SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
M. A. Hanna Company
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| 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 number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
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<PAGE>
M.A.HannaCompany
SUITE 36-5000, 200 PUBLIC SQUARE, CLEVELAND, OHIO 44114-2304
To Our Stockholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the 2000 annual meeting of stockholders of the Company to be held on
Wednesday, May 3, 2000, 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 or vote by telephone.
I look forward to seeing you on May 3.
Sincerely,
/s/ Phillip D. Ashkettle
------------------------
Phillip D. Ashkettle
Chairman, President and
Chief Executive Officer
<PAGE>
M.A.HannaCompany
SUITE 36-5000, 200 PUBLIC SQUARE
CLEVELAND, OHIO 44114-2304
Notice of Annual Meeting
The annual meeting of stockholders of M.A. Hanna Company will be held on
Wednesday, May 3, 2000 at 10:30 A.M. at the Forum Conference Center Auditorium,
1375 East Ninth Street, Cleveland, Ohio, for the following purposes:
(1) Electing eleven directors for the ensuing year;
(2) Ratifying the appointment of independent public accountants;
(3) Approving the Amended and Restated Long-Term Incentive Plan; and
(4) Transacting such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 7, 2000,
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, General Counsel and Secretary
March 23, 2000
PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED FORM OF PROXY OR VOTE BY
TELEPHONE 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>
TABLE OF CONTENTS
Page
---
NOTICE OF ANNUAL MEETING......................................
PROXY STATEMENT............................................... 1
General Information........................................... 1
ELECTION OF DIRECTORS......................................... (ITEM 1) 1
Meetings and Committees of the Board of Directors............. 4
Holdings of Shares of the Company's Common Stock.............. 5
Section 16(a) Beneficial Ownership Reporting Compliance....... 5
Executive Compensation........................................ 5
Employment Agreements......................................... 7
Defined Benefit Retirement Plans.............................. 10
Board Compensation and Organization
Committee Report on Executive Compensation................. 10
Compensation Committee Interlocks and Insider Participation... 13
Performance Graph............................................. 14
Directors' Compensation....................................... 15
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS.............................. (ITEM 2) 15
APPROVAL OF M.A. HANNA COMPANY LONG-TERM INCENTIVE PLAN,
AS AMENDED AND RESTATED AS OF MARCH 1, 2000................. (ITEM 3) 16
Submission of Stockholder Proposals........................... 23
Other Matters................................................. 23
<PAGE>
PROXY STATEMENT
General Information
This proxy 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 3, 2000. 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, or
the proxy is granted by calling the specially designated telephone number as
described on the accompanying form of proxy, 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 administrator 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 approve the Amended and
Restated Long-Term Plan and ratify the appointment of independent public
accountants, 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, 2000, the record date for the annual
meeting, the Company had outstanding and entitled to vote 48,961,947 shares of
Common Stock. Each share of Common Stock is entitled one vote on each matter
brought before the meeting.
The Company has retained Morrow & Co., Inc., a proxy solicitation firm,
for a fee of $10,000 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 23, 2000. The Annual Report
of the Company for the year ended December 31, 1999 was first mailed to
stockholders on March 15, 2000, 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, 1999,
approximately 92% of the then outstanding shares were present at the meeting and
voting.
1.ELECTION OF DIRECTORS
Mr. R. W. Pogue will retire from the Company's Board at the 2000 annual
meeting of stockholders pursuant to the Board's retirement policy, after 12
years of distinguished service. He made extraordinary contributions and provided
extremely valuable leadership and guidance to the Board and management, and in
recognition of the value of his participation, the Board has appointed him an
Advisory Director effective at his retirement, which will enable him to attend
Board meetings for the next year, but not vote. The Board has nominated the
remaining eleven
1
<PAGE>
incumbent Directors for election at the 2000 annual meeting. All nominees except
Mr. Ashkettle were previously elected by the stockholders.
It is intended that shares represented by the proxies in the accompanying
form will be voted for the election of the eleven 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, 2000 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>
PHILLIP D. ASHKETTLE Chairman, President and Chief Executive Officer, M.A. Hanna Company,
Director since 1999 January 1, 2000 to date; President and Chief Executive Officer
Age - 54 June 14, 1999 to December 31, 1999; President and Chief Executive Officer,
Reichhold, Inc. 1992-1999.
CAROL A. CARTWRIGHT President, Kent State University (public higher education
Ph.D. institution), 1991 to date. Director of KeyCorp (formerly
Director since 1994 Key Bank N.A.) and FirstEnergy (formerly Ohio Edison Company).
Age - 58 Member of the National Collegiate Athletic Association Board of
Directors.
WAYNE R. EMBRY President and Chief Operating Officer, Team Division, The Cleveland
Director since 1990 Cavaliers (professional basketball team), 1986 to date. Director of Ohio
Age - 62 Casualty Insurance Company.
J. TREVOR EYTON, O.C. Chairman, Group Advisory Board, EdperBrascan Corporation (natural
Director since 1986 resources, power generation and financial services). Member of the Senate of
Age - 65 Canada. Director of Barrick Gold Corporation, Coca Cola Enterprises Limited,
Imax Inc., Trilon Financial Corporation and Noranda, Inc.
ROBERT A. GARDA Executive-in-Residence, The Fuqua School of Business, Duke University,
Director since 1998 1997 to date. Independent consultant, 1995-1997; President and Chief
Age - 60 Executive Officer, Aladdin Industries, 1994-1995; Director, McKinsey & Company,
1972-1994. Director of Insect Biotechnology, Inc.
GORDON D. HARNETT Chairman, President and Chief Executive Officer, Brush Wellman Inc.
Director since 1997 (specialty materials), January 1991 to date. Director of The
Age - 57 Lubrizol Corp. and National City Bank.
DAVID H. HOAG Retired. Chairman of LTV Corporation (steel manufacturing), 1991-
Director since 1999 February 1, 1999 and Chief Executive Officer 1991-September 1998.
Age - 60 Director of Brush Wellman Inc., The Chubb Corporation, Federal Reserve
Bank of Cleveland, The Lubrizol Corporation and NACCO.
GEORGE D. KIRKHAM Retired financial industry executive.
Director since 1975
Age - 67
DAVID BAKER LEWIS Chairman, Lewis & Munday (attorneys), 1982 to date. Director of LGE
Director since 1997 Energy Corp., Comerica Bank, Michigan and TRW Inc.
Age - 55
</TABLE>
2
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<TABLE>
<S> <C>
MARVIN L. MANN Retired Chairman, Lexmark International, Inc. (office machines), 1991
Director since 1991 to 1998. Director of Imation, Inc. and Lexmark and member of the
Age - 66 Independent Board of Trustees, Fidelity Investments.
MARTIN D. WALKER Retired Chairman and Chief Executive Officer, M.A. Hanna
Director since 1986 Company; Chairman October 1998 to December 31, 1999 and
Age - 67 January 1, 1997 to June 30, 1997; Chief Executive Officer October 1998
to June 14, 1999; Chairman and Chief Executive Officer 1986-1996;
Director of Comerica Inc., The Goodyear Tire & Rubber Company,
Lexmark International, Inc., Textron Inc. and The Timken Company.
</TABLE>
The following table sets forth information as to the beneficial ownership
of the Company's Common Stock on January 31, 2000 by each director, 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 directors have sole voting and investment power
over the shares listed.
<TABLE>
<CAPTION>
Total
Shares &
Shares or Share
Shares Percent of Share Equivalent Equivalent
Beneficially Outstanding Held in Deferred Beneficially
Name Owned Shares Compensation Plans Held
- ---- ------------ ----------- ------------------ ------------
<S> <C> <C> <C> <C>
P. D. Ashkettle............. 11,100 * 0 11,100
C. A. Cartwright............ 26,977(1) * 2,303 29,280
W. R. Embry................. 28,399(1) * 2,428 30,827
J. T. Eyton ............... 19,972(2) * 8,878 28,850
R. A. Garda................. 14,500(2) * 919 15,419
G. D. Harnett .............. 16,998(3) * 8,627 25,625
D. H. Hoag.................. 1,000 * 0 1,000
G. D. Kirkham .............. 47,238(1)(4) * 2,428 49,666
D. B. Lewis................. 18,516(3) * 1,368 19,884
M. L. Mann.................. 50,837(1) * 14,360 65,197
R. W. Pogue................. 64,329(1) * 2,428 66,757
M. D. Walker................ 1,061,051(5) 2.17% 20,233 1,081,284
M. S. Duffey................ 65,400(5) * 0 65,400
G. W. Henry................. 137,332(5) * 0 137,332
J. S. Pyke, Jr.............. 140,007(5) * 6,276 146,283
All directors and executive
officers a group.......... 1,884,008(5) 3.85% 101,655 1,985,663
</TABLE>
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* The shares beneficially owned amount to less than one percent of the
outstanding shares of the Company's Common Stock.
(1)Includes 22,500 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 7,500 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's 1988 Long-Term
Incentive Plan.
(3)Includes 15,000 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's 1988 Long-Term
Incentive Plan.
(4)Includes 16,200 shares as to which Mr. Kirkham has shared investment and
voting power; the shares are held by a trust for which he serves as
co-trustee; Mr. Kirkham disclaims any beneficial interest in such shares.
(5)Includes shares which may be acquired within 60 days through the exercise of
stock options granted under the Company's 1988 Long-Term Incentive Plan, as
follows: 730,404, 48,236, 79,352, 89,553 and 122,187 shares for Messrs.
Walker, Duffey, Henry and Pyke and the other executive officers,
respectively.
3
<PAGE>
Meetings and Committees of the Board of Directors
The Board of Directors held 13 meetings in 1999. All director-nominees
attended at least seventy-five percent of the meetings of the Board and
committees of the Board.
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 standing 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 1999 with the Company's Chief Financial Officer,
Chief Accounting Officer, General Counsel, 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 and its health and safety record. The Committee also
selects and appoints independent public accountants to serve as the Company's
auditors each year. Present members are R. A. Garda, G. D. Harnett (Chair), G.
D. Kirkham and D.B. Lewis.
The Board Governance Committee held 4 formal meetings in 1999. Pursuant to
the Guidelines on Significant Corporate Goverance Issues adopted by the Board,
the Committee conducts assessments of the Board's performance and recommends
changes in the policies and operations of the Board and its Committees. 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 W. R. Embry (Chair), D. H. Hoag, G. D.
Kirkham and M. D. Walker.
The Compensation and Organization Committee, composed of directors who are
not employees of the Company, held 6 meetings in 1999. It approves remuneration
arrangements and succession plans for senior management and administers the
Company's executive compensation plans. Present members are C. A. Cartwright, W.
R. Embry, J. T. Eyton, M. L. Mann (Chair) 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 held 1 meeting in 1999. Present members are P. D.
Ashkettle, D. H. Hoag, M. L. Mann, R. W. Pogue (Chair) and M. D. Walker.
The Finance Committee, composed of directors who are not employees of the
Company, held 2 meetings in 1999. It is responsible for overseeing the Company's
financial policies and capital structure, management of foreign exchange risk
and banking relationships. The Committee is also responsible for overseeing the
funding, financial performance and administration of the Company's retirement
plans and the accounting for the plans. Present members are C.A. Cartwright
(Chair), J. T. Eyton, R. A. Garda, G. D. Harnett and D. B. Lewis.
Dr. C. A. Cartwright (Chair) and Messrs. M. L. Mann and R. W. Pogue also
served during 1999 on the ad hoc Search Committee responsible for conducting a
search for a new Chief Executive Officer. The Committee held 5 formal meetings.
