A shareholder may recommend nominees for consideration by the Board’s Nominating and Corporate Governance Committee for nomination for election to the Board. Shareholder recommendations for Directordirector nominees will receive the same consideration by the Board’s Nominating and Corporate Governance Committee that all other nominations receive. Shareholders wishingIf a shareholder wishes to recommend a nominee for Directordirector, the shareholder should submit such recommendation in writing, together with any supporting materials the shareholder deemsdeemed appropriate, to the Secretary of the Company.Company’s Secretary.
A shareholder may nominate a person for election to the Board, provided the recommendation is made in accordance with the procedures described herein and in the Company’s By-laws. To nominate a candidate for Directordirector at the 20102011 Annual Meeting, the shareholder’s notice of the nomination must be in writing and delivered to, or mailed and received at the Company no later than November 25, 2009.30, 2010.
such power and authority under the Plan to the terms of the Plan, theCompany’s officers, as it deems necessary or appropriate.
The Compensation Committee has the authority and discretion to determine the extent to which awards under the Plan will beare structured to conform withto the requirements applicable to performance-based compensation as describedset forth in Section 162(m) of the Code and the regulations issued thereunder.
Who is eligible to take such action, establish such procedures, andparticipate in the Plan?
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impose such restrictions as necessary to conform to such requirements. If an award underParticipation in the Plan is limited to approximately 30 officers and key employees of the Company and its subsidiaries who have significant responsibility for corporate, business segment or facility-based operations. Each individual participant must be nominated by management and approved by the Compensation Committee for participation in the Plan.
What types of awards are made under the Plan?
The Compensation Committee (or with respect to certain executives, the CEO) may, in its discretion, make cash awards to eligible participants under the Plan. The amount of a participant’s award may be based on a percentage of such participant’s salary or such other methods as may be established by the Compensation Committee. The factand/or terms of awards need not be uniform among all participants, or classes or categories of participants. No award paid to a participant for a particular performance period may exceed $2,000,000. A performance period generally is a calendar year but can be another period, as selected by the Compensation Committee, for which performance is being measured.
What performance measures are used?
For awards that are intended to qualify asbe performance-based compensation under Section 162(m) of the Code, and a provision of the Plan would prevent sucheach award from so qualifying, such provision will be administered, interpreted and construed to carry out such intention (or disregarded to the extent such provision cannot be so administered, interpreted or construed). Except to the extent prohibited by applicable law, the Compensation Committee may also allocate all or any portion of its responsibilities and powers to any of its members and may delegate all or any portion of its responsibilities to any person(s) selected by it, but it cannot delegate such authority with respect to any participant that is subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended. The Compensation Committee has the power to revoke any allocation or delegation at any time.
Who is eligible for awards under the Plan?
Persons eligible to be a participant under the Plan include employees, officers, non-employee directors and consultants of the Company or any subsidiary or affiliate of the Company. Eligible participants also include any individual(s) to whom an offer of employment or service has been extended. Holders of equity-based awards issued by a company acquired by the Company or with which the Company combines are also eligible to receive awards under the Plan, in substitution for awards granted by that company (“Substitute Awards”).
What is the term of the Plan?
No award will be granted under the Plan after the tenth anniversary of the Plan’s effective date, if this Proposal #2 is approved by the Company’s shareholders. Unless otherwise expressly provided in the Plan or in the applicable award agreement, any award granted prior to the termination date of the Plan may extend beyond such termination date, and the Compensation Committee has the authority to administer the Plan and to amend, alter, adjust, suspend, discontinue or terminate any such award or to waive any conditions or rights under any such award beyond such date.
How many shares have been allocated to the Plan?
The Plan provides for the issuance of an additional 4,000,000 shares, so that the total number of shares authorized for awards under the Plan since it inception is 5,500,000 shares of Company common stock. All of such shares may be issued as incentive stock options. As of March 5, 2009, 383,617 shares are available for future awards under the Plan, which number will increase to 4,383,617 under the Plan if this Proposal #2 is approved by the Company’s shareholders.
Any shares covered by an award that terminates, lapses or is forfeited or cancelled, or an award that is otherwise settled without the delivery of the full number of shares underlying the award, shall, to the extent of any such forfeiture, termination, lapse, cancellation, etc., again be available for issuance under the Plan.
Are there any limitations on the number of shares that may be awarded to any participant under the Plan?
The Plan provides that no participant receiving an award will be granted:
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| • | options or stock appreciation rights (“SARs”) with respect to more than 400,000 shares during any fiscal year; |
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| • | a performance award (denominated in shares) which could result in such participant being issued more than 250,000 shares during each fiscal year of the Company (which requires the Compensation Committee to assess the number of shares subject to other performance awards with multi-year performance periods); or |
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| • | a performance award (denominated in cash) which could result in such participant receiving more than $1,750,000 during any fiscal year of the Company (which requires the Compensation Committee to assess the dollar value of previously awarded cash-based performance awards with multi-year performance periods). |
The foregoing limitations are subject to adjustment as described below, but only to the extent that any such adjustment will not affect the status of any award intended to qualify as performance-based compensation under Section 162(m) of the Code; or any award intended to qualify as an incentive stock option.
How is fair market value determined under the Plan?
Fair market value is the value of a share of Common Stock of the Company determined as follows: (i) if the shares are listed on any established stock exchange, system or market, the fair market value will be the closing price for the shares as quoted on such exchange, system or market as reported in the Wall Street Journal or such other source as the Compensation Committee deems reliable; or (ii) in the absence of an established market for the shares, the fair market value will be determined in good faith by the Compensation Committee by the reasonable application of a reasonable valuation method, taking into account factors consistent with the requirements of Section 409A of the Code.
What types of awards are available under the Plan?
Options and SARs. The Compensation Committee is authorized to grant incentive stock options and non-qualified stock options (collectively, “options”) and SARs to participants under the Plan. The terms of any incentive stock option granted under the Plan must comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated under that section of the Code. No incentive stock options will be granted to a participant who is not an employee of the Company or a qualified subsidiary of the Company. Options
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designated as incentive stock options will not be eligible for treatment under the Code as “incentive stock options” (and will be deemed to be non-qualified stock options) to the extent that either (i) the aggregate fair market value of the shares (determined as of the date of grant) associated with such options that are exercisable for the first time by the participant during any calendar year (under all plans of the Company and any subsidiary) exceeds $100,000, taking options into account in the order in which they were granted or (ii) such options otherwise remain exercisable but are not exercised within three (3) months after termination of employment (or such other period of time provided in Section 422 of the Code). The terms and conditions of each option and SAR granted will be determined by the Compensation Committee and set forth in the applicable award agreement.
Subject to the terms of the Plan and the related award agreement, any option or SAR may be exercised at any time during the period commencing with either the date that option or SAR is granted or the first date permitted under a vesting schedule established by the Compensation Committee and ending with the expiration date of the option or SAR. A participant may exercise his option or SAR for all or part of the number of shares or rights which he is eligible to exercise under terms of the applicable award agreement. The Compensation Committee has the discretion to determine the form(s) and method(s) by which payment of the exercise price will be made by the participant, including, without limitation, by use of cash, shares, other awards, or other property, or any combination thereof.
Unless the applicable award agreement provides otherwise, the Plan provides for certain rules with respect to outstanding option and SAR awards that have been designated as stock-only SARs (“SOSARs”) at the time of separation of service. Separation of service includes: (1) with respect to a participant who is an employee of the Company or an affiliate, the termination of the participant’s employment with the Companyand/or all affiliates that also constitutes a “separation from service” within the meaning of the regulations promulgated also under Section 409A of the Code; (2) with respect to a participant who is a consultant of the Company or an affiliate, the expiration of the consultant’s contract or contracts under which services are performed that constitutes a “separation from service” within the meaning of the regulations promulgated under Section 409A of the Code; or (3) with respect to a participant who is a non-employee director of the Company or an affiliate, the date on which such non-employee director ceases to be a member of the Board (or other applicable board of directors) for any reason.
The following sets forth the general rules with respect to the treatment of outstanding option, SOSAR and any cash-based SAR awards at various separation from service events. The Compensation Committee has the authority to revise these general rules on aparticipant-by-participant basis by including such revised provisions in the award agreement:
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| • | In the event of separation from service for cause (as determined by the Company), then all outstanding option and SOSAR awards, and any cash-based SAR awards, whether vested or unvested, will immediately terminate and be forfeited. |
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| • | In the event of separation from service due to death or retirement of the participant, or the termination of service of the participant due to disability (whether or not a separation from service), then an amount of unvested options or SOSARs will vest equal to a percentage, the numerator of which equals the number of days that have elapsed as of the date in the applicable vesting period on which death or retirement occurs, or the date on which such disability commenced (such date to be determined by the Compensation Committee in its sole discretion), and the denominator of which equals the total number of days in such applicable vesting period, rounded down to the nearest whole share. Such vested options and SOSARS, together with all other vested and unexercised options and SOSARS may be exercised by the participant, or his or her beneficiaries, for three years following the date of death, disability or retirement, or, if shorter, until the end of the term of a particular option or SOSAR as established in the original award agreement. |
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| • | In all other events of separation from service, the participant will have a period of ninety (90) days following such separation from service (or, if shorter, until the end of the term of a particular option or SOSAR as established in the original award agreement) to exercise any vested and unexercised options and SARs then outstanding; all unvested option and SAR awards will immediately terminate and be forfeited. |
Restricted Stock and Restricted Stock Unit Awards. The Compensation Committee may grant restricted stock or restricted stock units to participants under the Plan. The terms and conditions of each such award are established by the Compensation Committee and set forth in an associated award agreement. The Compensation Committee has the discretion to impose restrictions, including limitations on the right to vote shares underlying restricted stock awards or the right to receive any dividends, which restrictions may lapse separately or in combination at such time(s) as the Compensation Committee may deem appropriate.
Unless the award agreement provides otherwise, certain rules apply to service-based restricted stock unit awards (“RSUs”) upon a separation of service. In the event of separation from service for cause (as determined by the Company), all outstanding RSUs will immediately terminate and be forfeited. In the event of separation from service due to death or
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retirement of the participant, or the termination of service of the participant due to disability (whether or not a separation from service), then an amount of unvested RSUs will vest equal to a percentage, the numerator of which equals the number of days that have elapsed as of the date in the applicable restriction period on which death or retirement occurs, or the date on which such disability commenced (such date to be determined by the Compensation Committee in its sole discretion), and the denominator of which equals the total number of days in such applicable restriction period, rounded down to the nearest whole share. All vested RSUs will be paid in accordance with the payment provisions described below. In all other events of separation from service, to the extent not previously paid, the participant shall be paid any vested RSUs in accordance with the payment provisions described below, and all unvested RSUs shall immediately terminate and be forfeited.
Restricted stock and RSU awards (subject to satisfaction of any purchase price requirement) will be transferred or paid to the participant as soon as practicable following the award date or the termination of the vesting or lapse of restrictions set forth in the Plan or the award agreement, and the satisfaction of any and all other conditions of the award applicable to such restricted stock or RSU award (the “Restriction End Date”), but in no event later than two and one-half (21/2) months following the end of the calendar year that includes the later of the award date or the Restriction End Date, as the case may be. In the event a participant terminates service with the Company due to a disability, then the participant’s vested RSUs will be paid to the participant within thirty (30) days of the participant’s qualification for long-term disability under the Company’s long-term disability plan or policy, or the Compensation Committee’s determination of disability, as the case may be. To the extent, however, that the provisions described above or the provisions of any award agreement for RSUs require, distributions of stock under circumstances that would constitute a “deferral of compensation” under Section 409A of the Code, any payment of such vested RSU awards shall conform to the applicable requirements of Section 409A of the Code, including, without limitation, the requirement that a distribution to a participant who is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) which is made on account of the specified employee’s separation from service shall not be made before the date which is six (6) months after the date of separation from service.
Stock Awards and Other Stock-Based Awards. The Compensation Committee is authorized to grant stock awards to participants under the Plan. Stock awards may be granted by the Compensation Committee in addition to, or in tandem with, other awards and may be issued in lieu of any cash compensation or fees for services to the Company as the Compensation Committee, in its discretion, determines or authorizes. Stock awards will be evidenced by an agreement or in such other manner as the Compensation Committee may determine appropriate, including, without limitation, book-entry registration or issuance of stock certificate(s).
Subject to the terms of the Plan, the Compensation Committee may also grant to participants such other awards (including rights to dividends and dividend equivalents) that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of the Company’s common stock as are deemed by the Compensation Committee to be consistent with the purposes of the Plan. The Compensation Committee will determine the terms and conditions of such awards and set forth such terms and conditions in an award agreement.
Performance Awards. The Compensation Committee may grant performance awards to participants under the Plan. The terms and conditions of each such award will be fixed by the Compensation Committee and set forth in the applicable award agreement, including the performance criteria as may be determined by the Compensation Committee.
For awards intended to qualify as performance-based compensation under Section 162(m) of the Code, performance awards will be conditioned upon the Company’s achievement of pre-established goals relatingone or more performance goal(s) with respect to one or more of the following performance measures (subject to such modifications as specifiedestablished by the Compensation Committee):Committee: cash flow; cash flow from operations; earnings (including earnings before interest, taxes, depreciation, and amortization, and pension income or expense, or some variation thereof or earnings targets that eliminate earnings from non-core sources, such as gains from pension assets and timberland sales)thereof); earnings per share, diluted or basic; earnings per share from continuing operations; net asset turnover; inventory turnover; capital expenditures; debt,debt; net debt; debt reduction; working capital; return on investment; return on sales; net or gross sales; market share; economic value added; cost of capital; change in assets; expense reduction levels; productivity; delivery performance; safety record; stock price; return on equity; total shareholder return; return on capital; return on assets or net assets; revenue; income or net income; operating income or operating net operating income; operating profit or net operating profit; gross margin, operating margin or profit margin; and completion of acquisitions;acquisitions, sales of significant assets, business expansion;expansion, product diversification and other non-financial operating and management performance objectives.
To the extent consistent with Section 162(m) of the Code, the Compensation Committee may determine that certain adjustments shall apply, in determining whether pre-established performance goals have been achieved,whole or in its discretion,part, in such manner as specified by the Compensation Committee, to exclude the effect of any of the following events that occur during a performance period: the impairment of tangible or intangible assets; litigation or claim judgments or settlements; the effect of changes in tax law, accounting standards or principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs, including but not limited to reductions in force and early retirement incentives; currency fluctuations; and any extraordinary, unusual, infrequent or non-recurring items, including, but not limited to, such items described in management’s discussion and analysis of financial
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condition and results of operations or the financial statements and notes to such financial statementsthereto appearing in the Company’s annual report to shareholdersshareowners for the applicable year.
Performance measures may be determined either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or subsidiary entity thereof, either individually, alternatively or in any combination, and measured over a period of time including any portion of a year, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Compensation Committee.
For performance awards intended to qualify as performance-based compensation under Section 162(m) of the Code, the Code requires that performance goal(s) relating to performance measures set forth above: (1) must be pre-established in writing (within 90No later than ninety (90) days after the beginning of an applicable performance period, the Compensation Committee will establish in writing the performance period)goals, performance measures and the method(s) for computing the amount of compensation which will be payable under the Plan to each participant if the performance goals established by the Compensation Committee and (2)are attained; provided, that for a performance period of less than one year, the achievement of performance goals be certified in writingCompensation Committee will take any action prior to paymentthe lapse of 25% of the award.performance period. In addition to establishing minimum performance goal(s)goals below which no compensation will be payable pursuantpaid with respect to a performancean award, the Compensation Committee, in its discretion, may create a performance schedule under which an amount less than or more than the target award may be paid so long as the performance goal(s)goals have been achieved.
The Compensation Committee, may, in its discretion, may also establish such additional restrictions or conditions that must be satisfied as a condition precedent to the payment of all or a portion of any awards. Such additional restrictions and conditions may include the receipt by a participant of a specified annual performance award.rating, continued employment by the participant until a date that may be beyond the end of a performance period, or the achievement of specified performance goals by the Company, business unit or participant. The Compensation Committee may, in its discretion, also reduce the amount of any performance award if it concludes that such reduction is necessary or appropriate based on: (i) an evaluation of sucha participant’s performance,performance; (ii) comparisons with compensation received by other similarly
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situated individuals working within the Company’s industry,industry; (iii) the Company’s financial results and conditions,conditions; or (iv) such other factors or conditions that the Compensation Committee deems relevant; provided that therelevant. The Compensation Committee willmay not have the discretionuse its discretionary authority to increase any award that is intended to be performance-based compensation under Section 162(m) of the Code.
WhatWhen are the methods a participant can use to pay any purchase or exercise price associated with a vested award?awards paid?
A participant can payPayment of awards is made as promptly as practicable (but in no event later than two and one-half months after the applicable purchase or exercise price for shares or other securities delivered pursuant to an award under the Plan, or the tax liability associated with such vesting or exercised award, in oneclose of the following methods or forms: cash, shares, other securities, other awards, or other property, or any combinationfiscal year in which the performance period ends) after the Company’s certified public accountants have completed their examination of the foregoing, asCompany’s year-end consolidated financial statements and the Compensation Committee may determine. The value of such consideration, if stock ofhas certified in writing the Companyextent to which the applicable performance goals and other material terms have been achieved. If an award is used, will be basedsubject to a vesting requirement whereby payment is contingent on the fair market valueparticipant’s continued employment beyond the end of such shares as of the date of payment.
How can the number of shares available for issuance under the Plan be adjusted?
In the event that the Compensation Committee determines that any dividend or other distribution (whether in the form of cash, stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,split-up, spin-off, combination, repurchase or exchange of stock or other securities of the Company, issuance of warrants or other rights to purchase stock or other securities of the Company, or other similar corporate transaction or event constitutes an equity restructuring transaction, as that term is defined in Statement of Financial Accounting Standards No. 123 (revised), or otherwise affects the common stock of the Company, then the Compensation Committee will adjust the following in a manner that is determined by the Compensation Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan:
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| • | the number and type of shares of stock (or other securities or property) which thereafter may be made the subject of awards, including the individual limits set forth in the Plan as described above; provided, that with respect to such individual limits, an adjustment will not be made unless such adjustment can be made in a manner that satisfies the requirement of Section 162(m) of the Code; |
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| • | the number and type of shares of stock (or other securities or property) subject to outstanding awards; |
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| • | the grant, purchase, or exercise price with respect to any award or, if deemed appropriate, make provision for a cashperformance period, payment to the holder of an outstanding award; provided, that the number of shares subject to any award shall always be a whole number; and |
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| • | other value determinations applicable to outstanding awards. |
The Compensation Committee’s adjustment shall be effective and binding for all purposes of the Plan; provided, that no adjustment will be made which will cause an incentive stock option to lose its status as such, and further provided that no such adjustment shall constitute (i) a modification of a stock right withinsoon as practicable following the meaningparticipant’s satisfaction of the regulations promulgated under Section 409A of the Code so as to constitute the grant of a new stock right, (ii) an extension of a stock right, including the addition of any feature for the deferral of compensation within the meaning of the regulations promulgated under Section 409A of the Code, or (iii) an impermissible acceleration of a payment date or a subsequent deferral of a stock right subject to Code Section 409A within the meaning of the regulations promulgated under Section 409A of the Code. No adjustment as the result of a change in capitalization will cause the exercise price to be less than the fair market value of such shares (as adjusted to
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reflect the change in capitalization) on the date of grant, and any adjustment as the result of the substitution of a new stock right or the assumption of an outstanding stock right pursuant to a corporate transaction shall satisfy the conditions described in the applicable regulations promulgated under the regulations promulgated under Section 409A of the Code.vesting requirement.
Are the awards transferable?
Except asUnless otherwise determined by the Compensation Committee no award and, no rightexcept in the case of death or disability as discussed in the paragraph below, participants who have terminated employment with the Company prior to the end of the performance period for any reason other than death, retirement, or total and permanent disability, will forfeit all rights to payment under any awards then outstanding under the Plan and will not be entitled to any cash payment for such period.
Unless otherwise determined by the Compensation Committee, if a participant’s employment with the Company terminates during a performance period by reason of death, retirement or total and permanent disability, the participant’s award will be pro-rated to reflect the period of service prior tohis/her death, retirement or total or permanent disability, as the case may be, subject to the Compensation Committee’s certification that the applicable performance goals and performance measures have been met.
Are awards transferable?
No. A participant’s rights under the Plan may not be assigned, soldpledged or otherwise transferred by a participant other than by willexcept, in the event of the participant’s death, to the participant’s designated beneficiary or by the laws of descent and distribution. In making any such determination, the Compensation Committee will not authorize any assignment, sale, or other transfer that would provide a participant or beneficiary with the opportunity to receive consideration from a third party as a result of such transaction. Each award, and each right under an award, will be exercisable during the participant’s lifetime only by the participant or, if permissible by applicable law, such person’s guardian or legal representative. No award, and no right under any such award, may be pledged, alienated, attached or otherwise encumbered by the participant.
How canCan the Plan be amended modified or terminated?
TheYes. Although the Company intends to continue to use the Plan from year to year, the Company reserves the right, by action of the Board mayor the Compensation Committee, to amend, suspend, discontinuemodify or terminate the Plan, or any portion thereof at any time; provided, that no such amendment, suspension, discontinuationmodification or termination will, be made without: (i) shareholder approval if such approval is necessary to comply with tax, legal or regulatory (including, for this purpose,without the rules of any national securities exchange(s) on which the Company’s stock is then listed) requirements or (ii) theparticipant’s consent, of the affected participant, if such action wouldmaterially adversely affect any materialthe rights of such participant to any payment that has been determined by the Compensation Committee to be due and owing to the participant under any outstanding award.the Plan, but not yet paid. Notwithstanding the foregoing or any provision of the Plan to the contrary, the Compensation Committee may at any time (without the consent of participants) modify, amend, or terminate any or all of the provisions of the Plan to the extent necessary: (i)necessary to conform the provisions of the Plan with Section 409A of the Code and (ii) to enable the Plan to achieve its stated purposes in any jurisdiction outside the United States in a tax-efficient manner and in compliance with local rules and regulations.
The Compensation Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate, any award, prospectively or retroactively, without the consent of the participant; provided, that no such action will impair any material rights of a participant granted an award under the Plan. The Compensation Committee is also authorized to make adjustments in terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events whenever the Compensation Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the intended benefits.Code.
What are the federalFederal income tax consequences of awards granted under the Plan?to participants?
The following brief description, which is based on existing law, sets forth certain of the federal income tax consequences of the grant of awards under the Plan. This description may differ from the actual tax consequences incurred by any individual recipient of an award. Moreover, existing law is subject to change by new legislation, by new regulations, by administrative pronouncements and by court decisions or by new or clarified interpretations or applications of existing laws, regulations, administrative pronouncements and court decisions. Any such change may affect the federal income tax consequences described below. The following summary of the federal income tax consequences in respect of the Plan is for general information only. Interested parties should consult their own tax advisors as to specific tax consequences, including the application and effect of foreign, state and local laws.
Non-Qualified Stock Options. A non-qualified stock option results in no taxable income to the optionee or deduction to the Company at the time it is granted. An optionee exercising such an option will generally realize taxable compensation at that time in the amount of the difference between the option price and the then market value of the shares, and income tax withholding requirements apply upon exercise. A deduction for federal income tax purposes will generally be allowable to the Company in the year of exercise in an amount equal to the taxable compensation realized by the optionee. The optionee’s tax basis in the option shares is equal to the option price paid for such shares plus the amount includable in income upon exercise. At sale, appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain (or loss) depending upon how long the shares have been held.
Incentive Stock Options. An optionee is not taxed at the time an incentive stock option is granted. The tax consequences upon exercise and later disposition of the underlying stock generally depend upon whether the optionee was an employee of the Company or a subsidiary at all times from the date of grant until three months preceding exercise (one year in the case of disability) and on whether the optionee holds the shares for more than one year after exercise and two years after the date of grant of the stock option.
If the optionee satisfies both the employment rule and the holding rule for income tax purposes, the optionee will not recognize income upon exercise of the stock option and the Company will not be allowed an income tax deduction at any time. The difference between the option exercise price and the amount realized upon disposition of the shares by the optionee will constitute a long-term capital gain or a long-term capital loss, as the case may be.
If the optionee meets the employment rule but fails to observe the holding rule (a “disqualifying disposition”), the optionee generally recognizes as ordinary income, in the year of the disqualifying disposition, the excess of the fair market
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value of the shares at the date of exercise over the option exercise price. Any excess of the sales price over the fair market value at the date of exercise will be recognized by the optionee as capital gain (long-term or short-term depending on the length of time the stock was held after the stock option was exercised). If the sale price is less than the fair market value on the date of exercise, then the ordinary income recognized by the optionee is generally limited to the excess of the sales price over the option exercise price. In both situations, the tax deduction allowable to the Company is limited to the ordinary income recognized by the optionee. Under current Internal Revenue Service guidelines, the Company is not required to withhold any federal income tax in the event of a disqualifying disposition.
Different consequences may apply for an optionee subject to the alternative minimum tax.
Restricted Stock. Upon the grant of restricted stock, a participant will not recognize taxable income and the Company will not be allowed a tax deduction. Rather, on the date when the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the shares on that date (less the price paid, if any, for such shares). Alternatively, a participant may file with the IRS a “section 83(b) election” no later than 30 days after the date of grant of restricted stock, as a result of which he will recognize taxable ordinary income at the time of the grant, generally in an amount equal to the fair market value of the shares on the date of grant, less any amount paid for the grant. The amount recognized by the participant is subject to income tax withholding requirements. At the time the participant recognizes income with respect to the restricted stock, the Company is generally entitled to a deduction in an equal amount. Upon the sale of any shares that are delivered to the participant pursuant to an award, the participant will realize capital gain (or loss) measured by the difference between the amount realized and the fair market value of the shares on the date the shares were vested/delivered to the participant pursuant to the award.
Performance Awards, Restricted Stock Unit Awards, Stock Awards, and Stock Appreciation Rights. A participant who receives a performance award, restricted stock unit award or stock appreciation right will not be required to recognize any income for federal income tax purposes at the time of the grant of such award, nor is the Company entitled to any deduction at such time. However, if a participant files an 83(b) election with the IRS within 30 days after the grant of a performance share award, he will recognize ordinary income at the time of the grant in an amount equal to the fair market value of the shares on the date of grant.
When any part of a performancean award (for which no 83(b) election was made) or award of restricted stock units or SARs is paid (in the case of cash) or becomes vested or delivered (in the case of shares)in cash to thea participant, the participant will realize compensation which is taxable to the participant as ordinary income in anthe amount equal toof the cash paid or the fair market value of shares vested or delivered. A participant who receives a stock award will generally recognize ordinary income equal to the fair market value of the shares on the date of grant (less the price paid, if any, for the shares).
Income tax withholding requirements generally apply to amounts that are recognized as ordinary income and thepaid. The Company will generally be entitled to a deduction in the same amount of the award and at the same time thatas the participant recognizes ordinary income. Upon the sale of
Are there any shares that are delivered to the participant pursuant to an award, the participant will realize either long-term or short-term capital gain (or loss), depending on how long the shares were held, equal to the difference between the amount realized and the fair market value of the shareslimitations on the date the shares were vested or delivered to the participant pursuant to the award.Company’s deductions?
Impact of Section 409A. Section 409A of the Internal Revenue Code applies to deferred compensation, unless the compensation was both deferred and vested prior to January 1, 2005. Generally speaking, “deferred compensation” is compensation earned currently, the payment of which is deferred to a later taxable year, and an amount is “vested” on the date that the participant’s right to receive the amount is no longer conditioned on the participant’s performance of services or upon the occurrence of an event (such as a change in control) or the achievement of performance goals that are substantially related to the purpose of the compensation.
Options, restricted stock, performance awards, restricted stock unit awards, SARs, stock awards and other stock-based awards available under the Plan are designed to be exempt from the requirements of Section 409A or to satisfy its requirements. An award that is subject to Section 409A and fails to satisfy its requirements will subject the holder of the award to immediate taxation, an interest penalty and an additional 20% tax on the amount underlying the award.
Limitations on Company’s Deductions; Consequences of Change of Control.With certain exceptions, Section 162(m) of the Code limits the Company’s deduction for compensation in excess of $1,000,000one million dollars paid to certain covered employees (generally the Company’s CEO and its threefour other highest-paid executive officers).officers other than the CEO. Compensation paid to such covered employees is not subject to the deduction limitation if it is considered “qualified performance-based compensation” within the meaning of Section 162(m) of the Code. Compensation is considered to be performance-based if it is paid pursuant to a plan that is approved by shareholders at least once every five years and satisfies certain other requirements.
By approving the Plan, shareholders also will be approving the eligibility of executive officers and others to participate in the Plan, the per-person limitations, and the general business criteria on which performance objectives for performance-based awards under the Plan may be based. The Plan imposes per-person limitations as described above.
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If the Company’s shareholders approve the Plan at the Annual Meeting, the Company intends that compensation paid by the Company in connection with disqualifying dispositions of incentive stock option shares, exercises of non-qualified stock options and SARs and the vesting or delivery of performance awards (intended to be treated as qualified performance-based compensation as defined in the Code) granted to participantscovered employees under the Plan will satisfy the requirements of qualified performance-based compensation and therefore entitle the Company will be entitled to a deduction with respect to the payment of such stock options, SARs and performance awards. A number of other requirements must be met in order for particular compensation to qualify as performance-based. There can be no assurance that compensation resulting from awards intended to qualify under Section 162(m) will in fact be fully deductible under all circumstances. Further,However, with respect to compensation attributable to restricted stock, restricted stock unit awards stock awards, other stock-based awards and performance awards (notthat are not intended to be treated as qualified performance-based compensation as defined in the Code),Code, the deduction that the Company might otherwise receive with respect to such awards to covered employees may be disallowed.
In addition, if a change of control of the Company causes vesting of awards under the Plan to accelerate or is deemed to result in the attainment of performance goals, the participants could, in some cases, be considered to have received “excess parachute payments,” which could subject participants to a 20% excise tax on the excess parachute payments and could result in a disallowance of the Company’s deductions.
The Board believes that the proposal to increase the number of shares available for awards under the Plan, and approval by the shareholders of the Amended and Restated 2005 Management Incentive Plan for purposes of complying with Section 162(m) of the Internal Revenue Code is in the best interests of the Company and its shareholders and unanimously recommends a vote FOR the proposal.
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PROPOSAL 3: RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP
The Audit Committee of the Board of Directors has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for the fiscal year 2009,2010, subject to ratification by the Company’s shareholders. Deloitte audited the Company’s consolidated financial statements for the fiscal year ended December 31, 2008.2009.
A Deloitte representative is expected to attend the Annual Meeting, will be given the opportunity to make a statement if he or she chooses to do so, and will be available to respond to appropriate shareholder questions.
What did the Company pay its independent registered public accounting firm in 20082009 and 2007?2008?
For the years ended December 31, 20082009 and 2007,2008, the aggregate fees billed to the Company by Deloitte were as follows:
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| | | 2008 | | 2007 | | | 2009 | | 2008 | |
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| Audit Fees(1) | | $ | 1,900,750 | | | $ | 2,031,365 | | | $ | 1,632,741 | | | $ | 1,900,750 | |
| Tax Fees(2) | | | 412,542 | | | | 247,950 | | |
| Audit Related Fees(2) | | | | 8,577 | | | | | |
| Tax Fees(3) | | | | 359,500 | | | | 412,542 | |
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| Total Fees | | $ | 2,313,292 | | | $ | 2,279,315 | | | $ | 2,000,818 | | | $ | 2.313,292 | |
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| (1) | Audit Fees — For professional services performed by Deloitte for the audit of the Company’s annual consolidated financial statements, review of consolidated financial statements included in the Company’s Quarterly Reports onForm 10-Q, Sarbanes-Oxley Section 404 attestation services, due diligence services and services that are normally provided in connection with statutory and regulatory filings or engagements. |
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| (2) | Audit-Related Fees — For assurance and related services performed by Deloitte that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under footnote (1) above. |
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| (3) | Tax Fees — For professional services performed by Deloitte with respect to tax compliance, tax advice and tax planning. This includes tax planning consultationsand consultations; tax audit assistance; and tax audit assistance.work stemming from “Audit-Related” items. |
All services rendered for the Company by Deloitte in 20082009 were permissible under applicable laws and regulations, and were pre-approved by the Audit Committee. The Audit Committee’s Audit and Non-Audit Services Pre-Approval Policy provides for the pre-approval of audit and non-audit services performed by the Company’s independent registered public accounting firm. Under the policy, the Audit Committee may pre-approve specific services, including fee levels, by the independent registered public accounting firm in a designated category (audit, audit-related, tax services and all other services). The Audit Committee may delegate, in writing, this authority to one or more of its members, provided that the member or members to whom such authority is delegated must report their decisions to the Audit Committee at its next scheduled meeting.
