-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OZchV5pDAYdjg/NW5OuZzaf3MJTxQ0DFHIFykfUAKqhle4piVv2yNLPx8v0xEvbN AO4IK8Msk1n8Dc4fIG+t+g== 0000950128-96-000635.txt : 19961202 0000950128-96-000635.hdr.sgml : 19961202 ACCESSION NUMBER: 0000950128-96-000635 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TUSCARORA INC CENTRAL INDEX KEY: 0000821538 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS FOAM PRODUCTS [3086] IRS NUMBER: 251119372 STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17051 FILM NUMBER: 96673407 BUSINESS ADDRESS: STREET 1: 800 FIFTH AVE CITY: NEW BRIGHTON STATE: PA ZIP: 15066 BUSINESS PHONE: 4128438200 MAIL ADDRESS: STREET 1: 800 FIFTH AVENUE CITY: NEW BRIGHTON STATE: PA ZIP: 15066 FORMER COMPANY: FORMER CONFORMED NAME: TUSCARORA PLASTICS INC DATE OF NAME CHANGE: 19920703 10-K 1 TUSCARORA INCORPORATED 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED For the fiscal year ended August 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to . Commission file number 0-17051 TUSCARORA INCORPORATED (Exact name of registrant as specified in its charter) Pennsylvania 25-1119372 (State or other jurisdiction of (IRS employer incorporation or organization) Identification No.) 800 Fifth Avenue New Brighton, Pennsylvania 15066 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 412-843-8200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, without par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The registrant estimates that as of October 25, 1996, the aggregate market value of the shares of its Common Stock held by non-affiliates of the registrant was approximately $101,796,900. As of October 25, 1996, 6,285,817 shares of Common Stock of the registrant were issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Annual Report to Shareholders for its fiscal year ended August 31, 1996 are incorporated by reference into Parts I and II of this annual report. Portions of the Proxy Statement for the registrant's Annual Meeting of Shareholders to be held on December 18, 1996 are incorporated by reference into Part III of this annual report. 2 PART I ITEM 1. BUSINESS. Tuscarora Incorporated (the "Company") was incorporated in 1962 as Tuscarora Plastics, Inc. The corporate name was changed in 1992 to reflect changes in the Company's business. The Company custom designs and manufactures interior protective packaging and material handling solutions for a broad range of manufactured products. The Company also supplies customers with components for industrial and consumer product applications. In each of the Company's markets, the focus is on engineering practical, cost effective solutions to meet each customer's specific end-use requirements. A variety of materials are used in the manufacture of the Company's products. The Company is the largest manufacturer of custom molded products made from expanded foam plastic materials in the United States, and as a result of an acquisition in October 1996, has become the largest manufacturer of such products in the United Kingdom (see "Business Acquisitions" below). The Company also manufactures products using materials, including corrugated paperboard, molded and/or die-cut foam plastic shapes, thermoformed plastic shapes and wood, either alone or in various combinations. The range of material options offered enables the Company to be competitive vis-a-vis companies which offer only a single material capability. For the 1996, 1995 and 1994 fiscal years, the interior protective packaging and material handling products contributed approximately 86%, 88% and 87%, respectively, of the Company's net sales. The remainder has been accounted for by the components. The Company's major markets are the high technology, consumer electronics, major appliance and automotive industries, but the Company competes in many other market segments as well. For the 1996, 1995 and 1994 fiscal years, the four major markets combined accounted for approximately 65%, 63% and 60%, respectively, of the Company's net sales. The Company serves more than 2,500 customers located in the United States, Mexico, Canada and the United Kingdom from over 30 manufacturing locations. For the 1996 fiscal year, no customer accounted for 10% or more, and the Company's ten largest customers accounted for 32.7%, of the Company's net sales. The Company has four manufacturing locations in the United Kingdom and one in Mexico. All the other manufacturing facilities are located in the United States. All these are east of the Mississippi River except for facilities in Colorado and New Mexico. -2- 3 INTERIOR PROTECTIVE PACKAGING AND MATERIAL HANDLING PRODUCTS The interior protective packaging products are used to protect a wide range of finished consumer and industrial goods during shipment. The products are designed to reduce or eliminate damage that may occur during shipment and handling as a result of shock, vibration or wide temperature fluctuations. Goods packaged in the Company's protective packaging include such items as: Computers and computer peripherals Water heaters and air conditioners Televisions and VCRs Refrigerators Satellite dishes Microwave ovens Office equipment Coffee makers and other kitchen Vaccine containers appliances Liquid chemicals Toys Pharmaceuticals Outboard motors Military equipment Office furniture These goods, together with the Company's interior protective packaging, are generally placed inside exterior shipping containers prior to shipment. The material handling products generally serve the same purposes and functions as the packaging products but are used primarily in intra-plant and inter-plant movement of parts and components rather than shipment of finished goods. For example, automobile manufacturers and their suppliers transport parts to assembly plants using foam dunnage trays made by the Company. Material handling products also frequently serve as carriers to position parts for automated assembly. The Company also manufactures insulated shippers which transport temperature-sensitive materials for the chemical and pharmaceutical industries. The material handling products are generally more durable than the interior protective packaging products and are usually reusable, providing a cost-effective means of transporting materials that are sensitive or difficult to handle. The interior protective packaging products are foam plastic shapes manufactured at the Company's custom molding facilities or products manufactured at the Company's integrated materials facilities. Most of the material handling products are also foam plastic shapes manufactured at the Company's custom molding facilities; however, in addition certain material handling products, such as durable returnable material handling pallets and trays, are made from rigid plastic materials and are manufactured at the Company's rigid plastic facilities. The packaging and material handling products manufactured at the Company's custom molding facilities possess an unusual combination of useful properties such as exceptional lightness, impact resistance and shock absorbency, toughness and strength, thermal insulating efficiency, temperature tolerance, buoyancy and chemical biological neutrality. The cost of the products to the customer is often less than alternative types of -3- 4 materials because, pound for pound, less material is required to provide equal or better protection. These products can also be easily and quickly handled thus reducing the customer's labor costs. Because foam plastic packaging shapes frequently require less space and are lighter than most other packaging materials, the customer is often able to reduce its product shipping costs. Similarly, properly designed foam plastic material handling devices often increase total yield per transportation container, thus reducing intra-plant or inter-plant freight cost. The Company's integrated material facilities often combine foam plastics with other materials such as corrugated paperboard to produce protective packaging products with properties superior to those provided by a single material. For the 1996, 1995 and 1994 fiscal years, sales of products manufactured by the Company's integrated materials facilities accounted for approximately 21%, 19% and 13%, respectively, of the Company's net sales, reflecting growth in the integrated materials business. COMPONENTS The Company manufactures foam plastic shapes which are used as components in automobiles, watercraft and recreational vehicles. Due to their light weight and high energy-absorbing properties, molded foam shapes are used as bumper cores and are positioned in door panels, steering wheels and dashboards to provide added passenger protection. Flotation and/or seating assemblies are made for the watercraft and recreational vehicles. The Company manufactures thermal insulation components which are foam plastic shapes used by the appliance industries to provide insulation in products such as home and commercial refrigerators, freezers, air conditioners and water coolers. The construction industry also uses these shapes as insulation in poured concrete or block walls, in prefabricated metal buildings and as core material for factory-manufactured steel exterior doors. In the high tech area, during the 1996 fiscal year the Company obtained a license for E-PAC, a design-for-assembly technology, utilizing foam plastic shapes, developed by Hewlett Packard in Germany. E-PAC is a concept for the internal assembly of electronic components that enables electronic device manufacturers to reduce both material cost and assembly time by bundling delicate electronic componentry into a lightweight, protective carrier that is placed inside an exterior housing. The Company makes components such as garage door panels and motor vehicle trim from rigid plastic materials. -4- 5 CUSTOM DESIGN All the Company's products are custom designed. The Company has six design and testing centers which support the Company's custom molding and integrated materials operations in the United States and Mexico and are strategically located throughout the United States. A separate design and testing center supports the Company's rigid plastics operations; and a separate design and testing center supports the manufacturing operations in the United Kingdom. The centers are staffed by design and engineering personnel who study and evaluate the requirements of the Company's customers. Four of the centers are certified International Safe Transit Association (ISTA) testing laboratories. The Company's customers make extensive use of the design and testing centers. With respect to the custom molding operations, prototype foam shapes are developed at the design and testing centers. After a shape is approved by the customer, one or more aluminum production molds are made and then shipped to a custom molding facility, generally the one nearest the customer, for production. The Company makes most of the production molds for its manufacturing operations in the United States and Mexico at a single mold making facility in the United States. In the United Kingdom, the building of the production molds is outsourced to a third party. The design and technical centers and mold making facility are equipped with computer-aided design (CAD) and computer-aided manufacturing (CAM) systems. Sales offices are located at each of the design and testing centers. MANUFACTURING The Company has 22 custom molding facilities and seven integrated materials facilities and manufactures rigid plastic products at three locations. The facilities are generally strategically situated near manufacturing facilities of the Company's customers. The location of all the Company's manufacturing facilities, as well as the design and testing centers and related sales offices and the mold making facility, is set forth under Item 2 of this annual report. Custom molded foam plastic products are produced by causing plastic beads to be blown into an aluminum production mold inserted in an automatic molding machine. Time and pressure controlled heat (in the form of steam) is applied to the beads in the mold, causing the beads to further expand, soften and fuse together to form the shape of the product which is then stabilized before removal from the molding machine. Significant capital expenditures for molding machines and other process equipment are required to manufacture custom molded products. Process equipment includes air compressors, steam boilers, -5- 6 cooling towers, conveyors, drying equipment and a wide variety of other standard industrial machinery items. The major items of expense in the manufacture of the custom molded products are the plastic resins from which the products are made, labor and the utilities needed to operate the process equipment. The manufacture of the integrated materials products and rigid plastic products is less capital intensive. In the integrated materials operations, the machinery and equipment consists primarily of machining and fabricating equipment for forming foam plastic and corrugated paperboard products. Fabrication of foam plastic involves the cutting of shapes from billets or planks of foam plastic using specialized cutting tools and hot wire equipment. Fabrication of corrugated paperboard involves slitting, die-cutting, folding and gluing the paperboard. The rigid plastic products are made primarily by thermoforming which is the process of taking a rigid sheet of hard thermoplastic such as ABS or high density polyethylene, heating it and then vacuum and/or pressure forming it around a mold. Molded foam plastic shapes and thermoformed shapes used in the integrated materials products are shipped from the facility where these shapes are made to the appropriate integrated materials facility for integration with other materials. The major items of expense in the manufacture of the integrated materials products and rigid plastic products are the materials from which the products are made and labor. The location of the Company's manufacturing facilities ensures timely delivery of products to customers and enables the Company to provide products at a lower shipping cost than more distant competitors. Significant production flexibility exists among the Company's facilities since molds and/or molding machines and other manufacturing equipment can be moved quickly from one facility to another to facilitate production and assure supply to customers. All the Company's manufacturing facilities have warehousing capacity for inventories of finished goods. This enables the Company to respond quickly to the delivery needs of customers. Distribution of products is made from the Company's manufacturing facilities and warehouses to customers by Company operated tractor-trailers and by common carrier. Most of the Company operated tractor-trailers are leased. -6- 7 SALES Sales are made primarily by the Company's own sales force which, including supporting technical personnel at the Company's design and testing centers, consists of approximately 76 salaried employees. Sales in certain geographic areas are handled by sales representatives paid on a commission basis who are assisted and supported by Company personnel. In general, the Company receives blanket purchase orders from its customers which do not specify release quantities and delivery dates. Actual shipments against these orders are determined by the customers' production schedules with the result that the products are generally required to be delivered on short notice. Accordingly, production and inventory levels are generally determined by customer release patterns rather than the backlog of purchase orders. FOREIGN OPERATIONS The Company commenced doing business in the United Kingdom during the 1995 fiscal year as a result of its acquisition of a custom molding business in Northampton, England and Glasgow, Scotland (see "Business Acquisitions" below). This business was expanded during the 1996 fiscal year as the Company established an additional custom molding facility in Spennymoor, England (see "New Site Development" below). In October 1996, the Company acquired another custom molding business in Livingston, Scotland (see "Business Acquisitions" below). The Company's manufacturing facility in Mexico is located in Juarez. This facility and a facility in New Mexico enable the Company to serve domestic customers that have opened "Maquiladora" operations across the U.S. Mexican border. Maquiladora programs enable domestic companies to ship component parts in bond into Mexico, assemble them and then ship them back in bond to the United States. To a limited extent, the facilities in Juarez also serve customers manufacturing and selling their products in Mexico. The Company's operations in the United Kingdom and Mexico are conducted through subsidiaries. The Company has no other subsidiaries which play an important role in the Company's business. RAW MATERIALS The materials from which the Company's custom molded products are made are expandable polystyrene ("EPS"), expanded polypropylene ("EPP"), expanded polyethylene ("EPE"), ARCEL(TM) and high heat-resistant styrene-based resins. All the resins are petroleum based. EPP and EPE are polyolefin resins and ARCEL(TM) is a co-polymer of polyethylene and polystyrene. EPS is received by the Company in an unexpanded state and in its raw form has an appearance much like table salt. ARCEL(TM) and the high heat-resistant resins are also received by the Company in an unexpanded state. Under conditions of time and pressure controlled heat, the raw material beads can be expanded to many times their original size with no increase in weight. The Company expands the beads to various densities depending upon the properties desired and stores the expanded beads until the final products are molded. In contrast, the EPP and EPE beads -7- 8 are already expanded when received by the Company and do not require further expansion before molding. Most of the Company's custom molded products are made from EPS. The other resins are particularly suitable for certain applications and are significantly more expensive. Accordingly, the products made from the other resins sell at higher prices than the products made from EPS. During the 1996, 1995 and 1994 fiscal years, approximately 22%, 20% and 22%, respectively, of the Company's net sales of custom molded products were attributable to products made from the premium resins. The Company has never experienced a shortage of the resins used in the manufacture of the custom molded products and does not foresee that any shortage will occur. EPS, EPP and EPE are generally available from a number of suppliers who will sell to any prospective purchaser. The high heat-resistant resins and ARCEL(TM) are each sold by a single supplier but are also generally available. The materials used in the manufacture of the integrated materials products (including corrugated paperboard and foam billets and planks) and rigid plastic products are also readily available. COMPETITION The Company's interior protective packaging and material handling products compete with similar products made by others as well as with other types of protective products. A majority of the similar products is produced by independent manufacturers who generally market their products in a particular geographic area from a single or limited number of facilities. While the Company is considerably larger than most of the manufacturers of similar products, the Company's penetration in the total interior protective packaging market is still relatively small. A number of the companies which produce competing products, particularly paper and corrugated packaging products, are well established and have substantially greater financial resources than the Company. The components manufactured by the Company for thermal insulation represent a small portion of the overall market for insulation products. Because of the specialized nature of this market, the Company competes primarily with other manufacturers of similar foam plastic products, rather than with manufacturers of alternate insulation products. With the exception of E-PAC which is licensed technology, the other components manufactured by the Company can be provided by other vendors using similar or alternative materials. Competition between the Company and manufacturers of similar products is based primarily on product engineering, price and customer service. -8- 9 CAPITAL EXPENDITURES Capital Expenditures for property, plant and equipment during the 1996, 1995 and 1994 fiscal years (not including expenditures in connection with business acquisitions) amounted to $23,129,000, $20,689,000 and $12,433,000, respectively. Capital expenditures for land, buildings and improvements during the 1996, 1995 and 1994 fiscal years (not including expenditures in connection with business acquisitions) amounted to $5,029,000, $3,841,000 and $3,265,000, respectively. The 1996 fiscal year expenditures included $615,000 to purchase the Company's custom molding facility in Tupelo, Mississippi, which was formerly leased, and $1,019,000 in connection with the establishment of new custom molding facilities in Spennymoor, England and Storm Lake, Iowa (see "New Site Development" below). Capital expenditures for machinery and equipment during the 1996, 1995 and 1994 fiscal years (not including expenditures in connection with business acquisitions) amounted to $18,100,000, $16,848,000 and $9,479,000, respectively. During the 1996 fiscal year, $8,512,000 of these expenditures was for automatic molding machines, $6,350,000 for other process equipment used in the manufacture of custom molded products, $1,452,000 for machinery and equipment used to manufacture the Company's integrated materials and rigid plastic products and $848,000 for environmental control equipment (see "Environmental Considerations" below). BUSINESS ACQUISITIONS In December 1995, the Company purchased all the outstanding capital stock of Alpine Packaging, Inc., a custom designer and manufacturer of specialty corrugated and technical/military specification packaging and wood pallets with a facility in Colorado Springs, Colorado. The Company issued 51,177 shares of its Common Stock and paid cash having an aggregate value of approximately $1,300,000 at the closing. During the 1995 fiscal year, the Company made two business acquisitions. In February 1995, the Company purchased the custom molding business of M.Y. Trondex Ltd. with facilities in Northampton, England and Glasgow, Scotland; and in September 1994, the Company purchased the specialty corrugated and foam packaging business of Astrofoam, Inc. with a facility in Holden, Massachusetts. An aggregate of approximately $5,100,000 was paid at the closings of these acquisitions. Two business acquisitions were also made during the 1994 fiscal year. In April 1994, the Company purchased the custom molding and fabricating business of Styro-Molders Corporation with a facility in Colorado Springs, Colorado; and in September 1993 the Company purchased the corrugated packaging business of Box Pack Incorporated with a facility in Greeneville, -9- 10 Tennessee. An aggregate of approximately $2,900,000 was paid at the closings of these acquisitions. Approximately 38% of the increase in net sales during the 1996 fiscal year was attributable to the M.Y. Trondex Ltd. and Alpine Packaging, Inc. acquisitions in February 1995 and December 1995, respectively. For purposes of this calculation, the net sales from the business acquired in the M.Y. Trondex Ltd. acquisition during the first five months of the 1996 fiscal year were included. In its business acquisitions, the Company generally agrees to pay additional consideration to the seller based on the sales realized by, or the operating performance of, the business acquired over a specified period after the acquisition. The aggregate amount of such additional consideration paid in cash and shares of the Company's Common Stock and recorded as additional purchase price or charged against selling and administrative expense during the 1996 fiscal year amounted to $1,238,000, of which $1,033,000 was recorded as additional purchase price. Two business acquisitions have also occurred since the end of the 1996 fiscal year. In September 1996, the Company purchased the custom thermoforming business of FormPac Corporation with a facility in Sandusky, Ohio, and in October 1996 the Company purchased all the outstanding capital stock of EPS (Moulders) Ltd., a company with a custom molding facility in Livingston, Scotland. As a result of the acquisition of EPS (Moulders) Ltd., the Company has become the largest manufacturer of custom molded products made from expanded foam plastic materials in the United Kingdom. For further information with respect to the above acquisitions, see Notes 8 and 11 of the Notes to Consolidated Financial Statements included in the Company's Annual Report to Shareholders for the 1996 fiscal year. Such Notes 8 and 11 are incorporated in this Item by reference. The Company will continue to look for acquisitions which mesh well with the Company's business. NEW SITE DEVELOPMENT The Company also acquires new manufacturing facilities through new site development. During the 1996 fiscal year, the Company completely renovated a leased property in Spennymoor, England and established a new custom molding facility where production commenced in June 1996. A new custom molding facility is also being constructed at Storm Lake, Iowa where production is expected to commence by the end of 1996. In addition, in August 1996 the Company announced plans to build a new custom molding facility in Brenham, Texas which it expects will become operational in the spring of 1997. -10- 11 The Company will continue to develop new production sites to meet the needs of its customers. SEASONALITY The Company's net sales and net income are subject to some seasonal variation. The Company's business generally declines in December due to a reduction in manufacturing activity by its customers, and this usually adversely affects the Company's net sales and net income during the second quarter of the fiscal year. Net income in the second fiscal quarter is also adversely affected by higher operating costs during the winter months. See Note 12 of the Notes to Consolidated Financial Statements included in the Company's Annual Report to Shareholders for the 1996 fiscal year. Said Note 12 is incorporated in this item by reference. EMPLOYEES As of August 31, 1996, the Company had 1,668 employees, of which 1,593 were full time employees and 1,294 were paid on an hourly basis. Of the hourly employees, 241 at six manufacturing facilities are covered by collective bargaining agreements with six different unions. The agreements expire at various dates from March 1998 through August 1999. The Company considers its labor relations to be good and has never suffered a work stoppage as a result of a labor conflict. ENVIRONMENTAL CONSIDERATIONS The Company has obtained air quality permits for all its custom molding facilities except its facilities in the United Kingdom where air quality permits are not required. Certain of the permits restrict the amount of pentane (a blowing agent contained in the Company's foam plastic resins) which may be released during the manufacturing process and have resulted in capital expenditures for batch pre-expanders which allow the Company to use low pentane content EPS. Air quality permits have not been required in connection with the manufacture of the Company's integrated materials and rigid plastics products. Where required, water permits have been obtained for all process related waste water and storm water discharges. The Company has acquired recycling equipment for all its custom molding and integrated materials facilities. The equipment includes (i) regrinders which enable the Company to reuse in-house scrap and products returned by customers, (ii) EPS densifiers which enable the Company to compact in-house scrap and products returned by customers for reprocessing in the polystyrene recylcing market and (iii) balers which enable the Company to compact in-house corrugated paperboard scrap for reprocessing. In-house scrap resulting from the manufacture of rigid plastic products is returned to the raw material suppliers of these materials for recycling. -11- 12 The Company's foam plastic products may also be safely landfilled or incinerated. The Company's integrated materials products may be recycled, safely landfilled or incinerated and the rigid plastic products may also be recycled. During the 1996, 1995 and 1994 fiscal years, the Company's capital expenditures for environmental matters, including batch pre-expanders and recycling equipment, amounted to $848,000, $1,742,000 and $1,064,000, respectively. Capital expenditures for environmental matters during the 1997 fiscal year are expected to amount to approximately $1,000,000. In September 1994, the Company commenced a program under which environmental compliance audits will be conducted at all the Company's manufacturing facilities in the United States. At the end of the 1996 fiscal year, 10 audits had been completed. The audits have been conducted by an independent environmental consulting firm and have not resulted in plans for any significant additional expenditures for environmental matters. There has been public concern that using chloro-fluoro-carbons ("CFCs") in the manufacture of plastic products may deplete the Earth's upper atmospheric ozone layer. The Company does not use, nor has it ever used, CFCs in the manufacture of any of its products. [This space intentionally left blank.] -12- 13 ITEM 2. PROPERTIES. The Company's headquarters are located at 800 Fifth Avenue, New Brighton, Pennsylvania 15066. The Company has custom molding facilities at the following locations: Colorado Springs, Colorado New Brighton, Pennsylvania Putnam, Connecticut Greeneville, Tennessee Conyers, Georgia Lewisburg, Tennessee Streator, Illinois (two facilities) Martinsville, Indiana Sterling, Virginia Chesaning, Michigan Pardeeville, Wisconsin Tupelo, Mississippi Juarez, Mexico Las Cruces, New Mexico Northampton, England Cortland, New York Spennymoor, England Butner, North Carolina Glasgow, Scotland Marion, Ohio Livingston, Scotland The Company purchased the custom molding facility in Tupelo, Mississippi which was previously leased in November 1995, completed the construction of the custom molding facility in Spennymoor, England in June 1996 (see "New Site Development" under Item 1) and acquired the custom molding facility in Livingston, Scotland in a business acquisition in October 1996 (see "Business Acquisitions" under Item 1). See also "New Site Development" under Item 1 for information with respect to additional custom molding facilities under construction and to be constructed. The Company manufactures products from EPS at all its custom molding facilities except one of the facilities in Lewisburg, Tennessee which is a dedicated polyolefins plant. Products are also made from one or more of the Company's premium raw material resins at a majority of the custom molding facilities. The Company has integrated materials facilities at the following locations: Colorado Springs, Colorado Beaver, Pennsylvania Conyers, Georgia Greeneville, Tennessee Holden, Massachusetts Burlington, Wisconsin Saginaw, Michigan The integrated materials facilities in Colorado Springs, Colorado, Conyers, Georgia and Greeneville, Tennessee are at different sites from the custom molding facilities at these locations. Some integrated materials operations are also conducted at the Company's custom molding facilities in Tupelo, -13- 14 Mississippi, Butner, North Carolina, Juarez, Mexico and Northampton, England. The Company acquired the integrated materials facility in Colorado Springs, Colorado in a business acquisition in December 1995 (see "Business Acquisitions" under Item 1). After this acquisition, the Company transferred its integrated materials operations at its custom molding plant in Colorado Springs to the new integrated materials facility. The Company acquired a custom thermoforming facility in Sandusky, Ohio in a business acquisition in September 1996 (see "Business Acquisitions" under Item 1). After this acquisition, the Company transferred its rigid plastic operations in Beaver, Pennsylvania to the new thermoforming facility in Sandusky, Ohio and to the Company's other existing facilities where rigid plastic products are manufactured in Conyers, Georgia and Burlington, Wisconsin. In Conyers, Georgia and Burlington, Wisconsin, the rigid plastic products are manufactured at the same sites where integrated materials products are manufactured. The Company's mold making facility is in Sun Prairie, Wisconsin. This facility is considered a manufacturing facility because most of the aluminum production molds that are made by the Company at this facility are sold to and owned by the Company's customers. All the custom molding facilities in the United States are owned by the Company except the facility in Colorado Springs, Colorado and the EPS facility in Lewisburg, Tennessee. The Company has options to purchase these facilities. All the Company's other manufacturing facilities are leased (except for the custom molding facility in Livingston, Scotland and the integrated materials facility in Saginaw, Michigan), but the Company also has options to purchase many of these leased facilities. The Company generally makes substantial leasehold improvements to, and exercises its options to purchase, the leased facilities. The leases for the manufacturing facilities expire at various dates from June 1997 through November 2006. In many cases, the leases may be extended at the Company's option. The Company's custom molding and integrated materials operations are supported by design and testing centers located at the Company's headquarters in New Brighton, Pennsylvania, at the custom molding facility in Colorado Springs, Colorado, at the manufacturing facilities in Holden, Massachusetts, Burlington, Wisconsin and Northampton, England and at separate facilities in Conyers, Georgia and Holly, Michigan. The Company's rigid plastic operations are supported by a design and testing center at the new custom thermoforming facility in Sandusky, Ohio. Sales offices are located at each of the design and testing centers. The Company has warehouse facilities at each manufacturing location as well as in other locations. The -14- 15 Company continues to own properties in Essex, Connecticut, Louisville, Kentucky, Baltimore, Maryland and Durham, North Carolina where former manufacturing operations have been discontinued. All but one of these properties is leased to a third party. The Company believes that its facilities are generally well suited for their respective uses and that they are generally adequately sized and designed to provide the operating efficiencies necessary for the Company to be competitive. The Company continually expands and modernizes its existing facilities and establishes new facilities as necessary to meet the demand for its products. Information with respect to the machinery and equipment used in the Company's manufacturing operations and with respect to the Company's transportation equipment provided in Item 1 of this annual report is also incorporated by reference in this Item 2. ITEM 3. LEGAL PROCEEDINGS. In June 1995, a Complaint was filed against the Company in Edwina Wilhoit v. Tuscarora, Inc., a civil action in the United States District Court for the Eastern District of Tennessee in Greeneville, Tennessee. The plaintiff, an employee at one of the Company's manufacturing facilities in Greeneville, Tennessee, alleged sexual harassment and assault by the Company's former plant manager in violation of Title VII of the 1964 Federal Civil Rights Act, as amended, the Tennessee Human Rights Act and Tennessee common law; and alleged a past pattern of sexual assault by the former plant manager. Substantial compensatory and punitive damages were sought. This matter, which was first reported in the annual report on Form 10-K for the 1995 fiscal year, was settled in July 1996 under a confidential agreement between the plaintiff and the Company. In October 1995, a Complaint was filed against the Company in L. Marie Roberts v. Tuscarora Incorporated, et al., a civil action in the State Court of Rockdale County, Georgia. The plaintiff, a former employee at one of the Company's manufacturing facilities in Conyers, Georgia, alleged sexual harassment by the plaintiff's supervisor and the Company's plant manager, respectively, and sexual assault by the plaintiff's supervisor. The plaintiff alleged various causes of action under Georgia law and seeks an unspecified amount of compensatory and punitive damages. After investigation, the Company terminated the employment of the supervisor but determined that the plant manager was not at fault. On the basis that the plaintiff alleged a cause of action under Title VII of the 1964 Federal Civil Rights Act, as amended, the Company removed the action to the United States District Court for the Northern District of Georgia, Atlanta Division. In October 1996, a Motion for Summary Judgment filed by the Company was granted and the action in the United States District Court was dismissed as to plaintiff's -15- 16 federal claims, but the District Court remanded any remaining state law claims to the State Court. The Company will continue to vigorously contest this proceeding which was also first reported in the annual report on Form 10-K for the 1995 fiscal year. Among other arguments, the Company will argue on res judicata and collateral estoppel grounds that the federal court action disposed of any state law claims against the Company. Since 1992, the Company has been involved in cost recovery litigation with the United States Environmental Protection Agency (the "USEPA") and other parties over clean up costs at the Smith's Farm Superfund Site in Bullitt County, Kentucky. The litigation was commenced in February 1992 in the United States District Court for the Western District of Kentucky under the caption AKZO Coatings, Inc., et al. v. AC&S, Inc., et al. In 1988, the Company may have generated small amounts of scrap product and warehouse demolition waste debris that were transported to the site from the Company's custom molding facility in Louisville, Kentucky where operations have since been discontinued. The Company denies that either the scrap product or the demolition debris contained hazardous substances. In May 1996, the USEPA, as part of a global settlement, offered a settlement to certain de minimis parties, including the Company, under which the Company's share of the clean up costs would be approximately $70,000. The Company has notified the USEPA that the settlement proposed is acceptable. A Consent Order, which will contain a covenant not-to-sue and contribution protection, is being negotiated. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders of the Company during the fiscal quarter ended August 31, 1996. EXECUTIVE OFFICERS OF THE COMPANY In accordance with Instruction 3 to Item 401(b) of Regulation S-K, information with respect to the executive officers of the Company is set forth below.
Name Age Office with the Company ---- --- ----------------------- John P. O'Leary, Jr. 49 President and Chief Executive Officer Brian C. Mullins 55 Vice President and Treasurer James H. Brakebill 59 Vice President, Manufacturing David C. O'Leary 47 Vice President, Sales and Marketing
John P. O'Leary, Jr. has been President and Chief Executive Officer of the Company since prior to September 1991. He has been a director of the Company since 1974 and became Chairman of the Board of Directors in August 1994. Brian C. Mullins has been Vice President and Treasurer of the Company since prior to September 1991. Mr. Mullins is the Company's chief financial and accounting officer. -16- 17 James H. Brakebill has been Vice President, Manufacturing of the Company since April 1994; he was Vice President of Technology from prior to September 1991 to April 1994. Mr. Brakebill is responsible for all manufacturing operations of the Company. David C. O'Leary has been Vice President, Sales and Marketing of the Company since April 1994; he was Vice President-Southern Division from prior to September 1991 to April 1994. Mr. O'Leary is responsible for all sales and marketing activities of the Company. John P. O'Leary, Jr. and David C. O'Leary are brothers. The executive officers are elected annually by the Board of Directors at an organization meeting which is held immediately after each Annual Meeting of Shareholders. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is traded in the over-the-counter market on the National Market System of the National Association of Securities Dealers ("NASDAQ"). The Common Stock trades under the NASDAQ symbol TUSC. As of August 31, 1996, there were 824 holders of record of the Company's Common Stock. Information with respect to the market prices of, and the cash dividends paid with respect to, the Company's Common Stock during the fiscal years ended August 31, 1996 and 1995 appears under Note 12 Quarterly Financial Data (unaudited) of the Notes to Consolidated Financial Statements on page 19 of the Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996 and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The selected financial data required by this Item 6 is furnished by the "Eleven Year Consolidated Financial Summary" which appears on the bottom half of the inside front cover of the Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996 and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The Management's Discussion and Analysis of Results of Operations and Financial Condition required by this Item 7 appears on pages 19 through 21 of the Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996 and is incorporated herein by reference. -17- 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following financial statements and related notes and report appear on the pages indicated in the Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996 and are incorporated herein by reference:
Page(s) in Annual Report Financial Statements and Related Report to Shareholders --------------------------------------- --------------- Consolidated Statements of Income for the fiscal years ended August 31, 1996, 1995 and 1994........................................................................... 8 Consolidated Balance Sheets at August 31, 1996 and 1995........................................................................... 9 Consolidated Statements of Cash Flows for the fiscal years ended August 31, 1996, 1995 and 1994..................................................................... 10 Consolidated Statements of Shareholders' Equity for the fiscal years ended August 31, 1996, 1995 and 1994.......................................................... 11 Notes to Consolidated Financial Statements....................................................... 12-18 Report of Independent Accountants................................................................ 19
The supplementary financial information required by this Item 8 is included in Note 12--Quarterly Financial Data (unaudited) of the Notes to Consolidated Financial Statements and is also incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The information required by this Item 9 was included in current reports on Form 8-K filed by the Company with the Commission on February 15, 1996 and November 14, 1996. PART III ITEMS 10 THROUGH 13. In accordance with the provisions of General Instruction G to Form 10-K, the information required by Item 10 (Directors and Executive Officers of the Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management) and Item 13 (Certain Relationships and Related Transactions) is not set forth herein (except for the information concerning "Executive Officers of the Company" which appears at the end of Part I of this annual report) because the Company has already filed its definitive Proxy Statement for its Annual Meeting of Shareholders to be held on December 18, 1996, which includes such information, with the Commission. Such information is incorporated herein by reference, except for the information required to be included in the Proxy Statement by paragraphs (i), (k) and (l) of Item 402 of Regulation S-K. -18- 19 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. The financial statements, financial statement schedules and exhibits listed below are filed as part of this annual report: (a)(1) Financial Statements: The consolidated financial statements of the Company and its subsidiaries, together with the report of S.R. Snodgrass, A.C., dated October 11, 1996, appearing on pages 8 through 19 of the Company's Annual Report to Shareholders for the fiscal year ended August 31, 1996, are incorporated herein by reference (see Item 8 above). (a)(2) Financial Statement Schedules:
Page in this Schedules and Related Report Annual Report ---------------------------- ------------- Schedule II - Valuation Account for the fiscal years ended August 31, 1996, 1995 and 1994 S-1 Report of Independent Accountants on Schedules S-2
All other Financial Statement Schedules are omitted either because they are not applicable or are not material, or the information required therein is contained in the consolidated financial statements or notes thereto set forth in the Company's Annual Report to Shareholders for its fiscal year ended August 31, 1996. (a)(3) Exhibits:
Exhibit No. Document - ----------- -------- 3(i) Restated Articles of Incorporation, filed as Exhibit 3(i) to the Company's annual report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference. 3(ii) By-Laws, as Amended and Restated effective December 15, 1994, filed as Exhibit 3(ii) to the Company's quarterly report on Form 10-Q for the fiscal quarter ended February 28, 1995 and incorporated herein by reference.
