<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
M. A. HANNA COMPANY
(Name of Registrant as Specified In Its Charter)
M. A. HANNA COMPANY
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LOGO OF M.A. HANNA COMPANY APPEARS HERE]
To Our Stockholders:
On behalf of the Board of Directors and management, I
cordially invite you to attend the 1994 annual meeting of
stockholders of the Company to be held on Wednesday, May 4,
1994, at 10:30 A.M. at the Forum Conference Center Auditorium,
1375 East Ninth Street, Cleveland, Ohio.
At the meeting, in addition to considering and acting on the
matters described in the Proxy Statement, there will be a
management report. Following the report, there will be an
opportunity for stockholders to ask questions about the
Company and its operations.
If you will need special assistance at the meeting because
of a disability, please contact the office of the Corporate
Secretary at the above address.
Whether or not you currently plan to attend the meeting, it
is important that you exercise your right to vote. Please
sign, date and return the proxy card promptly.
I look forward to seeing you on May 4.
Sincerely,
/s/ M. D. Walker
M. D. Walker
Chairman
<PAGE>
[LOGO OF M.A. HANNA COMPANY APPEARS HERE]
1301 EAST NINTH STREET-- SUITE 3600
CLEVELAND, OHIO 44114-1860
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders of M. A. Hanna Company
will be held on Wednesday, May 4, 1994 at 10:30 A.M. at the
Forum Conference Center Auditorium, 1375 East Ninth Street,
Cleveland, Ohio, for the following purposes:
(1) Electing nine directors for the ensuing year;
(2) Ratifying the appointment of auditors;
(3) Ratifying and approving amendments to the Company's 1988
Long-Term Incentive Plan;
(4) Ratifying and approving the Directors' Deferred Fee
Plan; and
(5) Transacting such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on
March 7, 1994, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the
meeting or any adjournment thereof.
John S. Pyke, Jr.
Vice President and Secretary
March 17, 1994
PLEASE FILL OUT, SIGN AND MAIL THE ENCLOSED FORM OF PROXY IF
YOU DO NOT EXPECT TO BE PRESENT AT THE ANNUAL MEETING. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
This statement is furnished in connection with the solicitation by the Board
of Directors of M. A. Hanna Company of proxies to be used at the annual meeting
of stockholders of the Company to be held on Wednesday, May 4, 1994. The
meeting will be held at the Forum Conference Center Auditorium, 1375 East Ninth
Street, Cleveland, Ohio.
If the accompanying form of proxy is properly executed and returned, the
shares represented by it will be voted and, where a specification is made by
the stockholder, as provided therein, will be voted in accordance with such
specification. If no such specification is made, the shares will be voted in
accordance with the recommendations of the Company's management. The proxy may,
nevertheless, be revoked prior to its exercise by delivering written notice of
revocation to the Company, by executing a later dated proxy or by attending the
meeting and voting in person. For stockholders participating in the Company's
Dividend Reinvestment and Stock Purchase Plan, the administering bank will only
vote the shares that it holds for the participant's account in accordance with
the proxy returned by the participant and the procedures set forth above. If a
proxy is not returned or returned unsigned, none of the shares represented by
that proxy, whether held in the Dividend Reinvestment and Stock Purchase Plan
or otherwise, will be voted.
At the annual meeting, the results of stockholder voting will be tabulated by
the inspectors of election appointed for the annual meeting. The Company
intends to treat properly executed proxies that are marked "abstain" or that
are held in "street name" by brokers and are not voted on one or more
particular proposals (if otherwise voted on at least one proposal) as "present"
for purposes of determining whether a quorum has been achieved at the annual
meeting. Directors will be elected by a plurality vote. Votes withheld in
respect of the election of directors will not be counted in determining the
outcome of that vote. In respect of the proposals to ratify the appointment of
independent public accountants and ratify and approve the 1994 amendments to
the 1988 Long-Term Incentive Plan and the Directors' Deferred Fee Plan,
abstentions will be treated as votes against the proposal and broker non-votes
will be treated as having no effect on the outcome of the vote.
At the close of business on March 7, 1994 the record date for the annual
meeting, the Company had outstanding and entitled to vote 23,766,480 shares of
Common Stock. Each share of Common Stock is entitled one vote on each matter
brought before the meeting.
The Company has retained Georgeson & Co. Inc., a proxy solicitation firm, for
a fee of $8,000 plus reimbursement of normal expenses, to assist employees of
the Company in the solicitation of proxies by personal interview, telephone and
other means. The cost of solicitation of proxies will be borne by the Company.
The Notice of Annual Meeting, Proxy Statement and form of proxy are first
being mailed to stockholders on approximately March 18, 1994. The Annual Report
of the Company for the year ended December 31, 1993 was first mailed to
stockholders on February 28, 1994, but the Annual Report is not deemed to be
part of this Proxy Statement.
At the annual meeting of stockholders of the Company held on May 5, 1993,
approximately 82% of the then outstanding shares were present at the meeting
and voting.
1. ELECTION OF DIRECTORS
Mr. P. M. Marshall will retire from the Company's Board at the 1994 annual
meeting of stockholders pursuant to the Board's retirement policy. Mr. Marshall
served on the Board of Directors of Hanna since 1990. His contributions and
support have been of inestimable value and his participation will be greatly
missed.
The Board has nominated for election to the Board at the 1994 annual meeting
Dr. Carol A. Cartwright and eight other nominees, all of whom except Dr.
Cartwright were elected at the 1993 annual meeting of stockholders.
1
<PAGE>
It is intended that shares represented by the proxies in the accompanying
form will be voted for the election of the nine nominees listed below to serve
as directors for a term of one year and until their successors are elected and
qualified. If any nominee should be unable or unwilling to serve as a director,
which the Board of Directors does not anticipate, the proxies will be voted for
such other person as the Board of Directors may select or the size of the Board
may be reduced accordingly.
The following table lists information as of January 31, 1994 as to each
nominee for director, his or her principal occupation or employment and certain
other directorships. Except as otherwise indicated each nominee has had the
same principal occupation or employment during the past five years.
<TABLE>
<CAPTION>
NOMINEE FOR DIRECTOR PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS
- --------------------- --------------------------------------------
<S> <C>
B. C. Ames Partner, Clayton, Dubilier & Rice (investment bankers), May, 1990 to
Director since 1980 date. Chairman and Chief Executive Officer, The Uniroyal Goodrich
Age -- 68 Tire Company 1988 to May, 1990. Director of Diamond Shamrock R&M,
Inc., The Progressive Corporation and Warner-Lambert Company.
C. A. Cartwright President, Kent State University (public higher education
Ph.D. institution), 1991 to date. Vice Chancellor for Academic Affairs,
Age -- 52 University of California-Davis, 1988-1993. Director of Ohio Edison
Company, Society National Bank and Republic Engineered Steels, Inc.
and Director of the American Cancer Society, American Association for
Higher Education and American Council on Education.
W. R. Embry Executive Vice President and General Manager, The Cleveland Cavaliers
Director since 1990 (professional basketball team), 1986 to date. Chairman of the Board
Age -- 56 of Michael Alan Lewis Company (supplier to automotive industry).
Director of Centerior Energy Corporation, Ohio Casualty Insurance
Company and Society National Bank.
J. T. Eyton, Chairman, Brascan Limited (natural resources, consumer products and
O.C. financial services). Member of the Senate of Canada. Director of
Director since 1986 Brascan Limited, Edper Enterprises Ltd., Hees International Bancorp
Age -- 59 Inc., Noranda Inc. and Norcen Energy Resources Limited.
G. D. Kirkham Retired Senior Vice President, Kemper Securities Inc. (stockbrokers).
Director since 1975
Age -- 61
M. L. Mann Chairman and Chief Executive Officer, Lexmark International (office
Director since 1991 machines), March 1991 to date. Vice President of International
Age -- 60 Business Machines Corporation ("IBM") and President and General
Manager of various IBM divisions and subsidiaries 1985-March 1991.
Director of Infomart, a Trammell Crow Co., and member of the
Independent Board of Trustees, Fidelity Investments.
D. J. McGregor President and Chief Operating Officer of Hanna, May 3, 1989 to date.
Director since 1990 Senior Vice President -- Operations March 1988-September 1988 and
Age -- 53 Executive Vice President September 1988 to May 1989 of Hanna.
Director of Society Bank Corporation and Vulcan Materials
Corporation.
R. W. Pogue Senior Partner, Jones, Day, Reavis & Pogue (attorneys) January 1,
Director since 1988 1993 to date; Managing Partner, 1989-1992. Director of Continental
Age -- 65 Airlines, Derlan Industries Limited, OHM Corporation, Redland PLC,
Rotek Incorporated, Society National Bank and TRW Inc.
M. D. Walker Chairman and Chief Executive Officer of Hanna, September 1986 to date
Director since 1986 and President, December 1988 to May 3, 1989. Director of Comerica
Age -- 61 Inc., The Reynolds and Reynolds Company and Textron Inc.
</TABLE>
2
<PAGE>
The following table sets forth information as to the beneficial ownership of
the Company's Common Stock on January 31, 1994 by each director-nominee, the
chief executive officer and the four other most highly compensated executive
officers and, as a group, the foregoing persons and other executive officers.
Except as indicated in the footnotes, the director-nominees have sole voting
and investment power over the shares listed.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES
---- ------------ -----------
<S> <C> <C>
B. C. Ames................................... 11,425(1) *
C. A. Cartwright............................. 0 *
W. R. Embry.................................. 10,100(1) *
J. T. Eyton.................................. 16,030(1) *
G. D. Kirkham................................ 17,200(1)(2) *
M. L. Mann................................... 8,667(3) *
D. J. McGregor............................... 134,521(4) *
R. W. Pogue.................................. 18,000(1) *
M. D. Walker................................. 346,883(4) 1.5%
G. W. Henry.................................. 25,907(4) *
J. S. Pyke, Jr............................... 48,272(4) *
T. H. Wilson................................. 54,997(4) *
All directors and executive officers
as a group................................... 713,998(4) 3.0%
</TABLE>
* The shares beneficially owned amount to less than one percent of the
outstanding shares of the Company's Common Stock.
(1) Includes 10,000 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's 1988 Long-Term
Incentive Plan.
