<PAGE> 1
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 February 29, 1996 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: 2-45166
-------
A. Schulman, Inc. and its Consolidated Subsidiaries
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
- -------------------------------- ----------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3550 West Market Street, Akron, Ohio 44333
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(216) 666-3751
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
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
----- -----
Number of common shares outstanding
as of March 31, 1996 - 37,530,993
<PAGE> 2
A. SCHULMAN, INC.
STATEMENT OF CONSOLIDATED INCOME (Notes 1 and 2)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
-------------------------- ------------------------
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
<S> <C> <C> <C> <C>
Net sales $ 233,625,000 $ 249,637,000 $ 483,166,000 $ 500,878,000
Interest and other income 1,419,000 1,624,000 3,170,000 3,288,000
------------- ------------- ------------- -------------
235,044,000 251,261,000 486,336,000 504,166,000
------------- ------------- ------------- -------------
Costs and expenses:
Cost of goods sold 200,082,000 208,339,000 413,568,000 417,916,000
Selling, general and
administrative expenses 21,254,000 19,446,000 43,119,000 40,483,000
Interest expense 1,123,000 931,000 2,601,000 1,512,000
Foreign currency transaction
losses (gains) (95,000) 581,000 (36,000) 475,000
Minority interest 26,000 142,000 98,000 308,000
------------- ------------- ------------- -------------
222,390,000 229,439,000 459,350,000 460,694,000
------------- ------------- ------------- -------------
Income before taxes 12,654,000 21,822,000 26,986,000 43,472,000
Provision for income taxes:
U.S (86,000) 2,104,000 (144,000) 3,871,000
Foreign 5,128,000 6,621,000 11,044,000 13,269,000
------------- ------------- ------------- -------------
5,042,000 8,725,000 10,900,000 17,140,000
------------- ------------- ------------- -------------
Net income 7,612,000 13,097,000 16,086,000 26,332,000
Dividends on preferred stock (13,000) (13,000) (27,000) (27,000)
------------- ------------- ------------- -------------
Net income applicable to
common stock $ 7,599,000 $ 13,084,000 $ 16,059,000 $ 26,305,000
============= ============= ============= =============
Net income per share of
common stock $ .20 $ .35 $ .43 $ .70
============= ============= ============= =============
Cash dividends per share of
common stock $ .095 $ .085 $ .18 $ .16
============= ============= ============= =============
Average number of shares outstanding
which were used in computing net
income per common share 37,527,501 37,541,593 37,546,410 37,517,276
</TABLE>
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<PAGE> 3
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<TABLE>
<CAPTION>
February 29, August 31,
Assets 1996 1995
------------ ------------
Unaudited
---------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 3) $ 70,929,000 $ 83,997,000
Short-term investments, at cost 66,789,000 60,275,000
Accounts receivable, less allowance
for doubtful accounts of $5,490,000 at
February 29, 1996 and $4,859,000 at
August 31, 1995 156,197,000 143,183,000
Inventories, average cost or market,
whichever is lower 164,515,000 190,946,000
Prepaids, including tax effect of
temporary differences 11,531,000 12,705,000
------------ ------------
Total current assets 469,961,000 491,106,000
------------ ------------
Other assets:
Cash surrender value of life insurance 380,000 377,000
Deferred charges, etc., including tax effect
of temporary differences 14,607,000 14,506,000
------------ ------------
14,987,000 14,883,000
------------ ------------
Property, plant and equipment, at cost:
Land and improvements 8,870,000 8,909,000
Buildings and leasehold improvements 68,861,000 62,362,000
Machinery and equipment 181,093,000 173,325,000
Furniture and fixtures 19,725,000 19,054,000
Construction in progress 12,347,000 19,471,000
------------ ------------
290,896,000 283,121,000
Accumulated depreciation and investment grants
of $353,000 at February 29, 1996 and
$415,000 at August 31, 1995 150,201,000 141,944,000
------------ ------------
140,695,000 141,177,000
------------ ------------
$625,643,000 $647,166,000
============ ============
</TABLE>
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<PAGE> 4
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<TABLE>
<CAPTION>
February 29, August 31,
Liabilities and Stockholders' Equity 1996 1995
------------- -------------
Unaudited
---------
<S> <C> <C>
Current liabilities:
Notes payable $ 6,300,000 $ 17,800,000
Current portion of long-term debt 40,000 39,000
Accounts payable 68,413,000 60,204,000
U.S. and foreign income taxes payable 6,278,000 15,009,000
Accrued payrolls, taxes and related benefits 15,255,000 16,820,000
Other accrued liabilities 21,657,000 18,194,000
------------- -------------
Total current liabilites 117,943,000 128,066,000
------------- -------------
Long-term debt (Note 6) 57,075,000 75,096,000
Other long-term liabilities 32,676,000 31,230,000
Deferred income taxes 6,443,000 5,973,000
Minority interest 1,682,000 1,583,000
Stockholders' equity (Note 4):
Preferred stock, 5% cumulative, $100
par value, authorized, issued and
outstanding - 10,705 shares 1,071,000 1,071,000
Special stock, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $1 par value
Authorized - 75,000,000 shares
Issued - 38,031,667 shares at February 29, 1996
and 38,022,242 shares at August 3l, 1995 38,032,000 38,022,000
Other capital 38,245,000 38,069,000
Cumulative foreign currency translation
adjustment 38,157,000 41,979,000
Retained earnings 307,266,000 297,979,000
Treasury stock, at cost, 502,674 shares at
February 29, 1996 and 442,674 shares at
August 31, 1995 (Note 5) (12,063,000) (10,838,000)
Unearned stock grant compensation (884,000) (1,064,000)
------------- -------------
Common stock equity 408,753,000 404,147,000
------------- -------------
Total stockholders' equity 409,824,000 405,218,000
------------- -------------
$ 625,643,000 $ 647,166,000
============= =============
</TABLE>
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<PAGE> 5
A. SCHULMAN, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Notes 1 and 2)
<TABLE>
<CAPTION>
Six months ended
----------------
February 29, February 28,
1996 1995
---- ----
Unaudited
---------
<S> <C> <C>
Provided (used in) operating activities:
Net income $ 16,086,000 $ 26,332,000
Items not requiring the current use of cash:
Depreciation 9,745,000 8,139,000
Non-current deferred taxes 493,000 19,000
Foreign pension and other compensation 1,426,000 1,385,000
Postretirement benefit obligation 408,000 480,000
Changes in working capital:
Accounts receivable (13,770,000) (26,240,000)
Inventories 25,916,000 (56,466,000)
Prepaids 986,000 (1,645,000)
Accounts payable 8,749,000 20,666,000
Income taxes (8,813,000) (468,000)
Accrued payrolls and other accrued liabilities 2,069,000 2,568,000
Changes in other assets and other
long-term liabilities (782,000) (1,382,000)
------------ ------------
Net cash provided from (used in)
operating activities 42,513,000 (26,612,000)
------------ ------------
Provided (used in) investing activities:
Expenditures for property, plant and equipment (11,528,000) (36,163,000)
Disposals of property, plant and equipment 537,000 410,000
Purchases of short-term investments (97,301,000) (29,910,000)
Proceeds from sales of short-term investments 90,441,000 50,233,000
------------ ------------
Net cash used in investing activities (17,851,000) (15,430,000)
------------ ------------
Provided from (used in) financing activities:
Cash dividends paid (6,760,000) (6,001,000)
Increase (decrease) of notes payable (11,500,000) 26,700,000
Increase of long-term debt -- 17,000,000
Reduction of long-term debt (18,019,000) (18,000)
Purchase of treasury stock (1,226,000) --
Exercise of stock options 186,000 1,673,000
Increase (decrease) in minority interest 98,000 (292,000)
------------ ------------
Net cash provided (used in)
financing activities (37,221,000) 39,062,000
------------ ------------
Effect of exchange rate changes on cash (509,000) 2,589,000
------------ ------------
Net increase (decrease) in cash and cash equivalents (13,068,000) (391,000)
Cash and cash equivalents at beginning of year 83,997,000 60,062,000
------------ ------------
Cash and cash equivalents at end of period $ 70,929,000 $ 59,671,000
============ ============
</TABLE>
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<PAGE> 6
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The results of operations for the six months ended February 29, 1996 are not
necessarily indicative of the results expected for the year ended August 31,
1996.
(2) The interim financial statements furnished reflect all adjustments which
are, in the opinion of management, necessary to a fair presentation of the
results of the interim periods presented. All such adjustments are of a normal
recurring nature.
(3) All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. Such investments amounted to
$64,081,000 at February 29, 1996 and $56,198,000 at August 31, 1995. Investments
with maturities between three and twelve months are considered to be short-term
investments.
(4) A summary of the stockholders' equity accounts for the six months ended
February 29, 1996 is as follows:
<TABLE>
<CAPTION>
Foreign Unearned
Currency Stock
Common Other Retained Translation Grant
Stock Capital Earnings Adjustment Compensation
----- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance-September 1, 1995 $ 38,022,000 $ 38,069,000 $ 297,979,000 $ 41,979,000 $ (1,064,000)
Net income 16,086,000
Dividends paid or accrued:
Preferred (27,000)
Common, $.18 per share (6,772,000)
Stock options exercised 10,000 176,000
Foreign currency
translation adjustment (3,822,000)
Amortization of
restricted stock 180,000
------------- ------------- ------------- ------------- -------------
Balance-February 29, 1996 $ 38,032,000 $ 38,245,000 $ 307,266,000 $ 38,157,000 $ (884,000)
============= ============= ============= ============= =============
</TABLE>
(5) During November 1995, the Company repurchased 60,000 shares of its common
stock for $1,226,000. The Board of Directors of the Company has authorized the
repurchase of up to 3,940,000 additional shares. The timing of any purchases
will depend on the price of the stock and value it provides to the Company.
(6) In February 1996, the Company amended its revolving credit agreement to
extend the term one additional year. The termination date of the credit
agreement is now February 28, 2001.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Results of Operations
- -----------------------------------------
A comparison of net sales by classification for both the three month
and six month periods ending February 29, 1996 and February 28, 1995 is as
follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Six Months Ended
------------------ ----------------
Feb. 29, Feb. 28, Increase Feb. 29, Feb. 28, Increase
1996 1995 (Decrease) 1996 1995 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Manufacturing $143,021 $ 141,894 $ 1,127 $291,439 $ 288,094 $ 3,345
Merchant 47,155 58,116 (10,961) 99,554 111,408 (11,854)
Distribution 43,449 49,627 (6,178) 92,173 101,376 (9,203)
-------- --------- --------- -------- --------- --------
$233,625 $ 249,637 $ (16,012) $483,166 $ 500,878 $(17,712)
======== ========= ========= ======== ========= ========
</TABLE>
The translation effects from the weaker U.S. dollar increased sales by
$4.0 million in the quarter and $13.5 million for the six month period.
Total tonnage increased approximately 5% for the quarter but decreased
1% for the six month period. Tonnage for the quarter was up approximately 4% in
Europe and 6% in North America. European tonnage declined approximately 4%
during the six month period while North American tonnage increased approximately
3%. The increase in North American tonnage was due to the acquisition of Texas
Polymer Services on February 28, 1995.
A major factor contributing to the decline in sales was lower resin
prices which were down over 25% from the year ago period.
Gross margins on sales for the quarter were 14.4% compared to 16.5% for
the same quarter last year. Gross margins on sales for the six months ended
February 29, 1996 were 14.4% compared with 16.6% for the comparable six month
period last year. The decline in gross profit margins was due to competitive
price pressures. In addition, capacity utilization was slightly under 80%,
mainly because of a 55% increase in North American capacity last year. A
comparison of gross profit by classification for both the three month and six
month periods ending February 29, 1996 and February 28, 1995 is as follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Six Months Ended
------------------ ----------------
Feb. 29, Feb. 28, Increase Feb. 29, Feb. 28, Increase
1996 1995 (Decrease) 1996 1995 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Manufacturing $21,492 $ 26,849 $ (5,357) $44,872 $ 54,166 $ (9,294)
Merchant 5,370 8,264 (2,894) 11,391 16,501 (5,110)
Distribution 6,681 6,185 496 13,335 12,295 1,040
------- -------- -------- ------- -------- --------
$33,543 $ 41,298 $ (7,755) $69,598 $ 82,962 $(13,364)
======= ======== ======== ======= ======== ========
</TABLE>
Selling, general and administrative expenses increased in 1996 due to
the acquisition of Texas Polymer Services on February 28, 1995 and higher
compensation. In addition, the weakening of the U.S. dollar increased these
expenses by $396,000 for the quarter and $1,317,000 for the six month period.
Interest expense increased in 1996 mainly in the United States due to
greater levels of borrowing.
Foreign currency transaction gains and losses were primarily due to
changes in the value of currencies within the European Monetary System as well
as the Mexican peso.
- 7 -
<PAGE> 8
The minority interest represents a 30% equity position of MKV America
Inc., an affiliate of Mitsubishi Chemical Corporation, in a partnership with the
Company. Earnings of the partnership declined during 1996 due to lower sales and
profit margins.
The effective tax rates for the respective three month periods were
39.8% in 1996 and 40.0% in 1995. For the six months ended February 29, the
effective tax rates were 40.4% in 1996 and 39.4% in 1995. Lower earnings in
Germany reduced the effective tax rate in the quarter. However, a lower level of
anticipated foreign tax credits as well as reduced earnings in North America
increased the effective tax rate for the six months ended February 29, 1996.
Earnings in Europe decreased $1.6 million in the 1996 second quarter
and $2.6 million for the six month period. The decline was attributable
primarily to Germany where the economy has slowed considerably during the last
six months. European sales were down $8.8 million or 6% for the quarter
primarily due to lower resin prices.
North American income was down $3.9 million in the 1996 second quarter
and $7.6 million for the six month period. The major reason for the decline in
earnings was lower profit margins which were down by approximately 30% due to
competitive pricing. In addition, manufacturing capacities were utilized at a
69% rate for the quarter compared with a 94% rate in the same quarter last year.
During the last year, manufacturing capacities in North America increased 55%
principally because of the February 28, 1995 acquisition of Texas Polymer
Services and the start-up of a new Mexican facility in September 1995.
Earnings for the fiscal 1996 third quarter will improve from the
preceding quarter, but will be down from the same quarter last year. Order
levels in Europe and Mexico have shown a recent improvement and resin prices
have firmed during the last month which should strengthen margins and overall
profitability compared to recent quarters.
Material Changes in Financial Condition
- ---------------------------------------
As of February 29, 1996, the current ratio was 4.0 to 1 and working
capital was approximately $352 million. A major factor in the improvement of the
current ratio over August 31, 1995 was the $11.5 million reduction of notes
payable during the six months ended February 29, 1996.
In February 1996, the Company amended its $75 million revolving credit
agreement to extend the term one additional year. The termination date of the
credit agreement is now February 28, 2001.
The ratio of long-term liabilities to capital was 18.0% at February 29,
1996 compared to 20.8% at August 31, 1995. This ratio is calculated by dividing
the sum of long-term debt and other long-term liabilities by the sum of total
stockholders' equity, long-term debt and other long-term liabilities. This ratio
decreased during the six months ended February 29, 1996 due to the $18 million
reduction in the outstanding debt under the revolving credit agreement.
During November 1995, the Company repurchased 60,000 shares of its
common stock for $1,226,000. The Board of Directors of the Company has
authorized the repurchase of up to 3,940,000 additional shares. The timing of
any purchases will depend on the price of the stock and value it provides to
the Company.
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars using current exchange rates. Income statement
items are translated at average exchange rates prevailing during the period. The
resulting translation adjustments are recorded in the "cumulative foreign
currency translation adjustment" account in stockholders' equity. The
strengthening of the U.S. dollar at February 29, 1996 as compared to its value
at August 31, 1995 decreased this account by $3,822,000.
- 8 -
<PAGE> 9
Part II - Other Information
- ---------------------------
Items 1 through 5 are not applicable or the answer to such items is
negative; therefore, the items have been omitted and no reference is required in
this report.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
Exhibit
Number Exhibit
------ -------
10.1* Form of Amendment to Deferred Compensation Agreements
between the Registrant and Robert A. Stefanko, Terry L.
Haines and Larry A. Kushkin
10.2* Employment Agreement dated January 31, 1996, between the
Registrant and Robert A. Stefanko (replacing Employment
Agreement dated December 28, 1990)
10.3* Employment Agreement dated January 31, 1996, between the
Registrant and Terry L. Haines (replacing Employment
Agreement dated December 28, 1990)
10.4* Employment Agreement dated January 31, 1996, between the
Registrant and Larry A. Kushkin (replacing Employment
Agreement dated December 28, 1990)
10.5* Employment Agreement dated January 31, 1996, between the
Registrant and Leonard E. Emge
10.6* Employment Agreement dated January 31, 1996, between the
Registrant and Alain C. Adam (replacing Employment
Agreement dated December 28, 1990)
10.7* Employment Agreement dated January 31, 1996, between the
Registrant and Brian R. Colbow (replacing Employment
Agreement dated December 28, 1990)
10.8* Amendment to A. Schulman, Inc. Nonqualified Profit Sharing
Plan
10.9* Amendment to A. Schulman, Inc. 1991 Stock Incentive Plan
10.10* Amendment to A. Schulman, Inc. 1992 Non-Employee
Directors' Stock Option Plan
10.11 First Amendment to Credit Agreement dated February 26,
1996, among Registrant and Society National Bank,
individually and as Agent, First National Bank of Ohio,
Union Bank of Switzerland and The First National Bank of
Chicago
27** Financial Data Schedule
- 9 -
<PAGE> 10
*Management contract or compensatory plan or arrangement required to be
filed as an Exhibit hereto.
**Filed only in electronic format pursuant to Item 601(b)(27) of
Regulation S-K.
(b) Reports on Form 8-K.
--------------------
On January 16, 1996, the Registrant filed a report on Form 8-K dated
January 15, 1996. The filing was made in conjunction with the adoption by the
Registrant's Board of Directors of (1) a stockholder rights plan pursuant to
which the Registrant's common stockholders of record as of January 25, 1996,
were issued special stock purchase rights and (2) amendments to the Registrant's
By-laws to require a stockholder to provide notice to the Registrant within a
specified time frame of such stockholder's intent to nominate a director or
raise business at an annual meeting. No financial statements were filed with
such Form 8-K.
- 10 -
<PAGE> 11
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.
Date April 15, 1996 A. Schulman, Inc.
------------------- -----------------------------------------
(Registrant)
/s/ R. A. Stefanko
-----------------------------------------
R. A. Stefanko, Executive Vice President-
Finance & Administration
(Signing on behalf of Registrant as a duly
authorized officer of Registrant and signing as
the Principal Financial Officer of Registrant)
- 11 -
<PAGE> 1
Exhibit 10.1
FORM OF
AMENDMENT TO
DEFERRED COMPENSATION AGREEMENTS
AMENDMENT made this ____ day of January, 1996, to Agreement made as of
___________ (the "Agreement"), between A. SCHULMAN, INC. (the "Company") and
_________ (the "Employee").
Section 6 of the Agreement is hereby amended to read, in its entirety,
as follows:
"6. (a) Notwithstanding any provision hereof to the contrary,
upon the occurrence of a Change in Control (as defined in Section 6(b)
hereof), the Employee shall be one hundred percent (100%) vested in
his Deferred Benefit even if he has not completed ten (10) years of
employment from the date of the Agreement, and, upon the termination
of the Employee's employment following a Change in Control and prior
to the end of the Change-in-Control Protective Period (as defined in
Section 6(c) hereof):
(I) If the Employee's employment is terminated by the
Company it shall not be deemed a Termination for Cause under
this Agreement;
(II) The provisions of Section 5 hereof shall not be
applicable nor shall any similar provision in the Employment
Agreement be applicable; and
(III) The Deferred Benefit shall be paid to the
Employee in a lump sum within five (5) days of such
termination.
(b) For purposes of this Agreement, a 'Change in
Control' shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(I) any Person (as defined in Section 6(e) hereof) is
or becomes the Beneficial Owner (as defined in Section 6(d)
hereof), directly or indirectly, of securities of the Company
(not including in the securities benefi-
<PAGE> 2
cially owned by such Person any securities acquired directly from the
Company or its affiliates other than in connection with the acquisition
by the Company or its affiliates of a business) representing 25% or
more of either the then outstanding shares of common stock of the
Company or the combined voting power of the Company's then outstanding
securities; or
(II) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved; or
(III) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or approve the
issuance of voting securities of the Company in connection with a
merger or consolidation of the Company (or any direct or indirect
subsidiary of the Company) pursuant to applicable stock exchange
requirements, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company,
at least 75% of the combined voting power of the voting securities of
the Company
2
<PAGE> 3
or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any securities
acquired directly from the Company or its subsidiaries other than in
connection with the acquisition by the Company or its subsidiaries of a
business) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding securities; or
(IV) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of
the Company's assets, other than a sale or disposition by the Company
of all or substantially all of the Company's assets to an entity, at
least 75% of the combined voting power of the voting securities of
which are owned by stockholders in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be deemed
to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or transaction which
would otherwise constitute a Change in Control (a "Transaction") shall not
constitute a Change in Control for purposes of this
3
<PAGE> 4
Agreement if, in connection with the Transaction, the Employee
participates as an equity investor in the acquiring entity or any of
its affiliates (the "Acquiror"). For purposes of the preceding
sentence, the Employee shall not be deemed to have participated as an
equity investor in the Acquiror by virtue of (i) obtaining
beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award
under one or more incentive plans of the Acquiror (including, but not
limited to, the conversion in connection with the Transaction of
incentive compensation awards of the Company into incentive
compensation awards of the Acquiror), on terms and conditions
substantially equivalent to those applicable to other executives of
the Company immediately prior to the Transaction, after taking into
account normal differences attributable to job responsibilities, title
and similar matters, (ii) obtaining beneficial ownership of any equity
interest in the Acquiror on terms and conditions substantially
equivalent to those obtained in the Transaction by all other
stockholders of the Company, or (iii) passive ownership of less than
three percent (3%) of the stock of the Acquiror.
(c) For purposes of this Agreement, 'Change-in-Control
Protective Period' shall mean the period from the occurrence of a
Change in Control until the later of the second anniversary of such
Change in Control or, if such Change in Control shall be caused by the
stockholder approval of a merger or consolidation described in Section
6(b)(III) hereof, the second anniversary of the consummation of such
merger or consolidation.
(d) For purposes of this Agreement, 'Beneficial Owner' shall
have the meaning set forth in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended from time to time (the 'Exchange Act').
(e) For purposes of this Agreement, 'Person' shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (i) the Company or any of its
4
<PAGE> 5
subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company."
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
the Agreement as of the day and year first set forth above.
A. SCHULMAN, INC.
By__________________________
____________________________
Employee
5
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this 31 day of January, 1996, by and between A. SCHULMAN, INC., a Delaware
corporation (the "Employer"), and ROBERT A. STEFANKO (the "Employee").
WHEREAS, the Board of Directors of the Employer desires to provide for the
continued employment of the Employee as a member of the Employer's management,
in the best interest of the Employer and its stockholders. The Employee is
willing to commit himself continue to serve the Employer, on the terms and
conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
-------------
The definitions of capitalized terms used in this Agreement (unless stated
where first used) are provided in the last Section hereof.
2. EMPLOYMENT
----------
The Employer hereby continues to employ the Employee as Chief Financial
Officer and Executive Vice President-Finance and Administration of the
Employer, and the Employee hereby accepts such continued employment upon the
terms and conditions herein contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
-----------------------------------
3.1 DUTIES. The Employee shall devote his entire business time, attention
and energies to the Employer and shall not engage in any conduct which shall
reflect adversely upon the Companies. The Employee shall perform such duties
for the Companies as may be assigned to one in his executive status and
capacity by the Board. The Employee shall serve diligently and to the best of
his ability.
During his employment by the Employer, the Employee shall not, without the
Employer's prior written consent, be
<PAGE> 2
engaged in any other business activity, whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, except that
notwithstanding the foregoing, he may invest his personal funds for his own
account; provided that such investment shall be passive and not controlling in
any such investment and subject to the provisions of Section 13.2 hereof and
provided further that he will not be required to provide any substantial
services on behalf of such enterprise. Notwithstanding the foregoing, the
Employee may serve on the Boards of Directors of other corporations during the
Term as long as such service does not interfere with the performance of his
duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable office space,
furnishings, secretarial and administrative assistance. Without the Employee's
consent, the Employee shall not be required to report principally to an office
located more than five hundred (500) miles from his principal office at the
date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW DURING DISPUTE
-------------------------------------------------------------------
4.1 TERM OF AGREEMENT. The Employer hereby employs the Employee for a Term
commencing as of the date hereof and ending December 31, 1998. At the end of
the calendar month in which this Agreement is executed and at the end of each
calendar month thereafter up to and including January 31, 2005, this Agreement
shall automatically be extended for one (1) month unless either party shall
give notice to the other of non-extension prior to the end of such calendar
month; provided, however, if a Change in Control shall have occurred during the
Term of this Agreement, Sections 7 and 8 and 10 through 20 of this Agreement
shall continue in effect until at least the end of the Change-in-Control
Protective Period (whether or not the Term of the Agreement shall have expired
for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. Prior to any
Change in Control, the Employer may terminate the employment of the Employee
for Cause pursuant to this Agreement. Prior to any Change in Control, the
Employee may terminate his employment pursuant to this Agreement if the
Employer fails to make full and timely payments of all sums provided for in
Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall
breach its covenants hereunder in any material respect.
2
<PAGE> 3
4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any Change in Control,
if the Employee shall be terminated for Cause, and, within 30 days of such
termination, shall notify the Employer of his intention to adjudicate such
termination as improper, the Employer agrees that it will deposit with Society
National Bank, Cleveland, Ohio, as Escrow Agent the installments of the
Employee's Base Salary (as provided in Section 5 below) as the same would have
become payable but for such termination. In the event of a final adjudication
by a tribunal of competent jurisdiction that such termination was not for
Cause, then the amounts so deposited in escrow, plus any interest earned by the
Escrow Agent thereon, shall be delivered promptly to the Employee. If such
adjudication shall be in favor of the Employer, the Escrow Agent shall return
the sums so deposited, plus such interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated damages but the
Employer shall be entitled to a credit against any such award to the extent of
the sums so delivered to the Employee.
5. COMPENSATION
------------
The Employer agrees to pay to the Employee as compensation for his services
hereunder a Base Salary initially equal to the fixed annual salary currently
being paid to the Employee as shown on the Employer's employment records,
payable in substantially equal weekly, biweekly, bimonthly or monthly
installments, as the case may be, in the manner currently being paid to the
Employee. The Base Salary may be discretionarily increased by the Board from
time to time as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time shall not be decreased
during the Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's compensation may not be
limited to his Base Salary and that the Employee may receive an annual bonus in
the amount, if any, determined annually by the Employer.
The Employee shall also participate in employee compensation and benefit
plans available generally to executives of the Employer (including, without
limitation, any tax-qualified profit sharing plan, nonqualified profit sharing
plan, life insurance plan and health insurance plan) on a level appropriate to
his position and shall receive the employee fringe benefits available generally
to executives of the
3
<PAGE> 4
Employer (including, without limitation, the use of a company car).
