UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 0-15899
WELLMAN, INC.
-------------
(Exact name of registrant as specified in its charter)
Delaware 04-1671740
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1040 Broad Street, Shrewsbury, NJ 07702
---------------------------------------
(Address of principal executive offices)
(732) 542-7300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of August 6, 1999, there were 31,420,291 shares of the registrant's
Class A common stock, $.001 par value, outstanding and no shares of Class B
common stock outstanding.
<PAGE>
WELLMAN, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Condensed Consolidated Statements of Operations -
For the three and six months ended June 30, 1999 and 1998. . . 3
Condensed Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998. . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Stockholders' Equity
For the six months ended June 30, 1999 and the year ended
December 31, 1998. . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows -
For the six months ended June 30, 1999 and 1998. . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . . 7 - 13
ITEM 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . 14 - 22
PART II - OTHER INFORMATION
ITEM 4 - Submission of Matters to a Vote of Security Holders . . . 23
ITEM 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 24
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . .$232,635 $261,268 $451,526 $524,341
Cost of sales. . . . . . . . . . . . . 206,736 217,766 400,810 438,614
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . 25,899 43,502 50,716 85,727
Selling, general and
administrative expenses . . . . . . . 17,551 19,036 36,223 38,382
Restructuring charge, net. . . . . . . 18,972 -- 18,972 --
-------- -------- -------- --------
Operating income (loss). . . . . . . . (10,624) 24,466 (4,479) 47,345
Interest expense, net. . . . . . . . . 4,343 2,254 7,675 4,632
-------- -------- -------- --------
Earnings (loss) before income taxes
and cumulative effect of
accounting change . . . . . . . . . . (14,967) 22,212 (12,154) 42,713
Income tax expense (benefit) . . . . . (4,451) 7,800 (3,424) 15,590
-------- -------- -------- --------
Earnings (loss) before cumulative
effect of accounting change . . . . . (10,516) 14,412 (8,730) 27,123
Cumulative effect of accounting change,
net of tax. . . . . . . . . . . . . . -- -- (1,769) --
-------- -------- -------- --------
Net earnings (loss). . . . . . . . . .$(10,516) $ 14,412 $(10,499) $ 27,123
======== ======== ======== ========
Basic net earnings (loss) per
common share:
Earnings (loss) before cumulative
effect of accounting change . . . .$ (0.34) $ 0.46 $ (0.28) $ 0.87
Cumulative effect of accounting
change. . . . . . . . . . . . . . . -- -- (0.06) --
-------- -------- -------- --------
Net earnings (loss). . . . . . . . .$ (0.34) $ 0.46 $ (0.34) $ 0.87
======== ======== ======== ========
Diluted net earnings (loss) per
common share:
Earnings (loss) before cumulative
effect of accounting change . . . .$ (0.34) $ 0.46 $ (0.28) $ 0.86
Cumulative effect of accounting
change. . . . . . . . . . . . . . . -- -- (0.06) --
-------- -------- -------- --------
Net earnings (loss). . . . . . . . .$ (0.34) $ 0.46 $ (0.34) $ 0.86
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents. . . . . . . . . . . $ -- $ --
Receivables:
Accounts receivable, less allowance of $3,713
in 1999 and $4,184 in 1998. . . . . . . . . 66,051 101,420
Other . . . . . . . . . . . . . . . . . . 150,000 --
Inventories. . . . . . . . . . . . . . . . . . 181,483 183,883
Prepaid expenses and other current assets. . . 13,195 18,959
---------- ----------
Total current assets. . . . . . . . . . . . 410,729 304,262
Property, plant and equipment, at cost:
Land, buildings and improvements . . . . . . . 129,916 107,730
Machinery and equipment. . . . . . . . . . . . 824,562 762,800
Construction in progress . . . . . . . . . . . 220,645 437,084
---------- ----------
1,175,123 1,307,614
Less accumulated depreciation. . . . . . . . . (358,910) (392,756)
---------- ----------
Property, plant and equipment, net. . . . . 816,213 914,858
Cost in excess of net assets acquired, net . . . 253,132 262,089
Other assets, net. . . . . . . . . . . . . . . . 9,040 9,956
---------- ----------
$1,489,114 $1,491,165
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . $ 70,265 $ 64,013
Accrued liabilities. . . . . . . . . . . . . . 53,096 40,895
Current portion of long-term debt. . . . . . . 462,095 145,869
---------- ----------
Total current liabilities . . . . . . . . . 585,456 250,777
Long-term debt . . . . . . . . . . . . . . . . . 80,767 410,679
Deferred income taxes and other liabilities. . . 204,604 186,455
---------- ----------
Total liabilities . . . . . . . . . . . . . 870,827 847,911
Stockholders' equity:
Class A common stock, $0.001 par value;
55,000,000 shares authorized, 33,915,983
shares issued in 1999, 33,816,212 in 1998 . . 34 34
Class B common stock, $0.001 par value; 5,500,000
shares authorized; no shares issued . . . . . -- --
Paid-in capital. . . . . . . . . . . . . . . . 238,993 237,810
Accumulated other comprehensive income (loss). (4,871) 5,133
Retained earnings. . . . . . . . . . . . . . . 433,655 449,801
Less Class A common stock in treasury, at cost:
2,500,000 shares. . . . . . . . . . . . . . . (49,524) (49,524)
---------- ----------
Total stockholders' equity. . . . . . . . . 618,287 643,254
---------- ----------
$1,489,114 $1,491,165
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
COMMON ACCUMULATED
STOCK ISSUED OTHER
--------------- PAID-IN COMPREHENSIVE RETAINED TREASURY
SHARES AMOUNT CAPITAL INCOME (LOSS) EARNINGS STOCK TOTAL
------ ------ ------- ---------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 . 33,638 $34 $234,179 $ 372 $449,373 $(49,524) $634,434
Net earnings . . . . . . . . . 11,681 11,681
Currency translation
adjustments . . . . . . . . . 4,761 4,761
--------
Total comprehensive income . . 16,442
Cash dividends ($0.36 per
share). . . . . . . . . . . . (11,253) (11,253)
Exercise of stock options. . . 65 1,136 1,136
Issuance of restricted stock . 113 2,352 2,352
Tax effect of exercise of
stock options . . . . . . . . 143 143
------ --- -------- ------- -------- -------- --------
Balance at December 31, 1998 . 33,816 $34 $237,810 $ 5,133 $449,801 $(49,524) $643,254
Net loss . . . . . . . . . . . (10,499) (10,499)
Currency translation
adjustments . . . . . . . . . (10,004) (10,004)
--------
Total comprehensive loss . . . (20,503)
Cash dividends ($0.18 per
share). . . . . . . . . . . . (5,647) (5,647)
Issuance of restricted stock . 100 1,001 1,001
Amortization of deferred
compensation. . . . . . . . . 182 182
------ --- -------- ------- -------- -------- --------
Balance at June 30, 1999 . . . 33,916 $34 $238,993 $(4,871) $433,655 $(49,524) $618,287
====== === ======== ======= ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
WELLMAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(In thousands)
<CAPTION>
1999 1998
<S> <C> <C>
---- ----
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . $(10,499) $ 27,123
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . 28,147 31,571
Amortization . . . . . . . . . . . . . . . . . 4,404 4,368
Deferred income taxes . . . . . . . . . . . . . (1,362) 6,048
Provision for restructuring . . . . . . . . . . 18,972 --
Cumulative effect of accounting change. . . . . 1,769 --
Changes in assets and liabilities . . . . . . . 30,478 (36,207)
-------- --------
Net cash provided by operating activities . . . . 71,909 32,903
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment. . . . (55,919) (107,745)
-------- --------
Net cash used in investing activities . . . . . . (55,919) (107,745)
-------- --------
Cash flows from financing activities:
Borrowings (repayments) under long-term debt, net (11,258) 79,443
Dividends paid on common stock. . . . . . . . . . (5,647) (5,601)
Issuance of restricted stock. . . . . . . . . . . 1,001 --
Exercise of stock options . . . . . . . . . . . . -- 1,002
-------- --------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . (15,904) 74,844
-------- --------
Effect of exchange rate changes on cash
and cash equivalents . . . . . . . . . . . . . . . (86) (2)
-------- --------
Increase (decrease) in cash and cash equivalents. . 0 0
Cash and cash equivalents at beginning of period. . 0 0
-------- --------
Cash and cash equivalents at end of period. . . . . $ 0 $ 0
======== ========
Supplemental cash flow data:
Cash paid (received) during the period for:
Interest (net of amounts capitalized) . . . . . $ 7,314 $ 5,770
Income taxes paid (received). . . . . . . . . . $ (8,942) $ 7,832
Non-cash investing activities financed
through government grants. . . . . . . . . . . . $ 35 $ 3,366
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
WELLMAN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six months ended
June 30, 1999 and 1998 is unaudited)
(In thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six-month periods ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. For further information, refer to the
consolidated financial statements and footnotes thereto included in Wellman,
Inc.'s (which, together with its subsidiaries, is herein referred to as the
"Company") annual report on Form 10-K for the year ended December 31, 1998.
Certain 1998 amounts have been reclassified to conform to the 1999
presentation.
2. EARNINGS (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Numerator for basic and diluted
earnings (loss) per common share:
Earnings (loss) before cumulative
effect of accounting change. . $(10,516) $14,412 $ (8,730) $27,123
Cumulative effect of
accounting change. . . . . . . -- -- (1,769) --
-------- ------- -------- -------
Net earnings (loss) . . . . . . $(10,516) $14,412 $(10,499) $27,123
======== ======= ======== =======
Denominator:
Denominator for basic earnings
(loss) per common share -
weighted-average shares 31,203 31,173 31,203 31,156
Effect of dilutive securities:
Employee stock options and
restricted stock . . . . . . -- 463 -- 324
-------- ------- -------- -------
Denominator for diluted earnings
(loss) per common share-adjusted
weighted average shares. . . . 31,203 31,636 31,203 31,480
======== ======= ======== =======
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic net earnings (loss) per
common share:
Earnings (loss) before cumulative
effect of accounting change. . $ (0.34) $ 0.46 $ (0.28) $ 0.87
Cumulative effect of accounting
change . . . . . . . . . . . . - - (0.06) -
------- ------- -------- -------
Net earnings (loss) . . . . . . $ (0.34) $ 0.46 $ (0.34) $ 0.87
======= ======= ======== =======
Diluted net earnings (loss) per
common share:
Earnings (loss) before cumulative
effect of accounting change. . $ (0.34) $ 0.46 $ (0.28) $ 0.86
Cumulative effect of accounting
change . . . . . . . . . . . . - - (0.06) -
------- ------- -------- -------
Net earnings (loss) . . . . . . $ (0.34) $ 0.46 $ (0.34) $ 0.86
======= ======= ======== =======
</TABLE>
3. ACCOUNTS RECEIVABLE SECURITIZATION
During the second quarter of 1999, the Company entered into a one-year
agreement whereby the Company may sell without recourse up to $65,000 in an
undivided interest in certain of its domestic trade accounts receivable, on a
revolving basis, through an unconsolidated receivables subsidiary. At June
30, 1999, $60,000 of trade accounts receivable were sold under this program.
The sales of trade accounts receivable have been reflected as a reduction of
accounts receivable in the Company's Condensed Consolidated Balance Sheet.
Proceeds from receivable sales are less than the face amount of the trade
accounts receivable, since such receivables are sold at a discounted amount.
Discounts incurred for the quarter ended June 30, 1999, which were
approximately $400, were charged to selling, general and administrative
expenses.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Raw materials. . . . . . . . . . . $ 67,933 $ 66,580
Finished and semi-finished goods . 101,720 103,840
Supplies . . . . . . . . . . . . . 11,830 13,463
-------- --------
$181,483 $183,883
======== ========
</TABLE>
At June 30, 1999 and December 31, 1998, certain inventories were valued
at market, which was below cost. The Company increased its lower-of-cost or
market reserve by approximately $1,000 for the six months ended June 30,
1999. However, because of improved selling prices, during the second quarter
of 1999 the Company decreased its lower-of-cost or market reserve by
approximately $3,800.
8
<PAGE>
5. SALE AND LEASEBACK
During the second quarter of 1999, the Company sold certain production
equipment in connection with a sale and leaseback transaction. The lease has
been classified as an operating lease in accordance with Statement of
Financial Accounting Standards No. 13, "Accounting for Leases." The lease
has a term of five years, contains purchase and lease renewal options at
projected future fair market values and has a residual value guarantee. The
net book value of the equipment sold totaled approximately $118,000. The
gain realized from this sale, totaling approximately $32,000, has been
deferred and is being credited to income ratably over the lease term. The
cash proceeds of $150,000 were not received until July 1999 and, accordingly,
a receivable of this amount is included in the Company's Condensed
Consolidated Balance Sheet at June 30, 1999. Future minimum lease payments
are currently expected to approximate $2,600 per quarter through July 2004.
6. ACCOUNTING CHANGES
Effective January 1, 1999, the Company adopted the AICPA's Statement of
Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities,"
which required the Company to begin expensing all start-up and organization
costs as incurred. Start-up and organization costs incurred prior to the
adoption of this SOP have been reported as a cumulative effect of an
accounting change. The effect of the change was to decrease net earnings
(loss) in the first quarter of 1999 by $1,769, or $0.06 per diluted share.
In the first six months of 1999, the effect of the accounting change on
earnings (loss) before the cumulative effect of the accounting change was not
material.
The Company has extended the estimated useful lives of certain equipment
to reflect time periods more consistent with actual historical experience and
anticipated utilization of the assets. The effect of the change was to
decrease depreciation expense by approximately $1,750 for the three months
ended June 30, 1999 and $3,200 for the first half of 1999.
7. RESTRUCTURING CHARGES
The net restructuring charge of $18,972 in the second quarter of 1999 is
comprised of the 1999 restructuring charge of $19,195 related to the
Company's cost reduction and productivity improvement plan, net of a $223
adjustment for the now-completed 1997 restructuring plan.
