WELLMAN, INC.
DEFERRED COMPENSATION AND RESTRICTED STOCK PLAN

Effective as of February 17, 1998,
And As Amended as of December 1, 1998 and December 31, 2002

SECTION I. PURPOSE OF THE PLAN

1.1 Purpose of the Plan. Wellman, Inc. (the "Company") has adopted a Statement
of Policy with respect to Stock Ownership of Directors and Officers (the
"Statement of Policy") to promote and create significant ownership of the
Company's Common Stock by members of the Company's Board of Directors and senior
management. The Statement of Policy is intended to promote the interests of the
Company and its stockholders by increasing the ownership of Common Stock by the
directors and senior management so that, as stockholders themselves, those
individuals will be more likely to represent the views and interests of other
stockholders and to motivate them to manage the Company for long-term growth and
profitability. This Plan has been adopted to implement and promote the Statement
of Policy and to enhance the Company's ability to attract and retain persons who
will make substantial contributions to the Company's future success.

1.2 Effective Date. The Plan is effective on February 17, 1998 (the "Effective
Date"), subject to approval and ratification by the Company's stockholders no
later than September 30, 1998, and as amended, shall be effective as of December
1, 1998 and as of December 31, 2002, and will continue in effect until
terminated by the Board. Compensation may be deferred, Restricted Stock Awards
granted and Restricted Stock may be purchased and issued under the Plan prior to
stockholder approval, subject to the condition that such compensation shall be
paid to Participants and grants and purchases shall be canceled and any shares
shall be returned to the Company by the affected participants in the event that
the stockholders have not approved the Plan by September 30, 1998.

SECTION II. DEFINITIONS

2.1 Annual Bonus means the cash portion of any Incentive Award.

2.2 Base Salary means the annual salary paid by the Company to a management
Participant for performance of his job excluding any benefits, Incentive Award,
bonuses or any component of pay other than the base amount.

2.3 Beneficiary means any person, estate or trust entitled to receive the
certificate or certificates representing shares of Common Stock upon which the
restrictions have lapsed upon the death of a Participant, including contingent
Beneficiaries.

2.4 Board means the Board of Directors of the Company.

2.5 Business Day means any day on which the New York Stock Exchange is open and
the Common Stock is traded.

2.6 Cause in the context of a termination of employment means only one or more
of the following: (i) the commission in the course of employment of any
dishonest or fraudulent act; (ii) a conviction of a felony (from which, through
lapse of time or otherwise, no successful appeal shall have been made) whether
or not committed in the course of employment; (iii) the willful refusal to carry
out reasonable instructions of the Board which has a material adverse affect
upon the Company or any of its subsidiaries; and (iv) the willful disclosure of
any trade secrets or material confidential corporate information to persons not
authorized to know same.

2.7 Change in Control shall be deemed to have occurred when (i) any "person" or
"group" (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than
the Company, any of its subsidiaries, or any employee benefit plan of the
Company or of any subsidiary, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, the securities of
the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities; or (ii) during any period of two
consecutive years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors of the Company then
still in office who were directors of the Company at the beginning of the
period.

2.8 Committee means the Compensation Committee of the Board or any successor
committee.

2.9 Common Stock means the Common Stock, $.001 par value, of Wellman, Inc.

2.10 Company means Wellman, Inc. and its subsidiaries with domestic operations.

2.11 Disability shall have the meaning specified in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended.

2.12 Effective Date shall have the meaning set forth in subsection 1.2 hereof.

2.13 Exercise Price means (i) for Restricted Stock Awards granted after 1998,
85% of the average of the highest and lowest sales prices of the Common Stock as
reported on the New York Stock Exchange on the last day of the prior calendar
quarter and on each of the fifteen (15) days before and after that date, and
(ii) for Restricted Stock Awards granted in 1998, 85% of the average of the
highest and lowest sales prices of the Common Stock as reported on the New York
Stock Exchange on the date the Plan is approved by the stockholders and on each
of the fifteen (15) Business Days before and after that date.

2.14 Fair Market Value means the average of the highest and lowest sales prices
of the Common Stock as reported on the New York Stock Exchange on the date of
termination of employment or service of a Participant and on each of the fifteen
(15) Business Days before and after that date.

2.15 Incentive Award means an award under any incentive plan (other than a stock
option plan and this Plan) designated by the Committee that entitles the
recipient to shares of Common Stock, cash or a combination of Common Stock and
cash.

2.16 Participant means a non-employee director of the Company, any domestic
executive officer listed in the Company's most recent Annual Report on Form 10-K
or otherwise designated by the Committee, any other member of management of the
Company as designated by the Committee, or a consultant to the Company selected
in the Plan by the Committee.

2.17 Plan means this Wellman, Inc. Deferred Compensation and Restricted Stock
Plan, as it may be amended from time to time.

2.18 Restricted Period means the three year period commencing on the January 1st
of the year in which a Restricted Stock Award is granted pursuant to this Plan
during which the restrictions imposed by Section V hereof shall apply; provided,
however, that upon request of the Participant at least six months before the
expiration of the Restricted Period (including any extended Restricted Period)
and prior to termination of employment (regardless of the reason for
termination), the Restricted Period may be extended for a period of not less
than two years.

