<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Wellman, Inc.
(Name of Registrant as Specified In Its Charter)
Wellman, Inc.
(Name of Person(s) Filing Proxy Statement)
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.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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 statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
WELLMAN, INC.
1040 BROAD STREET, SUITE 302
SHREWSBURY, NEW JERSEY 07702
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
To the Stockholders of
Wellman, Inc.
Notice is hereby given that the Annual Meeting of the Stockholders of
Wellman, Inc. (the "Corporation") will be held at the Oyster Point Hotel, 146
Bodman Place, Red Bank, New Jersey, on Tuesday, May 19, 1998 at 10:00 A.M.,
Eastern Daylight Time, for the following purposes:
(1) To elect directors of the Corporation for the ensuing year, and
until their successors are duly elected and qualified.
(2) To ratify the adoption of the Wellman, Inc. Deferred Compensation
and Restricted Stock Plan.
(3) To ratify the selection by the Board of Directors of Ernst & Young
LLP as independent auditors to audit the Corporation's books and accounts
for the fiscal year ending December 31, 1998.
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof, including consideration of the
stockholder proposal set forth in the accompanying proxy statement, if such
proposal is presented at the meeting.
By Order of the Board of Directors,
DAVID K. DUFFELL
Secretary
April 17, 1998
Mailed at New York, New York
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT AS PROMPTLY
AS POSSIBLE. IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE
USED.
<PAGE> 3
WELLMAN, INC.
1040 BROAD STREET, SUITE 302
SHREWSBURY, NEW JERSEY 07702
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Stockholders of Wellman, Inc. (the
"Corporation") to be held on May 19, 1998 and at any adjournment thereof, for
the purposes set forth in the accompanying notice of such meeting. All
stockholders of record of the Corporation's Common Stock at the close of
business on March 31, 1998 will be entitled to vote. The stock transfer books
will not be closed.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors. Any stockholder giving a proxy in such form has the power to revoke
it at any time before it is exercised by filing a later proxy with the
Corporation, by attending the meeting and voting in person, or by notifying the
Corporation of the revocation in writing to its President at 1040 Broad Street,
Suite 302, Shrewsbury, New Jersey 07702. Any such proxy, if received in time for
the voting and not revoked, will be voted at the Annual Meeting in accordance
with the directions of the stockholder. Any proxy which fails to specify a
choice with respect to any matter to be acted upon will be voted for the
election of each nominee for director, in favor of Proposals 2 and 3, and
against the stockholder proposal referred to herein.
As of March 31, 1998, the Corporation had outstanding and entitled to vote
31,142,683 shares of Common Stock. Each share of such stock entitles the holder
thereof to one vote on the matters to be voted upon at the Annual Meeting with
all holders of Common Stock voting as one class. With regard to the election of
directors, votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals other than
the election of directors and will be counted as present for purposes of the
item on which the abstention is noted. Abstentions on the adoption of the
Deferred Compensation and Restricted Stock Plan, ratification of accountants and
the stockholder proposal will have the same legal effect as a vote against such
matter. Under the rules of the New York Stock Exchange, brokers holding shares
in street name have the authority to vote on certain matters when they have not
received instructions from the beneficial owners. Brokers that do not receive
instructions are entitled to vote on the election of directors, the adoption of
the Deferred Compensation and Restricted Stock Plan and the ratification of
accountants. As a result, broker non-votes will have no effect on the outcome of
the election of directors, the adoption of the Deferred Compensation and
Restricted Stock Plan and the ratification of accountants. Broker non-votes will
have the same legal effect as a vote against the stockholder proposal.
The holders of a majority of the issued and outstanding shares of Common
Stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum for the transaction of business. Abstentions and broker
non-votes will be counted in determining if a quorum is present. In the absence
of a quorum, the Annual Meeting may be postponed from time to time until
stockholders holding the requisite amount are present or represented by proxy.
<PAGE> 4
As of March 31, 1998, insofar as is known to the management of the
Corporation, the following persons owned beneficially more than 5% of the
outstanding Common Stock of the Corporation, the only capital stock of the
Corporation currently outstanding. Except as otherwise stated in the footnotes
below, the named persons have sole voting and investment power with regard to
the shares shown as owned by such persons.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
---------------- ---------------- -------
<S> <C> <C>
Pioneering Management Corporation........................... 1,971,000 6.33%
60 State Street
Boston, MA 02109
The Prudential Insurance.................................... 1,578,122(1) 5.07%
Company of America
751 Broad Street
Newark, NJ 07102
Moody Aldrich & Sullivan Ltd................................ 1,608,060 5.17%
30 Rowes Wharf
Boston, MA 02110
</TABLE>
- ---------------
(1) According to its Schedule 13G on file with the Securities and Exchange
Commission ("SEC"), The Prudential Insurance Company of America has sole
voting and dispositive power with respect to 4,300 shares and shared voting
and dispositive power with respect to 1,573,822 shares.
The approximate date on which the Proxy Statement and accompanying proxy
card will first be mailed to the stockholders of the Corporation is April 17,
1998.
2
<PAGE> 5
ELECTION OF DIRECTORS
The persons named below have been nominated for election at the Annual
Meeting as directors of the Corporation. The directors who are elected shall
hold office until their respective successors shall have been duly elected and
qualified. In accordance with Delaware General Corporation Law, directors are
elected by a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting.
All nominees are members of the present Board. Two of the present Board
members, Mr. C. William Beckwith and Mr. Peter H. Conze, are retiring this year
and are therefore not standing for re-election. Each of the nominees for
director has consented to being named a nominee in this Proxy Statement and has
agreed to serve as a director, if elected at the Annual Meeting. It is the
intention of the persons named in the proxy to vote for the following nominees.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Thomas M. Duff, 50........................ President, Chief Executive Officer and August, 1985
director of the Corporation since its
inception in 1985.
James B. Baker, 52........................ Partner of River Associates, LLC August, 1994
(private equity investment fund) since
1993. Prior to 1993, President and
Chief Operating Officer (1991-1992) and
Senior Vice President (1987-1991) of
CONSTAR International, Inc. (plastic
container manufacturer). Also a
director and chairman of the
Compensation Committee of U.S. Xpress
Enterprises, Inc.
Clifford J. Christenson, 48............... Executive Vice President of the November, 1995
Corporation since 1993 and Chief
Operating Officer since 1995. Prior to
1993, Chief Financial Officer and
Treasurer since 1985.
Allan R. Dragone, 72...................... Retired. From 1988 until 1989, Chairman August, 1990
of the Board of Fiber Industries, Inc.