(2) Includes 7,200 shares as to which Mr. Kirkham has shared investment and
voting power; the shares owned by a trust for which he serves as a co-
trustee; Mr. Kirkham disclaims any beneficial interest in such shares.
(3) Includes 6,667 shares which may be acquired within 60 days through the
exercise of a stock option granted under the Company's 1988 Long-Term
Incentive Plan.
(4) Includes shares which may be acquired within 60 days through the exercise
of stock options as follows: 108,000, 178,000, 22,250, 37,250, 37,600 and
439,967 shares for Messrs. McGregor, Walker, Henry, Pyke, Wilson and the
group, respectively.
3
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 8 meetings in 1993. All director-nominees
attended at least seventy-five percent of the meetings of the Board and
committees of the Board on which each served except for Mr. Eyton.
In addition to meeting as a group to review the Company's business, certain
members of the Board of Directors also devote their time and talents to the
Board's five standing committees. The committees and their principal functions
are as follows:
The Audit Committee, composed of directors who are not employees of the
Company, held 4 meetings in 1993 with the Company's Vice President--Finance,
Comptroller, Director of Internal Audit and independent public accountants to
review the plan and results of the audit by the independent accountants, the
Company's financial statements, the scope and results of the Company's internal
auditing procedures, the adequacy of the Company's system of internal controls
and the Company's environmental and litigation exposures. The Committee also
selects and appoints independent public accountants to serve as the Company's
auditors each year. Present members are W. R. Embry, G. D. Kirkham (Chairman),
M. L. Mann and P. M. Marshall.
The Board Composition and Governance Committee held one formal meeting in
1993. The Committee reviews and recommends changes in the policies and
operation of the Board and functions and responsibilities of the committees of
the Board. It also acts as a nominating committee of the Board and recommends
qualified candidates for election as directors. Stockholders wishing to
nominate candidates for consideration by the Committee can do so by writing to
the Corporate Secretary and providing the candidate's name, appropriate
biographical data and qualifications. Present members are B. C. Ames, W. R.
Embry (Chairman), R. W. Pogue and M. D. Walker.
The Compensation Committee, composed of directors who are not employees of
the Company, held 7 meetings in 1993. It approves remuneration arrangements and
succession plans for senior management and administers the Company's executive
compensation plans. Present members are B. C. Ames, J. T. Eyton, M. L. Mann
(Chairman) and R. W. Pogue.
The Executive Committee exercises all of the authority of the Board of
Directors during intervals between meetings of the Board except for those
powers to be exercised only by other committees of the Board, the declaration
of any dividend, the issuance of stock and the powers which pursuant to Section
141(c) of the General Corporation Law of the State of Delaware, as amended, may
not be delegated to a Committee. It did not meet formally in 1993. Present
members are B. C. Ames, R. W. Pogue and M. D. Walker (Chairman).
The Pension Plan Committee, composed of directors who are not employees of
the Company, held 2 meetings in 1993. It is responsible for reviewing the
operation and performance of the Company's pension investment program and a
management committee which in turn is responsible for the operation and
administration of the retirement and welfare plans of the Company and its
subsidiaries. Present members are W. R. Embry, G. D. Kirkham and R. W. Pogue
(Chairman).
TRANSATIONS WITH DIRECTORS
Jones, Day, Reavis & Pogue, of which Mr. Pogue was a Senior Partner during
1993, provided legal services to the Company in 1993.
HOLDINGS OF SHARES OF THE COMPANY'S COMMON STOCK
The only person believed by the Company to be the beneficial owner of more
than five percent of the outstanding shares of Common Stock of the Company as
of December 31, 1993 is Wachovia Bank of North Carolina, N.A., 302 North Main
Street, Winston-Salem, NC 27102, acting in its capacity as Trustee of the M. A.
Hanna Associates Ownership Trust. According to reports filed by the Trustee
with the Securities and Exchange Commission, the Trustee on January 31, 1994
owned and had shared voting and dispositive power over 3,114,576 shares, or
13.1% of the shares outstanding. Shares of Common Stock are periodically
allocated and released from the Trust to satisfy funding requirements under
certain of the Company's compensation
4
<PAGE>
and benefit plans ("Plans"). Participants in and trustees of the Plans under
confidential voting procedures have authority to vote all shares allocated to
them or to instruct that the shares not be voted. Unallocated shares held in
the Trust are voted in the same proportions as the shares for which
instructions have been received.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the chief executive
officer and the other most highly compensated executive officers, for services
rendered in all capacities to the Company and its subsidiaries for the last
three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION (1) COMPENSATION
----------------- -------------------------------------
AWARDS PAYOUTS
------------------------- -----------
RESTRICTED
NAME AND STOCK LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS ($)(2) OPTIONS (#) PAYOUTS (3) COMPENSATION
------------------ ---- -------- -------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
M. D. Walker 1993 $600,000 $450,000 22,511 47,000 $322,511 $256,104(4)
Chairman & Chief 1992 584,667 335,000 22,509 25,000 302,509 246,704
Executive Officer 1991 565,666 225,000 34,694 25,000 404,694
D. J. McGregor 1993 370,000 250,000 17,365 30,000 248,615 127,465(4)
President & Chief 1992 360,666 200,000 12,376 20,000 166,376 123,265
Operating Officer 1991 348,667 140,000 13,134 20,000 153,134
J. S. Pyke, Jr. 1993 185,000 110,000 5,175 5,000 73,925 55,372(4)
Vice President & 1992 178,334 80,000 5,645 4,000 75,645 54,122
Secretary 1991 163,000 70,000 9,394 4,000 109,394
T. H. Wilson 1993 187,000 84,000 5,175 5,000 73,925 59,651(4)
Vice President, 1992 181,666 80,000 5,645 3,500 75,645 57,301
Human Resources & 1991 175,000 54,000 9,394 4,000 109,394
Industrial Relations
G. W. Henry 1993 175,000 85,000 3,766 4,500 53,766 39,055(4)
Vice President, 1992 163,000 65,000 3,957 3,500 52,957 36,430
Operations 1991 145,667 42,000 5,632 3,000 65,632
</TABLE>
(1) Other Annual Compensation for each executive did not exceed disclosure
thresholds established by the Securities and Exchange Commission.
(2) The column reports all of the grants of restricted stock to the named
individuals prior to the end of the last fiscal year. The value of the
awards shown in the table is determined by multiplying the number of shares
awarded by the closing market price for the stock on the award date. The
total number of restricted shares and the value of those shares at the end
of the last fiscal year, based on the year-end closing price for the stock,
held by Messrs. Walker, McGregor, Pyke, Wilson and Henry were
3,293/$107,434, 1,714/$55,919, 841/$27,438, 841/$27,438 and 551/$17,976,
respectively. Restricted shares are issued at the same time LTIP payouts
are made equal in value to 25% of the value of the common stock component
of the LTIP payout; neither the restricted shares or the other shares
issued at the same time may be transferred for four years, at which time
the restrictions lapse. Dividends are paid on restricted stock.
5
<PAGE>
(3) Payout in cash and market value of Common Stock paid under the Company's
1988 Long-Term Incentive Plan in the year following the three-year
performance periods ending December 31, 1992, 1991 and 1990.
(4) Consists of matching contributions made by the Company under the Capital
Accumulation Plan, a retirement type of savings plan, of $70,125, $41,750,
$19,875, $20,025 and $18,000 for Messrs. Walker, McGregor, Pyke, Wilson and
Henry, respectively, and the dollar value of split dollar life insurance
premiums paid in the amounts of $185,979, $85,715, $35,497, $39,626 and
$21,055 for Messrs. Walker, McGregor, Pyke, Wilson and Henry, respectively.
The Company and Mr. Walker entered into an employment agreement in 1986, as
an inducement to Mr. Walker to join the Company and leave his former
employment, which, as amended, provides that Mr. Walker will remain employed by
the Company in his position as Chairman of the Board and Chief Executive
Officer through August 31, 1994. The agreement provides that during this period
Mr. Walker will receive a minimum base annual salary. In consideration of
certain benefits Mr. Walker surrendered by leaving his former employer, the
Company has agreed, for the purpose of providing supplemental retirement
benefits, and in recognition of his experience prior to employment by the
Company, to treat Mr. Walker's employment with the Company as commencing 11
years prior to the actual date of employment, September 1, 1986. Upon
retirement from employment with the Company and any of its subsidiaries, Mr.
Walker will receive supplemental retirement benefits based upon his assumed
employment date.
Mr. McGregor has an employment agreement with the Company which expires on
March 1, 1996, pursuant to which Mr. McGregor will receive a minimum base
annual salary and will be entitled to receive certain compensation if he is not
retained in at least the President and Chief Operating Officer capacity during
the term of the agreement.
The Company has in effect employment agreements with its executive officers,
including the officers named in the compensation table on page 5, which become
operative only upon a "change in control" of the Company, as defined in the
agreements. The agreements provide that the officers will remain employed by
the Company in their customary positions from the occurrence of a "change in
control" (i) for an initial term of three years which, unless otherwise elected
by either party, is automatically extended for an additional one-year period on
the third anniversary and each anniversary thereafter or (ii) until normal
retirement date, if sooner. During this employment period the officer will
receive a base salary at least equal to the annual rate in effect at the time
of the "change in control", plus any increases as may be awarded thereafter in
accordance with the Company's regular administrative practices, and a bonus
under the Company's pay-for-performance plan at least equal to the highest
annual bonus paid to him under such plan during the three years preceding the
time of the "change in control". In addition, during this employment period the
officer shall be entitled to continue to participate in all of the Company's
benefit programs in which he was participating at the time of the "change in
control".
