<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Wellman, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
WELLMAN, INC.
1040 BROAD STREET, SUITE 302
SHREWSBURY, NEW JERSEY 07702
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 18, 1999
OYSTER POINT HOTEL, 146 BODMAN PLACE, RED BANK, NEW JERSEY
10:00 AM, EASTERN DAYLIGHT TIME
To the Stockholders of
Wellman, Inc.
You are cordially invited to attend the 1999 Annual Meeting of the Stockholders
of Wellman, Inc. to:
- Elect directors.
- Ratify the Board's selection of Ernst & Young LLP as independent auditors
for 1999.
- Conduct other business properly brought before the meeting.
Your vote is important. Whether you plan to attend or not, please sign, date,
and return the enclosed proxy card in the envelope provided. If you attend the
meeting and prefer to vote in person, you may do so.
Sincerely yours,
DAVID K. DUFFELL
Secretary
April 23, 1999
<PAGE> 3
WELLMAN, INC.
1040 BROAD STREET, SUITE 302
SHREWSBURY, NEW JERSEY 07702
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed, beginning
April 23, 1999, to owners of shares of Wellman, Inc. Common Stock in connection
with the solicitation of proxies by the Board of Directors for the 1999 Annual
Meeting of Stockholders. This proxy procedure is necessary to permit all
Wellman, Inc. stockholders, many of whom live throughout the United States and
are unable to attend the Annual Meeting, to vote. The Board of Directors
encourages you to read this document thoroughly and to take this opportunity to
vote on the matters to be decided at the Annual Meeting.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Voting Procedures........................................... 3
Corporate Governance........................................ 6
Election of Directors (Item 1 on Proxy Card)................ 7
Ratification of Selection of Independent Accountants (Item 2
on Proxy Card)............................................ 9
Executive Compensation...................................... 10
Other Matters............................................... 18
</TABLE>
2
<PAGE> 4
VOTING PROCEDURES
YOUR VOTE IS VERY IMPORTANT. Your shares can only be voted at the Annual
Meeting if you are present or represented by proxy. Whether or not you plan to
attend the Annual Meeting, you are encouraged to vote by proxy to assure that
your shares will be represented. You may revoke this proxy at any time before it
is voted by written notice to the President of Wellman, by submission of a proxy
bearing a later date, or by casting a ballot at the Annual Meeting. Properly
executed proxies that are received before the Annual Meeting's adjournment will
be voted in accordance with the directions provided. If no directions are given,
your shares will be voted as recommended by the Board of Directors.
WHO CAN VOTE? Stockholders as of the close of business on March 31, 1999 are
entitled to vote. On that day, approximately 31,398,506 shares of Common Stock
were outstanding and eligible to vote. Each share is entitled to one vote on
each matter presented at the Annual Meeting.
HOW DO I VOTE? Whether you plan to attend the Annual Meeting and vote in person
or not, we urge you to complete, sign and date the enclosed proxy card and
return it in the postage-paid envelope provided. Returning the proxy card will
not affect your right to attend the Annual Meeting and vote.
HOW ARE VOTES COUNTED? The Annual Meeting will be held if a quorum, consisting
of a majority of the outstanding shares of Common Stock entitled to vote, is
represented. Broker non-votes, votes withheld and abstentions will be counted
for purposes of determining whether a quorum is present at the Annual Meeting.
In the case of shares held in the name of nominees, the nominees may vote those
shares only on matters deemed routine by the New York Stock Exchange, such as
the election of Directors and ratification of the selection of independent
accountants. On non-routine matters, nominees cannot vote and there is a
so-called "broker non-vote" on that matter.
WHO IS THE PROXY SOLICITOR? Continental Stock Transfer & Trust Company has been
retained by Wellman to assist in the distribution of proxy materials and
tabulation of votes for a nominal fee plus reimbursement of out-of-pocket
expenses.
WHICH STOCKHOLDERS OWN AT LEAST 5% OF WELLMAN? The following table shows, as of
March 31, 1999, all persons we know to be "beneficial owners"(1) of more than 5%
of Wellman's Common Stock. This information is based on reports on Schedule 13G
filed with the Securities and Exchange Commission ("SEC") by the firm listed in
the table below. If you wish, you may obtain copies of these reports from the
SEC.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
- ---------------- ---------------- -------
<S> <C> <C>
Dimensional Fund Advisors Inc. ........................... 1,578,300 5.02%
1299 Ocean Avenue
Santa Monica, CA 90401
</TABLE>
- ---------------
(1) "Beneficial ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own Wellman Common Stock not only if you hold it directly,
but also if you indirectly (through a relationship, a position as a director
or trustee, or a contract or understanding) have or share the power to vote
the stock, or to sell it, or you have the right to acquire it within 60
days.
(2) Dimensional Fund Advisors Inc. has sole voting and investment power over the
shares listed.
3
<PAGE> 5
HOW MUCH STOCK IS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS?