From 1986 until 1990, President and
Chief Executive Officer of Akzo
America, Inc., the U.S. subsidiary of
the Dutch conglomerate Akzo N.V. Also a
director and member of the Compensation
Committees of Purina Mills Inc. and
Sterling Chemicals, Inc.
Richard F. Heitmiller, 69................. President of Richard F. Heitmiller, November, 1988
Inc. (consulting firm) since 1982. From
1971 until 1982, various executive
positions with Arthur D. Little, Inc.
(management consultants) and Vice
President of its Decision Resources
subsidiary.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Jonathan M. Nelson, 41.................... President and Chief Executive Officer August, 1985
of Providence Equity Partners Inc.
(investment advisor) since its
inception in 1995 and a member of
Providence Equity Partners LLC which is
the general partners of Providence
Equity Partners L.P. and Providence
Equity Partners II L.P. Also
Co-Chairman of Providence Ventures Inc.
(investment advisor) since its
inception in 1990. Managing Director of
Narragansett Capital, Inc. (investment
advisor) since its inception in 1986; a
managing general partner of Providence
Ventures LP which is the general
partner of the general partner of
Providence Media Partners L.P. (venture
capital fund); and a general partner of
the general partner of Narragansett
Capital Partners-A and -B, L.P.
(venture capital funds) ("NCPAB"). Mr.
Nelson is also a director and member of
the Executive and Compensation
Committees and the Board of Governance
of Brooks Fiber Properties, Inc.
(provider of telecommunications
services), a director and member of the
Compensation Committee of Western
Wireless Corporation, and a director of
Metronet Communications Corp. (a
competitive access provider).
James E. Rogers, 52....................... Partner of SCI Investors Inc. September, 1993
(investment company) since 1993 and
Chairman of Custom Papers Group Inc. (a
paper manufacturer) since 1993. From
1991 until 1992, President and Chief
Executive Officer of Specialty Coatings
International Inc. (a manufacturer).
Prior to 1991, Senior Vice President
and Group Executive of James River
Corporation (a paper manufacturer). Mr.
Rogers is also a director and member of
the Compensation and Executive
Committees of Owens & Minor, Inc. (a
medical and surgical supplies
distributor) and a director and member
of the Compensation and Audit
Committees of Caraustar Industries,
Inc. (a paper manufacturer).
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
- ------------ --------------------------- --------
<S> <C> <C>
Raymond C. Tower, 73...................... Retired. From 1977 until retirement in August, 1990
1990, President and Chief Operating
Officer of FMC Corp. (a manufacturer of
machinery and chemicals).
Roger A. Vandenberg, 50................... President of Cariad Capital, Inc. August, 1985
(investment advisor) since its
inception in 1992. Managing Director of
Narragansett Capital, Inc. (investment
advisor) since its inception in 1986.
Also a general partner of the general
partner of NCPAB and a general partner
of the general partner of Narragansett
First Fund (a venture capital fund).
Mr. Vandenberg is also a director and
member of the Compensation Committee of
Monaco Coach Corporation (a
manufacturer of motor homes).
</TABLE>
Although the management does not expect that any of the persons named above
will be unable to serve as a director, should any of them be unable to accept
election, it is intended that the proxies will be voted for the election of a
substitute nominee selected by the persons named in the proxy.
The number of shares of the Corporation's Common Stock owned beneficially,
directly or indirectly, as of March 31, 1998 by the directors and nominees, by
the executive officers named in the Summary Compensation Table below, and by all
executive officers and directors as a group is as follows:
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENTAGE OF
NAME OWNED COMMON STOCK
- ---- ------------ -------------
<S> <C> <C>
Thomas M. Duff.............................................. 555,407(1) 1.8%
James B. Baker.............................................. 6,300(2)(3) (4)
C. William Beckwith......................................... 132,000(1) (4)
Clifford J. Christenson..................................... 124,738(1) (4)
Peter H. Conze.............................................. 6,867(2) (4)
Allan R. Dragone............................................ 8,000(2) (4)
Richard F. Heitmiller....................................... 7,334(2) (4)
Jonathan M. Nelson.......................................... 10,000(2) (4)
James E. Rogers............................................. 7,000(2) (4)
Raymond C. Tower............................................ 9,000(2) (4)
Roger A. Vandenberg......................................... 10,000(2) (4)
James P. Casey.............................................. 129,226(1) (4)
John R. Hobson.............................................. 44,931(1) (4)
Keith R. Phillips........................................... 39,927(1) (4)
All Directors and Executive Officers as a Group
(17 persons).............................................. 1,238,454(1)(2)(3) 3.9%
</TABLE>
- ------------
(1) Includes the following shares of Common Stock reserved for issuance upon
exercise of stock options currently exercisable or to become exercisable
within 60 days pursuant to the Wellman, Inc. Amended and Restated 1985
Incentive Stock Option Plan (the "Option Plan"): Mr. Duff, 175,000 shares;
5
<PAGE> 8
Mr. Beckwith, 131,000 shares; Mr. Christenson, 120,000 shares; Mr. Casey,
82,000 shares; Mr. Hobson, 42,000 shares; Mr. Phillips, 38,000 shares; and
all directors and executive officers as a group, 590,500 shares.
(2) Includes the following shares of Common Stock reserved for issuance upon
exercise of stock options currently exercisable or to become exercisable
within 60 days pursuant to the Wellman, Inc. Directors Stock Option Plan:
Mr. Baker, 3,000 shares; Mr. Conze, 6,000 shares; Mr. Dragone, 6,000 shares;
Mr. Heitmiller, 6,000 shares; Mr. Nelson, 6,000 shares; Mr. Rogers, 4,000
shares; Mr. Tower, 6,000 shares, Mr. Vandenberg, 6,000 shares; and all
directors and executive officers as a group, 43,000 shares.
(3) Includes 200 shares owned by Mr. Baker's wife.
(4) Less than 1%.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, currently comprised of
Messrs. Baker, Dragone, Nelson and Rogers (Chairperson), which is responsible
for reviewing certain of the Corporation's compensation programs and making
recommendations to the Board of Directors with respect to compensation. The
Compensation Committee met twice during the Corporation's last fiscal year.
The Board of Directors has a Finance and Audit Committee, currently
comprised of Messrs. Baker, Heitmiller, Rogers and Vandenberg (Chairperson),
which is responsible for reviewing the Corporation's internal auditing
procedures and accounting controls and considering the selection and
independence of the Corporation's outside auditors. The Finance and Audit
Committee met four times during the Corporation's last fiscal year.