If the executive officer's employment is terminated for any reason other than
death, disability, retirement or cause during the employment term, the officer
is entitled to receive, as liquidated damages for the breach of contract, a
payment equal to the present value of the sum of the salary and bonus(es) due
to the officer for the remainder of his employment term and is also entitled to
benefits and service credits under the Company's benefit plans for the
remainder of his employment term. The Company is entitled to offset against
amounts due to the officer any compensation payments made to the officer by
another employer under certain conditions. Termination of employment without
cause is defined to include a good faith determination by the officer that due
to changed circumstances significantly affecting his position with the Company
after the "change in control" occurs, he is unable to carry out his duties and
responsibilities.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- --------------------------------------------------------------------- --------------------------
PERCENT OF
TOTAL OPTIONS
GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---- -------------- ------------- ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
M. D. Walker 47,000 21.1% $30.750 1/1/2003 $796,807 $1,962,574
D. J. McGregor 30,000 13.5% 30.750 1/1/2003 508,600 1,252,707
J. S. Pyke, Jr. 5,000 2.2% 30.750 1/1/2003 84,767 208,784
T. H. Wilson 5,000 2.2% 30.750 1/1/2003 84,767 208,784
G. W. Henry 4,500 2.0% 30.750 1/1/2003 76,290 187,906
</TABLE>
(1) Each option granted becomes vested as to 25% of the award on the first
anniversary of the grant, and as to an additional 25% on each of the next
three January 1 dates.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE (1)
---- --------------- -------- ------------------- --------------------
<S> <C> <C> <C> <C>
M. D. Walker 122,500 $2,563,438 149,250/ $1,948,708/
65,750 207,657
D. J. McGregor 0 0 108,000/ 1,362,244/
45,000 151,875
J. S. Pyke, Jr. 11,250 225,473 37,250/ 589,656/
8,000 28,500
T. H. Wilson 11,250 215,629 37,600/ 596,049/
7,750 27,406
G. W. Henry 4,950 99,208 22,250/ 340,936/
7,000 23,875
</TABLE>
(1) Based on market value of the Company's common stock on December 31, 1993
($32.625 per share) minus the strike price.
LONG-TERM INCENTIVE PLAN LTIP UNIT AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
------------------------------------
PERFORMANCE
OR OTHER
NUMBER PERIOD UNTIL
OF UNITS MATURATION
NAME (#) OR PAYOUT THRESHOLD ($) TARGET ($) MAXIMUM ($)
---- -------- ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
M. D. Walker 240,000 3 years $60,000 $240,000 $480,000
D. J. McGregor 130,000 3 years 32,500 130,000 260,000
J. S. Pyke, Jr. 55,000 3 years 13,750 55,000 110,000
T. H. Wilson 55,000 3 years 13,750 55,000 110,000
G. W. Henry 48,500 3 years 12,125 48,500 97,000
</TABLE>
Units shown in the table above represent performance units (LTIP Units)
granted pursuant to the Corporation's 1988 Long-Term Incentive Plan. LTIP Units
represent the right to receive payments in cash or common stock or a
combination thereof when predetermined performance objectives established by
the Compensation Committee of the Board of Directors, using compound annual
earnings per share growth rate and three-year average return on stockholders'
equity as measures, are achieved over a three-year period. The target payout
amount of the awards is $1.00 per unit.
7
<PAGE>
RETIREMENT BENEFITS
The Salaried Employees Retirement Income Plan ("SERIP") is a non-contributory
pension plan covering all officers and other salaried employees of the Company.
In general, employees become covered under SERIP when they have completed one
year of eligibility service and are at least 21 years of age. Upon reaching the
normal retirement date (age 65), each participant in SERIP generally is
entitled to receive monthly for life a basic benefit equal to the greater of
(i) the participant's highest average monthly compensation (including bonuses
and overtime) for 60 consecutive months out of the final 120 months of his or
her employment or (ii) 1/12th of the average of his or her annual compensation
(including bonuses and overtime) during any 5 annual periods in which he or she
received the highest compensation included within the final 10 annual periods
of his or her employment, which is then multiplied by 2% for the first 20 years
of credited service and 1% for the next 20 years of credited service. In
addition, benefits are provided for early retirement and to surviving spouses.
The Company has adopted an excess benefits plan to pay retirement benefits
which but for limitations under the Employee Retirement Income Security Act of
1974 and the Internal Revenue Code would have been paid under SERIP. These
benefits will be paid out of the general funds of the Company or trust funds
established for this purpose.
The following table shows estimated annual benefits payable upon retirement
to participants in specified remuneration and years-of-service classifications
under the Company's above-mentioned pension plans for salaried employees.
Benefits payable under the qualified pension plans are not subject to any
deduction for Social Security benefits.
<TABLE>
<CAPTION>
YEARS OF SERVICE AT AGE 65
--------------------------------------------
AVERAGE ANNUAL
COMPENSATION
FOR LAST 5 YEARS
OF EMPLOYMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 90,000 $120,000 $135,000 $150,000 $165,000
500,000 150,000 200,000 225,000 250,000 275,000
700,000 210,000 280,000 315,000 350,000 385,000
900,000 270,000 360,000 405,000 450,000 495,000
1,100,000 330,000 440,000 495,000 550,000 605,000
</TABLE>
The credited years of service for retirement benefits for Messrs. Henry,
McGregor, Pyke, Walker and Wilson are 18, 5, 25, 18 and 14 respectively.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, as the delegate of the Board of Directors, has
furnished the following report on executive compensation.
During 1993 the Compensation Committee and management, with the assistance of
several independent compensation consultants, conducted a comprehensive and in-
depth review of Hanna's total compensation philosophy and objectives and its
executive compensation program. As a result of that review, the Committee made
a number of determinations which are reflected in this report, the compensation
reported in this proxy statement and the proposals being submitted to
stockholders at the 1994 annual meeting.
Hanna's executive compensation program is structured and administered to
drive and incent a level of performance necessary to achieve the Company's
vision, support Hanna's internal culture and operating environment and
reinforce its human resource management values. The objectives of the executive
compensation program are to:
. Establish a pay-for-performance philosophy and policy that puts all
executives at risk and can significantly differentiate in compensation
amounts based on corporate, business unit and individual performance and
the ability of the executive to impact those results;
8
<PAGE>
. Motivate and incent executives to achieve identified strategic business
plans and reward them for their achievement;
. Provide total compensation opportunities which are market competitive,
are subject to associated downside risk, and offer significant upside
opportunities based on performance, thus allowing Hanna to compete for
and retain outstanding performance-oriented executives who are critical
to Hanna's long-term success; and
. Align the interests of executives with the long-term interests of
stockholders through incentive award opportunities that can result in the
ownership of Hanna Common Stock, and assure that an increasingly
substantial portion of each executive's personal rewards related to
performance are attained through share ownership.
Hanna's executive compensation program is comprised of three major
components: base salary, annual incentive compensation and long-term incentive
compensation. As an executive's level of responsibility increases, a greater
portion of his or her potential total compensation opportunity is based on
performance incentives (including stock-based awards), and less on salary; this
approach results in greater variability in the individual's absolute cash
compensation level from year to year in response to variations in the Company's
performance.
The executive total compensation program is designed to be competitive with
the total compensation programs of a broad base of industrial companies with
annual sales levels comparable to Hanna. In order to assess competitive total
compensation programs and establish total compensation opportunities for Hanna
executives, the Committee relies on data contained in independent compensation
surveys such as the Wyatt Data Services' ECS Top Management Report, the Towers
Perrin Compensation Data Bank and the Conference Board Report on Top Executive
Compensation.
Hanna's total compensation program is structured to provide total
compensation opportunities that are commensurate with the Company's ability to
demonstrate consistently outstanding performance. In order to drive and reward
for a consistent high level of performance, Hanna's total compensation systems
are designed to respond with a total compensation opportunity that is above
average. Hanna targets total compensation opportunities for its executives'
outstanding performance at the 65th percentile of total compensation
opportunities afforded to executives performing similar responsibilities in
competitive companies. On the other hand, the total compensation system is also
designed to be responsive in the event the Company's actual performance is
below expected performance vis-a-vis the annual operating plan and/or industry
comparisons.
SALARIES
The Committee annually reviews the salaries of executive officers. Prior to
meeting, the Committee is furnished with data on the current total compensation
and total compensation history of each executive officer, survey data for
comparable positions at comparable industrial companies and individual
performance appraisal ratings by the Chief Executive Officer for each executive
officer except the Chief Executive Officer. At the meeting the Committee
reviews all available data and considers adjustments, effective September 1. In
1993 the Committee elected not to adjust salaries and instead increased the
annual incentive compensation opportunities for each executive officer.
ANNUAL INCENTIVE COMPENSATION FOR 1993
Executive officers were awarded, in January 1994, cash annual incentive
compensation payments based on Hanna's 1993 pre-tax operating earnings
performance compared with the pre-tax operating earnings performance set forth
in the 1993 operating plan that was approved by the Board of Directors at its
first meeting in 1993. The Committee also took into account discretionary
factors such as the accomplishment of strategic objectives, the slow growth of
the domestic economy and the recession in Europe which affected Hanna's
financial results. The Committee adjusted individual awards to reflect each
executive's performance for the year and his or her contributions to Hanna's
success in 1993.
9
<PAGE>
1993 LONG-TERM INCENTIVE PLAN AWARDS
Under Hanna's 1988 Long-Term Incentive Plan, which is described commencing
at page 14 of this proxy statement, the Committee grants non-qualified stock
options and long-term incentive performance units ("LTIP Units") annually.
Awards are based on a pay-grade level formula and take into account relevant
long-term incentive plan survey data and the amount of the awards previously
granted to the participants. Reflecting the long-term incentive plan survey
data and the recommendations of the independent compensation consultants who
assisted in the 1993 review of the executive compensation program, the Commit-
tee increased the total award levels and also changed the mix of stock options
and LTIP Units (awarding more stock options and fewer LTIP Units) when making
its awards in December, 1993.
The options were granted at a purchase price equal to 100% of the fair
market value of Hanna Common Stock on the date of the grant. Continued
employment and the actual long term changes in the market price of Hanna
Common Stock will ultimately determine the value of the awards.
The December, 1993 awards of LTIP Units were for a three-year performance
period starting on January 1, 1994; the Committee established target
performance measures for compound annual earnings per share growth and three-
year average return on stockholders' equity to be attained for the performance
period, with threshold and maximum achievement levels.
Information on the 1993 awards of options and LTIP Units to the chief
executive officer and the four other most highly compensated executive
officers appears in the table on page 7 of this proxy statement.
