def14a
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Section
240.14a-11(c) or Section 240.14a-12
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P. H. GLATFELTER COMPANY
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11
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Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which
transaction applies:
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and state how it was
determined):
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Proposed maximum aggregate value of
transaction:
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Total fee paid:
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Fee paid previously by written preliminary
materials. |
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the date of
its filing.
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(1) |
Amount Previously
Paid: |
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(2) |
Form Schedule or
Registration Statement No.: |
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(3) |
Filing Party: |
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Date Filed: |
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P. H. GLATFELTER COMPANY
96 South George Street, Suite 500
York, Pennsylvania 17401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
April 26, 2006
TO THE SHAREHOLDERS:
The 2006 Annual Meeting of the Shareholders of P. H. Glatfelter
Company, a Pennsylvania corporation, will be held at the York
Expo Center, 334 Carlisle Avenue, York, Pennsylvania, in the
White Rose Room, on Wednesday, April 26, 2006, at
10:00 am, to
consider and act upon the following items:
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the election of three members of the Board of Directors to serve
for three-year terms expiring in 2009; and |
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such other business as may properly come before the Meeting. |
Only holders of record of the Companys common stock at the
close of business on March 1, 2006, will be entitled to
notice of, and to vote at, the Annual Meeting.
It is important that your shares be represented and voted at the
Annual Meeting. Whether or not you currently plan to attend the
Meeting, please complete, date and sign the accompanying proxy
card and return it promptly in the enclosed envelope (requiring
no postage if mailed in the United States). If you choose, you
may still vote in person at the Meeting, even though you had
previously submitted a proxy card.
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Jeffrey J. Norton |
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Vice President, |
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General Counsel and Corporate |
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Secretary |
March 21, 2006
TABLE OF CONTENTS
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P. H. GLATFELTER COMPANY
PROXY STATEMENT
The
accompanying proxy is being solicited by the Board of Directors
(the Board) of P. H. Glatfelter Company
(the Company), 96 South George Street,
Suite 500, York, Pennsylvania 17401, in connection with the
2006 Annual Meeting of the Shareholders of the Company (the
Annual Meeting or Meeting) to be held on
Wednesday, April 26, 2006 at 10:00 AM,
334 Carlisle Avenue, York, Pennsylvania, in the White
Rose Room. This proxy statement and the accompanying proxy
card are being mailed to the Companys shareholders on or
about March 21, 2006.
ABOUT THE MEETING
What is the purpose of the Annual Meeting?
At the Annual Meeting, shareholders will consider and act upon
the following items:
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the election of three members of the Board of Directors to serve
for three-year terms expiring in 2009; and |
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such other business as may properly come before the Meeting. |
In addition, following the Meeting the Companys management
will report on the Companys business during the year ended
December 31, 2005, and respond to questions from
shareholders.
Who is entitled to vote at the Annual Meeting?
Only holders of record of the Companys common stock at the
close of business on the record date, March 1, 2006, are
entitled to receive notice of, and to vote at, the Meeting. Each
holder of the Companys common stock is entitled to one
vote per share owned of record on all business presented at the
Meeting, except that shareholders have cumulative voting rights
with respect to electing Directors. Cumulative voting means that
each shareholder is entitled to as many votes in electing
Directors as is equal to the number of his or her shares of
common stock multiplied by the number of Directors to be
elected. A shareholder may cast all such votes for a single
nominee or may distribute them between two or more nominees as
he or she sees fit. The persons named in the accompanying proxy
card as proxy holders will vote the shares as designated by the
shareholder, including any exercise of cumulative voting rights
through the distribution of votes among the nominees as
indicated on the proxy card. Absent such designation, the proxy
holders may use their discretionary authority to vote as they
see fit, including to vote cumulatively.
How do I vote?
If you complete and properly sign the accompanying proxy card
and return it to the Company, it will be voted as you specify.
If you are a holder of record of the Companys common stock
on the record date and attend the Meeting in person, you may
deliver your completed proxy card or vote in person at the
Meeting. Judges of election appointed by the Company will count
the votes.
What constitutes a quorum?
A quorum is necessary to permit a particular matter to be
considered and acted upon at the Meeting. The presence at the
Meeting, in person or by proxy, of shareholders entitled to cast
at least a majority of the votes that all shareholders are
entitled to cast on a particular matter will constitute a quorum
for the purposes of such matter. Abstentions and broker
non-votes are counted as present and entitled to
vote for purposes of determining a quorum. A broker
non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because
the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the
beneficial owner.
The Company had 44,233,059 shares of common stock
outstanding on the record date.
What vote is required to elect a Director and to approve a
proposal assuming there is a quorum?
Election of Directors. The three nominees for
Director receiving the highest number of votes cast by
shareholders will be elected to serve on the Board. Votes
withheld (or abstentions) with respect to the election of a
Director will not be voted with respect to such Director;
accordingly, votes withheld will have no direct effect on the
result of the vote, unless the withheld vote is cast for another
nominee. Broker non-votes are not counted for purposes of the
election of Directors.
How does discretionary voting authority apply?
If you sign and return the accompanying proxy card, but do not
make any selections, you give discretionary authority to the
persons named as proxy holders on the proxy card. Your shares
will then be voted as recommended by the Board.
What is the Boards recommendation?
The Board recommends a vote:
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FOR election of its three nominees for Director, George
H. Glatfelter II, Ronald J. Naples and Richard L. Smoot. |
-1-
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy card, you may
revoke your proxy and change your vote at any time before the
proxy is exercised by filing with the Companys Secretary
either a notice of revocation or a duly executed proxy bearing a
later date. Your authorization of the proxy holders to vote your
proxy will be revoked if you attend the Annual Meeting in person
and request to change your vote, vote in person or revoke your
proxy. Attendance at the Meeting will not by itself revoke a
previously granted proxy.
Who bears the cost of solicitation of proxies?
The Company bears the cost of preparing, printing, assembling
and mailing this proxy statement and other Board proxy
solicitation materials. The Company will also reimburse brokers
and other custodians, nominees and fiduciaries for their
reasonable
out-of-pocket expenses
for forwarding proxy and solicitation materials to the owners of
the Companys common stock. In addition to the solicitation
of proxies by mail, some of the officers and other employees of
the Company may solicit proxies personally, by telephone and by
other means. These persons receive no special compensation for
any solicitation activities.
When are shareholder proposals due for inclusion in the
proxy statement for the 2007 Annual Meeting of
Shareholders?
Proposals that a shareholder would like to present at the 2007
meeting must be submitted to the Company prior to the
preparation of the annual proxy statement. To be included in the
proxy statement for the Companys 2007 Annual Meeting,
shareholder proposals must be submitted in writing to the
Companys Secretary no later than November 21, 2006.
The Companys By-laws prescribe the procedures shareholders
must follow to bring business before shareholder meetings. To
bring matters before the 2007 Annual Meeting, under the terms of
the Companys By-laws, and to include a matter in the
Companys proxy statement and proxy for that meeting,
notice must be received by the Company within the time limit
described above. Such notice must meet the Companys By-law
requirements, and otherwise comply with the requirements of
Rule 14a-8 under
the Securities Exchange Act of 1934, as amended (the
Exchange Act). Copies of the Companys By-laws
may be obtained free of charge from the Secretary of the
Company. No shareholder proposals were submitted to the Company
for presentation at the 2006 Annual Meeting.
How can a shareholder nominate Director candidates?
You may recommend nominees for consideration by the Boards
Nominating and Corporate Governance Committee for nomination for
election to the Board. Shareholder recommendations for director
nominees will receive the same consideration by the Boards
Nominating and Corporate Governance Committee that all other
nominations receive. Shareholders wishing to recommend a nominee
for director should submit such recommendation in writing, along
with any supporting materials the shareholder deems appropriate,
to the Secretary of the Company.
You may nominate a person for election to the Board, provided
the recommendation is made in accordance with the procedures
described herein and the Companys By-laws. To nominate a
candidate for Director at the 2007 Annual Meeting, your notice
of the nomination must be received by the Companys
Secretary no later than November 21, 2006. The notice must
describe various matters regarding the nominee, including name,
address, occupation and Company shares held, all as provided by
the Companys By-laws. Copies of the relevant sections of
the By-laws may be obtained free of charge from the Secretary of
the Company.
-2-
OWNERSHIP OF COMPANY STOCK
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the Companys knowledge, the following table sets forth
information regarding ownership of Glatfelters outstanding
common stock as of March 1, 2006 (except as otherwise
noted) by: (i) each person who is known by the Company to
own beneficially more than 5% of the common stock of the
Company; (ii) each director and named executive officer;
and (iii) all directors and executive officers as a group.
Except as otherwise indicated and subject to applicable
community property laws, each owner has sole voting and
investment powers with respect to the securities listed. The
number of shares beneficially owned by each person is determined
under the rules of the Securities and Exchange Commission
(SEC) and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under
the rules of the SEC, all shares with respect to which a person
has the right to acquire beneficial ownership within
60 days is considered beneficially owned by that person.
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Number of Shares of |
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Common Stock |
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Percent |
Shareholder |
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Position |
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Beneficially Owned (1) |
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of Class |
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Mac-Per-Wolf Company
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3,951,400 |
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(2) |
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8.93% |
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Janus Capital Management LLC
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3,889,000 |
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(2) |
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8.79% |
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Dimensional Fund Advisors Inc.
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3,860,100 |
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(3) |
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8.73% |
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The PNC Financial Services Group, Inc.