In 1997, the Board of Directors created a Corporate Governance Committee,
currently comprised of Messrs. Baker (Chairperson), Duff, Rogers, Tower and
Vandenberg, which is responsible for reviewing the Board's composition,
committee structure and compensation, assessing Board performance, responding to
major shareholder issues and considering the qualifications and recommending to
the stockholders the election of directors of the Corporation. Stockholders may
recommend nominees for election as directors by writing to the President of the
Corporation. As a result of the formation of this committee, the Nominating
Committee was eliminated. The Corporate Governance Committee met once during the
Corporation's last fiscal year.
The Corporation's Board of Directors held a total of four meetings during
1997. Each member of the Board of Directors attended at least 75% of the
aggregate number of meetings of the Board and all committees on which he served.
COMPENSATION OF DIRECTORS AND OFFICERS
DIRECTORS COMPENSATION
Each director of the Corporation who is not an employee currently receives
fees of $35,000 per year, plus $1,500 for each Board or Committee meeting
attended in person and $750 for each telephonic meeting attended. Each
chairperson of the Board committee also receives an annual fee of $4,000. Upon
approval of the Deferred Compensation and Restricted Stock Plan (see "Adoption
of Deferred Compensation and Restricted Stock Plan" below), 50% of the fees
payable to non-employee directors will be payable in restricted stock of the
Corporation. Directors who are employees receive no additional compensation for
serving as directors or attending Board or Committee meetings.
6
<PAGE> 9
The Corporation maintains a directors restricted stock plan pursuant to
which each non-employee director of the Corporation is eligible to receive a
total of 2,000 shares of the Corporation's Common Stock which vest over a period
of three years commencing on the date he was first elected to the Board,
provided he has continuously served as a director for the preceding twelve
months.
The Corporation also maintains a directors stock option plan pursuant to
which each non-employee director of the Corporation is eligible to receive
annually options to acquire 1,000 shares of the Corporation's Common Stock.
On an annual basis, each non-employee director is eligible to participate
in the Directors' Deferred Compensation Plan which allows the deferral of all or
a portion of directors compensation (excluding expense reimbursement) payable
from time to time. Directors participating in this Plan may elect to have the
deferred compensation invested in an interest-bearing account, a share
equivalent account representing the Corporation's Common Stock, or a combination
of the two. The interest-bearing account accrues interest at the rate equal to
the total return earned by the Lehman Aggregate Bond Index. Deferred
compensation in the share equivalent account is treated as though it were
invested in Common Stock. If a participant makes a share election, dividend
equivalents accrue to a participant's account quarterly and each account is
adjusted to reflect share ownership changes resulting from events such as a
stock split. Participants have no voting rights with respect to the share
equivalent account. All distributions from accounts are made in cash. Messrs.
Baker, Nelson and Vandenberg have each elected to defer their compensation and
to invest in the share equivalent account. This Plan will be terminated
effective February 17, 1998 if the Deferred Compensation and Restricted Stock
Plan is approved. See "Adoption of Deferred Compensation and Restricted Stock
Plan."
Effective December 31, 1997, the Corporation terminated the Directors
Retirement Plan pursuant to which, upon voluntary retirement from the Board of
Directors, non-employee directors who have served as directors for three or more
years were entitled to receive total retirement payments equal to the annual
directors fee in effect at the date of retirement multiplied by the number of
full years of continuous service as a director of the Corporation. See "Adoption
of Deferred Compensation and Restricted Stock Plan."
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table summarizes the compensation for the years ended
December 31, 1997, 1996 and 1995 of the Corporation's chief executive officer
and the four other most highly compensated executive officers whose salary and
bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPEN- OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) SARS(2) SATION(3)
--------------------------- ---- ------ ----- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Duff....................... 1997 $680,000 $464,683 $69,105 -- $150,078
President, CEO 1996 $665,000 $ 61,574 $71,239 70,000 $215,023
1995 $620,000 $534,705 $62,954 40,000 $218,200
Clifford J. Christenson.............. 1997 $360,000 $246,770 $36,036 -- $ 81,108
Executive Vice President, COO 1996 $360,000 $ 49,896 $35,275 50,000 $109,611
1995 $296,250 $255,494 $28,955 30,000 $101,295
James P. Casey....................... 1997 $275,000 $ 85,530 27,344 -- $ 58,482
Vice President; 1996 $270,000 $ 24,300 $25,761 35,000 $ 85,358
President, Fibers Group 1995 $252,500 $217,763 $23,956 20,000 $ 74,128
John R. Hobson....................... 1997 $200,000 $149,594 $20,329 -- $ 49,493
Vice President 1996 $200,000 $ 63,817 $19,529 35,000 $ 64,416
Recycled Products 1995 $164,500 $137,753 $15,640 20,000 $ 59,153
Keith R. Phillips.................... 1997 $210,000 $136,797 $20,608 -- $ 44,021
Vice President 1996 $207,500 $ 26,458 $20,607 30,000 $ 59,195
Chief Financial 1995 $193,750 $104,152 $19,815 20,000 $ 58,115
Officer and Treasurer
</TABLE>
- ------------
(1) Includes the Corporation's contributions to life insurance premiums or
payments in lieu thereof (Mr. Duff, $69,105; Mr. Christenson, $36,036; Mr.
Casey, $27,344; Mr. Hobson, $20,329; and Mr. Phillips, $20,608 in 1997).
(2) None of the options granted were options with tandem SARs and no
free-standing SARs were granted.
(3) Consists of the Corporation's contributions to employee retirement ($21,153
for each of Messrs. Duff, Christenson, Casey, Hobson and Phillips in 1997),
supplemental retirement (Mr. Duff, $124,125; Mr. Christenson, $55,155; Mr.
Casey, $32,529; Mr. Hobson, $23,540; and Mr. Phillips, $18,068 in 1997), and
savings plans ($4,800 for each of Messrs. Duff, Christenson, Casey, Hobson,
and Phillips in 1997).
8
<PAGE> 11
No options were granted in the year ended December 31, 1997 to the
individuals named in the Summary Compensation Table since the Compensation
Committee determined to award options annually in February rather than in
December as it had done in past years. The following table sets forth certain
information with respect to unexercised options to purchase the Corporation's
Common Stock granted under the Option Plan to the individuals named in the
Summary Compensation Table above. No options were exercised in 1997 by such
individuals.
