to will be
deemed to be cured and not continuing, but no such waiver or consent will
extend to any other or subsequent Event of Default or Potential Default or
impair any right consequent to any other or subsequent Event of Default or
Potential Default or impair any right consequent thereto.
8.04 NO IMPLIED WAIVER: CUMULATIVE REMEDIES. No
course of dealing and no delay or failure of the Bank in exercising any right,
power or privilege under this Agreement, the Notes or any other Loan Document
will affect any other or future exercise of any such right, power or privilege
or exercise of any other right, power or privilege except as and to the extent
that the assertion of any such right, power or privilege shall be barred by an
applicable statute of limitations; nor shall any single or partial exercise of
any such right, power or privilege or any abandonment or discontinuance of
steps to enforce such a right, power or privilege preclude any further exercise
of such right, power or privilege or of any other right, power or privilege.
The rights and remedies of the Bank under this Agreement, the Notes or any
other Loan Document are cumulative and not exclusive of any rights or remedies
which the Bank would otherwise have.
8.05 NOTICES. All notices, requests, demands,
directions and other communications (collectively notices) under the provisions
of this Agreement or the Notes must be in writing (including telexed or
telecopied communication) unless otherwise expressly permitted under this
Agreement and must be sent by first-class or first-class express mail, private
overnight or next Business Day courier or by telecopy with confirmation in
writing
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mailed first class, in all cases with charges prepaid, and any such properly
given notice will be effective when received. All notices will be sent to the
applicable party at the addresses stated below or in accordance with the last
unrevoked written direction from such party to the other parties.
If to Borrower: John P. O'Leary, Jr.
President and Chief Executive Officer
Tuscarora Incorporated
800 Fifth Avenue
New Brighton, PA 15066
Telecopier: (412) 843-4845
and a copy to: Arlie R. Nogay, Esquire
Reed Smith Shaw & McClay
435 Sixth Avenue
Pittsburgh, PA 15219
Telecopier: (412) 288-3063
If to Bank: Brian V. Ciaverella
Vice President
Mellon Bank, N.A.
Two Mellon Bank Center, Room 152-0230
Pittsburgh, PA 15259-0001
Telecopier: (412) 236-9010
and a copy to: Jeffrey J. Conn, Esquire
Thorp, Reed & Armstrong
One Riverfront Center
Pittsburgh, PA 15222
Telecopier: (412) 394-2555
8.06 EXPENSES; TAXES; ATTORNEYS FEES. The Borrower
agrees to pay or cause to be paid and to save the Bank harmless against
liability for the payment of all reasonable out-of-pocket expenses, including,
but not limited to reasonable fees and expenses of counsel and paralegals for
the Bank, incurred by the Bank from time to time (i) arising in connection with
the preparation, execution, delivery and performance of this Agreement, the
Notes and the other Loan Documents, (ii) relating to any requested amendments,
waivers or consents to this Agreement, the Notes or any of the other Loan
Documents and (iii) arising in connection with the Bank's enforcement or
preservation of rights under this Agreement, the Notes or any of the other Loan
Documents, including but not limited to such reasonable expenses as may be
incurred by the Bank in the collection of the outstanding principal amount of
the Loans. The Borrower agrees to pay all stamp, document, transfer, recording
or filing taxes or fees and similar impositions now or in the future reasonably
determined by the Bank
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to be payable in connection with this Agreement, the Notes or any other Loan
Document. The Borrower agrees to save the Bank harmless from and against any
and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions. In the event of a determination adverse to the Borrower of any
action at law or suit in equity in relation to this Agreement, the Notes or the
other Loan Documents, the Borrower will pay, in addition to all other sums
which the Borrower may be required to pay, a reasonable sum for attorneys and
paralegals fees incurred by the Bank or the holder of the Notes in connection
with such action or suit. All payments due from the Borrower under this Section
will be added to and become part of the Loans until paid in full.
8.07 SEVERABILITY. The provisions of this Agreement
are intended to be severable. If any provision of this Agreement is held
invalid or unenforceable in whole or in part in any jurisdiction, the provision
will, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability of the provision in any other jurisdiction or the remaining
provisions of this Agreement in any jurisdiction.
8.08 GOVERNING LAW: CONSENT TO JURISDICTION. This
Agreement will be deemed to be a contract under the laws of the Commonwealth of
Pennsylvania and for all purposes will be governed by and construed and
enforced in accordance with the substantive laws, and not the laws of
conflicts, of said Commonwealth. The Borrower consents to the exclusive
jurisdiction and venue of the federal and state courts located in Allegheny
County, Pennsylvania, in any action on, relating to or mentioning this
Agreement, the Notes, the other Loan Documents, or any one or more of them.
8.09 PRIOR UNDERSTANDINGS. This Agreement, the Notes
and the other Loan Documents supersede all prior understandings and agreements,
whether written or oral, among the parties relating to the transactions
provided for in this Agreement, the Notes and the other Loan Documents.
8.10 DURATION; SURVIVAL. All representations and
warranties of the Borrowers contained in this Agreement or made in connection
with this Agreement or any of the other Loan Documents shall survive the making
of and will not be waived by the execution and delivery of this Agreement, the
Notes or the other Loan Documents, by any investigation by the Bank, or the
making of any Loan. Notwithstanding termination of this Agreement or an Event
of Default, all covenants and agreements of the Borrower will continue in full
force and effect from and after the date of this Agreement so long as the
Borrower may borrow under this Agreement and until
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payment in full of the Notes, interest thereon, and all fees and other
obligations of the Borrower under this Agreement or the Notes. Without
limitation, it is understood that all obligations of the Borrower to make
payments to or indemnify the Bank will survive the payment in full of the Notes
and of all other obligations of the Borrower under this Agreement, the Notes
and the other Loan Documents.
8.11 TERM OF AGREEMENT. This Agreement will
terminate when all Indebtedness of the Borrower to Bank including, without
limitation, the Loans and interest on the Loans is paid in full, and the
Borrower has no right to borrow under this Agreement and the Bank has no
obligation to make Loans under this Agreement.
8.12 COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the different parties to this Agreement on
separate counterparts each of which, when so executed, will be deemed an
original, but all such counterparts will constitute but one and the same
instrument.
8.13 SUCCESSORS AND ASSIGNS. This Agreement will be
binding upon and inure to the benefit of the Bank, the Borrower and its
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under this Agreement without the prior written consent of the
Bank.
8.14 NO THIRD PARTY BENEFICIARIES. The rights and
benefits of this Agreement and the other Loan Documents are not intended to,
and shall not, inure to the benefit of any third party.
8.15 PARTICIPATION AND ASSIGNMENT. (a) The Bank may
from time to time sell, assign or grant one or more participations in all or
any part of the Loans made by Bank or which may be made by the Bank, or its
right, title and interest in the Loans in or to this Agreement (including,
without limitation, all or a portion of the Revolving Credit Loans and the Term
Loan), to another lending office, lender or financial institution; provided,
however, that:
(i) the Bank's obligations under this
Agreement and the other Loan Documents shall remain unchanged and the Bank
shall remain responsible for performance of such obligations;
(ii) no participant shall be entitled to
require the Bank to take or refrain from taking any action under this Agreement
or any other Loan Document, except that the Bank may agree with a participant
that the Bank will not, without the consent of such participant (which consent
shall not be unreasonably withheld or delayed), take the following type of
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action: (x) increase the Revolving Credit Facility Commitment over the amount
then in effect, (y) extend the Revolving Credit Expiry Date or the Term Loan
Expiry Date or (z) reduce the principal amount of or extend the time for
payment of principal of any Loan, or reduce the rate of interest or extend the
time for payment of interest borne by any Loan (other than as a result of
waiving the applicability of any increase in the interest rate applicable to
overdue amounts), or extend the time for payment of or reduce the amount of the
commitment fee payable under Section 2.07, or reduce or postpone the payment of
any other fees, expenses, indemnities or amounts payable under any Loan
Document;
(iii) such participation shall not include a
transfer of all or any portion of the Bank's obligation to make Revolving
Credit Loans under the Revolving Credit Facility Commitment; and
(iv) the Borrower shall continue to deal solely
and exclusively with the Bank in connection with this Agreement and the other
Loan Documents.
(b) ASSIGNMENT. The Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable Law, at any time
assign all or a portion of its rights and obligations under this Agreement and
the other Loan Documents (including, without limitation, all or any portion of
the Revolving Credit Facility Commitment and Loans owing to it and any of the
Notes held by it) to any affiliate of the Bank or to one or more additional
commercial banks or other Persons (each a "Purchasing Lender"); provided, that:
(i) any such assignment to a Purchasing Lender
which is not an affiliate of the Bank shall be made only with the consent
(which shall not be unreasonably withheld or delayed) of the Borrower;
(ii) if the Bank makes such an assignment of
less than all of its then remaining rights and obligations under this Agreement
and the other Loan Documents, the Bank shall retain, after such assignment, a
minimum principal amount of $25,000,000 of the Revolving Credit Facility
Commitment and Loans then outstanding, and such assignment shall be in a
minimum aggregate principal amount of $5,000,000 of the Revolving Credit
Facility Commitment and Loans then outstanding;
(iii) each such assignment shall be of a
constant, and not a varying, percentage of the Revolving Credit Facility
Commitment and the Loans of the Bank and of all of the
55
<PAGE> 56
Bank's rights and obligations under this Agreement and the other Loan
Documents; and
(iv) each such assignment shall be made
pursuant to a written agreement between the Bank and the Purchasing Lender.
8.16 The Borrower shall, upon the Bank's reasonable
request from time to time, use its reasonable best efforts to cooperate with
the Bank's syndication effort including, without limitation, assisting the Bank
from time to time in preparing information packages for delivery to prospective
participants and Purchasing Lenders containing relevant information about the
Borrower and the Loan Documents, and causing appropriate officers,
representatives and experts to meet with prospective participants and
Purchasing Lenders from time to time.
8.17 CONSTRUCTION. Unless the context of this
Agreement otherwise clearly requires, references to the plural include the
singular, the singular the plural, the part the whole and "or" has the
inclusive meaning represented by the phrase "and/or". References in this
Agreement to "judgments" of Bank include good faith estimates by Bank (in the
case of quantitative judgments) and good faith beliefs by Bank (in the case of
qualitative judgments).
8.18 EXHIBITS. All exhibits and schedules attached
to this Agreement are incorporated and made a part of this Agreement.
8.19 HEADINGS. The section headings contained in
this Agreement are for convenience only and do not limit or define or affect
the construction or interpretation of this Agreement in any respect.
8.20 LIMITATION OF LIABILITY. To the fullest extent
permitted by Law, no claim may be made by the Borrower against the Bank or any
affiliate, director, officer, employee, attorney or agent of the Bank for any
special, incidental, indirect, consequential or punitive damages in respect of
any claim arising from or relating to this Agreement or any other Loan Document
or any statement, course of conduct, act, omission or event occurring in
connection herewith or therewith (whether for breach of contract, tort or any
other theory of liability). The Borrower hereby waives, releases and agrees
not to sue upon any claim for any such damages, whether such claim presently
exists or arises hereafter and whether or not such claim is known or suspected
to exist in its favor. This Section 8.19 shall not limit any rights of the
Borrower arising solely out of willful misconduct.
56
<PAGE> 57
8.21 WAIVER OF TRIAL BY JURY.
THE BORROWER AND THE BANK EXPRESSLY,
KNOWINGLY AND VOLUNTARILY WAIVE ALL
BENEFIT AND ADVANTAGE OF ANY RIGHT TO A INITIALS:
TRIAL BY JURY, AND NEITHER WILL AT ANY TIME
INSIST UPON, OR PLEAD OR IN ANY MANNER /s/ J P O'L
WHATSOEVER CLAIM OR TAKE THE BENEFIT OR -------------
ADVANTAGE OF A TRIAL BY JURY IN ANY ACTION BORROWER
ARISING IN CONNECTION WITH THIS AGREEMENT,
THE NOTES OR ANY OF THE LOAN DOCUMENTS. /s/ B V C
-------------
BANK
[INTENTIONALLY LEFT BLANK]
57
<PAGE> 58
IN WITNESS WHEREOF, and intending to be legally bound, the
parties, by their duly authorized officers, have executed and delivered this
Agreement on the date set forth at the beginning of this Agreement.
Attest: Tuscarora Incorporated
By: /s/ BRIAN C. MULLINS By: /s/ JOHN P. O'LEARY, JR.
-------------------- ------------------------
Title: Vice President - Treasurer Title: President - CEO
------------------------- ---------------------
Mellon Bank, N.A.
By: /s/ BRIAN V. CIAVERELLA
-----------------------
Vice President
58
<PAGE> 59
REVOLVING CREDIT NOTE
$40,000,000 Pittsburgh, Pennsylvania
August 14, 1996
FOR VALUE RECEIVED, the undersigned, Tuscarora Incorporated a
Pennsylvania corporation (the "Borrower") hereby promises to pay to the order
of Mellon Bank, N.A., a national banking association (the "Bank"), as provided
for in the Loan Agreement (as defined below), the lesser of (i) the principal
sum of Forty Million and 00/100 Dollars ($40,000,000.00), or (ii) the aggregate
unpaid principal amount of all Revolving Credit Loans made by Bank to Borrower
pursuant to that certain Loan Agreement, by and between Borrower and Bank,
dated the date hereof, as such agreement may be amended, modified or
supplemented from time to time (the "Loan Agreement"). Borrower hereby further
promises to pay to the order of Bank interest on the unpaid principal amount of
this Revolving Credit Note from time to time outstanding at the rate or rates
per annum determined pursuant to Article II of, or as otherwise provided in,
the Loan Agreement, and with such amounts being payable on the dates set forth
in Article II of, or as otherwise provided in, the Loan Agreement.
All payments and prepayments to be made in respect of principal,
interest, or other amounts due from Borrower under this Revolving Credit Note
shall be payable at 12:00 noon, Pittsburgh, Pennsylvania time, on the day when
due, without presentment,
<PAGE> 60
demand, protest or notice of any kind, all of which are expressly waived, and
an action therefor shall immediately accrue. All such payments shall be made to
Bank at its designated office located at Two Mellon Bank Center, Pittsburgh,
Pennsylvania 15259, in lawful money of the United States of America in
immediately available funds without setoff, counterclaim or other deduction of
any nature.
Except as otherwise provided in the Loan Agreement, if any payment of
principal or interest under this Revolving Credit Note shall become due on a
day which is not a Business Day, such payment shall be made on the next
following Business Day and such extension of time shall be included in
computing interest in connection with such payment.
This Revolving Credit Note is one of the Notes referred to in, and is
entitled to the benefits of, the Loan Agreement, as the same may be amended,
modified or supplemented from time to time. Capitalized terms used in this
Revolving Credit Note which are defined in the Loan Agreement shall have the
meanings assigned to them therein unless otherwise defined in this Revolving
Credit Note.
WARRANT OF ATTORNEY TO CONFESS JUDGMENT. THE BORROWER HEREBY
IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY, ANY ATTORNEY OR ANY CLERK
OF ANY COURT OF RECORD, UPON AN EVENT OF DEFAULT, TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST THE BORROWER
2
<PAGE> 61
FOR SUCH SUMS AS ARE DUE AND/OR MAY BECOME DUE UNDER THIS REVOLVING CREDIT
NOTE, WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, WITHOUT STAY OF
EXECUTION AND WITH A REASONABLE AMOUNT ADDED FOR ATTORNEYS' COLLECTION FEES. TO
THE EXTENT PERMITTED BY LAW, THE BORROWER RELEASES ALL ERRORS IN SUCH
PROCEEDINGS. IF A COPY OF THIS REVOLVING CREDIT NOTE, VERIFIED BY AFFIDAVIT BY
OR ON BEHALF OF THE HOLDER OF THIS REVOLVING CREDIT NOTE SHALL HAVE BEEN FILED
IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL REVOLVING CREDIT
NOTE AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY THE INITIAL
EXERCISE THEREOF AND MAY BE EXERCISED AS OFTEN AS THE HOLDER SHALL FIND IT
NECESSARY AND DESIRABLE AND THIS REVOLVING CREDIT NOTE OR A COPY THEREOF SHALL
BE A SUFFICIENT WARRANT THEREFOR. THE HOLDER HEREOF MAY CONFESS ONE OR MORE
JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR ANY PART OF THE
AMOUNT OWING HEREUNDER, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN
CONFESSED ON MORE THAN ONE OCCASION FOR THE SAME AMOUNT. IN THE EVENT ANY
JUDGMENT CONFESSED AGAINST THE BORROWER HEREUNDER IS STRICKEN OR OPENED UPON
APPLICATION BY OR ON THE BORROWER'S BEHALF FOR ANY REASON, HOLDER IS HEREBY
AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST THE
BORROWER FOR ANY PART OR ALL OF THE AMOUNTS OWING HEREUNDER, AS PROVIDED FOR
HEREIN, IF DOING SO WILL CURE ANY ERRORS OR DEFECTS IN SUCH PRIOR PROCEEDINGS.