4
<PAGE>
Holdings of Shares of the Company's Common Stock
The following table lists the only persons believed by the Company to be
the beneficial owners of more than five percent of the outstanding shares of
Common Stock of the Company as of December 31, 1999. The nature of the
beneficial ownership is set forth in the footnotes below.
Shares Percent of
Beneficial Owner Beneficially Owned Outstanding
------------ ------------------ ----------
FMR Corp.................................. 3,895,700(1) 7.96%
82 Devonshire Street
Boston, MA 02109
Mellon Financial Corporation.............. 3,520,983(2) 7.19%
One Mellon Center
Pittsburgh, PA 15258
Wachovia Bank of North Carolina, N.A., ... 3,790,322(3) 7.74%
Trustee of the M.A. Hanna
Associates Ownership Trust
301 North Main Street
Winston-Salem, NC 27102
- ----------
(1) Sole dispositive power, according to Schedule 13G dated February 1, 2000,
as filed with the Securities and Exchange Commission.
(2) Shares beneficially owned, as to which it has sole and shared voting power
with respect to 3,005,623 shares, according to Schedule 13G dated January
21, 2000 filed with the Securities and Exchange Commission.
(3) Shared voting and dispositive power. Shares of Common Stock are
periodically allocated and released from the Trust to satisfy funding
requirements under certain of the Company's compensation 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's Directors and certain officers to report ownership of
M.A. Hanna securities and benefit plan interests and subsequent acquisitions,
dispositions or other transfer of interests in such securities if and to the
extent reportable events occur which require reporting. The Company is required
to describe in this proxy statement whether it has knowledge that any person
required to file such a report may have failed to do so in a timely manner.
Based on the filed reports and related information furnished to the Company, the
Company believes that all such filing requirements were complied with in a
timely manner since January 1, 1999 except that the Company's staff
inadvertently filed a Form 4 on behalf of Mr. Walker due on February 10, 2000,
one day late.
Executive Compensation
The following table sets forth the compensation for the chief executive
officers who held office in 1999 and the four other most highly compensated
executive officers, for services rendered in all capacities to the Company and
its subsidiaries for the last three years.
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------- -----------------------------------
Awards Payouts
----------------------- ----------
Other Restricted
Name and Annual Stock Number of LTIP All Other
Principal Position Year Salary Bonus Compensation(1) Awards($)(2) Options Payouts(3) Compensation(4)
------------------ ---- ------ ----- ------------- ------------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phillip D. Ashkettle 1999 $357,083 $481,000 $343,928 0 100,000 N/A 0
President & Chief Executive 1998 N/A N/A N/A N/A N/A N/A N/A
Officer (from 6/14/99) 1997 N/A N/A N/A N/A N/A N/A N/A
M. D. Walker 1999 $500,000 0 $3,446 0 100,000 0 $445,089
Chairman & Chief Executive 1998 $115,705 0 0 0 100,000 $120,334 $460,017
Officer (from 10/7/98 to 6/14/99) 1997 $330,000 $215,000 $ 3,446 41,715 100,000 $453,600 $246,654
and Chairman from 6/14/99 to
12/31/99)
G. W. Henry 1999 $301,000 $180,000 $88,309 6,278 58,520 $50,251 $47,204
Executive Vice President of 1998 $258,333 $40,000 $74,551 3,846 42,667 $61,520 $60,412
Worldwide Plastics 1997 $236,667 $155,000 $71,015 8,434 15,625 $91,665 $59,460
M. S. Duffey 1999 $249,260 $136,000 $286 0 55,769 0 $27,370
Senior Vice President, Finance 1998 $238,700 $25,000 $455 2,040 34,062 $32,400 $29,261
& Administration & CFO 1997 $213,333 $117,000 $791 5,947 13,896 $64,638 $29,019
J. S. Pyke, Jr. 1999 $233,295 $127,500 $525 0 43,209 0 $62,150
Vice President, General 1998 $226,125 $27,500 $1,419 3,846 31,929 $61,520 $80,971
Counsel & Secretary 1997 $216,667 $117,000 $950 9,558 13,583 $103,950 $82,043
</TABLE>
- ----------
(1) The column reports the Company's reimbu rsement for the Medicare taxes
incurred by the named officers on accrued non-qualified plan benefits. In
addition, the column reports reimbursement to Mr. Ashkettle in connection
with his employment by the Company of $85,161 for club initiation fees and
dues, $93,222 for legal fees and tax reimbursements on those fees and
$53,292 for moving expenses and the Company also paid relocation fees of
$109,375. The column also reports reimbursement to Mr. Henry of moving
expenses and payments to equalize cost-of-living and housing differences
in connection with an assignment outside of his home country in the
amounts of $520 in 1997 and $1,388 in 1998, and relocation fees, moving
expenses and tax reimbursements on those expenses and club dues
aggregating $88,240 in 1999. The aggregate amount of perquisites and
personal benefits provided to the other officers did not exceed the
disclosure threshhold established by the Securities and Exchange
Commission.
(2) The column reports grants of restricted stock to the named individuals
during the 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, Henry, Duffey, and Pyke were 3,999/$43,739, 1,528/$16,713,
785/$8,586, and 1,121/$12,261, 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 nor the other shares issued at the same time may be transferred for
four years, at which time the restrictions lapse. The named officers
receive dividends on their restricted shares at the same time and
frequency as all stockholders.
(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 period ending December 31, 1998, 1997, and 1996.
(4) The column reports matching contributions made by the Company under the
M.A. Hanna 401(k) and Retirement Plan of $43,749, $29,121, $22,982, and
$21,743 for Messrs. Walker, Henry, Duffey, and Pyke, respectively, and the
dollar value of split dollar life insurance premiums paid in the amounts
of $38,261, $18,083, $4,388, and $40,407 for Messrs. Walker, Henry,
Duffey, and Pyke, respectively. This column also reports distributions to
Mr. Walker of $312,983 from the non-qualified retirement plan and $50,096
from the Voluntary Non-Qualified Deferred Compensation Plan.
The Company's Voluntary Non-Qualified Deferred Compensation Plan, approved
by stockholders in 1995, provides that executives whose total annual cash
compensation exceeds $150,000 may elect to defer up to 25% of his or her salary
and up to 100% of his or her short-term compensation and to allocate the
deferral to a cash account ("Cash Account") or an account maintained in shares
of M.A. Hanna Common Stock (the "Stock Account"). Balances in the Cash Account
earn interest quarterly at a rate equal to 125% of the Moody's Corporate Bond
Yield Index. As cash dividends are declared on M.A. Hanna Common Stock, the
executive's Stock Account is credited with additional shares of M.A. Hanna
Common Stock equivalent to cash dividends paid on the balance of shares in the
Stock Account. All deferrals to the Stock Account are "matched" by a 25% premium
in the form of additional
6
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shares of M.A. Hanna Common Stock. When the executive retires, dies or becomes
disabled, the full balance in the Cash Account and Stock Account is distributed
to the executive, and if employment terminates for any other reason, a partial
distribution will be made. Mr. Pyke has elected to participate in the Plan.
Employment Agreements
On June 14, 1999 the Company entered into an Employment Agreement (the
"Employment Agreement") with Mr. Phillip D. Ashkettle by which the Company
agreed to employ Mr. Ashkettle for a period of three years, initially as
President and Chief Executive Officer. Under the Employment Agreement Mr.
Ashkettle is entitled to an annual base salary of not less than $650,000, which
will be reviewed starting in the Fall of 2000 and adjusted in accordance with
the Company's administrative practices for its executive officers. The
Employment Agreement provided that Mr. Ashkettle would be entitled to a 1999
annual incentive compensation award of not less than $410,000 and up to a
maximum of $812,500 and thereafter annual incentive compensation target awards
which will be not less than 85% of base salary, with a potential payout range
from zero to 200% of such target based on Mr. Ashkettle's performance and
contributions to the success of the Company as determined by the Compensation
and Organization Committee. Under the Employment Agreement and pursuant to the
Company's Long-Term Incentive Plan, Mr. Ashkettle received a non-qualified stock
option to purchase 100,000 shares at the closing price of the Company's Common
Stock on June 14, 1999 and an award of 40,613 LTIP Units in the form of
Performance Shares for the three-year performance period 1999-2001, which are
subject to the same option terms and conditions applicable to other participants
in the Long-Term Incentive Plan and to the same target performance measures
established for the other executive officers for the same performance period.
The Company also agreed to reimburse Mr. Ashkettle for his reasonable relocation
costs in accordance with the Company's policies applicable to other executives
except that the Company will provide limited capital loss protection on the
disposition of his former residence.
To compensate Mr. Ashkettle for the loss of certain payments and benefits
which he forfeited by terminating employment with his previous employer, the
Company agreed in the Employment Agreement to pay him $1,500,000 in February of
each of 2000 and 2001, one half in cash and one half in shares of Common Stock.
Mr. Ashkettle has agreed to defer receipt of these payments, which will be
deposited in a trust account, until his retirement. The Company entered into a
Supplemental Retirement Agreement with Mr. Ashkettle, replacing a similar
agreement with his prior employer, which provides for annual payments of
$526,000 for the life of Mr. Ashkettle commencing on his retirement from the
Company on or after December 31, 2005 or earlier under certain circumstances. In
the event Mr. Ashkettle dies after attaining age 55 but before the supplemental
retirement benefit commences, Mr. Ashkettle's wife will receive a survivor
benefit commencing on January 1, 2006 for her life. The Company also granted a
sign-on nonqualified stock option under the Long-Term Incentive Plan to purchase
531,250 shares of Common Stock at the closing price on June 14, 1999 which will
vest in three equal installments, subject to stockholder approval of an amended
Long-Term Incentive Plan.
In the event Mr. Ashkettle is terminated by the Company without cause, he
will generally be entitled to a severance payment equal to the base salary and
annual incentive compensation payments at target for the balance of his
employment period, his stock options will become fully vested and exercisable
and he will be entitled to receive payment for his Performance Shares as earned,
prorated for his service during the relevant performance period. The Company
will also provide the supplemental retirement payments described in the
preceding paragraph. The foregoing description of Mr. Ashkettle's Employment
Agreement does not purport to be complete and is qualified in its entirety by
reference to such agreement, which has been filed with the Securities and
Exchange Commission as an exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999.