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3,390,692 |
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(4) |
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7.67% |
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Barclays Global Investors, NA
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2,938,803 |
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(5) |
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6.64% |
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Kathleen A. Dahlberg
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Director |
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11,554 |
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(6) |
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Nicholas DeBenedictis
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Director |
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17,554 |
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(7) |
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George H. Glatfelter II
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Chairman of the Board & CEO |
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651,909 |
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(8) |
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1.46% |
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J. Robert Hall
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Director |
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11,554 |
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(9) |
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Richard C. Ill
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Director |
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4,734 |
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(10) |
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John P. Jacunski
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Vice President & Corporate Controller |
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499 |
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(11) |
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Ronald J. Naples
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Director |
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11,228 |
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(12) |
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Dante C. Parrini
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Executive Vice President &
Chief Operating Officer |
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64,231 |
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(13) |
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* |
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Werner A. Ruckenbrod
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Vice President Long Fiber &
Overlay |
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20,448 |
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(14) |
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Richard L. Smoot
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Director |
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19,054 |
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(15) |
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* |
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Lee C. Stewart
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Director |
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12,054 |
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(16) |
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John C. van Roden
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Executive Vice President &
Chief Financial Officer |
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11,566 |
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(17) |
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All directors and executive officers as a group
(15 individuals) |
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838,354 |
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(18) |
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1.87% |
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(1) |
For purposes of the table, shares of common stock are considered
beneficially owned by a person if such person has or shares
voting or investment power with respect to such stock. As a
result, more than one person may beneficially own the same
security and, in some cases, the same shares are listed opposite
more than one name in the table. The table includes, in some
cases, shares beneficially held by spouses or minor children, as
to which beneficial ownership is disclaimed. |
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(2) |
Consists of shares beneficially owned as of December 31,
2005. The 3,889,000 shares are held by various investment
companies registered under Section 8 of the Investment
Company Act of 1940, individual clients and institutional
clients to which Perkins, Wolf, McDonnell and Company, LLC
(Perkins Wolf), an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940,
acts as investment adviser or sub-adviser. Perkins Wolf
disclaims beneficial ownership of such shares. Janus Capital
Management LLC has an indirect 30% ownership stake in Perkins
Wolf. Due to the above ownership structure, holdings for Janus
Capital and Perkins Wolf are aggregated for purposes of this
filing. In addition, Perkins Wolfs holdings of the
Companys common stock are aggregated with |
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Mac-Per-Wolf Company, the majority owner of Perkins Wolf. Janus
Capital and Mac-Per-Wolf possess share voting and investment
authority over the 3,889,000 shares. Mac-Per-Wolf Company
also beneficially owns an additional 62,400 shares held by
PWMCO, LLC, a wholly-owned subsidiary of Mac-Per-Wolf and both a
broker dealer registered under Section 15 of the Act and an
investment adviser registered under Section 203 of the
Investment Advisers Act of 1940. Mac-Per-Wolf possesses sole
voting and investment authority over the 62,400 shares. The
address for Janus Capital Management is 151 Detroit Street,
Denver, Colorado 80206. The address for Mac-Per-Wolf Company,
311 S. Wacker Dr., Suite 6000, Chicago, Illinois
60606. |
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(3) |
Consists of shares beneficially owned, as of December 31,
2005, by Dimensional Fund Advisors Inc. Dimensional
Fund Advisors possesses sole voting and investment
authority over all 3,860,100 shares. Dimensional
Fund Advisors is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940. All
3,860,100 shares are owned by four investment companies
registered under the Investment Company Act of 1940, to which
Dimensional Fund Advisors furnishes investment advice, and
by certain other commingled group trusts and separate accounts
to which Dimensional Fund Advisors serves as investment
manager. Dimensional Fund Advisors disclaims beneficial
ownership of such shares. The address of Dimensional
Fund Advisors Inc. is 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401. |
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(4) |
Consists of shares beneficially owned as of December 31,
2005. The 3,390,692 shares consist of 3,389,292 shares
as to which the PNC Financial Services Group, Inc.
(PNC) has sole voting authority; 961,070 shares
as to which PNC has sole investment authority; and
2,428,711 shares as to which PNC has shared investment
authority. PNC is holding theses shares as trustee, custodian,
executor or agent. The amounts specified for shared voting
authority and shared investment authority include
240,000 shares held by PNC Bank, National Association
(PNC Bank) as co-trustee with George H.
Glatfelter II as of March 1, 2006. All shares
beneficially owned by PNC are also considered to be beneficially
owned by its subsidiary, PNC Bancorp, Inc. and by PNC Bank, a
subsidiary of PNC Bancorp, Inc. The address for PNC is Fifth
Avenue and Wood Street, Pittsburgh, Pennsylvania 15265. |
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(5) |
According to Barclays Global Investors, NA.s most recent
Schedule 13G filing, filed February 17, 2004, consists
of shares beneficially owned, as of December 31, 2003, by
Barclays Global Investors, NA. and certain other entities, which
include banks as defined in Section 3(a)(6) of
the Securities Exchange Act of 1934 and an investment advisor
registered under Section 203 of the Investment Advisers Act
of 1940 filing together. Barclays Global Investors, NA. and the
other entities are holding these shares in trust accounts for
the economic benefit of the beneficiaries of those accounts. The
2,938,803 shares include 2,658,675 shares with respect
to which Barclays Global Investors, NA. and the other entities
have sole voting authority and sole investment authority,
2,352,456 shares beneficially owned by Barclays Global
Investors, NA., 500,540 shares beneficially owned by
Barclays Global Fund Advisors and 85,807 shares
beneficially owned by Barclays Global Investors, Ltd. The
address of Barclays Global Investors, NA. is 45 Fremont Street,
San Francisco, California 94105. |
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(6) |
Consists of outstanding options to purchase 7,500 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 4,054 shares held directly. |
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(7) |
Consists of outstanding options to purchase 13,500 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 4,054 shares held jointly
by Mr. DeBenedictis and his spouse. |
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(8) |
Consists of outstanding options to purchase 388,226 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date, approximately 3,381 shares
held by Mr. Glatfelter through the Companys 401(k)
Plan, 240,000 shares held in trust as co-trustee with PNC
Bank as to which Mr. Glatfelter disclaims beneficial
ownership and 20,302 shares held directly. |
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(9) |
Consists of outstanding options to purchase 7,500 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 4,054 shares held directly. |
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(10) |
Consists of outstanding options to purchase 2,500 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 2,234 shares held directly. |
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(11) |
Consists of approximately 499 shares held by
Mr. Jacunski through the Companys 401(k) Plan. |
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(12) |
Consists of outstanding options to purchase 9,000 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 2,228 shares held directly. |
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(13) |
Consists of outstanding options to purchase 57,471 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date, 2,977 shares held by
Mr. Parrini through the Companys 401(k) Plan and
3,783 shares held directly. |
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(14) |
Consists of outstanding options to purchase 19,340 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 1,108 shares held directly. |
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(15) |
Consists of outstanding options to purchase 13,500 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 5,554 shares held directly. |
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(16) |
Consists of outstanding options to purchase 7,500 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and 4,554 shares held directly. |
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(17) |
Consists of outstanding options to purchase 11,000 shares,
which were exercisable as of March 1, 2006, or within
60 days from such date and approximately 566 shares
held by Mr. van Roden through the Companys 401(k)
Plan. |
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(18) |
See Notes 6 through 17. Consists of outstanding options to
purchase 537,037 shares, which were exercisable as of
March 1, 2006 or within 60 days from such date,
9,392 shares held by executive officers through the
Companys 401(k) Plan, 51,925 shares held directly and
240,000 shares held in trust pursuant to which George H.
Glatfelter II acts as co-trustee with PNC Bank as to which
Mr. Glatfelter disclaims beneficial ownership. |
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information as of
December 31, 2005 regarding the Companys equity
compensation plans.
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(a) | |
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(b) | |
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(c) | |
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Number of securities | |
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remaining available for | |
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Number of securities | |
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future issuance under | |
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to be issued upon | |
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Weighted-average | |
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equity compensation | |
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exercise of | |
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exercise price of | |
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plans (excluding | |
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outstanding options, | |
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outstanding options, | |
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securities reflected in | |
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warrants and rights | |
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warrants and rights | |
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column (a)) | |
Plan Category |
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(1) | |
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(2) | |
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(3) | |
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Equity compensation plans
approved by security holders
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1,849,771 |
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$ |
14.06 |
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1,469,118 |
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Equity compensation plans not approved by security holders
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Total
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1,849,771 |
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$ |
14.06 |
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1,469,118 |
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(1) |
Includes 1,553,209 non-qualified stock options, and 296,562
restricted stock units. |
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(2) |
Weighted average exercise price is based on outstanding
non-qualified stock option prices only. |
|
(3) |
Represents the securities remaining available for issuance under
the 2005 Long-Term Incentive Plan. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys Directors and executive officers, and persons who
own more than ten percent of a registered class of the
Companys equity securities (10% Holders), to
file reports of holdings and transactions in the Companys
common stock with the SEC and the New York Stock Exchange (the
NYSE). Based on the Companys records and other
information, the Company believes that, in 2005, its Directors,
executive officers and 10% Holders (of which there are none) met
all applicable filing requirements.
-5-
PROPOSAL 1: ELECTION OF DIRECTORS
At the Annual Meeting, the Companys shareholders will vote
to fill three Director positions, each with three-year terms
expiring on the date of the Companys 2009 Annual Meeting
of Shareholders and until their respective successors are
elected and qualified. The Board proposes that George H.
Glatfelter II, Ronald J. Naples and Richard L. Smoot, who
are currently serving as Directors of the Company, be re-elected
as Directors for terms expiring in 2009. The nominees have
consented to serve if elected to the Board.