3
<PAGE> 62
This Revolving Credit Note shall be governed by, and shall be construed
and enforced in accordance with, the laws of the Commonwealth of Pennsylvania
without regard to the principles of the conflicts of laws thereof. Borrower
hereby consents to the jurisdiction and venue of the Court of Common Pleas of
Allegheny County, Pennsylvania and the United States District Court for the
Western District of Pennsylvania with respect to any suit arising out of or
mentioning this Revolving Credit Note.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Borrower has executed, issued and delivered this Revolving Credit Note in
Pittsburgh, Pennsylvania on the day and year written above.
Attest: Tuscarora Incorporated
By: /s/ BRIAN C. MULLINS By: /s/ JOHN P. O'LEARY, JR.
-------------------- ------------------------
Title: Vice President & Treasurer Title: President & CEO
-------------------------- ---------------------
4
<PAGE> 63
TERM NOTE
$37,000,000 Pittsburgh, Pennsylvania
August 14, 1996
FOR VALUE RECEIVED, the undersigned, Tuscarora Incorporated a
Pennsylvania corporation ("Borrower") hereby promises to pay to the order of
Mellon Bank, N.A., a national banking association (the "Bank"), as provided for
in the Loan Agreement (as defined below), the aggregate principal amount of
Thirty Seven Million and 00/100 Dollars ($37,000,000.00), together with interest
on the unpaid principal amount of this Term Note at the rate or rates per annum
determined pursuant to Article II of, or as otherwise provided in, that certain
Loan Agreement, by and between Borrower and Bank, dated the date hereof, as such
agreement may be amended, modified or supplemented from time to time (the "Loan
Agreement") and with such amounts being payable on the dates set forth in
Article II of, or as otherwise provided in, the Loan Agreement.
All payments and prepayments to be made in respect of principal,
interest or other amounts due from Borrower under this Term Note shall be
payable at 12:00 noon, Pittsburgh, Pennsylvania time, on the day when due,
without presentment, demand, protest or notice of any kind, all of which are
expressly waived, and an action therefor shall immediately accrue. All such
payments shall be made to Bank at its designated office located at Two Mellon
Bank
<PAGE> 64
Center, Pittsburgh, Pennsylvania 15259, in lawful money of the United States of
America in immediately available funds without setoff, counterclaim or other
deduction of any nature.
Except as otherwise provided in the Loan Agreement, if any payment of
principal or interest under this Term Note shall become due on a day which is
not a Business Day, such payment shall be made on the next following Business
Day and such extension of time shall be included in computing interest in
connection with such payment.
This Term Note is one of the Notes referred to in, and is entitled to
the benefits of, the Loan Agreement, as the same may be amended, modified or
supplemented from time to time. Capitalized terms used in this Term Note which
are defined in the Loan Agreement shall have the meanings assigned to them
therein unless otherwise defined in this Term Note.
This Term Note shall be governed by, and shall be construed and enforced
in accordance with, the laws of the Commonwealth of Pennsylvania without regard
to the principles of the conflicts of laws thereof. Borrower hereby consents to
the jurisdiction and venue of the Court of Common Pleas of Allegheny County,
Pennsylvania and the United States District Court for the Western District of
Pennsylvania with respect to any suit arising out of or mentioning this Term
Note.
2
<PAGE> 65
WARRANT OF ATTORNEY TO CONFESS JUDGMENT. THE BORROWER HEREBY IRREVOCABLY
AUTHORIZES AND EMPOWERS THE PROTHONOTARY, ANY ATTORNEY OR ANY CLERK OF ANY COURT
COURT OF RECORD, UPON AN EVENT OF DEFAULT, TO APPEAR FOR AND CONFESS RECORD,
UPON AN EVENT OF DEFAULT, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THE
BORROWER FOR SUCH SUMS AS ARE DUE AND/OR MAY BECOME DUE UNDER THIS TERM NOTE,
WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, WITHOUT STAY OF EXECUTION AND
WITH A REASONABLE AMOUNT ADDED FOR ATTORNEYS' COLLECTION FEES. TO THE EXTENT
PERMITTED BY LAW, THE BORROWER RELEASES ALL ERRORS IN SUCH PROCEEDINGS. IF A
COPY OF THIS TERM NOTE, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF THE HOLDER OF
THIS TERM NOTE SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY
TO FILE THE ORIGINAL TERM NOTE AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER
TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED
BY THE INITIAL EXERCISE THEREOF AND MAY BE EXERCISED AS OFTEN AS THE HOLDER
SHALL FIND IT NECESSARY AND DESIRABLE AND THIS TERM NOTE OR A COPY THEREOF SHALL
BE A SUFFICIENT WARRANT THEREFOR. THE HOLDER HEREOF MAY CONFESS ONE OR MORE
JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR ANY PART OF THE
AMOUNT OWING HEREUNDER, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN
CONFESSED ON MORE THAN ONE OCCASION FOR THE SAME AMOUNT. IN THE EVENT ANY
JUDGMENT CONFESSED AGAINST THE BORROWER HEREUNDER IS STRICKEN OR OPENED UPON
APPLICATION BY OR ON THE BORROWER'S BEHALF FOR ANY REASON, HOLDER IS HEREBY
AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST THE
BORROWER FOR ANY PART OR ALL OF THE AMOUNTS OWING
3
<PAGE> 66
HEREUNDER, AS PROVIDED FOR HEREIN, IF DOING SO WILL CURE ANY ERRORS OR DEFECTS
IN SUCH PRIOR PROCEEDINGS.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Borrower has excuted, issued and delivered this Term Note in Pittsburgh,
Pennsylvania on the day and year written above.
Attest: Tuscarora Incorporated
By: /s/ BRIAN C. MULLINS By: /s/ JOHN P. O'LEARY, JR.
-------------------- ------------------------
Title: Vice President & Treasurer Title: President & CEO
-------------------------- ---------------------
4
<PAGE> 1
EXHIBIT 10.4
TUSCARORA INCORPORATED
1989 STOCK INCENTIVE PLAN
(AS AMENDED EFFECTIVE AUGUST 15, 1996)
The purposes of the 1989 Stock Incentive Plan (the "Plan") are to encourage
eligible employees of Tuscarora Plastics, Inc. (the "Company") and its
Subsidiaries to increase their efforts to make the Company and each Subsidiary
more successful, to provide an additional inducement for such employees to
remain with the Company or a Subsidiary, to reward such employees by providing
an opportunity to acquire shares of the Common Stock, without par value, of the
Company (the "Common Stock") on favorable terms and to provide a means through
which the Company may attract able persons to enter the employ of the Company or
one of its Subsidiaries. For the purposes of the Plan, the term "Subsidiary"
means any corporation in an unbroken chain of corporations beginning with the
Company if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing at least fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
SECTION 1
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board").
The Board shall interpret the Plan and prescribe such rules, regulations
and procedures in connection with the operations of the Plan as it shall deem to
be necessary and advisable for the administration of the Plan consistent with
the purposes of the Plan.
The Board shall keep records of action taken at its meetings. A majority of
the Board shall constitute a quorum at any meeting and the acts of a majority of
the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Board, shall be the acts of the Board.
SECTION 2
ELIGIBILITY
Those employees of the Company or any Subsidiary who share responsibility
for the management, growth or protection of the business of the Company or any
Subsidiary shall be eligible to be granted stock options (with or without cash
payment rights) and to receive restricted share awards as described herein.
Subject to the provisions of the Plan, the Board shall have full and final
authority, in its discretion, to grant stock options (with or without cash
payment rights) and to award restricted shares as described herein and to
determine the employees to whom any such grant or award shall be made and the
number of shares to be covered thereby. In determining the eligibility of any
employee, as well as in determining the number of shares covered by each grant
of a stock option or award of restricted shares and whether cash payment rights
shall be granted in conjunction with a stock option, the Board shall consider
the position and the responsibilities of the employee being considered, the
nature and value to the Company or a Subsidiary of his or her services, his or
her present and/or potential contribution to the success of the Company or a
Subsidiary and such other factors as the Board may deem relevant.
<PAGE> 2
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock which may be issued and
as to which grants of stock options or awards of restricted shares may be made
under the Plan is 599,500 shares, subject to adjustment and substitution as set
forth in Section 8. If any stock option granted under the Plan is cancelled by
mutual consent or terminates or expires for any reason without having been
exercised, the number of shares subject thereto shall again be available for
purposes of the Plan. If any shares of the Common Stock are forfeited to the
Company pursuant to the restrictions applicable to restricted shares awarded
under the Plan, the number of shares so forfeited shall again be available for
purposes of the Plan. The shares which may be issued under the Plan may be
either authorized but unissued shares or shares previously issued and thereafter
acquired by the Company or partly each, as shall be determined from time to time
by the Board.
SECTION 4
GRANT OF STOCK OPTIONS AND CASH PAYMENT RIGHTS AND AWARDS OF RESTRICTED SHARES
The Board shall have authority, in its discretion, (a) to grant "incentive
stock options" pursuant to Section 422 of the Internal Revenue Code of 1986 (the
"Code"), to grant "nonstatutory stock options" (i.e., stock options which do not
qualify under such Section 422 of the Code) or to grant both types of stock
options (but not in tandem) and (b) to award restricted shares. The Board also
shall have the authority, in its discretion, to grant cash payment rights in
conjunction with nonstatutory stock options with the effect provided in Section
5(D). Cash payment rights may not be granted in conjunction with incentive stock
options. Cash payment rights granted in conjunction with a nonstatutory stock
option may be granted either at the time the stock option is granted or at any
time thereafter during the term of the stock option.
Notwithstanding any other provision contained in the Plan or in any stock
option agreement or an amendment thereto, but subject to the possible exercise
of the Board's discretion contemplated in the last sentence of this Section 4,
the aggregate fair market value, determined as provided in Section 5(H) on the
date of grant of incentive stock options, of the shares with respect to which
such incentive stock options are exercisable for the first time by an employee
during any calendar year under all plans of the corporation employing such
employee, any parent or subsidiary corporation of such corporation and any
predecessor corporation of any such corporation shall not exceed $100,000. If
the date on which one or more incentive stock options could first be exercised
would be accelerated pursuant to any provision of the Plan or any stock option
agreement or an amendment thereto, and the acceleration of such exercise date
would result in a violation of the $100,000 restriction set forth in the
preceding sentence, then, notwithstanding any such provision, but subject to the
provisions of the next succeeding sentence, the exercise date of such incentive
stock options shall be accelerated only to the extent, if any, that does not
result in a violation of such restriction and, in such event, the exercise date
of the incentive stock options with the lowest option price shall be accelerated
first. The Board may, in its discretion, authorize the acceleration of the
exercise date of one or more incentive stock options even if such acceleration
would violate the $100,000 restriction set forth in the first sentence of this
paragraph and even if one or more such incentive stock options are converted in
part to nonstatutory stock options.
2
<PAGE> 3
SECTION 5
TERMS AND CONDITIONS OF STOCK OPTIONS AND CASH PAYMENT RIGHTS
Stock options and cash payment rights granted under the Plan shall be
subject to the following terms and conditions:
(A) The purchase price at which each stock option may be exercised
(the "option price") shall be such price as the Board, in its discretion,
shall determine but shall not be less than one hundred percent (100%) of
the fair market value per share of the Common Stock covered by the stock
option on the date of grant, except that in the case of an incentive stock
option granted to an employee who, immediately prior to such grant, owns
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Subsidiary (a "Ten
Percent Employee"), the option price shall not be less than one hundred ten
percent (110%) of such fair market value on the date of grant. For purposes
of this Section 5(A), the fair market value of the Common Stock shall be
determined as provided in Section 5(H). For purposes of this Section 5(A),
an individual (i) shall be considered as owning not only shares of stock
owned individually but also all shares of stock that are at the time owned,
directly or indirectly, by or for the spouse, ancestors, lineal descendants
and brothers and sisters (whether by the whole or half blood) of such
individual and (ii) shall be considered as owning proportionately any
shares owned, directly or indirectly, by or for any corporation,
partnership, estate or trust in which such individual is a shareholder,
partner or beneficiary.
(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order); provided, however, that in lieu of such
cash the person exercising the stock option may (if authorized by the Board
at the time of grant in the case of an incentive stock option, or at any
time in the case of a nonstatutory stock option) pay the option price in
whole or in part by delivering to the Company shares of the Common Stock
having a fair market value on the date of exercise of the stock option,
determined as provided in Section 5(H), equal to the option price for the
shares being purchased; except that (i) any portion of the option price
representing a fraction of a share shall in any event be paid in cash and
(ii) no shares of the Common Stock which have been held for less than one
year may be delivered in payment of the option price of a stock option. The
date of exercise of a stock option shall be determined under procedures
established by the Board, and as of the date of exercise the person
exercising the stock option shall be considered for all purposes to be the
owner of the shares with respect to which the stock option has been
exercised. Payment of the option price with shares shall not increase the
number of shares of the Common Stock which may be issued under the Plan as
provided in Section 3.
(C) No stock option shall be exercisable by a grantee during
employment during the first six months of its term. No incentive stock
option shall be exercisable after the expiration of ten years (five years
in the case of a Ten Percent Employee) from the date of grant. No
nonstatutory stock option shall be exercisable after the expiration of ten
years and six months from the date of grant. A stock option to the extent
exercisable at any time may be exercised in whole or in part.
(D) Cash payment rights granted in conjunction with a nonstatutory
stock option shall entitle the person who is entitled to exercise the stock
option, upon exercise of the stock option or any portion thereof, to
receive cash from the Company (in addition to the shares to be received
upon exercise of the stock option) equal to such percentage as the Board,
in its discretion, shall determine not greater than one hundred percent
(100%) of the excess of the fair market value of a share of the Common
Stock on the date of exercise of the stock option (or on the date provided
for in the following sentence) over the option price per share of the stock
option times the number of shares covered by the stock option, or portion
thereof, which is exercised. If any such person is subject to the
provisions of Section 16(b) of the 1934
3
<PAGE> 4
Act at the time of exercise of the stock option, the amount of such cash
payment shall be determined as of the date on which any restrictions
imposed by Section 16(b) of the 1934 Act no longer apply for purposes of
Section 83 of the Code. Payment of the cash provided for in this Section
5(D) shall be made by the Company as soon as practicable after the time the
amount payable is determined. For purposes of this Section 5(D), the fair
market value of the Common Stock shall be determined as provided in Section
5(H).
(E) No stock option shall be transferable by the grantee otherwise
than by Will, or if the grantee dies intestate, by the laws of descent and
distribution of the state of domicile of the grantee at the time of death.
All stock options shall be exercisable during the lifetime of the grantee
only by the grantee.
(F) Unless the Board, in its discretion, shall otherwise determine but
subject to the provisions of Section 4 in the case of incentive stock
options and subject to the restriction on exercise set forth in Section
5(I):
(i) If the employment of a grantee who is not disabled within the
meaning of Section 422(c)(6) of the Code (a "Disabled Grantee") is
voluntarily terminated with the consent of the Company or a Subsidiary
or a grantee retires under any retirement plan of the Company or a
Subsidiary, any then outstanding incentive stock option held by such
grantee shall be exercisable by the grantee (but only to the extent
exercisable by the grantee immediately prior to the termination of
employment, provided that the restriction on exercise set forth in
Section 5(I) shall not be considered solely in determining the extent to
which such stock option is exercisable on the date of termination of
employment) at any time prior to the expiration date of such incentive
stock option or within three months after the date of termination of
employment, whichever is the shorter period;
(ii) If the employment of a grantee who is not a Disabled Grantee
is voluntarily terminated with the consent of the Company or a
Subsidiary or a grantee retires under any retirement plan of the Company
or a Subsidiary, any then outstanding nonstatutory stock option held by
such grantee shall be exercisable by the grantee (but only to the extent
exercisable by the grantee immediately prior to the termination of
employment, provided that the restriction on exercise set forth in
Section 5(I) shall not be considered solely in determining the extent to
which such stock option is exercisable on the date of termination of
employment) at any time prior to the expiration date of such
nonstatutory stock option or within one year after the date of
termination of employment, whichever is the shorter period;
(iii) If the employment of a grantee who is a Disabled Grantee is
voluntarily terminated with the consent of the Company or a Subsidiary,
any then outstanding stock option held by such grantee shall be
exercisable by the grantee in full (whether or not so exercisable by the
grantee immediately prior to the termination of employment) by the
grantee at any time prior to the expiration date of such stock option or
within one year after the date of termination of employment, whichever
is the shorter period;
(iv) Following the death of a grantee during employment, any
outstanding stock option held by the grantee at the time of death shall
be exercisable in full (whether or not so exercisable by the grantee
immediately prior to the death of the grantee) by the person entitled to
do so under the Will of the grantee, or, if the grantee shall fail to
make testamentary disposition of the stock option or shall die
intestate, by the legal representative of the grantee at any time prior
to the expiration date of such stock option or within one year after the
date of death, whichever is the shorter period;
(v) Following the death of a grantee after termination of
employment during a period when a stock option is exercisable, any
outstanding stock option held by the grantee at the time of death
4
<PAGE> 5
shall be exercisable by such person entitled to do so under the Will of
the grantee or by such legal representative (but only to the extent the
stock option was exercisable by the grantee immediately prior to the
death of the grantee, provided that the restriction on exercise set
forth in Section 5(I) shall not be considered solely in determining the
extent to which such stock option was exercisable by the grantee
immediately prior to the death of the grantee) at any time prior to the
expiration date of such stock option or within one year after the date
of death, whichever is the shorter period; and
(vi) If the employment of a grantee terminates for any reason other
than voluntary termination with the consent of the Company or a
Subsidiary, retirement under any retirement plan of the Company or a
Subsidiary or death, all outstanding stock options held by the grantee
at the time of such termination of employment shall automatically
terminate.