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END FY-END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas M. Duff...................... 175,000 98,000 $125,000 $152,750
Clifford J. Christenson............. 120,000 73,000 $100,000 $110,625
James P. Casey...................... 82,000 52,000 $ 61,250 $ 78,500
John R. Hobson...................... 42,000 46,800 $ 37,750 $ 74,250
Keith R. Phillips................... 38,000 47,000 $ 40,500 $ 66,375
</TABLE>
- ------------
(1) Based on the closing price on the New York Stock Exchange of the
Corporation's Common Stock on December 31, 1997 ($19.50).
Pension Plan. The Corporation's subsidiary, Fiber Industries, Inc.
("FII"), maintains the Fiber Industries, Inc. Retirement Income Plan (the
"Pension Plan"), a tax-qualified defined benefit pension plan for eligible
employees of FII, which included Mr. Casey. Effective July 1, 1991, no
additional employees became Participants in the Pension Plan.
Participants are entitled to a monthly retirement benefit if they retire
(i) at or after age 65 (normal retirement age) or (ii) at or after age 55 with
either five or ten years of vesting service depending on whether they retire
directly from employment with FII or are transferred Celanese employees.
Participants whose employment with FII terminates after five years of vesting
service will also be eligible for a monthly retirement benefit. If benefits are
paid prior to normal retirement age they may be reduced, depending on the date
benefits begin and the Participant's age and service.
A Participant's normal retirement benefit is calculated under a formula
which takes into consideration final average compensation, years of service up
to 35, and benefits to be derived through Social Security and certain employee
benefit plans. Final average compensation covered by the Pension Plan is based
on the combined amounts set forth under the headings "Salary" and "Bonus" of the
Summary Compensation Table for Mr. Casey.
Benefits, computed on the basis of a straight life annuity, are payable
upon early, normal and late retirement, and upon death of a Participant with at
least five years of service. If benefits are paid in a form other than a
straight life annuity to the Participant, they are adjusted actuarially to
reflect the features of such other form.
9
<PAGE> 12
The following table illustrates the estimated annual normal retirement
benefits payable under the Pension Plan. These benefit levels assume an
employee's retirement at age 65 during 1997 and payment in the form of a single
life annuity.
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ---------------------------------------------------------------------
EARNINGS 15 20 25 30 35
-------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$125,000 13,659 23,025 32,390 41,755 51,120
$150,000 16,052 27,355 38,657 49,960 61,263
$175,000 16,819 26,528 38,089 49,650 61,211
$200,000 19,278 29,988 41,942 53,970 65,998
$225,000 21,736 33,812 47,195 60,757 74,319
$250,000 24,195 37,636 52,447 67,544 82,641
$275,000 26,653 41,461 57,699 74,330 90,962
$300,000 28,937 45,014 61,090 78,332 95,828
$400,000 28,970 45,065 61,160 78,332 95,828
$450,000 28,970 45,065 61,160 78,332 95,828
$500,000 28,970 45,065 61,160 78,332 95,828
$600,000 28,970 45,065 61,160 78,332 95,828
$700,000 28,970 45,065 61,160 78,332 95,828
</TABLE>
Notwithstanding the above table, benefits under the Pension Plan may not
exceed certain limits imposed by the Internal Revenue Code (the "Code"). The
maximum benefit payable in 1997 is $125,000. The table incorporates the Code
limitations on compensation allowable under a qualified pension plan. The limit
on compensation allowable in 1997 is $160,000. In addition, the above estimated
benefits are subject to limitations for employees who also participate in the
Wellman, Inc. Retirement Plan and the Wellman, Inc. Employee Stock Ownership
Plan. The estimated credited years of service under the Pension Plan for Mr.
Casey is 29 years.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors of the Corporation
(the "Committee"), which is composed entirely of non-employee directors, met
twice during fiscal 1997. The Committee has responsibility for administering the
Corporation's annual Management Incentive Compensation Plan and stock option
plan. The Committee is also responsible for making compensation recommendations
to the Board with respect to the five executive officers whose fiscal 1997
compensation is disclosed on the Summary Compensation Table on page 8 of this
proxy statement. In this capacity, the Committee determines the salary,
management incentive plan awards and stock option grants for those executive
officers, following administrative policies and practices which it establishes
from time to time in accordance with the terms and provisions of the plans. This
Committee Report describes the Corporation's officer compensation program
strategy, the components of the compensation program, and the manner in which
1997 compensation determinations were made by the Committee with respect to the
President and Chief Executive Officer, Mr. Thomas M. Duff, whose compensation is
determined by the Committee meeting in executive session without Mr. Duff being
present. Similar determinations were made by the Committee with respect to the
other four executive officers, based on recommendations submitted by Mr. Duff.
Stock Ownership Policy. In February 1998 the Board of Directors, at the
recommendation of the Compensation Committee, adopted a Statement of Policy
pursuant to which directors and executive officers of the Corporation are
required to beneficially own targeted levels of the Corporation's Common Stock
based on their compensation levels. The Board believes that increasing the
ownership of the Common Stock by management will more closely align the
interests of management and the stockholders and will motivate
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<PAGE> 13
management to manage the Corporation for long-term growth and profitability. In
order to implement the Statement of Policy, the Committee recommended and the
Board approved, subject to stockholder approval, the Deferred Compensation and
Restricted Stock Plan. See "Adoption of Deferred Compensation and Restricted
Stock Plan."
Compensation Strategy. The Committee endeavors to maintain an officer
compensation program which is competitive with the practices of public
corporations of similar revenue size. The Committee believes a substantial
component of executive officer total compensation should be based on the
Corporation's financial performance. The Management Incentive Plan compensates
executive officers commensurate with the Corporation's financial performance and
other strategic goals, and annual stock option grants ensure that their
longer-term incentive compensation is directly related to increases in the
market value of the Corporation's stock.
The remainder of this Committee Report describes the components of the
Corporation's officer compensation program and the manner in which these were
administered in fiscal 1997.
Base Salary. Base salary forms the competitive foundation of the officer
compensation program. Executive officer salaries are administered by the
Committee so as to ensure they remain competitive with practices of companies of
comparable revenue size. The Committee has periodically engaged compensation
consultants to survey market practices to ensure executive officer salaries
remain competitive in a manner which properly reflects the performance of the
incumbent officers. Such surveys have included the practices of some, but by no
means all, of the companies included in the peer groups shown on the Stock
Performance Graph.
In light of the Corporation's disappointing financial results in 1996, the
Compensation Committee froze the salaries of all executive officers in 1997 at
the 1996 levels. As a result, Mr. Duff's salary was not adjusted by the
Committee in 1997. Mr. Duff's 1997 annual salary falls within the fourth
quartile (above the 75th percentile) of competitive practice for corporations
with revenues of comparable size. The average 1997 salaries of the other
executive officers approximated the 50th percentile of competitive practice for
their peers in corporations with revenues of comparable size.