If a nominee is unable to serve as a Director at the time of the
meeting, an event that the Board does not anticipate, the
persons named in the accompanying proxy card will vote for such
substitute nominee as may be designated by the Board, unless the
Board reduces the number of Directors accordingly.
Board of Directors
The following table sets forth information as to the nominees
and the other persons who are to continue as Directors of the
Company after the Annual Meeting. The offices referred to in the
table are offices of the Company unless otherwise indicated.
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Name |
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|
Year | |
Principal Occupation and |
|
|
|
First | |
Businesses During Last Five |
|
|
|
Elected | |
Years and Current Directorships |
|
Age | |
|
Director | |
| |
Nominees to be elected for terms expiring in 2009 |
George H. Glatfelter II Chairman since April 2000;
Chief Executive Officer since June 1998; President from June
1998 to February 2001. Mr. Glatfelter serves as a Director
of Met-Pro Corporation. |
|
|
54 |
|
|
|
1992 |
|
|
Ronald J. Naples Since October 1995, Chairman, Chief
Executive Officer and Director of Quaker Chemical Corporation, a
specialty chemical company serving the metalworking and
manufacturing industries. He also serves as a Director of NCO
Corporation and is the Chairman of the Federal Reserve Bank of
Philadelphia. |
|
|
60 |
|
|
|
2000 |
|
|
Richard L. Smoot Retired since September 2002. Regional
Chairman, PNC Bank, National Association, Philadelphia/ South
Jersey markets from December 2000 to September 2002; President
and Chief Executive Officer, PNC Bank, National Association,
Philadelphia/ South Jersey markets, from July 1991 to December
2000. He also serves as a Director of Aqua America Corporation. |
|
|
65 |
|
|
|
1994 |
|
|
Directors continuing for terms expiring in 2007 |
Kathleen A. Dahlberg Founder and President/ CEO of Open
Vision Partners (a consortium of professionals bringing new
technologies and businesses to market) and a business consultant
on the application of new technologies for business improvement
and process change since September 2001; Vice President of
Worldwide Restaurant Solutions at McDonalds Corporation
from 2002 to 2004;. From 1997 to 2001, Vice
President
e-business at BP Amoco. |
|
|
53 |
|
|
|
2001 |
|
|
Richard C. Ill Since 1993, President, CEO and Director of
Triumph Group, Inc., a leading international aviation services
company. Mr. Ill is a member of the Board of Governors of
the Aerospace Industries Association, is on the Advisory Board
for Outward Bound USA, and is a Director of Denman and Davis,
Inc. and of Airgas, Inc. |
|
|
63 |
|
|
|
2004 |
|
|
Lee C. Stewart Since May 2001, associated with Daniel
Stewart & Company, a private investment and equity bank
located in London, England. Member of Advisory Board for Daniel
Stewart & Company; Executive Vice President and Chief
Financial Officer of Foamex International, Inc. from March 2001
to May 2001; Vice President of Union Carbide Corporation from
1996 to 2001. Mr. Stewart is also a Director of AEP
Industries, Inc., a Director of Marsulex, Inc. and a Director of
International Transmission Holding Corporation. |
|
|
57 |
|
|
|
2002 |
|
-6-
|
|
|
|
|
|
|
|
|
Name |
|
|
|
Year | |
Principal Occupation and |
|
|
|
First | |
Businesses During Last Five |
|
|
|
Elected | |
Years and Current Directorships |
|
Age | |
|
Director | |
| |
Directors continuing for terms expiring in 2008 |
Nicholas DeBenedictis Chairman, Chief Executive Officer
and Director of Aqua America Corporation (formerly Philadelphia
Suburban Corporation), the largest publicly-traded water company
in the United States, since May 1993. He also serves as a
Director of Met-Pro Corporation, Exelon Corporation and
Harleysville Insurance. |
|
|
60 |
|
|
|
1995 |
|
|
J. Robert Hall Chief Executive Officer of Ardale
Enterprises LLC since 1998, a private company specializing in
acquisition related activities in the food industry. He served
as Chairman of PEP Snack Foods, Inc. (a holding company for Wise
Foods, Inc., a leading regional snack food company) from 2000 to
2002 and now serves as Vice Chairman and as a Director of Taco
Bueno Restaurants and Custom Food Products, Inc. He is also on
the Advisory Board of Belmay Inc. |
|
|
53 |
|
|
|
2002 |
|
CORPORATE GOVERNANCE AND BOARD OF
DIRECTORS
The Board of Directors and management of the Company are
dedicated to good corporate governance. The Board has adopted
Governance Principles to provide a framework for governance of
the Company. These Governance Principles are set forth in full
on the Companys website at
www.glatfelter.com/e/govprinciples.htm and available in print
upon request directed to the Corporate Secretarys Office,
96 South George Street, Suite 500, York, PA 17401-1434.
What is the composition of the Board?
The Board currently consists of eight members. In the
Companys Governance Principles, the Board has adopted the
NYSE standards for determining the independence of Directors,
which requires that a Director does not have a material
relationship with the Company.
The Board has determined the following Directors to be
independent and not to have any material relationship with the
Company: Ms. Dahlberg and Messrs. DeBenedictis, Hall,
Ill, Naples and Smoot. The Board determined that
Mr. Glatfelter has a material relationship with the Company
because he is the Chairman and Chief Executive Officer. The
Board also determined that Mr. Stewart does not currently
meet the independence requirements because of a previous
consulting arrangement with the Company, which terminated in the
first quarter of 2003. Thus, Messrs. Glatfelter and Stewart
are deemed not to be independent Directors by NYSE standards and
the Companys Governance Principles. It is expected
Mr. Stewart will satisfy the independence requirements
beginning in the second quarter of 2006.
What committees has the Board established?
The Companys 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 following the Companys Annual Meeting.
The Board has adopted a written charter for its standing
committees, all of which are posted on the Companys
website at www.glatfelter.com/e/govcommittees.htm, and available
in print upon request directed to the Corporate Secretarys
Office, 96 South George Street, Suite 500, York, PA
17401-1434. The Charters for the Audit Committee and Nominating
and Corporate Governance Committee were attached as
Appendices A and B, respectively, to the Companys
2005 Proxy Statement and remain unchanged, having both been
reaffirmed by the Board on March 8, 2006.
Audit Committee. The Audit Committee currently
consists of four Directors: Messrs. DeBenedictis (Chair),
Hall, 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 this proxy statement is first mailed to shareholders. 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. The functions of, and additional
information about, the Audit Committee are set forth in the
Report of the Audit Committee below. The Audit Committee held
twelve meetings during 2005.
-7-
Compensation Committee. The Compensation Committee
currently consists of four Directors: Ms. Dahlberg (Chair),
and Messrs. DeBenedictis, Naples and Smoot. In the opinion
of the Board, all four Compensation Committee members meet the
Director independence requirements set forth in the NYSE listing
standards in effect on the date this proxy statement is first
mailed to shareholders. The functions of, and additional
information about, the Compensation Committee is set forth in
the Report of the Compensation Committee included elsewhere in
this Proxy Statement. The Compensation Committee held nine
meetings during 2005.
Finance Committee. The Finance Committee currently
consists of three Directors: Messrs. Stewart (Chair),
Glatfelter and Hall. 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, the Finance Committee is charged with:
|
|
|
|
|
the review and recommendation for approval by the Board of the
Companys budgets; |
|
|
the review of the performance of the Companys pension
funds and approval of the Companys recommendations
regarding investment objectives, strategies and/or managers as
warranted; and |
|
|
the review of the range of investment vehicles available to
participants under the Companys 401(k) Plan and the
availability of Company stock as an investment option under the
401(k) Plan. |
The Finance Committee also oversees development and monitors
execution of the Companys 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.
The Finance Committee held three meetings during 2005.
Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee currently consists
of four Directors: Mr. Smoot (Chair), Ms. Dahlberg,
and Messrs. DeBenedictis and Hall. In the opinion of the
Board, all four 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
this proxy statement is first mailed to shareholders. The
Nominating and Corporate Governance Committee:
|
|
|
|
|
provides advice to the Board regarding all corporate governance
matters (including the Companys Code of Business Conduct
and the Code of Business Ethics for the CEO and Senior Financial
Officers); |
|
|
makes nominations of Directors and officers of the Company; |
|
|
makes recommendations to the Board regarding the Boards
size and composition and the tenure and retirement age of
Directors; |
|
|
reviews the qualifications of candidates for the Board and
recommends to the Directors nominees for election to the Board
at each annual meeting; |
|
|
considers nominees recommended by shareholders; |
|
|
nominates persons to fill vacancies on the Board occurring
between annual meetings; |
|
|
nominates Directors for committee membership and committee
chairpersons; and |
|
|
reviews and approves Company contributions to affiliated persons
or entities and Company contributions in excess of $25,000 to
any other person or entity. |
The Nominating and Corporate Governance Committee considers
candidates for Board membership suggested by its members, other
Board members, management and shareholders. When evaluating
whether to recommend an individual for election or re-election
to the Board, the Nominating and Corporate Governance Committee
will consider, at a minimum and in accordance with the
Companys corporate Governance Principles, the
nominees independence, availability of sufficient time to
serve on the Companys Board and the possession of such
knowledge, experience, skills, expertise, wisdom, integrity,
business acumen, understanding of the Companys business
environment and diversity so as to enhance the Boards
ability to manage and direct the affairs and business of the
Company. Shareholders wishing to recommend a nominee for
election to the Board should follow the procedures set forth on
page 2 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 and director nominations submitted for
presentation at the annual 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
and makes nominations to the Board for election of officers.