Whether termination of employment is a voluntary termination with the
consent of the Company or a Subsidiary and whether a grantee is a Disabled
Grantee shall be determined in each case, in its discretion, by the Board
and any such determination by the Board shall be final and binding.
If a grantee of a stock option engages in the operation or management
of a business (whether as owner, partner, officer, director, employee or
otherwise and whether during or after termination of employment) which is
in competition with the Company or any of its Subsidiaries, the Board may
immediately terminate all outstanding stock options held by the grantee.
Whether a grantee has engaged in the operation or management of a business
which is in competition with the Company or any of its Subsidiaries shall
also be determined, in its discretion, by the Board, and any such
determination by the Board shall be final and binding.
(G) All stock options and cash payment rights shall be confirmed by a
written agreement or an amendment thereto in a form prescribed by the
Board, in its discretion. Each agreement or amendment thereto shall be
executed on behalf of the Company by the Chief Executive Officer (if other
than the President), the President or any Vice President and by the
grantee.
(H) Fair market value of the Common Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Board, in its discretion, may determine
to rely upon): (a) if the Common Stock is listed on the New York Stock
Exchange, the highest and lowest sales prices per share of the Common Stock
as quoted in the NYSE Composite Transactions listing for such date, (b) if
the Common Stock is not listed on such exchange, the highest and lowest
sales prices per share of Common Stock for such date on (or on any
composite index including) the principal United States securities exchange
registered under the 1934 Act on which the Common Stock is listed or (c) if
the Common Stock is not listed on any such exchange, the highest and lowest
sales prices per share of the Common Stock for such date on the National
Association of Securities Dealers Automated Quotations System or any
successor system then in use ("NASDAQ"). If there are no such sale price
quotations for the date as of which fair market value is to be determined
but there are such sale price quotations within a reasonable period both
before and after such date, then fair market value shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date
before and the nearest date after the date as of which fair market value is
to be determined. The average should be weighted inversely by the
respective numbers of trading days between the selling dates and the date
as of which fair market value is to be determined. If there are no such
sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide
bid and asked prices per share of Common Stock as so quoted for such date
on NASDAQ, or if none, the weighted average of the means between such bona
fide bid and asked prices on
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the nearest trading date before and the nearest trading date after the date
as of which fair market value is to be determined, if both such dates are
within a reasonable period. The average is to be determined in the manner
described above in this Section 5(H). If the fair market value of the
Common Stock cannot be determined on the basis previously set forth in this
Section 5(H) on the date as of which fair market value is to be determined,
the Board shall in good faith determine the fair market value of the Common
Stock on such date. Fair market value shall be determined without regard to
any restriction other than a restriction which, by its terms, will never
lapse.
(I) Notwithstanding any other provision of this Section 5 or any other
provision of the Plan or any stock option agreement or an amendment
thereto, any grantee who has made a hardship withdrawal from the Tuscarora
Incorporated Savings Plan shall be prohibited, for a period of twelve (12)
months following such hardship withdrawal, from exercising any stock option
granted under the Plan in such a manner and to the extent that the exercise
of such stock option would result in an employee elective contribution or
an employee contribution to an employer plan within the meaning of Treasury
Regulation sec. 1.401(k)-1(d)(2)(iii)(B)(3) or any successor regulation
thereto.
Subject to the foregoing provisions of this Section and the other
provisions of the Plan, any stock option granted under the Plan may be exercised
at such times and in such amounts and be subject to such restrictions and other
terms and conditions, if any, as shall be determined, in its discretion, by the
Board and set forth in the agreement referred to in Section 5(G) or an amendment
thereto.
SECTION 6
TERMS AND CONDITIONS OF RESTRICTED SHARE AWARDS
Restricted share awards shall be evidenced by a written agreement in a form
prescribed by the Board, in its discretion, which shall set forth the number of
shares of the Common Stock awarded, the restrictions imposed thereon (including,
without limitation, restrictions on the right of the grantee to sell, assign,
transfer or encumber such shares while such shares are subject to other
restrictions imposed under this Section 6), the duration of such restrictions,
events (which may, in the discretion of the Board, include performance-based
events) the occurrence of which would cause a forfeiture of the restricted
shares and such other terms and conditions as the Board in its discretion deems
appropriate. If Rule 16b-3 under the 1934 Act or any successor rule so requires,
each restricted share agreement shall provide that the restricted shares subject
to such agreement may not be sold, assigned, transferred or encumbered until six
months have elapsed from the date of the restricted share award unless the
restrictions applicable to the restricted shares have lapsed or terminated as a
result of death or disability. Restricted share awards shall be effective only
upon execution of the applicable restricted share agreement on behalf of the
Company by the Chief Executive Officer (if other than the President), the
President or any Vice President, and by the awardee.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, the share certificates representing the restricted
shares shall be held by the Company in escrow. Upon the lapse or termination of
the applicable restrictions (and not before such time), the share certificates
representing the restricted shares shall be delivered to the awardee. From the
date a restricted share award is effective, the grantee shall be a shareholder
with respect to all the shares represented by the share certificates for the
restricted shares and shall have all the rights of a shareholder with respect to
the restricted shares, including the right to vote the restricted shares and to
receive all dividends and other distributions paid with respect to the
restricted shares, subject only to the succeeding paragraph and the restrictions
imposed by the Board.
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of the Common Stock, the shares of the Common Stock
distributed with respect to any restricted shares held in
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escrow shall also be held by the Company in escrow and be subject to the same
restrictions as are applicable to the restricted shares. If the outstanding
shares of the Common Stock shall be changed into or exchangeable for a different
number or kind of shares of stock or other securities of the Company or another
corporation, whether through reorganization, reclassification, recapitalization,
stock splitup, combination of shares, merger or consolidation or otherwise, such
stock or other securities into which any restricted shares held in escrow are
changed or for which any restricted shares held in escrow may be exchanged shall
also be held by the Company in escrow and be subject to the same restrictions as
are applicable to the restricted shares. Owners of any restricted shares held in
escrow shall be treated in the same manner as owners of shares of the Common
Stock not held in escrow with respect to fractional shares resulting from any
dividend or other distribution with respect to restricted shares or from any
change in or exchange of restricted shares, and any cash or other property paid
in lieu of a fractional share shall be subject to restrictions similar to those
applicable to the restricted shares except as otherwise determined by the Board
in its discretion.
If an awardee of restricted shares engages in the operation or management
of a business (whether as owner, partner, officer, director, employee or
otherwise and whether during or after termination of employment) which is in
competition with the Company or any of its Subsidiaries, the Board may
immediately declare forfeited all restricted shares held by the awardee as to
which the restrictions have not yet lapsed. Whether an awardee has engaged in
the operation or management of a business which is in competition with the
Company or any of its Subsidiaries shall also be determined, in its discretion,
by the Board, and any such determination by the Board shall be final and
binding.
SECTION 7
ISSUANCE OF SHARES
The obligation of the Company to issue shares of the Common Stock under the
Plan shall be subject to (i) the effectiveness of a registration statement under
the Securities Act of 1933, as amended, with respect to such shares, if deemed
necessary or appropriate by counsel for the Company, (ii) the condition that the
shares shall have been listed (or authorized for listing upon official notice of
issuance) upon each stock exchange, if any, on which the shares of Common Stock
may then be listed and (iii) all other applicable laws, regulations, rules and
orders which may then be in effect.
SECTION 8
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
then subject to any outstanding stock options and the number of shares of the
Common Stock which may be issued under the Plan but are not then subject to
outstanding stock options shall be adjusted by adding thereto the number of
shares of the Common Stock which would have been distributable thereon if such
shares had been outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend or distribution.
If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation or otherwise, then there shall be substituted
for each share of the Common Stock subject to any then outstanding stock option
and for each share of the Common Stock which may be issued under the Plan but
which is not then subject to any outstanding stock option, the number and kind
of shares of stock or other
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<PAGE> 8
securities into which each outstanding share of the Common Stock shall be so
changed or for which each such share shall be exchangeable.
In case of any adjustment or substitution as provided for in this Section
8, the aggregate option price for all shares subject to each then outstanding
stock option prior to such adjustment or substitution shall be the aggregate
option price for all shares of stock or other securities (including any
fraction) to which such shares shall have been adjusted or which shall have been
substituted for such shares. Any new option price per share shall be carried to
at least three decimal places with the last decimal place rounded upwards to the
nearest whole number.
No adjustment or substitution provided for in this Section 8 shall require
the Company to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution.
If any such adjustment or substitution provided for in this Section 8
requires the approval of shareholders in order to enable the Company to grant
incentive stock options, then no such adjustment or substitution shall be made
without the required shareholder approval. Notwithstanding the foregoing, in the
case of incentive stock options, if the effect of any such adjustment or
substitution would be to cause the stock option to fail to continue to qualify
as an incentive stock option or to cause a modification, extension or renewal of
such stock option within the meaning of Section 424 of the Code, the Board may
determine that such adjustment or substitution not be made but rather shall use
reasonable efforts to effect such other adjustment of each then outstanding
stock option as the Board, in its discretion, shall deem equitable and which
will not result in any disqualification, modification, extension or renewal
(within the meaning of Section 424 of the Code) of such incentive stock option.
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Neither the adoption of the Plan nor any action of the Board pursuant to
the Plan shall be deemed to give any employee any right to be granted a stock
option (with or without cash payment rights) or to be awarded restricted shares
under the Plan. Nothing in the Plan, in any stock option or cash payment rights
granted under the Plan, in any restricted share award under the Plan or in any
agreement providing for any of the foregoing or amendment thereto shall confer
any right to any employee to continue in the employ of the Company or any
Subsidiary or interfere in any way with the rights of the Company or any
Subsidiary to terminate the employment of any employee at any time or adjust the
compensation of any employee at any time.
SECTION 10
AMENDMENT
The right to alter and amend the Plan at any time and from time to time and
the right to revoke or terminate the Plan are hereby specifically reserved to
the Board; provided always that no such revocation or termination shall
terminate any outstanding stock options or cash payment rights granted under the
Plan or cause a revocation or a forfeiture of any restricted share award under
the Plan; and provided further that no such alteration or amendment of the Plan
shall, without shareholder approval (a) increase the total number of shares
which may be issued under the Plan, (b) change the minimum option price, (c)
make any changes in the class of employees eligible to receive incentive stock
options or (d) extend any period set forth in the Plan during which stock
options (with or without cash payment rights) may be granted or restricted
shares may be
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awarded. No alteration, amendment, revocation or termination of the Plan shall,
without the written consent of the holder of a stock option, cash payment rights
or restricted shares theretofore granted or awarded under the Plan, adversely
affect the rights of such holder with respect thereto.
SECTION 11
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be October 16,
1989, the date of adoption of the Plan by the Board, provided that such adoption
of the Plan by the Board is approved by the affirmative vote of the holders of
at least a majority of the outstanding shares of voting stock of the Company
represented in person or by proxy at a meeting of such holders duly called,
convened and held on or prior to October 15, 1990. No stock option granted under
the Plan may be exercised and no restricted shares may be awarded until after
such approval. No stock option or cash payment rights may be granted and no
restricted shares may be awarded under the Plan subsequent to October 15, 1999.
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TUSCARORA INCORPORATED
1989 STOCK INCENTIVE PLAN
ADDENDUM FOR UK EMPLOYEES
1 INTRODUCTION
This addendum shall apply for the purposes of the grant of stock options
which the Company intends shall be approved under the Income and Corporation
Taxes Act 1988 ("Taxes Act") to employees of the Company or any subsidiary in
the UK to acquire shares in the Company. Such stock options will be granted
under and subject to the Rules of the 1989 Stock Incentive Plan ("Plan") as
apply to nonstatutory stock options except as set out in this addendum.
The words and meaning in this addendum shall have the same meanings as in
the Rules of the Plan.
2 OPTIONS
The provisions of the Plan relating to incentive stock options, cash
payment rights and restricted shares shall not apply to approved stock options
granted to UK participants.
3 ELIGIBILITY
Only UK employees of the Company or any subsidiary who are not directors,
or UK employees who are directors of the Company or a subsidiary and are
required under the terms of their employment to devote to their duties not less
than 25 hours per week excluding meal breaks and are not excluded from
participating under Paragraph 8 to Schedule 9 to the Taxes Act, are eligible to
be granted a stock option.
4 INDIVIDUAL LIMITS
An employee must not be granted a stock option which would, at the proposed
date of grant, cause the aggregate of the market value of shares which he or she
may acquire by the exercise of a stock option granted under the Plan or any
other share option scheme approved under Schedule 9 to the Taxes Act and
established by the Company or by any of its associated companies, as defined in
Section 187 of the Taxes Act, to exceed pound sterling 30,000.
For the purposes of this Section, market value will be either 100% of the
fair market value of the shares on the date of grant or the option price as
agreed in advance with the Inland Revenue, whichever is the higher. In
determining the limits under this Section amounts quoted in United States
dollars shall be translated into sterling at the average of the spot buying and
selling rates for sterling using the rate quoted for United States dollars in
comparable amounts by National Westminster Bank PLC on the business day prior to
the date of grant.
5 AMENDMENTS
If the Inland Revenue approved status of stock options granted is to be
maintained, no amendment or alteration to this addendum or the Rules of the Plan
which could affect the options shall have effect unless such amendment or
alteration has been approved by the Inland Revenue.
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6 EXERCISE OF OPTIONS
Shares to be issued following the exercise of an option will be issued
within 30 days of the date of exercise. The Board will procure the transfer of
shares to be transferred following the exercise of an option within 30 days of
the date of exercise.
The provisions of the Plan relating to payment of the option price by
delivery of shares of the Common Stock shall not apply to approved stock options
granted to UK participants.
No option may be exercised after the end of the day before the tenth
anniversary of the date of grant of that option.
7 SHARES
Options under the Plan will only be granted over shares which are fully
paid ordinary shares in the capital of the Company which comply with the
requirements of Paragraphs 10 to 14 inclusive, of Schedule 9 to the Taxes Act.
8 ADJUSTMENT AND SUBSTITUTION OF SHARES
In the event to any variation in the equity share capital of the Company
including a capitalization or rights issue, sub-division, consolidation or
reduction of share capital:
(i) the number and/or nominal amount of shares comprised in each stock
option, and/or
(ii) the stock option price,
may be adjusted in any way (including retrospective adjustments) in which the
Board considers appropriate subject to the prior approval of the Inland Revenue.
Notice: The Board may notify optionholders of any adjustment made under
this Section.
If any such adjustment provided for in this Section requires the approval
of shareholders then no such adjustment shall be made without shareholder
approval.
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EXHIBIT 10.5
TUSCARORA INCORPORATED
COMMON STOCK PURCHASE PLAN FOR SALARIED EMPLOYEES
(AS AMENDED ON OCTOBER 11, 1996)
The purpose of the Common Stock Purchase Plan for Salaried Employees (the
"Plan") is to provide the eligible employees of Tuscarora Incorporated (the
"Company") and its Subsidiaries with a convenient means of purchasing shares of
Common Stock, without par value (the "Common Stock"), of the Company through
regular salary deductions, matching employer contributions and investment of
cash dividends. For the purposes of the Plan, the term "Subsidiary" means any
corporation in an unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the unbroken chain
owns stock processing at least fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
PARTICIPATION IN THE PLAN IS VOLUNTARY, AND NO RECOMMENDATION IS MADE TO
ELIGIBLE EMPLOYEES AS TO WHETHER THEY SHOULD OR SHOULD NOT PARTICIPATE IN THE
PLAN. THERE IS NO GUARANTEE UNDER THE PLAN AGAINST LOSS BECAUSE OF FLUCTUATIONS
IN THE MARKET PRICE OF THE COMMON STOCK. IN SEEKING THE BENEFITS OF SHARE
OWNERSHIP, EACH PARTICIPANT MUST ALSO ACCEPT THE RISKS ATTENDANT TO SUCH
OWNERSHIP.