The following table shows, as of March 31, 1999, the Wellman Common Stock owned
beneficially by Wellman's directors and executive officers. Except for Mr. Duff,
Wellman's President, Chief Executive Officer and a director, no director or
executive officer owns beneficially 1% or more of the outstanding shares of
Wellman Common Stock. All directors and executive officers of Wellman as a group
beneficially own 5.1% of the outstanding shares of Wellman Common Stock.
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE OF
BENEFICIALLY COMMON
NAME OWNED(1)(2)(3) STOCK
- ---- -------------- -------------
<S> <C> <C>
Thomas M. Duff......................................... 673,027 2.1%
James B. Baker......................................... 23,180 --
Clifford J. Christenson................................ 231,114 --
Allan R. Dragone....................................... 20,761 --
Richard F. Heitmiller.................................. 20,160 --
James E. Rogers........................................ 17,911 --
Marvin O. Schlanger.................................... 2,336 --
Raymond C. Tower....................................... 22,041 --
Roger A. Vandenberg.................................... 33,165 --
James P. Casey......................................... 205,225 --
John R. Hobson......................................... 79,910 --
Keith R. Phillips...................................... 78,377 --
All Directors and Executive Officers as a Group (15
persons)............................................. 1,652,244 5.1%
</TABLE>
- ---------------
(1) Each of the directors and executive officers listed has sole voting and
investment power over the shares listed, except for Mr. Baker. Of the shares
listed for Mr. Baker, 200 are owned by his wife.
(2) The number of shares shown for each non-employee director includes the 2,000
restricted shares of Wellman Common Stock that were granted to each director
at the time he was first elected to the board. These restricted shares vest
over a three-year period. Each of the 2,000 restricted shares of Messrs.
Baker, Dragone, Heitmiller, Rogers, Tower and Vandenberg have vested. Mr.
Schlanger's 2,000 restricted shares will vest in three installments on
January 12, 2000, 2001 and 2002. For more information on these restricted
shares, see "Corporate Governance -- Director Compensation" on page 6.
The number of shares shown for each non-employee director also includes the
following shares that may be acquired upon exercise of stock options that
were exercisable as of March 31, 1999 or that will become exercisable
within 60 days of that date: Mr. Baker, 4,000; Mr. Dragone, 7,000; Mr.
Heitmiller, 7,000; Mr. Rogers, 5,000; Mr. Schlanger, 0; Mr. Tower, 7,000;
and Mr. Vandenberg, 7,000. For more information on directors' stock
options, see "Corporate Governance -- Director Compensation" on page 6.
The number of shares shown for each non-employee director also includes the
following restricted shares that were awarded under the Deferred
Compensation and Restricted Stock Plan: Mr. Baker, 13,618; Mr. Dragone,
11,760; Mr. Heitmiller, 9,827; Mr. Rogers, 7,911; Mr. Schlanger, 336; Mr.
Tower, 11,040; and Mr. Vandenberg, 22,164. For more
4
<PAGE> 6
information on the Deferred Compensation and Restricted Stock Plan, see
"Corporate Governance -- Director Compensation" on page 6.
(3) The number of shares shown for each executive officer includes the following
shares that may be acquired upon exercise of stock options that were
exercisable as of March 31, 1999 or that will become exercisable within 60
days of that date: Mr. Duff, 219,000; Mr. Christenson, 153,000; Mr. Casey,
106,000; Mr. Hobson, 62,400; and Mr. Phillips, 59,000.
The number of shares shown for each executive officer also includes the
following restricted shares that were awarded under the Deferred
Compensation and Restricted Stock Plan: Mr. Duff, 40,282; Mr. Christenson,
23,333; Mr. Casey, 3,887; Mr. Hobson, 3,197; and Mr. Phillips, 10,023. For
more information on the Deferred Compensation and Restricted Stock Plan,
see "Executive Compensation -- Report of the Compensation Committee on
Executive Compensation" on page 10.
The number of shares shown for each executive officer also includes the
number of shares of Wellman Common Stock owned indirectly as of March 31,
1999 by such officer in Wellman's Employee Stock Ownership Plan and
Retirement Plan: Mr. Duff, 2,754 and 31,991; Mr. Christenson, 2,847 and
51,934; Mr. Casey, 2,918 and 46,832; Mr. Hobson, 3,518 and 10,795; and Mr.
Phillips, 2,166 and 7,188.
Wellman has adopted a stock ownership policy for its directors and executive
officers. Under this policy, directors and executive officers are required to
beneficially own targeted amounts of Wellman Common Stock. These targets are
based on compensation levels, with increasing amounts of stock required to be
owned by the higher-paid executives. As of March 31, 1999, each of the directors
and executive officers had met his targeted ownership level.
5
<PAGE> 7
CORPORATE GOVERNANCE
In accordance with Delaware General Corporation Law and the Wellman Certificate
of Incorporation and Bylaws, Wellman's business, property and affairs are
managed under the direction of the Board of Directors. Although Directors are
not involved in the day-to-day operating details, they are kept informed of
Wellman's business through written reports and documents provided to them
regularly, as well as by operating, financial and other reports presented by the
Chief Executive Officer and other officers of the Company at meetings of the
Board of Directors and committees of the Board.