The Nominating and Corporate Governance Committee has the
authority to retain Director search consultants, outside counsel
or other experts as it deems necessary
-8-
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 2005. The Nominating and Corporate
Governance Committee held four meetings during 2005.
How may shareholders communicate with the Companys
Board or the non-management Directors of the Company?
You may submit any written correspondence to the Board or any
individual Director (whether management or non-management),
c/o Corporate Secretarys Office, 96 South George
Street, Suite 500, York, PA 17401-1434. You can also call
the Companys Integrity Helpline
(1-800-346-1676).
The Companys Board has approved a process whereby the
Office of the Corporate Secretary will regularly forward any and
all communications received on behalf of the Board or individual
Directors to the Board or the respective Director and the Chair
of the Committee responsible for the matter addressed in the
communication. All communication that relates to concerns
regarding accounting, internal controls or auditing matters will
be forwarded to the Chair of the Audit Committee promptly upon
receipt with a copy to the addressee.
What is the Companys policy regarding Director
attendance at the Annual Meeting?
While the Company does not have a formal policy regarding
Director attendance at the Annual Meeting of Shareholders, the
Companys Directors, including persons nominated for
election at the annual meeting, generally attend the annual
meeting. All of the Companys Directors attended the 2005
Annual Meeting of Shareholders.
How often did the Board meet during 2005?
The Board held eight meetings during 2005, including a two-day
retreat to discuss strategic issues. The standing committees
established by the Board held a total of twenty-eight meetings
in 2005. All of the incumbent Directors attended at least 75% of
the aggregate of the meetings of the Board and Board committees
on which he or she served in 2005. 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?
Our corporate website (www.glatfelter.com) includes a
Corporate Governance page consisting of, among others, our
Governance Principles and Code of Business Conduct, listing of
our Board of Directors and Executive Officers, Nominating, Audit
and Compensation Committees of the Board of Directors and their
respective Charters, Code of Business Ethics for the CEO and
Senior Financial Officers of Glatfelter, our
whistle-blower policy and other related material. We
intend to satisfy the disclosure requirement for any future
amendments to, or waivers from, our Code of Business Conduct or
Code of Business Ethics for the CEO and Senior Financial
Officers by posting such information on our website. We will
provide a copy of the 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.
DIRECTOR COMPENSATION
How are Directors compensated?
2005 Base Compensation. Directors receive an
annual retainer fee of $22,000 two thirds of which consist of
shares of the Companys common stock with a market value on
the grant date, with the balance paid in cash. In addition to
the annual retainer, non-employee Directors are paid $1,500 for
attendance at the annual Board retreat and $1,000 for every
Board and committee meeting they attend. Non-employee Directors
serving as committee chairpersons are paid an additional $4,000
(paid in cash) annually for their service. In addition, each
non-employee Director receives an annual restricted stock unit
award valued at $15,500 on the grant date and that will vest
over a three-year period. As with the prior Director
compensation program, all accrued, but unpaid, Director cash
compensation payments are made on each May 1st and
November 1st.
Deferred Compensation. Pursuant to the
Companys 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 2005.
For previous deferral elections, the Company has credited a
deferred fee account with phantom shares of the Companys
common stock (stock units) on the date the retainer would
otherwise have been paid. The number of stock units credited to
a Directors deferred account is the amount of the deferred
fee divided by the fair market value of the Companys
common stock on such date. Additional stock units are credited
to each Directors account when dividends are paid on the
Companys common stock as of any such dividend payment
date. A Director will be entitled to receive a cash payment
equal to the amount credited to his or her
-9-
account following termination of such Directors service on
the Board.
Benefits. Each non-employee Director is covered by
the Companys Directors and officers liability
insurance, as well as the Companys travel accident
insurance.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation of the Chief Executive Officer of the Company and
the Companys next four most highly compensated executive
officers in 2005.
SUMMARY COMPENSATION TABLE
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|
Long-Term Compensation | |
|
|
|
|
|
|
|
|
|
|
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|
| |
|
|
|
|
|
|
Annual Compensation | |
|
Awards | |
|
Payouts | |
|
|
|
|
|
|
| |
|
| |
|
| |
|
|
|
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Long- | |
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|
|
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|
|
|
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|
Term | |
|
|
|
|
|
|
|
|
Restricted | |
|
|
|
Incentive | |
|
|
|
|
|
|
|
|
Other Annual | |
|
Stock | |
|
Securities | |
|
Plan | |
|
All Other | |
Name and Principal |
|
Fiscal | |
|
Salary | |
|
Bonus | |
|
Compensation | |
|
Awards | |
|
Underlying | |
|
Payouts | |
|
Compensation | |
Position |
|
Year | |
|
($) | |
|
($)(1) | |
|
(2) | |
|
($)(3) | |
|
Options | |
|
($)(4) | |
|
($)(5) | |
| |
George H. Glatfelter II
|
|
|
2005 |
|
|
|
522,591 |
|
|
|
25,000 |
|
|
|
|
|
|
|
408,400 |
|
|
|
|
|
|
|
435,191 |
|
|
|
3,175 |
|
|
Chairman and
|
|
|
2004 |
|
|
|
482,004 |
|
|
|
|
|
|
|
|
|
|
|
444,400 |
|
|
|
|
|
|
|
|
|
|
|
3,100 |
|
|
|
Chief Executive Officer
|
|
|
2003 |
|
|
|
482,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
209,542 |
|
|
|
3,623 |
|
|
Dante C. Parrini
|
|
|
2005 |
|
|
|
331,008 |
|
|
|
40,000 |
|
|
|
|
|
|
|
213,416 |
|
|
|
|
|
|
|
97,801 |
|
|
|
3,150 |
|
|
Executive Vice President and
|
|
|
2004 |
|
|
|
295,767 |
|
|
|
|
|
|
|
|
|
|
|
116,665 |
|
|
|
|
|
|
|
|
|
|
|
3,075 |
|
|
|
Chief Operating Officer
|
|
|
2003 |
|
|
|
271,116 |
|
|
|
59,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,787 |
|
|
|
3,339 |
|
|
John C. van Roden
|
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|
2005 |
|
|
|
304,479 |
|
|
|
|
|
|
|
|
|
|
|
136,990 |
|
|
|
|
|
|
|
|
|
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|
16,500 |
|
|
Executive Vice President and
|
|
|
2004 |
|
|
|
294,174 |
|
|
|
55,000 |
|
|
|
185,082 |
|
|
|
105,545 |
|
|
|
|
|
|
|
|
|
|
|
16,569 |
|
|
|
Chief Financial Officer
|
|
|
2003 |
|
|
|
209,432 |
|
|
|
123,191 |
|
|
|
6,604 |
|
|
|
|
|
|
|
11,000 |
|
|
|
|
|
|
|
12,719 |
|
|
Werner A. Ruckenbrod (6)
|
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2005 |
|
|
|
286,990 |
|
|
|
|
|
|
|
10,489 |
|
|
|
62,006 |
|
|
|
|
|
|
|
11,798 |
|
|
|
|
|
|
Vice President Long Fiber
|
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2004 |
|
|
|
260,339 |
|
|
|
42,000 |
|
|
|
12,995 |
|
|
|
47,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
& Overlay Papers
|
|
|
2003 |
|
|
|
234,907 |
|
|
|
78,323 |
|
|
|
12,366 |
|
|
|
|
|
|
|
4,240 |
|
|
|
|
|
|
|
|
|
|
John P. Jacunski
|
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|
2005 |
|
|
|
213,754 |
|
|
|
60,000 |
|
|
|
|
|
|
|
84,488 |
|
|
|
|
|
|
|
|
|
|
|
3,150 |
|
|
Vice President and
|
|
|
2004 |
|
|
|
200,004 |
|
|
|
60,000 |
|
|
|
57,244 |
|
|
|
90,152 |
|
|
|
|
|
|
|
|
|
|
|
2,750 |
|
|
|
Corporate Controller
|
|
|
2003 |
|
|
|
40,581 |
|
|
|
|
|
|
|
5,076 |
|
|
|
|
|
|
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(1) |
Reflects discretionary and incentive bonuses, including those
under the Management Incentive Plan for 2005. No bonuses under
the Management Incentive Plan were paid to executive officers
for 2004. At Mr. Glatfelters request, in lieu of any
incentive cash bonus earned in 2003, the Board granted
Mr. Glatfelter an award of 11,700 additional restricted
stock units in 2004. In 2003, Mr. van Roden received a
$15,000 signing bonus and an additional $108,191 as a guaranteed
bonus under his employment contract. |
|
(2) |
Includes the aggregate incremental costs to the Company of
providing certain benefits to the named executive officers. The
2004 amount for Mr. van Roden consists of a relocation
expense reimbursement perquisite of $111,771 and an income tax
reimbursement payment of $73,311. The amounts indicated for
Mr. Ruckenbrod constitute reimbursement for automobile
expenses, paid in Euros
() and converted
to United States dollars ($) using the average exchange rate for
2005. The amounts indicated for Mr. Jacunski consist of
relocation expense reimbursement. |
|
(3) |
The following chart sets forth all outstanding awards of
restricted stock units to each named executive officer. No such
awards were made in 2003. |
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|
Units Awarded | |
|
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| |
|
|
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|
2005 | |
|
2004 | |
|
Fair Value | |
|
|
| |
Glatfelter
|
|
|
28,300 |
|
|
|
40,000 |
|
|
$ |
969,177 |
|
Parrini
|
|
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14,800 |
|
|
|
10,500 |
|
|
|
359,007 |
|
van Roden
|
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|