The Board believes that the ratification of Deloitte as the Company’s independent registered public accounting firm for the year ending December 31, 20092010 is in the best interest of the Company and the shareholders and unanimously recommends a vote FOR the proposal.
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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS
The Board of Directors and management of the Company are dedicated to effective corporate governance. The Board has adopted Corporate Governance Principles to provide a framework for governance of the Company. These Corporate Governance Principles are set forth in full on the Company’s website atwww.glatfelter.com/about_us/corporate_governance/principles.aspx and available in print upon request directed to the Secretary of the Company at 96 South George Street, Suite 500, York, PA17401-1434.
What is the composition of the Board?
The Board currently consists of eight members. Each year, the Board elects one of its members to serve as Chairman. The Board reviews its governance structure and the qualifications of each Director and determines which Director is best qualified to chair the Board. The Board believes that the Company and its shareholders are best served by having a Chairman who has a wide-ranging, in-depth knowledge of the Company’s business operations and the competitive landscape and who can best execute the strategic plan approved by the Board. Based on his extensive experience and knowledge of the Company’s operations, industry, competitive challenges and opportunities, the Board has determined that, at this time, the Chief Executive Officer is the Director best qualified to serve in the role of Chairman. More specifically the Chairman:
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| • | Chairs all meetings of the Board other than executive sessions |
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| • | Identifies strategic issues that should be considered for the Board agenda; and |
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| • | Consults with Directors in the development of the schedule, agenda and materials for all meetings of the Board. |
In addition, the agenda for each Board meeting and the schedule of meetings is available to all Directors in advance so that any Director can review and request changes. Moreover, all Directors have unrestricted access to management at all times and communicate informally with management on a variety of topics.
The Board believes that shareholders are best served by the Board’s current leadership structure, because the Corporate Governance Principals and the Company’s policies and procedures provide for an empowered, independent Board and the full involvement of the independent members of the Board in the Board’s operations and its decision making.
In the Company’s Governance Principles, the Board has adopted the NYSE standards for determining the independence of Directors, which require that a Director not have a material relationship with the Company.
On an annual basis, each member of the Board is required to complete a questionnaire which is designed, in part, to provide information to assist the Board in determining
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whether the director is independent under NYSE rules and our Corporate Governance Principles. In addition, each Director or nominee for Director has an affirmative duty to disclose to the Nominating and Corporate Governance Committee relationships between and among that director (or an immediate family member), the Company,and/or the management of the Company.
The Board has determined the following Directors to beare independent and do not to have any material relationship with the Company: Ms. Dahlberg and Messrs. DeBenedictis, Hall, Ill, Naples, Smoot and Stewart. The Board determined that Mr. Glatfelter has a material relationship with the Company because he is the Chairman and Chief Executive Officer of the Company. Thus, Mr. Glatfelter is deemed not to be an independent Director by NYSE standards and the Company’s Governance Principles.
What committees has the Board established?
The Company’s Board of Directors has four standing committees: the Audit Committee, the Compensation Committee, the Finance Committee, and the Nominating and Corporate Governance Committee. The Board appoints the members of all of these standing committees and their Chairpersons at its organizational meeting held following the Company’s Annual Meeting.
The Board has adopted a written charter for each of its standing committees, all of which are posted on the Company’s corporate website atwww.glatfelter.com/about_us/corporate_governance/committees.aspx, and available in print upon request directed to the Secretary of the Company at 96 South George Street, Suite 500, York, PA17401-1434.
Audit Committee. The Audit Committee, established in accordance with Section 3(a)(58)(A) of the Exchange Act, currently consists of four Directors: Messrs. Hall (Chair), DeBenedictis, Ill and Naples. In the opinion of the Board, all four Audit Committee members meet the Director independence requirements set forth in the listing standards of the NYSE and the applicable rules and regulations of the SEC in effect on the date of this proxy statement. The Board has determined that, based on their experience, Messrs. DeBenedictis, Hall, Ill and Naples are audit committee financial experts, as that term is defined in the applicable SEC regulations, and that all members of the Audit Committee are financially literate within the meaning of the NYSE listing standards. The Audit Committee held 78 meetings during 2008.2009.
In accordance with its Board-approved charter, the purpose of the Audit Committee is to assist the Board in its oversight of (i) the quality and integrity of the accounting, auditing, and financial reporting practices of the Company, (ii) the compliance by the Company, its directors and officers with applicable laws and regulations and its Code of Business Conduct, (iii) the independent auditors’ qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditors. The Audit Committee:
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| | • | is directly responsible for the appointment, replacement, if necessary, oversight, and evaluation of the Company’s independent auditors, which report directly to it, which appointment is submitted to the Company’s shareholders for ratification at the Annual Meeting each year; |
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| | • | has the sole responsibility for pre-approving all audit and non-audit services provided by the Company’s independent auditors and fees related thereto pursuant to its Pre-Approval policy; |
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| | • | reviews and recommends for approval by the Board the Company’s audited consolidated financial statements for inclusion in its annual reports onForm 10-K, and reviews with management the financial information contained in the Company’s annual reports onForm 10-K and quarterly reports onForm 10-Q, and management’s discussion and analysis of financial conditions and results of operations contained in the periodic reports, and discusses them with management and the independent auditors prior to filing with the SEC; |
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| | • | reviews with management and the Company’s independent auditorsregistered public accounting firm the Company’s earnings press releases prior to release to the public; |
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| | • | discusses any significant changes to the Company’s accounting policies; |
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| | • | reviews the quality and adequacy of the Company’s accounting systems, disclosure controls and procedures and internal controls over financial reporting; |
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| | • | provides guidance and oversight to the internal audit activities of the Company, including reviewing the organization, plans and results of such activities, and providing the internal auditor full access to the Committee (and the Board) to report on any and all appropriate matters; |
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| | • | monitors compliance with legal prohibitions on loans to Directors and executive officers of the Company; |
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| | • | reviews and assesses the adequacy of the Company’s hiring guidelines for employees or former employees of the independent auditors;registered public accounting firm; |
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| | • | provides guidance to and oversight of the compliance program of the Company, including the establishment and maintenance of procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by |
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| | employees of concerns regarding questionable accounting or auditing matters, in addition to other compliance matters; and |
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| | • | participates in the annual performance evaluation of the Director of Internal Audit. |
The Audit Committee has the authority to retain special legal, accounting, or other experts as it deems necessary to carry out its duties, and the Company makes funds available to the Committee for such retention.duties.
Compensation Committee. The Compensation Committee currently consists of five Directors: Mr. Naples, (Chair), Ms. Dahlberg, (Chair), and Messrs. DeBenedictis, Naples, Smoot and Stewart. In the opinion of the Board, all five Compensation Committee members meet the Director independence requirements set forth in the NYSE listing standards in effect on the date of this proxy statement. The Compensation Committee held 87 meetings during 2008.2009.
In accordance with its Board-approved charter, the Compensation Committee is responsible for discharging the Board’s duties related to compensation of the Company’s executives and also reviews, recommends for approval by the Board and oversees the Company’s management incentive and equity-based incentive compensation plans, defined benefit and contribution plans, and other welfare benefit plans. In addition to, or in furtherance of, the Compensation Committee’s functions described above, the Compensation Committee:
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| | • | recommends to the Board an executive compensation policy that is designed to support overall business strategies and objectives, attract and retain key executives, link compensation with business objectives and organizational performance, align executives’ interests with those of the Company’s shareholders and provide reasonable and competitive compensation opportunities; |
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| | • | reviews and approves periodically a general compensation policy and salary structure for executives and other key employees of the Company and its subsidiaries, which considers business and financial objectives, industry and labor market best practices and such other information as it may deem appropriate; |
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| | • | annually reviews and recommends to the independent members of the Board corporate goals and objectives relevant to the compensation of the Chief Executive Officer (the “CEO”), and manages and executes the evaluation process conducted by the independent members of the Board of the CEO in light of these goals and objectives; |
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| | • | reviews and recommends to the independent members of the Board the CEO’s compensation, including salary, bonus, and other incentive and equity-based compensation, based on the evaluation of the CEO’s performance; |
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| | • | reviews and approves annually, with the CEO’s involvement, the salaries and equity-based grants, as well as discretionary cash awards, for the Company’s non-CEO executives; |
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| | • | establishes individual target award levels for incentive compensation payments to the Company’s non-CEO executives, in relation to Board-established financial target(s) or other performance measures for such incentive compensation, recommends to the Board whether such financial target(s) or other performance measures have been achieved, and approves the payment of incentive compensation upon Board determination that such targets or measures have been met; |
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| | • | reviews the Compensation Discussion & Analysis and recommends to the Board that the Compensation Discussion & Analysis be included in the proxy statement; |
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| | • | reviews and recommends to the Board any modifications of the non-employee Directors’ compensation program; and |
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| | • | reviews and recommends for approval by the Board new incentive compensation plans or changes and amendments to existing plans. |
The Compensation Committee has the authority to engage independent compensation consultants, legal counsel or advisors, as it may deem appropriate in its sole discretion, and to approve related fees and retention terms of such consultants, counsel, or advisors, and routinely holds executive sessions without management.
The Chair of the Compensation Committee is responsible for leadership of the Committee and sets meeting agendas. The Committee may form subcommittees and delegate authority to them, as it deems appropriate. The meetings of the Compensation Committee are regularly attended by the CEO and the Committee’s independent compensation consultant, but the Committee usually meets in executive session at each meeting.
The CEO gives performance assessments and compensation recommendations for each executive officer of the Company (other than himself). The Compensation Committee considers the CEO’s recommendations with the assistance of a compensation consultant and approves the compensation of the executive officers (other than the CEO) based on such deliberations. In the case of the CEO, the Committee develops its own recommendation in executive session without the
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CEO, or any other member of management, present and then provides this recommendation to the independent members of the Board for approval in executive session. The CEO, the Vice President of Human Resources & Administration, and the Vice President, General Counsel & Secretary generally attend, and the Senior Vice President & Chief Financial Officer occasionally attends, Compensation Committee meetings but none are present for executive sessions or any discussion of their own compensation.
The Committee has engaged Compensation Strategies, Inc., (“Consultant”), an independent executive compensation consulting firm, to provide advice and assistance to the Committee and to the Company’s management in the area of executive and non-employee DirectorDirector’s compensation for the Company. The Consultant reports directly to the Committee but has been authorized by the Committee to work with certain executive officers of the Company as well as other employees in the Company’s human resources, legal, and finance departments. The Consultant conducts regular reviews of total compensation of the Company’s executive group, based on the process described in the Compensation Discussion & Analysis contained elsewhere in this proxy statement, for review by management in determining the appropriate levels of compensation for each executive.
The Consultant also conducts regular reviews of total compensation of the Company’s non-employee Directors and assists the Committee in the development of recommended changes in such compensation for approval by the Board of Directors. The Consultant also provides advice to the Committee and management with respect to other executive and Board compensation issues that might arise throughout the year. During 2008,2009, the scope of the Consultant’s assignments included a pay for performance analysis of the Company’s
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bonus pay versus that of its peer group, advisingadvice on the design of the MIP and long term incentive programs for 20082009 and for 2009,2010, as discussed in the CD&A; and IRS Section 409A reviews of the Company’s benefit plans;plans.
The Chair of the Compensation Committee is responsible for leadership of the Committee and advisingdevelopment of the meeting agendas. The Committee may form subcommittees and delegate authority to them, as it deems appropriate. The meetings of the Compensation Committee are regularly attended by the CEO and the Committee’s independent compensation consultant, but the Committee usually meets in executive session at each meeting.
The CEO performs performance assessments and compensation recommendations for each executive officer of the Company (other than himself) on necessary revisionsan annual basis. The Compensation Committee considers the CEO’s recommendations with the assistance of the Consultant and approves the compensation of the executive officers (other than the CEO). In the case of the CEO, the Committee develops its own recommendation in executive session without the CEO, or any other member of management, present and then provides this recommendation to the change in control agreements that the Company has with certainindependent members of the Company’s officers.Board for approval in executive session. The CEO, the Vice President of Human Resources & Administration, and the Vice President, General Counsel & Secretary generally attend, and the Senior Vice President & Chief Financial Officer occasionally attends, Compensation Committee meetings but none are present for executive sessions or any discussion of their own compensation.
Finance Committee. The Finance Committee currently consists of four Directors: Mr. Ill, (Chair) and Messrs. Stewart (Chair), Glatfelter, Hall and Ill.Stewart. The Finance Committee provides advice to the Board on the financial policies of the Company and has oversight over matters of financial significance to the Company. Specifically, pursuant to its Board-approved charter, the Finance Committee is charged with:Committee:
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| | • | the reviewreviews and recommendationrecommends for approval by the Board, of the Company’s operating and capital budgets; |
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| | • | the review ofreviews the performance of the Company’s pension funds and approval of the Company’s recommendations regarding investment objectives, strategiesand/or managers as warranted; |
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| | • | the review ofreviews the range of investment vehicles available to participants under the Company’s 401(k) Plan and the availability of Company stock as an investment option under the 401(k) Plan; |
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| | • | overseeingoversees the development and monitoring execution of the Company’s financial policies, including financial objectives, strategies and plans and the execution thereof, exclusive of accounting and other matters, which are within the oversight responsibilities of the Audit Committee; and |
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| | • | convening,convenes, at the request of management or the Board, for the purposes of providingto provide insight and guidance on other issues of financial significance, including any long-term financial plans of the Company. |
The Finance Committee held 54 meetings during 2008.2009.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee currently consists of five Directors: Mr. SmootStewart (Chair), Ms. Dahlberg, and Messrs. DeBenedictis, Hall and Stewart.Smoot. In the opinion of the Board, all five members of the Nominating and Corporate Governance Committee meet the Director independence requirements as set forth in the NYSE listing standards in effect on the date of this proxy statement. Pursuant to its Board-approved charter, the Nominating and Corporate Governance Committee:
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| | • | provides advice to the Board regarding all corporate governance matters (including the Company’s Code of Business Conduct and the Code of Business Ethics for the CEO and Senior Financial Officers); |
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| | • | makes recommendations to the Board regarding the Board’s size and composition and the tenure and retirement age of Directors; |
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| | • | reviews the qualifications of candidates for the Board and |
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| • | recommends to the Board the nominees for election to the Board at each annual meeting;Annual Meeting; |
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| | • | considers nominees for the Board recommended by shareholders; |
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| | • | makes nominations of Directors and officers of the Company; |
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| | • | nominates persons to fill vacancies on the Board occurring between annual meetings; |
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| | • | nominates Directors for committee membership and committee chairpersons; |
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| | • | reviews and approves related party transactions; and |
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| | • | reviews and approves Company contributions to affiliated persons or entities and Company contributions in excess of $25,000, per year to any other person or entity. |
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The Nominating and Corporate Governance Committee considers candidates for Board membership suggestedreviews all Director nominations submitted to the Company, including individuals recommended by itsshareholders, Directors or members other Board members, management and shareholders.of management. When evaluating whether to recommend an individual for electionnomination or re-election to the Board,re-nomination, the Nominating and Corporate Governance Committee will consider, at a minimum and in accordance with the Company’s Governance Principles, the nominee’s independence, availability of sufficient time to serve on the Board and the candidate’s knowledge, experience, skills, expertise, wisdom, integrity, business acumen and understanding of the Company’s business environmentenvironment.
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In evaluating Director candidates, the Committee considers a wide variety of qualifications, attributes and other factors and recognizes that a diversity so as toof viewpoints and practical experiences can enhance the Board’s ability to manage and direct the affairs and businesseffectiveness of the Board. Accordingly, as part of its evaluation of each Director candidate, the Committee takes into account how that candidate’s background, experience, qualifications, attributes and skills may complement, supplement or duplicate those of other prospective candidates.
The Committee specifically reviews the qualifications of each candidate for election or re-election, including for incumbent Directors, his or her understanding of the Company’s businesses and the environment within which the Company operates, attendance and participation at meetings, and independence, including any relationships with the Company. Shareholders wishingPrior to nomination, each candidate for election must consent to stand for election, and each nominee must agree in writing to abide by the Company’s majority voting policy.
After the Committee has completed its evaluation of all candidates, it presents its recommendation to the Board for consideration and approval. The Committee also discusses with the Board any candidates who were submitted to and considered by the Committee but not recommended for election or re-election as Directors.
We will report any material change to this procedure in a quarterly or annual filing with the SEC. In addition, we will make any changes to this procedure available promptly by posting that information on the Corporate Governance section of our website at www.glatfelter.com/about_us/corporate_governance/default.aspx.
Based on the process described above, the Committee recommended and the Board determined to nominate each of the incumbent Directors for re-election at the 2010 Annual Meeting of Shareholders. The Committee and Board concluded that each of the incumbent Directors should be nominated for re-election based on the experience, qualifications, attributes and skills identified in the biographical information contained under “Election of Directors” on pages 7 to 8. The Committee and the Board assessed these factors in light of the Company’s businesses, which provide a diverse line of specialty papers and engineered products around the world. In particular, the Committee and the Board considered the following factors:
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| • | Each nominee has extensive experience guiding large, complex organizations as executive leaders or board members; |
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| • | The nominees’ experiences relate to and derive from a broad range of occupations and industries, which provides both differing viewpoints among the nominees and familiarity with many diverse markets targeted by the Company’s businesses and environments that can affect the implementation and execution of the Company’s business plans. These include government and public policy (Mr. DeBenedictis, Mr. Naples and Mr. Glatfelter), professional services (Ms. Dahlberg, Mr. Ill, Mr. Naples, Mr. Smoot, and Mr. Stewart,), public interest (Mr. Glatfelter, Mr. DeBenedictis and Mr., Naples), financial services (Mr. Hall, Mr. Stewart and Mr. Smoot), and manufacturing (Ms. Dahlberg, Mr. Glatfelter, Mr. Hall, Mr. Ill and Mr. Naples); |
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| • | The nominees’ experiences include experience with several business sectors and operational challenges applicable to the Company’s businesses. These areas include consumer goods (Mr. Hall, Ms. Dahlberg), new product development (Mr. Glatfelter. Mr. Ill), international operations (Mr. Glatfelter, Mr. Ill and Mr. Naples), strategic partnerships (Mr. Ill) and regulated industries (Mr. DeBenedictis); and |
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| • | The nominees have significant substantive expertise in several areas applicable to service on the Board and its Committees, including finance and banking (Mr. Hall, Mr. DeBenedictis, Mr. Naples, Mr. Smoot, Mr. Stewart), public company accounting and financial reporting (Mr. DeBenedictis Mr. Hall, Mr. Naples and Mr. Smoot and Mr. Stewart), strategic planning (Mr. Hall, Mr. Ill, Mr. Naples. Mr. DeBenedictis, Mr. Glatfelter , Ms. Dahlberg), operations management (all the nominees), corporate governance (Mr. Ill, Mr. Smoot, Mr. Stewart) and risk management (all of the nominees). |
Any shareholder who wishes to recommend a nominee for election to the Board should follow the procedures set forth on pages 2-3page 3 of this proxy statement.
The Committee periodically reviews and oversees orientation programs for newly elected Directors and continuing education programs for incumbent Directors. The Committee also reviews shareholder proposals submitted for presentation at the annual meetingAnnual Meeting and proposed responses from the Board, and makes recommendations to the Board concerning Board procedures. The Nominating and Corporate Governance Committee is charged with developing and recommending corporate governance principles to the Board and reviewing these principles for appropriateness and compliance with SEC and NYSE requirements. The Nominating and Corporate Governance Committee reviews the senior management organization and succession plan.
The Nominating and Corporate Governance Committee has the authority to retain Director search consultants, outside counsel or other experts as it deems necessary to carry out its duties, and the Company makes funds available to the Committee for such retention. No third party Director search firms were engaged in 2008.2009. The Nominating and Corporate Governance Committee held 53 meetings during 2008.2009.
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How may shareholdersa shareholder communicate with the Company’s Board or the non-management Directors of the Company?
YouA shareholder may submit anyaddress written correspondence to the Board or any individual Director (whether management or non-management), to Mr. Thomas G. Jackson, Vice President General Counsel and Secretary, P.H.P. H. Glatfelter Company, 96 South George Street, Suite 500, York, PA17401-1434.
The Company’s Board has approved a process whereby the Secretary of the Company will receive, review and, as appropriate, forward any communications received on behalf of the Board or individual Directorswhich are addressed to the Board or a Director to the respectiveBoard or named Director andor the Chair of the Committee responsible for the matter addressed in the communication. All communications that relate to concerns regarding accounting, internal controls or auditing matters will be forwarded to the Chair of the Audit Committee.
Does the Company have a majority-voting policy?
The Company’s Governance Principles include a majority-voting policy for the election of Directors. Pursuant to the majority-voting policy, in an uncontested election, if a nominee for Director who is an incumbent Director receives a greater number of votes “withheld” from his or her election than votes “for” such election (a “Majority Withheld Vote”), and no successor has been elected at such meeting, the Director must tender his or her resignation following certification of the shareholder vote. In an uncontested election, if a nominee for Director who is not an incumbent Director receives at any meeting for the election of Directors at which a quorum is present a Majority Withheld Vote (but does receive the requisite plurality vote), the nominee will be deemed to have been elected to the Board and to have immediately resigned. To be eligible to stand for election, each person who agrees to be nominated must also agree, in writing, to be bound by this provision.
In the event of a Majority Withheld Vote, the Nominating and Corporate Governance Committee will consider the tendered resignation and make a recommendation to the Board as to whether or not to accept it. The Board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days following certification of the shareholder vote. In making their determinations, the Nominating and Corporate Governance Committee and the Board may consider any factors or other information that they consider appropriate or relevant. Thereafter, the Board will promptly disclose its decision whether or not to accept the Director’s resignation (and the reasons for rejecting the resignation, if applicable) in a press release or filing with the SEC. Any Director who tenders his or her resignation pursuant to this provision shall not participate in the Nominating and Corporate Governance Committee’s recommendation or Board action regarding whether or not to accept the resignation. However, if each member of the Nominating and Corporate Governance Committee received a Majority Withheld Vote at the same meeting, then the remaining independent Directors who did not receive a Majority Withheld Vote shall consider the resignations and determine whether or not to accept them. If the Directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer Directors, all Directors may participate in the action regarding whether to accept the resignations, provided, however, that each Director’s resignation will be acted upon separately and no Director may participate in the Board action regarding whether or not to accept his or her resignation. A Director whose resignation is not accepted by the Board shall continue to serve until the next annual meeting of shareholders at which he or she is up for election and until his or her successor is duly elected, or until his or her earlier resignation or removal. If a Director’s resignation is accepted by the Board, or if a nominee for Directordirector who is not an incumbent Director is deemed to have been elected and to have immediately resigned, then the Board, in its sole discretion, may fill any resulting vacancy pursuant to the Company’s By-laws or may amend the
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Company’s By-laws to decrease the size of the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board as to whether or not it should fill the vacancy or amend the Company’s By-laws to reduce the size of Board.
What is the Company’s policy regarding Director attendance at the Annual Meeting?
While the Company does not have a formal policy regarding Director attendance at the Annual Meetingannual meeting of Shareholders,shareholders, the Company’s Directors, including persons nominated for election at the Annual Meeting,an annual meeting, generally attend the Annual Meeting.annual meeting.
How often did the Board meet during 2008?2009?
The Board held 79 meetings during 2008.2009. The standing committees established by the Board held a total of 2522 meetings in 2008.2009. Each of the incumbent Directors attended at least 91% of the aggregate of the meetings of the Board and Board committees on which he or she served in 2008.2009. Non-management Directors meet in regularly scheduled executive sessions (without management), at which the Chair of the Nominating and Corporate Governance Committee presides.
Where can additional Corporate Governance and related information be obtained?
The Company’s corporate website (www.glatfelter.com) includes a Corporate Governance page consisting of, among others, the Company’s Governance Principles and Code of Business Conduct, a listing of the Company’sour Board of Directors and Executive Officers, Nominating, Audit and Compensation Committees of the Board of Directors and their respective Charters, the Company’s Code of Business Conduct, the Code of Business Ethics for the CEO and Senior Financial Officers of Glatfelter the Company’s “whistle-blower” policy and other related material. The Company intends to satisfy the disclosure requirement for any future amendments to, or waivers from, its Code of Business Conduct or Code of Business Ethics for the CEO and Senior Financial Officers by posting such information on its website. The Company will,
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upon request, provide a copy of its Code of Business Conduct or Code of Business Ethics for the CEO and Senior Financial Officers, without charge, to any person who requests one, by calling(717) 225-2724.at no charge.
How were Directors compensated?
Base Compensation. Non-employee Directors received an annual retainer fee of $35,000, two thirds of which consisted of shares of the Company’s common stock with an equivalent market value on the grant date, with the balance paid in cash. In addition to the annual retainer, non-employee Directors were paid in cash $2,000 for attendance at the annual Board retreat and $1,500 for each Board or committee meeting that they attended. Non-employee Directors serving as committee chairpersons of the Audit or Compensation Committees were paid an additional $10,000 (in cash) annually for their service and the Chairperson of the Finance and Nominating and Corporate Governance Committees each received an additional $5,000 in cash. In addition, each non-employee Director received an annual restricted stock unit award valued at $30,000, on the grant date. Such awards will vest over a three-year period. All accrued, but unpaid, Director cash compensation payments are made on each May 1st and November 1st. RSUs granted to directors in 2009 and thereafter will immediately vest upon a change in control. The RSUs granted to the directors prior to 2009 do not vest upon a change in control.
Deferred Compensation. Pursuant to the Company’s Deferred Compensation Plan for Directors (the Deferred Compensation Plan), every year each Director may elect to defer 50%, 75% or 100% of his or her annual retainer paid to such Director for serving on the Board, but not including any fees paid to a Director for attending meetings of the Board or any committee of the Board or for serving as a chairperson of a committee of the Board. No such elections were made with respect to fees earned in 2008.2009.
Benefits.Each non-employee Director is covered by the Company’s Director’s and officers’ liability insurance, as well as the Company’s travel accident insurance.
Share Ownership Guidelines. The Company has established share ownership guidelines for its non-employee Directors in order to further enhance alignment with shareholders. The share ownership guidelines require that Directorseach Director own at least 7,200 shares of the Company’s common stock. Shares owned directly by the Director, unvested restricted stock and RSUs, and stock units held in the Deferred Compensation Plan are counted toward satisfying the share ownership guideline for Directors. As of December 31, 2008,2009, all of the non-employee Directors were in compliance with the share ownership guideline.
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NON-EMPLOYEE DIRECTOR COMPENSATION TABLE
The following table sets forth non-employee director compensation earned during the year ended December 31, 2008.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fees Earned
| | | | | | | | | | | Fees Earned
| | | | | | |
| | | or Paid
| | | | | | All Other
| | | | | or Paid
| | | | All Other
| | |
| | | in Cash
| | Stock Awards
| | Option Awards
| | Compensation
| | Total
| | | in Cash
| | Stock Awards
| | Compensation
| | Total
|
| Name | | (1) | | (2) | | (3) | | (4) | | ($) | | | (1) | | (2) | | (3) | | ($) |
| | | | |
| |
| Kathleen A. Dahlberg | | $ | 50,669 | | | $ | 53,327 | | | $ | — | | | $ | 1,684 | | | $ | 105,680 | | | $ | 41,669 | | | $ | 29,998 | | | $ | 2,179 | | | $ | 73,846 | |
| Nicholas DeBenedictis | | | 52,669 | | | | 53,327 | | | | — | | | | 1,684 | | | | 107,680 | | | | 52,169 | | | | 29,998 | | | | 2,179 | | | | 84,346 | |
| J. Robert Hall | | | 58,169 | | | | 53,327 | | | | — | | | | 1,684 | | | | 113,180 | | | | 57,669 | | | | 29,998 | | | | 2,179 | | | | 89,846 | |
| Richard C. Ill | | | 40,669 | | | | 53,327 | | | | — | | | | 1,684 | | | | 95,680 | | | | 46,669 | | | | 29,998 | | | | 2,179 | | | | 78,846 | |
| Ronald J. Naples | | | 42,169 | | | | 53,327 | | | | — | | | | 1,684 | | | | 97,180 | | | | 53,169 | | | | 29,998 | | | | 2,179 | | | | 85,346 | |
| Richard L. Smoot | | | 47,169 | | | | 53,327 | | | | — | | | | 1,684 | | | | 102,180 | | | | 41,669 | | | | 29,998 | | | | 2,179 | | | | 73,846 | |
| Lee C. Stewart | | | 53,169 | | | | 53,327 | | | | — | | | | 1,684 | | | | 108,180 | | | | 52,669 | | | | 29,998 | | | | 2,179 | | | | 84,846 | |
| |
| |
| (1) | The amounts include the portion of annual retainer fees earned and paid, or to be paid, in cash as well as meeting fees and chairmanship fees earned and paid, or to be paid, in cash. |
| |
| (2) | The amounts listed above reflect the dollarfair market value recognized, in accordance with FAS 123R, for financial statement reporting purposes during 2008 for all existing awardsRSUs granted on May 1, 2009, the closing price of restricted stock units. Assumptions used in the calculation of these amounts are included in footnote 10 to the Company’s audited financial statements included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2008. In 2008, each non-employee Director received 1,986 shares of the Company’sGlatfelter common stock which was issued to pay 2/3 of the annual retainer and had a grant date fair value of $23,333, and 2,070 restricted stock units (“RSUs”) with a grant date fair value of $29,994. At December 31, 2008, each non-employee director held 5,044 outstanding RSUs$9.23 |
| |
| (3) | At December 31, 2008, the aggregate number of outstanding stock options held by each non-employee Director was: Ms. Dahlberg — 7,500; Mr. DeBenedictis — 2,500; Mr. Hall — 7,500; Mr. Ill — 2,500; Mr. Naples — 9,000; Mr. Smoot — 2,500 and Mr. Stewart — 7,500. |
|
(4) | Represents dividend equivalents paid to the non-employee Directors in 2008.2009. The Directors earn dividend equivalents on their outstanding RSUs. |
-21--17-
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION & ANALYSIS
Overview of Compensation Program Objectives and Design
The Compensation Committee of the Board of Directors (the “Committee”) approves the Company’s compensation philosophy and supervises the compensation program for the Named Executive Officers (“NEOs”) isand other executives of the Company. The Committee has designed the Company’s compensation programs to attract, retain, motivate and motivate highly qualified executives. In orderreward the executives who are crucial to accomplishthe success of our business. The Committee believes that compensation should reflect performance and should be fair, competitive and reasonable in light of a person’s responsibilities and experience and the overall profitability of the Company. The Committee believes that executive pay should vary according to the performance of the Company and that the best way to achieve these principles and objectives is by providing a mix of compensation programs that focus on long-term and short-term performance as well as progress in furthering the programgoals of the Company’s strategic plan. The Committee wants the interests of the Company’s executives to be aligned with the interests of the Company’s shareholders. As a result, the total compensation paid to the NEOs and other Company executives consists of several forms of compensation, including base salary, annual incentives, long-term incentives, limited perquisites, and benefits. The Company believes that structuringMoreover, the Committee generally structures total compensation opportunities thatto target the 50th percentile of market levels, iswhich, it believes, provides a competitive forlevel of compensation relative to the Company’s industry and will allow it to achieve the objectives ofis consistent with its compensation program.philosophy. A significant portion of each NEO’s compensation opportunity consists of annual and long-term variable compensation that is contingent on the achievement of specific Company financial goals, reflects individual performance, and is designed to align the NEOs’NEO’s interests with those of the Company’s shareholders. VariableThe opportunity to earn variable compensation opportunity differs among the NEOsis different for each NEO and generally increases commensurate with the NEO’s level of responsibility within the Company. In addition, the mix of annual and long-term incentive compensation varies among the NEOs in that the relative weightingproportion of long-term incentive compensation is greater for greater levels of responsibility. TheCurrently, the Company’s annual compensation is cash-based, while long-term compensation is intended to consistconsists of both cash and equity-based awards. The Company does not have specific allocation goals between cash and equity-based compensation or between annual and long-term incentive compensation; instead, the Company relies on the process described below in its determination of compensation levels for each NEO.
