<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED June 30, 1999
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COMMISSION FILE NUMBER 1-5222
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M. A. HANNA COMPANY
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 34-0232435
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SUITE 36-5000, 200 PUBLIC SQUARE, CLEVELAND, OHIO 44114-2304
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-589-4000
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NOT APPLICABLE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (I) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the proceeding 12 months, and (2) has been subjected to such filing
requirements for the past 90 days. YES X NO
--- ---
Common Shares Outstanding, as of the close of the
period covered by this report 48,899,382.
<PAGE> 2
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------
INDEX
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PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 1999 and 1998 2
Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 3
Consolidated Statements of
Cash Flows -Six Months Ended
June 30, 1999 and 1998 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Interim Financial Condition and Results
of Operations. 7-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
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<TABLE>
<CAPTION>
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
Net Sales $ 594,263 $ 595,613 $ 1,174,822 $ 1,187,114
Costs and Expenses
Cost of goods sold 486,987 486,040 962,465 963,312
Selling, general and administrative 76,079 74,072 154,796 148,936
Interest on debt 8,251 8,769 16,533 17,041
Amortization of intangibles 3,973 4,229 7,970 8,286
Other - net 1,518 707 2,593 1,848
----------- ----------- ----------- -----------
576,808 573,817 1,144,357 1,139,423
----------- ----------- ----------- -----------
Income Before Income Taxes and
Cumulative Effect of Change in
Accounting Principle 17,455 21,796 30,465 47,691
Income taxes 7,069 8,827 12,338 19,315
----------- ----------- ----------- -----------
Income Before Cumulative Effect
of a Change in Accounting Principle 10,386 12,969 18,127 28,376
Cumulative effect of a change in
accounting principle -- -- -- (2,059)
----------- ----------- ----------- -----------
Net Income $ 10,386 $ 12,969 $ 18,127 $ 26,317
=========== =========== =========== ===========
Net Income per Share
Basic
Income before cumulative effect
of a change in accounting principle $ .23 $ .29 $ .41 $ .63
Cumulative effect of a change in
accounting principle -- -- -- (.04)
----------- ----------- ----------- -----------
Net income $ .23 $ .29 $ .41 $ .59
=========== =========== =========== ===========
Diluted
Income before cumulative effect
of a change in accounting principle $ .23 $ .29 $ .41 $ .62
Cumulative effect of a change in
accounting principle -- -- -- (.04)
----------- ----------- ----------- -----------
Net income $ .23 $ .29 $ .41 $ .58
=========== =========== =========== ===========
Dividends per common share $ .12 $ .1125 $ .24 $ .225
=========== =========== =========== ===========
</TABLE>
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<TABLE>
<CAPTION>
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
June December
30, 1999 31, 1998
----------- -----------
(Dollars in thousands)
Assets
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 39,623 $ 32,322
Receivables 379,942 350,102
Inventories:
Finished products 167,423 169,830
Raw materials and supplies 62,683 66,703
----------- -----------
230,106 236,533
Prepaid expenses 12,318 9,937
Deferred income taxes 21,884 25,554
----------- -----------
Total current assets 683,873 654,448
Property, Plant and Equipment 603,159 598,573
Less allowances for depreciation 276,606 258,986
----------- -----------
326,553 339,587
Other Assets
Goodwill and other intangibles 456,727 467,577
Investments and other assets 90,123 91,277
Deferred income taxes 38,317 41,008
----------- -----------
585,167 599,862
----------- -----------
$ 1,595,593 $ 1,593,897
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Notes payable to banks $ 4,858 $ 3,391
Trade payables and accrued expenses 372,590 358,081
Current portion of long-term debt 1,614 2,611
----------- -----------
Total current liabilities 379,062 364,083
Other Liabilities 208,809 210,476
Long-term Debt
Senior notes 87,775 87,775
Medium-term notes 160,000 160,000
Other 217,635 233,111
----------- -----------
465,410 480,886
Stockholders' Equity
Preferred stock, without par value
Authorized 5,000,000 shares
Issued -0- shares in 1999 and 1998 -- --
Common stock, par value $1
Authorized 100,000,000 shares
Issued 66,123,152 shares at June 30, 1999 and
66,059,298 shares at December 31, 1998 66,123 66,059
Capital surplus 312,177 293,613
Retained earnings 478,037 470,566
Accumulated translation adjustment (17,016) (12,327)
Associates ownership trust (72,976) (65,255)
Cost of treasury stock 17,223,770 shares at June 30, 1999
and 16,439,467 shares at December 31, 1998) (224,033) (214,204)
----------- -----------
542,312 538,452
----------- -----------
$ 1,595,593 $ 1,593,897
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
SIX MONTHS ENDED
JUNE 30
----------------------
1999 1998
---- ----
(Dollars in thousands)
Cash Provided from (Used for) Operating Activities
<S> <C> <C>
Net income $ 18,127 $ 26,317
Depreciation and amortization 32,594 29,220
Companies carried at equity:
Income (2,385) (2,333)
Dividends received 1,400 1,550
Changes in operating assets and liabilities:
Receivables (35,291) (30,530)
Inventories 2,751 (8,383)
Prepaid expenses (889) (3,231)
Trade payables and accrued expenses 18,357 3,149
Restructuring payments (4,643) (2,284)
Cumulative effect of a change in accounting principle -- 3,460
Other 13,553 7,068
--------- ---------
Net operating activities 43,574 24,003
Cash Provided from (Used for) Investing Activities
Capital expenditures (23,440) (31,725)
Acquisitions of businesses, less cash acquired (9,423) (59,121)
Acquisition payments (233) (207)
Sales of assets 2,197 --
Investments in associated and other companies (391) --
Return of cash from associated and other companies 512 --
Other 6,303 (3,220)
--------- ---------
Net investing activities (24,475) (94,273)
Cash Provided from (Used for) Financing Activities
Cash dividends paid (10,657) (10,054)
Proceeds from the sale of common stock 674 2,119
Purchase of shares for treasury -- (13,463)
Increase in debt 54,699 118,502
Reduction in debt (56,798) (19,884)
--------- ---------
Net financing activities (12,082) 77,220
Effect of exchange rate changes on cash 284 (644)
--------- ---------
Cash and Cash Equivalents
Increase 7,301 6,306
Beginning of period 32,322 41,430
--------- ---------
End of period $ 39,623 $ 47,736
========= =========
Cash paid during period
Interest $ 15,691 $ 16,606
Income taxes 302 12,214
</TABLE>
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<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
June 30, 1999
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Basis of Presentation
- ---------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and in the opinion of
the Company include all adjustments necessary to present fairly the results of
operations, financial position, and changes in cash flow. Reference should be
made to the footnotes included in the 1998 Annual Report.
The results of operations for the interim periods are not necessarily indicative
of the results expected for the full year.
Net Income Per Share of Common Stock
- ------------------------------------
Basic net income per share is computed by dividing net income applicable to
common stock by the average number of shares outstanding of 44,577,005 and
44,654,530 for the quarters ended June 30, 1999 and 1998, respectively.
Outstanding shares for the six months ended June 30, 1999 and 1998 were
44,530,611 and 44,767,542. Shares of common stock held by the Associates
Ownership Trust ("AOT") enter into the determination of the average number of
shares outstanding as the shares are released from the AOT to fund a portion of
the Company's obligations under certain of its employee compensation and benefit
plans.
The number of shares used to compute diluted net income per share is based on
the number of shares used for basic net income per share increased by the common
stock equivalents which would arise from the exercise of stock options. The
average number of shares used in the computation was 44,886,750 and 45,346,271
for the quarters ended June 30, 1999 and 1998, respectively, and 44,680,533 and
45,538,224 for the six months ended June 30, 1999 and 1998, respectively.
Comprehensive Income
- --------------------
Comprehensive income for the second quarter of 1999 and 1998 was $8,795 and
$11,878, respectively. Comprehensive income for the six months ended June 30,
1999 and 1998 was, $13,438 and $24,258, respectively. Comprehensive income
includes net income and foreign currency translation adjustments for the
quarters and six months ending June 30, 1999 and 1998, respectively.
Pending Accounting Changes
- --------------------------
In June 1998, the Financial Accounting Standards Board issued Statement No. 133
"Accounting for Derivative Instruments and Hedging Activities". The Company is
analyzing the impact of Statement 133. On June 30, 1999, the Financial
Accounting Standards Board issued Statement 137, which delays the effective date
of Statement 133 for one year to fiscal years beginning after June 15, 2000.