MEETING OF THE BOARD. The Board of Directors held six meetings in 1998. Each of
the incumbent Directors attended at least 75% of the Board and committee
meetings to which the Director was assigned.
COMMITTEES OF THE BOARD. The Board of Directors has established three standing
committees. Directors' committee memberships are included in their biographical
information beginning on page 7.
Finance and Audit Committee -- monitors the auditing, accounting, methods of
financing and financial reporting of the Company. The committee makes
recommendations to the Board concerning the accounting firm to be employed as
the independent accountants and consults with these accountants with regard to
the adequacy of internal controls and the scope and results of their audits. The
committee met four times in 1998.
Compensation Committee -- responsible for overseeing Wellman's compensation
programs, including recommending compensation for senior management and the
granting of stock options. The committee met seven times in 1998.
Corporate Governance Committee -- responsible for reviewing the composition,
size and organization of the Board and its committees, and for reviewing and
making recommendations with regard to director compensation. This committee is
also charged with the responsibility of responding to major shareholder issues,
assessing Board performance and reviewing candidate qualifications for Board
membership and recommending director nominations. The committee met twice in
1998.
DIRECTOR COMPENSATION. Each non-employee director receives fees of $35,000 per
year, plus $1,500 for each board or Committee meeting attended in person and
$750 for each telephonic meeting attended. Each chairperson of the Board
committee also receives an annual fee of $4,000. In accordance with the Deferred
Compensation and Restricted Stock Plan, 50% of these fees are paid in restricted
stock. In addition, the Plan allows directors to defer up to 50% (100% in 1998)
of any cash remuneration due to them. Restricted stock awards are granted for
such deferred compensation.
At the time of his election to the Board, each non-employee director receives
2,000 shares of Wellman's Common Stock which vest over a period of three years
commencing on the election date, provided he has continuously served as a
director for the preceding twelve months.
Each non-employee director also receives annually options to acquire 1,000
shares of Wellman's Common Stock.
Effective December 31, 1997, Wellman terminated its Directors Deferred
Compensation Plan and Directors Retirement Plan. The Retirement Plan had
provided that non-employee directors who voluntarily retired from the Board
after serving as directors for three or more years were entitled to receive
retirement payments equal to the annual directors fee then in effect multiplied
by the number of full years of continuous service as a director. Upon
termination of the Plans,
6
<PAGE> 8
the non-employee directors were entitled to receive restricted stock in exchange
for the accrued benefits due to them.
Employee directors receive no compensation for their Board service.
OTHER MATTERS. The Board in 1997 established 70 years as the mandatory
retirement age for directors. However, the mandatory retirement age is 75 for
directors over the age of 65 at the time the policy was adopted. A director who
reaches retirement age must retire at or prior to the next Annual Meeting.
- --------------------------------------------------------------------------------
ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
Under the terms of the Bylaws, the Wellman Board consists of nine members. The
nine nominees named on the following pages were renominated by the Board to
serve as directors for an additional one-year term. Each nominee has consented
to stand for election and the Board does not anticipate that any nominee will be
unavailable to serve. In the event that one or more of the nominees should
become unavailable to serve at the time of the Annual Meeting, the shares
represented by proxy will be voted for the remaining nominees and any substitute
nominee(s) designated by the Board. If no substitute nominee(s) are designated,
the size of the Board will be reduced. Director elections are determined by a
plurality of the votes cast.
The following biographies provide a brief description of each nominee's
principal occupation and business experience, age (as of March 31, 1999),
directorships held in other public corporations and Board Committee memberships.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE LISTED NOMINEES.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Thomas M. Duff, 51............ President, Chief Executive Officer and director August, 1985
of Wellman since its inception in 1985.
James B. Baker, 53............ Partner of River Associates, LLC (private equity August, 1994
investment fund) since 1993. Prior to 1993,
President and Chief Operating Officer
(1991-1992) and Senior Vice President
(1987-1991) of CONSTAR International, Inc.
(plastic container manufacturer). Also a
director, chairman of the Compensation Committee
and member of the Audit Committee of U.S. Xpress
Enterprises, Inc. Chair of the Corporate
Governance Committee; member of the Finance and
Audit Committee.
Clifford J. Christenson, 49... Executive Vice President of Wellman since 1993 November, 1995
and Chief Operating Officer since 1995. Prior to
1993, Chief Financial Officer and Treasurer
since 1985.
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Allan R. Dragone, 73.......... Retired. From 1988 until 1989, Chairman of the August, 1990
Board of Fiber Industries, Inc. From 1986 until
1990, President and Chief Executive Officer of
Akzo America, Inc., the U.S. subsidiary of the
Dutch conglomerate Akzo N.V. Also a director and
member of the Compensation and Finance
Committees of Sterling Chemicals, Inc. Member of
the Compensation and the Audit and Finance
Committees.
Richard F. Heitmiller, 70..... President of Richard F. Heitmiller, Inc. November, 1988
(consulting firm) since 1982. From 1971 until
1982, various executive positions with Arthur D.