1999 Restructuring
------------------
During the second quarter of 1999, the Company implemented an overall
cost reduction and productivity improvement plan, expected to improve long-
term profitability and stockholder returns. The Company recorded a pretax
restructuring charge totaling $19,195 in its second-quarter 1999 earnings.
The plan included a pretax charge of $11,483 for closing the Company's wool
business (to be completed by the end of 1999), which consisted of an
impairment charge of $8,033 to write-down those related assets to their fair
value, an accrual for closure costs of $1,880, a $1,320 accrual for
severance, and a $250 accrual for other exit costs. The Company's wool
business reported sales and an operating loss for the first six months of
1999 of $10,983 and $(429), respectively, compared to sales and operating
income for the first half of 1998 of $20,623 and $495, respectively. In
addition, the plan included a pretax charge of $2,901 to close the Company's
9
<PAGE>
New York facility, which included lease termination costs and an accrual for
severance. The plan included an additional accrual for severance costs for
other positions throughout the Company. The closure of the wool business and
other cost reductions throughout the Company will result in the termination
of approximately 120 and 130 employees, respectively. As of June 30, 1999,
the Company had terminated 9 employees.
The following represents changes in the accruals during the second
quarter of 1999:
<TABLE>
<CAPTION>
Closure and
Lease
Termination Termination Accrual for
Benefits Costs Other Expenses
----------- ----------- --------------
<S> <C> <C> <C>
Accrual during the second
quarter of 1999. . . . . . $6,547 $3,026 $745
Cash payments during the
second quarter of 1999 . . (92) - -
------ ------ ----
Accrual balance at June 30,
1999 . . . . . . . . . . . $6,455 $3,026 $745
====== ====== ====
</TABLE>
1998 Restructuring
------------------
In the fourth quarter of 1998, the Company adopted a restructuring plan
to consolidate and lower the overall operating costs of the business units in
the Recycled Products Group. In connection with this plan, the Company
closed the operations of a leased manufacturing facility in New Jersey and a
sales office in England. The Company recorded a pretax charge of $6,861 in
its fourth quarter of 1998, which included a $3,738 write-off of equipment
and other assets to be sold or scrapped; a $1,717 accrual primarily for the
removal and dismantling of the equipment and restoration of the leased
facility to its original state; and a $1,406 accrual for the termination
benefits of approximately 88 employees. Total costs associated with the New
Jersey facility and the sales office in England were $4,371 and $827,
respectively.
The following represents changes in the accruals since December 31, 1998:
<TABLE>
<CAPTION>
Termination Accrual for
Benefits Other Expenses
----------- --------------
<S> <C> <C>
Accrual at December 1998. . . . . . . . . . . . . $1,406 $1,717
Cash payments in the first six months of 1999 . . 1,188 1,673
------ ------
Accrual balance at June 30, 1999. . . . . . . . . $ 218 $ 44
====== ======
</TABLE>
The remaining activity associated with the 1998 restructuring is expected to
be completed during 1999.
1997 Restructuring
------------------
During the second quarter of 1997, the Company adopted a restructuring
plan designed to reduce costs and enhance the overall competitiveness of its
European operations. In connection with this plan, the Company recorded a
10
<PAGE>
pretax charge of $7,469 during its second quarter of 1997. This consisted of
restructuring costs of $10,469, less a previously recorded $3,000 charge to
cost of goods sold to provide for inventory losses related to the Company's
take-or-pay supply arrangement entered into as part of the acquisition of its
Netherlands-based PET resins business in 1995. Approximately $6,375 of the
restructuring charge was an accrual for estimated costs to modify certain
supply and service agreements at the Company's Netherlands-based PET resins
business. The restructuring accrual also included $3,594 of termination
benefits for 65 employees at its recycled fiber operation in Ireland and the
PET resins business. The 1997 restructuring plan was completed during the
second quarter of 1999. The following represent changes in the
accrual since December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Accrual balance at December 31, 1998 . $861
Cash payments in the first six
months of 1999 . . . . . . . . . . . . (638)
Overaccrual included in earnings. . . . (223)
----
Accrual balance at June 30, 1999. . . . $ 0
====
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
The Company has commitments and contingent liabilities, including
environmental liabilities, commitments to receive certain state incentives,
raw material purchase commitments, and various operating commitments,
including commitments to provide certain retirement benefits.
The Company's operations are subject to extensive laws and regulations
governing air emissions, wastewater discharges and solid and hazardous waste
management activities. The Company's policy is to expense environmental
remediation costs when it is both probable that a liability has been incurred
and the amount can be reasonably estimated. While it is often difficult to
reasonably quantify future environmental-related expenditures, the Company
currently estimates its future non-capital expenditures related to
environmental matters to range between approximately $11,000 and $25,200. In
connection with these expenditures, the Company has accrued undiscounted
liabilities of approximately $15,000 at June 30, 1999 and $16,000 at December
31, 1998, which are reflected as other noncurrent liabilities in the
Company's Condensed Consolidated Balance Sheets. These accruals represent
management's best estimate of probable non-capital environmental
expenditures. In addition, aggregate future capital expenditures related to
environmental matters are expected to range from $8,900 to $27,000. These
non-capital and capital expenditures are expected to be incurred during the
next 10 to 20 years. The Company believes that it is entitled to recover a
portion of these expenditures under indemnification and escrow agreements.
In order to receive certain state grants, the Company agreed to meet
certain conditions, including capital expenditures and employment levels at
its Mississippi facility. During the second quarter of 1999, the Company
recognized approximately $2.0 million of grant income. As of June 30, 1999,
the Company had a deferred liability of approximately $25,000 which it
expects to be reduced as these conditions are satisfied.
The Company has entered into commitments to purchase raw materials in the
ordinary course of its trade or business. The minimum payments under these
commitments approximate $19,000 per year. The commitments extend for varying
periods up to 10 years and, in general, the prices are not in excess of
current market prices.
11
<PAGE>
The Company has certain obligations under several qualified and
nonqualified retirement plans. During the second quarter of 1999,
modifications made to a retirement plan resulted in the Company increasing
operating earnings by approximately $800 during the quarter.
9. COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) is comprised of foreign
currency translation. There is no provision for U.S. federal and state
income taxes on the earnings that are permanently invested and on the related
translation adjustments. Comprehensive income (loss) was $(2,858) and
$16,241 for the three months ended June 30, 1999 and 1998, respectively, and
$(10,004) and $26,108 for the six months ended June 30, 1999 and 1998,
respectively.
10. SEGMENT INFORMATION
The Company's operations are classified into three principal reportable
segments that provide different products or services. The Company's three
reportable business segments are managed separately based on fundamental
differences in their operations.
Generally, the Company evaluates segment profit on the basis of operating
profit less certain charges for research and development costs,
administrative costs, and amortization expenses. The accounting policies are
the same as those described in the Company's most recently filed Form 10-K.
<TABLE>
<CAPTION>
Recycled Packaging
Fibers Products Products
Group Group Group Total
----- ----- ----- -----
Three months ended June 30, 1999
- --------------------------------
<S> <C> <C> <C> <C>
Revenues. . . . . . . . . . . . $ 70,724 $ 75,245 $ 86,666 $ 232,635
Segment profit (loss) . . . . . (3,544) 3,804 8,088 8,348
Assets (1). . . . . . . . . . . 393,348 247,312 605,574 1,246,234
Three months ended June 30, 1998
- --------------------------------
Revenues. . . . . . . . . . . . $ 91,794 $ 98,221 $ 71,253 $ 261,268
Segment profit (loss) . . . . . 9,097 7,124 8,245 24,466
Six months ended June 30, 1999
- -------------------------------
Revenues. . . . . . . . . . . . $145,009 $157,286 $149,231 $ 451,526
Segment profit (loss) . . . . . (1,105) 7,937 7,661 14,493
Assets (1). . . . . . . . . . 393,348 247,312 605,574 1,246,234
Six months ended June 30, 1998
- -------------------------------
Revenues. . . . . . . . . . . . $191,851 $202,826 $129,664 $ 524,341
Segment profit (loss) . . . . . 21,320 18,089 7,936 47,345
</TABLE>
(1) Assets for the Packaging Products Group increased by approximately
$318,000 at June 30, 1999 compared to the amount reported in the
December 31, 1998 Form 10-K, primarily due to the commencement of
operations of two resin production lines at the Company's Mississippi
facility.
12
<PAGE>
Following are the reconciliations to corresponding totals in the
condensed consolidated financial statements:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total for reportable segments . $ 8,348 $24,466 $ 14,493 $47,345
Restructuring charge. . . . . . (18,972) - (18,972) -
Interest expense, net . . . . . (4,343) (2,254) (7,675) (4,632)
-------- ------- -------- -------
Earnings (loss) before income
taxes and cumulative effect
of accounting change . . . . . $(14,967) $22,212 $(12,154) $42,713
======== ======= ======== =======
</TABLE>
13
<PAGE>
WELLMAN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is principally engaged in the manufacture and marketing of
high-quality polyester products, including Fortrel(R) brand polyester textile
fibers, polyester fibers made from recycled raw materials and PermaClear(R)
brand PET packaging resins. The Company currently has annual capacity to
manufacture approximately 1.1 billion pounds of fiber and 1.1 billion pounds
of resins worldwide at six major production facilities in the United States
and Europe. The Company is also the world's largest PET plastics recycler,
utilizing a significant amount of recycled raw materials in its manufacturing
operations.
The Company is nearing completion of its new, state-of-the-art Pearl
River Plant in Mississippi. This facility commenced operation of the first
of three production lines, a 235 million pound PET resin line, in the first
quarter of 1999. The second 235 million pound PET resin line commenced
operation in the second quarter of 1999. The start up of the third and final
production line, for 230 million pounds of polyester fiber, is currently
scheduled for 2000. See "Outlook" below.
The Fibers Group produces Fortrel(R) textile fibers, which currently
represent approximately 60% of the Company's fiber production. These fibers
are used in apparel, home furnishings, and non-wovens and are produced from
two chemical raw materials, PTA and MEG. The other 40% of fiber production,
primarily fiberfill and carpet fibers, is manufactured by the Recycled
Products Group (RPG) from recycled raw materials, including postindustrial
fiber, resin and film materials and postconsumer PET containers. The
Company's PET resins, produced by the Packaging Products Group (PPG) from PTA
and MEG, are primarily used in the manufacture of clear plastic soft drink
bottles and other food and beverage packaging.
The Company's markets are highly competitive. It competes in these
markets primarily on the basis of product quality, customer service, brand
identity and price. It believes it is the second-largest polyester staple
and fourth-largest POY producer in the United States and the third-largest
PET resins producer in North America. Several of the Company's competitors
are substantially larger than the Company and have substantially greater
economic resources.
Demand for polyester fiber historically has been cyclical, as it is
subject to changes in consumer preferences and spending, retail sales
patterns, and fiber or textile product imports. Since late 1997, the Far
East has been experiencing a significant economic and financial crisis. This
crisis has led to higher imports from that region of polyester fiber, fabric
and apparel, resulting in fiber price pressure in the United States and
Europe, which has adversely affected profitability. Global PET resins demand
continues to grow, driven by new product applications for PET and conversions
from other packaging materials to PET. Sales for PET resins, primarily for
soft drink bottles and other beverages, may be influenced by weather.
14
<PAGE>
The Company's profitability is primarily determined by its raw material
margins (the difference between product selling prices and raw material
costs). Both fiber and PET resin raw material margins experience increases
or decreases primarily based on selling price and raw material cost changes,
which stem from supply and demand factors and competitive conditions. Given
the Company's substantial unit volumes, the impact of selling price and raw
material cost changes are significant.
Supply, demand, prices and raw material costs each may be affected by
global economic and market conditions, import activity, and the prices of
competing materials. Recent and contemplated changes in ownership of certain
fiber and resin competitors have had a destabilizing influence in the
Company's markets.
RESTRUCTURINGS
During the second quarter of 1999, the Company approved an overall cost
reduction and productivity improvement plan, expected to improve long-term
profitability and stockholder returns. As a result, the Company recorded a
pretax restructuring charge of $19.2 million, or $0.41 per diluted share
after tax, in its second-quarter 1999 earnings. The Company announced plans
to close its Wool business in Johnsonville, S.C. by the end of the year and
began implementing other cost reduction and productivity improvement plans
throughout the Company. See note 7 to the Condensed Consolidated Financial
Statements for details of the second-quarter 1999 restructuring charge.
The Company's cost reduction and productivity improvement plan is
expected to generate annual pretax savings of approximately $35.0 million,
which will begin to phase in during the second half of 1999 and in 2000. See
"Outlook" below. The savings associated with the cost reduction portion of
the plan, expected to be approximately $25.0 million, will primarily result
from lower costs for services, supplies, and wages. The productivity
improvement portion of the plan is expected to generate savings of
approximately $10.0 million and to increase unit sales volumes and lower
annual costs by means of throughput and manufacturing improvements and
operational efficiencies in production facilities.
In the fourth quarter of 1998, the Company adopted a restructuring plan
to consolidate and lower the overall operating costs of the business units in
the Recycled Products Group. In connection with this plan, the Company
closed the operations of a leased manufacturing facility in New Jersey and a
sales office in Europe. The Company recorded a pretax charge of $6,861, or
$0.14 per diluted share after tax, in its 1998 fourth-quarter earnings. See
note 7 to the Condensed Consolidated Financial Statements for details of
charges to the accruals since December 31, 1998.
Benefits derived in the first six months of 1999 from the 1998
restructuring are estimated to be approximately $2.6 million.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net sales for the three months ended June 30, 1999 decreased 11.0% to
$232.6 million from $261.3 million for the prior year period. This decrease
was primarily the result of reductions in worldwide polyester fiber selling
prices. The economic and financial troubles in the Far East that began in
1997 have resulted in significant increases in fiber imports from that region
15
<PAGE>
and intense price pressure on worldwide fiber markets. Net sales for the
Fibers Group decreased 23.0% to $70.7 million in the 1999 period from $91.8
million in the 1998 period, primarily due to a 20.5% decline in the average
selling price per pound of polyester fiber. In addition, polyester fiber
unit volumes decreased 3.0%. Net sales for the RPG decreased 23.4% to $75.2
million in the 1999 period from $98.2 million in the 1998 period, primarily
as a result of lower unit volumes and average selling prices for recycled
polyester fiber, which declined 8.4% and 16.4%, respectively. In addition,
the RPG experienced a 19.7% decline in net sales in other divisions,
primarily as a result of the closure of a leased manufacturing facility in
New Jersey and significantly lower sales in the Company's wool business.