Profit Improvement Plan
- -----------------------
During the first six months of 1999, the Company continued to take actions under
its Profit Improvement Plan announced during the third quarter of 1998. Details
of the utilization of the profit improvement accruals during the first six
months of 1999 are as follows:
<TABLE>
<CAPTION>
Accrual balance Utilized first six Accrual balance
December 31, 1998 months 1999 June 30, 1999
----------------- ----------- -------------
<S> <C> <C> <C>
Associate costs $ 5,257 2,402 $2,855
Asset write-downs 2,779 1,030 1,749
Plant closures 2,163 1,004 1,159
----- ----- -----
$10,199 $4,436 $5,763
======= ====== ======
</TABLE>
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<PAGE> 7
Business Segments
- -----------------
The Company has three reportable segments - rubber processing, plastic
processing and distribution. The reportable segments are business units that
offer different products and services. Additionally, the manufacturing processes
for rubber processing and plastic processing are different. Rubber processing
includes the manufacture of custom rubber compounds and additives. Plastic
processing includes the production of custom plastic compounds and custom
formulated colorants and additives. Distribution for the periods reported
includes distribution of engineered plastic shapes and thermoplastic and
thermoset resins and glass fiber materials. Other operations include the
Company's Diversified Polymer Products business and its marine operations.
<TABLE>
<CAPTION>
Rubber Plastic Other
Processing Processing Distribution Operating Corporate Total
---------- ---------- ------------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
QUARTER ENDING JUNE 30, 1999
Net sales from external customers $130,721 $227,725 $232,132 $3,685 $ $594,263
Intersegment sales 856 5,462 1,571 - - 7,889
Operating income 11,532 16,028 3,592 344 (5,790) 25,706
QUARTER ENDING JUNE 30, 1998
Net sales from external customers $138,680 $217,789 $235,519 $3,625 $ $595,613
Intersegment sales 582 6,523 1,863 - - 8,968
Operating income 14,608 13,051 7,812 278 (5,184) 30,565
SIX MONTHS ENDING JUNE 30, 1999
Net sales from external customers $260,919 $453,175 $453,420 $7,308 $ $1,174,822
Intersegment sales 1,573 10,820 3,232 - - 15,625
Operating income 22,898 29,954 6,110 579 (12,543) 46,998
SIX MONTHS ENDING JUNE 30, 1998
Net sales from external customers $277,468 $434,959 $467,237 $7,450 $ $1,187,114
Intersegment sales 1,315 12,464 3,688 - - 17,467
Operating income 30,006 28,631 16,981 450 (11,336) 64,732
</TABLE>
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------
Results of Operations
- ---------------------
Consolidated net sales for the quarter ending June 30 decreased slightly from
$595.6 million in 1998 to $594.3 million in 1999, representing a decrease of .2
percentage points. The six months ending June 30 experienced a 1.0 percent
decrease in consolidated net sales from $1,187.1 million in 1998 to $1,174.8
million in 1999. The sales decreases are attributable to (i) declines in sales
volume, (ii) an unfavorable price/mix variance primarily due to a decline in
resin costs resulting in lower selling prices and (iii) an unfavorable foreign
exchange impact. Acquisitions offset declines by contributing 2.9 percent to
consolidated net sales for the quarter and 2.6 percent for the six months ending
June 30.
Net sales for the quarter in the plastic processing segment increased 4.0
percent to $233.2 million in 1999 compared with $224.3 million in 1998.
Quarterly volume was down, price/mix was flat and the foreign exchange impact
was unfavorable. Net sales increased 3.7 percent from $447.4 million for the six
months ending June 30, 1998 to $464.0 million for the six months ending June 30,
1999. Volume and price mix variances were unfavorable for the six months ending
June 30 while the foreign exchange impact was flat. The increases in net sales
were attributable to the So.F.teR acquisition, which contributed net sales
growth of 7.7 percent for the quarter and 6.8 percent for the six months ending
June 30. Sales volume in the European compounding business, excluding
acquisitions, increased while revenue was down due to decreases in resin prices,
competitive price pressures and a strengthening U.S. dollar. Volume was down in
Asia due to a decline in sales in the electronics market. Domestic sales volume
increased but has been mitigated by a shift in demand to lower priced products
coupled with a decline in resin costs resulting in lower selling prices.
The rubber processing segment experienced a 5.5 percent decrease in net sales
for the quarter to $131.6 million in 1999 compared with $139.3 million in 1998.
Net sales decreased 5.8 percent from $278.8 million for the six months ending
June 30, 1998 to $262.5 million for six months ending June 30, 1999. Both for
the quarter and the six months ending June 30 volume decreased while the
price/mix variance and the foreign exchange impact were unfavorable. The decline
in sales was attributable to several customers moving their rubber compounding
operations in house in the third and fourth quarters of 1998. The rubber
processing business has partially offset this loss in sales by contracting with
manufacturers to outsource their rubber compounding operations.
The distribution segment's net sales decreased 1.5 percent to $233.7 million for
the quarter ending June 30, 1999 from $237.4 million for the comparable period
in 1998. Net distribution sales declined 3.0 percent from $470.9 million to
$456.7 million for the six month periods ending June 30, 1998 and 1999,
respectively. Sales volume increased while the price/mix variances were
unfavorable for both the quarter and the six months ending June 30. The foreign
exchange impact was flat for the quarter and unfavorable for
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<PAGE> 9
the six month period ending June 30. Resin distribution continues to feel
the impact of lower average resin prices while shapes distribution continues
their initiative of intensifying customer focus and improving customer service
to further stimulate sales following poor fourth quarter results in 1998.
Gross margins declined 0.3 percentage points for the second quarter to 18.1
percent in 1999 compared with 18.4 percent in 1998 and declined 0.8 percentage
points for the six month periods ending June 30 to 18.1 percent in 1999,
compared with 18.9 percent in 1998. The decrease in gross margins is due to the
year over year performance issues in the shapes distribution business. In
addition, margins in the rubber processing business declined on a year over year
basis due to lower volumes, an unfavorable shift in price/mix domestically,
plant expansion costs, and additional expenses associated with supply chain and
lean manufacturing initiatives. The resin distribution business also continues
to be impacted by pricing pressures. Margins in the plastic processing unit
improved both for the quarter and the six months ending June 30 due to benefits
achieved through the company's profit improvement plan initiated in the third
quarter of 1998.
Selling, general and administrative costs for the second quarter increased $2.0
million to $76.1 million, or 12.8 percent of sales in 1999 as compared with 12.4
percent of sales in 1998, and for the six months ending June 30 increased $5.9
million to $154.8, or 13.2 percent of sales for 1999 compared to $148.9 million
or 12.5 percent in 1998. The increase was attributable to expenses associated
with acquisitions, increased depreciation from the substantial completion of the
installation of our ERP systems in 1998, and selling and technical investments
in the European plastics compounding business.
Other-net increased $0.8 million for the quarter and $0.7 million for the six
months ended June 30 due the increase in minority interest eliminations.
The sale of a non-core segment of M.A. Hanna's resin distribution business
closed July 15, 1999. Interplastic Distribution Group Incorporated acquired the
business, which sold a variety of thermoset resins, glass fiber and associated
products.
Liquidity and Sources of Capital
- --------------------------------
Operating activities provided $43.6 million for the first six months of 1999
after providing for working capital requirements of $15.1 million. Investing
activities used $24.5 million and included $23.4 million for capital
expenditures and $9.4 million for acquisitions. Financing activities used $12.1
million for debt reduction of $2.1 million and $10.7 million for dividend
payments.
The current ratio was 1.8:1 at June 30, 1999 and December 31, 1998. Debt to
total capital was 46.2 percent at June 30, 1999 and 47.2 percent at December 31,
1998.
Market Risk
- -----------
The Company is exposed to foreign currency exchange risk in the ordinary course
of business. Management has examined the Company's exposure to this risk and has
concluded that the Company's exposure in this area is not material to fair
values, cash flows or earnings.
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<PAGE> 10
The Company is exposed to foreign currency exchange risks in the ordinary course
of its business operations due to the fact that the Company's products are
provided in numerous countries around the world and collection of revenues and
payment of certain expenses may give rise to currency exposure. The Company also
enters into intercompany lending transactions and foreign exchange contracts
related to this foreign currency exposure.
Environmental Matters
- ---------------------
The Company is subject to various laws and regulations concerning environmental
matters. The Company is committed to a long-term environmental protection
program that reduces releases of hazardous materials into the environment as
well as to the remediation of identified existing environmental concerns.
Claims have been made against subsidiaries of the Company for costs of
environmental remediation measures taken or to be taken in connection with
operations that have been sold or closed. These include the clean-up of
Superfund sites and participation with other companies in the clean-up of
hazardous waste disposal sites, several of which have been designated as
Superfund sites. Reserves for such liabilities have been established and no
insurance recoveries have been anticipated in the determination of reserves.
While it is not possible to predict with certainty, management believes that the
aforementioned claims will be resolved without material adverse effect on the
financial position, results of operations or cash flows of the Company.
Year 2000 Readiness Disclosure
- ------------------------------
The Company is addressing the issue of computer programs and embedded computer
chips being unable to distinguish between the year 1900 and the year 2000. It
has undertaken various initiatives intended to ensure that its computer programs
and embedded chip computer chips will perform as intended regardless of date and
that all data including dates can be accessed and processed with expected
results. All of the Company's major business units are compliant based on
testing to date. Management is aware that its customers and suppliers may be
impacted if the Company is not Year 2000 compliant on a timely basis.