SECTION 1
ELIGIBILITY
All regular full-time salaried employees of the Company and its
Subsidiaries, are eligible to participate in the Plan, provided (i) they have
attained the age of 18 years and (ii) they have completed one year of service
with the Company or its subsidiaries. Employees of the Company and its
Subsidiaries whose wages and other conditions of employment are covered by a
collective bargaining agreement are not eligible to participate in the Plan
unless and until such agreement provides for the application of the Plan to
employees covered by such agreement.
SECTION 2
ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board").
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan.
The Committee shall keep records of action taken at its meetings. A
majority of the Committee shall constitute a quorum at any meeting and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the Committee, shall be
the acts of the Committee.
The Company shall maintain an account for each participant in the name of
each participant and shall maintain all records in connection with the Plan.
<PAGE> 2
Neither the Company nor the Committee shall be liable for any act done in
good faith or for any good faith omission to act, including, without limitation,
any claim of liability with respect to the prices or times at which shares of
the Common Stock are purchased or sold for a participant or with respect to any
fluctuation in market value before or after any purchase or sale of shares.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock which may be issued by
the Company under the Plan is one hundred fifty thousand (150,000) shares,
subject to adjustment and substitution as set forth in this Section 3. The
shares which may be issued under the Plan may be either authorized but unissued
shares or shares previously issued and thereafter acquired by the Company or
partly each, as shall be determined from time to time by the Board. If a
dividend or other distribution shall be declared upon the Common Stock payable
in shares of the Common Stock, the number of shares of the Common Stock which
may be issued under the Plan but have not yet been issued shall be adjusted by
adding thereto the number of shares of the Common Stock which would have been
distributable thereon if such shares had been outstanding on the date fixed for
determining the shareholders entitled to receive such stock dividend or
distribution. If the outstanding shares of the Common Stock shall be changed
into or exchangeable for a different number of shares of the Common Stock, then
there shall be substituted for each remaining share of the Common Stock which
may be issued under the Plan, the number of shares of the Common Stock into
which each outstanding share of the Common Stock shall be so changed or for
which each such share shall be exchangeable.
SECTION 4
PARTICIPATION
An eligible employee may enroll as a participant at any time by completing
and signing an enrollment and salary deduction authorization form and delivering
it to the Company's Accounting Department, except that any eligible employee who
has made a hardship withdrawal from the Tuscarora Plastics, Inc. Savings Plan
(the "401(k) Plan") shall be prohibited, for a period of 12 months from the date
of the hardship withdrawal, from submitting such form. Enrollment shall become
effective as of the first day of the first month which begins after the date the
enrollment and salary deduction authorization form is received by the Company's
Accounting Department.
An eligible employee whose participation in the Plan has terminated may
reenroll in the Plan by following the above procedure. An employee who makes a
hardship withdrawal from the 401(k) Plan may, however, be prohibited from
reenrolling in the Plan for a certain period as set forth in the preceding
paragraph.
The Committee reserves the right to reject any enrollment and salary
deduction authorization form on the grounds of excessive reenrollment. This
reservation is intended to minimize unnecessary administrative expense and to
encourage use of the Plan as long-term shareholder and employee investment
service.
SECTION 5
EMPLOYEE CONTRIBUTIONS
Each eligible employee is permitted to authorize a deduction from his or
her salary, in even multiples of $1.00, of a minimum of $10.00 per month and a
maximum of $300.00 per month, provided, however, that the
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maximum deduction for any calendar year shall not exceed eight percent (8%) of
the annual salary of the eligible employee.
Salary deduction authorizations shall remain effective until changed or
terminated by the participant. A participant may change or terminate salary
deduction authorizations at any time by completing and signing a salary
deduction authorization change or termination form and delivering it to the
Company's Accounting Department. A change or termination of salary deductions
shall become effective as of the first day of the first month which begins after
the date the salary deduction authorization change or termination form is
received by the Company's Accounting Department. In addition, all salary
deductions for an employee shall be automatically suspended for a period of
twelve months from the date of a hardship withdrawal by the employee from the
401(k) Plan.
Contributions by a participant through salary deduction authorizations
shall be credited to the account under the Plan relating to the participant as
of each salary payment date and shall be used to purchase shares of Common Stock
for credit to such account as provided under Section 9 below.
SECTION 6
EMPLOYER CONTRIBUTIONS
On each Purchase Date, as defined in Section 9 below, the account relating
to each participant shall be credited with an amount equal to ten percent (10%)
of the amount credited to such account under Section 5 above the not previously
applied to the purchase of shares of Common Stock. Such amount shall be used to
purchase shares of Common Stock on such Purchase Date for credit to the account
relating to the participant as provided under Section 9 below.
SECTION 7
DIVIDENDS AND OTHER DISTRIBUTIONS
Except as provided below, each account relating to a participant shall be
credited with all cash dividends and other cash distributions, if any, paid in
respect of the full shares and any fractional interest in a share credited to
the account, less any amount the Company is required to deduct as backup
withholding in respect of the dividend or distribution received, or considered
to be received. Cash dividends and other cash distributions credited to a
participant's account shall be invested in Common Stock in accordance with
Section 9 below.
Cash dividends and other cash distributions paid in respect of shares
credited to a participant's account shall be paid directly to the participant
and shall not be credited to the participant's account or invested in Common
Stock for a period of twelve months from the date of a hardship withdrawal by
the participant to which the account relates from the 401(k) Plan if such
investment would constitute elective contributions or employee contributions
under an employer plan within the meaning of Treasury Regulations sec.
1.401(k)-1(d)(2)(iv)(B)(4) or any successor regulation.
Any stock dividends or stock splits in respect of shares of Common Stock
credited to an account shall be reflected in the account without charge. Any
distributions of other securities or rights to subscribe for additional shares
in respect of shares of Common Stock credited to an account relating to a
participant shall be made directly to the participant.
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SECTION 8
NO INTEREST ON AMOUNTS CREDITED TO ACCOUNTS
No interest shall be paid on amounts credited to the accounts relating to
the participants. Amounts credited to the accounts shall be under the control of
the Company and its Subsidiaries until used to purchase shares of Common Stock
or paid to participants and may be used for any corporate purpose.
SECTION 9
PURCHASE OF SHARES OF COMMON STOCK
On the sixth business day of each month (the "Purchase Date"), the
contributions by the participants and their employers which have been credited
to the accounts under the Plan and which have not been previously so applied
shall be applied to the purchase of shares of Common Stock from the Company.
Cash dividends or distributions which are to be invested in Common Stock under
the Plan shall be applied to the purchase of shares of Common Stock from the
Company on each dividend or distribution payment date. The purchase price of
each share shall be the fair market value (determined as set forth in Section 17
below) of a share of the Common Stock on the Purchase Date or the dividend or
distribution payment date, as the case may be. The shares purchased on each
Purchase Date and dividend or distribution payment date shall be credited to the
accounts for which the shares are purchased in proportion to the respective
amounts used to purchase shares from each account. Each allocation shall be made
in full shares and in fractional interests in a share to the ten-thousandth of a
share.
At the time of purchase, the participant with respect to an account shall
immediately acquire full ownership of all shares and of any fractional interest
in a share purchased for and credited to the account. All shares purchased shall
be registered in the name of the Company or another nominee or custodian for the
benefit of the participants under the Plan. Although a participant may not
assign or hypothecate an interest in the Plan as such, upon purchase of shares
under the Plan such shares may be sold pursuant to the procedures set forth in
Sections 10 and 11 below or, following distribution of such shares to the
participant, may be sold, assigned, hypothecated or otherwise dealt with by the
participant as is the case with respect to any other shares of Common Stock the
participant may own.
Notwithstanding the foregoing, upon termination of an account relating to a
participant under Section 10 or Section 11 below, any employee contributions
credited to the account and not yet applied to the purchase of shares of Common
Stock from the Company shall not be so applied and shall be delivered to the
participant, and no employer contribution shall be made with respect to such
employee contributions. Also, notwithstanding the foregoing and the provisions
of Section 7 above, cash dividends or distributions with respect to shares of
Common Stock credited to an account shall be delivered to the participant
instead of credited to the account and applied to the purchase of shares of
Common Stock from the Company on the dividend or distribution payment date if
the date as of which the account is terminated is more than ten (10) calendar
days prior to the record date of the cash dividend or distribution.
SECTION 10
VOLUNTARY SALE OR WITHDRAWAL OF SHARES
A participant may direct at any time that any or all of the shares credited
to the account relating to the participant be sold. Upon such sale, a check for
the proceeds, less any brokerage commissions and other charges applicable to the
sale, shall be delivered to the participant. The participant may also request at
any
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<PAGE> 5
time that a certificate or certificates representing any or all of the full
shares credited to the account relating to the participant be delivered to the
participant.
If the participant directs that all shares credited to the account relating
to the participant be sold and the net proceeds delivered to the participant or
requests that a certificate or certificates representing all full shares
credited to the account relating to the participant be delivered to the
participant, and the participant terminates or has terminated all salary
deduction authorizations, the account shall be terminated as of the later of the
date the direction or request is received and the effective date of the
termination of salary deductions.
Each direction or request referred to in this Section 10 shall be made by
the participant by completing and signing a sale or withdrawal form and
delivering it to the Company or an agent designated by the Company. Upon
termination, any fractional interest in a share credited to the account may be
sold and the net proceeds delivered to the participant or the value of the
fractional interest may be determined by reference to the current fair market
value of the Common Stock and paid to the participant in cash.
SECTION 11
TERMINATION OF ACCOUNT UPON TERMINATION OF EMPLOYMENT
The account relating to a participant whose employment with the Company and
its Subsidiaries terminates shall also be terminated as of the date of
termination of employment. The participant may direct that all shares credited
to the account be sold and the net proceeds delivered to the participant, or the
participant may request that a certificate or certificates representing all full
shares credited to the account be delivered to the participant. Any brokerage
commissions and other charges applicable to sales are payable by the participant
and will be deducted in determining the net proceeds. If no direction is
received from the participant prior to the time the account relating to a
participant would normally be settled, a certificate or certificates
representing all full shares credited to the account will be delivered to the
participant.
Each direction or request referred to in this Section 11 shall be made by
the participant by completing and signing a sale or withdrawal form and
delivering it to the Company or an agent designated by the Company. Upon
termination, any fractional interest in a share credited to the account may be
sold and the net proceeds delivered to the participant or the value of the
fractional interest may be determined by reference to the current fair market
value of the Common Stock and paid to the participant in cash.
SECTION 12
INFORMATION FOR PARTICIPANTS; VOTING RIGHTS
Each participant shall receive at least quarterly each year a statement of
all transactions affecting the account relating to the participant and the
number of shares (including any fractional interest in a share) of the Common
Stock credited to the account. Each participant shall also receive copies of all
reports, proxy statements and other communications distributed by the Company to
its shareholders generally at the time and in the manner such material is sent
to such shareholders.
Participants shall receive proxy soliciting material in connection with
each meeting of shareholders of the Company. Shares can be voted only by the
holder of record. The shares of Common Stock credited to each account (including
any fractional interest in a share) shall be voted by the holder of record only
in accordance with the participant's signed proxy instructions duly delivered to
the holder of record.
5
<PAGE> 6
SECTION 13
AMENDMENT OR TERMINATION OF PLAN
The Board reserves the right to amend or terminate the Plan at any time.
Any amendment or termination shall not result in the forfeiture of any funds
deducted from the salary of any participant, or of any shares of Common Stock or
fractional interest in a share credited to an account, or of any dividends or
other distribution in respect of such shares, before the effective date of the
amendment or termination.
SECTION 14
WITHHOLDING
The purchase of shares of Common Stock under the Plan may result in
compensation income to participants and may be subject to Federal income and
employment tax, state income tax and/or local income tax withholding. The
Company or one of its Subsidiaries shall withhold all applicable withholding
taxes on any such compensation income from the salary of the participant who
realizes such compensation income. Each participant's salary also shall be
subject to withholding of all applicable Federal income and employment, state
income and local income taxes without regard to any amounts deducted therefrom
as salary deductions authorized under the Plan.
SECTION 15
EXPENSES OF THE PLAN
The Company and its Subsidiaries will pay all expenses incident to the
operation of the Plan, including the costs of record keeping, accounting fees,
legal fees, issue or transfer taxes on purchases of shares of the Common Stock
pursuant to the Plan, the costs of delivery of stock certificates to
participants and the costs of delivery of shareholder communications. Neither
the Company nor any of its Subsidiaries will pay any expenses, commissions or
taxes incurred in connection with the sale of shares of Common Stock credited to
an account at the direction of the participant. Expenses in connection with any
such sale will be deducted from the proceeds of sale prior to any remittance to
the participant.
SECTION 16
RIGHTS NOT TRANSFERABLE
The right to purchase shares of Common Stock under the Plan shall not be
transferable by an eligible employee and such right shall be exercisable during
the eligible employee's lifetime only by the eligible employee. Upon the death
of a participant, any shares held for the account relating to the participant
and any cash payment for any fractional shares shall be transferred in
accordance with the Will of the participant, or, if the participant dies
intestate, the laws of descent and distribution of the state of domicile of the
participant at the time of death.
SECTION 17
FAIR MARKET VALUE
Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to rely upon):
(a) if the
6
<PAGE> 7
Common Stock is listed on the New York Stock Exchange, the highest and lowest
sales prices per share of the Common Stock as quoted in the NYSE--Composite
Transactions listing for such date, (b) if the Common Stock is not listed on
such exchange, the highest and lowest sales prices per share of the Common Stock
for such date on (or on any composite index including) the principal United
States securities exchange registered under the 1934 Act on which the Common
Stock is listed or (c) if the Common Stock is not listed on any such exchange,
the highest and lowest sales prices per share of the Common Stock for such date
on NASDAQ. If there are no such sale price quotations for the date as of which
fair market value is to be determined but there are such sale price quotations
within a reasonable period both before and after such date, then fair market
value shall be determined by taking a weighted average of the means between the
highest and lowest sales prices per share of the Common Stock as so quoted on
the nearest date before and the nearest date after the date as of which fair
market value is to be determined. The average should be weighted inversely by
the respective numbers of trading days between the selling dates and the date as
of which fair market value is to be determined. If there are no such sale price
quotations on or within a reasonable period both before and after the date as of
which fair market value is to be determined, then fair market value of the
Common Stock shall be the mean between the bona fide bid and asked prices per
share of the Common Stock as so quoted for such date on NASDAQ, or if none, the
weighted average of the means between such bona fide bid and asked prices on the
nearest trading date before and the nearest trading date after the date as of
which fair market value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner described above
in this Section 17. If the fair market value of the Common Stock cannot be
determined on the basis previously set forth in this Section 17 on the date as
of which fair market value is to be determined, the Committee shall in good
faith determine the fair market value of the Common Stock on such date. Fair
market value shall be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
SECTION 18
ISSUANCE OF SHARES
The obligation of the Company to issue shares of the Common Stock under the
Plan shall be subject to (i) the effectiveness of a registration statement under
the Securities Act of 1933, as amended, with respect to such shares, if deemed
necessary or appropriate by counsel for the Company, (ii) the condition that the
shares shall have been listed (or authorized for listing upon official notice of
issuance) upon each stock exchange, if any, on which the shares of Common Stock
may then be listed and (iii) all other applicable laws, regulations, rules and
orders which may then be in effect.
SECTION 19
TERMINATION OF PLAN
The Plan shall terminate when all of the shares of the Common Stock which
may be issued under the Plan have been purchased; provided that the Board, in
its sole discretion, may terminate the Plan at any time without any obligation
on account of such termination, except as hereinafter provided. Upon termination
of the Plan, distribution of each account shall be made as provided in Section
11 above in the case of a participant whose employment with the Company and its
Subsidiaries has terminated.
7
<PAGE> 1
Exhibit 10.9
FIRST AMENDMENT TO THE
TUSCARORA INCORPORATED AND SUBSIDIARY
COMPANIES SALARIED EMPLOYEES'
MONEY PURCHASE PENSION PLAN
(As amended and restated effective as of September 1, 1989)
WHEREAS, Tuscarora Incorporated (the "Employer") maintains the
Tuscarora Incorporated and Subsidiary Companies Salaried Employees' Money
Purchase Pension Plan, as amended and restated effective as of September 1,
1989 (the "Plan"); and
WHEREAS, the Employer desires to amend the Plan to provide an
additional quarterly contribution for certain employees of the Employer; and
WHEREAS, pursuant to Plan Section 7.1, the Employer has reserved the
right to amend the Plan at any time.