While the Committee determines overall compensation strategy and policies for the NEOs other key executives and advisors and, except in the case of the CEO, approves their compensation, it seeks input from certain NEOs and other executives with respect to both overall guidelines and discrete compensation decisions. Specifically:
| | |
| • | the Committee retains an external compensation consultant (“Consultant”) to provide independent advice, information, and analysis on executive compensation and benefits; |
|
| • | the Vice President of Human Resources and Administration works with the Committee and the Consultant to develop the design of compensation programs and decision-making frameworks for determining compensation levels; |
|
| • | the CEO and CFO provide background and recommendations to the Committee regarding the Company’s key financial objectives and metrics and performance against them; |
|
| • | compensation actions for NEOs other than the CEO are developed and recommended by the CEO, in consultation with the Vice President — Human Resources and Administration, and based on guidance received from the Consultant; and |
|
| • | the Company’s General Counsel and Secretary and the Company’s Human Resources staff provide legal and governance advice and other technical support to the Committee. |
The NEOs noted above may, at the invitation of the Committee, attend portions of the Committee meetings; however, the Committee’s usual practice is to meet in executive session both alone and with the Consultant to reach final decisions about NEO compensation.
The compensation level for each NEO, except the CEO, is approved by the Committee after consideration of the specific recommendation of the CEO. In the case of the CEO, the Committee, with assistance from the Consultant, develops recommendations in executive session without the CEO or any other member of management in attendance, and then provides its recommendation to the independent members of the Company’s Board of Directors (the “Board”) for consideration and approval in executive session. All references to actions by the Committee with respect to setting the compensation of the NEOs shall mean, without further reference, that the Committee acts with respect to all NEOs except the CEO. Further, all references to actions by the Committee with respect to CEO compensation shall mean, without further reference, that the independent members of the Board have acted with respect to CEO compensation in accordance with the recommendation of the Committee.
The Committee has delegated to the Vice President, Human Resources and Administration authority to take certain administrative actions with respect to the Company’s incentive compensation plans and retirement and other benefit plans. Moreover, within the limits and guidelines specified in the Company’s approved incentive compensation plans, the CEO is authorized to determine incentive compensation for employees
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other than the NEOs and other officers of the Company, and, depending on the vehicle used for such incentive compensation, the amounts awarded by the CEO may be subject to terms and overall amounts approved by the Committee. The design and administration of pension, savings, welfare, and vacation benefit plans and practices generally are handled by Company’s Human Resources, Finance, and Legal employees, although the Committee retains authority for approving major design changes, material changes to benefits that affect the NEOs and other executive officers, and certain administrative decisions that affect executive officers.
The Committee has sole authority to retain and terminate any consultants directly assisting it. The Committee also has the sole authority to approve the fees and other engagement terms for its consultants. For 2009, the Committee retained Compensation Strategies, Inc. (“CSI”) as its Consultant. In preparation to establish fiscal year 2009 compensation, the Committee used CSI to assess the competitiveness of the executive compensation program, to make recommendations regarding the program design based on prevailing market practices and business conditions, to advise the Committee on: i) the level of each NEO’s compensation, ii) peer group composition, iii) incentive plan performance metric conventions and design, (iv) external trends and regulatory developments, (v) executive succession planning, and (vi) to conduct research and analysis directed by the Committee. The Consultant also performed an analysis of bonuses paid under the Company’s Management Incentive Program relative to the Company’s peer group and financial performance. Moreover, the Consultant continued to provide competitive market data on executive compensation during 2009 which was used to evaluate the overall competitiveness of the Company’s compensation program and to develop recommendations on the total compensation paid to NEOs and other executives of the Company. The Consultant attended portions of Committee meetings and regularly met in executive session with the Committee with no members of management present. the Consultant does not provide any other human resources, benefits, or related services to the Company, Committee, or Board of Directors.
During 2009, the Company also engaged Mercer Consulting (“Mercer”) to perform a competitive market assessment of the Company’s executive pension programs and design and to offer recommendations based on prevailing market practices. Mercer has periodically advised the Company on pension administration issues for the NEOs and other Company executives.
The Committee has established several practices to ensure the Consultant’s independence, candor, and objectivity. The Consultant is engaged by and reports directly to the Committee, frequently meets separately with the Committee with no members of management present, and consults with the Committee’s Chairman between meetings. At each meeting of the Committee, management reports to the Committee the fees paid for services performed by the Consultant, and the Committee approves annually the work plan and budget for the Consultant.
Determination of Compensation Levels
As indicated above, the Committee generally structures total compensation opportunities to target the 50th percentile of market levels, which, it believes, provides a competitive level of compensation relative to the Company’s industry. In order to determine competitivethe 50th percentile of market levels, at the targeted 50th percentile, the Compensation Committee reviews a market analysis of total compensation for similarly situated executives of afrom peer group of peer companies with reference to certain(as discussed further below) and other broader-based market data. The market analysiscompensation data that is compiledprepared by Compensation Strategies, Inc., the Committee’s independent compensation consultant (the “Consultant”).Consultant. This market analysis is performed annually with respect to the CEO and CFO positions and every other year with respect to other executives.remaining NEOs. However, if market compensation levels with respect to the CEO or CFO are found to have changed substantially induring the off-years, a full review of all positionstotal compensation for the CEO, CFO and the NEOs is conducted. For 2008,2009, the review includedwas scheduled to include only the CEO and CFOCFO; however, due to the economic crisis that was experienced during 2009 and the impact of that crisis on economic growth and compensation as well aslevels, the Committee, on the recommendation of the Consultant, approved the expansion of the compensation review to include a review of the total compensation of all other executive officers.of the NEOs. Consistent with standard practices, due to the varying sizes of the companies included in the peer group companies, statistical analysis is used to adjust allnormalize the market compensation data collected to reflect the currentrelative annual revenues of the Company given the variation in sizeand each of the companies from which compensation data is collected. Each element of compensation as well as total compensation are quantified and reviewed to determine the Company’s competitiveness compared to the market.peer group companies. In determining appropriate individual compensation levels for the NEOs, the Committee considers this competitivethe adjusted market compensation data including information ranging from the 25th to the 75th percentiles, and the individual’sNEO’s tenure, experience, and particular set of skills as well as individualthe NEO’s and CompanyCompany’s overall performance. Compensation levels for all NEOs, except the CEO, are approved by the Committee based on the recommendation of the CEO. In the case of the CEO, the Committee develops its own recommendation in executive session without the CEO, or any other member of management present, and then provides this recommendation to the independent members of the Board for approval in executive session. All subsequent references herein to actions by the Compensation Committee assume without further reference that the independent members of the Board act with respect to CEO compensation in accordance with the recommendation of the Committee. In addition, each year the Committee, with the support of the Committee’s compensation consultant, retroactively reviews the relative performance of the Company and associated short-term incentive payouts to the NEOs against corresponding financial performance measures and incentive payouts of the Company’s peer group companies.
The groupannual revenues of peerthe companies usedincluded in the review of total compensation levels consists of publicly traded companies with annual revenues rangingCompensation Peer Group for 2009 ranged from approximately $250$260 million to $6.9 billion that compete against the Company’s products, are from the broader paper and packaging industries, or compete for the same executive talent, including other companies headquartered in south central Pennsylvania. The group was recommended by the Consultant and approved by the Committee. The Committee reviews themake-up of the group on an annual basis with the assistance of the Consultant.$6.8 billion. Since the Company competes for executive talent with a broad range of companies and industries, the companies with which it competes for talent are not necessarily the same companies included in the peer group that isCompensation Peer Group are not the same as those companies which are included in the Company’s performance graph in the Company’s Annual Report to shareholders. Each companyShareholders. A listing of the companies included in the groupCompensation Peer Group for 2008,2009 and whether that Companyinformation on which of these companies are also appearsincluded in the performance graph that appears in
-22--19-
graph included in the Company’s Annual Report onForm 10-K, is shownprovided below:
| | | |
| | | Performance
|
| | | Graph
|
| Compensation Peer Group | | Peer Group |
| |
| |
AVERY DENNISONAbitibibowater, Inc. | | No |
ABITIBIBOWATER, INC. Avery Dennison | | Yes |
BUCKEYE TECHNOLOGIES, INC.Bemis Co. Inc. | | No |
CALGON CARBON CORPBuckeye Technologies, Inc. | | Noü |
CARAUSTAR INDUSTRIES, INC.Caraustar Industries, Inc. | | No |
CHESAPEAKE CORP. | | No |
CSS INDUSTRIES, INC.Industries, Inc. | | No |
CULP, INC.Graphic Packaging Holding Co. | | No |
DENTSPLY INTERNATIONAL, INC.Greif, Inc. | | No |
DIXIE GROUP, INC.Lydall, Inc. | | No |
GREIF, INC.Meadwestvaco Corp. | | No |
HARSCO CORP.Nashua Corp. | | No |
LYDALL, INC.Neenah Paper Co. | | Noü |
MEADWESTVACO CORPPackaging Corp. of America | | No |
NASHUA CORP.Potlach Corp | | No |
PACKAGING CORP. OF AMERICARayonier, Inc. | | No |
POTLACH CORPRock-Tenn Co. | | No |
RAYONIER, INC.Schweitzer-Mauduit International, Inc. | | Noü |
ROCK-TENN CO.Sonoco Products Co. | | No |
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.Wausau Paper Corp | | Yes |
SONOCO PRODUCTS CO. | | No |
TREX COMPANY, INC. | | No |
WAUSAU PAPER CORP | | Yesü |
| |
| |
Base Salary
The Committee’s policy is to set salaries forAlthough the Committee has structured the compensation of the NEOs at levelssuch that are sufficient to attract and retain high-caliber individuals, based on the relative value of each position as measured against the market, as discussed above. In addition to reference to comparable market data, the Committee’s review of base salaries includes an assessmenta significant portion of each NEO’s tenure, experience,compensation opportunity consists of annual and skill set as well as individual and Company performance and competitive and internal equitable considerations. Baselong-term variable compensation, it believes that reasonable, fixed, annual compensation appropriately meets the Company’s compensation objectives. The base salaries of the NEOs are reviewed and approved annually by the Committee, typically induring the first quarter of the calendar year. Consistent with the Committee’s compensation philosophy, base salaries for the NEOs are generally targeted at the 50th percentile of the market. The Committee believes this compensation level is sufficient to achieve the objectives of the Company’s compensation program. In addition to assessing base salaries against comparable market data, in setting the annual base salary of each NEO, the Committee considers several factors, including salary recommendations from the CEO, the relative importance of the job to the Company, the external competitiveness of the NEOs’ total compensation packages, the nature and complexity of their job duties, the performance of the NEOs and the Company, as well as internal equity considerations. The Committee does not assign relative weightings to any of these factors. The Committee reviews base salaries annually, but may adjust salaries at any point during the year. The Committee does not necessarily adjust the NEOs’ base salaries each year.
During 2008,2009, based on the recommendation of the CEO and the Committee’s independent assessment of market data and economic outlook, the Committee opted not to adjust the base salaries of the NEOs with the lone exception of an adjustment that the Committee, upon the recommendation of the CEO, approved to the base salary of a NEO which the Committee concluded was significantly below the 50th percentile of the market. The Committee adjusted that NEO’s salary 10% in 2009. Likewise, the Board, upon the recommendation of the Committee, opted not to adjust the base salary of the CEO. As a group, the NEOs’ base salaries remained slightly below the 50th percentile of the market during 2009.
For 2010, the Committee, after reviewing the current base salaries of the NEOs, has approved base salary increases for the Company’s NEOs ranging from 4.5%3% to 20.0% were approved by the Committee and became20% effective as of February 1, 2008. Such adjustments were based on the Committee’s assessment of each NEOs performance, the achievement of business objectives, a market compensation analysis conducted by the Consultant, and, in one case, included a planned salary adjustment for a NEO who was significantly below the 50th percentile due to a recent promotion.2010. As a group, the NEOs’ adjusted base salaries wereremain slightly below the 50th percentile of the market for 2008.
At its February 18, 2009 meeting, due to the current economic climate and the uncertainty of its impact on the Company, the Committee decided to defer making a decision on adjusting the 2009 base salaries for the NEOs until later in 2009.2010.
Annual Incentives
The Committee believes that annual incentive awards, or bonuses, provide important performance incentives for the NEOs and other eligible Company executives and help to further the Committee’s compensation philosophy. The Company currently provides an annual incentive bonus opportunity to the NEOs under the Company’s Management Incentive Plan (“MIP”(the “MIP”). The potential compensationBy design, the incentive bonuses, which NEOs and other executives are eligible to earn under the MIP, by design, comprisescomprise a significant portion of the NEO’sNEOs’ total compensation. The objective ofConsistent with the MIP is to incentCommittee’s philosophy, the NEOs, as well as other eligible executives and key employees, to improve the performance of the Company through annual cash incentive bonuses. The MIP is designed to ensure that incentive bonus awards represent at-risk compensation for the NEOs, and other eligible employees, to reward them onthe achievement of corporate and in some cases, business unit performance,objectives that are pre-established by the Committee, and to provide an incentive bonus awardcompensation that is competitive with the market for each position. The
Each year the Committee targets annual incentiveapproves a target bonus opportunities under the MIP for each NEO, expressed as a percentage of the NEOs’ base salaries with the exception of the CEO, whose target bonus is approved by the Board of Directors. The Committee generally establishes target bonuses for the NEOs at the 50th50th percentile of the marketcompetitive marketplace. However, given that the NEOs’ 2009 base salaries were below-market, their target bonuses, as a dollar amount, were also slightly below the 50th percentile of the market. For 2009, the Committee did not modify the target bonuses for any of the NEOs from the levels established during 2008. For 2010, target bonus percentages for the NEOs remain unchanged from 2009.
The following table sets forth targeted bonus levels for each NEO basedas a percentage of the NEO’s base salary:
| | | | | | | | | |
| | | 2009
| | | 2009 Target Bonus (as
| |
Named Executive
| | Target
| | | a percentage of 2009
| |
| Officer | | Bonus | | | Base Salary) | |
| | |
| |
| Glatfelter | | $ | 528,640 | | | | 80 | % |
| Jacunski | | | 182,834 | | | | 55 | |
| Parrini | | | 328,266 | | | | 65 | |
| Mukherjee | | | 113,850 | | | | 45 | |
| Rapp | | | 166,890 | | | | 45 | |
| |
| |
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Usually, in February each year, after the Company’s audited, consolidated, year-end financial results are available, the Committee confirms whether the pre-established MIP corporate performance metrics have been met and decides whether and, at what level, to award bonuses to the NEOs. As discussed further below, the amount ultimately received by the NEOs and other eligible executives is dependent on an assessmentthe extent of each NEO’s tenure, experience and skill set, and competitive and internal equitable considerations. Incentiveachievement of performance metrics established annually by the Committee for the MIP. The MIP provides that the Committee may, in its discretion, adjust any bonus opportunities are set annually and potentially represent a significant portion of total compensation.earned by any NEO or other executive downward but the Committee does not have discretion to increase any bonus earned by any NEO or other executive.
In recent years, with the lone exception of 2009, the amount of a bonus has depended primarily on the Company’s achievement of profitability to judge the Company’s overall performance. For 2008,2009, due to the uncertainty arising out of the global economic crisis, the Committee establishedconcluded that it was critical that the NEOs and other Company executives focus their attention and efforts on maximizing the Company’s cash flows while preserving the strength of the Company’s balance sheet and, to that end, adopted a MIP design which incorporated dual metrics: Operating Net Income (“ONI”) (whichand Leverage Ratio. ONI consists of net income determined in accordance with United States’ generally accepted accounting principles (“US GAAP”) adjusted to exclude after-tax pension income andor pension expense, gains from the sale of timberlands)timberlands, legal defense costs associated with a significant environmental matter that is currently in litigation, the proceeds of a one-time tax credit and certain one-time costs which were associated with acquisitions. Leverage Ratio is defined as net debt divided by earnings, before interest, taxes, depreciation, amortization and net pension income/expense (“EBITDAP”). In 2009, The Committee weighted these metrics at 40% ONI and 60% Leverage Ratio.
As in past years, the single performance metric forCommittee set the MIP, except for the Vice Presidentstarget level of ONI at the Company’s two business units, including Mr. Rapp, for whombudgeted 2009 ONI. Likewise, the Committee establishedset the target level of Leverage Ratio at a slightly modified MIP design.
For the leaders oflevel which corresponded to the Company’s two business units, including Mr. Rapp, the Committee adopted a MIP design which incorporated two metrics, ONI and Business Unit Operating Profit (defined as earnings from operations before interest and taxes) weighted 60% ONI and 40% Business Unit operating profit.
budgeted level of EBITDAP. In keeping with itspast practice, the Committee also establishedincorporated a design feature in the 2009 MIP which required that the Company achieve a pre-established minimum target and maximum levelslevel of performance for each MIP metric before any bonus would be earned by any eligible executive, including the NEOs, under the MIP performance metrics under each MIP design which correspond to MIP payments equal to 50%, 100% and 200% respectively(“Bonus Threshold Performance Level”). For 2009, the Bonus Threshold Performance Level was 80% of the targeted performance level for each MIP payout levelsmetric. In addition to this minimum performance requirement, the MIP design established by the Committee provided that no bonus under the MIP would be earned unless at least $16 million of ONI was achieved by the Company. Further, the Committee capped the aggregate bonuses payable under the 2009 MIP to all eligible executives, including the NEOs, at 8.6% of the NEOsCompany’s 2009 ONI, on an after-tax basis (the “Aggregate Bonus Cap”), which is consistent with the amount of bonuses paid to eligible executives under the MIP over the most recent five-year period. Subject to the Aggregate Bonus Cap, targeted payment amounts for achievement of the Bonus Threshold Performance Level remained unchanged from prior years at 50% of the NEO’s target bonus levels, and other eligible executives.achievement of the maximum performance level would result in bonus payments which would be equal to 200% of the NEO’s target bonus levels.
The following table summarizes the level of Company performance associated with each MIP performance measures used to determine bonuses earned with respect to 2008:metric and the corresponding target bonus level for the NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Percent of targeted bonus | | | Percent of targeted bonus |
| | | 50% | | 100% | | 200% | | | 50% | | 100% | | 200% |
| | | | |
| |
Performance metric (millions) | | | | | | | | | | | | | | | | | | | | | |
| Operating Net Income | | $ | 23.8 | | | $ | 33.6 | | | $ | 47.0 | | | $ | 19.0 | | | $ | 23.7 | | | $ | 33.2 | |
| Composite Fibers Operating Profit | | | 22.3 | | | | 27.9 | | | | 39.1 | | |
| Leverage Ratio | | | | 2.40 | | | | 2.00 | | | | 1.20 | |
| |
In 2008,2009, the Company’s ONI totaled $36.5$37.2 million, EBITDAP totaled $125.2 million and adjusted net debt was $112.2 million resulting in a Leverage Ratio of 0.9x. Both ONI and Leverage Ratio were each above the maximum performance level, which, translated to 121.6%if no bonus cap were applicable, would have triggered a payout level for the NEOs at bonus level that was 200% of the targetedNEOs’ bonus target level. However, due to the 8.6% ONI cap described above, the bonus payout level of ONI and a
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121.6% payout factor for those NEO’s whose MIP bonus incentive was based solely on ONI. Operating profit for the Company’s Composite Fibers Business Unit totaled $25.0 million in 2008 which translatedNEOs was reduced to 73.7%180% of the targeted level of Composite Fibers Operating Profit. Therefore, in accordance with the MIP design applicable to leaders of the Company’s two business units discussed above, Mr. Rapp’s payout factor for 2008 was a weighted combination of the 12.1.6% of targeted ONI, weighted at 60% and the 73.7% of targeted operating profit for the Composite Fibers Business Unit, weighted at 40%,- which resulted in a payout factor for Mr. Rapp of 102.4% of his targeted MIPNEOs’ bonus target level.
The amount ultimately received by the participants is dependent on the extent of achievement of the MIP performance measures. By design, no payments may be made under the MIP if a pre-established minimum threshold level of performance is not achieved for each MIP performance metric. The target level of ONI (the level at which target bonuses would be paid) for 2008 was based on the Company’s budgeted 2008 ONI which, as part of the Company’s Operating Budget, was approved by the Board. The Committee believes the Company’s budgeted ONI and hence, the ONI MIPLeverage Ratio target level waslevels were set at a sufficient levellevels to sufficiently challenge the NEOs, and meet the short term performance objectives of the MIP.Company and satisfy the Company’s compensation objectives. The following table summarizes target bonus opportunities for 20082009 as a percent of base salaries:
| | | | | | | | | | | | | | | | | | | | | |
| | | Range (Percent of
| | | Target Bonus
|
| In millions | | Base Salary) | | |
| | | | Range (Percent of
|
| MIP Performance Level | | | Base Salary) |
| | | | |
| |
Minimum(50% of performance target) | | | 22.5 | | | To | | | 40.0 | | | | 22.5 | | | To | | | 40.0 | |
Target(100% of performance target) | | | 45.0 | | | To | | | 80.0 | | | | 45.0 | | | To | | | 80.0 | |
Maximum(200% of performance target) | | | 90.0 | | | To | | | 160.0 | | | | 90.0 | | | To | | | 160.0 | |
| |
The ranges set forth above are based on advice received from the Consultant regarding market practices. All payments to the NEOs under the MIP are based entirely on actual ONI and Leverage Ratio performance of the Company or, where applicable, the combination of ONI and business unit operating profit;Company; no portion of the MIP payment is based on individual performance of each NEO. However, the Committee has the authority to reduce payments under the MIP based on the Committee’s assessment of individual performance during the year, with the approval of the independent members of the Board of Directors in the case of the CEO. No such reductions were made for 2008.
The NEOs’ target bonuses, as a percentage of base salary, were approximately equivalent to the 50th percentile of the market; however, given the below-market base salaries described above, target bonus opportunities, as a dollar amount, were also slightly below the 50th percentile of the market.2009.
For 2009, due to the uncertainty arising out of the current global economic recession,2010, the Committee concluded that it was critical that the NEO’s and other Company executives focus their attention and efforts on maximizing the Company’s cash flows while preserving the strength of its balance sheet and, to that end, havehas adopted a MIP design which incorporates dualthe following two metrics: ONI and Leverage RatioFree Cash Flow for all NEOs under the MIP including the leaders of the Company’s two business units. Leverage Ratio is definedONI will, again, consist of net income determined in accordance with United States’ generally accepted accounting principles (“US GAAP”) adjusted to exclude certain items as net debt divideddetermined by earnings, before interest, taxes, depreciation, amortization and net pension income/expense (“EBITDAP”). In 2009, thesethe
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Committee. Free Cash Flow will consist of operating cash flows minus capital expenditures. These metrics will be weighted 40%80% ONI and 60% Leverage Ratio. As in past years, the20% Free Cash Flow. The target performance level of ONI has been set at a level which accounts for the additional net income that is expected to be realized from the Company’s budgeted 2009 ONI.recent acquisition of Concert Industries; the target performance for ONI is established slightly higher than the Company’s 2010 budget to encourage management to successfully integrate that acquisition. Likewise, the target performance level of Leverage RatioFree Cash Flow has been set at a level which corresponds to the budgeted levels of net debt (defined as total debt less collateralized borrowings less cash) and EBITDAP and which is well within the leverage ratio provided under the Company’s covenants under its revolving credit agreement. In addition, no payments under the MIP will be earned unless a minimum ONI is met. Further, the aggregate payout under the 2009 MIP, on an after-tax basis will be capped at 8.6%budgeted level of 2009 ONI which is consistent with the average percentage payout of MIP over the most recent five year period.Free Cash Flow. Target bonus percentages for the NEOs remain unchanged from 2008. Subject to the cap described above,2009 and payment amounts for achievement of the threshold performance levels will remain unchanged at 50% of the target opportunities, and achievement of the maximum performance level would result in payments equal to 200% of the target opportunities.
Long-Term Incentives
Over the long term, the Committee believes that executive compensation should be substantially linked with corporate performance and shareholder value creation. The Committee believes that long-term compensation provides strong incentives for executives to improve the Company’s long-term performance, deliver value to its shareholders and remain employed by the Company. It also helps to retain the Company’s executives. Accordingly, again generally targeting the 50th percentile of the competitive marketplace, and with advice from the Consultant, the Committee determines annually the amount of long-term compensation that will be granted to executives under the Company’s shareholder approved Amended and Restated Long Term Incentive Plan (“LTIP”). The Committee also reviews on an annual basis the appropriateness and relative weightings of the long-term incentive compensation vehicles available under the LTIP. Most recently in 2008, the Committee supported a cash component of long-term incentive compensation. The cash LTIP (“cash LTIP”) component was intended to provide performance-based cash awards to eligible executives if the Company achieved preset financial targets by the end of a specified multi-year period and to reduce the number of shares of Company stock that are required to be issued under the LTIP. Accordingly, the 2008 cash LTIP will provide cash payments to eligible executives of the Company following the close of a three-year period ending with fiscal year 2010 if certain pre-set ONI and Return on Capital Employed goals are reached. The ONI portion of the cash LTIP represents 40% of the total award, while the remaining 60% is dependent on the Company’s Return on Capital Employed performance. The target performance goals are consistent with the Company’s long-term strategic objectives and, in the Committee’s opinion, represent reasonably aggressive performance levels. Target opportunities for the NEOs range from $59,290 to $319,000. Payment amounts for achievement of the threshold performance levels would equal 50% of the target opportunities, and achievement of the maximum performance levels would result in payments equal to 150% of the target opportunities. The Company’s approvedperformance against the established targets is measured over a three-year period, not on an annual basis. Therefore, the Committee will not be in a position to measure the Company’s performance against these targets until the end of the Company’s 2010 fiscal year.
As a result of the uncertain impact of the global economic crisis that continued during 2009, the Committee concluded that setting multi-year financial performance targets for the Company was too speculative, and that it was appropriate to temporarily suspend the cash LTIP. To that end, the Committee designed the 2009 long-term incentive program with respect to consist exclusively of equity-based compensation in the NEOs and other executives includesform of restricted stock units (RSUs),(“RSUs”) and stock-only stock appreciation rights (SOSARs), and a cash-based long-term incentive plan (cash LTIP)(“SOSARs”). The program is designed to retainMoreover, the NEOs and other executives and to focus their attention on2009 design which was approved by the long-term performance of the business.
In 2008, the long-term incentive program was designed soCommittee provided that RSUs representedwould constitute approximately 20% of theeach NEO’s incentive compensation opportunity under the program and that SOSARs and cash LTIP each representedwould constitute approximately 40%80% of the incentive compensation opportunity for each NEOopportunity. While the Committee believed that this relative weighting of RSUs and other eligible executives. RSUs are intended to create strong incentivesSOSARs provided an appropriate long — term incentive compensation opportunity for the NEOs given the economic conditions and other executivesoutlook at that time, the Committee has not ruled out reinstating the cash LTIP in future periods as economic conditions stabilize.
RSUs. The Committee, on an annual basis, grants RSUs under the LTIP to maximize shareholder value and, at the same time, provide an incentive to remain through the full vesting datecertain of the awards.Company’s executives with each grant vesting over a five-year period. The number of RSUs granted to the NEOs during 2009 ranged from 4,215 to 14,820, depending on the position of the NEO and information provided by the Committee’s external compensation consultant regarding competitive market compensation practices for each NEO. Each grant recipient of RSUs receives cash payments equal to the dividends paid on an equivalent number of shares of Companythe Company’s common stock. The number of RSUs granted on March 5, 2008, ranged from 2,090 to 9,100 for the NEOs, depending on the position of the NEO and recommendations received from the Committee’s compensation consultant regarding competitive market practices for each position. The RSUs vest ratably, with one-third of the units vesting on the third, fourth, and fifth anniversaries of each grant. Upon full vesting of each grant with allof RSUs, the units are converted to shares being deliveredof the Company’s common stock at a 1:1 ratio, and those shares are transferred to the timeRSU grant recipient. RSU grants made by the Committee in 2004, 2005 and 2006 either vested or resulted in the payment of final vesting.dividend equivalent payments to the NEOs in 2009, as indicated in the Summary Compensation Table.
SOSARs. The Committee, also on an annual basis, grants SOSARs provide a direct linkageunder the LTIP to certain of the Company’s executives. SOSARs are intended to directly link executive compensation to the interests of shareholders through awards thewhich have a value of whichthat is entirely dependent on appreciation in the Company’s stock price from the date the
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awards are granted. The SOSARs granted on March 5, 2008,to the NEOs during 2009 ranged from 14,88068,060 to 64,500 for the NEOs,262,680 depending on the position of the NEO and recommendations received frominformation provided by the Committee’s external compensation consultant regarding competitive market compensation practices for each position. The SOSARs granted on March 5, 2008by the Committee during 2009 had an exercise price equal to the Company’s closing common stock price on the
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date of grant, or $13.44,$9.91, have a ten-year expiration term, and vest ratably, with one-third of the SOSARs vesting on the first, second, and third anniversaries of the date of grant. This vesting schedule ensures that recipients remain employed with the Company for an appropriate length of time prior to being able to exercise the SOSARs. Upon exercise of a vested SOSAR, the recipientexecutive will receive shares of Company common stock with a value equal to the appreciation of the Company’s common stock from the date of grant. The re-pricing of SOSARs is not permitted under the Plan.LTIP.
The cash LTIP is intended to provide performance-based cash awards to participants if the Company achieves preset financial targets by the end of a specified multi-year period and also to reduce the annual share usage and dilution under the Plan. The 2008 cash LTIP will provide cash payments following the close of a three-year period ending with fiscal year 2010 if certain pre-set Operating Net Income and ReturnBased on Capital Employed goals are reached. The Operating Net Income portionits assessment of the cash LTIP represents 40% of the total award, while the remaining 60% is dependent on Return on Capital Employed performance. The target performance goals are consistent with the Company’s long-term strategic objectivescompetitive market practices and in the Committee’s opinion, represent reasonably aggressive performance levels. Target opportunities for the NEOs range from $73,700 to $319,000. Payment amounts for achievement of the threshold performance levels would equal 50% of the target opportunities, and achievement of the maximum performance levels would result in payments equal to 150% of the target opportunities. The Company’s performance against the established targets are measured over a three year period, not on an annual basis. Therefore,data, the Committee will not be inbelieves that a position to measure the Company’s performance against these targets until the endmix of the Company’s 2010 fiscal year.
The Company believed this combination of long-term incentive vehiclesRSUs and their weightings provided theSOSARs provides an appropriate and competitive balance of performance-based and retention-based grants as well as stock-basedtime-vested compensation.
Stock Options. Once a popular compensation tool, stock options grant the holder the right to buy stock of a company at a fixed price for a fixed exercise period. Like SOSARs, stock options reward executives if the Company’s stock price rises. Stock options provide no value if the stock price stays flat or goes down. In past years, the Committee had regularly granted nonqualified stock options to Company’s executives and cash-based grants for 2008.other key employees to align the interests of the employees with those of the Company. However, in response to recent changes in the accounting rules governing the treatment of the cost of granting options, the Committee has not granted options to any of the NEOs or other key executives since 2004 but several NEOs still hold unexpired options that were granted in prior periods. Those stock options were also granted with an exercise price equal to the closing price of Company stock on the grant date. The Company does not reprice stock options.
For 2009,2010, the Committee has designed the long-term incentive programLTIP will continue to include RSUs and SOSARS, only, with RSUs again representing 20% and SOSARs representing 80%, of each NEO’s total long-term incentive. Due to the continuing uncertainty arising out ofin the current global economic recession,economy, the Committee elected to suspendcontinue the suspension of the cash LTIP for 2009.2010. The number of RSUs are intendedgranted to create strong incentivesthe NEOs on March 3, 2010 ranged from 2,020 to 8,190 for the NEOs, and other executives to maximize shareholder value and, atdepending on the same time, provide an incentive to remain with the Company through the full vesting dateposition of the awards. NEOsNEO and other executives who have been awarded RSUs receive cash payments equalinformation provided by the Committee’s compensation consultant regarding competitive market practices for each position. The SOSARs granted to the dividends paidNEOs on an equivalent number of shares of Company common stock. The RSUs, when granted, will vest ratably, with one-thirdMarch 3, 2010, ranged from 25,300 to 102,500 for the NEOs, depending on the position of the units vesting onNEO and information provided by the third, fourth, and fifth anniversaries of grant, with all shares being delivered at the time of final vesting.