Beginning in 1995 the Company began a multi-year project to (i) replace 22
legacy systems which resulted from acquisitions made since 1986, (ii) introduce
enterprise-wide information technology systems from SAP America, Inc., Oracle
Corporation and J.D. Edwards in order to consolidate and standardize its
information technology systems and (iii) install other enterprise-wide software
in order to serve customers better and operate more efficiently. An important
benefit of this project is that the new systems and software will be year 2000
compliant.
New systems and software have been installed, tested and operating compliant as
of June 30, 1999 at all major facilities. The new systems and software comprises
at least 95% of the systems and software being operated by the Company
worldwide. In connection with the introduction of the new systems and software,
the Company has identified the legacy systems being retained which are not
currently year 2000 compliant,
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<PAGE> 11
and has programs underway to bring them to a state of year 2000 compliance
through upgrading or replacement, as appropriate. In addition, the Company has
implemented a program to identify and test date chips to ensure year 2000
functionality. Testing and remediation will continue through the end of the year
and be completed on all critical systems by the year end.
The Company has also been engaged in the process of identifying and prioritizing
critical suppliers and customers at the direct interface level, and
communicating with respect to their state of year 2000 readiness. Evaluations of
the most critical third parties have been completed and the Company will
continue to review the readiness of all its suppliers and customers.
A significant portion of the costs to implement the new systems and software has
already been incurred and is being amortized or charged to expense in current
operations. The historical costs of remediating the non-compliant systems has
been included in the Company's information technology cost reporting and are not
material to its financial condition, results of operations or cash flows. The
Company does not believe that future costs associated with the new systems and
software and the required modifications of the legacy systems to become year
2000 compliant will be material to its financial condition, results of
operations or cash flows.
The Company has in process a general contingency plan for dealing with any
serious year 2000 compliance failures as they may occur and expects to fund the
contingency plan efforts from operating funds. The plan will address both
internal (staffing, computer systems and inventory) and external (suppliers,
service providers and customers) risks. As part of the plan, the Company is
identifying alternative sources or strategies where necessary if significant
exposures are identified.
The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failure could materially and adversely affect the Company's
results of operations, liquidity and financial condition or adversely affect the
Company's relationships with its suppliers, customers or other third parties.
Due to the general uncertainty inherent in the year 2000 problem, resulting in
part from the uncertainty of the year 2000 readiness of suppliers and customers,
management is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on its financial condition, results of
operations or cash flows. Management believes that completion of the
implementation of the new systems and software should reduce the possibility of
significant interruptions of normal operations.
While the Company is committed to, and has every expectation of being fully Year
2000 compliant, for the reasons stated above it cannot and will not guarantee to
its customers and suppliers that it will achieve year 2000 compliance on a
timely basis or that it will meet all of its customer and supplier requirements
for year 2000 capability.
Other
- -----
Any forward-looking statements included in this quarterly report are based on
current expectations. Any statements in this report that are not historical in
nature are forward-looking statements. Actual results may differ materially
depending on business conditions
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<PAGE> 12
and growth in the plastics and rubber industries, general economy, foreign
political and economic developments, the year 2000 problem, availability and
pricing of raw materials, changes in product mix, shifts in market demand, and
changes in prevailing interest rates.
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<PAGE> 13
PART II
Item 6 Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits filed pursuant to Regulation S-K (Item 601):
(10) Material Contracts:
*(a) Employment Agreement dated as of June 14, 1999 between P.
D. Ashkettle and the Registrant.
*(b) Supplemental Retirement Agreement dated as of June 14,
1999 between P. D. Ashkettle and the Registrant.
*(c) Nonqualified Deferred Compensation Agreement dated as of
June 14, 1999 between P. D. Ashkettle and the Registrant.
[* - identifies management contract or compensation plans or
arrangements filed pursuant to Item 601(b)(10)(iii)(A) ]
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
M. A. HANNA COMPANY (Registrant)
/s/ Thomas E. Lindsey
---------------------
Thomas E. Lindsey
Controller
(Principal Accounting Officer)
Date: August 12, 1999
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<PAGE> 1
EXHIBIT 10 (a)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June
14, 1999 (the "Effective Date"), is made and entered into by and between M.A.
HANNA COMPANY, a Delaware corporation (the "Company") and Phillip D. Ashkettle
("Executive").
WHEREAS, the Company desires to obtain Executive's management
and executive services by directly engaging Executive as its President and Chief
Executive Officer;
WHEREAS, in order to induce Executive to serve in such
positions, the Company desires to provide Executive with compensation and other
benefits on the terms and conditions set forth in this Agreement; and
WHEREAS, Executive is willing to accept such employment and
perform services for the Company, on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the promises and of the
mutual covenants herein contained, it is agreed as follows:
1. EMPLOYMENT, POSITIONS AND DUTIES.
1.1 The Company hereby agrees to employ Executive and the Executive
hereby agrees to undertake employment with the Company upon the terms and
considerations herein set forth.
1.2 During the Term (as hereafter defined), the Executive will serve in
the positions of President and Chief Executive Officer of the Company.
Throughout the Term, the Company will use its best efforts to cause the
Executive to be elected as a member of the Board of Directors of the Company
(the "Board") and will use its best efforts to cause him to be included in the
management slate for election as a director at every stockholders' meeting at
which his term as a director would otherwise expire. The Company confirms that
the Board adopted a resolution on May 14, 1999 expressing its intent, if the
Executive continues in the positions of President and Chief Executive Officer,
to elect the Executive Chairman of the Board no later than December 31, 2000.
1.3 During the Term, the Executive will be the Company's full-time
employee and, except as may otherwise be approved in advance in writing by the
Board, and except during vacation periods and reasonable periods of absence due
to sickness, personal injury or other disability, the Executive will devote
substantially all of his working time and efforts, to the best of his ability,
experience and talent, to the performance of services, duties and
responsibilities in accordance with this Agreement. The Executive will have such
duties, functions, responsibilities and authority as are
<PAGE> 2
(i) consistent with the positions set forth in Section 1.2, (ii) assigned to his
positions by the By-Laws of the Company or (iii) reasonably assigned to him by
the Board. Executive will report directly to the Board.
1.4 Notwithstanding the foregoing, Executive may, (i) subject to the
approval of the Board, serve as the director of a noncompeting company, (ii)
serve as an officer, director, trustee or otherwise participate in purely
educational, welfare, social, charitable, religious and civic organizations, and
(iii) manage personal and family investments.
1.5 In connection with his employment during the Term, unless otherwise
agreed by the Executive, the Executive will be based at the Company's principal
executive offices in Cleveland, Ohio. As promptly as practicable following the
Effective Date, Executive will relocate to the Cleveland, Ohio area. The
Executive will undertake normal business travel on behalf of the Company, the
reasonable expenses of which will be paid by the Company pursuant to Section 5.
2. TERM OF EMPLOYMENT. Executive's term of employment under this Agreement
will commence on the Effective Date and, subject to the provisions of this
Agreement, will terminate on the earlier of (i) the third anniversary of the
Effective Date or (ii) termination of the Executive's employment pursuant to
Section 7; provided, however, that this Agreement will be automatically renewed
and the term extended for additional one-year periods commencing on the first
anniversary of the Effective Date, and on each anniversary date thereafter,
unless the Company or the Executive provides 90 days' prior written notice in
accordance with Section 12.5 before the end of the initial term or any renewal
term (any reference to the "Term" of this Agreement will include the initial
term and any renewal thereof).
3. COMPENSATION.
3.1 SALARY. The Company will pay Executive an annual base salary ("Base
Salary") of not less than $650,000 until adjusted in the Fall of 2000, as
provided below. Base Salary will be payable at the times and in the manner
consistent with the Company's general policies regarding compensation of
executive officers. Base Salary will be reviewed annually beginning in the Fall
of 2000. At such time, Base Salary will be adjusted in accordance with the
Company's administrative practice for its executive officers, subject to this
Section 3.1, and, as so adjusted, will thereafter constitute "Base Salary"
hereunder; provided, however, that Base Salary may not be decreased except as a
part of a decrease in annual base salary applicable to executive officers of the
Company generally. Any increase in Base Salary will not limit or reduce any
other obligation of the Company to the Executive.
3.2 ANNUAL INCENTIVE COMPENSATION. For 1999, Executive will receive
annual incentive compensation of not less than $410,000 and up to a maximum of
$812,500, based on the Company's performance measured against the preestablished
1999 performance objectives for the Company, as determined by the Compensation
and Organization Committee of the Board (the "Compensation Committee"), subject
to
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Executive remaining employed by the Company for the balance of 1999. For 2000
and thereafter, if the Compensation Committee authorizes any annual cash
incentive program or approves any other annual management incentive program or
arrangement, Executive will be eligible to participate in such plan, program or
arrangement (the "IC Plan") on terms commensurate with Executive's position and
level of responsibility; provided, however, that Executive's annual target
incentive compensation will be not less than 85% of Base Salary, with a
potential pay-out range from zero to 200% of such target based on Executive's
performance and contributions to the success of the Company as determined by the
Compensation Committee. Except as set forth in the preceding two sentences,
nothing in this Section 3.2 will guarantee to the Executive any specific amount
of incentive compensation.