Management Incentive Plan. The Management Incentive Plan ("MIP") was first
implemented in 1992. Annual bonuses earned by the executive officers, and other
plan participants, are directly related to, and based upon, corporate (and for
operating executives, their operating unit's) profit and achieving individual
strategic objectives established early in the year. Under the terms of the MIP,
profit is defined as operating profit less a capital charge based on the net
assets employed to generate these profits. The Committee establishes for each
participant in the MIP a maximum targeted award based on a percentage of base
salary and the portion of that target award which is to be based upon achieving
strategic goals.
Mr. Duff's target MIP award is 60% of base salary; 30% of the target award
is based upon achieving strategic objectives. The target awards for the other
executive officers range from 50% to 60% of base salary; 35% to 40% of the
target awards are based upon achieving strategic objectives.
For fiscal 1997, the Committee recommended the payment of an annual bonus
of $464,683 for Mr. Duff.
Stock Options. Annual stock option grants represent the third component of
the Corporation's officer compensation program. Stock option grants permit
optionees to share in the future growth in market value of the Corporation's
common stock by allowing them to purchase shares of stock for a period of eleven
years following the date of grant at a price equal to the price of a share of
common stock on the date the options were granted. To ensure stock options
provide a longer-term stockholder value-based incentive, 20% of the options
granted in a year become exercisable (i.e., the optionee can purchase the option
shares) on the first through fifth anniversaries of the grant date, provided the
optionee remains an employee of the Corporation.
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<PAGE> 14
The Chief Executive Officer of the Corporation submits proposed stock
option grants for the executive officers (other than himself) to the Committee
for approval. In making the final determination of option grants, the Committee
considers the individual executive's scope of responsibility, individual
performance, the levels of profits and return on assets of the Corporation and
of its operating divisions (with no specific target levels being established),
competitive levels of option grants, and the aggregate number of options awarded
to the executive to date. The Committee, in its discretion, assigns relative
weights to these factors as it deems appropriate.
No stock option grants were made in 1997. In prior years, annual grants
were made in December. The Committee determined to change the timing of annual
option grants to February, when financial results for the prior fiscal year
would be available.
The table on page 9 of this proxy statement entitled "FY-End Option/SAR
Values" shows the total number of exercisable and unexercisable options which
each executive officer was granted as of December 31, 1997 and the appreciated
value of these grants based on the market price of the Corporation's Common
Stock on that date. The Committee believes it is important for the executive
officers to have a significant incentive based on increases in the market value
of the Corporation. The option grants shown on the table reflect actions taken
by the Committee and the Board of Directors which are fully consistent with this
intention and the compensation strategy previously described in this Committee
Report.
The Committee believes that the compensation paid by the Corporation to the
executive officers will be fully deductible.
This report has been provided by the Compensation Committee.
James B. Baker
Allan R. Dragone
Jonathan M. Nelson
James E. Rogers (Chairperson)
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<PAGE> 15
FIVE-YEAR PERFORMANCE COMPARISON
The following graph compares the five-year cumulative total return for the
Corporation's stock with the Standard & Poor's ("S&P") 500 Stock Index and the
S&P Midcap 400 Index. Due to the unique nature of its operations, the
Corporation believes there exists no appropriate or comparable line of business
or industry index, nor could one be constructed, which would render a meaningful
or accurate performance comparison. The Corporation has derived an average of
approximately 65.5% of its total sales over the last three years from the sale
of man-made fibers, primarily polyester. The Corporation believes that the
polyester fiber manufacturing operations of its major publicly-owned
competitors, if such operations could be analyzed separately, would not
represent as significant a proportion of their sales or operations. Further, the
Corporation, which is the world's largest plastics recycler, believes it is the
only major polyester fiber producer to utilize a significant amount of recycled
raw materials in its manufacturing operations.
<TABLE>
<CAPTION>
Measurement Period Wellman, S&P Mid-
(Fiscal Year Covered) Inc. S&P 500 Cap 400
--------------------- ------- ------- --------
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 88.52 110.08 113.95
1994 135.77 111.53 109.87
1995 109.51 153.45 143.86
1996 83.72 188.68 171.49
1997 97.04 251.63 226.80
</TABLE>
The above graph assumes $100 invested on December 31, 1992 in the
Corporation's stock and $100 invested at that time in each of the two indices.
The comparison assumes that all dividends are reinvested.
EMPLOYMENT CONTRACTS
The Corporation has entered into change of control employment agreements
with five key executives, including Messrs. Duff, Christenson, Casey, Hobson and
Phillips. These agreements are intended to encourage such executives to remain
in the employ of the Corporation by providing them with greater security and to
reinforce and encourage continued attention and dedication to their duties
without distraction in the face of the potentially disturbing circumstances
arising from the possibility of a change in control. A change of control is
defined to include the acquisition by any person or group of 20% or more of the
Corporation's then
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<PAGE> 16
outstanding stock, a change in the majority of the Corporation's Board of
Directors or approval of a reorganization, merger or consolidation by the
Corporation's stockholders.
The employment agreements (which include provisions for renewal and for
automatic extension upon a change of control) provide for employment as officers
of the Corporation at base salaries determined by the Board of Directors, plus
participation in the Corporation's executive bonus plan. Provided there has been
no change in control, the employment agreements of the executives other than Mr.
Duff provide the executive's employment may be terminated upon 30 days notice.
Mr. Duff's agreement provides that, provided there has been no change in
control, his employment may be terminated at any time but that he will be
entitled to one year's compensation in the event of termination other than for
cause or disability.
In addition, the executives are eligible to participate in all incentive,
savings, retirement and welfare benefit plans applicable to other Corporation
executives and shall receive reimbursement for expenses and automobiles. The
agreements provide that if the executive is terminated after a change of
control, other than for cause, death or disability, or if the executive
terminates for good reason (as defined in the agreements), the executive is
entitled to receive his salary and bonus through the date of termination and a
lump sum severance payment equal to three times the sum of his base salary and
annual bonus (and certain other benefits). Further, an additional payment is
required in an amount such that after the payment of all taxes, income and
excise, the executive will be in the same after-tax position as if no excise tax
under Section 4999 of the Code had been imposed.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE AND OTHER INFORMATION
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than 10% of a
registered class of the Corporation's equity securities ("insiders"), to file
reports of ownership and changes in ownership with the SEC. Insiders are
required by SEC regulation to furnish the Corporation with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Corporation, the Corporation believes that during 1997 all
Section 16(a) filing requirements applicable to its insiders were complied with,
except for Mr. Heitmiller who inadvertently failed to timely file a Form 4
reporting a sale of 666 shares.