Committee’s compensation consultant regarding competitive market practices for each position. The SOSARs when granted, will havehad an exercise price equal to the Company’s closing common stock price on the date of grant, a ten-year expiration term and vest ratably over three years, with one-third of the SOSARs vesting on the first, second, and third anniversaries of the date of grant.or $13.95.
ItBased on market information provided by the Consultant, the Committee continues to believe this mix of equity based compensation, at the relative weightings discussed above, provides the appropriate balance of performance-based and retention-based grants.
In recent years it has been the Company’sCommittee’s practice to approveconsider recommendations for equity-based grants under the long-term incentive program to the NEOs and certain other key executives of the Company at the Committee and Board meetingsits meeting that occuroccurs in March of each year. If such equity-based grants are approved by the Committee, the Committee then recommends to the Board of Directors that it approve those grants at the March meeting of the Board of Directors. However, sincein 2009, the Committee deviated from its normal schedule for approving equity grants as a result of management’s determination in late 2008 that there is currentlywould likely be an insufficient number of shares available for issuanceunder the LTIP to the NEOs and other key executives, the Committee has deferred approving anysupport equity-based grants to the NEOs and other key executives pendingexecutives. Therefore, the approval of any grants was deferred until after the Company’s shareholders approved an increase in the number of shares of common stock available for awards under the Plan as set forthLTIP. On April 29, 2009, the Company’s shareholders, on the recommendation of the Board, approved an increase in Proposal #2, described in this proxy statement.the number of shares available for grant under the LTIP and the Committee and the Board subsequently approved equity-based grants of RSUs and SOSARs to NEO’s and certain other key executives on May 5, 2009.
Executive ShareOther Equity Ownership GuidelinesPolicies
The Company has established share ownership guidelinesseveral policies for its NEOs and certain other executives of the Company in order to further enhance alignment with shareholders.reinforce the importance of aligning the financial interests of executives and shareholders, and that impose certain controls and restrictions on the ability of an executive officer to buy or sell securities.
Executive Share Ownership Guidelines
The Company’s executives historically have held a significant portion of their personal wealth in the form of the Company’s common stock (or RSUs, stock options, or SOSARs that mirror the performance of the Company’s common stock). The Committee believes it is important to require the Company’s senior executives, including the NEOs, to meet minimum stock ownership guidelines (the “Executive Share Ownership Guidelines”). These guidelines were established in 2002 and updated in 2009; the minimum stock ownership targets reflect a stock price valuation of approximately $13.00 (the closing price on the date that the guidelines were initially adopted) and the base salary at the time the individual became subject to the guidelines. The Committee expresses these guidelines in terms of the value of equity holdings as a multiple of each senior executive’s base salary. Depending on the executive’s position, the share ownership guidelinesExecutive Share Ownership Guidelines require the executive to own a sufficient number of shares of Company stock having a market value that ranges in value from 1 times to, in the case of the CEO, 4 times the senior executive’s base salary.
The share ownership guidelines provideEquity interests that an executive will have up to five years fromcount toward satisfaction of the time thatExecutive Share Ownership Guidelines include shares owned outright by the executive, became subject to the guideline to reachor his or her required level of share ownership. Shares owned directly by the executive,spouse and dependent children, vested and unvested RSUs, shares held in a Section 401(k) or deferred compensation account, and 50% of any appreciation on either unexercised vested stock options are counted towards achievement ofor SOSARs. Newly hired or promoted executives have up to five years from the guidelines.
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time that the executive became subject to the Executive Share Ownership Guidelines to meet the applicable guideline. The Committee may reduce future long-term incentive awards for any executive who fails to meet the Executive Share Ownership Guidelines, depending on the circumstances. Each year, the Committee reviews whether the Company’s executives meet the Executive Share Ownership Guidelines. As of December 31, 2008,2009, all NEOs were either in compliance with the applicable guideline for their position or were on track to satisfy their applicable guideline within the allotted period.
| | | | | | | | | | | | | |
| | | Ownership
| | | | | | | |
| | | Guideline
| | | | | | | |
| | | (Market
| | | | | | | |
| | | value relative
| | | | | | | |
| | | to Starting
| | | | | | # of Shares
| |
| | | Base
| | | # of Shares
| | | currently
| |
| Name | | Salary) | | | Required | | | held | |
| | |
| |
| Glatfelter | | | 4 | X | | | 146,500 | | | | 160,894 | |
| Jacunski | | | 2 | X | | | 30,400 | | | | 42,001 | |
| Parrini | | | 3 | X | | | 53,700 | | | | 68,078 | |
| Mukherjee | | | 1 | X | | | 16,300 | | | | 18,022 | |
| Rapp | | | 1 | X | | | 22,800 | | | | 14,485 | |
| |
| |
Blackout Periods and Pre-Clearance of Securities Transactions. The Company’s Code of Business Conduct and Insider Trading Policies prohibit certain employees, including all of the NEOs, from purchasing or selling the Company’s securities beginning on the first business day of the last month of each calendar quarter until the second business day after the Company releases its earnings for the quarter. The Company may also impose additional blackout periods on its executives due the availability of material, non-public information regarding the Company’s securities. In addition, the Company requires certain employees, including all of the NEOs, to pre-clear purchase or sale transactions involving the Company’s stock or securities, including stock option and SOSARs exercises. The Committee regularly reviews the list of Company “Insiders” who are subject to these trading restrictions.
Other BenefitsChange in Control Arrangements
The Company has entered intoChange-in-Control Employment Agreements with each of the NEOs, as well as certain other executives of the Company, the terms of which are discussed on page 39pages 35 to 40 of this proxy statement. The Board has determined that it is in the best interests of the CompanyGenerally, these agreements provide for severance and its shareholdersother benefits to assure that the Company will have the continued dedication of thesebe paid to executives despite the possibility, threat, or occurrence of a change in control of the Company. These agreements are intended to diminish the inevitable distraction of the executive due to the uncertainties and risks created by a threatened or pending change in
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control and to provide the executive with compensation arrangements upon a qualifying change inof control that provide the executive with financial security and which are competitive with those of other comparably situated companies.
In order to allow recipients to participate in a change in control along with shareholders, upon a change in control of the Company (as defined in the agreements), all outstanding RSUsincluding an amount to cover applicable excise taxes imposed under the Code. The Committee intends that have been heldthese arrangements will serve as an incentive for at least 6 months will become immediatelyexecutives to act in the interest of shareholders during a takeover, despite the risk of losing their jobs. Potential payments under these arrangements do not directly impact the yearly decisions made regarding other elements of executive compensation. The Company’s equity grant agreements outline the terms and unconditionally vested, andconditions for the restrictions with respect to such RSUs shall lapse. All outstanding stock options and SOSARs will become immediately exercisable uponacceleration of equity vesting when a change in control occurs.
In the wake of the Company (as defined in the agreements). In 2009,general marketplace and shareholder concerns about executives potentially earning undue benefits that take effect after mergers and acquisitions, the Committee, in March 2009, directed that all subsequent grants of RSUs and SOSARs made during 2009 and in later periods to the NEOs and other eligible executives incorporate “double trigger” change of control provisions. This meansIn general, a single trigger provision provides that accelerated vesting of equity awards would occur in the event of a change of control irrespective of a corresponding termination. A double trigger provision, by contrast, only accelerates vesting in the event of a change of control and in the event that the executive is terminated without “Good Cause” or quits with “Good Reason” (as those terms are defined in the applicable agreement). As a result, vesting of RSUs or SOSARS that are granted after March 2009 and that have been held for at least six months will accelerate vesting only upon such a termination without cause of the NEO or other executive that occurs within two years of a change in controlchange-in-control event. The Committee believes that the incorporation of the double trigger provision will ensure continuity of management during mergers and acquisitions and assist with attracting and retaining key executives, ultimately benefitting shareholders.
Post-Employment Compensation
The Company provides post-employment compensation to its executives, including the NEOs, under the Company’s qualified pension plan for salaried employees (collectively the “Pension Plan”). Compensation that is paid under the Pension Plan is subject to legal limits specified in the Code. The Committee believes that offering post-employment compensation allows the Company to attract, retain, recruit and motivate qualified employees and executives in the current competitive marketplace. To that end, the Committee has established a non-qualified Supplemental Executive Retirement Plan (SERP) consisting of two post-employment benefits for certain NEOs and other executives who have been selectednominated by the CompensationCompany and approved by the Committee for participation.to participate in this plan. The first benefit knownavailable under the SERP, referred to as the “Restoration Pension” Benefit” provides an additionalthose executives whose benefits under the Pension Plan may be reduced due to legal limits applicable to qualified pension plans under the Code with a supplemental pension benefit, based onwhich will restore the participant’sportion of the pension benefit that was earned under the terms of the Pension Plan which is intended to restore that portion of the Pension Plan’s benefit that cannot be paid from thatthe Pension Plan due to the legal limitations onlimits provided in the compensation and total benefits payable to certain executives. ParticipantsCode. Eligible executives may receive the Restoration Pension inBenefit as an annuity or as a singlelump sum, or in any form permitted underdepending on the Pension Plan, as elected byvalue of the participantbenefit at the time he or she first becomesthe executive terminates employment with the Company. Effective February 10, 2010, the Committee approved a participant. revision to the Restoration Pension Benefit which revised the procedure for approval of the executives who will be eligible for this benefit. Subject to approval of the Committee, executives will generally be eligible for the Restoration Pension Benefit if they have at least one year of pensionable compensation in excess of the Code’s annual compensation limit for qualified pension plans.
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The second post-employment benefit knownavailable under the SERP is referred to as the “FACFinal Average Compensation or “FAC” Pension. The FAC Pension” pays a monthly pension benefit equal to a designated percentage of the participant’s finalexecutive’s average compensation (as defined below),over the 5 years immediately preceding his retirement, offset by the actuarialan equivalent value of the participant’s benefits under the Pension Plan and certain Company-sponsored nonqualified defined benefit pension arrangements, including (if applicable) the Restoration Pension. The designated percentage is 2% multiplied by the participant’s years of credited service under the Pension Plan, but not in excess of 55%. The FAC Pension is payable following the participant’sexecutive’s retirement aton or after age 6255 in the form of an annuity or a joint and 75% survivor annuity withlump sum, depending on the participant’s spouse or, if so requested byvalue of the participant and approved bybenefit at the Company’s Compensation Committee, as a single sum. Thetime it is scheduled to commence. If the FAC Pension can also be paid on anis payable prior to age 62, the monthly amount of the benefit is reduced to reflect its early retirement basis as early as age 55, but reduced by 2.5% for each year by which the early benefit commencement precedes the participant’s attainment of age 62.commencement. A survivor benefit is also payable under the FAC Pension to the participant’s surviving spouse ifin the participant dies before his or her benefit commencement date. Final average compensation means the annualized averageevent of the participant’s death before the FAC Pension commences. Pursuant to transition rules under Section 409A of the Code, in 2008, participants in the FAC Pension were afforded a one-time opportunity to elect to have their FAC pensions paid as a lump sum. Currently, only the CEO and the COO are eligible compensation for the sixty (60) calendar months immediately preceding his or her retirement, which, inFAC Pension and each has elected, under the casetransition rule, a lump sum distribution of the NEOs, includes the salary, bonus and non-equity incentive plan compensation amounts indicated in the Summary Compensation Table.their FAC Pension.
The CompanyCommittee has also established a Supplemental Management Pension Plan (“SMPP”) consisting of two benefits. The first benefit, is known as the MIP Adjustment Supplement. In prior years,Supplement is a historic restoration benefit that currently benefits none of the NEOs. Prior to 2005, the Company’s MIP included a deferral feature by which MIP recipients could defer payment of all or a portion of their MIP bonuses. That deferral feature was eliminated for MIP bonuses paid after 2005. However, under the Company’s Pension Plan, a deferred MIP bonus was not considered as part of pensionable compensation under the terms of the Company’s Management Incentive Plan, which was adopted as of January 1, 1994, and amended as of January 1, 2000 (the “Former MIP”) permitted a participant to defer a portion of his or her MIP bonus. Such deferred MIP bonus is not included in determining the participant’s final average compensation under the Pension Plan. However, for eligible executives a pension supplement (the “MIP Adjustment Supplement”) is paid from the Company’s Supplemental Management Pension Plan. The MIP Adjustment Supplement is, generally speaking, equalwas intended to restore the MIP deferral to pensionable compensation under the Pension Plan and pays the difference, if any, between the participant’sbenefit earned by the employee under the Pension Plan and the benefit that the executive would have earned had the MIP bonus not been deferred and his or hertherefore eligible for inclusion as part of pensionable earnings. The MIP Adjustment Supplement benefits a smaller number of employees each year because (i) the MIP Adjustment Supplement is currently not available to any executive who receives a benefit under the Company’s SERP, and (ii) the Pension Plan benefit if it had been determined by takingPlan’s final average compensation formula takes into account a participant’s five full consecutive years of employment in which his pensionable compensation was the highest. Prior to its elimination, the CEO deferred a portion of his prior MIP bonus. Executives who participate inbonuses under this deferral feature. Since no MIP deferrals have been permitted since 2005, however, none of the Company’s SERP, described above,other NEOs have or are not eligible to benefit from this feature and the Company anticipates that the need for the MIP Adjustment Supplement.Supplement will soon end. The second benefit, known as the Early Retirement Supplement, is available to certain management and executive employees, who are not eligible for the FAC Pension under the SERP, who retire from employment with the Company on or after age 55 but prior to age 65, normal retirement age under the Company’s tax-qualified Pension Plan. The Pension Plan permits a participant who retires early to receive a reduced monthly early retirement pension that begins immediately following retirement, or to postpone commencement of the pension until a later date, but not later than normal retirement age. If the participant agrees to postpone commencement of his or her Pension Plan pension until at least 36 months following early retirement (or, if earlier, until his or her normal retirement date following attainment of age 65) (the “Deferred Pension Plan Commencement Date”), then the Early Retirement Supplement will pay a supplemental benefit during the postponement period. The Early Retirement Supplement is equal to the monthly amount of the Pension Plan pension (or the sum of the Pension Plan pension and the Restoration Pension under the SERP, if applicable) payable on the Deferred Pension Plan Commencement Date in the form of a single life annuity. The benefit begins on the first day of the month on or next following early retirement and continues for 36 months (or until normal retirement date) when the deferred Pension Plan pension begins to be paid. There is a limited benefit payable for the surviving spouse if the participant dies before the end of the 36 month payment period.
Certain NEOs and other executives are eligible for limited executive perquisites. These perquisites include dining and country club dues, and in 2008, the incremental costs for transportation and meals for the spouses of certain NEOs who accompanied them on a Board retreat outside the United States and the costs of sporting and entertainment activitiesPerquisites
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for certain NEO’s incurred in connection with the same Board retreat. Perquisites are offered by the Company to certain NEOs and other executives on a limited basis in order for the Company to remain competitive with the market and to attract and retain highly qualified executive talent. The most recent perquisite market analysis was performed in 2008. The Committee believes that perquisites should be a minimal part of executive compensation. The principal perquisites that the Company may provide to certain of its executives include, in the United States, dining and country club memberships and in Europe, a car allowance. From time to time, the Company may provide additional perquisites to an executive officer on an isolated basis. The Company values perquisites based on their incremental cost to the Company. Detail on perquisites offered to the NEOs can be found in the Summary Compensation Table.
Deductibility of Executive Compensation
Certain awards made under the PlanLTIP and the 2005 Management Incentive Plan will qualify as performance-based compensation that will be exempt from the federal income tax $1 million deduction limitation imposed under Section 162(m) of the Internal Revenue Code. However, while the CompanyCommittee has put in placeestablished procedures to help maximize tax deductibility, in order to design compensation programs that address the Company’s needs, the CompanyCommittee has not established a policy that requires that all executive compensation be exempt from the limitations on business deductions provided in Section 162(m) deduction limitation.of the Code, as amended. The CompanyCommittee expects that all 20082009 MIP bonus payments or any compensation derivedreceived by Company executives from the exercise of stock options or the vesting of SOSARs will be exempt from the Section 162(m) deduction limitation as performance-based compensation.
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth on pages 2218 through 2725 of this proxy statement (the “Compensation Discussion and Analysis”) with the management of the Company.
Based on the review and discussions describeddescribe above, the Compensation Committee has recommended to the Company’s Board that the Company’s Compensation Discussion and Analysis be included in the Company’s proxy statement for the Annual Meeting.
The information disclosed in the Company’s Report of the Compensation Committee shall not be deemed to be “soliciting material,” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act.
Kathleen A. Dahlberg (Chair)The Compensation Committee of the Board of Directors of P. H. Glatfelter Company.
Nicholas DeBenedictis
Ronald J. Naples (Chair)
Kathleen A. Dahlberg
Nicholas DeBenedictis
Richard L. Smoot
Lee C. Stewart
-27--26-
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation of the Chief Executive Officer of the Company, the Chief Financial Officer of the Company and the Company’s three most highly compensated executive officers in 20082009 other than the Chief Executive Officer and the Chief Financial Officer.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Change in
| | | | | | | | | | | | | | | | | Change in
| | | | | | | |
| | | | | | | | | | | | | | | Pension Value
| | | | | | | | | | | | | | | | | Pension Value
| | | | | | | |
| | | | | | | | | | | | | | | and Non
| | | | | | | | | | | | | | | | | and Non
| | | | | | | |
| | | | | | | | | | | | | Non-Equity
| | Qualified
| | | | | | | | | | | | | | | Non-Equity
| | Qualified
| | | | | | | |
| | | | | | | | | Stock
| | Option
| | Incentive
| | Deferred Comp
| | | | | | | | | | | Stock
| | Option
| | Incentive
| | Deferred Comp
| | All Other
| | | | | |
Name and Principal
| | | | | | Bonus
| | Awards
| | Awards
| | Plan Comp
| | Earnings
| | All Other
| | | | | | | | | Awards
| | Awards
| | Plan Comp
| | Earnings
| | Compensation
| | | | | |
| Position | | Year | | Salary | | (1) | | (2) | | (3) | | (4) | | (5) | | (6) | | Total | | | Year | | Salary | | (1) | | (2) | | (3) | | (4) | | (5) | | Total | | | |
| | | | | |
| |
George H. Glatfelter II | | | 2008 | | | $ | 654,600 | | | $ | — | | | $ | 286,197 | | | $ | 358,067 | | | $ | 642,660 | | | $ | 151,719 | | | $ | 42,178 | | | $ | 2,135,421 | | | | 2009 | | | $ | 660,800 | | | $ | 146,866 | | | | 743,384 | | | | 951,552 | | | | 1,659,000 | | | | 34,640 | | | | 4,196,242 | | | | | |
| Chairman & Chief | | | 2007 | | | | 579,085 | | | | — | | | | 333,981 | | | | 137,284 | | | | 295,000 | | | | 648,915 | | | | 40,368 | | | | 2,034,633 | | | | 2008 | | | | 654,600 | | | | 122,304 | | | | 239,940 | | | | 642,660 | | | | 151,719 | | | | 45,778 | | | | 1,857,001 | | | | | |
| Executive Officer | | | 2006 | | | | 541,183 | | | | 137,619 | | | | 293,709 | | | | — | | | | 630,000 | | | | 3,592 | | | | 31,124 | | | | 1,637,227 | | | | 2007 | | | | 579,085 | | | | 176,137 | | | | 508,512 | | | | 295,000 | | | | 648,915 | | | | 43,968 | | | | 2,251,617 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
John P. Jacunski | | | 2008 | | | | 329,458 | | | | — | | | | 86,120 | | | | 150,211 | | | | 222,272 | | | | 14,000 | | | | 13,943 | | | | 816,004 | | | | 2009 | | | | 332,426 | | | | 62,136 | | | | 286,311 | | | | 329,102 | | | | 24,000 | | | | 13,396 | | | | 1,047,371 | | | | | |
| Senior Vice President & | | | 2007 | | | | 291,509 | | | | — | | | | 86,102 | | | | 57,421 | | | | 108,884 | | | | 7,000 | | | | 12,140 | | | | 563,056 | | | | 2008 | | | | 329,458 | | | | 51,475 | | | | 101,370 | | | | 222,272 | | | | 14,000 | | | | 13,943 | | | | 732,518 | | | | | |
| Chief Financial Officer | | | 2006 | | | | 241,801 | | | | 39,641 | | | | 60,099 | | | | — | | | | 130,000 | | | | 12,000 | | | | 8,249 | | | | 491,790 | | | | 2007 | | | | 291,509 | | | | 84,291 | | | | 212,578 | | | | 108,884 | | | | 7,000 | | | | 12,140 | | | | 716,402 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dante C. Parrini | | | 2008 | | | | 498,011 | | | | — | | | | 154,634 | | | | 256,058 | | | | 399,073 | | | | 86,000 | | | | 38,045 | | | | 1,431,821 | | | | 2009 | | | | 505,025 | | | | 104,154 | | | | 479,713 | | | | 590,879 | | | | 239,000 | | | | 30,394 | | | | 1,967,749 | | | | | |
| Executive Vice | | | 2007 | | | | 409,164 | | | | — | | | | 163,729 | | | | 98,557 | | | | 182,461 | | | | 99,000 | | | | 27,842 | | | | 980,753 | | | | 2008 | | | | 498,011 | | | | 86,534 | | | | 170,227 | | | | 399,073 | | | | 86,000 | | | | 38,045 | | | | 1,277,910 | | | | | |
| President & Chief | | | 2006 | | | | 349,320 | | | | 69,441 | | | | 123,240 | | | | — | | | | 330,000 | | | | 32,000 | | | | 22,740 | | | | 926,741 | | | | 2007 | | | | 409,164 | | | | 122,738 | | | | 365,116 | | | | 182,461 | | | | 99,000 | | | | 27,842 | | | | 1,187,737 | | | | | |
| Operating Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Martin Rapp (7) | | | 2008 | | | | 377,476 | | | | — | | | | 37,547 | | | | 86,114 | | | | 168,126 | | | | 41,000 | | | | 23,741 | | | | 734,004 | | |
| Vice President & General | | | 2007 | | | | 337,138 | | | | — | | | | 30,091 | | | | 33,121 | | | | 108,512 | | | | 191,000 | | | | 18,217 | | | | 718,079 | | |
| Manager Composite Fibers Business Unit | | | 2006 | | | | 135,942 | (8) | | | 201,645 | | | | 14,316 | | | | — | | | | — | | | | — | | | | 1,141 | | | | 353,044 | | |
Debabrata Mukherjee | | | | 2009 | | | | 251,083 | | | | 45,982 | | | | 211,882 | | | | 204,930 | | | | 37,000 | | | | 7,538 | | | | 758,415 | | | | | |
| Vice President & General Manager | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Specialty Papers Business Unit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
William T. Yanavitch II | | | 2008 | | | | 239,103 | | | | — | | | | 69,013 | | | | 83,221 | | | | 131,618 | | | | 25,000 | | | | 12,849 | | | | 560,804 | | |
| Vice President Human | | | 2007 | | | | 222,054 | | | | — | | | | 78,293 | | | | 32,049 | | | | 66,864 | | | | 18,000 | | | | 11,204 | | | | 428,464 | | |
| Resources and Administration | | | 2006 | | | | 213,850 | | | | 30,845 | | | | 56,357 | | | | — | | | | 130,000 | | | | 16,000 | | | | 8,952 | | | | 456,004 | | |
Martin Rapp(6) | | | | 2009 | | | | 359,688 | | | | 38,253 | | | | 160,999 | | | | 300,402 | | | | 107,000 | | | | 16,477 | | | | 984,578 | | | | | |
| Vice President & General Manager | | | | 2008 | | | | 377,476 | | | | 29,165 | | | | 57,251 | | | | 168,126 | | | | 41,000 | | | | 23,741 | | | | 696,759 | | | | | |
| Composite Fibers Business Unit | | | | 2007 | | | | 337,138 | | | | 25,504 | | | | 122,768 | | | | 108,512 | | | | 191,000 | | | | 18,217 | | | | 803,139 | | | | | |
| |
| |
| (1) | The amount reflects a discretionary bonus award granted for 2006 performance. Mr. Rapp’s bonus amount for 2006 includes $54,828 as a sign-on bonus and a bonus for 2006, the amount of which was guaranteed pursuant to the terms of Mr. Rapp’s employment agreement. |
|
(2) | The amounts reflect the dollarfair market value recognized, in accordance with FAS 123R, for financial statement reporting purposes duringof RSUs granted on May 5, 2009, March 5, 2008 2007 and 2006 for all existing awards of RSUs.March 3, 2007. The method used in the calculation ofto calculate these amounts is includedindicated in footnote 10 to the Company’s audited financial statements included in the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2008.2010. RSUs earn dividend equivalents, with payment made on the payment date for dividends declared on the Company’s common stock. |
| |
(3)(2) | The amounts reflect the dollar value recognized, in accordance with FAS 123R,the Financial Accounting Standards Board Accounting Standards Codification “FASB ASC”, for financial statement reporting purposes during 2009 and 2008 and 2007 for all outstanding SOSAR awards. Assumptions2007. The method used to calculate these amounts is indicated in footnote 10 to the Company’s audited financial statements included in the calculation of these FAS 123R amounts are as follows:Company’s Annual Report onForm 10-K for the year ended December 31, 2010. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2008 | | 2007 | | | 2009 | | 2008 | | 2007 |
| | | | | | |
| | | March | | December | | March | | | | | | | March | | December |
| | | | |
| |
| Dividend Yield | | | 2.68% | | | | 2.44% | | | | 2.26% | | |
| Risk-free Rate of Return | | | 3.69% | | | | 4.06% | | | | 4.5% | | |
| Dividend yield | | | | 3.63% | | | | 2.68% | | | | 2.26% | | | | 2.44% | |
| Risk-free rate of return | | | | 2.26 | | | | 3.69 | | | | 4.50 | | | | 4.06 | |
| Volatility | | | 31.90% | | | | 31.01% | | | | 32.80% | | | | 40.59 | | | | 31.90 | | | | 32.80 | | | | 31.81 | |
| Term | | | 6 years | | | | 6 years | | | | 6 years | | | | 6 years | | | | 6 years | | | | 6 years | | | | 6 years | |
| |
| |
(4)(3) | The 2009, 2008 and 2007 amounts reflect cash payments under the Company’s 2005 Management Incentive Plan (the “MIP”). See discussion of the MIP in the “CompensationCompensation Discussion and Analysis” beginningAnalysis on page 2320-22 of this proxy statement. The 2006 amounts reflect cash payouts triggered by the vesting of performance-based awards granted as part of the long-term incentive plan (the “2004 LTIP”) established in April 2004 under the Company’s 1992 Key Employee Long Term Incentive Plan. |
| |
(5)(4) | For each of the named executive officers other than Mr. Glatfelter, the amounts reflect the actuarial increase in the present value of such named executive officer’s benefits under all pension plans established by the Company determined using interest and mortality rate assumptions consistent with those used in the Company’s financial statements and includes amounts which the named executive officersNEOs may not be currently entitled to receive because such amounts are not vested. For Mr. Glatfelter, the 2009 amount represents a $1,659,000 actuarial increase in the present value of his benefits under all pension plans established by the Company and $0 of above-market interest earned on deferred compensation. The 2008 amount represents a $150,000 actuarial increase in the present value of his benefits under all pension plans established by the Company and $1,719 of above-market interest earned on deferred compensation. The 2007 amount represents a $645,000 actuarial increase in the present value of his benefits under all pension plans established by the Company and $3,915 of above-market interest earned on deferred compensation. The entire 2006 amount for Mr. Glatfelter represents above-market interest earned on deferred compensation. See “Nonqualified Deferred Compensation” on page 35 of this proxy statement. Mr. Glatfelter’s deferred compensation is credited quarterly with interest based on the prime rate at Morgan Guaranty Trust Company of New York. Above market interest was calculated by subtracting the interest Mr. Glatfelter’s deferred compensation would have earned in a given year if the rate of interest was equal to 120% of the applicable long-term federal rate for such year with compounding from the actual interest earnings credited to such deferred compensation in such year. |
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| |
(6)(5) | Other compensation includes the following: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | RSU
| | | | | | | 401(k)
| | Perquisites
| | RSU
| | Other
| | |
| | | 401(k)
| | Perquisites
| | Divi-
| | Other
| | | | | Match | | (i),(ii) | | Dividends | | (iii) | | Total |
| | | Match | | (i) | | dends | | (ii) | | Total | | |
| | | |
| | |
| 2008 | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| 2009 | | | | | | | | | | | | | | | | |
| Glatfelter | | $ | 1,734 | | | $ | — | | | $ | 40,419 | | | $ | 25 | | | $ | 42,178 | | | $ | 1,509 | | | $ | — | | | $ | 29,506 | | | $ | 3,625 | | | $ | 34,640 | |
| Jacunski | | | 4,022 | | | | — | | | | 9,921 | | | | — | | | | 13,943 | | | | 4,125 | | | | — | | | | 9,271 | | | | — | | | | 13,396 | |
| Parrini | | | 3,875 | | | | 15,658 | | | | 18,512 | | | | — | | | | 38,045 | | | | 4,528 | | | | 7,884 | | | | 17,982 | | | | — | | | | 30,394 | |
| Mukherjee | | | | 3,311 | | | | — | | | | 4,227 | | | | — | | | | 7,538 | |
| Rapp | | | — | | | | 20,707 | | | | 3,034 | | | | — | | | | 23,741 | | | | — | | | | 12,553 | | | | 3,924 | | | | — | | | | 16,477 | |
| Yanavitch | | | 4,126 | | | | — | | | | 8,723 | | | | — | | | | 12,849 | | |
| 2007 | | | | | | | | | | | | | | | | | | | | | |
| | | Glatfelter | | $ | 3,375 | | | $ | — | | | $ | 36,968 | | | $ | 25 | | | $ | 40,368 | | |
| Jacunski | | | 3,728 | | | | — | | | | 8,412 | | | | — | | | | 12,140 | | |
| Parrini | | | 3,875 | | | | 7,884 | | | | 16,083 | | | | — | | | | 27,842 | | |
| Rapp | | | — | | | | 13,692 | | | | 3,157 | | | | 1,368 | | | | 18,217 | | |
| Yanavitch | | | 3,375 | | | | — | | | | 7,865 | | | | — | | | | 11,204 | | |
| 2006 | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| Glatfelter | | | 1,813 | | | $ | — | | | $ | 29,286 | | | $ | 25 | | | $ | 31,124 | | |
| Jacunski | | | 2,633 | | | | — | | | | 5,616 | | | | — | | | | 8,249 | | |
| Parrini | | | 3,300 | | | | 7,884 | | | | 11,556 | | | | — | | | | 22,740 | | |
| Rapp | | | 0 | | | | 1,141 | | | | 0 | | | | — | | | | 1,141 | | |
| Yanavitch | | | 2,940 | | | | — | | | | 6,012 | | | | — | | | | 8,952 | | |
| | |
| | |
-27-
| | |
| | i. | The amount included in the “Perquisites” column for Mr. Parrini represents country and dining club dues paid in 2008,2009, by the Company. Also included are costs incurred by the Company for Mr. Parrini’s spouse to accompany him to a Board of Directors meeting outside the United States. The costs include the Company’s incremental costs for transportation and meals for Mr. Parrini’s spouse and sporting and entertainment activities for Mr. Parrini and his spouse. |
| | |
| | The amount included in the “Perquisites” column for Mr. Rapp for 2008 and 2007 represents a car allowance paid for by the Company. Also included in 2008 are costs incurred by the Company for Mr. Rapp’s spouse to accompany him to a Board of Directors meeting outside the United States. The costs include the Company’s incremental costs for transportation and meals for Mr. Rapp’s spouse and sporting and entertainment activities for Mr. Rapp and his spouse. |
The costs incurred for Mr. Parrini and Mr. Rapp and their spouses were in Euros and were converted to U.S. dollars using the average exchange rate for 2008 of 1.464.