3.3 LONG-TERM INCENTIVE COMPENSATION.
3.3.1 In general, subject to this Section 3.3, Executive will be
eligible to participate in the Company's 1988 Long-Term Incentive Plan, as
amended, or any successor thereto (the "LTIP").
3.3.2 Executive's LTIP award for the 1999-2001 Performance Period
will consist of (i) the grant on the Effective Date of a nonqualified stock
option to purchase 100,000 shares of the Company's common stock with an exercise
price per share equal to the closing price of the Company's common stock on the
New York Stock Exchange on the Effective Date, and (ii) the grant of Performance
Shares with an aggregate Award Value determined below, subject to the same
Management Objectives that are generally applicable to Performance Shares
granted for the 1999-2001 Performance Period, except that the Company will
guarantee payment of not less than 50% of the Award Value. The aggregate Award
Value of the Executive's 1999-2001 Performance Shares will be equal to (a) 95%
of the sum of Base Salary plus Executive's 1999 annual target incentive
compensation, (b) reduced by the lesser of the Black-Scholes value of the stock
option grant described in Section 3.2.2(i) or the Black-Scholes value of an
identical stock option grant with an exercise price equal to $15.00. The
Black-Scholes valuation method will be applied in a manner consistent with the
Company's historic practices. The number of Executive's 1999-2001 Performance
Shares will be equal to the aggregate Award Value obtained in the second
preceding sentence, divided by the closing price of the Company's common stock
on the New York Stock Exchange on the Effective Date, rounded up to the nearest
whole number. The Management Objectives applicable to the Executive's 1999-2001
Performance Shares will not be prorated to reflect the actual period of
Executive's service during the 1999-2001 Performance Period.
3.3.3 The Executive will receive LTIP awards for the 2000-2002 and
2001-2003 Performance Periods on the same basis as awards to other executives
receiving awards and commensurate with the Executive's position and level of
responsibility.
3.3.4 The terms "Performance Period", "Award Value" and "Management
Objectives" will have the same meanings in this Agreement as set forth
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in the LTIP. The term "Performance Share" will have the meaning in this
Agreement set forth in the Company's most recent form of Performance Share
Agreement.
3.3.5 Except as expressly set forth in this Section 3.3, (i)
Executive's participation in the LTIP will be subject to the terms of the LTIP,
and (ii) Executive will not be guaranteed any specific level or amount of
long-term incentive compensation.
3.4 OTHER COMPENSATION. Nothing in this Section 3 will preclude the
Compensation Committee from authorizing such additional compensation to the
Executive, in cash or in property, as the Compensation Committee may determine
in its sole discretion to be appropriate.
4. EMPLOYEE BENEFITS.
4.1 EMPLOYEE BENEFIT PROGRAMS, PLANS AND PRACTICES. (i) During the
Term, subject to Section 3 and this Section 4, the Company will provide
Executive and his eligible dependents, subject to the terms and conditions of
the applicable plans as they may be amended from time to time, participation in
all Company-sponsored employee benefit plans, including all employee retirement
income and welfare benefit policies, plans, programs or arrangements in which
senior executives of the Company participate, including the Company's health and
disability plans, in a manner commensurate with his position and level of
responsibility in the Company. Executive will not participate in the M.A. Hanna
Company life insurance plan sponsored through the Company's Flexible Benefits
Plan or in the M.A. Hanna Company retiree medical plan.
(ii) During the Term, Executive will participate in the same manner as
other senior executives of the Company in the M.A. Hanna Company 401(k) and
Retirement Plan and Trust. Executive will not participate in the M.A. Hanna
Company Supplemental Retirement Benefit Plan or the M.A. Hanna Company Excess
Benefit Plan.
(iii) Executive will be eligible to commence participation in the
Company's health plan on August 1, 1999. The Company will reimburse Executive
for his COBRA premiums for health plan coverage to August 1, 1999.
(iv) Executive will be eligible to participate in the M.A. Hanna
Company Voluntary Non-Qualified Deferred Compensation Plan. Under the terms of
such Plan, participation elections are made annually, except that a
participation election for 1999 must be made within the first 30 days of
employment with the Company.
4.2 VACATION AND FRINGE BENEFITS. Executive will be entitled to five
(5) weeks' vacation per year. In addition, Executive will be entitled to the
perquisites and other fringe benefits made available to senior executives of the
Company, commensurate with his position and level of responsibility with the
Company, including, without limitation, (i) a monthly automobile allowance of
$810.00,
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(ii) payment by the Company of (a) dues at one country club of the Executive's
choosing and initiation fees, assessments and dues at one Cleveland area country
club of the Executive's choosing, and (b) initiation fees and dues at the Union
Club and one other luncheon/athletic club of Executive's choosing in Cleveland,
Ohio, (iii) payment by the Company of the cost of personal financial counseling
up to $10,000 annually and (iv) participation in the Company's Executive
Physical Program. For this purpose, "personal financial counseling" will include
tax return preparation and tax, estate and personal financial planning services.
5. EXPENSES.
5.1 The Company will promptly reimburse the Executive for all travel
and other business expenses that the Executive incurs in the course of the
performance of his duties to the Company under this Agreement in a manner
commensurate with the Executive's position and level of responsibility with the
Company and in accordance with the Company's policies and rules relating to the
reimbursement of such expenses.
5.2 The Company will reimburse the Executive for his reasonable
relocation costs to the Cleveland, Ohio area in accordance with applicable
Company policy at Level 1; provided, however, that the Executive will not be
required to repay the Company for any relocation benefits in the event of a
voluntary termination of Executive's employment for Good Reason (as defined
below).
6. SPECIAL COMPENSATION.
6.1 MAKE-WHOLE PAYMENTS.
6.1.1 Executive will be entitled to receive $1,500,000 in February
of each of 2000 and 2001 (the "Make-whole Payments"), each one payable one half
in cash and one half in common stock of the Company (valued for this purpose at
the closing price on February 1 of the year of payment). Executive's rights to
receive the Make-whole Payments will vest and become nonforfeitable (i) on
February 1, 2000 and February 1, 2001, respectively, unless Executive
voluntarily terminates his employment with the Company other than for Good
Reason (as defined below) or the employment of the Executive is terminated for
Cause (as defined below), in either case, prior to such dates, or, if earlier
(ii) in the event of a Change in Control (as such term is defined in Executive's
Change in Control Agreement described in Section 9.1).
6.1.2 The Executive and the Company acknowledge that it is in the
best interests of the Company that the Company not be precluded by Section
162(m) of the Internal Revenue Code of 1986, as amended ("Section 162(m)") from
claiming a deduction for the Make-whole Payments. Accordingly, the Executive and
the Company agree to use their best efforts to structure the Make-whole Payments
in a manner intended to preserve the Company's tax deductions for such Payments.
Such efforts will include, but not necessarily be limited to, (i) the
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implementation of a deferral arrangement whereby the Executive would agree to
defer his right to receive the Make-whole Payments for such period as may be
necessary to avoid the application of Section 162(m), and (ii) with such
deferral arrangement being secured by a trust, the assets of which are subject
to the claims of the general creditors of the Company and pursuant to which the
Executive will have the right to direct the investment of the portion of the
trust assets attributable to the cash payments described in Section 6.1.1.
6.2 SIGN-ON STOCK OPTION.
6.2.1 The Company will grant to Executive, effective on the
Effective Date, under the LTIP a nonqualified stock option (the "Sign-on
Option") to purchase 500,000 shares, subject to adjustment as provided in the
next sentence, of the Company's common stock with an exercise price per share
equal to the closing price of the Company's common stock on the New York Stock
Exchange on the Effective Date. In the event that the exercise price of the
Sign-on Option exceeds $15.00 per share, the number of shares subject to the
Option will be equal to 500,000, multiplied by the ratio of the exercise price
to $15.00, rounded up to the nearest whole number. The Option will vest and
become exercisable to the extent of one-third of the shares subject to the
Option on each of the first three anniversaries of the Effective Date. The
Option will expire 10 years after the date of grant. The Option will be subject
to the LTIP and, except as expressly provided in this Section 6.2 and elsewhere
in the Agreement, will be evidenced by the standard form of stock option
agreement approved by the Compensation Committee for all participants in the
LTIP.
6.2.2 Notwithstanding Section 6.2.1, the grant of the Sign-on
Option will be subject to stockholder approval of the LTIP, including any
stockholder approval necessary to exempt the Option from Section 162(m). The
Company hereby agrees to request such approval not later than the year 2000
annual meeting of stockholders.
6.3 SPLIT-DOLLAR INSURANCE. The Company will provide Executive with a
benefit equivalent to the split-dollar insurance benefit to which Executive was
entitled as of the termination of his employment with his prior employer,
subject to the terms and conditions of any split-dollar agreement and Section 7.
6.4 SERP. The Company and the Executive will enter into a supplemental
retirement agreement in substantially the form attached hereto as Exhibit A.