The Company has entered into amended and restated employment agreements
with certain executive officers, including the named executive officers, which
become operative only upon a "change in control" of the Company, as defined in
the agreements. The executive officers who did not enter into the amended and
restated employment agreement are parties to a predecessor employment agreement
which also becomes operative on a "change in
7
<PAGE>
control" of the Company and provides similar terms and conditions. The amended
and restated 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 one year which, unless otherwise elected by
either party, is automatically extended for an additional one-year period on the
first 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 average of
the annual bonuses 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 a payment equal to the present value of his benefits under the
Company's benefit plans for the remainder of his employment term supplemented by
an amount equal to the present value of the contributions the Company would have
made to the plans for the officer for the remainder of the 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.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized Value at
Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
------------------------------------------------- ----------------------------
Percent of Option Expiration
Optons Total Options Exercise Date of
Name Granted (#) Granted Price Option 5% 10%
---- ---------- -------- --------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
P. D. Ashkettle 100,000 11.45% $15.9375 06/14/09 $1,002,301 $2,540,027
M. D. Walker 100,000 11.45% $11.3125 03/02/09 $ 711,437 $1,802,921
G. W. Henry 58,520 6.70% $10.6250 12/01/09 $ 391,031 $ 990,949
M. S. Duffey 55,769 6.39% $10.6250 12/01/09 $ 372,649 $ 944,365
J. S. Pyke, Jr. 43,209 4.95% $10.6250 12/01/09 $ 288,723 $ 731,680
</TABLE>
8
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONVALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of In-the-Money
Unexercised Options Options at
at Fiscal Year-End(#) Fiscal Year-End
Shares Acquired Value Exercisable (E)/ Exercisable (E)/
Name on Exercise Realized Unexercisable (U) Unexercisable (U)
---- ------------ ------------ -------------------- ----------------
<S> <C> <C> <C> <C>
P.D. Ashkettle........ -- $ -- --(E) $ --(E)
100,000(U) $ --(U)
M.D. Walker........... -- $ -- 697,072(E) $ 58,984(E)
166,666(U) $ --(U)
G.W. Hcnry............ 6,750 $62,232.98 92,136(E) $ 7,078(E)
92,429(U) $ 18,288(U)
M.S. Duffey........... -- $ -- 61,055(E) $ --(E)
83,223(U) $ 17,428(U)
J.S. Pyke, Jr......... 12,375 $41,680.24 89,297(E) $ 9,437(E)
69,279(U) $ 13,503(U)
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated Future Payouts Under
Performance Non-Stock Price Based Plans
or Other --------------------------------------------------
Period
Number of Until Threshold Number Target Number Maximum Number
Performance Maturation of Performance of Performance of Performance
Name Share Units(#) or Payout Share Units(#) Share Units(#) Share Units(#)
---- ------------- ----------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
P. D. Ashkettle... 111,074 3 years 55,537 111,074 222,148
M. D. Walker...... -- -- -- --
G. W. Henry....... 6,912 3 years 3,456 6,912 13,824
M. S. Duffey...... 5,681 3 years 2,841 5,681 11,362
J. S. Pyke, Jr.... 5,274 3 years 2,637 5,274 10,548
</TABLE>
The number of Performance Shares shown in the table above represent
performance shares granted pursuant to the Company's 1988 Long-Term Incentive
Plan as amended. Performance Shares represent the right to receive payments
under the plan at the end of the three-year performance period commencing
January 1, 2000. The number of performance shares earned by the named officers
at the end of the three-year cycle will be determined by the Compensation and
Organization Committee and will be based on achievement against earnings per
share growth and return on shareholder equity measures. If the EPS and ROSE
targets are met, the target number of performance shares will be paid out. If
the results exceed target performance, the number of performance shares paid
will range between the target number and the maximum number of performance
shares shown in the above table. If, on the other hand, results are less than
target performance, the number of performance shares paid will range between the
target number and the threshold number of performance shares. If performance
after the three-year performance period fails to reach threshold levels, no
performance shares will be paid to any of the named officers. Payments will be
determined based on the market value of M.A. Hanna Common Stock at the end of
the performance period at which time a portion of the award will be paid in
shares of M.A. Hanna Common Stock and a portion in cash.
9
<PAGE>
Defined Benefit Retirement Plans
The Salaried Employees Retirement Income Plan ("SERIP") is a
non-contributory pension plan covering all officers employed prior to January 1,
1999 and certain other salaried employees of the Company. Effective December 31,
1998 SERIP was closed to new participants, benefit accruals ceased and the
benefits of the participants were frozen. 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 prior to January 1, 1999, 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 and will
continue to accrue non-qualified benefits for the executive officers for up to a
5-year period in connection with the freezing of 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 two pension plans for
salaried employees. Benefits payable under the qualified pension plan are not
subject to any deduction for Social Security benefits.
Average Annual
Compensation Years of Service at Age 65
For Last 5 Years ---------------------------------------------------------
of Employment 15 Years 20 Years 25 Years 30 Years 35 Years
- --------------- -------- -------- -------- -------- --------
$ 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
The credited years of service for retirement benefits for Messrs. Duffey,
Henry, Pyke and Walker are 5, 24, 31 and 23, respectively.
BOARD COMPENSATION AND ORGANIZATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
M.A. 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 M.A. Hanna's internal culture and operating environment and
reinforce its human resource management values. The objectives of the executive
compensation program are to:
o Establish a pay-for-performance philosophy and policy that places a
meaningful portion of each executive's compensation at risk with the
stockholders, commensurate with the executive's ability to impact
bottom line results;
o Motivate and incent executives to achieve a level of performance
consistent with the Company's strategic business objectives and
reward them for their achievement;
o Provide total compensation opportunities which are market
competitive, are subject to associated downside risk and offer
significant upside opportunities based on performance, thus enabling
M.A. Hanna
10
<PAGE>
to compete for and retain outstanding, talented and highly motivated
executives who are vital to M.A. Hanna's long-term success; and
o Align the interests of executives with the long-term interest of
stockholders through incentive-award opportunities that are linked
to the long-term performance of the Company and that result in
ownership of M.A. Hanna Common Stock; and
o Retain the skills that are critical to the future success of the
Company.
M.A. Hanna's executive compensation program is comprised of three
principal 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 may result in variability in the executive's actual total cash
compensation level from year to year if there are 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 M.A. Hanna. In order to assess
competitive total compensation programs and establish total compensation
opportunities for M.A. Hanna executives, the Committee receives the advice of an
independent compensation consultant and utilizes data contained in independent
compensation surveys such as the Watson Wyatt Data Services' Top Management
Report, the Towers Perrin Compensation Data Bank (Cash Compensation and
Long-Term Incentive Plan Surveys), the Conference Board's report on Top
Executive Compensation and Hewitt's Project 777 Executive Compensation Study.
M.A. 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, M.A. Hanna's total compensation
systems are designed to deliver a total compensation opportunity that is above
average. M.A. Hanna targets executive 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 systems are
also designed to be responsive in the event the Company's actual performance
falls below expectations vis-a-vis the annual operating plan and/or industry
comparisons.
Base Salaries
M.A. Hanna targets its executives' base salaries to the median, or 50th
percentile, of base salaries reported in the published surveys referenced above
by comparable companies.
The Committee annually reviews the base salaries of executive officers.
Prior to the meeting at which the annual review occurs, the Committee is
furnished with data on the current total compensation and total compensation
history of each executive officer, current survey data for comparable positions
at comparable industrial companies and individual performance appraisal ratings
by the Chief Executive Officer for each executive officer except himself. At the
meeting the Committee reviews all available data and considers adjustments; in
1999 it made selective adjustments in executive officers' salaries.
Annual Incentive Compensation for 1999
Because the Company did not fully achieve its earnings plan for 1999, the
Committee approved payments at 80% of target to the executive officers based on
the Company's performance. The Committee also approved individual awards for
certain executive officers which reflected the executive's performance for the
year.
1999 Long-Term Incentive Plan Awards
Under M.A. Hanna's stockholder-approved Long-Term Incentive Plan, the
Committee grants stock options and long-term incentive plan performance units
("LTIP Units") in the form of Performance Shares annually to
11
<PAGE>
cover a three-year performance period. Awards are based on a pay grade level
formula which takes into account relevant long-term award data as reported by a
broad base of industrial companies in the Towers Perrin Compensation Data Bank
Long-Term Incentive Plan Survey.
In December 1999 the Committee made grants of non-qualified stock options
at a purchase price equal to 100% of the fair market value of M.A. Hanna Common
Stock on the grant date and awards of LTIP Units in the form of Performance
Share units for a three-year performance period beginning on January 1, 2000.
The Committee will establish target performance measures to be attained for the
performance period, with threshold and maximum achievement levels.
1999 Long-Term Incentive Plan Payments
The Committee applied the compound annual earnings per share growth and
three-year average return on stockholders' equity performance measures
established for the three-year performance period ending December 31, 1998
against actual performance and determined that the performance was below
threshholds so that executive officers were not entitled to a payout of LTIP
Units for that performance period but that certain business unit participants
had earned payouts for that period. The Committee elected to make a portion of
the payment to each business unit participant entitled to a payout in cash and a
portion in shares of M.A. Hanna Common Stock, and awarded each participant
shares of restricted M.A. Hanna Common 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 three years, at which time the restrictions lapse.
Chief Executive Officers' Compensation
Mr. M. D. Walker served as Chief Executive Officer until June 14, 1999,
when Mr. Phillip D. Ashkettle was elected his successor. Mr. Walker's base pay
was not increased in 1999 and he did not receive any incentive compensation for
1999. The Committee awarded Mr. Walker a non-qualified stock option to purchase
100,000 shares of Common Stock at the closing price on March 2, 1999.
Mr. Walker has agreed to provide consulting services to the Company
through June 30, 2002 and in that connection the Company provides an off-site
office and administrative support.
Mr. Ashkettle was recruited to join the Company as President and Chief
Executive Officer. In connection with the negotiations to employ Mr. Ashkettle,
the Company obtained advice from independent consultants and advisors with
respect to the development of a total compensation opportunity for Mr.
Ashkettle. Mr. Ashkettle's Employment Agreement is described in the section
Employment Agreements on page 7 of this proxy statement. Mr. Ashkettle's base
salary and incentive compensation and the size of his stock option grants were
determined based on competitive practices among (i) companies of similar size in
the specialty chemicals industry, (ii) the need to employ an experienced chief
executive officer from the specialty chemicals industry and (iii) the need to
replace certain compensation which Mr. Ashkettle forfeited upon resigning from
his previous employer. Apart from base salary and the replacement compensation
and benefits, Mr. Ashkettle's compensation is tied to the performance of the
Company and the Company's Common Stock price during his tenure and Mr.
Ashkettle's contributions to the growth and profitability of the Company.
Mr. Ashkettle's base salary for 1999 reflects payment at the minimum rate
agreed in his Employment Agreement. His annual incentive compensation award for
1999 was determined by the Compensation and Organization Committee based in part
on the assumption that Mr. Ashkettle would have earned an annual incentive
compensation award at target at his previous employer for service with that
employer and in part on the Company's 1999 performance measured against its
earnings plan, similar to the other executive officers.
Pursuant to the terms of his Employment Agreement and in accordance with
the Company's Long-Term Incentive Plan, Mr. Ashkettle was granted on June 14,
1999 a non-qualified stock option to purchase 100,000 shares of the Company's
Common Stock and 40,613 LTIP Units in the form of Performance Shares for the
performance period 1999-2001, which are subject to the same option terms and
conditions applicable to other participants in the Long-Term Incentive Plan and
the same target performance measures established for the other
12
<PAGE>
executive officers for the same performance period. In addition, the Company
also granted Mr. Ashkettle on June 14, 1999 a sign-on non-qualified stock option
to purchase 531,250 shares of the Company's Common Stock at the closing price on
that date of $15.9375 per share, subject to stockholder approval of the Amended
Plan described in this proxy statement. On December 1, 1999 Mr. Ashkettle was
granted a non-qualified stock option to purchase 100,000 shares of the Company's
Common Stock, subject to stockholder approval of the Amended Plan, and 70,461
LTIP Units in the form of Performance Shares for the performance period
2000-2002, in connection with the annual grants to all participants under the
Current Plan. As part of his Employment Agreement, the Company will provide Mr.
Ashkettle with certain other compensation and benefits to replace forfeited
compensation and benefits, as more fully described in the section Employment
Agreements.
Stock Ownership Guidelines
Stock ownership guidelines have been established for participants in the
Company's Long-Term Incentive Plan which encourages them to acquire a guideline
value of M.A. Hanna Common Stock. The guidelines are expressed as a multiple of
base salary. The multiples range from three times base salary for the Chief
Executive Officer to .5 times base salary for the non-officer, key manager
participants in the Plan. Under the policy there will be no penalty for failure
to achieve the expected levels of ownership but if a participant does not hold
the guideline value of M.A. Hanna Common Stock at the end of a three-year
period, up to one-half of his or her annual incentive compensation award will be
paid in shares of M.A. Hanna Common Stock until the expected stock ownership
value is achieved. The Committee monitors attainment of the guidelines.