1993 LONG-TERM INCENTIVE PLAN PAYMENTS
The Committee applied the performance measures established for the three-
year performance period ending December 31, 1992 against actual performance
and determined that participants had earned a payout of the LTIP Units for
that performance period at 125% of the target amounts, and authorized the
payments to be made in 1993. The Committee elected to make a portion of the
payment to each participant in cash and a portion in shares of Common Stock,
and awarded each participant shares of restricted stock equal in value to 25%
of the Common Stock portion of the payment. The terms of the restricted stock
require the participant to hold the restricted stock and the stock issued in
partial payment of the LTIP Unit award for four years, at which time the
restrictions lapse. Information on the 1993 payments to the chief executive
officer and the four other most highly compensated executive officers appears
in the table on page 5 of this proxy statement.
CHIEF EXECUTIVE OFFICER COMPENSATION
In reviewing Mr. Walker's total compensation level and each component
thereof, the Committee took into account the same compensation survey data for
comparable companies and Hanna~'s financial and strategic performance factors
that it considered in connection with the other executive officers. Taking
into account the recommendations of the independent compensation consultants
who assisted with the compensation program review in 1993, the Committee
increased Mr. Walker's pay-grade level and his incentive compensation
guidelines to place Mr. Walker's total compensation and cash compensation
opportunity levels more in line with competitive companies.
As in the case with the other executive officers, Mr. Walker's salary was
not adjusted in 1993.
In determining Mr. Walker's 1993 annual incentive compensation payment, the
Committee evaluated his personal 1993 performance and noted his dynamic
leadership in formulating, refining and communicating Hanna's vision and its
focus on four areas. The Committee took into account Hanna~'s record revenues,
25% increase in earnings from continuing operations, 19% increase in earnings
per share excluding non-recurring events and 16% total return to stockholders
in 1993. The Committee also took into account Mr. Walker's role in developing
and accomplishing key strategic initiatives.
Mr. Walker's 1993 Long-Term Incentive awards were made in accordance with
the program guidelines and his 1993 Long-Term Incentive Plan payouts were
calculated at the same percentages as those which applied to other
participants.
10
<PAGE>
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Internal Revenue Code Section 162 (m) and proposed regulations thereunder
respecting the non-deductibility of certain executive compensation payments in
excess of $1 million do not affect Hanna's compensation payments for 1993 and
are not expected to affect compensation payments for 1994. The Committee is
currently evaluating the new Code requirements, the proposed regulations and
Hanna's compensation programs, and intends to adopt a policy with respect
thereto following completion of the evaluation. One of the amendments to the
1988 Long-Term Incentive Plan proposed for ratification and approval at the
1994 annual meeting of stockholders is intended to qualify stock options as a
category of compensation exempt from the $1 million limitation.
COMPENSATION COMMITTEE
M. L. Mann, Chairman
B. C. Ames
J. T. Eyton
R. W. Pogue
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during 1993 was comprised entirely of non-employee
directors. Mr. R. F. Anderson, who previously served as an employee and officer
of Hanna until his retirement in 1986, was a member of the Committee until May
5, 1993, when he retired as a director. Mr. R. W. Pogue, who replaced Mr.
Anderson on the Committee, is a Senior Partner of Jones, Day, Reavis & Pogue,
which provided legal services to the Company in 1993. Messrs. B. C. Ames and J.
T. Eyton served on the Committee for the full year.
11
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG HANNA, S&P 500 INDEX AND S&P
SPECIALTY CHEMICALS INDEX
This performance graph assumes that the value of the investment in Hanna and
each index was $100 on December 31, 1988 and that all dividends were
reinvested.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG HANNA ,S&P 500 INDEX AND S&P SPECIALTY CHEMICALS INDEX
<CAPTION>
Measurement period S&P SPECIALTY
(Fiscal year Covered) HANNA 500 CHEMICALS
- --------------------- ----- --- ---------
<S> <C> <C> <C>
Measurement PT -
12/31/88 $ 100 $ 100 $ 100
FYE 12/31/89 $ 142.78 $ 131.69 $ 121.79
FYE 12/31/90 $ 104.63 $ 127.60 $ 117.03
FYE 12/31/91 $ 111.63 $ 166.47 $ 165.22
FYE 12/31/92 $ 165.26 $ 179.15 $ 175.03
FYE 12/31/93 $ 191.16 $ 197.21 $ 199.57
</TABLE>
DIRECTORS' COMPENSATION
Directors who are not full-time employees of the Company are compensated for
their services by payment of a quarterly retainer fee of $5,750 and a fee of
$1,300 for each Board meeting attended. They also receive a fee of $1,100 for
each committee meeting attended when the meeting occurs on the same day as a
Board meeting and $1,300 when the meeting occurs on a day when no Board meeting
is held; Chairmen of Board committees are paid an additional fee of $200 for
each committee meeting attended. Executive Committee members who are not full-
time employees of the Company are paid an additional quarterly retainer fee of
$1,250. Directors who are also full-time employees of the Company are not
compensated for their services as directors and members of Board committees.
Pursuant to amendments to the 1988 Long Term Incentive Plan adopted in 1991,
one-time grants of options to purchase 10,000 shares of the Company's Common
Stock were granted in 1991 to all non-employee directors then in office and
thereafter to non-employee directors at the time of their election to the Board
at an option price equal to the closing sale price of the Common Stock on the
New York Stock Exchange on the date of grant. One-third of the grant becomes
exercisable after the director has served for one year from the date of grant,
an additional one-third after two years and the balance after three years of
service.
The Company has established a non-qualified retirement plan for its non-
employee directors. The annual retirement benefit is an amount equal to the
highest annual retainer fee in effect during the director's final five years of
service. Each qualifying director is entitled to receive, upon retirement as a
director, a quarterly
12
<PAGE>
benefit for a period equal to his or her years of service, ten years or his or
her date of death, whichever first occurs. A minimum of five years of service
is required in order to receive a benefit under this program.
2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors delegated its authority to select and appoint the
Company's independent public accountants to the Audit Committee, which
selected and appointed Ernst & Young to be the Company's auditor for the year
1994, subject to ratification by the stockholders. Ernst & Young have audited
Hanna's books for more than sixty-five years and served as its independent
public accountants for 1993. In accordance with the established practice of
Ernst & Young, partners and employees of the firm assigned to the Hanna
account are periodically rotated, thus giving Hanna the benefit of new
thinking and approaches in the audit area. The Audit Committee considers Ernst
& Young to be well qualified. If the appointment is not ratified, the Audit
Committee will reconsider its choice but will not be bound by the refusal of
the stockholders to ratify the appointment of Ernst & Young. A representative
of Ernst & Young is expected to be present at the annual meeting, will have
the opportunity to make a statement if such representative desires to do so
and is expected to be available to respond to appropriate questions. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1994.
3. RATIFICATION AND APPROVAL OF 1994 AMENDMENTS TO 1988 LONG-TERM INCENTIVE
PLAN
The Company desires to continue its policy of encouraging greater ownership
of Hanna Common Stock by its employees and directors in order to more closely
align their interests with those of the stockholders. For this purpose,
subject to approval by the stockholders of the Company at the annual meeting,
the Board of Directors has amended the 1988 Long-Term Incentive Plan (the
"Plan"), which was approved by stockholders on May 4, 1988 and amended in
several respects with stockholder approval on May 1, 1991. A summary of the
proposed amendments (the "Amendment") is set forth below, followed by a
description of the entire Plan. The full text of the Amendment is annexed to
this proxy statement as Exhibit A and the summary is qualified in its entirety
by reference to Exhibit A.
AUTHORIZED SHARES
The Amendment increases the number of shares of Common Stock that may be
sold or delivered under the Plan by 1,000,000 shares. At December 31, 1993
there were only 4,054 shares remaining available under the Plan. The Amendment
increases the total number of shares authorized under the Plan to 1,900,000
plus such number of shares of Common Stock authorized for sale or delivery
under the Company's predecessor plan that remained unutilized under the
predecessor plan upon its termination in 1988. These authorized shares may be
shares of original issuance or treasury shares. Pursuant to the Amendment,
shares sold under the Plan may also be from the Company's Associates Ownership
Trust, a trust established by the Company in 1991 to fund a portion of the
Company's obligations under certain of its employee compensation and benefit
plans.
The Amendment also provides that shares of Restricted Stock that are
forfeited by an Eligible Employee and reacquired by the Company will no longer
be available under the Plan. This change is intended to make this provision of
the Plan consistent with recent interpretations of Rule 16b-3 under the
Securities Exchange Act of 1934 (the "1934 Act").
OPTION RIGHTS
The Plan provides, among other things, for granting stock options to
Eligible Employees of the Company. New Section 162(m) of the Internal Revenue
Code (the "Code~"), which was part of the Omnibus Budget Reform Act of 1993,
generally disallows a tax deduction to public companies for compensation over
$1 million paid, or otherwise taxable, to persons named in the Summary
Compensation Table and employed by the Company at the end of the applicable
year. Qualifying performance-based compensation will not be
13
<PAGE>
subject to the deduction limit if certain requirements are met. In the case of
stock options, one requirement is that the plan state a maximum number of
shares with respect to which option rights may be granted during a specified
period. The Amendment provides that no Eligible Employee shall be granted
Option Rights for more than 100,000 shares of Common Stock in any fiscal year,
thereby meeting the new requirement. A second requirement is that the Plan must
be approved by stockholders. Approval of the Amendment shall be deemed the
equivalent of approval of the Plan. If the requisite approval is not obtained,
no additional awards will be made under the Plan.
The Amendment also adds express authorization for the Board of Directors to
provide for the deferred payment of any option exercise price from the proceeds
of sale through a broker of some or all of the shares of Common Stock to which
any option exercise relates. This provision minimizes transaction costs when
the exercise of an option is followed by the sale of the option shares through
a broker to obtain funds to pay the exercise price by permitting deferral of
the payment of the exercise price until settlement of the sale.
Finally, the Amendment grants authority to permit an Optionee who retires
with the Company's consent to have a period of up to 5 years after retirement
to exercise his or her option, but not beyond 10 years from the date of grant.
The Plan currently authorizes a period of up to 3 years in this circumstance.
While the Compensation Committee, which administers the Plan, does not intend
to grant more than a 3 year period as a general matter, it desires to have the
discretion to grant up to 5 years in an appropriate circumstance.
DIVIDEND CREDITS
As originally adopted in 1988, the Plan provided for the allocation of
Dividend Credits, which are dividends that would have been paid, in the case of
an optionee who held unexercised Option Rights, on the optioned shares if they
had been outstanding. The Compensation Committee has determined that the
allocation of Dividend Credits no longer fits the Company's overall
compensation strategy. Accordingly, the Amendment provides that no further
Dividend Credits shall be allocated under the Plan. Dividend Credits allocated
prior to the Amendment but still outstanding will be governed by the terms of
the Plan as previously in effect.