6. EXPENSES
--------
The Employee is authorized to incur reasonable expenses for promoting the
business of the Employer, including expenses for entertainment, travel and
similar items. The Employer shall reimburse the Employee for all such expenses
upon the presentation by the Employee, from time to time, of an itemized
account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
----------------------------------------
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee's employment
shall be terminated for any reason during the Term (or, if later, prior to the
end of the Change-in-Control Protective Period), the Employer shall pay the
Employee's Base Salary to the Employee through the Date of Termination at the
rate in effect at the time the Notice of Termination is given (subject to
Section 7.2 hereof), together with all compensation and benefits payable to the
Employee through the Date of Termination under the terms of any compensation or
benefit plan, program or arrangement maintained by the Employer during such
period. Subject to Sections 8, 9, 10 and 11 hereof, after completing the
expense reimbursements required by Section 6 hereof and making the payments and
providing the benefits required by this Section 7, the Employer shall have no
further obligations to the Employee under this Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During the Term (or, if
later, at any time prior to the end of the Change-in-Control Protective
Period), during any period that the Employee fails to perform the Employee's
full-time duties with the Employer as a result of incapacity due to physical or
mental illness (but in no event for more than twenty-four (24) months), the
Employer shall pay only sixty percent (60%) of the Employee's Base Salary to
the Employee at the rate in effect at the commencement of any such period (less
amounts, if any, payable to the Employee at or prior to the time of any such
Base Salary payment under disability benefit plans of the Employer or under the
Social Security disability insurance program). After six (6) months of
Disability, the Employer shall have the right to terminate the Employee's
employment pursuant to this Agreement and all Base Salary payments (except the
sixty percent (60%) payments pursuant to the foregoing sentence) shall cease.
Except to the extent
4
<PAGE> 5
provided in this Section 7.2, all Base Salary payments to the Employee shall be
abated during the period of Disability. Subject to Sections 8, 9, 10 and 11
hereof, after completing the expense reimbursements required by Section 6
hereof and making the payments and providing the benefits required by this
Section 7, the Employer shall have no further obligations to the Employee under
this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY; TERMINATION PAY;
--------------------------------------------------------------------
PROMPT PAYMENT
- --------------
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee's employment shall
be terminated for any reason during the Term of this Agreement (or, if later,
prior to the end of the Change-in-Control Protective Period), the Employer
shall pay the Employee's normal post-termination compensation and benefits to
the Employee as such payments become due. Subject to Section 10 hereof, such
post-termination compensation and benefits shall be determined under, and paid
in accordance with, the Employer's retirement, insurance and other compensation
or benefit plans, programs and arrangements (other than this Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding anything to the
contrary in Section 7.2, 9.1 or 10.1(A) hereof, if the laws governing this
Agreement shall require that the Employer continue to pay or otherwise
compensate the Employee for any period of time following termination of the
Employee's employment ("Continuation Pay") or if such laws require certain
amounts of severance pay, termination compensation or the like (collectively,
"Termination Pay"), then to the fullest extent permitted by law any payments to
the Employee pursuant to Section 7.2, 9.1 or 10.1(A) hereof shall be included
in the calculation of Continuation Pay and Termination Pay and such payments
shall be deducted from the amount of Continuation Pay or Termination Pay due
the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7 or 9 hereof or
this Section 8 shall be made promptly after the event giving rise to the
obligation and shall be made to the Employee or in accordance with Section 14.2
hereof, as the case may be.
5
<PAGE> 6
9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A CHANGE IN
----------------------------------------------------------------
CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
- --------------------------------------------------
9.1 DEATH BENEFIT. If the Employee's employment shall be terminated by
death during the Term (or, if later, prior to the end of the Change-in-Control
Protective Period), then, in addition to the compensation and benefits provided
by Sections 7.1 and 8 hereof, the Employer shall pay a lump sum amount equal to
sixty percent (60%) of the Base Salary for twenty-four (24) months in
accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the Employer shall
terminate the Employee's employment during the Term and prior to a Change in
Control, without Cause (and not for Disability or in connection with the
Employee's death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term,
each of which bonuses shall be equal to one-half (1/2) times the average annual
bonus paid to the Employee during the most recent five (5) calendar years of
the Employee's employment by any of the Companies (prorated for any partial
years in the remaining Term).
10. SEVERANCE PAYMENTS; TOTAL PAYMENTS
----------------------------------
10.1 SEVERANCE PAYMENTS.
The Employer shall pay the Employee the payments described in this Section
10.1 (the "Severance Payments") upon the termination of the Employee's
employment following a Change in Control and prior to the end of the
Change-in-Control Protective Period, in addition to any payments and benefits
to which the Employee is entitled under Sections 5, 6, 7 and 8.1 hereof, unless
such termination is (i) by the Employer for Cause, (ii) by reason of death or
Disability, or (iii) by the Employee without Good Reason; provided, however,
that, during the one-month period beginning with the first day of the month
immediately following the first anniversary of the Change in Control, the
Employee can terminate his employment for any reason (a "Window Period
Termination") and, upon such termination, the Employer shall pay the Employee
the Severance Payments described in this Section 10.1, in addition to any
payments and benefits to which the Employee is entitled under Sections 5, 6, 7
and 8.1 hereof. For purposes of this Agreement, the Employee's employment
shall be deemed to have been terminated by the Employer without Cause following
a Change in
6
<PAGE> 7
Control or by the Employee with Good Reason following a Change in Control, as
the case may be, if (i) the Employee's employment is terminated without Cause
prior to a Change in Control and such termination was at the request or
direction of a Person who has entered into an agreement with the Employer the
consummation of which would constitute a Change in Control, (ii) the Employee
terminates his employment with Good Reason prior to a Change in Control and the
circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Employee's employment is terminated by
the Employer without Cause prior to a Change in Control (but following a
Potential Change in Control) and such termination is otherwise in connection
with or in anticipation of a Change in Control which actually occurs. For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Employee shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the Employee for periods
subsequent to the Date of Termination and in lieu of any severance benefit
otherwise payable to the Employee, the Employer shall pay to the Employee a
lump sum severance payment, in cash, equal to three (3) times the sum of (i)
the higher of the Employee's Base Salary in effect immediately prior to the
occurrence of the event or circumstance upon which the Notice of Termination
is based or the Employee's Base Salary in effect immediately prior to the
Change in Control, and (ii) the higher of the annual bonus earned by the
Employee in respect of the Employer's fiscal year immediately preceding that
in which the Date of Termination occurs or the average annual bonus so earned
in respect of the three fiscal years immediately preceding that in which the
Change in Control occurs.
(B) Notwithstanding any provision of any annual incentive plan to the
contrary, the Employer shall pay to the Employee a lump sum amount, in cash,
equal to the sum of (i) any annual incentive compensation which has been
allocated or awarded to the Employee for a completed fiscal year preceding
the Date of Termination and which, as of the Date of Termination, is
contingent only upon the continued employment of the Employee to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of a deemed
annual bonus for the Employer's fiscal year in
7
<PAGE> 8
which the Date of Termination occurs, calculated by multiplying (i) the
higher of the annual bonus earned by the Employee with respect to the
immediately preceding fiscal year or the average annual bonus earned by the
Employee with respect to the immediately preceding three fiscal years of the
Employer by (ii) the fraction obtained by dividing the number of days in the
fiscal year of the Employer in which termination occurs up to and including
the Date of Termination by 365.
(C) For the thirty-six (36) month period immediately following the Date
of Termination, the Employer shall arrange to provide the Employee with life,
disability, accident and health insurance benefits substantially similar to
those which the Employee is receiving immediately prior to the Notice of
Termination (without giving effect to any amendment to such benefits made
subsequent to a Change in Control, which amendment adversely affects in any
manner the Employee's entitlement to or the amount of such benefits).
Benefits otherwise receivable by the Employee pursuant to this Section
10.1(C) shall be reduced to the extent comparable benefits are actually
received by or made available to the Employee without cost during the
thirty-six (36) month period following the Employee's termination of
employment (and any such benefits actually received by or made available to
the Employee shall be reported to the Employer by the Employee).
10.2 TOTAL PAYMENTS.
(A) If the Employee becomes entitled to the Severance Payments, if any of
the payments or benefits received or to be received by the Employee in
connection with a Change in Control or the Employee's termination of employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Employer, any Person whose actions result in a Change in
Control or any Person affiliated with the Employer or such Person) (such
payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Employer shall pay to the Employee an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Employee, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up payment, shall be equal to the Total
Payments.
8
<PAGE> 9
(B) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax counsel
reasonably acceptable to the Employee and selected by the accounting firm which
was, immediately prior to the Change in Control, the Employer's independent
auditor (the "Auditor") (the "Tax Counsel"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(1) of the Code shall be treated as subject to
the Excise Tax unless, in the opinion of the Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Employee
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Employee's residence on the Date of
Termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
(C) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Employee's employment, the Employee shall repay to the Employer, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being repaid by the
Employee to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income tax deduction) plus interest on the
amount of such repayment at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at
9
<PAGE> 10
the time of the termination of the Employee's employment (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Employer shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Employee with respect to such excess) at the time that the
amount of such excess is finally determined. The Employee and the Employer
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
10.3 The payments provided in Sections 10.1(A) and (B) hereof and in
Section 10.2 hereof shall be made not later than the fifth day following the
Date of Termination; PROVIDED, HOWEVER, that if the amounts of such payments
cannot be finally determined on or before such day, the Employer shall pay to
the Employee on such day an estimate, as determined in good faith by the
Employee or, in the case of payments under Section 10.2 hereof, in accordance
with Section 10.2 hereof, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Employer to the Employee, payable on the fifth (5th)
business day after demand by the Employer (together with interest at one
hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Employer
shall provide the Employee with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Employer has
received from outside counsel, auditors or consultants (and any such opinions
or advice which are in writing shall be attached to the statement). In the
event the Employer should fail to pay when due the amounts described in
Sections 10.1(A), (B) and (C) hereof or in Section 10.2 hereof, the Employee
shall also be entitled to receive from the Employer an amount representing
interest on any such unpaid amounts from the due date, as determined under this
Section 10.3 (without regard to any extension of the Date of Termination
pursuant to Section 11.3 hereof), to the date of payment at one hundred twenty
10
<PAGE> 11
percent (120%) of the rate provided in section 1274(b)(2)(B) of the Code.
10.4 The Employer also shall pay to the Employee all legal fees and
expenses incurred by the Employee (i) in disputing in good faith any issue
relating to the termination of the Employee's employment following a Change in
Control and prior to the end of the Change-in-Control Protective Period, (ii)
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement, or (iii) in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Employee's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Employer
reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
-------------------------------------------------------
11.1 NOTICE OF TERMINATION. During the Term (and, if longer, until the end
of the Change-in-Control Protective Period), any purported termination of the
Employee's employment (other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the other party hereto
in accordance with Section 15 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
Further, with respect to any purported termination of the Employee's employment
after a Change in Control and prior to the end of the Change-in-Control
Protective Period, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Employee and an opportunity for the Employee,
together with the Employee's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Employee was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
11
<PAGE> 12
11.2 DATE OF TERMINATION. "Date of Termination," with respect to any
purported termination of the Employee's employment during the Term (and, if
longer, prior to the end of the Change-in-Control Protective Period), shall
mean (i) if the Employee's employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the Employee shall not
have returned to the full-time performance of the Employee's duties during such
thirty (30) day period), and (ii) if the Employee's employment is terminated
for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination by the Employer, shall not be less than thirty
(30) days (except in the case of a termination for Cause) and, in the case of a
termination by the Employee, shall not be less than fifteen (15) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any purported
termination of the Employee's employment after a Change in Control and prior to
the end of the Change-in-Control Protective Period, if within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 11.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the date on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); PROVIDED, HOWEVER, that the Date of Termination shall be extended
by a notice of dispute given by the Employee only if such notice is given in
good faith and the Employee pursues the resolution of such dispute with
reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and prior to the end of the Change-in-Control
Protective Period and the Date of Termination is extended in accordance with
Section 11.3 hereof, the Employer shall continue to pay the Employee the full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Employee as a
participant in all compensation, benefit and insurance plans in which the
Employee was participating when the notice giving rise to the dispute was
given, until the Date of Termination, as determined in accordance with
12
<PAGE> 13
Section 11.3 hereof. Amounts paid under this Section 11.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
7.1 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement.
12. NO MITIGATION
-------------
The Employer agrees that, if the Employee's employment with the Employer
terminates following a Change in Control and prior to the end of the
Change-in-Control Protective Period, the Employee is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 10.1(C) hereof) shall not be reduced by any compensation
earned by the Employee as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
-----------------------------------------------------
13.1 CONFIDENTIALITY. The Companies' methods, plans for doing business,
processes, pricing, compounds, customers and supplies are vital to the
Companies and, to the extent not made public by the Companies, constitute
confidential information subject to the Companies' proprietary rights therein.
The Employee covenants and agrees that during the Term and at all times
thereafter, the Employee will not, directly or indirectly, make known, divulge,
furnish, make available or use, otherwise than in the regular course of the
Employee's employment by the Employer, any invention, product, process,
apparatus or design of any of the Companies, or any knowledge or information in
respect thereof (including, but not limited to, business methods and
techniques), or any other confidential or so-called "insider" information of
any of the Companies. This covenant shall apply without regard to the time or
circumstances of any termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee covenants and
agrees that during the period of three (3) years following any termination of
the Employee's employment which occurs prior to a Change in Control, the
Employee will not, directly or indirectly, either as an individual for
13
<PAGE> 14
the Employee's own account or as an investor, or other participant in, or as an
employee, agent, or representative of, any other business enterprise:
(i) solicit, employ, entice, take away or interfere with, or attempt to
solicit, employ, entice, take away or interfere with, any employee of
the Employer or the Companies; or
(ii) engage or participate in or finance, aid or be connected with any
enterprise which competes with the business of the Companies, or any
of them.
The geographical limitations of the foregoing shall include any country in
which the Companies or any of them shall be doing business as of such date of
such termination. This covenant shall apply without regard to the
circumstances of any termination of the Employee's employment which occurs
prior to a Change in Control.
13.3 The Employee acknowledges that the covenants contained in this Section
13 are of the essence of this Agreement and said covenants shall be construed
as independent of any other provisions of this Agreement. Recognizing the
irreparable nature of the injury that could result from the Employee's
violation of any of the covenants and agreement to be performed and/or observed
by the Employee pursuant to the provisions of this Section 13, and that damages
would be inadequate compensation, it is agreed that any violations by the
Employee of the provisions of this Section 13, shall be the proper subject for
immediate injunctive and other equitable relief to the Employer.
14. SUCCESSORS; BINDING AGREEMENT
-----------------------------
14.1 In addition to any obligations imposed by law upon any successor to
the Employer, the Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Employer to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Employer would be required to perform it if no such succession
had taken place. Failure of the Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Employee to compensation from
14
<PAGE> 15
the Employer in the same amount and on the same terms as the Employee would be
entitled to hereunder if the Employee were to terminate the Employee's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Except as provided in this
Section 14.1, this Agreement shall not be assignable by either party without
the written consent of the other party hereto.
14.2 This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee shall
die while any amount would still be payable to the Employee hereunder (other
than amounts which, by their terms, terminate upon the death of the Employee)
if the Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the Employee's
estate.
15. NOTICES
-------
For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed, if to the Employee, to
the address shown for the Employee in the personnel records of the Employer
and, if to the Employer, to the address set forth below, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Employer:
Terry L. Haines
President and Chief Executive Officer
A. Schulman, Inc.
P. O. Box 1710
Akron, Ohio 44309-1710
15
<PAGE> 16
With a copy to:
James H. Berick, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
16. MISCELLANEOUS
-------------
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by
the Employee and such officer as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. This Agreement supersedes the Employment Agreement between the Employer
and the Employee dated as of December 28, 1990 and any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party (except the
Agreements between the Employer and the Employee with respect to deferred
compensation, dated August 1, 1985 and March 21, 1991, as they may be amended,
and except as expressly set forth in this Agreement). The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Ohio. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Employee has agreed. The
obligations of the Employer and the Employee under this Agreement which by
their nature may require (partial or total) performance after the expiration of
the Term or the Change-in-Control Protective Period (including, without
limitation, those under Sections 5 through 11 and Section 13 hereof) shall
survive such expiration.
17. VALIDITY
--------
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceabil-
16
<PAGE> 17
ity of any other provision of this Agreement, which shall remain in full force
and effect.
18. COUNTERPARTS
------------
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL; ARBITRATION
-----------------------------------------------------------
After a Change in Control and prior to the end of the Change-in-Control
Protective Period, all claims by the Employee for benefits under this Agreement
shall be directed to and determined by the Committee and shall be in writing.
Any denial by the Committee of a claim for benefits under this Agreement shall
be delivered to the Employee in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Committee shall afford a reasonable opportunity to the Employee for
a review of the decision denying a claim and shall further allow the Employee
to appeal to the Committee a decision of the Committee within sixty (60) days
after notification by the Committee that the Employee's claim has been denied.
Any further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Akron, Ohio in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Notwithstanding any provision of this Agreement to the contrary,
the Employee shall be entitled to seek specific performance of the Employee's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have the meanings
indicated below:
(A) "Base Amount" shall have the meaning set forth in section 280G(b)(3) of
the Code.
(B) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
17
<PAGE> 18
(C) "Board" shall mean the Board of Directors of the Employer.
(D) "Cause" for termination by the Employer of the Employee's employment
shall mean the following:
(I) with respect to a termination as to which the Notice of Termination
is duly given prior to a Change in Control, the Employee's breach of his
covenants herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or knowingly
permitting nonfeasance of his duties in any material respect, or the
Employee's committing a felony; and
(II) with respect to a termination as to which the Notice of
Termination is duly given following a Change in Control, (i) the willful and
continued failure by the Employee to substantially perform the Employee's
duties with the Employer (other than any such failure resulting from the
Employee's incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of Termination for
Good Reason by the Employee pursuant to Section 11.1 hereof) after a written
demand for substantial performance is delivered to the Employee by the
Board, which demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the Employee's
duties, or (ii) the willful engaging by the Employee in conduct which is
demonstrably and materially injurious to the Employer or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Employee's part shall be
deemed "willful" unless done, or omitted to be done, by the Employee not in
good faith and without reasonable belief that the Employee's act, or failure
to act, was in the best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim by the
Employer that Cause exists shall be given effect unless the Employer
establishes to the Committee by clear and convincing evidence that Cause
exists.
18
<PAGE> 19
(E) A "Change in Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Employer (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Employer or its affiliates other than in connection with the acquisition by
the Employer or its affiliates of a business) representing 25% or more of
either the then outstanding shares of common stock of the Employer or the
combined voting power of the Employer's then outstanding securities; or
(II) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Employer) whose
appointment or election by the Board or nomination for election by the
Employer's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved; or
(III) the stockholders of the Employer approve a merger or
consolidation of the Employer with any other corporation or approve the
issuance of voting securities of the Employer in connection with a merger or
consolidation of the Employer (or any direct or indirect subsidiary of the
Employer) pursuant to applicable stock exchange requirements, other than (i)
a merger or consolidation which would result in the voting securities of the
Employer outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee
19
<PAGE> 20
benefit plan of the Employer or any subsidiary of the Employer, at least 75%
of the combined voting power of the voting securities of the Employer or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Employer (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Employer (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition by the
Employer or its subsidiaries of a business) representing 25% or more of
either the then outstanding shares of common stock of the Employer or the
combined voting power of the Employer's then outstanding securities; or
(IV) the stockholders of the Employer approve a plan of complete
liquidation or dissolution of the Employer or an agreement for the sale or
disposition by the Employer of all or substantially all of the Employer's
assets, other than a sale or disposition by the Employer of all or
substantially all of the Employer's assets to an entity, at least 75% of the
combined voting power of the voting securities of which are owned by
stockholders in substantially the same proportions as their ownership of the
Employer immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be deemed to
have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of the Employer immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Employer immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or transaction which would
otherwise constitute a Change in Control (a "Transaction") shall not constitute
a Change in Control for purposes of this Agreement if, in connection with the
Transaction, the Employee participates as an equity investor in the acquiring
entity or any of its affiliates (the
20
<PAGE> 21
"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under
one or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences attributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the
Acquiror on terms and conditions substantially equivalent to those obtained in
the Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(F) "Change-in-Control Protective Period" shall mean the period from the
occurrence of a Change in Control until the later of the second anniversary of
such Change in Control or, if such Change in Control shall be caused by the
stockholder approval of a merger or consolidation described in Section
20(E)(III) hereof, the second anniversary of the consummation of such merger or
consolidation.
(G) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(H) "Committee" shall mean (i) the individuals (not fewer than three in
number) who, immediately prior to a Potential Change in Control, constitute the
Compensation Committee of the Board, plus (ii) in the event that fewer than
three individuals are available from the group specified in clause (i) above
for any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)); provided, however,
that the maximum number of individuals constituting the Committee shall not
exceed five.
(I) "Companies" shall mean, collectively, the Employer and each corporation
which is now and hereafter shall become a subsidiary of, or a parent of, the
Employer, together with their respective successors and assigns.
21
<PAGE> 22
(J) "Continuation Pay" shall mean those payments so described in Section
8.2 hereof.
(K) "Date of Termination" shall have the meaning stated in Section 11.2
hereof.
(L) "Disability" shall be deemed the reason for the termination by the
Employer of the Employee's employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the full-time performance of the Employee's duties with the
Employer for a period of six (6) consecutive months, the Employer shall have
given the Employee a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Employee shall not
have returned to the full-time performance of the Employee's duties.
(M) "Employee" shall mean the individual named in the first paragraph of
this Agreement.
(N) "Employer" shall mean A. Schulman, Inc. and, except in determining
under Section 20(E) hereof whether or not any Change in Control of the Employer
has occurred, any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(O) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(P) "Excise Tax" shall mean any excise tax imposed under section 4999 of
the Code.
(Q) "Good Reason" for termination by the Employee of the Employee's
employment shall mean the occurrence (without the Employee's express prior
written consent) after any Change in Control, or after any Potential Change in
Control under the circumstances described in the second sentence of Section
10.1 hereof (treating all references in paragraphs (I) through (VII) below to a
"Change in Control" as references to a "Potential Change in Control"), of any
one of the following acts by the Employer, or failures by the Employer to act,
unless, in the case of any act or failure to act described in paragraph (I),
(V), (VI) or (VII) below, such act or failure to act is corrected prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
22
<PAGE> 23
(I) the assignment to the Employee of any duties inconsistent with
the Employee's status as an executive officer of the Employer or a
substantial adverse alteration in the nature or status of the Employee's
responsibilities from those in effect immediately prior to the Change in
Control (other than any such alteration primarily attributable to the fact
that the Employer may no longer be a public company);
(II) a reduction by the Employer in the Employee's annual base salary
as in effect on the date hereof or as the same may be increased from time to
time except for across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in control of
the Employer;
(III) the relocation of the Employer's principal executive offices to a
location more than fifty (50) miles from the location of such offices
immediately prior to the Change in Control or the Employer's requiring the
Employee to be based anywhere other than the Employer's principal executive
offices except for required travel on the Employer's business to an extent
substantially consistent with the Employee's present business travel
obligations;
(IV) the failure by the Employer, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation, or
to pay to the Employee any portion of an installment of deferred
compensation under any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to continue in effect any compensation
plan in which the Employee participates immediately prior to the Change in
Control which is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan and Nonqualified
Profit Sharing Plan or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the failure
by the Employer to continue the
23
<PAGE> 24
Employee's participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employee's participation relative to
other participants, as existed at the time of the Change in Control;
(VI) the failure by the Employer to continue to provide the Employee
with benefits substantially similar to those enjoyed by the Employee under
any of the Employer's pension, life insurance, medical, health and accident,
or disability plans in which the Employee was participating at the time of
the Change in Control, the taking of any action by the Employer which would
directly or indirectly materially reduce any of such benefits or deprive the
Employee of any material fringe benefit enjoyed by the Employee at the time
of the Change in Control, or the failure by the Employer to provide the
Employee with the number of paid vacation days to which the Employee is
entitled on the basis of years of service with the Employer in accordance
with the Employer's normal vacation policy in effect at the time of the
Change in Control; or
(VII) any purported termination of the Employee's employment which is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment for Good Reason
shall not be affected by the Employee's incapacity due to physical or mental
illness. The Employee's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in Section 10.2
hereof.
24
<PAGE> 25
(S) "Notice of Termination" shall have the meaning stated in Section 11.1
hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Employer or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Employer or any of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the stockholders of the
Employer in substantially the same proportions as their ownership of stock of
the Employer.
(U) "Potential Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(1) the Employer enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(2) the Employer or any Person publicly announces an intention to take
or to consider taking actions which, if consummated, would constitute a
Change in Control;
(3) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Employer representing 15% or more of either the then
outstanding shares of common stock of the Employer or the combined voting
power of the Employer's then outstanding securities; or
(4) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
(V) "Severance Payments" shall mean those payments described in Section
10.1 hereof.
(W) "Term" shall mean the period of time described in Section 4.1 hereof
(including any extension or continuation described therein).
25
<PAGE> 26
(X) "Termination Pay" shall mean those payments so described in
Section 8.2 hereof.
(Y) "Total Payments" shall mean those payments described in Section
10.2 hereof.
(Z) "Window Period Termination" shall have the meaning stated in
Section 10.1 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed (the corporate signatory by the respective officer duly authorized)
as of the day and year first above written.
/s/ Robert A. Stefanko
---------------------------
Robert A. Stefanko
A. SCHULMAN, INC.
By /s/ James H. Berick
--------------------------
James H. Berick, Secretary
26
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of this 31st day of January, 1996, by and between A.
SCHULMAN, INC., a Delaware corporation (the "Employer"), and TERRY L. HAINES
(the "Employee").
WHEREAS, the Board of Directors of the Employer desires to
provide for the continued employment of the Employee as a member of the
Employer's management, in the best interest of the Employer and its
stockholders. The Employee is willing to commit himself continue to serve the
Employer, on the terms and conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
-------------
The definitions of capitalized terms used in this Agreement
(unless stated where first used) are provided in the last Section hereof.
2. EMPLOYMENT
----------
The Employer hereby continues to employ the Employee as
President and Chief Executive Officer of the Employer, and the Employee hereby
accepts such continued employment upon the terms and conditions herein
contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
-----------------------------------
3.1 DUTIES. The Employee shall devote his entire business
time, attention and energies to the Employer and shall not engage in any
conduct which shall reflect adversely upon the Companies. The Employee shall
perform such duties for the Companies as may be assigned to one in his
executive status and capacity by the Board. The Employee shall serve
diligently and to the best of his ability.
During his employment by the Employer, the Employee shall not,
without the Employer's prior written consent, be engaged in any other business
activity, whether or not such
<PAGE> 2
business activity is pursued for gain, profit or other pecuniary advantage,
except that notwithstanding the foregoing, he may invest his personal funds for
his own account; provided that such investment shall be passive and not
controlling in any such investment and subject to the provisions of Section
13.2 hereof and provided further that he will not be required to provide any
substantial services on behalf of such enterprise. Notwithstanding the
foregoing, the Employee may serve on the Boards of Directors of other
corporations during the Term as long as such service does not interfere with
the performance of his duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable
office space, furnishings, secretarial and administrative assistance. Without
the Employee's consent, the Employee shall not be required to report
principally to an office located more than five hundred (500) miles from his
principal office at the date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT;
--------------------------------------------
ESCROW DURING DISPUTE
- ---------------------
4.1 TERM OF AGREEMENT. The Employer hereby employs the
Employee for a Term commencing as of the date hereof and ending December 31,
1998. At the end of the calendar month in which this Agreement is executed and
at the end of each calendar month thereafter up to and including August 31,
2008, this Agreement shall automatically be extended for one (1) month unless
either party shall give notice to the other of non-extension prior to the end
of such calendar month; provided, however, if a Change in Control shall have
occurred during the Term of this Agreement, Sections 7 and 8 and 10 through 20
of this Agreement shall continue in effect until at least the end of the
Change-in-Control Protective Period (whether or not the Term of the Agreement
shall have expired for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL.