Deductibility of Executive Compensation
Internal Revenue Code Section 162 (m) and regulations thereunder
respecting the non-deductibility of certain executive compensation payments in
excess of $1 million did not affect the deductibility of M.A. Hanna compensation
payments in 1999 and are not expected to affect materially the deductibility of
compensation payments in 2000. In connection with the agreements negotiated when
he joined the Company, Mr. Ashkettle agreed to defer certain elements of his
compensation. The deferred compensation will be paid to Mr. Ashkettle after
retirement, at which time the deductibility of such compensation will not be
subject to Section 162 (m).
Compensation and Organization Committee
M. L. Mann, Chair
C. A. Cartwright
W. R. Embry
J. T. Eyton
R. W. Pogue
Compensation and Organization Committee Interlocks and Insider
Participation
There are no Compensation and Organization Committee interlocks or insider
participation.
13
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*
AMONG M.A. HANNA COMPANY, THE S&P 500 INDEX
AND THE S&P CHEMICALS (SPECIALTY) INDEX
[Plot Points from Line Graph]
M.A. HANNA COMPANY S & P 500 S & P CHEMICALS(SPECIALTY)
12/94 100 100 100
12/95 120 138 131
12/96 144 169 135
12/97 169 226 167
12/98 85 290 142
12/99 78 351 157
*$100 INVESTED ON 12/31/94 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
This performance graph assumes that the value of the investment in M.A.
Hanna and each index was $100 on December 31, 1994 and that all dividends were
reinvested.
14
<PAGE>
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 $6,750 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 $1,500 when the meeting occurs on a day when no Board meeting
is held; Chairs of Board committees are paid an additional quarterly retainer
fee of $750. 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.
Under the Directors' Deferred Fee Plan, which was approved by
stockholders, non-employee directors are required to defer a minimum of 25% of
their quarterly Board retainer fee into a Deferred Benefit Account maintained in
Units, which are accounting units equal in value to one share of M.A. Hanna
Common Stock. Directors may also elect to defer the balance of his or her
retainer fees and meeting fees to the Units account or a cash account. The Units
account is credited with additional units equal in value to cash dividends paid
on the Common Stock equivalent to the balance of units in the Unit account and
the cash account is credited with interest equal to interest payable on 1-year
U.S. Treasury bills. Each Deferred Benefit Account maintained in Units is
credited after the end of each year with additional units equal in value to 25%
of the value of the units credited to each Deferred Benefit Account during the
year. The Deferred Benefits Accounts are paid to Directors at the termination of
their service or, at the director's election, at his or her death.
One-time grants of options to purchase 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. The amount of shares subject to
the one-time grant, adjusted for stock splits, is currently 22,500. 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.
A non-qualified retirement plan for non-employee Directors was terminated
effective May 1, 1997, and no further benefits will accrue under the plan from
that date for incumbent or future Directors. Each Director then in office who
would have been entitled to receive a benefit under the terminated plan received
an amount of restricted Common Stock of the Company equal to the net present
value on May 1, 1997 of the benefit he or she would have received under the
terminated plan, and the restrictions shall lapse upon the Director's
termination of service.
Effective May 1, 1998 the non-employee Directors' compensation includes an
annual award of $15,650 in the form of restricted M.A. Hanna Company Common
Stock, valued at 100% of the market value of Common Stock on May 1. In general,
the restricted shares vest only if the Director serves at least five years on
the Board, with payment on the Director's retirement from the Board. If the
Director's service is terminated for actions opposed to the best interests of
the Company, the restricted shares will be forfeited. This compensation in
restricted shares is intended to confirm the mutuality of interest among all
stockholders, including the Directors, and maintain director compensation at
competitive levels which may be adjusted as appropriate.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors delegated its authority to select and appoint the
Company's independent public accountants to the Audit Committee of the Board,
which selected and appointed PricewaterhouseCoopers LLP to be the Company's
independent public accountants for the year 2000, subject to ratification by the
stockholders. The Audit Committee considers PricewaterhouseCoopers LLP to be
well qualified.
If the appointment is not ratified, the Audit Committee will reconsider
its decision but will not be bound by the refusal of the stockholders to ratify
the appointment of PricewaterhouseCoopers LLP. A representative of
PricewaterhouseCoopers LLP is expected to be present at the annual meeting, will
have an opportunity to make a statement if such representative desires to do so
and is expected to be available to respond to appropriate questions. The Audit
Committee of the Board of Directors recommends that the stockholders vote FOR
ratification of the
15
<PAGE>
appointment of PricewaterhouseCoopers LLP as the Company's independent public
accountants for the fiscal year ending December 31, 2000.
3. APPROVAL OF M.A. HANNA COMPANY LONG-TERM INCENTIVE PLAN, AS AMENDED AND
RESTATED AS OF MARCH 1, 2000
The Company desires to continue its policy of aligning the interests of
its executives with the long-term interests of stockholders through
incentive-award opportunities that are linked to the long-term performance of
the Company and that result in the executives' ownership of M.A. Hanna Common
Stock. The 1988 Long-Term Incentive Plan (the "Current Plan") was approved by
stockholders in 1988 and amendments to the Current Plan were approved by
stockholders in 1991, 1994 and 1997. In order to continue the Company's ability
to attract, retain and motivate officers, key executives and Non-Employee
Directors, the Board of Directors approved the amendment and restatement of the
Current Plan on March 1, 2000 (the "Amended Plan"), and has recommended that the
Amended Plan be submitted to the Company's stockholders for approval at the 2000
Annual Meeting.
The reasons for amending and restating the Current Plan are to meet
Internal Revenue Code requirements for incentive stock options and the
deductibility of stock option and appreciation rights awards under Section
162(m) of the Code and to increase the number of shares available, provide
additional flexibility in establishing awards and administering the Amended
Plan, establish and change certain limits on the amounts of awards and change
the stock option awards to Non-Employee Directors.
The Current Plan is administered by the Compensation and Organization
Committee of the Board of Directors (the "Committee"), which will continue to
administer the Amended Plan.
A summary of the proposed changes is set forth below, followed by a
summary description of the entire Amended Plan. A full text of the Amended Plan
is annexed to this Proxy Statement as Exhibit A, and the following summary is
qualified in its entirety by reference to Exhibit A. Capitalized words in the
summary have the same meaning as the defined terms in the Amended Plan in
Exhibit A, unless the context dictates otherwise.
SUMMARY OF CHANGES
Available Shares. The Amended Plan increases the number of Common Shares
available by 1,500,000 shares. The Current Plan authorized the issuance of an
aggregate of 4,275,000 shares (giving effect to stock splits) and as of January
1, 2000, the shares subject to outstanding awards under the Current Plan are
3,998,995 and the shares available for future awards are 128,830. The number of
shares available is subject to adjustments for stock dividends, stock splits and
certain other situations described in Section 11 of the Amended Plan.
The Amended Plan provides that the Common Shares available for issuance
shall be adjusted to account for shares relating to awards that expire, are
forfeited or are transferred, surrendered or extinguished upon the payment of
any Option Price by the transfer of Common Shares or upon satisfaction of any
tax withholding amount. Upon payment in cash of the benefit provided by any
Option Rights granted under the Amended Plan, any shares relating to those
Option Rights shall again be available for issue or transfer under the Amended
Plan.
Flexibility in Establishing Awards and Administering the Plan. The Amended
Plan adds provisions to the Current Plan which enable flexibility in
establishing awards and administering the Plan. The Amended Plan provides that
awards of Deferred Shares may be made to Participants and Restricted Shares may
be made to Non-Employee Directors and that payment of the Option Price by a
Participant may be made in the form of Restricted Shares. The Amended Plan
authorizes the Committee, if it so elects, to establish Management Objectives
that must be achieved as a condition to the exercise of Option Rights or the
termination of restrictions with respect to Restricted Shares and to require
that dividends or other distributions paid with respect to Restricted Shares be
deferred and reinvested in additional Restricted Shares.
Under the Amended Plan the Committee is authorized to provide special
terms for awards to Participants who are foreign nationals or who are employed
outside of the United States as the Committee deems necessary or appropriate to
accommodate differences in local law, tax policy or custom. The Committee may
also permit
16
<PAGE>
Participants to elect to defer the issuance of Common Shares or the settlement
of awards in cash. These authorities did not exist under the Current Plan.
Limits on the Amounts of Awards. In recognition of amendments to the Code
and corporate governance practices which came into existence after the adoption
of the Current Plan, the Amended Plan establishes new limitations on certain
awards. The Amended Plan limits awards of Option Rights and Appreciation Rights
to a participant to an aggregate of 731,250 Common Shares during 1999 and
200,000 Common Shares during any following year. The Current Plan limited awards
of Option Rights to 100,000 shares in any one fiscal year of the Company. In
anticipation of this change an award of a stock option to purchase 531,250
Common Shares was made to Mr. P. D. Ashkettle in connection with his employment
by the Company in June 1999 and an award of a stock option to purchase 100,000
Common Shares was made in December 1999 in connection with annual awards to all
participants under the Current Plan, conditioned on stockholder approval of the
Amended Plan. The Amended Plan also contains limitations on the aggregate
amounts of awards of Performance Shares and Restricted and Deferred Shares.
The Amended Plan limits the total number of Common Shares that may be
issued under the Amended Plan upon the exercise of Incentive Stock Options to
750,000 and prohibits the transfer or assignment of Option Rights intended to
qualify as Incentive Stock Options under Section 422 of the Code other than by
will or the laws of descent and distribution. In order to ensure that awards to
any person who is or is likely to be a "covered employee" within the meaning of
Section 162(m) of the Code continue to be available for exemption under Section
162(m), the Committee is prohibited from modifying Management Objectives
attached to such awards and adjusting the number of LTIP Units or Performance
Shares, where such actions would result in the loss of such exemption.
Stock Option Awards to Non-Employee Directors. The Current Plan provided
for one-time grants of Option Rights to purchase 22,500 Common Shares (adjusted
to reflect stock splits) to Non-Employee Directors upon their first election to
the Board and stipulated an aggregate number of shares of Common Stock available
for such awards, which has now been exhausted. The Board took into account
current competitive pay practices for Directors and determined that it would
more appropriate and equitable to make smaller annual grants of Option Rights
rather than a large one-time grant. Therefore the Amended Plan authorizes the
grant of Option Rights from time to time subject only to the overall limitations
on Common Shares available under the Amended Plan. It is the intention of the
Committee to make annual grants of Option Rights for an amount of Common Shares
calculated by dividing 200% of the annual retainer fee for Directors then in
effect by the Option Price on the date of the award; for example, if the annual
retainer fee was $27,000 and the Option Price on the date of the award was
$11.00 per share, the number of shares awarded would be 4,909 ($27,000 x 2 =
$54,000 / $11.00 = 4,909).
Other Changes. The Amended Plan makes a number of other changes in the
Current Plan which reflect the changes in long-term incentive plan practices
since the adoption of the Current Plan in 1988, the addition of provisions that
the Committee previously had approved for inclusion in the agreements evidencing
the awards, and administrative and language clarifications. Under the Amended
Plan the awards may be evidenced by an electronic medium or a conventional paper
form and the Optionee can constructively, rather than actually, transfer
currently owned Common Shares in payment of the Option Price. The Amended Plan
authorizes the Committee to cancel or rescind an award if the Participant
engages in "detrimental activity", which is defined as engaging in a business
which is competitive with the business of the Company, an activity that results
in a termination for cause, a violation of the Company's Code of Conduct, a
conviction of a crime and any other act determined to be injurious, detrimental
or prejudicial to any interest of the Company.