| | |
| | ii. | The amounts included in the “Perquisites” column for Mr. Rapp represents a car allowance paid for by the Company. |
| | |
| iii. | The amount included in the “Other” column for Mr. Glatfelter isconsists of $3,600 in annual salary which Mr. Glatfelter receives for serving as President and Chairman of Glatfelter Pulpwood Company and an annual $25 payment made by the Company for Mr. Glatfelter’s membership in Glatfelter’sthe Company’s Quarter Century Club. This Club consists of GlatfelterCompany employees and retirees thatwho have been continuously employed by the Company for 25 or more years. The amount included for Mr. Rapp in the other column for 2007 represents life insurance policy premiums.premiums which are paid by the Company on behalf of Mr. Rapp. |
| |
(7)(6) | Mr. Rapp’s cash compensation is paid in Euros € and amounts(€). Amounts presented here have been converted to United States dollars ($) using the average exchange rate for 2008 of 1.464.2009 or 1.3968 $/€. Mr. Rapp’s cash compensation (not including automobile expense reimbursement) was €257,839, €246,034 and €99,206 for 2009, 2008, and 2007, and 2006, respectively. Mr. Rapp joined the Company in August of 2006. |
|
(8) | Represents Mr. Rapp’s salary from August 2006 (when he joined the Company) through December 2006. |
-29--28-
GRANTS OF PLAN-BASED AWARDS
The following table sets forth information concerning grants of plan-based awards in 2008:2009:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | All Other
| | All Other
| | | | | | | | | | | | | | | All Other
| | All Other
| | | | |
| | | | | | | | | | | Stock Awards:
| | Option
| | | | | | | | | | | | | | | Stock Awards:
| | Option
| | Exercise
| | |
| | | | | | | | | | | Number of
| | Awards:
| | Exercise
| | Grant Date
| | | | | | | | | | | Number of
| | Awards:
| | or Base
| | Grant Date
|
| | | | | | | | | | | Shares of
| | Number of
| | or Base
| | Fair Value
| | | | | | | | | | | Shares of
| | Number of
| | Price of
| | Fair Value
|
| | | | | Estimated Possible Payouts Under Non-
| | Stock or
| | Securities
| | Price of
| | of Stock
| | | | | Estimated Possible Payouts Under Non-
| | Stock or
| | Securities
| | Option
| | of Stock
|
| | | | | Equity Incentive Plan (1) | | Units
| | Underlying
| | Option
| | and Option
| | | | | Equity Incentive Plan (1) | | Units
| | Underlying
| | Awards
| | and Option
|
| Name | | Grant Date | | Threshold | | Target | | Maximum | | (2) | | (3) | | Awards | | Awards | | | Grant Date | | Threshold | | Target | | Maximum | | (2) | | (3) | | ($/Share) | | Awards |
| | | | |
| |
| Glatfelter | | | 02/18/09 | | | $ | 265,760 | | | $ | 531,520 | | | $ | 1,063,040 | | | | | | | | | | | | | | | | | | | | 02/17/10 | | | $ | 264,320 | | | $ | 528,640 | | | $ | 1,057,280 | | | | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | 03/07/08 | | | | | | | | | | | | | | | | 9,100 | | | | | | | | | | | $ | 122,304 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | 14,820 | | | | — | | | | — | | | | 146,866 | |
| | | | 03/07/08 | | | | | | | | | | | | | | | | | | | | 64,500 | | | $ | 13.44 | | | | 239,940 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | — | | | | 262,680 | | | | 9.91 | | | | 743,384 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Jacunski | | | 02/18/09 | | | | 91,417 | | | | 182,834 | | | | 365,668 | | | | | | | | | | | | | | | | | | | | 02/17/10 | | | | 91,417 | | | | 182,834 | | | | 365,668 | | | | — | | | | — | | | | — | | | | — | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | 3,830 | | | | | | | | | | | | 51,475 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | 6,270 | | | | — | | | | — | | | | 62,136 | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | | | | | 27,250 | | | | 13.44 | | | | 88,848 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | — | | | | 101,170 | | | | 9.91 | | | | 286,311 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Parrini | | | 02/18/09 | | | | 164,133 | | | | 328,266 | | | | 656,532 | | | | | | | | | | | | | | | | | | | | 02/17/10 | | | | 164,133 | | | | 328,266 | | | | 656,532 | | | | — | | | | — | | | | — | | | | — | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | 6,440 | | | | | | | | | | | | 86,554 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | 10,510 | | | | — | | | | — | | | | 104,154 | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | | | | | 45,760 | | | | 13.44 | | | | 170,227 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | — | | | | 169,510 | | | | 9.91 | | | | 479,713 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mukherjee | | | | 02/17/10 | | | | 56,925 | | | | 113,850 | | | | 227,700 | | | | — | | | | — | | | | — | | | | — | |
| | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | 4,640 | | | | — | | | | — | | | | 45,982 | |
| | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | — | | | | 74,870 | | | | 9.91 | | | | 211,882 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rapp | | | 02/18/09 | | | | 91,334 | | | | 182,668 | | | | 365,336 | | | | | | | | | | | | | | | | | | | | 02/17/10 | | | | 83,445 | | | | 166,890 | | | | 333,780 | | | | — | | | | — | | | | — | | | | — | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | 2,170 | | | | | | | | | | | | 29,165 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | 3,860 | | | | — | | | | — | | | | 38,253 | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | | | | | 15,390 | | | | 13.44 | | | | 57,251 | | | | 05/05/09 | | | | — | | | | — | | | | — | | | | — | | | | 56,890 | | | | 9.91 | | | | 160,999 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Yanavitch | | | 02/18/09 | | | | 54,133 | | | | 108,265 | | | | 216,530 | | | | | | | | | | | | | | | | | | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | 2,090 | | | | | | | | | | | | 28,090 | | |
| | | | 03/05/08 | | | | | | | | | | | | | | | | | | | | 14,880 | | | | 13.44 | | | | 55,354 | | |
| | |
| | |
| |
| (1) | The amount shown represent awards under the Company’s Management Incentive Plan. Threshold payments equal 50% of the target amount and maximum payments equal 200% of the target amount shown. For 2008,2009, the Company’s operating net income resulted in a MIP payment equal to 121.6%180% of target. See discussion in “CompensationCompensation Discussion and Analysis”Analysis beginning on page 2218 of this proxy statement. |
| |
| (2) | The amounts shown reflect grants of RSUs to the named executive officers under the Plan. |
| |
| (3) | The amounts shown reflect grants of SOSARs to the named executive officers under the Plan. |
-30--29-
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information concerning outstanding equity awards as of December 31, 2008:2009:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Option Awards | | | | | | | |
| | | | Number of
| | Number of
| | | | | | | | | | | |
| | | | Securities
| | Securities
| | | | | | | | | | | |
| | | | Underlying
| | Underlying
| | | | | | | | | | | |
| | | | Unexercised
| | Unexercised
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Options (#) | | Options (#) | | | | | | | | | | | |
| | | Option Awards | | | | | | | | | | | | | | | | | | | | |
| | | Number of
| | | | | | | | Stock Awards | | | | | | | | | | | Stock Awards | |
| | | Underlying
| | Securities
| | | | | | Stock
| | | | Market Value of
| | | | | | | | | | | Stock
| | | | Market Value of
| |
| | | Options (#) | | Unexercised | | Option
| | Option
| | Award
| | Number of Shares or
| | Shares or Units of
| | | | | | | Option
| | Option
| | Award
| | Number of Shares or
| | Shares or Units of
| |
| | | | | Exercise
| | Expiration
| | Grant
| | Units of Stock That
| | Stock That Have
| | | | | | | Exercise
| | Expiration
| | Grant
| | Units of Stock That
| | Stock That Have
| |
Name | | Exercisable | | Unexercisable | | Price ($) | | Date | | Date | | Have Not Vested (#) | | Not Vested ($) (4) | | | Exercisable | | Unexercisable | | Price | | Date | | Date | | Have Not Vested( #) | | Not Vested (4) | |
| |
| G. H. Glatfelter II | | | 39,400 | | | | 0 | | | | 13.28 | | | | 12/14/09 | | | | 3/9/05 | | | | 9,433 | (1) | | | 87,727 | | | | 79,000 | | | | — | | | $ | 15.47 | | | | 12/17/11 | | | | 6/7/06 | | | | 8,700 | (1) | | $ | 105,705 | |
| | | | 79,000 | | | | 0 | | | | 15.47 | | | | 12/17/11 | | | | 6/7/06 | | | | 17,400 | (1) | | | 161,820 | | |
| | | | 63,600 | | | | 0 | | | | 13.70 | | | | 12/16/12 | | | | 3/7/07 | | | | 7,300 | (2) | | | 67,890 | | | | 63,600 | | | | — | | | | 13.70 | | | | 12/16/12 | | | | 3/7/07 | | | | 7,300 | (2) | | | 88,695 | |
| | | | 17,134 | | | | 34,266 | | | | 15.94 | (5) | | | 03/07/17 | | | | 3/7/07 | | | | 2,500 | (3) | | | 23,250 | | | | 34,267 | | | | 17,133 | | | | 15.94 | (5) | | | 03/07/17 | | | | 3/7/07 | | | | 1,250 | (3) | | | 15,188 | |
| | | | 19,867 | | | | 39,733 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/5/08 | | | | 9,100 | (2) | | | 84,630 | | | | 39,733 | | | | 19,867 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/5/08 | | | | 9,100 | (2) | | | 110,565 | |
| | | | 0 | | | | 64,500 | | | | 13.44 | (7) | | | 03/05/18 | | | | | | | | | | | | | | | | 21,500 | | | | 43,000 | | | | 13.44 | (7) | | | 03/05/18 | | | | 5/5/09 | | | | 14,820 | (2) | | | 180,063 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | 262,680 | | | | 9.91 | (8) | | | 05/05/19 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| J. P. Jacunski | | | 7,167 | | | | 14,333 | | | | 15.94 | (5) | | | 03/07/17 | | | | 3/9/05 | | | | 1,967 | (1) | | | 18,293 | | | | 14,333 | | | | 7,167 | | | | 15.94 | (5) | | | 03/07/17 | | | | 6/7/06 | | | | 2,533 | (1) | | | 30,775 | |
| | | | 8,300 | | | | 16,600 | | | | 14.78 | (6) | | | 12/19/17 | | | | 6/7/06 | | | | 5,066 | (1) | | | 47,114 | | | | 16,600 | | | | 8,300 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/7/07 | | | | 3,100 | (2) | | | 37,665 | |
| | | | 0 | | | | 27,250 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/7/07 | | | | 3,100 | (2) | | | 28,830 | | | | 9,084 | | | | 18,166 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/7/07 | | | | 729 | (3) | | | 8,857 | |
| | | | | | | | | | | | | | | | | | | | 3/7/07 | | | | 1,458 | (3) | | | 13,559 | | | | — | | | | 101,170 | | | | 9.91 | (8) | | | 05/05/19 | | | | 3/5/08 | | | | 3,830 | (2) | | | 46,535 | |
| | | | | | | | | | | | | | | | | | | | 3/5/08 | | | | 3,830 | (2) | | | 35,619 | | | | | | | | | | | | | | | | | | | | 5/5/09 | | | | 6,270 | (2) | | | 76,181 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| D. C. Parrini | | | 15,900 | | | | 0 | | | | 12.95 | | | | 12/18/10 | | | | 3/9/05 | | | | 4,933 | (1) | | | 45,877 | | | | 15,900 | | | | — | | | | 12.95 | | | | 12/18/10 | | | | 6/7/06 | | | | 4,533 | (1) | | | 55,076 | |
| | | | 12,300 | | | | 24,600 | | | | 15.94 | (5) | | | 03/07/17 | | | | 6/7/06 | | | | 9,066 | (1) | | | 84,314 | | | | 26,400 | | | | 12,300 | | | | 15.94 | (5) | | | 03/07/17 | | | | 3/7/07 | | | | 5,200 | (2) | | | 63,180 | |
| | | | 14,267 | | | | 28,533 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/7/07 | | | | 5,200 | (2) | | | 48,360 | | | | 28,533 | | | | 14,267 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/7/07 | | | | 833 | (3) | | | 10,121 | |
| | | | 0 | | | | 45,760 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/7/07 | | | | 1,666 | (3) | | | 15,494 | | | | 15,254 | | | | 30,506 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/5/08 | | | | 6,440 | (2) | | | 78,246 | |
| | | | | | | | | | | | | | | | | | | | 3/5/08 | | | | 6,440 | (2) | | | 59,892 | | | | — | | | | 169,510 | | | | 9.91 | (8) | | | 05/05/19 | | | | 5/5/09 | | | | 10,510 | (2) | | | 127,696 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| M. Rapp | | | 4,134 | | | | 8,266 | | | | 15.94 | (5) | | | 03/07/17 | | | | 8/1/06 | | | | 3,466 | (1) | | | 32,234 | | |
| | | | 4,800 | | | | 9,600 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/7/07 | | | | 1,600 | (2) | | | 14,880 | | |
| | | | 0 | | | | 15,390 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/5/08 | | | | 2,170 | (2) | | | 20,181 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| W. T. Yanavitch II | | | 4,000 | | | | 8,000 | | | | 15.94 | (5) | | | 03/17/17 | | | | 5/16/05 | | | | 4,667 | (1) | | | 43,403 | | |
| D. Mukherjee | | | | 6,467 | | | | 3,233 | | | | 15.94 | (5) | | | 03/07/17 | | | | 6/6/06 | | | | 1,167 | (1) | | | 14,179 | |
| | | | 4,634 | | | | 9,266 | | | | 14.78 | (6) | | | 12/18/17 | | | | 6/7/06 | | | | 3,600 | (1) | | | 33,480 | | | | 7,467 | | | | 3,733 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/7/07 | | | | 1,200 | (2) | | | 14,580 | |
| | | | 0 | | | | 14,880 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/7/07 | | | | 1,700 | (2) | | | 15,810 | | | | 3,990 | | | | 7,980 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/7/07 | | | | 313 | (3) | | | 3,803 | |
| | | | | | | | | | | | | | | | | | | | 3/7/07 | | | | 1,042 | (3) | | | 9,691 | | | | — | | | | 74,870 | | | | 9.91 | (8) | | | 03/05/19 | | | | 3/5/08 | | | | 1,680 | (2) | | | 20,412 | |
| | | | | | | | | | | | | | | | | | | | 3/5/08 | | | | 2,090 | (2) | | | 19,437 | | | | | | | | | | | | | | | | | | | | 5/5/09 | | | | 4,640 | (2) | | | 56,376 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| M. Rapp | | | | 8,267 | | | | 4,133 | | | | 15.94 | (5) | | | 03/07/17 | | | | 8/1/06 | | | | 1,733 | (1) | | | 21,056 | |
| | | | | 9,600 | | | | 4,800 | | | | 14.78 | (6) | | | 12/19/17 | | | | 3/7/07 | | | | 1,600 | (2) | | | 19,440 | |
| | | | | 5,130 | | | | 10,260 | | | | 13.44 | (7) | | | 03/05/18 | | | | 3/5/08 | | | | 2,170 | (2) | | | 26,366 | |
| | | | | — | | | | 56,890 | | | | 9.91 | (8) | | | 03/05/19 | | | | 5/5/09 | | | | 3,860 | (2) | | | 46,899 | |
| | | |
| | | |
| |
| (1) | Represents RSUs which vest ratably, with one third of the units vesting on each December 31st of the second, third and fourth full year after theythe RSUs are awarded, with all shares delivered at the time of final vesting. |
| |
| (2) | Represents RSUs which vest ratably, with one third of the units vesting on each anniversarythe third, fourth and fifth anniversaries of the grant date of the second, third and fourth full year after they are awarded,RSUs, with all shares delivered at the time of final vesting. |
| |
| (3) | Represents RSUs which vest ratably, with one third of the units vesting on each anniversary date of the first, second and third full year after they are awarded,anniversaries of the grant date of the RSUs, with all shares delivered at the time of final vesting. |
| |
| (4) | Calculated based on the closing price of the Company’s common stock on December 31, 20082009 ($9.30)12.15). |
| |
| (5) | Represents SOSARs granted on March 7, 2007 which vest ratably, with one third of the grant vesting on each anniversary date of the first, second and third full year after they are awarded.anniversaries of the grant date of the SOSARs. All SOSARs are settled in shares of the Company’s common stock. See the discussion of SOSARs in “Compensation Discussion & Analysis” beginning on page 2322 of this proxy statement. |
| |
| (6) | Represents SOSARs granted on December 19, 2007 which vest ratably, with one third of the grant vesting on each anniversary date of the first, second and third full year after they are awarded.anniversaries of the grant date of the SOSARs. All SOSARs are settled in shares of the Company’s common stock. See the discussion of SOSARs in “Compensation Discussion & Analysis” beginning on page 2322 of this proxy statement. |
| |
| (7) | Represents SOSARs granted on March 3, 2008 which vest ratably, with one third of the grant vesting on each anniversary date of the first, second and third full year after they are awarded.anniversaries of the grant date of the SOSARs. All SOSARs are settled in shares of the Company’s common stock. See the discussion of SOSARs in “Compensation Discussion & Analysis” beginning on page 2322 of this proxy statement. |
|
| (8) | Represents SOSARs granted on May 5, 2009 which vest ratably, with one third of the grant vesting on the first, second and third anniversaries of the grant date of the SOSARs. All SOSARs are settled in shares of the Company’s common stock. See the discussion of SOSARs in “Compensation Discussion & Analysis” beginning on page 22 of this proxy statement. |
-31--30-
OPTION EXERCISES AND STOCK VESTED
The following table sets forth information concerning options exercised and stock vested during fiscal 2008:2009:
| | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards | | | | | | | | | | | | | | | | | |
| | | Number of Shares
| | Value Realized
| | Number of Shares
| | Value Realized on
| | | Option Awards | | Stock Awards | |
| | | Acquired on Exercise
| | on Exercise
| | Acquired on Vesting
| | Vesting
| | | Number of Shares
| | Value Realized
| | Number of Shares
| | Value Realized on
| |
| | | (#) | | ($) | | (#) | | ($) | | | Acquired on Exercise | | on Exercise | | Acquired on Vesting | | Vesting | |
| | | | | |
| |
| G. H. Glatfelter II | | | 0 | | | | 0 | | | | 32,717 | (1) | | | 304,268 | | | | — | | | $ | — | | | | 48,200 | (1) | | $ | 585,630 | |
| J. P. Jacunski | | | 0 | | | | 0 | | | | 7,196 | (2) | | | 66,923 | | | | — | | | | — | | | | 12,426 | (2) | | | 150,976 | |
| D. C. Parrini | | | 0 | | | | 0 | | | | 13,799 | (3) | | | 128,331 | | | | — | | | | — | | | | 25,534 | (3) | | | 310,238 | |
| D. Mukherjee | | | | — | | | | — | | | | 5,058 | (4) | | | 61,458 | |
| M. Rapp | | | 0 | | | | 0 | | | | 1,733 | (4) | | | 16,117 | | | | — | | | | — | | | | 3,467 | (5) | | | 42,124 | |
| W. T. Yanavitch II | | | 0 | | | | 0 | | | | 6,988 | (5) | | | 64,988 | | |
| |
| | |
| | (1) | Represents 13,33428,300 shares, the final tranche of an award granted on April 4, 2004,March 9, 2005, and which lapsed and was paid out on December 31, 2008, 9,4332009, 17,400 shares that vested on December 31, 2008,2009, but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2010, and 2,500 shares that vested on March 7, 2009, but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on March 7, 2010. |
|
| (2) | Represents 5,900 shares, the final tranche of an award granted on March 9, 2005, and 9,950which lapsed and was paid out on December 31, 2009, 5,067 shares that vested on December 31, 20082009, but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2010, and 1,459 shares that vested on March 7, 2009 but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on March 7, 2010. |
| |
| | (2)(3) | Represents 1,96714,800 shares, the final tranche of an award granted on April 4, 2004,March 9, 2005, and which lapsed and was paid out on December 31, 2008, 1,9672009, 49,067 shares that vested on December 31, 2008,2009, but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2010, and 1,667 shares that vested on March 7, 2009 but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on March 7, 2010. |
|
| (4) | Represents 2,100 shares, the final tranche of an award granted on March 9, 2005, and 3,262which lapsed and was paid out on December 31, 2009, 2,333 shares that vested on December 31, 20082009, but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2010. |
|
| (3) | Represents 3,500 shares, the final tranche of an award granted on April 4, 2004,2010, and which lapsed and was paid out on December 31, 2008, 4,933625 shares that vested on December 31, 2008,March 7, 2009 but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2009, and 5,366March 7, 2010. |
|
| (5) | Represents 3,467 shares that vested on December 31, 2008 but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2010. |
|
| (4) | Represents 1,733 shares that vested on December 31, 20082009 but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2010 |
| |
| | (5)(6) | Represents 4,66714,000 shares, the final tranche of an award granted on March 9, 2005, and which lapsed and was paid out on December 31, 2009, 3,600 shares that vested on December 31, 2008,2009 but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2009,2010 and 2,3211,042 shares that vested on December 31, 2008March 7, 2009 but to which, pursuant to terms of the award, delivery is deferred until the final tranche of the award vests on December 31, 2010.March 7, 2010 . |
-32--31-
PENSION BENEFITS
The following table sets forth information concerning pension benefits during fiscal year 2008.2009.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Present Value
| | | | | | | | | Present Value
| | | |
| | | | | Number of Years
| | of Accumulated
| | Payments During
| | | | | Number of Years
| | of Accumulated
| | Payments During
| |
| | | | | Credited Services
| | Benefit
| | Last Fiscal Year
| | | | | Credited Services
| | Benefit
| | Last Fiscal Year
| |
| Name | | Plan Name | | (#) | | ($)(1) | | ($) | | | Plan Name | | (#) | | ($)(1) | | ($) | |
| | | | | |
| |
| G. H. Glatfelter II | | Pension Plan | | | 32 | | | | 707,000 | | | | 0 | | | Pension Plan | | | 33 | | | | 790,000 | | | | — | |
| | | SERP | | | 32 | | | | 2,925,000 | | | | 0 | | | SERP | | | 33 | | | | 4,501,000 | | | | — | |
| J. P. Jacunski | | Pension Plan | | | 5 | | | | 42,000 | | | | 0 | | | Pension Plan | | | 6 | | | | 56,000 | | | | — | |
| | | SMPP | | | 5 | | | | 12,000 | | | | 0 | | | SMPP | | | 6 | | | | 22,000 | | | | — | |
| D. C. Parrini | | Pension Plan | | | 11 | | | | 119,000 | | | | 0 | | | Pension Plan | | | 12 | | | | 137,000 | | | | — | |
| | | SERP | | | 11 | | | | 328,000 | | | | 0 | | | SERP | | | 12 | | | | 549,000 | | | | — | |
| D. Mukherjee | | | Pension Plan | | | 12 | | | | 82,000 | | | | — | |
| | | | SMPP | | | 12 | | | | 33,000 | | | | — | |
| M. Rapp | | Pension Plan | | | 5 | (2) | | | 0 | | | | 0 | | | Pension Plan | | | N/A | | | | N/A | | | | N/A | |
| | | Contractual Agreement | | | 5 | (2) | | | 232,000 | (2) | | | 0 | | |
| W. T. Yanavitch II | | Pension Plan | | | 9 | | | | 101,000 | | | | 0 | | |
| | | SMPP | | | 9 | | | | 29,000 | | | | 0 | | | Contractual Agreement | | | 7 | (2) | | | 339,0002 | | | | — | |
| |
| | |
| | (1) | For all NEOs except Mr. Rapp,Glatfelter’s present value calculations arecalculation is based on a 6.25%6.3% discount rate for the SERP and a 0.00%6.2% discount rate for the Pension Plan, a 0% postretirement COLA rate, RP-2000 mortality projected to 2010, age 62 retirement, and no pre-retirement decrements. Mr. Jacunski’s present value calculation is based on a 5.9% discount rate for the SMPP and a 6.2% discount rate for the Pension Plan, a 0% postretirement COLA rate, RP-2000 mortality projected to 2010, age 62 retirement for the SMPP and age 65 retirement for the Pension Plan, and no pre-retirement decrements. Mr. Parrini’s present value calculation is based on a 6.3% discount rate for the SERP and a 6.2% discount rate for the Pension Plan, a 0% postretirement COLA rate, RP-2000 mortality projected to 2010, age 62 retirement for the SERP and age 65 retirement for the Pension Plan, and no pre-retirement decrements. Mr. Mukherjee’s present value calculation is based on a 5.9% discount rate for the SMPP and a 6.2% discount rate for the Pension Plan, a 0% postretirement COLA rate, RP-2000 mortality projected to 2010, age 62 retirement, and no pre-retirement decrements. Mr. Rapp’s present value calculation is based on a 6.25%5.9% discount rate, a 2.00%2% postretirement COLA rate, Heubeck Richtafeln 2005G mortality, age 65 retirement, and no pre-retirement decrements.decrements |
| | |
| | (2) | Mr. Rapp’s years of credited service include four years of pre-participation service that were granted under his contractual agreement. The portion of the present value of Mr. Rapp’s accumulated benefit attributable to this four-year service credit is $155,000.$194,000. |
As of December 31, 2008, neither Mr. Jacunski nor Mr. Yanavitch2009, only Messrs. Glatfelter and Parrini were eligible for the FAC Pension (in addition to the qualified pension plan). Messrs. Jacunski and therefore, each are entitledMukherjee were eligible for the Early Retirement Supplement (in addition to receivethe qualified pension plan). Mr. Rapp was eligible for a pension benefit as stipulated under the Pension Plan, together with, as applicable, the Restoration Pension and the MIP Adjustment Supplement.his employment agreement. A description of the various plans follows.
What employee retirement plans has the Company established for Directors and Executive Officers?
| | | | | | | | | |
| | | | | SERP | | |
| | | Pension
| | | | FAC
| | |
| | | Plan | | Restoration | | Pension | | SMPP |
| |
| |
| G. H. Glatfelter II | | √ | | √ | | √ | | |
| J. P. Jacunski | | √ | | | | | | √ |
| D. C. Parrini | | √ | | √ | | √ | | |
| D. Mukherjee | | √ | | | | | | √ |
| M. Rapp | | | | | | | | |
W. T. Yanavitch II | | √ | | | | | | √ |
| |
| |
As of December 31, 2008,2009, all of the NEOs except Mr. Rapp were eligible for the P. H. Glatfelter Company Retirement Plan for Salaried Employees (the “Qualified Pension Plan”). In addition, Mr. Glatfelter and Mr. Parrini were eligible for both the FAC (final average compensation) and Restoration portions of the Company’s Supplemental Executive Retirement Plan, and Mr. Jacunski and Mr. YanavitchMukherjee were each eligible for the Early Retirement Supplement portion of the Company’s Supplemental Management Pension Plan. Finally, Mr. Rapp was eligible for a pension benefit through a special contractual agreement between him and the Company.
The following describes all of these benefit plans/arrangements in further detail.
Qualified Pension Plan. All eligible salaried employees of the Company participate in the Qualified Pension Plan. This is a tax-qualified defined benefit pension plan.
Salaried employees who were plan participants on January 1, 20082007 are eligible for a normal retirement pension beginning at age 65 equal to:
| | |
| | • | 1.4% of the participant’s final average compensation multiplied by his or her years of benefit service (to a maximum of 25), plus |
| |
| | • | 0.5% of final average compensation for each year of benefit service in excess of 25. |
Final average compensation generally means the participant’s highest average compensation over any consecutive five year period which spans the ten year period preceding the year of the participant’s retirement, during which the participant had the highest average compensation. However, if a participant does not have five consecutive calendar years of compensation, then final average compensation is determined
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by dividing compensation over the entire period of participation by the number of years (and fractions of years) in such period.
Eligible compensation generally includes salary as listed onin the Summary Compensation Table plus paid bonus (to a maximum of the IRS limit, which was $230,000$245,000 for 2008)2009). Eligible compensation, however, does not include any Management Incentive PlanMIP bonus that the participant electsany NEO had elected to defer. In 2005 the Company eliminated the deferral feature for MIP bonuses.
The Qualified Pension Plan provides for early retirement benefits for participants who retire at or after age 55 and prior to age 65. The amount of the monthly early retirement pension is reduced on account of its early commencement, at
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the rate of 2.5% per year. Early retirees at or after age 62 with 30 or more years of benefit service can receive an unreduced early retirement pension. Mr. Glatfelter is currently eligible for a reduced early retirement benefit under the Qualified Pension Plan.
The foregoing benefit formula based on final average compensation does not apply to new hires on and after January 1, 2007, who instead participate under a new “cash balance” formula. None of the listed executives participate under the new benefit formula.
Qualified Pension Plan interests generally vest upon the first to occur of five years of service or the employee reaching 55 years of age. As of December 31, 2006, however, the plan was amended to fully vest all participants on that date. All of the listed executives (except Mr. Rapp, who does not participate in the Qualified Pension Plan) became fully vested on that date.
Supplemental Executive Retirement Plan. The Company has a Supplemental Executive Retirement Plan (“SERP”) consisting of two benefits, either or both of which are available to those management and executive employees who have been selected by the Company’s Compensation Committee for participation therein.
The first benefit, known as the “Restoration Pension,” provides an additional pension benefit based on the participant’s pension benefit earned under the terms of the Qualified Pension Plan, which is intended to restore that portion of the Qualified Pension Plan’s benefit that cannot be paid from that plan due to legal limitations on the compensation and total benefits payable under the Qualified Pension Plan. Participants may receive the Restoration Pension in a single sum or in any form permitted under the Qualified Pension Plan, as elected by the participant at the time he or she first becomes a participant. Mr. Glatfelter and Mr. Parrini have both elected to receive their Restoration Pensions in a single sum. Effective February 10, 2010, the Committee approved a revision to the Restoration Pension Benefit which revised the procedure for approval of the executives who will be eligible for this benefit. Subject to approval of the Committee, employees will generally be eligible for the Restoration Pension Benefit if they have at least one year of pensionable compensation in excess of the Code’s annual compensation limit for qualified pension plans.
The second benefit, known as the “FAC Pension,” pays a benefit equal to 2% of the participant’s final average compensation (as defined below) multiplied by the participant’s years of benefit service under the Qualified Pension Plan. This calculated amount is then offset by the actuarial equivalent value of the participant’s benefits under the Qualified Pension Plan, as well as certain Company-sponsored nonqualified defined benefit pension arrangements (including the Restoration Pension if applicable).
Final average compensation means the annualized average of the participant’s eligible compensation for the sixty (60) calendar months immediately preceding his or her retirement. Eligible compensation generally means the salary and annual incentive bonus amounts listed in the Summary Compensation Table.
The FAC Pension can also be paid on an early retirement basis as early as age 55, but reduced by 2.5% for each year by which the early benefit commencement precedes the participant’s attainment of age 62. Mr. Glatfelter is currently eligible for an early-retirement FAC Pension benefit.
The FAC Pension is payable following the participant’s retirement at or after age 62 in the form of a joint and 75% survivor annuity with the participant’s spouse or, if so requested by the participant and approved by the Compensation Committee, as a single sum. Mr. Glatfelter and Mr. Parrini have each elected to receive their FAC Pensions in a single sum (subject to Compensation Committee approval). A survivor benefit is also payable under the FAC Pension to the participant’s surviving spouse if the participant dies before his or her benefit commencement date.
Distribution of any SERP benefit (Restoration or FAC) to a participant who is a “key employee” under Internal Revenue Service (“IRS”) rules must, under Section 409A of the Internal Revenue Code, of 1986, as amended (the “IRC”), be delayed until six months following retirement or termination.
Supplemental Management Pension Plan. The Company has a Supplemental Management Pension Plan (“SMPP”) consisting of two benefits.
The first benefit, known as the MIP Adjustment Supplement provides an additional pension benefit based on the participant’s pension benefit earned under the terms of the Qualified Pension Plan (“Pension Benefit”), taking into account any Management Incentive Plan bonus that the participant elected to defer. (Prior to 2005, the terms of the Company’s Management Incentive Plan (“MIP”), permitted a participant to defer a portion of his or her MIP bonus. Such deferred MIP bonus is not included in determining the participant’s final average compensation under the Qualified Pension Plan.)
The second benefit, known as the Early Retirement Supplement, provides an additional pension benefit based on
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the participant’s Pension Benefit. In order to be eligible for this benefit, an otherwise eligible management employee who retires on or after age 55, must elect to defer commencement of his or her Pension Benefit until three years after retirement from the Company (or until his or her normal retirement date under the Qualified Pension Plan, if earlier). The participant is then eligible to receive monthly “bridge” pension payments from the date of his or her retirement until the deferred commencement date of his or her Pension Benefit. The monthly amount of the eligible participant’s bridge payments will be equal to the monthly Pension Benefit amount, if payable in the form of a single life annuity beginning as of the deferred benefit commencement date chosen by the participant under the Qualified Pension Plan.