-19- 20
Exhibit No. Document - ----------- -------- 4 Loan Agreement, dated as of August 14, 1996, between the Company and Mellon Bank, N.A., with Revolving Credit Note and Term Note attached, filed herewith. 10.1 1985 Incentive Stock Option Plan, as adopted by the Company's Board of Directors on August 22, 1985 and approved by the Company's shareholders on October 31, 1985, filed on June 20, 1988 as part of Exhibit 10.1 to Amendment No. 1 to Registration Statement No. 33-17138 on Form S-1 and incorporated herein by reference.* 10.2 1985 Incentive Stock Option Plan, as amended by the Company's Board of Directors on October 29, 1987, filed on June 20, 1988 as part of Exhibit 10.2 to Amendment No. 1 to Registration Statement No. 33-17138 on Form S-1 and incorporated herein by reference.* 10.3 1989 Stock Incentive Plan, as amended by the Company's Board of Directors on October 13, 1994 and approved by the Company's shareholders on December 15, 1994, filed as Exhibit 10.3 of the Company's annual report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference.* 10.4 1989 Stock Incentive Plan, as amended by the Company's Board of Directors effective August 31, 1996, filed herewith.* 10.5 Common Stock Purchase Plan for Salaried Employees, as amended by the Company's Board of Directors on October 11, 1996, filed herewith.* 10.6 Deferred Compensation Plan for Non-Employee Directors, as adopted by the Company's Board of Directors on December 14, 1994, filed as Exhibit 10.6 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended February 28, 1995 and incorporated herein by reference.* 10.7 Retirement Policy and Plan for Non-Employee Directors, as amended by the Company's Board of Directors on December 14, 1994, filed as Exhibit 10.7 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended February 28, 1995 and incorporated herein by reference.* 10.8 Written description of supplemental retirement benefit for Thomas P. Woolaway, filed as Exhibit 10.7 to the Company's annual report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference.*
-20- 21
Exhibit No. Document - ----------- -------- 10.9 First Amendment to the Tuscarora Incorporated and Subsidiary Companies Salaried Employees' Money Purchase Pension Plan, as adopted by the Company's Board of Directors on October 11, 1996, providing for additional employer contributions for certain of the Company's executive officers, filed herewith.* 10.10 Tuscarora Incorporated Supplemental Executive Retirement Plan, as adopted by the Company's Board of Directors on February 9, 1996, and related Consent of the Company's Compensation Committee, dated October 11, 1996, designating certain of the Company's executive officers as Plan participants, and form of Participation Agreement, filed herewith.* 10.11 Indemnification and Insurance Agreement, dated August 12, 1988, between the Company and John P. O'Leary, Sr. (substantially identical agreements have been entered into with all the Company's directors), filed as Exhibit 10.3 to the Company's annual report on Form 10-K for the fiscal year ended August 31, 1988 and incorporated herein by reference. 11 Statement re Computation of Earnings Per Share, filed herewith. 13 Those portions of the Annual Report to Shareholders for the fiscal year ended August 31, 1996 which are expressly incorporated in this annual report by reference, filed herewith. 21 List of subsidiaries of the Company, filed herewith. 23 Consent of S.R. Snodgrass, A.C., filed herewith. 24 Powers of Attorney, filed herewith. 27 Financial Data Schedule, filed herewith.
- --------------- * Management contract or compensatory plan, contract or arrangement required to be filed by Item 601(b)(10)(iii) of Regulation S-K. The Company agrees to furnish to the Commission upon request copies of all instruments defining the rights of holders of long-term debt of the Company and its subsidiaries which are not filed as a part of this annual report. -21- 22 Copies of the exhibits filed as a part of this annual report are available at a cost of $.20 per page to any shareholder of record upon written request to Brian C. Mullins, Vice President and Treasurer, Tuscarora Incorporated, 800 Fifth Avenue, New Brighton, Pennsylvania 15066. (b)Reports on Form 8-K: No current reports on Form 8-K were filed during the fiscal quarter ended August 31, 1996. [This space intentionally left blank.] -22- 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Tuscarora Incorporated By /s/ JOHN P. O'LEARY, JR. ---------------------------------- John P. O'Leary, Jr., President and Chief Executive Officer Date: November 27, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in the capacities indicated on November 27, 1996: /s/ JOHN P. O'LEARY, JR. /s/ BRIAN C. MULLINS - ------------------------- ----------------------- John P. O'Leary, Jr. Brian C. Mullins (Director and Chief (Principal Financial Executive Officer) Officer and Principal Accounting Officer) Thomas S. Blair David I. Cohen Abe Farkas Karen L. Farkas Robert W. Kampmeinert David C. O'Leary Harold F. Reed, Jr. James I. Wallover Thomas P. Woolaway By /s/ BRIAN C. MULLINS --------------------- Brian C. Mullins, Attorney-in-Fact -23- 24 TUSCARORA INCORPORATED Schedule II - Valuation Account Years Ended August 31, 1996, 1995 and 1994
Balance at Charged to Balance at Beginning Costs and End Description of Period Expenses Deductions(1) of Period ----------- --------- -------- ------------- --------- Allowance for doubtful accounts Year Ended August 31, 1996 $694,675 $381,196 $288,696 $787,175 Year Ended August 31, 1995 646,991 287,782 240,098 694,675 Year Ended August 31, 1994 643,386 180,000 176,395 646,991
- --------------- (1) Uncollected receivables written off, net of recoveries. S-1 25 REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE Tuscarora Incorporated New Brighton, Pennsylvania Our report on the consolidated financial statements of Tuscarora Incorporated and subsidiaries has been incorporated by reference in this Form 10-K from the Company's 1996 Annual Report to Shareholders and appears on page 19 therein. In connection with our audits of such financial statements, we have also audited the related financial statement schedule which appears on page S-1 of this annual report on Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly the information required to be included therein. /s/ S.R. SNODGRASS, A.C. --------------------------- Beaver Falls, Pennsylvania S.R. SNODGRASS, A.C., October 11, 1996 Certified Public Accountants S-2 26 TUSCARORA INCORPORATED FORM 10-K FOR FISCAL YEAR ENDED AUGUST 31, 1996 EXHIBIT INDEX The following exhibits are required to be filed with this annual report on Form 10-K. Exhibits are incorporated herein by reference to other documents pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended, as indicated in the index. Exhibits not incorporated herein by reference follow the index.
Exhibit No. Document - ------- --------------------------------------------------------------- 3(i) Restated Articles of Incorporation, filed as Exhibit 3(i) to the Company's annual report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference. 3(ii) By-Laws, as Amended and Restated effective December 15, 1994, filed as Exhibit 3(ii) to the Company's quarterly report on Form 10-Q for the fiscal quarter ended February 28, 1995 and incorporated herein by reference. 4 Loan Agreement, dated as of August 14, 1996, between the Company and Mellon Bank, N.A., with Revolving Credit Note and Term Note attached, filed herewith. 10.1 1985 Incentive Stock Option Plan, as adopted by the Company's Board of Directors on August 22, 1985 and approved by the Company's shareholders on October 31, 1985, filed on June 20, 1988 as part of Exhibit 10.1 to Amendment No. 1 to Registration Statement No. 33-17138 on Form S-1 and incorporated herein by reference.* 10.2 1985 Incentive Stock Option Plan, as amended by the Company's Board of Directors on October 29, 1987, filed on June 20, 1988 as part of Exhibit 10.2 to Amendment No. 1 to Registration Statement No. 33-17138 on Form S-1 and incorporated herein by reference.* 10.3 1989 Stock Incentive Plan, as amended by the Company's Board of Directors on October 13, 1994 and approved by the Company's shareholders on December 15, 1994, filed as Exhibit 10.3 to the Company's annual report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference.*
27
Exhibit No. Document - ------- --------------------------------------------------------------- 10.4 1989 Stock Incentive Plan, as amended by the Company's Board of Directors effective August 31, 1996, filed herewith.* 10.5 Common Stock Purchase Plan for Salaried Employees, as amended by the Company's Board of Directors on October 11, 1996, filed herewith.* 10.6 Deferred Compensation Plan for Non-Employee Directors, as adopted by the Company's Board of Directors on December 14, 1994, filed as Exhibit 10.6 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended February 28, 1995 and incorporated herein by reference.* 10.7 Retirement Policy and Plan for Non-Employee Directors, as amended by the Company's Board of Directors on December 14, 1994, filed as Exhibit 10.7 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended February 28, 1995 and incorporated herein by reference.* 10.8 Written description of supplemental retirement benefit for Thomas P. Woolaway, filed as Exhibit 10.7 to the Company's annual report on Form 10-K for the Company's fiscal year ended August 31, 1995 and incorporated herein by reference.* 10.9 First Amendment to the Tuscarora Incorporated and Subsidiary Companies Salaried Employee's Money Purchase Pension Plan, as adopted by the Company's Board of Directors on October 11, 1996, providing for additional employer contributions for certain of the Company's executive officers, filed herewith.* 10.10 Tuscarora Incorporated Supplemental Executive Retirement Plan, as adopted by the Company's Board of Directors on February 9, 1996, and related Consent of the Company's Compensation Committee, dated October 11, 1996, designating certain of the Company's executive officers as Plan participants, and form of Participation Agreement, filed herewith.* 10.11 Indemnification and Insurance Agreement, dated August 12, 1988, between the Company and John P. O'Leary, Sr. (substantially identical agreements have been entered into with all the Company's directors), filed as Exhibit 10.3 to the Company's annual report on Form 10-K for the fiscal year ended August 31, 1988 and incorporated herein by reference.
2 28
Exhibit No. Document - ------- --------------------------------------------------------------- 11 Statement re Computation of Earnings Per Share, filed herewith. 13 Those portions of the Annual Report to Shareholders for the fiscal year ended August 31, 1996 which are expressly incorporated in this annual report by reference, filed herewith. 21 List of subsidiaries of the Company, filed herewith. 23 Consent of S.R. Snodgrass, A.C., filed herewith. 24 Powers of Attorney, filed herewith. 27 Financial Data Schedule, filed herewith.
- ----------- * Management contract or compensatory plan, contract or arrangement required to be filed by Item 601(b)(10)(iii) or Regulation S-K. -3- EX-4 2 TUSCARORA INCORPORATED 10-K 1 EXHIBIT 4 LOAN AGREEMENT Agreement, dated the 14th day of August, 1996, by and between Tuscarora Incorporated, a Pennsylvania corporation (the "Borrower"), and Mellon Bank, N.A., a national banking association (the "Bank") ("Agreement"). W I T N E S S E T H: WHEREAS, pursuant to the Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated July 27, 1983, by and between the Borrower (under its former name, Tuscarora Plastics, Inc.) and Bank, as amended by (i) the First Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated September 4, 1984, (ii) the Second Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated October 2, 1985, (iii) the Third Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated January 30, 1987, (iv) the Fourth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated August 31, 1987, (v) the Fifth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated February 29, 1988, (vi) the Sixth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated August 1, 1989, (vii) the Seventh Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated May 31, 1990, (viii) the Eighth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated August 1, 1991, (ix) the Ninth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated December 18, 1991, (x) the Tenth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated August 18, 1992, (xi) the Eleventh Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated February 26, 1993, (xii) the Twelfth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated June 30, 1994 and (xiii) the Thirteenth Amendment to Secured Term Loan, Revolving Credit and Line of Credit Agreement, dated May 31, 1995 (as amended, the "Prior Loan Agreement"), the Bank has, among other things, extended credit to the Borrower in the form of (a) a revolving credit loan facility in an aggregate principal amount not to exceed Fourteen Million and 00/100 Dollars ($14,000,000.00) and (b) four (4) separate term loans (defined in the Prior Loan Agreement as Term Loan No. 7, Term Loan No. 8, Term Loan No. 9 and Term Loan No. 10) in an original principal amount of Forty Million Eight Hundred Thousand and 00/100 Dollars ($40,800,000.00); and WHEREAS, the Borrower has requested the Bank (i) to provide a revolving credit facility to the Borrower in an aggregate principal amount not to exceed Forty Million and 00/100 Dollars 2 ($40,000,000.00), the proceeds of which will be used for general corporate purposes and acquisitions and (ii) to extend a term loan to the Borrower in the original principal amount of Thirty Seven Million and 00/100 Dollars ($37,000,000.00), the proceeds of which will be used to pay to the Bank all amounts due to it under the Prior Loan Agreement; and WHEREAS, the Bank is willing to extend such credit to Borrower pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.01 CERTAIN DEFINITIONS. In addition to other words and terms defined elsewhere in this Agreement, the following words and terms have the following meanings, respectively, unless the context otherwise clearly requires: "Affiliate" shall mean, as of the date hereof or any time during the term of this Agreement, any Person which directly or indirectly controls, is controlled by or is under common control with Borrower. The term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall mean this Loan Agreement as amended, modified or supplemented from time to time. "As Offered Rate" shall mean, for any Interest Period for any As Offered Rate Loan, the fixed interest rate per annum offered by the Bank to the Borrower in Bank's sole discretion. "As Offered Rate Loan" shall mean any Loan that bears interest with reference to the As Offered Rate. "Assessment Rate" shall mean, for any day of any Interest Period for a CD Rate Loan, the fixed rate per annum (rounded upward to the next higher whole multiple of 1/100% if such rate is not such a multiple) determined in good faith by the Bank in accordance with its usual procedures (which determination shall be conclusive 2 3 absent manifest error) as representing for such day the maximum effective rate per annum payable by the Bank to the Federal Deposit Insurance Corporation (or any successor) for such day for insurance on dollar time deposits in an amount and for a maturity equal to such CD Rate Loan and such Interest Period, exclusive of any credit allowed against such annual assessment on account of assessment payments made or to be made by Bank. The CD Rate shall be adjusted automatically as of the effective date of each change in the Assessment Rate. "Bank" means Mellon Bank, N.A., a national banking association with its main office located at Two Mellon Bank Center, Pittsburgh, Pennsylvania 15259. "Borrower" shall mean Tuscarora Incorporated, a Pennsylvania corporation, with its chief executive office at 800 Fifth Avenue, New Brighton, Pennsylvania 15066. "Business Day" shall mean a day of the year on which banks are not required or authorized to close in Pittsburgh, Pennsylvania and, if the applicable Business Day relates to any Libor Rate Loan, a day on which dealings are carried on in the London interbank eurodollar market. "Capital Expenditure" shall mean any expenditure made or liability incurred which is, in accordance with GAAP, treated as a capital expenditure and not as an expense item for the year in which it was made or incurred, as the case may be. "Capitalized Lease Obligations" shall mean any amount payable with respect to any lease of any tangible or intangible property (whether real, personal or mixed), however denoted, which is required by GAAP to be reflected as a liability on the balance sheet of the lessee. "Cash Flow" shall mean, for the period of determination, (i) Net Income, (ii) plus depreciation, depletion and amortization, (iii) minus Eight Million Dollars ($8,000,000.00), (iv) minus Distributions, in each case determined and Consolidated for the Borrower and its Subsidiaries in accordance with GAAP. "CD Rate" shall mean, for any Interest Period for any CD Rate Loan, the interest rate per annum determined by Bank by adding: (A) the rate per annum (rounded upwards to the next higher whole multiple of 1/100% if such rate is not such a multiple) equal at all times during 3 4 such Interest Period to the quotient of (i) the rate of interest estimated in good faith by the Bank (which determination shall be conclusive) to be the average of the secondary market bid rates at or about 11:00 a.m., Pittsburgh, Pennsylvania time, on the first day of such Interest Period by dealers of recognized standing for negotiable certificates of deposit of major money center banks for delivery on such day in an amount and for a maturity equal to such CD Rate Loan and such Interest Period, divided by (ii) a number equal to 1.00 minus the CD Reserve Requirement and (B) the Assessment Rate for such date. "CD Rate Loan" shall mean any Loan that bears interest with reference to the CD Rate. "CD Reserve Requirement" shall mean, for any day of any Interest Period for a CD Rate Loan, the percentage (rounded upward to the next higher whole multiple of 1/100% if such rate is not such a multiple), determined in good faith by Bank in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as representing for such day the maximum effective reserve requirement (whether basic, supplemental, marginal, emergency or otherwise) prescribed by the Board of Governors of the Federal Reserve System (or any successor) with respect to liabilities or assets consisting of non-personal time deposits in dollars of the United States in an amount and for a maturity equal to such CD Rate Loan and such Interest Period. The CD Rate shall be adjusted automatically as of the effective date of such change and the CD Reserve Requirement. "Change of Control" shall mean (i) any Person or group within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as amended, as in effect on the date of this Agreement, has become the owner of, directly or indirectly, beneficially or of record, shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; or (ii) the Continuing Directors have ceased to occupy a majority of the seats (excluding vacant seats) on the Board of Directors of the Borrower. "Closing" shall mean the closing of the transactions provided for in this Agreement on the Closing Date. 4 5 "Closing Date" shall mean August 14, 1996 or such other date upon which the parties may agree. "Code" shall mean the Internal Revenue Code of 1986 as amended along with the rules, regulations, decisions and other official interpretations in connection therewith. "Consolidated" shall mean the resulted consolidation of the financial statements of the Borrower and each of its Subsidiaries in accordance with GAAP, including principles of consolidation consistent with those applied in preparation of the Consolidated financial statements referred to in Section 6.1 herein. "Continuing Directors" shall mean, collectively, (i) all members of the Board of Directors of the Borrower who have held office continuously since the date of this Agreement and (ii) all members of the Board of Directors of the Borrower who assume office after the date of this Agreement and whose election and nomination for election by the Borrower's shareholders was approved by a vote of two-thirds of the then Continuing Directors. "Distributions" shall mean, for the period of determination, (a) all distributions of cash, securities or other property (other than capital stock) on or in respect of any shares of any class of capital stock of the Borrower; and (b) all purchases, redemptions or other acquisitions by Borrower of any shares of any class of capital stock of the Borrower other than in connection with the exercise of stock options granted by the Borrower. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect as of the date of this Agreement and as amended from time to time in the future. "ERISA Affiliate" shall mean a Person which is under common control with Borrower within the meaning of Section 414(b) of the Code including, but not limited to, a Subsidiary of the Borrower. "Event of Default" means any of the Events of Default described in Section 7.01 of this Agreement. "Expiry Date" shall mean, with respect to the Revolving Credit Loans, the Revolving Credit Expiry Date and, with respect to the Term Loan, the Term Loan Expiry Date. 5 6 "Fixed Rate" shall mean, for any Interest Period for any Fixed Rate Loan, the sum of (A) the interest rate per annum (rounded upward to the next higher whole multiple of 1/100% if such rate is not such a multiple) determined in good faith by Bank in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the rate of interest which the Bank is required to pay (or will offer to pay) on a liability in an amount and for a maturity equal to such Fixed Rate Loan and such Interest Period as adjusted at the time it is being determined by Bank for reserve requirements and such other requirements as may be imposed by any Official Body, together with fees assessed by Bank's money management department plus (B) one and one quarter of one percent (1.25%). "Fixed Rate Loan" shall mean any Loan that bears interest with reference to the Fixed Rate. "Funded Debt" shall mean, as of the date of determination, (i) all Indebtedness which would as of such date be classified in whole or in part as a long-term liability in accordance with GAAP (including the current portion thereof), all Indebtedness having a final maturity more than one (1) year from the date of creation of such Indebtedness and all Indebtedness, regardless of its term, which is renewable or extendable (pursuant to the terms thereof or otherwise) to a date more than one year from the date of the creation of such Indebtedness, and (ii) all Indebtedness which would as of such date be classified in whole or in part as a current liability in accordance with GAAP, in each case determined and Consolidated for the Borrower and its Subsidiaries in accordance with GAAP. "Funded Debt to Cash Flow Ratio" shall mean, as of the date of determination, the ratio of Funded Debt to Cash Flow for the preceding twelve (12) month period. "Funding Breakage Date" shall mean as set forth in Section 2.09(c) hereof. "Funding Breakage Indemnity" shall mean as set forth in Section 2.09(c) hereof. "GAAP" means generally accepted accounting principles (as such principles may change from time to time) applied on a consistent basis (except for changes in application in which the Borrower's independent certified public accountants concur). "Indebtedness" shall mean (i) all obligations for borrowed money (including, without limitation, all notes payable 6 7 and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or similar instruments, all obligations on which interest charges are customarily paid, all obligations under conditional sale or other title retention agreements and all obligations issued or assumed as full or partial payment for property whether or not any such notes, drafts or obligations are obligations for borrowed money), (ii) all obligations secured by any Lien existing on property owned or acquired subject thereto, whether or not the obligations secured thereby shall have been assumed, (iii) all obligations to repay amounts drawn down by beneficiaries of letters of credit and (iv) indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such indebtedness shall be the capitalized amount of such obligations as determined in accordance with such principles; provided, however, that obligations of the Borrower to pay supplemental pension benefits, deferred compensation or deferred income taxes shall not in any event be deemed to constitute Indebtedness for purposes of this Agreement. "Interest Coverage Ratio" shall mean, for the period of determination, the ratio of Operating Earnings to Interest Expense. "Interest Expense" shall mean, for the period of determination, all interest accruing during such period on Indebtedness, including without limitation, all interest required under GAAP to be capitalized during such period, in each case determined and Consolidated for the Borrower and its Subsidiaries in accordance with GAAP. "Interest Period" shall mean, with respect to any Libor Rate Loan, As Offered Rate Loan, CD Rate Loan, or Fixed Rate Loan, the period commencing on the date such Loan is made or converted and ending on the last day of such period as selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period as selected by the Borrower pursuant to the provisions below. The duration of each Interest Period for any Libor Rate Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan shall be for the number of days, months or years selected by Borrower upon notice, in accordance with Sections 2.01(c) or 2.02(c) provided that: (i) the Interest Period for any Libor Rate Loan or CD Rate Loan shall be one (1), two (2), three (3), four (4) five (5), six (6), nine (9) or twelve (12) months or such other period as may be agreed upon by Borrower and Bank; 7 8 (ii) the Interest Period for any As Offered Rate Loan shall be one (1), two (2), three (3), four (4), five (5) or six (6) months or such other period as may be agreed upon by Borrower and Bank; (iii) the Interest Period for any Fixed Rate Loan shall be for one (1), two (2), three (3), four (4), five (5), six (6), seven (7) or eight (8) years or such other period as may be agreed upon by Borrower and Bank; (iv) Interest Periods shall be selected in a manner which will insure that Borrower shall be able to make scheduled payments of principal under the Notes without incurring liability under Section 2.09(c) hereof; provided, however, that in the event the Borrower is required to prepay any Libor Rate Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan in order to make a scheduled payment of principal under the Notes, the Borrower shall indemnify the Bank as provided in Section 2.09(c) hereof; (v) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall occur on the next succeeding Business Day, provided that if such extension of time would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; (vi) if the Borrower fails to so select the duration of any Interest Period for an As Offered Rate Loan, Libor Rate Loan or CD Rate Loan, the duration of such Interest Period shall be one (1) month; (vii) if the Borrower fails to so select the duration of an Interest Period for a Fixed Rate Loan, the Borrower shall be deemed to have selected a Prime Rate Loan; and (viii) the last day of any Interest Period shall not occur after the Expiry Date of the facility under which such Loan is made. "Law" shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body. "Libor Rate" shall mean, for any Interest Period for any Libor Rate Loan, a fixed rate per annum (rounded upwards to the next higher whole multiple of 1/100% if such rate is not such a multiple) equal at all times during such Interest Period to the 8 9 quotient of (a) the rate determined in good faith by the Bank in accordance with its usual procedures (such determination to be conclusive absent manifest error) to be the average of the rates per annum (rounded upwards to the next higher whole multiple of 1/100% if such rate is not such a multiple) at which deposits in United States Dollars are offered at 11:00 a.m. (London, England Time) (or as soon thereafter as is reasonably practicable) by prime banks in the London interbank eurodollar market two (2) Business Days prior to the first day of such Interest Period in an amount and maturity equal to the amount and maturity of such Libor Rate Loan, divided by (b) a number equal to 1.00 minus the aggregate (without duplication) of the rates (expressed as a decimal fraction) of the Libor Reserve Requirements. "Libor Rate Loan" shall mean any Loan that bears interest with reference to the Libor Rate. "Libor Reserve Requirements" shall mean, for any day of any Interest Period for a Libor Rate Loan, the percentage (rounded upward to the next higher whole multiple of 1/100% if such rate is not such a multiple) as determined in good faith by the Bank in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as representing the maximum reserves (whether basic, supplemental, marginal, emergency or otherwise) prescribed by the Board of Governors of the Federal Reserve System (or any successor) with respect to liabilities or assets consisting of or including "Eurocurrency Liabilities" (as defined in Regulation D of the Board of Governors of the Federal Reserve System) in an amount and for a maturity equal to such Libor Rate Loan and such Interest Period. The Libor Rate shall be adjusted automatically as of the effective date of each change in the Libor Reserve Requirement. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature including, but not limited to, any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Loan" or "Loans" shall mean the Revolving Credit Loans, the Term Loan (whether made as or converted to Prime Rate Loans, Libor Rate Loans, As Offered Rate Loans, CD Rate Loans or Fixed Rate Loans) and any other credit to the Borrower extended by the Bank in accordance with Article II hereof as evidenced by the Notes, as the case may be. 9 10 "Loan Document" or "Loan Documents" mean, singularly or collectively as the context may require, this Agreement, the Notes and any and all other documents, instruments, certificates and agreements executed and delivered in connection with this Agreement, as any of them may be amended, modified, extended or supplemented from time to time. "Material Adverse Change" shall mean a material adverse change in the business, operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. "Material Adverse Effect" shall mean a material adverse effect on the business, operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. "Net Income" means, for the period of determination, net income (after taxes), excluding, however, extraordinary gains, in each case determined and Consolidated for the Borrower and its Subsidiaries in accordance with GAAP. "Notes" shall collectively mean the Revolving Credit Note, the Term Note and any other note of the Borrower executed and delivered pursuant to this Agreement, together with all extensions, renewals, refinancings or refundings in whole or in part. "Office", when used in connection with the Bank, means its designated office located at Two Mellon Bank Center, Pittsburgh, Pennsylvania 15259 or such other office of the Bank as the Bank may designate in writing from time to time. "Official Body" means any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Operating Earnings" shall mean, for the period of determination, Net Income, plus Interest Expense plus all income taxes included in Net Income. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Title IV of ERISA. "Person" shall mean an individual, corporation, partnership, joint venture, trust, or unincorporated organization or government or agency or political subdivision thereof. 10 11 "Plan" means any deferred compensation program, including both single and multi-employer plans, subject to Title IV of ERISA and established and maintained for employees of the Borrower or any Subsidiary or any ERISA Affiliate. "Potential Default" shall mean any event or condition which with notice, passage of time or determination by Bank, or any combination of the foregoing, would constitute an Event of Default. "Prime Rate" shall mean that rate of interest per annum announced by Bank from time to time as its Prime Rate which may not represent the lowest rate charged by Bank to other borrowers at any time or from time to time. "Prime Rate Loan" shall mean any Loan that bears interest with reference to the Prime Rate. "Prior Loan Agreement" shall have the meaning assigned to such term in the preamble hereof. "Prior Security Documents" shall have the meaning assigned to such term in Section 2.14 hereof. "Prohibited Transaction" shall mean any transaction which is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA. "Reportable Event" shall mean any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, except any such event as to which the provision for thirty (30) days notice to the PBGC is waived under applicable regulations. "Revolving Credit Expiry Date" shall mean August 31, 1999, or such earlier date on which the Revolving Credit Facility Commitment shall have been terminated pursuant to this Agreement. "Revolving Credit Facility Commitment" shall mean as set forth in Section 2.01(a) hereof. "Revolving Credit Loans" shall mean as set forth in Section 2.01(a) hereof. "Revolving Credit Note" means the Revolving Credit Note of Borrower executed and delivered pursuant to Section 2.01(b) of this Agreement, as the same may be amended, modified or supplemented from time to time, together with all extensions, renewals, refinancings or refundings, in whole or in part. 11 12 "Subsidiary" of Borrower at any time means (i) any corporation more than fifty percent (50%) of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation is owned (directly or indirectly) by the Borrower and/or one or more Subsidiaries of the Borrower and (ii) any partnership, association, joint venture or other entity in which the Borrower and/or one or more Subsidiaries of the Borrower has more than a fifty percent (50%) equity interest. "Tangible Net Worth" means, as of the date of determination, net worth less all intangible assets, in each case determined and Consolidated for the Borrower and its Subsidiaries in accordance with GAAP. "Termination Event" shall mean (i) a Reportable Event, (ii) the termination of a single employer Plan or the treatment of a single employer Plan amendment as the termination of such Plan under Section 4041 of ERISA, or the filing of a notice of intent to terminate a single employer Plan, or (iii) the institution of proceedings to terminate a single employer Plan by the PBGC under Section 4042 of ERISA, or (iv) the appointment of a trustee to administer any single employer Plan. "Term Loan" shall mean as set forth in Section 2.02(a) hereof. "Term Loan Expiry Date" shall mean August 31, 2004. "Term Note" means the Term Note of Borrower executed and delivered pursuant to Section 2.02(b) of this Agreement, as may be amended, modified or supplemented from time to time, together with all extensions, renewals, refinancings or refundings, in whole or in part. "Treasury Rate" as of any Funding Breakage Date shall mean the rate per annum determined by the Bank in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the semiannual equivalent yield to maturity (expressed as a semiannual equivalent and decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) for United States Treasury securities maturing on the last day of the corresponding Interest Period and trading in the secondary market in reasonable volume (or if no such securities mature on such date, the rate determined by standard securities interpolation methods as applied to the series of securities maturing as close as possible to, but earlier than, such date, and 12 13 the series of such securities maturing as close as possible to, but later than, such date). ARTICLE II THE CREDIT FACILITIES 2.01 Revolving Credit Facility Commitment. ------------------------------------- (a) REVOLVING CREDIT LOANS. Subject to the terms and conditions and relying upon the representations and warranties set forth in this Agreement and the other Loan Documents, the Bank agrees to make, continue or convert loans (the "Revolving Credit Loans") to the Borrower at any time or from time to time on or after the Closing Date and to and including the day immediately preceding the Revolving Credit Expiry Date, in an aggregate principal amount not exceeding at any one time outstanding Forty Million and 00/100 Dollars ($40,000,000.00) (the "Revolving Credit Facility Commitment"). Within the limits of time and amount set forth in this Section 2.01, and subject to the provisions of this Agreement including, without limitation, the Bank's right to demand repayment of the Revolving Credit Loans upon the occurrence of an Event of Default, Borrower may borrow, repay and reborrow under this Section 2.01; provided, however, that Borrower may prepay any Libor Rate Loan, As Offered Rate Loan or CD Rate Loan only on the last day of the applicable Interest Period for such Libor Rate Loan, As Offered Rate Loan or CD Rate Loan. (b) REVOLVING CREDIT NOTE. The obligation of Borrower to repay the unpaid principal amount of the Revolving Credit Loans made to Borrower by the Bank and to pay interest on the unpaid principal amount thereof will be evidenced in part by the Revolving Credit Note of Borrower dated the Closing Date, in substantially the form attached as Exhibit "A" to this Agreement with the blanks appropriately filled. The executed Revolving Credit Note will be delivered by Borrower to the Bank on the Closing Date. (c) MAKING, CONTINUING OR CONVERTING OF REVOLVING CREDIT LOANS. Subject to the terms and conditions set forth in this Agreement and the other Loan Documents, and provided that the Borrower has satisfied all applicable conditions specified in Article IV hereof, the Bank shall make Revolving Credit Loans to the Borrower which, as selected by the Borrower pursuant to this Section 2.01(c), shall be Prime Rate Loans, Libor Rate Loans, As Offered Rate Loans or CD Rate Loans. 