APPROVAL BY STOCKHOLDERS
Payout of the LTIP Unit awards in February, 1994 for the three-year
performance period ending December 31, 1993 were made to participants in cash
and in shares of Common Stock and Restricted Stock. However, actual delivery of
such shares to the participants was made contingent upon approval of the
Amendment by stockholders at the 1994 annual meeting of stockholders because
there were insufficient shares available under the Plan at the time. The total
number of shares of Common Stock contingently awarded was 21,676 and the total
number of shares of Restricted Stock contingently awarded was 5,441. If the
requisite approval of the Amendment is not obtained, cash payments equivalent
to the value of such shares at the time of the payout will be made in lieu of
delivery of such shares.
The approval and ratification of the Amendment requires the affirmative vote
of the holders of a majority of the shares present or represented and entitled
to vote on the matter at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
SUMMARY OF THE 1988 LONG-TERM INCENTIVE PLAN
ADMINISTRATION
The Plan is administered by the Board of Directors, which has delegated its
authority under the Plan to the Compensation Committee of the Board of
Directors ("Compensation Committee"). The current members of the Compensation
Committee are Messrs. Ames, Eyton, Mann and Pogue.
ELIGIBILITY
Any person who is an officer (including an officer who is a member of the
Board of Directors) or other key employees of the Company or any of its
subsidiaries may be selected by the Compensation Committee to participate in
the Plan.
14
<PAGE>
PRINCIPAL FEATURES OF THE PLAN
The Plan provides for the granting of four types of benefits:
1. Long-term incentive performance units ("LTIP Units"), which entitle
participants to receive cash payments, Common Stock or a combination
thereof if specified achievement objectives are met;
2. Stock options ("Option Rights"), which will enable participants to
benefit from increases in the market value of the Common Stock after the
granting date;
3. Stock appreciation rights ("Appreciation Rights"), which provide an
alternative means of realizing the benefits provided by Option Rights; and
4. Shares of Common Stock designated as restricted ("Restricted Stock"),
which are subject to restrictions on transfer and risk of forfeiture upon
the occurrence of certain events.
LTIP UNITS
Each LTIP Unit is assigned a value ("Award Value") in connection with its
grant. A participant to whom an LTIP Unit is granted will be given achievement
objectives ("Management Objectives") to meet within a specified period of not
less than three years ("Performance Period"). A minimum level of acceptable
achievement also will be established ("Minimum"). If by the end of the
Performance Period the participant has achieved the specified Management
Objectives, he or she will be deemed to have earned 100% of the Award Value. If
the Management Objectives have been exceeded, or if the Management Objectives
have not been attained but the Minimum has been attained or exceeded, the
percentage of the Award Value deemed earned by the participant may be a higher
or lower percentage (but never more than 200%) as determined in accordance with
a formula established by the Compensation Committee in connection with its
grant. Amounts earned will be paid to participants in cash, Common Stock or a
combination thereof after the close of the Performance Period.
The Compensation Committee has authority under the Plan to make adjustments
in the Performance Objectives or Minimum to eliminate distortions arising from
transactions or events occurring subsequent to the grant of any LTIP Unit.
OPTION RIGHTS
Option Rights may be granted which entitle the optionee to purchase shares of
Common Stock at a price equal to the market value on the date of grant. The
option price is payable in cash or by delivery to the Company of shares of
Common Stock that have been owned by the optionee not less than six months
which are equal in value to the option price, or a combination of the
foregoing. The Amendment also provides for the payment from the proceeds of
sale through a broker of some or all of the shares of Common Stock to which the
option relates.
Option Rights granted under the Plan may be Option Rights that are intended
to qualify as "incentive stock options" within the meaning of Section 422 of
the Code or Option Rights that are not intended to so qualify.
No Option Right may be exercised more than 10 years from the date of grant.
Each grant must specify the period or periods of continuous employment with the
Company or any subsidiary which is necessary before the Option Rights or
installments thereof will become exercisable.
The Plan also includes a Directors' Stock Option Plan. Under this Plan a
single grant of an option to purchase 10,000 shares of Common Stock was made to
the nine non-employee directors in office at the time the Directors' Stock
Option Plan was adopted by the Board of Directors on February 6, 1991. The
Directors' Stock Option Plan originally provided that in the future single
grants would be made to up to six newly-elected directors on the date of their
election. One such grant has been made, and five may be made in the future. All
the terms and conditions established in the Plan for grants of Option Rights to
employees also apply to grants of Option Rights to directors under the
Directors' Stock Option Plan, except that the date of the grant to a director
is automatic and one-third of the grant becomes exercisable after the director
has served for one year from the date of grant, an additional one-third after
two years and the balance after three
15
<PAGE>
years of service. The Directors' Stock Option Plan also specifies that a
director terminating service for a reason other than retirement, disability,
death or for cause shall have up to three months within which to exercise his
or her options, rather than up to 30 days in the case of the employees, and
that the retirement, disability or death of a director causes the options to
become exercisable in full.
APPRECIATION RIGHTS
Appreciation Rights provide to optionees an alternative means of realizing
the benefits of Option Rights. The holder of an Appreciation Right may, in lieu
of exercising all or any part of his or her Option Rights, receive from the
Company an amount equal to 100%, or such lesser percentage as the Compensation
Committee may determine, of the spread between the option price and the current
value of the optioned shares. The Compensation Committee has not granted
Appreciation Rights since 1991 and all outstanding Appreciation Rights were
cancelled in 1992.
RESTRICTED STOCK
Shares of Common Stock may be awarded to participants which are subject to
certain restrictions ("Restricted Stock") in order to induce the participant to
hold other shares of Common Stock issued to him or her at the same time.
Restricted Stock may provide the recipient all the rights of a stockholder of
the Company, including the right to vote the shares and to receive any
dividends, provided, however, that neither the Restricted Stock nor any other
shares of Common Stock issued under the Plan at the same time as the Restricted
Stock and designated as coupled with the Restricted Stock may be transferred by
the recipient until certain restrictions established the Board of Directors
lapse or expire. If a predetermined event established by the Board of Directors
occurs during the restriction period, all of the Restricted Stock shall be
forfeited and reacquired by the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Plan based on federal income tax
laws in effect on January 1, 1994. This summary is not intended to be
exhaustive and does not describe state or local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
LTIP Units. No income generally will be recognized upon the grant of LTIP
Units. Upon payment in respect of the earn-out of LTIP Units, the recipient
generally will be required to include as taxable ordinary income in the year of
receipt an amount equal to the amount of cash received and the fair market
value of any non-restricted Common Stock received.
Non-qualified Option Rights. In general: (i) no income will be recognized by
an optionee at the time a non-qualified Option Right is granted; (ii) at the
time of exercise of a non-qualified Option Right, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares if
they are non-restricted on the date of exercise; and (iii) at the time of sale
of shares acquired pursuant to the exercise of a non-qualified Option Right,
any appreciation (or depreciation) in the value of the shares after the date of
exercise will be treated as either short-term or long-term capital gain (or
loss) depending on how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an incentive stock option. If Common
Stock is issued to an optionee pursuant to the exercise of an incentive stock
option and no disqualifying disposition of the shares is made by the optionee
within two years after the date of grant or within one year after the transfer
of the shares to the optionee, then upon the sale of the shares any amount
realized in excess of the option price will be taxed to the optionee as long-
term capital gain and any loss sustained will be a long-term capital loss.
If Common Stock acquired upon the exercise of an incentive stock option is
disposed of prior to the expiration of either holding period described above,
the optionee generally will recognize ordinary income in
the year of disposition in an amount equal to any excess of the fair market
value of the shares at the time of exercise (or, if less, the amount realized
on the disposition of the shares in the sale or exchange) over the option price
paid for the shares. Any further gain (or loss) realized by the optionee
generally will be taxed as short-term or long-term capital gain (or loss)
depending on the holding period.
16
<PAGE>
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of an Appreciation Right. When the Appreciation Right
is exercised, the participant normally will be required to include as taxable
ordinary income in the year of exercise an amount equal to the amount of any
cash, and the fair market value of any non-restricted shares of Common Stock,
received pursuant to the exercise.
Restricted Stock. The recipient of Restricted Stock generally will be subject
to tax at ordinary income rates on the fair market value of the Restricted
Stock (reduced by any amount paid by the participant for such Restricted Stock)
at such time as the shares are no longer subject to forfeiture or restrictions
on transfer for purposes of Section 83 of the Code ("Restrictions"). However, a
recipient who so elects under Section 83(b) of the Code within 30 days of the
date of transfer of the shares will have taxable ordinary income on the date of
transfer of the shares equal to the excess of the fair market value of such
shares (determined without regard to the Restrictions) over the purchase price,
if any, of such Restricted Stock. If a Section 83(b) election has not been
made, any dividends received with respect to Restricted Stock subject to
restrictions generally will be treated as compensation that is taxable as
ordinary income to the participant.
Special Rules Applicable to Officers. In limited circumstances where the sale
of stock that is received as the result of a grant of an award could subject an
officer to suit under Section 16(b) of the 1934 Act, the tax consequences to
the officer may differ from the tax consequences described above. In these
circumstances, unless a special election has been made, the principal
difference usually will be to postpone valuation and taxation of the stock
received so long as the sale of the stock received could subject the officer to
suit under Section 16(b) of the 1934 Act, but no longer than six months.
Tax Consequences to the Company. To the extent that a participant recognizes
ordinary income in the circumstances described above, the Company or the
subsidiary for which the participant performs services will be entitled to a
corresponding deduction provided that, among other things, (i) the income meets
the test of reasonableness, is an ordinary and necessary business expense, is
not an "excess parachute payment" within the meaning of Section 280G of the
Code, and is not disallowed by the $1 million limitation on certain executive
compensation and (ii) any applicable withholding obligations are satisfied.
NEW PLAN BENEFITS
It is not possible to determine the specific amounts that may be awarded to
various individuals in the future under the Plan. The following table sets
forth the benefits or amounts that were received by or allocated to each of the
following under the Plan during the year ended December 31, 1993.