Distribution of any SMPP benefit (MIP Adjustment Supplement or Early Retirement Supplement) to a participant who is a “key employee” under IRS rules must, under IRC Section 409A, be delayed until six months following retirement or termination. Also, it is anticipated that changes will be made to the Early Retirement Supplement benefit to
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address Section 409A compliance before final IRS guidance takes effect.
Mr. Rapp’s Pension Agreement. Mr. Rapp is covered under a special pension arrangement with the Company that was entered into during 2007. Under this arrangement, he is eligible for a normal retirement benefit after having attained age 65.
Mr. Rapp’s normal retirement benefit is based on 1.5% of his “pensionable income” multiplied by his years of service (including the pre-service period from August 1, 2002 through July 31, 2006). “Pensionable income” is the average of his base pay plus bonus for the five years immediately preceding his retirement.
Mr. Rapp is eligible for an early retirement benefit under his special arrangement after reaching age 60. His early retirement benefit equals his normal retirement benefit reduced by 2.5% per year.
Mr. Rapp’s normal form of benefit is a 60%joint-and-survivor annuity.
NONQUALIFIED DEFERRED COMPENSATION
The following table sets forth information concerning nonqualified deferred compensation of the NEOs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Aggregate
| | | | | | | | | | | Aggregate
| | | | | |
| | | Executive
| | Registrant
| | Earnings
| | Aggregate
| | Aggregate
| | | Executive
| | Registrant
| | Earnings
| | Aggregate
| | Aggregate
| |
| | | Contributions in
| | Contributions in
| | in Last FY
| | Withdrawals/
| | Balance
| | | Contributions in
| | Contributions in
| | in Last FY
| | Withdrawals/
| | Balance
| |
| Name | | Last FY | | Last FY | | (1) | | Distributions | | at Last FYE | | | Last FY | | Last FY | | (1) | | Distributions | | at Last FYE | |
| | | | | |
| |
| G.H. Glatfelter II | | $ | 0 | | | $ | 0 | | | $ | 9,200 | | | | | | | $ | 148,966 | | |
| George H. Glatfelter II | | | $ | — | | | $ | — | | | $ | 6,700 | | | $ | — | | | $ | 155,666 | |
| |
| | |
| | (1) | Of the $9,200$6,700 in interest earned in 2008, $1,7192009, $-0- was reported as above-market earnings on deferred compensation in the “SummarySummary Compensation Table”Table on page 2827 of this proxy statement. |
The Nonqualified Deferred Compensation table above provides information about deferral elections under the P.H. Glatfelter Company Management Incentive Plans, effective January 1, 1982, as amended (the “1982 MIP”). Pursuant to the deferred compensation component of the 1982 MIP, certain executive officers were entitled to defer receipt of any portion of the incentive awards made under the 1982 MIP and irrevocably elect a time for future payment in accordance with deferral terms and options established by the Compensation Committee. Mr. Glatfelter, who deferred payment of an award he received under the MIP for the 1985 plan year until 2016, is the only NEO who has a deferred award under the 1982 MIP. Under the 1982 MIP, the amount of deferred awards is adjusted by crediting the cumulative deferred awards with interest at the end of each calendar quarter. Pursuant to the 1982 MIP, for each calendar quarter, Mr. Glatfelter’s deferred award is credited with interest earned for the quarter at an interest rate equal to the prime rate on the last business day of the quarter at the Morgan Guaranty Trust Company of New York. If Mr. Glatfelter’s deferred award is paid during a quarter, interest on the accumulated award will be accrued at the rate prevailing at the end of the previous quarter. Mr. Glatfelter’s deferred award will be paid within 30 days of the date stipulated on his election form. The payment of Mr. Glatfelter’s deferred award may be accelerated if necessary upon the approval of the Board’s Compensation Committee. However, if Mr. Glatfelter separates from the Company, the deferred award will be paid as stipulated on his election form. If Mr. Glatfelter dies before all awards are paid out, the unpaid amounts will be paid in a lump sum to his designated beneficiary.
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
As described on page 3924 of this proxy statement, the NEOs have each executed Change In Control Employment Agreements with the Company. The information below describes and quantifies compensation that would become payable to NEOs under those agreements in the event of termination of the employment of the NEOs under several different circumstances. The amounts shown assume that termination was effective as of December 31, 2008,2009, and include amounts earned through such time and estimates of the amounts that would be paid to the NEOs upon their termination. The actual amounts to be paid can only be determined at the time of a NEO’s separation from the Company.
Termination Not in Connection with a Change in Control
Severance. In addition to the items described below, payments and benefits provided on a non-discriminatory basis to salaried employees generally and in the change in control context, discussed below, the Compensation Committee or the independent Directors of the Board may authorize additional severance benefits, although they are not obligated to do so. In the past, the Company has agreed to provide additional severance benefits to departing executive officers in order to enter into definitive termination agreements on terms desirable to the Company.
Pension Benefits. A general description of each pension plan in which the NEOs participate, the years of service credited and the present value of each NEO’s accumulated pension benefit are included on page 3324 of this proxy statement. In addition to the Pension Plan, Mr. Glatfelter and Mr. Parrini each are eligible participants under the SERP and Mr. Jacunski and Mr. YanavitchMukherjee are each eligible participants under the SMPP. Neither the SERP nor the SMPP are available on a non-discriminatory basis to salaried employees generally.
SMPP. In the event of termination under any circumstance on December 31, 2008,2009, neither Mr. Jacunski nor Mr. YanavitchMukherjee would be entitled to an Early Retirement Supplement under the SMPP because they would have been under the age of 55 at the time of termination. Neither Mr. Jacunski nor Mr. YanavitchMukherjee has accrued any benefit under the MIP Adjustment Supplement.
SERP. The table below sets forth the various monthly payments that Mr. Glatfelter and Mr. Parrini (or, in certain circumstances, their spouses) would be entitled to receive for their lifetimes upon termination, as of December 31, 2008,2009, under several different circumstances.
TERMINATION PAYMENTS UNDER SERP
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Termination Other
| | | | | | | Termination Other
| | | | |
| | | than Upon Death or
| | Termination as a
| | | | | than Upon Death or
| | Termination as a
| | |
| Name | | Disability | | Result of Death (1) | | Disability (2) | | | Disability | | Result of Death (1) | | Disability (2) |
| | | | |
| |
| G. H. Glatfelter II | | $ | 23,000 | (3) | | $ | 18,000 | | | $ | 26,000 | | | $ | 23,000 | (3) | | $ | 18,000 | | | $ | 26,000 | |
| | | |
| J. P. Jacunski | | | | — | | | | — | | | | — | |
| D. C. Parrini | | | 0 | (4) | | $ | 2,000 | | | $ | 6,000 | | | | — | (4) | | | 2,000 | | | | 6,000 | |
| D. Mukherjee | | | | — | | | | — | | | | — | |
| |
| |
| (1) | Represents survivor benefit payable to the NEO’s spouse for her lifetime. |
| |
| (2) | Represents FAC pension benefit payable beginning upon reaching the age of 62. The Compensation Committee has the authority to commence the FAC Pension when the SERP participant reaches 55, if the participant requests, but the monthly FAC Pension amount would be reduced at the rate of 2.5% per year for each year between the participant’s age 62 normal retirement date and his early benefit commencement date. |
| |
| (3) | This represents payment in the form of a joint and 75% surviving spouse annuity. In the event of death following the commencement of benefits, the surviving spouse receives monthly payments for her lifetime in an amount equal to 75% of the monthly benefit payable to the NEO. |
| |
| (4) | Mr. Parrini was under 55 years of age on December 31, 2008,2009, so voluntary termination would result in his forfeiture of any benefits under the SERP. This represents payment in the form of a joint and 75% surviving spouse annuity. In the event of death following benefit commencement, the surviving spouse receives monthly payments for her lifetime in an amount equal to 75% of the monthly benefit payable to the NEO. |
If a SERP participant becomes an employee or officer of a competitor of the Company or uses or discloses confidential information of the Company (except as required by the SERP participant’s duties as an employee of the Company), then all benefits under the SERP are forfeited.
Deferred Compensation. As permitted by the Former MIP, Mr. Glatfelter has deferred his receipt of the payment of an award he previously earned under the MIP until 2016. The last column of the “NonqualifiedNonqualified Deferred Compensation”Compensation table on page 3534 of this proxy statement reports Mr. Glatfelter’s aggregate balance at December 31, 2008.2009. Mr. Glatfelter, or his beneficiary in the event of his death, is entitled to receive the amount in his account in the event of his termination. None of the other NEOs have deferred compensation.
2005 Management Incentive Plan.The bonuses paid to NEOs and other executives in 20082009 under the 2005 Management Incentive Plan were subject to a performance period that ended on December 31, 2008.2009. If a NEO had been terminated on December 31, 20082009 and the performance goals to which the 2009 awards were subject
-36--35-
to which the 2008 awards were subject had been achieved, then the NEO would be entitled to receive payment of his or her full bonus under the 2005 Management Incentive Plan. If a NEO is terminated during a performance period that has been set for a bonus granted under the 2005 Management Incentive Plan, then the NEO forfeits his or her award, except that in the case of termination of employment due to the retirement, disability or death of a NEO, such award will be prorated to reflect the period of service.
Stock Options. With regard to the outstanding stock options held by Mr. Glatfelter and Mr. Parrini, if Mr. Glatfelter or Mr. Parrini retires prior to the expiration of the stock options, those options exercisable on the date of his retirement will remain exercisable until the first to occur of the third anniversary of his retirement or the expiration of the stock options. In the event that Mr. Glatfelter or Mr. Parrini dies after retirement, options exercisable on the date of his death will remain exercisable by his legal representative until the first to occur of the first anniversary of the date of his death or the expiration of such options. Based on a $9.30$12.15 closing price of the Company’s common stock on December 31, 2008 (the last trading day of 2008),2009, Mr. Glatfelter and Mr. Parrini would have realized a value of $0$98,580 and $0$12,720 had they each retired on December 31, 20082009 and immediately exercised all of theirin-the-money options.
SOSARs & RSUsRSUs..
RSUs. Each of the NEOs holds RSUs granted under the Plan. If the NEO ceases to be an employee of the Company for any reason (voluntary or involuntary), other than death, disability or retirement, then unvested RSUs are forfeited. If, subsequent to vesting of the RSUs, the NEO ceases to be an employee for any reason other than as a result of termination for cause (as defined in the RSU award certificate), death, disability or retirement, the restrictions with respect to the vested RSUs shall continue until they would otherwise have lapsed if such employment had not terminated. However, if, subsequent to vesting of the RSUs, the NEO is terminated for cause, all outstanding RSUs, whether vested or unvested, are forfeited. Upon the death, disability or retirement of an NEO while employed by the Company, an amount of unvested RSUs shall vest equal to a percentage, the numerator of which equals the number of days that has elapsed as of the date of death or retirement or the date on which such disability commenced in the vesting restriction period for each1/3 tranche, and the denominator of which equals the total number of days in each such vesting restriction period, and the Company will issue in the NEO’s name or in the name of the NEO’s legal representatives, beneficiaries or heirs, as the case may be, in payment for the RSUs with respect to which all restrictions have lapsed that number of shares of the Company’s common stock equal to the number of RSUs with respect to which all restrictions have lapsed.
All unvested RSUs on the date of such death, disability or retirement will be forfeited. The table below sets forth the value of RSUs for which vesting accelerates based upon termination as a result of disability, death or retirement on December 31, 20082009 (calculated based on the closing price of the Company’s common stock on December 31, 20082009 ($9.30))12.15):
| | | | | | | | | |
| | | Disability/Death/
| | Disability/ Death/
| |
| | | Retirement | | Retirement | |
| | | | |
| |
| G. H. Glatfelter II | | $ | 241,319 | | | $ | 211,410 | |
| J. P. Jacunski | | | 76,321 | | | | 61,564 | |
| | | | | | |
| D. C. Parrini | | | 137,997 | | | | 110,164 | |
| D. Mukherjee | | | | 28,346 | |
| M. Rapp | | | 31,655 | | | | 42,124 | |
| W. T. Yanavitch II | | | 74,522 | | |
| |
SOSARs. Each of the NEOs holds SOSARs granted under the Plan. If an NEO ceases to be an employee of the Company for reasons other than death, disability, retirement or involuntary termination for cause (as defined in the SOSAR award certificate) (an “Other Termination”), then, for a period of ninety days following such Other Termination, the NEO may exercise any SOSARs that vested prior to such Other Termination. All unvested SOSARs on the date such Other Termination will be immediately and irrevocably forfeited. If the Company terminates the NEO’s employment for cause, then all outstanding SOSARs, whether vested or unvested, will be immediately and irrevocably forfeited. Upon the death, disability or retirement of an NEO while employed by the Company, an amount of unvested SOSARs shall vest equal to a percentage, the numerator of which equals the number of days that have elapsed as of the date of death or retirement or the date on which such disability commenced in the vesting restriction period for each1/3 tranche, and the denominator of which equals the total number of days in each such vesting restriction period and all vested SOSARs will be exercisable for three years from the date of such death, disability or retirement. In the event that the vesting set forth above yields a fractional number of SOSARs, the number of SOSARs subject to vesting in any given year will be rounded down to the nearest whole number of SOSARs. All unvested SOSARs (after giving effect to the foregoing sentence) on the date of such death, disability or retirement will be immediately and irrevocably forfeited. The exercise price for all such SOSARs which have been granted to the NEOs and which vested on or prior to December 31, 2009, exceeded the closing price of the Company’s common stock at December 31, 20082009 ($9.30)12.15). Accordingly, thereif any NEO would be nohave died, become disabled or retired during 2009, the NEO would not have realized any value offrom SOSARs for which vesting accelerates as a result of death, disability or retirement for any NEO.
would have become vested due to such events.
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Change in Control
Set forth in the table below are the amounts of compensation payable to each NEO upon termination by the Company for cause, termination by the NEO without good reason, termination by the NEO for good reason, termination by the Company other than for cause, death or disability, and termination in the event of disability or death of the NEO. The amounts set forth in the table below assume a change in control as of December 31, 2008,2009, and termination of each executive upon the change in control.
Potential Payments Upon a Termination of Employment Following a Change in Control
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Cash Payment of
| | Cash Payment of
| | | | | | Value of
| | | | | | | Cash Payment of
| | Cash Payment of
| | | | | | Value of
| | | |
| | | Cash
| | Present Value of
| | Unvested Section
| | Present Value of
| | | | Unvested
| | | | | Cash
| | Present Value of
| | Unvested Section
| | Present Value of
| | | | Unvested
| | | |
Executive/Type of
| | Severance
| | Incremental Pension
| | 401(k) Company
| | Welfare Benefits
| | Excise Tax
| | SOSARs &
| | | | | Severance
| | Incremental Pension
| | 401(k) Company
| | Welfare Benefits
| | Excise Tax
| | SOSARs &
| | | |
| Termination | | Payment | | Benefit (1) | | Match (2) | | Continuation (3) | | Gross-Up | | RSUs (4) | | Total (5) | | | Payment ($) | | Benefit ($)(1) | | Match ($)(2) | | Continuation ($)(3) | | Gross-Up ($) | | RSUs ($)(4) | | Total ($)(5) | |
| | | | | |
| |
| | | |
| George H. Glatfelter II | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Death | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 425,317 | | | $ | 425,317 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,088,619 | | | $ | 1,088,619 | |
| | | |
| Disability | | | — | | | | — | | | | — | | | | — | | | | — | | | | 425,317 | | | | 425,317 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,088,619 | | | $ | 1,088,619 | |
| | | |
| Termination by Company for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | |
| Termination by Executive Without Good Reason | | | — | | | | — | | | | — | | | | — | | | | — | | | | 425,317 | | | | 425,317 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,088,619 | | | $ | 1,088,619 | |
| | | |
| Termination by Executive for Good Reason/by Company Other Than for Cause, Death, Disability | | | 4,415,960 | | | | — | | | | — | | | | 46,242 | | | | 1,621,467 | | | | 425,317 | | | | 6,508,986 | | | $ | 4,820,349 | | | $ | — | | | $ | — | | | $ | 48,194 | | | $ | 1,892,807 | | | $ | 1,088,619 | | | $ | 7,849,970 | |
| | | |
| John P. Jacunski | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Death | | | — | | | | — | | | | — | | | | — | | | | — | | | | 143,415 | | | | 143,415 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 426,634 | | | $ | 426,634 | |
| | | |
| Disability | | | — | | | | — | | | | — | | | | — | | | | — | | | | 143,415 | | | | 143,415 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 426,634 | | | $ | 426,634 | |
| | | |
| Termination by Company for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | |
| Termination by Executive Without Good Reason | | | — | | | | — | | | | — | | | | — | | | | — | | | | 143,415 | | | | 143,415 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 426,634 | | | $ | 426,634 | |
| | | |
| Termination by Executive for Good Reason/by Company Other Than for Cause, Death, Disability | | | 1,348,325 | | | | — | | | | — | | | | 29,004 | | | | 499,443 | | | | 143,415 | | | | 2,020,187 | | | $ | 1,460,080 | | | $ | — | | | $ | — | | | $ | 28,357 | | | $ | 583,444 | | | $ | 426,634 | | | $ | 2,498,515 | |
| | | |
| Dante C. Parrini | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Death | | | — | | | | — | | | | — | | | | — | | | | — | | | | 253,937 | | | | 253,937 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 714,022 | | | $ | 714,022 | |
| | | |
| Disability | | | — | | | | — | | | | — | | | | — | | | | — | | | | 253,937 | | | | 253,937 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 714,022 | | | $ | 714,022 | |
| | | |
| Termination by Company for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | |
| Termination by Executive Without Good Reason | | | — | | | | — | | | | — | | | | — | | | | — | | | | 253,937 | | | | 253,937 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 714,022 | | | $ | 714,022 | |
| | | |
| Termination by Executive for Good Reason/by Company Other Than for Cause, Death, Disability | | | $ | 2,409,063 | | | $ | 891,000 | | | $ | — | | | $ | 43,721 | | | $ | 1,389,874 | | | $ | 714,022 | | | $ | 5,447,680 | |
| | | |
| Debabrata Mukherjee | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Death | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 277,051 | | | $ | 277,051 | |
| | | |
| Disability | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 277,051 | | | $ | 277,051 | |
| | | |
| Termination by Company for Cause | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | |
| Termination by Executive Without Good Reason | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 277,051 | | | $ | 277,051 | |
| | | |
| Termination by Executive for Good Reason/by Company Other Than for Cause, Death, Disability | | | 2,221,449 | | | | 670,000 | | | | — | | | | 41,556 | | | | 1,152,459 | | | | 253,937 | | | | 4,339,401 | | | $ | 935,131 | | | $ | — | | | $ | — | | | $ | 27,507 | | | $ | 414,548 | | | $ | 277,051 | | | $ | 1,654,237 | |
| | | |
| Martin Rapp | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Death | | | — | | | | — | | | | — | | | | — | | | | — | | | | 67,332 | | | | 67,332 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 248,593 | | | $ | 248,593 | |
| | | |
| Disability | | | — | | | | — | | | | — | | | | — | | | | — | | | | 67,332 | | | | 67,332 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 248,593 | | | $ | 248,593 | |
| | | |
| Termination by Company for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | |
| Termination by Executive Without Good Reason | | | — | | | | — | | | | — | | | | — | | | | — | | | | 67,332 | | | | 67,332 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 248,593 | | | $ | 248,593 | |
| Termination by Executive for Good Reason/by Company Other Than for Cause, Death, Disability | | | 1,282,830 | | | | — | | | | — | | | | 32,960 | | | | 459,717 | | | | 67,332 | | | | 1,842,839 | | |
| | | |
| William T. Yanavitch II | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Death | | | — | | | | — | | | | — | | | | — | | | | — | | | | 121,830 | | | | 121,830 | | |
| Disability | | | — | | | | — | | | | — | | | | — | | | | — | | | | 121,830 | | | | 121,830 | | |
| Termination by Company for Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
| Termination by Executive Without Good Reason | | | — | | | | — | | | | — | | | | — | | | | — | | | | 121,830 | | | | 121,830 | | |
| Termination by Executive for Good Reason/by Company Other Than for Cause, Death, Disability | | | 879,673 | | | | — | | | | — | | | | 27,958 | | | | 330,253 | | | | 121,830 | | | | 1,389,714 | | | $ | 1,392,483 | | | $ | — | | | $ | — | | | $ | 34,109 | | | $ | 530,967 | | | $ | 248,593 | | | $ | 2,206,152 | |
| |
| |
| (1) | Represents actuarial present value of unvested retirement plans based on the maximum benefit formula level; present values calculated consistent with calculations in the Pension Benefits table above. |
| |
| (2) | Represents value of unvested portion of Section 401(k) Company match. |
| |
| (3) | Based on current type of coverage and premium levels. |
| |
| (4) | Assumes full vesting and exercise on December 31, 2008.2009. |
| |
| (5) | Does not include payment of present value of vested accrued benefits as listed in the Pension Benefits table, deferred compensation balances as listed in the Nonqualified Deferred Compensation table, or the value of vested options, SOSARs, or RSUs. |
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Change in Control Agreements. As of December 31, 2008,2009, the Company had entered intochange-in-control agreements with each of the NEOs. Under the agreements, each would become entitled to additional payments and benefits if his employment was terminated under certain conditions within two years following a change in control of the Company. Under the agreements, each employee’s employment with the Company would continue for two years from the date of a change in control. During such period, the employee would continue in a position at least equal to the position he held prior to the change in control and shall receive compensation and benefits from the Company at least equal to those paid to him prior to the change in control. In the event of a termination following a change in control, the following benefits would be provided to the NEOs
Termination for Good Reason; Termination By the Company Other than for Cause, Disability or Death. If, within two years following a change in control, the employee’s employment is terminated by the Company other than for cause, death or disability, or is terminated by the employee for good reason, he would receive his then current base salary through the date of termination and accrued but unpaid vacation, plus the following severance benefits:
| | |
| | • | Severance Payment. Within thirty days after the date of termination, a lump sum payment in an amount which consists of the following amounts: |
| | |
| | • | A bonus payment for the year in which the date of termination occurs, which is based on the greater of the NEO’s three-year average bonus and target bonus, pro-rated for the NEO’s term of service during the year; and |
| |
| | • | A severance payment in an amount equal to two times (three times in the case of Mr. Glatfelter) (a) the NEO’s annual base salary (at the highest rate achieved before the date of termination) plus (b) the NEO’s annual bonus defined as the greater of the NEO’s three-year average bonus and the NEO’s target bonus under the Company’s Management Incentive Plan. |
| | |
| | • | Health and Welfare Benefits. For a period of two years (three years in the case of Mr. Glatfelter) after the Date of Termination, or such longer period as any plan, program, practice or policy may provide, the Company would continue to provide group medical, prescription, dental, disability, salary continuance, group life, accidental death and dismemberment and travel accident insurance benefits at levels substantially equal to those which would have been provided to them in accordance with the Company’s plans, programs, practices and policies with respect to such benefits if the NEOs employment had not been terminated. |
| |
| | • | 401(k) and Pension. In the event that the NEO has not, as of the date of termination, earned sufficient vesting service to have earned (A) a non-forfeitable interest in his matching contribution account under the Company’s 401(k) plan, and (B) a non-forfeitable interest in his accrued benefit under the terms of the Company’s Pension, the Company would pay to the NEO a lump sum in cash (less applicable withholdings) in an amount equal to the sum of: |
| | |
| | • | the NEO’s unvested matching contribution account under the 401(k) Plan, valued as of the date of termination; and |
| |
| | • | the actuarial present value of the NEO’s unvested normal retirement pension under the Pension Plan, based on the NEO’s accrued benefit under the plan as of the date of termination, as determined by the Company’s actuary utilizing actuarial equivalency factors for determining single sum amounts under the terms of the Pension Plan. |
If the NEO is, as of the date of termination, a participant in the Restoration Plan or the FAC Pension, the NEO would become fully vested in the accrued benefit, and the vested benefit would be paid in accordance with the terms of the respective plans.
If the NEO is, as of the date of termination, a participant in the P.H. Glatfelter Company Supplemental Pension Plan (the “SMPP”) with at least five years of vesting service, then the Company must contribute funds, to the extent it has not already done so, to the trust serving as a funding vehicle for that plan as follows:
| | |
| | • | If the NEO is a participant in the MIP Adjustment Supplement under the SMPP, the Company shall fund the trust with sufficient assets to pay the NEO’s accrued benefit under the MIP Adjustment Supplement within five days of the date of termination; or |
| |
| | • | If the NEO is eligible to receive the Early Retirement Supplement under the SMPP, the Company shall fund the trust with sufficient assets to pay the NEO’s accrued benefit under the Early Retirement Supplement, within five days following the later to occur of (i) the date of termination or (ii) the benefit commencement date with respect to the NEO’s Early Retirement Supplement. |
Termination for Cause; Termination By NEO Other than for Good Reason; Termination by Death or Disability. If, within two years following a change in control, the NEO’s employment is terminated by the NEO other than for good reason or by the Company for cause or because of death or disability, the NEO or the legal representatives of the NEO in the case of the NEO’s death, would receive obligations
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accrued or earned and vested (if applicable) by the NEO as of the date of termination (e.g., earned salary).
Change in Control. For purposes of payments made upon termination of employment, a “Change in Control” means:
| | |
| | • | the acquisition of direct or indirect beneficial ownership of 20% or more of the combined voting power of the Company’s outstanding voting securities by any person, entity or group, excluding the Company, its subsidiaries, any employee benefit plan of the Company or its subsidiaries, and any purchaser or group of purchasers who are descendants of, or entities controlled by descendants of, P. H. Glatfelter; |
| |
| | • | in any twelve (12) month period, the ceasing of individuals who constitute the Board to constitute at least a majority of the Board, other than any person becoming a director whose election was approved by at least a majority of incumbent directors, excluding any such person whose initial election occurs as a result of an actual or threatened election contest; or |
| |
| | • | the consummation of (i) a reorganization, merger or consolidation in which shareholders of the Company immediately prior to such event do not, immediately thereafter, beneficially own more than 50% of the combined voting power of the reorganized, merged or consolidated company’s then outstanding voting securities or (ii) a liquidation or dissolution of the Company, or the sale of all or substantially all of the assets of the Company to a Third Party. |
Cause. For purposes of payments made upon termination of employment “cause” means:
| | |
| | • | acts of personal dishonesty intended to result in substantial personal enrichment of the NEO at the expense of the Company; |
| |
| | • | repeated violation by the NEO of his obligations under the Change in Control Employment Agreement or illegal conduct or gross misconduct, which is materially injurious to the Company, demonstrably willful and deliberate, and is not remedied in a reasonable period of time after receipt of written notice from the Company; |
| |
| | • | violation of any of the Company’s policies, including, but not limited to, policies regarding sexual harassment, insider trading, confidentiality, non-disclosure, non-competition, non-disparagement, substance abuse and conflicts of interest and any other written policy of the Company; or |
| |
| | • | the conviction of a felony which is materially injurious to the Company or a plea of guilty or no contest to a charge of a felony which is materially injurious to the Company.Company. |
Good Reason. For purposes of payments made upon termination of employment, “Good Reason” means:
| | |
| | • | a material diminution in the NEO’s authority, duties or responsibilities; |
| |
| | • | a material diminution in the NEO’s base salary or the Company’s failure to comply with certain provisions of the Change in Control Employment Agreement relating to the NEO’s compensation; |
| |
| | • | any failure by the Company to comply with any of the provisions of the Change in Control Employment Agreement; or |
| |
| | • | a material change in the office or location of the NEO other than that described in the Change in Control Employment Agreement. |
TaxGross-Up Payments. During the two year period following a change in control, if any payment or benefit to an NEO, whether pursuant to the agreements or otherwise, is subject to the excise tax imposed by the Internal Revenue Code of 1986, as amended, on “excess parachute payments,” then an additional payment would be made to such NEO so that the amount he receives on a net basis would be the same amount that he would have received absent the applicability of the excise tax.
409A.. The Change in Control Employment Agreement includes provisions in the nature of nonqualified deferred compensation which must conform to the requirements of IRC section 409A. Certain payments triggered by termination of employment following a change in control, for persons who are “key employees” under IRS rules, cannot begin before six months after termination of employment.
SERP. In the event of a change of control, each SERP participant’s right under the SERP becomes fixed and non-forfeitable with respect to accrued benefits on that date of the change in control. In addition, the designated percentage of the participant’s final average compensation payable under the FAC Pension (before adjustment for offsets) is fixed at 55 percent.
RSUsSOSARs and SOSARs.RSUs. UponPrior to March 2009, upon a change in control, all of the RSUs that have been held for at least six months become immediately and unconditionally vested, and the restrictions with respect to such RSUs lapse. Similarly, upon a change in control, all outstanding SOSARs will become immediately and unconditionally vested.
In the wake of general marketplace and shareholder concerns about executives potentially earning undue benefits that take effect after mergers and acquisitions, the Committee, in March 2009, directed that all subsequent grants of RSUs and SOSARs made to the NEOs and other eligible executives incorporate “double trigger” change of control provisions. In general, a single trigger provision provides that accelerated vesting of equity awards would occur in the event of a change of control irrespective of a corresponding termination. A double trigger provision, by contrast, only accelerates vesting in the event of a change of control and in the event
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that the executive is terminated without “Good Cause” or quits with “Good Reason” (as those terms are defined in the applicable agreement). As a result, RSUs or SOSARS that have been held for at least six months will accelerate vesting only upon such a termination that occurs within two years of achange-in-control event. The Committee believes that the incorporation of the double trigger provision will ensure continuity of management during mergers and acquisitions and assist with attracting and retaining key executives, ultimately benefitting shareholders.
For the purposes of both SOSARs and RSUs, a change in control means:
| | |
| | • | the acquisition, by a third party, of beneficial ownership of 50% or more of the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or |
| |
| | • | individuals who constitute the Board at the time the SOSAR or RSU is granted (the “Incumbent Directors”) cease to constitute at least a majority of |
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| | |
| | the Board, provided that any person becoming a director whose election or nomination was approved by a vote of at least a majority of the Incumbent Directors who are directors at the time of such vote shall be an Incumbent Director; or |
| | |
| | • | consummation of (i) a reorganization, merger or consolidation, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation (other than the acquirer) do not, immediately thereafter, beneficially own more than 50% of the combined voting power of the reorganized, merged or consolidated company, or (ii) a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company to a third party. |
In addition to the foregoing, a change in control with respect to an individual NEO shall be deemed to occur if the NEO’s employment with the Company is terminated prior to the date on which a change in control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a change in control or (ii) otherwise arose in connection with or anticipation of a change in control.
Accrued Pay and Regular Retirement Benefits
In addition to the benefits described above, the NEOs are also entitled to certain payments and benefits upon termination of employment that are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include:
| | |
| | • | Accrued salary and vacation pay; |
| |
| | • | Vested interests under the Pension Plan, as described in Pension Benefits on pages 3324 through 3525 of this proxy statement; |
| |
| | • | Life insurance benefits; and |
| |
| | • | Distributions of plan balances under the Company’s 401(k) plan. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions Policy
The Nominating and Corporate Governance Committee (or its Chair, under some circumstances) will review the relevant facts of all proposed Related Person Transactions and either approve or disapprove of the entry into the Related Person Transaction. In August 2008, in conjunction with the Company’s ongoing strategic initiative to monetize the value of its timberlands, the Company, through a wholly-owned subsidiary, completed the sale of 260 acres of timberland for $3.25 million in cash to George H. Glatfelter II, its Chairman and Chief Executive Officer, and his wife Beverly G. Glatfelter (the “Glatfelters”). The 260 acres of timberland which was subject to the agreement with the Glatfelters had been independently appraised and marketed for public sale by the Company. Based on those appraisals and the marketing process that was pursued, the Company and its Board believed that the sale price agreed to with the Glatfelters constituted fair market value for the timberlands.
In accordance with the Company’s Corporate Governance standards, the sale transaction with the Glatfelters was reviewed and pre-approved by the Nominating and Corporate Governance Committee of the Company’s Board of Directors as a related party transaction.
Under this written policy, a “Related Person Transaction” is generally a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) ininvolving an amount which is at least $100,000, which the Company was, is or will be a participant, and the amount involved exceeds $100,000, and in which any Related Person had, has or will have a direct or indirect material interest. A “Related Person” is generally any person who is, or at any time since the beginning of the Company’s last fiscal year was, (i) a Director or executive officer of the Company or a nominee to become a Director of the Company; (ii) any person who is known to be the beneficial owner of more than 5% of any class of the Company’s voting securities; (iii) any immediate family member of any of the foregoing persons; or (iv) any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position, or in which such person has a 5% or greater beneficial ownership interest. There were no Related Person Transactions during 2009.