13 14 (i) Each Revolving Credit Loan that is made as or converted into a Prime Rate Loan shall be made or converted on such Business Day and in such amount as Borrower shall request by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Business Day requested by the Borrower to be the date of disbursement of the requested Prime Rate Loan. On each borrowing date, the Bank shall make the proceeds of the Prime Rate Loan available to Borrower at the Bank's Office in immediately available funds not later than 12:00 noon (Pittsburgh, Pennsylvania, time). (ii) Each Revolving Credit Loan that is made as, continued or converted into a Libor Rate Loan shall be made on such Business Day, in such amount (greater than or equal to Five Hundred Thousand Dollars ($500,000) provided, however, that any amount in excess of Five Hundred Thousand Dollars ($500,000) may only be in increments of One Hundred Thousand Dollars ($100,000)), and with such an Interest Period as Borrower shall request by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the date of disbursement of the requested Libor Rate Loan. On each borrowing date, the Bank shall make the proceeds of the Libor Rate Loan available to Borrower at the Bank's Office in immediately available funds, no later than 12:00 noon (Pittsburgh, Pennsylvania time). In addition, in the event that Borrower desires to continue a Libor Rate Loan for an additional Interest Period, Borrower shall provide Bank with written notice thereof on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period. In the event that Borrower fails to provide the Bank with the required written notice on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period for a Libor Rate Loan, Borrower shall be deemed to have given written notice that such Loan shall be converted to a Prime Rate Loan on the last day of the applicable Interest Period. Each written notice of any Libor Rate Loan shall be irrevocable and binding on Borrower and Borrower shall indemnify the Bank against any loss or expense incurred by the Bank as a result of any failure by Borrower to consummate such transaction calculated as set forth in Section 2.09(c) hereof. (iii) Each Revolving Credit Loan that is made as, continued or converted into an As Offered Rate Loan shall be made on such Business Day, in such amount (greater than or equal to One Million Dollars ($1,000,000), provided, however, that any amount in excess of One Million Dollars ($1,000,000) may only be in increments of One Hundred Thousand Dollars ($100,000)), and with such Interest Period as Borrower shall request by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh, 14 15 Pennsylvania time) on the Second (2nd) Business Day prior to the date of requested disbursement of the requested As Offered Rate Loan. On each borrowing date, the Bank shall make the proceeds of the As Offered Rate Loan available to Borrower at the Bank's Office in immediately available funds not later than 12:00 noon (Pittsburgh, Pennsylvania time). In addition, in the event that Borrower desires to continue an As Offered Rate Loan for an additional Interest Period, Borrower shall provide Bank with written notice thereof on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period. In the event that Borrower fails to provide the Bank with the required written notice on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period for an As Offered Rate Loan, Borrower shall be deemed to have given written notice that such Loan shall be converted to a Prime Rate Loan on the last day of the applicable Interest Period. Each written notice of any As Offered Rate Loan shall be irrevocable and binding on Borrower and Borrower shall indemnify the Bank against any loss or expense incurred by the Bank as a result of any failure by Borrower to consummate such transaction calculated as set forth in Section 2.09(c) hereof. (iv) Each Revolving Credit Line that is made as, continued or converted into a CD Rate Loan shall be made on such Business Day, in such amount (greater than or equal to One Million Dollars ($1,000,000), provided, however, that any amount in excess of One Million Dollars ($1,000,000) may only be in increments of One Hundred Thousand Dollars ($100,000)), and with such Interest Period as Borrower shall request by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the date of requested disbursement of the requested CD Rate Loan. On each borrowing date, the Bank shall make the proceeds of the CD Rate Loan available to Borrower at the Bank's office in immediately available funds, no later than 12:00 noon (Pittsburgh, Pennsylvania time). In addition, in the event that Borrower desires to continue a CD Rate Loan for an additional Interest Period, Borrower shall provide Bank with written notice thereof on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period. In the event that Borrower fails to provide the Bank with the required written notice on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period for a CD Rate Loan, Borrower shall be deemed to have given written notice that such Loan shall be converted to a Prime Rate Loan on the last day of the applicable Interest Period. Each written notice of any CD Rate Loan shall be irrevocable and binding on Borrower and Borrower shall indemnify the Bank against any loss or expense incurred by 15 16 the Bank as the result of any failure by Borrower to consummate such transaction calculated as set forth in Section 2.09(c) hereof. (d) MAXIMUM PRINCIPAL BALANCE OF REVOLVING CREDIT LOANS. The aggregate principal amount of all Revolving Credit Loans outstanding shall not exceed the Revolving Credit Facility Commitment. The Borrower agrees that if at any time the aggregate principal amount of all Revolving Credit Loans outstanding exceeds the Revolving Credit Facility Commitment ("Over Advance"), the Borrower shall promptly pay to the Bank such amount as may be necessary to eliminate such Over Advance. If not sooner paid, all of the Revolving Credit Loans, all unpaid accrued interest thereon, and all other sums and costs incurred by Bank pursuant to this Agreement with respect to the Revolving Credit Loans, shall be immediately due and payable on the Revolving Credit Expiry Date, without notice, presentment or demand. (e) EXTENSION OF REVOLVING CREDIT EXPIRY DATE. On or before each annual anniversary of the date of this Agreement and so long as no Event of Default has occurred and is continuing, the Bank will, in the ordinary course of its business and in its sole and absolute discretion, (i) determine whether to extend the Revolving Credit Expiry Date by one (1) additional year, and (ii) advise the Borrower in writing of its decision. The Borrower acknowledges that the Bank has no obligation whatsoever to the Borrower to extend the Revolving Credit Expiry Date. 2.02 Term Loan. ---------- (a) TERM LOAN. Subject to the terms and conditions of, and relying upon the representations and warranties set forth in, this Agreement and the other Loan Documents, the Bank agrees to make a term loan ("Term Loan") to the Borrower on the Closing Date in an aggregate principal amount of Thirty Seven Million Dollars ($37,000,000). (b) TERM LOAN NOTE. The obligation of the Borrower to repay the unpaid principal amount of the Term Loan made to the Borrower by the Bank and to pay interest on the unpaid principal amount thereof shall be evidenced in part by the Term Loan Note of the Borrower, dated the Closing Date, in substantially the form attached as Exhibit "B" to this Agreement, with the blanks appropriately filled. The executed Term Loan Note shall be delivered by the Borrower to the Bank on the Closing Date. (c) MAKING THE TERM LOAN AND TERM LOAN RATE OPTIONS. 16 17 (i) On or before 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the Closing Date, the Borrower shall advise the Bank of the portion of the Term Loan which shall be made as a Libor Rate Loan(s) and the Interest Period(s) with respect thereto; provided, however, that such Libor Rate Loan(s) shall only be made in such amount(s) greater than or equal to Five Hundred Thousand Dollars ($500,000) and, provided further, that any amounts in excess of Five Hundred Thousand Dollars ($500,000) may only be in increments of One Hundred Thousand Dollars ($100,000). After the Closing Date, the Borrower may, subject to the terms and conditions of this Agreement, convert all or a portion of the Term Loan which is a Libor Rate Loan(s) to a Prime Rate Loan, As Offered Rate Loan or Fixed Rate Loan as set forth in this Section 2.02(c). Any portion of the Term Loan that is converted from either a Prime Rate Loan, As Offered Rate Loan or Fixed Rate Loan into a Libor Rate Loan shall be converted, and shall begin to accrue interest with reference to the Libor Rate, on such Business Day, in such amount (greater than or equal to Five Hundred Thousand Dollars ($500,000.00) provided, however, that any amount in excess of Five Hundred Thousand Dollars ($500,000) may only be in increments of One Hundred Thousand Dollars ($100,000)), and with such Interest Period as the Borrower shall request by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the requested date of conversion into such Libor Rate Loan. In addition, in the event that the Borrower desires to continue the portion of the Term Loan which is a Libor Rate Loan for an additional Interest Period, the Borrower shall provide the Bank with written notice thereof on or before 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period. In the event that the Borrower fails to provide the Bank with the required written notice prior to 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period for a Libor Rate Loan, the Borrower shall be deemed to have given notice that such portion of the Term Loan shall be converted to a Prime Rate Loan on the last day of the applicable Interest Period. Each written notice of any Libor Rate Loan shall be irrevocable and binding on the Borrower and the Borrower shall indemnify the Bank against any loss or expense incurred by the Bank as a result of any failure by the Borrower to consummate such transaction calculated as set forth in Section 2.09(c) hereof. (ii) On or before 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the Closing Date, the Borrower shall advise the Bank of the portion of the Term Loan which shall be made as an As Offered Rate Loan(s) and 17 18 the Interest Period(s) with respect thereto; provided, however, that such As Offered Rate Loan(s) shall only be made in such amount(s) greater than or equal to One Million Dollars ($1,000,000) and, provided further, that any amounts in excess of One Million and 00/100 Dollars ($1,000,000.00) may only be in increments of One Hundred Thousand Dollars ($100,000). After the Closing Date, the Borrower may, subject to the terms and conditions of this Agreement, convert all or a portion of the Term Loan which is an As Offered Rate Loan(s) to a Prime Rate Loan, Libor Rate Loan, or Fixed Rate Loan as set forth in this Section 2.02(c). Any portion of the Term Loan that is converted from either a Prime Rate Loan, Libor Rate Loan, or Fixed Rate Loan into an As Offered Rate Loan shall be converted, and shall begin to accrue interest with reference to the As Offered Rate, on such Business Day, in such amount (greater than or equal to One Million Dollars ($1,000,000) provided, however, that any amount in excess of One Million Dollars ($1,000,000) may only be in increments of One Hundred Thousand Dollars ($100,000)), and with such Interest Period as the Borrower shall request by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the requested date of conversion into such As Offered Rate Loan. In addition, in the event that the Borrower desires to continue the portion of the Term Loan which is an As Offered Rate Loan for an additional Interest Period, the Borrower shall provide the Bank with written notice thereof on or before 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period. In the event that the Borrower fails to provide the Bank with the required written notice prior to 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period for an As Offered Rate Loan, the Borrower shall be deemed to have given notice that such portion of the Term Loan shall be converted to a Prime Rate Loan on the last day of the applicable Interest Period. Each written notice of any As Offered Rate Loan shall be irrevocable and binding on the Borrower and the Borrower shall indemnify the Bank against any loss or expense incurred by the Bank as a result of any failure by the Borrower to consummate such transaction calculated as set forth in Section 2.09(c) hereof. (iii) On or before 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the Closing Date, the Borrower shall advise the Bank of the portion of the Term Loan which shall be made as a Fixed Rate Loan(s) and the Interest Period(s) with respect thereto; provided, however, that such Fixed Rate Loan(s) shall only be made in such amount(s) greater than or equal to One Million Dollars ($1,000,000) and, provided further, that any amounts in excess of One Million Dollars 18 19 ($1,000,000) may only be in increments of One Hundred Thousand Dollars ($100,000). After the Closing Date, the Borrower may, subject to the terms and conditions of this Agreement, convert all or a portion of the Term Loan which is a Fixed Rate Loan(s) to a Prime Rate Loan, Libor Rate Loan or As Offered Rate Loan as set forth in this Section 2.02(c). Any portion of the Term Loan that is converted from either a Prime Rate Loan, Libor Rate Loan or As Offered Rate Loan into a Fixed Rate Loan shall be converted, and shall begin to accrue interest with reference to the Fixed Rate, on such Business Day, in such amount (greater than or equal to One Million Dollars ($1,000,000) provided, however, that any amount in excess of One Million Dollars ($1,000,000) may only be in increments of One Hundred Thousand Dollars ($100,000)), and with such Interest Period as the Borrower shall request by written notice received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the requested date of conversion into such Fixed Rate Loan. In addition, in the event that the Borrower desires to continue the portion of the Term Loan which is a Fixed Rate Loan for an additional Interest Period, the Borrower shall provide the Bank with written notice thereof on or before 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day prior to the expiration of the applicable Interest Period. In the event that the Borrower fails to provide the Bank with the required written notice prior to 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Business Day prior to the expiration of the applicable Interest Period for a Fixed Rate Loan, the Borrower shall be deemed to have given notice that such portion of the Term Loan shall be converted to a Prime Rate Loan on the last day of the applicable Interest Period. Each written notice of any Fixed Rate Loan shall be irrevocable and binding on the Borrower and the Borrower shall indemnify the Bank against any loss or expense incurred by the Bank as a result of any failure by the Borrower to consummate such transaction calculated as set forth in Section 2.09(c) hereof. (iv) On the Closing Date and until conversion, if any, pursuant to the terms and conditions of this Agreement, the portion of the Term Loan which is not a Libor Rate Loan, As Offered Rate Loan or Fixed Rate Loan shall be a Prime Rate Loan. After the Closing Date, the Borrower shall have the option, subject to the terms and conditions of this Agreement, to convert a portion of the Term Loan which is a Prime Rate Loan to a Libor Rate Loan, As Offered Rate Loan or Fixed Rate Loan as set forth in this Section 2.02(c). Any portion of the Term Loan that is converted from a Libor Rate Loan, As Offered Rate Loan or Fixed Rate Loan into a Prime Rate Loan shall be converted, and shall begin to accrue interest with reference to the Prime Rate, on such Business Day and in such amount as the Borrower shall request by written notice 19 20 received by the Bank no later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Business Day of the requested conversion of such portion of the Term Loan into a Prime Rate Loan. (d) PAYMENTS OF PRINCIPAL AND MATURITY. Commencing on October 1, 1996, and continuing on the first day of each January, April, July and October thereafter through and including the Term Loan Expiry Date, the Borrower shall make a principal payment in the amount of One Million One Hundred Fifty Six Thousand Two Hundred Fifty and 00/100 Dollars ($1,156,250.00). All remaining unpaid principal, accrued interest and all other sums and costs incurred by the Bank pursuant to this Agreement with respect to the Term Loan shall be immediately due and payable on the Term Loan Expiry Date without notice, presentment or demand. 2.03 Interest Rates. --------------- (a) Subject to the terms and conditions of this Agreement, the aggregate outstanding principal balance of the Revolving Credit Loans shall be, at the option of Borrower, as selected pursuant to Section 2.01(c), (i) Prime Rate Loans which shall bear interest at a rate per annum equal to the Prime Rate, (ii) Libor Rate Loans which shall bear interest during each Interest Period at a rate per annum equal to one percent (1.00%) in excess of the Libor Rate for such Interest Period, (iii) As Offered Rate Loans which shall bear interest during each Interest Period at a rate per annum equal to the As Offered Rate for such Interest Period, or (iv) CD Rate Loans which shall bear interest during each Interest Period at a rate per annum equal to one percent (1.00%) in excess of the CD Rate for such Interest Period. (b) Subject to the terms and conditions of this Agreement, the aggregate outstanding principal balance of the Term Loan shall be, at the option of Borrower, as selected pursuant to Section 2.02(c), (i) Prime Rate Loans which shall bear interest at a rate per annum equal to the Prime Rate, (ii) Libor Rate Loans which shall bear interest during each Interest Period at a rate per annum equal to one and one quarter of one percent (1.25%) in excess of the Libor Rate for such Interest Period, (iii) As Offered Rate Loans which shall bear interest during each Interest Period at a rate per annum equal to the As Offered Rate for such Interest Period or (iv) Fixed Rate Loans which shall bear interest during each Interest Period at a rate per annum equal to the Fixed Rate for such Interest Period. 2.04 INTEREST PAYMENTS. The Borrower shall pay to the Bank interest on the unpaid principal balance of the aggregate outstanding balance of the Revolving Credit Loans which are Prime 20 21 Rate Loans on the first (1st) day of each January, April, July and October during the period from the Closing Date to and including the Revolving Credit Expiry Date. The Borrower shall pay to the Bank interest on the unpaid principal balance of the Revolving Credit Loans which are Libor Rate Loans, As Offered Rate Loans or CD Rate Loans on the earlier of (i) the last day of the applicable Interest Period for such Loan or (ii) for such Loans with an applicable Interest Period exceeding three (3) months, on the three (3) month anniversary of each Loan during the period from the Closing Date to and including the Revolving Credit Expiry Date. The Borrower shall pay to the Bank interest on the portion of the unpaid principal balance of the Term Loan which is a Prime Rate Loan, in arrears, on the first (1st) day of each January, April, July and October during the period from the Closing Date to and including the Term Loan Expiry Date. The Borrower shall pay to the Bank interest on the portions of the unpaid principal balance of the Term Loan which are Libor Rate Loans, As Offered Rate Loans or Fixed Rate Loans, in arrears, on the earlier of (i) the last day of the applicable Interest Period for each such Loan or (ii) for such Loans with an applicable Interest Period exceeding three (3) months, on the three (3) month anniversary of each Loan during the period from the Closing Date to and including the Term Loan Expiry Date. After maturity of any part of the Loans (whether by acceleration or otherwise), interest on such part of the Loans shall be immediately due and payable without notice, presentment, or demand. 2.05 INTEREST AFTER DEFAULT; USURY. Whenever the unpaid principal amount of the Loans or any portion thereof, accrued interest thereon, any fees, or any other sums payable hereunder shall become due and payable and remain unpaid (whether at maturity, upon the occurrence of an Event of Default, by acceleration or otherwise) the amount thereof shall thereafter until paid in full bear interest: (i) in the case of principal on a Prime Rate Loan, at a rate per annum equal to two percent (2.00%) above the Prime Rate then in effect, such interest rate to change automatically from time to time effective as of the effective date of each change in the Prime Rate; and (ii) in the case of principal on Libor Rate Loans, As Offered Rate Loans, CD Rate Loans or Fixed Rate Loans, at a rate per annum equal to two percent (2.00%) above the then current interest rate with respect to each such Loan during the remainder of the Interest Period applicable to such Loan and, thereafter, in accordance with clause (i) of this Section 2.05. In the event the rates of interest provided for in this Section 2.05, or any other section of this Agreement, are finally determined by any Official Body to exceed the maximum rate of interest permitted by applicable usury or similar laws, their or 21 22 its application will be suspended and there will be charged instead the maximum rate of interest permitted by such laws. 2.06 LATE CHARGE. Upon the occurrence of an Event of Default with respect to the payment of any installment of interest or principal on the Notes for more than five (5) days after said installment becomes due, in addition to making a payment of the installment due and any interest thereon at the applicable default interest rate, the Borrower shall pay to Bank a late charge in an amount equal to five percent (5%) of any such overdue installment. 2.07 FEES. The Borrower shall pay to Bank a commitment fee on the unused portion of the Revolving Credit Facility Commitment during the period from the Closing Date to the Revolving Credit Expiry Date, payable quarterly in arrears beginning on October 1, 1996 and continuing on the first (1st) day of each January, April, July and October thereafter and on the Revolving Credit Expiry Date. Such fee shall be equal to the amount by which Forty Million and 00/100 Dollars ($40,000,000.00) has exceeded the average daily closing principal balance of the Revolving Credit Loans during the preceding calendar quarter, multiplied by one-eighth of one percent (0.125%), multiplied by a fraction, the numerator of which is the actual number of days in such calendar quarter and the denominator of which is 360. In addition, the Borrower shall, on the Closing Date, pay to the Bank a restructuring fee in the amount of Twenty-Five Thousand and 00/100 Dollars ($25,000.00). 2.08 ADJUSTMENT TO PRIME RATE; COMPUTATION OF INTEREST AND FEES. In the event of any change in the Prime Rate, the rate of interest upon each Prime Rate Loan shall be adjusted to immediately correspond with such change; except any interest rate charged hereunder shall not exceed the highest rate permitted by law. Interest on Loans, unpaid fees and other sums payable hereunder shall be computed on the basis of a year of three hundred sixty (360) days and paid for the actual number of days elapsed. 2.09 Additional Costs. ----------------- (a) If, due to either (i) the introduction of, or any change in, or in the interpretation of, any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to, or reduction in income receivable by, the Bank of making, funding or maintaining Loans (or commitments to make the Loans), then the Borrower shall from time to time, upon demand by the Bank, pay to the Bank additional amounts sufficient to reimburse such Bank for 22 23 any such additional costs or reduction in income. A certificate of the Bank submitted to the Borrower on or before the date such demand is made in good faith as to the amount of such additional costs shall be conclusive and binding for all purposes, absent manifest error. Upon notice from the Bank to the Borrower within five (5) Business Days after the Bank notifies the Borrower of any such additional costs pursuant to this Section 2.09(a), the Borrower may either (A) prepay in full all Loans of any types so affected then outstanding, together with interest accrued thereon to the date of such prepayment, or (B) convert all Loans of any types so affected then outstanding into Loans of any other type not so affected upon not less than four (4) Business Days' notice to the Bank. If any such prepayment or conversion of any Libor Rate Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan occurs on any day other than the last day of the applicable Interest Period for such Loan, the Borrower also shall pay to the Bank such additional amounts as set forth in Section 2.09(c). (b) If either (i) the introduction of, or any change in, or in the interpretation of, any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and the Bank determines in good faith that the amount of such capital is increased by or based upon the existence of the Loans (or commitment to make the Loans) and other extensions of credit (or commitments to extend credit) of similar type, then, upon demand by the Bank, the Borrower shall pay to the Bank from time to time as specified by the Bank additional amounts sufficient to compensate the Bank in the light of such circumstances, to the extent that the Bank reasonably determines such increase in capital to be allocable to the existence of the Bank's Loans (or commitment to make the Loans). A certificate of the Bank in good faith submitted to the Borrower on or before the date such demand is made as to such amounts shall be conclusive and binding for all purposes, absent manifest error. Upon notice from the Borrower to the Bank within five (5) Business Days after the Bank notifies the Borrower of any such additional costs pursuant to this Section 2.09(b), the Borrower may either (A) prepay in full all Loans of any types so affected then outstanding, together with interest accrued thereon to the date of such prepayment, or (B) convert all Loans of any types so affected then outstanding into Loans of any other type not so affected upon not less than four (4) Business Days' notice to the Bank. If any such prepayment or conversion of any Libor Rate Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan occurs on any day other than the last day of the applicable Interest Period for such Loan, the Borrower also shall 23 24 pay to the Bank such additional amounts as set forth in Section 2.09(c). (c) If the Borrower shall prepay any Libor Rate Loan, As Offered Rate Loan, CD Rate Loan or Fixed Rate Loan on a day other than the last day of the applicable Interest Period for such Loan (whether such prepayment is permitted by Section 2.09 or 2.10, as a result of the failure by Borrower to consummate a transaction after providing notice as set forth in Sections 2.01(c)(ii), (iii) and (iv) and 2.02(c)(i,) (ii) and (iii), or otherwise permitted by Bank or otherwise required under the terms of this Agreement) (a "Funding Breakage Date"), the Borrower shall pay to the Bank an amount (the "Funding Breakage Indemnity") determined by the Bank as follows: (i) first, calculate the following amount: (A) the principal amount of such Loans owing to the Bank which shall be prepaid times (B) the greater of (x) zero or (y) the rate of interest applicable to such principal amount on the Funding Breakage Date minus the Treasury Rate as of the Funding Breakage Date, times (c) the number of days from and including the Funding Breakage Date to, but not including, the last day of such Interest Period, times (d) 1/360; (ii) the Funding Breakage Indemnity to be paid by the Borrower to the Bank shall be the amount equal to the present value as of the Funding Breakage Date (discounted at the Treasury Rate as of such Funding Breakage Date, and calculated on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) of the amount described in the preceding clause (i) (which amount described in the preceding clause (i) is assumed for purposes of such present value calculation to be payable on the last day of the corresponding Interest Period). Such Funding Breakage Indemnity shall be due and payable on demand, and the Bank shall, upon making such demand, notify the Borrower of the amount so demanded. In addition, the Borrower shall, on the due date for payment of any Funding Breakage Indemnity, pay to the Bank an additional amount equal to interest on such Funding Breakage Indemnity from the Funding Breakage Date to, but not including, such date at the Prime Rate (calculated on the basis of a year of 360 days and actual days elapsed). The amount payable to the Bank under this Section 2.09(c) shall be determined in good faith by the Bank, and such determination shall be conclusive absent manifest error. 24 25 2.10 ILLEGALITY; IMPRACTICABILITY. Notwithstanding any other provision contained in this Agreement, if on any date on which a Libor Rateor CD Rate, as the case may be, would otherwise be set, the Bank shall have in good faith determined (which determination shall be conclusive absent manifest error) that (i) adequate and reasonable means do not exist for ascertaining a Libor Rateor CD Rate, as the case may be, (ii) a contingency has occurred which materially and adversely affects the interbank markets, or (iii) the effective cost to the Bank of funding a proposed Libor Rate Loan or CD Rate Loan exceeds the Libor Rate or CD Rate respectively, then (y) on notice thereof by the Bank to the Borrower, the obligation of the Bank to make or continue a Loan of a type so affected or to convert any type of Loan into a Loan of a type so affected shall terminate and the Bank shall thereafter be obligated to make Prime Rate Loans whenever any written notice requests any type of Loans so affected and (z) upon demand therefor by the Bank to the Borrower, the Borrower shall either (i) forthwith prepay in full all Loans of the type so affected then outstanding, together with interest accrued thereon or (ii) request that the Bank, upon four (4) Business Days' notice, convert all Loans of the type so affected then outstanding into Loans of a type not so affected. If any such prepayment or conversion of any Libor Rate Loan or CD Rate Loan, as the case may be, occurs on any day other than the last day of the applicable Interest Period for such Loan, the Borrower also shall pay to the Bank such additional amounts as set forth in Section 2.09(c). 2.11 PAYMENTS. All payments to be made with respect to principal, interest, fees or other amounts due from the Borrower under this Agreement or under the Notes are payable at 12:00 noon (Pittsburgh, Pennsylvania time), on the day when due, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action for the payments will accrue immediately. All such payments must be made to the Bank at its Office in U.S. Dollars and in funds immediately available at such Office, without setoff, counterclaim or other deduction of any nature. The Bank may in its discretion deduct such payments from the Borrower's demand or deposit accounts with Bank on the due date. All such payments shall be applied at the option of the Bank to accrued and unpaid interest, outstanding principal and other sums due under this Agreement in such order as the Bank, in its sole discretion, shall elect. All such payments shall be made net of, without deduction or offset, and free and clear of any and all present and future taxes, levies, deductions, charges, and withholdings and all liabilities with respect thereto, excluding income and franchise taxes imposed on the Bank under the laws of the United States or any state or political subdivision thereof. If the Borrower is compelled by law to deduct any such taxes or 25 26 levies (other than such excluded taxes) or to make any such other deductions, charges, or withholdings, it will pay such additional amounts as may be necessary in order that the net payments after such deduction, and after giving effect to any United States federal or state income taxes required to be paid by the Bank in respect of such additional amounts, shall equal the amount of such payment without such tax, deduction or withholding. 2.12 OPTIONAL PREPAYMENTS OF TERM LOAN. Subject to the provisions of this Section 2.12, the Borrower shall have the right, at its option, to prepay the Term Loan in whole or in part at any time; provided, however, that any portion of the Term Loan which is a Libor Rate Loan or an As Offered Rate Loan may only be converted or prepaid hereunder at the end of the Interest Period for such Loan. All prepayments of any portion of the Term Loan shall be applied to the unpaid installments of principal in the reverse order of their scheduled maturities. For any prepayment of any portion of the Term Loan, the Borrower shall give the Bank written notice (which shall be irrevocable) of each prepayment not later than 10:00 a.m. (Pittsburgh, Pennsylvania time) on the Second (2nd) Business Day immediately preceding the date of prepayment, specifying the aggregate amount of principal to be prepaid and the prepayment date. Following receipt of the notice as specified in the preceding sentence, the principal amount specified therein, together with accrued unpaid interest thereon to the date of such prepayment, shall be due and payable on such prepayment date without notice, presentment or demand. In addition, in the event that any portion of the Term Note which is being prepaid is a Fixed Rate Loan, the Bank may deliver to the Borrower written notice of the amount determined by the Bank to be the difference between (a) the present value of the interest payments that would have been paid in the future to the Bank by the Borrower on such prepaid portion of principal accruing at the Fixed Rate, but for such prepayment and (b) the present value of the interest payments that would be paid in the future to the Bank at the United States Treasury Rate if, on or about the date of prepayment, the Bank made a hypothetical investment of the prepaid portion of principal accruing at the Fixed Rate in United States Treasury Securities maturing on or about the date that the prepaid portion of principal would have matured but for such prepayment and bearing interest accruing from the date of prepayment, payable on each date on which Borrower, but for such prepayment, would have paid interest on the prepaid portion of principal. As used herein, "United States Treasury Rate" shall mean a rate of interest per annum (rounded upward to the next higher whole multiple of 1/100% if such rate is not such a multiple), equal to the annual yield the Bank could obtain by purchasing on the date of prepayment United States Treasury Securities with semi-annual interest payments, maturing on 26 27 or about the date on which the prepaid portion of principal would have matured in amounts approximately equal to the prepaid portion. The amounts specified in such notice shall be due and payable by the Borrower to the Bank upon delivery of such notice. 2.13 LOAN ACCOUNT. The Bank will open and maintain on its books a loan account (the "Loan Account") for the Borrower with respect to Loans made, repayments, prepayments, the computation and payment of interest and fees and the computation and final payment of all other amounts due and sums paid to the Bank under this Agreement. Except in the case of manifest error in computation, the Loan Account for the Borrower will be conclusive and binding on the Borrower as to the amount at any time due to the Bank from the Borrower under this Agreement or the Notes. 2.14 SECURITY. The Bank hereby releases, discharges and terminates all security interests, liens and other encumbrances created pursuant to the security documents listed on Schedule 2.14 to this Agreement (the "Prior Security Documents"), and such Prior Security Documents are hereby terminated and are of no further force and effect. Notwithstanding anything to the contrary contained in the preceding sentence, all indemnity and expense obligations contained in the Prior Security Documents shall survive the termination of, and the release of the security interests and mortgages created under, the Prior Security Documents. The Bank agrees to, within thirty (30) days after appropriate UCC-3 termination statements and mortgage satisfaction pieces are prepared by the Borrower's counsel and received by the Bank, execute appropriate UCC-3 termination statements and mortgage satisfaction pieces to, at Borrower's sole cost and expense and upon the appropriate filing by the Borrower or its counsel, release, discharge and terminate of record all Liens created under the Prior Security Documents. Bank acknowledges that, as of the Closing Date, it is not aware of any indemnity or expense obligation due and payable by the Borrower under the Prior Security Documents. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Bank that: 3.01 ORGANIZATION AND QUALIFICATION. The Borrower and each of its United States Subsidiaries are corporations, partnerships or limited partnerships, as the case may be, duly organized, validly existing and in good standing under their 27 28 respective jurisdictions of incorporation. The Borrower and each of its United States Subsidiaries are duly qualified or licensed to do business as a foreign corporation and are in good standing in all jurisdictions in which the ownership of their properties or the nature of their activities or both makes such qualification or licensing necessary, except only to the extent that the failure to be so qualified or licensed would not have a Material Adverse Effect. 3.02 POWER TO CARRY ON BUSINESS; LICENSES. The Borrower and each of its United States Subsidiaries have all requisite corporate power and authority to own and operate their properties and to carry on their business as now conducted and as presently planned to be conducted. The Borrower and each of its United States Subsidiaries have all licenses, permits, consents and governmental approvals or authorizations necessary to carry on their business as now conducted or as presently planned to be conducted except only for such licenses, permits, consents and governmental approvals or authorizations the failure of which to obtain would not have a Material Adverse Effect. 3.03 EXECUTION AND BINDING EFFECT. This Agreement, the Notes, and the other Loan Documents to which the Borrower is a party have been duly authorized by all appropriate corporation action of the Borrowerand have been duly and validly executed and delivered by the Borrower, and each such agreement constitutes a legal, valid and binding obligation of the Borrower, enforceable against Borrower in accordance with its terms. 3.04 ABSENCE OF CONFLICTS. Neither the execution and delivery of this Agreement or the other Loan Documents by the Borrower, nor the consummation of the transactions contemplated in any of them by the Borrower, nor the performance of or compliance with their terms and conditions by the Borrower will (a) violate any Law, (b) conflict with or result in a breach of or a default under the articles of incorporation or by-laws of the Borrower, (c) conflict with or result in a breach or a default under any material agreement or instrument to which the Borrower or any of its Subsidiaries is a party or by which any of them or any of their material properties (now owned or acquired in the future) may be subject or bound or (d) result in the creation or imposition of any Lien upon any property (owned or leased) of the Borrower or any of its Subsidiaries. 3.05 AUTHORIZATIONS AND FILINGS. No authorization, consent, approval, license, exemption or other action by, and no registration, qualification, designation, declaration or filing with, any Official Body is or will be necessary or advisable in 28 29 connection with the execution and delivery of this Agreement or the other Loan Documents by the Borrower, the consummation by the Borrower of the transactions contemplated in any of them, or the performance of or compliance by the Borrower with the terms and conditions of this Agreement or the other Loan Documents. 3.06 TITLE TO PROPERTY. The Borrower and each of its Subsidiaries has good and marketable title in fee simple to all real property and good and marketable title to all other property purported to be owned by them, including that reflected in the most recent balance sheet referred to in Section 3.07 of this Agreement or submitted pursuant to Section 5.01(a) of this Agreement (except as sold or otherwise disposed of in the ordinary course of business), subject only to Liens not forbidden by Section 6.01 of this Agreement. 3.07 Financial Statements. --------------------- (a) The Borrower has delivered to the Bank a Consolidated balance sheet and related statements of income, cash flow and shareholders' equity of the Borrower and its Subsidiaries for the fiscal year ending August 31, 1995, as audited by S.R. Snodgrass A.C. without qualification. Such financial statements (including the notes) present fairly the Consolidated financial position of the Borrower and its Subsidiaries as of the end of such fiscal period and the results of their operations and their cash flow for the fiscal period then ended, all in accordance with GAAP applied consistently with the audited financial statements for the preceding fiscal year. (b) The Borrower has delivered to the Bank internally prepared Consolidated balance sheets and related statements of income and cash flow of the Borrower and its Subsidiaries for the fiscal quarters ending November 30, 1995, February 29, 1996 and May 31, 1996. Such financial statements provided by the Borrower present fairly the financial position of the Borrower and its Subsidiaries as of the end of each period and the results of their operations and their cash flow for each period, all in conformity with GAAP (except that such financial statements do not contain all of the footnote disclosure required by GAAP), subject to year end adjustments, applied on a basis consistent with that of the preceding fiscal year's audited financial statements. 3.08 TAXES. All tax returns required to be filed by the Borrower and each Subsidiary have been properly prepared, executed and filed. All taxes, assessments, fees and other governmental charges upon the Borrower, its Subsidiaries or upon 29 30 any of their properties, income, sales or franchises which are due and payable have been paid other than those not yet payable without premium or penalty and those contested with due diligence in good faith without the incurrence of any Lien against the Borrower which would have a Material Adverse Effect. The reserves and provisions for taxes on the books of the Borrower and its Subsidiaries are adequate for all open years and for their current fiscal period. Neither the Borrower nor any Subsidiary knows of any proposed additional assessment or basis for any assessment for additional taxes (whether or not reserved against). 3.09 LITIGATION. Except as set forth in the Borrower's annual report on Form 10-K for the fiscal year ended August 31, 1995 (the "1995 Form 10-K"), there is no pending, or to the best knowledge of Borrower and its Subsidiaries, contemplated or threatened, action, suit or proceeding by or before any Official Body against or affecting the Borrower or its Subsidiaries, at law or equity, which, if adversely decided, would have a Material Adverse Effect. 3.10 COMPLIANCE WITH LAWS. Neither the Borrower nor any Subsidiary is subject to any material contingent liability on account of any Law or in violation of any Law which would have a Material Adverse Effect. 3.11 PENSION PLANS. (a) Each Plan has been and will be maintained and funded in accordance with its terms and with all provisions of ERISA and other applicable laws; (b) no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan; (c) no liability to the PBGC has been incurred with respect to any Plan, other than for premiums due and payable; (d) no Plan has been terminated, no proceedings have been instituted to terminate any Plan, and there exists no intent to terminate or institute proceedings to terminate any Plan; (e) no withdrawal, either complete or partial, has occurred or commenced with respect to any multi-employer Plan, and there exists no intent to withdraw either completely or partially from any multi-employer Plan; and (f) there has been no cessation of, and there is no intent to cease, operations at a facility or facilities where such cessation could reasonably be expected to result in a separation from employment of more than 20% of the total number of employees who are participants under a Plan. 3.12 PATENTS, LICENSES, FRANCHISES. The Borrower and each Subsidiary owns or possesses the right to use all of the material patents, trademarks, service marks, trade names, copyrights, licenses, franchises and permits and rights with respect to the foregoing necessary to own and operate their 30 31 properties and to carry on their business as presently conducted and presently planned to be conducted without conflict with the rights of others. 