SUMMARY OF THE AMENDED PLAN
Amended Plan Limits. The maximum number of Common Shares that may be
issued or transferred (i) upon exercise of Option Rights or Appreciation Rights,
(ii) in payment of LTIP Units or Performance Shares that have been earned, (iii)
as Restricted Shares and released from the substantial risk of forfeiture, (iv)
as Deferred Shares or (v) as awards of Option Rights to Non-Employee Directors,
may not in the aggregate exceed 1,628,830
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Common Shares, which may be shares of original issuance, treasury shares or
shares from the Associates Ownership Trust, or a combination thereof. This
figure is composed of 128,830 shares covered by the Current Plan and 1,500,000
shares added by the Amended Plan. These limits are subject to adjustments as
provided in the Amended Plan for stock splits, stock dividends,
recapitalizations and other similar events.
Upon the payment of any option price by the transfer to the Company of
Common Shares or upon satisfaction of tax withholding obligations or any other
payment made or benefit realized under the Amended Plan by the transfer or
relinquishment of Common Shares, there shall be deemed to have been issued or
transferred only the net number of shares actually issued or transferred by the
Company. Upon the payment in cash of a benefit provided by any award under the
Amended Plan, any Common Shares that were covered by such award shall again be
available for issuance or transfer under the Amended Plan.
The number of shares actually issued or transferred by the Company upon
exercise of Incentive Stock Options shall not exceed 750,000; no participant may
be granted Option Rights and Appreciation Rights for more than 731,250 Common
Shares during 1999 and more than 200,000 Common Shares during any following
calendar year; the number of Performance Shares that may be paid out under the
Plan shall not exceed 1,500,000 and the number of Restricted Shares and Deferred
Shares shall not exceed 750,000; all subject to adjustment as provided in the
Amended Plan.
Option Rights. Option Rights may be granted which entitle the Optionee to
purchase Common Shares at a price not less than its fair market value on the
date of the grant. The option price is payable in cash, by the actual or
constructive transfer of Common Shares owned by the Optionee not less than 6
months, Restricted Shares provided that the Common Shares received upon exercise
of such Option Rights shall be subject to the same risks of forfeiture or
restrictions on transfer as may correspond to the Restricted Shares surrendered,
or any combination of these methods. Any grant of Option Rights may provide for
the deferred payment of the option price on the sale of some or all of the
shares obtained from the exercise.
Option Rights granted under the Amended 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 or combinations
thereof.
No Option Rights may be exercised more than 10 years from the date of
grant. Each grant to an employee must specify the period of continuous
employment that is necessary before the Option Rights become exercisable and may
provide for the earlier exercisability of the Option Rights in the event of
retirement or death or disability of the participant. Any grant of Option Rights
may specify Management Objectives (as described below) that must be achieved as
a condition to exercise such rights.
Appreciation Rights. Appreciation Rights provide to participants an
alternative means of realizing the benefits of Option Rights. They represent the
right to receive from the Company an amount, determined by the Committee and
expressed as a percentage not exceeding 100 percent, of the difference between
the base price established for such Rights and the market value of the Common
Shares on the date the rights are exercised. Appreciation Rights can be tandem
(i.e., granted with Option Rights to provide an alternative to exercise of the
Option Rights) or freestanding. Tandem Appreciation Rights may only be exercised
at a time when the related Option Right is exercisable and the spread is
positive, and the related Option Right must be surrendered for cancellation.
Free-standing Appreciation Rights must have a base price per Right that is not
less than the fair market value of the Common Shares on the date of grant, must
specify the period of continuous employment that is necessary before such
Appreciation Rights become exercisable (except that they may provide for the
earlier exercise of the Appreciation Rights in the event of retirement or death
or disability of the participant) and may not be exercisable more than 10 years
from the date of grant. Any grant of Appreciation Rights may specify that the
amount payable by the Company on exercise of an Appreciation Rights may be paid
in cash, in Common Shares or in any combination thereof, and may either grant to
the recipient or retain in the Committee the right to elect among those
alternatives. Any grant of Appreciation Rights may specify Management Objectives
that must be achieved as a condition to the exercise such rights.
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LTIP Units and Performance Shares. A LTIP Unit is the equivalent of $1.00
and a Performance Share is the equivalent of 1 Common Share. The participant to
whom a LTIP Unit or Performance Share is granted will be given one or more
Management Objectives to meet within a specified period of not less 3 years (the
"Performance Period"). The specified Performance Period may be subject to
earlier termination in the event of retirement or death or disability of the
participant. A minimum level of acceptable achievement will also be established
by the Committee. If by the end of the Performance Period, the participant has
achieved the specified Management Objectives, the participant will be deemed to
have fully earned the LTIP Units or Performance Shares. If the participant has
not achieved the Management Objectives, but has attained or exceeded the
predetermined minimum level of acceptable achievement, the participant will be
deemed to have partly earned the LTIP Units or Performance Shares in accordance
with a predetermined formula. To the extent earned, the LTIP Units or
Performance shares will be paid to the participant at the time and in the manner
determined by the Committee in cash, Common Shares or any combination thereof.
Restricted Shares. Restricted Shares constitute an immediate transfer of
ownership to the recipient in consideration of the performance of services. The
participant has dividend and voting rights on such shares. Restricted Shares
must be subject to a "substantial risk of forfeiture" of the shares, within the
meaning of Section 83 of the Code, for a period of at least 3 years to be
determined by the Committee on the date of the grant. In order to enforce these
forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in the manner prescribed by the Committee on the date
of grant for the period during which such forfeiture provisions are to continue.
The Committee may provide for the earlier termination of the forfeiture
provisions in the event of retirement or death or disability of the participant.
Any grant of Restricted Shares may specify Management Objectives which, if
achieved, will result in termination or early termination of the restrictions
applicable to such shares. Any such grant must also specify in respect of such
specified Management Objectives, a minimum acceptable level of achievement and
must set forth a formula for determining the number of Restricted Shares on
which restrictions will terminate if performance is at or above the minimum
level, but below full achievement of the specified Management Objectives.
Deferred Shares. Deferred Shares constitute an agreement to issue shares
to the recipient in the future in consideration of the performance of services,
but subject to the fulfillment of such conditions as the Committee may specify.
The participant has no right to transfer any rights under his or her award and
no right to vote the Deferred Shares. The Committee must fix a deferral period
of at least 3 years at the time of grant, and may provide for the earlier
termination of the deferral period in the event of retirement or death or
disability of the participant.
Management Objectives. The Amended Plan requires that the Committee
establish "Management Objectives" for purposes of LTIP Units and Performance
Shares. When so determined by the Committee, Option Rights, Appreciation Rights
and Restricted Shares may also specify Management Objectives. Management
Objectives may be described in terms of either Company-wide objectives or
objectives that are related to the performance of the individual participant or
subsidiary, division, department or function within the Company or a subsidiary
in which the participant is employed. Management Objectives applicable to any
award to a participant who is, or is determined by the Committee likely to
become, a "covered employee" within the meaning of 162(m)(3) of the Code shall
be limited to specified levels of, growth in one or more of the following:
revenues, earnings before interest and taxes, net income, cash flow, earnings
per share, debt to capital ratio, economic value added, return on total capital,
return on invested capital, return on equity, return on assets and/or total
return to stockholders. Except in the case of such a covered employee, if the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company, or the manner in which it
conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may modify such Management Objectives, in
whole or in part, as the Committee deems appropriate and equitable.
Additionally, even in the case of a covered employee, a Management Objective can
be modified if the modification would not result in the Company's loss of the
otherwise available exemption of the award under Section 162(m).
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Awards to Non-Employee Directors. Non-Employee Directors may from time to
time be granted Option Rights and may be awarded Restricted Shares. Each grant
of Option Rights will be made on the same terms and conditions as described
above except that the Amended Plan stipulates that the Option Rights will vest
equally over 3 years with accelerated vesting in the event of termination of
service, other than by death or disability, as to the Option Rights that would
be vested on a date which is six months and a day after the termination of
service. Grants of Restricted Shares will be made consistent with the provisions
described above.
Eligibility. Officers and key executives of the Company and its
subsidiaries, as determined by the Committee, may be selected to receive
benefits under the Amended Plan. In addition, Non-Employee Directors of the
Company will be eligible for grants of Option Rights and Restricted Shares as
described above under the heading "Awards to Non-Employee Directors."
Transferability. Participants may transfer awards to members of their
immediate families under certain conditions. The Committee, in its sole
discretion, may provide for transferability of particular awards under the
Amended Plan. Otherwise, Option Rights and other derivative securities awarded
under the Amended Plan will not be transferable by a participant other than by
will or the laws of descent and distribution. Any award made under the Amended
Plan may provide that any Common Shares issued or transferred as a result of the
award will be subject to further restrictions upon transfer.
Adjustments. The number of shares covered by outstanding Option Rights,
Appreciation Rights, Performance Shares and Deferred Shares and the prices per
share applicable thereto, are subject to adjustment in certain situations as
provided in Section 11 of the Amended Plan.
Foreign Employees. The Committee may provide for special terms for awards
to participants who are foreign nationals or who are employed by the Company or
any subsidiary outside the United States as the Committee may deem necessary or
appropriate to accommodate differences in local law, tax policy or custom.
Administration. The Compensation and Organization Committee of the Board
of Directors, as constituted from time to time, will administer and interpret
the Amended Plan.
Amendments and Other Matters. The Amended Plan may be amended by the
Committee so long as any amendment that must be approved by the stockholders of
the Company in order to comply with applicable law or the rules of the New York
Stock Exchange is not effective until such approval has been obtained.
The Committee may not, without the further approval of the stockholders of
the Company, authorize the amendment of any outstanding Option Right to reduce
the option price. Furthermore, no Option Right may be cancelled and replaced
with awards having a lower option price without further approval of the
stockholders of the Company.
The Committee may cancel, rescind, suspend, withhold or otherwise limit or
restrict any unexpired, unpaid or deferred award at any time if a participant is
not in compliance with the agreement or document evidencing the award and the
Amended Plan or if the participant engages in any "detrimental activity", which
is defined in Section 15 of the Amended Plan to include generally any conduct or
an act which is determined to be injurious, detrimental or prejudicial to any
interest of the Company.
The Committee may permit participants to elect to defer the issuance of
Common Shares or the settlement of awards in cash under the Amended Plan.
Amended Plan Benefits. It is not possible to determine specific amounts
that may be awarded in the future under the Amended Plan. However, as indicated
in the table below, the Committee has made awards to certain executive officers
named in the Summary Compensation Table and certain other key executives during
the year 1999. Also, as shown in the table, awards of Option Rights would be
made beginning in the year 2000 to Non-Employee Directors under the Amended
Plan, if such plan is approved by the stockholders.
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NEW PLAN BENEFITS
THE M.A. HANNA COMPANY LONG-TERM INCENTIVE PLAN
Stock Performance
Options Share Awards
--------- -----------
Number Number
Name and Position of Shares of Shares
------------- --------- -----------
P. D. Ashkettle........................... 100,000(A) 111,074
President and Chief Executive Officer 531,250(B)
100,000(C)
M. D. Walker.............................. 100,000(D)
Chairman
G. W. Henry............................... 58,520(C) 6,912
Executive Vice President,
Worldwide Plastics
M. S. Duffey.............................. 55,769(C) 5,681
Senior Vice President,
Finance and Administration
J. S. Pyke, Jr............................ 43,209(C) 5,274
Vice President, General Counsel and Secretary
Executive Officer Group................... 1,131,792 152,902
Non-Employee Director Group............... 45,000(E)
- ----------
(A) Reflects stock option granted on June 14, 1999, in connection with Mr.