(See Restructurings above.) Net sales for the PPG increased 21.6% to $86.7
million in the 1999 period from $71.3 million in the 1998 period due to a
56.5% increase in PET resin unit volumes, reflecting the start-up in the
first half of 1999 of the two PET resin production lines at the Company's new
facility in Mississippi. Higher volumes more than offset a 22.3% decline in
the average selling price per pound of PET resin.
Cost of sales decreased 5.1% to $206.7 million for the three months ended
June 30, 1999 from $217.8 million for the three months ended June 30, 1998,
primarily due to lower worldwide chemical and recycled raw material costs.
As a percentage of sales, however, cost of sales increased to 88.9% in the
1999 period from 83.3% in the 1998 period, resulting from lower selling
prices more than offsetting lower raw material costs. As a percentage of
sales, cost of sales for the Fibers Group increased 13.4% in the 1999 period
compared to the 1998 period, primarily due to lower polyester fiber selling
prices, which were partially offset by lower chemical raw material costs.
Cost of sales as a percentage of sales for the RPG were essentially unchanged
for the same periods. As a percentage of sales, cost of sales for the PPG
increased 4.6% in the 1999 period as compared to the 1998 period. This was
primarily due to lower worldwide PET resins selling prices, which were
partially offset by higher domestic sales volumes. In addition, cost of
sales for the PPG were impacted by lower chemical raw material costs, a
change in the lower-of-cost or market reserve, grant income, and reduced
depreciation expense (see notes 4, 6 and 8 to the Company's Condensed
Consolidated Financial Statements).
As a result of the foregoing, gross profit for the 1999 period declined
40.5% to $25.9 million in the 1999 period compared to $43.5 million in the
1998 period. The gross profit margin was 11.1% in the 1999 period compared
to 16.7% in the 1998 period.
Selling, general and administrative expenses amounted to $17.6 million,
or 7.5% of sales, in the 1999 period compared to $19.0 million, or 7.3% of
sales, in the 1998 period. Selling, general and administrative expenses
declined primarily as a result of the collection of a trade receivable
previously written off.
As a result of the foregoing, the Company reported an operating loss of
$10.6 million for the three months ended June 30, 1999. Excluding the
restructuring charge in the second quarter of 1999, operating income declined
65.9% to $8.3 million in the 1999 period from $24.5 million in the 1998
period.
Interest expense was $4.3 million in the 1999 period compared to $2.3
million in the 1998 period. The increase is due to a higher level of debt
related to the Company's manufacturing operations. A significant portion of
interest was capitalized in 1998 and 1999 relating to the construction in
progress at the Company's Mississippi facility.
16
<PAGE>
As a result of the foregoing, the Company reported a net loss of $10.5
million, or $(0.34) per diluted share, for the three months ended June 30,
1999. Excluding the 1999 restructuring charge, the Company reported net
earnings of $2.5 million, or $0.08 per diluted share, for the three months
ended June 30, 1999 compared to $14.4 million, or $0.46 per diluted share,
for the three months ended June 30, 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net sales for the six months ended June 30, 1999 decreased 13.9% to
$451.5 million from $524.3 million for the six months ended June 30, 1998.
This decrease was primarily the result of reductions in worldwide polyester
fiber and PET resins selling prices. Net sales for the Fibers Group
decreased 24.4% to $145.0 million in the 1999 period from $191.9 million in
the 1998 period, primarily due to a 21.0% decline in the average selling
price per pound of polyester fiber. In addition, polyester fiber unit
volumes decreased 4.4%. Net sales for the RPG decreased 22.5% to $157.3
million in the 1999 period from $202.8 million in the 1998 period, primarily
as a result of lower average selling prices and unit volumes for recycled
polyester fiber, which declined 13.5% and 10.4%, respectively. In addition,
the RPG experienced a 16.2% decline in net sales in other divisions as a
result of the closure of a leased manufacturing facility in New Jersey and
significantly lower sales in the Company's wool business. (See
Restructurings above.) Net sales for the PPG increased 15.1% to $149.2
million in the 1999 period from $129.7 million in the 1998 period due to a
49.1% increase in PET resin unit volumes, reflecting the start-up in the
first half of 1999 of the two resin production lines at the Company's new
facility in Mississippi. Higher volumes more than offset a 22.8% decline in
the average selling price per pound of PET resin.
Cost of sales decreased 8.6% to $400.8 million for the six months ended
June 30, 1999 from $438.6 million for the six months ended June 30, 1998,
primarily due to lower worldwide chemical and recycled raw material costs.
As a percentage of sales, however, cost of sales increased to 88.8% in the
1999 period from 83.7% in the 1998 period. As a percentage of sales, cost of
sales for the Fibers Group increased 10.1% in the 1999 period compared to the
1998 period, primarily due to lower polyester fiber selling prices, which
were partially offset by lower chemical raw material costs. Cost of sales as
a percentage of sales for the RPG increased 2.4% in the 1999 period compared
to the 1998 period, primarily due to lower polyester fiber selling prices and
production volumes, which were partially offset by lower recycled raw
material costs. As a percentage of sales, cost of sales for the PPG
increased 3.2% in the 1999 period as compared to the 1998 period. This was
primarily due to lower worldwide PET resins selling prices, which were
partially offset by higher domestic sales volumes, lower chemical raw
material costs, and reduced depreciation expense. (See note 6 to the
Condensed Consolidated Financial Statements.)
As a result of the foregoing, gross profit for the six months ended June
30, 1999 declined 40.8% to $50.7 million in the 1999 period compared to $85.7
million in the 1998 period. The gross profit margin was 11.2% in the 1999
period compared to 16.3% in the 1998 period.
Selling, general and administrative expenses amounted to $36.2 million,
or 8.0% of sales, in the 1999 period compared to $38.4 million, or 7.3% of
sales, in the 1998 period. This decrease was primarily due to reduced costs
in the worldwide fiber operations and the collection of a trade receivable
previously written off.
17
<PAGE>
As a result of the foregoing, the Company reported an operating loss of
$4.5 million for the six months ended June 30, 1999. Excluding the
restructuring charge in the second quarter of 1999, operating income
decreased 69.3% to $14.5 million from $47.3 million in the 1998 period.
Interest expense was $7.7 million in the 1999 period compared to $4.6
million in the 1998 period. The increase is due to a higher level of debt
related to the Company's manufacturing operations. A significant portion of
interest was capitalized in 1998 and 1999 relating to the construction in
progress at the Company's Mississippi facility.
As a result of the foregoing, the Company reported a net loss before the
cumulative effect of a change in accounting principle of $8.7 million, or
$(0.28) per diluted share, for the six months ended June 30, 1999. Excluding
the restructuring charge in the second quarter of 1999 (see "Restructurings"
above) and the cumulative effect of accounting change, net earnings would
have been $4.3 million, or $0.14 per diluted share, compared to $27.1
million, or $0.86 per diluted share, in the 1998 period. Effective January
1, 1999, the Company adopted the AICPA's Statement of Position ("SOP") No. 98-
5, "Reporting on the Costs of Start-Up Activities," which required the
Company to begin expensing all start-up and organization costs as incurred.
Start-up and organization costs incurred prior to the adoption of this SOP
have been reported as a cumulative effect of a change in accounting
principle. The effect of the change was to decrease net income in the first
quarter of 1999 by $1.8 million, or $0.06 per diluted share.
OUTLOOK
The U.S. polyester fiber markets have been severely impacted by the Far
Eastern economic crisis and the resultant increase in imports of fiberfill,
yarn, fabric and apparel from that region. High levels of Asian imports are
still present throughout the domestic textile chain. As a result, demand for
polyester fiber remains weak, with excess capacity and declining selling
prices continuing to adversely affect domestic fiber producers. Expected
increases in raw material costs in the second half of 1999 have prompted
industry announcements of increases in polyester selling prices beginning in
the third quarter of 1999. If the actual increases in selling price are not
large enough to cover the increases in raw material costs, the Company's
profit margins will suffer.
U.S. polyester fiberfill producers filed an anti-dumping petition against
Korean and Taiwanese producers in April 1999. The U.S. Department of
Commerce may impose a preliminary anti-dumping duty on these producers in
September 1999.
Demand for domestic PET packaging resins continues to grow, and imports
are not expected to be material. The PET resins industry began implementing
selling price increases in the second and third quarters of 1999. Raw
material cost increases are also expected for the second half of 1999.
The first of two 235 million pound PET resin production lines at the
Company's new Mississippi facility came on-line in the first quarter of 1999.
The second resin line commenced operation in the second quarter of 1999. As
a result, resin unit sales volumes are expected to increase significantly in
1999. The start-up of the plant's 230 million pound fiber production line is
currently scheduled for 2000. The Company's results of operations will be
negatively impacted by the increase in interest and depreciation expenses
associated with the completion and start-up of the fiber production line.
18
<PAGE>
The Company incurred a restructuring charge of $19.2 million in the
second quarter of 1999 in order to exit the wool business and implement its
profit improvement plan. The latter consists of cost reductions and
productivity improvements, which are expected to phase in during the second
half of 1999 and 2000. When completed, the plan is expected to generate
annual pre-tax savings of approximately $35 million. The impact on the
Company's earnings in the second half of 1999 is not expected to be
significant. See note 7 to the Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $71.9 million for the six months
ended June 30, 1999 compared to $32.9 million provided by operations for the
six months ended June 30, 1998. The Company entered into an asset
securitization program which provided approximately $60.0 million. See note
3 to the Condensed Consolidated Financial Statements.
Net cash used in investing activities, comprised solely of capital
spending, amounted to $55.9 million in the first six months of 1999 compared
to $107.7 million in the first six months of 1998. Management expects to
spend between $100 million and $120 million on capital expenditures in 1999,
with the majority being spent to complete the construction of the Mississippi
facility.
Net cash used in financing activities amounted to $15.9 million in the
1999 period compared to net cash provided by financing activities $74.8
million in the 1998 period.
During the second quarter of 1999, the Company sold certain production
equipment in connection with a sale and leaseback transaction. The proceeds
of approximately $150.0 million from the sale were not received until July
1999 and were used to pay down debt. Future minimum lease payments are
currently expected to approximate $2.6 million per quarter through July 2004.
See note 5 to the Condensed Consolidated Financial Statements.
The Company's $330.0 million senior revolving credit facility matures in
February 2000. As a result, certain amounts previously treated as long-term
debt, including amounts borrowed under uncommitted lines of credit, have been
classified as current liabilities at June 30, 1999. Management expects to
refinance this facility on a long-term basis during the third quarter of
1999.
The Company's financing agreements contain normal financial and
restrictive covenants. Certain subsidiaries have guaranteed substantially
all of the Company's indebtedness for borrowed money. The financial
resources available to the Company at June 30, 1999 include $280.0 million
under its revolving credit facility, unused short-term uncommitted lines of
credit aggregating approximately $36.0 million, and internally generated
funds. However, at June 30, 1999 the Company could only incur approximately
$110.0 million of additional debt without amending the terms of its revolving
credit facility.
During 1998, the SEC declared effective the Company's universal shelf
registration statement covering the issuance of up to $400 million of debt
and/or equity securities. No securities have been sold from this shelf
registration.
The Company believes its financial resources and other credit
arrangements will be sufficient to meet its cash needs for working capital,
capital expenditures, debt repayments and dividends.
19
<PAGE>
For information about the Company's derivative financial instruments, see
Item 7A. "Quantitative and Qualitative Disclosure About Market Risk" of the
Company's Form 10-K for the year ended December 31, 1998.
YEAR 2000 COMPUTER ISSUE
Overview
The "Year 2000 Computer Issue" is the result of computer programs being
written using only two digits rather than four to refer to a year. If
uncorrected, these computer programs may not be able to distinguish between
the years 1900 and 2000 and may fail to operate or may produce unpredictable
results.
The Company has been addressing the Year 2000 Computer Issue within its
information technology and non-information technology systems through a
Company-wide Year 2000 project. Non-information technology systems typically
include embedded technology such as computer chips within manufacturing
and other types of equipment. The Company's Year 2000 Project formally
commenced in December 1997. The vital and critical systems in the Company's
domestic operations are now judged to be Year 2000 ready. The International
subsidiaries are in the final stages of testing remediated systems and
contingency planning. They are expected to be complete by August 30, 1999.
The Company believes it is prepared for the Year 2000. However, certain
areas of its processes use software supplied by various third parties.
Compliance information from third party software companies continues to be
updated. As the Company becomes aware of vendor recommendations, they will
be evaluated and applied where necessary.
Year 2000 Project
The Company organized its Year 2000 Project into five broad phases: (1)
development of a Company-wide inventory of both information technology and
embedded systems; (2) Company-wide assessment, with focus on vital and
critical items; (3) renovation/remediation; (4) validation and testing;
and (5) implementation. As systems passed the Company's established test
criteria, they were considered Year 2000 ready and cleared for
implementation. The Company focused on the following vital and critical
items in its remediation efforts: (a) information systems portfolio, (b)
embedded systems, (c) purchasing and trading partners, (d) end-user owned
applications, and (e) network and personal computers.
(a) Information systems portfolio: The Company believes the vital and
critical systems components in the Information Systems Portfolio are
now Year 2000 compliant. These have been divided into two categories:
corporate systems and manufacturing systems. Corporate systems, which
consist largely of third-party applications and, to a lesser degree, in-house
written applications, include, but are not limited to, human resources/
payroll, accounts payable, general ledger, order fulfillment (shipping,
receiving, and invoicing), electronic data interchange (EDI), and phone/voice
mail. Manufacturing systems are located at and support manufacturing
processes at Company facilities.