9,500 |
|
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|
9,500 |
|
|
|
269,610 |
|
Ruckenbrod
|
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|
4,300 |
|
|
|
4,300 |
|
|
|
122,034 |
|
Jacunski
|
|
|
5,900 |
|
|
|
5,900 |
|
|
|
167,442 |
|
|
|
|
|
Restricted stock unit awards generally vest
1/3
in each of the third, fourth and fifth years following date of
grant. The fair value set forth above is based on the closing
price of Glatfelter common stock as of December 31, 2005,
or $14.19 per share. Restricted stock units earn dividend
equivalents, with payment |
-10-
|
|
|
(if dividends have been paid on the Companys common stock)
made quarterly. |
|
(4) |
Payouts for 2005 triggered by the vesting of performance-based
stock awards for Messrs. Glatfelter, Parrini, and
Ruckenbrod, which were awarded on December 17, 2002
pursuant to the 1992 Plan. The following table summarizes
information with respect to this award. The value of the shares
is based on the share price as of December 31, 2005, or
$14.19 per share. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of | |
|
|
|
|
|
|
Shares | |
|
Dividends | |
|
Cash | |
|
|
| |
Glatfelter
|
|
$ |
161,057 |
|
|
$ |
15,150 |
|
|
$ |
258,984 |
|
Parrini
|
|
|
36,185 |
|
|
|
3,404 |
|
|
|
58,212 |
|
Ruckenbrod
|
|
|
10,784 |
|
|
|
1,014 |
|
|
|
|
|
|
|
|
|
In 2004, there were no cash payments made, and no vesting of
restricted stock occurred, under the 1992 Plan. Payouts were
triggered by the vesting of restricted stock awards for
Messrs. Glatfelter and Parrini, which were awarded in 1999
pursuant to the 1992 Plan and had a four-year vesting period
ending December 31, 2003. |
|
(5) |
Other compensation for the periods presented includes matching
contributions under the Companys 401(k) Savings Plan as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
Glatfelter
|
|
$ |
3,150 |
|
|
$ |
3,075 |
|
|
$ |
3,598 |
|
Parrini
|
|
|
3,150 |
|
|
|
3,075 |
|
|
|
3,339 |
|
van Roden
|
|
|
2,100 |
|
|
|
2,169 |
|
|
|
2,137 |
|
Ruckenbrod
|
|
|
|
|
|
|
|
|
|
|
|
|
Jacunski
|
|
|
3,150 |
|
|
|
2,750 |
|
|
|
|
|
|
|
|
|
In addition, in each period presented beginning April 2003,
Mr. van Roden received a $1,200 monthly stipend in
lieu of medical coverage under Glatfelters Salaried
Medical Plan. |
|
(6) |
Mr. Ruckenbrods cash compensation is paid in Euros
() and amounts
presented herein have been converted to United States dollars
($) using the average exchange rate for 2005. For 2005, 2004 and
2003, Mr. Ruckenbrods cash compensation (exclusive of
automobile expense reimbursement) was
230,496,
209,377 and
188,923,
respectively. |
Year-End Option Values
The following table sets forth information concerning options
exercised in 2005 and the value of unexercised options to
purchase common stock held by the named executive officers on
December 31, 2005:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
|
|
Underlying Unexercised | |
|
Value of Unexercised In-the- | |
|
|
|
|
|
|
Options at Fiscal Year | |
|
Money Options at Fiscal | |
|
|
|
|
|
|
End (#) | |
|
Year End ($)(1) | |
|
|
Shares | |
|
|
|
| |
|
|
Acquired on | |
|
Value | |
|
|
Name |
|
Exercise (#) | |
|
Realized ($) | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
| |
G. H. Glatfelter II
|
|
|
|
|
|
|
|
|
|
|
388,226 |
|
|
|
0 |
|
|
|
452,664 |
|
|
|
0 |
|
D. C. Parrini
|
|
|
|
|
|
|
|
|
|
|
57,471 |
|
|
|
0 |
|
|
|
56,285 |
|
|
|
0 |
|
J. C. van Roden
|
|
|
|
|
|
|
|
|
|
|
7,333 |
|
|
|
3,667 |
|
|
|
22,805 |
|
|
|
11,404 |
|
W. A. Ruckenbrod
|
|
|
|
|
|
|
|
|
|
|
17,220 |
|
|
|
2,120 |
|
|
|
20,802 |
|
|
|
4,070 |
|
J. P. Jacunski
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(1) |
Value is measured by the difference between the closing price
for the Companys common stock on the NYSE on
December 31, 2005, and the exercise price of the option. |
-11-
EMPLOYEE RETIREMENT PLANS AND PENSION PLAN TABLES
What employee retirement plans has the Company established
for Directors and Executive Officers?
The following table identifies the employee retirement plans in
which each named executive officer participates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERP | |
|
|
|
|
| |
|
|
Pension | |
|
|
|
FAC | |
|
|
Plan | |
|
Restoration | |
|
Pension | |
| |
G. H. Glatfelter II
|
|
|
X |
|
|
|
X |
|
|
|
X |
|
D. C. Parrini
|
|
|
X |
|
|
|
X |
|
|
|
X |
|
J. C. van Roden
|
|
|
X |
|
|
|
X |
|
|
|
|
|
W. A. Ruckenbrod
|
|
|
X |
|
|
|
|
|
|
|
|
|
J. P. Jacunski
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
Pension Plans. Executive officers and Directors
who are full-time employees of the Company participate in the P.
H. Glatfelter Company Retirement Plan for Salaried Employees
(the Pension Plan). Benefits payable under the Pension Plan are
based upon years of service and average annual compensation for
the five consecutive calendar years during the ten years
preceding the year of retirement that yield the highest average.
Retirement benefits under the Pension Plan are not subject to
any deduction for Social Security benefits. Annual compensation
for purposes of the Pension Plan generally includes salary as
listed in the Summary Compensation Table plus bonus listed in
the Summary Compensation Table for the prior year. To the extent
deferral of an award under the Companys Management
Incentive Plan causes a reduction in a participants
pension under the Pension Plan, a pension supplement (the
MIP Adjustment Supplement) will be paid from the
Companys Supplemental Management Pension Plan.
Mr. Ruckenbrod is covered by a separate defined benefit
retirement pension plan provided for under the Retirement
Pension Agreement between Mr. Ruckenbrod and S&H
Verwaltungsgesellschaft mbH, a German subsidiary of the Company,
effective January 1, 2000. The Retirement Pension Agreement
provides for a retirement benefit equal to 1.286% of
Mr. Ruckenbrods average pensionable salary (which
includes base salary and bonuses paid under the Management
Incentive Plan) during the last five years of his employment
period for each year of service. Mr. Ruckenbrods
Retirement Pension Agreement is governed by German law and as
such benefits thereunder are not subject to any deduction for
Social Security benefits.
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 Companys Compensation
Committee for participation therein. The first benefit, known as
the Restoration Pension, provides an additional
pension benefit based on the participants pension benefit
earned under the terms of the Pension Plan, which is intended to
restore that portion of the Pension Plans benefit that
cannot be paid from that Plan due to legal limitations on the
compensation and total benefits payable thereunder. Participants
may receive the Restoration Pension in a single sum or in any
form permitted under the Pension Plan, as elected by the
participant at the time he or she first becomes a participant.
The second benefit, known as the FAC Pension, pays a
monthly pension benefit equal to a designated percentage of the
participants final average compensation (as defined
below), offset by the actuarially equivalent value of the
participants 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
participants years of credited service under the Pension
Plan, but not in excess of 55%. The FAC Pension is payable
following the participants retirement at or after
age 62 in the form of a joint and 75% survivor annuity with
the participants spouse or, if so requested by the
participant and approved by the Companys Compensation
Committee, as a single sum. 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 participants attainment of age 62. A
survivor benefit is also payable under the FAC Pension to the
participants surviving spouse if the participant dies
before his or her benefit commencement date. Final average
compensation means the annualized average of the
participants eligible compensation for the sixty
(60) calendar months immediately preceding his or her
retirement, which generally means the salary and bonus amounts
listed in the Summary Compensation Table.
-12-
What are the estimated annual retirement benefits of the
Companys executives?
The following table shows the estimated annual retirement
benefits, payable in the form of a joint and 75% survivor
annuity beginning at age 62, to those executives who are
eligible for the FAC Pension under the SERP. This benefit
consists of the sum of the executives Pension Plan
benefits and the additional amount necessary to yield the
benefit calculated under the FAC Pension.
PENSION PLAN TABLE (U.S.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated annual retirement benefit based on years of service (1) | |
Average Annual | |
|
| |
(Five Year) | |
|
|
Compensation ($) | |
|
15 | |
|
20 | |
|
25 | |
|
27.5 or more | |
| |
|
| |
|
| |
|
| |
|
| |
|
125,000 |
|
|
|
37,500 |
|
|
|
50,000 |
|
|
|
62,500 |
|
|
|
68,750 |
|
|
150,000 |
|
|
|
45,000 |
|
|
|
60,000 |
|
|
|
75,000 |
|
|
|
82,500 |
|
|
175,000 |
|
|
|
52,500 |
|
|
|
70,000 |
|
|
|
87,500 |
|
|
|
96,250 |
|
|
200,000 |
|
|
|
60,000 |
|
|
|
80,000 |
|
|
|
100,000 |
|
|
|
110,000 |
|
|
250,000 |
|
|
|
75,000 |
|
|
|
100,000 |
|
|
|
125,000 |
|
|
|
137,500 |
|
|
300,000 |
|
|
|
90,000 |
|
|
|
120,000 |
|
|
|
150,000 |
|
|
|
165,000 |
|
|
400,000 |
|
|
|
120,000 |
|
|
|
160,000 |
|
|
|
200,000 |
|
|
|
220,000 |
|
|
500,000 |
|
|
|
150,000 |
|
|
|
200,000 |
|
|
|
250,000 |
|
|
|
275,000 |
|
|
600,000 |
|
|
|
180,000 |
|
|
|
240,000 |
|
|
|
300,000 |
|
|
|
330,000 |
|
|
700,000 |
|
|
|
210,000 |
|
|
|
280,000 |
|
|
|
350,000 |
|
|
|
385,000 |
|
|
800,000 |
|
|
|
240,000 |
|
|
|
320,000 |
|
|
|
400,000 |
|
|
|
440,000 |
|
(1) Pension benefit paid as a
joint and 75% survivor annuity.