Prior to any Change in Control, the Employer may terminate the employment of
the Employee for Cause pursuant to this Agreement. Prior to any Change in
Control, the Employee may terminate his employment pursuant to this Agreement
if the Employer fails to make full and timely payments of all sums provided for
in Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall
breach its covenants hereunder in any material respect.
2
<PAGE> 3
4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any Change
in Control, if the Employee shall be terminated for Cause, and, within 30 days
of such termination, shall notify the Employer of his intention to adjudicate
such termination as improper, the Employer agrees that it will deposit with
Society National Bank, Cleveland, Ohio, as Escrow Agent the installments of the
Employee's Base Salary (as provided in Section 5 below) as the same would have
become payable but for such termination. In the event of a final adjudication
by a tribunal of competent jurisdiction that such termination was not for
Cause, then the amounts so deposited in escrow, plus any interest earned by the
Escrow Agent thereon, shall be delivered promptly to the Employee. If such
adjudication shall be in favor of the Employer, the Escrow Agent shall return
the sums so deposited, plus such interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated
damages but the Employer shall be entitled to a credit against any such award
to the extent of the sums so delivered to the Employee.
5. COMPENSATION
------------
The Employer agrees to pay to the Employee as compensation for
his services hereunder a Base Salary initially equal to the fixed annual salary
currently being paid to the Employee as shown on the Employer's employment
records, payable in substantially equal weekly, biweekly, bimonthly or monthly
installments, as the case may be, in the manner currently being paid to the
Employee. The Base Salary may be discretionarily increased by the Board from
time to time as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time shall not be decreased
during the Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's compensation
may not be limited to his Base Salary and that the Employee may receive an
annual bonus in the amount, if any, determined annually by the Employer.
The Employee shall also participate in employee compensation
and benefit plans available generally to executives of the Employer (including,
without limitation, any tax-qualified profit sharing plan, nonqualified profit
sharing plan, life insurance plan and health insurance plan) on a level
appropriate to his position and shall receive the employee fringe benefits
available generally to executives of the
3
<PAGE> 4
Employer (including, without limitation, the use of a company car).
6. EXPENSES
--------
The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for entertainment,
travel and similar items. The Employer shall reimburse the Employee for all
such expenses upon the presentation by the Employee, from time to time, of an
itemized account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
----------------------------------------
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee's
employment shall be terminated for any reason during the Term (or, if later,
prior to the end of the Change-in-Control Protective Period), the Employer
shall pay the Employee's Base Salary to the Employee through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given (subject to Section 7.2 hereof), together with all compensation and
benefits payable to the Employee through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Employer during such period. Subject to Sections 8, 9, 10 and 11 hereof,
after completing the expense reimbursements required by Section 6 hereof and
making the payments and providing the benefits required by this Section 7, the
Employer shall have no further obligations to the Employee under this
Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During
the Term (or, if later, at any time prior to the end of the Change-in-Control
Protective Period), during any period that the Employee fails to perform the
Employee's full-time duties with the Employer as a result of incapacity due to
physical or mental illness (but in no event for more than twenty-four (24)
months), the Employer shall pay only sixty percent (60%) of the Employee's Base
Salary to the Employee at the rate in effect at the commencement of any such
period (less amounts, if any, payable to the Employee at or prior to the time
of any such Base Salary payment under disability benefit plans of the Employer
or under the Social Security disability insurance program). After six (6)
months of Disability, the Employer shall have the right to terminate the
Employee's employment pursuant to this Agreement and all Base Salary payments
(except the sixty percent (60%) payments pursuant to the foregoing sentence)
shall cease. Except to the extent
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<PAGE> 5
provided in this Section 7.2, all Base Salary payments to the Employee shall be
abated during the period of Disability. Subject to Sections 8, 9, 10 and 11
hereof, after completing the expense reimbursements required by Section 6
hereof and making the payments and providing the benefits required by this
Section 7, the Employer shall have no further obligations to the Employee under
this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY;
--------------------------------------------------
TERMINATION PAY; PROMPT PAYMENT
- -------------------------------
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee's
employment shall be terminated for any reason during the Term of this Agreement
(or, if later, prior to the end of the Change-in-Control Protective Period),
the Employer shall pay the Employee's normal post- termination compensation and
benefits to the Employee as such payments become due. Subject to Section 10
hereof, such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Employer's retirement, insurance and
other compensation or benefit plans, programs and arrangements (other than this
Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding
anything to the contrary in Section 7.2, 9.1 or 10.1(A) hereof, if the laws
governing this Agreement shall require that the Employer continue to pay or
otherwise compensate the Employee for any period of time following termination
of the Employee's employment ("Continuation Pay") or if such laws require
certain amounts of severance pay, termination compensation or the like
(collectively, "Termination Pay"), then to the fullest extent permitted by law
any payments to the Employee pursuant to Section 7.2, 9.1 or 10.1(A) hereof
shall be included in the calculation of Continuation Pay and Termination Pay
and such payments shall be deducted from the amount of Continuation Pay or
Termination Pay due the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7
or 9 hereof or this Section 8 shall be made promptly after the event giving
rise to the obligation and shall be made to the Employee or in accordance with
Section 14.2 hereof, as the case may be.
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<PAGE> 6
9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A
------------------------------------------------------
CHANGE IN CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
- ------------------------------------------------------------
9.1 DEATH BENEFIT. If the Employee's employment shall be
terminated by death during the Term (or, if later, prior to the end of the
Change-in-Control Protective Period), then, in addition to the compensation and
benefits provided by Sections 7.1 and 8 hereof, the Employer shall pay a lump
sum amount equal to sixty percent (60%) of the Base Salary for twenty-four (24)
months in accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the
Employer shall terminate the Employee's employment during the Term and prior to
a Change in Control, without Cause (and not for Disability or in connection
with the Employee's death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term,
each of which bonuses shall be equal to one-half (1/2) times the average annual
bonus paid to the Employee during the most recent five (5) calendar years of
the Employee's employment by any of the Companies (prorated for any partial
years in the remaining Term).
10. SEVERANCE PAYMENTS; TOTAL PAYMENTS
----------------------------------
10.1 Severance Payments.
------------------
The Employer shall pay the Employee the payments described in
this Section 10.1 (the "Severance Payments") upon the termination of the
Employee's employment following a Change in Control and prior to the end of the
Change-in-Control Protective Period, in addition to any payments and benefits
to which the Employee is entitled under Sections 5, 6, 7 and 8.1 hereof, unless
such termination is (i) by the Employer for Cause, (ii) by reason of death or
Disability, or (iii) by the Employee without Good Reason; provided, however,
that, during the one-month period beginning with the first day of the month
immediately following the first anniversary of the Change in Control, the
Employee can terminate his employment for any reason (a "Window Period
Termination") and, upon such termination, the Employer shall pay the Employee
the Severance Payments described in this Section 10.1 in addition to any
payments and benefits to which the Employee is entitled under Sections 5, 6, 7
and 8.1 hereof. For purposes of this Agreement, the Employee's employment
shall be deemed to have been terminated by the Employer without Cause following
a Change in
6
<PAGE> 7
Control or by the Employee with Good Reason following a Change in Control, as
the case may be, if (i) the Employee's employment is terminated without Cause
prior to a Change in Control and such termination was at the request or
direction of a Person who has entered into an agreement with the Employer the
consummation of which would constitute a Change in Control, (ii) the Employee
terminates his employment with Good Reason prior to a Change in Control and the
circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Employee's employment is terminated by
the Employer without Cause prior to a Change in Control (but following a
Potential Change in Control) and such termination is otherwise in connection
with or in anticipation of a Change in Control which actually occurs. For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Employee shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that such position is not correct.
(A) In lieu of any further salary payments
to the Employee for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Employee,
the Employer shall pay to the Employee a lump sum severance payment,
in cash, equal to three (3) times the sum of (i) the higher of the
Employee's Base Salary in effect immediately prior to the occurrence
of the event or circumstance upon which the Notice of Termination is
based or the Employee's Base Salary in effect immediately prior to the
Change in Control, and (ii) the higher of the annual bonus earned by
the Employee in respect of the Employer's fiscal year immediately
preceding that in which the Date of Termination occurs or the average
annual bonus so earned in respect of the three fiscal years
immediately preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of any
annual incentive plan to the contrary, the Employer shall pay to the
Employee a lump sum amount, in cash, equal to the sum of (i) any
annual incentive compensation which has been allocated or awarded to
the Employee for a completed fiscal year preceding the Date of
Termination and which, as of the Date of Termination, is contingent
only upon the continued employment of the Employee to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of a
deemed annual bonus for the Employer's fiscal year in
7
<PAGE> 8
which the Date of Termination occurs, calculated by multiplying (i)
the higher of the annual bonus earned by the Employee with respect to
the immediately preceding fiscal year or the average annual bonus
earned by the Employee with respect to the immediately preceding three
fiscal years of the Employer by (ii) the fraction obtained by dividing
the number of days in the fiscal year of the Employer in which
termination occurs up to and including the Date of Termination by 365.
(C) For the thirty-six (36) month period
immediately following the Date of Termination, the Employer shall
arrange to provide the Employee with life, disability, accident and
health insurance benefits substantially similar to those which the
Employee is receiving immediately prior to the Notice of Termination
(without giving effect to any amendment to such benefits made
subsequent to a Change in Control, which amendment adversely affects
in any manner the Employee's entitlement to or the amount of such
benefits). Benefits otherwise receivable by the Employee pursuant to
this Section 10.1(C) shall be reduced to the extent comparable
benefits are actually received by or made available to the Employee
without cost during the thirty-six (36) month period following the
Employee's termination of employment (and any such benefits actually
received by or made available to the Employee shall be reported to the
Employer by the Employee).
10.2 Total Payments.
--------------
(A) If the Employee becomes entitled to the Severance
Payments, if any of the payments or benefits received or to be received by the
Employee in connection with a Change in Control or the Employee's termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Employer, any Person whose actions
result in a Change in Control or any Person affiliated with the Employer or
such Person) (such payments or benefits, excluding the Gross-Up Payment, being
hereinafter referred to as the "Total Payments") will be subject to the Excise
Tax, the Employer shall pay to the Employee an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Employee, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up payment, shall be equal to the Total
Payments.
8
<PAGE> 9
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel reasonably acceptable to the Employee and selected by the accounting
firm which was, immediately prior to the Change in Control, the Employer's
independent auditor (the "Auditor") (the "Tax Counsel"), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of the Tax Counsel, such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, and
(iii) the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Employee shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state and locality
of the Employee's residence on the Date of Termination, net of the maximum
reduction in federal income taxes which could be obtained from deduction of
such state and local taxes.
(C) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of the Employee's employment, the Employee shall repay to the
Employer, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the Gross-Up Payment
being repaid by the Employee to the extent that such repayment results in a
reduction in Excise Tax and/or a federal, state or local income tax deduction)
plus interest on the amount of such repayment at one hundred twenty percent
(120%) of the rate provided in section 1274(b)(2)(B) of the Code. In the event
that the Excise Tax is determined to exceed the amount taken into account
hereunder at
9
<PAGE> 10
the time of the termination of the Employee's employment (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Employer shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Employee with respect to such excess) at the time that the
amount of such excess is finally determined. The Employee and the Employer
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
10.3 The payments provided in Sections 10.1(A) and (B) hereof
and in Section 10.2 hereof shall be made not later than the fifth day following
the Date of Termination; PROVIDED, HOWEVER, that if the amounts of such
payments cannot be finally determined on or before such day, the Employer shall
pay to the Employee on such day an estimate, as determined in good faith by the
Employee or, in the case of payments under Section 10.2 hereof, in accordance
with Section 10.2 hereof, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Employer to the Employee, payable on the fifth (5th)
business day after demand by the Employer (together with interest at one
hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Employer
shall provide the Employee with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Employer has
received from outside counsel, auditors or consultants (and any such opinions
or advice which are in writing shall be attached to the statement). In the
event the Employer should fail to pay when due the amounts described in
Sections 10.1(A), (B) and (C) hereof or in Section 10.2 hereof, the Employee
shall also be entitled to receive from the Employer an amount representing
interest on any such unpaid amounts from the due date, as determined under this
Section 10.3 (without regard to any extension of the Date of Termination
pursuant to Section 11.3 hereof), to the date of payment at one hundred twenty
10
<PAGE> 11
percent (120%) of the rate provided in section 1274(b)(2)(B) of the Code.
10.4 The Employer also shall pay to the Employee all legal
fees and expenses incurred by the Employee (i) in disputing in good faith any
issue relating to the termination of the Employee's employment following a
Change in Control and prior to the end of the Change-in-Control Protective
Period, (ii) in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement, or (iii) in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of the Employee's written requests
for payment accompanied with such evidence of fees and expenses incurred as the
Employer reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
------------------------------------------------------
11.1 NOTICE OF TERMINATION. During the Term (and, if longer,
until the end of the Change-in-Control Protective Period), any purported
termination of the Employee's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 15 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated. Further, with respect to any purported termination of the
Employee's employment after a Change in Control and prior to the end of the
Change-in-Control Protective Period, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at
a meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Employee and an opportunity
for the Employee, together with the Employee's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Employee was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
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<PAGE> 12
11.2 DATE OF TERMINATION. "Date of Termination," with
respect to any purported termination of the Employee's employment during the
Term (and, if longer, prior to the end of the Change-in-Control Protective
Period), shall mean (i) if the Employee's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided
that the Employee shall not have returned to the full-time performance of the
Employee's duties during such thirty (30) day period), and (ii) if the
Employee's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Employer,
shall not be less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Employee, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any
purported termination of the Employee's employment after a Change in Control
and prior to the end of the Change-in-Control Protective Period, if within
fifteen (15) days after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to this Section 11.3),
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be
extended until the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree
of a court of competent jurisdiction (which is not appealable or with respect
to which the time for appeal therefrom has expired and no appeal has been
perfected); PROVIDED, HOWEVER, that the Date of Termination shall be extended
by a notice of dispute given by the Employee only if such notice is given in
good faith and the Employee pursues the resolution of such dispute with
reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs following a Change in Control and prior to the end of the
Change-in-Control Protective Period and the Date of Termination is extended in
accordance with Section 11.3 hereof, the Employer shall continue to pay the
Employee the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and continue the
Employee as a participant in all compensation, benefit and insurance plans in
which the Employee was participating when the notice giving rise to the dispute
was given, until the Date of Termination, as determined in accordance with
12
<PAGE> 13
Section 11.3 hereof. Amounts paid under this Section 11.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
7.1 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement.
12. NO MITIGATION
-------------
The Employer agrees that, if the Employee's employment with
the Employer terminates following a Change in Control and prior to the end of
the Change-in-Control Protective Period, the Employee is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 10.1(C) hereof) shall not be reduced by any compensation
earned by the Employee as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
-----------------------------------------------------
13.1 CONFIDENTIALITY. The Companies' methods, plans for
doing business, processes, pricing, compounds, customers and supplies are vital
to the Companies and, to the extent not made public by the Companies,
constitute confidential information subject to the Companies' proprietary
rights therein. The Employee covenants and agrees that during the Term and at
all times thereafter, the Employee will not, directly or indirectly, make
known, divulge, furnish, make available or use, otherwise than in the regular
course of the Employee's employment by the Employer, any invention, product,
process, apparatus or design of any of the Companies, or any knowledge or
information in respect thereof (including, but not limited to, business methods
and techniques), or any other confidential or so-called "insider" information
of any of the Companies. This covenant shall apply without regard to the time
or circumstances of any termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee
covenants and agrees that during the period of three (3) years following any
termination of the Employee's employment which occurs prior to a Change in
Control, the Employee will not, directly or indirectly, either as an individual
for
13
<PAGE> 14
the Employee's own account or as an investor, or other participant in, or as an
employee, agent, or representative of, any other business enterprise:
(i) solicit, employ, entice, take away or interfere with,
or attempt to solicit, employ, entice, take away or
interfere with, any employee of the Employer or the
Companies; or
(ii) engage or participate in or finance, aid or be
connected with any enterprise which competes with the
business of the Companies, or any of them.
The geographical limitations of the foregoing shall include any country in
which the Companies or any of them shall be doing business as of such date of
such termination. This covenant shall apply without regard to the
circumstances of any termination of the Employee's employment which occurs
prior to a Change in Control.
13.3 The Employee acknowledges that the covenants contained
in this Section 13 are of the essence of this Agreement and said covenants
shall be construed as independent of any other provisions of this Agreement.
Recognizing the irreparable nature of the injury that could result from the
Employee's violation of any of the covenants and agreement to be performed
and/or observed by the Employee pursuant to the provisions of this Section 13,
and that damages would be inadequate compensation, it is agreed that any
violations by the Employee of the provisions of this Section 13, shall be the
proper subject for immediate injunctive and other equitable relief to the
Employer.
14. SUCCESSORS; BINDING AGREEMENT
-----------------------------
14.1 In addition to any obligations imposed by law upon any
successor to the Employer, the Employer will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Employer to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Employer would be required to perform it if no such succession
had taken place. Failure of the Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Employee to compensation from
14
<PAGE> 15
the Employer in the same amount and on the same terms as the Employee would be
entitled to hereunder if the Employee were to terminate the Employee's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Except as provided in this
Section 14.1, this Agreement shall not be assignable by either party without
the written consent of the other party hereto.
14.2 This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee shall die while any amount would still be payable to the Employee
hereunder (other than amounts which, by their terms, terminate upon the death
of the Employee) if the Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Employee's estate.
15. NOTICES
-------
For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to
the Employee, to the address shown for the Employee in the personnel records of
the Employer and, if to the Employer, to the address set forth below, or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Employer:
Robert A. Stefanko
Chief Financial Officer and Executive
Vice President-Finance and Administration
A. Schulman, Inc.
P. O. Box 1710
Akron, Ohio 44309-1710
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<PAGE> 16
With a copy to:
James H. Berick, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
16. MISCELLANEOUS
-------------
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. This Agreement supersedes the Employment
Agreement between the Employer and the Employee dated as of December 28, 1990
and any other agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof which have been made by
either party (except the Agreement between the Employer and the Employee with
respect to deferred compensation, dated March 21, 1991, as it may be amended,
and except as expressly set forth in this Agreement). The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Ohio. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Employee has agreed. The
obligations of the Employer and the Employee under this Agreement which by
their nature may require (partial or total) performance after the expiration of
the Term or the Change-in-Control Protective Period (including, without
limitation, those under Sections 5 through 11 and Section 13 hereof) shall
survive such expiration.
17. VALIDITY
--------
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceabil-
16
<PAGE> 17
ity of any other provision of this Agreement, which shall remain in full force
and effect.
18. COUNTERPARTS
------------
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL;
----------------------------------------------
ARBITRATION
- -----------
After a Change in Control and prior to the end of the
Change-in-Control Protective Period, all claims by the Employee for benefits
under this Agreement shall be directed to and determined by the Committee and
shall be in writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Employee in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable opportunity to
the Employee for a review of the decision denying a claim and shall further
allow the Employee to appeal to the Committee a decision of the Committee
within sixty (60) days after notification by the Committee that the Employee's
claim has been denied. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Akron, Ohio in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Employee shall be entitled to seek specific
performance of the Employee's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
20. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(A) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
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<PAGE> 18
(C) "Board" shall mean the Board of Directors of the
Employer.
(D) "Cause" for termination by the Employer of the
Employee's employment shall mean the following:
(I) with respect to a termination as to
which the Notice of Termination is duly given prior to a
Change in Control, the Employee's breach of his covenants
herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or
knowingly permitting nonfeasance of his duties in any material
respect, or the Employee's committing a felony; and
(II) with respect to a termination as to
which the Notice of Termination is duly given following a
Change in Control, (i) the willful and continued failure by
the Employee to substantially perform the Employee's duties
with the Employer (other than any such failure resulting from
the Employee's incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Employee pursuant
to Section 11.1 hereof) after a written demand for substantial
performance is delivered to the Employee by the Board, which
demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the
Employee's duties, or (ii) the willful engaging by the
Employee in conduct which is demonstrably and materially
injurious to the Employer or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Employee's
part shall be deemed "willful" unless done, or omitted to be
done, by the Employee not in good faith and without reasonable
belief that the Employee's act, or failure to act, was in the
best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim
by the Employer that Cause exists shall be given effect unless
the Employer establishes to the Committee by clear and
convincing evidence that Cause exists.
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(E) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its affiliates other than in connection with the acquisition
by the Employer or its affiliates of a business) representing
25% or more of either the then outstanding shares of common
stock of the Employer or the combined voting power of the
Employer's then outstanding securities; or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Employer) whose appointment or election by the Board or
nomination for election by the Employer's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved; or
(III) the stockholders of the Employer
approve a merger or consolidation of the Employer with any
other corporation or approve the issuance of voting securities
of the Employer in connection with a merger or consolidation
of the Employer (or any direct or indirect subsidiary of the
Employer) pursuant to applicable stock exchange requirements,
other than (i) a merger or consolidation which would result in
the voting securities of the Employer outstanding immediately
prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee
19
<PAGE> 20
benefit plan of the Employer or any subsidiary of the
Employer, at least 75% of the combined voting power of the
voting securities of the Employer or such surviving entity or
any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition
by the Employer or its subsidiaries of a business)
representing 25% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(IV) the stockholders of the Employer
approve a plan of complete liquidation or dissolution of the
Employer or an agreement for the sale or disposition by the
Employer of all or substantially all of the Employer's assets,
other than a sale or disposition by the Employer of all or
substantially all of the Employer's assets to an entity, at
least 75% of the combined voting power of the voting
securities of which are owned by stockholders in substantially
the same proportions as their ownership of the Employer
immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Employer immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Employer
immediately following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for purposes of this
Agreement if, in connection with the Transaction, the Employee participates as
an equity investor in the acquiring entity or any of its affiliates (the
20
<PAGE> 21
"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under
one or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences attributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the
Acquiror on terms and conditions substantially equivalent to those obtained in
the Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(F) "Change-in-Control Protective Period" shall mean the
period from the occurrence of a Change in Control until the later of the second
anniversary of such Change in Control or, if such Change in Control shall be
caused by the stockholder approval of a merger or consolidation described in
Section 20(E)(III) hereof, the second anniversary of the consummation of such
merger or consolidation.
(G) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(H) "Committee" shall mean (i) the individuals (not fewer than
three in number) who, immediately prior to a Potential Change in Control,
constitute the Compensation Committee of the Board, plus (ii) in the event that
fewer than three individuals are available from the group specified in clause
(i) above for any reason, such individuals as may be appointed by the
individual or individuals so available (including for this purpose any
individual or individuals previously so appointed under this clause (ii));
provided, however, that the maximum number of individuals constituting the
Committee shall not exceed five.
(I) "Companies" shall mean, collectively, the Employer and
each corporation which is now and hereafter shall become a subsidiary of, or a
parent of, the Employer, together with their respective successors and assigns.
21
<PAGE> 22
(J) "Continuation Pay" shall mean those payments so
described in Section 8.2 hereof.
(K) "Date of Termination" shall have the meaning stated in
Section 11.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Employer of the Employee's employment, if, as a result of
the Employee's incapacity due to physical or mental illness, the Employee shall
have been absent from the full-time performance of the Employee's duties with
the Employer for a period of six (6) consecutive months, the Employer shall
have given the Employee a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Employee shall
not have returned to the full-time performance of the Employee's duties.
(M) "Employee" shall mean the individual named in the first
paragraph of this Agreement.
(N) "Employer" shall mean A. Schulman, Inc. and, except in
determining under Section 20(E) hereof whether or not any Change in Control of
the Employer has occurred, any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(O) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(P) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(Q) "Good Reason" for termination by the Employee of the
Employee's employment shall mean the occurrence (without the Employee's express
prior written consent) after any Change in Control, or after any Potential
Change in Control under the circumstances described in the second sentence of
Section 10.1 hereof (treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Employer, or failures by the
Employer to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
22
<PAGE> 23
(I) the assignment to the Employee of any
duties inconsistent with the Employee's status as an executive
officer of the Employer or a substantial adverse alteration in
the nature or status of the Employee's responsibilities from
those in effect immediately prior to the Change in Control
(other than any such alteration primarily attributable to the
fact that the Employer may no longer be a public company);
(II) a reduction by the Employer in the
Employee's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in
control of the Employer;
(III) the relocation of the Employer's
principal executive offices to a location more than fifty (50)
miles from the location of such offices immediately prior to
the Change in Control or the Employer's requiring the Employee
to be based anywhere other than the Employer's principal
executive offices except for required travel on the Employer's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(IV) the failure by the Employer, without
the Employee's consent, to pay to the Employee any portion of
the Employee's current compensation, or to pay to the Employee
any portion of an installment of deferred compensation under
any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to continue
in effect any compensation plan in which the Employee
participates immediately prior to the Change in Control which
is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan
and Nonqualified Profit Sharing Plan or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Employer to continue the
23
<PAGE> 24
Employee's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level
of the Employee's participation relative to other
participants, as existed at the time of the Change in Control;
(VI) the failure by the Employer to continue
to provide the Employee with benefits substantially similar to
those enjoyed by the Employee under any of the Employer's
pension, life insurance, medical, health and accident, or
disability plans in which the Employee was participating at
the time of the Change in Control, the taking of any action by
the Employer which would directly or indirectly materially
reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by the Employee at the time of
the Change in Control, or the failure by the Employer to
provide the Employee with the number of paid vacation days to
which the Employee is entitled on the basis of years of
service with the Employer in accordance with the Employer's
normal vacation policy in effect at the time of the Change in
Control; or
(VII) any purported termination of the
Employee's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment
for Good Reason shall not be affected by the Employee's incapacity due to
physical or mental illness. The Employee's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Employee that Good Reason exists shall be
presumed to be correct unless the Employer establishes to the Committee by
clear and convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in
Section 10.2 hereof.
24
<PAGE> 25
(S) "Notice of Termination" shall have the meaning stated in
Section 11.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Employer or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Employer or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Employer in substantially the same proportions as their
ownership of stock of the Employer.
(U) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(1) the Employer enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(2) the Employer or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(3) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Employer
representing 15% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(4) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(V) "Severance Payments" shall mean those payments described
in Section 10.1 hereof.
(W) "Term" shall mean the period of time described in Section
4.1 hereof (including any extension or continuation described therein).
25
<PAGE> 26
(X) "Termination Pay" shall mean those payments so described
in Section 8.2 hereof.
(Y) "Total Payments" shall mean those payments described in
Section 10.2 hereof.
(Z) "Window Period Termination" shall have the meaning
stated in Section 10.1 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed (the corporate signatory by the respective officer
duly authorized) as of the day and year first above written.
/s/ Terry L. Haines
------------------------------------
Terry L. Haines
A. SCHULMAN, INC.
By /s/ James H. Berick
-----------------------------------
James H. Berick, Secretary
0111503.01-01S6a 26
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this 31 ST day of January, 1996, by and between A. SCHULMAN, INC., a Delaware
corporation (the "Employer"), and LARRY A. KUSHKIN (the "Employee").
WHEREAS, the Board of Directors of the Employer desires to provide for the
continued employment of the Employee as a member of the Employer's management,
in the best interest of the Employer and its stockholders. The Employee is
willing to commit himself continue to serve the Employer, on the terms and
conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
-------------
The definitions of capitalized terms used in this Agreement (unless stated
where first used) are provided in the last Section hereof.