Ashkettle's employment.
(B) Reflects stock option granted on June 14, 1999, subject to stockholder
approval of the Amended Plan, in connection with Mr. Ashkettle's
employment.
(C) The figures shown reflect stock options awarded under the current Plan on
December 1, 1999 as described in the Summary Compensation Table and the
Option Grants in Last Fiscal Year table; the award to Mr. Ashkettle was
made subject to stockholder approval of the Amended Plan.
(D) Reflects stock option granted on March 2, 1999.
(E) Assumed stock option grants @ 5,000 Option Rights per Non-Employee
Director per year.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the Federal income tax
consequences of certain transactions under the Amended Plan based on the
Internal Revenue Code, as presently in effect. This summary is not intended to
be complete and does not describe state or local tax consequences.
Tax Consequences to Participants
Non-qualified Stock Options. 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 nonqualified 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
unrestricted, 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, appreciation
(or depreciation) in value of the shares after the date of exercise will be
treated as 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. However, the
excess of the fair market value of the shares on the exercise date over the
option price is included in the Optionee's income for purposes of the
alternative minimum tax. If Common Shares are issued to the Optionee pursuant to
the exercise of an incentive stock option, and if no disqualifying disposition
of such shares is made by such Optionee within 2 years after the date of the
grant or within 1 year after
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the transfer of such shares to the Optionee, then upon sale of the shares, any
amount realized in excess of the option price will be taxed to the Optionee as a
capital gain and any loss sustained will be a capital loss.
If Common Shares acquired upon exercise of an incentive stock option are
disposed of prior to the expiration of either holding period described above,
the Optionee generally will recognize ordinary income tax in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of such shares at the time of exercise (or if less, the amount realized on the
disposition of such shares if a sale or exchange) over the option price paid for
such shares. Any further gain (or loss) realized by the Optionee generally will
be taxed as a capital gain (or loss) depending on the holding period.
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of a tandem Appreciation Right or a freestanding
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 cash received and the fair market
valued of any unrestricted Common Shares received on the exercise.
LTIP Units and Performance Shares. No income generally will be recognized
upon the grant of LTIP Units or Performance Shares. Upon payment in respect of
the earn-out of LTIP Units or Performance Shares, 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
unrestricted Common Shares received.
Restricted Shares. The recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares (reduced by an amount paid by the participant for such
Restricted Shares) 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 participant 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 Shares. If a Section 83(b)
election has not been made, any dividends received with respect to Restricted
Shares that are subject to the Restrictions generally will be treated as
compensation that is taxable as ordinary income to the participant.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
Common Shares on the date that such shares are transferred to the participant
under the award (reduced by any amount paid by the participant for such Deferred
Shares), and the capital gains/loss holding period for such shares will also
commence on such date.
Tax Consequences to the Company or Subsidiary
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or Subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, 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 limitation on certain executive compensation under Section 162(m) of the
Code.
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VOTE REQUIRED TO APPROVE THE AMENDED PLAN
A favorable vote of the majority of votes cast on the matter is necessary
for approval of the Amended Plan.
If the Amended Plan is not approved, the Current Plan remains in effect.
The Board of Directors unanimously recommends a vote FOR the approval of
the M.A. Hanna Company Long-Term Incentive Plan, as amended and restated as of
March 1, 2000.
Submission of Stockholder 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 Suite 36-5000, 200 Public Square, Cleveland, Ohio
44114-2304, Attention: Corporate Secretary, on or before November 3, 2000.
Other Matters
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, General Counsel and Secretary
March 23, 2000
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EXHIBIT A
THE M.A. HANNA COMPANY LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED AS OF MARCH 1, 2000
Table of Contents
Page
---
1. Purpose............................................................. 25
2. Definitions......................................................... 25
3. Shares Available under the Plan..................................... 27
4. Option Rights....................................................... 27
5. Appreciation Rights................................................. 28
6. LTIP Units and Performance Shares................................... 29
7. Restricted Shares................................................... 30
8. Deferred Shares..................................................... 30
9. Awards to Non-Employee Directors.................................... 31
10. Transferability..................................................... 32
11. Adjustments......................................................... 32
12. Fractional Shares................................................... 32
13. Withholding Taxes................................................... 32
14. Foreign Employees................................................... 33
15. Cancellation and Rescission of Awards............................... 33
16. Administration of the Plan.......................................... 33
17. Amendments and Other Matters........................................ 33
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M.A. HANNA COMPANY LONG-TERM INCENTIVE PLAN,
AS AMENDED AND RESTATED AS OF MARCH 1, 2000
1. Purpose. The purpose of this Plan is to attract, retain and motivate
Directors, officers and key executives of M.A. Hanna Company (the "Company") and
its Subsidiaries and to provide to such persons incentives and rewards for
superior performance and contribution.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5 of this
Plan, and shall include both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Base Price" means the price to be used as the basis for determining the
Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem
Appreciation Right.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Committee designated by the Board of Directors to
administer the Plan.
"Common Shares" means the shares of Common Stock, par value $1.00, of the
Company or any security into which such Common Shares may be changed by reason
of any transaction or event of the type referred to in Section 11 of this Plan.
"Covered Employee" means a Participant who is, or is determined by the
Committee to be likely to become, a "covered employee" within the meaning of
Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Committee on which a grant
of Option Rights, Appreciation Rights, LTIP Units or Performance Shares or a
grant or sale of Restricted Shares or Deferred Shares shall become effective
(which date shall not be earlier than the date on which the Committee takes
action with respect thereto).
"Deferral Period" means the period of time during which Deferred Shares
are subject to deferral limitations under Section 8 of this Plan.
"Deferred Shares" means an award made pursuant to Section 8 of this Plan
of the right to receive Common Shares at the end of a specified Deferral Period.
"Director" means a member of the Board of Directors of the Company.
"Evidence of Award" means an agreement, certificate, resolution or other
type or form of writing or other evidence approved by the Committee which sets
forth the terms and conditions of the Option Rights, Appreciation Rights, LTIP
Units, Performance Shares, Restricted Shares, Deferred Shares or awards to
Non-Employee Directors. An Evidence of Award may be in an electronic medium, may
be limited to a notation on the books and records of the Company and, with the
approval of the Committee, need not be signed by a representative of the Company
or a Participant.
"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right.
"Incentive Stock Options" means Option Rights that are intended to qualify
as "incentive stock options" under Section 422 of the Code or any successor
provision.
"LTIP Unit" means a bookkeeping entry that records a unit equivalent to
$1.00 awarded pursuant to Section 6 of this Plan.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of LTIP Units or Performance Shares or, when so determined by the
Committee, Option Rights, Appreciation Rights and Restricted Shares pursuant to
this Plan. Management Objectives may be described in terms of Company-wide
objectives or objectives that are related to the performance of the individual
Participant or of the Subsidiary, division, department, region or function
within the
25
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Company or Subsidiary in which the Participant is employed. The Management
Objectives may be made relative to the performance of other corporations. The
Management Objectives applicable to any award to a Covered Employee shall be
based on specified levels of or growth in one or more of the following criteria:
revenues, earnings before interest and taxes, net income, cash flow, earnings
per share, debt to capital ratio, economic value added, return on total capital,
return on invested capital, return on equity, return on assets and/or total
return to stockholders. Management Objectives may be stated as a combination of
the listed factors.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may in its discretion modify such
Management Objectives or the related minimum acceptable level of achievement, in
whole or in part, as the Committee deems appropriate and equitable, except in
the case of a Covered Employee where such action would result in the loss of the
otherwise available exemption of the award under Section 162(m) of the Code. In
such case, the Committee shall not make any modification of the Management
Objectives or minimum acceptable level of achievement.
"Market Value per Share" means, as of any particular date, the fair market
value of the Common Shares as determined by the Committee.
"Non-Employee Director" means a Director who is not an employee of the
Company or any Subsidiary.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an Option
Right.
"Option Right" means the right to purchase Common Shares upon exercise of
an option granted pursuant to Section 4 or Section 9 of this Plan.
"Participant" means a person who is selected by the Committee to receive
benefits under this Plan and who is at the time an officer, or other key
employee of the Company or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within 90 days of the Date
of Grant, and shall also include each Non-Employee Director who receives an
award of Option Rights or Restricted Shares.
"Performance Period" means, in respect of a LTIP Unit or Performance
Share, a period of time established pursuant to Section 6 of this Plan within
which the Management Objectives relating to such Performance Share or
Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the equivalent
of one Common Share awarded pursuant to Section 6 of this Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 7 or Section 9 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 7 has
expired.
"Spread" means the excess of the Market Value per Share on the date when
an Appreciation Right is exercised, or on the date when Option Rights are
surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or
Free-Standing Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity (i) more than 50
percent of whose outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more than 50
percent of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive
Stock Options, "Subsidiary" means any corporation in which at the time the
Company owns or
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controls, directly or indirectly, more than 50 percent of the total combined
voting power represented by all classes of stock issued by such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted pursuant
to Section 5 of this Plan that is granted in tandem with an Option Right.
"Voting Power" means at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
3. Shares Available Under the Plan. (a) Subject to adjustment as provided
in Section 3(b) and Section 11 of this Plan, the number of Common Shares that
may be issued or transferred (i) upon the exercise of Option Rights or
Appreciation Rights, (ii) as Restricted Shares and released from substantial
risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of LTIP
Units or Performance Shares that have been earned, or (v) as awards to
Non-Employee Directors shall not exceed in the aggregate 1,500,000 Common
Shares, plus (x) such number of shares of Common Stock authorized for awards
under the Company's 1988 Long-Term Incentive Plan, as amended, that remain
unutilized under that Plan as of March 1, 2000 and (y) any shares described in
Section 3(b). Such shares may be shares of original issuance, treasury shares,
shares from the Associates Ownership Trust or a combination of the foregoing.
(b) The number of shares available in Section 3(a) above shall be adjusted
to account for shares relating to awards that expire, are forfeited or are
transferred, surrendered or relinquished upon the payment of any Option Price by
the transfer to the Company of Common Shares or upon satisfaction of any
withholding amount. Upon payment in cash of the benefit provided by any award
granted under this Plan, any shares that were covered by that award shall again
be available for issue or transfer hereunder.
(c) Notwithstanding anything in this Section 3, or elsewhere in this Plan,
to the contrary and subject to adjustment as provided in Section 11 of this
Plan, (i) the aggregate number of Common Shares actually issued or transferred
by the Company upon the exercise of Incentive Stock Options shall not exceed
750,000 Common Shares; (ii) no Participant shall be granted Option Rights and
Appreciation Rights, in the aggregate, for more than 731,250 Common shares
during 1999 and 200,000 Common Shares during any following calendar year; (iii)
the number of Performance Shares that may be granted and paid out under this
Plan shall not in the aggregate exceed 1,500,000; and (iv) the number of
Restricted Shares and Deferred Shares shall not (after taking forfeitures into
account, exceed 750,000.
4. Option Rights. The Committee may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants 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, subject to adjustments as provided in Section 11 of this Plan.
(b) Each grant shall specify an Option Price per share, which may not be
less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify whether the Option Price shall be payable (i)
in cash or by check acceptable to the Company, (ii) by the actual or
constructive transfer to the Company of Common Shares owned by the Optionee not
less than 6 months (or other consideration authorized pursuant to Section 4(d))
having a value at the time of exercise equal to the total Option Price, or (iii)
by a combination of such methods of payment.