No Director may participate in any consideration or approval of a Related Person Transaction with respect to which he or she or any of his or her immediate family members is the Related Person. Related Person Transactions are approved only if they are determined to be in, or not inconsistent with, the best interests of the Company and its shareholders.
If a relatedRelated Person Transaction thatwhich has not been previously approved or previously ratified is discovered, the Nominating and Corporate Governance Committee, or its Chair, will promptly consider all of the relevant facts. If the transaction is ongoing, the Committee will consider all options and may ratify, amend or terminate the Related Person Transaction. If the transaction has been completed, the Committee will consider if rescission of the transaction is appropriate and whether disciplinary action is warranted. In addition, the Committee will review all ongoing Related Person Transactions on an annual basis to determine whether to continue, modify or terminate the Related Person Transaction.
In reviewing the relevant facts of all proposed Related Person Transactions, the Nominating and Corporate Governance
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Committee, or its Chair, will take into account, among other factors it deems appropriate:
| | |
| | • | The benefits to the Company of the transactions; |
| |
| | • | The impact on a Director’s independence, in the event the “Related Person” is a Director, an immediate family member of a Director or an entity |
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| | |
| | in which a Director is a partner, shareholder or executive officer; |
| | |
| | • | The availability of other sources for comparable products or services; |
| |
| | • | The terms of the transaction; and |
| |
| | • | The terms available from unrelated third parties or to employees generally. |
To the extent that the Nominating and Corporate Governance Committee, or its Chair, needs additional information to make an informed decision regarding a proposed Related Person Transaction, the Nominating and Corporate Governance Committee, or its Chair, may consult with management of the Company or other members of the Board of Directors of the Company.
Compensation Committee Interlocks and Insider Participation.
The current members of the Company’s Compensation Committee are Ronald J. Naples (Chair), Kathleen A. Dahlberg, (Chair), Nicholas DeBenedictis, Ronald J. Naples, Richard L. Smoot and Lee Stewart. No executive officer of the Company has served as a Director or member of the compensation committee (or other committee serving an equivalent function) of any other entity whose executive officers served as a Director or member of the Compensation Committee of the Company.
RISK OVERSIGHT
The Board oversees the management of risks inherent in the operation of the Company’s businesses and the implementation of its strategic plan. The Board performs this oversight role by using several different levels of review. In connection with its reviews of the operations of the Company’s business units and corporate functions, the Board addresses the primary risks associated with those units and functions. In addition, the Board reviews the risks associated with the Company’s strategic plan at an annual strategic planning session and periodically throughout the year as part of its consideration of the strategic direction of the Company.
Each of the Board’s Committees also oversees the management of Company risks that fall within the Committee’s areas of responsibility. In performing this function, each Committee has full access to management, as well as the ability to engage advisors. At each meeting of the Board, the Chair of each Committee reports to the Board on his Committee’s oversight activities.
The Company is presently in the process of developing a formal enterprise risk management program. In the interim, it continues to manage its enterprise risks through a variety of policies, programs and internal control functions and processes which are designed to identify the primary risks to the Company’s business and update Management on those risks, and monitor and evaluate the primary risks associated with particular business units and functions These programs and policies are overseen, supervised and administered by management which periodically updates the Board and individual Committees of the Board on material risks which have been identified or publicly disclosed. The Company’s Manager — Internal Auditing, who functionally reports directly to the Audit Committee, assists the Company in identifying, evaluating and implementing risk management controls and methodologies to address identified risks. In connection with its risk management role, at each of its meetings, the Audit Committee meets privately with representatives from the Company’s independent registered public accounting firm, and the Company’s Manager — Internal Auditing. The Audit Committee provides reports to the Board that include these activities.
As part of its oversight of the Company’s executive compensation program, the Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company reviews all of its compensation policies and procedures, including the incentives that such policies create and factors that may reduce the likelihood of excessive risk taking, to determine whether such policies present a significant risk to the Company. Based on this review, the Compensation Committee has concluded that the Company’s compensation policies and procedures are not reasonably likely to have a material adverse effect on the Company.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31, 20082009 with the Company’s management and its independent registered public accounting firm. The Company’s management has advised the Audit Committee that such audited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
The Audit Committee has discussed with Deloitte & Touche, LLP (“Deloitte”), the Company’s independent registered public accounting firm, certain matters required to be discussed by Statement on Auditing Standards No. 61, “Communications with Audit Committees”, and SECRegulation S-X,Rule 2-07. The Audit Committee has also discussed with Deloitte their independence from the Company and its management. The Audit Committee has received a letter and written disclosures from Deloitte required by applicable requirements of the Public Company Accounting Oversight Board, disclosing all relationships between Deloitte and its related entities and the Company. In addition to the information provided by Deloitte, the Audit Committee considered the level of non-audit and tax services provided by Deloitte in determining that it was independent.
Based on the review and discussions described above, the Audit Committee has recommended to the Company’s Board that the Company’s audited consolidated financial statements be included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008,2009, for filing with the SEC.
The Audit Committee of the
Board of Directors of
P. H. Glatfelter Company
J. Robert Hall (Chair)
Nicholas DeBenedictis
Richard C. Ill
Ronald J. Naples
ANNUAL REPORT ONFORM 10-K
Copies of the Company’s Annual Report onForm 10-K for the year ended December 31, 2008,2009, as filed with the SEC, are being mailed to shareholders with this Proxy Statement. A shareholder may obtain a copy of the Annual Report without charge by writing to: Investor Relations, P. H. Glatfelter Company, 96 South George Street, Suite 500, York, PA 17401. The10-K, Proxy Statement and Annual Report can also be obtained through the Company’sour website, www.glatfelter.com.www.glatfelter.com.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board knows of no business that will be presented for consideration at the Annual Meeting other than the items referred to above. If any other matter is properly brought before the Meeting for action by shareholders, the persons named in the accompanying proxy will have discretionary authority to vote proxies with respect to such matter in accordance with their best judgment.
ADDITIONAL INFORMATION
The Company is permitted by SEC regulations to deliver a single Annual Report or Proxy Statement to any household at which two or more registered shareholders have the same last name and address, unless the Company has received instructions to the contrary from one or more of the shareholders. The Company will, continuehowever, to include a separate proxy card for each registered shareholder account.
The Company will deliver promptly, upon written or oral request, a separate copy of the Annual Report or Proxy Statement, as applicable, to a shareholder at a shared address to which a single copy of the documents was delivered. TheAny shareholder who desires to receive a separate copy of the Annual Report or Proxy Statement should send a written request to Investor Relations, P. H. Glatfelter Company, 96 South George Street, Suite 500, York, PA 17401, or call us at(717) 225-2724,225-2724. if the shareholder (i) wishes to receive a separate copy of an Annual Report or Proxy Statement for this Meeting; (ii) would like to receive separate copies of those materials for future meetings; or (iii) is sharing an address and wishes to request delivery of a single copy of Annual Reports or Proxy Statements if the shareholder is now receiving multiple copies of Annual Reports or Proxy Statements.
Thomas G. Jackson
Vice President,
General Counsel and Secretary
March 25, 2009
30, 2010
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Appendix A
P. H. GLATFELTER COMPANY
AMENDED & RESTATED LONG-TERM2005 MANAGEMENT INCENTIVE PLAN
(as Amended and Restated Effective January 1, 2010)
1. PURPOSE. This Amended and Restated Long-TermPURPOSE OF THE PLAN
The purpose of the Management Incentive Plan (the(hereinafter called the “Plan”) has been established byis to advance the interests of the P. H. Glatfelter Company (the “Company”)and its shareholders by providing incentives to reward Eligible Individuals by meanskey employees with significant responsibility for the success and growth of appropriate incentives for achieving long-range Company goals; provide incentive compensation opportunities that are competitive with those of other similar companies; further match Eligible Individuals’ financial interests with thosethe Company. The Plan is designed to: (i) promote the attainment of the Company’s other shareholders through compensation that is based onsignificant business objectives; (ii) encourage and reward management teamwork across the Company’s common stockentire Company; and thereby enhance the long-term financial interest of the Company and its Affiliates, including through the growth(iii) assist in the value of the Company’s equity and enhancement of long-term shareholder return; and facilitate recruitmentattraction and retention of outstanding personnel eligibleemployees vital to participate in the Plan.Company’s long-term success.
This Plan was originally established effective as of April 27, 2005 (the “Original Effective Date”),January 1, 2005. The Plan was amended and restated effective January 1, 2008 to conform its provisions to the requirements of Section 409A of the Internal Revenue Code (“Code”) and the final regulations thereunder. The Plan is amended and restated again, effective as of January 1, 2008 to reflect2010.
DEFINITIONS
For the provisions of Section 409Apurpose of the Code, and was further amended and restated as approved byPlan, the Board of Directors on March 4, 2009.
2. DEFINITIONS. The capitalized terms used in this Plan have the meanings set forth below. Except when otherwise indicated by the context, reference to the masculine genderfollowing definitions shall include, when used, the feminine gender and any term used in the singular shall also include the plural.apply:
“Affiliate” means: (i) any Subsidiary of the Company; (ii) any entity or Person or group of Persons that, directly or through one or more intermediaries, is controlled by the Company; and (iii) any entity or Person or group of Persons in which the Company has a significant equity interest, as determined by the Committee.
“Agreement” means any written agreement, contract or other instrument or document evidencing any Award granted under the Plan, which may, but need not, be executed or acknowledged by a Participant.
“Award” means any Option, SAR, award of Restricted Stock or Restricted Stock Units, Stock Award, Other Stock-Based Award, or Performance Award granted under the Plan.
“Board” or “Board of Directors”Board” means the Board of Directors of the Company, as it may be constituted from time to time.Company.
“Code”Code” means the Internal Revenue Code of 1986, as amended, and in effect from time to time, orincluding any successor statute.law thereto.
“Committee”Committee” means the Compensation Committee of the Board, of Directors, or any successor committee thereto, or such other committee of the Board of Directors as is appointed or designated by the Board to administer the Plan.
“Covered Person” means an Eligible Individual who is determined by the Committee toPlan, in each case which shall be a “covered employee” ascomprised solely of two or more “outside Directors” (as defined inunder Section 162(m) of the Code forand the tax year of the Company with regard to which a deduction in respect of such person’s Award would be allowed.regulations promulgated thereunder).
“Disability”Company” means (i)P. H. Glatfelter Company and any subsidiary entity or affiliate thereof.
“Participant” means any person who has satisfied the eligibility requirements set forth in Paragraph 4 and who has been selected to participate in the Plan by the Committee.
“Performance Goal” means, in relation to any Performance Period, the level of performance that must be achieved with respect to a Performance Measure.
“Performance Measures” means any one or more of the following performance criteria, either individually, alternatively or in any combination, and subject to such modifications as specified by the Committee, applied to either the Company as a whole or to a business unit or subsidiary entity thereof, either individually, alternatively or in any combination, and measured over a period of time including any portion of a year, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee: cash flow; cash flow from operations; earnings (including earnings before interest, taxes, depreciation, and amortization, and pension income or expense, or some variation thereof); earnings per share, diluted or basic; earnings per share from continuing operations; net asset turnover; inventory turnover; capital expenditures; debt; net debt; debt reduction; working capital; return on investment; return on sales; net or gross sales; market share; economic value added; cost of capital; change in assets; expense reduction levels; productivity; delivery performance; safety record; stock price; return on equity; total stockholder return; return on capital; return on assets or net assets; revenue; income or net income; operating income or operating net income; operating profit or net operating profit; gross margin, operating margin or profit margin; and completion of acquisitions, sales of significant assets, business expansion, product diversification and other non-financial operating and management performance objectives. The Committee may determine that certain adjustments shall apply, in whole or in part, in such manner as specified by the Committee, to exclude the effect of any of the following events that occur during a Performance Period, provided that if an award is intended to constitute performance-based compensation within the meaning of Section 162(m) of the Code, such adjustments shall be applied consistent with the requirements of that Code section and tax regulations thereunder: the impairment of tangible or intangible assets; litigation or claim judgments or settlements; the effect of changes in tax law, accounting standards or principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs, including but not limited to reductions in force and early retirement incentives; currency fluctuations; and any extraordinary, unusual, infrequent or non-recurring items, including, but not limited to, such items described in management’s discussion and analysis of financial condition and results of operations or the financial statements and notes thereto appearing in the Company’s annual report to shareowners for the applicable year.
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“Performance Period” means, in relation to any award, the calendar year or other period for which a Participant’s performance is being calculated, with each such period constituting a separate Performance Period.
“Total and Permanent Disability” means: (1) if the Participant is insured under a long-term disability insurance policy or plan which is paid for by the Company, the Participant is totally disabled under the terms of that policy or plan; or (ii)(2) if no such policy or plan exists, the Participant willshall be considered to be totally disabled as determined by the Committee; provided in each case that the Participant is disabled within the meaning of Code Section 409A(a)(2)(C).Committee.
“Eligible Individual” means any full-time or part-time employee, officer, non-employee Director or consultant of the Company or an Affiliate. Eligible Individual will also include any individual or individuals to whom an offer of employment or service has been extended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” means, as of any date and unless otherwise determined by the Committee, the value of the Shares determined as follows:
(i) If the Shares are listed on any established stock exchange, system or market, its Fair Market Value shall be the closing price for the Shares as quoted on such exchange, system or market as reported in the Wall Street Journal or such other source as the Committee deems reliable; and
(ii) In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Committee by the reasonable application of a reasonable valuation method, taking into account factors consistent with Treas. Reg. § 409A-1(b)(5)(iv)(B) as the Committee deems appropriate.
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“Incentive Stock Option” means an option granted under Section 6 that meets the requirements of Section 422 of the Code, or any successor provision thereto.
“Non-Qualified Stock Option” means an option granted under Section 6 that is not an Incentive Stock Option.
“Option” means an Incentive Stock Option or a Non-Qualified Stock Option.
“Other Stock-Based Award” means any right granted under Section 8.
“Participant” means any Eligible Individual to whom an Award has been made.
“Performance Award” means an Award to a Participant under Section 9, which award may be denominated in cash or Shares.
“Person” means any individual, corporation, joint venture, association, partnership, limited liability company, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
“Plan” means this Amended and Restated Long-Term Incentive Plan, as set forth herein and as amended from time to time.
“Reporting Person” means any Eligible Individual subject to Section 16 of the Securities Exchange Act of 1934, as amended.
“Restricted Stock” means a grant of Shares pursuant to Section 7.
“Restricted Stock Unit” means a contractual right underlying an Award granted under Section 7 that is denominated in Shares, which unit represents a right to receive a Share (or the value of a Share) upon the terms and conditions set forth in the Plan and the applicable Agreement.
“Retirement”Retirement” means retirement of an employee from employment with the Company and all affiliates on or after attaining age 65, or after attaining age 62 with 30 Benefit Years, which entitles the eligible Participant to a Normal or Late Retirement benefit, or to an unreduced Early Retirement benefit,employee: (1) as defined under the terms of the Glatfelter Retirement Plan for Salaried Employees or the Glatfelter Retirement Plan for Hourly Employees. All capitalized terms used in this definition have the meanings set forth in the applicableany retirement plan.
“SAR” means a stock appreciation right, which is the right to receive a payment in cash or Shares equal to the amount of appreciation, if any, in the Fair Market Value of a Share from the date of grant of the right to the date of its payment, and which may be awarded to Eligible Individuals under Section 6.
“Separation from Service” means (i) with respect to an Eligible Individual who is an employeeplan of the Company or an Affiliate, the termination of his employment with the Company and all Affiliates that constitutes a “separation from service” within the meaning of Treas. Reg.which is qualified under Section 1.409A-1(h)(1), (ii) with respect to an Eligible Individual who is a consultant401 of the CompanyCode; or an Affiliate, the expiration of his contract or contracts under which services are performed that constitutes a “separation from service” within the meaning of Treas. Reg.Section 1.409A-1(h)(2), or (iii) with respect to an Eligible Individual who is a non-employee Director of the Company or an Affiliate, the date on which such non-employee Director ceases to be a member of the Board (or other applicable board of directors) for any reason.
“Share” means a share of Stock.
“Stock” means the common stock, par value $.01 per share (as such par value may be adjusted from time to time), of the Company.
“Stock Award” means an award of Shares pursuant to Section 8.
“Subsidiary” means any entity in which the Company owns or otherwise controls, directly or indirectly, stock or other ownership interests having the voting power to elect a majority of the board of Directors, or other governing group having functions similar to a board of Directors, as determined by the Committee. In the case of Incentive Stock Options, Subsidiary means any entity that qualifies as a “subsidiary corporation”
Administration of the Company under Section 424(f) of the Code.Plan
“Substitute Award” means an Award granted in assumption of, or in substitution for, an outstanding award previously granted by a Person acquired by the Company or with which the Company combines.
“Successor” with respect to a Participant means the legal representative of an incompetent Participant and, if the Participant is deceased, the legal representative of the estate of the Participant or the person or persons who may, by bequest or inheritance, or under the terms of an Award or of forms submitted by the Participant to the Committee, acquire the right to receive cashand/or Shares issuable in satisfaction of an Award.
3. ADMINISTRATION. The authority to control and manage the operation and administrationmanagement of the Plan isshall be vested in the Committee; provided, however, that all acts and authority of the Committee pursuant to this Plan areshall be subject to the provisions of the Committee’s Charter, as amended from time to time, and such other authority as may be delegated to the Committee by the Board.
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(a) The Committee hasmay, with respect to Participants for whom awards are not intended to be performance-based compensation subject to Section 162(m) of the exclusive powerCode, delegate such of its powers and authority under the Plan to make Awards, to determine when and to which Eligible Individuals Awards will be granted, the types of Awards andCompany’s officers as it deems necessary or appropriate. In the number of Shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisionsevent of such Awards and, subjectdelegation, all references to the Committee in this Plan shall be deemed references to such officers as it relates to those aspects of the Plan that have been delegated.
Subject to the terms of the Plan, and applicable law, to cancel, suspend or amend existing Awards. In making such Award determinations, the Committee shall, among other things, have full authority and discretion to determine eligibility for participation in the Plan, make awards under the Plan, establish the terms and conditions of such awards (including the Performance Goal(s) and Performance Measure(s) to be utilized) and determine whether the Performance Goals applicable to any Performance Measures for any awards have been achieved. The Committee’s determinations under the Plan need not be uniform among all Participants, or classes or categories of Participants, and may take into account the naturebe applied to such Participants, or classes or categories of services rendered by the Eligible Individual, the Eligible Individual’s present and potential contribution to the Company’s success and such other factorsParticipants, as the Committee, deems relevant.in its sole and absolute discretion, considers necessary, appropriate or desirable; provided however, that the Committee shall not exercise its authority and discretion to waive the satisfaction of the applicable Performance Goal(s) or Performance Measure(s). The Committee is authorized to interpret the Plan, to adopt administrative rules, procedures, regulations, and guidelines for the Plan (including without limitation procedures for the exercise of its discretion to determine whether Performance Goals have been metand/or to reduce the amount of awards as set forth in Section 5(d)), and may correct any defect, supply any omission or reconcile any inconsistency or conflict in the Plan or in any award. All determinations by the Committee shall be final, conclusive and binding on the Company, the Participant and any and all interested parties.
(b) Subject to the provisions of the Plan, the Committee will have the authority and discretion to determine the extent to which Awardsawards under the Plan will be structured to conform to the requirements applicable to performance-based compensation as described in Section 162(m) of the Code, and to take such action, establish such procedures, and impose such restrictions at the time such awards are granted as the Committee determines to be necessary or appropriate to conform to such requirements. Notwithstanding any provision of the Plan to the contrary, if an Awardaward under this Plan is intended to qualify as performance-based compensation under Section 162(m) of the Code and the regulations issued thereunder and a provision of this Plan would prevent such Awardaward from so qualifying, such provision shall be administered, interpreted and construed to carry out such intention (or disregarded to the extent such provision cannot be so administered, interpreted or construed).
(c) The Committee has the power to approve forms of Agreement for use under the Plan.
(d) The Committee has the authority and discretion to establish terms and conditions of Awards as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States.
(e) The Committee may, subject to Section 11(b), determine whether, to what extent and under what circumstances Awards may be settled, paid or exercised in cash, Shares or other Awards or other property, or canceled, forfeited or suspended.
(f) The Committee has the authority to interpret the Plan and any Award or Agreement made under the Plan, to establish, amend, waive and rescind any rules and regulations relating to the administration of the Plan, to determine the terms and provisions of any Agreements entered into hereunder (not inconsistent with the Plan), to amend the terms and provisions of any such Agreement (not inconsistent with the Plan) and to make all other determinations necessary or advisable for the administration of the Plan.
(g) The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems desirable. The determinations of the Committee in the administration of the Plan, as described herein will be final, binding and conclusive on all interested parties.
(h) The Committee will maintain and keep adequate records concerning the Plan and concerning its proceedings and act in such form and detail as the Committee may decide.
(i) Except to the extent prohibited by applicable law or regulation, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it; provided, however, the Committee shall not delegate any such authority with respect to any Awards made to a Reporting Person. The Committee may revoke any such allocation or delegation at any time.
(j) The Company and any Affiliate will, to the fullest extent permitted by law, furnish the Committee with such data and information as may be required for it to discharge its duties. The records of the Company and any Affiliate as to an Eligible Individual’s employment, or other provision of services, termination of employment, or cessation of the provision of services, leave of absence, reemployment and compensation will be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefit under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
(k) To the fullest extent permitted by law, each member and former member of the Committee and each person to whom the Committee delegates or has delegated authority under this Plan shall be entitled to indemnification by the Company against and from any loss, liability, judgment, damage, cost and reasonable expense incurred by such member, former member or other person by reason of any action taken, failure to act or determination made in good faith under or with respect to this Plan.
(l) Notwithstanding any provision of the Plan to the contrary, if any benefit provided under this Plan is subject to the provisions of Section 409A of the Code and the regulations issued thereunder, the provisions of the Plan shall be administered, interpreted and construed in a manner necessary to comply with Section 409A and the regulations issued thereunder (or disregarded to the extent such provision cannot be so administered, interpreted, or construed.)
4. SHARES AVAILABLE FOR AWARDS.Participation in the Plan
(a) Subject to adjustment as providedParticipation in Section 4(d), the maximum number of Shares that may be delivered pursuant to Awards granted under the Plan is 5,500,000,limited to officers and the maximum number of Shares that may be issued under the Plan as Incentive Stock Options is 5,500,000. The number of Shares available for Awards made under the Plan includes an additional 4,000,000 Shares added to the Plan in 2009. No Participant receiving an Award will be granted: (i) Options or SARs with respect to more than 400,000 Shares during any fiscal year; (ii) a Performance Award (denominated in Shares) which could result in such Participant
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receiving more than 250,000 Shares for each full or partial fiscal yearkey employees of the Company containedwho have significant responsibility for corporate, business segment or facility-based operations and who are selected by the Committee for participation in the performance period of such Performance Award, provided, however, that, if any other Performance Awards are outstanding for the Participant for a given year, such Share limitationPlan. Nothing herein contained shall be reduced for each such year byconstrued as giving any employee the Shares that could be received by the Participant under all such Performance Awards, divided, for each such Performance Award, by the number of full or partial fiscal years of the Company containedright to participate in the performance period of each such outstanding Performance Award; or (iii) a Performance Award (denominated in cash) which could result in such Participant receiving more than $1,750,000.00 for each full or partial fiscal year of the Company contained in the performance period of such Performance Award, provided, however, that, if any other such Performance Awards are outstanding for such Participant for a given year, such dollar limitation shall be reduced for each such year by the amount that could be received by the Participant under all such Performance Awards, divided, for each such Performance Award, by the number of full or partial fiscal years of the Company contained in the performance period of each such outstanding Performance Award. The foregoing limitations are subject to adjustment as provided in this Section 4, but only to the extent that any such adjustment will not affect the status of: (1) any Award intended to qualify as performance-based compensation under Section 162(m) of the Code; or (2) any Award intended to qualify as an Incentive Stock Option.
The following is an example of the application of the foregoing paragraph. If a Participant receives the following Share-based Performance Awards, then the Award made for 2009 will need to be reduced, or the vesting period extended, to prevent the possibility that more than 250,000 Shares will vest for 2009.
| | | | | | | | | | | | | | | | | | | | | | | |
Award
| | | | Number of
| | | Vesting Per
| | Shares vest
| | | Shares vest
| | | Shares vest
| |
| Year | | Performance Period | | Shares | | | Year | | 2008 | | | 2009 | | | 2010 | |
| | |
| |
| | 2007 | | | 1/1/07 to 12/31/09 | | | 250,000 | | | one-third | | | 83,333 | | | | 83,334 | | | | | |
| | 2008 | | | 1/1/08 to 12/31/09 | | | 250,000 | | | one-half | | | 125,000 | | | | 125,000 | | | | | |
| | 2009 | | | 1/1/09 to 12/31/10 | | | 250,000 | | | one-half | | | | | | | 125,000 | | | | 125,000 | |
| |
| |
(b) Shares to be issued under the Plan may be made available from authorized but unissued Stock, Stock held by the Company in its treasury, or Stock purchased by the Company on the open market or otherwise. During the term of the Plan, the Company will at all times reserve and keep available the number of shares of Stock that are sufficient to satisfy the requirements of the Plan.
(c) Any Shares covered by an Award that terminates, lapses or is forfeited or cancelled, or an Award that is otherwise settled without the delivery of the full number of Shares underlying the Award, shall, to the extent of any such forfeiture, termination, lapse, cancellation, etc., again be available for issuance under the Plan.Incentive Compensation Awards
(d) In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,split-up, spin-off, combination, repurchase or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or other similar corporate transaction or event constitutes an equity restructuring transaction, as that term is defined in Statement of Financial Accounting Standards No. 123 (revised), or otherwise affects the Stock, then the Committee shall adjust the following in a manner that is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan: (i) the number and type of shares of Stock (or other securities or property) which thereafter may be made the subject of Awards, including the individual limits set forth in Section 4(a); provided, however, that with respect to such individual limits in Section 4(a), an adjustment will not be made unless such adjustment can be made in a manner that satisfies the requirement of Section 162(m) of the Code; (ii) the number and type of shares of Stock (or other securities or property) subject to outstanding Awards; (iii) the grant, purchase, or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided, however, that the number of Shares subject to any Award shall always be a whole number; and (iv) other value determinations applicable to outstanding Awards. The Committee’s adjustment shall be effective and binding for all purposes of this Plan; provided, that no adjustment shall be made which will cause an Incentive Stock Option to lose its status as such, and further provided that no such adjustment shall constitute (i) a modification of a stock right within the meaning of Treas. Reg.Section 1.409A-1(b)(5)(v)(B) so as to constitute the grant of a new stock right, (ii) an extension of a stock right, including the addition of any feature for the deferral of compensation within the meaning of Treas. Reg.Section 1.409A-1(b)(5)(v)(C), or (iii) an impermissible acceleration of a payment date or a subsequent deferral of a stock right subject to Code Section 409A within the meaning of Treas. Reg.Section 1.409A-1(b)(5)(v)(E). Furthermore, no adjustment as the result of a change in capitalization shall cause the exercise price to be less than the Fair Market Value of such Shares (as adjusted to reflect the change in capitalization) on the date of grant, and any adjustment as the result of the substitution of a new stock right or the assumption of an outstanding stock right pursuant to a corporate transaction shall satisfy the conditions described in Treas. Reg.Section 1.409A-1(b)(5)(v)(D).
5. ELIGIBILITY. All Eligible Individuals are eligible to participate in this Plan and receive Awards hereunder. Holders of equity-based awards issued by a company acquired by the Company or with which the Company combines are eligible to receive Substitute Awards hereunder.
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6. OPTIONS AND SARS. The Committee is hereby authorized to grant Options and SARs to Participants with the following terms and conditions and with such additional terms and conditions,may, in either case not inconsistent with the provisions of the Plan, as the Committee determines and sets forth in the Award Agreement:
(a) The exercise price per Share under an Option or SAR will be determined by the Committee; provided, however, that, except in the case of Substitute Awards, such exercise price shall not be less than the Fair Market Value of a Share on the date of grant of such Option or SAR. The Committee shall not have the authority to reprice Options or SARS to reduce the exercise price without first obtaining shareholder approval for such repricing.
(b) The term of each Option will be fixed by the Committee and the effect thereon, if any, of the Separation from Service of the Participant will be determined by the Committee and set forth in the applicable Agreement. The Agreement will contain the terms of the Award, including, but not limited to: (i) the number of Shares that may be issued upon exercise of an Option or number of SARs subject to an Award; (ii) the exercise price of each Option or SAR; (iii) the term of the Option or SAR; (iv) such terms and conditions on the vestingand/or exercisability of an Option or SAR as may be determined by the Committee; (v) any restrictions on transfer of the Option or SAR and forfeiture provisions; and (vi) such further terms and conditions, in each case, not inconsistent with this Plan as may be determinedits discretion, from time to time by the Committee.
(c) Subjectmake awards to the terms ofpersons eligible for participation in the Plan andpursuant to which the related Agreement, any Option or SARParticipant will earn cash compensation. The amount of a Participant’s award may be exercised at any time during the period commencing with either the date that Optionbased on a percentage of such Participant’s salary or SAR is granted or the first date permitted under a vesting schedulesuch other methods as may be established by the Committee and ending with the expiration date of the Option or SAR. A Participant may exercise his Option or SAR for all or part of the number of Shares or rights which he is eligible to exercise under terms of the Option or SAR. The Committee will determine the method or methods by which, and the form or forms in which, including, without limitation, cash, Shares, other Awards, or other property, or any combination thereof, having a Fair Market Value on the exercise date equalCommittee. Each award shall be communicated to the relevant exercise price of an Option, payment ofParticipant, and shall specify, among other things, the exercise price with respect thereto may be made or deemed to have been made.
(d) Unless otherwise revised in the Award Agreement documenting an Option or SAR Award, the following general rules will apply to outstanding Option and SAR Awards designated as Stock-Only SARs (“SOSARs”) at the time of Separation from Service:
(i) In the event of Separation from Service for cause (as determined by the Company), then all outstanding Option and SOSAR Awards, and any cash-based SAR Awards, whether vested or unvested, will immediately terminate and be forfeited.
(ii) In the event of Separation from Service due to death or Retirement of the Participant while employed by the Company or any of its subsidiaries, or the termination of service of the Participant due to Disability (whether or not a Separation from Service), then an amount of unvested Options or SOSARs shall vest equal to a percentage, the numerator of which equals the number of days that has elapsed as of the date of death or Retirement or the date on which such Disability commenced (such date to be determined by the Committee in its sole discretion) in the vesting restriction period for each applicable vesting tranche, and the denominator of which equals the total number of days in each such applicable vesting period, rounded down to the nearest whole Share. For example, if a Participant holds a SOSAR Award for 12,000 shares vesting one-third in each year, and Retires on July 31 of the second year of the vesting period, such Participant will have previously vested in 4,000 shares with respect to the first one-third tranche, and will vest in 3,161 Shares with respect to the second one-third tranche (4,000 Shares times 577/730), and 2,107 Shares with respect to the third one-third tranche (4,000 Shares times 577/1,095). Such vested Options and SOSARs, together with all other vested and unexercised Options and SOSARs may be exercised by the Participant, or his or her beneficiaries, for three years following the date of death, Disability or Retirement, or, if shorter, until the end of the term of a particular Option or SOSAR as established in the Award Agreement.
(iii) In all other events of Separation from Service, the Participant shall have a period of ninety (90) days following such Separation from Service (or, if shorter, until the end of the term of a particular Option or SOSAR as established in the original Award Agreement) to exercise any vested and unexercised Options and SARs then outstanding; all unvested Option and SAR Awards shall immediately terminate and be forfeited.
(e) The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated thereunder. No Incentive Stock Option shall be granted to any Eligible Individual who is not an employee of the Company or a Subsidiary. Options designated as Incentive Stock Options shall not be eligible for treatment under the Code as “incentive stock options” (and will be deemed to be Non-Qualified Stock Options) to the extent that either (i) the aggregate Fair Market Value of Shares (determined as of the date of grant) with respect to such Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000.00, taking Options into account in the order in which they were granted or (ii) such Options otherwise remain exercisable but are not exercised within three (3) months of termination of employment (or such other period of time provided in Section 422 of the Code).
