<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
TUSCARORA INCORPORATED
--------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------
[ X ] No fee required
<PAGE> 2
Tuscarora Logo
800 FIFTH AVENUE
NEW BRIGHTON, PENNSYLVANIA 15066
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 19, 2000
To The Shareholders:
The Annual Meeting of Shareholders of Tuscarora Incorporated (the
"Company") will be held at the Pittsburgh Airport Marriott, Parkway West,
Coraopolis, Allegheny County, Pennsylvania on Tuesday, December 19, 2000 at
10:30 A.M., Pittsburgh time, for the purpose of considering and acting upon the
following:
(1) The election of three persons to serve as directors for a three-year
term expiring at the annual meeting of shareholders in 2003;
(2) The approval of the amendment of the Company's 1997 Stock Incentive
Plan to increase the total number of shares of the Company's Common
Stock which may be issued thereunder by an additional 250,000 shares
(from 750,000 to 1,000,000);
(3) The ratification of the appointment to Ernst & Young LLP as independent
public accountants to audit the financial statements of the Company and
its subsidiaries for the 2001 fiscal year; and
(4) Such other business as may properly come before the Annual Meeting or
any adjournment thereof.
By Order of the Board of Directors,
Harold F. Reed, Jr.,
Secretary
New Brighton, Pennsylvania
November 16, 2000
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY SO THAT
YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE
PRESENCE OF A QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. THE GIVING OF YOUR
PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE
MEETING. PLEASE INDICATE ON THE PROXY YOU RETURN WHETHER OR NOT YOU WILL ATTEND
THE MEETING.
<PAGE> 3
November 16, 2000
TUSCARORA INCORPORATED
800 FIFTH AVENUE
NEW BRIGHTON, PENNSYLVANIA 15066
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 19, 2000
This Proxy Statement is furnished to shareholders in connection with the
solicitation by the Board of Directors of Tuscarora Incorporated (the "Company")
of proxies in the accompanying form for use at the Annual Meeting of
Shareholders of the Company to be held on December 19, 2000 and at any
adjournment thereof. If a proxy in the accompanying form is duly executed and
returned to the Company, the shares represented will be voted at the Meeting
and, where a choice is specified, will be voted in accordance with the
specification made. Any shareholder who gives a proxy has the power to revoke it
by notice to the Secretary at any time before it is exercised. A later-dated
proxy will revoke an earlier proxy, and shareholders who attend the Meeting may,
if they wish, vote in person even though they have submitted a proxy, in which
event the proxy will be deemed to have been revoked.
The Company's Restated Articles of Incorporation (the "Articles") provide
that the Company has the authority to issue 50,000,000 shares of Common Stock,
without par value (the "Common Stock"), and 2,000,000 shares of Preferred Stock,
par value $.01 per share. Only shares of Common Stock have been issued. As of
the close of business on October 24, 2000, 9,305,326 shares of Common Stock were
issued and outstanding.
Holders of record of the Common Stock as of the close of business on
October 24, 2000 have the right to receive notice of and to vote at the Annual
Meeting. These shareholders are entitled to one vote for each share held on all
matters to be considered and acted upon at the Meeting. Under the Company's
Articles, the shareholders do not have cumulative voting rights in the election
of directors.
The Annual Report to Shareholders for the fiscal year ended August 31,
2000, which includes consolidated financial statements, is enclosed with this
Proxy Statement.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Under the proxy rules of the Securities and Exchange Commission (the
"SEC"), a person who directly or indirectly has or shares voting power and/or
investment power with respect to a security is considered a beneficial owner of
the security. Voting power includes the power to vote or direct the voting of
shares, and investment power includes the power to dispose of or direct the
disposition of shares. Shares as to which voting power and/or investment power
may be acquired within 60 days are also considered as beneficially owned.
MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of shares of the Company's Common Stock by (i) each director, (ii)
each person named in the Summary Compensation Table included in this Proxy
Statement and (iii) all directors and executive officers of the Company as a
group. Unless otherwise indicated in the footnotes to the table, the information
is as of the close of business on
<PAGE> 4
October 24, 2000 and each person named has sole voting power and sole investment
power with respect to the shares included in the table.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
---------------------
NUMBER OF PERCENT
NAME SHARES OF CLASS
---- --------- --------
<S> <C> <C>
David I. Cohen (1)(3)................................... 10,558 .11%
Abe Farkas (1)(3)(4)(5)................................. 439,100 4.72%
Karen L. Farkas (1)(3).................................. 23,000 .25%
Robert W. Kampmeinert (1)(4)(6)(7)...................... 23,000 .25%
Jeffery L. Leininger (1)................................ 3,500 .04%
Brian C. Mullins (1)(2)(4).............................. 74,834 .80%
David C. O'Leary (1)(2)(3)(4)(6)........................ 189,487 2.03%
John P. O'Leary, Jr. (1)(2)(3)(4)(6)(8)................. 327,292 3.49%
Harold F. Reed, Jr. (1)(3)(4)........................... 76,450 .82%
Thomas P. Woolaway (1)(3)(4)............................ 252,836 2.72%
All directors and executive officers of the
Company as a group (10 persons) (1)................... 1,420,057 14.98%
</TABLE>
---------------
(1) Includes shares covered by stock options as follows: David I. Cohen, 3,500
shares; Abe Farkas, 3,500 shares; Karen L. Farkas, 3,500 shares; Robert W.
Kampmeinert, 3,500 shares; Jeffery L. Leininger, 3,500 shares; Brian C.
Mullins, 41,250 shares; David C. O'Leary, 35,250 shares; John P. O'Leary,
Jr., 70,500 shares; Harold F. Reed, Jr., 3,500 shares and Thomas P.
Woolaway, 3,500 shares. In computing the percentage ownership for each
person and all directors and executive officers as a group, the shares
covered by the stock options held by each person and the group are deemed
outstanding. The table does not include performance based stock options
granted to the Company's executive officers which become exercisable,
depending on the market price of the Company's Common Stock, and,
accordingly, may or may not become exercisable within 60 days of October 24,
2000.
(2) Includes shares credited to their accounts under the Company's Common Stock
Purchase Plan for Salaried Employees as of the close of business on August
31, 2000 as follows: Brian C. Mullins, 1,873 shares; David C. O'Leary, 2,054
shares and John P. O'Leary, Jr., 1,672 shares.
(3) Includes shares held jointly with their spouses, as to which voting power
and investment power are shared, as follows: David I. Cohen, 7,058 shares;
Abe Farkas, 122,700 shares; Karen L. Farkas, 750 shares; David C. O'Leary,
30,684 shares; John P. O'Leary, Jr., 16,368 shares; Harold F. Reed, Jr.,
13,500 shares and Thomas P. Woolaway, 54,751 shares.
(4) Includes shares held by their wives as follows: Abe Farkas, 93,000 shares;
Robert W. Kampmeinert, 1,500 shares; Brian C. Mullins, 7,230 shares; David
C. O'Leary, 2,796 shares; John P. O'Leary, Jr., 592 shares; Harold F. Reed,
Jr., 1,500 shares and Thomas P. Woolaway, 77,139 shares. Beneficial
ownership of these shares is disclaimed.
(5) Includes 188,400 shares held by the wife of Abe Farkas as trustee under
trusts for children and grandchildren. Beneficial ownership of these shares
is disclaimed.
(6) Includes shares held in custodian accounts for children as follows: Robert
W. Kampmeinert, 3,000 shares; David C. O'Leary, 15,475 shares and John P.
O'Leary, Jr., 15,622 shares. Beneficial ownership of these shares is
disclaimed.
(7) Includes 15,000 shares held by Parker/Hunter Incorporated. Beneficial
ownership of these shares is disclaimed.
(8) Includes 120,285 shares held by the trust for the individual account defined
contribution pension plans of the Company and its subsidiaries. John P.
O'Leary, Jr. is a named fiduciary with respect to the trust and has sole
power to direct the trustee as to the acquisition, disposition and voting of
the Company's Common Stock held by the trust.
2
<PAGE> 5
The information in the table does not include 305,761 shares of the
Company's Common Stock held by trusts created under the Will of John P. O'Leary,
Sr., co-founder and former Chief Executive Officer of the Company. The children
of John P. O'Leary, Sr.: John P. O'Leary, Jr., David C. O'Leary and Kerry
O'Leary Zombeck, and their mother, Beverly J. O'Leary, are co-trustees of these
trusts and share voting power and investment power.
Directors Abe Farkas and Karen L. Farkas are father and daughter.
OTHER BENEFICIAL OWNERS
Information with respect to the only person known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock as of the most
recently filed Schedule 13G, is as follows:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
---------------------
NUMBER OF PERCENT
NAME AND ADDRESS SHARES OF CLASS
---------------- --------- --------
<S> <C> <C>
T. Rowe Price Associates, Inc. 833,700 8.96%
100 East Pratt Street
Baltimore, Maryland 21202
</TABLE>
T. Rowe Price Associates, Inc. ("Price Associates") is an investment
advisor registered under the Investment Advisors Act of 1940. It advised the
Company that the shares are owned by various individual and institutional
investors which Price Associates serves as investment advisor with power to
direct investments and/or to vote the shares. Included in the total shown are
730,000 shares (7.84% of the shares outstanding) owned by T. Rowe Price Small
Cap Value Fund, Inc., a closed end mutual fund registered under the Investment
Company Act of 1940. Price Associates advised the Company that although it is
deemed to be a beneficial owner of the shares for purposes of the SEC reporting
requirements, it expressly disclaims that it is, in fact, the beneficial owner
of the shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file with the SEC reports of beneficial
ownership and changes in beneficial ownership of the Company's Common Stock.
These persons are required to furnish the Company with copies of all Section
16(a) reports they file. During the 2000 fiscal year, Abe Farkas made a late
report with respect to the purchase of 1,500 shares. Based on copies of the
reports they filed, the Company believes that all other reports required to be
filed under Section 16(a) by the Company's directors and executive officers
since the beginning of the 2000 fiscal year were timely filed.
ELECTION OF DIRECTORS
Three directors will be elected at the Annual Meeting to serve until the
annual meeting of shareholders in 2003 and until their successors are elected.
The Board of Directors has nominated Karen L. Farkas, Robert W. Kampmeinert and
Harold F. Reed, Jr. and recommends a vote "FOR" their election. Each nominee has
consented to be named as a nominee. All the nominees are incumbent directors.
Unless authority to so vote is withheld, it is intended that the proxies
solicited by the Board of Directors will be voted "FOR" the election of the
three nominees. In the event that at the date of the Annual Meeting any of the
nominees should for any reason not be available for election, the proxies
solicited by the Board will be voted for the election of the other nominees and
such substitute nominees as shall be designated by the Board.
The Board of Directors does not have a nominating committee. The Company's
Articles provide that nominations for the election of directors at a meeting of
shareholders may be made only by the Board, a committee of the Board or a
shareholder of record entitled to vote in the election of the directors to be
elected; provided, however, that a nomination may only be made by a shareholder
of record at a meeting of
3
<PAGE> 6
shareholders if written notice that the nomination is to be made is received by
the Secretary of the Company prior to the meeting. In the case of an annual
meeting, the written notice must be received 90 days prior to the anniversary
date of the immediately preceding annual meeting and must contain certain
information with respect to the nominee as set forth in the Articles.
Information with respect to the nominating procedure may be obtained by a
shareholder from the Secretary of the Company. No written notice that a
nomination would be made by a shareholder at the Annual Meeting was received by
the Company.
Information with respect to the nominees and the other directors whose
terms of office will continue after the Annual Meeting is set forth in the
following table. The nominees and other directors have held the positions shown
for more than five years unless otherwise indicated.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR
NAME SINCE EMPLOYMENT; DIRECTORSHIPS; AGE
---- -------- ------------------------------
<S> <C> <C>
Nominees for a term expiring in
2003:
Karen L. Farkas 1994 Chief Operating Officer and Treasurer of Heart
Smart Foods Ltd. (wholesaler of specialty foods),
Alberta, Canada; Tutor and seminar instructor in
corporate finance at Athabasca University,
Alberta, Canada; Age 52
Robert W. Kampmeinert 1994 Chairman, President and Chief Executive Officer
of Parker/Hunter Incorporated (investment banking
firm), Pittsburgh, Pennsylvania; Director of
Tollgrade Communications, Inc.; Age 57
Harold F. Reed, Jr. 1969 Senior Partner of Reed, Luce, Tosh, Wolford and
Douglass (law firm), Beaver, Pennsylvania;
Secretary of the Company; Age 73
Continuing directors with a term
expiring in 2001:
David I. Cohen 1993 Director of Cohen & Grigsby, P.C. (law firm),
Pittsburgh, Pennsylvania since September 1, 1999;
Partner of Titus & McConomy LLP (law firm),
Pittsburgh, Pennsylvania from July 1995 to August
31, 1999; Age 49
Abe Farkas 1962 Retired; formerly owner of Beaver Super Market,
Beaver, Pennsylvania; Age 84
John P. O'Leary, Jr. 1974 President and Chief Executive Officer of the
Company (also Chairman of the Board of Directors
of the Company); Director of Matthews
International Corporation; Age 53
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION OR
NAME SINCE EMPLOYMENT; DIRECTORSHIPS; AGE
---- -------- ------------------------------
<S> <C> <C>
Continuing directors with a term
expiring in 2002:
Jeffery L. Leininger 1996 Vice Chairman, Mellon Bank, N.A. (national bank),
Pittsburgh, Pennsylvania since February 1996;
Executive Vice President and Department Head,
Mellon Bank, N.A., prior to February 1996; Age 54
David C. O'Leary 1985 Senior Vice President and Chief Operating Officer
of the Company since October 1998; Vice President
and Chief Operating Officer of the Company from
May 1997 to October 1998; Vice President, Sales
and Marketing of the Company from April 1994 to
May 1997; Age 51
Thomas P. Woolaway 1962 Retired Chief Operating Officer of the Company;
Vice Chairman of the Board of Directors of the
Company; Age 69
</TABLE>
During the 2000 fiscal year, there were 8 meetings of the Board of
Directors. Average attendance at those meetings was 97.3%.