1988 LONG-TERM INCENTIVE PLAN AS AMENDED
<TABLE>
<CAPTION>
LTIP UNITS OPTION RIGHTS
-------------------- ----------------
NAME AND POSITION
- ----------------- DOLLAR DOLLAR
VALUE NUMBER VALUE NUMBER
OF
($)(1) OF UNITS ($)(2) UNITS
---------- --------- -------- -------
<S> <C> <C> <C> <C>
M. D. Walker $ 240,000 240,000 $ 88,125 47,000
Chairman & Chief Executive Officer
D. J. McGregor 130,000 130,000 56,250 30,000
President & Chief Operating Officer
J. S. Pyke, Jr. 55,000 55,000 9,375 5,000
Vice President & Secretary
T. H. Wilson 55,000 55,000 9,375 5,000
Vice President, Human Resources & In-
dustrial Relations
G. W. Henry 48,500 48,500 8,438 4,500
Vice President, Operations
Executive Group 738,000 738,000 281,563 135,500
Non-Executive Director Group 0 0 0 0
Non-Executive Officer Employee Group 3,350,400 3,350,400 496,831 250,310
</TABLE>
(1)Estimated future payout at target values.
(2) Based on the market value of the Company's Common Stock on December 31,
1993 minus the strike price.
17
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GENERAL
The closing sale price of the Company's Common Stock on the New York Stock
Exchange on March 15, 1994 was $37.375 per share.
No Option Right, Appreciation Right, LTIP Unit or Dividend Credit is
transferable by a grantee except upon death, by will or the laws of descent and
distribution. Option Rights and Appreciation Rights shall be exercisable during
the grantee's lifetime only by him or her or by his or her guardian or legal
representative.
The maximum number of shares of Common Stock that may be sold under the Plan,
the number of shares covered by outstanding Option Rights and Appreciation
Rights granted thereunder, the prices per share applicable thereto, the number
of shares to be awarded to directors under the Directors' Stock Option Plan and
the maximum number of Option Rights that may be awarded in any year to one
individual are subject to adjustment in the event of stock dividends, stock
splits, combination of shares, recapitalization, mergers, consolidations, spin-
offs, reorganizations, liquidations, issuances of rights and warrants, and
similar events.
The Plan provides for the cancellation of Option Rights with the concurrence
of the affected optionee and authorizes the granting of new Option Rights to
such optionee at the then current market price (which might be less than the
option price under the cancelled option).
The Plan may be amended from time to time by the Board of Directors or the
Compensation Committee, but without further approval of the stockholders no
such amendment shall (i) increase the maximum number of shares that may be sold
under the Plan, (ii) change the definition of employees eligible to receive
grants, or (iii) cause Rule 16b-3 under the 1934 Act to become inapplicable to
the Plan.
4. RATIFICATION AND APPROVAL OF DIRECTORS' DEFERRED FEE PLAN
The Board of Directors has adopted, subject to the approval of the Company's
stockholders, the M. A. Hanna Company Directors' Deferred Fee Plan (the
"Directors' Plan"). The purpose of the Directors' Plan is to help solidify the
common interest of directors and stockholders in enhancing the value of the
Company's Common Stock. It is also intended that the Directors' Plan will
assist in attracting and retaining qualified individuals to serve as directors.
If approved by stockholders, the Directors' Plan will give those directors who
are not also employees of the Company an opportunity to defer receipt, and
therefore the recognition as income for federal income tax purposes, of all or
a portion of their annual retainer and meeting fees payable by the Company for
their services as a director. A copy of the Directors' Plan is attached as
Exhibit B hereto, and a summary description below is qualified in its entirety
by reference to such Exhibit.
PRINCIPAL FEATURES
The Directors' Plan provides that any director who is not also an employee of
the Company may elect to defer all or a portion of the compensation payable to
him or her for services as a director during a fiscal year by delivering
written notice of such election prior to the beginning of such fiscal year
(except at the time of adoption of the Directors' Plan or at the time a person
first becomes eligible to participate in the Directors' Plan).
Under the terms of the Directors' Plan, a director may elect to have his or
her director's fees credited to an account in either cash or Units (an
accounting unit equal in value to one share of Common Stock). Deferred fees
that a director elects to have credited in cash will be credited to the
director's account as they become payable to the director. A director's account
to which fees have been credited in cash will earn interest annually at the
rate of interest payable on 1-year U.S. Treasury Bills or such other rate as
the Committee may establish. In no event, however, will the rate of interest be
more than 5 percent higher than the rate payable on such U.S. Treasury Bills.
Deferred fees payable in Units will be credited to a director's account at the
end of the fiscal year on the basis of the average of the market values of the
Common Stock on the last trading day in each calendar month during the year.
Each account to which fees have been credited in Units shall be credited
annually after the end of each fiscal year with additional Units equal in value
to the amount of cash dividends paid by the Company during such year on Common
Stock equivalent to the average daily balance of Units in such account during
the year.
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Distribution of a director's account may be made in, a lump sum, in five
annual installments or a combination of the foregoing, as designated by the
director, upon: (i) the termination of service of the participant as a director
of the Company, for any reason, or (ii) if the director shall so elect, only
upon his or her death. Amounts credited to a director's account in dollars are
paid in cash, and amounts credited in Units are paid in full shares of Common
Stock.
Each director has the right at any time to designate the beneficiary to whom
payment under the Directors' Plan will be made in the event of his or her death
prior to complete distribution. Also, an emergency payment up to the value of a
director's account may be made in the event that the committee administering
the Directors' Plan, upon written petition of a director, determines that a
director has suffered an "unforeseeable financial emergency" (as defined in the
Directors' Plan).
FEDERAL TAX CONSEQUENCES
No income will be recognized by a director at the time that cash or Units are
credited to his or her account. At the time of distributions, the director
generally will be required to include as taxable ordinary income an amount
equal to the amount of cash received and the fair market value of any Common
Stock received.
GENERAL
The maximum number of Units that may be granted under the Directors' Plan
during its term is 100,000.
The Directors' Plan will be administered by a Committee consisting of the
Chairman of the Board (provided he is not a nonemployee director) and two
Company officers or directors who are not nonemployee directors who shall be
appointed by the Chairman of the Board. The Committee shall supervise the
administration of the Directors' Plan, may from time to time adopt procedures
governing the Directors' Plan and shall have authority to give interpretive
rulings with respect to the Directors' Plan.
By its terms the Directors' Plan may be amended from time to time by the
Board of Directors, but no such amendment may affect the rights of directors to
amounts credited to directors under the Directors' Plan and without further
approval of the stockholders, no such amendment shall increase the maximum
number of shares available to be issued under the Directors' Plan or cause Rule
16b-3 under the 1934 Act to become inapplicable to the Directors' Plan.
APPROVAL BY STOCKHOLDERS
The approval and ratification of the Directors' Plan requires the affirmative
vote of the holders of a majority of the shares present or represented and
entitled to vote on the matter at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
SUBMISSION OF SHAREHOLDER PROPOSALS
If a holder of the Company's Common Stock wishes to present a proposal for
consideration at next year's annual meeting, any such proposal must be received
at the Company's offices at 200 Public Square, Cleveland, Ohio 44114,
Attention: Corporate Secretary, on or before November 16, 1994.
The management knows of no other matters which are likely to be brought
before the meeting, but if any such matters properly come before the meeting
the persons named in the enclosed proxy, or their substitutes, will vote the
proxy in accordance with their best judgment.
John S. Pyke, Jr. Vice
President and Secretary
March 17, 1994
19
<PAGE>
EXHIBIT A
TEXT OF 1994 AMENDMENTS TO 1988 LONG-TERM INCENTIVE PLAN
The Company's 1988 Long-Term Incentive Plan, as amended (the "Plan"), has
been further amended in the following respects:*
A. Paragraph 3 of the Plan has been amended as follows:
3. Shares Available Under Plan. The shares of Common Stock which may be sold
or delivered upon the exercises of Option Rights or Appreciation Rights, upon
the payment of the Payment Value of an LTIP Unit, or upon the grant of
Restricted Stock shall not exceed the sum of 900,000 1,900,000 plus such number
of shares of Common Stock authorized for sale or delivery under the Company's
Restated 1979 Executive Incentive Compensation Plan that remain unutilized
under that Plan upon termination thereof, which sum shall be subject to
adjustment as provided in Paragraph 9 of this Plan. SUCH SHARES MAY BE SHARES
OF ORIGINAL ISSUANCE, TREASURY SHARES, SHARES FROM THE ASSOCIATES OWNERSHIP
TRUST OR A COMBINATION OF THE FOREGOING. [Shares of Restricted Stock that are
forfeited by an Eligible Employee and reacquired by the Company shall again be
available under the Plan.]
B. Sub-paragraphs (a), (c) and (f) of Paragraph 4 of the Plan have been
amended as follows:
4. Grants of Option Rights. The Board of Directors may, from time to time and
upon such terms and conditions as it may determine, authorize the granting to
Eligible Employees of options to purchase shares of Common Stock. Each such
grant may utilize any or all of the authorizations, and shall be subject to all
of the limitations, contained in the following provisions:
(a) Each grant shall specify the number of shares of Common Stock to
which it pertains; PROVIDED, HOWEVER, THAT NO ELIGIBLE EMPLOYEE SHALL BE
GRANTED OPTION RIGHTS FOR MORE THAN 100,000 SHARES OF COMMON STOCK IN ANY
ONE FISCAL YEAR OF THE COMPANY, SUBJECT TO ADJUSTMENTS AS PROVIDED IN
SECTION 9 OF THIS PLAN.
(c) Each grant shall specify that the option price shall be payable at
the time of exercise (i) in cash or by check acceptable to the Company,
(ii) by delivery to the Company of shares of Common Stock that have been
owned by the Optionee not less than six months equal in value to the option
price (such shares to be valued for this purpose at their Market Price per
Share on the date of exercise) or (iii) a combination of the foregoing, as
may be selected by the Optionee at the time of exercise. THE BOARD OF
DIRECTORS MAY PROVIDE FOR THE DEFERRED PAYMENT OF THE OPTION PRICE FROM THE
PROCEEDS OF SALE THROUGH A BROKER OF SOME OR ALL OF THE SHARES OF COMMON
STOCK TO WHICH ANY EXERCISE RELATES.