(d) The Committee may determine, at or after the Date of Grant, that
payment of the Option Price of any Option Right (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted Shares or
other Common Shares that are forfeitable or subject to restrictions on transfer.
Unless otherwise determined by the Committee at or after the Date of Grant,
whenever any Option Price is paid in whole or in part by means of any of the
forms of consideration specified in this Section 4(d), the Common Shares
received upon
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the exercise of the Option Rights shall be subject to the same risks of
forfeiture or restrictions on transfer as may correspond to any that apply to
the consideration surrendered; provided, however, that such risks of forfeiture
or restrictions on transfer shall apply only to the same number of Common Shares
received by the Optionee as applied to the forfeitable or restricted Common
Shares surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the Option Price from
the proceeds of sale through a bank or broker on a date satisfactory to the
Company of some or all of the shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the election
of the Optionee, in installments, with or without interest, upon terms
determined by the Committee.
(g) Successive grants may be made to the same Participant whether or not
any Option Rights previously granted to such Participant remain unexercised.
(h) Each grant shall specify the period or periods of continuous service
by the Optionee with the Company or any Subsidiary that is necessary before the
Option Rights or installments thereof will become exercisable.
(i) Any grant of Option Rights may specify Management Objectives that must
be achieved as a condition to the exercise of such rights.
(j) Option Rights granted under this Plan may be (i) options, including,
without limitation, Incentive Stock Options, that are intended to qualify under
particular provisions of the Code, (ii) options that are not intended so to
qualify, or (iii) combinations of the foregoing.
(k) The exercise of an Option Right shall result in the cancellation on a
share-for-share basis of any Tandem Appreciation Right authorized under Section
5 of this Plan.
(n) No Option Right shall be exercisable more than 10 years from the Date
of Grant.
(o) Each grant of Option Rights shall be evidenced by an Evidence of Award
which shall contain such terms and provisions, consistent with this Plan and
applicable sections of the Code, as the Committee may approve.
5 Appreciation Rights. (a) The Committee may authorize the granting (i) to
any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted
hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A
Tandem Appreciation Right shall be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount
determined by the Committee, which shall be expressed as a percentage of the
Spread (not exceeding 100 percent) at the time of exercise. Tandem Appreciation
Rights may be granted at any time prior to the exercise or termination of the
related Option Rights; provided, however, that a Tandem Appreciation Right
awarded in relation to an Incentive Stock Option must be granted concurrently
with such Incentive Stock Option. A Free-Standing Appreciation Right shall be a
right of the Participant to receive from the Company an amount determined by the
Committee, which shall be expressed as a percentage of the Spread (not exceeding
100 percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(i) Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in Common Shares or in
any combination thereof and may either grant to the Participant or retain in the
Committee the right to elect among those alternatives.
(ii) Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Committee at the
Date of Grant.
(iii) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
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(iv) Each grant of an Appreciation Right shall be evidenced by an
Evidence of Award, which shall describe such Appreciation Right, identify the
related Option Right, state that such Appreciation Right is subject to all the
terms and conditions of this Plan, and contain such other terms and provisions,
consistent with this Plan and applicable sections of the Code, as the Committee
may approve.
(c) Any grant of Tandem Appreciation Rights shall provide that such Rights
may be exercised only at a time when the related Option Right is also
exercisable and at a time when the Spread is positive, and by surrender of the
related Option Right for cancellation.
(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-Standing
Appreciation Right a Base Price, which shall be equal to or greater or less than
the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-Standing Appreciation Rights previously granted
to the Participant remain unexercised; and
(iii) No Free-Standing Appreciation Right granted under this Plan
may be exercised more than 10 years from the Date of Grant.
6. LTIP Units and Performance Shares. The Committee may also authorize the
granting to Participants of LTIP Units and Performance Shares that will become
payable (or payable early) to a Participant upon achievement of specified
Management Objectives. 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 LTIP Units or Performance
Shares to which it pertains, which number may be subject to adjustment to
reflect changes in compensation or other factors; provided, however, that no
such adjustment shall be made in the case of a Covered Employee where such
action would result in the loss of the otherwise available exemption of the
award under Section 162(m) of the Code.
(b) The Performance Period with respect to each LTIP Unit or
Performance Share shall be such period of time (not less than 3 years)
commencing with the Date of Grant as shall be determined by the Committee at the
time of grant.
(c) Any grant of LTIP Units or Performance Shares shall specify
Management Objectives which, if achieved, will result in payment or early
payment of the award, and each grant may specify in respect of such specified
Management Objectives a minimum acceptable level of achievement and shall set
forth a formula for determining the number of LTIP Units or Performance Shares
that will be earned if performance is at or above the minimum level, but falls
short of full achievement of the specified Management Objectives. The grant of
LTIP Units or Performance Shares shall specify that, before the Performance
Shares or Performance Units shall be earned and paid, the Committee must
determine that the Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of LTIP
Units or Performance Shares that have been earned. Any grant may specify that
the amount payable with respect thereto may be paid by the Company to the
Participant in cash, in Common Shares or in any combination thereof, and may
either grant to the Participant or retain in the Committee the right to elect
among those alternatives.
(e) Any grant of LTIP Units may specify that the amount payable or
the number of Common Shares issued with respect thereto may not exceed maximums
specified by the Committee at the Date of Grant. Any grant of Performance Shares
may specify that the amount payable with respect thereto may not exceed a
maximum specified by the Committee at the Date of Grant.
(f) Unless otherwise determined by the Committee at the time of the
award or thereafter, if a Participant's employment has terminated because of
death, disability or retirement at or after normal retirement age (or earlier
with the consent of the Committee) under a retirement plan of the Company or a
Subsidiary prior to the end of the Performance Period, the extent to which an
LTIP Unit or Performance Share shall be deemed to have been earned,
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<PAGE>
as calculated at the end of the Performance Period, shall be determined as if
such Participant's employment had not terminated and the result shall be
multiplied by a fraction, the numerator of which is the number of days such
Participant was employed during the Performance Period and the denominator of
which is the total number of days in the Performance Period. If a Participant's
employment terminates for any reason other than as described in the preceding
sentence, the Participant shall be deemed not to have earned the LTIP Unit or
Performance Share unless the Committee determines otherwise in its sole
discretion (in which event the extent to which the LTIP Unit or Performance
Share shall be deemed to have been earned shall not exceed the amount determined
pursuant to the preceding sentence).
(g) Each grant of LTIP Units or Performance Shares shall be evidenced by
an Evidence of Award, which shall contain such terms and provisions, consistent
with this Plan and applicable sections of the Code, as the Committee may
approve.
7. Restricted Shares. The Committee may also authorize the grant or sale
of Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the limitations,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of the
ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional consideration
or in consideration of a payment by such Participant that is less than Market
Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period of not
less than 3 years to be determined by the Committee at the Date of Grant.
(d) Each such grant or sale shall provide that during the period for which
such substantial risk of forfeiture is to continue, the transferability of the
Restricted Shares shall be prohibited or restricted in the manner and to the
extent prescribed by the Committee at the Date of Grant (which restrictions may
include, without limitation, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives that,
if achieved, will result in termination or early termination of the restrictions
applicable to such shares. Each grant may specify in respect of such Management
Objectives a minimum acceptable level of achievement and may set forth a formula
for determining the number of Restricted Shares on which restrictions will
terminate if performance is at or above the minimum level, but falls short of
full achievement of the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require that any or
all dividends or other distributions paid thereon during the period of such
restrictions be automatically deferred and reinvested in additional Restricted
Shares, which may be subject to the same restrictions as the underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced by an
Evidence of Award, which shall contain such terms and provisions, consistent
with this Plan and applicable sections of the Code, as the Committee may
approve. Unless otherwise directed by the Committee, all certificates
representing Restricted Shares shall be held in custody by the Company until all
restrictions thereon shall have lapsed, together with a stock power or powers
executed by the Participant in whose name such certificates are registered,
endorsed in blank and covering such Shares.
8. Deferred Shares. The Committee may also authorize the granting or sale
of Deferred Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements
contained in the following provisions:
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(a) Each such grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Committee may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral Period of
not less than 1 year, as determined by the Committee at the Date of Grant.
(d) During the Deferral Period, the Participant shall have no right
to transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
Evidence of Award, which shall contain such terms and provisions, consistent
with this Plan and applicable sections of the Code, as the Committee may
approve.
9. Awards to Non-Employee Directors. The Committee may, from time to time
and upon such terms and conditions as it may determine, authorize the granting
to Non-Employee Directors of Option Rights and may also authorize the grant or
sale of Restricted Shares to Non-Employee Directors.
(a) Each grant of Option Rights awarded pursuant to this Section 9
shall be upon terms and conditions consistent with Section 4 of this Plan and
shall be evidenced by an Evidence of Award, which shall contain such terms and
provisions, consistent with this Plan and applicable sections of the Code, as
the Committee may approve. Each grant shall specify an Option Price per share,
which shall not be less than the Market Value per Share on the Date of Grant.
Each such Option Right granted under the Plan shall expire not more than 10
years from the Date of Grant and shall be subject to earlier termination as
hereinafter provided. Unless otherwise determined by the Committee, such Option
Rights shall be subject to the following additional terms and conditions:
(i) Each grant shall specify the number of Common Shares to
which it pertains subject to the limitations set forth in Section 3 of this
plan.
(ii) Each such Option Right shall become exercisable to the
extent of one-third of the number of shares covered thereby 1 year after the
Date of Grant and to the extent of an additional one-third of such shares after
each of the next two successive years thereafter.
(iii) In the event of the termination of service on the Board
by the holder of any such Option Rights, other than by reason of disability or
death, the then outstanding Option Rights of such holder may be exercised to the
extent that they would be exercisable on the date that is six months and one day
after the date of such termination and shall expire six months and one day after
such termination, or on their stated expiration date, whichever occurs first.
(iv) In the event of the death or disability of the holder of
any such Option Rights, each of the then outstanding Option Rights of such
holder may be exercised at any time within 1 year after such death or
disability, but in no event after the expiration date of the term of such Option
Rights.
(v) If a Non-Employee Director subsequently becomes an
employee of the Company or a Subsidiary while remaining a member of the Board,
any Option Rights held under the Plan by such individual at the time of such
commencement of employment shall not be affected thereby.
(vi) Option Rights may be exercised by a Non-Employee Director
only upon payment to the Company in full of the Option Price of the Common
Shares to be delivered. Such payment shall be made in cash or in Common Shares
then owned by the optionee for at least six months, or in a combination of cash
and such Common Shares.
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(b) Each grant or sale of Restricted Shares pursuant to this Section
9 shall be upon terms and conditions consistent with Section 7 of this Plan.
10. Transferability. (a) No Option Right, Appreciation Right or other
derivative security granted under the Plan shall be transferable by a
Participant other than by will or the laws of descent and distribution. Except
as otherwise determined by the Committee, Option Rights and Appreciation Rights
shall be exercisable during the Optionee's lifetime only by him or her or by his
or her guardian or legal representative.
(b) The Committee may specify at the Date of Grant that part or all
of the Common Shares that are (i) to be issued or transferred by the Company
upon the exercise of Option Rights or Appreciation Rights, upon the termination
of the Deferral Period applicable to Deferred Shares or upon payment under any
grant of LTIP Units or Performance Shares or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 7 of this Plan, shall be subject to further restrictions on transfer.