VOTE REQUIRED
Only affirmative votes are counted in the election of directors. The three
nominees for election as directors at the Annual Meeting who receive the highest
number of votes cast for the election of directors by the holders of the
Company's Common Stock present in person or voting by proxy, a quorum being
present, will be elected as directors.
COMMITTEES OF BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, a Compensation Committee
and an Audit Committee.
The members of the Executive Committee are John P. O'Leary, Jr. (Chairman),
David C. O'Leary, Harold F. Reed, Jr. and Thomas P. Woolaway. The Committee may
exercise all the power and authority of the Board in the management of the
affairs of the Company except for matters expressly reserved by law for Board
action. It is intended that the Committee will meet only infrequently as
necessary between regular meetings of the Board. The Executive Committee did not
meet during the 2000 fiscal year.
The members of the Compensation Committee are Robert W. Kampmeinert
(Chairman), Harold F. Reed, Jr. and Thomas P. Woolaway. The Committee recommends
to the Board the base salary of the Company's executive officers and the grant
of stock options under the Company's stock option plans. For the 1998 fiscal
year, the Committee recommended to the Board the bonuses of the Company's
executive officers. Beginning with the 1999 fiscal year, the Committee
administers the Company's Annual Incentive Bonus Plan and recommends to the
Board the bonuses to be paid thereunder to executive officers. The Committee
also administers the Company's Common Stock Purchase Plan for Salaried Employees
and designates the participants and levels of participation under the Company's
Supplemental Executive Retirement Plan. The Committee also makes recommendations
to the Board with respect to director compensation, including the grant of stock
options to non-employee directors, and administers the Company's Deferred
Compensation Plan for Non-Employee Directors. During the 2000 fiscal year, there
were 2 meetings of the Compensation Committee.
The members of the Audit Committee are David I. Cohen (Chairman), Abe
Farkas, Karen L. Farkas and Jeffery L. Leininger. The responsibilities of the
Committee are to provide assistance to the Board in
5
<PAGE> 8
fulfilling its oversight responsibility to the shareholders and others relating
to the Company's financial statements and the financial reporting process, the
systems of internal accounting and financial controls, the internal audit
function, the annual independent audit of the Company's financial statements and
the legal compliance and ethics program as established by management and the
Board. The Audit Committee's responsibilities are included in its written
charter attached as Appendix A to this Proxy Statement. Each member of the Audit
Committee is an independent director as defined in Rule 4200(a)(15) of the
National Association of Securities Dealers' listing standards. During the 2000
fiscal year, there were 3 meetings of the Audit Committee.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives an annual
retainer of $5,000. Non-employee directors who serve on the Executive Committee
also receive an annual fee of $1,500 and non-employee directors who serve as
Chairmen of Board Committees also receive an annual fee of $1,000. In addition,
non-employee directors receive $1,500 for each Board meeting and $750 for each
meeting of the Compensation Committee and Audit Committee they attend.
Non-employee directors receive reimbursement for travel expenses to attend Board
and Committee meetings. Directors who are employees of the Company do not
receive compensation for serving as a director.
The Company maintains a Deferred Compensation Plan for Non-Employee
Directors which permits Directors who are not employees of the Company to defer
the payment of compensation earned for services as a director until after
termination of service. Participants may defer the payment of compensation into
a bookkeeping account which credits the participant with phantom share units of
the Company's Common Stock or into a bookkeeping account to which interest is
credited. The number of phantom share units credited is the amount of
compensation deferred divided by the fair market value of the Company's Common
Stock on the date of deferral. Three non-employee directors have elected to
defer all or part of their compensation into a phantom share account. As cash
dividends are paid, additional phantom share units are credited to the account.
Payments of the value of an account are made by the Company in cash after the
participant ceases to be a director at the election of the participant in a lump
sum or in up to ten annual installments.
The Company's 1997 Stock Incentive Plan provides for the grant of stock
options to non-employee directors. On October 26, 1999, each non-employee
director was granted a stock option to purchase 1,000 shares of the Company's
Common Stock at $12.50 per share. The stock options became exercisable on
October 26, 2000 and expire on October 25, 2009. The exercise price may be paid
in cash, in shares of the Common Stock which have been held for at least one
year or in any combination of cash and such shares.
The Company also has a retirement plan for directors who are not current or
former employees of the Company. Under the plan, retirement benefits are paid to
any director whose service as a director has terminated, who is 60 years of age
or older and who has completed at least five years of service on the Board at
the time of termination of service. The retirement benefit is an amount equal to
50% of the annual retainer and Board meeting fees paid each year to active
non-employee directors. Payments are made at the same time as payments are made
to the active non-employee directors. The benefits commence immediately upon
termination of service and terminate upon the earliest to occur of (i) the
expiration of a period of time equal to the length of time the retired director
served on the Board, (ii) the death of the retired director or (iii) the tenth
anniversary of the date on which service as a director terminated. There are no
survivor benefits payable under the plan.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation. The following table sets forth information concerning the
compensation paid for services rendered in all capacities to the Company and its
subsidiaries for the last three fiscal years to those persons who were at August
31, 2000, the Chief Executive Officer of the Company and the Company's other
executive officers.
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
------------------------------ ------ ------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John P. O'Leary, Jr. 2000 $296,000 $180,900 -- -- $22,517
President and 1999 282,000 141,900 -- 100,000 22,570
Chief Executive Officer 1998 272,000 75,000 -- 15,000 22,640
David C. O'Leary 2000 217,000 110,500 -- -- $19,361
Senior Vice President and 1999 206,000 86,400 -- 65,000 19,333
Chief Operating Officer 1998 185,000 45,000 -- 7,500 19,505
Brian C. Mullins 2000 191,000 87,600 -- -- $22,473
Senior Vice President, 1999 182,000 68,700 -- 40,000 22,435
Chief Financial Officer 1998 176,000 40,000 -- 7,500 22,475
and Treasurer
</TABLE>
---------------
(1) The titles of David C. O'Leary and Brian C. Mullins were changed from Vice
President to Senior Vice President in October 1998. David C. O'Leary became
Chief Operating Officer in May 1997.
(2) Represents base salary and includes the tax deferred contributions made by
the Company on behalf of the executive officers under the Company's Section
401(k) Plan for Salaried Employees.
(3) Bonuses for the 2000 and 1999 fiscal years represent amounts calculated
under the Company's Annual Incentive Bonus Plan and recommended to the Board
of Directors by the Compensation Committee. The Annual Incentive Bonus Plan
provides for the establishment of financial targets and the payment of
bonuses to, among others, executive officers depending on the extent to
which such targets are achieved. Bonuses for the 1998 fiscal year represent
cash bonuses awarded to the executive officers by the Board, on the
recommendation of the Compensation Committee, following the end of the
fiscal year. For additional information with respect to bonuses, see
"Compensation Committee Report on Executive Compensation".
(4) The dollar value of perquisites and other personal benefits is required to
be disclosed in this column in accordance with the rules of the SEC
regarding the disclosure of compensation of executive officers if the amount
for any executive officer equals or exceeds $50,000 or 10% of the total of
annual salary and bonus. The dollar value of the perquisites and other
personal benefits did not exceed the threshold amount for any of the
executive officers named for any of the fiscal years covered in the table.
(5) Represents the number of shares of the Company's Common Stock for which
stock options were granted during the fiscal year. No stock options were
granted to executive officers during the 2000 fiscal year. The stock options
granted during the 1999 fiscal year were granted under the Company's 1997
Stock Incentive Plan and the stock options granted during the 1998 fiscal
year were granted under the Company's 1989 Stock Incentive Plan.
(6) This column includes employer contributions for the accounts of the named
executive officers under (i) the Company's individual account defined
contribution pension plan for salaried employees, (ii) the Company's Section
401(k) Plan for Salaried Employees and (iii) the Company's Common Stock
Purchase Plan for Salaried Employees. For the 2000 fiscal year, the
breakdown of the employer contributions among the plans is as follows:
7
<PAGE> 10
<TABLE>
<CAPTION>
PENSION SECTION COMMON STOCK
NAME PLAN 401(K) PLAN PURCHASE PLAN
---- ------- ----------- -------------
<S> <C> <C> <C>
John P. O'Leary, Jr............... $20,800 $1,357 $360
David C. O'Leary.................. $17,600 $1,401 $360
Brian C. Mullins.................. $20,800 $1,433 $240
</TABLE>
Option Exercises and Values. The following table sets forth as to the
persons named in the Summary Compensation Table information with respect to the
number of shares of the Company's Common Stock acquired upon the exercise of
stock options during the 2000 fiscal year, the value realized from such
exercises, the number of shares covered by unexercised stock options held at
August 31, 2000 and the value of such unexercised stock options at August 31,
2000.
AGGREGATED OPTION EXERCISES IN 2000 FISCAL YEAR AND
2000 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 2000 2000 FISCAL YEAR
ACQUIRED FISCAL YEAR END(#) END($)(1)
ON EXERCISE --------------------------- ---------------------------
NAME (#) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
John P. O'Leary, Jr................... None 70,500 100,000 $88,575 $143,000
David C. O'Leary...................... None 35,250 65,000 $44,288 $ 92,950
Brian C. Mullins...................... None 46,650 40,000 $122,720 $ 57,200
</TABLE>
---------------
(1) The value of unexercised in-the-money stock options is the difference
between the aggregate fair market value of shares covered by stock options
with an exercise price less than fair market value at 2000 fiscal year end
and the aggregate exercise price of such stock options.
Supplemental Retirement Benefits. The Company has a supplemental executive
retirement plan under which supplemental retirement benefits may be paid by the
Company directly to key executives designated by the Compensation Committee.
John P. O'Leary, Jr., and Brian C. Mullins have been designated as participants.
Under the plan, designated percentages of compensation are credited each fiscal
quarter to an unfunded bookkeeping account for each participant. Interest is
thereafter credited to the account for each fiscal quarter at the then prime
rate as announced by the Company's principal bank. Payments from the account
commence after the later of the participant's termination of employment or age
55 and are paid in the form of a single life annuity unless another form of
annuitized payment is elected. A participant does not have the option to elect
to receive a lump sum payment from the Company. Under an agreement entered into
with each participant, the supplemental retirement benefits may be forfeited in
the event of certain activity by the participant not in the best interests of
the Company during the three-year period following termination of employment.
During the 2000 fiscal year, the amounts accrued by the Company under the plan
to the bookkeeping accounts for the benefit of John P. O'Leary, Jr. and Brian C.
Mullins, including accrued interest, amounted to $35,629, and $20,531,
respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's principal bank is Mellon Bank, N.A. ("Mellon"), of which
Jeffery L. Leininger, a director of the Company, is a Vice Chairman. In
September 1999, the Company entered into a new $90,000,000 credit agreement with
Mellon Bank, N.A. and a second bank providing for a $45,000,000 revolving credit
facility expiring on September 1, 2004 and $45,000,000 in five year term notes.
The Company initially borrowed $19,030,000 under the revolving credit facility,
of which $12,686,667 was borrowed from Mellon and the $45,000,000 under the term
notes, of which $30,000,000 was borrowed from Mellon. The term notes are
repayable in quarterly installments of $1,125,000 with a final payment of
$22,500,000 on September 1, 2004. The proceeds were used primarily to repay in
full the outstanding borrowings under a credit agreement with Mellon in effect
at August 31, 1999. In August 2000, the credit agreement was
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<PAGE> 11
amended to increase the amount available under the revolving credit facility to
$55,000,000 through August 31, 2001. Under the credit agreement the Company may
choose between interest rate options for specified interest periods for both the
revolving credit facility and the term notes. The credit agreement also provides
for a facility fee of 0.25% per annum on each lender's commitment. At August 31,
2000, $40,030,000 was borrowed under the revolving credit facility, of which
$26,686,667 was borrowed from Mellon, and the term notes had a remaining
outstanding principal balance of $40,500,000, of which $27,000,000 was borrowed
from Mellon. Separately, the Company has entered into an interest rate swap and
cap agreement with Mellon to reduce the impact of increases in interest rates on
the Company's variable rate long-term debt. The notional value under this
agreement at August 31, 2000 amounted to $18,500,000.
For information regarding transactions involving Robert W. Kampmeinert and
Harold F. Reed, Jr., directors of the Company, see "Compensation Committee
Interlocks and Insider Participation".
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 2000 fiscal year, the members of the Compensation Committee were
Robert W. Kampmeinert (Chairman), Harold F. Reed, Jr. and Thomas P. Woolaway.
Robert W. Kampmeinert is the Chairman, President and Chief Executive
Officer of Parker/Hunter Incorporated, an investment banking firm which rendered
professional services to the Company during the 2000 fiscal year and will render
professional services to the Company during the 2001 fiscal year.
Harold F. Reed, Jr. is a partner in the law firm of Reed, Luce, Tosh,
Wolford and Douglass which rendered professional services to the Company during
the 2000 fiscal year and will render professional services to the Company during
the 2001 fiscal year. Mr. Reed is also Secretary of the Company.