3.13 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.13 hereof, (a) neither the Borrower nor any of its United States Subsidiaries are in violation of The Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, The Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, The Clean Water Act, The Toxic Substances Control Act and The Clean Air Act or any rule or regulation promulgated pursuant to any of the foregoing statutes, or any other federal, state or local environmental law, statute, rule, regulation or ordinance applicable to the Borrower, any Subsidiary or their respective properties (all of the foregoing are sometimes collectively referred to in this Section 3.13 as the "Environmental Laws") which would have a Material Adverse Effect; (b) Neither the Borrower, its United States Subsidiaries nor any of their Affiliates, directors, officers, employees, agents or independent contractors have arranged, by contract, agreement or otherwise, (i) for the disposal or treatment of, or (ii) with a transporter for the transport, disposal or treatment of, any Hazardous Substance (as defined by CERCLA, as amended), owned, used or possessed by the Borrower or any Subsidiary, whether or not to a location identified by the Environmental Protection Agency (the "EPA") on the National Priorities List, 40 C.F.R. Part 300, (or proposed by the EPA in the Federal Register for listing on such National Priorities List) or identified under any corresponding state statute or regulation concerning cleanup of waste disposal sites (a "State Superfund Law") in violation of any applicable Environmental Laws which would have a Material Adverse Effect; (c) To the best knowledge of the Borrower, no predecessor of the Borrower has arranged by contract, agreement or otherwise, (i) for the disposal or treatment of, or (ii) with a transporter for the transport, disposal or treatment of, any Hazardous Substance, owned, used or possessed by the predecessor in violation of any applicable Environmental Laws which would have a Material Adverse Effect; (d) To the best knowledge of the Borrower, neither the Borrower, its United States Subsidiaries nor any of their Affiliates "owned" or "operated" any "facility" at the time any waste containing Hazardous Substances was disposed of at such 31 32 facility within the meaning of CERCLA, as amended, or any State Superfund Law in violation of any applicable Environmental Laws which would have a Material Adverse Effect. 3.14 PROCEEDS. The Borrower will use the proceeds of the Revolving Credit Loans for general corporate purposes and for acquisitions of businesses operating in lines of business similar to those described in the 1995 Form 10-K. The Borrower will use the proceeds of the Term Loan to repay Indebtedness of the Borrower to the Bank under the Prior Loan Agreement. 3.15 MARGIN STOCK. The Borrower will make no borrowing under this Agreement for the purpose of buying or carrying any "margin stock", as such term is used in Regulation U and related regulations of the Board of Governors of the Federal Reserve System, as amended from time to time. Neither the Borrower nor any Subsidiary owns any "margin stock". Neither the Borrower nor any Subsidiary is engaged in the business of extending credit to others for such purpose, and no part of the proceeds of any borrowing under this Agreement will be used to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock". 3.16 NO EVENT OF DEFAULT: COMPLIANCE WITH MATERIAL AGREEMENTS. Except as set forth on Schedule 3.16 to this Agreement, no event has occurred and is continuing and no condition exists which constitutes an Event of Default or Potential Default. Neither the Borrower nor any of its Subsidiaries are (i) in violation of any term of any charter instrument or bylaw or (ii) in default under any material agreement, lease or instrument to which the Borrower or its Subsidiaries are a party or by which they or any of their properties (owned or leased) may be subject or bound. 3.17 NO MATERIAL ADVERSE CHANGE. Since May 31, 1996, there has been no Material Adverse Change. 3.18 SUBSIDIARIES. Schedule 3.18 to this Agreement sets forth each Subsidiary of the Borrower, the authorized and outstanding capital stock (or other equity interest) of such Subsidiary and the outstanding capital stock (or other equity interest) of such Subsidiary which is owned by the Borrower or any of its Subsidiaries. 3.19 LABOR CONTROVERSIES. There are no labor controversies pending or, to the best knowledge of the Borrower, threatened, against the Borrower or any of its Subsidiaries which, if adversely determined, would have a Material Adverse Effect. 32 33 3.20 SOLVENCY. After the making of the Loans, the Borrower (a) will be able to pay its debts as they become due, (b) will have funds and capital sufficient to carry on its business and all businesses in which it is about to engage, and (c) will own property having a value at both fair valuation and at fair saleable value in the ordinary course of Borrower's business greater than the amount required to pay its debts as they become due. The Borrower was not insolvent immediately prior to the date of this Agreement and will not be rendered insolvent by the execution and delivery of this Agreement, the borrowing hereunder and/or the consummation of any transactions contemplated by this Agreement. 3.21 ACCURATE AND COMPLETE DISCLOSURE. No representation or warranty made by the Borrower under this Agreement, the other Loan Documents or the schedules and exhibits attached thereto, and no statement made by the Borrower in any financial statement (furnished pursuant to Sections 3.07 or 5.01 or otherwise), certificate, report, exhibit or document furnished by the Borrower to the Bank pursuant to or in connection with this Agreement is false or misleading in any material respect (including by omission of material information necessary to make such representation, warranty or statement not misleading). The Borrower is not aware of any facts which it has not disclosed to the Bank in writing which materially and adversely affects, or would materially and adversely affect, the assets, business, operations or financial condition of the Borrower or any Subsidiary or the ability of the Borrower to perform its obligations under this Agreement and the other Loan Documents. ARTICLE IV CONDITIONS OF LENDING The obligation of the Bank to make any Loan is subject to the satisfaction of the following conditions: 4.01 REPRESENTATIONS AND WARRANTIES: EVENTS OF DEFAULT AND POTENTIAL DEFAULTS. The representations and warranties contained in Article III shall be true and correct on and as of the date of each Loan with the same effect as though made on and as of each such date, except to the extent that any such representation or warranty (including any Schedule referred to therein) relates specifically to a prior date and except to the extent that any such representation and warranty (including any Schedule referred to therein) is not true and correct in any material respect as a result of activities or actions permitted to be taken by the Borrower or any of its Subsidiaries pursuant to Article VI hereof. 33 34 On the date of each Loan, no Event of Default and no Potential Default shall have occurred and be continuing or exist or shall occur or exist after giving effect to the Loan to be made on such date. Each request by the Borrower for any Loan shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 4.01 have been satisfied as of the date of such request. Failure of the Bank to receive notice from the Borrower to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 4.01 have been satisfied as of the date such Loan is made. 4.02 PROCEEDINGS AND INCUMBENCY. On the Closing Date, the Borrower shall have delivered to the Bank a certificate, in form and substance reasonably satisfactory to the Bank, dated the Closing Date and signed on behalf of the Borrower by the Secretary or an Assistant Secretary of the Borrower, certifying as to (a) true copies of the articles of incorporation and bylaws of the Borrower as in effect on such date, (b) true copies of all corporate action taken by the Borrower relative to this Agreement, the Notes and the other Loan Documents including, but not limited to, that described in Section 3.03 of this Agreement, and (c) the names, true signatures and incumbency of the officers of the Borrower authorized to execute and deliver this Agreement, the Notes and the other Loan Documents. The Bank may conclusively rely on each such certificate unless and until a later certificate revising the prior certificate has been furnished to the Bank. 4.03 AGREEMENT AND NOTES. On the Closing Date, this Agreement and the Notes, satisfactory in terms, form and substance to the Bank, shall have been executed and delivered by the Borrower to the Bank. 4.04 OPINION OF COUNSEL. On the Closing Date, there shall have been delivered to the Bank a written opinion, dated the Closing Date, of counsel to the Borrower, in form and substance reasonably satisfactory to Bank and its counsel. 4.05 OTHER DOCUMENTS AND CONDITIONS. On or before the Closing Date, the following documents and conditions shall have been delivered to Bank or satisfied by or on behalf of the Borrower: (a) GOOD STANDING AND TAX LIEN CERTIFICATES. A good standing certificate of the Borrower certifying to the good standing and corporate status of the Borrower, good standing/foreign qualification certificates from other jurisdictions in which the Borrower is qualified to do business and 34 35 tax lien certificates of the Borrower from each jurisdiction in which the Borrower is qualified to do business. (b) FINANCIAL STATEMENTS. Financial statements as described in Section 3.07 of this Agreement. (c) INSURANCE. Evidence, in form and substance satisfactory to the Bank, that the business and all assets of the Borrower and each of its Subsidiaries are adequately insured and that the Bank is entitled to thirty (30) days notice of cancellation and modification of such insurance policies. (d) LIEN SEARCH. Copies of record searches (including UCC searches, judgment, tax and other lien searches) evidencing that no Liens exist against the Borrower or any of its Subsidiaries except those Liens permitted by Section 6.01 of this Agreement. (e) NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have occurred with respect to the Borrower since May 31, 1996. (f) OTHER DOCUMENTS AND CONDITIONS. Such other documents and conditions as may be required to be submitted to the Bank by the terms of this Agreement or of any Loan Document or set forth on the Closing Checklist with respect to the transaction contemplated by this Agreement. 4.06 DETAILS PROCEEDINGS AND DOCUMENTS. All legal details and proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory to the Bank and the Bank shall have received all such counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance reasonably satisfactory to the Bank, as the Bank may from time to time reasonably request. 4.07 FEES AND EXPENSES. The Borrower shall have paid all reasonable fees and charges as required for the Closing and relating to the Closing, including reasonable legal fees, closing costs, filing and notary fees and any other similar matters pertinent to the Closing. 35 36 ARTICLE V AFFIRMATIVE COVENANTS The Borrower covenants to the Bank as follows: 5.01 Reporting and Information Requirements. --------------------------------------- (a) ANNUAL AUDITED REPORTS. As soon as practicable, and in any event within one hundred twenty (120) days after the close of each fiscal year of the Borrower, the Borrower will furnish to the Bank Consolidated audited statements of income, cash flow and shareholders' equity of the Borrower and its Subsidiaries for such fiscal year and a Consolidated audited balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal year, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year, prepared in accordance with GAAP applied on a basis consistent with that of the preceding fiscal year (except for changes in application in which such accountants concur) with such statements and balance sheet to be certified by independent certified public accountants of recognized standing selected by the Borrower and satisfactory to the Bank. The certificate or report of such accountants shall be free of exceptions or qualifications not acceptable to the Bank and shall in any event contain a written statement of such accountants substantially to the effect that such accountants examined such statements and balance sheet in accordance with generally accepted auditing standards. (b) QUARTERLY REPORTS. As soon as practicable, and in any event within sixty (60) days after the close of each fiscal quarter of the Borrower during the term of this Agreement, the Borrower will furnish to the Bank Consolidated statements of income and cash flow for the Borrower and its Subsidiaries for such quarter and for the portion of the fiscal year to the end of such quarter, and a Consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such quarter, all in reasonable detail. All such statements and balance sheets shall be prepared by the Borrower and certified by the President or the Chief Financial Officer of the Borrower as presenting fairly the financial position of the Borrower and its Subsidiaries as of the end of such quarter and the results of their operations for such periods, subject to year end adjustment, in conformity with GAAP (except that such financial statements do not contain all footnote disclosure required by GAAP) applied in a manner consistent with that of the most recent audited financial statements furnished to the Bank. 36 37 (c) QUARTERLY COMPLIANCE CERTIFICATE. Each set of statements and balance sheets delivered pursuant to Sections 5.01(a) and 5.01(b) of this Agreement shall be accompanied by a compliance certificate, substantially in the form of Exhibit C attached hereto, executed by the President or Chief Financial Officer of the Borrower, stating that no Event of Default or Potential Default exists and that the Borrower is in compliance with the financial covenants set forth in Section 5.13 of this Agreement. Such certificate shall include all figures necessary to calculate the Borrower's compliance with such financial covenants. If an Event of Default or Potential Default has occurred and is continuing or exists, such certificate shall specify in detail the nature and period of existence of the Event of Default or Potential Default and any action taken or contemplated to be taken by the Borrower. (d) FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. As soon as practicable, and in any event within ten (10) days after the filing thereof, the Borrower shall furnish to the Bank a copy of (i) each proxy statement or report filed by the Borrower with the United States Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended, and (ii) each registration statement (except registration statements on Form S-8) filed by the Borrower with the SEC under the Securities Act of 1933, as amended. (e) AUDIT REPORTS. Promptly upon receipt thereof, the Borrower will deliver to the Bank one copy of each other report submitted to the Borrower by its independent accountants, including comment or management letters, in connection with any annual, interim or special audit report made by them of the Borrower or its books and records. (f) VISITATION: AUDITS. The Borrower will permit such persons as the Bank may designate to visit and inspect any of the properties of the Borrower or its Subsidiaries, to examine, and to make copies and extracts from, the books and records of the Borrower and its Subsidiaries and to discuss their affairs with their officers, employees and independent accountants upon reasonable prior notice and during normal business hours. The Borrower authorizes the officers, employees and independent accountants for the Borrower and its Subsidiaries to discuss with the Bank the affairs of the Borrower and its Subsidiaries. The Bank agrees to enter into customary confidentiality agreements in form and substance reasonably satisfactory to Bank in connection therewith. 37 38 (g) NOTICE OF EVENT OF DEFAULT. Promptly upon becoming aware of an Event of Default or Potential Default, the Borrower will give the Bank notice of the Event of Default or Potential Default, together with a written statement of the President or Chief Financial Officer of the Borrower setting forth the details of the Event of Default or Potential Default and any action taken or contemplated to be taken by the Borrower. (h) NOTICE OF MATERIAL ADVERSE CHANGE. Promptly upon becoming aware thereof, the Borrower will give the Bank notice by telephone or telecopier (with written confirmation sent on the same or next Business Day) with respect to any Material Adverse Change or any development or occurrence which would have a Material Adverse Effect. (i) FURTHER INFORMATION. The Borrower will promptly furnish to the Bank such other information relating to the Borrower and its Subsidiaries, and in such form, as the Bank may reasonably request from time to time. 5.02 PRESERVATION OF EXISTENCE AND FRANCHISES. The Borrower and each of its Subsidiaries will maintain their respective corporate existences, rights and franchises in full force and effect in their respective jurisdictions of incorporation. The Borrower and each of its Subsidiaries will qualify and remain qualified as a foreign corporation in each jurisdiction in which the ownership of their properties or the nature of their activities or both makes such qualification necessary except only to the extent that the failure to be so qualified would not have a Material Adverse Effect. 5.03 INSURANCE. The Borrower and each of its Subsidiaries will maintain with financially sound and reputable insurers insurance with respect to their properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is reasonably satisfactory to the Bank and as is customary in the case of corporations or other entities engaged in the same or similar business or having similar properties similarly situated. The Borrower and each of its Subsidiaries will cause the Bank to be provided with thirty (30) days advance notice of the termination of any such policy of insurance. 5.04 MAINTENANCE OF PROPERTIES. The Borrower and each of its Subsidiaries will maintain or cause to be maintained in good repair, working order and condition, the properties now or in the future owned, leased or otherwise possessed by each of them and shall make or cause to be made all needful and proper repairs, 38 39 renewals, replacements and improvements to the properties so that the business carried on in connection with the properties may be properly and advantageously conducted at all times except only to the extent that the failure to do so would not have a Material Adverse Effect. 5.05 PAYMENT OF LIABILITIES. The Borrower and each of its Subsidiaries will pay or discharge: (a) on or prior to the date on which a premium or penalty attaches, all taxes, assessments, fees and other governmental charges or levies imposed upon them or any of their respective properties, income, sales or franchises other than those contested with due diligence in good faith without the incurrence of any Lien which would have a Material Adverse Effect; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like persons which, if unpaid, would result in the creation of a Lien upon any of their property which would have a Material Adverse Effect; (c) on or prior to the date when due, all other lawful claims which, if unpaid, would result in the creation of a Lien upon any of their property which would have a Material Adverse Effect; and (d) all other current liabilities so that none is due more than one hundred twenty (120) days after the due date for each liability, except current liabilities which are subject to good faith dispute and as to which the Borrower or such Subsidiary has created adequate reserves on its books. 5.06 FINANCIAL ACCOUNTING PRACTICES. The Borrower and each of its Subsidiaries will make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect their respective transactions and dispositions of assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization, (b) transactions are recorded as necessary (i) to permit preparation of financial statements in conformity with GAAP and (ii) to maintain accountability for assets, (c) to ensure access to assets is permitted only in accordance with management's general or specific authorization and (d) to ensure the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 39 40 5.07 COMPLIANCE WITH LAWS. The Borrower and each of its Subsidiaries shall comply with all applicable Laws except only to the extent that the failure to do so would not have a Material Adverse Effect. 5.08 PENSION PLANS. The Borrower and each of its Subsidiaries shall (a) keep in full force and effect any and all Plans which are presently in existence or may, from time to time, come into existence under ERISA, unless such Plans can be terminated without material liability to the Borrower or any Subsidiary in connection with such termination; (b) make contributions to each of their Plans in a timely manner and in a sufficient amount to comply with the requirements of ERISA; (c) comply with all material requirements of ERISA which relate to such Plans so as to preclude the occurrence of any Reportable Event, Prohibited Transaction (other than a Prohibited Transaction subject to an exemption under ERISA) or material accumulated funding deficiency as such term is defined in ERISA; and (d) notify the Bank immediately upon receipt by the Borrower or any Subsidiary of any notice of the institution of any proceeding or other action which may result in the termination of any Plan. The Borrower shall deliver to the Bank, promptly after the filing or receipt thereof, copies of all reports or notices which the Borrower or any Subsidiary files or receives under ERISA with respect to the Plans with or from the Internal Revenue Service, the PBGC, or the U.S. Department of Labor, other than reports or notices which do not materially or adversely affect the Borrower, any Subsidiary, their businesses, assets, financial condition, or the ability of the Borrower to perform its respective obligations under this Agreement. 5.09 USE OF PROCEEDS. Borrower shall use the proceeds of the Loans for the purposes set forth in Section 3.14 hereof. 5.10 CONTINUATION OF AND CHANGE IN BUSINESS. The Borrower and its Subsidiaries will continue to engage in the business and activities described in the 1995 Form 10-K and the Borrower and its Subsidiaries will not engage in any other business or activity without the prior written consent of the Bank, which consent shall not be unreasonably withheld or delayed. 5.11 LIEN SEARCHES. The Bank may, but shall not be obligated to, conduct lien searches of the Borrower and its Subsidiaries and their assets and properties on an annual basis and at such other times as the Bank, in its reasonable discretion, may determine to be necessary. The Borrower shall reimburse the Bank for the Bank's reasonable out-of-pocket costs and expenses in connection with such lien searches. 40 41 5.11 FURTHER ASSURANCES. The Borrower, at its own cost and expense, will cause to be promptly and duly taken, executed, acknowledged and delivered all further acts, documents and assurances as the Bank may from time to time reasonably request in order to more effectively carry out the intent and purposes of this Agreement and the transactions contemplated by this Agreement. 5.12 OWNERSHIP OF STOCK IN SUBSIDIARIES. The Borrower shall, directly or through its Subsidiaries, maintain an ownership interest in each of its Subsidiaries equal to the percentage ownership interest set forth on Schedule 3.18 hereto except as otherwise permitted by Sections 6.04 and 6.05 hereof. 5.13 FINANCIAL COVENANTS. The following financial covenants with respect to the Borrower shall apply: (a) TANGIBLE NET WORTH. From the date hereof until August 31, 1996, the Borrower shall maintain a Tangible Net Worth not less than Forty Five Million and 00/100 Dollars ($45,000,000.00). On September 1, 1996 and, at all times thereafter, during the term of this Agreement, the Borrower shall maintain a Tangible Net Worth not less than (a) Forty Five Million and 00/100 Dollars ($45,000,000.00) plus (b) fifty percent (50%) of the Net Income of the Borrower for the fiscal year ending August 31, 1996 and each fiscal year thereafter (excluding any net loss in any such fiscal year) plus (c) the proceeds to the Borrower from the sale by the Borrower of its capital stock after August 31, 1996 as reflected in the Borrower's Consolidated cash flow statements. (b) FUNDED DEBT TO CASH FLOW RATIO. The Borrower's Funded Debt to Cash Flow Ratio shall be less than or equal to 6.00 to 1.00 for the period equal to the four (4) most recently ended consecutive fiscal quarters during the term of this Agreement. (c) INTEREST COVERAGE RATIO. The Borrower's Interest Coverage Ratio shall be greater than or equal to 3.50 to 1.00 for the period equal to the four (4) most recently ended consecutive fiscal quarters during the term of this Agreement. 5.14 ACQUISITIONS FINANCED BY REVOLVING CREDIT LOANS. On or prior to the date on which any Revolving Credit Loan is made to the Borrower for the purposes of completing any acquisition of all or substantially all of the property, assets or equity interest of any Person, Borrower shall deliver to Bank historical financial information and all other information reasonably requested by the Bank with respect to the Person to be acquired. In addition, if the purchase price for any such acquisition is in excess of Seven 41 42 Million Five Hundred Dollars ($7,500,000), Borrower will provide Bank with pro forma financial statements and a certificate from the President or Chief Financial Officer of the Borrower which certifies that the Borrower is, and following such acquisition, will be, in compliance with all financial covenants set forth in Section 5.13 of this Agreement. ARTICLE VI NEGATIVE COVENANTS The Borrower covenants to the Bank as follows: 6.01 LIENS. The Borrower will not, and will not permit any Subsidiary to, at any time, incur, create, assume or permit to exist, any Lien on any of its property or assets, tangible or intangible, now or hereafter owned, or agree to become liable to do so, except: (a) Liens existing on the Closing Date and set forth on Schedule 6.01 to this Agreement; (b) Liens granted in favor of the Bank; (c) pledges or deposits under workers compensation, unemployment insurance and social security laws, or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases or to secure statutory obligations or surety or similar bonds used in the ordinary course of business; (d) Liens arising from taxes, assessments, fees, charges, levies or claims described in Section 5.05 of this Agreement; (e) purchase money security interests for purchases of equipment permitted under Section 6.02(d) of this Agreement; (f) unfiled materialmen's, mechanics, workmen's and repairmen's liens (provided, that if such a lien shall be filed or perfected, it shall be discharged of record promptly by payment, bond or otherwise); and (g) zoning restrictions, easements, minor restrictions on the use of real property, minor irregularities in title thereto and other minor Liens that do not secure the payment 42 43 of money or the performance of an obligation and that do not in the aggregate materially detract from the value of a property or asset to, or materially impair its use in the business of, the Borrower or any Subsidiary. 6.02 INDEBTEDNESS. The Borrower will not, and will not permit any Subsidiary to, at any time, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness existing on the Closing Date, and set forth on Schedule 6.02 to this Agreement, provided, however, that none of such Indebtedness shall be extended, renewed or refinanced without the prior written consent of the Bank; (b) Indebtedness under this Agreement, the Notes, the other Loan Documents or under any other document, instrument or agreement between the Borrower or a Subsidiary and the Bank or Mellon Europe Limited; (c) current accounts payable, accrued taxes reflected as current liabilities and other current items arising out of transactions (other than borrowings) in the ordinary course of business; (d) purchase money Indebtedness for purchases of equipment in the ordinary course of business and in amounts which shall not exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00) as to any one purchase of equipment or One Million and 00/100 Dollars ($1,000,000.00) as to the aggregate of all such purchases in each case in any one fiscal year; (e) Indebtedness represented by unsecured short term trade notes with suppliers provided that such Indebtedness shall not exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) as to any one transaction or One Million and 00/100 Dollars ($1,000,000.00) as to the aggregate of all outstanding unsecured trade notes with suppliers; (f) Capitalized Lease Obligations in amounts less than Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) for any single Capitalized Lease Obligation and One Million and 00/100 Dollars ($1,000,000.00) as to the aggregate of all such Capitalized Lease Obligations; (g) Indebtedness constituting loans and advances permitted by Section 6.04 of this Agreement; and 43 44 (h) Indebtedness under interest rate or currency protection agreements, interest rate or currency futures, interest rate or currency options, interest rate or currency swap or cap agreements or other interest rate or currency hedge agreements incurred in the ordinary course of business, provided that (i) such Indebtedness is incurred with the Bank as counterparty and (ii) such Indebtedness shall not be entered into for speculative purposes. 6.03 GUARANTEES AND CONTINGENT LIABILITIES. The Borrower will not, and will not permit any Subsidiary to, at any time directly or indirectly assume, guarantee, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of any other Person, except: (a) those guarantees existing on the Closing Date and set forth on Schedule 6.03 to this Agreement; (b) endorsements on negotiable or other instruments in any amount for deposit or collection or similar transactions in the ordinary course of their businesses; (c) guarantees by the Borrower of obligations or liabilities of any Subsidiary to the Bank or Mellon Europe Limited; (d) the indemnity obligations of the Borrower to its directors and officers under the articles of incorporation of the Borrower and to its directors under indemnification agreements entered into between the Borrower and each of its directors; and (e) indemnities by the Borrower or any Subsidiary arising from or under contracts and agreements with unrelated Persons entered into by the Borrower or such Subsidiary in the ordinary course of business. 6.04 LOANS AND INVESTMENTS; CERTAIN BUSINESS TRANSACTIONS. The Borrower will not and will not permit any Subsidiary to, purchase, own, invest in or otherwise acquire, directly or indirectly, any stock or other securities of any Person, or all or substantially all of the assets of any Person (whether in a single or series of related transactions) or make or permit to exist any investment or capital contribution to or acquire any interest whatsoever in any other Person or permit to exist any loans or advances for such purposes except: (a) loans and investments existing on the Closing Date and set forth on Schedule 6.04 to this Agreement; 44 45 (b) additional loans to and investments in the Subsidiaries named on Schedule 3.18 to this Agreement; (c) acquisitions of the stock, equity or assets of Persons in businesses similar to those described in the 1995 10-K provided, however, that the total amount of all such acquisitions shall not, in any fiscal year, exceed Twenty Five Million and 00/100 Dollars ($25,000,000) in the aggregate; (d) investments in direct obligations of the United States of America or any agency thereof and in obligations guaranteed by the United States of America or the Bank or other reputable financial institution, each of which is organized under the laws of the United States; (e) certificates of deposit issued by the Bank or Century National Bank and investments in money market mutual funds or other money market accounts with the Bank or Century National Bank; and (f) other loans and investments after the Closing Date reflected on the Consolidated balance sheet from time to time of an amount not in excess of One Million Dollars ($1,000,000.00). 6.05 MERGER OR CONSOLIDATION; OTHER BUSINESS TRANSACTIONS. Borrower will not, and will not permit any Subsidiary to, form a partnership or a joint venture or merge or consolidate with or into any other Person, or agree to do any of the foregoing, except that the Borrower may permit any Subsidiary to, merge or consolidate with or into, the Borrower or any Subsidiary. 6.06 DISPOSITIONS OF ASSETS. The Borrower will not, and will not permit any Subsidiary to, sell, convey, pledge, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily any of its respective properties or assets, tangible or intangible (including stock of Subsidiaries) except in the ordinary course of business and except that the Borrower may permit any Subsidiary to transfer assets or stock to the Borrower or any other Subsidiary. 6.07 CAPITAL EXPENDITURES. The Borrower will not, and will not permit any Subsidiary to, make or commit to make, Capital Expenditures in any fiscal year aggregating more than the sum of (i) Twenty Five Million and 00/100 Dollars ($25,000,000.00). For purposes of this Section 6.07, amounts paid in transactions accounted for as business acquisitions shall not be considered as Capital Expenditures. 45 46 6.08 NEGATIVE PLEDGE. Except for Section 4.02(d) of the Reimbursement Agreement, dated as of December 1, 1991, by and between the Borrower and NCNB National Bank of North Carolina, the Borrower will not, and will not permit any of its Subsidiaries to, enter into or suffer to exist any agreement with any Person other than in connection with this Agreement, which prohibits or limits the ability of the Borrower or any Subsidiary to create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Borrower or any Subsidiary, whether now owned or hereafter acquired or created. 6.09 CONTINUATION OF BUSINESS. The Borrower will not, and will not permit any Subsidiary to, engage in any business not substantially similar to those conducted as of the Closing Date and described in the 1995 Form 10-K. 6.10 MARGIN STOCK. The Borrower will not use the proceeds of any Loans directly or indirectly to purchase or carry any "margin stock" (within the meaning of Regulations U, G, T, or X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying, directly or indirectly, any margin stock. 6.11 SELF-DEALING. The Borrower and its Subsidiaries will not enter into or carry out any loan, advance or other transaction (including, without limitation, purchasing property or services or selling property or services) with any shareholder, director, officer or partner, except that any such Person may render services to the Borrower for compensation at rates substantially similar to those generally paid by corporations or partnerships engaged in the same or similar businesses for the same or similar services. 6.12 LEASES. The Borrower and its Subsidiaries will not at any time enter into or suffer to remain in effect any agreement to lease, as lessee, any real or personal property except leases of real and personal property in the ordinary course of business. ARTICLE VII DEFAULTS 7.01 EVENTS OF DEFAULT. An Event of Default means the occurrence or existence of one or more of the following events or 46 47 conditions (whatever the reason for such Event of Default and whether voluntary, involuntary or effected by operation of Law): (a) The Borrower shall fail to pay principal on any of the Noteswithin five (5) Business Days after the date principal on any of the Notes is due; or (b) The Borrower shall fail to pay interest on the Loans or any fees payable pursuant to Article II of this Agreement within five (5) Business Days after the date such interest or fees are due; or (c) The Borrower shall fail to pay any other fee, or other amount payable pursuant to this Agreement, the Notes or any of the other Loan Documents when due and such failure shall continue for a period of five (5) Business Days after notice thereof is given to the Borrower; or (d) Any representation or warranty made by the Borrower under this Agreement, the Notes or any of the other Loan Documents or any statement made by the Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrower to the Bank pursuant to this Agreement or the other Loan Documents shall prove to have been false or misleading in any material respect as of the time when made; or (e) The Borrower shall be in default in the performance or observance of any covenant contained in Articles V and VI of this Agreement; or (f) The Borrower shall be in default in the performance or observance of any other covenant, agreement or duty under this Agreement, the Notes or the other Loan Documents (not constituting an Event of Default under any other provisions of this Section 7.01) and such default shall continue for a period of thirty (30) days after notice thereof is given to the Borrower; or (g) The Borrower or any Subsidiary shall (i) default (as principal or guarantor or other surety) in any payment of principal of or interest on any obligation (or set of related obligations) for borrowed money in excess of $250,000, beyond any period of grace with respect to the payment or, if an obligation for borrowed money (or set of related obligations) in excess of $250,000 is or are payable or repayable on demand, the Borrower or such Subsidiary fails to pay or repay such obligation or obligations when demanded, or (ii) default in the observance of any other covenant, term or condition contained in any agreement or instrument by which an obligation for borrowed money (or set of 47 48 related obligations) in excess of $250,000 is or are created, secured or evidenced, if the effect of such default is to cause all or part of such obligation or obligations to become due before its or their otherwise stated maturity; or (h) One or more judgments for the payment of money in excess of $1,000,000 shall have been entered against the Borrower or any Subsidiary; or (i) A writ or warrant of attachment, garnishment, execution, distraint or similar process shall have been issued against the Borrower or any Subsidiary or any of their respective properties and the same shall remain undischarged or unstayed for a period of thirty (30) consecutive days; or (j) Bank has determined in good faith that a Material Adverse Change has occurred or that the prospect of payment or performance of any covenant, agreement or duty under this Agreement, the Notes or the other Loan Documents is impaired or that the Bank is insecure; or (k) A Change of Control shall occur; or (l) (i) A Termination Event with respect to a Plan shall occur, (ii) any Person shall engage in any prohibited transaction involving any Plan, (iii) an accumulated funding deficiency, whether or not waived, shall exist with respect to any Plan, (iv) either of the Borrowers or any ERISA Affiliate shall be in "Default" (as defined in Section 4219(c)(5) of ERISA with respect to payments due to a multi-employer Plan resulting from such Borrower's or any ERISA affiliate's, complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Plan, or (v) any other event or condition shall occur or exist with respect to a single employer Plan, except that no such event or condition shall constitute an Event of Default if it, together with all other events or conditions at the time existing, would not subject the Borrower or any of its Subsidiaries to any tax, penalty, debt or liability which, alone or in the aggregate, would have a material adverse effect on the Borrower or any Subsidiary; or (m) A proceeding shall be instituted in respect of the Borrower or any Subsidiary: (i) seeking to have an order for relief entered in respect of the Borrower or any Subsidiary, or seeking a declaration or entailing a finding that the Borrower or 48 49 any Subsidiary is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to the Borrower or any Subsidiary, their assets or debts under any law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar law now or in the future which shall not have been dismissed or stayed within sixty (60) days after such proceedings were instituted; or (ii) seeking appointment of a receiver, trustee, custodian, liquidator, assignee, sequestrator or other similar official for the Borrower or any Subsidiary or for all or any substantial part of their property which shall not have been dismissed or stayed within sixty (60) days after such proceedings were instituted; or (n) The Borrower or any Subsidiary shall become insolvent, shall become generally unable to pay their debts as they become due, shall voluntarily suspend transaction of their businesses, shall make a general assignment for the benefit of creditors, shall institute a proceeding described in Section 7.01(m)(i) of this Agreement or shall consent to any order for relief, declaration, finding or relief described in Section 7.01(m)(i) of this Agreement, shall institute a proceeding described in Section 7.01(m)(ii) of this Agreement or shall consent to the appointment or to the taking of possession by any such official of all or any substantial part of their property whether or not any proceeding is instituted, dissolve, wind-up or liquidate themselves or any substantial part of their property, or shall take any action in furtherance of any of the foregoing. 