Little, Inc. (management consultants) and Vice
President of its Decision Resources subsidiary.
Also a director of Globe Holdings Inc. Member of
the Compensation and the Audit and Finance
Committees.
James E. Rogers, 53........... President of SCI Investors, Inc. (investment September, 1993
company) since 1993. From 1991 until 1993,
President and Chief Executive Officer of
Specialty Coatings International Inc. (a
manufacturer). Prior to 1991, Senior Vice
President and Group Executive of James River
Corporation (a paper manufacturer). Mr. Rogers
is also a director and member of the
Compensation, Executive and Strategic Committees
of Owens & Minor, Inc. (a medical and surgical
supplies distributor) and a director and member
of the Compensation and Audit Committees of
Caraustar Industries, Inc. (a paper
manufacturer). Chair of the Compensation
Committee and member of the Corporate Governance
Committee.
Marvin O. Schlanger, 50....... Principal of Cherry Hill Chemical Investments, January, 1999
LLC (a chemical and allied industries management
services firm) since 1998. President and Chief
Executive Officer of ARCO Chemical Company in
1998; Executive Vice President and Chief
Operating Officer of ARCO Chemical Company from
1994 to 1998; prior to 1994, Chief Financial
Officer and director. Also a director, member of
the Planning and Finance Committee and Chairman
of the Pension Committee of UGI Corporation
(utility holding company). Member of the
Compensation and Audit and Finance Committees.
Raymond C. Tower, 74.......... Retired. From 1977 until retirement in 1990, August, 1990
President and Chief Operating Officer of FMC
Corp. (a manufacturer of machinery and
chemicals). Member of the Compensation and the
Corporate Governance Committees.
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS SINCE
------------ --------------------------- --------
<S> <C> <C>
Roger A. Vandenberg, 51....... President of Cariad Capital, Inc. (investment August, 1985
advisor) since its inception in 1992. Managing
Director of Narragansett Capital, Inc.
(investment advisor) since its inception in
1986. Also a general partner of the general
partner of Narragansett Capital Partners-A and
-B, L.P. (venture capital funds) and a general
partner of the general partner of Narragansett
First Fund (a venture capital fund). Mr.
Vandenberg is also a director and member of the
Compensation Committee of Monaco Coach
Corporation (a manufacturer of motor homes).
Chair of the Finance and Audit Committee and
member of the Corporate Governance Committee.
</TABLE>
RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
ITEM 2 ON PROXY CARD
Subject to stockholder ratification, the Board of Directors, acting upon the
recommendation of the Finance and Audit Committee, has reappointed the firm of
Ernst & Young LLP as independent auditors to examine the financial statements of
Wellman for the fiscal year 1999. Ratification requires the affirmative vote of
a majority of eligible shares present at the Annual Meeting, in person or by
proxy, and voting thereon. If this appointment is not ratified by stockholders,
the Audit Committee may reconsider its recommendation.
One or more representatives of Ernst & Young LLP are expected to be at the
Annual Meeting. They will have an opportunity to make a statement and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION.
9
<PAGE> 11
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"), which is
composed entirely of non-employee directors, met seven times during fiscal 1998.
The Committee has responsibility for administering the annual Management
Incentive Compensation Plan and stock option plans. The Committee is also
responsible for making compensation recommendations to the Board with respect to
the five executive officers whose fiscal 1998 compensation is disclosed on the
Summary Compensation Table on page 13 of this proxy statement. In this capacity,
the Committee determines the salary, management incentive plan awards and stock
option grants for those executive officers, following administrative policies
and practices which it establishes from time to time in accordance with the
terms and provisions of the plans. This Committee Report describes the executive
compensation program strategy, the components of the compensation program, and
the manner in which 1998 compensation determinations were made by the Committee
with respect to the President and Chief Executive Officer, Mr. Thomas M. Duff,
whose compensation is determined by the Committee meeting in executive session
without Mr. Duff being present. Similar determinations were made by the
Committee with respect to the other four executive officers, based on
recommendations submitted by Mr. Duff.
Stock Ownership Policy. In February 1998 the Board of Directors, at the
recommendation of the Compensation Committee, adopted a Statement of Policy
which requires directors and executive officers to beneficially own targeted
levels of Wellman's Common Stock based on their compensation levels. The Board
believes that increasing management's ownership of the Common Stock will more
closely align the interests of management and the stockholders and will motivate
management to manage Wellman for long-term growth and profitability. In order to
implement the Statement of Policy, Wellman adopted the Deferred Compensation and
Restricted Stock Plan. Under this Plan, executives are required to defer any
amounts payable under the Management Incentive Compensation Plan over their
target percentage and may elect to defer up to 50% of any other cash
compensation payable to them. Restricted stock awards are granted for such
deferred compensation. The number of shares of restricted stock issued is equal
to the cash value of the compensation earned divided by 85% of the average of
the highest and lowest sales prices of Wellman Common Stock reported on the New
York Stock Exchange for a 31 day period.