(b) Embedded systems: The Company believes the vital and critical items
in the Embedded Systems Portfolio are now Year 2000 compliant. These include
items such as programmed logic controllers, drives, and process controllers.
(c) Purchasing and trading partners: The Company has surveyed all of
its vital and critical trading partners (suppliers and customers) concerning
20
<PAGE>
their Year 2000 efforts in general. Electronic Data Interchange trading
partners have been surveyed specifically with regards to the compliance of
their software. The Company has received written responses to its surveys
but is aware that these written responses may not accurately represent the
Year 2000 compliance status of a trading partner. Certain targeted suppliers
and customers are being interviewed personally. As part of this project,
contracts are being reviewed and rewritten where necessary to include Year
2000 clauses.
(d) End-user owned applications: There are various end-user written
desktop applications throughout the Company's locations. Of those that are
vital and critical to operations, the Company believes that the majority have
no Year 2000 date issues. For those with date issues, remediation has been
completed.
(e) Network and personal computers: The Company believes the vital and
critical local area network servers and personal computers are Year 2000
ready due to remediation or replacement.
Costs
Total project costs are not expected to be material. Total remediation
costs as of June 30, 1999 were approximately $2,900.
Risks
Due to the numerous uncertainties inherent in the Year 2000 Computer
Issue, the Company cannot ensure that its most important suppliers and
customers will be Year 2000 compliant on time. Although the Company believes
that its vital and critical trading partners are taking all reasonable steps
necessary to deal with the Year 2000 issue, the failure to timely correct
their Year 2000 computer problems could materially and adversely affect the
Company's operations and financial condition. Interruption of normal
business operations could result if a critical supplier is unable to meet
contractual obligations in a timely way. The Company has completed
contingency plans which involve, among other actions, managing inventories
and adjusting staffing strategies.
Based on current plans and efforts to date, the Company does not
anticipate that the Year 2000 issue will have a material effect on results of
operations or financial condition. However, the above expectations are
subject to uncertainties. Forward-looking statements contained in this Year
2000 Computer Issue section should be read in conjunction with the Company's
disclosures under the heading "Forward Looking Statements; Risks and
Uncertainties" below.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS
133), effective for fiscal years beginning after June 15, 2000. The Company
expects to adopt FAS 133 in January 2001. The Company has not yet determined
what the effect of FAS 133 will be on its results of operations or financial
position. However, the statement could increase volatility in earnings and
comprehensive income.
FORWARD-LOOKING STATEMENTS; RISKS AND UNCERTAINTIES
Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
21
<PAGE>
Private Securities Litigation Reform Act of 1995. In addition, words such as
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. The Company cautions that a number of
important factors could cause actual results for 1999 and beyond to differ
materially from those expressed in any forward-looking statements made by or
on behalf of the Company. Such statements contain a number of risks and
uncertainties, including, but not limited to, demand and competition for
polyester fiber and PET resins; availability and cost of raw materials;
levels of production capacity and announced changes thereto; changes in
financial markets, interest rates and foreign currency exchange rates; work
stoppages; natural disasters; U.S., European, Far Eastern and global economic
conditions and changes in laws and regulations; Year 2000 compliance; prices
of competing products; and the Company's ability to complete expansions and
other capital projects on time and budget and to maintain the operations of
its existing production facilities. The Company cannot assure that it will
be able to anticipate or respond timely to changes which could adversely
affect its operating results in one or more fiscal quarters. Results of
operations in any past period should not be considered indicative of results
to be expected in future periods. Fluctuations in operating results may
result in fluctuations in the price of the Company's common stock.
For a more complete description of the prominent risks and uncertainties
inherent in the Company's business, see the Company's Form 10-K for the year
ended December 31, 1998.
22
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on May 18, 1999.
(b) Not applicable.
(c) At the Annual Meeting of Stockholders, the stockholders voted on the
following matters:
1. The nominees for election as directors for the ensuing year, and
until their successors are elected and qualified, received the
following votes:
Name For Against/Withheld
==== === ================
Thomas M. Duff 24,597,748 479,154
Clifford J. Christenson 24,565,128 511,774
James B. Baker 24,602,425 474,477
Allan R. Dragone 24,567,387 509,515
Richard F. Heitmiller 24,590,609 486,293
James E. Rogers 24,605,705 471,197
Marvin O. Schlanger 24,570,789 506,113
Raymond C. Tower 24,583,638 493,264
Roger A. Vandenberg 24,606,497 470,405
As a result, all of the above nominees were elected to the Board.
(*)
2. The proposal to ratify the selection by the Board of Directors of
Ernst & Young LLP as independent auditors to audit the Company's
books and accounts for the fiscal year ending December 31, 1999
received the following votes: 24,900,405 votes cast for, 125,172
votes cast against, 51,325 abstentions. As a result, the Board's
selection of Ernst & Young LLP was approved. (*)
(*) Under the rules of the New York Stock Exchange, brokers holding
shares in street name have the authority to vote certain matters
when they have not received instructions from the beneficial owners.
Brokers that did not receive such instructions were entitled to vote
on proposals 1 and 2. As a result, broker non-votes had no effect
on the outcome of these proposals.
(d) Not applicable.
23
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3(b) Restated By-laws, as of May 18, 1999.
4(a) Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the
registrant has not filed herewith any instrument with respect
to long-term debt which does not exceed 10% of the total
assets of the registrant and its subsidiaries on a
consolidated basis. The registrant hereby agrees to furnish a
copy of any such instrument to the Securities and Exchange
Commission upon request.
4(g)(3)Amendment No. 3, dated as of August 16, 1999, to Rights
Agreement.
10(h) Wellman, Inc. Amended and Restated Management Incentive
Compensation Plan for the Executive Group.
10(o) Wellman, Inc. Deferred Compensation and Restricted Stock Plan,
as amended, effective as of December 1, 1998.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WELLMAN, INC.
Dated August 13, 1999 By /s/ Keith R. Phillips
--------------- ------------------------
Keith R. Phillips
Chief Financial Officer,
Vice President and Treasurer
(Principal Financial Officer)
Dated August 13, 1999 By /s/ Mark J. Rosenblum
--------------- ------------------------
Mark J. Rosenblum
Chief Accounting Officer,
Vice President and Controller
(Principal Accounting Officer)
25
<PAGE>
Exhibit 3(b)
As amended 5/18/99
WELLMAN, INC.
RESTATED BY-LAWS
ARTICLE I.
OFFICES
SECTION 1.01. Registered Office. The registered office of the
Corporation in the State of Delaware shall be at Corporation Trust Center,
1209 Orange Street in the City of Wilmington, County of New Castle. The name
of the resident agent in charge thereof shall be The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware.
SECTION 1.02. Other Offices. The Corporation may also have an office in
Shrewsbury, New Jersey, and at such other place or places either within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation require.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Place of Meetings. All meetings of the stockholders of the
Corporation shall be held at such place ether within or without the State of
Delaware as shall be fixed by the Board of Directors and specified in the
respective notices or waivers of notice of said meetings.
SECTION 2.02. Annual Meetings. (a) The annual meeting of the
stockholders for the election of directors and for the transaction of such
other business as may come before the meeting shall be held at the principal
office of the Corporation in the State of Delaware, or such place as shall be
fixed by the Board of Directors, at ten o'clock in the forenoon, local time,
on the third Tuesday in May in each year, if not a legal holiday at the place
where such meeting is to be held, and if a legal holiday, then on the next
succeeding business day not a legal holiday at the same hour. (b) In respect
of the annual meeting for any particular year the Board of Directors may, by
resolution fix a different day, time or place (either within or without the
State of Delaware) for the annual meeting. (c) If the election of directors
shall not be held on the day designated herein or the day fixed by the Board,
as the case may be, for any annual meeting, or on the day of any adjourned
session thereof, the Board of Directors shall cause the election to be held
at a special meeting as soon thereafter as conveniently may be. At such
special meeting the stockholders may elect the directors and transact other
business with the same force and effect as at an annual meeting duly called
and held.
SECTION 2.03 Special Meetings. A special meeting of the stockholders for
any purpose or purposes may be called at any time by the President or by
order of the Board of Directors and must be called by the Secretary upon the
request in writing of any stockholder holding of record at least fifteen
percent of the outstanding shares of stock of the Corporation entitled to
vote at such meeting.
SECTION 2.04. Notice of Meetings. (a) Except as otherwise required by
statute, notice of each annual or special meeting of the stockholders shall
<PAGE>
be given to each stockholder of record entitled to vote at such meeting not
less than ten days nor more than fifty days before the day on which the
meeting is to be held by delivering written notice thereof to him personally
or by mailing such notice, postage prepaid, addressed to him at his post-
office address last shown in the records of the Corporation or by
transmitting notice thereof to him at such address by telegraph, cable or any
other available method. Every such notice shall state the time and place of
the meeting and, in case of a special meeting, shall state briefly the
purposes thereof. (b) Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend such meeting in
person or by proxy or who shall in person or by attorney thereunto
authorized, waive such notice in writing or by telegraph, cable or any other
available method either before or after such meeting. N 0t of any
adjourned meeting of the stockholders shall not be required to be given
except when expressly required by law.
SECTION 2.05. Quorum. (a) At each meeting of the stockholders, except
where otherwise provided by statute, the Certificate of Incorporation or
these By-Laws, the holders of record of a majority of the issued and
outstanding shares of a stock of the Corporation entitled to vote at such
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. (b) In the absence of a quorum a majority
in interest of the stockholders of the Corporation entitled to vote, present
in person or represented by proxy or, in the absence of all such
stockholders, any officer entitled to preside at, or act as secretary of,
such meeting, shall have the power to adjourn the meeting from time to time,
until stockholders holding the requisite amount of stock shall be present or
represented. At any such adjourned meeting at which a quorum shall be
present any business may be transacted which might have been transacted at
the meeting as originally called.
SECTION 2.06. Organization. At each meeting of the stockholders the
President, any Vice President, or any other officer designated by the Board
of Directors, shall act as chairman, and the Secretary or an Assistant
Secretary of the Corporation, or in the absence of the Secretary and all
Assistant Secretaries, a person whom the chairman of such meeting shall
appoint shall act as secretary of the meeting and keep the minutes thereof.
SECTION 2.07. Voting. (a) Except as otherwise provided by law or by the
Certificate of Incorporation or these By-Laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote, in person or by
proxy, for each share of capital stock of the Corporation registered in his
name on the books of the Corporation:
(i) on the date fixed pursuant to Section 9.03 of these By-Laws as
the record date for the determination of stockholders entitled to vote at
such meeting; or
(ii) if no such record date shall have been fixed, then the record
date shall be at the close of business on the day next preceding the day on
which notice of such meeting is given.
(b) Persons holding stock in a fiduciary capacity shall be entitled to
vote the shares so held. In the case of stock held jointly by two or more
executors, administrators, guardians, conservators, trustees or other
fiduciaries, such fiduciaries may designate in writing one or more of their
number to present such stock and vote the shares so held, unless there is a
provision, to the contrary in the instrument, if any, defining their powers
and duties. (c) Persons whose stock is pledged shall be entitled to vote
2
<PAGE>
thereon until such stock is transferred on the books of the Corporation to
the pledgee, and thereafter only the pledgee shall be entitled to vote. (d)
Any stockholder entitled to vote may do so in person or by his proxy
appointed by an instrument in writing subscribed by such stockholder or by
his attorney thereunto authorized, or by a telegram, cable or any other
available method delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted after three years from its date, unless
said proxy provides for a longer period. (e) At all meetings of the
stockholders, all matters (except where other provision is made by law or by
the Certificate of Incorporation or these By-Laws) shall be decided by the
vote of a majority in interest of the stockholders entitled to vote thereon,
present in person or by proxy, at such meeting, a quorum being present.
SECTION 2.08. Inspectors. The chairman of the meeting may at any time
appoint two or more inspectors to serve at a meeting of the stockholders.
Such inspectors shall decide upon the qualifications of voters, accept and
count the votes for and against the questions presented, report the results
of such votes, and subscribe and deliver to the secretary of the meeting a
certificate stating the number of shares of stock issued and outstanding and
entitled to vote thereon and the number of shares voted for and against the
questions presented. The inspectors need not be stockholders of the
Corporation, and any director or officer of the Corporation may be an
inspector on any question other than a vote for or against his election to
any position with the Corporation or on any other question in which he may be
directly interested. Before acting as herein provided each inspector shall
subscribe an oath faithfully to execute the duties of an inspector with
strict impartiality and according to the best of his ability.
SECTION 2.09. List of Stockholders. (a) It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger to prepare and make, or cause to be prepared and made, at least
ten days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote thereat, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered
in the name of stockholder. Such list shall be open during ordinary business
hours to the examination of any stockholder for any purpose germane to the
meeting for a period of at least ten days prior to the election, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting or, if not so specified, at the place
where the meeting is to be held. (b) Such list shall be produced and kept at
the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present. (c) Upon the willful neglect or
refusal of the directors to produce such list at any meeting for the election
of directors they shall be ineligible for election to any office at such
meeting. (d) The stock ledger shall be conclusive evidence as to who are the
stockholders entitled to examine the stock ledger and the list of
stockholders required by this Section 2.09 or the books of the Corporation or
to vote in person or by proxy at any meeting of stockholders.
SECTION 2.10. Introduction of Business at a Meeting of Stockholders. (a)
At an annual or special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
properly brought before an annual or special meeting of stockholders. To be
properly brought before an annual or special meeting of stockholders,
business must be (i) in the case of a special meeting, specified in the
notice of the special meeting (or any supplement thereto) given by the
officer of the Corporation calling such meeting or by or at the direction of
the Board, or (ii) in the case of an annual meeting, properly brought before
the meeting by or at the direction of the Board, or otherwise properly
3
<PAGE>
brought before the annual meeting by a stockholder. For business to be
properly brought before an annual meeting of stockholders by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to the Secretary of the Corporation, or mailed to and received at
the principal executive offices of the Corporation by the Secretary, not less
than 30 days prior to the date of the annual meeting; provided, however, that
if less than 40 days' notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by the stockholder to
be timely must be so delivered or received not later than the close of
business on the 7th day following the earlier of (i) the day on which such
notice of the meeting was mailed, or (ii) the day on which such public
disclosure was made.