7.02 Consequences of an Event of Default. ------------------------------------ (a) If an Event of Default specified in subsections (a) through (l) of Section 7.01 of this Agreement occurs, the Bank will be under no further obligation to make Loans and may at its option demand the unpaid principal amount of the Notes, interest accrued on the unpaid principal amount and all other amounts owing by the Borrower under this Agreement, the Notes and the other Loan Documents to be immediately due and payable 49 50 without presentment, demand, protest or further notice of any kind, all of which are expressly waived, and an action for any amounts due shall accrue immediately. (b) If an Event of Default specified in subsections (m) or (n) of Section 7.01 of this Agreement occurs and continues or exists, the Bank will be under no further obligation to make Loans and the unpaid principal amount of the Notes, interest accrued on the unpaid principal amount of the Notes and all other amounts owing by the Borrowers under this Agreement, the Notes and the other Loan Documents shall automatically become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are expressly waived, and an action for any amounts due shall accrue immediately. 7.03 SET-OFF. If the unpaid principal amount of the Notes, interest accrued on the unpaid principal amount of the Notes or other amount owing by the Borrowers under this Agreement, the Notes or the other Loan Documents shall have become due and payable (at maturity, by acceleration or otherwise), the Bank and any assignee of the Bank will each have the right, in addition to all other rights and remedies available to it, without notice to the Borrower, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of, the Borrower by the Bank or by such assignee including, without limitation, all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or in the future maintained by the Borrower with the Bank or such assignee. The Borrower consents to and confirms the foregoing arrangements and confirms the Bank's rights and such assignee's rights of banker's lien and set-off. Nothing in this Agreement will be deemed a waiver or prohibition of or restriction on the Bank's rights or any such assignee's rights of banker's lien or set-off. ARTICLE VIII MISCELLANEOUS 8.01 BUSINESS DAYS. Except as otherwise provided in this Agreement, whenever any payment or action to be made or taken under this Agreement, or under the Notes or under any of the other Loan Documents is stated to be due on a day which is not a Business Day, such payment or action will be made or taken on the next following Business Day and such extension of time will be included in computing interest or fees, if any, in connection with such payment or action. 50 51 8.02 RECORDS. The unpaid principal amount of the Notes, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount and the duration of such applicability shall at all times be ascertained from the records of the Bank, which shall be conclusive absent manifest error. 8.03 AMENDMENTS AND WAIVERS. The Bank and the Borrower may from time to time enter into agreements amending, modifying or supplementing this Agreement, the Notes or any other Loan Document or changing the rights of the Bank or of the Borrower under this Agreement, under the Notes or under any other Loan Document and the Bank may from time to time grant waivers or consents to a departure from the due performance of the obligations of the Borrower under this Agreement, under the Notes or under any other Loan Document. Any such agreement, waiver or consent must be in writing and will be effective only to the extent specifically set forth in such writing. In the case of any such waiver or consent relating to any provision of this Agreement, any Event of Default or Potential Default so waived or consented to will be deemed to be cured and not continuing, but no such waiver or consent will extend to any other or subsequent Event of Default or Potential Default or impair any right consequent to any other or subsequent Event of Default or Potential Default or impair any right consequent thereto. 8.04 NO IMPLIED WAIVER: CUMULATIVE REMEDIES. No course of dealing and no delay or failure of the Bank in exercising any right, power or privilege under this Agreement, the Notes or any other Loan Document will affect any other or future exercise of any such right, power or privilege or exercise of any other right, power or privilege except as and to the extent that the assertion of any such right, power or privilege shall be barred by an applicable statute of limitations; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise of such right, power or privilege or of any other right, power or privilege. The rights and remedies of the Bank under this Agreement, the Notes or any other Loan Document are cumulative and not exclusive of any rights or remedies which the Bank would otherwise have. 8.05 NOTICES. All notices, requests, demands, directions and other communications (collectively notices) under the provisions of this Agreement or the Notes must be in writing (including telexed or telecopied communication) unless otherwise expressly permitted under this Agreement and must be sent by first-class or first-class express mail, private overnight or next Business Day courier or by telecopy with confirmation in writing 51 52 mailed first class, in all cases with charges prepaid, and any such properly given notice will be effective when received. All notices will be sent to the applicable party at the addresses stated below or in accordance with the last unrevoked written direction from such party to the other parties. If to Borrower: John P. O'Leary, Jr. President and Chief Executive Officer Tuscarora Incorporated 800 Fifth Avenue New Brighton, PA 15066 Telecopier: (412) 843-4845 and a copy to: Arlie R. Nogay, Esquire Reed Smith Shaw & McClay 435 Sixth Avenue Pittsburgh, PA 15219 Telecopier: (412) 288-3063 If to Bank: Brian V. Ciaverella Vice President Mellon Bank, N.A. Two Mellon Bank Center, Room 152-0230 Pittsburgh, PA 15259-0001 Telecopier: (412) 236-9010 and a copy to: Jeffrey J. Conn, Esquire Thorp, Reed & Armstrong One Riverfront Center Pittsburgh, PA 15222 Telecopier: (412) 394-2555 8.06 EXPENSES; TAXES; ATTORNEYS FEES. The Borrower agrees to pay or cause to be paid and to save the Bank harmless against liability for the payment of all reasonable out-of-pocket expenses, including, but not limited to reasonable fees and expenses of counsel and paralegals for the Bank, incurred by the Bank from time to time (i) arising in connection with the preparation, execution, delivery and performance of this Agreement, the Notes and the other Loan Documents, (ii) relating to any requested amendments, waivers or consents to this Agreement, the Notes or any of the other Loan Documents and (iii) arising in connection with the Bank's enforcement or preservation of rights under this Agreement, the Notes or any of the other Loan Documents, including but not limited to such reasonable expenses as may be incurred by the Bank in the collection of the outstanding principal amount of the Loans. The Borrower agrees to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or in the future reasonably determined by the Bank 52 53 to be payable in connection with this Agreement, the Notes or any other Loan Document. The Borrower agrees to save the Bank harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions. In the event of a determination adverse to the Borrower of any action at law or suit in equity in relation to this Agreement, the Notes or the other Loan Documents, the Borrower will pay, in addition to all other sums which the Borrower may be required to pay, a reasonable sum for attorneys and paralegals fees incurred by the Bank or the holder of the Notes in connection with such action or suit. All payments due from the Borrower under this Section will be added to and become part of the Loans until paid in full. 8.07 SEVERABILITY. The provisions of this Agreement are intended to be severable. If any provision of this Agreement is held invalid or unenforceable in whole or in part in any jurisdiction, the provision will, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of the provision in any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction. 8.08 GOVERNING LAW: CONSENT TO JURISDICTION. This Agreement will be deemed to be a contract under the laws of the Commonwealth of Pennsylvania and for all purposes will be governed by and construed and enforced in accordance with the substantive laws, and not the laws of conflicts, of said Commonwealth. The Borrower consents to the exclusive jurisdiction and venue of the federal and state courts located in Allegheny County, Pennsylvania, in any action on, relating to or mentioning this Agreement, the Notes, the other Loan Documents, or any one or more of them. 8.09 PRIOR UNDERSTANDINGS. This Agreement, the Notes and the other Loan Documents supersede all prior understandings and agreements, whether written or oral, among the parties relating to the transactions provided for in this Agreement, the Notes and the other Loan Documents. 8.10 DURATION; SURVIVAL. All representations and warranties of the Borrowers contained in this Agreement or made in connection with this Agreement or any of the other Loan Documents shall survive the making of and will not be waived by the execution and delivery of this Agreement, the Notes or the other Loan Documents, by any investigation by the Bank, or the making of any Loan. Notwithstanding termination of this Agreement or an Event of Default, all covenants and agreements of the Borrower will continue in full force and effect from and after the date of this Agreement so long as the Borrower may borrow under this Agreement and until 53 54 payment in full of the Notes, interest thereon, and all fees and other obligations of the Borrower under this Agreement or the Notes. Without limitation, it is understood that all obligations of the Borrower to make payments to or indemnify the Bank will survive the payment in full of the Notes and of all other obligations of the Borrower under this Agreement, the Notes and the other Loan Documents. 8.11 TERM OF AGREEMENT. This Agreement will terminate when all Indebtedness of the Borrower to Bank including, without limitation, the Loans and interest on the Loans is paid in full, and the Borrower has no right to borrow under this Agreement and the Bank has no obligation to make Loans under this Agreement. 8.12 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties to this Agreement on separate counterparts each of which, when so executed, will be deemed an original, but all such counterparts will constitute but one and the same instrument. 8.13 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and inure to the benefit of the Bank, the Borrower and its successors and assigns, except that the Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of the Bank. 8.14 NO THIRD PARTY BENEFICIARIES. The rights and benefits of this Agreement and the other Loan Documents are not intended to, and shall not, inure to the benefit of any third party. 8.15 PARTICIPATION AND ASSIGNMENT. (a) The Bank may from time to time sell, assign or grant one or more participations in all or any part of the Loans made by Bank or which may be made by the Bank, or its right, title and interest in the Loans in or to this Agreement (including, without limitation, all or a portion of the Revolving Credit Loans and the Term Loan), to another lending office, lender or financial institution; provided, however, that: (i) the Bank's obligations under this Agreement and the other Loan Documents shall remain unchanged and the Bank shall remain responsible for performance of such obligations; (ii) no participant shall be entitled to require the Bank to take or refrain from taking any action under this Agreement or any other Loan Document, except that the Bank may agree with a participant that the Bank will not, without the consent of such participant (which consent shall not be unreasonably withheld or delayed), take the following type of 54 55 action: (x) increase the Revolving Credit Facility Commitment over the amount then in effect, (y) extend the Revolving Credit Expiry Date or the Term Loan Expiry Date or (z) reduce the principal amount of or extend the time for payment of principal of any Loan, or reduce the rate of interest or extend the time for payment of interest borne by any Loan (other than as a result of waiving the applicability of any increase in the interest rate applicable to overdue amounts), or extend the time for payment of or reduce the amount of the commitment fee payable under Section 2.07, or reduce or postpone the payment of any other fees, expenses, indemnities or amounts payable under any Loan Document; (iii) such participation shall not include a transfer of all or any portion of the Bank's obligation to make Revolving Credit Loans under the Revolving Credit Facility Commitment; and (iv) the Borrower shall continue to deal solely and exclusively with the Bank in connection with this Agreement and the other Loan Documents. (b) ASSIGNMENT. The Bank may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time assign all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or any portion of the Revolving Credit Facility Commitment and Loans owing to it and any of the Notes held by it) to any affiliate of the Bank or to one or more additional commercial banks or other Persons (each a "Purchasing Lender"); provided, that: (i) any such assignment to a Purchasing Lender which is not an affiliate of the Bank shall be made only with the consent (which shall not be unreasonably withheld or delayed) of the Borrower; (ii) if the Bank makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, the Bank shall retain, after such assignment, a minimum principal amount of $25,000,000 of the Revolving Credit Facility Commitment and Loans then outstanding, and such assignment shall be in a minimum aggregate principal amount of $5,000,000 of the Revolving Credit Facility Commitment and Loans then outstanding; (iii) each such assignment shall be of a constant, and not a varying, percentage of the Revolving Credit Facility Commitment and the Loans of the Bank and of all of the 55 56 Bank's rights and obligations under this Agreement and the other Loan Documents; and (iv) each such assignment shall be made pursuant to a written agreement between the Bank and the Purchasing Lender. 8.16 The Borrower shall, upon the Bank's reasonable request from time to time, use its reasonable best efforts to cooperate with the Bank's syndication effort including, without limitation, assisting the Bank from time to time in preparing information packages for delivery to prospective participants and Purchasing Lenders containing relevant information about the Borrower and the Loan Documents, and causing appropriate officers, representatives and experts to meet with prospective participants and Purchasing Lenders from time to time. 8.17 CONSTRUCTION. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural, the part the whole and "or" has the inclusive meaning represented by the phrase "and/or". References in this Agreement to "judgments" of Bank include good faith estimates by Bank (in the case of quantitative judgments) and good faith beliefs by Bank (in the case of qualitative judgments). 8.18 EXHIBITS. All exhibits and schedules attached to this Agreement are incorporated and made a part of this Agreement. 8.19 HEADINGS. The section headings contained in this Agreement are for convenience only and do not limit or define or affect the construction or interpretation of this Agreement in any respect. 8.20 LIMITATION OF LIABILITY. To the fullest extent permitted by Law, no claim may be made by the Borrower against the Bank or any affiliate, director, officer, employee, attorney or agent of the Bank for any special, incidental, indirect, consequential or punitive damages in respect of any claim arising from or relating to this Agreement or any other Loan Document or any statement, course of conduct, act, omission or event occurring in connection herewith or therewith (whether for breach of contract, tort or any other theory of liability). The Borrower hereby waives, releases and agrees not to sue upon any claim for any such damages, whether such claim presently exists or arises hereafter and whether or not such claim is known or suspected to exist in its favor. This Section 8.19 shall not limit any rights of the Borrower arising solely out of willful misconduct. 56 57 8.21 WAIVER OF TRIAL BY JURY. THE BORROWER AND THE BANK EXPRESSLY, KNOWINGLY AND VOLUNTARILY WAIVE ALL BENEFIT AND ADVANTAGE OF ANY RIGHT TO A INITIALS: TRIAL BY JURY, AND NEITHER WILL AT ANY TIME INSIST UPON, OR PLEAD OR IN ANY MANNER /s/ J P O'L WHATSOEVER CLAIM OR TAKE THE BENEFIT OR ------------- ADVANTAGE OF A TRIAL BY JURY IN ANY ACTION BORROWER ARISING IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN DOCUMENTS. /s/ B V C ------------- BANK [INTENTIONALLY LEFT BLANK] 57 58 IN WITNESS WHEREOF, and intending to be legally bound, the parties, by their duly authorized officers, have executed and delivered this Agreement on the date set forth at the beginning of this Agreement. Attest: Tuscarora Incorporated By: /s/ BRIAN C. MULLINS By: /s/ JOHN P. O'LEARY, JR. -------------------- ------------------------ Title: Vice President - Treasurer Title: President - CEO ------------------------- --------------------- Mellon Bank, N.A. By: /s/ BRIAN V. CIAVERELLA ----------------------- Vice President 58 59 REVOLVING CREDIT NOTE $40,000,000 Pittsburgh, Pennsylvania August 14, 1996 FOR VALUE RECEIVED, the undersigned, Tuscarora Incorporated a Pennsylvania corporation (the "Borrower") hereby promises to pay to the order of Mellon Bank, N.A., a national banking association (the "Bank"), as provided for in the Loan Agreement (as defined below), the lesser of (i) the principal sum of Forty Million and 00/100 Dollars ($40,000,000.00), or (ii) the aggregate unpaid principal amount of all Revolving Credit Loans made by Bank to Borrower pursuant to that certain Loan Agreement, by and between Borrower and Bank, dated the date hereof, as such agreement may be amended, modified or supplemented from time to time (the "Loan Agreement"). Borrower hereby further promises to pay to the order of Bank interest on the unpaid principal amount of this Revolving Credit Note from time to time outstanding at the rate or rates per annum determined pursuant to Article II of, or as otherwise provided in, the Loan Agreement, and with such amounts being payable on the dates set forth in Article II of, or as otherwise provided in, the Loan Agreement. All payments and prepayments to be made in respect of principal, interest, or other amounts due from Borrower under this Revolving Credit Note shall be payable at 12:00 noon, Pittsburgh, Pennsylvania time, on the day when due, without presentment, 60 demand, protest or notice of any kind, all of which are expressly waived, and an action therefor shall immediately accrue. All such payments shall be made to Bank at its designated office located at Two Mellon Bank Center, Pittsburgh, Pennsylvania 15259, in lawful money of the United States of America in immediately available funds without setoff, counterclaim or other deduction of any nature. Except as otherwise provided in the Loan Agreement, if any payment of principal or interest under this Revolving Credit Note shall become due on a day which is not a Business Day, such payment shall be made on the next following Business Day and such extension of time shall be included in computing interest in connection with such payment. This Revolving Credit Note is one of the Notes referred to in, and is entitled to the benefits of, the Loan Agreement, as the same may be amended, modified or supplemented from time to time. Capitalized terms used in this Revolving Credit Note which are defined in the Loan Agreement shall have the meanings assigned to them therein unless otherwise defined in this Revolving Credit Note. WARRANT OF ATTORNEY TO CONFESS JUDGMENT. THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY, ANY ATTORNEY OR ANY CLERK OF ANY COURT OF RECORD, UPON AN EVENT OF DEFAULT, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER 2 61 FOR SUCH SUMS AS ARE DUE AND/OR MAY BECOME DUE UNDER THIS REVOLVING CREDIT NOTE, WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, WITHOUT STAY OF EXECUTION AND WITH A REASONABLE AMOUNT ADDED FOR ATTORNEYS' COLLECTION FEES. TO THE EXTENT PERMITTED BY LAW, THE BORROWER RELEASES ALL ERRORS IN SUCH PROCEEDINGS. IF A COPY OF THIS REVOLVING CREDIT NOTE, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF THE HOLDER OF THIS REVOLVING CREDIT NOTE SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL REVOLVING CREDIT NOTE AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY THE INITIAL EXERCISE THEREOF AND MAY BE EXERCISED AS OFTEN AS THE HOLDER SHALL FIND IT NECESSARY AND DESIRABLE AND THIS REVOLVING CREDIT NOTE OR A COPY THEREOF SHALL BE A SUFFICIENT WARRANT THEREFOR. THE HOLDER HEREOF MAY CONFESS ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR ANY PART OF THE AMOUNT OWING HEREUNDER, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN CONFESSED ON MORE THAN ONE OCCASION FOR THE SAME AMOUNT. IN THE EVENT ANY JUDGMENT CONFESSED AGAINST THE BORROWER HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON THE BORROWER'S BEHALF FOR ANY REASON, HOLDER IS HEREBY AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER FOR ANY PART OR ALL OF THE AMOUNTS OWING HEREUNDER, AS PROVIDED FOR HEREIN, IF DOING SO WILL CURE ANY ERRORS OR DEFECTS IN SUCH PRIOR PROCEEDINGS. 3 62 This Revolving Credit Note shall be governed by, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the principles of the conflicts of laws thereof. Borrower hereby consents to the jurisdiction and venue of the Court of Common Pleas of Allegheny County, Pennsylvania and the United States District Court for the Western District of Pennsylvania with respect to any suit arising out of or mentioning this Revolving Credit Note. IN WITNESS WHEREOF, and intending to be legally bound hereby, the Borrower has executed, issued and delivered this Revolving Credit Note in Pittsburgh, Pennsylvania on the day and year written above. Attest: Tuscarora Incorporated By: /s/ BRIAN C. MULLINS By: /s/ JOHN P. O'LEARY, JR. -------------------- ------------------------ Title: Vice President & Treasurer Title: President & CEO -------------------------- --------------------- 4 63 TERM NOTE $37,000,000 Pittsburgh, Pennsylvania August 14, 1996 FOR VALUE RECEIVED, the undersigned, Tuscarora Incorporated a Pennsylvania corporation ("Borrower") hereby promises to pay to the order of Mellon Bank, N.A., a national banking association (the "Bank"), as provided for in the Loan Agreement (as defined below), the aggregate principal amount of Thirty Seven Million and 00/100 Dollars ($37,000,000.00), together with interest on the unpaid principal amount of this Term Note at the rate or rates per annum determined pursuant to Article II of, or as otherwise provided in, that certain Loan Agreement, by and between Borrower and Bank, dated the date hereof, as such agreement may be amended, modified or supplemented from time to time (the "Loan Agreement") and with such amounts being payable on the dates set forth in Article II of, or as otherwise provided in, the Loan Agreement. All payments and prepayments to be made in respect of principal, interest or other amounts due from Borrower under this Term Note shall be payable at 12:00 noon, Pittsburgh, Pennsylvania time, on the day when due, without presentment, demand, protest or notice of any kind, all of which are expressly waived, and an action therefor shall immediately accrue. All such payments shall be made to Bank at its designated office located at Two Mellon Bank 64 Center, Pittsburgh, Pennsylvania 15259, in lawful money of the United States of America in immediately available funds without setoff, counterclaim or other deduction of any nature. Except as otherwise provided in the Loan Agreement, if any payment of principal or interest under this Term Note shall become due on a day which is not a Business Day, such payment shall be made on the next following Business Day and such extension of time shall be included in computing interest in connection with such payment. This Term Note is one of the Notes referred to in, and is entitled to the benefits of, the Loan Agreement, as the same may be amended, modified or supplemented from time to time. Capitalized terms used in this Term Note which are defined in the Loan Agreement shall have the meanings assigned to them therein unless otherwise defined in this Term Note. This Term Note shall be governed by, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without regard to the principles of the conflicts of laws thereof. Borrower hereby consents to the jurisdiction and venue of the Court of Common Pleas of Allegheny County, Pennsylvania and the United States District Court for the Western District of Pennsylvania with respect to any suit arising out of or mentioning this Term Note. 2 65 WARRANT OF ATTORNEY TO CONFESS JUDGMENT. THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY, ANY ATTORNEY OR ANY CLERK OF ANY COURT COURT OF RECORD, UPON AN EVENT OF DEFAULT, TO APPEAR FOR AND CONFESS RECORD, UPON AN EVENT OF DEFAULT, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER FOR SUCH SUMS AS ARE DUE AND/OR MAY BECOME DUE UNDER THIS TERM NOTE, WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT, WITHOUT STAY OF EXECUTION AND WITH A REASONABLE AMOUNT ADDED FOR ATTORNEYS' COLLECTION FEES. TO THE EXTENT PERMITTED BY LAW, THE BORROWER RELEASES ALL ERRORS IN SUCH PROCEEDINGS. IF A COPY OF THIS TERM NOTE, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF THE HOLDER OF THIS TERM NOTE SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL TERM NOTE AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER SHALL NOT BE EXHAUSTED BY THE INITIAL EXERCISE THEREOF AND MAY BE EXERCISED AS OFTEN AS THE HOLDER SHALL FIND IT NECESSARY AND DESIRABLE AND THIS TERM NOTE OR A COPY THEREOF SHALL BE A SUFFICIENT WARRANT THEREFOR. THE HOLDER HEREOF MAY CONFESS ONE OR MORE JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR ANY PART OF THE AMOUNT OWING HEREUNDER, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN CONFESSED ON MORE THAN ONE OCCASION FOR THE SAME AMOUNT. IN THE EVENT ANY JUDGMENT CONFESSED AGAINST THE BORROWER HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON THE BORROWER'S BEHALF FOR ANY REASON, HOLDER IS HEREBY AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER FOR ANY PART OR ALL OF THE AMOUNTS OWING 3 66 HEREUNDER, AS PROVIDED FOR HEREIN, IF DOING SO WILL CURE ANY ERRORS OR DEFECTS IN SUCH PRIOR PROCEEDINGS. IN WITNESS WHEREOF, and intending to be legally bound hereby, the Borrower has excuted, issued and delivered this Term Note in Pittsburgh, Pennsylvania on the day and year written above. Attest: Tuscarora Incorporated By: /s/ BRIAN C. MULLINS By: /s/ JOHN P. O'LEARY, JR. -------------------- ------------------------ Title: Vice President & Treasurer Title: President & CEO -------------------------- --------------------- 4 EX-10.4 3 TUSCARORA INCORPORATED 10-K 1 EXHIBIT 10.4 TUSCARORA INCORPORATED 1989 STOCK INCENTIVE PLAN (AS AMENDED EFFECTIVE AUGUST 15, 1996) The purposes of the 1989 Stock Incentive Plan (the "Plan") are to encourage eligible employees of Tuscarora Plastics, Inc. (the "Company") and its Subsidiaries to increase their efforts to make the Company and each Subsidiary more successful, to provide an additional inducement for such employees to remain with the Company or a Subsidiary, to reward such employees by providing an opportunity to acquire shares of the Common Stock, without par value, of the Company (the "Common Stock") on favorable terms and to provide a means through which the Company may attract able persons to enter the employ of the Company or one of its Subsidiaries. For the purposes of the Plan, the term "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing at least fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. SECTION 1 ADMINISTRATION The Plan shall be administered by the Board of Directors of the Company (the "Board"). The Board shall interpret the Plan and prescribe such rules, regulations and procedures in connection with the operations of the Plan as it shall deem to be necessary and advisable for the administration of the Plan consistent with the purposes of the Plan. The Board shall keep records of action taken at its meetings. A majority of the Board shall constitute a quorum at any meeting and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Board, shall be the acts of the Board. SECTION 2 ELIGIBILITY Those employees of the Company or any Subsidiary who share responsibility for the management, growth or protection of the business of the Company or any Subsidiary shall be eligible to be granted stock options (with or without cash payment rights) and to receive restricted share awards as described herein. Subject to the provisions of the Plan, the Board shall have full and final authority, in its discretion, to grant stock options (with or without cash payment rights) and to award restricted shares as described herein and to determine the employees to whom any such grant or award shall be made and the number of shares to be covered thereby. In determining the eligibility of any employee, as well as in determining the number of shares covered by each grant of a stock option or award of restricted shares and whether cash payment rights shall be granted in conjunction with a stock option, the Board shall consider the position and the responsibilities of the employee being considered, the nature and value to the Company or a Subsidiary of his or her services, his or her present and/or potential contribution to the success of the Company or a Subsidiary and such other factors as the Board may deem relevant. 2 SECTION 3 SHARES AVAILABLE UNDER THE PLAN The aggregate number of shares of the Common Stock which may be issued and as to which grants of stock options or awards of restricted shares may be made under the Plan is 599,500 shares, subject to adjustment and substitution as set forth in Section 8. If any stock option granted under the Plan is cancelled by mutual consent or terminates or expires for any reason without having been exercised, the number of shares subject thereto shall again be available for purposes of the Plan. If any shares of the Common Stock are forfeited to the Company pursuant to the restrictions applicable to restricted shares awarded under the Plan, the number of shares so forfeited shall again be available for purposes of the Plan. The shares which may be issued under the Plan may be either authorized but unissued shares or shares previously issued and thereafter acquired by the Company or partly each, as shall be determined from time to time by the Board. SECTION 4 GRANT OF STOCK OPTIONS AND CASH PAYMENT RIGHTS AND AWARDS OF RESTRICTED SHARES The Board shall have authority, in its discretion, (a) to grant "incentive stock options" pursuant to Section 422 of the Internal Revenue Code of 1986 (the "Code"), to grant "nonstatutory stock options" (i.e., stock options which do not qualify under such Section 422 of the Code) or to grant both types of stock options (but not in tandem) and (b) to award restricted shares. The Board also shall have the authority, in its discretion, to grant cash payment rights in conjunction with nonstatutory stock options with the effect provided in Section 5(D). Cash payment rights may not be granted in conjunction with incentive stock options. Cash payment rights granted in conjunction with a nonstatutory stock option may be granted either at the time the stock option is granted or at any time thereafter during the term of the stock option. Notwithstanding any other provision contained in the Plan or in any stock option agreement or an amendment thereto, but subject to the possible exercise of the Board's discretion contemplated in the last sentence of this Section 4, the aggregate fair market value, determined as provided in Section 5(H) on the date of grant of incentive stock options, of the shares with respect to which such incentive stock options are exercisable for the first time by an employee during any calendar year under all plans of the corporation employing such employee, any parent or subsidiary corporation of such corporation and any predecessor corporation of any such corporation shall not exceed $100,000. If the date on which one or more incentive stock options could first be exercised would be accelerated pursuant to any provision of the Plan or any stock option agreement or an amendment thereto, and the acceleration of such exercise date would result in a violation of the $100,000 restriction set forth in the preceding sentence, then, notwithstanding any such provision, but subject to the provisions of the next succeeding sentence, the exercise date of such incentive stock options shall be accelerated only to the extent, if any, that does not result in a violation of such restriction and, in such event, the exercise date of the incentive stock options with the lowest option price shall be accelerated first. The Board may, in its discretion, authorize the acceleration of the exercise date of one or more incentive stock options even if such acceleration would violate the $100,000 restriction set forth in the first sentence of this paragraph and even if one or more such incentive stock options are converted in part to nonstatutory stock options. 2 3 SECTION 5 TERMS AND CONDITIONS OF STOCK OPTIONS AND CASH PAYMENT RIGHTS Stock options and cash payment rights granted under the Plan shall be subject to the following terms and conditions: (A) The purchase price at which each stock option may be exercised (the "option price") shall be such price as the Board, in its discretion, shall determine but shall not be less than one hundred percent (100%) of the fair market value per share of the Common Stock covered by the stock option on the date of grant, except that in the case of an incentive stock option granted to an employee who, immediately prior to such grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Subsidiary (a "Ten Percent Employee"), the option price shall not be less than one hundred ten percent (110%) of such fair market value on the date of grant. For purposes of this Section 5(A), the fair market value of the Common Stock shall be determined as provided in Section 5(H). For purposes of this Section 5(A), an individual (i) shall be considered as owning not only shares of stock owned individually but also all shares of stock that are at the time owned, directly or indirectly, by or for the spouse, ancestors, lineal descendants and brothers and sisters (whether by the whole or half blood) of such individual and (ii) shall be considered as owning proportionately any shares owned, directly or indirectly, by or for any corporation, partnership, estate or trust in which such individual is a shareholder, partner or beneficiary. (B) The option price for each stock option shall be paid in full upon exercise and shall be payable in cash in United States dollars (including check, bank draft or money order); provided, however, that in lieu of such cash the person exercising the stock option may (if authorized by the Board at the time of grant in the case of an incentive stock option, or at any time in the case of a nonstatutory stock option) pay the option price in whole or in part by delivering to the Company shares of the Common Stock having a fair market value on the date of exercise of the stock option, determined as provided in Section 5(H), equal to the option price for the shares being purchased; except that (i) any portion of the option price representing a fraction of a share shall in any event be paid in cash and (ii) no shares of the Common Stock which have been held for less than one year may be delivered in payment of the option price of a stock option. The date of exercise of a stock option shall be determined under procedures established by the Board, and as of the date of exercise the person exercising the stock option shall be considered for all purposes to be the owner of the shares with respect to which the stock option has been exercised. Payment of the option price with shares shall not increase the number of shares of the Common Stock which may be issued under the Plan as provided in Section 3. (C) No stock option shall be exercisable by a grantee during employment during the first six months of its term. No incentive stock option shall be exercisable after the expiration of ten years (five years in the case of a Ten Percent Employee) from the date of grant. No nonstatutory stock option shall be exercisable after the expiration of ten years and six months from the date of grant. A stock option to the extent exercisable at any time may be exercised in whole or in part. (D) Cash payment rights granted in conjunction with a nonstatutory stock option shall entitle the person who is entitled to exercise the stock option, upon exercise of the stock option or any portion thereof, to receive cash from the Company (in addition to the shares to be received upon exercise of the stock option) equal to such percentage as the Board, in its discretion, shall determine not greater than one hundred percent (100%) of the excess of the fair market value of a share of the Common Stock on the date of exercise of the stock option (or on the date provided for in the following sentence) over the option price per share of the stock option times the number of shares covered by the stock option, or portion thereof, which is exercised. If any such person is subject to the provisions of Section 16(b) of the 1934 3 4 Act at the time of exercise of the stock option, the amount of such cash payment shall be determined as of the date on which any restrictions imposed by Section 16(b) of the 1934 Act no longer apply for purposes of Section 83 of the Code. Payment of the cash provided for in this Section 5(D) shall be made by the Company as soon as practicable after the time the amount payable is determined. For purposes of this Section 5(D), the fair market value of the Common Stock shall be determined as provided in Section 5(H). (E) No stock option shall be transferable by the grantee otherwise than by Will, or if the grantee dies intestate, by the laws of descent and distribution of the state of domicile of the grantee at the time of death. All stock options shall be exercisable during the lifetime of the grantee only by the grantee. (F) Unless the Board, in its discretion, shall otherwise determine but subject to the provisions of Section 4 in the case of incentive stock options and subject to the restriction on exercise set forth in Section 5(I): (i) If the employment of a grantee who is not disabled within the meaning of Section 422(c)(6) of the Code (a "Disabled Grantee") is voluntarily terminated with the consent of the Company or a Subsidiary or a grantee retires under any retirement plan of the Company or a Subsidiary, any then outstanding incentive stock option held by such grantee shall be exercisable by the grantee (but only to the extent exercisable by the grantee immediately prior to the termination of employment, provided that the restriction on exercise set forth in Section 5(I) shall not be considered solely in determining the extent to which such stock option is exercisable on the date of termination of employment) at any time prior to the expiration date of such incentive stock option or within three months after the date of termination of employment, whichever is the shorter period; (ii) If the employment of a grantee who is not a Disabled Grantee is voluntarily terminated with the consent of the Company or a Subsidiary or a grantee retires under any retirement plan of the Company or a Subsidiary, any then outstanding nonstatutory stock option held by such grantee shall be exercisable by the grantee (but only to the extent exercisable by the grantee immediately prior to the termination of employment, provided that the restriction on exercise set forth in Section 5(I) shall not be considered solely in determining the extent to which such stock option is exercisable on the date of termination of employment) at any time prior to the expiration date of such nonstatutory stock option or within one year after the date of termination of employment, whichever is the shorter period; (iii) If the employment of a grantee who is a Disabled Grantee is voluntarily terminated with the consent of the Company or a Subsidiary, any then outstanding stock option held by such grantee shall be exercisable by the grantee in full (whether or not so exercisable by the grantee immediately prior to the termination of employment) by the grantee at any time prior to the expiration date of such stock option or within one year after the date of termination of employment, whichever is the shorter period; (iv) Following the death of a grantee during employment, any outstanding stock option held by the grantee at the time of death shall be exercisable in full (whether or not so exercisable by the grantee immediately prior to the death of the grantee) by the person entitled to do so under the Will of the grantee, or, if the grantee shall fail to make testamentary disposition of the stock option or shall die intestate, by the legal representative of the grantee at any