Compensation Strategy. The Committee endeavors to maintain an officer
compensation program which is competitive with the practices of public
corporations of similar revenue size. The structure for the compensation of the
executive officers consists of three primary components: base salary, the
Management Incentive Plan and stock options. The Committee believes a
substantial component of executive officer total compensation should be based on
Wellman's financial performance. The Management Incentive Plan compensates
executive officers commensurate with Wellman's financial performance and other
strategic goals, and annual stock option grants ensure that longer-term
incentive compensation is directly related to increases in the market value of
Wellman's Common Stock.
The remainder of this Committee Report describes the components of Wellman's
officer compensation program and the manner in which these were administered in
1998.
10
<PAGE> 12
Base Salary. Base salary forms the foundation of the officer compensation
program. The Committee has periodically engaged compensation consultants to
survey market practices to ensure executive officer salaries remain competitive
in a manner which properly reflects the performance of the incumbent officers.
Such surveys have included the practices of some, but by no means all, of the
companies included in the peer groups shown on the Stock Performance Graph.
Mr. Duff's 1998 annual salary shown in the Summary Compensation Table below
falls within the fourth quartile (above the 75th percentile) of competitive
practice for corporations with revenues of comparable size. The average 1998
salaries of the other executive officers approximated the 50th percentile of
competitive practice for their peers in corporations with revenues of comparable
size.
Management Incentive Plan. The Management Incentive Plan ("MIP") was first
implemented in 1992. Annual bonuses earned by the executive officers and other
plan participants are directly related to corporate (and for operating
executives, their operating unit's) profit and achieving individual strategic
objectives established early in the year. Under the terms of the MIP, profit is
based on operating profit less a capital charge related to the net assets
employed to generate these profits. The Committee establishes for each
participant in the MIP a maximum targeted award based on a percentage of base
salary and the portion of that target award which is to be based upon achieving
strategic goals.
Mr. Duff's target MIP award was 60% of base salary; 30% of the target award was
based upon achieving strategic objectives and 70% was based upon achieving
financial objectives. The target awards for the other executive officers ranged
from 50% to 60% of base salary; 35% to 40% of the target awards were based upon
achieving strategic objectives and 60% to 65% was based upon achieving financial
objectives.
Based on his performance in 1998, the Committee recommended the payment of an
annual bonus of $321,893 for Mr. Duff.
Stock Options. Annual stock option grants represent the third component of
Wellman's executive compensation program. All stock options are granted with
exercise prices equal to fair market value of the stock on the date of grant so
that optionees share in the future growth in market value of Wellman's Common
Stock. To ensure stock options provide a longer-term stockholder value-based
incentive, 20% of the options granted in a year become exercisable (i.e., the
optionee can purchase the option shares) on the first through fifth
anniversaries of the grant date, provided the optionee remains an employee.
The Chief Executive Officer submits proposed stock option grants for the
executive officers (other than himself) to the Committee for approval. In making
the final determination of option grants, the Committee considers the individual
executive's scope of responsibility, individual performance, the levels of
profits and return on assets of the corporation and of its operating divisions
(with no specific target levels being established), competitive levels of option
grants, and the aggregate number of options awarded to the executive to date.
The Committee, in its discretion, assigns relative weights to these factors as
it deems appropriate.
The Option Grants Table on page 14 shows the terms and size of 1998 option
grants made to the executive officers named in the Summary Compensation Table
below.
The values shown under the "Grant Date Value" column of this table represent an
estimate of the potential value of these grants. These projections should not be
11
<PAGE> 13
construed as a forecast of future stock price or the compensation that will be
realized from the actual exercise of these options. Unless the future price of
Wellman's stock is higher than $18.81 per share, the price at the time the 1998
options were granted, these options will have no value.
The Committee believes that the compensation paid by the Corporation to the
executive officers will be fully deductible.
This report has been provided by the Compensation Committee.
Allan R. Dragone
Richard F. Heitmiller
James E. Rogers (Chairperson)
Marvin O. Schlanger
Raymond C. Tower
12
<PAGE> 14
COMPENSATION TABLES
The following table summarizes the compensation for the years ended December 31,
1998, 1997 and 1996 of the Corporation's chief executive officer and the four
other most highly compensated executive officers whose salary and bonus exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
-------------------------------------- --------------------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION(2) AWARDS(1)(3) SARS(4) COMPENSATION(5)
- --------------------------- ---- --------- -------- --------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Duff............ 1998 $695,000 $321,893 $70,688 $109,830 50,000 $149,978
President, CEO 1997 $680,000 $464,683 $69,105 -- -- $150,078
1996 $665,000 $ 61,574 $71,239 -- 70,000 $215,023
Clifford J. Christenson... 1998 $375,000 $183,863 $37,416 $ 56,013 35,000 $ 81,008
Executive Vice 1997 $360,000 $246,770 $36,036 -- -- $ 81,108
President, COO 1996 $360,000 $ 49,896 $35,275 -- 50,000 $109,611
James P. Casey............ 1998 $282,500 $ 81,595 $28,167 $ 8,387 25,000 $ 58,382
Vice President; 1997 $275,000 $ 85,530 $27,344 -- -- $ 58,482
President, Fibers Group 1996 $270,000 $ 24,300 $25,761 -- 35,000 $ 85,358
John R. Hobson............ 1998 $215,000 $ 77,252 $21,691 $ 8,387 25,000 $ 49,393
Vice President, 1997 $200,000 $149,594 $20,329 -- -- $ 49,493
Recycled Products Group 1996 $200,000 $ 63,817 $19,529 -- 35,000 $ 64,416
Keith R. Phillips......... 1998 $217,500 $107,590 $21,320 $ 23,267 20,000 $ 43,921
Vice President, 1997 $210,000 $136,797 $20,608 -- -- $ 44,021
Chief Financial 1996 $207,500 $ 26,458 $20,607 -- 30,000 $ 59,195
Officer and Treasurer
</TABLE>
- ---------------
(1) Under the Deferred Compensation and Restricted Stock Plan, employees may
elect to defer specified amounts of salary, bonus and other cash
compensation. Restricted stock awards are granted for such deferred amounts.