2. EMPLOYMENT
----------
The Employer hereby continues to employ the Employee as Executive Vice
President-International Automotive Operations of the Employer, and the Employee
hereby accepts such continued employment upon the terms and conditions herein
contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
-----------------------------------
3.1 DUTIES. The Employee shall devote his entire business time, attention
and energies to the Employer and shall not engage in any conduct which shall
reflect adversely upon the Companies. The Employee shall perform such duties
for the Companies as may be assigned to one in his executive status and
capacity by the Board. The Employee shall serve diligently and to the best of
his ability.
During his employment by the Employer, the Employee shall not, without the
Employer's prior written consent, be engaged in any other business activity,
whether or not such
<PAGE> 2
business activity is pursued for gain, profit or other pecuniary advantage,
except that notwithstanding the foregoing, he may invest his personal funds for
his own account; provided that such investment shall be passive and not
controlling in any such investment and subject to the provisions of Section
13.2 hereof and provided further that he will not be required to provide any
substantial services on behalf of such enterprise. Notwithstanding the
foregoing, the Employee may serve on the Boards of Directors of other
corporations during the Term as long as such service does not interfere with
the performance of his duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable office space,
furnishings, secretarial and administrative assistance. Without the Employee's
consent, the Employee shall not be required to report principally to an office
located more than five hundred (500) miles from his principal office at the
date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW DURING DISPUTE
-------------------------------------------------------------------
4.1 TERM OF AGREEMENT. The Employer hereby employs the Employee for a Term
commencing as of the date hereof and ending December 31, 1998. At the end of
the calendar month in which this Agreement is executed and at the end of each
calendar month thereafter up to and including July 31, 2002, this Agreement
shall automatically be extended for one (1) month unless either party shall
give notice to the other of non-extension prior to the end of such calendar
month; provided, however, if a Change in Control shall have occurred during the
Term of this Agreement, Sections 7 and 8 and 10 through 20 of this Agreement
shall continue in effect until at least the end of the Change-in-Control
Protective Period (whether or not the Term of the Agreement shall have expired
for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. Prior to any
Change in Control, the Employer may terminate the employment of the Employee
for Cause pursuant to this Agreement. Prior to any Change in Control, the
Employee may terminate his employment pursuant to this Agreement if the
Employer fails to make full and timely payments of all sums provided for in
Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall
breach its covenants hereunder in any material respect.
2
<PAGE> 3
4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any Change in Control,
if the Employee shall be terminated for Cause, and, within 30 days of such
termination, shall notify the Employer of his intention to adjudicate such
termination as improper, the Employer agrees that it will deposit with Society
National Bank, Cleveland, Ohio, as Escrow Agent the installments of the
Employee's Base Salary (as provided in Section 5 below) as the same would have
become payable but for such termination. In the event of a final adjudication
by a tribunal of competent jurisdiction that such termination was not for
Cause, then the amounts so deposited in escrow, plus any interest earned by the
Escrow Agent thereon, shall be delivered promptly to the Employee. If such
adjudication shall be in favor of the Employer, the Escrow Agent shall return
the sums so deposited, plus such interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated damages but the
Employer shall be entitled to a credit against any such award to the extent of
the sums so delivered to the Employee.
5. COMPENSATION
------------
The Employer agrees to pay to the Employee as compensation for his services
hereunder a Base Salary initially equal to the fixed annual salary currently
being paid to the Employee as shown on the Employer's employment records,
payable in substantially equal weekly, biweekly, bimonthly or monthly
installments, as the case may be, in the manner currently being paid to the
Employee. The Base Salary may be discretionarily increased by the Board from
time to time as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time shall not be decreased
during the Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's compensation may not be
limited to his Base Salary and that the Employee may receive an annual bonus in
the amount, if any, determined annually by the Employer.
The Employee shall also participate in employee compensation and benefit
plans available generally to executives of the Employer (including, without
limitation, any tax-qualified profit sharing plan, nonqualified profit sharing
plan, life insurance plan and health insurance plan) on a level appropriate to
his position and shall receive the employee fringe benefits available generally
to executives of the
3
<PAGE> 4
Employer (including, without limitation, the use of a company car).
6. EXPENSES
--------
The Employee is authorized to incur reasonable expenses for promoting the
business of the Employer, including expenses for entertainment, travel and
similar items. The Employer shall reimburse the Employee for all such expenses
upon the presentation by the Employee, from time to time, of an itemized
account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
----------------------------------------
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee's employment
shall be terminated for any reason during the Term (or, if later, prior to the
end of the Change-in-Control Protective Period), the Employer shall pay the
Employee's Base Salary to the Employee through the Date of Termination at the
rate in effect at the time the Notice of Termination is given (subject to
Section 7.2 hereof), together with all compensation and benefits payable to the
Employee through the Date of Termination under the terms of any compensation or
benefit plan, program or arrangement maintained by the Employer during such
period. Subject to Sections 8, 9, 10 and 11 hereof, after completing the
expense reimbursements required by Section 6 hereof and making the payments and
providing the benefits required by this Section 7, the Employer shall have no
further obligations to the Employee under this Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During the Term (or, if
later, at any time prior to the end of the Change-in-Control Protective
Period), during any period that the Employee fails to perform the Employee's
full-time duties with the Employer as a result of incapacity due to physical or
mental illness (but in no event for more than twenty-four (24) months), the
Employer shall pay only sixty percent (60%) of the Employee's Base Salary to
the Employee at the rate in effect at the commencement of any such period (less
amounts, if any, payable to the Employee at or prior to the time of any such
Base Salary payment under disability benefit plans of the Employer or under the
Social Security disability insurance program). After six (6) months of
Disability, the Employer shall have the right to terminate the Employee's
employment pursuant to this Agreement and all Base Salary payments (except the
sixty percent (60%) payments pursuant to the foregoing sentence) shall cease.
Except to the extent
4
<PAGE> 5
provided in this Section 7.2, all Base Salary payments to the Employee shall be
abated during the period of Disability. Subject to Sections 8, 9, 10 and 11
hereof, after completing the expense reimbursements required by Section 6
hereof and making the payments and providing the benefits required by this
Section 7, the Employer shall have no further obligations to the Employee under
this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY; TERMINATION PAY;
--------------------------------------------------------------------
PROMPT PAYMENT
- --------------
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee's employment shall
be terminated for any reason during the Term of this Agreement (or, if later,
prior to the end of the Change-in-Control Protective Period), the Employer
shall pay the Employee's normal post-termination compensation and benefits to
the Employee as such payments become due. Subject to Section 10 hereof, such
post-termination compensation and benefits shall be determined under, and paid
in accordance with, the Employer's retirement, insurance and other compensation
or benefit plans, programs and arrangements (other than this Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding anything to the
contrary in Section 7.2, 9.1 or 10.1(A) hereof, if the laws governing this
Agreement shall require that the Employer continue to pay or otherwise
compensate the Employee for any period of time following termination of the
Employee's employment ("Continuation Pay") or if such laws require certain
amounts of severance pay, termination compensation or the like (collectively,
"Termination Pay"), then to the fullest extent permitted by law any payments to
the Employee pursuant to Section 7.2, 9.1 or 10.1(A) hereof shall be included
in the calculation of Continuation Pay and Termination Pay and such payments
shall be deducted from the amount of Continuation Pay or Termination Pay due
the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7 or 9 hereof or
this Section 8 shall be made promptly after the event giving rise to the
obligation and shall be made to the Employee or in accordance with Section 14.2
hereof, as the case may be.
5
<PAGE> 6
9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A CHANGE IN
----------------------------------------------------------------
CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
- --------------------------------------------------
9.1 DEATH BENEFIT. If the Employee's employment shall be terminated by
death during the Term (or, if later, prior to the end of the Change-in-Control
Protective Period), then, in addition to the compensation and benefits provided
by Sections 7.1 and 8 hereof, the Employer shall pay a lump sum amount equal to
sixty percent (60%) of the Base Salary for twenty-four (24) months in
accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the Employer shall
terminate the Employee's employment during the Term and prior to a Change in
Control, without Cause (and not for Disability or in connection with the
Employee's death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term,
each of which bonuses shall be equal to one-half (1/2) times the average annual
bonus paid to the Employee during the most recent five (5) calendar years of
the Employee's employment by any of the Companies (prorated for any partial
years in the remaining Term).
10. SEVERANCE PAYMENTS; TOTAL PAYMENTS
----------------------------------
10.1 SEVERANCE PAYMENTS.
The Employer shall pay the Employee the payments described in this Section
10.1 (the "Severance Payments") upon the termination of the Employee's
employment following a Change in Control and prior to the end of the
Change-in-Control Protective Period, in addition to any payments and benefits
to which the Employee is entitled under Sections 5, 6, 7 and 8.1 hereof, unless
such termination is (i) by the Employer for Cause, (ii) by reason of death or
Disability, or (iii) by the Employee without Good Reason; provided, however,
that, during the one-month period beginning with the first day of the month
immediately following the first anniversary of the Change in Control, the
Employee can terminate his employment for any reason (a "Window Period
Termination") and, upon such termination, the Employer shall pay the Employee
the Severance Payments described in this Section 10.1, in addition to any
payments and benefits to which the Employee is entitled under Sections 5, 6, 7
and 8.1 hereof. For purposes of this Agreement, the Employee's employment
shall be deemed to have been terminated by the Employer without Cause following
a Change in
6
<PAGE> 7
Control or by the Employee with Good Reason following a Change in Control, as
the case may be, if (i) the Employee's employment is terminated without Cause
prior to a Change in Control and such termination was at the request or
direction of a Person who has entered into an agreement with the Employer the
consummation of which would constitute a Change in Control, (ii) the Employee
terminates his employment with Good Reason prior to a Change in Control and the
circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Employee's employment is terminated by
the Employer without Cause prior to a Change in Control (but following a
Potential Change in Control) and such termination is otherwise in connection
with or in anticipation of a Change in Control which actually occurs. For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Employee shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the Employee for periods
subsequent to the Date of Termination and in lieu of any severance benefit
otherwise payable to the Employee, the Employer shall pay to the Employee a
lump sum severance payment, in cash, equal to three (3) times the sum of (i)
the higher of the Employee's Base Salary in effect immediately prior to the
occurrence of the event or circumstance upon which the Notice of Termination
is based or the Employee's Base Salary in effect immediately prior to the
Change in Control, and (ii) the higher of the annual bonus earned by the
Employee in respect of the Employer's fiscal year immediately preceding that
in which the Date of Termination occurs or the average annual bonus so earned
in respect of the three fiscal years immediately preceding that in which the
Change in Control occurs.
(B) Notwithstanding any provision of any annual incentive plan to the
contrary, the Employer shall pay to the Employee a lump sum amount, in cash,
equal to the sum of (i) any annual incentive compensation which has been
allocated or awarded to the Employee for a completed fiscal year preceding
the Date of Termination and which, as of the Date of Termination, is
contingent only upon the continued employment of the Employee to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of a deemed
annual bonus for the Employer's fiscal year in
7
<PAGE> 8
which the Date of Termination occurs, calculated by multiplying (i) the
higher of the annual bonus earned by the Employee with respect to the
immediately preceding fiscal year or the average annual bonus earned by the
Employee with respect to the immediately preceding three fiscal years of the
Employer by (ii) the fraction obtained by dividing the number of days in the
fiscal year of the Employer in which termination occurs up to and including
the Date of Termination by 365.
(C) For the thirty-six (36) month period immediately following the Date
of Termination, the Employer shall arrange to provide the Employee with life,
disability, accident and health insurance benefits substantially similar to
those which the Employee is receiving immediately prior to the Notice of
Termination (without giving effect to any amendment to such benefits made
subsequent to a Change in Control, which amendment adversely affects in any
manner the Employee's entitlement to or the amount of such benefits).
Benefits otherwise receivable by the Employee pursuant to this Section
10.1(C) shall be reduced to the extent comparable benefits are actually
received by or made available to the Employee without cost during the
thirty-six (36) month period following the Employee's termination of
employment (and any such benefits actually received by or made available to
the Employee shall be reported to the Employer by the Employee).
10.2 TOTAL PAYMENTS.
(A) If the Employee becomes entitled to the Severance Payments, if any of
the payments or benefits received or to be received by the Employee in
connection with a Change in Control or the Employee's termination of employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Employer, any Person whose actions result in a Change in
Control or any Person affiliated with the Employer or such Person) (such
payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Employer shall pay to the Employee an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Employee, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up payment, shall be equal to the Total
Payments.
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<PAGE> 9
(B) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax counsel
reasonably acceptable to the Employee and selected by the accounting firm which
was, immediately prior to the Change in Control, the Employer's independent
auditor (the "Auditor") (the "Tax Counsel"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(1) of the Code shall be treated as subject to
the Excise Tax unless, in the opinion of the Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Employee
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Employee's residence on the Date of
Termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
(C) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of the
Employee's employment, the Employee shall repay to the Employer, at the time
that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being repaid by the
Employee to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income tax deduction) plus interest on the
amount of such repayment at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at
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<PAGE> 10
the time of the termination of the Employee's employment (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Employer shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Employee with respect to such excess) at the time that the
amount of such excess is finally determined. The Employee and the Employer
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
10.3 The payments provided in Sections 10.1(A) and (B) hereof and in
Section 10.2 hereof shall be made not later than the fifth day following the
Date of Termination; PROVIDED, HOWEVER, that if the amounts of such payments
cannot be finally determined on or before such day, the Employer shall pay to
the Employee on such day an estimate, as determined in good faith by the
Employee or, in the case of payments under Section 10.2 hereof, in accordance
with Section 10.2 hereof, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Employer to the Employee, payable on the fifth (5th)
business day after demand by the Employer (together with interest at one
hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Employer
shall provide the Employee with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Employer has
received from outside counsel, auditors or consultants (and any such opinions
or advice which are in writing shall be attached to the statement). In the
event the Employer should fail to pay when due the amounts described in
Sections 10.1(A), (B) and (C) hereof or in Section 10.2 hereof, the Employee
shall also be entitled to receive from the Employer an amount representing
interest on any such unpaid amounts from the due date, as determined under this
Section 10.3 (without regard to any extension of the Date of Termination
pursuant to Section 11.3 hereof), to the date of payment at one hundred twenty
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<PAGE> 11
percent (120%) of the rate provided in section 1274(b)(2)(B) of the Code.
10.4 The Employer also shall pay to the Employee all legal fees and
expenses incurred by the Employee (i) in disputing in good faith any issue
relating to the termination of the Employee's employment following a Change in
Control and prior to the end of the Change-in-Control Protective Period, (ii)
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement, or (iii) in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Employee's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Employer
reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
------------------------------------------------------
11.1 NOTICE OF TERMINATION. During the Term (and, if longer, until the end
of the Change-in-Control Protective Period), any purported termination of the
Employee's employment (other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the other party hereto
in accordance with Section 15 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
Further, with respect to any purported termination of the Employee's employment
after a Change in Control and prior to the end of the Change-in-Control
Protective Period, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Employee and an opportunity for the Employee,
together with the Employee's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Employee was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
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<PAGE> 12
11.2 DATE OF TERMINATION. "Date of Termination," with respect to any
purported termination of the Employee's employment during the Term (and, if
longer, prior to the end of the Change-in-Control Protective Period), shall
mean (i) if the Employee's employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the Employee shall not
have returned to the full-time performance of the Employee's duties during such
thirty (30) day period), and (ii) if the Employee's employment is terminated
for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination by the Employer, shall not be less than thirty
(30) days (except in the case of a termination for Cause) and, in the case of a
termination by the Employee, shall not be less than fifteen (15) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any purported
termination of the Employee's employment after a Change in Control and prior to
the end of the Change-in-Control Protective Period, if within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 11.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the date on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); PROVIDED, HOWEVER, that the Date of Termination shall be extended
by a notice of dispute given by the Employee only if such notice is given in
good faith and the Employee pursues the resolution of such dispute with
reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and prior to the end of the Change-in-Control
Protective Period and the Date of Termination is extended in accordance with
Section 11.3 hereof, the Employer shall continue to pay the Employee the full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Employee as a
participant in all compensation, benefit and insurance plans in which the
Employee was participating when the notice giving rise to the dispute was
given, until the Date of Termination, as determined in accordance with
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<PAGE> 13
Section 11.3 hereof. Amounts paid under this Section 11.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
7.1 hereof) and shall not be offset against or reduce any other amounts due
under this Agreement.
12. NO MITIGATION
-------------
The Employer agrees that, if the Employee's employment with the Employer
terminates following a Change in Control and prior to the end of the
Change-in-Control Protective Period, the Employee is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 10.1(C) hereof) shall not be reduced by any compensation
earned by the Employee as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
-----------------------------------------------------
13.1 CONFIDENTIALITY. The Companies' methods, plans for doing business,
processes, pricing, compounds, customers and supplies are vital to the
Companies and, to the extent not made public by the Companies, constitute
confidential information subject to the Companies' proprietary rights therein.
The Employee covenants and agrees that during the Term and at all times
thereafter, the Employee will not, directly or indirectly, make known, divulge,
furnish, make available or use, otherwise than in the regular course of the
Employee's employment by the Employer, any invention, product, process,
apparatus or design of any of the Companies, or any knowledge or information in
respect thereof (including, but not limited to, business methods and
techniques), or any other confidential or so-called "insider" information of
any of the Companies. This covenant shall apply without regard to the time or
circumstances of any termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee covenants and
agrees that during the period of three (3) years following any termination of
the Employee's employment which occurs prior to a Change in Control, the
Employee will not, directly or indirectly, either as an individual for
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<PAGE> 14
the Employee's own account or as an investor, or other participant in, or as an
employee, agent, or representative of, any other business enterprise:
(i) solicit, employ, entice, take away or interfere with, or attempt to
solicit, employ, entice, take away or interfere with, any employee of
the Employer or the Companies; or
(ii) engage or participate in or finance, aid or be connected with any
enterprise which competes with the business of the Companies, or any
of them.
The geographical limitations of the foregoing shall include any country in
which the Companies or any of them shall be doing business as of such date of
such termination. This covenant shall apply without regard to the
circumstances of any termination of the Employee's employment which occurs
prior to a Change in Control.
13.3 The Employee acknowledges that the covenants contained in this Section
13 are of the essence of this Agreement and said covenants shall be construed
as independent of any other provisions of this Agreement. Recognizing the
irreparable nature of the injury that could result from the Employee's
violation of any of the covenants and agreement to be performed and/or observed
by the Employee pursuant to the provisions of this Section 13, and that damages
would be inadequate compensation, it is agreed that any violations by the
Employee of the provisions of this Section 13, shall be the proper subject for
immediate injunctive and other equitable relief to the Employer.
14. SUCCESSORS; BINDING AGREEMENT
-----------------------------
14.1 In addition to any obligations imposed by law upon any successor to
the Employer, the Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Employer to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Employer would be required to perform it if no such succession
had taken place. Failure of the Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Employee to compensation from
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<PAGE> 15
the Employer in the same amount and on the same terms as the Employee would be
entitled to hereunder if the Employee were to terminate the Employee's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Except as provided in this
Section 14.1, this Agreement shall not be assignable by either party without
the written consent of the other party hereto.
14.2 This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee shall
die while any amount would still be payable to the Employee hereunder (other
than amounts which, by their terms, terminate upon the death of the Employee)
if the Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the Employee's
estate.
15. NOTICES
-------
For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed, if to the Employee, to
the address shown for the Employee in the personnel records of the Employer
and, if to the Employer, to the address set forth below, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Employer:
Robert A. Stefanko
Chief Financial Officer and Executive
Vice President-Finance and Administration
A. Schulman, Inc.
P. O. Box 1710
Akron, Ohio 44309-1710
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<PAGE> 16
With a copy to:
James H. Berick, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
16. MISCELLANEOUS
-------------
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by
the Employee and such officer as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. This Agreement supersedes the Employment Agreement between the Employer
and the Employee dated as of December 28, 1990 and any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party (except the
Agreement(s) between the Employer and the Employee with respect to deferred
compensation, dated August 1, 1985 and September 1, 1992, as they may be
amended, and except as expressly set forth in this Agreement). The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Ohio. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Employee has agreed. The
obligations of the Employer and the Employee under this Agreement which by
their nature may require (partial or total) performance after the expiration of
the Term or the Change-in-Control Protective Period (including, without
limitation, those under Sections 5 through 11 and Section 13 hereof) shall
survive such expiration.
17. VALIDITY
--------
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceabil-
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<PAGE> 17
ity of any other provision of this Agreement, which shall remain in full force
and effect.
18. COUNTERPARTS
------------
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL; ARBITRATION
-----------------------------------------------------------
After a Change in Control and prior to the end of the Change-in-Control
Protective Period, all claims by the Employee for benefits under this Agreement
shall be directed to and determined by the Committee and shall be in writing.
Any denial by the Committee of a claim for benefits under this Agreement shall
be delivered to the Employee in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Committee shall afford a reasonable opportunity to the Employee for
a review of the decision denying a claim and shall further allow the Employee
to appeal to the Committee a decision of the Committee within sixty (60) days
after notification by the Committee that the Employee's claim has been denied.
Any further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Akron, Ohio in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Notwithstanding any provision of this Agreement to the contrary,
the Employee shall be entitled to seek specific performance of the Employee's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have the meanings
indicated below:
(A) "Base Amount" shall have the meaning set forth in section 280G(b)(3) of
the Code.
(B) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
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<PAGE> 18
(C) "Board" shall mean the Board of Directors of the Employer.
(D) "Cause" for termination by the Employer of the Employee's employment
shall mean the following:
(I) with respect to a termination as to which the Notice of Termination
is duly given prior to a Change in Control, the Employee's breach of his
covenants herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or knowingly
permitting nonfeasance of his duties in any material respect, or the
Employee's committing a felony; and
(II) with respect to a termination as to which the Notice of
Termination is duly given following a Change in Control, (i) the willful and
continued failure by the Employee to substantially perform the Employee's
duties with the Employer (other than any such failure resulting from the
Employee's incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of Termination for
Good Reason by the Employee pursuant to Section 11.1 hereof) after a written
demand for substantial performance is delivered to the Employee by the
Board, which demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the Employee's
duties, or (ii) the willful engaging by the Employee in conduct which is
demonstrably and materially injurious to the Employer or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Employee's part shall be
deemed "willful" unless done, or omitted to be done, by the Employee not in
good faith and without reasonable belief that the Employee's act, or failure
to act, was in the best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim by the
Employer that Cause exists shall be given effect unless the Employer
establishes to the Committee by clear and convincing evidence that Cause
exists.
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<PAGE> 19
(E) A "Change in Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Employer (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Employer or its affiliates other than in connection with the acquisition by
the Employer or its affiliates of a business) representing 25% or more of
either the then outstanding shares of common stock of the Employer or the
combined voting power of the Employer's then outstanding securities; or
(II) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Employer) whose
appointment or election by the Board or nomination for election by the
Employer's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved; or
(III) the stockholders of the Employer approve a merger or
consolidation of the Employer with any other corporation or approve the
issuance of voting securities of the Employer in connection with a merger or
consolidation of the Employer (or any direct or indirect subsidiary of the
Employer) pursuant to applicable stock exchange requirements, other than (i)
a merger or consolidation which would result in the voting securities of the
Employer outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee
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<PAGE> 20
benefit plan of the Employer or any subsidiary of the Employer, at least 75%
of the combined voting power of the voting securities of the Employer or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Employer (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Employer (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition by the
Employer or its subsidiaries of a business) representing 25% or more of
either the then outstanding shares of common stock of the Employer or the
combined voting power of the Employer's then outstanding securities; or
(IV) the stockholders of the Employer approve a plan of complete
liquidation or dissolution of the Employer or an agreement for the sale or
disposition by the Employer of all or substantially all of the Employer's
assets, other than a sale or disposition by the Employer of all or
substantially all of the Employer's assets to an entity, at least 75% of the
combined voting power of the voting securities of which are owned by
stockholders in substantially the same proportions as their ownership of the
Employer immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be deemed to
have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of the Employer immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Employer immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or transaction which would
otherwise constitute a Change in Control (a "Transaction") shall not constitute
a Change in Control for purposes of this Agreement if, in connection with the
Transaction, the Employee participates as an equity investor in the acquiring
entity or any of its affiliates (the
20
<PAGE> 21
"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under
one or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences attributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the
Acquiror on terms and conditions substantially equivalent to those obtained in
the Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(F) "Change-in-Control Protective Period" shall mean the period from the
occurrence of a Change in Control until the later of the second anniversary of
such Change in Control or, if such Change in Control shall be caused by the
stockholder approval of a merger or consolidation described in Section
20(E)(III) hereof, the second anniversary of the consummation of such merger or
consolidation.
(G) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(H) "Committee" shall mean (i) the individuals (not fewer than three in
number) who, immediately prior to a Potential Change in Control, constitute the
Compensation Committee of the Board, plus (ii) in the event that fewer than
three individuals are available from the group specified in clause (i) above
for any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)); provided, however,
that the maximum number of individuals constituting the Committee shall not
exceed five.
(I) "Companies" shall mean, collectively, the Employer and each corporation
which is now and hereafter shall become a subsidiary of, or a parent of, the
Employer, together with their respective successors and assigns.
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<PAGE> 22
(J) "Continuation Pay" shall mean those payments so described in Section
8.2 hereof.
(K) "Date of Termination" shall have the meaning stated in Section 11.2
hereof.
(L) "Disability" shall be deemed the reason for the termination by the
Employer of the Employee's employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the full-time performance of the Employee's duties with the
Employer for a period of six (6) consecutive months, the Employer shall have
given the Employee a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Employee shall not
have returned to the full-time performance of the Employee's duties.
(M) "Employee" shall mean the individual named in the first paragraph of
this Agreement.
(N) "Employer" shall mean A. Schulman, Inc. and, except in determining
under Section 20(E) hereof whether or not any Change in Control of the Employer
has occurred, any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(O) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(P) "Excise Tax" shall mean any excise tax imposed under section 4999 of
the Code.
(Q) "Good Reason" for termination by the Employee of the Employee's
employment shall mean the occurrence (without the Employee's express prior
written consent) after any Change in Control, or after any Potential Change in
Control under the circumstances described in the second sentence of Section
10.1 hereof (treating all references in paragraphs (I) through (VII) below to a
"Change in Control" as references to a "Potential Change in Control"), of any
one of the following acts by the Employer, or failures by the Employer to act,
unless, in the case of any act or failure to act described in paragraph (I),
(V), (VI) or (VII) below, such act or failure to act is corrected prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
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<PAGE> 23
(I) the assignment to the Employee of any duties inconsistent with
the Employee's status as an executive officer of the Employer or a
substantial adverse alteration in the nature or status of the Employee's
responsibilities from those in effect immediately prior to the Change in
Control (other than any such alteration primarily attributable to the fact
that the Employer may no longer be a public company);
(II) a reduction by the Employer in the Employee's annual base salary
as in effect on the date hereof or as the same may be increased from time to
time except for across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in control of
the Employer;
(III) the relocation of the Employer's principal executive offices to a
location more than fifty (50) miles from the location of such offices
immediately prior to the Change in Control or the Employer's requiring the
Employee to be based anywhere other than the Employer's principal executive
offices except for required travel on the Employer's business to an extent
substantially consistent with the Employee's present business travel
obligations;
(IV) the failure by the Employer, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation, or
to pay to the Employee any portion of an installment of deferred
compensation under any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to continue in effect any compensation
plan in which the Employee participates immediately prior to the Change in
Control which is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan and Nonqualified
Profit Sharing Plan or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the failure
by the Employer to continue the
23
<PAGE> 24
Employee's participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employee's participation relative to
other participants, as existed at the time of the Change in Control;
(VI) the failure by the Employer to continue to provide the Employee
with benefits substantially similar to those enjoyed by the Employee under
any of the Employer's pension, life insurance, medical, health and accident,
or disability plans in which the Employee was participating at the time of
the Change in Control, the taking of any action by the Employer which would
directly or indirectly materially reduce any of such benefits or deprive the
Employee of any material fringe benefit enjoyed by the Employee at the time
of the Change in Control, or the failure by the Employer to provide the
Employee with the number of paid vacation days to which the Employee is
entitled on the basis of years of service with the Employer in accordance
with the Employer's normal vacation policy in effect at the time of the
Change in Control; or
(VII) any purported termination of the Employee's employment which is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment for Good Reason
shall not be affected by the Employee's incapacity due to physical or mental
illness. The Employee's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in Section 10.2
hereof.