The following executive officers who participate in the
U.S. Pension Plan had the indicated credited years of
service on December 31, 2005:
Mr. Glatfelter 30 years and
Mr. Parrini 9 years.
As of December 31, 2005 Messrs. van Roden and Jacunski
are not eligible for the FAC Pension and therefore are entitled
to receive a pension determined under the Pension Plan, together
with, as applicable, the Restoration Pension and the MIP
Adjustment Supplement. However, on December 31, 2005, they
had not yet fulfilled the five year vesting requirement under
the Companys pension plans.
The following table shows the estimated annual retirement
benefits to Mr. Ruckenbrod, who participates in a different
pension plan than the executives based in the United States.
PENSION PLAN TABLE (GERMANY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated annual retirement benefit based on years of service (1) | |
Average Annual | |
|
| |
(Five Year) | |
|
|
Compensation ($) | |
|
15 | |
|
20 | |
|
25 | |
|
30 | |
|
35 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
125,000 |
|
|
|
24,000 |
|
|
|
32,000 |
|
|
|
40,000 |
|
|
|
48,000 |
|
|
|
56,000 |
|
|
150,000 |
|
|
|
29,000 |
|
|
|
39,000 |
|
|
|
48,000 |
|
|
|
58,000 |
|
|
|
68,000 |
|
|
175,000 |
|
|
|
34,000 |
|
|
|
45,000 |
|
|
|
56,000 |
|
|
|
68,000 |
|
|
|
79,000 |
|
|
200,000 |
|
|
|
39,000 |
|
|
|
51,000 |
|
|
|
64,000 |
|
|
|
77,000 |
|
|
|
90,000 |
|
|
250,000 |
|
|
|
48,000 |
|
|
|
64,000 |
|
|
|
80,000 |
|
|
|
96,000 |
|
|
|
113,000 |
|
|
300,000 |
|
|
|
58,000 |
|
|
|
77,000 |
|
|
|
96,000 |
|
|
|
116,000 |
|
|
|
135,000 |
|
|
400,000 |
|
|
|
77,000 |
|
|
|
103,000 |
|
|
|
129,000 |
|
|
|
154,000 |
|
|
|
180,000 |
|
|
500,000 |
|
|
|
96,000 |
|
|
|
129,000 |
|
|
|
161,000 |
|
|
|
193,000 |
|
|
|
225,000 |
|
|
600,000 |
|
|
|
116,000 |
|
|
|
154,000 |
|
|
|
193,000 |
|
|
|
231,000 |
|
|
|
270,000 |
|
|
700,000 |
|
|
|
135,000 |
|
|
|
180,000 |
|
|
|
225,000 |
|
|
|
270,000 |
|
|
|
315,000 |
|
|
800,000 |
|
|
|
154,000 |
|
|
|
206,000 |
|
|
|
257,000 |
|
|
|
309,000 |
|
|
|
360,000 |
|
|
|
|
|
(1) |
Pension benefit paid as joint and 75% survivor annuity. |
Mr. Ruckenbrod is entitled to receive a full lifetime
pension benefit starting with his 62nd birthday, or (if
earlier) upon his incapacity to perform his job.
Mr. Ruckenbrod is also entitled to a reduced pension as
early as age 55. The unreduced amounts shown above would be
reduced by 2.5% for each year that he retired before
age 62. In the event of Mr. Ruckenbrods death,
his spouse shall continue to receive 60% of the pension benefit
(provided they had been married for five years). The pension
plan also provides for benefits in the event
-13-
of Mr. Ruckenbrods death before reaching retirement.
Annual compensation for purposes of this pension plan generally
includes salary as listed in the Summary Compensation Table plus
bonus listed in the Summary Compensation Table for the prior
year. Mr. Ruckenbrod has 21 years of service credited
under this pension plan, as of December 31, 2005.
EMPLOYMENT, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
AGREEMENTS
Has the Company entered into any employment contracts with
any of the named executive officers or with any material
consequence?
Mr. Ruckenbrod has an employment agreement with S&H
Verwaltungsgesellschaft mbH, a German subsidiary of the Company,
effective January 1, 2000. The employment agreement
established Mr. Ruckenbrods initial base salary at
DM 310,000, subject to annual adjustments. Using the
irrevocable conversion rate utilized to convert
Deutschemarks to
Euros ()
during Germanys transition to the new currency, this
amounted to
164,843.
(Applying the average annual conversion rate for the year 2005
to Mr. Ruckenbrods 2000 base salary to enable a
comparison with the Summary Compensation Table above, this
initial base salary amounted to $205,230.) In addition to
customary health and welfare benefits, the agreement provides
for Mr. Ruckenbrods use of a Company-owned car, up to
one year of paid disability benefits (net of insurance payments)
and a severance benefit equal to twelve months base salary
following his termination by the Company without cause. The
employment agreement expires at the end of the month in which
Mr. Ruckenbrod reaches age 65.
What
change-in-control
agreements has the Company executed?
The Company has entered into
Change-in-Control
Employment Agreements with each of Messrs. Glatfelter, van
Roden, Parrini, Ruckenbrod, and Jacunski, along with three other
executives. Under the agreements, each employee will become
entitled to additional payments and benefits if his employment
is terminated under certain conditions within two years
following a change in control (as defined in the agreements) of
the Company. Under the agreements, each employees
employment with the Company will continue for two years from the
date of a change in control. During such period, the employee
shall continue in 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.
The foregoing agreements provide that if, within two years
following a change in control, the employees employment is
terminated by the Company other than for cause, death or
disability, or is terminated by the employee for good reason
(each as defined in the agreements), he will receive his then
current base salary through the date of termination, plus a lump
sum payment, payable within thirty days after the date of
termination, representing certain severance benefits (in lieu of
further salary payments and in lieu of any severance benefits
otherwise payable by the Company). The severance benefits under
the agreements consist of: (i) a pro-rated bonus for the
year in which the date of termination occurs, on the basis of
the target bonus under the Management Incentive Plan;
(ii) an amount equal to two times (three times in the case
of Mr. Glatfelter) (a) the employees annual base
salary (at the highest rate achieved in the 90-day period
through and including the date of termination) plus (b) his
annual bonus for the last full fiscal year before the date of
termination; (iii) continued health, disability and life
insurance coverage for two years (three years in the case of
Mr. Glatfelter) at substantially similar levels of
coverage, or at the Companys option, payment to the
executive of an amount equal to the Companys cost of
providing such benefits; (iv) compensation for certain
unvested retirement benefits; (v) for participants in the
Companys Supplemental Management Pension Plan with at
least five years of vesting service, a contribution of funds,
under certain circumstances, by the Company to the trust serving
as the funding vehicle for the plan; and (vi) full vesting
and payout under all deferred compensation plans, if any. The
agreements also provide that if any payment by the Company
results in excise tax under the Internal Revenue Code, then the
employee is entitled to a
gross-up payment so
that the net amount he retains will be equal to his payment less
ordinary and normal taxes (but not less the excise tax).
The agreements also provide that if the employees
employment is terminated by the Company for cause, death or
disability, or is terminated by the employee (including
voluntary retirement) without good reason, in lieu of the
severance benefits above, such employee will receive a lump sum
cash payment of his then current base salary through the date of
termination, together with all compensation and benefits to
which he is entitled under the Companys benefit plans for
periods preceding the date of termination.
The agreements further provide that if any payment or benefit to
an employee, whether pursuant to the agreements or otherwise, is
subject to the excise tax imposed by the Internal Revenue Code
of 1986, as amended (the Code), on excess
parachute payments, then an additional payment will be
made to such employee so that the amount he receives on a net
basis will be the same amount that he would have received absent
the applicability of the excise tax.
-14-
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
What are the responsibilities of the Companys
Compensation Committee?
In accordance with its Board-approved charter, the Compensation
Committee is responsible for discharging the Boards duties
related to compensation of the Companys executives and
also reviews, recommends for approval by the Board and oversees
the Companys 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 Committees functions
described above, the Compensation Committee:
|
|
|
|
|
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 Companys
shareholders and provide reasonable and competitive compensation
opportunities; |
|
|
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; |
|
|
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; |
|
|
reviews and recommends to the independent members of the Board
the CEOs compensation, including salary, bonus, and other
incentive and equity-based compensation, based on the evaluation
of the CEOs performance; |
|
|
reviews and approves annually, with the CEOs involvement,
the salaries and equity-based grants, as well as discretionary
cash awards, for the Companys non-CEO executives; |
|
|
establishes individual target award levels for incentive
compensation payments to the Companys 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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prepares the annual report to shareholders on the compensation
of the Companys CEO and other executives; and |
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reviews and recommends to the Board any modifications of the
non-employee Directors compensation program. |
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 Compensation Committee from time to time reviews the
Companys entire executive compensation structure through
an examination of compensation information for comparable
companies and certain broader-based market data, compiled by an
independent compensation consultant. The group of comparable
companies, including certain companies against which the Company
competes with its products, companies from the broader paper
industry, packaging companies, and companies from which the
Company recruits senior executives, including other companies
headquartered in south central Pennsylvania, is developed by the
Committees compensation consultant and approved by the
Committee. The companies that comprise the Peer Group in the
Stock Performance Chart below are the Companys
industry-based comparable companies and as such are included in
the group of comparable companies for the review of comparable
executive compensation.