The amounts of salary and bonus set forth include the following deferred
amounts: Mr. Duff, $360,013 and $200,000; Mr. Christenson, $140,010 and
$140,000; Mr. Casey, $45,012 and 0; Mr. Hobson, $45,012 and 0; and Mr.
Phillips, $67,508 and $50,000. The shares of restricted stock issued in
connection with these deferred amounts are reflected in the Restricted Stock
Awards column above.
(2) Includes Wellman's contributions to life insurance premiums or payments in
lieu thereof (Mr. Duff, $70,688; Mr. Christenson, $37,416; Mr. Casey,
$28,167; Mr. Hobson, $21,691; and Mr. Phillips, $21,320 in 1998).
(3) These amounts are the dollar values of restricted stock awards granted under
the Deferred Compensation and Restricted Stock Plan, which was adopted in
1998. Each value is determined by multiplying the number of shares in each
award by the closing market price of Common Stock on the date of grant and
subtracting the consideration paid by the Named Executive Officer. Holders
of restricted stock receive the same cash dividends as other stockholders
owning Common Stock.
The aggregate number of all restricted stock and value at December 31, 1998
(determined by taking the number of shares issued at December 31, 1998
multiplied by the closing market price on December 31, 1998, net of any
consideration paid) are shown below. The
13
<PAGE> 15
aggregate amount paid for these shares was $657,554. Amounts shown do not
include the restricted shares issued in connection with the bonuses for 1998
since such bonuses were not paid until March 1999.
<TABLE>
<CAPTION>
AGGREGATE
RESTRICTED
SHARES NET VALUE
---------- ---------
<S> <C> <C>
Mr. Duff......................................... 17,300 $(183,769)
Mr. Christenson.................................. 6,728 $ (71,468)
Mr. Casey........................................ 2,163 $ (22,976)
Mr. Hobson....................................... 2,163 $ (22,976)
Mr. Phillips..................................... 3,244 $ (34,459)
</TABLE>
(4) None of the options granted were options with tandem SARs and no
free-standing SARs were granted.
(5) Consists of Wellman's contributions to employee retirement ($21,053 for each
of Messrs. Duff, Christenson, Casey, Hobson and Phillips in 1998),
supplemental retirement (Mr. Duff, $124,125; Mr. Christenson, $55,155; Mr.
Casey, $32,529; Mr. Hobson, $23,540; and Mr. Phillips, $18,068 in 1998), and
savings plans ($4,800 for each of Messrs. Duff, Christenson, Casey, Hobson,
and Phillips in 1998).
The following table sets forth certain information relating to option grants
pursuant to the Option Plan in the year ended December 31, 1998 to the
individuals named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED(1)(2) FISCAL YEAR ($/SH) DATE VALUE(3)
- ---- ------------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Thomas M. Duff................. 50,000 11.1% 18.81 2/17/09 $478,500
Clifford J. Christenson........ 35,000 7.8% 18.81 2/17/09 $334,950
James P. Casey................. 25,000 5.6% 18.81 2/17/09 $239,250
John R. Hobson................. 25,000 5.6% 18.81 2/17/09 $239,250
Keith R. Phillips.............. 20,000 4.5% 18.81 2/17/09 $191,400
</TABLE>
- ---------------
(1) None of the options granted were options with tandem SARs and no
free-standing SARs were granted.
(2) All options granted to the named executives were granted on February 17,
1998 pursuant to Wellman's Stock Option Plan. The options become exercisable
in 20% increments on February 17, 1999, 2000, 2001, 2002 and 2003. If a
Change of Control (as defined in the Plan) occurs, these options would
immediately become exercisable.