(f) Each grant shall specify the period or periods of continuous
employment by the Optionee with the Company or any Subsidiary which are
necessary before the Option Rights or installments thereof will become
exercisable. Any grant may permit acceleration of exercisability upon the
occurrence of specified events and may permit acceleration of
exercisability after termination of the Optionee's employment but not
beyond 10 years from the date of grant, as follows: in the event of the
Optionee's termination due to disability or retirement with the Company's
consent, up to 3 5 years after termination or retirement; in the event of
the Optionee's death, up to 1 year from the date of death; and in the event
of any other termination, up to 30 days from the date of termination.
C. Paragraph 7 of the Plan has been amended to read in its entirety as
follows:
7. Dividend Credits. NO DIVIDEND CREDITS WILL BE ALLOCATED UNDER THE PLAN ON
OR AFTER MAY 4, 1994. ALL DIVIDEND CREDITS ALLOCATED PRIOR TO MAY 4, 1994 SHALL
BE GOVERNED BY THE PLAN AS IN EFFECT PRIOR TO SUCH DATE.
*Note: Bold-face text reflects additions and lined-out text reflects deletions.
A-1
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EXHIBIT B
M. A. HANNA COMPANY DIRECTORS' DEFERRED FEE PLAN
ARTICLE I PURPOSE
The purpose of the M. A. Hanna Company Directors' Deferred Fee Plan (the
"Plan") is to provide benefits upon termination of service or death for
Directors of M. A. Hanna Company or their beneficiaries. It is intended that
the Plan will assist in attracting and retaining qualified individuals to serve
as Directors.
ARTICLE II DEFINITIONS
For the purposes of the Plan, the following words and phrases shall have the
meanings indicated:
2.1 BENEFICIARY. Beneficiary means the person or persons designated or deemed
to be designated by the Participant pursuant to Article VII to receive benefits
payable under the Plan in the event of the Participant's death.
2.2 BOARD. Board means the Board of Directors of the Company.
2.3 COMMITTEE. Committee has the meaning set forth in Section 8.1 hereof.
2.4 COMMON STOCK. Common Stock means the Company's common stock, par value $l
per share, or such other security as may at the applicable time be represented
by the Units.
2.5 COMPANY. Company means M. A. Hanna Company, a Delaware corporation, and
any successor thereto.
2.6 DECLARED RATE. Declared Rate means the interest rate payable on l-year
U.S. Treasury Bills issued on the specified date or, if not then issued, on the
next date of issue, or such other rate as may from time to time be established
by the Committee; provided, however, that in no event shall the Declared Rate
be more than 5 percent higher than the rate payable on such Bills.
2.7 DEFERRAL BENEFIT. Deferral Benefit means the benefit payable to a
Participant or his or her Beneficiary pursuant to Article VI hereof.
2.8 DEFERRED BENEFIT ACCOUNT. Deferred Benefit Account means the account
maintained on the books of the Company for each Participant pursuant to Article
V hereof.
2.9 DIRECTOR. Director means a member of the Board.
2.10 EMERGENCY BENEFIT. Emergency Benefit has the meaning set forth in
Section 6.2 hereof.
2.11 FEE. Fee or Fees means any compensation payable in cash to a Director
for his or her services as a member of the Board or any Committee thereof.
2.12 MARKET VALUE. Market Value means the average of the highest and lowest
sales prices of the Common Stock on the New York Stock Exchange on the
specified date (or, if Common Stock was not traded on such date, on the next
preceding date on which it was traded) as reported in The Wall Street Journal.
2.13 PARTICIPANT. Participant means any eligible Director who elects to
participate by filing a Participation Agreement as provided in Section 3.2
hereof.
2.14 PARTICIPATION AGREEMENT. Participation Agreement means the agreement
filed by a Participant, in the form prescribed by the Committee, pursuant to
Section 3.2 hereof.
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2.15 PLAN YEAR. Plan Year means a 12-month period commencing January 1 and
ending the following December 31, except that the first Plan Year shall
commence May 4, 1994 and end December 31, 1994.
2.16 RULE 16B-3. Rule 16b-3 means Rule 16b-3 under the Securities Exchange
Act of 1934 or any successor rule.
2.17 UNIT. Unit means an accounting unit equal in value to one share of
Common Stock. The maximum number of Units that may be allocated to the Deferred
Benefit Accounts of all Participants under the Plan in the aggregate shall be
100,000 Units. Such maximum number and the number of Units included in any
Deferred Benefit Account shall be adjusted as appropriate to reflect any stock
dividend, stock split, recapitalization, merger or other similar event
affecting the Common Stock.
ARTICLE III ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Eligibility to participate in the Plan is limited to those
Directors who are not employees of the Company or any of its subsidiaries.
3.2 PARTICIPATION. Participation in the Plan shall be limited to eligible
Directors who elect to participate in the Plan by filing a Participation
Agreement with the Committee. A properly completed and executed Participation
Agreement must be filed on or prior to the December 31 immediately preceding
the Plan Year in which the Participant's participation in the Plan will
commence, and the election to participate shall be effective on the first day
of the Plan Year following receipt by the Company of the Participation
Agreement; provided, however, that, in the case of the first Plan Year, such a
Participation Agreement must be filed by April 15, 1994 and shall be effective
as of the first day of the first Plan Year. In the event that a Director first
becomes eligible to participate during the course of a Plan Year, such
Participation Agreement must be filed no later than 30 days following election
or appointment to the Board, and such Participation Agreement shall be
effective only with regard to Fees earned or payable following the filing of
the Participation Agreement with the Committee.
3.3 TERMINATION OF PARTICIPATION. A Participant may elect to terminate his or
her participation in the Plan by filing a written notice thereof with the
Committee, which termination shall be effective at any time specified by the
Participant in the notice, but not earlier than the first day of the Plan Year
immediately succeeding the Plan Year in which such notice is filed with the
Committee. Amounts credited to such Participant's Deferred Benefit Account with
respect to periods prior to the effective date of such termination shall
continue to be payable pursuant to, and otherwise governed by, the terms of the
Plan.
ARTICLE IV DEFERRAL OF FEES
4.1 DEFERRAL. A Participant may elect to defer all, or a specified
percentage, of his or her Fees, and a Participant may elect to have his or her
deferred Fees credited to his Deferred Benefit Account either in dollar amounts
or Units. A Participant may not change the percentage of his or her Fees to be
deferred, or the form in which Fees are to be credited.
4.2 CREDITING OF DEFERRED FEES. Deferred Fees that a Participant elects to
have credited in dollar amounts shall be credited to the Participant's Deferred
Benefit Account as they become payable to the Director. Deferred Fees payable
to a Director during a Plan Year that a Participant elects to have credited in
Units shall be credited to the Participant's Deferred Benefit Account annually
after the end of such Plan Year on the basis of the average of the Market
Values of the Common Stock on the last trading day in each calendar month
during such Plan Year.
ARTICLE V DEFERRED BENEFIT ACCOUNT
5.1 DETERMINATION OF ACCOUNT. On any particular date, a Participant's
Deferred Benefit Account shall consist of the aggregate amount of dollars and
Units credited thereto pursuant to Section 4.2 hereof, plus any
B-2
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interest credited pursuant to Section 5.2 hereof, plus any dividend equivalents
credited pursuant to Section 5.3 hereof, minus the aggregate amount of
distributions, if any, made from such Deferred Benefit Account.
5.2 CREDITING OF INTEREST. As of the last day of each Plan Year, each
Deferred Benefit Account to which Fees have been credited in dollar amounts
shall be increased by the amount of interest earned during the Plan Year.
Interest shall be credited at the Declared Rate as of the last day of the Plan
Year based on the average daily balance of the Participant's Deferred Benefit
Account since the beginning of the Plan Year, but after the Deferred Benefit
Account has been adjusted for any contributions or distributions to be credited
or deducted for such period. Interest for the first Plan Year applicable to a
Deferred Benefit Account shall be prorated. Until a Participant or his or her
Beneficiary receives his or her entire Deferred Benefit Account, the unpaid
balance thereof credited in dollar amounts shall bear interest as provided in
this Section 5.2.
5.3 CREDITING OF DIVIDEND EQUIVALENTS. Each Deferred Benefit Account to which
Fees have been credited in Units shall be credited annually after the end of
each Plan Year with additional Units equal in value to the amount of cash
dividends paid by the Company during such Plan Year on Common Stock equivalent
to the average daily balance of Units in such Deferred Benefit Account during
such Plan Year. Such dividend equivalents shall be valued on the basis of the
average Market Value computed pursuant to Section 4.2 hereof. Until a
Participant or his or her Beneficiary receives his or her entire Deferred
Benefit Account, the unpaid balance thereof credited in Units shall earn
dividend equivalents as provided in this Section 5.3.
5.4 STATEMENT OF ACCOUNTS. The Committee shall provide to each Participant,
within 120 days after the close of each Plan Year, a statement setting forth
the balance of such Participant's Deferred Benefit Account as of the last day
of the preceding Plan Year and showing all adjustments made thereto during such
Plan Year.
5.5 VESTING OF DEFERRED BENEFIT ACCOUNT. A Participant shall be 100 percent
vested in his or her Deferred Benefit Account at all times.
ARTICLE VI PAYMENT OF BENEFITS
6.1 TERMINATION OF SERVICE AS A DIRECTOR OR DEATH. Upon (i) the termination
of service of the Participant as a Director of the Company, for any reason or
(ii) if the Participant shall so elect, only upon his or her death, the Company
shall pay to the Participant or his Beneficiary, as the case may be, a Deferral
Benefit equal to the balance of his or her Deferred Benefit Account, less any
amounts previously distributed.
6.2 EMERGENCY BENEFIT. In the event that the Committee, upon written petition
of a Participant, determines, in its sole discretion, that the Participant has
suffered an unforeseeable financial emergency, the Company shall pay to the
Participant, as soon as practicable following such determination, an amount in
cash necessary to meet the emergency (the "Emergency Benefit"), but not
exceeding the balance of such Participant's Deferred Benefit Account as of the
date of such payment. For purposes of this Section 6.2, an "unforeseeable
financial emergency" shall mean a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant
or of a dependent of the Participant, loss of the Participant's property due to
a casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. Cash needs
arising from foreseeable events such as the purchase of a house or education
expenses for children shall not be considered to be the result of an
unforeseeable financial emergency. The amount of the Deferral Benefit otherwise
payable under the Plan to such Participant shall be adjusted to reflect the
early payment of the Emergency Benefit. For purposes of this Section 6.2,
Deferred Benefit Accounts including Units shall be valued on the basis of the
Market Value of the Common Stock on the date preceding the date of payment of
an Emergency Benefit.