(b) A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before an annual meeting of
stockholders (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and any other
stockholders known by such stockholder to be supporting such proposal, (iii)
the class and number of bares of the Corporation which are beneficially owned
by such stockholder on. the date of such stockholder's notice and by any
other stockholders known by such stockholder to be supporting such proposal
on the date of such stockholder's notice, and (iv) any material interest of
the stockholder in such proposal.
(c) Notwithstanding anything in the By-laws to the contrary, no business
shall be conducted at a meeting of stockholders except in accordance with the
procedures set forth in this Section 2.10. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that the
business was not properly brought before the meeting in accordance with the
procedures prescribed by the By-laws, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought before
the meeting shall not be transacted.
SECTION 2.11. Notwithstanding Section 2.07(e) of these By-laws, at all
meetings of the stockholders, any matter properly brought before the meeting
by a stockholder in accordance with Section 2.10 of these By-laws shall be
decided by the vote of a majority of the total quorum. For purposes of the
foregoing, an abstention from voting on such a matter or a broker non-vote
shall have the same legal effect as a vote "against" the matter.
ARTICLE 3.
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business, property and affairs of the
Corporation shall be managed by the Board of Directors.
SECTION 3.02. Number, Qualifications and Term of Office. (a) The number
of directors of the Corporation which shall constitute the whole Board of
Directors shall be such number, not less than one nor more than nine as from
time to time shall be fixed by the Board of Directors. (b) A director need
not be a stockholder. Each director shall hold office until the annual
meeting of the stockholders next following his election and until his
successor shall have been elected and shall qualify, or until his death, or
until he shall resign, or until he shall have been removed in the manner
hereinafter provided.
4
<PAGE>
SECTION 3.03. Election of Directors. At each meeting of the stockholders
for the election of directors at which a quorum is present, the persons, not
exceeding the authorized number of directors, receiving the greatest number
of votes of the stockholders entitled to vote thereon, present in person or
by proxy, shall be the directors. In the case of any increases in the number
of directors, the additional director or directors may be elected either at
the meeting of the Board of Directors or of the stockholders at which each
increase is voted, or at any subsequent annual, regular or special meeting of
the Board of Directors or stockholders.
SECTION 3.04. Quorum and Manner of Acting. (a) Except as otherwise
provided by statute or by the Certificate of Incorporation, a majority of the
directors at the time in office shall constitute a quorum for the transaction
of business at any meeting and the affirmative action of a majority of the
directors present at any meeting at which a quorum is present shall be
required for the taking of any action by the Board of Directors. (b) In the
event one or more of the directors shall be disqualified to vote at such
meeting, then the required quorum shall be reduced by one for each such
director so disqualified; provided, however, that in no event shall the
quorum as adjusted be less than one third of the total number of directors.
(c) In the absence of a quorum at any meeting of the Board such meeting need
not be held; or a majority of the directors present thereat or, if no
director be present, the Secretary may adjourn such meeting from time to time
until a quorum shall be present. Notice of any adjourned meeting need not be
given.
SECTION 3.05. Offices, Place of Meeting and Records. The Board of
Directors may hold meetings, have an office or offices and keep the books and
records of the Corporation at such place or places within or without the
State of Delaware as the Board may from time to time determine. The place of
meeting shall be specified or fixed in the respective notices or waivers of
notice thereof, except where otherwise provided by statute, by the
Certificate of Incorporation or these By-Laws.
SECTION 3.06. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of
other business, as soon as practicable following each annual election of
directors. Such meeting shall be called and held at the place and time
specified in the notice or waiver of notice thereof as in the case of a
special meeting of the Board of Directors.
SECTION 3.07. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such places and at such times as the Board shall
from time to time by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting is to be
held, then the meeting which would otherwise be held on that day shall be
held at said place at the same hour on the next succeeding business day.
Notice of regular meetings need not be given.
SECTION 3.08. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the President or by any two of the
directors. Notice of each such meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least two
days before the day on which the meeting is to be held, or shall be sent to
him at his residence or at such place of business by telegraph, cable or
other available means, or shall be delivered personally or by telephone, not
later than one day before the day on which the meeting is to be held. Each
such notice shall state the time and place of the meeting but need not state
5
<PAGE>
the purposes thereof except as otherwise herein expressly provided. Notice
of any such meeting need not be given to any director, however, if waived by
him in writing or by telegraph, cable or any other available method, whether
before or after such meeting shall be held, or if he shall be present at such
meeting.
SECTION 3.09. Organization. At each meeting of the Board of Directors
the President or, in his absence, a director chosen by a majority of the
directors present, shall act as chairman. The Secretary or, in his absence
an Assistant Secretary or, in the absence of the Secretary and all Assistant
Secretaries, a person whom the chairman of such meeting shall appoint shall,
act as secretary of such meeting and keep the minutes thereof.
SECTION 3.10. Order of Business. At all meetings of the Board of
Directors business shall be transacted in the order determined by the Board.
SECTION 3.11. Removal of Directors. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, any director may be
removed, either with or without cause, at any time, by the affirmative vote
of the holders of record of a majority of the issued and outstanding stock
entitled to vote for the election of directors of the Corporation given at a
special meeting of the stockholders called and held for the purpose; and the
vacancy in the Board caused by any such removal may be filled by such
stockholders at such meetings in the manner hereinafter provided or, if the
stockholders at such meeting shall fail to fill such vacancy, as in these By-
Laws provided.
SECTION 3.12. Resignation. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of
Directors, the President, any Vice President or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective.
SECTION 3.13. Vacancies. Any vacancy in the Board of Directors caused by
death, resignation, removal, disqualification, an increase in the number of
directors, or any other cause may be filled by majority action of the
remaining directors then in office, though less than a quorum, or by the
stockholders of the Corporation at the next annual meeting or any special
meeting called for the purpose, and each director so elected shall hold
office until the next annual election of directors and until his successor
shall be duly elected and qualified or until his death or until he shall
resign or shall have been removed in the manner herein provided.
SECTION 3.14. Compensation. Each director, in consideration of his
serving as such, shall be entitled to receive from the Corporation such
amount per annum or such fees for attendance at directors' meetings, or both,
as the Board of Directors shall from time to time determine, together with
reimbursement for the reasonable expenses incurred by him in connection with
the performance of his duties; provided that nothing herein contained shall
be construed to preclude any director from serving the Corporation or its
subsidiaries in any other capacity and receiving proper compensation
therefor.
6
<PAGE>
ARTICLE 4.
COMMITTEES
SECTION 4.01. Executive Committee. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board, appoint an
Executive Committee to consist of not less than two nor more than five
members of the Board of Directors, including the President, and shall
designate one of the members as its chairman. Notwithstanding any limitation
on the size of the Executive Committee, the Committee may invite members of
the Board to attend one at a time at its meetings. For the purpose of the
meeting he so attends, the invited director shall be entitled to vote on
matters considered at such meeting and shall receive the Executive Committee
fee for such attendance. At anytime one additional director may be invited
to an Executive Committee meeting in addition to the rotational invitee and
in such case such additional invitee shall also be entitled to vote on
matters considered at such meeting and shall receive the Executive Committee
fee for such attendance.
Each member of the Executive Committee shall hold office, so long as he
shall remain a director, until the first meeting of the Board of Directors
held after the next annual meeting of the Board of Directors held after the
next annual election of directors and until his successor is duly appointed
and qualified. The chairman of the Executive Committee or, in his absence, a
member of the Committee chosen by a majority of the members present shall
preside at meetings of the Executive Committee and the Secretary or an
Assistant Secretary of the Corporation, or such other person as the Executive
Committee shall from time to time determine, shall act as secretary of the
Executive Committee.
The Board of Directors, by action of the majority of the whole Board,
shall fill vacancies in the Executive Committee.
SECTION 4.02. Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee shall have and may exercise all
of the powers of the Board of Directors in all cases in which specific
directions shall not have been given by the Board of Directors.
SECTION 4.03. Procedure; Meetings; Quorum. The Executive Committee shall
fix its own rules of procedure subject to the approval of the Board of
Directors, and shall meet at such times and at such place or places as may be
provided by such rules. At every meeting of the Executive Committee the
presence of a majority of all the members shall be necessary to constitute a
quorum and the affirmative vote of a majority of the members present shall be
necessary for the adoption by it of any resolution. In the absence of a
quorum at any meeting of the Executive Committee such meeting need not be
held, or a majority of the members present thereat or, if no members be
present, the secretary of the meeting may adjourn such meeting from time to
time until a quorum be present.
SECTION 4.04. Compensation. Each member of the Executive Committee shall
be entitled to receive from the Corporation such fee, if any, as shall be
fixed by the Board of Directors, together with reimbursement for the
reasonable expenses incurred by him in connection with the performance of his
duties.
SECTION 4.05. Other Board Committees. The Board of Directors may from
time to time, by resolution passed by a majority of the whole Board,
7
<PAGE>
designate one or more committees in addition to the Executive Committee, each
committee to consist of two or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution or in the By-Laws of
the Corporation, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation.
A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall have power
to change the members of any committee at any time, to fill vacancies and to
discharge any such committee, either with or without cause, at any time.
SECTION 4.06. Alternates. The President may designate one or more
directors as alternate members of any committee who may act in the place and
stead of members who temporarily cannot attend any such meeting.
SECTION 4.07. Additional Committees. The Board of Directors may from
time to time create such additional committees of directors, officers,
employees or other persons designated by it (or any combination of such
persons) for the purpose of advising the Board, the Executive Committee and
the officers and employees of the Corporation in all such matters as the
Board shall deem advisable and with such functions and duties as the Board
shall by resolutions prescribe.
A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall have the
power to change the Members of any committee at any time, to fill vacancies
and to discharge any such committee, either with or without cause, at any
time.
ARTICLE 5.
ACTION BY CONSENT
SECTION 5.01. Consent by Directors. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if prior to such action a written consent
thereto is signed by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Board or such committee.
SECTION 5.02. Consent by Stockholders. Any action required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting
upon the written consent of the holders. of shares of stock entitled to vote
who hold the number of shares which in the aggregate are at least equal to
the percentage of the total vote required by statute or the Certificate of
Incorporation or these By-Laws for the proposed corporate action.
ARTICLE 6.
OFFICERS
SECTION 6.01. Number. The principal officers of the Corporation shall be
a President, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, one or more Vice Presidents (the number thereof and
variations in title to be determined by the Board of Directors), a Treasurer
and a Secretary.
8
<PAGE>
SECTION 6.02. Election, Qualifications and Term of Office. Each officer
of the Corporation, except such officers as may be appointed in accordance
with the provisions of Section 6.03, shall be elected annually by the Board
of Directors and shall hold office until his successor shall have been duly
elected and qualified, or until his death, or until he shall have resigned or
shall have been removed in the manner herein provided. The Chairman of the
Board and the President shall be and remain directors.
SECTION 6.03. Other Officers. The Corporation may have such other
officers, agents, and employees as the Board of Directors may deem necessary,
including a Controller, one or more assistant Controllers, one or more
Assistant Treasurers and one or more Assistant Secretaries, each of whom
shall hold office for such period, have such authority, and perform such
duties as the Board of Directors or the President may from time to time
determine. The Board of Directors may delegate to any principal officer the
power to appoint or remove any such subordinate officers, agents, or
employees.
SECTION 6.04. Removal. Any officer may be removed, either with or
without cause, by the vote of a majority of the whole Board of Directors or,
except in case of any officer elected by the Board of Directors, by any
committee of officers upon whom the power of removal may be conferred by the
Board of Directors.
SECTION 6.05. Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors or the President. Any such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 6.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-Laws
for regular election or appointment to such office.
SECTION 6.07. Chief Executive Officer. The Chief Executive Officer shall
preside at all meetings of the Board of Directors. Subject to definition by
the Board of Directors, he shall have general executive powers and such
specific powers and duties as from time to time may be conferred upon or
assigned to him by the Board of Directors.
SECTION 6.08. President. Subject to the powers of the Chief Executive
Officer, the President shall have general executive powers and shall perform
such duties as from time to time may be conferred upon or assigned to him by
the Board of Directors or the Chief Executive Officer. In the absence of the
Chief Executive Officer, the President shall preside at meetings of the Board
of Directors.
SECTION 6.09. Chief Operating Officer. Subject to the powers of the
Chief Executive Officer and the President, the Chief Operating Officer shall
have general executive powers, including operational authority over the
Corporation's divisions, and shall perform such duties as from time to time
may be conferred upon or assigned to him by the Chief Executive Officer or
the Board of Directors.
SECTION 6.10. Vice President. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the Executive Committee
may from time to time prescribe or as shall be assigned to him by the
President.
9
<PAGE>
SECTION 6.11. Chief Financial Officer. The Chief Financial Officer shall
have charge and custody of, and be responsible for, all funds and securities
of the Corporation, and shall deposit all such funds to the credit of the
Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of these By-Laws; he shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors or the Executive Committee, making proper vouchers for such
disbursements, and shall render to the Board of Directors or the
stockholders, whenever the Board may require him so to do, a statement of all
his transactions as Chief Financial Officer or the financial condition of the
Corporation; and, in general, he shall perform all the duties as from time to
time may be assigned to him by the Board of Directors, any committee of the
Board designated by it so to act or the President.