Thomas P. Woolaway, a co-founder of the Company, was an officer of the
Company from its formation until his retirement in 1994. Mr. Woolaway was the
Chief Operating Officer of the Company at the time of his retirement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program for its executive officers is
administered by the Compensation Committee of the Board of Directors, all the
members of which are non-employee directors. The program is composed primarily
of cash compensation, consisting of base salary and a bonus, but also includes
non-cash compensation in the form of stock options and accrued supplemental
retirement benefits. As of August 31, 2000, the Company had three executive
officers, each of whom is named in the Summary Compensation Table included in
this Proxy Statement.
Base Salary and Bonus. The base salary and bonus of each executive officer
for each fiscal year is established by the Board of Directors upon the
recommendations by the Committee. Base salary for a fiscal year is determined at
the end of the preceding fiscal year. Bonuses for a fiscal year are determined
after the financial results for the fiscal year become available.
Base salaries represent the fixed portion of the executive officers' total
compensation. The base salary of each executive officer depends primarily on the
office and responsibilities of such executive officer. Apart from changes to
recognize increases in responsibilities (for example, the base salary of David
C. O'Leary was increased more significantly than the base salaries for the other
executive officers in fiscal year 1999 as a result of his having become the
Company's Chief Operating Officer), it is intended that increases in the base
salaries of executive officers reflect the rate of inflation, individual
performance and the Company's profit performance during the preceding fiscal
year. Based on these criteria, and in recognition of the establishment of the
Annual Incentive Bonus Plan (described below) and the grant of stock options
under the 1997 Stock Incentive Plan (also described below) the base salaries
recommended by the Committee, and approved by the Board, for the executive
officers for the 2000 fiscal year were in the range of 5%.
As to bonuses, the Committee strongly believes that a meaningful portion of
the total compensation of the executive officers should be variable and
determined in a manner that is tied to the profitability of the
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<PAGE> 12
Company. Prior to fiscal year 1999, no plan existed which required that bonuses
be paid if certain criteria were met and there was no formula which prescribed
the factors to be considered in awarding bonuses. In general, the Committee
considered financial results and individual performance for a fiscal year in the
context of financial results and individual performance in recent prior fiscal
years and recommended the bonuses of the executive officers on this basis.
Commencing in August 1997, the Committee began considering revision of the bonus
system to provide a more incentive based and target oriented bonus computation.
Thereafter, in November 1997 the Company retained William M. Mercer,
Incorporated, a compensation consultant, to review the Company's compensation
arrangements for senior management. The review was undertaken in conjunction
with a Company reorganization from centralized management to five divisions
determined on a geographical basis, each with a division Vice President
responsible for a group of five to nine manufacturing facilities. During the
remainder of the 1998 fiscal year, Mercer prepared a competitive pay levels
study and recommended an incentive bonus plan which was reviewed in depth by the
Committee. In August 1998, the effort culminated in the adoption of the Annual
Incentive Bonus Plan (the "Plan") with respect to executive officers, among
others. The Plan provides for the establishment of financial targets expressed
in terms of sales growth, return on sales and return on assets and the payment
of bonuses primarily depending on the extent to which the targets are achieved.
The bonuses for the executive officers, including the Chief Executive Officer,
for the 1999 and 2000 fiscal years were determined primarily by the extent to
which the financial targets established for the 1999 and 2000 fiscal years were
achieved. While the Committee places significant weight on results calculated
under the Plan, its bonus recommendations for the executive officers may take
into account other factors, principally individual performance. While the
Committee makes recommendations, the ultimate responsibility for determination
and approval of bonuses for the executive officers rests with the Board of
Directors.
The Committee does not recommend base salaries or bonuses based on
compensation paid to comparable executives by other companies, although from
time to time the Committee reviews ranges of compensation for executive officers
of manufacturing companies with comparable sales.
Stock Options. The Committee recommends stock option grants to the Board of
Directors. Stock options have been the principal form of long-term compensation
received by the Company's executive officers. The Committee has favored stock
options as a long-term incentive because they match the interests of the
employee-optionholder with those of the shareholders. Any value received by the
employee is tied directly to stock price increases. Stock options have generally
been granted each October following the release of the Company's financial
results for the preceding fiscal year. The number of shares covered by each
stock option grant depends on the optionee's responsibilities with the Company,
as reflected by the optionee's job classification. John P. O'Leary, Jr., by
virtue of his position as Chief Executive Officer, has received stock options
for greater numbers of shares than the other executive officers (see
"Compensation of Executive Officers--Summary Compensation Table"). The grants
made in fiscal year 1998 were made under the Company's 1989 Stock Incentive Plan
(the "1989 Plan"). The exercise price of the options granted is 100% of the fair
market value of the Company's Common Stock on the effective date of grant, the
options became exercisable after six months and the options have a ten-year
term. No further stock options may be granted under the 1989 Plan.
In October 1997, the Committee recommended that the Board of Directors
adopt, and the Board adopted, the Company's 1997 Stock Incentive Plan (the "1997
Plan"), which was then approved by the Company's shareholders in December 1997.
Under the 1997 Plan, the Board may currently grant options to purchase a total
of 750,000 shares of the Company's Common Stock to key employees of the Company
and its subsidiaries and to the Company's non-employee directors. (The Board has
amended the 1997 Plan, subject to shareholder approval, to increase to 1,000,000
shares the total number of shares as to which options may be granted. See
"Approval of Amendment of 1997 Stock Incentive Plan"). The grants made in fiscal
year 1999 were made under the 1997 Plan (see "Compensation of Executive
Officers--Summary Compensation Table") and were substantially as recommended by
William M. Mercer, Incorporated in a report delivered to the Committee in August
1998. The philosophy of the 1997 Plan includes promoting the long-term success
of the Company by creating a long-term mutuality of interest between the
Company's key employees and non-employee directors and the Company's
shareholders and providing an additional inducement to these
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<PAGE> 13
employees to remain with the Company as well as a means through which the
Company may attract and retain high-quality employees. The grants were made in
four equal tranches, one of which becomes exercisable three years after the date
of grant solely on the basis of the passage of time. The other three tranches do
not vest until seven years after the date of grant but may become exercisable
earlier upon the achievement of certain increases in the stock price of the
Company's Common Stock. As in prior years, the exercise price of the options is
100% of the fair market value of the Company's Common Stock on the effective
date of grant and the options have a ten-year term. Consistent with the
intention of the Board and the Committee that a significant portion of an
executive officer's total compensation be tied to the long-term financial
success of the Company and its shareholders, the grants to the executive
officers were significantly larger than the grants made in prior years. The
stock options granted to John P. O'Leary, Jr. covered significantly more shares
than the grants to the other executive officers. The amounts of options granted
combined with the longer vesting periods and stock price targets were designed
to provide meaningful but reasonable compensation to the executive officers in
relation to the rewards enjoyed by the Company's shareholders.
Contemporaneous with the recommendations made by the Committee in fiscal
year 1999, the Committee decided that it would not necessarily recommend that
options be granted to executive officers each year. The Committee will make a
determination each year as to whether or not to recommend to the Board that
options be granted to the executive officers and in what amounts. In fiscal year
2000 no grants were made to the executive officers.
Retirement Benefits. The Company's executive officers will receive
retirement benefits under the Company's individual account defined contribution
pension plan for salaried employees and the Company's Section 401(k) Plan, both
of which are qualified plans under the Internal Revenue Code. In addition,
benefits payable directly by the Company to John P. O'Leary, Jr. and Brian C.
Mullins upon retirement are being accrued by the Company in unfunded bookkeeping
accounts established under the Company's supplemental executive retirement plan.
Other. The executive officers may also participate in the Company's Common
Stock Purchase Plan for Salaried Employees which is administered by the
Committee. Certain perquisites and other personal benefits are provided to
certain of the Company's employees, including its executive officers, but, in
the aggregate, they are not significant.
The Committee is aware that the deduction for tax purposes for compensation
paid to the Chief Executive Officer and the other executive officers is limited
to $1 million under Section 162(m) of the Internal Revenue Code and that certain
performance based compensation may be excluded from this limitation. The
Committee has not recommended that any steps be taken to qualify any
compensation for the exclusion because it has not been necessary to do so.
Respectfully submitted,
Robert W. Kampmeinert, Chairman
Harold F. Reed, Jr.
Thomas P. Woolaway
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<PAGE> 14
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return
on the Company's Common Stock over the 1996-2000 fiscal years with the
cumulative total return of the Russell 2000 Index and the Dow Jones Containers
and Packaging Industry Group over the same period. The graph assumes a $100
investment on August 31, 1995 in the Company's Common Stock and in each of the
indices and assumes the reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG TUSCARORA INCORPORATED, THE RUSSELL 2000 INDEX
AND THE DOW JONES CONTAINERS AND PACKAGING INDEX
<TABLE>
<CAPTION>
DOW JONES
TUSCARORA CONTAINERS &
INCORPORATED RUSSELL 2000 PACKAGING
------------ ------------ ------------
<S> <C> <C> <C>
1995 100.00 100.00 100.00
1996 96.15 110.82 100.23
1997 114.71 142.91 135.47
1998 98.28 115.19 105.20
1999 85.31 147.86 119.35
2000 101.37 169.47 82.00
</TABLE>
AUDIT COMMITTEE REPORT
We have reviewed and discussed with management the Company's consolidated
financial statements as of and for the fiscal year ended August 31, 2000.
We have discussed with the independent public accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended.
We have received and reviewed the written disclosures and the letter from
the independent public accountants required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, and have discussed
with the independent public accountants their independence.
Based on the review and discussions referred to above, we recommended to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2000.
Respectfully submitted,
David I. Cohen, Chairman
Abe Farkas
Karen L. Farkas
Jeffery L. Leininger
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<PAGE> 15
APPROVAL OF AMENDMENT OF
1997 STOCK INCENTIVE PLAN
The 1997 Stock Incentive Plan (the "1997 Plan") was adopted by the
Company's Board of Directors on October 17, 1997 and the adoption of the 1997
Plan was approved by the Company's shareholders at the Annual Meeting of
Shareholders held on December 18, 1997.
DESCRIPTION OF AMENDMENT
On October 13, 2000, the Board of Directors, on the recommendation of the
Compensation Committee, approved an amendment of the 1997 Plan to increase the
total number of shares which may be issued thereunder by an additional 250,000
shares. The amendment increases the total number of shares which may be issued
under the 1997 Plan from 750,000 shares to 1,000,000 shares, subject to
proportionate adjustment in the event of stock splits and similar events. The
amendment must be approved by the Company's shareholders and, if the
shareholders do not approve the amendment, the 1997 Plan will remain in effect
without including the amendment. The Board recommends a vote "FOR" approval of
the amendment of the 1997 Plan and, unless otherwise directed therein, the
proxies solicited by the Board will be voted "FOR" approval of the amendment.
In October 2000, the Board also amended the 1997 Plan to provide that if
the outstanding shares of Common Stock of the Company are changed into or become
exchangeable for cash or any other property, then the shares of Common Stock
subject to options will also be substituted for such cash or other property. The
effect of this amendment is that if the Company engaged in any fundamental
transaction, such as a reorganization, recapitalization, merger or consolidation
in which its shares of Common Stock were changed into cash or other property,
outstanding stock options would, likewise, be changed into such cash or other
property. The Company determined that the amendment did not require
shareholders' approval.
VOTE REQUIRED
Under Pennsylvania law, the affirmative vote of a majority of the votes
cast at the Annual Meeting by the holders of the Company's Common Stock voting
in person or represented by proxy and entitled to vote, a quorum being present,
is necessary for the approval of the amendment of the 1997 Plan. Abstentions
from voting by shareholders present in person or represented by proxy and
entitled to vote are not votes cast "FOR" or "AGAINST" the approval of the
amendment of the 1997 Plan and are therefore not counted in determining whether
the required vote has been obtained.
SUMMARY OF THE PLAN
The material features of the 1997 Plan are summarized below.
General
The purposes of the 1997 Plan are to encourage eligible individuals, which
include employees and non-employee directors of the Company and its
subsidiaries,
- to increase their efforts to make the Company and its subsidiaries more
successful,
- to provide an additional inducement for such persons to remain with the
Company or a subsidiary,
- to reward such persons by providing an opportunity to acquire the
Company's Common Stock on favorable terms, and
- to provide a means through which the Company may attract able persons to
enter its employ.
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 and directors of the Company who are not also employees are eligible
to receive awards under the Plan.
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<PAGE> 16
As amended, the aggregate number of shares of the Company's Common Stock
which may be issued under the Plan is 1,000,000 shares, subject to proportionate
adjustment in the event of stock splits and similar events. No awards may be
granted under the Plan subsequent to December 17, 2007.
In the event any outstanding stock option is cancelled by mutual consent or
terminates or expires for any reason without having been exercised in full, the
shares of Common Stock not purchased under the stock option are again available
for purposes of the 1997 Plan, except that to the extent that alternative stock
appreciation rights granted in conjunction with a stock option under the 1997
Plan are exercised and the related stock option surrendered, the number of
shares available for purposes of the 1997 Plan will be reduced by the number of
shares of Common Stock issued upon exercise of the alternative stock
appreciation rights. If any shares of Common Stock are forfeited to the Company
pursuant to the restrictions applicable to restricted shares awarded under the
1997 Plan, the number of shares so forfeited are again available for purposes of
the 1997 Plan. To the extent performance shares are not earned, the number of
shares is again available for purposes of the Plan.
The shares which may be issued under the 1997 Plan may be either authorized
but unissued shares or treasury shares or partly each.
Stock options are currently outstanding under the Company's 1989 Stock
Incentive Plan. No other share awards were granted under this plan, and no
further stock options or other awards may be granted thereunder.