24
<PAGE> 25
(S) "Notice of Termination" shall have the meaning stated in Section 11.1
hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Employer or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Employer or any of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the stockholders of the
Employer in substantially the same proportions as their ownership of stock of
the Employer.
(U) "Potential Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(1) the Employer enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(2) the Employer or any Person publicly announces an intention to take
or to consider taking actions which, if consummated, would constitute a
Change in Control;
(3) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Employer representing 15% or more of either the then
outstanding shares of common stock of the Employer or the combined voting
power of the Employer's then outstanding securities; or
(4) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
(V) "Severance Payments" shall mean those payments described in Section
10.1 hereof.
(W) "Term" shall mean the period of time described in Section 4.1 hereof
(including any extension or continuation described therein).
25
<PAGE> 26
(X) "Termination Pay" shall mean those payments so described in Section 8.2
hereof.
(Y) "Total Payments" shall mean those payments described in Section 10.2
hereof.
(Z) "Window Period Termination" shall have the meaning stated in Section
10.1 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed (the corporate signatory by the respective officer duly authorized) as
of the day and year first above written.
/s/ Larry A. Kushkin
-------------------------------------
Larry A. Kushkin
A. SCHULMAN, INC.
By /s/ James H. Berick
-----------------------------------
James H. Berick, Secretary
26
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of this 31st day of January, 1996, by and between A. SCHULMAN,
INC., a Delaware corporation (the "Employer"), and LEONARD E. EMGE (the
"Employee").
WHEREAS, the Board of Directors of the Employer desires to
provide for the continued employment of the Employee as a member of the
Employer's management, in the best interest of the Employer and its
stockholders. The Employee is willing to commit himself continue to serve the
Employer, on the terms and conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
-------------
The definitions of capitalized terms used in this Agreement
(unless stated where first used) are provided in the last Section hereof.
2. EMPLOYMENT
----------
The Employer hereby continues to employ the Employee as Vice
President-Manufacturing of the Employer, and the Employee hereby accepts such
continued employment upon the terms and conditions herein contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
-----------------------------------
3.1 DUTIES. The Employee shall devote his entire business
time, attention and energies to the Employer and shall not engage in any
conduct which shall reflect adversely upon the Companies. The Employee shall
perform such duties for the Companies as may be assigned to one in his
executive status and capacity by the Board. The Employee shall serve
diligently and to the best of his ability.
During his employment by the Employer, the Employee shall not,
without the Employer's prior written consent, be
<PAGE> 2
engaged in any other business activity, whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, except that
notwithstanding the foregoing, he may invest his personal funds for his own
account; provided that such investment shall be passive and not controlling in
any such investment and subject to the provisions of Section 13.2 hereof and
provided further that he will not be required to provide any substantial
services on behalf of such enterprise. Notwithstanding the foregoing, the
Employee may serve on the Boards of Directors of other corporations during the
Term as long as such service does not interfere with the performance of his
duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable
office space, furnishings, secretarial and administrative assistance. Without
the Employee's consent, the Employee shall not be required to report
principally to an office located more than five hundred (500) miles from his
principal office at the date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW DURING DISPUTE
-------------------------------------------------------------------
4.1 TERM OF AGREEMENT. The Employer hereby employs the
Employee for a Term commencing as of the date hereof and ending December 31,
1997. If a Change in Control shall have occurred during the Term of this
Agreement, Sections 7 and 8 and 10 through 20 of this Agreement shall continue
in effect until at least the end of the Change-in-Control Protective Period
(whether or not the Term of the Agreement shall have expired for other
purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL.
Prior to any Change in Control, the Employer may terminate the employment of
the Employee for Cause pursuant to this Agreement. Prior to any Change in
Control, the Employee may terminate his employment pursuant to this Agreement
if the Employer fails to make full and timely payments of all sums provided for
in Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall
breach its covenants hereunder in any material respect.
4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any
Change in Control, if the Employee shall be terminated for Cause,
and, within 30 days of such termination, shall notify the Employer of his
intention to adjudicate such termination as improper, the Employer agrees that
it will deposit with Society
2
<PAGE> 3
National Bank, Cleveland, Ohio, as Escrow Agent the installments of the
Employee's Base Salary (as provided in Section 5 below) as the same would have
become payable but for such termination. In the event of a final adjudication
by a tribunal of competent jurisdiction that such termination was not for
Cause, then the amounts so deposited in escrow, plus any interest earned by the
Escrow Agent thereon, shall be delivered promptly to the Employee. If such
adjudication shall be in favor of the Employer, the Escrow Agent shall return
the sums so deposited, plus such interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated
damages but the Employer shall be entitled to a credit against any such award
to the extent of the sums so delivered to the Employee.
5. COMPENSATION
------------
The Employer agrees to pay to the Employee as compensation for
his services hereunder a Base Salary initially equal to the fixed annual salary
currently being paid to the Employee as shown on the Employer's employment
records, payable in substantially equal weekly, biweekly, bimonthly or monthly
installments, as the case may be, in the manner currently being paid to the
Employee. The Base Salary may be discretionarily increased by the Board from
time to time as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time shall not be decreased
during the Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's compensation
may not be limited to his Base Salary and that the Employee may receive an
annual bonus in the amount, if any, determined annually by the Employer.
The Employee shall also participate in employee compensation
and benefit plans available generally to executives of the Employer (including,
without limitation, any tax-qualified profit sharing plan, nonqualified profit
sharing plan, life insurance plan and health insurance plan) on a level
appropriate to his position and shall receive the employee fringe benefits
available generally to executives of the Employer (including, without
limitation, the use of a company car).
3
<PAGE> 4
6. EXPENSES
--------
The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for entertainment,
travel and similar items. The Employer shall reimburse the Employee for all
such expenses upon the presentation by the Employee, from time to time, of an
itemized account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
----------------------------------------
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee's
employment shall be terminated for any reason during the Term (or, if later,
prior to the end of the Change-in-Control Protective Period), the Employer
shall pay the Employee's Base Salary to the Employee through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given (subject to Section 7.2 hereof), together with all compensation and
benefits payable to the Employee through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Employer during such period. Subject to Sections 8, 9, 10 and 11 hereof,
after completing the expense reimbursements required by Section 6 hereof and
making the payments and providing the benefits required by this Section 7, the
Employer shall have no further obligations to the Employee under this
Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During
the Term (or, if later, at any time prior to the end of the Change-in-Control
Protective Period), during any period that the Employee fails to perform the
Employee's full-time duties with the Employer as a result of incapacity due to
physical or mental illness (but in no event for more than twenty-four (24)
months), the Employer shall pay only sixty percent (60%) of the Employee's Base
Salary to the Employee at the rate in effect at the commencement of any such
period (less amounts, if any, payable to the Employee at or prior to the time
of any such Base Salary payment under disability benefit plans of the Employer
or under the Social Security disability insurance program). After six (6)
months of Disability, the Employer shall have the right to terminate the
Employee's employment pursuant to this Agreement and all Base Salary payments
(except the sixty percent (60%) payments pursuant to the foregoing sentence)
shall cease. Except to the extent provided in this Section 7.2, all Base
Salary payments to the Employee shall be abated during the period of
Disability. Subject to Sections 8, 9, 10 and 11 hereof, after completing
4
<PAGE> 5
the expense reimbursements required by Section 6 hereof and making the payments
and providing the benefits required by this Section 7, the Employer shall have
no further obligations to the Employee under this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY; TERMINATION PAY; PROMPT
---------------------------------------------------------------------------
PAYMENT
- -------
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee's
employment shall be terminated for any reason during the Term of this Agreement
(or, if later, prior to the end of the Change-in-Control Protective Period),
the Employer shall pay the Employee's normal post- termination compensation and
benefits to the Employee as such payments become due. Subject to Section 10
hereof, such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Employer's retirement, insurance and
other compensation or benefit plans, programs and arrangements (other than this
Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding
anything to the contrary in Section 7.2, 9.1 or 10.1(A) hereof, if the laws
governing this Agreement shall require that the Employer continue to pay or
otherwise compensate the Employee for any period of time following termination
of the Employee's employment ("Continuation Pay") or if such laws require
certain amounts of severance pay, termination compensation or the like
(collectively, "Termination Pay"), then to the fullest extent permitted by law
any payments to the Employee pursuant to Section 7.2, 9.1 or 10.1(A) hereof
shall be included in the calculation of Continuation Pay and Termination Pay
and such payments shall be deducted from the amount of Continuation Pay or
Termination Pay due the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7
or 9 hereof or this Section 8 shall be made promptly after the event giving
rise to the obligation and shall be made to the Employee or in accordance with
Section 14.2 hereof, as the case may be.
9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A
------------------------------------------------------
CHANGE IN CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
- ------------------------------------------------------------
9.1 DEATH BENEFIT. If the Employee's employment shall be
terminated by death during the Term (or, if later, prior to the end of the
Change-in-Control Protective Period),
5
<PAGE> 6
then, in addition to the compensation and benefits provided by Sections 7.1 and
8 hereof, the Employer shall pay a lump sum amount equal to sixty percent (60%)
of the Base Salary for twenty-four (24) months in accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the
Employer shall terminate the Employee's employment during the Term and prior to
a Change in Control, without Cause (and not for Disability or in connection
with the Employee's death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term,
each of which bonuses shall be equal to one-half (1/2) times the average annual
bonus paid to the Employee during the most recent five (5) calendar years of
the Employee's employment by any of the Companies (prorated for any partial
years in the remaining Term).
10. SEVERANCE PAYMENTS; DEDUCTIBILITY.
---------------------------------
10.1 SEVERANCE PAYMENTS.
------------------
Subject to Section 10.2 hereof, the Employer shall pay the
Employee the payments described in this Section 10.1 (the "Severance Payments")
upon the termination of the Employee's employment following a Change in Control
and prior to the end of the Change-in-Control Protective Period, in addition
to any payments and benefits to which the Employee is entitled under Sections
5, 6, 7 and 8.1 hereof, unless such termination is (i) by the Employer for
Cause, (ii) by reason of death or Disability, or (iii) by the Employee without
Good Reason. For purposes of this Agreement, the Employee's employment shall
be deemed to have been terminated by the Employer without Cause following a
Change in Control or by the Employee with Good Reason following a Change in
Control, as the case may be, if (i) the Employee's employment is terminated
without Cause prior to a Change in Control and such termination was at the
request or direction of a Person who has entered into an agreement with the
Employer the consummation of which would constitute a Change in Control, (ii)
the Employee terminates his employment with Good Reason prior to a Change in
Control and the circumstance or event which constitutes Good Reason occurs at
the request or direction of such Person, or (iii) the Employee's employment is
terminated by the Employer without Cause prior to a Change in Control (but
following a Potential Change in Control) and such termination is otherwise in
connection with or in anticipation of a Change in Control which actually
occurs. For purposes of any determination regarding
6
<PAGE> 7
the applicability of the immediately preceding sentence, any position taken by
the Employee shall be presumed to be correct unless the Employer establishes to
the Committee by clear and convincing evidence that such position is not
correct.
(A) In lieu of any further salary payments
to the Employee for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Employee,
the Employer shall pay to the Employee a lump sum severance payment,
in cash, equal to two (2) times the sum of (i) the higher of the
Employee's Base Salary in effect immediately prior to the occurrence
of the event or circumstance upon which the Notice of Termination is
based or the Employee's Base Salary in effect immediately prior to the
Change in Control, and (ii) the higher of the annual bonus earned by
the Employee in respect of the Employer's fiscal year immediately
preceding that in which the Date of Termination occurs or the average
annual bonus so earned in respect of the three fiscal years
immediately preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of any
annual incentive plan to the contrary, the Employer shall pay to the
Employee a lump sum amount, in cash, equal to the sum of (i) any
annual incentive compensation which has been allocated or awarded to
the Employee for a completed fiscal year preceding the Date of
Termination and which, as of the Date of Termination, is contingent
only upon the continued employment of the Employee to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of a
deemed annual bonus for the Employer's fiscal year in which the Date
of Termination occurs, calculated by multiplying (i) the higher of the
annual bonus earned by the Employee with respect to the immediately
preceding fiscal year or the average annual bonus earned by the
Employee with respect to the immediately preceding three fiscal years
of the Employer by (ii) the fraction obtained by dividing the number
of days in the fiscal year of the Employer in which termination occurs
up to and including the Date of Termination by 365.
(C) For the twenty-four (24) month period
immediately following the Date of Termination, the Employer shall
arrange to provide the Employee with life, disability, accident and
health insurance benefits substantially similar to those which the
Employee is receiving
7
<PAGE> 8
immediately prior to the Notice of Termination (without giving effect
to any amendment to such benefits made subsequent to a Change in
Control, which amendment adversely affects in any manner the
Employee's entitlement to or the amount of such benefits); PROVIDED,
HOWEVER, that, unless the Employee consents to a different method
(after taking into account the effect of such method on the
calculation of "parachute payments" pursuant to Section 10.2 hereof),
such health insurance benefits shall be provided through a third-
party insurer. Benefits otherwise receivable by the Employee pursuant
to this Section 10.1(C) shall be reduced to the extent comparable
benefits are actually received by or made available to the Employee
without cost during the twenty-four (24) month period following the
Employee's termination of employment (and any such benefits actually
received by or made available to the Employee shall be reported to the
Employer by the Employee). If the Severance Payments shall be
decreased pursuant to Section 10.2 hereof, and the Section 10.1(C)
benefits which remain payable after the application of Section 10.2
hereof are thereafter reduced pursuant to the immediately preceding
sentence because of the receipt or availability of comparable
benefits, the Employer shall, at the time of such reduction, pay to
the Employee the least of (a) the amount of the decrease made in the
Severance Payments pursuant to Section 10.2 hereof, (b) the amount of
the subsequent reduction in these Section 10.1(C) benefits, or (c) the
maximum amount which can be paid to the Employee without being, or
causing any other payment to be, nondeductible by reason of section
280G of the Code.
10.2 DEDUCTIBILITY.
-------------
(A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be received
by the Employee in connection with a Change in Control or the termination of
the Employee's employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Employer, any Person whose
actions result in a Change in Control or any Person affiliated with the
Employer or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") would not be
deductible (in whole or part), by the Employer, an affiliate or Person making
such payment or providing such benefit as a result of section 280G of the Code,
then, to the extent necessary to make such portion
8
<PAGE> 9
of the Total Payments deductible (and after taking into account any reduction
in the Total Payments provided by reason of section 280G of the Code in such
other plan, arrangement or agreement), the cash Severance Payments shall first
be reduced (if necessary, to zero), and the noncash Severance Payments shall
thereafter be reduced (if necessary, to zero); PROVIDED, HOWEVER, that the
Employee may elect (at any time prior to the delivery of a Notice of
Termination hereunder) to have the noncash Severance Payments reduced (or
eliminated) prior to any reduction of the cash Severance Payments.
(B) For purposes of this limitation, (i) no portion of
the Total Payments the receipt or enjoyment of which the Employee shall have
effectively waived in writing prior to the delivery of a Notice of Termination
shall be taken into account, (ii) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel (the "Tax Counsel")
reasonably acceptable to the Employee and selected by the accounting firm which
was, immediately prior to the Change in Control, the Employer's independent
auditor (the "Auditor") does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only
to the extent necessary so that the Total Payments (other than those referred
to in clauses (i) or (ii)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of section 280G(b)(4)(B) of
the Code or are otherwise not subject to disallowance as deductions by reason
of section 280G of the Code, in the opinion of the Tax Counsel, and (iv) the
value of any noncash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
(C) If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Employee and the Employer in applying the
terms of this Section 10.2, the aggregate "parachute payments" paid to or for
the Employee's benefit are in an amount that would result in any portion of
such "parachute payments" not being deductible by reason of section 280G of the
Code, then the Employee shall have an obligation to pay the Employer upon
demand an amount equal to the sum of (i) the excess of the aggregate "parachute
payments" paid to or for the Employee's benefit over the aggregate "parachute
payments" that could have been paid to or for the
9
<PAGE> 10
Employee's benefit without any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at one hundred twenty percent
(120%) of the rate provided in section 1274(b)(2)(B) of the Code from the date
of the Employee's receipt of such excess until the date of such payment.
10.3 The payments provided in Sections 10.1(A) and (B) hereof
shall be made not later than the fifth day following the Date of Termination;
PROVIDED, HOWEVER, that if the amounts of such payments, and the limitation on
such payments set forth in Section 10.2 hereof, cannot be finally determined on
or before such day, the Employer shall pay to the Employee on such day an
estimate, as determined in good faith by the Employer, in accordance with
Section 10.2 hereof, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Employer to the Employee, payable on the fifth (5th)
business day after demand by the Employer (together with interest at one
hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Employer
shall provide the Employee with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Employer has
received from outside counsel, auditors or consultants (and any such opinions
or advice which are in writing shall be attached to the statement). In the
event the Employer should fail to pay when due the amounts described in
Sections 10.1(A), (B) and (C) hereof or in Section 10.2 hereof, the Employee
shall also be entitled to receive from the Employer an amount representing
interest on any such unpaid amounts from the due date, as determined under this
Section 10.3 (without regard to any extension of the Date of Termination
pursuant to Section 11.3 hereof), to the date of payment at one hundred twenty
percent (120%) of the rate provided in section 1274(b)(2)(B) of the Code.
10
<PAGE> 11
10.4 The Employer also shall pay to the Employee all legal
fees and expenses incurred by the Employee (i) in disputing in good faith any
issue relating to the termination of the Employee's employment following a
Change in Control and prior to the end of the Change-in-Control Protective
Period, (ii) in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement, or (iii) in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of the Employee's written requests
for payment accompanied with such evidence of fees and expenses incurred as the
Employer reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
------------------------------------------------------
11.1 NOTICE OF TERMINATION. During the Term (and, if longer,
until the end of the Change-in-Control Protective Period), any purported
termination of the Employee's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 15 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated. Further, with respect to any purported termination of the
Employee's employment after a Change in Control and prior to the end of the
Change-in-Control Protective Period, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at
a meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Employee and an opportunity
for the Employee, together with the Employee's counsel, to be heard before the
Board) finding that, in the good faith opinion of the Board, the Employee was
guilty of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
11.2 DATE OF TERMINATION. "Date of Termination," with
respect to any purported termination of the Employee's employment during the
Term (and, if longer, prior to the end of the Change-in-Control Protective
Period), shall mean (i) if the
11
<PAGE> 12
Employee's employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Employee shall not have
returned to the full-time performance of the Employee's duties during such
thirty (30) day period), and (ii) if the Employee's employment is terminated
for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination by the Employer, shall not be less than thirty
(30) days (except in the case of a termination for Cause) and, in the case of a
termination by the Employee, shall not be less than fifteen (15) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any
purported termination of the Employee's employment after a Change in Control
and prior to the end of the Change-in-Control Protective Period, if within
fifteen (15) days after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to this Section 11.3),
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be
extended until the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree
of a court of competent jurisdiction (which is not appealable or with respect
to which the time for appeal therefrom has expired and no appeal has been
perfected); PROVIDED, HOWEVER, that the Date of Termination shall be extended
by a notice of dispute given by the Employee only if such notice is given in
good faith and the Employee pursues the resolution of such dispute with
reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs following a Change in Control and prior to the end of the
Change-in-Control Protective Period and the Date of Termination is extended in
accordance with Section 11.3 hereof, the Employer shall continue to pay the
Employee the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and continue the
Employee as a participant in all compensation, benefit and insurance plans in
which the Employee was participating when the notice giving rise to the dispute
was given, until the Date of Termination, as determined in accordance with
Section 11.3 hereof. Amounts paid under this Section 11.4 are in addition to
all other amounts due under this Agreement (other than those due under Section
7.1 hereof) and shall not
12
<PAGE> 13
be offset against or reduce any other amounts due under this Agreement.
12. NO MITIGATION
-------------
The Employer agrees that, if the Employee's employment with
the Employer terminates following a Change in Control and prior to the end of
the Change-in-Control Protective Period, the Employee is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 10.1(C) hereof) shall not be reduced by any compensation
earned by the Employee as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
-----------------------------------------------------
13.1 CONFIDENTIALITY. The Companies' methods, plans for
doing business, processes, pricing, compounds, customers and supplies are vital
to the Companies and, to the extent not made public by the Companies,
constitute confidential information subject to the Companies' proprietary
rights therein. The Employee covenants and agrees that during the Term and at
all times thereafter, the Employee will not, directly or indirectly, make
known, divulge, furnish, make available or use, otherwise than in the regular
course of the Employee's employment by the Employer, any invention, product,
process, apparatus or design of any of the Companies, or any knowledge or
information in respect thereof (including, but not limited to, business methods
and techniques), or any other confidential or so-called "insider" information
of any of the Companies. This covenant shall apply without regard to the time
or circumstances of any termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee
covenants and agrees that during the period of two (2) years following any
termination of the Employee's employment which occurs prior to a Change in
Control, the Employee will not, directly or indirectly, either as an individual
for the Employee's own account or as an investor, or other participant in, or
as an employee, agent, or representative of, any other business enterprise:
13
<PAGE> 14
(i) solicit, employ, entice, take away or interfere with,
or attempt to solicit, employ, entice, take away or
interfere with, any employee of the Employer or the
Companies; or
(ii) engage or participate in or finance, aid or be
connected with any enterprise which competes with the
business of the Companies, or any of them.
The geographical limitations of the foregoing shall include any country in
which the Companies or any of them shall be doing business as of such date of
such termination. This covenant shall apply without regard to the
circumstances of any termination of the Employee's employment which occurs
prior to a Change in Control.
13.3 The Employee acknowledges that the covenants contained
in this Section 13 are of the essence of this Agreement and said covenants
shall be construed as independent of any other provisions of this Agreement.
Recognizing the irreparable nature of the injury that could result from the
Employee's violation of any of the covenants and agreement to be performed
and/or observed by the Employee pursuant to the provisions of this Section 13,
and that damages would be inadequate compensation, it is agreed that any
violations by the Employee of the provisions of this Section 13, shall be the
proper subject for immediate injunctive and other equitable relief to the
Employer.
14. SUCCESSORS; BINDING AGREEMENT
-----------------------------
14.1 In addition to any obligations imposed by law upon any
successor to the Employer, the Employer will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Employer to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Employer would be required to perform it if no such succession
had taken place. Failure of the Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Employee to compensation from the
Employer in the same amount and on the same terms as the Employee would be
entitled to hereunder if the Employee were to terminate the Employee's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing
14
<PAGE> 15
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. Except as provided in this Section 14.1, this
Agreement shall not be assignable by either party without the written consent
of the other party hereto.
14.2 This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee shall die while any amount would still be payable to the Employee
hereunder (other than amounts which, by their terms, terminate upon the death
of the Employee) if the Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Employee's estate.
15. NOTICES
-------
For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to
the Employee, to the address shown for the Employee in the personnel records of
the Employer and, if to the Employer, to the address set forth below, or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Employer:
Robert A. Stefanko
Chief Financial Officer and Executive
Vice President-Finance and Administration
A. Schulman, Inc.
P. O. Box 1710
Akron, Ohio 44309-1710
With a copy to:
James H. Berick, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
15
<PAGE> 16
16. MISCELLANEOUS
-------------
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. This Agreement supersedes any other agreements
or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party, except as expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Employee has agreed. The obligations of the Employer and the
Employee under this Agreement which by their nature may require (partial or
total) performance after the expiration of the Term or the Change-in-Control
Protective Period (including, without limitation, those under Sections 5
through 11 and Section 13 hereof) shall survive such expiration.
17. VALIDITY
--------
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
18. COUNTERPARTS
------------
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
16
<PAGE> 17
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL; ARBITRATION
-----------------------------------------------------------
After a Change in Control and prior to the end of the
Change-in-Control Protective Period, all claims by the Employee for benefits
under this Agreement shall be directed to and determined by the Committee and
shall be in writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Employee in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable opportunity to
the Employee for a review of the decision denying a claim and shall further
allow the Employee to appeal to the Committee a decision of the Committee
within sixty (60) days after notification by the Committee that the Employee's
claim has been denied. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Akron, Ohio, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Employee shall be entitled to seek specific
performance of the Employee's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
20. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(B) "Board" shall mean the Board of Directors of the
Employer.
(C) "Cause" for termination by the Employer of the
Employee's employment shall mean the following:
(I) with respect to a termination as to
which the Notice of Termination is duly given prior to a
Change in Control, the Employee's breach of his covenants
herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or
knowingly permitting
17
<PAGE> 18
nonfeasance of his duties in any material respect, or the
Employee's committing a felony; and
(II) with respect to a termination as to
which the Notice of Termination is duly given following a
Change in Control, (i) the willful and continued failure by
the Employee to substantially perform the Employee's duties
with the Employer (other than any such failure resulting from
the Employee's incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Employee pursuant
to Section 11.1 hereof) after a written demand for substantial
performance is delivered to the Employee by the Board, which
demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the
Employee's duties, or (ii) the willful engaging by the
Employee in conduct which is demonstrably and materially
injurious to the Employer or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Employee's
part shall be deemed "willful" unless done, or omitted to be
done, by the Employee not in good faith and without reasonable
belief that the Employee's act, or failure to act, was in the
best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim
by the Employer that Cause exists shall be given effect unless
the Employer establishes to the Committee by clear and
convincing evidence that Cause exists.
(D) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its affiliates other than in connection with the acquisition
by the Employer or its affiliates of a business) representing
25% or more of either the then outstanding shares of common
stock of the Employer or the combined voting
18
<PAGE> 19
power of the Employer's then outstanding securities; or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Employer) whose appointment or election by the Board or
nomination for election by the Employer's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved; or
(III) the stockholders of the Employer
approve a merger or consolidation of the Employer with any
other corporation or approve the issuance of voting securities
of the Employer in connection with a merger or consolidation
of the Employer (or any direct or indirect subsidiary of the
Employer) pursuant to applicable stock exchange requirements,
other than (i) a merger or consolidation which would result in
the voting securities of the Employer outstanding immediately
prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit
plan of the Employer or any subsidiary of the Employer, at
least 75% of the combined voting power of the voting
securities of the Employer or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition
by the Emp-
19
<PAGE> 20
loyer or its subsidiaries of a business) representing 25% or
more of either the then outstanding shares of common stock of
the Employer or the combined voting power of the Employer's
then outstanding securities; or
(IV) the stockholders of the Employer
approve a plan of complete liquidation or dissolution of the
Employer or an agreement for the sale or disposition by the
Employer of all or substantially all of the Employer's assets,
other than a sale or disposition by the Employer of all or
substantially all of the Employer's assets to an entity, at
least 75% of the combined voting power of the voting
securities of which are owned by stockholders in substantially
the same proportions as their ownership of the Employer
immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Employer immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Employer
immediately following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for purposes of this
Agreement if, in connection with the Transaction, the Employee participates as
an equity investor in the acquiring entity or any of its affiliates (the
"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under
one or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences attributable to job responsibilities, title and similar
matters,
20
<PAGE> 21
(ii) obtaining beneficial ownership of any equity interest in the Acquiror on
terms and conditions substantially equivalent to those obtained in the
Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(E) "Change-in-Control Protective Period" shall mean the
period from the occurrence of a Change in Control until the later of the second
anniversary of such Change in Control or, if such Change in Control shall be
caused by the stockholder approval of a merger or consolidation described in
Section 20(E)(III) hereof, the second anniversary of the consummation of such
merger or consolidation.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Committee" shall mean (i) the individuals (not fewer than
three in number) who, immediately prior to a Potential Change in Control,
constitute the Compensation Committee of the Board, plus (ii) in the event that
fewer than three individuals are available from the group specified in clause
(i) above for any reason, such individuals as may be appointed by the
individual or individuals so available (including for this purpose any
individual or individuals previously so appointed under this clause (ii));
provided, however, that the maximum number of individuals constituting the
Committee shall not exceed five.