6.3 FORM OF PAYMENT. Amounts credited to the Deferred Benefit Account of a
Participant in dollars shall be paid in cash, and amounts credited in Units
shall be paid in full shares of Common Stock (with any
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fractional share to be paid in cash based on the then current Market Value).
The Deferral Benefit shall be paid in one of the following forms, as elected by
the Participant in his or her Participation Agreement:
(a) Equal annual installments over a period of 5 years (together, in the
case of deferred compensation credited in dollar amounts, with interest
thereon credited after the payment commencement date pursuant to Section
5.2 hereof).
(b) A lump sum.
(c) A combination of (a) and (b) above. The Participant shall designate
the percentage payable under each option.
For the purposes of this Section 6.3, each distribution of Common Stock from
Deferred Benefit Accounts including Units shall be made on the basis of one
share of Common Stock for each Unit.
6.4 COMMENCEMENT OF PAYMENTS. Commencement of payments under Section 6.1
hereof shall begin within 60 days following receipt of notice by the Committee
of an event which entitles a Participant (or a Beneficiary) to payments under
the Plan, or at such earlier date as may be determined by the Committee;
provided, however, that payments to be made to a former Director in Common
Stock during his or her lifetime shall not commence until 6 months after he or
she has ceased to be a Director.
ARTICLE VII BENEFICIARY DESIGNATION
7.1 BENEFICIARY DESIGNATION. Each Participant shall have the right, at any
time, to designate any person or persons as his Beneficiary to whom payment
under the Plan shall be made in the event of his or her death prior to complete
distribution to the Participant of his or her Deferral Benefit. Any Beneficiary
designation shall be made in a written instrument filed with the Committee and
shall be effective only when received in writing by the Committee.
7.2 AMENDMENTS. Any Beneficiary designation may be changed by a Participant
by the filing of a new Beneficiary designation, which will cancel all
Beneficiary designations previously filed.
7.3 NO DESIGNATION. If a Participant fails to designate a Beneficiary as
provided above, or if all designated Beneficiaries predecease the Participant,
then the Participant's designated Beneficiary shall be deemed to be the
Participant's estate.
7.4 EFFECT OF PAYMENT. Payment to a Participant's Beneficiary (or, upon the
death of a Beneficiary, to his or her estate) shall completely discharge the
Company's obligations under the Plan.
ARTICLE VIII ADMINISTRATION
8.1 COMMITTEE; DUTIES. The administrative committee for the Plan (the
"Committee") shall consist of the Chairman of the Board (provided he is not a
nonemployee Director) and two Company officers or Directors who are not
nonemployee Directors who shall be appointed by the Chairman of the Board. The
Committee shall supervise the administration of the Plan, may from time to time
adopt procedures governing the Plan and shall have authority to give
interpretive rulings with respect to the Plan.
8.2 AGENTS. The Committee may appoint an individual, who may be an employee
of the Company, to be the Committee's agent with respect to the day-to-day
administration of the Plan. In addition, the Committee may, from time to time,
employ other agents and delegate to them such administrative duties as it sees
fit, and may from time to time consult with counsel who may be counsel to the
Company.
8.3 BINDING EFFECT OF DECISIONS. Any decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan shall be final and
binding upon all persons having any interest in the Plan.
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8.4 INDEMNITY OF COMMITTEE. The Company shall indemnify the members of the
Committee against claims, loss, damage, expense and liability arising from any
action or failure to act with respect to the Plan to the extent provided in the
By-laws of the Company and any applicable indemnification agreement between the
Company and such member.
ARTICLE IX AMENDMENT AND TERMINATION OF PLAN
The Board may at any time amend, suspend, terminate or reinstate any or all
of the provisions of the Plan, except that no such amendment, suspension or
termination may adversely affect any Participant's Deferred Benefit Account as
it existed as of the effective date of such amendment, suspension or
termination without such Participant's consent. No amendment shall become
effective without approval by all Participants if such amendment would cause
transactions under the Plan to cease to be exempt under Rule 16b-3.
ARTICLE X MISCELLANEOUS
10.1 FUNDING. Neither Participants, nor their Beneficiaries, nor their heirs,
successors or assigns, shall have any secured interest or claim in any property
or assets of the Company. The Company's obligation under the Plan shall be
merely that of an unfunded and unsecured promise of the Company to pay money in
the future. It is the intention of the Company that the Plan be unfunded for
tax purposes and for purposes of Title I of ERISA. The Company may create a
trust to hold funds, Common Stock or other securities to be used in payment of
its obligations under the Plan, and may fund such trust; provided, however,
that any funds contained therein shall remain liable for the claims of the
Company's general creditors.
10.2 NON-ASSIGNABILITY. No right or interest under the Plan of a Participant
or his or her Beneficiary (or any person claiming through or under any of
them), shall be (i) assignable or transferable in any manner, (ii) subject to
alienation, anticipation, sale, pledge, encumbrance, attachment, garnishment or
other legal powers or (iii) in any manner liable for or subject to the debts or
liabilities of the Participant or Beneficiary. If any Participant or
Beneficiary (other than the surviving spouse of any deceased Participant) shall
attempt to or shall transfer, assign, alienate, anticipate, sell, pledge or
otherwise encumber his or her benefits hereunder or any part thereof, or if by
reason of his or her bankruptcy or other event happening at any time such
benefits would devolve upon anyone else or would not be enjoyed by him or her,
then the Committee, in its discretion, may terminate his or her interest in any
such benefit to the extent the Committee considers necessary or advisable to
prevent or limit the effects of such occurrence. Termination shall be effected
by filing a written "termination declaration" with the Secretary of the Company
and making reasonable efforts to deliver a copy to the Participant or
Beneficiary whose interest is adversely affected (the "Terminated
Participant").
As long as the Terminated Participant is alive, any benefits affected by the
termination shall be retained by the Company and, in the Committee's sole and
absolute judgment, may be paid to or expended for the benefit of the Terminated
Participant, his or her spouse, his or her children or any other person or
persons in fact dependent upon him or her in such a manner as the Committee
shall deem proper. Upon the death of the Terminated Participant, all benefits
withheld from him or her and not paid to others in accordance with the
preceding sentence shall be disposed of according to the provisions of the Plan
that would apply if he or she died prior to the time that all benefits to which
he or she was entitled were paid to him or her.
10.3 CAPTIONS. The captions contained herein are for convenience only and
shall not control or affect the meaning or construction hereof.
10.4 GOVERNING LAW. The provisions of the Plan shall be construed and
interpreted according to the internal substantive laws of the State of Ohio.
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10.5 SUCCESSORS. The provisions of the Plan shall bind and inure to the
benefit of the Company and its successors and assigns. The term successors as
used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise, acquire all or
substantially all of the business and assets of the Company and successors of
any such corporation or other business entity.
10.6 EFFECTIVE DATE. The Plan shall be effective on the first day of the
first Plan Year, subject to approval by the shareholders of the Company.
10.7 RIGHT TO CONTINUED SERVICE. Nothing contained herein shall be construed
to confer upon any Director the right to continue to serve as a Director of the
Company or in any other capacity.
10.8 RULE 16B-3. This Plan is intended to comply with Rule 16b-3 as in effect
prior to May 1, 1991. If at any time Rule 16b-3 as promulgated on February 8,
1991 or at any later date shall become applicable to the Plan, (a) if necessary
for acquisition of Units under the Plan to continue to be exempt under Rule
16b-3, no election to have Deferred Fees credited in Units shall become
effective pursuant to Section 4.2 hereof until 6 months after such election is
made and (b) the Committee may make such other changes in the terms or
operation of the Plan as may then be necessary or appropriate to comply with
such Rule, including, without limitation, by eliminating any restriction
originally included in the Plan to comply with Rule 16b-3 that may no longer be
required.
B-6
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[RECYCLED LOGO APPEARS HERE]
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GRAPHICS APPENDIX LIST
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EDGAR Version Typeset Version
- ------------- ---------------
12 A performance graph showing a comparison
of five-year cumulative total return among
Hanna, S&P 500 Index and S&P Specialty Chemicals
Index. (The numbers used in this graph appear on
page 12.)
<PAGE>
P R O X Y
M. A. HANNA COMPANY
1301 E. Ninth Street - Suite 3600
Cleveland, Ohio 44114-1860
Annual Meeting
May 4, 1994
The undersigned hereby appoints M. D. Walker, D. J. McGregor, and J. S. Pyke,
Jr. as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares
of Common Stock of M. A. Hanna Company held on record by the undersigned on
March 7, 1994 at the annual meeting of stockholders to be held on May 4, 1994
and any adjournment thereof.
(change of address)
Election of Directors, Nominees:
Nominees: B. C. Ames, C. A. Cartwright, W. R. Embry,
J. T. Eyton, G. D. Kirkham, M. L. Mann, ---------------------------
D. J. McGregor, R. W. Pogue, M. D. Walker
---------------------------
---------------------------
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted for the election of directors nominated by the Board of Directors,
ratification of the appointment of auditors, approval of the 1988 Long-Term
Incentive Plan amendments and approval of the Directors' Deferred Fee Plan.
Please sign exactly as the name appears on reverse side. When shares are held
by joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
This proxy is solicited on behalf of the Board of Directors.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
SEE REVERSE
No. SIDE
<PAGE>
[X] Please mark your
votes as in this
example.
SHARES IN YOUR NAME REINVESTMENT SHARES
1 Election of Directors (see reverse)
FOR WITHHELD
[_] [_]
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
2 Ratification of appointment of auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
3 Ratification and approval of amendments to 1988 Long-Term Incentive Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
4 Ratification and approval of Directors' Deferred Fee Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
5 Upon such other business as may properly come before the meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
Change of Address
[_]
SIGNATURE(S) DATE
----------------------------- ------
SIGNATURE(S) DATE
----------------------------- ------
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such.