Administration
The Plan is administered by the Board. The Board has full authority, in its
discretion, to interpret the Plan and to determine the persons who will receive
awards and the number of shares to be covered by each award. In determining the
eligibility of any participant, as well as in determining the number of shares
to be covered by an award and the type of awards to be made to such individuals,
the Board will consider the position and responsibilities of the person being
considered, the nature and value to the Company or subsidiary of his or her
services, his or her present and/or potential contribution to the success of the
Company or subsidiary and such other factors as the Board may deem relevant.
The types of awards which the Board has authority to grant are (1) stock
options (with or without cash payment rights or alternative stock appreciation
rights) (2) restricted shares and (3) performance shares. Each of these types of
awards is described below.
Stock Options
The Plan provides for the grant of "incentive stock options" pursuant to
Section 422 of the Code, or "nonstatutory stock options", which are stock
options that do not so qualify. Stock options may not be granted in tandem, and
incentive stock options may only be granted to employees. The option price for
each stock option may not be less than 100% of the fair market value of the
Company's Common Stock on the date the stock option is granted. Fair market
value, for purposes of the Plan, is generally the mean between the publicly
reported high and low sale prices per share of the Company's Common Stock for
the date as of which fair market value is to be determined. On October 24, 2000
the fair market value of a share of the Company's Common Stock, as so computed,
was $13.875.
A stock option granted becomes exercisable at such time or times and/or
upon the occurrence of such event or events as the Board may determine. Unless
otherwise determined by the Board, a stock option granted is exercisable from
its date of grant. No stock option may be exercised after the expiration of ten
years from the date of grant. A stock option to the extent exercisable at any
time may be exercised in whole or in part.
The option price for each stock option will be payable in full in cash at
the time of exercise; however, in lieu of cash the holder of an 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 Company's
Common Stock having a fair market value on the date of exercise of the stock
option equal to the option price for the shares being purchased, except that
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<PAGE> 17
any portion of the option price representing a fraction of a share must be paid
in cash, and no shares of the Company's Common Stock which have been held less
than one year may be delivered in payment of the option price of a stock option.
For incentive stock options, the aggregate fair market value (determined on
the date of grant) of the shares with respect to which 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 exercise date of incentive stock
options is accelerated pursuant to any provision of the 1997 Plan or any
agreement (see "Additional Rights in Certain Events" below) and the acceleration
would result in a violation of this limitation, then, subject to the provisions
of the next sentence, the exercise dates of such incentive stock options will be
accelerated only to the extent, if any, that does not result in a violation of
such limitation and, in any such event, the exercise dates of the incentive
stock options with the lowest option prices will 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 limitation and even if such incentive stock options would as a result
be converted in whole or in part into nonstatutory stock options.
Notwithstanding any provision of the 1997 Plan or any stock option
agreement, or amendment thereto, any optionee who has made a hardship withdrawal
from the Company's Section 401(k) Plan (or other holder of an option granted to
such a grantee) is prohibited, for a period of twelve (12) months following such
hardship withdrawal, from exercising any stock option granted under the 1997
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)(iv)(B)(4) or any successor regulation thereto. The unofficial position
of the Internal Revenue Service appears to be that the payment of the option
price in cash would result in such a contribution whereas the payment of the
option price in shares would not.
Unless the Board, in its discretion, otherwise determines at the grant of a
stock option, the following provisions of this paragraph will apply in the event
of an optionee-employee whose employment is terminated, except that the second
preceding paragraph will apply in any event if the exercise date of any
incentive stock option is accelerated and the preceding paragraph will apply in
any event if an optionee makes a hardship withdrawal under the Company's Section
401(k) Plan. If the employment of an optionee is voluntarily terminated with the
consent of the Company, or the optionee retires under any retirement plan of the
Company, all outstanding stock options held by the optionee will be exercisable
(but only to the extent exercisable immediately prior to the termination of
employment) at any time prior to the expiration date of the stock option or
within three years after termination of employment, whichever is the shorter
period. Following the death of an optionee during employment, all outstanding
stock options of the optionee at the time of death will be exercisable (whether
or not so exercisable immediately prior to the death of the optionee) by the
holder of the option, or if the optionee held the option at the time of death,
by the person entitled to do so under the Will of the optionee, or, if the
optionee shall fail to make testamentary disposition of the stock option or
shall die intestate, by the legal representative of the optionee, at any time
prior to the expiration date of the stock option or within three years after the
date of death of the optionee, whichever is the shorter period. Following the
death of the optionee after termination of employment, all outstanding stock
options of the optionee at the time of death will be exercisable (but only to
the extent exercisable immediately prior to the death of the optionee without
taking into account the restriction on exercise relating to hardship
withdrawals) by the holder of the option, or if the optionee held the option at
the time of death, by the person entitled to do so under the Will of the
optionee, or, if the optionee shall fail to make testamentary disposition of the
stock option or shall die intestate, by the legal representative of the
optionee, at any time prior to the shorter of (i) the expiration date of the
stock option or (ii) within three years after the date of termination of
employment of the optionee or one year after the date of death of the optionee,
whichever is the longer period. If the employment of an optionee terminates for
any other reason, all outstanding stock options granted to the optionee, whether
or not exercisable immediately prior to termination of employment, will
automatically terminate.
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<PAGE> 18
Unless the Board, in its discretion, otherwise determines at the grant of a
stock option, the following provisions of this paragraph will apply in the event
of an optionee who is a non-employee director whose services with the Company
are terminated. If a non-employee director ceases to be a director of the
Company for any reason other than resignation, removal for cause or death, any
then outstanding stock option of the non-employee director will be exercisable
(but only to the extent exercisable immediately prior to ceasing to be a
director) at any time prior to the expiration date of the stock option or within
three years after the date the non-employee director ceases to be a director,
whichever is the shorter period. If during his or her term of office as a
director, a non-employee director resigns from the Board (which does not include
not standing for reelection at the end of his or her then current term) or is
removed from office for cause, any then outstanding stock option of such
non-employee director (whether or not exercisable by the non-employee director
immediately prior to resignation or removal) shall automatically terminate.
Following the death of an optionee during service as a non-employee director,
all outstanding stock options of such non-employee director at the time of death
will be exercisable in full by the holder of the option (whether or not so
exercisable immediately prior to the death of the optionee) or, if the
non-employee director held the stock option at the time of death, by the person
entitled to do so under the Will of the optionee, or, if the optionee shall fail
to make testamentary disposition of the stock option or shall die intestate, by
the legal representative of the optionee, at any time prior to the expiration
date of the stock option or within three years after the date of death,
whichever is the shorter period. Following the death of a non-employee director
after service as a non-employee director, all outstanding stock options of such
non-employee director at the time of death will be exercisable (but only to the
extent exercisable immediately prior to the death of the optionee) by the holder
of the stock option or, if the non-employee director held the stock option at
the time of death, by the person entitled to do so under the Will of the
optionee or, if the optionee shall fail to make testamentary disposition of the
stock option or shall die intestate, by the legal representative of the
optionee, at any time prior to the shorter of (i) the expiration date of the
stock option or (ii) within three years after the date of death of the optionee,
whichever is the longer period.
No incentive stock option granted under the 1997 Plan is transferable other
than by Will or by the laws of descent and distribution, and an incentive stock
option may be exercised during an optionee's lifetime only by the optionee.
Unless the Board, in its discretion, otherwise determines, nonstatutory stock
options may be transferred by the optionee by gift to the optionee's spouse or
to any of the optionee's lineal descendants or to the trustee(s) of a trust for
the benefit of any such persons.
Each grant of a stock option must be confirmed by a stock option agreement
between the Company and the optionee which sets forth the terms of the stock
option.
Alternative Stock Appreciation Rights
The Board may grant alternative stock appreciation rights to employees in
conjunction with an incentive stock option only at the time of the stock option
grant. Alternative stock appreciation rights may be granted in conjunction with
a nonstatutory stock option to employees or non-employee directors either at the
time the stock option is granted or at any time during the term of the stock
option.
Alternative stock appreciation rights are exercisable to the extent that
the related stock option is exercisable and only by the same person who is
entitled to exercise the related stock option. An alternative stock appreciation
right entitles the person exercising the stock option to surrender the related
stock option or any portion thereof without exercising the stock option and to
receive from the Company that number of shares of the Company's Common Stock
having an aggregate fair market value on the date of exercise of the alternative
stock appreciation right equal to the excess of the fair market value of one
share of the Company's Common Stock on such date over the option price per share
times the number of shares covered by the stock option or portion thereof which
is surrendered. Alternative stock appreciation rights granted under the 1997
Plan may be paid in cash or part in cash and part in shares, in the discretion
of the Board.
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Cash Payment Rights
The Board may grant cash payment rights to employees or non-employee
directors in conjunction with a nonstatutory stock option, either at the time of
the stock option grant or at any time thereafter during the term of the stock
option.
Cash payment rights entitle the person exercising them, upon exercise of
the stock option, or any portion thereof, to receive from the Company cash, in
addition to the shares to be received upon exercise of the stock option, equal
to the excess of a percentage (not greater than 100%) of the fair market value
of one share on the date of exercise over the option price per share, multiplied
by the number of shares covered by the stock option, or portion thereof, which
is exercised.
Restricted Shares
Restricted shares of the Company's Common Stock may be awarded to employees
or non-employee directors by the Board and will be subject to such restrictions
(which may include restrictions on the right to transfer or encumber the shares
while subject to restriction) as the Board may impose and will be subject to
forfeiture in whole or in part if certain events (which may, in the discretion
of the Board, include termination of employment and/or performance-based events)
specified by the Board occur prior to the lapse of the restrictions. The
restricted share agreement between the Company and the grantee will set forth
the number of restricted shares awarded to the awardee, the restrictions imposed
thereon, the duration of such restrictions, the events the occurrence of which
would cause a forfeiture of the restricted shares in whole or in part and such
other terms and conditions as the Board in its discretion deems appropriate.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, share certificates for the restricted shares will
be held in escrow. Upon the lapse or termination of the restrictions (and not
before), the share certificates will be delivered to the grantee. The Board, in
its discretion, may determine that dividends and other distributions on the
shares held in escrow will not be paid to the grantee until the lapse or
termination of the applicable restrictions. From the date a restricted share
award is effective, however, the grantee will be a shareholder with respect to
the restricted shares and will have all the rights of a shareholder with respect
to such shares, including the right to vote the shares and to receive all
dividends and other distributions paid with respect to the shares, subject only
to the preceding provisions of this paragraph, the succeeding paragraph and the
restrictions imposed by the Board.
If a dividend or other distribution is declared upon the Company's Common
Stock payable in shares of the Common Stock, the shares of the Common Stock
distributed with respect to any restricted shares held in escrow will 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 Company's
Common Stock are changed into or exchangeable for a different number or kind of
shares of stock or other securities of the Company or another company or cash or
other property, whether through reorganization, reclassification,
recapitalization, stock split-up, combination of shares, merger or consolidation
or otherwise, such stock or other securities or cash or other property into
which any restricted shares held in escrow are changed or for which any
restricted shares held in escrow may be exchanged will also be held by the
Company in escrow and be subject to the same restrictions as are applicable to
the restricted shares.
Performance Shares
The Board may award performance shares to employees or non-employee
directors which will entitle the grantee to receive up to the number of shares
of the Company's Common Stock covered by the award at the end or at a specified
time or times during a specified award period contingent upon the extent to
which one or more predetermined performance targets are satisfied during the
award period. The performance target or targets may be expressed in terms of
earnings per share, return on shareholder equity, operating profit, return on
capital employed or such other measures of accomplishment by the Company or a
subsidiary, or the grantee individually, as may be established, in its
discretion, by the Board. The performance target or targets may vary for
different award periods and need not be the same for each grantee receiving an
award for an award period. The performance target or targets and such other
terms and conditions of the award of the
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performance shares as the Board, in its discretion, deems appropriate will be
set forth in a performance share agreement between the Company and the grantee.
At any time prior to the end of an award period, the Board may adjust
downward (but not upward) the performance target or targets as a result of major
events unforeseen at the time of the award, such as changes in the economy, in
the industry or the laws affecting the operations of the Company or a
subsidiary, or any branch, department or portion thereof, or any other event the
Board determines would have a significant impact on the probability of attaining
the previously established performance target or targets. The Board, in its
discretion, may determine that grantees are entitled to any dividends or other
distributions that would have been paid on earned performance shares had the
shares been outstanding during the period from the award to the payment of the
performance shares.
If prior to the close of an award period, the employment of a grantee of
performance shares is voluntarily terminated with the consent of the Company or
a subsidiary, the grantee retires under any retirement plan of the Company or a
subsidiary or the grantee dies, the Board, in its discretion, may determine to
pay to the grantee all or part of the performance shares based upon the extent
to which the Board determines the performance target or targets have been
achieved and such other factors the Board may deem relevant. Unless performance
shares are deemed to have been fully earned as a result of the occurrence of
certain events (see "Additional Rights in Certain Events" below), if the
employment of a grantee of an award of performance shares terminates prior to
the time the performance shares have been earned for any other reason, the
unearned performance shares will be deemed not to have been earned.
Other Shares
The Board, in its discretion, may from time to time make other awards of
shares of the Company's Common Stock to employees or non-employee directors
under the Plan as an inducement to the grantee to retain his or her services for
the Company or a subsidiary, in recognition of the contribution of the grantee
to the performance of the Company or a subsidiary, or any branch, department or
portion thereof, in recognition of the grantee's individual performance or on
the basis of such other factors as the Board may deem relevant.