(H) "Companies" shall mean, collectively, the Employer and
each corporation which is now and hereafter shall become a subsidiary of, or a
parent of, the Employer, together with their respective successors and assigns.
(I) "Continuation Pay" shall mean those payments so
described in Section 8.2 hereof.
(J) "Date of Termination" shall have the meaning stated in
Section 11.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Employer of the Employee's employment, if, as a result of
the Employee's incapacity due to physical or mental illness, the Employee shall
have been absent from the full-time performance of the Employee's duties with
the Employer for a period of six (6) consecutive months, the Employer shall
have given the Employee a Notice of Termination for
21
<PAGE> 22
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Employee shall not have returned to the full-time performance of the
Employee's duties.
(L) "Employee" shall mean the individual named in the first
paragraph of this Agreement.
(M) "Employer" shall mean A. Schulman, Inc. and, except in
determining under Section 20(E) hereof whether or not any Change in Control of
the Employer has occurred, any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(N) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(O) "Good Reason" for termination by the Employee of the
Employee's employment shall mean the occurrence (without the Employee's express
prior written consent) after any Change in Control, or after any Potential
Change in Control under the circumstances described in the second sentence of
Section 10.1 hereof (treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Employer, or failures by the
Employer to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Employee of any
duties inconsistent with the Employee's status as an executive
officer of the Employer or a substantial adverse alteration in
the nature or status of the Employee's responsibilities from
those in effect immediately prior to the Change in Control
(other than any such alteration primarily attributable to the
fact that the Employer may no longer be a public company);
(II) a reduction by the Employer in the
Employee's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in
control of the Employer;
22
<PAGE> 23
(III) the relocation of the Employer's
principal executive offices to a location more than fifty (50)
miles from the location of such offices immediately prior to
the Change in Control or the Employer's requiring the Employee
to be based anywhere other than the Employer's principal
executive offices except for required travel on the Employer's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(IV) the failure by the Employer, without
the Employee's consent, to pay to the Employee any portion of
the Employee's current compensation, or to pay to the Employee
any portion of an installment of deferred compensation under
any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to continue
in effect any compensation plan in which the Employee
participates immediately prior to the Change in Control which
is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan
and Nonqualified Profit Sharing Plan or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Employer to continue the Employee's participation
therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employee's
participation relative to other participants, as existed at
the time of the Change in Control;
(VI) the failure by the Employer to continue
to provide the Employee with benefits substantially similar to
those enjoyed by the Employee under any of the Employer's
pension, life insurance, medical, health and accident, or
disability plans in which the Employee was participating at
the time of the Change in Control, the taking of any action by
the Employer which would directly or indirectly materially
reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by
23
<PAGE> 24
the Employee at the time of the Change in Control, or the
failure by the Employer to provide the Employee with the
number of paid vacation days to which the Employee is entitled
on the basis of years of service with the Employer in
accordance with the Employer's normal vacation policy in
effect at the time of the Change in Control; or
(VII) any purported termination of the
Employee's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment
for Good Reason shall not be affected by the Employee's incapacity due to
physical or mental illness. The Employee's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Employee that Good Reason exists shall be
presumed to be correct unless the Employer establishes to the Committee by
clear and convincing evidence that Good Reason does not exist.
(P) "Notice of Termination" shall have the meaning stated
in Section 11.1 hereof.
(Q) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Employer or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Employer or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Employer in substantially the same proportions as their
ownership of stock of the Employer.
(R) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
24
<PAGE> 25
(1) the Employer enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(2) the Employer or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(3) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Employer
representing 15% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(4) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(S) "Severance Payments" shall mean those payments described
in Section 10.1 hereof.
(T) "Term" shall mean the period of time described in Section
4.1 hereof (including any extension or continuation described therein).
25
<PAGE> 26
(U) "Termination Pay" shall mean those payments so described
in Section 8.2 hereof.
(V) "Total Payments" shall mean those payments described in
Section 10.2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed (the corporate signatory by the respective officer
duly authorized) as of the day and year first above written.
/s/ Leonard E. Emge
----------------------------------
Leonard E. Emge
A. SCHULMAN, INC.
By: /s/ James H. Berick
-------------------------------
James H. Berick, Secretary
26
<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of this 31st day of January, 1996, by and between A. SCHULMAN,
INC., a Delaware corporation (the "Employer"), and ALAIN C. ADAM (the
"Employee").
WHEREAS, the Board of Directors of the Employer desires to
provide for the continued employment of the Employee as a member of the
Employer's management, in the best interest of the Employer and its
stockholders. The Employee is willing to commit himself continue to serve the
Employer, on the terms and conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
-------------
The definitions of capitalized terms used in this Agreement
(unless stated where first used) are provided in the last Section hereof.
2. EMPLOYMENT
----------
The Employer hereby continues to employ the Employee as Vice
President-Automotive Marketing of the Employer, and the Employee hereby accepts
such continued employment upon the terms and conditions herein contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
-----------------------------------
3.1 DUTIES. The Employee shall devote his entire business
time, attention and energies to the Employer and shall not engage in any
conduct which shall reflect adversely upon the Companies. The Employee shall
perform such duties for the Companies as may be assigned to one in his
executive status and capacity by the Board. The Employee shall serve
diligently and to the best of his ability.
During his employment by the Employer, the Employee shall not,
without the Employer's prior written consent, be
<PAGE> 2
engaged in any other business activity, whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, except that
notwithstanding the foregoing, he may invest his personal funds for his own
account; provided that such investment shall be passive and not controlling in
any such investment and subject to the provisions of Section 13.2 hereof and
provided further that he will not be required to provide any substantial
services on behalf of such enterprise. Notwithstanding the foregoing, the
Employee may serve on the Boards of Directors of other corporations during the
Term as long as such service does not interfere with the performance of his
duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable
office space, furnishings, secretarial and administrative assistance. Without
the Employee's consent, the Employee shall not be required to report
principally to an office located more than five hundred (500) miles from his
principal office at the date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW DURING DISPUTE
-------------------------------------------------------------------
4.1 TERM OF AGREEMENT. The Employer hereby employs the
Employee for a Term commencing as of the date hereof and ending December 31,
1996. At the end of the calendar month in which this Agreement is executed and
at the end of each calendar month thereafter up to and including November 30,
2012, this Agreement shall automatically be extended for one (1) month unless
either party shall give notice to the other of non-extension prior to the end
of such calendar month; provided, however, if a Change in Control shall have
occurred during the Term of this Agreement, Sections 7 and 8 and 10 through 20
of this Agreement shall continue in effect until at least the end of the
Change-in-Control Protective Period (whether or not the Term of the Agreement
shall have expired for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL.
Prior to any Change in Control, the Employer may terminate the employment of
the Employee for Cause pursuant to this Agreement. Prior to any Change in
Control, the Employee may terminate his employment pursuant to this Agreement
if the Employer fails to make full and timely payments of all sums provided for
in Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall
breach its covenants hereunder in any material respect.
2
<PAGE> 3
4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any Change
in Control, if the Employee shall be terminated for Cause, and, within 30 days
of such termination, shall notify the Employer of his intention to adjudicate
such termination as improper, the Employer agrees that it will deposit with
Society National Bank, Cleveland, Ohio, as Escrow Agent the installments of the
Employee's Base Salary (as provided in Section 5 below) as the same would have
become payable but for such termination. In the event of a final adjudication
by a tribunal of competent jurisdiction that such termination was not for
Cause, then the amounts so deposited in escrow, plus any interest earned by the
Escrow Agent thereon, shall be delivered promptly to the Employee. If such
adjudication shall be in favor of the Employer, the Escrow Agent shall return
the sums so deposited, plus such interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated
damages but the Employer shall be entitled to a credit against any such award
to the extent of the sums so delivered to the Employee.
5. COMPENSATION
------------
The Employer agrees to pay to the Employee as compensation for
his services hereunder a Base Salary initially equal to the fixed annual salary
currently being paid to the Employee as shown on the Employer's employment
records, payable in substantially equal weekly, biweekly, bimonthly or monthly
installments, as the case may be, in the manner currently being paid to the
Employee. The Base Salary may be discretionarily increased by the Board from
time to time as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time shall not be decreased
during the Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's compensation
may not be limited to his Base Salary and that the Employee may receive an
annual bonus in the amount, if any, determined annually by the Employer.
The Employee shall also participate in employee compensation
and benefit plans available generally to executives of the Employer (including,
without limitation, any tax-qualified profit sharing plan, nonqualified profit
sharing plan, life insurance plan and health insurance plan) on a level
appropriate to his position and shall receive the employee fringe benefits
available generally to executives of the
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<PAGE> 4
Employer (including, without limitation, the use of a company car).
6. EXPENSES
--------
The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for entertainment,
travel and similar items. The Employer shall reimburse the Employee for all
such expenses upon the presentation by the Employee, from time to time, of an
itemized account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee's
employment shall be terminated for any reason during the Term (or, if later,
prior to the end of the Change-in-Control Protective Period), the Employer
shall pay the Employee's Base Salary to the Employee through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given (subject to Section 7.2 hereof), together with all compensation and
benefits payable to the Employee through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Employer during such period. Subject to Sections 8, 9, 10 and 11 hereof,
after completing the expense reimbursements required by Section 6 hereof and
making the payments and providing the benefits required by this Section 7, the
Employer shall have no further obligations to the Employee under this
Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During
the Term (or, if later, at any time prior to the end of the Change-in-Control
Protective Period), during any period that the Employee fails to perform the
Employee's full-time duties with the Employer as a result of incapacity due to
physical or mental illness (but in no event for more than twenty-four (24)
months), the Employer shall pay only sixty percent (60%) of the Employee's Base
Salary to the Employee at the rate in effect at the commencement of any such
period (less amounts, if any, payable to the Employee at or prior to the time
of any such Base Salary payment under disability benefit plans of the Employer
or under the Social Security disability insurance program). After six (6)
months of Disability, the Employer shall have the right to terminate the
Employee's employment pursuant to this Agreement and all Base Salary payments
(except the sixty percent (60%) payments pursuant to the foregoing sentence)
shall cease. Except to the extent
4
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provided in this Section 7.2, all Base Salary payments to the Employee shall be
abated during the period of Disability. Subject to Sections 8, 9, 10 and 11
hereof, after completing the expense reimbursements required by Section 6
hereof and making the payments and providing the benefits required by this
Section 7, the Employer shall have no further obligations to the Employee under
this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY; TERMINATION PAY; PROMPT
---------------------------------------------------------------------------
PAYMENT
- -------
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee's
employment shall be terminated for any reason during the Term of this Agreement
(or, if later, prior to the end of the Change-in-Control Protective Period),
the Employer shall pay the Employee's normal post-termination compensation and
benefits to the Employee as such payments become due. Subject to Section 10
hereof, such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Employer's retirement, insurance and
other compensation or benefit plans, programs and arrangements (other than this
Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding
anything to the contrary in Section 7.2, 9.1 or 10.1(A) hereof, if the laws
governing this Agreement shall require that the Employer continue to pay or
otherwise compensate the Employee for any period of time following termination
of the Employee's employment ("Continuation Pay") or if such laws require
certain amounts of severance pay, termination compensation or the like
(collectively, "Termination Pay"), then to the fullest extent permitted by law
any payments to the Employee pursuant to Section 7.2, 9.1 or 10.1(A) hereof
shall be included in the calculation of Continuation Pay and Termination Pay
and such payments shall be deducted from the amount of Continuation Pay or
Termination Pay due the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7
or 9 hereof or this Section 8 shall be made promptly after the event giving
rise to the obligation and shall be made to the Employee or in accordance with
Section 14.2 hereof, as the case may be.
5
<PAGE> 6
9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A
------------------------------------------------------
CHANGE IN CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
- ------------------------------------------------------------
9.1 DEATH BENEFIT. If the Employee's employment shall be
terminated by death during the Term (or, if later, prior to the end of the
Change-in-Control Protective Period), then, in addition to the compensation and
benefits provided by Sections 7.1 and 8 hereof, the Employer shall pay a lump
sum amount equal to sixty percent (60%) of the Base Salary for twenty-four (24)
months in accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the
Employer shall terminate the Employee's employment during the Term and prior to
a Change in Control, without Cause (and not for Disability or in connection
with the Employee's death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term,
each of which bonuses shall be equal to one-half (1/2) times the average annual
bonus paid to the Employee during the most recent five (5) calendar years of
the Employee's employment by any of the Companies (prorated for any partial
years in the remaining Term).
10. SEVERANCE PAYMENTS; DEDUCTIBILITY.
---------------------------------
10.1 SEVERANCE PAYMENTS.
------------------
Subject to Section 10.2 hereof, the Employer shall pay the
Employee the payments described in this Section 10.1 (the "Severance Payments")
upon the termination of the Employee's employment following a Change in Control
and prior to the end of the Change-in- Control Protective Period, in addition
to any payments and benefits to which the Employee is entitled under Sections
5, 6, 7 and 8.1 hereof, unless such termination is (i) by the Employer for
Cause, (ii) by reason of death or Disability, or (iii) by the Employee without
Good Reason. For purposes of this Agreement, the Employee's employment shall
be deemed to have been terminated by the Employer without Cause following a
Change in Control or by the Employee with Good Reason following a Change in
Control, as the case may be, if (i) the Employee's employment is terminated
without Cause prior to a Change in Control and such termination was at the
request or direction of a Person who has entered into an agreement with the
Employer the consummation of which would constitute a Change in Control, (ii)
the Employee terminates his employment with Good Reason prior to a Change in
Control and
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<PAGE> 7
the circumstance or event which constitutes Good Reason occurs at the request
or direction of such Person, or (iii) the Employee's employment is terminated
by the Employer without Cause prior to a Change in Control (but following a
Potential Change in Control) and such termination is otherwise in connection
with or in anticipation of a Change in Control which actually occurs. For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Employee shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that such position is not correct.
(A) In lieu of any further salary payments
to the Employee for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Employee,
the Employer shall pay to the Employee a lump sum severance payment,
in cash, equal to one (1) times the sum of (i) the higher of the
Employee's Base Salary in effect immediately prior to the occurrence
of the event or circumstance upon which the Notice of Termination is
based or the Employee's Base Salary in effect immediately prior to the
Change in Control, and (ii) the higher of the annual bonus earned by
the Employee in respect of the Employer's fiscal year immediately
preceding that in which the Date of Termination occurs or the average
annual bonus so earned in respect of the three fiscal years
immediately preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of any
annual incentive plan to the contrary, the Employer shall pay to the
Employee a lump sum amount, in cash, equal to the sum of (i) any
annual incentive compensation which has been allocated or awarded to
the Employee for a completed fiscal year preceding the Date of
Termination and which, as of the Date of Termination, is contingent
only upon the continued employment of the Employee to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of a
deemed annual bonus for the Employer's fiscal year in which the Date
of Termination occurs, calculated by multiplying (i) the higher of the
annual bonus earned by the Employee with respect to the immediately
preceding fiscal year or the average annual bonus earned by the
Employee with respect to the immediately preceding three fiscal years
of the Employer by (ii) the fraction obtained by dividing the number
of days in the fiscal year of the
7
<PAGE> 8
Employer in which termination occurs up to and including the Date of
Termination by 365.
(C) For the twelve (12) month period
immediately following the Date of Termination, the Employer shall
arrange to provide the Employee with life, disability, accident and
health insurance benefits substantially similar to those which the
Employee is receiving immediately prior to the Notice of Termination
(without giving effect to any amendment to such benefits made
subsequent to a Change in Control, which amendment adversely affects
in any manner the Employee's entitlement to or the amount of such
benefits); PROVIDED, HOWEVER, that, unless the Employee consents to a
different method (after taking into account the effect of such method
on the calculation of "parachute payments" pursuant to Section 10.2
hereof), such health insurance benefits shall be provided through a
third-party insurer. Benefits otherwise receivable by the Employee
pursuant to this Section 10.1(C) shall be reduced to the extent
comparable benefits are actually received by or made available to the
Employee without cost during the twelve (12) month period following
the Employee's termination of employment (and any such benefits
actually received by or made available to the Employee shall be
reported to the Employer by the Employee). If the Severance Payments
shall be decreased pursuant to Section 10.2 hereof, and the Section
10.1(C) benefits which remain payable after the application of Section
10.2 hereof are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt or availability of
comparable benefits, the Employer shall, at the time of such
reduction, pay to the Employee the least of (a) the amount of the
decrease made in the Severance Payments pursuant to Section 10.2
hereof, (b) the amount of the subsequent reduction in these Section
10.1(C) benefits, or (c) the maximum amount which can be paid to the
Employee without being, or causing any other payment to be,
nondeductible by reason of section 280G of the Code.
10.2 DEDUCTIBILITY.
-------------
(A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be received
by the Employee in connection with a Change in Control or the termination of
the Employee's employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Employer, any Person whose
8
<PAGE> 9
actions result in a Change in Control or any Person affiliated with the
Employer or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") would not be
deductible (in whole or part), by the Employer, an affiliate or Person making
such payment or providing such benefit as a result of section 280G of the Code,
then, to the extent necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such other plan, arrangement
or agreement), the cash Severance Payments shall first be reduced (if
necessary, to zero), and the noncash Severance Payments shall thereafter be
reduced (if necessary, to zero); PROVIDED, HOWEVER, that the Employee may elect
(at any time prior to the delivery of a Notice of Termination hereunder) to
have the noncash Severance Payments reduced (or eliminated) prior to any
reduction of the cash Severance Payments.
(B) For purposes of this limitation, (i) no portion of
the Total Payments the receipt or enjoyment of which the Employee shall have
effectively waived in writing prior to the delivery of a Notice of Termination
shall be taken into account, (ii) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel (the "Tax Counsel")
reasonably acceptable to the Employee and selected by the accounting firm which
was, immediately prior to the Change in Control, the Employer's independent
auditor (the "Auditor") does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only
to the extent necessary so that the Total Payments (other than those referred
to in clauses (i) or (ii)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of section 280G(b)(4)(B) of
the Code or are otherwise not subject to disallowance as deductions by reason
of section 280G of the Code, in the opinion of the Tax Counsel, and (iv) the
value of any noncash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
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<PAGE> 10
(C) If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Employee and the Employer in applying the
terms of this Section 10.2, the aggregate "parachute payments" paid to or for
the Employee's benefit are in an amount that would result in any portion of
such "parachute payments" not being deductible by reason of section 280G of the
Code, then the Employee shall have an obligation to pay the Employer upon
demand an amount equal to the sum of (i) the excess of the aggregate "parachute
payments" paid to or for the Employee's benefit over the aggregate "parachute
payments" that could have been paid to or for the Employee's benefit without
any portion of such "parachute payments" not being deductible by reason of
section 280G of the Code; and (ii) interest on the amount set forth in clause
(i) of this sentence at one hundred twenty percent (120%) of the rate provided
in section 1274(b)(2)(B) of the Code from the date of the Employee's receipt of
such excess until the date of such payment.
10.3 The payments provided in Sections 10.1(A) and (B) hereof
shall be made not later than the fifth day following the Date of Termination;
PROVIDED, HOWEVER, that if the amounts of such payments, and the limitation on
such payments set forth in Section 10.2 hereof, cannot be finally determined on
or before such day, the Employer shall pay to the Employee on such day an
estimate, as determined in good faith by the Employer, in accordance with
Section 10.2 hereof, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Employer to the Employee, payable on the fifth (5th)
business day after demand by the Employer (together with interest at one
hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Employer
shall provide the Employee with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Employer has
received from outside counsel, auditors or consultants (and any such opinions
or advice which are in writing shall be
10
<PAGE> 11
attached to the statement). In the event the Employer should fail to pay when
due the amounts described in Sections 10.1(A), (B) and (C) hereof or in Section
10.2 hereof, the Employee shall also be entitled to receive from the Employer
an amount representing interest on any such unpaid amounts from the due date,
as determined under this Section 10.3 (without regard to any extension of the
Date of Termination pursuant to Section 11.3 hereof), to the date of payment at
one hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B)
of the Code.
10.4 The Employer also shall pay to the Employee all legal
fees and expenses incurred by the Employee (i) in disputing in good faith any
issue relating to the termination of the Employee's employment following a
Change in Control and prior to the end of the Change-in-Control Protective
Period, (ii) in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement, or (iii) in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of the Employee's written requests
for payment accompanied with such evidence of fees and expenses incurred as the
Employer reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
------------------------------------------------------
11.1 NOTICE OF TERMINATION. During the Term (and, if longer,
until the end of the Change-in-Control Protective Period), any purported
termination of the Employee's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 15 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated. Further, with respect to any purported termination of the
Employee's employment after a Change in Control and prior to the end of the
Change-in-Control Protective Period, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at
a meeting of the Board which was called and held for the purpose of considering
such termi-
11
<PAGE> 12
nation (after reasonable notice to the Employee and an opportunity for the
Employee, together with the Employee's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Employee was guilty
of conduct set forth in clause (i) or (ii) of the definition of Cause herein,
and specifying the particulars thereof in detail.
11.2 DATE OF TERMINATION. "Date of Termination," with
respect to any purported termination of the Employee's employment during the
Term (and, if longer, prior to the end of the Change-in-Control Protective
Period), shall mean (i) if the Employee's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided
that the Employee shall not have returned to the full-time performance of the
Employee's duties during such thirty (30) day period), and (ii) if the
Employee's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Employer,
shall not be less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Employee, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any
purported termination of the Employee's employment after a Change in Control
and prior to the end of the Change-in-Control Protective Period, if within
fifteen (15) days after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to this Section 11.3),
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be
extended until the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree
of a court of competent jurisdiction (which is not appealable or with respect
to which the time for appeal therefrom has expired and no appeal has been
perfected); PROVIDED, HOWEVER, that the Date of Termination shall be extended
by a notice of dispute given by the Employee only if such notice is given in
good faith and the Employee pursues the resolution of such dispute with
reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination
occurs following a Change in Control and prior to the end of the
Change-in-Control Protective Period and the Date of Termination is extended in
accordance with Section 11.3
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hereof, the Employer shall continue to pay the Employee the full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, salary) and continue the Employee as a participant in all
compensation, benefit and insurance plans in which the Employee was
participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 11.3 hereof.
Amounts paid under this Section 11.4 are in addition to all other amounts due
under this Agreement (other than those due under Section 7.1 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement.
12. NO MITIGATION
-------------
The Employer agrees that, if the Employee's employment with
the Employer terminates following a Change in Control and prior to the end of
the Change-in-Control Protective Period, the Employee is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 10.1(C) hereof) shall not be reduced by any compensation
earned by the Employee as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
-----------------------------------------------------
13.1 CONFIDENTIALITY. The Companies' methods, plans for
doing business, processes, pricing, compounds, customers and supplies are vital
to the Companies and, to the extent not made public by the Companies,
constitute confidential information subject to the Companies' proprietary
rights therein. The Employee covenants and agrees that during the Term and at
all times thereafter, the Employee will not, directly or indirectly, make
known, divulge, furnish, make available or use, otherwise than in the regular
course of the Employee's employment by the Employer, any invention, product,
process, apparatus or design of any of the Companies, or any knowledge or
information in respect thereof (including, but not limited to, business methods
and techniques), or any other confidential or so-called "insider" information
of any of the Companies. This
13
<PAGE> 14
covenant shall apply without regard to the time or circumstances of any
termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee
covenants and agrees that during the period of one (1) year following any
termination of the Employee's employment which occurs prior to a Change in
Control, the Employee will not, directly or indirectly, either as an individual
for the Employee's own account or as an investor, or other participant in, or
as an employee, agent, or representative of, any other business enterprise:
(i) solicit, employ, entice, take away or interfere with,
or attempt to solicit, employ, entice, take away or
interfere with, any employee of the Employer or the
Companies; or
(ii) engage or participate in or finance, aid or be
connected with any enterprise which competes with the
business of the Companies, or any of them.
The geographical limitations of the foregoing shall include any country in
which the Companies or any of them shall be doing business as of such date of
such termination. This covenant shall apply without regard to the
circumstances of any termination of the Employee's employment which occurs
prior to a Change in Control.
13.3 The Employee acknowledges that the covenants contained
in this Section 13 are of the essence of this Agreement and said covenants
shall be construed as independent of any other provisions of this Agreement.
Recognizing the irreparable nature of the injury that could result from the
Employee's violation of any of the covenants and agreement to be performed
and/or observed by the Employee pursuant to the provisions of this Section 13,
and that damages would be inadequate compensation, it is agreed that any
violations by the Employee of the provisions of this Section 13, shall be the
proper subject for immediate injunctive and other equitable relief to the
Employer.
14. SUCCESSORS; BINDING AGREEMENT
-----------------------------
14.1 In addition to any obligations imposed by law upon any
successor to the Employer, the Employer will require any successor (whether
direct or indirect, by purchase, merger,
14
<PAGE> 15
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Employer to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Employer would be required
to perform it if no such succession had taken place. Failure of the Employer
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee
to compensation from the Employer in the same amount and on the same terms as
the Employee would be entitled to hereunder if the Employee were to terminate
the Employee's employment for Good Reason after a Change in Control, except
that, for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. Except
as provided in this Section 14.1, this Agreement shall not be assignable by
either party without the written consent of the other party hereto.
14.2 This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Employee shall die while any amount would still be payable to the Employee
hereunder (other than amounts which, by their terms, terminate upon the death
of the Employee) if the Employee had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Employee's estate.
15. NOTICES
-------
For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to
the Employee, to the address shown for the Employee in the personnel records of
the Employer and, if to the Employer, to the address set forth below, or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
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<PAGE> 16
To the Employer:
Robert A. Stefanko
Chief Financial Officer and Executive
Vice President-Finance and Administration
A. Schulman, Inc.
P. O. Box 1710
Akron, Ohio 44309-1710
With a copy to:
James H. Berick, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
16. MISCELLANEOUS
-------------
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. This Agreement supersedes the Employment
Agreement between the Employer and the Employee dated as of December 28, 1990
and any other agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof which have been made by
either party, except as expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Ohio. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Employee has agreed. The
obligations of the Employer and the Employee under this Agreement which by
their nature may require (partial or total) performance after the expiration of
the Term or the Change-in-Control Protective Period (including, without
limitation, those under Sections 5 through 11 and Section 13 hereof) shall
survive such expiration.
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17. VALIDITY
--------
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
18. COUNTERPARTS
------------
This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL; ARBITRATION
-----------------------------------------------------------
After a Change in Control and prior to the end of the
Change-in-Control Protective Period, all claims by the Employee for benefits
under this Agreement shall be directed to and determined by the Committee and
shall be in writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Employee in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable opportunity to
the Employee for a review of the decision denying a claim and shall further
allow the Employee to appeal to the Committee a decision of the Committee
within sixty (60) days after notification by the Committee that the Employee's
claim has been denied. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Akron, Ohio, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Employee shall be entitled to seek specific
performance of the Employee's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
20. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
17
<PAGE> 18
(B) "Board" shall mean the Board of Directors of the
Employer.