time prior to the expiration date of such stock option or within one year after the date of death, whichever is the shorter period; (v) Following the death of a grantee after termination of employment during a period when a stock option is exercisable, any outstanding stock option held by the grantee at the time of death 4 5 shall be exercisable by such person entitled to do so under the Will of the grantee or by such legal representative (but only to the extent the stock option was exercisable by the grantee immediately prior to the death of the grantee, provided that the restriction on exercise set forth in Section 5(I) shall not be considered solely in determining the extent to which such stock option was exercisable by the grantee immediately prior to the death of the grantee) at any time prior to the expiration date of such stock option or within one year after the date of death, whichever is the shorter period; and (vi) If the employment of a grantee terminates for any reason other than voluntary termination with the consent of the Company or a Subsidiary, retirement under any retirement plan of the Company or a Subsidiary or death, all outstanding stock options held by the grantee at the time of such termination of employment shall automatically terminate. Whether termination of employment is a voluntary termination with the consent of the Company or a Subsidiary and whether a grantee is a Disabled Grantee shall be determined in each case, in its discretion, by the Board and any such determination by the Board shall be final and binding. If a grantee of a stock option engages in the operation or management of a business (whether as owner, partner, officer, director, employee or otherwise and whether during or after termination of employment) which is in competition with the Company or any of its Subsidiaries, the Board may immediately terminate all outstanding stock options held by the grantee. Whether a grantee has engaged in the operation or management of a business which is in competition with the Company or any of its Subsidiaries shall also be determined, in its discretion, by the Board, and any such determination by the Board shall be final and binding. (G) All stock options and cash payment rights shall be confirmed by a written agreement or an amendment thereto in a form prescribed by the Board, in its discretion. Each agreement or amendment thereto shall be executed on behalf of the Company by the Chief Executive Officer (if other than the President), the President or any Vice President and by the grantee. (H) Fair market value of the Common Stock shall be the mean between the following prices, as applicable, for the date as of which fair market value is to be determined as quoted in The Wall Street Journal (or in such other reliable publication as the Board, in its discretion, may determine to rely upon): (a) if the Common Stock is listed on the New York Stock Exchange, the highest and lowest sales prices per share of the Common Stock as quoted in the NYSE Composite Transactions listing for such date, (b) if the Common Stock is not listed on such exchange, the highest and lowest sales prices per share of Common Stock for such date on (or on any composite index including) the principal United States securities exchange registered under the 1934 Act on which the Common Stock is listed or (c) if the Common Stock is not listed on any such exchange, the highest and lowest sales prices per share of the Common Stock for such date on the National Association of Securities Dealers Automated Quotations System or any successor system then in use ("NASDAQ"). If there are no such sale price quotations for the date as of which fair market value is to be determined but there are such sale price quotations within a reasonable period both before and after such date, then fair market value shall be determined by taking a weighted average of the means between the highest and lowest sales prices per share of the Common Stock as so quoted on the nearest date before and the nearest date after the date as of which fair market value is to be determined. The average should be weighted inversely by the respective numbers of trading days between the selling dates and the date as of which fair market value is to be determined. If there are no such sale price quotations on or within a reasonable period both before and after the date as of which fair market value is to be determined, then fair market value of the Common Stock shall be the mean between the bona fide bid and asked prices per share of Common Stock as so quoted for such date on NASDAQ, or if none, the weighted average of the means between such bona fide bid and asked prices on 5 6 the nearest trading date before and the nearest trading date after the date as of which fair market value is to be determined, if both such dates are within a reasonable period. The average is to be determined in the manner described above in this Section 5(H). If the fair market value of the Common Stock cannot be determined on the basis previously set forth in this Section 5(H) on the date as of which fair market value is to be determined, the Board shall in good faith determine the fair market value of the Common Stock on such date. Fair market value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. (I) Notwithstanding any other provision of this Section 5 or any other provision of the Plan or any stock option agreement or an amendment thereto, any grantee who has made a hardship withdrawal from the Tuscarora Incorporated Savings Plan shall be prohibited, for a period of twelve (12) months following such hardship withdrawal, from exercising any stock option granted under the Plan in such a manner and to the extent that the exercise of such stock option would result in an employee elective contribution or an employee contribution to an employer plan within the meaning of Treasury Regulation sec. 1.401(k)-1(d)(2)(iii)(B)(3) or any successor regulation thereto. Subject to the foregoing provisions of this Section and the other provisions of the Plan, any stock option granted under the Plan may be exercised at such times and in such amounts and be subject to such restrictions and other terms and conditions, if any, as shall be determined, in its discretion, by the Board and set forth in the agreement referred to in Section 5(G) or an amendment thereto. SECTION 6 TERMS AND CONDITIONS OF RESTRICTED SHARE AWARDS Restricted share awards shall be evidenced by a written agreement in a form prescribed by the Board, in its discretion, which shall set forth the number of shares of the Common Stock awarded, the restrictions imposed thereon (including, without limitation, restrictions on the right of the grantee to sell, assign, transfer or encumber such shares while such shares are subject to other restrictions imposed under this Section 6), the duration of such restrictions, events (which may, in the discretion of the Board, include performance-based events) the occurrence of which would cause a forfeiture of the restricted shares and such other terms and conditions as the Board in its discretion deems appropriate. If Rule 16b-3 under the 1934 Act or any successor rule so requires, each restricted share agreement shall provide that the restricted shares subject to such agreement may not be sold, assigned, transferred or encumbered until six months have elapsed from the date of the restricted share award unless the restrictions applicable to the restricted shares have lapsed or terminated as a result of death or disability. Restricted share awards shall be effective only upon execution of the applicable restricted share agreement on behalf of the Company by the Chief Executive Officer (if other than the President), the President or any Vice President, and by the awardee. Following a restricted share award and prior to the lapse or termination of the applicable restrictions, the share certificates representing the restricted shares shall be held by the Company in escrow. Upon the lapse or termination of the applicable restrictions (and not before such time), the share certificates representing the restricted shares shall be delivered to the awardee. From the date a restricted share award is effective, the grantee shall be a shareholder with respect to all the shares represented by the share certificates for the restricted shares and shall have all the rights of a shareholder with respect to the restricted shares, including the right to vote the restricted shares and to receive all dividends and other distributions paid with respect to the restricted shares, subject only to the succeeding paragraph and the restrictions imposed by the Board. If a dividend or other distribution shall be declared upon the Common Stock payable in shares of the Common Stock, the shares of the Common Stock distributed with respect to any restricted shares held in 6 7 escrow shall also be held by the Company in escrow and be subject to the same restrictions as are applicable to the restricted shares. If the outstanding shares of the Common Stock shall be changed into or exchangeable for a different number or kind of shares of stock or other securities of the Company or another corporation, whether through reorganization, reclassification, recapitalization, stock splitup, combination of shares, merger or consolidation or otherwise, such stock or other securities into which any restricted shares held in escrow are changed or for which any restricted shares held in escrow may be exchanged shall also be held by the Company in escrow and be subject to the same restrictions as are applicable to the restricted shares. Owners of any restricted shares held in escrow shall be treated in the same manner as owners of shares of the Common Stock not held in escrow with respect to fractional shares resulting from any dividend or other distribution with respect to restricted shares or from any change in or exchange of restricted shares, and any cash or other property paid in lieu of a fractional share shall be subject to restrictions similar to those applicable to the restricted shares except as otherwise determined by the Board in its discretion. If an awardee of restricted shares engages in the operation or management of a business (whether as owner, partner, officer, director, employee or otherwise and whether during or after termination of employment) which is in competition with the Company or any of its Subsidiaries, the Board may immediately declare forfeited all restricted shares held by the awardee as to which the restrictions have not yet lapsed. Whether an awardee has engaged in the operation or management of a business which is in competition with the Company or any of its Subsidiaries shall also be determined, in its discretion, by the Board, and any such determination by the Board shall be final and binding. SECTION 7 ISSUANCE OF SHARES The obligation of the Company to issue shares of the Common Stock under the Plan shall be subject to (i) the effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to such shares, if deemed necessary or appropriate by counsel for the Company, (ii) the condition that the shares shall have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange, if any, on which the shares of Common Stock may then be listed and (iii) all other applicable laws, regulations, rules and orders which may then be in effect. SECTION 8 ADJUSTMENT AND SUBSTITUTION OF SHARES If a dividend or other distribution shall be declared upon the Common Stock payable in shares of the Common Stock, the number of shares of the Common Stock then subject to any outstanding stock options and the number of shares of the Common Stock which may be issued under the Plan but are not then subject to outstanding stock options shall be adjusted by adding thereto the number of shares of the Common Stock which would have been distributable thereon if such shares had been outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend or distribution. If the outstanding shares of the Common Stock shall be changed into or exchangeable for a different number or kind of shares of stock or other securities of the Company or another corporation, whether through reorganization, reclassification, recapitalization, stock split-up, combination of shares, merger or consolidation or otherwise, then there shall be substituted for each share of the Common Stock subject to any then outstanding stock option and for each share of the Common Stock which may be issued under the Plan but which is not then subject to any outstanding stock option, the number and kind of shares of stock or other 7 8 securities into which each outstanding share of the Common Stock shall be so changed or for which each such share shall be exchangeable. In case of any adjustment or substitution as provided for in this Section 8, the aggregate option price for all shares subject to each then outstanding stock option prior to such adjustment or substitution shall be the aggregate option price for all shares of stock or other securities (including any fraction) to which such shares shall have been adjusted or which shall have been substituted for such shares. Any new option price per share shall be carried to at least three decimal places with the last decimal place rounded upwards to the nearest whole number. No adjustment or substitution provided for in this Section 8 shall require the Company to issue or sell a fraction of a share or other security. Accordingly, all fractional shares or other securities which result from any such adjustment or substitution shall be eliminated and not carried forward to any subsequent adjustment or substitution. If any such adjustment or substitution provided for in this Section 8 requires the approval of shareholders in order to enable the Company to grant incentive stock options, then no such adjustment or substitution shall be made without the required shareholder approval. Notwithstanding the foregoing, in the case of incentive stock options, if the effect of any such adjustment or substitution would be to cause the stock option to fail to continue to qualify as an incentive stock option or to cause a modification, extension or renewal of such stock option within the meaning of Section 424 of the Code, the Board may determine that such adjustment or substitution not be made but rather shall use reasonable efforts to effect such other adjustment of each then outstanding stock option as the Board, in its discretion, shall deem equitable and which will not result in any disqualification, modification, extension or renewal (within the meaning of Section 424 of the Code) of such incentive stock option. SECTION 9 EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER Neither the adoption of the Plan nor any action of the Board pursuant to the Plan shall be deemed to give any employee any right to be granted a stock option (with or without cash payment rights) or to be awarded restricted shares under the Plan. Nothing in the Plan, in any stock option or cash payment rights granted under the Plan, in any restricted share award under the Plan or in any agreement providing for any of the foregoing or amendment thereto shall confer any right to any employee to continue in the employ of the Company or any Subsidiary or interfere in any way with the rights of the Company or any Subsidiary to terminate the employment of any employee at any time or adjust the compensation of any employee at any time. SECTION 10 AMENDMENT The right to alter and amend the Plan at any time and from time to time and the right to revoke or terminate the Plan are hereby specifically reserved to the Board; provided always that no such revocation or termination shall terminate any outstanding stock options or cash payment rights granted under the Plan or cause a revocation or a forfeiture of any restricted share award under the Plan; and provided further that no such alteration or amendment of the Plan shall, without shareholder approval (a) increase the total number of shares which may be issued under the Plan, (b) change the minimum option price, (c) make any changes in the class of employees eligible to receive incentive stock options or (d) extend any period set forth in the Plan during which stock options (with or without cash payment rights) may be granted or restricted shares may be 8 9 awarded. No alteration, amendment, revocation or termination of the Plan shall, without the written consent of the holder of a stock option, cash payment rights or restricted shares theretofore granted or awarded under the Plan, adversely affect the rights of such holder with respect thereto. SECTION 11 EFFECTIVE DATE AND DURATION OF PLAN The effective date and date of adoption of the Plan shall be October 16, 1989, the date of adoption of the Plan by the Board, provided that such adoption of the Plan by the Board is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of voting stock of the Company represented in person or by proxy at a meeting of such holders duly called, convened and held on or prior to October 15, 1990. No stock option granted under the Plan may be exercised and no restricted shares may be awarded until after such approval. No stock option or cash payment rights may be granted and no restricted shares may be awarded under the Plan subsequent to October 15, 1999. 9 10 TUSCARORA INCORPORATED 1989 STOCK INCENTIVE PLAN ADDENDUM FOR UK EMPLOYEES 1 INTRODUCTION This addendum shall apply for the purposes of the grant of stock options which the Company intends shall be approved under the Income and Corporation Taxes Act 1988 ("Taxes Act") to employees of the Company or any subsidiary in the UK to acquire shares in the Company. Such stock options will be granted under and subject to the Rules of the 1989 Stock Incentive Plan ("Plan") as apply to nonstatutory stock options except as set out in this addendum. The words and meaning in this addendum shall have the same meanings as in the Rules of the Plan. 2 OPTIONS The provisions of the Plan relating to incentive stock options, cash payment rights and restricted shares shall not apply to approved stock options granted to UK participants. 3 ELIGIBILITY Only UK employees of the Company or any subsidiary who are not directors, or UK employees who are directors of the Company or a subsidiary and are required under the terms of their employment to devote to their duties not less than 25 hours per week excluding meal breaks and are not excluded from participating under Paragraph 8 to Schedule 9 to the Taxes Act, are eligible to be granted a stock option. 4 INDIVIDUAL LIMITS An employee must not be granted a stock option which would, at the proposed date of grant, cause the aggregate of the market value of shares which he or she may acquire by the exercise of a stock option granted under the Plan or any other share option scheme approved under Schedule 9 to the Taxes Act and established by the Company or by any of its associated companies, as defined in Section 187 of the Taxes Act, to exceed pound sterling 30,000. For the purposes of this Section, market value will be either 100% of the fair market value of the shares on the date of grant or the option price as agreed in advance with the Inland Revenue, whichever is the higher. In determining the limits under this Section amounts quoted in United States dollars shall be translated into sterling at the average of the spot buying and selling rates for sterling using the rate quoted for United States dollars in comparable amounts by National Westminster Bank PLC on the business day prior to the date of grant. 5 AMENDMENTS If the Inland Revenue approved status of stock options granted is to be maintained, no amendment or alteration to this addendum or the Rules of the Plan which could affect the options shall have effect unless such amendment or alteration has been approved by the Inland Revenue. 10 11 6 EXERCISE OF OPTIONS Shares to be issued following the exercise of an option will be issued within 30 days of the date of exercise. The Board will procure the transfer of shares to be transferred following the exercise of an option within 30 days of the date of exercise. The provisions of the Plan relating to payment of the option price by delivery of shares of the Common Stock shall not apply to approved stock options granted to UK participants. No option may be exercised after the end of the day before the tenth anniversary of the date of grant of that option. 7 SHARES Options under the Plan will only be granted over shares which are fully paid ordinary shares in the capital of the Company which comply with the requirements of Paragraphs 10 to 14 inclusive, of Schedule 9 to the Taxes Act. 8 ADJUSTMENT AND SUBSTITUTION OF SHARES In the event to any variation in the equity share capital of the Company including a capitalization or rights issue, sub-division, consolidation or reduction of share capital: (i) the number and/or nominal amount of shares comprised in each stock option, and/or (ii) the stock option price, may be adjusted in any way (including retrospective adjustments) in which the Board considers appropriate subject to the prior approval of the Inland Revenue. Notice: The Board may notify optionholders of any adjustment made under this Section. If any such adjustment provided for in this Section requires the approval of shareholders then no such adjustment shall be made without shareholder approval. 11 EX-10.5 4 TUSCARORA INCORPORATED 10-K 1 EXHIBIT 10.5 TUSCARORA INCORPORATED COMMON STOCK PURCHASE PLAN FOR SALARIED EMPLOYEES (AS AMENDED ON OCTOBER 11, 1996) The purpose of the Common Stock Purchase Plan for Salaried Employees (the "Plan") is to provide the eligible employees of Tuscarora Incorporated (the "Company") and its Subsidiaries with a convenient means of purchasing shares of Common Stock, without par value (the "Common Stock"), of the Company through regular salary deductions, matching employer contributions and investment of cash dividends. For the purposes of the Plan, the term "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock processing at least fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. PARTICIPATION IN THE PLAN IS VOLUNTARY, AND NO RECOMMENDATION IS MADE TO ELIGIBLE EMPLOYEES AS TO WHETHER THEY SHOULD OR SHOULD NOT PARTICIPATE IN THE PLAN. THERE IS NO GUARANTEE UNDER THE PLAN AGAINST LOSS BECAUSE OF FLUCTUATIONS IN THE MARKET PRICE OF THE COMMON STOCK. IN SEEKING THE BENEFITS OF SHARE OWNERSHIP, EACH PARTICIPANT MUST ALSO ACCEPT THE RISKS ATTENDANT TO SUCH OWNERSHIP. SECTION 1 ELIGIBILITY All regular full-time salaried employees of the Company and its Subsidiaries, are eligible to participate in the Plan, provided (i) they have attained the age of 18 years and (ii) they have completed one year of service with the Company or its subsidiaries. Employees of the Company and its Subsidiaries whose wages and other conditions of employment are covered by a collective bargaining agreement are not eligible to participate in the Plan unless and until such agreement provides for the application of the Plan to employees covered by such agreement. SECTION 2 ADMINISTRATION The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"). The Committee shall interpret the Plan and prescribe such rules, regulations and procedures in connection with the operations of the Plan as it shall deem to be necessary and advisable for the administration of the Plan consistent with the purposes of the Plan. The Committee shall keep records of action taken at its meetings. A majority of the Committee shall constitute a quorum at any meeting and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Committee, shall be the acts of the Committee. The Company shall maintain an account for each participant in the name of each participant and shall maintain all records in connection with the Plan. 2 Neither the Company nor the Committee shall be liable for any act done in good faith or for any good faith omission to act, including, without limitation, any claim of liability with respect to the prices or times at which shares of the Common Stock are purchased or sold for a participant or with respect to any fluctuation in market value before or after any purchase or sale of shares. SECTION 3 SHARES AVAILABLE UNDER THE PLAN The aggregate number of shares of the Common Stock which may be issued by the Company under the Plan is one hundred fifty thousand (150,000) shares, subject to adjustment and substitution as set forth in this Section 3. The shares which may be issued under the Plan may be either authorized but unissued shares or shares previously issued and thereafter acquired by the Company or partly each, as shall be determined from time to time by the Board. If a dividend or other distribution shall be declared upon the Common Stock payable in shares of the Common Stock, the number of shares of the Common Stock which may be issued under the Plan but have not yet been issued shall be adjusted by adding thereto the number of shares of the Common Stock which would have been distributable thereon if such shares had been outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend or distribution. If the outstanding shares of the Common Stock shall be changed into or exchangeable for a different number of shares of the Common Stock, then there shall be substituted for each remaining share of the Common Stock which may be issued under the Plan, the number of shares of the Common Stock into which each outstanding share of the Common Stock shall be so changed or for which each such share shall be exchangeable. SECTION 4 PARTICIPATION An eligible employee may enroll as a participant at any time by completing and signing an enrollment and salary deduction authorization form and delivering it to the Company's Accounting Department, except that any eligible employee who has made a hardship withdrawal from the Tuscarora Plastics, Inc. Savings Plan (the "401(k) Plan") shall be prohibited, for a period of 12 months from the date of the hardship withdrawal, from submitting such form. Enrollment shall become effective as of the first day of the first month which begins after the date the enrollment and salary deduction authorization form is received by the Company's Accounting Department. An eligible employee whose participation in the Plan has terminated may reenroll in the Plan by following the above procedure. An employee who makes a hardship withdrawal from the 401(k) Plan may, however, be prohibited from reenrolling in the Plan for a certain period as set forth in the preceding paragraph. The Committee reserves the right to reject any enrollment and salary deduction authorization form on the grounds of excessive reenrollment. This reservation is intended to minimize unnecessary administrative expense and to encourage use of the Plan as long-term shareholder and employee investment service. SECTION 5 EMPLOYEE CONTRIBUTIONS Each eligible employee is permitted to authorize a deduction from his or her salary, in even multiples of $1.00, of a minimum of $10.00 per month and a maximum of $300.00 per month, provided, however, that the 2 3 maximum deduction for any calendar year shall not exceed eight percent (8%) of the annual salary of the eligible employee. Salary deduction authorizations shall remain effective until changed or terminated by the participant. A participant may change or terminate salary deduction authorizations at any time by completing and signing a salary deduction authorization change or termination form and delivering it to the Company's Accounting Department. A change or termination of salary deductions shall become effective as of the first day of the first month which begins after the date the salary deduction authorization change or termination form is received by the Company's Accounting Department. In addition, all salary deductions for an employee shall be automatically suspended for a period of twelve months from the date of a hardship withdrawal by the employee from the 401(k) Plan. Contributions by a participant through salary deduction authorizations shall be credited to the account under the Plan relating to the participant as of each salary payment date and shall be used to purchase shares of Common Stock for credit to such account as provided under Section 9 below. SECTION 6 EMPLOYER CONTRIBUTIONS On each Purchase Date, as defined in Section 9 below, the account relating to each participant shall be credited with an amount equal to ten percent (10%) of the amount credited to such account under Section 5 above the not previously applied to the purchase of shares of Common Stock. Such amount shall be used to purchase shares of Common Stock on such Purchase Date for credit to the account relating to the participant as provided under Section 9 below. SECTION 7 DIVIDENDS AND OTHER DISTRIBUTIONS Except as provided below, each account relating to a participant shall be credited with all cash dividends and other cash distributions, if any, paid in respect of the full shares and any fractional interest in a share credited to the account, less any amount the Company is required to deduct as backup withholding in respect of the dividend or distribution received, or considered to be received. Cash dividends and other cash distributions credited to a participant's account shall be invested in Common Stock in accordance with Section 9 below. Cash dividends and other cash distributions paid in respect of shares credited to a participant's account shall be paid directly to the participant and shall not be credited to the participant's account or invested in Common Stock for a period of twelve months from the date of a hardship withdrawal by the participant to which the account relates from the 401(k) Plan if such investment would constitute elective contributions or employee contributions under an employer plan within the meaning of Treasury Regulations sec. 1.401(k)-1(d)(2)(iv)(B)(4) or any successor regulation. Any stock dividends or stock splits in respect of shares of Common Stock credited to an account shall be reflected in the account without charge. Any distributions of other securities or rights to subscribe for additional shares in respect of shares of Common Stock credited to an account relating to a participant shall be made directly to the participant. 3 4 SECTION 8 NO INTEREST ON AMOUNTS CREDITED TO ACCOUNTS No interest shall be paid on amounts credited to the accounts relating to the participants. Amounts credited to the accounts shall be under the control of the Company and its Subsidiaries until used to purchase shares of Common Stock or paid to participants and may be used for any corporate purpose. SECTION 9 PURCHASE OF SHARES OF COMMON STOCK On the sixth business day of each month (the "Purchase Date"), the contributions by the participants and their employers which have been credited to the accounts under the Plan and which have not been previously so applied shall be applied to the purchase of shares of Common Stock from the Company. Cash dividends or distributions which are to be invested in Common Stock under the Plan shall be applied to the purchase of shares of Common Stock from the Company on each dividend or distribution payment date. The purchase price of each share shall be the fair market value (determined as set forth in Section 17 below) of a share of the Common Stock on the Purchase Date or the dividend or distribution payment date, as the case may be. The shares purchased on each Purchase Date and dividend or distribution payment date shall be credited to the accounts for which the shares are purchased in proportion to the respective amounts used to purchase shares from each account. Each allocation shall be made in full shares and in fractional interests in a share to the ten-thousandth of a share. At the time of purchase, the participant with respect to an account shall immediately acquire full ownership of all shares and of any fractional interest in a share purchased for and credited to the account. All shares purchased shall be registered in the name of the Company or another nominee or custodian for the benefit of the participants under the Plan. Although a participant may not assign or hypothecate an interest in the Plan as such, upon purchase of shares under the Plan such shares may be sold pursuant to the procedures set forth in Sections 10 and 11 below or, following distribution of such shares to the participant, may be sold, assigned, hypothecated or otherwise dealt with by the participant as is the case with respect to any other shares of Common Stock the participant may own. Notwithstanding the foregoing, upon termination of an account relating to a participant under Section 10 or Section 11 below, any employee contributions credited to the account and not yet applied to the purchase of shares of Common Stock from the Company shall not be so applied and shall be delivered to the participant, and no employer contribution shall be made with respect to such employee contributions. Also, notwithstanding the foregoing and the provisions of Section 7 above, cash dividends or distributions with respect to shares of Common Stock credited to an account shall be delivered to the participant instead of credited to the account and applied to the purchase of shares of Common Stock from the Company on the dividend or distribution payment date if the date as of which the account is terminated is more than ten (10) calendar days prior to the record date of the cash dividend or distribution. SECTION 10 VOLUNTARY SALE OR WITHDRAWAL OF SHARES A participant may direct at any time that any or all of the shares credited to the account relating to the participant be sold. Upon such sale, a check for the proceeds, less any brokerage commissions and other charges applicable to the sale, shall be delivered to the participant. The participant may also request at any 4 5 time that a certificate or certificates representing any or all of the full shares credited to the account relating to the participant be delivered to the participant. If the participant directs that all shares credited to the account relating to the participant be sold and the net proceeds delivered to the participant or requests that a certificate or certificates representing all full shares credited to the account relating to the participant be delivered to the participant, and the participant terminates or has terminated all salary deduction authorizations, the account shall be terminated as of the later of the date the direction or request is received and the effective date of the termination of salary deductions. Each direction or request referred to in this Section 10 shall be made by the participant by completing and signing a sale or withdrawal form and delivering it to the Company or an agent designated by the Company. Upon termination, any fractional interest in a share credited to the account may be sold and the net proceeds delivered to the participant or the value of the fractional interest may be determined by reference to the current fair market value of the Common Stock and paid to the participant in cash. SECTION 11 TERMINATION OF ACCOUNT UPON TERMINATION OF EMPLOYMENT The account relating to a participant whose employment with the Company and its Subsidiaries terminates shall also be terminated as of the date of termination of employment. The participant may direct that all shares credited to the account be sold and the net proceeds delivered to the participant, or the participant may request that a certificate or certificates representing all full shares credited to the account be delivered to the participant. Any brokerage commissions and other charges applicable to sales are payable by the participant and will be deducted in determining the net proceeds. If no direction is received from the participant prior to the time the account relating to a participant would normally be settled, a certificate or certificates representing all full shares credited to the account will be delivered to the participant. Each direction or request referred to in this Section 11 shall be made by the participant by completing and signing a sale or withdrawal form and delivering it to the Company or an agent designated by the Company. Upon termination, any fractional interest in a share credited to the account may be sold and the net proceeds delivered to the participant or the value of the fractional interest may be determined by reference to the current fair market value of the Common Stock and paid to the participant in cash. SECTION 12 INFORMATION FOR PARTICIPANTS; VOTING RIGHTS Each participant shall receive at least quarterly each year a statement of all transactions affecting the account relating to the participant and the number of shares (including any fractional interest in a share) of the Common Stock credited to the account. Each participant shall also receive copies of all reports, proxy statements and other communications distributed by the Company to its shareholders generally at the time and in the manner such material is sent to such shareholders. Participants shall receive proxy soliciting material in connection with each meeting of shareholders of the Company. Shares can be voted only by the holder of record. The shares of Common Stock credited to each account (including any fractional interest in a share) shall be voted by the holder of record only in accordance with the participant's signed proxy instructions duly delivered to the holder of record. 5 6 SECTION 13 AMENDMENT OR TERMINATION OF PLAN The Board reserves the right to amend or terminate the Plan at any time. Any amendment or termination shall not result in the forfeiture of any funds deducted from the salary of any participant, or of any shares of Common Stock or fractional interest in a share credited to an account, or of any dividends or other distribution in respect of such shares, before the effective date of the amendment or termination. SECTION 14 WITHHOLDING The purchase of shares of Common Stock under the Plan may result in compensation income to participants and may be subject to Federal income and employment tax, state income tax and/or local income tax withholding. The Company or one of its Subsidiaries shall withhold all applicable withholding taxes on any such compensation income from the salary of the participant who realizes such compensation income. Each participant's salary also shall be subject to withholding of all applicable Federal income and employment, state income and local income taxes without regard to any amounts deducted therefrom as salary deductions authorized under the Plan. SECTION 15 EXPENSES OF THE PLAN The Company and its Subsidiaries will pay all expenses incident to the operation of the Plan, including the costs of record keeping, accounting fees, legal fees, issue or transfer taxes on purchases of shares of the Common Stock pursuant to the Plan, the costs of delivery of stock certificates to participants and the costs of delivery of shareholder communications. Neither the Company nor any of its Subsidiaries will pay any expenses, commissions or taxes incurred in connection with the sale of shares of Common Stock credited to an account at the direction of the participant. Expenses in connection with any such sale will be deducted from the proceeds of sale prior to any remittance to the participant. SECTION 16 RIGHTS NOT TRANSFERABLE The right to purchase shares of Common Stock under the Plan shall not be transferable by an eligible employee and such right shall be exercisable during the eligible employee's lifetime only by the eligible employee. Upon the death of a participant, any shares held for the account relating to the participant and any cash payment for any fractional shares shall be transferred in accordance with the Will of the participant, or, if the participant dies intestate, the laws of descent and distribution of the state of domicile of the participant at the time of death. SECTION 17 FAIR MARKET VALUE Fair market value of the Common Stock shall be the mean between the following prices, as applicable, for the date as of which fair market value is to be determined as quoted in The Wall Street Journal (or in such other reliable publication as the Committee, in its discretion, may determine to rely upon): (a) if the 6 7 Common Stock is listed on the New York Stock Exchange, the highest and lowest sales prices per share of the Common Stock as quoted in the NYSE--Composite Transactions listing for such date, (b) if the Common Stock is not listed on such exchange, the highest and lowest sales prices per share of the Common Stock for such date on (or on any composite index including) the principal United States securities exchange registered under the 1934 Act on which the Common Stock is listed or (c) if the Common Stock is not listed on any such exchange, the highest and lowest sales prices per share of the Common Stock for such date on NASDAQ. If there are no such sale price quotations for the date as of which fair market value is to be determined but there are such sale price quotations within a reasonable period both before and after such date, then fair market value shall be determined by taking a weighted average of the means between the highest and lowest sales prices per share of the Common Stock as so quoted on the nearest date before and the nearest date after the date as of which fair market value is to be determined. The average should be weighted inversely by the respective numbers of trading days between the selling dates and the date as of which fair market value is to be determined. If there are no such sale price quotations on or within a reasonable period both before and after the date as of which fair market value is to be determined, then fair market value of the Common Stock shall be the mean between the bona fide bid and asked prices per share of the Common Stock as so quoted for such date on NASDAQ, or if none, the weighted average of the means between such bona fide bid and asked prices on the nearest trading date before and the nearest trading date after the date as of which fair market value is to be determined, if both such dates are within a reasonable period. The average is to be determined in the manner described above in this Section 17. If the fair market value of the Common Stock cannot be determined on the basis previously set forth in this Section 17 on the date as of which fair market value is to be determined, the Committee shall in good faith determine the fair market value of the Common Stock on such date. Fair market value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. SECTION 18 ISSUANCE OF SHARES The obligation of the Company to issue shares of the Common Stock under the Plan shall be subject to (i) the effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to such shares, if deemed necessary or appropriate by counsel for the Company, (ii) the condition that the shares shall have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange, if any, on which the shares of Common Stock may then be listed and (iii) all other applicable laws, regulations, rules and orders which may then be in effect. SECTION 19 TERMINATION OF PLAN The Plan shall terminate when all of the shares of the Common Stock which may be issued under the Plan have been purchased; provided that the Board, in its sole discretion, may terminate the Plan at any time without any obligation on account of such termination, except as hereinafter provided. Upon termination of the Plan, distribution of each account shall be made as provided in Section 11 above in the case of a participant whose employment with the Company and its Subsidiaries has terminated. 