Mr. Vandenberg was formerly the President and a director of Glasstech
Industries, Inc. ("Glasstech"), a portfolio company of NCPAB, and a director and
vice chairman of Glasstech's operating company subsidiary. Glasstech filed for
protection under federal bankruptcy laws in 1993 and emerged from bankruptcy in
January 1995.
ADOPTION OF DEFERRED COMPENSATION AND RESTRICTED STOCK PLAN
The Wellman, Inc. Deferred Compensation and Restricted Stock Plan (the
"Plan") is intended to implement and promote the Statement of Policy requiring
directors and executives officers to own targeted amounts of the Corporation's
Common Stock based on compensation levels and provide an increased incentive for
employees to contribute to the Corporation's future success and proprietary,
thus enhancing the value of the Corporation's stock for the benefit of the
stockholders, and to increase the Corporation's ability to attract and retain
qualified individuals.
Pursuant to the terms of the Plan, 1,000,000 shares of the Corporation's
Common Stock are reserved for issuance to eligible participants. The Restricted
Stock Plan was adopted by the Board of Directors on February 17, 1998.
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<PAGE> 17
BOARD RECOMMENDATION
The Board recommends a vote FOR the ratification of the Plan. Approval of
the Plan will require the favorable vote of a majority of the shares entitled to
vote thereon present in person or represented by proxy at the Annual Meeting
when a quorum is present.
DESCRIPTION OF THE PLAN
Participation. Directors, key executive and managerial employees and
consultants to the Corporation are eligible to participate in the Plan.
Administration. The Plan is administered by the Compensation Committee of
the Board (the "Committee"), which determines the employees and consultants
eligible to participate, interprets the Plan, establishes rules for its
administration and imposes such conditions and restrictions as it determines
appropriate with respect to the Plan.
Terms. Pursuant to the Restricted Stock Plan, participants will be
required to defer the following amounts of compensation earned after January 1,
1998: (i) non-employee directors, 50% of directors retainer fees earned; (ii)
executive officers, any amounts payable under the Corporation's Management
Incentive Compensation Plan for Executive Group over the target percentage
defined in such plan; (iii) in the discretion of, and on terms determined by,
the Committee, consultants, full or partial payment of consulting fees earned;
and (iv) participants who fail to meet their targeted stock ownership levels in
any year as provided in the Statement of Policy, the annual bonuses and salary
increases, if any. In addition, participants may elect to defer up to 50% (or
100% in 1998 only) of any cash remuneration from the Corporation. Participants
will be granted restricted stock awards for such deferred compensation. The
number of shares of restricted stock issued will be equal to the cash value of
the amount earned divided by 85% of the average of the highest and lowest sales
prices as reported on the New York Stock Exchange on the last business day of
the prior year (or in 1998, the date of stockholder approval of the Plan) and
each of the 15 days before and after such day. Subject to the discretion of the
Committee, non-employee directors will receive restricted stock in satisfaction
of any amounts payable in connection with the termination of the Directors
Retirement Plan and Directors Deferred Compensation Plans. (See "Compensation of
Directors and Officers -- Directors Compensation"). The number of shares issued
in exchange for the accrued benefit as of December 31, 1997 under the Directors
Retirement Plan will be equal to such benefit divided by 85% of the average of
the highest and lowest sales prices of the Common Stock as reported on the New
York Stock Exchange on the date of stockholder approval of the Plan and on each
of the 15 business days before and after that date. The number of shares issued
in exchange for the accrued benefit under the Directors Deferred Compensation
Plan will be equal to the number of shares of phantom stock held on the date of
stockholder approval of the Plan.
The restricted stock issued pursuant to the Plan may not be sold,
transferred, assigned, pledged or otherwise disposed of during the three year
period (subject to extension of successive two-year periods) commencing on the
January lst of the year in which the restricted stock award is granted. If a
participant's employment is terminated by the Corporation without cause or by
reason of retirement, disability or death of the participant, the Committee
shall determine when the restrictions applicable to the shares of Restricted
Stock will lapse. If a participant's employment is terminated for cause or
voluntarily by the participant, the participant forfeits all restricted stock
and will receive a cash payment equal to the lower of 85% of such stock's fair
market value (as defined by the Plan) or the deferred compensation used to
acquire such stock. If a Change of Control (as defined in the Plan) occurs,
unless the Committee determines otherwise prior to the Change of Control, all
applicable restrictions on the restricted stock outstanding will lapse. At the
time of issuance of shares of restricted stock under the Plan, a certificate for
the shares will be issued in the name of the recipient but the certificate will
be held in custody by the Corporation for the participant's account.
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<PAGE> 18
Subject to the foregoing, the participant will, commencing on the date of
issuance of restricted stock, have the rights and privileges of a holder of
Common Stock, including the right to receive dividends and the right to vote the
shares.
Stock Dividends or Splits. Appropriate adjustments will be made to fairly
preserve the intended benefits of the Plan in the event of any change in the
stock of the Corporation by reason of any stock dividend, stock split, spin-off
or any other change affecting the Corporation's common stock or capitalization.
Duration and Amendment of Plan. The Plan may be terminated or amended by
the Board of Directors at any time. Unless otherwise determined by the
Committee, the restrictions on the then outstanding restricted stock issued
pursuant to the Plan would continue to apply.
Federal Income Tax Consequences. A participant who elects to defer
compensation and subsequently receives a restricted stock award which is later
exchanged for restricted stock and who does not elect to be taxed at the time of
issuance will not realize current federal taxable income. The Corporation will
not be entitled to a current federal tax deduction for compensation which is
deferred or for the issuance of a restricted stock award or restricted stock.
When the restrictions lapse, the participant will realize taxable ordinary
income in an amount equal to the fair market value of the Common Stock at that
time. The Corporation will be entitled to a corresponding tax deduction in the
same amount, subject to the provisions of Section 162(m) of the Internal Revenue
Code. However, if the participant files an appropriate election within 30 days
after the issuance of restricted stock, the participant will recognize ordinary
taxable income in the year the restricted stock is issued in an amount equal to
the fair market value of such shares, determined without regard to the
restrictions. To the extent the participant has taxable income as a result of an
appropriate election, the Corporation will be entitled to a deduction in such
year in the same amount.