(C) "Cause" for termination by the Employer of the
Employee's employment shall mean the following:
(I) with respect to a termination as to
which the Notice of Termination is duly given prior to a
Change in Control, the Employee's breach of his covenants
herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or
knowingly permitting nonfeasance of his duties in any material
respect, or the Employee's committing a felony; and
(II) with respect to a termination as to
which the Notice of Termination is duly given following a
Change in Control, (i) the willful and continued failure by
the Employee to substantially perform the Employee's duties
with the Employer (other than any such failure resulting from
the Employee's incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Employee pursuant
to Section 11.1 hereof) after a written demand for substantial
performance is delivered to the Employee by the Board, which
demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the
Employee's duties, or (ii) the willful engaging by the
Employee in conduct which is demonstrably and materially
injurious to the Employer or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Employee's
part shall be deemed "willful" unless done, or omitted to be
done, by the Employee not in good faith and without reasonable
belief that the Employee's act, or failure to act, was in the
best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim
by the Employer that Cause exists shall be given effect unless
the Employer establishes to the Committee by clear and
convincing evidence that Cause exists.
18
<PAGE> 19
(D) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its affiliates other than in connection with the acquisition
by the Employer or its affiliates of a business) representing
25% or more of either the then outstanding shares of common
stock of the Employer or the combined voting power of the
Employer's then outstanding securities; or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Employer) whose appointment or election by the Board or
nomination for election by the Employer's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved; or
(III) the stockholders of the Employer
approve a merger or consolidation of the Employer with any
other corporation or approve the issuance of voting securities
of the Employer in connection with a merger or consolidation
of the Employer (or any direct or indirect subsidiary of the
Employer) pursuant to applicable stock exchange requirements,
other than (i) a merger or consolidation which would result in
the voting securities of the Employer outstanding immediately
prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee
19
<PAGE> 20
benefit plan of the Employer or any subsidiary of the
Employer, at least 75% of the combined voting power of the
voting securities of the Employer or such surviving entity or
any parent thereof outstanding immediately after such merger
or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition
by the Employer or its subsidiaries of a business)
representing 25% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(IV) the stockholders of the Employer
approve a plan of complete liquidation or dissolution of the
Employer or an agreement for the sale or disposition by the
Employer of all or substantially all of the Employer's assets,
other than a sale or disposition by the Employer of all or
substantially all of the Employer's assets to an entity, at
least 75% of the combined voting power of the voting
securities of which are owned by stockholders in substantially
the same proportions as their ownership of the Employer
immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Employer immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Employer
immediately following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for purposes of this
Agreement if, in connection with the Transaction, the Employee participates as
an equity investor in the acquiring entity or any of its affiliates (the
20
<PAGE> 21
"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under
one or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences attributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the
Acquiror on terms and conditions substantially equivalent to those obtained in
the Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(E) "Change-in-Control Protective Period" shall mean the
period from the occurrence of a Change in Control until the later of the second
anniversary of such Change in Control or, if such Change in Control shall be
caused by the stockholder approval of a merger or consolidation described in
Section 20(E)(III) hereof, the second anniversary of the consummation of such
merger or consolidation.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Committee" shall mean (i) the individuals (not fewer than
three in number) who, immediately prior to a Potential Change in Control,
constitute the Compensation Committee of the Board, plus (ii) in the event that
fewer than three individuals are available from the group specified in clause
(i) above for any reason, such individuals as may be appointed by the
individual or individuals so available (including for this purpose any
individual or individuals previously so appointed under this clause (ii));
provided, however, that the maximum number of individuals constituting the
Committee shall not exceed five.
(H) "Companies" shall mean, collectively, the Employer and
each corporation which is now and hereafter shall become a subsidiary of, or a
parent of, the Employer, together with their respective successors and assigns.
21
<PAGE> 22
(I) "Continuation Pay" shall mean those payments so
described in Section 8.2 hereof.
(J) "Date of Termination" shall have the meaning stated in
Section 11.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Employer of the Employee's employment, if, as a result of
the Employee's incapacity due to physical or mental illness, the Employee shall
have been absent from the full-time performance of the Employee's duties with
the Employer for a period of six (6) consecutive months, the Employer shall
have given the Employee a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Employee shall
not have returned to the full-time performance of the Employee's duties.
(L) "Employee" shall mean the individual named in the first
paragraph of this Agreement.
(M) "Employer" shall mean A. Schulman, Inc. and, except in
determining under Section 20(E) hereof whether or not any Change in Control of
the Employer has occurred, any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(N) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(O) "Good Reason" for termination by the Employee of the
Employee's employment shall mean the occurrence (without the Employee's express
prior written consent) after any Change in Control, or after any Potential
Change in Control under the circumstances described in the second sentence of
Section 10.1 hereof (treating all references in paragraphs (I) through (VII)
below to a "Change in Control" as references to a "Potential Change in
Control"), of any one of the following acts by the Employer, or failures by the
Employer to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI) or (VII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Employee of any
duties inconsistent with the Employee's status as an executive
officer of the Employer or a substantial adverse alteration in
the nature or status of the
22
<PAGE> 23
Employee's responsibilities from those in effect immediately
prior to the Change in Control (other than any such alteration
primarily attributable to the fact that the Employer may no
longer be a public company);
(II) a reduction by the Employer in the
Employee's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in
control of the Employer;
(III) the relocation of the Employer's
principal executive offices to a location more than fifty (50)
miles from the location of such offices immediately prior to
the Change in Control or the Employer's requiring the Employee
to be based anywhere other than the Employer's principal
executive offices except for required travel on the Employer's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(IV) the failure by the Employer, without
the Employee's consent, to pay to the Employee any portion of
the Employee's current compensation, or to pay to the Employee
any portion of an installment of deferred compensation under
any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to continue
in effect any compensation plan in which the Employee
participates immediately prior to the Change in Control which
is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan
and Nonqualified Profit Sharing Plan or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Employer to continue the Employee's participation
therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employee's
23
<PAGE> 24
participation relative to other participants, as existed at
the time of the Change in Control;
(VI) the failure by the Employer to continue
to provide the Employee with benefits substantially similar to
those enjoyed by the Employee under any of the Employer's
pension, life insurance, medical, health and accident, or
disability plans in which the Employee was participating at
the time of the Change in Control, the taking of any action by
the Employer which would directly or indirectly materially
reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by the Employee at the time of
the Change in Control, or the failure by the Employer to
provide the Employee with the number of paid vacation days to
which the Employee is entitled on the basis of years of
service with the Employer in accordance with the Employer's
normal vacation policy in effect at the time of the Change in
Control; or
(VII) any purported termination of the
Employee's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment
for Good Reason shall not be affected by the Employee's incapacity due to
physical or mental illness. The Employee's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Employee that Good Reason exists shall be
presumed to be correct unless the Employer establishes to the Committee by
clear and convincing evidence that Good Reason does not exist.
(P) "Notice of Termination" shall have the meaning stated in
Section 11.1 hereof.
(Q) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not
24
<PAGE> 25
include (i) the Employer or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Employer or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Employer in substantially
the same proportions as their ownership of stock of the Employer.
(R) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(1) the Employer enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(2) the Employer or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(3) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Employer
representing 15% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(4) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(S) "Severance Payments" shall mean those payments described
in Section 10.1 hereof.
(T) "Term" shall mean the period of time described in Section
4.1 hereof (including any extension or continuation described therein).
25
<PAGE> 26
(U) "Termination Pay" shall mean those payments so described
in Section 8.2 hereof.
(V) "Total Payments" shall mean those payments described in
Section 10.2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed (the corporate signatory by the respective officer
duly authorized) as of the day and year first above written.
/s/ Alain C. Adam
--------------------------------
Alain C. Adam
A. SCHULMAN, INC.
By /s/ James H. Berick
------------------------------
James H. Berick, Secretary
26
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this 31 day of January, 1996, by and between A. SCHULMAN, INC., a Delaware
corporation (the "Employer"), and BRIAN R. COLBOW (the "Employee").
WHEREAS, the Board of Directors of the Employer desires to provide for the
continued employment of the Employee as a member of the Employer's management,
in the best interest of the Employer and its stockholders. The Employee is
willing to commit himself continue to serve the Employer, on the terms and
conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
-------------
The definitions of capitalized terms used in this Agreement (unless stated
where first used) are provided in the last Section hereof.
2. EMPLOYMENT
----------
The Employer hereby continues to employ the Employee as Treasurer of the
Employer, and the Employee hereby accepts such continued employment upon the
terms and conditions herein contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
-----------------------------------
3.1 DUTIES. The Employee shall devote his entire business time, attention
and energies to the Employer and shall not engage in any conduct which shall
reflect adversely upon the Companies. The Employee shall perform such duties
for the Companies as may be assigned to one in his executive status and
capacity by the Board. The Employee shall serve diligently and to the best of
his ability.
During his employment by the Employer, the Employee shall not, without the
Employer's prior written consent, be engaged in any other business activity,
whether or not such
<PAGE> 2
business activity is pursued for gain, profit or other pecuniary advantage,
except that notwithstanding the foregoing, he may invest his personal funds for
his own account; provided that such investment shall be passive and not
controlling in any such investment and subject to the provisions of Section
13.2 hereof and provided further that he will not be required to provide any
substantial services on behalf of such enterprise. Notwithstanding the
foregoing, the Employee may serve on the Boards of Directors of other
corporations during the Term as long as such service does not interfere with
the performance of his duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable office space,
furnishings, secretarial and administrative assistance. Without the Employee's
consent, the Employee shall not be required to report principally to an office
located more than five hundred (500) miles from his principal office at the
date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW DURING DISPUTE
-------------------------------------------------------------------
4.1 TERM OF AGREEMENT. The Employer hereby employs the Employee for a Term
commencing as of the date hereof and ending December 31, 1996. At the end of
the calendar month in which this Agreement is executed and at the end of each
calendar month thereafter up to and including March 31, 2011, this Agreement
shall automatically be extended for one (1) month unless either party shall
give notice to the other of non-extension prior to the end of such calendar
month; provided, however, if a Change in Control shall have occurred during the
Term of this Agreement, Sections 7 and 8 and 10 through 20 of this Agreement
shall continue in effect until at least the end of the Change-in-Control
Protective Period (whether or not the Term of the Agreement shall have expired
for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. Prior to any
Change in Control, the Employer may terminate the employment of the Employee
for Cause pursuant to this Agreement. Prior to any Change in Control, the
Employee may terminate his employment pursuant to this Agreement if the
Employer fails to make full and timely payments of all sums provided for in
Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall
breach its covenants hereunder in any material respect.
2
<PAGE> 3
4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any Change in Control,
if the Employee shall be terminated for Cause, and, within 30 days of such
termination, shall notify the Employer of his intention to adjudicate such
termination as improper, the Employer agrees that it will deposit with Society
National Bank, Cleveland, Ohio, as Escrow Agent the installments of the
Employee's Base Salary (as provided in Section 5 below) as the same would have
become payable but for such termination. In the event of a final adjudication
by a tribunal of competent jurisdiction that such termination was not for
Cause, then the amounts so deposited in escrow, plus any interest earned by the
Escrow Agent thereon, shall be delivered promptly to the Employee. If such
adjudication shall be in favor of the Employer, the Escrow Agent shall return
the sums so deposited, plus such interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated damages but the
Employer shall be entitled to a credit against any such award to the extent of
the sums so delivered to the Employee.
5. COMPENSATION
------------
The Employer agrees to pay to the Employee as compensation for his services
hereunder a Base Salary initially equal to the fixed annual salary currently
being paid to the Employee as shown on the Employer's employment records,
payable in substantially equal weekly, biweekly, bimonthly or monthly
installments, as the case may be, in the manner currently being paid to the
Employee. The Base Salary may be discretionarily increased by the Board from
time to time as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time shall not be decreased
during the Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's compensation may not be
limited to his Base Salary and that the Employee may receive an annual bonus in
the amount, if any, determined annually by the Employer.
The Employee shall also participate in employee compensation and benefit
plans available generally to executives of the Employer (including, without
limitation, any tax-qualified profit sharing plan, nonqualified profit sharing
plan, life insurance plan and health insurance plan) on a level appropriate to
his position and shall receive the employee fringe benefits available generally
to executives of the
3
<PAGE> 4
Employer (including, without limitation, the use of a company car).
6. EXPENSES
--------
The Employee is authorized to incur reasonable expenses for promoting the
business of the Employer, including expenses for entertainment, travel and
similar items. The Employer shall reimburse the Employee for all such expenses
upon the presentation by the Employee, from time to time, of an itemized
account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
----------------------------------------
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee's employment
shall be terminated for any reason during the Term (or, if later, prior to the
end of the Change-in-Control Protective Period), the Employer shall pay the
Employee's Base Salary to the Employee through the Date of Termination at the
rate in effect at the time the Notice of Termination is given (subject to
Section 7.2 hereof), together with all compensation and benefits payable to the
Employee through the Date of Termination under the terms of any compensation or
benefit plan, program or arrangement maintained by the Employer during such
period. Subject to Sections 8, 9, 10 and 11 hereof, after completing the
expense reimbursements required by Section 6 hereof and making the payments and
providing the benefits required by this Section 7, the Employer shall have no
further obligations to the Employee under this Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During the Term (or, if
later, at any time prior to the end of the Change-in-Control Protective
Period), during any period that the Employee fails to perform the Employee's
full-time duties with the Employer as a result of incapacity due to physical or
mental illness (but in no event for more than twenty-four (24) months), the
Employer shall pay only sixty percent (60%) of the Employee's Base Salary to
the Employee at the rate in effect at the commencement of any such period (less
amounts, if any, payable to the Employee at or prior to the time of any such
Base Salary payment under disability benefit plans of the Employer or under the
Social Security disability insurance program). After six (6) months of
Disability, the Employer shall have the right to terminate the Employee's
employment pursuant to this Agreement and all Base Salary payments (except the
sixty percent (60%) payments pursuant to the foregoing sentence) shall cease.
Except to the extent
4
<PAGE> 5
provided in this Section 7.2, all Base Salary payments to the Employee shall be
abated during the period of Disability. Subject to Sections 8, 9, 10 and 11
hereof, after completing the expense reimbursements required by Section 6
hereof and making the payments and providing the benefits required by this
Section 7, the Employer shall have no further obligations to the Employee under
this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY; TERMINATION PAY;
-------------------------------------------------------------------
PROMPT PAYMENT
- --------------
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee's employment shall
be terminated for any reason during the Term of this Agreement (or, if later,
prior to the end of the Change-in-Control Protective Period), the Employer
shall pay the Employee's normal post-termination compensation and benefits to
the Employee as such payments become due. Subject to Section 10 hereof, such
post-termination compensation and benefits shall be determined under, and paid
in accordance with, the Employer's retirement, insurance and other compensation
or benefit plans, programs and arrangements (other than this Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding anything to the
contrary in Section 7.2, 9.1 or 10.1(A) hereof, if the laws governing this
Agreement shall require that the Employer continue to pay or otherwise
compensate the Employee for any period of time following termination of the
Employee's employment ("Continuation Pay") or if such laws require certain
amounts of severance pay, termination compensation or the like (collectively,
"Termination Pay"), then to the fullest extent permitted by law any payments to
the Employee pursuant to Section 7.2, 9.1 or 10.1(A) hereof shall be included
in the calculation of Continuation Pay and Termination Pay and such payments
shall be deducted from the amount of Continuation Pay or Termination Pay due
the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7 or 9 hereof or
this Section 8 shall be made promptly after the event giving rise to the
obligation and shall be made to the Employee or in accordance with Section 14.2
hereof, as the case may be.
5
<PAGE> 6
9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A CHANGE IN
----------------------------------------------------------------
CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
- --------------------------------------------------
9.1 DEATH BENEFIT. If the Employee's employment shall be terminated by
death during the Term (or, if later, prior to the end of the Change-in-Control
Protective Period), then, in addition to the compensation and benefits provided
by Sections 7.1 and 8 hereof, the Employer shall pay a lump sum amount equal to
sixty percent (60%) of the Base Salary for twenty-four (24) months in
accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the Employer shall
terminate the Employee's employment during the Term and prior to a Change in
Control, without Cause (and not for Disability or in connection with the
Employee's death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term,
each of which bonuses shall be equal to one-half (1/2) times the average annual
bonus paid to the Employee during the most recent five (5) calendar years of
the Employee's employment by any of the Companies (prorated for any partial
years in the remaining Term).
10. SEVERANCE PAYMENTS; DEDUCTIBILITY.
---------------------------------
10.1 SEVERANCE PAYMENTS.
------------------
Subject to Section 10.2 hereof, the Employer shall pay the Employee the
payments described in this Section 10.1 (the "Severance Payments") upon the
termination of the Employee's employment following a Change in Control and
prior to the end of the Change-in-Control Protective Period, in addition to any
payments and benefits to which the Employee is entitled under Sections 5, 6, 7
and 8.1 hereof, unless such termination is (i) by the Employer for Cause, (ii)
by reason of death or Disability, or (iii) by the Employee without Good Reason.
For purposes of this Agreement, the Employee's employment shall be deemed to
have been terminated by the Employer without Cause following a Change in
Control or by the Employee with Good Reason following a Change in Control, as
the case may be, if (i) the Employee's employment is terminated without Cause
prior to a Change in Control and such termination was at the request or
direction of a Person who has entered into an agreement with the Employer the
consummation of which would constitute a Change in Control, (ii) the Employee
terminates his employment with Good Reason prior to a Change in Control and
6
<PAGE> 7
the circumstance or event which constitutes Good Reason occurs at the request
or direction of such Person, or (iii) the Employee's employment is terminated
by the Employer without Cause prior to a Change in Control (but following a
Potential Change in Control) and such termination is otherwise in connection
with or in anticipation of a Change in Control which actually occurs. For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Employee shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the Employee for periods
subsequent to the Date of Termination and in lieu of any severance benefit
otherwise payable to the Employee, the Employer shall pay to the Employee a
lump sum severance payment, in cash, equal to one (1) times the sum of (i)
the higher of the Employee's Base Salary in effect immediately prior to the
occurrence of the event or circumstance upon which the Notice of Termination
is based or the Employee's Base Salary in effect immediately prior to the
Change in Control, and (ii) the higher of the annual bonus earned by the
Employee in respect of the Employer's fiscal year immediately preceding that
in which the Date of Termination occurs or the average annual bonus so earned
in respect of the three fiscal years immediately preceding that in which the
Change in Control occurs.
(B) Notwithstanding any provision of any annual incentive plan to the
contrary, the Employer shall pay to the Employee a lump sum amount, in cash,
equal to the sum of (i) any annual incentive compensation which has been
allocated or awarded to the Employee for a completed fiscal year preceding
the Date of Termination and which, as of the Date of Termination, is
contingent only upon the continued employment of the Employee to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of a deemed
annual bonus for the Employer's fiscal year in which the Date of Termination
occurs, calculated by multiplying (i) the higher of the annual bonus earned
by the Employee with respect to the immediately preceding fiscal year or the
average annual bonus earned by the Employee with respect to the immediately
preceding three fiscal years of the Employer by (ii) the fraction obtained by
dividing the number of days in the fiscal year of the
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<PAGE> 8
Employer in which termination occurs up to and including the Date of
Termination by 365.
(C) For the twelve (12) month period immediately following the Date of
Termination, the Employer shall arrange to provide the Employee with life,
disability, accident and health insurance benefits substantially similar to
those which the Employee is receiving immediately prior to the Notice of
Termination (without giving effect to any amendment to such benefits made
subsequent to a Change in Control, which amendment adversely affects in any
manner the Employee's entitlement to or the amount of such benefits);
PROVIDED, HOWEVER, that, unless the Employee consents to a different method
(after taking into account the effect of such method on the calculation of
"parachute payments" pursuant to Section 10.2 hereof), such health insurance
benefits shall be provided through a third-party insurer. Benefits otherwise
receivable by the Employee pursuant to this Section 10.1(C) shall be reduced
to the extent comparable benefits are actually received by or made available
to the Employee without cost during the twelve (12) month period following
the Employee's termination of employment (and any such benefits actually
received by or made available to the Employee shall be reported to the
Employer by the Employee). If the Severance Payments shall be decreased
pursuant to Section 10.2 hereof, and the Section 10.1(C) benefits which
remain payable after the application of Section 10.2 hereof are thereafter
reduced pursuant to the immediately preceding sentence because of the receipt
or availability of comparable benefits, the Employer shall, at the time of
such reduction, pay to the Employee the least of (a) the amount of the
decrease made in the Severance Payments pursuant to Section 10.2 hereof, (b)
the amount of the subsequent reduction in these Section 10.1(C) benefits, or
(c) the maximum amount which can be paid to the Employee without being, or
causing any other payment to be, nondeductible by reason of section 280G of
the Code.
10.2 DEDUCTIBILITY.
-------------
(A) Notwithstanding any other provisions of this Agreement, in the event
that any payment or benefit received or to be received by the Employee in
connection with a Change in Control or the termination of the Employee's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Employer, any Person whose
8
<PAGE> 9
actions result in a Change in Control or any Person affiliated with the
Employer or such Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total Payments") would not be
deductible (in whole or part), by the Employer, an affiliate or Person making
such payment or providing such benefit as a result of section 280G of the Code,
then, to the extent necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such other plan, arrangement
or agreement), the cash Severance Payments shall first be reduced (if
necessary, to zero), and the noncash Severance Payments shall thereafter be
reduced (if necessary, to zero); PROVIDED, HOWEVER, that the Employee may elect
(at any time prior to the delivery of a Notice of Termination hereunder) to
have the noncash Severance Payments reduced (or eliminated) prior to any
reduction of the cash Severance Payments.
(B) For purposes of this limitation, (i) no portion of the Total Payments
the receipt or enjoyment of which the Employee shall have effectively waived in
writing prior to the delivery of a Notice of Termination shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel (the "Tax Counsel") reasonably acceptable
to the Employee and selected by the accounting firm which was, immediately
prior to the Change in Control, the Employer's independent auditor (the
"Auditor") does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of
the Code, (iii) the Severance Payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(i) or (ii)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subject to disallowance as deductions by reason of section
280G of the Code, in the opinion of the Tax Counsel, and (iv) the value of any
noncash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code.
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(C) If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding that, notwithstanding the good faith of
the Employee and the Employer in applying the terms of this Section 10.2, the
aggregate "parachute payments" paid to or for the Employee's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Employee shall have
an obligation to pay the Employer upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Employee's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Employee's benefit without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code; and (ii) interest on
the amount set forth in clause (i) of this sentence at one hundred twenty
percent (120%) of the rate provided in section 1274(b)(2)(B) of the Code from
the date of the Employee's receipt of such excess until the date of such
payment.
10.3 The payments provided in Sections 10.1(A) and (B) hereof shall be made
not later than the fifth day following the Date of Termination; PROVIDED,
HOWEVER, that if the amounts of such payments, and the limitation on such
payments set forth in Section 10.2 hereof, cannot be finally determined on or
before such day, the Employer shall pay to the Employee on such day an
estimate, as determined in good faith by the Employer, in accordance with
Section 10.2 hereof, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest at one hundred twenty percent (120%) of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Employer to the Employee, payable on the fifth (5th)
business day after demand by the Employer (together with interest at one
hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Employer
shall provide the Employee with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Employer has
received from outside counsel, auditors or consultants (and any such opinions
or advice which are in writing shall be
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attached to the statement). In the event the Employer should fail to pay when
due the amounts described in Sections 10.1(A), (B) and (C) hereof or in Section
10.2 hereof, the Employee shall also be entitled to receive from the Employer
an amount representing interest on any such unpaid amounts from the due date,
as determined under this Section 10.3 (without regard to any extension of the
Date of Termination pursuant to Section 11.3 hereof), to the date of payment at
one hundred twenty percent (120%) of the rate provided in section 1274(b)(2)(B)
of the Code.
10.4 The Employer also shall pay to the Employee all legal fees and
expenses incurred by the Employee (i) in disputing in good faith any issue
relating to the termination of the Employee's employment following a Change in
Control and prior to the end of the Change-in-Control Protective Period, (ii)
in seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement, or (iii) in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within five
(5) business days after delivery of the Employee's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Employer
reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
------------------------------------------------------
11.1 NOTICE OF TERMINATION. During the Term (and, if longer, until the end
of the Change-in-Control Protective Period), any purported termination of the
Employee's employment (other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the other party hereto
in accordance with Section 15 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment under the provision so indicated.
Further, with respect to any purported termination of the Employee's employment
after a Change in Control and prior to the end of the Change-in-Control
Protective Period, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
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(after reasonable notice to the Employee and an opportunity for the Employee,
together with the Employee's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Employee was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
11.2 DATE OF TERMINATION. "Date of Termination," with respect to any
purported termination of the Employee's employment during the Term (and, if
longer, prior to the end of the Change-in-Control Protective Period), shall
mean (i) if the Employee's employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the Employee shall not
have returned to the full-time performance of the Employee's duties during such
thirty (30) day period), and (ii) if the Employee's employment is terminated
for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination by the Employer, shall not be less than thirty
(30) days (except in the case of a termination for Cause) and, in the case of a
termination by the Employee, shall not be less than fifteen (15) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any purported
termination of the Employee's employment after a Change in Control and prior to
the end of the Change-in-Control Protective Period, if within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 11.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the date on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); PROVIDED, HOWEVER, that the Date of Termination shall be extended
by a notice of dispute given by the Employee only if such notice is given in
good faith and the Employee pursues the resolution of such dispute with
reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and prior to the end of the Change-in-Control
Protective Period and the Date of Termination is extended in accordance with
Section 11.3
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hereof, the Employer shall continue to pay the Employee the full compensation
in effect when the notice giving rise to the dispute was given (including, but
not limited to, salary) and continue the Employee as a participant in all
compensation, benefit and insurance plans in which the Employee was
participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 11.3 hereof.
Amounts paid under this Section 11.4 are in addition to all other amounts due
under this Agreement (other than those due under Section 7.1 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement.
12. NO MITIGATION
-------------
The Employer agrees that, if the Employee's employment with the Employer
terminates following a Change in Control and prior to the end of the
Change-in-Control Protective Period, the Employee is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 10.1(C) hereof) shall not be reduced by any compensation
earned by the Employee as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
-----------------------------------------------------
13.1 CONFIDENTIALITY. The Companies' methods, plans for doing business,
processes, pricing, compounds, customers and supplies are vital to the
Companies and, to the extent not made public by the Companies, constitute
confidential information subject to the Companies' proprietary rights therein.
The Employee covenants and agrees that during the Term and at all times
thereafter, the Employee will not, directly or indirectly, make known, divulge,
furnish, make available or use, otherwise than in the regular course of the
Employee's employment by the Employer, any invention, product, process,
apparatus or design of any of the Companies, or any knowledge or information in
respect thereof (including, but not limited to, business methods and
techniques), or any other confidential or so-called "insider" information of
any of the Companies. This
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covenant shall apply without regard to the time or circumstances of any
termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee covenants and
agrees that during the period of one (1) year following any termination of the
Employee's employment which occurs prior to a Change in Control, the Employee
will not, directly or indirectly, either as an individual for the Employee's
own account or as an investor, or other participant in, or as an employee,
agent, or representative of, any other business enterprise:
(i) solicit, employ, entice, take away or interfere with, or attempt to
solicit, employ, entice, take away or interfere with, any employee of
the Employer or the Companies; or
(ii) engage or participate in or finance, aid or be connected with any
enterprise which competes with the business of the Companies, or any
of them.