7 EX-10.9 5 TUSCARORA INCORPORATED 10-K 1 Exhibit 10.9 FIRST AMENDMENT TO THE TUSCARORA INCORPORATED AND SUBSIDIARY COMPANIES SALARIED EMPLOYEES' MONEY PURCHASE PENSION PLAN (As amended and restated effective as of September 1, 1989) WHEREAS, Tuscarora Incorporated (the "Employer") maintains the Tuscarora Incorporated and Subsidiary Companies Salaried Employees' Money Purchase Pension Plan, as amended and restated effective as of September 1, 1989 (the "Plan"); and WHEREAS, the Employer desires to amend the Plan to provide an additional quarterly contribution for certain employees of the Employer; and WHEREAS, pursuant to Plan Section 7.1, the Employer has reserved the right to amend the Plan at any time. NOW, THEREFORE, the Plan is hereby amended, effective September 1, 1996, as follows: 1. Section 3.1 of the Plan is hereby amended in its entirety to read as follows: "3.1 EMPLOYER CONTRIBUTION. As of each quarterly Valuation Date, each Employer shall contribute to the Trust an amount equal to: (a) beginning September 1, 1976, four percent (4%); (b) beginning September 1, 1977, five percent (5%); and 2 (c) beginning September 1, 1988, five and one-half percent (5-1/2%) of the aggregate Compensation of all Participants during the Plan's fiscal quarter ending on such Valuation Date; provided, that effective September 1, 1996, each Employer shall contribute, to extent permitted under the Code and applicable regulations, an additional amount as of each such Valuation Date equal to the percentage of Compensation of the Participants listed in Appendix A for the fiscal quarter ending on such date. Employer contributions made pursuant to subsections (a), (b) and (c) shall be allocated to each Participant's account in the ratio that each Participant's Compensation bears to all Participants' Compensation during the fiscal quarter ending on such Valuation Date. The additional Employer contribution provided pursuant to Appendix A shall be allocated to each affected Participant's account based on the percentage of the Participant's Compensation specified in the Appendix for the quarter. Forfeitures arising during any Plan Year (including any forfeiture arising by reason of Plan Section 4.8) which are attributable to contributions made by an Employer shall be applied to reduce the contribution of such Employer." 2. A new Appendix A is hereby added to the Plan to read as follows: "APPENDIX A ADDITIONAL PLAN CONTRIBUTIONS Effective September 1, 1996, an additional Employer Contribution shall be made in accordance with Section 3.1 for the following Participants at the rate of the Participant's Compensation for the fiscal quarter specified below: Name of Percentage of Participant Compensation ----------- ------------ J. O'Leary 7-1/2% B. Mullins 7-1/2% J. Brakebill 7-1/2% D. O'Leary 5-1/2% R. Margeson 4-1/2% B. Buettin 1-1/2%" 2 3 3. This Amendment is hereby adopted subject to the condition that the Plan, as so amended, shall continue to be a tax-qualified retirement plan, within the meaning of Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended. In the event it is finally determined that this Amendment would adversely affect the qualified status of the Plan, then it shall be deemed null, void and of no effect, as if it had never been adopted. 4. The Plan is hereby ratified and affirmed in all other respects. IN WITNESS WHEREOF, Tuscarora Incorporated has caused this document to be executed by its duly authorized officer, this 11th day of October, 1996. TUSCARORA INCORPORATED By: /s/ BRIAN C. MULLINS --------------------- Brian C. Mullins, Vice President and Treasurer 3 EX-10.10 6 TUSCARORA INCORPORATED 10-K 1 Exhibit 10.10 TUSCARORA INCORPORATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN STATEMENT OF INTENT The Employer has adopted this Tuscarora Incorporated Supplemental Executive Retirement Plan ("Plan") in order to provide certain eligible executive and senior management employees of the Employer with supplemental retirement benefits, in addition to amounts provided by the Employer's qualified retirement plans and by Social Security. The Employer acknowledges that the Plan is an "employee pension benefit plan" within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan is intended to be an "unfunded [plan] maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" which is eligible for the exemptions applicable to such plans under Titles I and IV of ERISA (and which is not subject to any requirement imposed under Section 401(a) of the Code); the Plan is further intended to provide for benefits that are not taxable as income to each Participant until such time as such benefits are paid to the Participant. The Plan is intended to be generally effective as of March 1, 1996. 1. ELIGIBLE EXECUTIVES. In order to be eligible to receive an allocation to a book account for any Plan Year hereunder, an individual must be (i) an employee of the Employer in active employment with the Employer during all or part of a Plan Year, (ii) who is an executive or senior management employee, and (iii) who has been previously designated by the Compensation Committee of the Employer's Board of Directors, in its sole discretion, as eligible to participate in this plan, has been provided a Participation Agreement providing for participation herein, has executed and returned the Participation Agreement as provided therein, and such designation and agreement has not been revoked by the Compensation Committee in its sole discretion prior to such date. An individual who satisfies these requirements, who has had an amount credited to a bookkeeping account on his/her behalf hereunder, and who has not yet been paid out all of the amounts credited on his/her behalf hereunder shall be hereinafter referred to as a "Participant." For purposes of this Plan, the "Plan Year" shall be the 12-month period beginning on September 1 and ending on the succeeding August 31 (with an initial "short plan year" beginning on March 1, 1996 and ending on August 31, 1996). 2. PERCENTAGE ALLOCATION. A Participant shall have allocated to a book account on his/her behalf under this Plan for each quarter during a Plan Year, the applicable percentage of his/her Compensation for such quarter. For purposes of this Plan, "Compensation" shall mean the Participant's salary and bonus paid by the Employer, plus any elective contributions which are excludable from gross income under Code Section 125 (cafeteria plans) or Section 402(e)(3) (401(k) cash or deferred arrangements). The applicable percentage for any Participant shall be the amount determined by the Compensation Committee, in its sole discretion, as the applicable percentage and disclosed to the Participant in his/her Participation Agreement; such amount may be changed from time to time by the Compensation Committee, in its sole discretion, with written notice to affected Participants, without the necessity for a formal Plan amendment. 3. CREDITING TO PARTICIPANT ACCOUNTS. Amounts allocable on behalf of a Participant under paragraph (2) above shall be credited to an account on the Employer's books in the Participant's name, as of the last day of each quarter during the Plan Year for which such amounts are to be credited. There shall also be credited to a Participant's account for each quarter on such date simple interest at the "Plan Rate." The "Plan Rate" for each quarter shall be 2 the rate announced by Mellon Bank, N.A. as its prime rate as in effect on the first day of such quarter. 4. VESTING OF ACCOUNT BALANCES. All amounts credited to a Participant's bookkeeping account shall become fully vested upon the Participant's completion of five Years of Service (as such term is defined in the Tuscarora Incorporated and Subsidiary Companies Salaried Employees' Money Purchase Pension Plan), or upon the Participant's termination of employment due to death or a permanent disability which qualifies the Participant for benefits under the Employer's long-term disability plan, and shall not be subject to forfeiture thereafter except as provided in the following two sentences. Notwithstanding the foregoing, no benefits shall be payable under this Plan to or on behalf of a Participant, and any benefits in pay status shall cease to be paid, if the Participant's employment is terminated for cause amounting to gross misconduct or if the Employer's Board of Directors determines, in its sole discretion, that the Participant has taken actions which have willfully or through gross negligence injured the Employer or any parent, affiliated, subsidiary or related company. Injuring the Employer or any parent, affiliated, subsidiary or related company willfully or through gross negligence would include, without limitation, embezzlement, destruction of Employer property or property of any parent, affiliated, subsidiary or associated company, revelation of trade secrets, disclosure of customer lists, or violation of the terms of any covenant not to compete between the Employer and the Participant, any of which results in harm to the Employer's assets, reputation, good will or business or those of any parent, affiliated, subsidiary or associated company. Moreover, a Participant's right to receive or to continue receiving benefits hereunder shall be subject to such additional conditions as may be set forth in his/her Participation Agreement. A Participant who terminates employment with the Employer for any reason prior to completion of five Years of Service, death or disability shall forfeit his/her account balance and all right to benefits hereunder, unless the Compensation Committee determines, in its sole discretion, and subject to such conditions as it may determine appropriate, to grant vesting of benefits hereunder. 5. COMMENCEMENT OF PARTICIPANT'S BENEFIT PAYMENTS. Payment of the Participant's account balance to the Participant shall commence as soon as practicable after the later of the Participant's termination of employment or the Participant's attainment of age 55 (provided, that where the Participant's employment terminates due to a permanent disability which qualifies him/her for benefits under the Employer's long-term disability plan, benefits may commence upon the Participant's termination of employment without regard to the age 55 requirement). The Participant and Employer may mutually agree prior to the date of distribution to change that date upon such terms and conditions as the Employer shall, in its sole discretion, deem necessary or appropriate. 6. FORM OF BENEFIT. The Participant's benefit shall be paid in one of the following forms, as elected by the Participant: A single life annuity, a joint and 50% survivor annuity, a joint and 100% survivor annuity, or a single life annuity with 60, 120 or 180 months guaranteed, which in each case is the actuarial equivalent of the amount credited to the Participant's book account hereunder on the last day of the calendar quarter in which his/her employment terminates (or he/she attains age 55, as applicable). Such election must be made on a form provided by the Employer, and must be made at least twelve (12) months before the date of commencement (and, where applicable, must designate the Participant's survivor annuitant or the beneficiary of the Participant's guaranteed payments). Upon such terms and conditions as the Employer shall, in its sole discretion, deem necessary or appropriate, the Employer and Participant may mutually agree prior to distribution to change the payment form to any other actuarially equivalent form of payment, and/or the Employer may determine to honor an election of form of payment made less than twelve (12) months prior to commencement. Where the Participant elects a joint and survivor annuity, and the survivor annuitant dies after commencement but prior to the Participant's death, no new election shall be permitted, and the Participant shall continue to receive his/her life annuity benefit in the amount in effect prior to 2 3 the survivor annuitant's death. Where the Participant elects a single life annuity with guaranteed payments, and the person designated to receive such guaranteed payments predeceases the Participant, the Participant shall be permitted to substitute a new beneficiary. Actuarial equivalence for all purposes under this Plan shall be determined using the factors specified on Exhibit A hereof. Notwithstanding any other provision hereof, the Compensation Committee may pay a Participant's benefit in the form of a single lump-sum distribution, immediately upon the Participant's termination of employment, where it determines in its sole discretion that it is necessary or appropriate to do so (including, by way of example and not limitation, where the benefit is sufficiently small that periodic payment would be administratively burdensome), provided that the amount of such lump-sum distribution would not exceed $50,000. 7. DEATH BENEFITS. The following death benefits are payable under this Plan: (a) If a Participant dies after benefit payments have commenced under this Plan, a death benefit shall be payable only if the applicable payment form provides for a survivor benefit. The survivor benefit shall be payable to the survivor annuitant or beneficiary named by the Participant. If the Participant has not named a beneficiary at the time of his/her death, or his/her beneficiary predeceases him/her and no substitute beneficiary has been named, no death benefit shall be payable hereunder. (b) If a Participant dies before benefit payments have commenced hereunder, a death benefit shall be payable to the beneficiary named by the Participant to receive such benefit. If the Participant has not named such a beneficiary at the time of death, or his/her named beneficiary has predeceased him/her and no substitute beneficiary has been named, no death benefit shall be payable hereunder. The death benefit shall be payable in the form of a single-life annuity for the life of the beneficiary (who must be a natural person), which is the actuarial equivalent of the Participant's account balance on the last day of the calendar quarter of his/her death. Payment shall commence as soon as practicable after the Participant's death. The Compensation Committee, upon request of a Participant or beneficiary, may agree in its sole discretion to permit distribution upon a Participant's death prior to commencement to be made in a different time or form, on such conditions and subject to such restrictions as it may deem necessary or appropriate. 8. PLAN IS NOT FUNDED. All benefit payments made pursuant to this Plan shall be paid in cash from the Employer's general assets. No Employer assets shall at any time be set aside in a trust or other separate account or arrangement to make benefit payments under this Plan. The Participant and any survivor annuitant or beneficiary shall have only the rights of a general unsecured creditor of the Employer with respect to any rights they may have hereunder. Nothing contained herein shall be construed as constituting a guaranty that the Employer's assets will be sufficient to pay any benefits under this Plan. 9. NONTRANSFERABILITY OF BENEFITS. The rights of each Participant and any survivor annuitant or beneficiary under this Plan are not subject to the claims of their creditors and may not be voluntarily or involuntarily transferred, assigned, alienated, accelerated or encumbered. Notwithstanding the preceding sentence, the benefits payable under this Plan may, in the Employer's discretion, be offset by any liability of the Participant and any other amounts owed or otherwise payable by the Participant to the Employer. An amount will be subject to offset hereunder if owed or otherwise payable by the Participant at any time and for any reason, including (but not limited to) a loan to the Participant, recovery of amounts due to misconduct of the Participant, or any other liability or obligation of the Participant of any type, as determined by the Employer. 3 4 10. EXPENSES. The expenses of administering this Plan shall be borne by the Employer. 11. TAX LIABILITY. The Employer may withhold from any benefit payment made pursuant to this Plan any Federal, state or local taxes required to be withheld with respect to such payment. Moreover, amounts allocated to a book account hereunder are subject to withholding as required under the Federal Insurance Contributions Act (FICA); such withholding may be taken by the Employer from a Participant's regular salary or other compensation. 12. APPLICABLE LAW. This Plan shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, to the extent applicable and not preempted by federal law. 13. EFFECT ON EMPLOYMENT RIGHTS. Nothing in this Plan shall be construed as giving any Participant any right to continued employment with the Employer. 14. SEVERABILITY. If any portion of this Plan shall be held invalid or illegal for any reason, such event shall not affect or render invalid or unenforceable the remainder of this Plan. 15. BINDING EFFECT. This Plan shall be binding upon and inure to the benefit of each Participant, his/her survivor annuitant or beneficiary (as determined in accordance with paragraphs 6 and 7, above) and the Employer and its successors and assigns. 16. NO TRUST CREATED. Nothing contained in this Plan, and no action taken pursuant to its provisions by either party hereto, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Employer or any other person and the Participant, his/her designated beneficiary, other beneficiaries of the Participant or any other person. 17. DETERMINATION OF BENEFITS. The Employer shall make all determinations as to rights to benefits under this Plan. Subject to and in compliance with the specific procedures contained in the applicable regulations under ERISA: (i) any decision by the Employer denying a claim by any person for benefits under this Plan shall be stated in writing and delivered or mailed to such person; (ii) each such notice shall set forth the specific reasons for the denial, written to the best of the Employer's ability in a manner that may be understood without legal or actuarial counsel; and (iii) the Employer shall afford a reasonable opportunity to such person for a full and fair review of the decision denying such claim. 18. ADMINISTRATION. The Board of Directors of the Employer (or its authorized delegate) shall have full discretionary power and right to interpret, construe and administer this Plan. The interpretation and construction of this Plan by the Board of Directors of the Employer (or such delegate), and any action taken hereunder, shall be final, binding and conclusive upon all parties in interest. No member of the Board of Directors of the Employer or any person acting on its behalf shall, in any event, be liable to any person for any action taken or omitted to be taken in connection with the interpretation, construction or administration of this Plan, so long as such action or omission to act is made in good faith. 19. AMENDMENT. This Plan may be amended at any time and from time to time in the sole discretion of the Employer, through a resolution adopted or a written instrument issued by the Board of Directors or by a duly authorized officer of the Employer. 20. TERMINATION. This Plan may be terminated, in whole or part, at any time and from time to time in the sole discretion of the Employer, through a resolution adopted or a written instrument issued by the Board of Directors or by a duly authorized officer of the Employer. 4 5 EXHIBIT A ACTUARIAL EQUIVALENT FACTORS MORTALITY TABLE: 1983 Individual Annuity Mortality Table (1983 IAM)(Male) INTEREST RATE: 7.5% 6 TUSCARORA INCORPORATED CONSENT OF COMPENSATION COMMITTEE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OCTOBER 11, 1996 The undersigned, being all of the members of the Compensation Committee appointed by the Board of Directors of Tuscarora Incorporated, a Pennsylvania corporation, (the "Company") to administer the Company's Supplemental Executive Retirement Plan ("SERP"), do hereby adopt, by unanimous written consent, the following preambles and resolution in accordance with Section 1727(b) of the Pennsylvania Business Corporation Law of 1988, with the same force and effect as if such preambles and resolution had been adopted at a meeting of the Compensation Committee duly called and held on October 11, 1996: WHEREAS, in accordance with Section 1 of the SERP, the Compensation Committee has the power and authority to designate, in its sole discretion, certain executives or senior management employees to participate in the SERP and to determine the applicable percentage of compensation and bonus that will be paid by the Company on the participant's behalf; and WHEREAS, the Compensation Committee wishes to designate certain employees for participation in the SERP effective as of September 1, 1996; NOW, THEREFORE, BE IT RESOLVED, that the Compensation Committee hereby designates the following named persons as participants in the SERP effective as of September 1, 1996, and hereby establishes the percentage set opposite each designee's name as the applicable percentage of compensation to be credited each fiscal quarter to the book accounts of each of the participants, commencing with the first fiscal quarter for the 1997 fiscal year: John O'Leary, Jr. -- 6.2% Brian Mullins -- 6.0% 7 James Brakebill -- 8.3%; and RESOLVED FURTHER, that in accordance with Section 1 of the Plan, the Compensation Committee, in its sole discretion and without the necessity for formal Plan amendment, may change the percentages indicated above, provided written notice is given to affected participants. It is hereby directed that this Consent be duly filed with the records of meetings of the Compensation Committee. /s/ Thomas S. Blair /s/ Harold F. Reed, Jr. - ----------------------------- ------------------------------ Thomas S. Blair Harold F. Reed, Jr. /s/ Robert W. Kampmeinert /s/ Thomas P. Woolaway - ----------------------------- ------------------------------ Robert W. Kampmeinert Thomas P. Woolaway -2- 8 TUSCARORA INCORPORATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT, between ________________ ("Participant") and TUSCARORA INCORPORATED ("Employer"), dated as of ______________, 19__. 1. STATEMENT OF INTENT. The Employer, by action of the Compensation Committee of its Board of Directors, has determined to offer Participant the opportunity to participate in the Tuscarora Incorporated Supplemental Executive Retirement Plan ("SERP"), a copy of which is attached hereto. The SERP conditions a Participant's eligibility to participate in the SERP, among other things, on his/her entering into a Participation Agreement ("Agreement"). Participant desires to participate in the SERP. Therefore, in consideration of the foregoing, Participant and Employer hereby enter into this Agreement. 2. PARTICIPATION/EFFECTIVE DATE. Participant's participation in the SERP shall commence on the first day of the calendar quarter which coincides with or next precedes the date of this Agreement. He/she shall participate in the SERP, subject to all applicable terms, conditions and restrictions set forth therein and in this Agreement. For purposes of this Agreement, the terms of the SERP (as amended from time to time) shall be deemed to be incorporated herein by reference. 3. APPLICABLE PERCENTAGE. The Participant's applicable percentage (as contemplated in Section 2 of the SERP) as of the Effective Date of his/her participation shall be ___%. Such percentage may be changed at any time by the Compensation Committee by written notice to the Participant; the change shall be effective as of the beginning of the calendar quarter which coincides with or next precedes the later of (i) the date of the notice or (ii) the effective date specified by the Compensation Committee. Such notice will be deemed to amend this Section 3 accordingly. 4. BENEFICIARY DESIGNATION. In the event the Participant dies prior to the date on which payout of benefits under the SERP commences, the Participant hereby designates the following as his primary and contingent beneficiaries: 9 Primary Beneficiary ------------------- Name ----------------------------------------------- Address ----------------------------------------------- Date of birth ----------------------------------------- Soc. Sec. No. ----------------------------------------- Contingent Beneficiary ---------------------- Name ----------------------------------------------- Address ----------------------------------------------- Date of birth ----------------------------------------- Soc. Sec. No. ----------------------------------------- (The contingent beneficiary shall become the Participant's beneficiary in the event the primary beneficiary predeceases the Participant.) The Participant may revoke or change these designations at any time prior to his/her death by sending a written and signed notice thereof to the Chairman of the Compensation Committee. 5. FORFEITURE OF BENEFITS. In addition to the conditions and restrictions set forth in Section 4 of the SERP, the Participant hereby agrees that he/she will forfeit all right to any payment of benefits under the SERP (and that any benefit payments that have previously commenced will cease) in the event that the Participant, at any time during the three-year period commencing on the date of his/her termination from employment with the Employer, engages in any of the following conduct: (a) solicits or induces, or attempts to solicit or induce, any employee, agent or independent contractor of the Employer or its affiliates to terminate his/her/its relationship with the Employer or its affiliates; or (b) accepts any employment by (whether as employee, consultant, independent contractor or otherwise), makes a substantial investment in, or (with the intent to subsequently obtain an investment in, compensation from, or employment by such person or organization) becomes actively interested in, takes part in the affairs of, or gives advice and counsel to any person or organization which is a competitor or which may reasonably be deemed to be a competitor within the market areas in which the Employer's products are sold. Participant further agrees that in the event that Participant receives any payment of benefits hereunder after he/she engages in any of the above-described conduct, Participant shall be obligated to return to the Employer any such benefits, plus interest at the Plan Rate from the date of payment. Participant agrees that the Employer may offset any such 2 10 overpayment from any amount otherwise payable to Participant by the Employer. 6. CONTINUED PARTICIPATION/AMENDMENT OF TERMS. The Participant acknowledges and agrees that his/her continued participation in the SERP is at the sole discretion of the Compensation Committee, and that such participation (and this Agreement) may be terminated or revoked at any time by the Compensation Committee (provided, that except as otherwise contemplated in Section 4 of the SERP and in paragraph 5 hereof, such termination or revocation shall not cause the Participant to forfeit any right to vested benefits which have been credited to the Participant under the SERP prior to such termination or revocation). Moreover, Participant acknowledges and agrees that the Employer has reserved the right to amend or terminate the SERP at any time, in its sole discretion. 7. EFFECT ON EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as giving the Participant any right to continued employment with the Employer. 8. SEVERABILITY. If any portion of this Agreement shall be held invalid or illegal for any reason, such event shall not affect or render invalid or unenforceable the remainder of this Agreement. 9. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Participant, his/her survivor annuitant or beneficiary and the Employer and its successors and assigns. 10. APPLICABLE LAW. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, to the extent applicable and not preempted by federal law. IN WITNESS WHEREOF, the Participant and the Employer, by its duly authorized representative, have caused this Agreement to be executed on the day and year first set forth above. TUSCARORA INCORPORATED By: --------------------------- ------------------------------ 3 EX-11 7 TUSCARORA INCORPORATED 10-K 1 Exhibit 11 Exhibit 11 - Statement Re: Computation of Earnings Per Share
1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- PRIMARY Weighted average number of shares of Common Stock outstanding 6,097 6,109 6,129 6,154 6,242 Net effect of dilutive stock options - based on the treasury stock method using average market price 102 102 71 102 120 ------ ------ ------ ------ ------ TOTAL 6,199 6,211 6,200 6,256 6,362 ====== ====== ====== ====== ====== Net income $4,891 $4,270 $5,703 $8,980 $9,653 ====== ====== ====== ====== ====== Per share amount $0.80 $0.69 $0.92 $1.44 $1.52 ====== ====== ====== ====== ====== FULLY DILUTED Weighted average number of shares of Common Stock outstanding 6,097 6,109 6,129 6,154 6,242 Net effect of dilutive stock options - based on the treasury stock method using greater of average market price or closing market price 114 102 71 137 120 ------ ------ ------ ------ ------ TOTAL 6,211 6,211 6,200 6,291 6,362 ====== ====== ====== ====== ====== Net income $4,891 $4,270 $5,703 $8,980 $9,653 ====== ====== ====== ====== ====== Per share amount $0.80 $0.69 $0.92 $1.43 $1.52 ====== ====== ====== ====== ======
The per share and share numbers have been adjusted to reflect the 100% share distribution paid on April 14, 1992. In thousands, except per share data. EX-13 8 TUSCARORA INCORPORATED 10-K 1 Exhibit 13 TUSCARORA INCORPORATED CONSOLIDATED STATEMENTS OF INCOME - --------------------------------------------------------------------------------
Year Ended August 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------ Net Sales $182,589,621 $163,299,682 $120,085,187 Cost of Sales 139,249,481 123,682,160 92,476,379 - ------------------------------------------------------------------------------------------ Gross profit 43,340,140 39,617,522 27,608,808 - ------------------------------------------------------------------------------------------ Selling and Administrative Expenses 24,524,593 21,831,518 17,103,015 Interest Expense 2,928,483 2,603,250 1,327,689 Other (Income) Expense--Net (18,235) 148,636 161,111 - ------------------------------------------------------------------------------------------ 27,434,841 24,583,404 18,591,815 - ------------------------------------------------------------------------------------------ Income before income taxes 15,905,299 15,034,118 9,016,993 Provision for Income Taxes (Note 6) 6,252,682 6,053,854 3,313,954 - ------------------------------------------------------------------------------------------ Net income $ 9,652,617 $ 8,980,264 $ 5,703,039 - ------------------------------------------------------------------------------------------ Net income per share of Common Stock (Note 1) $1.55 $1.46 $0.93 - ------------------------------------------------------------------------------------------ Weighted average number of shares of Common Stock outstanding 6,241,606 6,153,745 6,129,062 - ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 8 2 TUSCARORA INCORPORATED CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
Assets (August 31) 1996 1995 - --------------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 3,379,776 $ 2,659,767 Trade accounts receivable, less allowance of $787,175 in 1996; $694,675 in 1995 26,094,406 23,463,267 Inventories (Note 2) 15,666,880 18,018,610 Prepaid expenses and other current assets 1,771,694 1,452,542 - --------------------------------------------------------------------------------------------------------------------- Total current assets 46,912,756 45,594,186 - --------------------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Land 2,658,573 2,515,155 Buildings and improvements 45,197,923 40,284,731 Machinery and equipment 111,383,112 93,542,491 - --------------------------------------------------------------------------------------------------------------------- Total 159,239,608 136,342,377 - --------------------------------------------------------------------------------------------------------------------- Less accumulated depreciation (80,529,962) (68,751,183) - --------------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 78,709,646 67,591,194 - --------------------------------------------------------------------------------------------------------------------- OTHER ASSETS Goodwill 3,406,779 2,251,422 Other non-current assets 2,140,261 2,284,457 - --------------------------------------------------------------------------------------------------------------------- Total other assets 5,547,040 4,535,879 - --------------------------------------------------------------------------------------------------------------------- Total assets $131,169,442 $117,721,259 - --------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity (August 31) - --------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES Current maturities of long-term debt (Note 3) $ 5,346,335 $ 4,819,255 Accounts payable 16,416,387 15,515,024 Accrued income taxes 153,930 365,986 Accrued payroll and related taxes 595,282 490,190 Other current liabilities (Note 7) 1,176,918 2,013,544 - --------------------------------------------------------------------------------------------------------------------- Total current liabilities 23,688,852 23,203,999 - --------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT (NOTE 3) 39,249,136 36,510,150 DEFERRED INCOME TAXES (NOTE 6) 2,069,988 1,849,078 OTHER LONG-TERM LIABILITIES (NOTE 7) 1,334,577 1,384,671 - --------------------------------------------------------------------------------------------------------------------- Total liabilities 66,342,553 62,947,898 - --------------------------------------------------------------------------------------------------------------------- COMMITMENTS (NOTE 10) SHAREHOLDERS' EQUITY Preferred Stock--par value $.01 per share; authorized shares, 1,000,000; none issued -- -- Common Stock--without par value, authorized shares, 20,000,000; issued shares, 6,284,615 in 1996, 6,200,158 in 1995 (Note 4) 6,284,615 6,200,158 Capital surplus (Note 4) 3,883,126 2,259,502 Retained earnings 54,825,048 46,799,379 Currency translation adjustment (38,690) (100,460) - --------------------------------------------------------------------------------------------------------------------- Total 64,954,099 55,158,579 - --------------------------------------------------------------------------------------------------------------------- Less Common Stock in treasury--8,234 shares in 1996; 27,532 shares in 1995; at cost (127,210) (385,218) - --------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 64,826,889 54,773,361 - --------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $131,169,442 $117,721,259 - ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 9 3 TUSCARORA INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
Year Ended August 31, 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 9,652,617 $ 8,980,264 $ 5,703,039 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 12,364,207 10,247,768 9,148,076 Amortization 612,773 641,745 572,474 Provision for losses on receivables 378,366 287,782 180,000 Increase (decrease) in deferred income taxes 200,468 168,189 (670,475) Loss on sale or abandonment of property, plant and equipment, net 80,883 64,425 7,217 Stock compensation expense 12,290 10,516 10,310 Changes in operating assets and liabilities, net of effects of business acquisitions: Decrease (increase): Trade accounts receivable (2,588,248) (5,059,511) (2,500,622) Inventories 2,561,825 (2,468,166) (3,531,860) Prepaid expenses and other current assets (309,401) (393,767) 40,320 Other non-current assets (226,454) (289,188) 821,970 Increase (decrease): Accounts payable 726,863 1,100,205 5,875,211 Accrued income taxes (281,410) 64,376 301,610 Accrued payroll and related taxes 100,695 (256,558) 124,317 Other current liabilities (884,162) 593,290 (201,252) Other long-term liabilities (53,049) 402,820 1,126,599 - --------------------------------------------------------------------------------------------------------------------- Cash provided by operating activities 22,348,263 14,094,190 17,006,934 - --------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of property, plant and equipment (23,128,792) (20,689,178) (12,433,432) Business acquisitions, net of cash acquired (Note 8) (513,239) (5,664,667) (3,712,807) Proceeds from sale of property, plant and equipment 152,129 184,764 52,844 - --------------------------------------------------------------------------------------------------------------------- Cash (used for) investing activities (23,489,902) (26,169,081) (16,093,395) - --------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from long-term debt 8,000,000 16,045,000 4,900,000 Payments on long-term debt (4,854,866) (3,667,977) (3,092,636) Dividends paid (1,626,948) (1,415,195) (1,225,751) Proceeds from sale of Common Stock 323,218 118,287 146,317 - --------------------------------------------------------------------------------------------------------------------- Cash provided by financing activities 1,841,404 11,080,115 727,930 - --------------------------------------------------------------------------------------------------------------------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 20,244 (16,947) -- Net increase (decrease) in cash and cash equivalents 720,009 (1,011,723) 1,641,469 - --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,659,767 3,671,490 2,030,021 - --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,379,776 $ 2,659,767 $ 3,671,490 - --------------------------------------------------------------------------------------------------------------------- Supplemental Disclosure of Cash Flow Data Income taxes paid $ 6,243,828 $ 5,821,289 $ 3,602,117 Interest paid $ 3,302,840 $ 2,396,164 $ 1,206,026 - ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 10 4 TUSCARORA INCORPORATED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - --------------------------------------------------------------------------------