What is the Boards philosophy regarding executive
compensation?
The Compensation Committee has generally structured the
Companys executive compensation program to (i) target
the 50th percentile of the market of comparable companies
in order to be competitive with its compensation programs and to
enable the Company to attract, retain and motivate a highly
qualified executive management team, (ii) provide a
significant portion of variable-based compensation that is
contingent upon objectively measured performance to align
executive officers interests with those of the
Companys shareholders, and (iii) include appropriate
and flexible design features in such programs that will be
responsive to the characteristics of the paper industry and to
the changing needs of the Company.
From time to time, the Compensation Committee solicits the
advice of consulting firms to evaluate the Companys
executive compensation program in order to ensure that such
program is reasonable and competitive
-15-
with compensation programs of the comparable companies. In 2005,
the Committee engaged an independent compensation consulting
firm to assist the Compensation Committee in its review of
compensation for executives. In particular, the Compensation
Committee considered a competitive market compensation analysis
for all executive positions, prepared by the compensation
consultant, which analyzed executive compensation at the
comparable companies.
What are the components of executive compensation?
The Compensation Committee has reviewed the aggregate
compensation and the components thereof of the Companys
executives, including, in particular, the compensation of the
CEO. Based upon that review, the Compensation Committee believes
that such compensation is reasonable, competitive and in the
best interests of the Companys shareholders. The
compensation package for the Companys executives includes
the following components:
Base Salary. The Companys policy is to pay
competitive salaries at levels that are sufficient to attract
and retain high-caliber individuals, based on the relative value
of each position as measured against the comparable companies.
The Company targets its executive base salaries at the
50th percentile of the market range for the respective
assignments. To perform this task, the Compensation Committee
assigns each executive position a salary, including a range and
a midpoint, based on the comparison to competitive market levels
for the executives job function at the comparable
companies.
Executive base salaries are reviewed and approved annually
(typically in the first quarter of the calendar year) and the
Compensation Committee sets the salary for each executive after
an assessment of his or her individual performance, overall
corporate performance, as well as competitive and internal
equitable considerations. Salaries and ranges may be further
adjusted by the Compensation Committee in the interim on the
basis of corporate performance, as well as competitive
considerations and individual performance. On February 28,
2005, salary adjustments for the Companys executives
ranging from 0% to 12.0% were approved. Such adjustments reflect
the Compensation Committees assessment of individual
performance, achievement of business objectives, a market
analysis conducted by an independent compensation consultant for
the executives position and relative salary compared to
market reference points, performance of the business, and the
Committees desire to retain leadership skills necessary to
execute the Companys business strategy in North America
and Europe.
Management Incentive Plan. Another component of
executive compensation utilized by the Compensation Committee is
incentive-based cash bonus awards under the Companys
Management Incentive Plan. The Management Incentive Plan,
administered by the Compensation Committee, is designed to
encourage executives and other eligible key employees to
increase the profitability of the Company and to reward them for
doing so through an annual cash bonus.
The Company targets its annual incentive bonus awards under the
Management Incentive Plan at the 50th percentile of the
annual incentive bonus for executive officers of the comparable
companies for target level performance. The Companys
Management Incentive Plan seeks to assure that incentive bonus
awards are at risk annually, to reward eligible executives and
key employees on the basis of corporate financial results on an
annual basis, and to provide an incentive bonus award that is
competitive for each position with that of the comparable
companies. These incentive bonus opportunities are set annually,
potentially represent a significant portion of total
compensation and are intended to correspond to the financial
performance of the Company for the applicable year.
For fiscal year 2005, the Committee established a single
performance metric of Net Operating Income (excluding after-tax
pension income and unusual, non-recurring items) as the
benchmark for payment of bonuses under the Management Incentive
Plan. The Committee established threshold, target and maximum
Net Operating Income objectives for the Management Incentive
Plan. The award of incentive bonuses to be paid to executives is
dependent on the extent of achievement of such objectives.
Unless the threshold Net Operating Income is attained, there
will be no payout under the Management Incentive Plan. In 2005,
the threshold Net Operating Income was not achieved and,
consequently, no bonuses were paid to executives under the
Management Incentive Plan.
A new Management Incentive Plan was approved, on the
Compensation Committees recommendation, by the Board in
March 2005 and by the Companys shareholders in April 2005
(the 2005 Management Incentive Plan). Beginning with
awards for fiscal year 2006, the 2005 Management Incentive Plan
approved by the shareholders will replace the Companys
former Management Incentive Plan.
-16-
Discretionary Compensation. The Compensation
Committee may approve additional compensation, including limited
discretionary bonuses, to any executive for performance, for
retention purposes, or to serve any other corporate objective,
based upon amounts budgeted by the Board for such purposes. In
March 2006, discretionary bonuses in recognition of individual
performance during 2005, were granted to a limited number of
executives ranging from 5% to 35% of base salary.
Long-Term Incentive Compensation. Long-term
incentive compensation is a key component of the compensation of
the Companys executives. Long-term incentive compensation
awards are designed to retain executives and to focus
executives attention on the long-term performance of the
business, while recognizing that the cyclical nature of paper
industry can impact short-term incentive compensation. In
addition, equity-based awards directly align the
executives financial interests with those of the
Companys shareholders. In general, the Company targets the
value of its long-term incentive grants at the
50th percentile of the long-term incentive compensation for
executive officers of the comparable companies.
The executives of the Company receive long-term incentives under
the Companys 1992 Key-Employee Long-Term Incentive Plan
(the 1992 Plan) and the Companys 2005
Long-Term Incentive Plan (the 2005 Plan), both of
which are administered by the Compensation Committee. Upon
shareholder approval in April 2005, the 2005 Plan replaced the
1992 Plan. No further grants have been, or will be, made under
1992 Plan.
Both the 1992 Plan and the 2005 Plan enable the Company to offer
eligible employees equity interests in the Company and other
incentive awards, including performance-based stock incentives
and cash awards. The long-term incentives available under the
plans are similar to long-term incentives offered by many of the
comparable companies.
Restricted
Stock Units. A form of long-term incentive compensation that
the Committee routinely utilizes in compensating senior
management is restricted stock units. Restricted stock units
create strong incentives for executives to maximize shareholder
value and, at the same time, provide an incentive to employees
that have been awarded them to remain through the full vesting
date. These restricted stock units vest in a staggered fashion,
with one-third of the units vesting on each December 31st
of the second, third, and fourth year after they are granted.
During this period, employees who have been awarded the
restricted stock units will receive payment of cash dividends on
all units awarded, whether or not they have vested. During 2005,
a total of 102,500 restricted stock units were awarded to
executives, 82,900 of which were awarded under the 1992 Plan
prior to shareholder approval of the 2005 Plan and 19,600 of
which were awarded under the 2005 Plan. All of the restricted
stock units granted to executives in 2005 had substantially
similar terms.
Performance
Cash Program. Another long-term incentive compensation
element utilized is the performance cash program for executives
and other members of senior management, which was implemented by
the Board under the 1992 Plan in 2004. This program provides an
additional cash incentive to executives and other members of
senior management, recognizing that the Management Incentive
Plan may not provide short term incentives due to Companys
performance in a given year. Under the current program,
performance cash awards will be paid to program participants if
the Company achieves a preset financial target by the end of
2009. The financial target was established by the Board and is
an estimate of three-year cumulative Net Operating Income
(excluding after tax pension income and unusual, non-recurring
items). Upon achieving the financial target, the participants
will receive an individual cash award, the amount of which
varies by their position, and the Board may then consider
establishing a new program and target. If the target is not met
by the end of 2009, the program will be cancelled and the Board
may consider establishing a new program and target. The target
was not met in 2005.
Total
Shareholder Return Program. Performance cash awards and
performance share awards were granted under the 1992 Plan to
certain executives by the Committee in December 2002, the
payment and vesting, respectively, of which were based on the
Companys achieving a threshold level of total shareholder
return for the three-year period that ended December 31,
2005 relative to the total shareholder returns at the comparable
companies for the same three-year period. Final performance cash
awards could range from 50% of pre-established target cash
awards if the threshold level of total shareholder return was
achieved up to 150% of the target amounts if the Company
achieved the maximum level of total shareholder return.
Participants in the program could receive from 50% of
pre-established target share awards upon achievement of the
threshold level of total shareholder return up to a maximum of
100% of target share awards if the target level of total
shareholder return was achieved. The Companys total
shareholder return for the three-year period ended
December 31, 2005 was at the 54th percentile, above
the target level, and participants in the program received cash
payouts at 108% of their respective target cash awards, ranging
from $27,605 to $258,984, and 100% of the target performance
share awards, ranging from 760 to
-17-
11,350 shares of stock. In addition, participants received
cash payouts representing dividends on the shares during the
performance period, ranging from $1,014 to $15,150.
How is the Company addressing Internal Revenue Code limits
on the deductibility of compensation?
The Compensation Committee has adopted practices such that,
where appropriate, certain awards made under the 2005 Long-Term
Incentive Plan and the 2005 Management Incentive Plan will
qualify as performance-based compensation that will be
deductible for federal income tax purposes under
Section 162(m) of the Code. However, in order to design
long-term compensation programs that provide the utmost
flexibility, the Company has not established a policy that
mandates that all compensation must be deductible under
Section 162(m).