NOW, THEREFORE, the Plan is hereby amended, effective September 1,
1996, as follows:
1. Section 3.1 of the Plan is hereby amended in its entirety to read
as follows:
"3.1 EMPLOYER CONTRIBUTION. As of each quarterly Valuation Date, each
Employer shall contribute to the Trust an amount equal to:
(a) beginning September 1, 1976, four percent (4%);
(b) beginning September 1, 1977, five percent (5%); and
<PAGE> 2
(c) beginning September 1, 1988, five and one-half percent
(5-1/2%)
of the aggregate Compensation of all Participants during the Plan's fiscal
quarter ending on such Valuation Date; provided, that effective September
1, 1996, each Employer shall contribute, to extent permitted under the Code
and applicable regulations, an additional amount as of each such Valuation
Date equal to the percentage of Compensation of the Participants listed in
Appendix A for the fiscal quarter ending on such date. Employer
contributions made pursuant to subsections (a), (b) and (c) shall be
allocated to each Participant's account in the ratio that each
Participant's Compensation bears to all Participants' Compensation during
the fiscal quarter ending on such Valuation Date. The additional Employer
contribution provided pursuant to Appendix A shall be allocated to each
affected Participant's account based on the percentage of the Participant's
Compensation specified in the Appendix for the quarter. Forfeitures arising
during any Plan Year (including any forfeiture arising by reason of Plan
Section 4.8) which are attributable to contributions made by an Employer
shall be applied to reduce the contribution of such Employer."
2. A new Appendix A is hereby added to the Plan to read as follows:
"APPENDIX A
ADDITIONAL PLAN CONTRIBUTIONS
Effective September 1, 1996, an additional Employer Contribution shall be
made in accordance with Section 3.1 for the following Participants at the
rate of the Participant's Compensation for the fiscal quarter specified
below:
Name of Percentage of
Participant Compensation
----------- ------------
J. O'Leary 7-1/2%
B. Mullins 7-1/2%
J. Brakebill 7-1/2%
D. O'Leary 5-1/2%
R. Margeson 4-1/2%
B. Buettin 1-1/2%"
2
<PAGE> 3
3. This Amendment is hereby adopted subject to the condition that the
Plan, as so amended, shall continue to be a tax-qualified retirement plan,
within the meaning of Sections 401(a) and 501(a) of the Internal Revenue Code
of 1986, as amended. In the event it is finally determined that this Amendment
would adversely affect the qualified status of the Plan, then it shall be
deemed null, void and of no effect, as if it had never been adopted.
4. The Plan is hereby ratified and affirmed in all other respects.
IN WITNESS WHEREOF, Tuscarora Incorporated has caused this document to
be executed by its duly authorized officer, this 11th day of October, 1996.
TUSCARORA INCORPORATED
By: /s/ BRIAN C. MULLINS
---------------------
Brian C. Mullins,
Vice President and Treasurer
3
<PAGE> 1
Exhibit 10.10
TUSCARORA INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
STATEMENT OF INTENT
The Employer has adopted this Tuscarora Incorporated Supplemental
Executive Retirement Plan ("Plan") in order to provide certain eligible
executive and senior management employees of the Employer with supplemental
retirement benefits, in addition to amounts provided by the Employer's
qualified retirement plans and by Social Security. The Employer acknowledges
that the Plan is an "employee pension benefit plan" within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The Plan is intended to be an "unfunded [plan] maintained primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees" which is eligible for the
exemptions applicable to such plans under Titles I and IV of ERISA (and which
is not subject to any requirement imposed under Section 401(a) of the Code);
the Plan is further intended to provide for benefits that are not taxable as
income to each Participant until such time as such benefits are paid to the
Participant. The Plan is intended to be generally effective as of March 1,
1996.
1. ELIGIBLE EXECUTIVES. In order to be eligible to receive an
allocation to a book account for any Plan Year hereunder, an individual must be
(i) an employee of the Employer in active employment with the Employer during
all or part of a Plan Year, (ii) who is an executive or senior management
employee, and (iii) who has been previously designated by the Compensation
Committee of the Employer's Board of Directors, in its sole discretion, as
eligible to participate in this plan, has been provided a Participation
Agreement providing for participation herein, has executed and returned the
Participation Agreement as provided therein, and such designation and agreement
has not been revoked by the Compensation Committee in its sole discretion prior
to such date. An individual who satisfies these requirements, who has had an
amount credited to a bookkeeping account on his/her behalf hereunder, and who
has not yet been paid out all of the amounts credited on his/her behalf
hereunder shall be hereinafter referred to as a "Participant." For purposes of
this Plan, the "Plan Year" shall be the 12-month period beginning on September
1 and ending on the succeeding August 31 (with an initial "short plan year"
beginning on March 1, 1996 and ending on August 31, 1996).
2. PERCENTAGE ALLOCATION. A Participant shall have allocated to a book
account on his/her behalf under this Plan for each quarter during a Plan Year,
the applicable percentage of his/her Compensation for such quarter. For
purposes of this Plan, "Compensation" shall mean the Participant's salary and
bonus paid by the Employer, plus any elective contributions which are
excludable from gross income under Code Section 125 (cafeteria plans) or
Section 402(e)(3) (401(k) cash or deferred arrangements). The applicable
percentage for any Participant shall be the amount determined by the
Compensation Committee, in its sole discretion, as the applicable percentage
and disclosed to the Participant in his/her Participation Agreement; such
amount may be changed from time to time by the Compensation Committee, in its
sole discretion, with written notice to affected Participants, without the
necessity for a formal Plan amendment.
3. CREDITING TO PARTICIPANT ACCOUNTS. Amounts allocable on behalf of a
Participant under paragraph (2) above shall be credited to an account on the
Employer's books in the Participant's name, as of the last day of each quarter
during the Plan Year for which such amounts are to be credited. There shall
also be credited to a Participant's account for each quarter on such date
simple interest at the "Plan Rate." The "Plan Rate" for each quarter shall be
<PAGE> 2
the rate announced by Mellon Bank, N.A. as its prime rate as in effect on the
first day of such quarter.
4. VESTING OF ACCOUNT BALANCES. All amounts credited to a
Participant's bookkeeping account shall become fully vested upon the
Participant's completion of five Years of Service (as such term is defined in
the Tuscarora Incorporated and Subsidiary Companies Salaried Employees' Money
Purchase Pension Plan), or upon the Participant's termination of employment due
to death or a permanent disability which qualifies the Participant for benefits
under the Employer's long-term disability plan, and shall not be subject to
forfeiture thereafter except as provided in the following two sentences.
Notwithstanding the foregoing, no benefits shall be payable under this Plan to
or on behalf of a Participant, and any benefits in pay status shall cease to be
paid, if the Participant's employment is terminated for cause amounting to
gross misconduct or if the Employer's Board of Directors determines, in its
sole discretion, that the Participant has taken actions which have willfully or
through gross negligence injured the Employer or any parent, affiliated,
subsidiary or related company. Injuring the Employer or any parent, affiliated,
subsidiary or related company willfully or through gross negligence would
include, without limitation, embezzlement, destruction of Employer property or
property of any parent, affiliated, subsidiary or associated company,
revelation of trade secrets, disclosure of customer lists, or violation of the
terms of any covenant not to compete between the Employer and the Participant,
any of which results in harm to the Employer's assets, reputation, good will or
business or those of any parent, affiliated, subsidiary or associated company.
Moreover, a Participant's right to receive or to continue receiving benefits
hereunder shall be subject to such additional conditions as may be set forth in
his/her Participation Agreement. A Participant who terminates employment with
the Employer for any reason prior to completion of five Years of Service, death
or disability shall forfeit his/her account balance and all right to benefits
hereunder, unless the Compensation Committee determines, in its sole
discretion, and subject to such conditions as it may determine appropriate, to
grant vesting of benefits hereunder.
5. COMMENCEMENT OF PARTICIPANT'S BENEFIT PAYMENTS. Payment of the
Participant's account balance to the Participant shall commence as soon as
practicable after the later of the Participant's termination of employment or
the Participant's attainment of age 55 (provided, that where the Participant's
employment terminates due to a permanent disability which qualifies him/her for
benefits under the Employer's long-term disability plan, benefits may commence
upon the Participant's termination of employment without regard to the age 55
requirement). The Participant and Employer may mutually agree prior to the date
of distribution to change that date upon such terms and conditions as the
Employer shall, in its sole discretion, deem necessary or appropriate.
6. FORM OF BENEFIT. The Participant's benefit shall be paid in one of
the following forms, as elected by the Participant: A single life annuity, a
joint and 50% survivor annuity, a joint and 100% survivor annuity, or a single
life annuity with 60, 120 or 180 months guaranteed, which in each case is the
actuarial equivalent of the amount credited to the Participant's book account
hereunder on the last day of the calendar quarter in which his/her employment
terminates (or he/she attains age 55, as applicable). Such election must be
made on a form provided by the Employer, and must be made at least twelve (12)
months before the date of commencement (and, where applicable, must designate
the Participant's survivor annuitant or the beneficiary of the Participant's
guaranteed payments). Upon such terms and conditions as the Employer shall, in
its sole discretion, deem necessary or appropriate, the Employer and
Participant may mutually agree prior to distribution to change the payment form
to any other actuarially equivalent form of payment, and/or the Employer may
determine to honor an election of form of payment made less than twelve (12)
months prior to commencement. Where the Participant elects a joint and survivor
annuity, and the survivor annuitant dies after commencement but prior to the
Participant's death, no new election shall be permitted, and the Participant
shall continue to receive his/her life annuity benefit in the amount in effect
prior to
2
<PAGE> 3
the survivor annuitant's death. Where the Participant elects a single
life annuity with guaranteed payments, and the person designated to receive
such guaranteed payments predeceases the Participant, the Participant shall be
permitted to substitute a new beneficiary. Actuarial equivalence for all
purposes under this Plan shall be determined using the factors specified on
Exhibit A hereof. Notwithstanding any other provision hereof, the Compensation
Committee may pay a Participant's benefit in the form of a single lump-sum
distribution, immediately upon the Participant's termination of employment,
where it determines in its sole discretion that it is necessary or appropriate
to do so (including, by way of example and not limitation, where the benefit is
sufficiently small that periodic payment would be administratively burdensome),
provided that the amount of such lump-sum distribution would not exceed
$50,000.
7. DEATH BENEFITS. The following death benefits are payable under
this Plan:
(a) If a Participant dies after benefit payments have commenced under
this Plan, a death benefit shall be payable only if the applicable
payment form provides for a survivor benefit. The survivor benefit
shall be payable to the survivor annuitant or beneficiary named by the
Participant. If the Participant has not named a beneficiary at the time
of his/her death, or his/her beneficiary predeceases him/her and no
substitute beneficiary has been named, no death benefit shall be
payable hereunder.
(b) If a Participant dies before benefit payments have commenced
hereunder, a death benefit shall be payable to the beneficiary named by
the Participant to receive such benefit. If the Participant has not
named such a beneficiary at the time of death, or his/her named
beneficiary has predeceased him/her and no substitute beneficiary has
been named, no death benefit shall be payable hereunder. The death
benefit shall be payable in the form of a single-life annuity for the
life of the beneficiary (who must be a natural person), which is the
actuarial equivalent of the Participant's account balance on the last
day of the calendar quarter of his/her death. Payment shall commence as
soon as practicable after the Participant's death. The Compensation
Committee, upon request of a Participant or beneficiary, may agree in
its sole discretion to permit distribution upon a Participant's death
prior to commencement to be made in a different time or form, on such
conditions and subject to such restrictions as it may deem necessary or
appropriate.
8. PLAN IS NOT FUNDED. All benefit payments made pursuant to this Plan
shall be paid in cash from the Employer's general assets. No Employer assets
shall at any time be set aside in a trust or other separate account or
arrangement to make benefit payments under this Plan. The Participant and any
survivor annuitant or beneficiary shall have only the rights of a general
unsecured creditor of the Employer with respect to any rights they may have
hereunder. Nothing contained herein shall be construed as constituting a
guaranty that the Employer's assets will be sufficient to pay any benefits
under this Plan.
9. NONTRANSFERABILITY OF BENEFITS. The rights of each Participant and
any survivor annuitant or beneficiary under this Plan are not subject to the
claims of their creditors and may not be voluntarily or involuntarily
transferred, assigned, alienated, accelerated or encumbered. Notwithstanding
the preceding sentence, the benefits payable under this Plan may, in the
Employer's discretion, be offset by any liability of the Participant and any
other amounts owed or otherwise payable by the Participant to the Employer. An
amount will be subject to offset hereunder if owed or otherwise payable by the
Participant at any time and for any reason, including (but not limited to) a
loan to the Participant, recovery of amounts due to misconduct of the
Participant, or any other liability or obligation of the Participant of any
type, as determined by the Employer.
3
<PAGE> 4
10. EXPENSES. The expenses of administering this Plan shall be borne
by the Employer.
11. TAX LIABILITY. The Employer may withhold from any benefit payment
made pursuant to this Plan any Federal, state or local taxes required to be
withheld with respect to such payment. Moreover, amounts allocated to a book
account hereunder are subject to withholding as required under the Federal
Insurance Contributions Act (FICA); such withholding may be taken by the
Employer from a Participant's regular salary or other compensation.
12. APPLICABLE LAW. This Plan shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, to the extent
applicable and not preempted by federal law.
13. EFFECT ON EMPLOYMENT RIGHTS. Nothing in this Plan shall be
construed as giving any Participant any right to continued employment with the
Employer.
14. SEVERABILITY. If any portion of this Plan shall be held invalid or
illegal for any reason, such event shall not affect or render invalid or
unenforceable the remainder of this Plan.
15. BINDING EFFECT. This Plan shall be binding upon and inure to the
benefit of each Participant, his/her survivor annuitant or beneficiary (as
determined in accordance with paragraphs 6 and 7, above) and the Employer and
its successors and assigns.
16. NO TRUST CREATED. Nothing contained in this Plan, and no action
taken pursuant to its provisions by either party hereto, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between
the Employer or any other person and the Participant, his/her designated
beneficiary, other beneficiaries of the Participant or any other person.
17. DETERMINATION OF BENEFITS. The Employer shall make all
determinations as to rights to benefits under this Plan. Subject to and in
compliance with the specific procedures contained in the applicable regulations
under ERISA: (i) any decision by the Employer denying a claim by any person for
benefits under this Plan shall be stated in writing and delivered or mailed to
such person; (ii) each such notice shall set forth the specific reasons for the
denial, written to the best of the Employer's ability in a manner that may be
understood without legal or actuarial counsel; and (iii) the Employer shall
afford a reasonable opportunity to such person for a full and fair review of
the decision denying such claim.
18. ADMINISTRATION. The Board of Directors of the Employer (or its
authorized delegate) shall have full discretionary power and right to
interpret, construe and administer this Plan. The interpretation and
construction of this Plan by the Board of Directors of the Employer (or such
delegate), and any action taken hereunder, shall be final, binding and
conclusive upon all parties in interest. No member of the Board of Directors of
the Employer or any person acting on its behalf shall, in any event, be liable
to any person for any action taken or omitted to be taken in connection with
the interpretation, construction or administration of this Plan, so long as
such action or omission to act is made in good faith.
19. AMENDMENT. This Plan may be amended at any time and from time to
time in the sole discretion of the Employer, through a resolution adopted or a
written instrument issued by the Board of Directors or by a duly authorized
officer of the Employer.
20. TERMINATION. This Plan may be terminated, in whole or part, at any
time and from time to time in the sole discretion of the Employer, through a
resolution adopted or a written instrument issued by the Board of Directors or
by a duly authorized officer of the Employer.
4
<PAGE> 5
EXHIBIT A
ACTUARIAL EQUIVALENT FACTORS
MORTALITY TABLE: 1983 Individual Annuity Mortality Table (1983 IAM)(Male)
INTEREST RATE: 7.5%
<PAGE> 6
TUSCARORA INCORPORATED
CONSENT OF COMPENSATION COMMITTEE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
OCTOBER 11, 1996
The undersigned, being all of the members of the Compensation Committee
appointed by the Board of Directors of Tuscarora Incorporated, a Pennsylvania
corporation, (the "Company") to administer the Company's Supplemental Executive
Retirement Plan ("SERP"), do hereby adopt, by unanimous written consent, the
following preambles and resolution in accordance with Section 1727(b) of the
Pennsylvania Business Corporation Law of 1988, with the same force and effect as
if such preambles and resolution had been adopted at a meeting of the
Compensation Committee duly called and held on October 11, 1996:
WHEREAS, in accordance with Section 1 of the SERP, the Compensation
Committee has the power and authority to designate, in its sole
discretion, certain executives or senior management employees to
participate in the SERP and to determine the applicable percentage of
compensation and bonus that will be paid by the Company on the
participant's behalf; and
WHEREAS, the Compensation Committee wishes to designate certain
employees for participation in the SERP effective as of September 1,
1996;
NOW, THEREFORE, BE IT RESOLVED, that the Compensation Committee
hereby designates the following named persons as participants in the
SERP effective as of September 1, 1996, and hereby establishes the
percentage set opposite each designee's name as the applicable
percentage of compensation to be credited each fiscal quarter to the
book accounts of each of the participants, commencing with the first
fiscal quarter for the 1997 fiscal year:
John O'Leary, Jr. -- 6.2%
Brian Mullins -- 6.0%
<PAGE> 7
James Brakebill -- 8.3%; and
RESOLVED FURTHER, that in accordance with Section 1 of the Plan, the
Compensation Committee, in its sole discretion and without the
necessity for formal Plan amendment, may change the percentages
indicated above, provided written notice is given to affected
participants.