SECTION 6.12. Secretary. The Secretary shall record or cause to be
recorded in books provided for the purpose the minutes of the meetings of the
stockholders, the Board of Directors, and all committees of which a secretary
shall not have been appointed; shall see that all notices are duly given in
accordance with the provisions of these By-Laws and as required by law; shall
be custodian of all corporate records (other than financial) and of the seal
of the Corporation and see that the seal is affixed to all documents the
execution of which on behalf of the Corporation under its seal is duly
authorized in accordance with the provisions of these By-Laws; shall keep, or
cause to be kept, the list of stockholders as required by Section 2.09, which
include the post-office addresses of the stockholders and the number of
shares held by them, respectively, and shall make or cause to be made, all
proper changes therein, shall see that the books, reports, statements,
certificates and all other documents and records required by law are properly
kept and filed; and, in general, shall perform all duties incident to the
office of Secretary and such other duties as may from time to time be
assigned to him by the Board of Directors, the Executive Committee or the
President.
SECTION 6.13. Treasurer. The Treasurer shall have such powers and
perform such duties as the Board of Directors or the Executive Committee may
from time to time prescribe or shall be assigned to him by the President or
Chief Financial Officer.
SECTION 6. 14. Salaries. The salaries of the principal officers of the
Corporation shall be fixed from time to time by the Board of Directors or a
special committee thereof, and none of such officers shall be prevented from
receiving a salary by reason of the fact that he is a director of the
Corporation.
ARTICLE 7.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Right to Indemnification. Each person who was or is made a party, or
is threatened to be made a party to, or is involved in any threatened,
pending or completed action, suit or proceeding, whether criminal,
administrative or investigative, by reason of the fact that the person is the
legal representative, is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified
10
<PAGE>
and held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment)
against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in
connection therewith; provided, however, that the Corporation shall indemnify
any such person seeking indemnity in connection with any action, suit or
proceeding (or part thereof) initiated by such person only if such action,
suit or proceeding (or part thereof) was authorized by the Board of Directors
of the Corporation. Such right shall be a contract right and shall include
the right to be paid by the Corporation expenses incurred in defending any
such proceeding in advance of its final disposition; provided, however, that,
if the Delaware General Corporation Law requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of such proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that
such director or officer is not entitled to be indemnified under this Article
or otherwise.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) is
not paid in full by the Corporation within ninety days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim.
If successful in whole or in part in such suit, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered to the
Corporation) that the claimant has not met the standards of conduct which
make it permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because claimant has met the applicable standards of conduct
set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant had not met
such applicable standards of conduct, shall be a defense to the action or
create a presumption that claimant had not met the applicable standards of
conduct.
(c) Non-Exclusivity of Rights. The rights conferred on any person by
paragraphs (a) and (b) shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Corporation's Certificate of Incorporation, By-Laws, agreement, vote of
stockholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any such director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
11
<PAGE>
other enterprise against any such expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
ARTICLE 8.
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS. ETC.
SECTION 8.01. Execution of Contracts. Unless the Board of Directors or
the Executive Committee shall otherwise determine, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, any Vice President or the Treasurer, and the Secretary or any
Assistant Secretary, may enter into any contract or execute any contract or
other instrument, the execution of which is not otherwise specifically
provided for, in the name and on behalf of the Corporation. The Board of
Directors, or any committee designated thereby with power so to act, except
as otherwise provided in these By-Laws, may authorize any other or additional
officer or officers or agent or agents of the Corporation, and such authority
may be general or confined to specific instances. Unless authorized so to do
by these By-Laws or by the Board of Directors or by any such committee, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to
render it liable pecuniary for any purpose or to any amount.
SECTION 8.02. Loans. No loan shall be contracted on behalf of the
Corporation, and no evidence of indebtedness shall be issued, endorsed or
accepted in its name, unless authorized by the Board of Directors or
Executive Committee or other committee designated by the Board to act. Such
authority may be general or confined to specific instances. When so
authorized, the officer or officers thereunto authorized may effect loans and
advances at any time for the Corporation from any bank, trust company or
other institution, or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes or other
evidences of indebtedness of the Corporation, and, when authorized as
aforesaid, as security for the payment of any and all loans, advances,
indebtedness and liabilities of the Corporation, may mortgage, pledge,
hypothecate or transfer any real or personal property at any time owned or
held by the Corporation, and to that end execute instruments of mortgage or
pledge or otherwise transfer such property.
SECTION 8.03. Checks, Drafts, etc. All checks, drafts, bills of exchange
or other orders for the payment of money, obligations, notes, or other
evidence of indebtedness, bills of lading, warehouse receipts and insurance
certificates of the Corporation, shall be signed or endorsed by such officer
or officers, agent or agents, attorney or attorneys, employee or employees,
of the Corporation as shall from time to time be determined by resolution of
the Board of Directors or Executive Committee or other committee designated
by the Board so to act.
SECTION 8.04. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board
of Directors or Executive Committee or other committee designated by the
Board so to act may from time to time designate, or as may be designated by
any officer or officers or agent or agents of the Corporation to whom such
power may be delegated by the Board of Directors or Executive Committee or
other committee designated by the Board so to act and, for the purpose of
such deposit and for the purposes of collection for the account of the
Corporation may be endorsed, assigned and delivered by any officer, agent or
12
<PAGE>
employee of the Corporation or in such other manner as may from time to time
be designated or determined by resolution of the Board of Directors or
Executive Committee or other committee designated by the Board so to act.
SECTION 8.05. Proxies in Respect of Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board of Directors or
the Executive Committee or other committee so designated to act by the Board,
the President or any Vice President may from time to time appoint an attorney
or attorneys or agent or agents of the Corporation, in the name and on behalf
of the Corporation, to cast the votes which the Corporation may be entitled
to cast as the holder of stock or other securities in any other corporation,
association or trust any of whose stock or other securities may be held by
the Corporation, at meetings of the holders of the stock or other securities
of such other corporation, association or trust, or to consent in writing, in
the name of the Corporation as such holder, to any action by such other
corporation, association or rust, and may instruct the person or persons so
appointed as to the manner. .of casting such votes or giving such consent,
and may execute or cause to be executed in the name and on behalf of the
Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the
premises.
ARTICLE 9.
BOOKS AND RECORDS
SECTION 9.01. Place. The books and records of the Corporation may be
kept at such places within or without the State of Delaware as the Board of
Directors may from time to time determine. The stock record books and the
blank stock certificate books shall be kept by the Secretary or by any other
officer or agent designated by the Board of Directors.
SECTION 9.02. Addresses of Stockholders. Each stockholder shall furnish
to the Secretary of the Corporation or to the transfer agent of the
Corporation an address at which notices of meetings and all other corporate
notices may be served upon or mailed to him, and if any stockholder shall
fail to designate such address, corporate notices may be served upon him by
mail, postage prepaid, to him at his post-office address last known to the
Secretary or to the transfer agent of the Corporation or by transmitting a
notice thereof to him at such address by telegraph, cable or other available
method.
SECTION 9.03. Record Dates. The Board of Directors may fix in advance a
date, not exceeding sixty days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for
the allotment of any rights, or the date when any change or conversion or
exchange of capital stock of the Corporation shall go into effect, or a date
in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting or any adjournment thereof, or entitled to receive payment of
any such dividend or to any such allotment of rights, or to exercise the
rights in respect of any change, conversion or exchange of capital stock of
the Corporation, or to give such consent, and in each such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to notice of, or to vote at, such meeting
and any adjournment thereof, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
13
<PAGE>
SECTION 9.04. Audit of Books and Accounts. The books and accounts of the
Corporation shall be audited at least once in each fiscal year by certified
public accountants of good standing selected by the Board of Directors.
ARTICLE 10.
SHARES AND THEIR TRANSFER
SECTION 10.01. Certificates of Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him in the Corporation and designating the class of stock to
which such shares belong, which shall otherwise be in such form as the Board
of Directors shall prescribe. Every such certificate shall be signed by the
President or a Vice President, and the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary of the Corporation; provided,
however, that where such certificate is signed or countersigned by a transfer
agent or registrar the signatures of such officers of the Corporation and the
seal of the Corporation may be in facsimile form. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures
shall have been used on, any such certificate or certificates shall cease to
be such officer or officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate or certificates shall have
been delivered by the Corporation, such certificate or certificates may
nevertheless be issued and delivered by the Corporation as though the person
or persons who signed such certificate or whose facsimile signature or
signatures shall have been used thereof had not ceased to be such officer or
officers of the Corporation.
SECTION 10.02. Record. A record shall be kept of the name of the person,
firm or corporation owning the stock represented by each certificate for
stock of the Corporation issued, the number of shares represented by each
such certificate, and the date thereof, and, in case of cancellation, the
date of cancellation. The person in whose name shares of stock stand on the
books of the Corporation shall be deemed the owner thereof for all purposes
as regards the Corporation.
SECTION 10.03. Transfer of Stock. Transfers of shares of the stock of
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized, and on
the surrender of the certificate or certificates for such shares properly
endorsed.
SECTION 10.04. Transfer Agent and Registrar; Regulations. The Corporation
shall, if and whenever the Board of Directors or Executive Committee shall so
determine, maintain one or more transfer offices or agencies, each in charge
of a transfer agent designated by the Board of Directors, where the shares of
the capital stock of the Corporation shall be directly transferable, and also
if and whenever the Board of Directors shall so determine, maintain one or
more by the Board of Directors, where such shares of stock shall be
registered. The Board of Directors may make such rules and regulations as it
may deem expedient, not inconsistent with these By-Laws, concerning the
issue, transfer and registration of certificates for shares of the capital
stock of the Corporation.
SECTION 10.05. Lost, Destroyed or Mutilated Certificates. In case of the
alleged loss or destruction or the mutilation of a certificate representing
capital stock of the Corporation, a new certificate may be issued in place
thereof, in the manner and upon such terms as the Board of Directors may
prescribe.
14
<PAGE>
ARTICLE 11.
SEAL
The Board of Directors shall provide a corporate seal, which shall be in
the form of a circle and shall bear the name of the Corporation and the words
and figures "Incorporated 1985, Delaware.
ARTICLE 12.
FISCAL YEAR
The fiscal year of the Corporation shall commence on the first day of
January, except as otherwise provided from time to time by the Board of
Directors.
ARTICLE 13.
WAIVER OF NOTICE
Whenever any notice whatever is required to be given by statute, these By-
Laws or the Certificate of Incorporation, a waiver thereof in writing, signed
by the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto.
ARTICLE 14.
AMENDMENTS
These By-Laws may be altered, amended or repealed, in whole or in part,
and new By-Laws may be adopted, in whole or in part, by the affirmative vote
of a majority of the whole Board of Directors given at any meeting. No
amendment may be made unless the By-Laws, as amended, is consistent with the
requirements of law and of the Certificate of Incorporation.
15
<PAGE>
Exhibit 4(g)(3)
Amendment No. 3 to Rights Agreement
Amendment, dated as of August 16, 1999, to the Rights Agreement, dated as
of August 6, 1991, as amended February 16, 1993 and February 24, 1996 (the
"Rights Agreement"), between Wellman, Inc., a Delaware corporation (the
"Company"). and Continental Stock Transfer & Trust Company of New Jersey, a
New York corporation (the "Rights Agent").
Pursuant to Section 21 of the Rights Agreement, the Company may remove the
Rights Agent and appoint a successor to the Rights Agent. In accordance with
Section 21A of the Rights Agreement, the Company hereby removes Continental
Stock Transfer & Trust Company (formerly Continental Stock Transfer & Trust
Company of New Jersey) as Rights Agent and appoints First Union National Bank
as successor to the Rights Agent.
In consideration of the foregoing and the mutual agreements set forth
herein, the parties hereto agree as follows:
I. The definition of Rights Agent in the first paragraph of the Rights
Agreement is hereby amended by replacing the name "Continental Stock
Transfer & Trust Company of New Jersey" in each place where it
appears with the name "First Union National Bank".
II. First Union National Bank hereby assumes all of the duties and
obligations of the Rights Agent under the Rights Agreement.
III. This Amendment shall be governed by and construed in accordance with
the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such
State.
IV. This Amendment may be executed in any number of counterparts, each of
which shall for all purposes be deemed to be an original and all such
counterparts shall together constitute one and the same instrument.
V. Terms not defined herein shall, unless the context otherwise
requires, have the meanings assigned to such terms in the Rights
Agreement.
VI. In all respects not inconsistent with the terms and provisions of
this Amendment, the Rights Agreement is hereby ratified, adopted,
approved and confirmed. In executing and delivering this Amendment,
the Rights Agent shall be entitled to all the privileges and
immunities afforded to the Rights Agent under the terms and
conditions of the Rights Agreement.
VII. If any term, provision, covenant or restriction on this Amendment is
held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment, and of the
Rights Agreement, shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and attested, all as of the date and year first above written.
WELLMAN, INC.
By:/s/ Keith R. Phillips
-----------------------
Keith R. Phillips
Chief Financial Officer
FIRST UNION NATIONAL BANK
By:/s/Kenneth Staab
-------------------------
Kenneth Staab
Vice President
2
<PAGE>
Exhibit 10(h)
WELLMAN, INC.
Amended and Restated
Management Incentive Compensation Plan for the Executive Group
ARTICLE I
NAME
1.1 The Plan shall be known as the "Wellman, Inc. Management Incentive
Compensation Plan for the Executive Group."
ARTICLE II
STATEMENT OF PURPOSE
2.1 The purpose of the Plan is to provide a system of incentive
compensation that will promote the maximization of shareholder value over the
long-term. In order to align management incentives with shareholder
interests, this Plan will tie incentive compensation to economic value added
and thereby reward management for increasing shareholder value.
ARTICLE III
DEFINITIONS
3.1 Plan Year means the fiscal year of the Company which is the calendar
year.
3.2 Effective Date means (a) January 1, 1992 with respect to the original
Plan and (b) January 1, 1999 with respect to the amended and restated Plan.
3.3 Committee means the Compensation Committee of the Board of Directors of
Wellman, Inc. or any successor committee.