(3) Based on the Black-Scholes option pricing model. The use of this model
should not be construed as an endorsement of its accuracy at valuing
options. The actual value, if any, an executive may realize will depend on
the excess of the stock price over the exercise price on the date the option
is exercised, so there is no assurance the actual value realized will
14
<PAGE> 16
be at or near the value estimated by the Black-Scholes model. The estimated
values under that model are based on the following assumptions:
<TABLE>
<S> <C>
Stock price.............................. $19.44
Exercise price........................... $18.81
Expected option term..................... 7 years
Stock price volatility................... .453
Dividend yield........................... 1.05%
Risk-free interest rate.................. 4.83%
</TABLE>
The following table sets forth certain information with respect to unexercised
options to purchase the Corporation's Common Stock granted under the Option Plan
to the individuals named in the Summary Compensation Table above. No options
were exercised in 1998 by such individuals.
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas M. Duff................... 219,000 104,000 -- --
Clifford J. Christenson.......... 153,000 75,000 -- --
James P. Casey................... 106,000 53,000 -- --
John R. Hobson................... 62,400 51,400 -- --
Keith R. Phillips................ 59,000 46,000 -- --
</TABLE>
- ---------------
(1) None of the Corporation's outstanding options were in-the-money on December
31, 1998.
15
<PAGE> 17
STOCK PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return for Wellman's
stock with the Standard & Poor's ("S&P") 500 Stock Index and the S&P Midcap 400
Index. Due to the unique nature of its operations, Wellman believes there exists
no appropriate or comparable line of business or industry index, nor could one
be constructed, which would render a meaningful or accurate performance
comparison. Wellman has derived an average of approximately 66% of its total
sales over the last three years from the sale of man-made fibers, primarily
polyester. Wellman believes that the polyester fiber manufacturing operations of
its major publicly-owned competitors, if such operations could be analyzed
separately, would not represent as significant a proportion of their sales or
operations. Wellman, which is the world's largest PET (polyethylene
terephthalate) plastic recycler, believes it is the only major polyester fiber
producer to utilize a significant amount of recycled raw materials in its
manufacturing operations.
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
WELLMAN, INC. S&P 500 S&P MID-CAP 400
------------- ------- ---------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 153.37 101.32 96.42
'1995' 123.72 139.40 126.25
'1996' 94.58 171.40 150.49
'1997' 109.62 228.59 199.03
'1998' 58.61 293.91 237.05
</TABLE>
The above graph assumes $100 invested on December 31, 1993 in Wellman's stock
and $100 invested at that time in each of the two indices. The comparison
assumes that all dividends are reinvested.
PENSION PLAN
Fiber Industries, Inc. ("FII"), a subsidiary of Wellman, maintains the Fiber
Industries, Inc. Retirement Income Plan (the "Pension Plan"), a tax-qualified
defined benefit pension plan for eligible employees of FII, which included Mr.
Casey. Effective July 1, 1991, no additional employees became participants in
the Pension Plan.
16
<PAGE> 18
Participants are entitled to a monthly retirement benefit if they retire (i) at
or after age 65 (normal retirement age) or (ii) at or after age 55 with either
five or ten years of vesting service depending on whether they retire directly
from employment with FII or are transferred Celanese employees. Participants
whose employment with FII terminates after five years of vesting service will
also be eligible for a monthly retirement benefit. If benefits are paid prior to
normal retirement age they may be reduced, depending on the date benefits begin
and the participant's age and service.
A participant's normal retirement benefit is calculated under a formula which
takes into consideration final average compensation, years of service up to 35,
and benefits to be derived through Social Security and certain employee benefit
plans. Final average compensation covered by the Pension Plan is based on the
combined amounts set forth under the headings "Salary" and "Bonus" of the
Summary Compensation Table for Mr. Casey.
Benefits, computed on the basis of a straight life annuity, are payable upon
early, normal and late retirement, and upon death of a participant with at least
five years of service. If benefits are paid in a form other than a straight life
annuity to the Participant, they are adjusted actuarially to reflect the
features of such other form.
The following table illustrates the estimated annual normal retirement benefits
payable under the Pension Plan. These benefit levels assume an employee's
retirement at age 65 during 1998 and payment in the form of a single life
annuity.
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ------------------------------------------
EARNINGS 15 20 25 30 35
- -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$125,000 11,144 20,489 29,834 39,179 48,525
$150,000 12,919 24,201 35,484 46,767 58,049
$175,000 14,085 23,570 35,369 47,169 58,968
$200,000 16,146 26,238 36,662 47,995 59,327
$225,000 18,208 29,588 41,232 54,012 66,793
$250,000 20,270 32,938 45,801 60,030 74,258
$275,000 22,331 36,288 50,371 66,047 81,723
$300,000 24,393 39,638 54,884 71,914 88,999
$400,000 25,751 41,846 57,941 74,036 91,301
$450,000 25,751 41,846 57,941 74,036 91,301
$500,000 25,751 41,846 57,941 74,036 91,301
$600,000 25,751 41,846 57,941 74,036 91,301
$700,000 25,751 41,846 57,941 74,036 91,301
</TABLE>
Notwithstanding the above table, benefits under the Pension Plan may not exceed
certain limits imposed by the Internal Revenue Code (the "Code"). The maximum
benefit payable in 1998 is $130,000. The table incorporates the Code limitations
on compensation allowable under a qualified pension plan. The limit on
compensation allowable in 1998 is $160,000. In addition, the above estimated
benefits are subject to limitations for employees who also participate in the
Wellman, Inc. Retirement Plan and the Wellman, Inc. Employee Stock Ownership
Plan. The estimated credited years of service under the Pension Plan for Mr.