The geographical limitations of the foregoing shall include any country in
which the Companies or any of them shall be doing business as of such date of
such termination. This covenant shall apply without regard to the
circumstances of any termination of the Employee's employment which occurs
prior to a Change in Control.
13.3 The Employee acknowledges that the covenants contained in this Section
13 are of the essence of this Agreement and said covenants shall be construed
as independent of any other provisions of this Agreement. Recognizing the
irreparable nature of the injury that could result from the Employee's
violation of any of the covenants and agreement to be performed and/or observed
by the Employee pursuant to the provisions of this Section 13, and that damages
would be inadequate compensation, it is agreed that any violations by the
Employee of the provisions of this Section 13, shall be the proper subject for
immediate injunctive and other equitable relief to the Employer.
14. SUCCESSORS; BINDING AGREEMENT
-----------------------------
14.1 In addition to any obligations imposed by law upon any successor to
the Employer, the Employer will require any successor (whether direct or
indirect, by purchase, merger,
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consolidation or otherwise) to all or substantially all of the business and/or
assets of the Employer to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Employer would be required
to perform it if no such succession had taken place. Failure of the Employer
to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee
to compensation from the Employer in the same amount and on the same terms as
the Employee would be entitled to hereunder if the Employee were to terminate
the Employee's employment for Good Reason after a Change in Control, except
that, for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. Except
as provided in this Section 14.1, this Agreement shall not be assignable by
either party without the written consent of the other party hereto.
14.2 This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee shall
die while any amount would still be payable to the Employee hereunder (other
than amounts which, by their terms, terminate upon the death of the Employee)
if the Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to the executors, personal representatives or administrators of the Employee's
estate.
15. NOTICES
-------
For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed, if to the Employee, to
the address shown for the Employee in the personnel records of the Employer
and, if to the Employer, to the address set forth below, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
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To the Employer:
Robert A. Stefanko
Chief Financial Officer and Executive
Vice President-Finance and Administration
A. Schulman, Inc.
P. O. Box 1710
Akron, Ohio 44309-1710
With a copy to:
James H. Berick, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
16. MISCELLANEOUS
-------------
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by
the Employee and such officer as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. This Agreement supersedes the Employment Agreement between the Employer
and the Employee dated as of December 28, 1990 and any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party, except as expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Employee has agreed. The obligations of the Employer and the
Employee under this Agreement which by their nature may require (partial or
total) performance after the expiration of the Term or the Change-in-Control
Protective Period (including, without limitation, those under Sections 5
through 11 and Section 13 hereof) shall survive such expiration.
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17. VALIDITY
--------
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
18. COUNTERPARTS
------------
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL; ARBITRATION
-----------------------------------------------------------
After a Change in Control and prior to the end of the Change-in-Control
Protective Period, all claims by the Employee for benefits under this Agreement
shall be directed to and determined by the Committee and shall be in writing.
Any denial by the Committee of a claim for benefits under this Agreement shall
be delivered to the Employee in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Committee shall afford a reasonable opportunity to the Employee for
a review of the decision denying a claim and shall further allow the Employee
to appeal to the Committee a decision of the Committee within sixty (60) days
after notification by the Committee that the Employee's claim has been denied.
Any further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Akron, Ohio, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Notwithstanding any provision of this Agreement to the contrary,
the Employee shall be entitled to seek specific performance of the Employee's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have the meanings
indicated below:
(A) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
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(B) "Board" shall mean the Board of Directors of the Employer.
(C) "Cause" for termination by the Employer of the Employee's employment
shall mean the following:
(I) with respect to a termination as to which the Notice of Termination
is duly given prior to a Change in Control, the Employee's breach of his
covenants herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or knowingly
permitting nonfeasance of his duties in any material respect, or the
Employee's committing a felony; and
(II) with respect to a termination as to which the Notice of
Termination is duly given following a Change in Control, (i) the willful and
continued failure by the Employee to substantially perform the Employee's
duties with the Employer (other than any such failure resulting from the
Employee's incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of Termination for
Good Reason by the Employee pursuant to Section 11.1 hereof) after a written
demand for substantial performance is delivered to the Employee by the
Board, which demand specifically identifies the manner in which the Board
believes that the Employee has not substantially performed the Employee's
duties, or (ii) the willful engaging by the Employee in conduct which is
demonstrably and materially injurious to the Employer or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Employee's part shall be
deemed "willful" unless done, or omitted to be done, by the Employee not in
good faith and without reasonable belief that the Employee's act, or failure
to act, was in the best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim by the
Employer that Cause exists shall be given effect unless the Employer
establishes to the Committee by clear and convincing evidence that Cause
exists.
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(D) A "Change in Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Employer (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Employer or its affiliates other than in connection with the acquisition by
the Employer or its affiliates of a business) representing 25% or more of
either the then outstanding shares of common stock of the Employer or the
combined voting power of the Employer's then outstanding securities; or
(II) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Employer) whose
appointment or election by the Board or nomination for election by the
Employer's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved; or
(III) the stockholders of the Employer approve a merger or
consolidation of the Employer with any other corporation or approve the
issuance of voting securities of the Employer in connection with a merger or
consolidation of the Employer (or any direct or indirect subsidiary of the
Employer) pursuant to applicable stock exchange requirements, other than (i)
a merger or consolidation which would result in the voting securities of the
Employer outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee
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benefit plan of the Employer or any subsidiary of the Employer, at least 75%
of the combined voting power of the voting securities of the Employer or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Employer (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Employer (not including in the securities Beneficially
Owned by such Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition by the
Employer or its subsidiaries of a business) representing 25% or more of
either the then outstanding shares of common stock of the Employer or the
combined voting power of the Employer's then outstanding securities; or
(IV) the stockholders of the Employer approve a plan of complete
liquidation or dissolution of the Employer or an agreement for the sale or
disposition by the Employer of all or substantially all of the Employer's
assets, other than a sale or disposition by the Employer of all or
substantially all of the Employer's assets to an entity, at least 75% of the
combined voting power of the voting securities of which are owned by
stockholders in substantially the same proportions as their ownership of the
Employer immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be deemed to
have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of the Employer immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Employer immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or transaction which would
otherwise constitute a Change in Control (a "Transaction") shall not constitute
a Change in Control for purposes of this Agreement if, in connection with the
Transaction, the Employee participates as an equity investor in the acquiring
entity or any of its affiliates (the
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"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under
one or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences attributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the
Acquiror on terms and conditions substantially equivalent to those obtained in
the Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(E) "Change-in-Control Protective Period" shall mean the period from the
occurrence of a Change in Control until the later of the second anniversary of
such Change in Control or, if such Change in Control shall be caused by the
stockholder approval of a merger or consolidation described in Section
20(E)(III) hereof, the second anniversary of the consummation of such merger or
consolidation.
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(G) "Committee" shall mean (i) the individuals (not fewer than three in
number) who, immediately prior to a Potential Change in Control, constitute the
Compensation Committee of the Board, plus (ii) in the event that fewer than
three individuals are available from the group specified in clause (i) above
for any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)); provided, however,
that the maximum number of individuals constituting the Committee shall not
exceed five.
(H) "Companies" shall mean, collectively, the Employer and each corporation
which is now and hereafter shall become a subsidiary of, or a parent of, the
Employer, together with their respective successors and assigns.
21
<PAGE> 22
(I) "Continuation Pay" shall mean those payments so described in Section
8.2 hereof.
(J) "Date of Termination" shall have the meaning stated in Section 11.2
hereof.
(K) "Disability" shall be deemed the reason for the termination by the
Employer of the Employee's employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from the full-time performance of the Employee's duties with the
Employer for a period of six (6) consecutive months, the Employer shall have
given the Employee a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Employee shall not
have returned to the full-time performance of the Employee's duties.
(L) "Employee" shall mean the individual named in the first paragraph of
this Agreement.
(M) "Employer" shall mean A. Schulman, Inc. and, except in determining
under Section 20(E) hereof whether or not any Change in Control of the Employer
has occurred, any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(N) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(O) "Good Reason" for termination by the Employee of the Employee's
employment shall mean the occurrence (without the Employee's express prior
written consent) after any Change in Control, or after any Potential Change in
Control under the circumstances described in the second sentence of Section
10.1 hereof (treating all references in paragraphs (I) through (VII) below to a
"Change in Control" as references to a "Potential Change in Control"), of any
one of the following acts by the Employer, or failures by the Employer to act,
unless, in the case of any act or failure to act described in paragraph (I),
(V), (VI) or (VII) below, such act or failure to act is corrected prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(I) the assignment to the Employee of any duties inconsistent with
the Employee's status as an executive officer of the Employer or a
substantial adverse alteration in the nature or status of the
22
<PAGE> 23
Employee's responsibilities from those in effect immediately prior to the
Change in Control (other than any such alteration primarily attributable to
the fact that the Employer may no longer be a public company);
(II) a reduction by the Employer in the Employee's annual base salary
as in effect on the date hereof or as the same may be increased from time to
time except for across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in control of
the Employer;
(III) the relocation of the Employer's principal executive offices to a
location more than fifty (50) miles from the location of such offices
immediately prior to the Change in Control or the Employer's requiring the
Employee to be based anywhere other than the Employer's principal executive
offices except for required travel on the Employer's business to an extent
substantially consistent with the Employee's present business travel
obligations;
(IV) the failure by the Employer, without the Employee's consent, to
pay to the Employee any portion of the Employee's current compensation, or
to pay to the Employee any portion of an installment of deferred
compensation under any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to continue in effect any compensation
plan in which the Employee participates immediately prior to the Change in
Control which is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan and Nonqualified
Profit Sharing Plan or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the failure
by the Employer to continue the Employee's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Employee's
23
<PAGE> 24
participation relative to other participants, as existed at the time of the
Change in Control;
(VI) the failure by the Employer to continue to provide the Employee
with benefits substantially similar to those enjoyed by the Employee under
any of the Employer's pension, life insurance, medical, health and accident,
or disability plans in which the Employee was participating at the time of
the Change in Control, the taking of any action by the Employer which would
directly or indirectly materially reduce any of such benefits or deprive the
Employee of any material fringe benefit enjoyed by the Employee at the time
of the Change in Control, or the failure by the Employer to provide the
Employee with the number of paid vacation days to which the Employee is
entitled on the basis of years of service with the Employer in accordance
with the Employer's normal vacation policy in effect at the time of the
Change in Control; or
(VII) any purported termination of the Employee's employment which is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment for Good Reason
shall not be affected by the Employee's incapacity due to physical or mental
illness. The Employee's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Employer establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(P) "Notice of Termination" shall have the meaning stated in Section 11.1
hereof.
(Q) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not
24
<PAGE> 25
include (i) the Employer or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Employer or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Employer in substantially
the same proportions as their ownership of stock of the Employer.
(R) "Potential Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(1) the Employer enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(2) the Employer or any Person publicly announces an intention to take
or to consider taking actions which, if consummated, would constitute a
Change in Control;
(3) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Employer representing 15% or more of either the then
outstanding shares of common stock of the Employer or the combined voting
power of the Employer's then outstanding securities; or
(4) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.
(S) "Severance Payments" shall mean those payments described in Section
10.1 hereof.
(T) "Term" shall mean the period of time described in Section 4.1 hereof
(including any extension or continuation described therein).
25
<PAGE> 26
(U) "Termination Pay" shall mean those payments so described in Section 8.2
hereof.
(V) "Total Payments" shall mean those payments described in Section 10.2
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed (the corporate signatory by the respective officer duly authorized) as
of the day and year first above written.
/s/ Brian R. Colbow
-------------------------------------
Brian R. Colbow
A. SCHULMAN, INC.
By /s/ James H. Berick
-----------------------------------
James H. Berick, Secretary
26
<PAGE> 1
Exhibit 10.8
AMENDMENT TO
A. SCHULMAN, INC.
NONQUALIFIED PROFIT SHARING PLAN
Pursuant to the power reserved to the Board in Section 6.2 of the Nonqualified
Profit Sharing Plan (the "Plan"), the Plan is hereby amended as follows:
I. A new Article VII is added to the Plan:
"ARTICLE VII
"CHANGE IN CONTROL
"7.1 Change in Control.
-----------------
(A) Notwithstanding any provision hereof to the contrary:
(I) Upon the occurrence of a Change in Control (as
defined in Section 7.1(B) hereof), each Participant's account
balance shall immediately become one hundred percent (100%)
vested and non-forfeitable;
(II) If a Participant's employment shall be
terminated for any reason during the Change-in-Control Protective
Period (as defined in Section 7.1(E) hereof), payment of the
Participant's vested account balance shall be made in a lump sum
payment within the five-day period immediately following such
termination; and
(III) Following a Change in Control, no termination
or amendment of the Plan shall adversely affect the rights of
Participants in and to their respective vested account balances
hereunder.
(B) For purposes of this Plan, a 'Change in Control'
shall be deemed to have occurred if the event set forth in any one of
the following paragraphs shall have occurred:
(I) any Person (as defined in Section 7.1(D) hereof)
is or becomes the Beneficial Owner (as defined in Section 7.1(C)
here-
<PAGE> 2
of), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its affiliates
other than in connection with the acquisition by the Company or
its affiliates of a business) representing 25% or more of either
the then outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding
securities; or
(II) the following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved; or
(III) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger or consolidation of the
Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than
(i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any subsidiary of the
2
<PAGE> 3
Company, at least 75% of the combined voting power of the voting
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its subsidiaries
other than in connection with the acquisition by the Company or
its subsidiaries of a business) representing 25% or more of
either the then outstanding shares of common stock of the Company
or the combined voting power of the Company's then outstanding
securities; or
(IV) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 75% of the combined
voting power of the voting securities of which are owned by
stockholders in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no 'Change in Control' shall be
deemed to have occurred if there is consummated any transaction or
series of integrated transactions immediately following which the
record holders of the common stock of the Company immediately prior to
such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns
all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise
3
<PAGE> 4
constitute a Change in Control (a 'Transaction') shall not constitute a
Change in Control for purposes of this Plan if, in connection with the
Transaction, the Eligible Director participates as an equity investor
in the acquiring entity or any of its affiliates (the 'Acquiror'). For
purposes of the preceding sentence, the Eligible Director shall not be
deemed to have participated as an equity investor in the Acquiror by
virtue of (i) obtaining beneficial ownership of any equity interest in
the Acquiror as a result of the grant to the Eligible Director of an
incentive compensation award under one or more incentive plans of the
Acquiror (including, but not limited to, the conversion in connection
with the Transaction of incentive compensation awards of the Company
into incentive compensation awards of the Acquiror), on terms and
conditions substantially equivalent to those applicable to other
executives of the Company immediately prior to the Transaction, after
taking into account normal differences attributable to job
responsibilities, title and similar matters, (ii) obtaining beneficial
ownership of any equity interest in the Acquiror on terms and
conditions substantially equivalent to those obtained in the
Transaction by all other stockholders of the Company, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(C) For purposes of this Plan, 'Beneficial Owner' shall have
the meaning set forth in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended from time to time (the 'Exchange Act').
(D) For purposes of this Plan, 'Person' shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or any of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
4
<PAGE> 5
(E) For purposes of this Plan, 'Change-in-Control Protective
Period' shall mean the period from the occurrence of a Change in
Control until the later of the second anniversary of such Change in
Control or, if such Change in Control shall be caused by the
stockholder approval of a merger or consolidation described in Section
7.1(B)(III) hereof, the second anniversary of the consummation of such
merger or consolidation."
0112746.01-01S6a 5
<PAGE> 1
Exhibit 10.9
AMENDMENT TO
A. SCHULMAN, INC.
1991 STOCK INCENTIVE PLAN
Pursuant to the power reserved to the Board and the Committee in
Section 12.1 of the 1991 Stock Incentive Plan (the "Plan"), the Plan is hereby
amended as follows:
Section 2.1(e) of the Plan is amended to read, in its entirety, as
follows:
"(e) 'Change in Control' shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(i) any Person (as defined below in this Section 2.1(e))
is or becomes the Beneficial Owner (as defined below
in this Section 2.1(e)), directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates other than in connection with the
acquisition by the Company or its affiliates of a
business) representing 25% or more of either the then
outstanding shares of common stock of the Company or
the combined voting power of the Company's then
outstanding securities; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then
serving: individuals who, on the date hereof,
constitute the Board and any new director (other than
a director whose initial assumption of office is in
connection with an actual or threatened election
contest, including but not limited to a consent
solicitation, relating to the election of directors
of the Company) whose appointment or election by the
Board or nomination for election by the Company's
stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in
office who either
<PAGE> 2
were directors on the date hereof or whose
appointment, election or nomination for election was
previously so approved; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation or approve the issuance of voting
securities of the Company in connection with a merger
or consolidation of the Company (or any direct or
indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than
(i) a merger or consolidation which would result in
the voting securities of the Company outstanding
immediately prior to such merger or consolidation
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity or any parent
thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any
subsidiary of the Company, at least 75% of the
combined voting power of the voting securities of the
Company or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the
Company (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not
including in the securities Beneficially Owned by
such Person any securities acquired directly from the
Company or its subsidiaries other than in connection
with the acquisition by the Company or its
subsidiaries of a business) representing 25% or more
of either the then outstanding shares of common stock
of the Company or the combined voting power of the
Company's then outstanding securities; or
2
<PAGE> 3
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or
an agreement for the sale or disposition by the
Company of all or substantially all of the Company's
assets, other than a sale or disposition by the
Company of all or substantially all of the Company's
assets to an entity, at least 75% of the combined
voting power of the voting securities of which are
owned by stockholders in substantially the same
proportions as their ownership of the Company
immediately prior to such sale.
Notwithstanding the foregoing, no 'Change in Control' shall be
deemed to have occurred if there is consummated any transaction or
series of integrated transactions immediately following which the
record holders of the common stock of the Company immediately prior to
such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns
all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change in Control (a
'Transaction') shall not constitute a Change in Control for purposes
of this Plan if, in connection with the Transaction, the Eligible
Director participates as an equity investor in the acquiring entity or
any of its affiliates (the 'Acquiror'). For purposes of the preceding
sentence, the Eligible Director shall not be deemed to have
participated as an equity investor in the Acquiror by virtue of (i)
obtaining beneficial ownership of any equity interest in the Acquiror
as a result of the grant to the Eligible Director of an incentive
compensation award under one or more incentive plans of the Acquiror
(including, but not limited to, the conversion in connection with the
Transaction of incentive compensation awards of the Company into
incentive compensation awards of the Acquiror), on terms and
conditions substantially equivalent to those applicable to other
executives of the Company immediately prior to the Transaction,
3
<PAGE> 4
after taking into account normal differences attributable to job
responsibilities, title and similar matters, (ii) obtaining beneficial
ownership of any equity interest in the Acquiror on terms and
conditions substantially equivalent to those obtained in the
Transaction by all other stockholders of the Company, or (iii) passive
ownership of less than three percent (3%) of the stock of the
Acquiror.
'Beneficial Owner' shall have the meaning set forth in Rule 13d-3
under the Securities Exchange Act of 1934, as amended from time to time (the
'Exchange Act').
'Person' shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of
the Company."
4
<PAGE> 1
Exhibit 10.10
AMENDMENT TO
A. SCHULMAN, INC.
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Pursuant to the power reserved by the Board in Section 10.2 of the 1992
Non-Employee Directors' Stock Option Plan (the "Plan"), the Plan is hereby
amended as follows:
Section 7.8 of the Plan is amended to read, in its entirety, as
follows:
"7.8 Change in Control.
(A) Notwithstanding any provision hereof to the contrary, upon
the occurrence of a Change in Control (as defined in Section 7.8(B)
hereof), all Options which are outstanding hereunder shall become
immediately exercisable. If such Change in Control shall be caused by
the stockholder approval of (x) a dissolution or liquidation of the
Company, (y) a merger or consolidation in which the Company is not the
surviving corporation, or (z) any other capital reorganization in which
more than fifty percent (50%) of the Shares of the Company entitled to
vote are exchanged, the Company shall give to each Eligible Director,
at the time of adoption of the plan for liquidation, dissolution,
merger, consolidation or reorganization either (i) a reasonable time
thereafter within which to exercise his or her Options, prior to the
effectiveness of such liquidation, dissolution, merger, consolidation
or reorganization, at the end of which time the Options shall
terminate, or (ii) the right to exercise the Options (or substitute
Options) as to an equivalent number of shares of stock of the
corporation succeeding the Company or acquiring its business by reason
of such liquidation, dissolution, merger, consolidation or
reorganization. In any such case, appropriate adjustment as to the
number and kind of shares and the per share exercise prices shall be
made.
(B) For purposes of this Plan, a 'Change in Control' shall be
deemed to have occurred if the
<PAGE> 2
event set forth in any one of the following paragraphs shall have
occurred:
(I) any Person (as defined in Section 7.8(D) hereof)
is or becomes the Beneficial Owner (as defined in Section 7.8(C)
hereof), directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
affiliates other than in connection with the acquisition by the
Company or its affiliates of a business) representing 25% or more
of either the then outstanding shares of common stock of the
Company or the combined voting power of the Company's then
outstanding securities; or
(II) the following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any
new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved; or
(III) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger or consolidation of the
Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than
(i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by
2
<PAGE> 3
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any subsidiary of the Company, at least 75% of the combined
voting power of the voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities Beneficially Owned
by such Person any securities acquired directly from the Company
or its subsidiaries other than in connection with the acquisition
by the Company or its subsidiaries of a business) representing
25% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company's then
outstanding securities; or
(IV) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 75% of the combined
voting power of the voting securities of which are owned by
stockholders in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no 'Change in Control' shall be
deemed to have occurred if there is consummated any transaction or
series of integrated transactions immediately following which the
record holders of the common stock of the Company immediately prior to
such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns
3
<PAGE> 4
all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change in Control (a
'Transaction') shall not constitute a Change in Control for purposes of
this Plan if, in connection with the Transaction, the Eligible Director
participates as an equity investor in the acquiring entity or any of
its affiliates (the 'Acquiror'). For purposes of the preceding
sentence, the Eligible Director shall not be deemed to have
participated as an equity investor in the Acquiror by virtue of (i)
obtaining beneficial ownership of any equity interest in the Acquiror
as a result of the grant to the Eligible Director of an incentive
compensation award under one or more incentive plans of the Acquiror
(including, but not limited to, the conversion in connection with the
Transaction of incentive compensation awards of the Company into
incentive compensation awards of the Acquiror), on terms and conditions
substantially equivalent to those applicable to other executives of the
Company immediately prior to the Transaction, after taking into
account normal differences attributable to job responsibilities, title
and similar matters, (ii) obtaining beneficial ownership of any equity
interest in the Acquiror on terms and conditions substantially
equivalent to those obtained in the Transaction by all other
stockholders of the Company, or (iii) passive ownership of less than
three percent (3%) of the stock of the Acquiror.
(C) For purposes of this Plan, 'Beneficial Owner' shall have
the meaning set forth in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended from time to time (the 'Exchange Act').
(D) For purposes of this Plan, 'Person' shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or any
4
<PAGE> 5
of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company."
5
<PAGE> 1
FIRST AMENDMENT TO
------------------
CREDIT AGREEMENT ("Amendment")
----------------
WHEREAS, A. SCHULMAN, INC. (herein called the "Borrower"), SOCIETY
NATIONAL BANK, FIRST NATIONAL BANK OF OHIO, UNION BANK OF SWITZERLAND and THE
FIRST NATIONAL BANK OF CHICAGO (herein collectively called the "Banks") and
SOCIETY NATIONAL BANK, as Agent for the Banks ("Agent") entered into a certain
Credit Agreement dated as of March 13, 1995 (herein called the "Agreement"), and
WHEREAS, the Borrower, Banks and Agent have agreed to amend the
Agreement to extend the term of the credit facility.
NOW, THEREFORE, for valuable consideration received to their mutual
satisfaction, the Borrower, Banks and Agent Bank hereby agree as follows:
1. Article I of the Agreement is hereby amended by deleting the
definition of "Termination Date" in its entirety and substituting the following
in place thereof:
"'TERMINATION DATE' shall mean February 28, 2001."
2. Section 2.1A of the Agreement is hereby amended by deleting the date
"February 28, 2000" from subpart (ii) of the fourth paragraph thereof and
inserting the date "February 28, 2001" in place thereof.
3. Except as herein specifically amended, directly or by reference, all
of the terms and conditions set forth in the Agreement are confirmed and
ratified and shall remain in full force and effect. This Amendment shall be
construed in accordance with the laws of the State of Ohio, without regard to
principles of conflicts of laws.
4. Borrower hereby represents and warrants to Banks and Agent that (a)
Borrower has the legal power and authority to execute and deliver this
Amendment; (b) the officials executing this Amendment have been duly authorized
to execute and deliver the same and bind Borrower with respect to the
provisions hereof; (c) the execution and delivery hereof by Borrower and the
performance and observance by Borrower of the provisions hereof do not violate
or conflict with the organizational agreements of Borrower or any law
applicable to Borrower or result in a breach of any provisions of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrower; and (d) this Amendment constitutes a
valid and binding obligation upon Borrower in every respect.
-1-
<PAGE> 2
IN WITNESS WHEREOF, the Borrower, the Banks and the Agent have caused
this Amendment to be executed by their duly authorized officers as of the 26
day of February, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Address: 3550 West Market Street A. SCHULMAN, INC.
Akron, Ohio 44333
By: /s/ R.A. Stefanko
----------------------------
Title: Executive Vice President
-------------------------
Address: 127 Public Square SOCIETY NATIONAL BANK,
Cleveland, Ohio, 44114 individually and as Agent
By: /s/ Frank J Jancar
----------------------------
Title: Vice President
-------------------------
Address: 106 South Main Street FIRST NATIONAL BANK OF OHIO
Akron, Ohio 44308
By: /s/ Cathy J Albaugh
----------------------------
Title: Vice President
-------------------------
Address: 30 South Wacker Drive UNION BANK OF SWITZERLAND
Chicago, Illinois 60606 By: /s/ Steven M. Dadmun
----------------------------
Title: Vice President
-------------------------
By: /s/ David E. Collignon
----------------------------
Title: Assistant Vice President
-------------------------
Address: One First National Plaza THE FIRST BATIONAL BANK OF CHICAGO
Suite 0634, 1-10
Chicago, Illinois 60670 By: /s/ Marguerite C. Canestraro
----------------------------
Attention: Ernest M. Misora Title: Vice President
-------------------------
</TABLE>
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of Feb. 29, 1996 and Aug. 31, 1995 and the
statement of consolidated income for the three months ended Feb. 29, 1996 and
Feb. 28, 1995 and for the six months ended Feb. 29, 1996 and Feb. 28, 1995 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000087565
<NAME> A. SCHULMAN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 70,929
<SECURITIES> 66,789
<RECEIVABLES> 156,197
<ALLOWANCES> 5,490
<INVENTORY> 164,515
<CURRENT-ASSETS> 469,961
<PP&E> 290,896
<DEPRECIATION> 150,201
<TOTAL-ASSETS> 625,643
<CURRENT-LIABILITIES> 117,943
<BONDS> 57,075
<COMMON> 38,032
0
1,071
<OTHER-SE> 370,721
<TOTAL-LIABILITY-AND-EQUITY> 625,643
<SALES> 483,166
<TOTAL-REVENUES> 486,336
<CGS> 413,568
<TOTAL-COSTS> 459,350
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,601
<INCOME-PRETAX> 26,986
<INCOME-TAX> 10,900
<INCOME-CONTINUING> 16,086
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,086
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