Additional Rights in Certain Events
The Plan provides for certain additional rights upon the occurrence of one
or more events described in Section 8 of the Plan ("Section 8 Events"). Such an
event is deemed to have occurred, with certain exceptions, when
- the Company acquires actual knowledge that any person (other than the
Company, a subsidiary or any employee benefit plan sponsored by the
Company) has acquired beneficial ownership, directly or indirectly, of
securities representing 20% or more of the voting power of the Company,
- a tender offer is made to acquire securities of the Company entitling the
holders thereof to 20% or more of the voting power of the Company,
- a solicitation subject to Rule 14a-11 under the Securities Exchange Act
of 1934 (the "1934 Act") (or any successor Rule) relating to the election
or removal of 50% or more of the Board or any class of the Board is made
by any person other than the Company or less than 51% of the members of
the Board are Continuing Directors (as defined below), or
- the shareholders of the Company approve a merger, consolidation, share
exchange, division or sale or other disposition of assets of the Company
as a result of which the shareholders of the Company immediately prior to
the transaction will not hold, directly or indirectly, immediately
following the transaction a majority of the voting power of (1) in the
case of a merger or consolidation, the surviving or resulting
corporation, (2) in the case of a share exchange, the acquiring
corporation or (3) in the case of a division or sale or other disposition
of assets, each surviving, resulting or acquiring corporation which,
immediately following the transaction, holds more than 10% of the
consolidated assets of the Company immediately prior to the transaction.
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A "Continuing Director" means a director of the Company who either (i) was
a director of the Company on the effective date of the Plan or (ii) is an
individual whose election, or nomination for election, as a director of the
Company was approved by a vote of at least two-thirds of the directors then
still in office who were Continuing Directors (other than an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Company which
would be subject to Rule 14a-11 under the 1934 Act (or any successor Rule)).
Subject to the provisions of Section 4 of the Plan limiting such rights in
the case of incentive stock options, unless the agreement between the Company
and the grantee otherwise provides, if any Section 8 Event occurs (i) all
outstanding stock options will become immediately and fully exercisable, (ii)
all stock options granted to a grantee whose employment or service as a Director
with the Company or a subsidiary terminates within one year of any Section 8
Event 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 will be exercisable for a period of three years from the
date of such termination of employment or service as a Director but in no event
after the expiration date of the stock option, (iii) all restrictions applicable
to restricted shares awarded under the Plan will lapse and (iv) all performance
shares awarded under the Plan will be deemed to have been fully earned as of the
date of the Section 8 Event, regardless of the attainment or nonattainment of
any performance target.
Miscellaneous
The Board of Directors may alter or amend the 1997 Plan at any time, except
that, without approval of the shareholders of the Company, no alteration or
amendment may (i) increase the total number of shares which may be issued under
the 1997 Plan, (ii) decrease the purchase price at which stock options may be
granted, (iii) reprice outstanding stock options or other awards, or (iv) extend
the duration of the 1997 Plan. In addition, no alteration or amendment of the
1997 Plan may, without the written consent of the holder of any outstanding
grant or award under the 1997 Plan, adversely affect the rights of such holder
with respect thereto.
The Board of Directors may also terminate the 1997 Plan at any time, but
termination of the 1997 Plan would not terminate any outstanding stock options,
alternative stock appreciation rights, or cash payment rights granted under the
1997 Plan or cause a revocation or forfeiture of any restricted share award or
performance share award under the 1997 Plan.
If an employee who has been granted stock options or awarded restricted
shares or performance shares under the 1997 Plan 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 in its
discretion immediately terminate all stock options granted to such person and
declare forfeited all restricted shares or performance shares granted to such
person as to which the restrictions have not yet lapsed.
The 1997 Plan contains no provision prohibiting the grant of stock options
by the Board upon the condition that outstanding stock options granted at a
higher option price be surrendered for cancellation. Certain outstanding stock
options granted under the 1997 Plan may from time to time have option prices in
excess of the market price per share of the Company's Common Stock. It is
possible, therefore, that the Board may grant stock options under the 1997 Plan
exercisable at the fair market value of shares of Common Stock on the date of
grant upon the condition that outstanding stock options with a higher option
price granted under the 1997 Plan be surrendered for cancellation.
POSSIBLE ANTI-TAKEOVER EFFECT
The provisions of the Plan providing for the acceleration of the exercise
date of stock options, the lapse of restrictions applicable to restricted shares
and the deemed earnout of performance shares upon the occurrence of a Section 8
Event, and for the extension of the period during which stock options may be
exercised upon termination of employment following a Section 8 Event may be
considered as having an anti-takeover effect.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of awards under present law.
Incentive Stock Options. An optionee will not recognize any taxable income
for Federal income tax purposes upon receipt of an incentive stock option or,
generally, at the time of exercise of an incentive stock option. The exercise of
an incentive stock option generally will result in an increase in an optionee's
taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other transfer within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares any amount realized in excess of
the optionee's tax basis in the shares disposed of will be treated as a
long-term capital gain, and any loss will be treated as a long-term capital
loss. In the event of a "disqualifying disposition," the difference between the
fair market value of the shares received on the date of exercise and the option
price (limited, in the case of a taxable sale or exchange, to the excess of the
amount realized upon disposition over the optionee's tax basis in the shares)
will be treated as compensation received by the optionee in the year of
disposition. Any additional gain will be taxable as a capital gain and any loss
as a capital loss, which will be long-term or short-term depending on whether
the shares were held for more than one year. Under proposed regulations, special
rules apply in determining the compensation income recognized upon a
disqualifying disposition if the option price of the incentive stock option is
paid with shares of the Company's Common Stock. If shares of the Company's
Common Stock received upon the prior exercise of an incentive stock option are
transferred to the Company in payment of the option price of an incentive stock
option within either of the periods referred to above, the transfer will be
considered a "disqualifying disposition" of the shares transferred, but, under
proposed regulations, only compensation income determined as stated above, and
no capital gain or loss, will be recognized.
Neither the Company nor any of its subsidiaries will be entitled to a
deduction with respect to shares received by an optionee upon exercise of an
incentive stock option and not disposed of in a "disqualifying disposition."
Except as described in "Other Tax Matters" below, if an amount is treated as
compensation received by an optionee because of a "disqualifying disposition,"
the Company or one of its subsidiaries generally will be entitled to a
corresponding deduction in the same amount for compensation paid.
Nonstatutory Stock Options. An optionee will not recognize any taxable
income for Federal income tax purposes upon receipt of a nonstatutory stock
option. Upon the exercise of a nonstatutory stock option the amount by which the
fair market value of the shares received, determined as of the date of exercise,
exceeds the option price will be treated as compensation received by the
optionee in the year of exercise. If the option price of a nonstatutory stock
option is paid in whole or in part with shares of the Company's Common Stock, no
income, gain or loss will be recognized by the optionee on the receipt of shares
equal in value on the date of exercise to the shares delivered in payment of the
option price. The fair market value of the remainder of the shares received upon
exercise of the nonstatutory stock option, determined as of the date of
exercise, less the amount of cash, if any, paid upon exercise will be treated as
compensation income received by the optionee on the date of exercise of the
stock option.
There is no published authority directly addressing the Federal income tax
consequences of certain aspects of transferring nonstatutory stock options, and
the following statements of the probable tax consequences are based on the
Company's interpretation of present law. An optionee should not recognize any
taxable income for Federal income tax purposes upon transfer of a nonstatutory
stock option by gift. Upon the exercise of a nonstatutory stock option by the
transferee, the optionee should be treated as receiving compensation, which is
subject to tax withholding, even though the nonstatutory stock option is
exercised by a transferee rather than an optionee.
Except as described in "Other Tax Matters" below, the Company or one of its
subsidiaries generally will be entitled to a deduction for compensation paid in
the same amount treated as compensation received by the optionee.
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Alternative stock appreciation rights. A grantee does not recognize any
taxable income for Federal income tax purposes upon receipt of alternative stock
appreciation rights. Upon the exercise of alternative stock appreciation rights,
the fair market value of the shares received, determined as of the date of
exercise, and any cash received, is generally treated as compensation received
in the year of exercise. In each instance that an amount is treated as
compensation received, the Company or one of its subsidiaries generally is
entitled to a corresponding deduction in the same amount for compensation paid.
Cash Payment Rights. A grantee does not recognize any taxable income for
Federal income tax purposes upon receipt of cash payment rights. Any cash
received in payment of cash payment rights is treated as compensation received
by the grantee in the year in which the grantee becomes entitled to receive the
cash payment. Except as described in "Other Tax Matters" below, in each instance
that an amount is treated as compensation received, the Company or one of its
subsidiaries generally is entitled to a corresponding deduction in the same
amount for compensation paid.
Restricted Shares. A grantee of restricted shares will not recognize any
taxable income for Federal income tax purposes in the year of the award,
provided the shares are subject to restrictions (that is, they are
nontransferable and subject to a substantial risk of forfeiture). However, a
grantee may elect under Section 83(b) of the Code to recognize compensation
income in the year of the award in an amount equal to the fair market value of
the shares on the date of the award, determined without regard to the
restrictions. If the grantee does not make a Section 83(b) election, the fair
market value of the shares on the date the restrictions lapse will be treated as
compensation income to the grantee and will be taxable in the year the
restrictions lapse. Except as described in "Other Tax Matters" below, the
Company or one of its subsidiaries generally will be entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
grantee.
Performance Shares. A grantee of performance shares does not recognize any
taxable income for Federal income tax purposes upon receipt of the award. Any
shares of the Company's Common Stock received pursuant to the award are treated
as compensation income received generally in the year in which the shares are
received. The amount of compensation income is the fair market value of the
shares on the date compensation income is recognized. The Company or one of its
subsidiaries generally is entitled to a corresponding deduction in the same
amount for compensation paid.
Other Tax Matters. The acceleration of the exercise date of a stock option
or the exercise of a stock option, the lapse of restrictions on restricted
shares or the deemed earnout of performance shares following the occurrence of a
Section 8 Event, in certain circumstances, may result in (i) a 20% Federal
excise tax (in addition to Federal income tax) to the grantee on certain amounts
associated with the stock option and certain payments of the Company's Common
Stock resulting from such lapse of restrictions on restricted shares or deemed
earnout of performance shares and (ii) the loss of a compensation deduction
which would otherwise be allowable to the Company or one of its subsidiaries.
Under Section 162(m) of the Code, the Company or one of its subsidiaries
may lose a compensation deduction, which would otherwise be allowable, for all
or a part of the compensation paid to any employee if, as of the close of the
tax year, the employee is the Chief Executive Officer of the Company or is among
the four highest compensated officers for that tax year (other than the Chief
Executive Officer) for whom total compensation is required to be reported to
shareholders under the 1934 Act, if the total compensation paid to such employee
exceeds $1,000,000.
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RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP as independent
public accountants to audit the financial statements of the Company and its
subsidiaries for the 2001 fiscal year. Ernst & Young LLP has audited the
financial statements of the Company and its subsidiaries since the 1997 fiscal
year. Although the appointment of independent public accountants is not required
to be submitted to a vote of the shareholders, the Board believes that
shareholders should participate in the selection of the independent public
accountants through the ratification process.
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of Ernst & Young LLP and, unless otherwise directed therein, the
proxies solicited by the Board will be voted "FOR" the ratification of the
appointment of Ernst & Young LLP. In the event the shareholders fail to ratify
the appointment, the Board will consider such vote as a direction to appoint
other independent public accountants for the 2002 fiscal year.
The Board of Directors expects that representatives of Ernst & Young LLP
will be present at the Annual Meeting. The Board understands that while such
representatives do not presently plan to make a statement at the Meeting, they
will be available to respond to appropriate questions.
VOTE REQUIRED
Under Pennsylvania law, the affirmative vote of a majority of the votes
cast at the Annual Meeting by the holders of the Company's Common Stock voting
in person or represented by proxy and entitled to vote, a quorum being present,
is necessary for the ratification of the appointment of Ernst & Young LLP.
Abstentions from voting by shareholders present in person or represented by
proxy and entitled to vote are not votes cast "FOR" or "AGAINST" the
ratification of the appointment of Ernst & Young LLP and are therefore not
counted in determining whether the required vote has been obtained.
OTHER MATTERS
No business other than that set forth above is expected to come before the
Annual Meeting or any adjournment thereof. Should other business properly come
before the Meeting or any adjournment thereof, the proxy holders will vote upon
the same in their discretion and best judgment.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies for the Annual Meeting will be paid by
the Company. In addition to the solicitation of proxies by mail, the officers
and regular employees of the Company may solicit proxies in person or by
telephone or telegraph. Brokers, banks and other holders of record, either
directly or through an agent, will forward proxy soliciting material and the
Company's Annual Report to Shareholders for the fiscal year ended August 31,
2000 to the beneficial owners of the shares of the Company's Common Stock held
of record by them, and the Company will reimburse such record holders for their
reasonable out-of-pocket expenses incurred in so doing.
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2001 SHAREHOLDER PROPOSALS
A proposal submitted by a shareholder for inclusion in the Company's Proxy
Statement for the regular annual meeting of shareholders to be held in 2001 must
be received by the Secretary, Tuscarora Incorporated, 800 Fifth Avenue, New
Brighton, Pennsylvania 15066 on or prior to July 19, 2001. Separately, if the
Company does not receive notice of a matter or proposal intended to be raised at
such annual meeting on or before October 2, 2001, then the persons appointed by
the Board of Directors to act as the proxy holders for such annual meeting will
be allowed to use their discretionary voting authority with respect to such
matter or proposal at such annual meeting.
Information with respect to the written notice and information required to
be provided by a shareholder of record in order to nominate a candidate for
election at an annual meeting of shareholders is contained under the heading
"Election of Directors" in this Proxy Statement.