7. TERMINATION OF EMPLOYMENT. Notwithstanding the Term specified in
Section 2, the termination of the Executive's employment hereunder will be
governed by the following provisions:
7.1 DEATH. The Executive's employment will terminate upon his death
during the Term. In the event of the Executive's death during the Term, the
Company
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will pay to the Executive's beneficiaries or estate, as appropriate, as
soon as practicable after the Executive's death, (i) the unpaid Base Salary to
which the Executive is entitled, pursuant to Section 3.1, and any other
compensation earned but not yet paid through the date of the Executive's
termination (collectively, the "Compensation Payments"), (ii) for any accrued
but unused vacation days (the "Vacation Payment"), (iii) the target incentive
compensation under the IC Plan in respect of the fiscal year in which the
Executive's termination occurs, prorated for the number of days until
Executive's termination during such fiscal year (the "Prorated IC"), (iv) any
remaining unpaid amount due to Executive under Section 6.1, (iv) the annual
payments that would be due under Section 6.4 and (vi) any death benefits under
the employee benefit programs, plans and practices referred to in Sections 4.1
and 6.3, in accordance with their terms. This Section 7.1 will not limit the
entitlement of the Executive's estate or beneficiaries to any death or other
benefits then available to the Executive under any life insurance, stock
ownership, stock options, or other benefit plan or policy that is maintained by
the Company for the Executive's benefit.
7.2 PERMANENT DISABILITY. If the Executive becomes totally and
permanently disabled (as defined by the Company's long-term disability benefit
sponsored through its Flexible Benefits Plan in effect at the time Executive's
disability is incurred) ("Permanent Disability") during the Term, the Company or
the Executive may terminate Executive's employment on written notice thereof in
accordance with Section 12.5 and the Company will provide to the Executive as
soon as practicable: (i) amounts payable pursuant to the terms of any applicable
disability insurance policy or similar arrangement that the Company maintains
during the Term, (ii) the Prorated IC, (iii) any remaining unpaid amount due to
Executive under Section 6.1, (iv) the annual payments that would be due under
the supplemental retirement agreement described by Section 6.4, (v) the Vacation
Payment, (vi) the Compensation Payments, (vii) the Company will continue to
provide the split-dollar benefit described in Section 6.3 and (viii) such
payments under applicable plans or programs, including but not limited to those
referred to in Section 4.1, to which the Executive is entitled pursuant to the
terms of such plans or programs.
7.3 VOLUNTARY TERMINATION BY EXECUTIVE; DISCHARGE FOR CAUSE. (i) During
the Term, the Company may terminate the Executive's employment hereunder for
Cause (as defined below). In the event that during the Term the Executive's
employment is terminated by the Company for Cause or by the Executive other than
for Good Reason (as defined below) or other than as a result of the Executive's
Permanent Disability, retirement or death, the Company will pay as soon as
practicable to the Executive (or his representative) (a) the Compensation
Payments and (b) the Vacation Payment, and the Executive will be entitled to no
other compensation, except as otherwise due to him under applicable law or the
terms of any applicable plan or program. Executive will not be entitled, among
other things, to the payment of (x) any annual incentive compensation in respect
of all or any portion of the fiscal year in which such termination occurs, (y)
any remaining unvested amount due to Executive under Section 6.1.1, or (z) any
amount under Section 6.4.
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(ii) For purposes of this Agreement, the Company will have "Cause" to
terminate the Executive's employment hereunder upon a finding by the Board that
(a) the Executive has been convicted by a court of competent jurisdiction of the
commission of a felony, (b) the Executive has willfully and continuously failed
to perform assigned duties after written notice from the Board of such failure,
(c) the Executive engaged in willful misconduct that is materially injurious to
the Company, or (d) the Executive materially breached the Company's intellectual
property rights agreement described in Section 9.2. Such finding must be made by
a resolution duly adopted by the affirmative vote of a majority of the full
number of directors constituting the Board at a meeting of the Board.
7.4 TERMINATION.
7.4.1 Involuntary Termination. During the Term, the Executive's
employment hereunder may be terminated by the Company for any reason other than
Cause by delivery in accordance with Section 12.5 to the Executive of a notice
of termination and a copy of a resolution duly adopted by the affirmative vote
of a majority of the full number of directors constituting the Board at a
meeting of the Board. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated other than for Cause if during
the Term the Executive terminates his employment with the Company prior to
termination for Cause for any of the following reasons (each, a "Good Reason"):
without the Executive's written consent, (i) the Company has breached any
material provision of this Agreement and within 30 days after notice thereof
from the Executive, the Company fails to cure such breach; (ii) a successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company fails to assume liability under the Agreement; (iii) the failure to
elect or reelect or otherwise to maintain the Executive as a director of the
Company or as Chairman of the Board in accordance with the intent of Section
1.2; (iv) the nullification of the Sign-on Option due to the failure to obtain
the requisite stockholder approvals described in Section 6.2.2; (v) at any time
after the Company has notified the Executive pursuant to Section 2 that the
Company does not intend to renew the Agreement and the Executive's employment at
the end of the Term (including any renewals) (rather than allowing the Agreement
automatically to renew); or (vi) there is a material reduction in the
Executive's duties and responsibilities.
7.4.2 Voluntary Termination. During the Term, the Executive may
voluntarily terminate the Agreement at any time upon 90 days' prior notice to
the Company as provided in Section 12.5. The Executive's death, retirement or
Permanent Disability during the Term will be deemed to constitute a voluntary
termination of employment for purposes of eligibility for termination payments
and benefits as provided in Section 7.5, but for no other purpose.
7.5 TERMINATION PAYMENTS AND BENEFITS.
7.5.1 Form and Amount. Upon the Executive's involuntary termination
other than for Cause pursuant to Section 7.4.1, (i) the Company will pay or
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provide as soon as practicable to the Executive (a) the Prorated IC, (b) the
Vacation Payment, (c) the Compensation Payments, and (d) such payments under
applicable plans or programs to which the Executive is entitled pursuant to the
terms of such plans or programs; (ii) the Company will pay or provide the
Executive for the balance of the Term (the "Continuation Period"), (a) Base
Salary at the rate in effect immediately prior to termination of employment,
paid in the same manner as if Executive had remained employed for the balance of
the Term, (b) the Executive's target annual incentive compensation pursuant to
the IC Plan for each year and a prorated portion thereof (based on the number of
days elapsed in the relevant period) for each partial year in the Continuation
Period, paid at the same time as other executive officers, and (c) the
continuation of employee welfare benefits set forth in Section 4.1 except as
offset by benefits paid or provided by other sources as set forth in Section 8,
or as prohibited by law; and (iii) notwithstanding any provision to the contrary
in the applicable award agreement or in any plan, (a) all stock options will
become fully vested and exercisable, (b) a prorated portion (based on the number
of days elapsed in the relevant Performance Period) of all outstanding
Performance Shares will be paid in accordance with the terms of the grant and
the achievement of the applicable Management Objectives at the same time as
other participants, (c) the Company will provide the annual payments that would
be due under the supplemental retirement agreement described in Section 6.4, and
(d) the Company will continue to provide the split-dollar benefit described in
Section 6.3. For purposes of determining the period of continuation coverage to
which the Executive or any of his dependents is entitled under Section 4980B of
the Internal Revenue Code of 1986, as amended (or any successor provision
thereto), under any group health plan maintained by the Company or its
affiliates, the Executive will be deemed to have remained employed until the end
of the Continuation Period.
7.5.2 Maintenance of Benefits. During the Continuation Period, the
Company will use its best efforts to maintain in full force and effect for the
continued benefit of the Executive all benefits referenced in Section
7.5.1(ii)(c) or will arrange to make available to the Executive benefits
substantially similar to those that the Executive would otherwise have been
entitled to receive if his employment had not been terminated. Such benefits
will be provided to the Executive on the same terms and conditions (including
employee contributions toward the premium payments) under which the Executive
was entitled to participate immediately prior to his termination at no
additional cost (including, without limitation, additional taxes thereon) to the
Executive.
7.5.3 Forfeiture. Notwithstanding the foregoing provisions of
Section 7.5, any right of the Executive to receive termination payments and
benefits under Section 7.5 will be forfeited to the extent of any amounts
payable or benefits to be provided after a material breach of the covenants set
forth in Section 10.1 or in the Company's intellectual property rights agreement
described in Section 9.2.
7.6 NONDUPLICATION OF BENEFITS. To the extent, and only to the extent,
a payment or benefit that is paid or provided under this Section 7 would also be
paid or
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provided under the terms of the applicable plan, program, agreement or
arrangement, including, without limitation, the Executive's Change-in-Control
Agreement described in Section 9.1, such applicable plan, program, agreement or
arrangement will be deemed to have been satisfied by the payment made or benefit
provided under this Agreement.
7.7 RESIGNATIONS. Except to the extent requested by the Board, upon any
termination of Executive's employment with the Company, Executive will
immediately resign all positions and directorships with the Company and each of
its subsidiaries and affiliates.