(c) Notwithstanding the provisions of Section 10(a), Option Rights
(other than Incentive Stock Options), Appreciation Rights, LTIP Units,
Performance Shares, Restricted Shares and Deferred Shares shall be transferable
by a Participant, without payment of consideration therefor by the transferee,
to any one or more members of the Participant's immediate family (or to one or
more trusts established solely for the benefit of one or more members of the
Participant's immediate family or to one or more partnerships in which the only
partners are members of the Participant's immediate family); provided, however,
that (i) no such transfer shall be effective unless reasonable prior notice
thereof is delivered to the Company and such transfer is thereafter effected in
accordance with any terms and conditions that shall have been made applicable
thereto by the Company or the Committee and (ii) any such transferee shall be
subject to the same terms and conditions hereunder as the Participant.
Notwithstanding the foregoing, in no event shall Incentive Stock Options be
transferable or assignable other than by will or by the laws of descent and
distribution.
11. Adjustments. The Committee may make or provide for such adjustments in
the numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Performance Shares and Deferred Shares granted hereunder, in the Option
Price and Base Price provided in outstanding Appreciation Rights, and in the
kind of shares covered thereby, as the Committee, in its sole discretion,
exercised in good faith, may determine is equitably required to prevent dilution
or enlargement of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Committee, in its
discretion, may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it, in good faith, may determine to
be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Committee may also make or provide for
such adjustments in the numbers of shares specified in Section 3 of this Plan as
the Committee in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 11;
provided, however, that any such adjustment to the number specified in Section
3(c)(i) shall be made only if and to the extent that such adjustment would not
cause any Option intended to qualify as an Incentive Stock Option to fail so to
qualify.
12. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide for
the elimination of fractions or for the settlement of fractions in cash.
13. Withholding Taxes. The Company shall have the right to deduct from any
payment under this Plan an amount equal to the federal, state and local and
foreign taxes which in the opinion of the Company are required to be withheld by
it with respect to such payment and to the extent that the amounts available to
the Company for such withholding are insufficient, it shall be a condition to
the receipt of such payment or the realization of such benefit that the
Participant or such other person make arrangements satisfactory to the Company
for payment of the balance of such taxes required to be withheld. At the
discretion of the Committee, such arrangements may
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include relinquishment of a portion of such benefit. In no event, however, shall
the Company accept Common Shares for payment of taxes in excess of required tax
withholding rates, except that, in the discretion of the Committee, a
Participant or such other person may surrender Common Shares owned for more than
6 months to satisfy any tax obligations resulting from any such transaction.
14. Foreign Employees. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for awards to Participants who are foreign nationals or who are
employed by the Company or any Subsidiary outside of the United States of
America as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to or amendments, restatements or alternative versions
of this Plan as it may consider necessary or appropriate for such purposes,
without thereby affecting the terms of this Plan as in effect for any other
purpose, and the Corporate Secretary or other appropriate officer of the Company
may certify any such document as having been approved and adopted in the same
manner as this Plan. No such special terms, supplements, amendments or
restatements, however, shall include any provisions that are inconsistent with
the terms of this Plan as then in effect unless this Plan could have been
amended to eliminate such inconsistency without further approval by the
stockholders of the Company.
15. Cancellation and Rescission of Awards. (a) Unless the Evidence of
Award specifies otherwise, the Committee may cancel, rescind, suspend, withhold
or otherwise limit or restrict any unexpired, unpaid or deferred award at any
time if the Participant is not in compliance with all applicable provisions of
the agreement evidencing the award and the Plan, or if the Participant engages
in any "Detrimental Activity". For purposes of this Section 15, "Detrimental
Activity" shall include: (i) the rendering of services for any organization or
engaging directly or indirectly in any business which is competitive with the
business of the Company, or which organization or business, or the rendering of
service to such organization or business, is or becomes otherwise prejudicial to
or in conflict with the interests of the Company; (ii) activity that results in
termination of the Participant's employment for cause; (iii) a violation of the
Company's Code of Conduct; (iv) the Participant being convicted of, or entering
a guilty plea, with respect to a crime, whether or not connected with the
Company; or (v) any other conduct or act determined to be injurious, detrimental
or prejudicial to any interest of the Company.
(b) Upon exercise, payment or delivery pursuant to an Award, the
Participant shall certify in a manner acceptable to the Company that he or she
is in compliance with the terms and conditions of the Plan. In the event a
Participant fails to comply with the provisions of paragraph (a) of this Section
15 prior to, or during the 6 months after, any exercise, payment or delivery
pursuant to an Award, such exercise, payment or delivery may be rescinded within
2 years thereafter. In the event of any such rescission, the Participant shall
pay the Company the amount of any gain realized or payment received as a result
of the rescinded exercise, payment or delivery, in such manner and on such terms
and conditions as may be required, and the Company shall be entitled to set-off
against the amount of any such gain any amount owed by the Participant to the
Company.
16. Administration of the Plan. (a) This Plan shall be administered by the
Committee. A majority of the Committee shall constitute a quorum, and the action
of the members of the Committee present at any meeting at which a quorum is
present, or acts unanimously approved in writing, shall be the acts of the
Committee.
(b) The interpretation and construction by the Committee of any
provision of this Plan or of any agreement, notification or document evidencing
the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred
Shares, LTIP Units or Performance Shares and any determination by the Committee
pursuant to any provision of this Plan or of any such agreement, notification or
document shall be final and conclusive. No member of the Committee shall be
liable for any such action or determination made in good faith.-
17. Amendments and Other Matters. (a) The Board of Directors of the
Company may at any time and from time to time amend the Plan in whole or in
part; provided, however, that any amendment which must be approved by the
stockholders of the Company in order to comply with applicable law or the rules
of the New York Stock Exchange or, if the Common Shares are not traded on the
New York Stock Exchange, the principal national securities exchange upon which
the Common Shares are traded or quoted, shall not be effective unless and until
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<PAGE>
such approval has been obtained. No such amendment shall (i) increase the
maximum number of shares specified in Paragraph 3 of the Plan (except that
adjustments authorized by Paragraph 11 of this Plan shall not be limited by this
provision) or (ii) permit the granting of Option Rights or Appreciation Rights
with exercise or grant prices lower than 100% of the Market Value per Share on
the date of the Award. Presentation of this Plan or any amendment thereof for
stockholder approval shall not be construed to limit the Company's authority to
offer similar or dissimilar benefits under other plans or otherwise with or
without stockholder approval. Without limiting the generality of the foregoing,
the Board of Directors may amend this Plan to eliminate provisions which are no
longer necessary as a result in changes in tax or securities laws or
regulations, or in the interpretation thereof.
(b) The Committee shall not, without the further approval of the
stockholders of the Company, authorize the amendment of any outstanding Option
Right to reduce the Option Price. Furthermore, no Option Right shall be
cancelled and replaced with awards having a lower Option Price without further
approval of the stockholders of the Company. This Section 17(b) is intended to
prohibit the repricing of "underwater" Option Rights and shall not be construed
to prohibit the adjustments provided for in Section 11 of this Plan.
(c) The Committee also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of this Plan.
(d) The Committee may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or deferral by
the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Company or a Subsidiary to the
Participant.
(e) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted Shares
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or any Deferred Shares as to which the Deferral
Period has not been completed, or any LTIP Units or Performance Shares which
have not been fully earned, or who holds Common Shares subject to any transfer
restriction imposed pursuant to Section 7 of this Plan, the Committee may, in
its sole discretion, accelerate the time at which such Option Right or
Appreciation Right may be exercised or the time at which such substantial risk
of forfeiture or prohibition or restriction on transfer will lapse or the time
when such Deferral Period will end or the time at which such LTIP Units or
Performance Shares will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other limitation or
requirement under any such award. With respect to any Participant the Committee
may, in its sole discretion, accelerate the time at which any Option Right or
Appreciation Right may be exercised or the time when a LTIP Unit or Performance
Share shall be deemed to have been fully earned or the time when a substantial
risk of forfeiture or prohibition on transfer of Restricted Shares shall lapse
or the time when a Deferral Period shall end in connection with a change in
control of the Company.
(f) This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or any
Subsidiary, nor shall it interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate such Participant's employment or
other service at any time.
(g) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision shall be null and void with respect to such
Option Right. Such provision, however, shall remain in effect for other Option
Rights and there shall be no further effect on any provision of this Plan.
(h) No grant shall be made under this Plan more than 10 years after
the date on which this Plan is first approved by the stockholders of the
Company, but all grants made on or prior to such date shall continue in effect
thereafter subject to the terms thereof and of this Plan.
34
<PAGE>
(i) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right or title to any assets, funds or
property of the Company or any Subsidiary, including without limitation, any
specific funds, assets or other property which the Company or any Subsidiary may
set aside in anticipation of any liability under the Plan. A Participant shall
have only a contractual right to an award or the amounts, if any, payable under
the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing
contained in the Plan shall constitute a guarantee that the assets of the
Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(j) This Plan and each Evidence of Award shall be governed by the
laws of the State of Ohio, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or interpretation of the Plan
to the substantive law of another jurisdiction.
(k) If any provision of the Plan is or becomes invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended or limited in scope to conform to applicable laws
or, in the discretion of the Committee, it shall be stricken and the remainder
of the Plan shall remain in full force and effect.
35
<PAGE>
Please mark your
[X] vote as in this 2134
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FORthe election of
Directors and FOR proposals 2, 3 and 4.
1. Election of Directors. FOR WITHHELD
(see reverse) [ ] [ ]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. Ratification of FOR AGAINST ABSTAIN
appointment of [ ] [ ] [ ]
accountants.
3. Approval of Amended FOR AGAINST ABSTAIN
and Restated Long-Term [ ] [ ] [ ]
Incentive Plan.
4. Upon such other FOR AGAINST ABSTAIN
business as may [ ] [ ] [ ]
properly come
before the meeting.
SPECIAL ACTION
Comments [ ]
Discontinue Annual Report [ ]
Mailing for this Account
Change of [ ]
Address
The signer hereby revokes all proxies heretofore given by the signer to
vote at said meeting or any adjournments thereof.
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL
M.A.HannaCompany
Dear Stockholder:
M.A. Hanna Company encourages you to vote your shares by telephone. This
eliminates the need to return the proxy card.
To vote your shares telephonically, you must use the voter control number
printed in the box above, just below the perforation. The series of numbers that
appear in the box above must be used to access the system.
On a touch-tone telephone, call 1-877-779-8683 24 hours a day, 7 days a week.
Your telephonic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
Your vote is important. Thank you for voting.
<PAGE>
- --------------------------------------------------------------------------------
M.A.HannaCompany
Suite 36-5000, 200 Public Square
Cleveland, Ohio 44114-2304
The undersigned hereby appoints P. D. Ashkettle and J. S. Pyke, Jr. as proxies,
each with the power to appoint his substitute, and authorizes them to represent
and to vote, as directed, all the shares this proxy is entitled to vote at the
M.A. Hanna Company annual meeting of stockholders to be held on May 3, 2000 and
any adjournment thereof. If no direction is made, the proxies will vote FOR the
election of nominees listed below, FOR the ratification of appointment of the
accountants, FOR the approval of the Amended and Restated Long-Term Incentive
Plan and upon such other business as may properly come before the meeting.
Nominees for election as Directors are:
01. P. D. Ashkettle 05. R. A. Garda 09. D. B. Lewis
02. C. A. Cartwright 06. G. D. Harnett 10. M. L. Mann
03. W. R. Embry 07. D. H. Hoag 11. M. D. Walker
04. J. T. Eyton 08. G. D. Kirkham
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL
M.A.HannaCompany
Annual Meeting of Stockholders
May 3, 2000
10:30 a.m.
Auditorium
Forum Conference Center
1375 East Ninth Street
Cleveland, Ohio 44114