Any dividends with respect to shares of restricted stock which are paid or
made available to the participant who has not elected to be taxed on the date of
issuance are treated as additional compensation taxable as ordinary income to
the participant and deductible to the Corporation. Any dividends with respect to
shares of restricted stock which are paid or made available to a participant who
has elected to be taxed on the restricted stock on the date of issuance will be
taxed as dividend income. The Corporation will not be entitled to a tax
deduction for these payments.
A participant's holding period with respect to any restricted stock will
start when the restrictions lapse or on the date received if an appropriate
election is made within 30 days of issuance of the stock. The participant's
basis will be the amount included in the participant's income. Any gain or loss
recognized by the participant upon a subsequent sale or exchange of the Common
Stock will be capital gain or loss. If the participant makes an election to
include amounts in income while they are subject to a substantial risk of
forfeiture and later suffers an economic loss because he has not complied with
the restrictions, then he will not be entitled to claim a tax loss on the amount
forfeited. The Corporation must include as ordinary income any amount previously
deducted with respect to any property which is forfeited.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this Proxy Statement, which are subject to change, and
does not purport to be a complete description of the federal income tax aspects
of the Plan. Participants may also be subject to state and local taxes in
connection with the issuance of restricted stock under the Plan and the sale or
other disposition of shares.
RATIFICATION OF SELECTION OF AUDITORS
The selection, by a majority of the members of the Board who are not
officers or employees of the Corporation, of Ernst & Young LLP as independent
auditors to audit the books and accounts of the Corporation for the fiscal year
ending December 31, 1998 shall be submitted to the Annual Meeting for
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<PAGE> 19
ratification. Such ratification requires the affirmative vote of a majority of
the shares entitled to vote thereon present in person or represented by proxy at
the Annual Meeting when a quorum is present. Representatives of Ernst & Young
LLP will be present at the Annual Meeting and will be given an opportunity to
make a statement if they desire to do so and will respond to appropriate
questions of stockholders.
The firm of Ernst & Young LLP has advised the Corporation that neither it
nor any of its members has any direct financial interest in the Corporation as a
promoter, underwriter, voting trustee, director, officer or employee.
All professional services rendered by Ernst & Young LLP during the year
ended December 31, 1997 were furnished at customary rates.
The Board recommends a vote FOR ratification of Ernst & Young LLP as
independent auditors for the fiscal year ending December 31, 1998.
STOCKHOLDER PROPOSAL
STOCKHOLDER PROPOSAL
Local 2398 of the Union of Needletrades, Industrial and Textile Employees
(the "Union"), 2100 L Street, NW, Suite 210, Washington, DC 20037, the
beneficial owner of 200 shares of Common Stock, has advised the Corporation that
it intends to introduce the following resolution (the "Union Proposal") at the
Corporation's 1998 Annual Meeting for the reasons given:
RESOLVED: The shareholders of Wellman, Inc. ("Company") request the Board
of Directors to redeem the shareholder rights issued August 6,
1991, unless said issuance is approved by the affirmative vote of
a majority of the outstanding shares at a meeting of shareholders
held as soon as practical.
SUPPORTING STATEMENT
This resolution received approximately 62.2% of votes cast at the 1997
Annual Meeting of Shareholders, up from 53.2% of votes cast in 1996.
In August of 1991, the Company's Board of Directors met and issued a
dividend of one common stock purchase right for each outstanding share of common
stock. These rights are a type of corporate anti-takeover device commonly known
as a poison pill.
We believe the terms of the rights are designed to discourage or thwart an
unwanted takeover of our Company. While management and the Board of Directors
should have appropriate tools to ensure that all shareholders benefit from any
proposal to buy the Company, we do not believe that the future possibility of a
takeover justifies the unilateral implementation of such a poison pill-type
device.
Rights plans like ours have become increasingly unpopular in recent years.
In 1997, a majority of shareholders at Bausch & Lomb, Consolidated Natural Gas,
Supervalu, Columbia/HCA Healthcare and Fleming Companies, among others, voted in
favor of proposals asking management to redeem or repeal poison pills.
The effects of poison pill rights plans on the trading value of companies'
stock have been the subject of extensive research. A 1986 study by the Office of
the Chief Economist of the U.S. Securities and Exchange Commission on the
economics of the rights plans states that "The stock-returns evidence suggests
that the effect of poison pills to deter prospective hostile takeover bids
outweighs the beneficial effects that might come from increased bargaining
leverage of the target management." Another, more recent, study by Professor
Michael Ryngaert singled out rights plans such as the one authorized by our
Company for their negative effect on shareholder value. A 1992 study by
Professor John Pound of Harvard University's Corporate Research
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<PAGE> 20
Project and Lilli A. Gordon of the Gordon Group found a correlation between high
corporate performance and the absence of poison pills.
A majority of shareholders who cast their votes at the 1993, 1994, 1996 and
1997 annual meetings supported this proposal. At the 1989 and 1990 annual
meetings management was unable to garner enough support to enact changes it
wanted in the Company's corporate governance structure. Taken together all of
these votes demonstrate consistent shareholder opposition to anti-takeover
initiatives proposed or enacted by management. We believe this is the reason
Wellman management refuses to agree to a binding vote on the poison pill issue.
In light of what can at best be described as the debatable economic benefit
of our share rights and the undeniably undemocratic way in which they were
assigned to shareholders and maintained, we believe these rights should be
either redeemed or voted on.
We urge shareholders to vote FOR this resolution.
BOARD RECOMMENDATION
THE BOARD STRONGLY OPPOSES THE UNION PROPOSAL AND RECOMMENDS A VOTE AGAINST
IT. AT THE 1997 ANNUAL MEETING, ONLY 44% OF THE OUTSTANDING SHARES WERE VOTED IN
FAVOR OF THIS RESOLUTION.
The Corporation's Stockholder Rights Plan (the "Rights Plan") is designed
to provide your Board with the ability to take what the Board believes are the
most effective steps to protect and maximize the value of your investment in the
Corporation. Under Delaware law, the Board has a fiduciary responsibility to
undertake this task and accordingly has a duty to oppose unfair takeover offers.
The Delaware Supreme Court has held that adoption of a rights plan is a valid
exercise of a Board's business judgment when the rights plan is adopted to help
the Board better fulfill its fiduciary duties. Federal and state courts
interpreting Delaware law have repeatedly validated the use of rights plans
during actual takeover contests as a useful and legitimate tool available to
directors in fulfilling their fiduciary duties. Over 1,600 publicly-held
companies have adopted stockholder rights plans.
The Board believes that the Rights Plan preserves and protects value for
all stockholders of the Corporation. The Rights Plan enables the Board of
Directors to respond in an orderly and considered manner to an unsolicited bid.