Common Stock Treasury Shares --------------------- ------------------ Currency Shares Capital Retained Translation Issued Amount Surplus Earnings Shares Amount Adjustment Total - ---------------------------------------------------------------------------------------------------------------------------- Balance at August 31, 1993 6,186,765 $6,186,765 $1,950,734 $34,757,022 72,654 ($348,487) -- $42,546,034 - ---------------------------------------------------------------------------------------------------------------------------- Net income 5,703,039 5,703,039 Sale of shares under employee stock purchase plan 6,949 6,949 98,098 105,047 Sale of shares under stock option plans 122,385 (48,140) 288,004 410,389 Shares acquired in payment of option price 22,111 (358,809) (358,809) Dividends paid ($0.20 per share) (1,225,751) (1,225,751) - ---------------------------------------------------------------------------------------------------------------------------- Balance at August 31, 1994 6,193,714 $6,193,714 $2,171,217 $39,234,310 46,625 ($419,292) -- $47,179,949 - ---------------------------------------------------------------------------------------------------------------------------- Net income 8,980,264 8,980,264 Sale of shares under employee stock purchase plan 6,444 6,444 113,874 120,318 Sale of shares under stock option plans (25,589) (33,700) 362,933 337,344 Shares acquired in payment of option price 14,607 (328,859) (328,859) Dividends paid ($0.23 per share) (1,415,195) (1,415,195) Currency translation adjustment ($100,460) (100,460) - ---------------------------------------------------------------------------------------------------------------------------- Balance at August 31, 1995 6,200,158 $6,200,158 $2,259,502 $46,799,379 27,532 ($385,218) ($100,460) $54,773,361 - ---------------------------------------------------------------------------------------------------------------------------- Net income 9,652,617 9,652,617 Sale of shares under employee stock purchase plan 6,013 6,013 134,381 140,394 Sale of unissued shares under stock option plans 11,080 11,080 129,754 140,834 Sale of shares under stock option plans (203,729) (21,300) 307,660 103,931 Shares acquired in payment of option price 2,002 (49,652) (49,652) Shares issued in connection with an acquisition 67,364 67,364 1,563,218 1,630,582 Dividends paid ($0.26 per share) (1,626,948) (1,626,948) Currency translation adjustment $61,770 61,770 - --------------------------------------------------------------------------------------------------------------------------- BALANCE AT AUGUST 31, 1996 6,284,615 $6,284,615 $3,883,126 $54,825,048 8,234 ($127,210) ($38,690) $64,826,889 - ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements. 11 5 TUSCARORA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Tuscarora Incorporated (the Company) is a multinational designer and manufacturer of interior protective packaging and material handling solutions, made from a variety of materials, for a broad range of manufactured products. The Company also supplies customers with molded foam plastic and thermoformed components for a number of industrial and consumer product applications. The principal end-use markets that the Company serves are the high technology, consumer electronics, major appliance and automotive industries. Principles of Consolidation The consolidated financial statements include the accounts of Tuscarora Incorporated and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. Foreign Currency Translation The financial statements of the Company's foreign subsidiaries are maintained in their functional currencies and translated into U.S. dollars. Assets and liabilities are translated at current exchange rates in effect at each balance sheet date, and revenues and expenses are translated at a weighted-average of exchange rates in effect during the year. Resulting translation gains or losses are accumulated as a separate component of shareholders' equity. In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows", cash flows from the Company's operations in foreign countries are calculated based on their functional currencies. As a result, amounts related to operating assets and liabilities reported on the Consolidated Statements of Cash Flows for the fiscal years ended August 31, 1996 and 1995 will not necessarily agree with changes in the corresponding balances on the Consolidated Balance Sheets. The effect of exchange rate changes on cash balances held in foreign currencies is reported on a separate line below cash flows provided by financing activities. Cash Equivalents The Company considers all highly liquid investments with a maturity of 90 days or less to be cash equivalents. Concentrations of Credit Risk Financial instruments which potentially subject the Company to credit risk consist primarily of trade accounts receivable. Due to the large number of the Company's customers and their dispersion across many geographic areas, concentrations of credit risk with respect to trade accounts receivable are limited. This risk is further reduced by the Company's maintenance of credit insurance on certain large accounts. Inventories Inventories other than finished goods are stated at the lower of cost or market, cost being determined on the FIFO (first-in, first-out) method. Finished goods are stated at the lower of average cost or market and include the cost of material, labor and manufacturing overhead. 12 6 TUSCARORA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property, Plant and Equipment Land, buildings and equipment are stated on the basis of cost. Major renewals and betterments are charged to the property accounts while replacements, maintenance and repairs which do not improve or extend the life of the assets are charged to income. When properties are disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any profit or loss on disposition is credited or charged to income. Provisions for depreciation of plant and equipment are computed on the straight-line method based on the following estimated useful lives: Building and improvements ............................. 10-30 years Machinery and equipment ............................... 3-10 years Other Assets Other assets consist primarily of intangible assets such as goodwill and covenants not to compete which have been acquired in connection with business acquisitions (see Note 8) and are amortized using the straight-line method over the periods estimated to be benefited, which currently do not exceed fifteen and three years, respectively. Interest Rate Agreements The Company has entered into interest rate cap and floor agreements with its principal bank to hedge its interest rate exposure. The cost associated with an agreement is amortized over the life of the agreement. Differences in interest, paid or received, under the agreements would be recognized as an adjustment to interest expense, but through August 31, 1996 no interest differential payments have been paid or received. The costs associated with, and the fair market value of, the agreements are not material. Net Income Per Share Net income per share has been computed on the weighted average number of shares of Common Stock outstanding. The fully diluted net income per share of Common Stock has not been separately presented as the amounts would not be materially different from the net income per share of Common Stock. Use of Estimates The financial statements are prepared in conformity with generally accepted accounting principles and, accordingly, include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates. Reclassification Certain amounts in the Consolidated Balance Sheet for the fiscal year ended August 31, 1995 and in the Consolidated Statements of Cash Flows for the fiscal years ended August 31, 1995 and 1994 have been reclassified to be consistent with the 1996 presentation. NOTE 2: INVENTORIES Inventories at August 31, 1996 and 1995 are summarized as follows: - --------------------------------------------------------
August 31, 1996 1995 - ------------------------------------------------------- Finished goods $ 9,739,590 $ 9,317,095 Work in process 215,475 421,524 Raw materials 4,233,990 6,576,578 Supplies 1,477,825 1,703,413 - ------------------------------------------------------- Total $15,666,880 $18,018,610 - -------------------------------------------------------
13 7 TUSCARORA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3: LONG-TERM DEBT In August 1996, the Company entered into a new credit agreement with its principal bank which provides for a $40,000,000 revolving credit facility expiring on August 31, 1999 and a $37,000,000 eight-year term note repayable in quarterly installments, with final maturity on August 31, 2004. The new revolving credit facility replaced a $14,000,000 revolving credit facility under the prior credit agreement. The proceeds from the new term loan were used to pay the outstanding principal balance of $26,720,000 under four term notes issued under the prior credit agreement as well as $10,280,000 borrowed under the prior revolving credit facility. Under the new credit agreement, the Company may choose as to both the revolving credit facility and the new term note between various interest rate options for specified interest periods. A commitment fee of 1/8 of 1% per annum is payable on the average daily unborrowed funds under the revolving credit facility. Long-term debt outstanding at August 31, 1996 and 1995 is summarized as set forth below:
- ---------------------------------------------------------------------------------------------------------------------- Interest Rate at August 31, August 31, 1996 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- Notes under credit agreement with principal bank: Variable rate revolving credit note 6.50% $ 3,215,000 $ 5,495,000 Term notes payable by maturity: Variable rate note payable in quarterly installments, through June 1, 2000 -- -- 7,900,000 Variable rate note payable in quarterly installments, through July 1, 2002 -- -- 2,800,000 Variable rate note payable in quarterly installments, through July 1, 2004 -- -- 8,100,000 Variable rate note payable in quarterly installments, through August 31, 2004 6.75% 37,000,000 -- Variable rate note payable in quarterly installments, through July 1, 2005 -- -- 12,000,000 Other long-term debt: Variable rate industrial development bonds Subject to annual mandatory sinking fund redemption through December 1, 2000, with final payment on December 1, 2001 3.70% 3,300,000 3,725,000 Variable rate mortgage note payable in quarterly installments, through March 30, 2006 8.75% 812,507 895,840 Non-interest bearing obligation payable in quarterly installments, through April 30, 1997 -- 182,642 413,565 Variable rate notes payable in monthly installments, through December, 31, 1999 9.42% 85,322 -- - ---------------------------------------------------------------------------------------------------------------------- 44,595,471 41,329,405 Less amounts due within one year, included in current liabilities 5,346,335 4,819,255 - ---------------------------------------------------------------------------------------------------------------------- Total long-term debt $39,249,136 $36,510,150 - ----------------------------------------------------------------------------------------------------------------------
The outstanding borrowings by the Company under the new credit agreement with its principal bank are unsecured. The new agreement contains covenants which require the Company to maintain a certain tangible net worth as well as certain financial ratios. These covenants also impose limitations on the amount which the Company may pay during any fiscal year for property, plant and equipment and transactions accounted for as business acquisitions. The agreement relating to the Company's industrial development bonds also contains financial covenants. At August 31, 1996, approximately $5,100,000 of retained earnings was available for the payment of cash dividends by the Company without causing a violation of any of the financial covenants. 14 8 TUSCARORA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Aggregate maturities of long-term debt during each of the five fiscal years ending after August 31, 1996 are as follows:
- ------------------------------------------------------- August 31, - ------------------------------------------------------- 1997 $5,346,335 1998 5,163,241 1999 5,154,606 2000 5,137,109 2001 5,133,332 - -------------------------------------------------------
NOTE 4: COMMON STOCK In all transactions involving the authorized but unissued shares of the Company's Common Stock, an amount equal to $1.00 times the number of shares which is issued is credited to the Common Stock account and the balance of the purchase price is credited to the Capital Surplus account. NOTE 5: STOCK OPTIONS AND COMMON STOCK PURCHASE PLAN In December 1994, the Company's shareholders approved an amendment to the Company's 1989 Stock Incentive Plan increasing the number of shares of the Company's Common Stock that may be issued under the plan by 300,000. At August 31, 1996, a total of 217,150 shares remained available for the grant of stock options under the plan. The outstanding stock options have been granted under this plan and a prior stock option plan. All stock options have been granted at 100% of the fair market value of the Company's Common Stock on the date of grant (110% in the case of Ten Percent Employees). The stock options have ten year option terms (five years in the case of Ten Percent Employees). The option price may be paid in cash, in already-owned shares of the Company's Common Stock or in a combination of cash and shares. Data concerning the stock options outstanding during the three fiscal years ended August 31, 1996 is as follows: - -------------------------------------------------------
Range of Shares Option Price - ------------------------------------------------------- Shares under option August 31, 1993 274,330 $ 3.17-16.44 Options granted 44,200 15.00 Options expired 9,300 10.00-15.00 Options exercised 48,140 3.17-16.44 - ------------------------------------------------------- Shares under option August 31, 1994 261,090 $ 3.17-16.44 Options granted 92,500 16.75 Options expired 1,200 15.00-16.44 Options exercised 33,700 3.17-16.44 - ------------------------------------------------------- Shares under option August 31, 1995 318,690 $ 3.17-16.75 Options granted 96,500 24.75 Options expired 5,100 15.00-24.75 Options exercised 32,380 3.17-16.75 - ------------------------------------------------------- SHARES UNDER OPTION AUGUST 31, 1996 377,710 $ 4.67-24.75 - -------------------------------------------------------
The options outstanding at August 31, 1996 are exercisable and expire at various dates from December 1996 to October 2005. The Company has a Common Stock Purchase Plan under which most full-time salaried employees in the U.S. may participate. Employees may authorize salary deductions up to 8% of annual salary but not to exceed $300 per month, and the Company contributes an amount equal to 10% of the contributions of the participating employees. The contributions are used to purchase shares of the Company's Common Stock from the Company at current market value. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). This standard establishes a fair value method for accounting for stock-based compensation plans either through recognition or disclosure. The statement must be implemented in the 1997 fiscal year. Management believes that the impact of adopting SFAS No. 123 will not be material. 15 9 TUSCARORA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6: INCOME TAXES In accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes", the provision (benefit) for taxes on income consists of the following:
- ------------------------------------------------------- Year Ended August 31, 1996 1995 1994 - ------------------------------------------------------- Payable Currently: Federal $4,894,867 $4,751,053 $3,252,570 State 1,140,588 1,121,211 731,859 Foreign 16,759 13,401 -- - ------------------------------------------------------- 6,052,214 5,885,665 3,984,429 - ------------------------------------------------------- Deferred: Federal 110,844 130,290 (520,314) State 34,094 37,899 (150,161) Foreign 55,530 -- -- - ------------------------------------------------------- 200,468 168,189 (670,475) - ------------------------------------------------------- Total provision $6,252,682 $6,053,854 $3,313,954 - -------------------------------------------------------
The following is a reconciliation of the statutory U.S. Corporate Federal income tax rate to the effective income tax rate:
- ------------------------------------------------------ Year Ended August 31, 1996 1995 1994 - ------------------------------------------------------ U.S. Statutory rate applied to pre-tax income 35.0% 35.0% 34.0% State income taxes net of Federal tax benefit 4.8% 5.0% 4.3% Other -0.5% 0.3% -1.5% - ------------------------------------------------------ 39.3% 40.3% 36.8% - ------------------------------------------------------
Deferred tax assets and liabilities at August 31, 1996, 1995 and 1994 were comprised of the following:
- ------------------------------------------------------------------ August 31, 1996 1995 1994 - ------------------------------------------------------------------ Deferred tax assets: Allowance for bad debts $ 310,901 $ 270,045 $ 258,409 Supplemental pension benefits 432,865 441,141 449,964 Other 72,047 -- 23,964 Deferred tax liabilities: Depreciation 2,809,804 2,513,391 2,315,596 Other 75,997 46,873 97,630 - ------------------------------------------------------------------ Net deferred tax liability $2,069,988 $1,849,078 $1,680,889 - ------------------------------------------------------------------
NOTE 7: RETIREMENT BENEFITS The Company maintains non-contributory individual account defined contribution pension plans covering most full-time employees in the U.S. and a contributory individual account defined contribution pension plan covering most full-time salaried employees in the U.K. Under these pension plans, the Company contribution made for each employee is generally 5-1/2% of total compensation. Benefits generally do not become vested until, but become fully vested upon, five full years of employment in the U.S. and two full years of employment in the U.K. Normal retirement under all plans is age 65. All contributions are made to the plan trustees and invested for the accounts of the participants. The Company contributions for the fiscal years ended August 31, 1996, 1995 and 1994 were $1,557,721, $1,409,179 and $1,163,002, respectively. The unfunded past service liability at August 31, 1996, 1995 and 1994 under the plans was $442,822, $405,525 and $382,626, respectively. The past service liability is paid over a ten-year period. The Company also maintains a Section 401(k) plan covering most full-time salaried employees in the U.S. The Company makes matching contributions based upon the savings of participants, subject to certain limitations. All contributions are made to the plan trustee, are fully vested and are invested by the plan trustee among various investment options in accordance with instructions from the participants. 16 10 TUSCARORA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company contributions for the fiscal years ended August 31, 1996, 1995 and 1994 were $94,628, $78,733 and $54,755, respectively. Certain former executive officers of the Company or their beneficiaries are receiving supplemental retirement benefits directly from the Company, the future liability for which is reflected as a long-term liability. As of August 31, 1996, this liability amounted to $1,083,788, of which $128,023 represents amounts payable within one year. The Company does not provide any other significant postretirement benefits. NOTE 8: ACQUISITIONS In December 1995, the Company acquired all the outstanding capital stock of Alpine Packaging, Inc., a custom designer and manufacturer of specialty corrugated and technical/military specification packaging and wood pallets, in Colorado Springs, Colorado, for which the Company issued 51,177 shares of its Common Stock and paid cash having an aggregate value of approximately $1,300,000 at the closing. The Consolidated Statement of Cash Flows for the fiscal year ended August 31, 1996 excludes the non-cash consideration issued in connection with the acquisition. During the fiscal year ended August 31, 1995, the Company acquired two businesses for an aggregate of approximately $5,100,000 in cash paid at the closings. In February 1995, the Company purchased the custom molding business of M.Y. Trondex Ltd. in the United Kingdom. In September 1994, the Company acquired the specialty corrugated and foam packaging business of Astrofoam, Inc., in Holden, Massachusetts. The Company also acquired two businesses during the fiscal year ended August 31, 1994 for a total of approximately $2,900,000 in cash paid at the closings. In April 1994, the Company acquired the custom molding and fabricating business of Styro-Molders Corporation in Colorado Springs, Colorado. In September 1993, the Company purchased the corrugated packaging business of Box Pack Incorporated in Greeneville, Tennessee. All the above acquisitions have been accounted for as purchases. In each of these acquisitions, (i) part of the purchase price was allocated to goodwill and/or a covenant not to compete (see Note 1) and (ii) the Company agreed to pay additional consideration to the seller based on the sales realized by, or the operating performance of, the business acquired over a specified period after the acquisition. The additional consideration is charged against selling expense or allocated to goodwill. NOTE 9: LEASE COMMITMENTS Rental expense charged to operations for the fiscal years ended August 31, 1996, 1995 and 1994 amounted to $4,223,461, $3,889,162 and $2,825,219, respectively. The approximate net minimum rentals required to be paid under all non-cancelable operating leases during each of the five fiscal years ending after August 31, 1996 is as follows:
- ------------------------------------------------------- August 31, - ------------------------------------------------------- 1997 $3,584,371 1998 2,958,265 1999 2,381,601 2000 1,919,969 2001 1,732,712 Thereafter 3,093,788 - -------------------------------------------------------
Substantially all the rental payments represent commitments under leases for manufacturing and warehouse facilities and under leases for trucking equipment. The Company has the option to purchase certain of the manufacturing and warehouse facilities. 17 11 TUSCARORA INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10: CLAIMS AND CONTINGENCIES Two lawsuits are pending against the Company involving claims of sexual discrimination and harassment in which compensatory and punitive damages are sought. The Company is vigorously contesting these lawsuits and believes that, consistent with a policy in place for many years, it promptly, reasonably and effectively responded to all alleged incidents. Other employment-related claims are pending before Federal and state agencies. The Company is also involved in legal and administrative proceedings, including one with respect to a Superfund site, which may result in the Company becoming liable for a portion of certain environmental cleanup costs. With respect to these matters, the Company believes that its share of the costs should not be significant. In the opinion of management, the disposition of the employment and environmental claims should not have a material adverse effect on the Company's financial position. NOTE 11: SUBSEQUENT EVENTS On September 10, 1996, the Company acquired the custom thermoforming business of FormPac Corporation in Sandusky, Ohio. On October 4, 1996, the Company acquired all the outstanding capital stock of EPS (Moulders) Ltd., a custom molding business of expanded polystyrene packaging products in Livingston, Scotland. The aggregate consideration paid at the closings of these transactions was approximately $5,900,000, substantially all of which was paid in cash. The Company will pay additional consideration based on the operating performance of FormPac's business and on the sales of EPS (Moulders) Ltd. following the acquisitions. In each case, the acquisitions will be accounted for as purchases. NOTE 12: QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial information is as follows:
- --------------------------------------------------------------------------------------------------------------------- Fiscal Quarter Ended November 30 February 29 May 31 August 31 - --------------------------------------------------------------------------------------------------------------------- FISCAL 1996: Net Sales $47,296,000 $43,188,000 $45,113,000 $46,993,000 Gross Profit 11,957,000 9,913,000 10,550,000 10,920,000 Net Income 3,155,000 1,987,000 2,371,000 2,140,000 Per Share of Common Stock: Net Income $0.51 $0.32 $0.38 $0.34 Dividends Paid -- $0.13 -- $0.13 Stock Market Prices: High 25-1/2 25-1/2 24-7/8 24-3/4 Low 22-1/4 21-1/2 23-3/8 21 - --------------------------------------------------------------------------------------------------------------------- November 30 February 28 May 31 August 31 - --------------------------------------------------------------------------------------------------------------------- FISCAL 1995: Net Sales $38,920,000 $37,890,000 $40,970,000 $45,520,000 Gross Profit 9,778,000 8,776,000 9,774,000 11,289,000 Net Income 2,501,000 1,840,000 2,345,000 2,294,000 Per Share of Common Stock: Net Income $0.41 $0.30 $0.38 $0.37 Dividends Paid -- $0.11 -- $0.12 Stock Market Prices: High 18-1/4 21 22 23-3/4 Low 14 16-1/4 18-1/2 18-3/4 - ---------------------------------------------------------------------------------------------------------------------
18 12 TUSCARORA INCORPORATED REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TUSCARORA INCORPORATED We have audited the accompanying consolidated balance sheets of Tuscarora Incorporated and subsidiaries as of August 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended August 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tuscarora Incorporated and subsidiaries as of August 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 1996, in conformity with generally accepted accounting principles. /s/ S.R. SNODGRASS, A.C. ------------------------ Beaver Falls, PA October 11, 1996 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS--FISCAL 1996 COMPARED TO FISCAL 1995 Net sales for the fiscal year ended August 31, 1996 were $182.6 million, an increase of $19.3 million, or 11.8%, over fiscal 1995. Approximately 38% of the increase in net sales was attributable to the acquisition of a custom molding business in the United Kingdom and of an integrated materials business in Colorado Springs, Colorado in February and December 1995, respectively (see Note 8 of the Notes to Consolidated Financial Statements). The balance of the increase is attributable to higher sales of both custom molded and integrated materials products in most major markets which the Company serves, particularly the major appliance and consumer electronics industries. The increase was achieved despite a reduction in selling prices which occurred in December 1995 following decreases in EPS resin costs. Net sales in the fourth quarter of fiscal 1996 were $47.0 million, an increase of 3.2%, or $1.5 million, over net sales of $45.5 million in the same period of fiscal 1995 despite the selling price reduction referred to above. The fiscal year over prior year growth rate in net sales in the fourth quarter was smaller than in the previous three fiscal quarters of fiscal 1996, as many of the Company's large industrial customers reduced their production rates to adjust their finished goods inventories. Although the sales level slowed in the early part of the fourth quarter, sales activity increased significantly at the end of the quarter and is expected to continue into fiscal 1997. Gross profit for the fiscal year ended August 31, 1996 was $43.3 million, or 23.7%, of net sales, compared to $39.6 million, or 24.3%, of net sales in fiscal 1995. The decrease in the gross profit margin is due primarily to lower than anticipated sales levels, particularly in the fourth quarter, which resulted in lower utilization of the Company's expanded manufacturing capacity and associated fixed costs. The decrease in the gross profit margin is also attributable to the lower selling prices. Selling and administrative expenses for the fiscal year ended August 31, 1996 increased 12.3%, or $2.7 million, to $24.5 million but remained steady as a percentage of net sales at 13.4%. The dollar increase was due primarily to increased employee costs and to costs added in connection with the acquisitions of the businesses in February and December 1995. 19 13 TUSCARORA INCORPORATED Interest expense for the fiscal year ended August 31, 1996 was $2.9 million compared to $2.6 million in fiscal 1995. The increase of $300,000 was due to a higher level of outstanding debt throughout the year, most of which was borrowed in fiscal 1995. Income before income taxes for the fiscal year ended August 31, 1996 increased to $15.9 million from $15.0 million for fiscal 1995, an increase of 5.8%. The provision for income taxes for the fiscal year ended August 31, 1996 increased due to the increase in income before income taxes. The Company's effective tax rate decreased to 39.3% from 40.3%. The effective tax rate was higher in fiscal 1995 due to the net operating loss of the U.K. operations which was not available to offset U.S. taxable income. Net income for the fiscal year ended August 31, 1996 was $9.7 million, an increase of 7.5% from $9.0 million in fiscal 1995. The increase was due primarily to the increase in net sales and gross profit. Net sales and net income for fiscal year 1996 were Company records. RESULTS OF OPERATIONS--FISCAL 1995 COMPARED TO FISCAL 1994 Net sales for the fiscal year ended August 31, 1995 were $163.3 million, representing an increase of $43.2 million, or 36.0%, over fiscal 1994. Approximately 42% of the increase in net sales was due to the acquisition of businesses in Colorado Springs, Colorado and Holden, Massachusetts in April and September 1994, respectively, and in the United Kingdom in February 1995 (see Note 8 of the Notes to Consolidated Financial Statements). The balance of the increase reflected strong demand from the Company's existing customers throughout the fiscal year in virtually all geographic and end-use markets, particularly high technology, consumer electronics, major appliances and automotive, and higher selling prices to customers as a result of the Company passing on higher raw material costs. Net sales in the fourth quarter of fiscal 1995 were $45.5 million, an increase of $11.7 million, or 34.7%, over net sales of $33.8 million in the fourth quarter of fiscal 1994. Substantial sales increases were obtained during fiscal 1995 and the fourth quarter of fiscal 1995 in both the Company's custom molding and integrated materials operations. Gross profit for the fiscal year ended August 31, 1995 was $39.6 million, or 24.3%, of net sales, compared to $27.6 million, or 23.0%, of net sales, for fiscal 1994. The gross profit margin was favorably impacted by the higher sales level which resulted in improvements in manufacturing efficiency in both the Company's custom molding and integrated materials operations and by the consumption in the first quarter of raw materials purchased by the Company during the 1994 fiscal year in advance of price increases from the Company's suppliers. The increase in the gross profit margin was partially offset by below-average margins at the U.K. operations following their acquisition. Selling and administrative expenses for the fiscal year ended August 31, 1995 increased $4.7 million, or 27.6%, but decreased as a percentage of net sales to 13.4% compared with 14.2% in fiscal 1994. The dollar increase was due primarily to employee costs added in connection with the acquisitions and increased commissions associated with the higher sales level. Interest expense for the fiscal year ended August 31, 1995 was $2.6 million compared to $1.3 million for fiscal 1994. The increase of $1.3 million was due to a higher level of outstanding debt coupled with higher interest rates. Income before income taxes for the fiscal year ended August 31, 1995 increased to $15.0 million from $9.0 million for fiscal 1994, an increase of 66.7%. The provision for income taxes for the fiscal year ended August 31, 1995 increased due to the increase in income before income taxes. The Company's effective tax rate increased to 40.3% from 36.8% primarily due to the income tax effect in fiscal 1995 of an unused net operating loss of the U.K. operations and the exclusion from taxable income in fiscal 1994 of the excess of the proceeds over the carrying value of life insurance policies owned by the Company. Net income for the fiscal year ended August 31, 1995 was $9.0 million, an increase of 57.5% from $5.7 million for fiscal 1994. The increase was due primarily to the increases in net sales and gross profit. Net sales and net income for fiscal 1995 were Company records. 20 14 TUSCARORA INCORPORATED LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities amounted to $22.3 million, $14.1 million and $17.0 million in fiscal 1996, 1995 and 1994, respectively. Depreciation and amortization in fiscal 1996, 1995 and 1994 amounted to $13.0 million, $10.9 million and $9.7 million, respectively. Because a substantial portion of cash flow from operations results from depreciation and amortization, the Company believes that its liquidity would not be adversely affected should a period of reduced earnings occur. At August 31, 1996, the Company's accounts receivable were higher than at the end of the previous fiscal year due to the increased sales level during the latter part of the fourth quarter. Inventories were lower at August 31, 1996 than they were at the end of the previous fiscal year due to the Company maintaining minimum raw material inventory levels as raw material prices trended lower during fiscal 1996. Capital expenditures for property, plant and equipment during fiscal 1996, 1995 and 1994 amounted to $23.1 million, $20.7 million and $12.4 million, respectively, including approximately $900,000, $1.7 million and $1.1 million, respectively, for environmental control equipment. The largest amount of the capital expenditures during all three years has been for machinery and equipment. For fiscal 1996, the expenditures included machinery and equipment for a new custom molding facility in Spennymoor, England where production commenced in June 1996 and for a new custom molding facility in Storm Lake, Iowa where operations are expected to commence in November 1996. During fiscal 1996, the Company also issued 51,177 shares of its Common Stock and paid cash, having an aggregate value of $1.3 million, in connection with the business acquisition in December 1995. In September 1996, the Company also acquired the custom thermoforming business of FormPac Corporation in Sandusky, Ohio and the custom molding business of EPS (Moulders) Ltd. in Livingston, Scotland for an aggregate of approximately $5.9 million (see Note 11 of the Notes to Consolidated Financial Statements). The Company will continue to look for acquisitions which will mesh well with the Company's business and will continue to develop new production sites to meet the needs of the Company's customers. In August 1996, the Company announced it will build a new custom molding facility in Brenham, Texas which it expects will become operational in the spring of fiscal 1997. Long-term debt increased to $39.2 million at August 31, 1996 from $36.5 million at August 31, 1995. During fiscal 1996, the Company entered into a new credit agreement with its principal bank which increased its revolving credit facility to $40.0 million from $14.0 million and consolidated four outstanding term loans which aggregated $26.7 million along with $10.3 million which was outstanding under the previous revolving credit facility into a new $37.0 million eight-year term loan. At August 31, 1996, $36.8 million of the new revolving credit facility remained available. See Note 3 of the Notes to Consolidated Financial Statements for additional information with respect to long-term debt. Cash dividends amounted to $1.6 million ($.26 per share), $1.4 million ($.23 per share) and $1.2 million ($.20 per share) in fiscal 1996, fiscal 1995 and fiscal 1994, respectively. Cash provided by operating activities as supplemented by the amount available under the bank credit agreement should continue to be sufficient to fund the Company's operating needs, capital requirements and dividend payments. INFLATION The impact of inflation on both the Company's financial position and results of operations has been minimal and is not expected to adversely effect fiscal 1997 results. 21 15 TUSCARORA INCORPORATED ELEVEN YEAR CONSOLIDATED FINANCIAL SUMMARY
- ---------------------------------------------------------------------------------------------------------------- Year Ended August 31 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------- Net sales $182,590 $163,300 $120,085 $101,075 $95,809 Income before income taxes 15,905 15,034 9,017 6,285 8,289 Net income 9,653 8,980 5,703 4,270(a) 4,981 Depreciation and amortization 12,977 10,890 9,721 9,206 7,879 Weighted average shares outstanding 6,242 6,154 6,129 6,109 6,097 Net income per share 1.55 1.46 0.93 0.70(a) 0.82 Margin on sales 5.3% 5.5% 4.7% 4.2% 5.2% Return on beginning shareholders' equity 17.6% 19.0% 13.4% 10.9% 14.2% Working capital 23,224 22,390 16,548 15,893 13,463 Total assets 131,169 117,721 94,225 79,769 75,510 Long-term debt (excluding current portion) 39,249 36,510 25,284 23,930 22,121 Shareholders' equity 64,827 54,773 47,180 42,546 39,280 Shareholders' equity per share 10.39 8.90 7.70 6.96 6.44 Dividends per share 0.26 0.23 0.20 0.18 0.16 - ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------- Year Ended August 31 1991 1990 1989 1988 1987 1986 - ----------------------------------------------------------------------------------------------------------------------------- Net sales $84,420 $85,458 $77,642 $65,583 $55,279 $46,641 Income before income taxes 6,856 7,912 7,479 5,644 5,192 3,587 Net income 4,230 4,874 4,478 3,469 2,834 2,210 Depreciation and amortization 7,235 6,591 5,463 4,269 3,347 2,811 Weighted average shares outstanding 6,057 6,022 6,020 5,356 5,290 5,288 Net income per share 0.70 0.81 0.74 0.65 0.54 0.42 Margin on sales 5.0% 5.7% 5.8% 5.3% 5.1% 4.7% Return on beginning shareholders' equity 13.4% 17.8% 19.0% 22.0% 21.1% 19.1% Working capital 13,728 11,385 11,418 10,146 5,792 5,086 Total assets 63,775 60,677 53,138 46,777 40,132 32,879 Long-term debt (excluding current portion) 14,870 16,264 13,165 13,248 12,858 11,005 Shareholders' equity 35,152 31,451 27,360 23,574 15,762 13,404 Shareholders' equity per share 5.80 5.22 4.54 4.40 2.98 2.53 Dividends per share 0.14 0.13 0.12 0.10 0.09 0.08 - -----------------------------------------------------------------------------------------------------------------------------
In the above table, all dollar amounts, except per share data, are in thousands. The weighted average number of shares of Common Stock outstanding and the dividends and other per share amounts have been adjusted to reflect the 200% share distribution paid on October 1, 1987 and the 100% share distribution paid on April 14, 1992. (a) Net income and net income per share for the 1993 fiscal year include income of $321,218 or $0.05 per share resulting from the cumulative effect of a change in the method of accounting for income taxes. EX-21 9 TUSCARORA INCORPORATED 10-K 1 Exhibit 21 TUSCARORA INCORPORATED List of Subsidiaries -------------------- The following is a complete list of the subsidiaries of the Company: Jurisdiction of Name of Subsidiary Incorporation - ------------------------------------------ ---------------------- Alpine Packaging, Inc. (1) Colorado Tuscarora International, Inc. (1) Delaware Tuscarora, S.A. de C.V. (2) Mexico Tuscarora de Mexico, S.A. de C.V. (2) Mexico Tuscarora Limited (1) England Tuscarora (Scotland) Limited (3) England - ------------ (1) 100% owned by Tuscarora Incorporated. (2) 100% owned by Tuscarora International, Inc. (3) 100% owned by Tuscarora Limited. EX-23 10 TUSCARORA INCORPORATED 10-K 1 Exhibit 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the incorporation by reference in the following documents of our reports, dated October 11, 1996, on our audits of the consolidated financial statements and a related financial statement schedule of Tuscarora Incorporated and its subsidiaries as of August 31, 1996 and 1995, and for the years ended August 31, 1996, 1995 and 1994, which reports are incorporated by reference or included in the annual report on Form 10-K of Tuscarora Incorporated for its fiscal year ended August 31, 1996: 1. Registration Statements No. 33-35373 and No. 333-06111 on Form S-8 for the 1985 Incentive Stock Option Plan and 1989 Stock Incentive Plan of Tuscarora Incorporated, filed under the Securities Act of 1933, as amended, and the Prospectus used in connection with such Registration Statements; and 2. Registration Statement No. 33-35587 on Form S-8 for the Tuscarora Incorporated Common Stock Purchase Plan for Salaried Employees, filed under the Securities Act of 1933, as amended, and the Prospectus used in connection with such Registration Statement. We also consent to the reference to our firm under the caption "Experts" in the above-mentioned Prospectuses. /s/ S.R. SNODGRASS, A.C. ----------------------- Beaver Falls, Pennsylvania S.R. Snodgrass, A.C. November 27, 1996 Certified Public Accountants EX-24 11 TUSCARORA INCORPORATED 10-K 1 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ THOMAS S. BLAIR ------------------- Thomas S. Blair 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ DAVID I. COHEN ------------------- David I. Cohen 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ ABE FARKAS -------------- ABE FARKAS 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ KAREN L. FARKAS ------------------- Karen L. Farkas 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ ROBERT W. KAMPMEINERT ------------------------- Robert W. Kampmeinert 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ DAVID C. O'LEARY -------------------- David C. O'Leary 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ HAROLD F. REED, JR. ----------------------- Harold F. Reed, Jr. 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ JAMES I. WALLOVER --------------------- James I. Wallover 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John P. O'Leary, Jr. and Brian C. Mullins and each of them, the undersigned's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended August 31, 1996 of Tuscarora Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person and hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. October 11, 1996 /s/ THOMAS P. WOOLAWAY ---------------------- Thomas P. Woolaway EX-27 12 TUSCARORA INCORPORATED 10-K
5 12-MOS AUG-31-1996 AUG-31-1996 3,379,776 0 26,881,581 787,175 15,666,880 46,912,756 159,239,608 80,529,962 131,169,442 23,688,852 39,249,136 0 0 6,284,615 58,542,274 131,169,442 182,589,621 182,589,621 139,249,481 139,249,481 0 378,366 2,928,483 15,905,299 6,252,682 9,652,617 0 0 0 9,652,617 1.52 1.52
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