8. OFFSET. In the event that the Executive obtains full-time employment
with a third party while receiving benefits under Section 7, the Company will be
relieved of its obligations under Section 7 to the extent of the Executive's
compensation from his new employer; provided, however, that the Executive's
coverage under the Company's welfare benefits as provided in Section
7.5.1(ii)(c) will terminate as soon as the Executive becomes covered under any
comparable employee benefit plan made available by another employer and covering
the same type of benefits. The Executive will report to the Company any such
compensation and benefits actually received by him.
9. OTHER EXECUTIVE AGREEMENTS.
9.1 The Executive will be offered an opportunity to enter into the
Company's change-in-control Employment Agreement (the "Change-in-Control
Agreement") and the Company's Indemnification Agreement, in the forms approved
by the Board for all executive officers of the Company, to be effective in each
case as of the Effective Date.
9.2 Executive agrees that, effective on the Effective Date, he will
enter into the Company's standard intellectual property rights agreement
executed by all exempt associates. Executive further agrees that if he breaches
such agreement and the breach results in a material detriment to the Company,
the Company may terminate any benefits under this Agreement and may pursue any
other remedies available, including, without limitation, obtaining an
injunction.
10. COVENANTS.
10.1 COMPETITIVE ACTIVITY. During any period in which the Executive is
receiving compensation from the Company other than retirement or disability
payments, the Executive will not, without the prior written consent of the
Company, which consent may be withheld for any reason or no reason, directly or
indirectly engage in any Competitive Activity. For this purpose, "Competitive
Activity" means the Executive's participation in the management of any business
enterprise if such enterprise engages in substantial and direct competition with
the Company and such enterprise's sales of any product or service competitive
with any product or service of the Company amounted to 10% of such enterprise's
net sales for its most recently completed fiscal year and if the Company's net
sales of said product or service
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amounted to 10% of the Company's net sales for its most recently completed
fiscal year. "Competitive Activity" will not include (i) the mere ownership of
securities in any such enterprise, provided, however, in the case of
publicly-traded enterprises, such ownership does not exceed 5% of the
outstanding voting securities or units of such enterprise, and the exercise of
rights appurtenant thereto or (ii) participation in the management of any such
enterprise other than in connection with the competitive operations of such
enterprise.
10.2 ENFORCEMENT. Executive and the Company agree that the covenants
contained in Section 10.1 are reasonable under the circumstances, and further
agree that if in the opinion of any court of competent jurisdiction any such
covenant is not reasonable in any respect, such court will have the right, power
and authority to excise or modify any provision or provisions of such covenants
as to the court will appear not reasonable and to enforce the remainder of the
covenants as so amended. Executive acknowledges and agrees that the remedy at
law available to the Company for breach of any of his obligations under Section
10.1 would be inadequate and that damages flowing from such a breach may not
readily be susceptible to being measured in monetary terms. Accordingly,
Executive acknowledges, consents and agrees that, in addition to any other
rights or remedies that the Company may have at law, in equity or under this
Agreement, upon adequate proof of his violation of any such provision of this
Agreement, the Company will be entitled to immediate injunctive relief and may
obtain a temporary order restraining any threatened or further breach, without
the necessity of proof of actual damage.
10.3 POST-TERMINATION ASSISTANCE. The Executive agrees that after his
employment with the Company has terminated he will provide, upon reasonable
notice, such information and assistance to the Company as may reasonably be
requested by the Company in connection with any litigation in which it or any of
its affiliates is or may become a party; provided, however, that the Company
agrees to reimburse the Executive on an after-tax basis for any related
out-of-pocket expenses, including travel expenses.
11. SURVIVAL. The expiration or termination of the Term will not impair
the rights or obligations of any party hereto that accrue hereunder prior to
such expiration or termination, except to the extent specifically stated herein.
In addition to the foregoing, the Executive's covenants contained in Sections
10.1 and 10.3 and the Company's obligations under Sections 7 and 12.1 will
survive the expiration or termination of Executive's employment.
12. MISCELLANEOUS PROVISIONS.
12.1 DISPUTE RESOLUTION. Any dispute arising out of or relating to this
Agreement or the breach, termination or validity thereof, shall be settled by
arbitration in accordance with the then-current Center for Public Resources
Rules for Non-administered Arbitration of Business Disputes by a single
arbitrator, who shall be appointed by such Center. The arbitration shall be
governed by the United States Arbitration Act, U.S.C. ss. 1-16, and judgment on
the award rendered by the arbitrator
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may be entered in any court having jurisdiction thereof. The arbitration shall
be held in Cleveland, Ohio. The arbitrator is not empowered to award damages in
excess of compensatory damages and each party hereby waives any right to recover
such damages with respect to any dispute resolved by arbitration. The parties
shall equally share the fees and costs of the arbitrator. Notwithstanding the
foregoing, the Company will not be required to seek or participate in
arbitration regarding any breach of the Executive's covenants contained in
Section 10.1 or 10.3, or in the Company's intellectual property rights
agreement, but may pursue its remedies for such breach in a court of competent
jurisdiction in the city in which the Company's principal executive offices are
based.
12.2 BINDING ON SUCCESSORS; ASSIGNMENT. This Agreement will be binding
upon and inure to the benefit of the Company, the Executive and each of their
respective successors, assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable;
provided, however, that neither this Agreement nor any rights or obligations
hereunder will be assignable or otherwise subject to hypothecation by Executive
(except by will or by operation of the laws of intestate succession) or by the
Company, except that the Company may assign this Agreement to any successor
(whether by merger, purchase or otherwise) to all or substantially all of the
stock, assets or businesses of the Company, if such successor expressly agrees
to assume the obligations of the Company hereunder.
12.3 GOVERNING LAW. This Agreement will be governed, construed,
interpreted and enforced in accordance with the substantive laws of the State of
Ohio, without regard to conflicts of law principles.
12.4 SEVERABILITY. Any provision of this Agreement that is deemed
invalid, illegal or unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provisions of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction. If any covenant
should be deemed invalid, illegal or unenforceable because its scope is
considered excessive, such covenant will be modified so that the scope of the
covenant is reduced only to the minimum extent necessary to render the modified
covenant valid, legal and enforceable.
12.5 NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express or UPS,
addressed to the Company (to the attention of the Secretary of the Company) at
its principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to
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the other in writing and in accordance herewith, except that notices of changes
of address will be effective only upon receipt.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one and the same Agreement.
12.7 ENTIRE AGREEMENT. Except as provided in Section 9 and as
contemplated by Sections 6.1, 6.3 and 6.4, the terms of this Agreement are
intended by the parties to be the final expression of their agreement with
respect to the Executive's employment by the Company and may not be contradicted
by evidence of any prior or contemporaneous agreement. The parties further
intend that this Agreement will constitute the complete and exclusive statement
of its terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative or other legal proceeding to vary the terms of this
Agreement.
12.8 AMENDMENTS; WAIVERS. This Agreement may not be modified, amended,
or terminated except by an instrument in writing, approved by the Company and
signed by the Executive and the Company. Failure on the part of either party to
complain of any action or omission, breach or default on the part of the other
party, no matter how long the same may continue, will never be deemed to be a
waiver of any rights or remedies hereunder, at law or in equity. The Executive
or the Company may waive compliance by the other party with any provision of
this Agreement that such other party was or is obligated to comply with or
perform only through an executed writing; provided, however, that such waiver
will not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure.
12.9 NO INCONSISTENT ACTIONS. The parties will not voluntarily
undertake or fail to undertake any action or course of action that is
inconsistent with the provisions or essential intent of this Agreement.
Furthermore, it is the intent of the parties hereto to act in a fair and
reasonable manner with respect to the interpretation and application of the
provisions of this Agreement.
12.10 HEADINGS AND SECTION REFERENCES. The headings used in this
Agreement are intended for convenience or reference only and will not in any
manner amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Agreement. All section references are to
sections of this Agreement, unless otherwise noted.
12.11 BENEFICIARIES. Executive will be entitled to select (and change,
to the extent permitted under any applicable law) a beneficiary or beneficiaries
to receive any compensation or benefit payable hereunder following Executive's
death, and may change such election, in either case by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to "Executive"
will be deemed, where appropriate, to his beneficiary, estate or other legal
representative.
-13-
<PAGE> 14
12.12 WITHHOLDING. The Company will be entitled to withhold from
payment any amount of withholding required by law.
12.13 LEGAL FEES AND EXPENSES. The Company will reimburse the Executive
for all legal fees and expenses incurred by the Executive in connection with the
review and negotiation of this Agreement and the separate documents expressly
contemplated by this Agreement, but not in excess, in the aggregate, of $50,000.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
/s/ Phillip D. Ashkettle
----------------------------------
Phillip D. Ashkettle
M.A. HANNA COMPANY
/s/ Martin D. Walker
By:-------------------------------
Name: Martin D. Walker
Title: Chairman
-14-
<PAGE> 1
EXHIBIT 10(B)
-------------
PHILLIP D. ASHKETTLE SUPPLEMENTAL RETIREMENT AGREEMENT
DATED AS OF JUNE 14, 1999
This PHILLIP D. ASHKETTLE SUPPLEMENTAL RETIREMENT AGREEMENT (the "SERP
Agreement"), dated as of June 14, 1999, is made and entered into by and between
M.A. HANNA COMPANY, a Delaware corporation (the "Company") and PHILLIP D.