3.4 Cause in the context of a termination of employment means only one or
more of the following: (i) the commission in the course of employment of
any dishonest or fraudulent act; (ii) a conviction of a felony (from which,
through lapse of time or otherwise, no successful appeal shall have been
made) whether or not committed in the course of employment; (iii) the willful
refusal to carry out reasonable instructions of the Board of Directors of
Wellman, Inc. which has a material adverse effect upon the Company or any of
its subsidiaries; and (iv) the willful disclosure of any trade secrets or
material confidential corporate information to persons not authorized to know
same.
3.5 Change of Control shall be deemed to have occurred when (i) any
"person" or "group" (as such terms are used in Sections 13(d)(3) and 14
(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than the Company, any of its subsidiaries, or any employee
benefit plan of the Company or of any subsidiary, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or more
of the combined voting power of the Company's then outstanding Securities; or
(ii) during any period of two consecutive years (not including any period
prior to the Effective Date), individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-
thirds of the directors of the Company then still in office who were
directors of the Company at the beginning of the period.
<PAGE>
3.6 Company means Wellman, Inc., a Delaware corporation.
ARTICLE IV
PLAN ADMINISTRATION
4.1 The Plan shall be administered by the Committee which shall have
exclusive and absolute authority and discretion to interpret the Plan, to
establish and modify rules for the administration of the Plan, to impose such
conditions and restrictions as it determines appropriate with respect to the
Plan and to take such other actions and make such other determinations as it
may deem necessary or advisable for the implementation and administration of
the Plan. All actions taken and all interpretations and determinations made
by the Committee in good faith shall be final and binding upon the
participants, the Company and all other interested persons. The Committee
may delegate certain responsibilities to the Chief Executive Officer or Chief
Operating Officer including the responsibility to assign objectives, targets,
target percentages or other administrative responsibilities, as the Committee
so designates. No member of the Committee shall be personally liable for any
action, determination or interpretation made in good faith with respect to
the Plan.
4.2 This Plan may be amended, suspended or terminated any time at the sole
discretion of the Board of Directors of Wellman, Inc., provided, however,
that no such change in the Plan shall be effective to eliminate or diminish
the distribution of any award earned by a Plan participant before the date of
such amendment, suspension or termination. Notice of any such amendment,
suspension or termination shall be given promptly to each Plan participant.
ARTICLE V
PARTICIPATION
5.1 The participants in the Plan consist of those employees who are
executives identified by the Committee.
ARTICLE VI
DESCRIPTION OF PLAN OPERATION
6.1 Each Plan Year the Committee will assign to each Plan participant bonus
targets directly related to corporate and, for operating executives, their
operating unit's profit and individual strategic objectives. Profit will be
based on operating profit less a capital charge related to the net assets
employed to generate such profit.
A target percentage will also be assigned to each Plan participant by the
Committee annually (the "target percentage"). The target percentage will be
the percentage of salary a Plan participant will be eligible to earn in bonus
if the Plan participant's targets are met.
The amount of the bonus payable hereunder to each Plan participant will be
determined by the Committee in its sole discretion.
Bonuses hereunder will be paid on or before March 15 following the Plan
Year. Bonus earnings over the target percentage amount must be deferred as
mandatory deferred compensation for the purchase of restricted stock for
eligible participants in the Wellman, Inc. Deferred Compensation and
Restricted Stock Plan.
2
<PAGE>
ARTICLE VII
CHANGE IN STATUS DURING THE PLAN YEAR
7.1 Disability. A participant shall be deemed "permanently disabled" if,
because of physical or mental condition, the participant is unable for a
period of at least one year to perform the principal duties of his/her
occupation as determined by a Company-approved physician. A participant
shall receive a pro rata bonus based on the number of full months worked for
the year in which the disability started. The payment shall be made at the
regular time for making bonus payments.
7.2 Death. A participant's beneficiary, as designated for the life
insurance program, shall receive a pro rata bonus based on the number of full
months worked for the Plan Year in which they die. The payment will be made
at the regular time for making bonus payments.
7.3 Retirement. A participant who retires from the Company upon or after
reaching age 55 shall receive a pro rata bonus based on the number of full
months worked for the Plan Year in which he/she retires. The payment will be
made at the regular time for making bonus payments.
7.4 Resignation or Termination for Cause. Termination of employment for
Cause or voluntary termination by a participant results in the forfeiture of
any award for the Plan Year in which employment terminates.
7.5 Termination without Cause. A participant who is terminated for reasons
other than those described above will receive a pro rata portion of that Plan
Year's award. The payment will be made at the regular time for making bonus
payments or as mutually agreed by the Committee and the terminated
participant.
7.6 No Guarantee. Participation in the Plan provides no guarantee that a
bonus under the Plan will be paid in any Plan Year. Similarly, the payment
of a bonus under the Plan in one Plan Year or selection as a participant is
no guarantee that a bonus under the Plan will be paid in any subsequent Plan
Year.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Withholding of Taxes. The Company shall have the right to withhold the
amount of taxes which, in the determination of the Company, are required to
be withheld under law with respect to any amount due or paid under the Plan.
8.2 Expenses. All expenses and costs in connection with the adoption and
administration of the Plan shall be borne by the Company.
8.3 No Prior Right or Offer. Except and until expressly granted pursuant
to the Plan, nothing in the Plan shall be deemed to give any employee any
contractual or other right to participate in the benefits of the Plan.
8.4 Disputed Claims for Benefits. In the event a participant (a
"claimant") has a dispute with respect to any of the benefits provided
hereunder, the claimant shall submit evidence satisfactory to the Committee
of facts establishing his entitlement to a payment under the Plan. Any claim
with respect to any of the benefits provided under the Plan shall be made in
writing within ninety (90) days of the annual Plan payment date. Failure by
3
<PAGE>
the claimant to submit his or her claim within such ninety (90) day period
shall bar the claimant from any claim for benefits under the Plan. In
reaching its decision, the Committee shall have complete discretionary
authority to determine all questions arising in the interpretation and
administration of the Plan, to construe the terms of the Plan, including any
doubtful or disputed terms and the eligibility of a participant for benefits.
8.5 Rights Personal to Employee. Any rights provided to an employee under
the Plan shall be personal to such employee, shall not be transferable
(except by will or pursuant to the laws of descent or distribution), and
shall be exercisable, during his or her lifetime, only by such employee.
8.6 Confidentiality. Specific details of any calculations under the Plan
must remain confidential and because of the individuality of the awards,
participants should not share information with each other.
8.7 Wellman, Inc. Profit Sharing Plan. Participants in the Wellman, Inc.
Management Incentive Compensation Plan are not eligible to participate in the
Wellman, Inc. Profit Sharing Plan.
8.8 Change of Control. Upon any Change of Control, unless the Committee in
its sole discretion determines otherwise prior to the Change of Control, the
benefits of the Plan will be paid to all participants within 45 days of the
Change of Control date. Plan payments will be based on the full Plan Year's
forecasted results as defined in the most recent financial forecast presented
to the Board prior to the Change of Control date using the most recent annual
base salary of each participant.
8.9 No Continued Employment. Neither the establishment of the Plan, the
assignment of targets nor the grant of an award hereunder shall be deemed to
constitute an express or implied contract of employment for any period of
time or in any way abridge the rights of the Company to determine the terms
and conditions of employment or to terminate the employment of any employee
with or without cause at any time.
8.10 No Vested Rights. Except as otherwise provided herein, no employee or
other person shall have any claim or right (legal, equitable, or otherwise)
to any award, allocation, or distribution and no officer or employee of the
Company or any other person shall have any authority to make representations
or agreements to the contrary. No interest conferred herein to a participant
shall be assignable or subject to claim by a participant's creditors.
8.11 Not Part of Other Benefits. The benefits provided in this Plan shall
not be deemed a part of any other benefit provided by the Company to its
employees. The Company assumes no obligation to Plan participants except as
specified herein. This is a complete statement of the terms and conditions
of the Plan.
4
<PAGE>
Exhibit 10(o)
WELLMAN, INC.
DEFERRED COMPENSATION AND RESTRICTED STOCK PLAN
Effective as of February 17, 1998,
and As Amended, Effective as of December 1, 1998
SECTION I. PURPOSE OF THE PLAN
1.1 Purpose of the Plan. Wellman, Inc. (the "Company") has adopted a
Statement of Policy with respect to Stock Ownership of Directors and
Officers (the "Statement of Policy") to promote and create significant
ownership of the Company's Common Stock by members of the Company's Board
of Directors and senior management. The Statement of Policy is intended
to promote the interests of the Company and its stockholders by increasing
the ownership of Common Stock by the directors and senior management so
that, as stockholders themselves, those individuals will be more likely to
represent the views and interests of other stockholders and to motivate
them to manage the Company for long-term growth and profitability. This
Plan has been adopted to implement and promote the Statement of Policy and
to enhance the Company's ability to attract and retain persons who will
make substantial contributions to the Company's future success.
1.2 Effective Date. The Plan is effective on February 17, 1998 (the
"Effective Date"), subject to approval and ratification by the Company's
stockholders no later than September 30, 1998, and as amended, shall be
effective as of December 1, 1998, and will continue in effect until
terminated by the Board. Compensation may be deferred, Restricted Stock
Awards granted and Restricted Stock may be purchased and issued under the
Plan prior to stockholder approval, subject to the condition that such
compensation shall be paid to Participants and grants and purchases shall
be canceled and any shares shall be returned to the Company by the
affected participants in the event that the stockholders have not approved
the Plan by September 30, 1998.
SECTION II. DEFINITIONS
2.1 Annual Bonus means the cash portion of any Incentive Award.
2.2 Base Salary means the annual salary paid by the Company to a
management Participant for performance of his job excluding any benefits,
Incentive Award, bonuses or any component of pay other than the base
amount.
2.3 Beneficiary means any person, estate or trust entitled to receive
the certificate or certificates representing shares of Common Stock upon
which the restrictions have lapsed upon the death of a Participant,
including contingent Beneficiaries.
2.4 Board means the Board of Directors of the Company.
2.5 Business Day means any day on which the New York Stock Exchange is
open and the Common Stock is traded.
2.6 Cause in the context of a termination of employment means only one
or more of the following: (i) the commission in the course of employment
of any dishonest or fraudulent act; (ii) a conviction of a felony (from
which, through lapse of time or otherwise, no successful appeal shall have
been made) whether or not committed in the course of employment; (iii) the
<PAGE>
willful refusal to carry out reasonable instructions of the Board which
has a material adverse affect upon the Company or any of its subsidiaries;
and (iv) the willful disclosure of any trade secrets or material
confidential corporate information to persons not authorized to know same.
2.7 Change in Control shall be deemed to have occurred when (i) any
"person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than the Company, any of its subsidiaries, or any employee
benefit plan of the Company or of any subsidiary, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
securities; or (ii) during any period of two consecutive years (not
including any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new
director was approved by a vote of at least two-thirds of the directors of
the Company then still in office who were directors of the Company at the
beginning of the period.
2.8 Committee means the Compensation Committee of the Board or any
successor committee.
2.9 Common Stock means the Common Stock, $.001 par value, of Wellman,
Inc.
2.10 Company means Wellman, Inc. and its subsidiaries with domestic
operations.
2.11 Disability shall have the meaning specified in Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended.
2.12 Effective Date shall have the meaning set forth in subsection 1.2
hereof.
2.13 Exercise Price means ( i ) for Restricted Stock Awards granted after
1998, 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 last day of
the prior calendar quarter and on each of the fifteen (15) days before
and after that date, and (ii) for Restricted Stock Awards granted in
1998, 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 the
Plan is approved by the stockholders and on each of the fifteen (15)
Business Days before and after that date.
2.14 Fair Market Value means 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 termination of employment or service of a Participant and on
each of the fifteen (15) Business Days before and after that date.
2.15 Incentive Award means an award under any incentive plan (other than
a stock option plan and this Plan) designated by the Committee that
entitles the recipient to shares of Common Stock, cash or a combination of
Common Stock and cash.
2.16 Participant means a non-employee director of the Company, any
domestic executive officer listed in the Company's most recent Annual
2
<PAGE>
Report on Form 10-K or otherwise designated by the Committee, any other
member of management of the Company as designated by the Committee, or a
consultant to the Company selected to participate in the Plan by the
Committee.
2.17 Plan means this Wellman, Inc. Deferred Compensation and Restricted
Stock Plan, as it may be amended from time to time.
2.18 Restricted Period means the three year period commencing on the
January 1st of the year in which a Restricted Stock Award is granted
pursuant to this Plan during which the restrictions imposed by Section V
hereof shall apply; provided, however, that upon request of the
Participant at least six months before the expiration of the Restricted
Period (including any extended Restricted Period) and prior to termination
of employment (regardless of the reason for termination), the Restricted
Period may be extended for a period of not less than two years.
2.19 Restricted Stock means shares of Common Stock which are issued by
the Company under this Plan subject to forfeiture, restrictions on
transfer and such other restrictions as are set forth in Section V hereof
or as the Committee may determine in accordance with the provisions of
Section V of this Plan.
2.20 Restricted Stock Award means an award that provides for a
Participant to acquire one share of Restricted Stock on the date
compensation is deferred which is equal to the Exercise Price.
2.21 Retirement means retirement from the Company on or after 55 years of
age.
2.22 Subsidiary means a domestic corporation of which more than 50% of
the total combined voting power of all classes of stock entitled to vote
is owned, directly or indirectly, by Wellman, Inc.
Unless the context clearly requires otherwise, the masculine pronoun
whenever used shall include the feminine and neuter pronouns, the singular
shall include the plural and the plural shall include the singular.
SECTION III. GENERAL TERMS
3.1 Administration of the Plan. The Plan shall be administered by the
Committee which shall have exclusive and absolute authority and discretion
to interpret the Plan, to establish and modify rules for the
administration of the Plan, to impose such conditions and restrictions as
it determines appropriate with respect to the Plan and to take such other
actions and make such other determinations as it may deem necessary or
advisable for the implementation and administration of the Plan. All
actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Participants,
the Company and all other interested persons. No member of the Committee
shall be personally liable for any action, determination or interpretation
made in good faith with respect to the Plan.