How is the Companys Chief Executive Officer
compensated?
For 2005, Mr. Glatfelters compensation consisted of
base salary, participation in the Management Incentive Plan and
long-term incentive compensation.
Effective February 1, 2005, Mr. Glatfelters
annual salary was increased to $530,200, or 10%. The
Compensation Committee recommended and the independent members
of the Board approved the increase based upon a review of
Mr. Glatfelters total compensation, recognizing that
Mr. Glatfelters salary was significantly below the
median salary of chief executive officers at the comparable
companies, he had not received a salary increase since 2002, and
the Company had successfully addressed challenging operational
issues while continuing to remain profitable despite difficult
industry conditions.
Mr. Glatfelter did not receive a bonus under the Management
Incentive Plan for 2005 because the threshold for Net Operating
Income was not achieved. However, he was awarded a $25,000
discretionary bonus, or 5% of base salary, reflecting individual
performance.
On March 3, 2005, Mr. Glatfelter was awarded 28,300
restricted stock units under the 1992 Plan in connection with
the Companys long-term incentive program established in
2004, which were set at a level, when combined with the
annualized value of the multi-year performance cash program
described below, to position Mr. Glatfelters total
long-term incentive compensation
at approximately the 50th percentile of the total
long-term incentive compensation of chief executive officers of
the comparable companies. The restricted stock units vest in a
staggered fashion, with one-third of the units vesting on each
December 31st of the second, third, and fourth year after
they are awarded.
In 2004, the Board established a multi-year performance cash
program target of $630,000 for Mr. Glatfelter under the
1992 Plan. No further grants under the performance cash program
will be made until this grant either pays out or expires. This
target is subject to the terms and criteria identified under the
discussion above regarding the performance cash program for the
executives and other members of senior management. As discussed
above, the financial target was not achieved in 2005.
Performance cash awards and performance share awards were
granted to Mr. Glatfelter by the Committee in December
2002, the payment and vesting, respectively, of which were based
on the Company achieving, at the end of a three-year period that
ended December 31, 2005, certain specified levels of total
shareholder return relative to total shareholder returns at the
comparable companies, as described above. Based on the
Companys total shareholder return performance,
Mr. Glatfelter received a cash payout of $258,984,
representing 108% of his target cash award and
11,350 shares of stock, representing 100% of his target
share award. In addition, Mr. Glatfelter received a cash
payout of $15,150 representing dividends on the shares during
the performance period. The total amount earned by the CEO is
shown in the LTIP Payouts column of the Summary
Compensation Table, and related footnotes, included in this
Proxy Statement.
Kathleen A. Dahlberg, Chair
Nicholas DeBenedictis
Ronald J. Naples
Richard L. Smoot
-18-
STOCK PERFORMANCE GRAPH
The following chart compares the yearly percentage change in the
cumulative total return on the Companys common stock
during the five years ended December 31, 2005, with the
cumulative total return on the S&P MidCap 400
Index and the Companys Peer Group (1). The comparison
assumes $100 was invested on December 31, 2000, in the
Companys common stock, and in each of the foregoing
indices and assumes reinvestment of dividends.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
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(1) |
The Companys Peer Group consists of companies in the same
industry as the Company. The returns of each Company in the Peer
Group have been weighted according to their respective stock
market capitalization for purposes of arriving at the Peer Group
average. The members of the Peer Group are as follows: Bowater,
Inc., Chesapeake Corporation, MeadWestvaco Corporation, Pope and
Talbot, Inc., Potlatch Corporation, Schweitzer-Mauduit
International, Inc., and Wausau Mosinee Paper Mills Corporation.
Certain of the comparable companies are included in the
S&P MidCap 400, and therefore are represented in
both indices in the performance chart. |
-19-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PNC Bank, National Association (PNC Bank),
an indirect subsidiary of PNC Financial Services Group,
Inc., has a banking relationship with the Company and provides
general banking services and credit facilities. PNC Bank is one
of four lending institutions under a $125 million Credit
Agreement dated June 24, 2002, which is used to finance the
Companys working capital needs. PNC Banks
committed share of this credit facility is $32.5 million.
As of December 31, 2005, the Companys borrowing under
the Credit Agreement was approximately $19.7 million, of
which PNC Banks portion was approximately
$5.1 million. All transactions between the Company and
PNC Bank have been made in the ordinary course of business,
on substantially the same terms as those prevailing at the time
for comparable transactions with other persons, and did not
involve more than the normal risk of collectability or present
other unfavorable features. PNC Bank serves as a trustee
for certain trusts of the Glatfelter family. (See Security
Ownership of Certain Beneficial Owners and Management).
REPORT OF THE AUDIT COMMITTEE
In accordance with its Board-approved Charter, the Audit
Committee:
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is directly responsible for the appointment, replacement, if
necessary, oversight, and evaluation of the Companys
independent auditors, which report directly to it; |
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has the sole responsibility for pre-approving all audit and
non-audit services provided by the Companys independent
auditors and fees related thereto pursuant to its Pre-Approval
policy; |
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reviews the Companys audited consolidated financial
statements contained in its annual reports on
Form 10-K, and the
financial information contained in its quarterly reports on
Form 10-Q, and
managements 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 independent auditors the
Companys earnings press releases prior to their release to
the public; |
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discusses any significant changes to the Companys
accounting policies; |
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reviews the Companys 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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establishes clear hiring policies for employees or former
employees of the independent auditors; and |
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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 employees of concerns
regarding questionable accounting or auditing matters, in
addition to other compliance matters. |
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.
The Audit Committee has reviewed and discussed the
Companys audited consolidated financial statements for the
year ended December 31, 2005 with the Companys
management and its independent auditors. The Companys
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.
-20-
The Audit Committee has discussed with Deloitte &
Touche, LLP (Deloitte), the Companys
independent registered public accounting firm, certain matters
required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees. The
Audit Committee has also discussed with Deloitte their
independence from the Company and its management. The Audit
Committee has received the written disclosures and letter from
Deloitte required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit
Committees, 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 Companys Board that the
Companys audited consolidated financial statements be
included in the Companys Annual Report on
Form 10-K for the
year ended December 31, 2005, for filing with the SEC.
Nicholas DeBenedictis (Chair)
J. Robert Hall
Richard C. Ill
Ronald J. Naples
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Who are the Companys auditors?
The Companys Audit Committee has selected
Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates
(collectively, Deloitte), as the Companys
independent registered public accounting firm, to audit the
consolidated financial statements of the Company and its
consolidated subsidiaries for the year ending December 31,
2006. 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 auditors in 2005 and
2004?
For the years ended December 31, 2005 and 2004, the
aggregate fees billed to the Company by Deloitte were as follows:
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2005 | |
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2004 | |
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Audit Fees (1)
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$ |
1,439,410 |
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$ |
1,672,795 |
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Audit-Related Fees (2)
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155,160 |
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5,000 |
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Tax Fees (3)
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403,921 |
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800,609 |
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All Other Fees (4)
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Total Fees
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$ |
1,998,491 |
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$ |
2,478,404 |
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Audit Fees For professional services performed by
Deloitte for the audit of the Companys annual consolidated
financial statements, review of consolidated financial
statements included in the Companys Quarterly Reports on
Form 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.
In addition, the 2004 figure includes the issuance of
Deloittes consent and comfort letters in connection with
the Companys secondary common stock offering, in the
amount of $99,030, which amount was reimbursed to the Company by
the selling shareholders. |
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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 Companys
consolidated financial statements and are not reported under
footnote No. 1 above. This includes due diligence services
related to potential acquisitions and services related to the
audit of the Companys defined benefit and defined
contribution plans. |
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Tax Fees For professional services performed by
Deloitte with respect to tax compliance, tax advice and tax
planning. This includes preparation of original and amended tax
returns for the Company and its consolidated subsidiaries; tax
planning and consultations; payment planning; tax audit
assistance; and tax work stemming from Audit-Related
items. |
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All Other Fees For other permissible work performed
by Deloitte that does not meet the above category descriptions. |
All services rendered for the Company by Deloitte in 2005 were
permissible under applicable laws and regulations, and were
pre-approved by the Audit Committee. The Audit Committees
Audit and Non-Audit
Services Pre-Approval Policy provides for the pre-approval of
audit and non-audit services performed by our 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.
-21-
ANNUAL REPORT ON
FORM 10-K
Copies of the Companys Annual Report on
Form 10-K for the
year ended December 31, 2005, 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.
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
continue 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. The shareholder
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, 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.
Jeffrey J. Norton
Vice President,
General Counsel and Corporate Secretary
March 21, 2006
-22-
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PROXY
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P. H. GLATFELTER COMPANY
YORK, PENNSYLVANIA
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PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 26, 2006, 10:00 A. M.
The undersigned shareholders of P. H. Glatfelter Company hereby appoints J. Robert Hall
and Lee C. Stewart, 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
White Rose Room, on Wednesday, April 26, 2006, 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)
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.
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Please mark your votes as in this example. |
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE FOLLOWING DIRECTORS
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VOTE FOR all nominees listed at
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VOTE WITHHELD |
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right, except as indicated below
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for all nominees
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Term expiring in 2009 |
Election of Directors
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George H. Glatfelter II
Ronald J. Naples
Richard L. Smoot |
To withhold authority for any individual nominee, write that nominees name in the space below.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE
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Signature
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Signature
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IF HELD JOINTLY |
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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.
RSVP We request that you advise us of your intention to attend the annual meeting in person so that we can make arrangements for suitable
accommodations. (Your failure to advise us of your intentions will not prevent you from attending the meeting in person.)
I will attend in person o