ASHKETTLE (the "Participant").
1. PURPOSE. The purpose of the Phillip D. Ashkettle Supplemental
Retirement Agreement is to provide the Participant, President and Chief
Executive Officer of the Company, the ability to retire from employment
with the Company with a source of supplemental retirement income.
2. ELIGIBILITY TO PARTICIPATE. Only Phillip D. Ashkettle shall be eligible
to participate in this SERP Agreement.
3. BENEFIT COMMENCEMENT. The Benefit payable under this SERP Agreement
shall commence following (i) retirement of the Participant on or after
December 31, 2005, (ii) termination of the Participant's employment
with the Company pursuant to Section 7.4.1 of the Employment Agreement
dated as of June 14, 1999 between the Participant and the Company (the
"Employment Agreement"), (iii) payment by the Company to the
Participant of damages for a material breach by the Company of the
Change-in-Control Agreement referenced in Section 9.1 of the Employment
Agreement (the "Change-in-Control Agreement"), (iv) termination of the
Participant's employment pursuant to Section 7.2 of the Employment
Agreement or (v) the Participant's death after attaining age 55 but
before benefits commence hereunder. In no event will benefits commence
prior to the first day of the month following the end of the
Continuation Period (as defined in the Employment Agreement) if any.
The Benefit payable under this SERP Agreement shall be payable to the
Participant and, if applicable, to his spouse or beneficiary after his
death.
4. AMOUNT OF BENEFIT. The Company will provide the Participant with annual
payments of $526,000 each for the life of the Participant commencing on
the later of (i) the date on which the Participant retires from
employment with the Company on or after December 31, 2005 or (ii) the
first day of the month following the end of the Continuation Period (as
defined in the Employment Agreement), if any. If the Participant's
employment with the Company is terminated pursuant to Section 7.4.1 of
the Employment Agreement before December 31, 2005, or if the Company
pays to the Participant damages for a material breach of the
Change-in-Control Agreement, or if the Participant's employment is
terminated pursuant to Section 7.2 of the Employment Agreement, the
Company will provide the Participant with annual payments for
-1-
<PAGE> 2
the life of the Participant commencing on the later of (i) the date on
which his employment is terminated or (ii) the first day of the month
following the end of the Continuation Period (as defined in Employment
Agreement), if any, in an amount equal to $526,000 multiplied by a
fraction (not greater than one), the numerator of which is the sum of
17 years and 9 months plus the Participant's years and complete months
of service with the Company (treating June of 1999 as a complete month
of service with the Company, and also treating any Continuation Period
under the Employment Agreement as service with the Company) and the
denominator of which is 20 years.
5. FORM OF BENEFIT PAYMENT. Benefits shall be paid in the form of a life
annuity, or any other form of payment approved by the Compensation and
Organization Committee of the Company's Board of Directors (the
"Compensation Committee") available as a benefit under the Company's
Salaried Employees Retirement Income Plan ("SERIP"), subject to the
same actuarial adjustments as in SERIP other than those related to
early commencement of payments. Instead of the annual retirement
benefit otherwise provided under this Plan, the Participant may elect,
not later than one year before his retirement or other voluntary
termination of employment or at any time before his termination of
employment pursuant to Section 7.4.1 of the Employment Agreement, to
receive benefits in the form of a lump sum payment, subject to the
approval of the Compensation Committee. The lump sum payment shall be
equal to the "present value" amount of the Participant's life annuity
benefit under the Plan, discounted on the same basis as is used for
lump sum calculations under SERIP. The lump sum benefit would be
payable within 30 days following the benefit commencement date set
forth in 3 above. There is no spousal consent required for any form of
benefit payable under this agreement.
6. PRE-RETIREMENT SPOUSE DEATH BENEFIT. In the event the Participant dies
after attaining age 55 but before benefits commence, payments will be
made to the Participant's spouse in the form of a pre-retirement
survivor benefit. This pre-retirement survivor benefit would commence
on January 1, 2006 and would be payable for the life of the spouse
only, with no rights of survivorship. This benefit will be calculated
as if the Participant had left the employ of the Company prior to
December 31, 2005. The pre-retirement survivor benefit shall be the
same as a pre-retirement survivor benefit under SERIP. This benefit
would be actuarially adjusted to the 50% Joint and Survivor option
under SERIP. The Participant's spouse may, prior to the Participant's
death, file with the Company a written election that, if the
Participant's death occurs before commencement of benefits hereunder
and before January 1, 2006 and the Participant is survived by such
spouse, payments to the spouse would commence before January 1, 2006 at
such time as is designated by such spouse, in which case payments shall
commence at such earlier time as is designated by the spouse, the
amount of such benefit to be reduced from the amount determined
pursuant to the preceding provisions of this paragraph in the same
manner that pre-retirement spouse benefits are reduced under Section
3.9 of SERIP on account of commencement before normal retirement age
under SERIP. To be effective, an election pursuant to the preceding
sentence must be filed with the Company
-2-
<PAGE> 3
either within the thirty-day period beginning on the date of the
execution of this Agreement, or at least twelve months before the
Participant's death. The Participant's spouse may file a revised
election. The latest effective election shall control.
7. SOURCE OF PAYMENT AND BENEFIT. The Benefit provided under this SERP
Agreement shall be paid by the Company from its general assets at the
time and in the manner provided herein. The Benefit shall not be
subject to assignment, pledge, alienation or anticipation by the
Participant, his spouse or his beneficiary. The obligations of the
Company hereunder constitute merely the promise of the Company to make
the payments provided for in this SERP Agreement. Neither the
Participant, his spouse, his beneficiary nor the estate of any of them
shall have, by reason of this SERP Agreement, any right, title, or
interest of any kind in or to any property of the Company. To the
extent the Participant has a right to receive payments from the Company
under this SERP Agreement, such right shall be no greater than the
right of any unsecured general creditor of the Company.
8. CONDITIONS OF PAYMENTS OF BENEFIT. Notwithstanding any provision of
this SERP Agreement to the contrary, the right of the Participant, his
spouse or his beneficiary to receive the Benefit shall cease (a) for
acts which constitute fraud, embezzlement, disclosure of confidential
information or dishonesty, or (b) upon Participant's voluntary
termination of employment with the Company other than by reason of
Section 7.4.1 or Section 7.2 of the Employment Agreement.
9. ADMINISTRATION. The Compensation Committee shall administer this SERP
Agreement, resolve any ambiguities or inconsistencies, and decide all
questions arising in its administration, interpretation or application.
Any decision of the Compensation Committee shall be conclusive and
binding upon the Participant or other persons having or claiming an
interest in this SERP Agreement.
10. AMENDMENT AND TERMINATION. By mutual agreement between the Compensation
Committee and the Participant, this SERP Agreement may be amended at
any time prior to December 31, 2005, and/or terminated in its entirety
at any time prior to commencement of benefits. Notwithstanding the
foregoing provisions of this paragraph, this SERP Agreement may not be
amended or terminated with respect to a Benefit that became payable
prior to such amendment or termination except with the written consent
of the Participant, his spouse or other beneficiary receiving such
Benefit.
11. WITHHOLDING. The Company shall have the right to deduct from any
payment of a Benefit or any other form of compensation from the Company
any amount required to satisfy its obligation to withhold federal,
state and local taxes, including, if appropriate FICA/Medicare tax on
the value of the benefits hereunder as they accrue or are paid.
12. CONSTRUCTION. This SERP Agreement is intended to qualify as a plan
maintained for the benefit of a select group of management or highly
compensated
-3-
<PAGE> 4
employees within the meaning of the Employee Retirement Income Security
Act of 1974 and shall be construed in accordance with such intention.
13. RE-EMPLOYMENT. Upon re-employment with the Company, benefits are
suspended in accordance with the same provisions in the SERIP. Benefits
would be re-calculated under the terms of this SERP Agreement and
commence upon subsequent retirement.
14. EFFECTIVE DATE. This SERP Agreement shall be effective as of the date
of its execution.
EXECUTED on this 29th day of June, 1999.
/s/ Phillip D. Ashkettle
---------------------------
Phillip D. Ashkettle
M. A. HANNA COMPANY
By: /s/ Lani L. Beach
---------------------------
Name: Lani L. Beach
Title: Vice President, Human Resources
-4-
<PAGE> 1
EXHIBIT 10(c)
PHILLIP D. ASHKETTLE NONQUALIFIED DEFERRED COMPENSATION AGREEMENT
DATED AS OF JUNE 14, 1999
This PHILLIP D. ASHKETTLE NONQUALIFIED DEFERRED COMPENSATION AGREEMENT
(the "Deferral Agreement"), dated as of June 14, 1999, is made and entered into
by and between M.A. HANNA COMPANY, a Delaware corporation (the "Company") and
Phillip D. Ashkettle (the "Participant").