By Order of the Board of Directors,
Harold F. Reed, Jr.,
Secretary
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APPENDIX A
TUSCARORA INCORPORATED
BOARD OF DIRECTORS
AUDIT COMMITTEE CHARTER
TITLE I - ORGANIZATION
This charter governs the operations of the Audit Committee (the
"Committee") of the Board of Directors (the "Board") of Tuscarora Incorporated
(the "Company"). The Committee will review and reassess the charter at least
annually. The Committee and its chairpersons shall be appointed by the Board,
and shall be comprised of at least three directors, each of whom shall be
independent of management and the Company. Members of the Committee will be
considered independent if they have no relationship that may interfere with the
exercise of their oversight responsibilities for the accounting, internal
control and financial reporting practices of the Company. All Committee members
will be financially literate, or will become financially literate within a
reasonable period of time after appointment to the Committee, and at least one
member will have accounting or related financial management expertise.
TITLE II - STATEMENT OF POLICY
The Committee will provide assistance to the Board in fulfilling its
oversight responsibility to the shareholders and others relating to the
Company's financial statements and the financial reporting process, the systems
of internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics program as established by management and the Board. In so
doing, it is the responsibility of the Committee to maintain free and open
communication between the Committee, the independent auditors, the internal
auditors and management of the Company. In discharging its oversight role, the
Committee shall have full access to all books, records, facilities, and
personnel of the Company and the power to retain outside counsel or other
experts for this purpose.
TITLE III - RESPONSIBILITIES AND PROCESS
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
their activities to the Board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The Committee in carrying out its
responsibilities believes its policies and procedures should remain flexible, in
order to react to changing conditions and circumstances. The Committee should
take the appropriate actions to set the overall corporate "tone" for quality
financial reporting, sound business risk practices, and ethical behavior.
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities:
A. The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Committee, as representatives of the
Company's shareholders. The Committee shall have the ultimate authority
and responsibility to monitor and evaluate and, when appropriate,
recommend to the Board that the independent auditors be replaced. The
Committee shall discuss with the auditors their independence from
management and the Company and the matters included in the written
disclosures from the independent auditors required by the Independence
Standards Board. Annually, the Committee will review and recommend to
the Board the appointment of the Company's independent auditors, subject
to ratification by the shareholders.
B. The Committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the
Committee will discuss with management, the internal auditors, and the
independent auditors the
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adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk, and
legal and ethical compliance programs. Further, the Committee will meet
separately with the internal auditors and the independent auditors, with
and without management present, to discuss the results of their
examinations.
C. The Committee will review the Company's quarterly financial results with
financial management and the independent auditors prior to the release
of earnings. Also, the Committee will discuss the results of the
quarterly review and any other matters required to be communicated to
the Committee by the independent auditors under generally accepted
auditing standards. The chair of the Committee may represent the entire
Committee for the purposes of this review and discussion.
D. The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K (or the annual report to shareholders if distributed prior
to the filing of Form 10-K), including their judgment about the quality,
not just acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the Committee will discuss the results of
the annual audit, and any other matters required to be communicated to
the Committee by the independent auditors under generally accepted
auditing standards and make a determination, based on its review and
discussions with management and the independent auditor, whether to
recommend to the Board that the financial statements be included in the
Company's Annual Report on Form 10-K.
TITLE IV - LIMITATION OF DUTIES
While this Committee has the oversight responsibilities set forth in the
Charter, it is not the duty, responsibility or obligation of this Committee to
plan or conduct audits or to determine or certify to any party that the
Company's financial statements are complete and accurate and are prepared in
accordance with generally accepted accounting principles. Furthermore, this
Committee shall have no duty or obligation to conduct investigations, resolve
any disagreements between management and the independent auditor or to assure
compliance with applicable laws and regulations or internal policies and
procedures of the Company.
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APPENDIX B
TUSCARORA INCORPORATED
1997 STOCK INCENTIVE PLAN
A purpose of the 1997 Stock Incentive Plan (the "Plan") is to encourage
eligible employees of Tuscarora Incorporated (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. Another purpose of the Plan is to promote the long-term
success of the Company by creating a long-term mutuality of interest between the
Company's non-employee directors (the "Nonemployee Directors") and the Company's
shareholders, to provide an additional inducement for the Nonemployee Directors
to remain with the Company and to provide a means through which the Company may
attract able persons to serve as Nonemployee Directors. 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. 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, including employees who
are directors of the Company, 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 alternative stock
appreciation rights and/or cash payment rights) and to receive awards of
restricted, performance and other shares as described herein. The Nonemployee
Directors shall be eligible to be granted nonstatutory stock options (with or
without alternative stock appreciation rights and/or cash payment rights) and to
receive awards of restricted shares 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
alternative stock appreciation rights and/or cash payment rights) and to award
restricted, performance and other shares as described herein and to determine
the persons 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 person, as
well as in determining the number of shares covered by each grant or award and
whether alternative stock appreciation rights and/or cash payment rights shall
be granted in conjunction with a stock option, the Board shall consider the
position and the responsibilities of the person being considered, the nature and
value to the Company or a Subsidiary of his or her services, his or her present
and/or potential
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contribution to the success of the Company or a Subsidiary and such other
factors as the Board may deem relevant.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock that may be issued and
as to which grants or awards may be made under the Plan is 1,000,000 shares,
subject to adjustment and substitution as set forth in Section 7. If any stock
option granted under the Plan is canceled by mutual consent or terminates or
expires for any reason without having been exercised in full, the number of
shares subject thereto shall again be available for purposes of the Plan, except
that to the extent that alternative stock appreciation rights granted in
conjunction with a stock option under the Plan are exercised and the related
stock option surrendered the number of shares available for purposes of the Plan
shall be reduced by the number of shares of Common Stock issued upon exercise of
such alternative stock appreciation rights. Any restricted shares which are
surrendered or forfeited to the Company and any performance shares which are not
earned shall again be available for issuance under the Plan.
The shares which may be issued under the Plan may be either authorized but
unissued shares or treasury shares or partly each.
SECTION 4
GRANT OF STOCK OPTIONS, ALTERNATIVE
STOCK APPRECIATION RIGHTS AND CASH
PAYMENT RIGHTS AND AWARD OF RESTRICTED,
PERFORMANCE AND OTHER SHARES
The Board shall have authority, in its discretion, (i) to grant "incentive
stock options" pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), to grant "nonstatutory stock options" (i.e., stock options
which do not qualify under Sections 422 or 423 of the Code) or to grant both
types of stock options (but not in tandem), (ii) to award restricted shares,
(iii) to award performance shares and (iv) to make other share awards, all as
provided herein. The Board also shall have the authority, in its discretion, to
grant alternative stock appreciation rights in conjunction with incentive stock
options or nonstatutory stock options with the effect provided in Section 5(D)
and to grant cash payment rights in conjunction with nonstatutory stock options
with the effect provided in Section 5(E). Alternative stock appreciation rights
granted in conjunction with an incentive stock option may only be granted at the
time the incentive stock option is granted. Cash payment rights may not be
granted in conjunction with incentive stock options. Alternative stock
appreciation rights and/or 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
agreement referred to in Section 5(I), 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(J) on the date
of grant, of the shares with respect to which 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 of such
incentive stock options could first be exercised would be accelerated pursuant
to any provision of the Plan or any stock option agreement, and the acceleration
of such exercise date would result in a violation of the limitation set forth in
the preceding sentence, then, notwithstanding any such provision, but subject to
the provisions of the next succeeding sentence, the exercise dates of such
incentive stock options shall be accelerated only to the date or dates, if any,
that do not result in a violation of such limitation and, in such event, the
exercise dates of the incentive stock options with the lowest option prices
shall be accelerated to the earliest such dates. The Board may, in its
discretion, authorize
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the acceleration of the exercise date of one or more incentive stock options
even if such acceleration would violate the $100,000 limitation set forth in the
first sentence of this paragraph and even if such incentive stock options are
thereby converted in whole or in part to nonstatutory stock options.
SECTION 5
STOCK OPTIONS, ALTERNATIVE STOCK APPRECIATION
RIGHTS AND CASH PAYMENT RIGHTS
Stock options, alternative stock appreciation rights 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 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(J).
(B) The option price for each stock option shall be payable in cash in
United States dollars (including check, bank draft or money order); provided,
however, that in lieu of 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(J), 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. Delivery of
shares, if authorized, may also be accomplished through the effective transfer
to the Company of shares held by a broker or other agent. The Company will
also cooperate with any person exercising a stock option who participates in a
cashless exercise program of a broker or other agent under which all or part
of the shares received upon exercise of the stock option are sold through the
broker or other agent or under which the broker or other agent makes a loan to
such person. Notwithstanding the foregoing, unless the Board, in its
discretion, shall otherwise determine 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, the exercise of the stock option shall not be deemed to occur and no
shares of Common Stock will be issued by the Company upon exercise of the
stock option until the Company has received payment of the option price in
full. 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) Each stock option shall be exercisable at such time or times as the
Board, in its discretion, shall determine, except that no stock option shall
be exercisable after the expiration of ten years from the date of grant. A
stock option to the extent exercisable at any time may be exercised in whole
or in part.
(D) Alternative stock appreciation rights granted in conjunction with a
stock option shall entitle the person exercising the alternative stock
appreciation rights to surrender the related stock option, or any portion
thereof, and to receive from the Company in exchange therefor that number of
shares of the Common Stock having an aggregate fair market value on the date
of exercise of the alternative stock appreciation rights equal to the excess
of the fair market value of one share of the Common Stock on such date of
exercise over the option price per share times the number of shares covered by
the related stock option, or portion thereof, which is surrendered.
Alternative stock appreciation rights shall be exercisable to the extent that
the related stock option is exercisable and only by the same person who is
entitled to exercise the related stock option; provided, however, that
alternative stock appreciation rights granted in conjunction with an incentive
stock option shall not be exercisable unless the then fair market value of the
Common Stock exceeds the option price of the shares subject to the incentive
stock option. Cash shall be paid in lieu
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of any fractional share. The Board shall have the authority, in its
discretion, to determine that the obligation of the Company shall be paid in
cash or part in cash and part in shares. The date of exercise of alternative
stock appreciation rights shall be determined under procedures established by
the Board, and as of the date of exercise the person exercising the
alternative stock appreciation rights shall be considered for all purposes to
be the owner of the shares to be received. To the extent that a stock option
as to which alternative stock appreciation rights have been granted is
exercised, canceled, terminates or expires, the alternative stock appreciation
rights shall be canceled. For the purposes of this Section 5(D), the fair
market value of the Common Stock shall be determined as provided in Section
5(J).
(E) 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 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. Payment of the cash provided for in this Section 5(E) shall be made
by the Company as soon as practicable after the time the amount payable is
determined. For purposes of this Section 5(E), the fair market value of the
Common Stock shall be determined as provided in Section 5(J).
(F) Unless the Board, in its discretion, shall otherwise determine, (i) no
incentive 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 and
(ii) all incentive stock options shall be exercisable during the lifetime of
the grantee only by the grantee. Unless the Board, in its discretion, shall
otherwise determine, a nonstatutory stock options may be transferred by the
grantee by gift to the grantee's spouse or to any of the grantee's lineal
descendants or to the trustee(s) of a trust for the benefit of any such
person. Any nonstatutory stock option gifted to any such person or trust shall
be subject to the restrictions, terms and conditions of the Plan and the
agreement referred to in Section 5(I), and any such transferee shall be deemed
to be a grantee and shall upon receipt of such stock option, as a condition of
effectiveness of the transfer, sign a written agreement with the Company
agreeing to such restrictions, terms and conditions.
(G) (1) 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(L), unless the Board, in its discretion, shall otherwise determine:
(i) If the employment of a 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 outstanding stock
option granted to the grantee shall be exercisable (but only to the extent
exercisable immediately prior to the termination of employment, provided
that the restriction on exercise set forth in Section 5(L) 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 stock option or until three years after the
date of termination of employment of the grantee, whichever is the shorter
period, and to the extent not exercisable shall terminate;
(ii) Following the death of a grantee during employment, any
outstanding stock option granted to the grantee shall be exercisable in
full (whether or not so exercisable immediately prior to the death of the
grantee) by the holder of the stock option, or if the grantee held the
stock option at the time of death, 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
the stock option or until three years after the date of death of the
grantee, whichever is the shorter period;
(iii) Following the death of a grantee after termination of employment
during a period when a stock option is exercisable, the stock option shall
be exercisable by the holder of the stock option, or if the grantee held
the stock option at the time of death, by such person entitled to do so
under the Will of the
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<PAGE> 32
grantee or by such legal representative, at any time during the shorter of
the following two periods: (i) until the expiration date of the stock
option or (ii) until three years after the termination of employment of the
grantee or one year after the date of death of the grantee (whichever is
longer); and
(iv) Unless Section 8(C) applies following termination of employment,
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, any outstanding stock option granted to the grantee (whether or not
exercisable immediately prior to termination of employment) shall
automatically terminate.
Whether termination of employment is a voluntary termination with the
consent of the Company or a Subsidiary shall be determined, in its
discretion, by the Board and any such determination by the Board shall be
final and binding.