Casey is 30 years.
17
<PAGE> 19
EMPLOYMENT AGREEMENTS
Wellman has entered into change of control employment agreements with Messrs.
Duff, Christenson, Casey, Hobson and Phillips. These agreements are intended to
encourage such executives to remain in Wellman's employ by providing them with
greater security and to reinforce and encourage continued attention and
dedication to their duties without distraction in the face of the potentially
disturbing circumstances arising from the possibility of a change in control. A
change of control is defined to include the acquisition by any person or group
of 20% or more of Wellman's then outstanding stock, a change in the majority of
its Board of Directors or approval of a reorganization, merger or consolidation
by Wellman's stockholders.
The employment agreements (which include provisions for renewal and for
automatic extension upon a change of control) provide for employment as officers
of Wellman at base salaries determined by the Board of Directors, plus
participation in the executive bonus plan. Provided there has been no change in
control, the employment agreements of the executives other than Mr. Duff provide
the executive's employment may be terminated upon 30 days notice. Mr. Duff's
agreement provides that, provided there has been no change in control, his
employment may be terminated at any time but that he will be entitled to one
year's compensation in the event of termination other than for cause or
disability.
In addition, the executives are eligible to participate in all incentive,
savings, retirement and welfare benefit plans applicable to other Wellman
executives and shall receive reimbursement for expenses and automobiles. The
agreements provide that if the executive is terminated after a change of
control, other than for cause, death or disability, or if the executive
terminates for good reason (as defined in the agreements), the executive is
entitled to receive his salary and bonus through the date of termination and a
lump sum severance payment equal to three times the sum of his base salary and
annual bonus (and certain other benefits). Further, an additional payment is
required in an amount such that after the payment of all taxes, income and
excise, the executive will be in the same after-tax position as if no excise tax
under Section 4999 of the Code had been imposed.
OTHER MATTERS
Management does not know of any matters which will be brought before the Annual
Meeting other than those specified in the notice thereof. However, if any other
matters properly come before the Annual Meeting, it is intended that the persons
named in the form of proxy, or their substitutes acting thereunder, will vote
therein in accordance with their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Wellman's officers
and directors, and persons who own more than 10% of a registered class of its
equity securities ("insiders"), to file reports of ownership and changes in
ownership with the SEC. Insiders are required by SEC regulation to furnish
Wellman with copies of all Section 16(a) forms they file. Based solely on review
of the copies of such forms furnished to Wellman, it believes that during 1998
all Section 16(a) filing requirements applicable to its insiders were complied
with.
18
<PAGE> 20
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Under the regulations of the SEC, a record or beneficial owner of shares of
Wellman's Common Stock may submit proposals to be included in the proxy
statement on proper subjects for action at the 2000 Annual Meeting of
Stockholders. All such proposals must be mailed to the Investor Relations
Manager at Wellman at 1040 Broad Street, Suite 302, Shrewsbury, New Jersey 07702
and must be received at that address on or before December 8, 1999, in order to
be included in the proxy relating to the 2000 Annual Meeting. A record or
beneficial owner of shares of Wellman's Common Stock may also submit proposals
on proper subjects for action at the 2000 Annual Meeting without including such
proposals in the proxy statement for such meeting. Wellman must be notified of
such owner's intention to do this no later than April 16, 2000.
By order of the Board of Directors,
DAVID K. DUFFELL
Secretary
New York, New York
April 23, 1999
19
<PAGE> 21
WELLMAN, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR ANNUAL MEETING MAY 18, 1999
The undersigned hereby appoints THOMAS M. DUFF, CLIFFORD J. CHRISTENSON and
DAVID K. DUFFELL, or any one or more of them, attorneys, with full power of
substitution to each for and in the name of the undersigned, with all powers the
undersigned would possess if personally present to vote the Common Stock of the
undersigned in Wellman, Inc. at the Annual Meeting of its Stockholders to be
held May 18, 1999 or at any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR
PROPOSALS 1, 2 AND 3.
1. Election of Directors:
FOR all nominees (Except as WITHHOLD AUTHORITY to vote
marked to the contrary below) [ ] for all nominees listed below [ ]
JAMES B. BAKER CLIFFORD J. CHRISTENSON ALLAN R. DRAGONE THOMAS M. DUFF
RICHARD F. HEITMILLER JAMES E. ROGERS MARVIN O. SCHLANGER
RAYMOND C. TOWER ROGER A. VANDENBERG
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the selection of Ernst & Young LLP as independent
auditors of the Corporation for the fiscal year ending December 31, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued from other side)
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
Dated: ............................................................, 1999
.........................................................................
.........................................................................
SIGNATURE(S)
NOTE: JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