1. Purpose. The purpose of this Deferral Agreement is to provide for
the deferral of the payments due to be made to Participant, President and Chief
Executive Officer of the Company, pursuant to Section 6.1.1 of the Employment
Agreement dated as of June 14, 1999, by and between the Company and Participant
(the "Employment Agreement"), in a manner such that Section 162(m) of the
Internal Revenue Code of 1986, as amended ("Section 162(m)") does not apply to
disallow a deduction to the Company for such payments.
2. Administration. The Compensation and Organization Committee of the
Company's Board of Directors (the "Compensation Committee") will administer this
Deferral Agreement, resolve any ambiguities or inconsistencies, and decide all
questions arising in its administration, interpretation or application. Any
decision of the Compensation Committee will be conclusive and binding upon the
Participant or other persons having or claiming an interest in this Deferral
Agreement.
3. Initial Deferral. Subject to Section 8(c), each payment due to be
made to Participant on the dates specified in Section 6.1.1 of the Employment
Agreement will be deferred. The amounts so deferred will be paid in accordance
with the terms of this Deferral Agreement.
4. Deferred Compensation Accounts. As of the first calendar day of each
calendar month specified in Section 6.1.1 of the Employment Agreement, the
amounts that would have been paid to Participant but for this Deferral Agreement
will be credited in equal portions (subject to Section 5(a)) to a Stock Account
and an Investment Account.
5. Amounts Credited to Stock Account.
(a) The number of shares of the Company's common stock ("Stock")
credited to the Stock Account will be equal to the dollar amount of the payment
deferred by the Participant into such account, divided by the closing price of a
share of Stock on the New York Stock Exchange on February 1 of the year the
payment was due to be made. The value of any fractional share will be credited
to the Investment Account, subject to Section 6. The Company will cause to be
transferred to the trust described in
<PAGE> 2
Section 9(b) a number of shares of Stock equal to the number credited to the
Stock Account. To the extent necessary for such purpose, the amounts credited to
the Stock Account will be used to acquire shares of Stock through (i) open
market purchases or (ii) purchases from the Company or the Trustee of the
Associates Ownership Trust.
(b) In the event that a cash dividend is paid with respect to the
Stock, the Stock Account will be credited with that number of additional shares
of Stock equal to (i) the cash dividend that would have been received by a
holder of shares of Stock equal to the number of shares previously credited to
the Stock Account, divided by (ii) the closing price of a share of the Stock on
the date the dividend is paid. In the event of a stock dividend (or other
distribution) to the holders of Stock, an appropriate adjustment to the Stock
Account will be made to reflect such dividend. Fractional shares will not be
credited but will be accumulated until equal to a whole share.
6. Amounts Credited to Investment Account. The amounts credited to the
Investment Account will be credited as designated by Participant to one or more
subaccounts. Except as the Compensation Committee may otherwise determine, each
subaccount will correspond to an investment option offered at such time under
the M.A. Hanna Company 401(k) and Retirement Plan. Such designations will be
made pursuant to forms and procedures prescribed for such purpose by the
Compensation Committee.
7. Vesting. Participant will be 100% vested in the Stock Account and
the Investment Account (referred to collectively as the "Accounts").
8. Distributions and Payments.
(a) Subject to Section 8(d), the amounts maintained in the Accounts
will be distributed to Participant (i) at the earliest time a corresponding
deduction would not be disallowed by Section 162(m), or (ii) if earlier, upon a
Change in Control (as such term is defined in Participant's Change in Control
Agreement described in Section 9.1 of the Employment Agreement (a "Change in
Control")).
(b) If Participant is a "covered employee," as such term is defined
by Section 162(m), at the end of a taxable period of the Company, the Company
will determine by the 15th day of the second month of the Company's next
succeeding taxable period whether and to what extent any amount may be
distributed to Participant under the Deferral Agreement, the deduction for which
would not be disallowed by Section 162(m). Such amount will promptly be paid to
Participant. Any such distribution will be debited first, to the Investment
Account (to such subaccounts and in such amounts as may be designated by
Participant), and then, to the extent necessary, to the Stock Account. For such
purpose, all Accounts will be valued as near as possible to the date of
distribution.
(c) In the event a Change in Control or an involuntary termination
of employment described in Section 7.4.1 of the Employment Agreement occurs
prior to
<PAGE> 3
the due date specified for a payment in Section 6.1.1 of the Employment
Agreement, such payment will promptly be made entirely in cash to Participant.
(d) Notwithstanding Sections 8(a), 8(b) and 8(c), Participant may
defer receipt of an amount otherwise due to be distributed or paid under Section
8(a), 8(b) or 8(c) by making an election in writing in such form and at such
time as may be prescribed for such purpose by the Compensation Committee.
(e) Distributions will be made to the extent practicable in the
form of the assets that correspond to the respective Accounts or subaccounts.
9. Deferral Agreement to be Unfunded; Trust to be Established.
(a) Subject to Section 9(b), (i) the Company will be under no
obligation to segregate or reserve any funds or other assets for purposes
relating to this Deferral Agreement and Participant will have no rights
whatsoever in or with respect to any funds or other assets held by the Company
for purposes of this Deferral Agreement or otherwise; and (ii) the Accounts
maintained for purposes of this Deferral Agreement will merely constitute
bookkeeping records of the Company and will not constitute any allocation
whatsoever of any assets of the Company or be deemed to create any trust or
special deposit with respect to any of the Company's assets.
(b) The Company's obligations under this Deferral Agreement will be
secured by a trust agreement for the benefit of Participant in substantially the
form as Exhibit A hereto. The Company will maintain assets in such trust at
least equal in value to the aggregate obligations of Company to Participant
under the terms of this Deferral Agreement and will follow Section 5(a)
regarding transfers of shares of Stock relating to the Stock Account.
Participant may request that the Compensation Committee direct the trustee of
the trust regarding the investment of the amounts credited to the subaccounts of
the Investment Account; provided, however, that the Compensation Committee may,
but is under no obligation to, so direct the trustee.
10. Miscellaneous Provisions.
10.1 BINDING ON SUCCESSORS; ASSIGNMENT. This Deferral Agreement
will be binding upon and inure to the benefit of the Company, the Participant
and each of their respective successors, assigns, personal and legal
representatives, executors, administrators, heirs, distributees, devisees, and
legatees, as applicable; provided, however, that neither this Deferral Agreement
nor any rights or obligations hereunder will be assignable or otherwise subject
to hypothecation by Participant (except by will or by operation of the laws of
intestate succession) or by the Company, except that the Company may assign this
Deferral Agreement to any successor (whether by merger, purchase or otherwise)
to all or substantially all of the stock, assets or businesses of the Company,
if such successor expressly agrees to assume the obligations of the Company
hereunder.
<PAGE> 4
10.2 GOVERNING LAW. This Deferral Agreement will be governed,
construed, interpreted and enforced in accordance with the substantive laws of
the State of Ohio, without regard to conflicts of law principles.
10.3 ENTIRE AGREEMENT. The terms of this Deferral Agreement are
intended by the parties to be the final expression of their agreement with
respect to the subject matter hereof. In the event of any contradiction or
inconsistency between the terms of this Deferral Agreement and any other
agreement with Participant, including, without limitation, the Employment
Agreement, the terms of this Deferral Agreement will control.
10.4 AMENDMENTS. This Deferral Agreement may not be modified, amended,
or terminated except by an instrument in writing, approved by the Company and
signed by the Participant and the Company.
10.5 HEADINGS AND SECTION REFERENCES. The headings used in this
Deferral Agreement are intended for convenience or reference only and will not
in any manner amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Deferral Agreement. All section
references are to sections of this Deferral Agreement, unless otherwise noted.
10.6 BENEFICIARIES. Participant will be entitled to select (and change,
to the extent permitted under any applicable law) a beneficiary or beneficiaries
to receive any amount payable hereunder following Participant's death, and may
change such election, in either case by giving the Company written notice
thereof. In the event of Participant's death or a judicial determination of his
incompetence, reference in this Deferral Agreement to "Participant" will be
deemed, where appropriate, to his beneficiary, estate or other legal
representative.
10.7 WITHHOLDING. The Company will be entitled to withhold from payment
of any amount due hereunder or from any other form of compensation from the
Company any amount of withholding required by law. Participant hereby
acknowledges that he may be liable for certain employment taxes with respect to
amounts deferred pursuant to this Deferral Agreement prior to any payments
hereunder and that, consequently, the Company may be required to deduct and
withhold such employment taxes from amounts otherwise due to Participant or may
request Participant to make other withholding arrangements satisfactory to the
Company.
10.8 CONSTRUCTION. This Deferral Agreement is intended to qualify as a
plan maintained for the benefit of a select group of management or highly
compensated employees within the meaning of the Employee Retirement Income
Security Act of 1974, as amended, and will be construed in accordance with such
intention.
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Deferral Agreement
as of the year and date first above written.
/s/ Phillip D. Ashkettle
--------------------------
Phillip D. Ashkettle
M.A. HANNA COMPANY
By: /s/ John S. Pyke, Jr.
-----------------------
Name: John S. Pyke, Jr.
Title: Vice President, General Counsel
and Secretary
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
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0
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