(G) (2) Unless the Board, in its discretion, shall otherwise determine:
(i) If a grantee ceases to serve as a Nonemployee Director for any
reason other than resignation, removal for cause or death, any outstanding
stock option granted to the grantee shall be exercisable (but only to the
extent exercisable immediately prior to ceasing to serve as a Nonemployee
Director) at any time prior to the expiration date of such stock option or
until three years after the date the grantee ceases to serve as a
Nonemployee Director, whichever is the shorter period, and to the extent
not exercisable shall terminate;
(ii) Following the death of a grantee during service as a Nonemployee
Director, any outstanding stock option granted to the grantee shall be
exercisable in full (whether or not so exercisable immediately prior to the
death of the grantee) by the holder of the stock option, or if the grantee
held the stock option at the time of death, 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 the stock option or until three years after the date of death of
the grantee, whichever is the shorter period;
(iii) Following the death of a grantee after ceasing to serve as a
Nonemployee Director during a period when a stock option is exercisable,
the stock option shall be exercisable by the holder of the stock option, or
if the grantee held the stock option at the time of death, by such person
entitled to do so under the Will of the grantee or by such legal
representative, at any time during the shorter of the following two
periods: (i) until the expiration date of the stock option or (ii) until
three years after the grantee ceased to serve as a Nonemployee Director or
one year after the date of death of the grantee (whichever is longer); and
(iv) Unless Section 8(C) applies following termination of service, if
during his or her term of office as a Nonemployee Director a grantee
resigns from the Board or is removed from office for cause, any outstanding
stock option granted to the grantee (whether or not exercisable immediately
prior to resignation or removal) shall automatically terminate.
(H) If a grantee of a stock option (i) engages in the operation or
management of a business (whether as owner, partner, officer, director,
employee or otherwise) which is in competition with the Company or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(C) applies), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization
having a business relationship with the Company or any of its Subsidiaries to
cease doing business with the Company or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Company or any of its Subsidiaries or (iii) solicits
any employee of the Company or any of its Subsidiaries to leave the employment
thereof or in any way interferes with the relationship of such employee with
the Company or any of its Subsidiaries, the Board, in its discretion, may
immediately terminate all outstanding stock options granted to the grantee.
Whether a grantee has engaged in any of the activities referred to the
preceding sentence which would cause the outstanding stock options to be
terminated shall be determined, in its discretion, by the Board, and any such
determination by the Board shall be final and binding.
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(I) All stock options, alternative stock appreciation rights and cash
payment rights shall be confirmed by an agreement which 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. The
agreement confirming a stock option shall specify whether the stock option is
an incentive stock option or a nonstatutory stock option. The provisions of
the agreements need not be identical.
(J) 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): (i) 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, (ii) 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 Securities
Exchange Act of 1934, as amended (the "1934 Act") on which the Common Stock is
listed or (iii) 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 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(J). If the fair market value of the Common Stock cannot be determined on any
basis previously set forth in this Section 5(J) for 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.
(K) 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
Common Stock may then be listed and (iii) all other applicable laws,
regulations, rules and orders which may then be in effect.
(L) Notwithstanding any other provision of this Section 5 or any other
provision of the Plan or any stock option agreement, any grantee who has made
a hardship withdrawal from the Tuscarora Incorporated Savings Plan for
Salaried Employees (or any holder of a stock option granted to such a grantee)
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 5 and the other
provisions of the Plan, stock options, alternative stock appreciation rights and
cash payment rights granted under the Plan shall 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(I).
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SECTION 6
RESTRICTED SHARES, PERFORMANCE SHARES AND
OTHER SHARE AWARDS
(A) Restricted Shares
Awards of restricted shares shall be confirmed by an agreement 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 (except as provided
below) while such shares are subject to other restrictions imposed under this
Section 6(A)), the duration of such restrictions, events (which may, in the
discretion of the Board, include termination of employment and/or
performance-based events) the occurrence of which would cause a forfeiture of
the restricted shares and such other terms and conditions as shall be
determined, in its discretion, by the Board. The agreement 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. The
provisions of the agreements need not be identical. Awards of restricted shares
shall be effective on the date determined, in its discretion, by the Board.
Following the award of restricted shares and prior to the lapse or
termination of the applicable restrictions, share certificates for the
restricted shares shall be issued in the name of the grantee and deposited with
the Company in escrow together with related stock powers signed by the grantee.
Except as provided in Section 7, the Board, in its discretion, may determine
that dividends and other distributions on the shares held in escrow shall not be
paid to the grantee until the lapse or termination of the applicable
restrictions. Unless otherwise provided, in its discretion, by the Board, any
such dividends or other distributions shall not bear interest. Upon the lapse or
termination of the applicable restrictions (and not before such time), the share
certificates for the restricted shares (subject to the provisions of Section 10)
shall be released from escrow and unpaid dividends, if any, shall be paid. From
the date the award of restricted shares is effective, the grantee shall be a
shareholder with respect to all the shares represented by the share certificates
and shall have all the rights of a shareholder with respect to all the
restricted shares, including the right to vote such shares and to receive all
dividends and other distributions paid with respect to such shares, subject only
to the preceding provisions of this paragraph and the other restrictions imposed
by the Board.
If a grantee of restricted shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director, employee
or otherwise) which is in competition with the Company or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(D) applies), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Company or any of its Subsidiaries to cease
doing business with the Company or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Company or any of its Subsidiaries or (iii) solicits any
employee of the Company or any of its Subsidiaries to leave the employment
thereof or in any way interferes with the relationship of such employee with the
Company or any of its Subsidiaries, the Board may immediately declare forfeited
all restricted shares awarded to the grantee as to which the restrictions have
not yet lapsed. Whether a grantee has engaged in any of the activities referred
to in the preceding sentence which would cause the restricted shares to be
forfeited shall be determined, in its discretion, by the Board, and any such
determination by the Board shall be final and binding.
Neither this Section 6(A) nor any other provision of the Plan shall
preclude a grantee from transferring restricted shares to (i) the trustee(s) of
a trust that is revocable by such grantee alone, both at the time of the
transfer and at all times thereafter prior to such grantee's death, or (ii) the
trustee(s) of any other trust to the extent approved in advance by the Board.
Restricted shares held by such trustee(s) shall be subject to all the
restrictions, terms and conditions of the Plan and the applicable agreement as
if such trustee(s) were a party to such agreement.
(B) Performance Shares
An award of performance shares shall entitle the grantee to receive up to
the number of shares of Common Stock covered by the award at the end of or at a
specified time or times during a specified award
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<PAGE> 35
period contingent upon the extent to which one or more predetermined performance
targets have been met during the award period. All the terms and conditions of
an award of performance shares shall be determined, in its discretion, by the
Board and shall be confirmed by an agreement which 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. The performance target or
targets may be expressed in terms of earnings per share, return on shareholder
equity, operating profit, return on capital employed or such other measures of
accomplishment by the Company or a Subsidiary, or any branch, department or
other portion thereof, or the grantee individually, as may be established, in
its discretion, by the Board. The performance target or targets may vary for
different award periods and need not be the same for each grantee receiving an
award for an award period.
At any time prior to the end of an award period, the Board may adjust
downward (but not upward) the performance target or targets as a result of major
events unforeseen at the time of the award, such as changes in the economy, in
the industry or laws affecting the operations of the Company or a Subsidiary, or
any branch, department or other portion thereof, or any other event the Board
determines would have a significant impact upon the probability of attaining the
previously established performance target or targets.
Payment of earned performance shares shall be made as soon as practicable
after the shares have been earned. The Board, in its discretion, may determine
that any dividends or other distributions that would have been paid on earned
performance shares had the shares been outstanding during the period from the
award to the payment of the performance shares shall also be paid. Unless
otherwise provided, in its discretion, by the Board, any such dividends or other
distributions shall not bear interest.
Unless otherwise provided in the agreement confirming the award of the
performance shares, if prior to the close of an award period, the employment of
a grantee of performance shares is voluntarily terminated with the consent of
the Company or a Subsidiary, the grantee retires under any retirement plan of
the Company or a Subsidiary or the grantee dies during employment, the Board in
its discretion, may determine to pay all or part of the performance shares based
upon the extent to which the Board determines the performance target or targets
have been achieved as of the date of termination of employment, retirement or
death, the period of time remaining until the end of the award period and/or
such other factors as the Board may deem relevant. If the Board, in its
discretion, determines that all or any part of the performance shares shall be
paid, payment shall be made as promptly as practicable following such
determination. Except as otherwise provided in Section 8(E), if the employment
of a grantee of an award of performance shares terminates prior to the time the
performance shares have been earned 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, the unearned
performance shares shall be deemed not to have been earned and such shares shall
not be paid. Whether termination of employment is a voluntary termination with
the consent of the Company or a Subsidiary shall be determined, in its
discretion, by the Board and any such determination by the Board shall be final
and binding.
If a grantee of performance shares (i) engages in the operation or
management of a business (whether as owner, partner, officer, director, employee
or otherwise) which is in competition with the Company or any of its
Subsidiaries (provided, however, that this clause shall not apply if Section
8(E) applies), (ii) induces or attempts to induce any customer, supplier,
licensee or other individual, corporation or other business organization having
a business relationship with the Company or any of its Subsidiaries to cease
doing business with the Company or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Company or any of its Subsidiaries or (iii) solicits any
employee of the Company or any of its Subsidiaries to leave the employment
thereof or in any way interferes with the relationship of such employee with the
Company or any of its Subsidiaries, the Board may immediately cancel the award.
Whether a grantee has engaged in any of the activities referred to the preceding
sentence which would cause the award of performance shares to be canceled shall
be determined, in its discretion, by the Board, and any such determination by
the Board shall be final and binding.
Neither this Section 6(B) nor any other provision of the Plan shall
preclude a grantee from transferring the right to receive performance shares to
(i) the trustee(s) of a trust that is revocable by such grantee alone, both at
the time of the transfer and at all times thereafter prior to such grantee's
death, or (ii) the trustee(s)
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of any other trust to the extent approved in advance by the Board. The right to
receive performance shares held by such trustee(s) shall be subject to all the
restrictions, terms and conditions of the Plan and the applicable agreement as
if such trustee(s) were a party to such agreement.
(C) Other Share Awards
The Board, in its discretion, may from time to time make other awards of
shares of Common Stock under the Plan as an inducement to the grantee to enter
the employment of the Company or a Subsidiary, in recognition of the
contribution of the grantee to the performance of the Company or a Subsidiary,
or any branch, department or other portion thereof, in recognition of the
grantee's individual performance or on the basis of such other factors as the
Board may deem relevant. Common Stock issued as a bonus pursuant to this Section
6(C) shall be issued for such consideration as the Board shall determine in its
sole discretion.
SECTION 7
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
subject to any outstanding stock options or performance share awards and the
number of shares of the Common Stock which may be issued under the Plan but are
not subject to outstanding stock options or performance share awards on the date
fixed for determining the shareholders entitled to receive such stock dividend
or distribution 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 such date. Shares of Common Stock so distributed with respect to
any restricted shares held in escrow shall also be held by the Company in escrow
and shall be subject to the same restrictions as are applicable to the
restricted shares on which they were distributed.
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 or for cash or other property,
whether through reorganization, reclassification, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there shall be
substituted for each share of the Common Stock subject to any then outstanding
stock option or performance share award, the number and kind of shares of stock
or other securities or cash or other property into which each outstanding share
of the Common Stock shall be so changed or for which each such share shall be
exchangeable, and there shall also be substituted for each share of the Common
Stock which may be issued under the 1997 Plan but which is not subject to any
outstanding stock option or performance share award, the number and kind of
shares of stock or other securities or other property into which each
outstanding share of the Common Stock shall be so changed or for which each such
share shall be exchangeable. Unless otherwise determined by the Board, in its
discretion, any such stock or securities, as well as any cash or other property,
into or for which any restricted shares held in escrow shall be changed or
exchangeable in any such transaction shall also be held by the Company in escrow
and shall be subject to the same restrictions as are applicable to the
restricted shares in respect of which such stock, securities, cash or other
property was issued or distributed.
In case of any adjustment or substitution as provided for in the first two
paragraphs of this Section 7, 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.
If the outstanding shares of the Common Stock shall be changed in value by
reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Common Stock, (i) the Board shall make any adjustments to any
then outstanding stock option which it determines are equitably required to
prevent dilution or enlargement of the rights of grantees which would otherwise
result from any such transaction, and (ii) unless otherwise determined by the
Board, in its discretion, any stock, securities, cash or other property
distributed with respect
B-9
<PAGE> 37
to any restricted shares held in escrow or for which any restricted shares held
in escrow shall be exchanged in any such transaction shall also be held by the
Company in escrow and shall be subject to the same restrictions as are
applicable to the restricted shares in respect of which such stock, securities,
cash or other property was distributed or exchanged.
No adjustment or substitution provided for in this Section 7 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. Owners of restricted shares held in
escrow shall be treated in the same manner as owners of Common Stock not held in
escrow with respect to fractional shares created by an adjustment or
substitution of shares, except that, unless otherwise determined by the Board,
in its discretion, 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 exchanged therefor.
If any adjustment or substitution provided for in this Section 7 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 elect
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 the incentive stock option.
Except as provided in this Section 7, a grantee shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
SECTION 8
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) Definitions.
For purposes of this Section 8, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Sections 13(d)
and 14(d) of the 1934 Act as in effect on the effective date of the Plan.
(2) "Beneficial Ownership" shall be determined as provided in Rule 13d-3
under the 1934 Act as in effect on the effective date of the Plan.
(3) A specified percentage of "Voting Power" of a company shall mean such
number of the Voting Shares as shall enable the holders thereof to cast such
percentage of all the votes which could be cast in an annual election of
directors (without consideration of the rights of any class of stock other
than the common stock of the company to elect directors by a separate class
vote); and "Voting Shares" shall mean all securities of a company entitling
the holders thereof to vote in an annual election of directors (without
consideration of the rights of any class of stock other than the common stock
of the company to elect directors by a separate class vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to acquire
securities of the Company (other than such an offer made by the Company or any
Subsidiary), whether or not such offer is approved or opposed by the Board.