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7. RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS. The Committee is hereby authorized to grant Awards of Restricted Stockand/or Restricted Stock Units to Eligible Individuals.
(a) The Awards granted under this Section 7 are subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote Shares underlying Restricted Stock Awards or the right to receive any dividend, other right or property), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate. Such Awards will be evidenced by an Agreement containing the terms of the Awards, including, but not limited to: (i) the number of Shares of Restricted Stock or Restricted Stock Units subject to such Award; (ii) the purchase price, if any, of the Shares of Restricted Stock or Restricted Stock Units and the means of payment for the Shares of Restricted Stock or Restricted Stock Units; (iii) the performance criteria, if any, and level of achievement in relation to the criteria that shall determine the number of Shares of Restricted Stock or Restricted Stock Units granted, issued, retainableand/or vested; provided, however, that any such performance criteria shall be selected from the criteria set forth in Section 9(b) to the extent the Committee determines that the Award needs to comply with Section 162(m) of the Code; (iv) such terms and conditions of the grant, issuance, vestingand/or forfeiture ofaward and the Restricted Stock or Restricted Stock Units asPerformance Goals to be achieved. In no event may be determined from timean award paid under the Plan to time by the Committee; (v) restrictions on transferability of the Restricted Stock or Restricted Stock Units; and (vi) such further terms and conditions, in each case, not inconsistent with this Plan as may be determined from time to time by the Committee.any Participant for any Performance Period exceed USD $2,000,000.
(b) Without limiting the foregoing, and except as otherwise revised in the Award Agreement documenting a service-based Restricted Stock Unit Award (“RSUs”), the following general rules will apply to outstanding RSUs at the time of Separation from Service:
(i) In the event of Separation from Service for cause (as determined by the Company), all outstanding RSUs will immediately terminate and be forfeited.
(ii) In the event of Separation from Service due to death or Retirement of the Participant while employed by the Company or any of its subsidiaries, or the termination of service of the Participant due to Disability (whether or not a Separation from Service), then an amount of unvested RSUs shall vest equal to a percentage, the numerator of which equals the number of days that has elapsed as of the date of death or Retirement or the date on which such Disability commenced (such date to be determined by the Committee in its sole discretion) in the vesting restriction period for each applicable vesting tranche, and the denominator of which equals the total number of days in each such vesting restriction period, rounded down to the nearest whole Share. For example, if a Participant holds RSUs for 12,000 shares with lapse of the restrictions occurring as to one-third of the Shares in each year, and Retires on July 31 of the second year of the restriction period, the restrictions withWith respect to the first tranche of 4,000 shares will have lapsed previously, and restrictions will lapse as to 3,161 Shares with respect to the second one-third tranche (4,000 Shares times 577/730), and 2,107 Shares with respect to the third one-third tranche (4,000 Shares times 577/1,095) at Retirement. All vested RSUs will be paid in accordance with the payment provisions set forth in Section 7(d) of this Plan.
(iii) In all other events of Separation from Service, to the extent not previously paid, the Participant shall be paid any vested RSUs in accordance with the payment provisions of Section 7(d), and all unvested RSUs shall immediately terminate and be forfeited.
(c) Any Award of Restricted Stock or Restricted Stock Units may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares underlying a Restricted Stock Award, such certificate will be registered in the name of the Participant and bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Shares.
(d) Restricted Stock and Restricted Stock Unit Awards shall (subject to satisfaction of any purchase price requirement) be transferred or paid to the Participant as soon as practicable following the Award date or the termination of the vesting or other restrictions set forth in the Plan or the Agreement and the satisfaction of any and all other conditions of the Award applicable to such Restricted Stock or Restricted Stock Unit Award (the “Restriction End Date”), but in no event later than two and one-half (21/2) months following the end of the calendar yearawards that includes the later of the Award date or the Restriction End Date, as the case may be. In the event a Participant terminates service with the Company due to a Disability, then the Participant’s vested Restricted Stock Units shall be paid to the Participant within thirty (30) days of the Participant’s qualification for long-term disability under the Company’s long-term disability plan or policy, or the Committee’s determination of Disability, as the case may be. Notwithstanding any of the foregoing, to the extent that the provisions of Section 7(b) hereof or the provisions of any Award Agreement for Restricted Stock Units require, distributions of Stock under circumstances that constitute a “deferral of compensation” shall conform to the applicable requirements of Section 409A of the Code, including, without limitation, the requirement that a distribution to a Participant who is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) which is made on account of the specified employee’s Separation from Service shall not be made before the date which is six (6) months after the date of Separation from Service.
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8. STOCK AWARDS AND OTHER STOCK-BASED AWARDS.
(a) Stock Awards. The Committee is hereby authorized to grant Stock Awards to Eligible Individuals. Stock Awards may be issued by the Committee in addition to, or in tandem with, other Awards granted under this Plan, and may be issued in lieu of any cash compensation or fees for services to the Company as the Committee, in its discretion, determines or authorizes. Stock Awards shall be evidenced by an Agreement or in such other manner as the Committee may deem necessary or appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares underlying a Stock Award, such certificate will be registered in the name of the Participant.
(b) Other Stock-Based Awards. The Committee is hereby authorized to grant to Participants such other Awards (including, without limitation, rights to dividends and dividend equivalents) that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Stock (including, without limitation, securities convertible into Stock) as are deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan, the Committee will determine the terms and conditions of such Awards and set forth such terms and conditions in an Agreement related to such Award. Shares or other securities delivered pursuant to a purchase right granted under this Section 8(b) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms, including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, as the Committee determines, the value of which consideration, as established by the Committee, shall, except in the case of Substitute Awards, not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is granted.
(c) Stock Awards and Other Stock-Based Awards shall be transferred or paid to the Participant as soon as practicable following the Award date and the satisfaction of any and all other conditions of the Agreement applicable to such Stock Award or Other Stock-Based Award (the “Satisfaction Date”), but in no event later than two and one-half (21/2) months following the end of the calendar year that includes the later of the Award date or the Satisfaction Date, as the case may be.
9. PERFORMANCE AWARDS.
(a) The Committee is hereby authorized to grant Performance Awards to Eligible Individuals. Unless otherwise determined by the Committee, such Awards will be evidenced by an Agreement containing the terms of such Awards, including, but not limited to, the performance criteria and such terms and conditions as may be determined from time to time by the Committee, in each case, not inconsistent with this Plan.
(b) For Awards intended to be performance-based compensation under Section 162(m) of the Code, Performance Awardseach award shall be conditioned upon the Company’s achievement of pre-established goal(s) relating to one or more ofPerformance Goal(s) with respect to the following performance measures Performance Measure(s)
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established within 90by the Committee. With respect to such awards, no later than ninety (90) days after the beginning of the performance period as determinedapplicable Performance Period, the Committee shall establish in writing the Performance Goals, Performance Measures and the amount(s) or objective method(s) for computing the amount(s) of compensation which will be payable under the Plan to each Participant if the Performance Goals established by the Committee and subjectare attained; provided however, that for a Performance Period of less than one year, the Committee shall take any such actions prior to such modifications as specified by the Committee: cash flow; cash flow from operations; earnings (including earnings before interest, taxes, depreciation, and amortization or some variation thereof or earnings targets that eliminate earnings from non-core sources, such as gains from pension assets and timberland sales); earnings per share, diluted or basic; earnings per share from continuing operations; net asset turnover; inventory turnover; capital expenditures; debt, net debt, debt reduction; working capital; return on investment; return on sales; net or gross sales; market share; economic value added; costlapse of capital; change in assets; expense reduction levels; productivity; delivery performance; safety record; stock price; return on equity; total shareholder return; return on capital; return on assets or net assets; revenue; income or net income; operating income or net operating income; operating profit or net operating profit; gross margin, operating margin or profit margin; and completion of acquisitions, business expansion, product diversification and other non-financial operating and management performance objectives. To the extent consistent with Section 162(m)25% of the Code,Performance Period. At the time the Committee may determine that certain adjustments apply,determines the Performance Goal(s)/Performance Measure(s) for a Performance Period, in whole or in part, in such manner as determined by the Committee, to exclude the effect of any of the following events that occur during a performance period: the impairment of tangible or intangible assets; litigation or claim judgments or settlements; the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs, including, but not limited to, reductions in force and early retirement incentives; currency fluctuations; and any extraordinary, unusual, infrequent or non-recurring items described in management’s discussion and analysis of financial condition and results of operations or the financial statements and notes thereto appearing in the Company’s annual report to shareholders for the applicable year. Performance measures may be determined either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Subsidiary entity thereof, either individually, alternatively or in any combination, and measured over a period of time including any portion of a year, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee.
(c) For Awards intended to be performance-based compensation under Section 162(m) of the Code, performance goal(s) relating to the performance measures set forth above shall be pre-established by the Committee, and achievement thereof certified in writing prior to payment of the Award, as required by Section 162(m) and regulations promulgated thereunder. In addition to establishing minimum performance goal(s)Performance Goals below which no compensation shall be payable pursuant to a Performance Award,an award, the Committee, in its
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discretion, may create a performance schedule under which an amount less than or more than the target award may be paid so long as the performance goal(s)Performance Goals have been achieved.
(d) The Committee, in its sole discretion, may also establish such additional restrictions or conditions that must be satisfied as a condition precedent to the payment of all or a portion of any awards. Such additional restrictions or conditions shall be established no later than the date the Committee determines the Performance Awards.Goal(s)/Performance Measure(s) for a Performance Period. Such additional restrictions or conditions need not be performance-based and may include, among other things, the receipt by a Participant of a specified annual performance rating, thea vesting requirement of continued employment by the Participant until a date which may be beyond the end of a Performance Period,and/or the achievement of specified performance goals by the Company, business unit or Participant.
Furthermore and notwithstanding any provision of this Plan to the contrary, the Committee, in its sole discretion, may retain the discretion to reduce the amount of any Performance Awardaward to a Participant if it concludes that such reduction is necessary or appropriate based upon: (i) an evaluation of such Participant’s performance; (ii) comparisons with compensation received by other similarly situated individuals working within the Company’s industry; (iii) the Company’s financial results and conditions; or (iv) such other factors or conditions that the Committee deems relevant. TheNotwithstanding any provision of this Plan to the contrary, the Committee shall not use its discretionary authority, with respect to increase any award that is intended to be performance-based compensation under Section 162(m) of the Code.Code, to increase, directly or indirectly, the amount of a payment to any individual above which it would be based on the pre-established Performance Goal(s) in the absence of such exercise of discretion.
(e) Performance Payment of Individual Incentive Awards
Awards shall be transferred or paid as promptly as practicable (but in no event later than 21/2 months after the close of the fiscal year in which the Performance Period ends) after the Company’s certified public accountants have completed their examination of the Company’s year-end consolidated financial statements and the Committee has certified in writing the extent to which the Participantapplicable Performance Goals and any other material terms have been achieved. For purposes of this provision, and for so long as the Code permits, the approved minutes of the Committee meeting in which the certification is made shall be treated as written certification.
Notwithstanding paragraph (a) above, in the event the Committee had, at the time the award was granted, imposed a vesting requirement of continued employment until a specified date before the award can be paid, the award shall be paid as soon as practicable followingafter the terminationlast to occur of (i) the payment date described in paragraph (a) or (ii) the vesting or other restrictions set forth in the Plan or the Agreement and the satisfaction of any and all other conditions of the Agreement applicable to such Performance Award (the “Performance End Date”),date, but in no event later than two and one-half (221/2) months following the endclose of the calendarfiscal year that includesin which the Performance End Date.later of (i) or (ii) occurs.
10. DURATION. The Plan became effective onParticipants who have terminated employment with the Original Effective Date. No Award may be grantedCompany prior to the end of a Performance Period for any reason other than death, Retirement or Total and Permanent Disability, shall forfeit any and all rights to payment under any awards then outstanding under the Plan after the tenth anniversaryterms of the date at which this Plan is approvedand shall not be entitled to any cash payment for such period. Unless otherwise determined by shareholdersthe Committee, if a Participant’s employment with the Company should terminate during a Performance Period by reason of death, Retirement or Total and Permanent Disability, the Participant’s award shall be prorated to reflect the period of service prior tohis/her death, Retirement or Total and Permanent Disability, and shall be paid either to the Participant or, as appropriate, the Participant’s estate, provided and subject to the Committee’s certification that the applicable Performance Goals and Performance Measures have been met. No award hereunder shall be paid in the absence of the Company in 2009. However, unless otherwise expressly provided inCommittee’s certification that the applicable Performance Goal(s) and Performance Measure(s) have been met.
Amendment or Termination of the Plan
While the Company intends that the Plan shall continue in force from year to year, the Company reserves the right by action of its Board of Directors, or in an applicable Agreement, any Award theretofore granted may extend beyond such date, and the authority of the Committee, to administer the Plan and to amend, alter, adjust, suspend, discontinue, or terminate any such Award, or to waive any conditions or rights under any such Award, and the authority of the Board to amend the Plan, shall extend beyond such date.
11. AMENDMENT, MODIFICATION AND TERMINATION.
(a) Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Agreement or in the Plan, the Board may amend, alter, suspend, discontinue,modify or terminate the Plan, or any portion thereof at any time; provided, however, that no such modification, amendment alteration, suspension, discontinuation or termination shall, be made without: (i) shareholder approval if such approval is necessary to comply with any tax, legal or regulatory (including, for this purpose, the rules of any national securities exchange(s) on which the Stock is then listed) requirement for which or with which the Board deems it necessary or desirable to qualify or comply; or (ii)without the consent of the affected Participant, if such action wouldmaterially adversely affect any materialthe rights of such Participant to any payment that has been determined by the Committee to be due and owing to the Participant under any outstanding Award. the Plan but not yet paid.
Notwithstanding the foregoing or any provision of the Plan to the contrary, the Committee may at any time (without the consent of the Participant) modify, amend or terminate any or all of the provisions of this Plan to the extent necessary: (i)necessary to conform the provisions of the Plan with Section 409A of the Code regardless of whether such modification, amendment, or termination of the Plan shall adversely affect the rights of a Participant under the Plan; and (ii) to enable the Plan to achieve its stated purposes in any jurisdiction outside the United States in a tax-efficient manner and in compliance with local rules and regulations.
(b) The Committee may waive any conditions or rights under, amend any terms of, or amend, alter, suspend, discontinue or terminate, any Award theretofore granted, prospectively or retroactively, without the consent of any Participant or holder or beneficiary of an Award, provided, however, that no such action shall impair any material rights of a Participant or holder or beneficiary under any Award theretofore granted under the Plan. The Committee may, in its discretion, vest part or all of a Participant’s Award that would otherwise be forfeited; provided that, in the case of a Restricted Stock Unit Award, Stock Award, Other Stock-Based Award or Performance Award, distribution thereof to the Participant shall be made no later than two and one-half (21/2) months following the end of the calendar year in which such vesting occurs. Notwithstanding the foregoing, no waiver, amendment, alteration, suspension, discontinuation or termination of the Award by the Committee shall constitute (i) a modification of a stock right within the meaning of Treas. Reg.Section 1.409A-1(b)(5)(v)(B) so as to constitute the grant of a new stock right, (ii) an extension of a stock right, including the addition of any feature for the deferral of compensation, within the meaning of Treas. Reg.Section 1.409A-1(b)(5)(v)(C), or an impermissible acceleration of a payment date or a subsequent deferral of a stock right subject to Code Section 409A within the meaning of Treas. Reg.Section 1.409A-1(b)(5)(v)(E). Furthermore, in no event may the Committee exchange Awards previously granted for Awards of a different type.
(c) With respect to Participants who reside or work outside the United States of America, the Committee may, in its sole discretion, amend, or otherwise modify, without Board or shareholder approval, the terms of the Plan or Awards with respect to such Participants in order to conform such terms with the provisions of local law; provided that such amendment or other modification shall not, without the approval of the shareholders of the Company, increase the total number of Shares reserved for purposes of the Plan, expand the class of Eligible Individuals who may receive Awards under the Plan, add a new type of Award to the Plan or make other changes that would require the approval of the shareholders of the Company under the rules of the national securities exchange(s) on which the Company’s Stock is then listed.
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(d) The Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, an event affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations or accounting principles), whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made availableRights Not Transferable
A Participant’s rights under the Plan subject, with respect to Awards intended to meet the requirements of Section 162(m) of the Code, compliance with the provisions of Section 162(m).
(e) In connection with an event described in Section 4(d)may not be assigned, pledged, or such other events as determined by the Committee and set forth in an Award Agreement, the Committee may, in its discretion: (i) cancel any or all outstanding Awards under the Plan in consideration for payment to the holder of each such cancelled Award of an amount equal to the portion of the consideration that would have been payable to such holder pursuant to such transaction if such Award had been fully vested and exercisable, and had been fully exercised, immediately prior to such transaction, less the exercise price, if any, that would have been payable therefore; or (ii) if the net amount referred to in clause (i) would be negative, cancel such Award for no consideration or payment of any kind. Payment of any amount payable pursuant to the preceding sentence may be made in cashand/or securities or other propertyotherwise transferred except, in the Committee’s discretion. Such payment shall be made as soon as practicable, but in no event later than two and one-half (21/2) months following the end of the calendar year in which the Committee exercises its discretion to make payment as aforesaid.
12. MISCELLANEOUS.
(a) Nothing in the Plan or in any Agreement confers upon any Eligible Individual who is a Participant the right to continue in the service or employment of the Company or any Affiliate or affect any right which the Company or any Affiliate may have to terminate or modify the employment or provision of service of the Participant with or without cause.
(b) The Company has the right to withhold from any payment of cash or Stock to a Participant or other person under the Plan an amount sufficient to cover any required withholding taxes, including the Participant’s social security and Medicare taxes (FICA) and federal, state, local income tax or such other applicable taxes (“Taxes”) with respect to income arising from payment of the Award. The Company may require the payment of any Taxes before issuing any Stock pursuant to the Award. The Committee may, if it deems appropriate in the case of a Participant, withhold such Taxes through a reduction of the number of Shares delivered to such individual, or allow the Participant to elect to cover all or any part of the required withholdings, and to cover any additional withholdings up to the amount needed to cover the Taxes with respect to income arising from payment of the Award, through a reduction of the number of Shares delivered to such individual or a subsequent return to the Company of Shares held by the Participant, in each case valued in the same manner as used in computing the withholding taxes under the applicable laws.
(c) Awards received by a Participant under this Plan are not be deemed a part of a Participant’s regular, recurring compensation for purposesdeath, to the Participant’s designated beneficiary, or in the absence of any termination, indemnity or severance pay laws and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Company or an Affiliate, unless expressly so provided by such other plan, contract or arrangement, or unless the Committee so determines. No provision of the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, including incentive arrangements providing for the issuance of options and stock, and awards that do not qualify under Section 162(m) of the Code, and such arrangements may be generally applicable or applicable only in specific cases.
(d) Except as the Committee may otherwise determine from time to time: (i) no Award and no right under any Award shall be assignable, alienable, saleable or transferable by a Participant otherwise thandesignation, by will or by the laws of descent and distribution; provided, however, that, a Participant may, indistribution.
Funding
The Plan is not funded and all awards payable hereunder shall be paid from the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rightsgeneral assets of the Participant, and to receive any property distributable, with respect to any Award upon the death of the Participant; and provided, further, however, that in no event shall the Committee authorize any assignment, alienation, sale, or other transfer under this paragraph that would provide a Participant or beneficiary with the opportunity to receive consideration from a third party; (ii) each Award, and each right under any Award, shall be exercisable during the Participant’s lifetime only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative; and (iii) no Award and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company. The provisions of this paragraph shall not apply to any Award which has been fully exercised, earned or paid, as the case may be, and shall not preclude forfeiture of an Award in accordance with the terms thereof.
(e) This Plan is unfunded and the Company is not required to segregate any assets that may at any time be represented by Awards under this Plan. Neither the Company, its Affiliates, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under this Plan nor shall anythingNo provision contained in this Plan or anyand no action taken pursuant to itsthe provisions create or be construed toof this Plan shall create a fiduciary relationship betweentrust of any kind or require the Companyand/or its Affiliates, and a Participant to maintain or Successor.set aside any specific funds to pay benefits hereunder. To the extent any persona Participant acquires a right to receive an Awardpayments from the Company under thisthe Plan, such right shall be no greater than the right of anany unsecured general creditor of the Company.
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Withholdings
(f) Any liability
The Company shall have the right to withhold from any awards payable under the Plan or other wages payable to a Participant such amounts sufficient to satisfy federal, state and local tax withholding obligations arising from or in connection with the Participant’s participation in the Plan and such other deductions as may be authorized by the Participant or as required by applicable law.
No Employment or Service Rights
Nothing contained in the Plan shall confer upon any Participant any right with respect to continued employment with the Company (or any of its affiliates) nor shall the Plan interfere in any way with the right of the Company (or any of its affiliates) to at any time reassign the Participant with respect to an Award shall be based solely upon contractual obligations created by this Plan anda different job, change the applicable Agreement. Except as may be required by law, neither the Company nor any member or former membercompensation of the BoardParticipant or ofterminate the Committee, norParticipant’s employment for any other person participating (including participation pursuant to a delegation of authority under Section 3(i) hereof)reason.
Other Compensation Plans
Nothing contained in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan shall have any liability to any partyprevent the Company from adopting other or additional compensation arrangements for any action taken, or not taken, under this Plan.employees of the Company.
(g) No certificate for Shares distributable pursuant to this Plan will be issued and delivered unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of Section 409A of the Code, applicable state securities laws, the Securities Act of 1933, as amended and in effect from time to time or any successor statute, the Exchange Act and the requirements of the national securities exchange(s) on which the Company’s Stock may, at such time, be listed.Governing Law
(h) To the extent that federal laws do not otherwise control, this Plan and all determinations made and actions taken pursuant to thisThe Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to its conflict of law provisions.
(i) InEffective Date
The Plan was originally effective January 1, 2005, with its material terms approved by the event that any provision of this Plan is heldCompany’s shareholders. It was previously amended and restated effective January 1, 2008 to be illegal or invalid for any reason,reflect the illegality or invalidity shall not affect the remaining provisions of this Plan,Section 409A of the Internal Revenue Code and this Plan shall be construedthe final regulations thereunder. It is hereby amended and enforcedrestated again effective as if the illegal or invalid provision had not been included.of January 1, 2010.
(j) No fractional shares shall be issued or delivered pursuant to this Plan or any Agreement, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.* * *
Pursuant to authority granted to William T. Yanavitch, II, Vice President of Human Resources and Administration, in resolutions of the Board of Directors datedadopted March 4, 2009,3, 2010, the foregoing Amendedamended and Restated Long-Termrestated 2005 Management Incentive Plan is adopted by the Board the 4ththis 3rd day of March, 2009,2010, to be effective as of the date this amended and restated Long-Term Incentive Plan2005 management incentive plan is approved by the Company’s shareholders which is expected to occurbe on April 29, 2009.May 5, 2010.
P. H.P.H. GLATFELTER COMPANY
| | |
| | By: | /s/ William T. Yanavitch II |
William T. Yanavitch, II,
Vice President of Human Resources and
Administration
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2010 Annual Meeting Admission Ticket
Wednesday, May 5, 2010
York Expo Center
334 Carlisle Avenue
York, Pennsylvania
Pennsylvania Room
Upon arrival, please present this admission ticket and photo identification and any other required documents.
Number of shares:
WO#
68807-1
6PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.6 PROXY P. H. GLATFELTER COMPANY YORK, PENNSYLVANIA PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 29, 2009, 10:00 A. M. | | | | |
A Proposals – The undersigned shareholdersBoard of P. H.G latfelter Company hereby appoints J. Robert HallDirectors recommends a voteFOR all the nominees listed and Richard C. Ill, each oft hem, attorneys andp o r xies, with power of substitution in each of them, tov ote and act for and on behalf of the undersigned at the annual meeti ng ofs harehold ers of the Company to be held at the York Expo Center, 334 Carlisle Avenue, York, Pennsylvania int he Pennsylvania Room, on Wednesday, April 29, 2009, and at all adjournments thereof, according to the number of shares which the undersigned would be entitled to vote if then personally present, as indicated hereon and n i their discretion upon such other business as may come before the meeting and hereby ratifies and confirms all th at said attorneys and proxies may do or causet o be done by virtue hereof. When properly executed, this proxy wil be voted as directed herein. It is agreed that, if no direction is given or directed on th e other side of this proxy card, said attorneys and proxies are appointed WITH authority to vote FOR the election ofe ach of the directors listed, FOR Proposal Proposals 2 and FOR Proposal 3. ( P LEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE) (Continued and to be signed on reverse side) BNY MELLON SHAREOWNER SERVICES Address Change/Comments P.O. BOX 3550 M ( ark t h e corresponding box on th e reverse side) SOUTH HACKENSACK, NJ 07606-9 250 FOLD AND DETACH HERE Driving Instructio ns to the York Expo Center, 334 Carlisle Avenue, York, Pennsylvania From theS outh: Take I-8 3 North to Exit 15 (Old Exit 5) S. George Street — Business 83. Turn left at first traffic light. Follow Country Club Road o t Richland Avenuet o Market Street. Turn lefto n Market Str eet to York Fair Grounds. From theN orth : Take I-8 3 to Exit 22 (Old Exit 10) N. George Street. At fir st traffic light, take Route 30 West to Carlisle Avenue (Rte.74) exit. Turn left on Carlisle Avenue to York Fair Grounds. From theE ast: Take Route3 0 West to Carlisle Avenue (Rte. 74) exit. Turn left on Carlisle Avenue to York Fair Grounds. From theW est: Take Route4 62 (W. MarketS treet) from Route 30. Follow Market Street to Highland Avenue. T urn left on Highland Avenue and continue to Bannister. Turn right to Carlisle Avenue. T urn right to York Fair Grounds. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2009 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 29, 2009. P. H. Gla t f elterC ompany’sP roxy Statementf or the 2009 Annual Meeting of Shareholders and the Annual Report for the year ended December 31, 2008, are availa ble via the Internet at www.glatfelter.com/Files/about_us/investor_relations/2009Proxy.pdf and www.g latf elter.com/Fil es/about_us/i nvestor_relations/2008Annualreport.pdf. Choose MLinkSMforf ast, easy and secure 24/7 onlin e access to your future proxy materials, investment plan statements, tax documents and more. Sim ply lo g on to Investor ServiceDirect®at www.bnymel on.com/shareowner/isd where step-by-step instructions will prompty ou through enrollment. 43134 |
VOTE FOR all nominees listed at right, except as indicated below VOTE WITHHELD for all nominees *EXCEPTIONS (INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.) *Exceptions THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE FOLLOWING DIRECTORS PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE Term expiring in 2010 01 George H. Glatfelter II 02 Ronald J. Naples 03 Richard L. Smoot Proposition 1: Election of Directors FOR AGAINST ABSTAIN Please | Using a black ink pen, please mark your votes as indicated in this example X THE BOARD OF DIRECTORS RECOMMENDSexample. Please do not write outside the designated areas. | | x |
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| | | | | | | | | | |
| o | Mark here to vote FOR all nominees | | o | 01 Kathleen A. Dahlberg | | o | 03 Richard C. III | | o | 05 Richard L. Smoot |
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| o | Mark here to WITHHOLD vote from all nominees | | o | 02 George H. Glatfelter II | | o | 04 Ronald J. Naples | | o | 06 Lee C. Stewart |
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| o | For all EXCEPT - To withhold a vote for one or more nominees, mark the box to the left, and the corresponding numbered box(es) to the right. | | | | Director Nominees
| | Number of Votes
|
| | | 01-Kathleen A. Dahlberg
02-George H. Glatfelter II
03-Richard C. III
04-Ronald J. Naples
05-Richard L. Smoot
06-Lee C. Stewart
Total Votes Cast | ___________ Votes FOR
___________ Votes FOR
___________ Votes FOR
___________ Votes FOR
___________ Votes FOR
___________ Votes FOR
___________ |
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| o | CUMULATIVE VOTING: If you desire to allocate your votes to individual nominees on a cumulative basis, as explained on page 1 of the Proxy Statement, mark the CUMULATIVE VOTING ‘FOR’ THE FOLLOWING PROPOSALS Proposition 2: Approvalbox and indicate the number of an increase invotes that you would like to cast FOR each nominee. The total of the votes you cast on this proxy may not exceed the number of shares available for awards under the Company’s Amended and Restated Long-Term Incentive Plan and approval ofyou own times 6.NOTE: If you wish to use cumulative voting, you MUST vote your proxy by mail. |
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| | FOR | | AGAINST | | ABSTAIN |
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2. Proposal to approve the Amended and Restated Long- Term2005 Management Incentive Plan for purposespurpose of complying with Section 162(m) of the Internal Revenue Code, as described in summary inCode. | | o | | o | | o |
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3. Proposal to ratify the accompanying Proxy Statement and included as Appendix A to the Proxy Statement. Proposition 3: Ratificationappointment of Deloitte & Touche LLP as the independent registered public accounting firm. I will attend in person RSVP We request that you advise us of your intention to attendfirm for the annual meeting in person so that we can make arrangementsCompany for suitable accommodations. (Your failure to advise us of your intentions will not prevent you from attending the meeting in person.) FOLD AND DETACH HERE fiscal year ending December 31, 2010. | | o | | o | | o |
| | Mark Here for
Address Change
or Comments
SEE REVERSE I will attend in person Signature Date Signature Date IF HELD JOINTLY Note: Signature should be the same as the name printed above. Executors, administrators, trustees, guardians, attorneys, and officers of corporations should add their title when signing. P. H. Glatfelter Company | | o |
B. Authorized Signature – This section must be completed for your vote to be counted – Date and Sign Below- Please sign exactly as name(s) appear hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
SignatureDateSignatureDate
Driving Instructions
to the
York Expo Center, 334 Carlisle Avenue, York, Pennsylvania
From the South:
Take I-83 North to Exit 15 (Old Exit 5) S. George Street - Business 83. Turn left at first traffic light. Follow Country Club Road to Richland Avenue to Market Street. Turn left on Market Street to York Fair Grounds.
From the North:
Take I-83 to Exit 22 (Old Exit 10) N. George Street. At first traffic light, take Route 30 West to Carlisle Avenue (Rte. 74) exit. Turn left on Carlisle Avenue to York Fair Grounds.
From the East:
Take Route 30 West to Carlisle Avenue (Rte. 74) exit. Turn left on Carlisle Avenue to York Fair Grounds.
From the West:
Take Route 462 (W. Market Street) from Route 30. Follow Market Street to Highland Avenue. Turn left on Highland Avenue and continue to Bannister. Turn right to Carlisle Avenue. Turn right to York Fair Grounds.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2010
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 5, 2010.
P. H. Glatfelter Company’s Proxy Statement for the 2010 Annual Meeting of Shareholders and the Annual Report for the year ended December 31, 2009, are available via the Internet at www.glatfelter.com//Files/about_us/investor_relations/2010Proxy.pdf and www.glatfelter.com/Files/about_us/investor_relations/2009Annualreport.pdf.
ChooseMLinkSMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment.
PROXY
P. H. GLATFELTER COMPANY
YORK, PENNSYLVANIA
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD MAY 5, 2010, 10:00 A. M.
The undersigned shareholders of P. H. Glatfelter Company hereby appoints Nicholas DeBenedictis and J. Robert Hall, each of them, attorneys and proxies, with power of substitution in each of them, to vote and act for and on behalf of the undersigned at the annual meeting of shareholders of the Company to be held at the York Expo Center, 334 Carlisle Avenue, York, Pennsylvania in the Pennsylvania Room,on Wednesday, May 5, 2010, and at all adjournments thereof, according to the number of shares which the undersigned would be entitled to vote if then personally present, as indicated hereon and in their discretion upon such other business as may come before the meeting and hereby ratifies and confirms all that said attorneys and proxies may do or cause to be done by virtue hereof.
When properly executed, this proxy will be voted as directed herein. It is agreed that, if no direction is given or directed on the other side of this proxy card, said attorneys and proxies are appointed WITH authority to vote FOR the re-election of each of the directors listed.
(PLEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE)
(Continued and to be signed on reverse side)
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| | | | BNY MELLON SHAREOWNER SERVICES |
| Address Change/Comments | | |
| (Mark the corresponding box on the reverse side) | | | P.O. BOX 3536 |
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| | | | SOUTH HACKENSACK, NJ 07606-9236 |
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WO#
68807-1