It is hereby directed that this Consent be duly filed with the records
of meetings of the Compensation Committee.
/s/ Thomas S. Blair /s/ Harold F. Reed, Jr.
- ----------------------------- ------------------------------
Thomas S. Blair Harold F. Reed, Jr.
/s/ Robert W. Kampmeinert /s/ Thomas P. Woolaway
- ----------------------------- ------------------------------
Robert W. Kampmeinert Thomas P. Woolaway
-2-
<PAGE> 8
TUSCARORA INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, between ________________ ("Participant")
and TUSCARORA INCORPORATED ("Employer"), dated as of ______________, 19__.
1. STATEMENT OF INTENT. The Employer, by action of the Compensation
Committee of its Board of Directors, has determined to offer Participant the
opportunity to participate in the Tuscarora Incorporated Supplemental Executive
Retirement Plan ("SERP"), a copy of which is attached hereto. The SERP
conditions a Participant's eligibility to participate in the SERP, among other
things, on his/her entering into a Participation Agreement ("Agreement").
Participant desires to participate in the SERP. Therefore, in consideration of
the foregoing, Participant and Employer hereby enter into this Agreement.
2. PARTICIPATION/EFFECTIVE DATE. Participant's participation in the
SERP shall commence on the first day of the calendar quarter which coincides
with or next precedes the date of this Agreement. He/she shall participate in
the SERP, subject to all applicable terms, conditions and restrictions set
forth therein and in this Agreement. For purposes of this Agreement, the terms
of the SERP (as amended from time to time) shall be deemed to be incorporated
herein by reference.
3. APPLICABLE PERCENTAGE. The Participant's applicable percentage (as
contemplated in Section 2 of the SERP) as of the Effective Date of his/her
participation shall be ___%. Such percentage may be changed at any time by the
Compensation Committee by written notice to the Participant; the change shall
be effective as of the beginning of the calendar quarter which coincides with
or next precedes the later of (i) the date of the notice or (ii) the effective
date specified by the Compensation Committee. Such notice will be deemed to
amend this Section 3 accordingly.
4. BENEFICIARY DESIGNATION. In the event the Participant dies prior to
the date on which payout of benefits under the SERP commences, the Participant
hereby designates the following as his primary and contingent beneficiaries:
<PAGE> 9
Primary Beneficiary
-------------------
Name
-----------------------------------------------
Address
-----------------------------------------------
Date of birth
-----------------------------------------
Soc. Sec. No.
-----------------------------------------
Contingent Beneficiary
----------------------
Name
-----------------------------------------------
Address
-----------------------------------------------
Date of birth
-----------------------------------------
Soc. Sec. No.
-----------------------------------------
(The contingent beneficiary shall become the Participant's beneficiary
in the event the primary beneficiary predeceases the Participant.)
The Participant may revoke or change these designations at any time
prior to his/her death by sending a written and signed notice thereof to the
Chairman of the Compensation Committee.
5. FORFEITURE OF BENEFITS. In addition to the conditions and
restrictions set forth in Section 4 of the SERP, the Participant hereby agrees
that he/she will forfeit all right to any payment of benefits under the SERP
(and that any benefit payments that have previously commenced will cease) in
the event that the Participant, at any time during the three-year period
commencing on the date of his/her termination from employment with the
Employer, engages in any of the following conduct:
(a) solicits or induces, or attempts to solicit or induce, any
employee, agent or independent contractor of the Employer or its affiliates to
terminate his/her/its relationship with the Employer or its affiliates; or
(b) accepts any employment by (whether as employee, consultant,
independent contractor or otherwise), makes a substantial investment in, or
(with the intent to subsequently obtain an investment in, compensation from, or
employment by such person or organization) becomes actively interested in,
takes part in the affairs of, or gives advice and counsel to any person or
organization which is a competitor or which may reasonably be deemed to be a
competitor within the market areas in which the Employer's products are sold.
Participant further agrees that in the event that Participant receives
any payment of benefits hereunder after he/she engages in any of the
above-described conduct, Participant shall be obligated to return to the
Employer any such benefits, plus interest at the Plan Rate from the date of
payment. Participant agrees that the Employer may offset any such
2
<PAGE> 10
overpayment from any amount otherwise payable to Participant by the Employer.
6. CONTINUED PARTICIPATION/AMENDMENT OF TERMS. The Participant
acknowledges and agrees that his/her continued participation in the SERP is at
the sole discretion of the Compensation Committee, and that such participation
(and this Agreement) may be terminated or revoked at any time by the
Compensation Committee (provided, that except as otherwise contemplated in
Section 4 of the SERP and in paragraph 5 hereof, such termination or revocation
shall not cause the Participant to forfeit any right to vested benefits which
have been credited to the Participant under the SERP prior to such termination
or revocation). Moreover, Participant acknowledges and agrees that the Employer
has reserved the right to amend or terminate the SERP at any time, in its sole
discretion.
7. EFFECT ON EMPLOYMENT RIGHTS. Nothing in this Agreement shall be
construed as giving the Participant any right to continued employment with the
Employer.
8. SEVERABILITY. If any portion of this Agreement shall be held
invalid or illegal for any reason, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement.
9. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Participant, his/her survivor annuitant or beneficiary and
the Employer and its successors and assigns.
10. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, to the extent
applicable and not preempted by federal law.
IN WITNESS WHEREOF, the Participant and the Employer, by its duly
authorized representative, have caused this Agreement to be executed on the day
and year first set forth above.
TUSCARORA INCORPORATED
By:
---------------------------
------------------------------
3
<PAGE> 1
Exhibit 11
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRIMARY
Weighted average number of
shares of Common Stock
outstanding 6,097 6,109 6,129 6,154 6,242
Net effect of dilutive
stock options - based on
the treasury stock method
using average market price 102 102 71 102 120
------ ------ ------ ------ ------
TOTAL 6,199 6,211 6,200 6,256 6,362
====== ====== ====== ====== ======
Net income $4,891 $4,270 $5,703 $8,980 $9,653
====== ====== ====== ====== ======
Per share amount $0.80 $0.69 $0.92 $1.44 $1.52
====== ====== ====== ====== ======
FULLY DILUTED
Weighted average number of
shares of Common Stock
outstanding 6,097 6,109 6,129 6,154 6,242
Net effect of dilutive
stock options - based on
the treasury stock method
using greater of average
market price or closing
market price 114 102 71 137 120
------ ------ ------ ------ ------
TOTAL 6,211 6,211 6,200 6,291 6,362
====== ====== ====== ====== ======
Net income $4,891 $4,270 $5,703 $8,980 $9,653
====== ====== ====== ====== ======
Per share amount $0.80 $0.69 $0.92 $1.43 $1.52
====== ====== ====== ====== ======
</TABLE>
The per share and share numbers have been adjusted to reflect the 100% share
distribution paid on April 14, 1992. In thousands, except per share data.
<PAGE> 1
Exhibit 13
TUSCARORA INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
August 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $182,589,621 $163,299,682 $120,085,187
Cost of Sales 139,249,481 123,682,160 92,476,379
- ------------------------------------------------------------------------------------------
Gross profit 43,340,140 39,617,522 27,608,808
- ------------------------------------------------------------------------------------------
Selling and Administrative Expenses 24,524,593 21,831,518 17,103,015
Interest Expense 2,928,483 2,603,250 1,327,689
Other (Income) Expense--Net (18,235) 148,636 161,111
- ------------------------------------------------------------------------------------------
27,434,841 24,583,404 18,591,815
- ------------------------------------------------------------------------------------------
Income before income taxes 15,905,299 15,034,118 9,016,993
Provision for Income Taxes (Note 6) 6,252,682 6,053,854 3,313,954
- ------------------------------------------------------------------------------------------
Net income $ 9,652,617 $ 8,980,264 $ 5,703,039
- ------------------------------------------------------------------------------------------
Net income per share of
Common Stock (Note 1) $1.55 $1.46 $0.93
- ------------------------------------------------------------------------------------------
Weighted average number of shares
of Common Stock outstanding 6,241,606 6,153,745 6,129,062
- ------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE> 2
TUSCARORA INCORPORATED
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets (August 31) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,379,776 $ 2,659,767
Trade accounts receivable, less allowance of
$787,175 in 1996; $694,675 in 1995 26,094,406 23,463,267
Inventories (Note 2) 15,666,880 18,018,610
Prepaid expenses and other current assets 1,771,694 1,452,542
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 46,912,756 45,594,186
- ---------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Land 2,658,573 2,515,155
Buildings and improvements 45,197,923 40,284,731
Machinery and equipment 111,383,112 93,542,491
- ---------------------------------------------------------------------------------------------------------------------
Total 159,239,608 136,342,377
- ---------------------------------------------------------------------------------------------------------------------
Less accumulated depreciation (80,529,962) (68,751,183)
- ---------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 78,709,646 67,591,194
- ---------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Goodwill 3,406,779 2,251,422
Other non-current assets 2,140,261 2,284,457
- ---------------------------------------------------------------------------------------------------------------------
Total other assets 5,547,040 4,535,879
- ---------------------------------------------------------------------------------------------------------------------
Total assets $131,169,442 $117,721,259
- ---------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity (August 31)
- ---------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt (Note 3) $ 5,346,335 $ 4,819,255
Accounts payable 16,416,387 15,515,024
Accrued income taxes 153,930 365,986
Accrued payroll and related taxes 595,282 490,190
Other current liabilities (Note 7) 1,176,918 2,013,544
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 23,688,852 23,203,999
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT (NOTE 3) 39,249,136 36,510,150
DEFERRED INCOME TAXES (NOTE 6) 2,069,988 1,849,078
OTHER LONG-TERM LIABILITIES (NOTE 7) 1,334,577 1,384,671
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 66,342,553 62,947,898
- ---------------------------------------------------------------------------------------------------------------------
COMMITMENTS (NOTE 10)
SHAREHOLDERS' EQUITY
Preferred Stock--par value $.01 per share;
authorized shares, 1,000,000; none issued -- --
Common Stock--without par value, authorized shares,
20,000,000; issued shares, 6,284,615 in 1996,
6,200,158 in 1995 (Note 4) 6,284,615 6,200,158
Capital surplus (Note 4) 3,883,126 2,259,502
Retained earnings 54,825,048 46,799,379
Currency translation adjustment (38,690) (100,460)
- ---------------------------------------------------------------------------------------------------------------------
Total 64,954,099 55,158,579
- ---------------------------------------------------------------------------------------------------------------------
Less Common Stock in treasury--8,234 shares
in 1996; 27,532 shares in 1995; at cost (127,210) (385,218)
- ---------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 64,826,889 54,773,361
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $131,169,442 $117,721,259
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
9
<PAGE> 3
TUSCARORA INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
August 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 9,652,617 $ 8,980,264 $ 5,703,039
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 12,364,207 10,247,768 9,148,076
Amortization 612,773 641,745 572,474
Provision for losses on receivables 378,366 287,782 180,000
Increase (decrease) in deferred income taxes 200,468 168,189 (670,475)
Loss on sale or abandonment of
property, plant and equipment, net 80,883 64,425 7,217
Stock compensation expense 12,290 10,516 10,310
Changes in operating assets and liabilities, net of
effects of business acquisitions:
Decrease (increase):
Trade accounts receivable (2,588,248) (5,059,511) (2,500,622)
Inventories 2,561,825 (2,468,166) (3,531,860)
Prepaid expenses and other current assets (309,401) (393,767) 40,320
Other non-current assets (226,454) (289,188) 821,970
Increase (decrease):
Accounts payable 726,863 1,100,205 5,875,211
Accrued income taxes (281,410) 64,376 301,610
Accrued payroll and related taxes 100,695 (256,558) 124,317
Other current liabilities (884,162) 593,290 (201,252)
Other long-term liabilities (53,049) 402,820 1,126,599
- ---------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 22,348,263 14,094,190 17,006,934
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (23,128,792) (20,689,178) (12,433,432)
Business acquisitions, net of cash acquired (Note 8) (513,239) (5,664,667) (3,712,807)
Proceeds from sale of property, plant and equipment 152,129 184,764 52,844
- ---------------------------------------------------------------------------------------------------------------------
Cash (used for) investing activities (23,489,902) (26,169,081) (16,093,395)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 8,000,000 16,045,000 4,900,000
Payments on long-term debt (4,854,866) (3,667,977) (3,092,636)
Dividends paid (1,626,948) (1,415,195) (1,225,751)
Proceeds from sale of Common Stock 323,218 118,287 146,317
- ---------------------------------------------------------------------------------------------------------------------
Cash provided by
financing activities 1,841,404 11,080,115 727,930
- ---------------------------------------------------------------------------------------------------------------------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 20,244 (16,947) --
Net increase (decrease) in cash and
cash equivalents 720,009 (1,011,723) 1,641,469
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,659,767 3,671,490 2,030,021
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,379,776 $ 2,659,767 $ 3,671,490
- ---------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Data
Income taxes paid $ 6,243,828 $ 5,821,289 $ 3,602,117
Interest paid $ 3,302,840 $ 2,396,164 $ 1,206,026
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
10
<PAGE> 4
TUSCARORA INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Treasury Shares
--------------------- ------------------
Currency
Shares Capital Retained Translation
Issued Amount Surplus Earnings Shares Amount Adjustment Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
August 31, 1993 6,186,765 $6,186,765 $1,950,734 $34,757,022 72,654 ($348,487) -- $42,546,034
- ----------------------------------------------------------------------------------------------------------------------------
Net income 5,703,039 5,703,039
Sale of shares under
employee stock
purchase plan 6,949 6,949 98,098 105,047
Sale of shares under
stock option plans 122,385 (48,140) 288,004 410,389
Shares acquired in
payment of
option price 22,111 (358,809) (358,809)
Dividends paid
($0.20 per share) (1,225,751) (1,225,751)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at
August 31, 1994 6,193,714 $6,193,714 $2,171,217 $39,234,310 46,625 ($419,292) -- $47,179,949
- ----------------------------------------------------------------------------------------------------------------------------
Net income 8,980,264 8,980,264
Sale of shares under
employee stock
purchase plan 6,444 6,444 113,874 120,318
Sale of shares under
stock option plans (25,589) (33,700) 362,933 337,344
Shares acquired in
payment of
option price 14,607 (328,859) (328,859)
Dividends paid
($0.23 per share) (1,415,195) (1,415,195)
Currency translation adjustment ($100,460) (100,460)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at
August 31, 1995 6,200,158 $6,200,158 $2,259,502 $46,799,379 27,532 ($385,218) ($100,460) $54,773,361
- ----------------------------------------------------------------------------------------------------------------------------
Net income 9,652,617 9,652,617
Sale of shares under
employee stock
purchase plan 6,013 6,013 134,381 140,394
Sale of unissued shares
under stock
option plans 11,080 11,080 129,754 140,834
Sale of shares under
stock option plans (203,729) (21,300) 307,660 103,931
Shares acquired in
payment of
option price 2,002 (49,652) (49,652)
Shares issued in
connection with
an acquisition 67,364 67,364 1,563,218 1,630,582
Dividends paid
($0.26 per share) (1,626,948) (1,626,948)
Currency translation adjustment $61,770 61,770
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT
AUGUST 31, 1996 6,284,615 $6,284,615 $3,883,126 $54,825,048 8,234 ($127,210) ($38,690) $64,826,889
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
11
<PAGE> 5
TUSCARORA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
Tuscarora Incorporated (the Company) is a multinational designer and
manufacturer of interior protective packaging and material handling solutions,
made from a variety of materials, for a broad range of manufactured products.
The Company also supplies customers with molded foam plastic and thermoformed
components for a number of industrial and consumer product applications. The
principal end-use markets that the Company serves are the high technology,
consumer electronics, major appliance and automotive industries.