(5) "Continuing Directors" shall mean a director of the Company who either
(a) was a director of the Company on the effective date of the Plan or (b) is
an individual whose election, or nomination for election,
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<PAGE> 38
as a director of the Company was approved by a vote of at least two-thirds of
the directors then still in office who were Continuing Directors (other than
an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of directors of
the Company which would be subject to Rule 14a-11 under the 1934 Act, or any
successor Rule).
(6) "Section 8 Event" shall mean the date upon which any of the following
events occurs:
(a) The Company acquires actual knowledge that any Person other than
the Company, a Subsidiary or any employee benefit plan(s) sponsored by the
Company or a Subsidiary has acquired the Beneficial Ownership, directly or
indirectly, of securities of the Company entitling such Person to 20% or
more of the Voting Power of the Company;
(b) A Tender Offer is made to acquire securities of the Company
entitling the holders thereof to 20% or more of the Voting Power of the
Company; or
(c) A solicitation subject to Rule 14a-11 under the 1934 Act (or any
successor Rule) relating to the election or removal of 50% or more of the
members of the Board or any class of the Board shall be made by any person
other than the Company or less than 51% of the members of the Board shall
be Continuing Directors; or
(d) The shareholders of the Company shall approve a merger,
consolidation, share exchange, division or sale or other disposition of
assets of the Company as a result of which the shareholders of the Company
immediately prior to such transaction shall not hold, directly or
indirectly, immediately following such transaction a majority of the Voting
Power of (i)in the case of a merger or consolidation, the surviving or
resulting corporation, (ii) in the case of a share exchange, the acquiring
corporation or (iii) in the case of a division or a sale or other
disposition of assets, each surviving, resulting or acquiring corporation
which, immediately following the transaction, holds more than 10% of the
consolidated assets of the Company immediately prior to the transaction;
provided, however, that (i) if securities beneficially owned by a grantee are
included in determining the Beneficial Ownership of a Person referred to in
(a) above, (ii) a grantee is required to be named pursuant to Item 2 of the
Schedule 14D-1 (or any similar successor filing requirement) required to be
filed by the bidder making a Tender Offer referred to in (b) above or (iii) if
a grantee is a "participant" as defined in Instruction 3 to Item 4 of Schedule
14A under the 1934 Act (or any successor Rule) in a solicitation (other than a
solicitation by the Company) referred to in (c) above, then no Section 8 Event
with respect to such grantee shall be deemed to have occurred by reason of
such event.
(B) Acceleration of the Exercise Date of Stock Options.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, in case any
"Section 8 Event" occurs all outstanding stock options (other than those granted
to a person referred to in the proviso to Section 8(A)(6)) shall become
immediately and fully exercisable whether or not otherwise exercisable by their
terms.
(C) Extension of the Expiration Date of Stock Options.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(I) shall otherwise
provide, notwithstanding any other provision contained in the Plan, all
outstanding stock options granted to a grantee (other than a grantee referred to
in the proviso to Section 8(A)(6)) whose employment with the Company or a
Subsidiary terminates within one year of any Section 8 Event 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, or whose service as a Nonemployee Director ceases within one year of
any Section 8 Event for any reason other than removal for cause or death, which
are exercisable shall continue to be exercisable for a period of three years
from the date of such termination of employment or the date the grantee ceases
to be a Nonemployee Director, but in no event after the expiration date of the
stock option.
B-11
<PAGE> 39
(D) Lapse of Restrictions on Restricted Shares.
Unless the agreement referred to in Section 6(A) shall otherwise provide,
notwithstanding any other provision contained in the Plan, if any "Section 8
Event" occurs prior to the scheduled lapse of all restrictions applicable to
restricted shares (other than shares awarded to a person referred to in the
proviso to Section 8(A)(6)), all such restrictions shall lapse upon the
occurrence of any such "Section 8 Event" regardless of the scheduled lapse of
such restrictions.
(E) Payment of Performance Shares
Unless the agreement referred to in Section 6(B) shall otherwise provide,
notwithstanding any other provision contained in the Plan, if any "Section 8
Event" occurs prior to the end of an award period with respect to an award of
performance shares to a grantee, the performance shares (unless the grantee is a
person referred to in the proviso to Section 8(A)(6)) shall be deemed to have
been fully earned as of the date of the Section 8 Event, regardless of the
attainment or nonattainment of any performance target and shall be paid as
promptly as practicable after the Section 8 Event.
SECTION 9
EFFECT OF THE PLAN ON THE RIGHTS OF GRANTEES
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 alternative stock appreciation rights and/or cash
payment rights) or an award under the Plan. Nothing in the Plan, in any stock
option, alternative stock appreciation rights or cash payment rights granted
under the Plan or in any award under the Plan or in any agreement providing for
any of the foregoing shall confer any right on 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.
Neither the adoption of the Plan nor any action of the Board pursuant to
the Plan shall confer any right to any person to continue as a Nonemployee
Director of the Company or interfere in any way with the rights of the
shareholders of the Company or the Board to elect and remove Nonemployee
Directors.
SECTION 10
WITHHOLDING
Income or employment taxes may be required to be withheld by the Company or
a Subsidiary in connection with the exercise of a stock option or alternative
stock appreciation rights, upon a "disqualifying disposition" of the shares
acquired upon exercise of an incentive stock option, at the time restricted
shares are awarded or vest, performance shares are earned or other shares are
awarded, or upon the receipt by the grantee of cash in payment of cash payment
rights or dividends which are treated as compensation. Except as provided below,
the grantee shall pay the Company in cash the amount required to be withheld.
Unless the Board, in its discretion, shall otherwise determine, a grantee
may elect to have any withholding obligation at the time of the exercise of a
nonstatutory stock option or alternative stock appreciation rights or at the
time restricted shares vest, performance shares are earned or other shares are
awarded satisfied in whole or in part by the Company withholding from the shares
of Common Stock that would otherwise be received shares of the Common Stock
having a fair market value, determined as provided in Section 5(J), on the date
that the amount of tax to be withheld is determined (the "Tax Date") equal to or
less than the amount required to be withheld, and in this event the Company will
request that the grantee pay any additional amount required to be withheld
directly to the Company in cash.
Unless the Board, in its discretion, shall otherwise determine, a grantee
may also elect to have any withholding obligation at the time of the exercise of
a stock option or alternative stock appreciation rights, upon a "disqualifying
disposition" of the shares acquired upon the exercise of an incentive stock
option or at the time restricted shares are granted or vest, performance shares
are earned or other shares are awarded
B-12
<PAGE> 40
satisfied in whole or in part by the grantee delivering to the Company shares of
the Common Stock having a fair market value, determined as provided in Section
5(J), on the Tax Date equal to or less than the amount required to be withheld,
except that no shares of the Common Stock which have been held for less than one
year may be delivered, and in this event the Company will request that the
grantee pay any additional amount required to be withheld directly to the
Company in cash.
Unless the Board, in its discretion, shall otherwise determine, any income
or employment taxes required to be withheld by the Company or any of its
Subsidiaries upon the receipt of cash in payment of cash payment rights or
dividends will be satisfied by the Company by withholding the taxes required to
be withheld from the cash the grantee would otherwise receive.
If a grantee does not pay any income or employment taxes required to be
withheld by the Company or any of its Subsidiaries within ten days after a
request for the payment of such taxes, the Company or such Subsidiary may
withhold such taxes from any other compensation to which the grantee is entitled
from the Company or any of its Subsidiaries. The Company shall not be required
to deliver any shares or make any cash payment under the Plan until the
withholding obligation has been satisfied.
SECTION 11
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 that no such alteration or amendment of the Plan shall,
without shareholder approval, (i) increase the number of shares which may be
issued under the Plan as set forth in Section 3, (ii) decrease the purchase
price at which stock options may be granted to less than one hundred percent
(100%) of the fair market value per share of the Common Stock on the date of
grant, (iii) reprice outstanding stock options or other awards or (iv) extend
the duration of the Plan. No alteration, amendment, revocation or termination of
the Plan shall, without the written consent of the holder of an outstanding
grant or award under the Plan, adversely affect the rights of such holder with
respect to such outstanding grant or award.
SECTION 12
EFFECTIVE DATE AND DURATION OF PLAN
Subject to its approval by the shareholders of the Company, the Plan shall
be effective as of December 18, 1997. No stock option or alternative stock
appreciation rights granted under the Plan may be exercised and no restricted,
performance or other shares may be awarded until after such approval. No stock
option, alternative stock appreciation rights or cash payment rights may be
granted and no restricted, performance or other share awards may be made under
the Plan subsequent to December 17, 2007.
B-13
<PAGE> 41
PROXY
TUSCARORA INCORPORATED
SOLICITED BY THE BOARD OF DIRECTORS
for the Annual Meeting of Shareholders
Pittsburgh Airport Marriott, Parkway West,
Coraopolis, Allegheny County, Pennsylvania
Tuesday, December 19, 2000--10:30 A.M., Pittsburgh time
The undersigned shareholder of Tuscarora Incorporated (the "Company")
hereby appoints John P. O'Leary, Jr., Harold F. Reed, Jr. and Brian C. Mullins,
and each of them acting individually, as proxies of the undersigned to vote at
the Annual Meeting of Shareholders of the Company to be held December 19, 2000,
and at any adjournment thereof, all the shares of Common Stock of the Company
which the undersigned may be entitled to vote, on the matters set forth on the
reverse side of this proxy and, in their discretion, upon any other business
which may properly come before the Meeting.
The undersigned shareholder hereby revokes all previous proxies for the
Annual Meeting, acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement, both dated November 16, 2000, and of the Annual Report to
Shareholders for the 2000 fiscal year, and hereby ratifies all that said proxies
may do by virtue hereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS GIVEN, THE SHARES WILL BE VOTED "FOR" ITEMS 1, 2
AND 3.
(Continued, and to be signed, on the other side)
-------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE> 42
MARK YOUR VOTES
AS INDICATED [X]
IN THIS EXAMPLE
Item (1) The election of Directors for a three year term expiring at the
annual meeting of shareholders in 2003.
FOR Withhold
all Nominees Authority
(except as to Vote for
indicated) all Nominees
[ ] [ ]
Nominees: Karen L. Farkas, Robert W. Kampmeinert and Harold F. Reed,
Jr. A vote FOR includes discretionary authority to vote for a
substituted nominee if any of the nominees listed becomes unable to
serve or for good cause will not serve. (To withhold authority to vote
for any individual nominee, print that nominee's name on the line
below.)
----------------------------------------------------------------------
Item (2) The approval of the amendment of the 1997 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item (3) The ratification of the appointment of Ernst & Young LLP as
independent public accountants of the Company for the
2001 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date and sign below exactly as your name
appears on this card. If you are acting as
attorney, executor, administrator, guardian or
trustee, please so indicate with your full title
when signing. Corporate holders should sign in
full corporate name by duly authorized officer. If
shares are held jointly, each shareholder named
should sign.
Dated , 2000
-----------------------------------
------------------------------------------------
------------------------------------------------
With respect to the Annual Meeting
I/We will attend ____ I/We will not attend ____
--------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
PLEASE INDICATE IN THE SPACE PROVIDED ABOVE
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
YOU ARE URGED TO PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON IN
ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED AT THE MEETING.
<PAGE> 43
November 16, 2000
TO: Participants in the Tuscarora Incorporated
Common Stock Purchase Plan for Salaried Employees
Dear Participant:
In accordance with Section 12 of the Tuscarora Incorporated Common Stock
Purchase Plan for Salaried Employees (the "Plan"), Mellon Bank, N.A., as record
holder of the shares of Common Stock of Tuscarora Incorporated ("Tuscarora") in
which you have a beneficial interest under the Plan, will vote your shares at
the Annual Meeting of Shareholders of Tuscarora to be held on December 19, 2000,
and at any adjournment thereof, in accordance with your written direction.
Enclosed are the Notice of Annual Meeting and Proxy Statement, both dated
November 16, 2000, and the Annual Report to Shareholders for the 2000 fiscal
year.
If you wish to instruct us in the voting of your shares, you may sign on the
reverse side exactly as your name appears thereon and date and return this card
in the enclosed envelope. By doing so, you are directing us to execute and file
a proxy in the form solicited by the Board of Directors of Tuscarora,
authorizing the proxies therein appointed to vote your shares at the Annual
Meeting on the matters set forth on the reverse side and, in their discretion,
upon any other business which may properly come before the Annual Meeting. The
Board of Directors of Tuscarora recommends a vote FOR Items 1, 2 and 3 and your
shares will be so voted unless you otherwise indicate.
MELLON BANK, N.A.
(Continued, and to be signed, on the other side)
------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE> 44
MARK YOUR VOTES
AS INDICATED [X]
IN THIS EXAMPLE
Item (1) The election of Directors for a three year term expiring at the
annual meeting of shareholders in 2003.
FOR Withhold
all Nominees Authority
(except as to Vote for
indicated) all Nominees
[ ] [ ]
Nominees: Karen L. Farkas, Robert W. Kampmeinert and Harold F. Reed,
Jr. A vote FOR includes discretionary authority to vote for a
substituted nominee if any of the nominees listed becomes unable to
serve or for good cause will not serve. (To withhold authority to vote
for any individual nominee, print that nominee's name on the line
below.)
----------------------------------------------------------------------
Item (2) The approval of the amendment of the 1997 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item (3) The ratification of the appointment of Ernst & Young LLP as
independent public accountants of the Company for the
2001 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date and sign below exactly as your name
appears on this card. If shares are held jointly,
each shareholder named should sign.
Dated , 2000
-----------------------------------
------------------------------------------------
------------------------------------------------
--------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND SIGN THE ABOVE
PROXY CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