3.2 Shares Subject to the Plan. The Common Stock to be issued as
Restricted Stock under the Plan may be either authorized but unissued
shares or treasury shares. The aggregate number of shares of Common Stock
which may be issued under the Plan may not exceed one million (1,000,000)
shares, subject, however, to the adjustments provided in subsection 3.3 in
the event of stock splits, stock dividends, exchanges of shares or the
3
<PAGE>
like occurring after the Effective Date. No Restricted Stock may be
issued under the Plan which would cause such maximum limit to be exceeded.
3.3 Adjustments. In the event of any stock dividend, stock split,
combination or exchange of shares, merger, consolidation, spin-off or
other distribution (other than normal cash dividend) of the Company assets
to stockholders, or any other change affecting shares or the Company's
capitalization, such adjustments as the Committee in its discretion may
deem appropriate to reflect such change or to fairly preserve the intended
benefits of the Plan shall be made. In addition, any shares issued by the
Company through the assumption or substitution of outstanding stock awards
or award commitments from an acquired company or other entity shall not
reduce the shares available for issuance under the Plan.
SECTION IV. DEFERRED COMPENSATION AND RESTRICTED STOCK AWARDS
4.1 Mandatory Deferred Compensation.
(a) Participants are required to defer the following amounts of
compensation earned after January 1, 1998:
(i) Non-employee directors of the Company must defer 50% of their
director's retainer fees;
(ii) Employees who are participants in the Wellman, Inc. Management
Incentive Compensation Plan must defer payment of any amounts earned over
the target percentage defined therein; and
(iii) At the discretion of the Committee and on terms determined by
the Committee, consultants may contractually commit to defer full or
partial payment of consulting fees.
The Participants will be granted Restricted Stock Awards as follows:
(i) Non-employee directors, on January 20th of 1998 and for each
year thereafter on the last day of each calendar quarter,
(ii) Participants in the Wellman, Inc. Management Incentive
Compensation Plan, when the amount earned over the target percentage is
determined; and
(iii) Consultants, as determined by the Committee.
(b) Each employee Participant who fails to achieve his targeted stock
ownership as provided in the Statement of Policy as of December 31st of
any year shall be required to defer his entire Annual Bonus earned in such
year and his Base Salary increase (if any) for the next year. Each
Director Participant who fails to achieve his targeted stock ownership as
provided in the Statement of Policy as of December 31st of any year shall
be required to defer the remainder of his director's retainer fees for the
next year. The Participant will be granted a Restricted Stock Award within
three months following the date he did not achieve his targeted stock
ownership.
4.2 Voluntary Deferred Compensation. (a) Not later than 45 days after
a Participant first becomes a Participant in the Plan and not later than
December 15 preceding the next full calendar year thereafter (i.e.,
December 15, 1998 for compensation earned in 1999), the Participant may
make an irrevocable election on a form provided by the Company to defer a
specified dollar amount of his Base Salary, Annual Bonus and any other
cash remuneration. Participants may only defer the following amounts:
(i) Participants who are employees may defer up to: (a) 100% of their
Base Salary for the period from April 1, 1998 to December 31, 1998 and
4
<PAGE>
100% of their Annual Bonus and any other cash remuneration earned in 1998
and (ii) 50% of their Base Salary, Annual Bonus and any other cash
remuneration in all future years.
(ii) Directors may defer up to 100% of their annual retainer, meeting
fees and other cash remuneration for the period from April 1, 1998 to
December 31, 1998 and in all future years.
The Participant will receive a Restricted Stock Award approximately 35
days after his election to defer compensation for 1998 and on the last day
of each calendar quarter of any year thereafter.
(b) For purposes of Section 4.1 and this Section 4.2, any Participant who
receives a hardship withdrawal from the Wellman, Inc. Retirement Plan or
the Wellman, Inc. Employee Stock Ownership Plan shall be prohibited from
having any deferred compensation contributions made to this Plan and all
others plans maintained by the Company for a twelve (12) month period
beginning as of the first day of the month following receipt of the
hardship withdrawal.
4.3 Termination of Directors Retirement and Deferred Compensation Plans.
Subject to the discretion of the Committee, non-employee director
Participants shall receive Restricted Stock as set forth below in
satisfaction of any amounts payable to them in connection with the
termination of the Wellman, Inc. Directors Retirement Plan and the
Wellman, Inc. Directors Deferred Compensation Plan. In the case of the
Directors Retirement Plan, the number of shares of Restricted Stock issued
in exchange for the accrued benefit as of December 31, 1997 shall be equal
to the accrued 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 the Plan is approved by the stockholders and on each
of the fifteen (15) Business Days before and after that date. In the case
of the Directors Deferred Compensation Plan, the number of shares of
Restricted Stock issued in exchange for the accrued benefit on the date
the plan is terminated shall be equal to the number of shares of phantom
stock held in the Directors Deferred Compensation Plan on the date this
Plan is approved by the stockholders.
SECTION V. RIGHTS AND TERMS OF RESTRICTED STOCK
5.1 Terms of Restricted Stock.
(a) Each Restricted Stock Award granted pursuant to the Plan will provide
for the exchange of the applicable Participant's deferred compensation for
Restricted Stock within fifteen (15) months after the date of grant. The
Restricted Stock shall be issued when a Participant's compensation is
actually deferred and exchanged for Restricted Stock pursuant to a
Restricted Stock Award. In the event a Participant is granted a
Restricted Stock Award and compensation is not actually deferred for
whatever reason, no Restricted Stock shall be issued.
(b) Each grant of a Restricted Stock Award pursuant to subsections 4.1
and 4.2 and each issuance of Restricted Stock pursuant to subsection 4.3
shall be embodied in an agreement signed by the Participant and the
Company (the "Agreement"). The Agreement (i) shall provide that the
Restricted Stock Award and any Restricted Stock issuable thereunder or
hereunder shall be subject to the provisions of the Plan, (ii) shall
provide that Participants who received Restricted Stock Awards pursuant to
subsections 4.1(b) and 4.2 shall not be able to sell stock (except shares
5
<PAGE>
acquired upon exercise of an option granted pursuant to a stock option
plan of the Company and disposed of within 30 days of such exercise)
during the period these Restricted Stock Awards are exercisable unless
they receive permission of the Committee (which will generally be granted
only if there are extenuating circumstances), and (iii) shall contain such
other provisions as the Committee may prescribe not inconsistent with the
Plan.
(c) All Restricted Stock Awards granted and Restricted Stock issued
pursuant to this Plan shall be subject to the following restrictions: (i)
a Participant shall not be entitled to delivery of a certificate
evidencing the shares of Restricted Stock until the expiration or
termination of the Restricted Period and the satisfaction of any and all
other conditions specified in the Agreement applicable to such shares of
Restricted Stock; (ii) none of the Restricted Stock Awards or shares of
Restricted Stock may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period and until the
satisfaction of any and all other conditions specified in the Agreement
applicable to such Restricted Stock; and (iii) any Restricted Stock Awards
or shares of Restricted Stock which are forfeited shall be returned to the
Company and all rights of the Participant with respect to such Restricted
Stock Awards or shares of Restricted Stock shall terminate without further
obligation on the part of the Company upon the occurrence of any of the
events set forth below in subsection 5.4.
5.2 Custody of Shares of Restricted Stock; Rights with Respect to Stock.
(a) Any certificates representing shares of Restricted Stock issued under
the Plan shall be issued in the Participant's name but shall be held by
the Company during the Restricted Period. The Company shall serve as
attorney-in-fact for the Participant during the Restricted Period with
full power and authority in the Participant's name to assign and convey to
the Company any shares of Restricted Stock held by the Company for such
Participant if the Participant forfeits the shares under the terms of the
Restricted Stock. Each certificate representing shares of Restricted Stock
may bear a legend referring to the Plan and the risk of forfeiture of the
shares and stating that such shares are nontransferable until all
restrictions have been satisfied and the legend has been removed.
(b) Upon the purchase of Restricted Stock pursuant to the Plan and the
issuance of a certificate or certificates representing such Restricted
Stock, the Participant shall thereupon be a stockholder and have all the
rights of a stockholder with respect to such shares, including the right
to vote and receive all dividends or other distributions made or paid with
respect to such shares; provided, however, that such Restricted Stock and
any new, additional or different securities the Participant may become
entitled to receive with respect to such Restricted Stock by virtue of a
stock split, dividend or other change in the corporate or capital
structure of the Company, shall be subject to the restrictions described
in subsection 5.1 hereof.
5.3 Distribution of Restricted Stock. If a Participant who receives
shares of Restricted Stock under the Plan remains in the continuous
employment or service of the Company during the entire Restricted Period
and otherwise does not forfeit such shares pursuant to subsection 5.4
hereof, all restrictions applicable to the shares of Restricted Stock
6
<PAGE>
shall lapse upon expiration of the Restricted Period, and a certificate or
certificates representing the shares of Common Stock that were granted to
the Participant in the form of shares of Restricted Stock shall be
delivered to the Participant.
5.4 Forfeiture.
(a) If a Participant's service or employment is terminated before the
expiration of the Restricted Period by the Company 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 held by the Company for such Participant shall lapse,
giving appropriate consideration to each individual situation, provided
that in no event shall the restrictions continue longer than those in
effect on the date of such termination. On each of the respective dates,
the certificate or certificates representing the shares of Common Stock
upon which the restrictions have lapsed shall be delivered to the
Participant (or in the event of the Participant's death, to his
Beneficiary).
(b) If a Participant's service or employment is terminated before the
expiration of the Restricted Period by the Company for Cause or by the
Participant at any time, the Participant shall forfeit all Restricted
Stock and shall receive a cash payment equal to the lower of 85% of the
Fair Market Value of the Restricted Stock or the deferred compensation
used to acquire the Restricted Stock.
(c) In the case of any consultant Participant, any events of forfeiture
shall be determined by the Committee in its sole discretion (including but
not limited to confidentiality and competitive issues) and shall be set
forth in the Agreement with respect to the Restricted Stock Award granted
to such consultant.
(d) If a Participant's service is terminated for any reason before a
Restricted Stock Award is exchanged for Restricted Stock, then the
Participant shall forfeit all rights under the Restricted Stock Award.
5.5 Change of Control. Upon any Change of Control, unless the Committee
in its sole discretion determines otherwise prior to the Change of
Control, all restrictions applicable to shares of Restricted Stock shall
immediately lapse and the certificate or certificates representing the
shares of Common Stock that were granted to the Participants in the form
of shares of Restricted Stock shall be delivered to the Participants. In
addition, each Participant shall have the right to deliver to the Company
cash and receive unrestricted Common Stock for any unexchanged Restricted
Stock Award.
5.6 Waiver of Restrictions. The Committee, in its sole discretion, may
at any time waive any or all restrictions with respect to any Restricted
Stock Award or shares of Restricted Stock.
SECTION VI. MISCELLANEOUS
6.1 Termination and Amendment. The Board at any time may amend or
terminate the Plan. Notwithstanding any expiration or termination of the
Plan, unless otherwise determined by the Committee, the provisions
relating to Restricted Stock Awards and Restricted Stock contained in
Sections II, III, IV, V and VI shall continue to apply with respect to all
Restricted Stock Awards or shares of Restricted Stock outstanding as of
the date of expiration or termination.
7
<PAGE>
6.2 Withholding. Each Participant shall pay to the Company any amount
necessary to satisfy applicable federal, state or local tax withholding
requirements attributable to the grant of a Restricted Stock Award, the
issuance of Restricted Stock under the Plan, or upon the vesting of such
Restricted Stock, promptly upon notification of the amount due. If these
amounts are not paid when requested, then at the election of the
Committee, these amounts may be withheld from the shares of Common Stock
that otherwise would be distributed to such Participant pursuant to the
Plan.
6.3 Legal and Other Requirements. The grant of Restricted Stock Awards
and the distribution of shares of Restricted Stock shall be subject to the
condition that if at any time the Company determines in its discretion
that the satisfaction of withholding tax or other tax liabilities, or the
listing, registration or qualification of any shares of Common Stock upon
any securities exchange or under any federal or state law, or the consent
or approval of any regulatory body, is necessary or desirable as a
condition of, or in connection with such grant or distribution, then in
any such event, such grant or distribution shall not be effective unless
such liabilities have been satisfied or such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Company.
6.4 Choice of Law. The Plan, its validity, interpretation and
administration and the rights and obligations of all persons having an
interest therein shall be governed by and construed in accordance with the
laws of the State of Delaware, except to the extent that such laws may be
preempted by federal law.
6.5 Fractional Shares. The Company shall not be required to issue or
deliver any fractional share of Restricted Stock issuable under this Plan
but shall round each issuance of shares of Restricted Stock hereunder up
to the nearest whole share.
6.6 No Employment Contract. The Plan shall not confer upon any
Participant any right to continued employment by the Company nor shall the
Plan in any way interfere with the right of the Company to terminate the
employment of any Participant at any time.
6.7 Section 83(b) Elections. A Participant who files an election with
the Internal Revenue Service to include the fair market value of any
shares of Restricted Stock in gross income during a Restricted Period
shall promptly furnish the Company with a copy of such election together
with the amount of any federal, state, local or other taxes required to be
withheld (if any) to enable the Company to claim an income tax deduction
with respect to such election.
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FDS for Second quarter 1999 10-q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 219,764
<ALLOWANCES> 3,713
<INVENTORY> 181,483
<CURRENT-ASSETS> 410,729
<PP&E> 1,175,123
<DEPRECIATION> 358,910
<TOTAL-ASSETS> 1,489,114
<CURRENT-LIABILITIES> 585,456
<BONDS> 80,767
0
0
<COMMON> 34
<OTHER-SE> 618,253
<TOTAL-LIABILITY-AND-EQUITY> 1,489,114
<SALES> 451,526
<TOTAL-REVENUES> 451,526
<CGS> 400,810
<TOTAL-COSTS> 400,810
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,675
<INCOME-PRETAX> (12,154)
<INCOME-TAX> (3,424)
<INCOME-CONTINUING> (8,730)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,769)
<NET-INCOME> (10,499)
<EPS-BASIC> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