Principles of Consolidation
The consolidated financial statements include the accounts of Tuscarora
Incorporated and its wholly-owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries are maintained
in their functional currencies and translated into U.S. dollars. Assets and
liabilities are translated at current exchange rates in effect at each balance
sheet date, and revenues and expenses are translated at a weighted-average of
exchange rates in effect during the year. Resulting translation gains or
losses are accumulated as a separate component of shareholders' equity.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows", cash flows from the Company's operations in foreign
countries are calculated based on their functional currencies. As a result,
amounts related to operating assets and liabilities reported on the
Consolidated Statements of Cash Flows for the fiscal years ended August 31,
1996 and 1995 will not necessarily agree with changes in the corresponding
balances on the Consolidated Balance Sheets. The effect of exchange rate
changes on cash balances held in foreign currencies is reported on a separate
line below cash flows provided by financing activities.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of 90 days
or less to be cash equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to credit risk
consist primarily of trade accounts receivable. Due to the large number of the
Company's customers and their dispersion across many geographic areas,
concentrations of credit risk with respect to trade accounts receivable are
limited. This risk is further reduced by the Company's maintenance of credit
insurance on certain large accounts.
Inventories
Inventories other than finished goods are stated at the lower of cost or market,
cost being determined on the FIFO (first-in, first-out) method. Finished goods
are stated at the lower of average cost or market and include the cost of
material, labor and manufacturing overhead.
12
<PAGE> 6
TUSCARORA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment
Land, buildings and equipment are stated on the basis of cost. Major renewals
and betterments are charged to the property accounts while replacements,
maintenance and repairs which do not improve or extend the life of the assets
are charged to income. When properties are disposed of, the related cost and
accumulated depreciation are removed from the respective accounts, and any
profit or loss on disposition is credited or charged to income.
Provisions for depreciation of plant and equipment are computed on the
straight-line method based on the following estimated useful lives:
Building and improvements ............................. 10-30 years
Machinery and equipment ............................... 3-10 years
Other Assets
Other assets consist primarily of intangible assets such as goodwill and
covenants not to compete which have been acquired in connection with business
acquisitions (see Note 8) and are amortized using the straight-line method over
the periods estimated to be benefited, which currently do not exceed fifteen
and three years, respectively.
Interest Rate Agreements
The Company has entered into interest rate cap and floor agreements with its
principal bank to hedge its interest rate exposure. The cost associated with an
agreement is amortized over the life of the agreement. Differences in interest,
paid or received, under the agreements would be recognized as an adjustment to
interest expense, but through August 31, 1996 no interest differential payments
have been paid or received. The costs associated with, and the fair market
value of, the agreements are not material.
Net Income Per Share
Net income per share has been computed on the weighted average number of shares
of Common Stock outstanding. The fully diluted net income per share of Common
Stock has not been separately presented as the amounts would not be materially
different from the net income per share of Common Stock.
Use of Estimates
The financial statements are prepared in conformity with generally accepted
accounting principles and, accordingly, include amounts that are based on
management's best estimates and judgments. Actual results could differ from
those estimates.
Reclassification
Certain amounts in the Consolidated Balance Sheet for the fiscal year ended
August 31, 1995 and in the Consolidated Statements of Cash Flows for the fiscal
years ended August 31, 1995 and 1994 have been reclassified to be consistent
with the 1996 presentation.
NOTE 2: INVENTORIES
Inventories at August 31, 1996 and 1995 are summarized as follows:
- --------------------------------------------------------
<TABLE>
<CAPTION>
August 31, 1996 1995
- -------------------------------------------------------
<S> <C> <C>
Finished goods $ 9,739,590 $ 9,317,095
Work in process 215,475 421,524
Raw materials 4,233,990 6,576,578
Supplies 1,477,825 1,703,413
- -------------------------------------------------------
Total $15,666,880 $18,018,610
- -------------------------------------------------------
</TABLE>
13
<PAGE> 7
TUSCARORA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: LONG-TERM DEBT
In August 1996, the Company entered into a new credit agreement with its
principal bank which provides for a $40,000,000 revolving credit facility
expiring on August 31, 1999 and a $37,000,000 eight-year term note repayable in
quarterly installments, with final maturity on August 31, 2004. The new
revolving credit facility replaced a $14,000,000 revolving credit facility
under the prior credit agreement. The proceeds from the new term loan were used
to pay the outstanding principal balance of $26,720,000 under four term notes
issued under the prior credit agreement as well as $10,280,000 borrowed under
the prior revolving credit facility. Under the new credit agreement, the
Company may choose as to both the revolving credit facility and the new term
note between various interest rate options for specified interest periods. A
commitment fee of 1/8 of 1% per annum is payable on the average daily
unborrowed funds under the revolving credit facility.
Long-term debt outstanding at August 31, 1996 and 1995 is summarized as
set forth below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Interest Rate at August 31,
August 31, 1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Notes under credit agreement with principal bank:
Variable rate revolving credit note 6.50% $ 3,215,000 $ 5,495,000
Term notes payable by maturity:
Variable rate note payable in quarterly
installments, through June 1, 2000 -- -- 7,900,000
Variable rate note payable in quarterly
installments, through July 1, 2002 -- -- 2,800,000
Variable rate note payable in quarterly
installments, through July 1, 2004 -- -- 8,100,000
Variable rate note payable in quarterly
installments, through August 31, 2004 6.75% 37,000,000 --
Variable rate note payable in quarterly
installments, through July 1, 2005 -- -- 12,000,000
Other long-term debt:
Variable rate industrial development bonds
Subject to annual mandatory sinking fund
redemption through December 1, 2000,
with final payment on December 1, 2001 3.70% 3,300,000 3,725,000
Variable rate mortgage note payable in quarterly
installments, through March 30, 2006 8.75% 812,507 895,840
Non-interest bearing obligation payable in
quarterly installments, through April 30, 1997 -- 182,642 413,565
Variable rate notes payable in monthly
installments, through December, 31, 1999 9.42% 85,322 --
- ----------------------------------------------------------------------------------------------------------------------
44,595,471 41,329,405
Less amounts due within one year, included in current liabilities 5,346,335 4,819,255
- ----------------------------------------------------------------------------------------------------------------------
Total long-term debt $39,249,136 $36,510,150
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The outstanding borrowings by the Company under the new credit agreement
with its principal bank are unsecured. The new agreement contains covenants
which require the Company to maintain a certain tangible net worth as well as
certain financial ratios. These covenants also impose limitations on the amount
which the Company may pay during any fiscal year for property, plant and
equipment and transactions accounted for as business acquisitions.
The agreement relating to the Company's industrial development bonds also
contains financial covenants. At August 31, 1996, approximately $5,100,000 of
retained earnings was available for the payment of cash dividends by the
Company without causing a violation of any of the financial covenants.
14
<PAGE> 8
TUSCARORA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aggregate maturities of long-term debt during each of the five fiscal years
ending after August 31, 1996 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------
August 31,
- -------------------------------------------------------
<S> <C>
1997 $5,346,335
1998 5,163,241
1999 5,154,606
2000 5,137,109
2001 5,133,332
- -------------------------------------------------------
</TABLE>
NOTE 4: COMMON STOCK
In all transactions involving the authorized but unissued shares of the
Company's Common Stock, an amount equal to $1.00 times the number of shares
which is issued is credited to the Common Stock account and the balance of the
purchase price is credited to the Capital Surplus account.
NOTE 5: STOCK OPTIONS AND COMMON STOCK PURCHASE PLAN
In December 1994, the Company's shareholders approved an amendment to the
Company's 1989 Stock Incentive Plan increasing the number of shares of the
Company's Common Stock that may be issued under the plan by 300,000. At August
31, 1996, a total of 217,150 shares remained available for the grant of stock
options under the plan. The outstanding stock options have been granted under
this plan and a prior stock option plan.
All stock options have been granted at 100% of the fair market value of the
Company's Common Stock on the date of grant (110% in the case of Ten Percent
Employees). The stock options have ten year option terms (five years in the
case of Ten Percent Employees). The option price may be paid in cash, in
already-owned shares of the Company's Common Stock or in a combination of cash
and shares. Data concerning the stock options outstanding during the three
fiscal years ended August 31, 1996 is as follows:
- -------------------------------------------------------
<TABLE>
<CAPTION>
Range of
Shares Option Price
- -------------------------------------------------------
<S> <C> <C>
Shares under option
August 31, 1993 274,330 $ 3.17-16.44
Options granted 44,200 15.00
Options expired 9,300 10.00-15.00
Options exercised 48,140 3.17-16.44
- -------------------------------------------------------
Shares under option
August 31, 1994 261,090 $ 3.17-16.44
Options granted 92,500 16.75
Options expired 1,200 15.00-16.44
Options exercised 33,700 3.17-16.44
- -------------------------------------------------------
Shares under option
August 31, 1995 318,690 $ 3.17-16.75
Options granted 96,500 24.75
Options expired 5,100 15.00-24.75
Options exercised 32,380 3.17-16.75
- -------------------------------------------------------
SHARES UNDER OPTION
AUGUST 31, 1996 377,710 $ 4.67-24.75
- -------------------------------------------------------
</TABLE>
The options outstanding at August 31, 1996 are exercisable and expire at
various dates from December 1996 to October 2005.
The Company has a Common Stock Purchase Plan under which most full-time
salaried employees in the U.S. may participate. Employees may authorize salary
deductions up to 8% of annual salary but not to exceed $300 per month, and the
Company contributes an amount equal to 10% of the contributions of the
participating employees. The contributions are used to purchase shares of the
Company's Common Stock from the Company at current market value.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). This standard establishes a fair value method for
accounting for stock-based compensation plans either through recognition or
disclosure. The statement must be implemented in the 1997 fiscal year.
Management believes that the impact of adopting SFAS No. 123 will not be
material.
15
<PAGE> 9
TUSCARORA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: INCOME TAXES
In accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes", the provision (benefit) for taxes on income
consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------
Year Ended
August 31, 1996 1995 1994
- -------------------------------------------------------
<S> <C> <C> <C>
Payable
Currently:
Federal $4,894,867 $4,751,053 $3,252,570
State 1,140,588 1,121,211 731,859
Foreign 16,759 13,401 --
- -------------------------------------------------------
6,052,214 5,885,665 3,984,429
- -------------------------------------------------------
Deferred:
Federal 110,844 130,290 (520,314)
State 34,094 37,899 (150,161)
Foreign 55,530 -- --
- -------------------------------------------------------
200,468 168,189 (670,475)
- -------------------------------------------------------
Total provision $6,252,682 $6,053,854 $3,313,954
- -------------------------------------------------------
</TABLE>
The following is a reconciliation of the statutory U.S. Corporate Federal
income tax rate to the effective income tax rate:
<TABLE>
<CAPTION>
- ------------------------------------------------------
Year Ended
August 31, 1996 1995 1994
- ------------------------------------------------------
<S> <C> <C> <C>
U.S. Statutory rate
applied to
pre-tax income 35.0% 35.0% 34.0%
State income taxes
net of Federal
tax benefit 4.8% 5.0% 4.3%
Other -0.5% 0.3% -1.5%
- ------------------------------------------------------
39.3% 40.3% 36.8%
- ------------------------------------------------------
</TABLE>
Deferred tax assets and liabilities at August 31, 1996, 1995 and 1994 were
comprised of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
August 31, 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for
bad debts $ 310,901 $ 270,045 $ 258,409
Supplemental
pension benefits 432,865 441,141 449,964
Other 72,047 -- 23,964
Deferred tax liabilities:
Depreciation 2,809,804 2,513,391 2,315,596
Other 75,997 46,873 97,630
- ------------------------------------------------------------------
Net deferred
tax liability $2,069,988 $1,849,078 $1,680,889
- ------------------------------------------------------------------
</TABLE>
NOTE 7: RETIREMENT BENEFITS
The Company maintains non-contributory individual account defined contribution
pension plans covering most full-time employees in the U.S. and a contributory
individual account defined contribution pension plan covering most full-time
salaried employees in the U.K. Under these pension plans, the Company
contribution made for each employee is generally 5-1/2% of total compensation.
Benefits generally do not become vested until, but become fully vested upon,
five full years of employment in the U.S. and two full years of employment in
the U.K. Normal retirement under all plans is age 65. All contributions are
made to the plan trustees and invested for the accounts of the participants.
The Company contributions for the fiscal years ended August 31, 1996, 1995 and
1994 were $1,557,721, $1,409,179 and $1,163,002, respectively. The unfunded
past service liability at August 31, 1996, 1995 and 1994 under the plans was
$442,822, $405,525 and $382,626, respectively. The past service liability is
paid over a ten-year period.
The Company also maintains a Section 401(k) plan covering most full-time
salaried employees in the U.S. The Company makes matching contributions based
upon the savings of participants, subject to certain limitations. All
contributions are made to the plan trustee, are fully vested and are invested
by the plan trustee among various investment options in accordance with
instructions from the participants.
16
<PAGE> 10
TUSCARORA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company contributions for the fiscal years ended August 31, 1996, 1995 and
1994 were $94,628, $78,733 and $54,755, respectively.
Certain former executive officers of the Company or their beneficiaries are
receiving supplemental retirement benefits directly from the Company, the
future liability for which is reflected as a long-term liability. As of August
31, 1996, this liability amounted to $1,083,788, of which $128,023 represents
amounts payable within one year.
The Company does not provide any other significant postretirement benefits.
NOTE 8: ACQUISITIONS
In December 1995, the Company acquired all the outstanding capital stock of
Alpine Packaging, Inc., a custom designer and manufacturer of specialty
corrugated and technical/military specification packaging and wood pallets, in
Colorado Springs, Colorado, for which the Company issued 51,177 shares of its
Common Stock and paid cash having an aggregate value of approximately
$1,300,000 at the closing. The Consolidated Statement of Cash Flows for the
fiscal year ended August 31, 1996 excludes the non-cash consideration issued in
connection with the acquisition.
During the fiscal year ended August 31, 1995, the Company acquired two
businesses for an aggregate of approximately $5,100,000 in cash paid at the
closings. In February 1995, the Company purchased the custom molding business
of M.Y. Trondex Ltd. in the United Kingdom. In September 1994, the Company
acquired the specialty corrugated and foam packaging business of Astrofoam,
Inc., in Holden, Massachusetts.
The Company also acquired two businesses during the fiscal year ended August
31, 1994 for a total of approximately $2,900,000 in cash paid at the closings.
In April 1994, the Company acquired the custom molding and fabricating business
of Styro-Molders Corporation in Colorado Springs, Colorado. In September 1993,
the Company purchased the corrugated packaging business of Box Pack
Incorporated in Greeneville, Tennessee.
All the above acquisitions have been accounted for as purchases. In each of
these acquisitions, (i) part of the purchase price was allocated to goodwill
and/or a covenant not to compete (see Note 1) and (ii) the Company agreed to
pay additional consideration to the seller based on the sales realized by, or
the operating performance of, the business acquired over a specified period
after the acquisition. The additional consideration is charged against selling
expense or allocated to goodwill.
NOTE 9: LEASE COMMITMENTS
Rental expense charged to operations for the fiscal years ended August 31,
1996, 1995 and 1994 amounted to $4,223,461, $3,889,162 and $2,825,219,
respectively. The approximate net minimum rentals required to be paid under all
non-cancelable operating leases during each of the five fiscal years ending
after August 31, 1996 is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------
August 31,
- -------------------------------------------------------
<S> <C>
1997 $3,584,371
1998 2,958,265
1999 2,381,601
2000 1,919,969
2001 1,732,712
Thereafter 3,093,788
- -------------------------------------------------------
</TABLE>
Substantially all the rental payments represent commitments under leases
for manufacturing and warehouse facilities and under leases for trucking
equipment. The Company has the option to purchase certain of the manufacturing
and warehouse facilities.
17
<PAGE> 11
TUSCARORA INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10: CLAIMS AND CONTINGENCIES
Two lawsuits are pending against the Company involving claims of sexual
discrimination and harassment in which compensatory and punitive damages are
sought. The Company is vigorously contesting these lawsuits and believes that,
consistent with a policy in place for many years, it promptly, reasonably and
effectively responded to all alleged incidents. Other employment-related claims
are pending before Federal and state agencies.
The Company is also involved in legal and administrative proceedings,
including one with respect to a Superfund site, which may result in the Company
becoming liable for a portion of certain environmental cleanup costs. With
respect to these matters, the Company believes that its share of the costs
should not be significant.
In the opinion of management, the disposition of the employment and
environmental claims should not have a material adverse effect on the Company's
financial position.
NOTE 11: SUBSEQUENT EVENTS
On September 10, 1996, the Company acquired the custom thermoforming business
of FormPac Corporation in Sandusky, Ohio. On October 4, 1996, the Company
acquired all the outstanding capital stock of EPS (Moulders) Ltd., a custom
molding business of expanded polystyrene packaging products in Livingston,
Scotland. The aggregate consideration paid at the closings of these
transactions was approximately $5,900,000, substantially all of which was paid
in cash. The Company will pay additional consideration based on the operating
performance of FormPac's business and on the sales of EPS (Moulders) Ltd.
following the acquisitions. In each case, the acquisitions will be accounted
for as purchases.