It puts the Board in a better position to defend against unfair offers, such as
coercive, partial or two-tiered bids and stock accumulation programs in which
all stockholders do not share in the premium associated with a change in
control. The Rights Plan positions the Board to negotiate a higher price for the
stockholders, from the original bidder or a third party, when the sale of the
Corporation is considered to be in the best interests of the Corporation and its
stockholders. The Rights Plan also permits the Board to deal more effectively
with "greenmail" transactions where an acquiring person seeks a large short-term
profit at the expense of the Corporation and its stockholders.
It is important to note that the Rights Plan is not intended to prevent a
bidder from making a tender offer for the Corporation and it will not do so. The
basic objective of the Rights Plan is to encourage prospective acquirors to
negotiate with the Board of Directors. The Board's ability to negotiate with a
potential acquiror on behalf of all stockholders is significantly greater than
that of the stockholders individually.
The Rights Plan also gives the Board a greater period of time within which
it can properly evaluate the proposed offer. This additional time is important
because hostile bidders frequently rely on the twenty business day offering
period to "stampede" stockholders into accepting their offer at an unfair price.
The 1986 study by the Office of the Chief Economist of the U.S. Securities and
Exchange Commission, which is referred to in the Union's Supporting Statement,
noted that of thirteen companies that were acquired, each with a rights plan,
all received bids that were superior to those offered initially.
A March 1988 study by Georgeson & Co., a major proxy solicitor, found that
companies with rights plans received premiums which were on average 69% higher
in takeover contests than the premiums received by
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<PAGE> 21
companies without such plans. Even though a bidder may offer a premium over the
current market price of the target company's stock, that premium does not
necessarily recognize the inherent value of the target company. The bidder, of
course, can be expected to act in its own self interest; in other words, to try
to acquire the target company as cheaply as possible and to pressure
stockholders into selling. The Rights Plan provides, in the Board's opinion,
valuable stockholder protection against that happening.
The Union suggests that the Rights Plan may have a negative effect on the
trading value of the Corporation's stock. However, there is no evidence that the
adoption of the Rights Plan has depressed the Corporation's stock price.
The Board's overriding objective in adopting the Rights Plan was to
preserve the Corporation's long-term value for the benefit of all of its
stockholders. The Board believes there is strong empirical evidence that such
plans better position the Board to negotiate the most attractive and fair price
for all stockholders.
The Board believes that the proper time to consider redemption of the
rights issued under the Rights Plan is when a specific offer is made to acquire
the Corporation's stock. Redemption of the rights prior to that time would be
premature and would remove any incentive for a potential acquiror to negotiate
with the Board so that the stockholders are treated fairly.
The true test of the benefits of the Rights Plan is how it is used in
practice. The question of a stockholder vote on the Rights Plan misses the
point. The real issue is whether the Corporation's stockholders trust the Board
to utilize this tool properly if and when the need arises. This Board will, as
fiduciaries, properly consider the interest of all stockholders if there is ever
such an offer.
For the above reasons, the Board recommends that the stockholders vote
AGAINST the adoption of the Union Proposal.
The affirmative vote of a majority of the total quorum (as such term is
defined in Section 2.11 of the Corporation's by-laws) is necessary to adopt the
Union Proposal. Unless otherwise indicated, the persons named on the proxy will
vote all proxies AGAINST the Union Proposal.
OTHER MATTERS
Management does not know of any matters which will be brought before the
Annual Meeting other than those specified in the notice thereof. However, if any
other matters properly come before the Annual Meeting, it is intended that the
persons named in the form of proxy, or their substitutes acting thereunder, will
vote therein in accordance with their best judgment.
FINANCIAL STATEMENTS
The financial statements of the Corporation are contained in the 1997
Annual Report to Stockholders, which has been provided to the stockholders
concurrently herewith. Such report and the financial statements contained
therein are not to be considered as a part of this soliciting material.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Under the regulations of the Securities and Exchange Commission, a record
or beneficial owner of shares of the Corporation's Common Stock may submit
proposals on proper subjects for action at the 1999 Annual Meeting of
Stockholders of the Corporation. All such proposals must be mailed to the
Corporation at 1040 Broad Street, Suite 302, Shrewsbury, New Jersey 07702 and
must be received at that address on or before December 18, 1998, in order to be
included in the Corporation's proxy relating to the 1998 Annual Meeting.
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<PAGE> 22
EXPENSE OF SOLICITATION OF PROXIES
All the expenses of preparing, assembling, printing and mailing the
material used in the solicitation of proxies by the Board will be paid by the
Corporation. In addition to the solicitation of proxies by use of the mails,
officers and regular employees of the Corporation may solicit proxies on behalf
of the Board by telephone, telegram or personal interview, the expenses of which
will be borne by the Corporation. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
materials to the beneficial owners of stock held of record by such persons at
the expense of the Corporation. The Corporation has retained Continental Stock
Transfer & Trust Company to assist in this solicitation at an estimated cost of
$3,000 which will be borne by the Corporation.
By order of the Board of Directors,
DAVID K. DUFFELL
Secretary
New York, New York
April 17, 1998
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<PAGE> 23
WELLMAN, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR ANNUAL MEETING MAY 19, 1998
The undersigned hereby appoints THOMAS M. DUFF, CLIFFORD J. CHRISTENSON and
DAVID K. DUFFELL, or any one or more of them, attorneys, with full power of
substitution to each for and in the name of the undersigned, with all powers the
undersigned would possess if personally present to vote the Common Stock of the
Undersigned in Wellman, Inc. at the Annual Meeting of its Stockholders to be
held May 19, 1998 or at any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR
PROPOSALS 1, 2 AND 3.
1. Election of Directors:
FOR all nominees (except as WITHHOLD AUTHORITY to vote
marked to the contrary below) [ ] for all nominees listed below [ ]
JAMES B. BAKER CLIFFORD J. CHRISTENSON ALLAN R. DRAGONE THOMAS M. DUFF
RICHARD F. HEITMILLER JONATHAN M. NELSON JAMES E. ROGERS RAYMOND C. TOWER
ROGER A. VANDENBERG
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the adoption of the Wellman, Inc. Deferred
Compensation and Restricted Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to ratify the selection of Ernst & Young LLP as independent
auditors of the Corporation for the fiscal year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE
AGAINST PROPOSAL 4.
4. Stockholder proposal to recommend redemption of shareholder rights issued
August 6, 1991 unless approved by affirmative vote of the majority of
outstanding shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued from other side)
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSAL 4.
Dated: .............., 1998
...........................
...........................
SIGNATURE(S)
NOTE: JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON.