NOTE 12: QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fiscal Quarter Ended
November 30 February 29 May 31 August 31
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FISCAL 1996:
Net Sales $47,296,000 $43,188,000 $45,113,000 $46,993,000
Gross Profit 11,957,000 9,913,000 10,550,000 10,920,000
Net Income 3,155,000 1,987,000 2,371,000 2,140,000
Per Share of Common Stock:
Net Income $0.51 $0.32 $0.38 $0.34
Dividends Paid -- $0.13 -- $0.13
Stock Market Prices:
High 25-1/2 25-1/2 24-7/8 24-3/4
Low 22-1/4 21-1/2 23-3/8 21
- ---------------------------------------------------------------------------------------------------------------------
November 30 February 28 May 31 August 31
- ---------------------------------------------------------------------------------------------------------------------
FISCAL 1995:
Net Sales $38,920,000 $37,890,000 $40,970,000 $45,520,000
Gross Profit 9,778,000 8,776,000 9,774,000 11,289,000
Net Income 2,501,000 1,840,000 2,345,000 2,294,000
Per Share of Common Stock:
Net Income $0.41 $0.30 $0.38 $0.37
Dividends Paid -- $0.11 -- $0.12
Stock Market Prices:
High 18-1/4 21 22 23-3/4
Low 14 16-1/4 18-1/2 18-3/4
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 12
TUSCARORA INCORPORATED
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF TUSCARORA INCORPORATED
We have audited the accompanying consolidated balance sheets of Tuscarora
Incorporated and subsidiaries as of August 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended August 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tuscarora
Incorporated and subsidiaries as of August 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended August 31, 1996, in conformity with generally accepted accounting
principles.
/s/ S.R. SNODGRASS, A.C.
------------------------
Beaver Falls, PA
October 11, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS--FISCAL 1996
COMPARED TO FISCAL 1995
Net sales for the fiscal year ended August 31, 1996 were $182.6 million, an
increase of $19.3 million, or 11.8%, over fiscal 1995. Approximately 38% of the
increase in net sales was attributable to the acquisition of a custom molding
business in the United Kingdom and of an integrated materials business in
Colorado Springs, Colorado in February and December 1995, respectively (see
Note 8 of the Notes to Consolidated Financial Statements). The balance of the
increase is attributable to higher sales of both custom molded and integrated
materials products in most major markets which the Company serves, particularly
the major appliance and consumer electronics industries. The increase was
achieved despite a reduction in selling prices which occurred in December 1995
following decreases in EPS resin costs.
Net sales in the fourth quarter of fiscal 1996 were $47.0 million, an
increase of 3.2%, or $1.5 million, over net sales of $45.5 million in the same
period of fiscal 1995 despite the selling price reduction referred to above.
The fiscal year over prior year growth rate in net sales in the fourth quarter
was smaller than in the previous three fiscal quarters of fiscal 1996, as many
of the Company's large industrial customers reduced their production rates to
adjust their finished goods inventories. Although the sales level slowed in the
early part of the fourth quarter, sales activity increased significantly at the
end of the quarter and is expected to continue into fiscal 1997.
Gross profit for the fiscal year ended August 31, 1996 was $43.3 million,
or 23.7%, of net sales, compared to $39.6 million, or 24.3%, of net sales in
fiscal 1995. The decrease in the gross profit margin is due primarily to lower
than anticipated sales levels, particularly in the fourth quarter, which
resulted in lower utilization of the Company's expanded manufacturing capacity
and associated fixed costs. The decrease in the gross profit margin is also
attributable to the lower selling prices.
Selling and administrative expenses for the fiscal year ended August 31,
1996 increased 12.3%, or $2.7 million, to $24.5 million but remained steady as
a percentage of net sales at 13.4%. The dollar increase was due primarily to
increased employee costs and to costs added in connection with the acquisitions
of the businesses in February and December 1995.
19
<PAGE> 13
TUSCARORA INCORPORATED
Interest expense for the fiscal year ended August 31, 1996 was $2.9 million
compared to $2.6 million in fiscal 1995. The increase of $300,000 was due to a
higher level of outstanding debt throughout the year, most of which was
borrowed in fiscal 1995.
Income before income taxes for the fiscal year ended August 31, 1996
increased to $15.9 million from $15.0 million for fiscal 1995, an increase of
5.8%.
The provision for income taxes for the fiscal year ended August 31, 1996
increased due to the increase in income before income taxes. The Company's
effective tax rate decreased to 39.3% from 40.3%. The effective tax rate was
higher in fiscal 1995 due to the net operating loss of the U.K. operations
which was not available to offset U.S. taxable income.
Net income for the fiscal year ended August 31, 1996 was $9.7 million, an
increase of 7.5% from $9.0 million in fiscal 1995. The increase was due
primarily to the increase in net sales and gross profit.
Net sales and net income for fiscal year 1996 were Company records.
RESULTS OF OPERATIONS--FISCAL 1995
COMPARED TO FISCAL 1994
Net sales for the fiscal year ended August 31, 1995 were $163.3 million,
representing an increase of $43.2 million, or 36.0%, over fiscal 1994.
Approximately 42% of the increase in net sales was due to the acquisition of
businesses in Colorado Springs, Colorado and Holden, Massachusetts in April and
September 1994, respectively, and in the United Kingdom in February 1995 (see
Note 8 of the Notes to Consolidated Financial Statements). The balance of the
increase reflected strong demand from the Company's existing customers
throughout the fiscal year in virtually all geographic and end-use markets,
particularly high technology, consumer electronics, major appliances and
automotive, and higher selling prices to customers as a result of the Company
passing on higher raw material costs. Net sales in the fourth quarter of fiscal
1995 were $45.5 million, an increase of $11.7 million, or 34.7%, over net sales
of $33.8 million in the fourth quarter of fiscal 1994. Substantial sales
increases were obtained during fiscal 1995 and the fourth quarter of fiscal 1995
in both the Company's custom molding and integrated materials operations.
Gross profit for the fiscal year ended August 31, 1995 was $39.6 million, or
24.3%, of net sales, compared to $27.6 million, or 23.0%, of net sales, for
fiscal 1994. The gross profit margin was favorably impacted by the higher sales
level which resulted in improvements in manufacturing efficiency in both the
Company's custom molding and integrated materials operations and by the
consumption in the first quarter of raw materials purchased by the Company
during the 1994 fiscal year in advance of price increases from the Company's
suppliers. The increase in the gross profit margin was partially offset by
below-average margins at the U.K. operations following their acquisition.
Selling and administrative expenses for the fiscal year ended August 31,
1995 increased $4.7 million, or 27.6%, but decreased as a percentage of net
sales to 13.4% compared with 14.2% in fiscal 1994. The dollar increase was due
primarily to employee costs added in connection with the acquisitions and
increased commissions associated with the higher sales level.
Interest expense for the fiscal year ended August 31, 1995 was $2.6 million
compared to $1.3 million for fiscal 1994. The increase of $1.3 million was due
to a higher level of outstanding debt coupled with higher interest rates.
Income before income taxes for the fiscal year ended August 31, 1995
increased to $15.0 million from $9.0 million for fiscal 1994, an increase of
66.7%.
The provision for income taxes for the fiscal year ended August 31, 1995
increased due to the increase in income before income taxes. The Company's
effective tax rate increased to 40.3% from 36.8% primarily due to the income
tax effect in fiscal 1995 of an unused net operating loss of the U.K.
operations and the exclusion from taxable income in fiscal 1994 of the excess
of the proceeds over the carrying value of life insurance policies owned by the
Company.
Net income for the fiscal year ended August 31, 1995 was $9.0 million, an
increase of 57.5% from $5.7 million for fiscal 1994. The increase was due
primarily to the increases in net sales and gross profit.
Net sales and net income for fiscal 1995 were Company records.
20
<PAGE> 14
TUSCARORA INCORPORATED
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities amounted to $22.3 million, $14.1
million and $17.0 million in fiscal 1996, 1995 and 1994, respectively.
Depreciation and amortization in fiscal 1996, 1995 and 1994 amounted to $13.0
million, $10.9 million and $9.7 million, respectively. Because a substantial
portion of cash flow from operations results from depreciation and
amortization, the Company believes that its liquidity would not be adversely
affected should a period of reduced earnings occur.
At August 31, 1996, the Company's accounts receivable were higher than at
the end of the previous fiscal year due to the increased sales level during the
latter part of the fourth quarter. Inventories were lower at August 31, 1996
than they were at the end of the previous fiscal year due to the Company
maintaining minimum raw material inventory levels as raw material prices
trended lower during fiscal 1996.
Capital expenditures for property, plant and equipment during fiscal 1996,
1995 and 1994 amounted to $23.1 million, $20.7 million and $12.4 million,
respectively, including approximately $900,000, $1.7 million and $1.1 million,
respectively, for environmental control equipment. The largest amount of the
capital expenditures during all three years has been for machinery and
equipment. For fiscal 1996, the expenditures included machinery and equipment
for a new custom molding facility in Spennymoor, England where production
commenced in June 1996 and for a new custom molding facility in Storm Lake,
Iowa where operations are expected to commence in November 1996. During fiscal
1996, the Company also issued 51,177 shares of its Common Stock and paid cash,
having an aggregate value of $1.3 million, in connection with the business
acquisition in December 1995.
In September 1996, the Company also acquired the custom thermoforming
business of FormPac Corporation in Sandusky, Ohio and the custom molding
business of EPS (Moulders) Ltd. in Livingston, Scotland for an aggregate of
approximately $5.9 million (see Note 11 of the Notes to Consolidated Financial
Statements).
The Company will continue to look for acquisitions which will mesh well with
the Company's business and will continue to develop new production sites to
meet the needs of the Company's customers. In August 1996, the Company
announced it will build a new custom molding facility in Brenham, Texas which
it expects will become operational in the spring of fiscal 1997.
Long-term debt increased to $39.2 million at August 31, 1996 from $36.5
million at August 31, 1995. During fiscal 1996, the Company entered into a new
credit agreement with its principal bank which increased its revolving credit
facility to $40.0 million from $14.0 million and consolidated four outstanding
term loans which aggregated $26.7 million along with $10.3 million which was
outstanding under the previous revolving credit facility into a new $37.0
million eight-year term loan. At August 31, 1996, $36.8 million of the new
revolving credit facility remained available. See Note 3 of the Notes to
Consolidated Financial Statements for additional information with respect to
long-term debt.
Cash dividends amounted to $1.6 million ($.26 per share), $1.4 million ($.23
per share) and $1.2 million ($.20 per share) in fiscal 1996, fiscal 1995 and
fiscal 1994, respectively.
Cash provided by operating activities as supplemented by the amount
available under the bank credit agreement should continue to be sufficient to
fund the Company's operating needs, capital requirements and dividend payments.
INFLATION
The impact of inflation on both the Company's financial position and results of
operations has been minimal and is not expected to adversely effect fiscal 1997
results.
21
<PAGE> 15
TUSCARORA INCORPORATED
ELEVEN YEAR CONSOLIDATED FINANCIAL SUMMARY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Year Ended August 31 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $182,590 $163,300 $120,085 $101,075 $95,809
Income before income taxes 15,905 15,034 9,017 6,285 8,289
Net income 9,653 8,980 5,703 4,270(a) 4,981
Depreciation and amortization 12,977 10,890 9,721 9,206 7,879
Weighted average shares outstanding 6,242 6,154 6,129 6,109 6,097
Net income per share 1.55 1.46 0.93 0.70(a) 0.82
Margin on sales 5.3% 5.5% 4.7% 4.2% 5.2%
Return on beginning shareholders' equity 17.6% 19.0% 13.4% 10.9% 14.2%
Working capital 23,224 22,390 16,548 15,893 13,463
Total assets 131,169 117,721 94,225 79,769 75,510
Long-term debt (excluding current portion) 39,249 36,510 25,284 23,930 22,121
Shareholders' equity 64,827 54,773 47,180 42,546 39,280
Shareholders' equity per share 10.39 8.90 7.70 6.96 6.44
Dividends per share 0.26 0.23 0.20 0.18 0.16
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended August 31 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $84,420 $85,458 $77,642 $65,583 $55,279 $46,641
Income before income taxes 6,856 7,912 7,479 5,644 5,192 3,587
Net income 4,230 4,874 4,478 3,469 2,834 2,210
Depreciation and amortization 7,235 6,591 5,463 4,269 3,347 2,811
Weighted average shares outstanding 6,057 6,022 6,020 5,356 5,290 5,288
Net income per share 0.70 0.81 0.74 0.65 0.54 0.42
Margin on sales 5.0% 5.7% 5.8% 5.3% 5.1% 4.7%
Return on beginning shareholders' equity 13.4% 17.8% 19.0% 22.0% 21.1% 19.1%
Working capital 13,728 11,385 11,418 10,146 5,792 5,086
Total assets 63,775 60,677 53,138 46,777 40,132 32,879
Long-term debt (excluding current portion) 14,870 16,264 13,165 13,248 12,858 11,005
Shareholders' equity 35,152 31,451 27,360 23,574 15,762 13,404
Shareholders' equity per share 5.80 5.22 4.54 4.40 2.98 2.53
Dividends per share 0.14 0.13 0.12 0.10 0.09 0.08
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
In the above table, all dollar amounts, except per share data, are in
thousands.
The weighted average number of shares of Common Stock outstanding and the
dividends and other per share amounts have been adjusted to reflect the 200%
share distribution paid on October 1, 1987 and the 100% share distribution paid
on April 14, 1992.
(a) Net income and net income per share for the 1993 fiscal year include income
of $321,218 or $0.05 per share resulting from the cumulative effect of a change
in the method of accounting for income taxes.
<PAGE> 1
Exhibit 21
TUSCARORA INCORPORATED
List of Subsidiaries
--------------------
The following is a complete list of the subsidiaries of the Company:
Jurisdiction of
Name of Subsidiary Incorporation
- ------------------------------------------ ----------------------
Alpine Packaging, Inc. (1) Colorado
Tuscarora International, Inc. (1) Delaware
Tuscarora, S.A. de C.V. (2) Mexico
Tuscarora de Mexico, S.A. de C.V. (2) Mexico
Tuscarora Limited (1) England
Tuscarora (Scotland) Limited (3) England
- ------------
(1) 100% owned by Tuscarora Incorporated.
(2) 100% owned by Tuscarora International, Inc.
(3) 100% owned by Tuscarora Limited.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the following documents
of our reports, dated October 11, 1996, on our audits of the consolidated
financial statements and a related financial statement schedule of Tuscarora
Incorporated and its subsidiaries as of August 31, 1996 and 1995, and for the
years ended August 31, 1996, 1995 and 1994, which reports are incorporated by
reference or included in the annual report on Form 10-K of Tuscarora
Incorporated for its fiscal year ended August 31, 1996:
1. Registration Statements No. 33-35373 and No. 333-06111 on Form S-8
for the 1985 Incentive Stock Option Plan and 1989 Stock Incentive Plan of
Tuscarora Incorporated, filed under the Securities Act of 1933, as amended, and
the Prospectus used in connection with such Registration Statements; and
2. Registration Statement No. 33-35587 on Form S-8 for the Tuscarora
Incorporated Common Stock Purchase Plan for Salaried Employees, filed under the
Securities Act of 1933, as amended, and the Prospectus used in connection with
such Registration Statement.
We also consent to the reference to our firm under the caption
"Experts" in the above-mentioned Prospectuses.
/s/ S.R. SNODGRASS, A.C.
-----------------------
Beaver Falls, Pennsylvania S.R. Snodgrass, A.C.
November 27, 1996 Certified Public Accountants
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ THOMAS S. BLAIR
-------------------
Thomas S. Blair
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ DAVID I. COHEN
-------------------
David I. Cohen
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ ABE FARKAS
--------------
ABE FARKAS
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ KAREN L. FARKAS
-------------------
Karen L. Farkas
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ ROBERT W. KAMPMEINERT
-------------------------
Robert W. Kampmeinert
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ DAVID C. O'LEARY
--------------------
David C. O'Leary
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ HAROLD F. REED, JR.
-----------------------
Harold F. Reed, Jr.
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ JAMES I. WALLOVER
---------------------
James I. Wallover
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the
undersigned's true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated,
and any and all amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
the undersigned might or could do in person and hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitutes, may lawfully do or cause to be done by virtue hereof.
October 11, 1996
/s/ THOMAS P. WOOLAWAY
----------------------
Thomas P. Woolaway
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<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
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<RECEIVABLES> 26,881,581
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