2.19 Restricted Stock means shares of Common Stock which are issued by the
Company under this Plan subject to forfeiture, restrictions on transfer and such
other restrictions as are set forth in Section V hereof or as the Committee may
determine in accordance with the provision of Section V of this Plan.

2.20 Restricted Stock Award means an award that provides for a Participant to
acquire one share of Restricted Stock as soon as administratively possible after
the date compensation is deferred which is equal to the Exercise Price.

2.21 Retirement means retirement from the Company on or after 55 years of age.

2.22 Subsidiary means a domestic corporation of which more than 50% of the total
combined voting power of all classes of stock entitled to vote is owned,
directly or indirectly, by Wellman, Inc.

Unless the context clearly requires otherwise, the masculine pronoun whenever
used shall include the feminine and neuter pronouns, the singular shall include
the plural and the plural shall include the singular.

SECTION III. GENERAL TERMS

3.1 Administration of the Plan. The Plan shall be administered by the Committee
which shall have exclusive and absolute authority and discretion to interpret
the Plan, to establish and modify rules for the administration of the Plan, to
impose such conditions and restrictions as it determines appropriate with
respect to the Plan and to take such other actions and make such other
determinations as it may deem necessary or advisable for the implementation and
administration of the Plan. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Participants, the Company and all other interested persons. No member
of the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan.

3.2 Shares Subject to the Plan. The Common Stock to be issued as Restricted
Stock under the Plan may be either authorized but unissued shares or treasury
shares. The aggregate number of shares of Common Stock which may be issued under
the Plan may not exceed one million (1,000,000) shares, subject, however, to the
adjustments provided in subsection 3.3 in the event of stock splits, stock
dividends, exchanges or shares or the like occurring after the Effective Date.
No Restricted Stock may be issued under the Plan which would cause such maximum
limit to be exceeded.

3.3 Adjustments. In the event of any stock dividend, stock split, combination or
exchange of shares, merger, consolidation, spin-off or other distribution (other
than normal cash dividend) of the Company assets to stockholders, or any other
change affecting shares or the Company's capitalization, such adjustments as the
Committee in its discretion may deem appropriate to reflect such change or to
fairly preserve the intended benefits of the Plan shall be made. In addition,
any shares issued by the Company through the assumption or substitution of
outstanding stock awards or award commitments from an acquired company or other
entity shall not reduce the shares available for issuance under the Plan.

SECTION IV. DEFERRED COMPENSATION AND RESTRICTED STOCK AWARDS

4.1 Mandatory Deferred Compensation.

(a) Participants are required to defer the following amounts of compensation
earned after January 1, 1998 through December 31, 2002:

(i) Non-employee directors of the Company must defer 50% of their director's
retainer fees;

(ii) Employees who are participants in the Wellman, Inc. Management Incentive
Compensation Plan must defer payment of any amounts earned over the target
percentage defined therein; and

(iii) At the discretion of the Committee and on terms determined by the
Committee, consultants may contractually commit to defer full or partial payment
of consulting fees.

The Participants will be granted Restricted Stock Awards as follows:

(i) Non-employee directors, on January 20th of 1998 and for each year thereafter
on the last day of each calendar quarter,

(ii) Participants in the Wellman, Inc. Management Incentive Compensation Plan,
when the amount earned over the target percentage is determined; and

(iii) Consultants, as determined by the Committee.

(b) Participants are required to defer the following amounts of compensation
earned after January 1, 2003:

(i) Employers who are participants in the Wellman, Inc. Management Incentive
Compensation Plan must defer payment of any amounts earned over the target
percentage defined therein; and

(ii) At the discretion of the Committee and on the terms determined by the
Committee, consultants may contractually commit to defer full or partial payment
of consulting fees.

The Participants will be granted Restricted Stock Awards as follows:

(i) Participants in the Wellman, Inc. Management Incentive Compensation Plan,
when the amount earned over the target percentage is determined; and

(ii) Consultants, as determined by the Committee.

(c) Each employee Participant who fails to achieve his targeted stock ownership
as provided in the Statement of Policy as of December 31st of any year shall be
required to defer his entire Annual Bonus earned in such year for the next year.
The participant will be granted a Restricted Stock Award within three months
following the date he did not achieve his targeted stock ownership.

4.2 Voluntary Deferred Compensation. (a) Not later than 45 days after a
Participant first becomes a Participant in the Plan and not later than December
15 preceding the next full calendar year thereafter (i.e., December 15, 1998 for
compensation earned in 1999), the Participant may make an irrevocable election
on a form provided by the Company to defer a specified dollar amount of his Base
Salary, Annual Bonus and other cash remuneration. Participants may only defer
the following amounts:

(i) Participants who are employees may defer up to: (a) 100% of their Base
Salary for the period from April 1, 1998 to December 31, 1998 and 100% of their
Annual Bonus and any other cash remuneration earned in 1998, (ii) 50% of their
Base Salary, Annual Bonus and any other cash remuneration in 1999, 2000, 2001
and 2002, and (iii) 50% of their Annual Bonus in all future years.

(ii) Directors may defer up to 100% of their annual retainer, meeting fees and
other cash remuneration for the period from April 1, 1998 to December 31, 1998
and in 1999, 2000, 2001 and 2002.

The Participant will receive a Restricted Stock Award approximately 35 days
after his election to defer compensation for 1998 and on the last day of each
calendar quarter of any year from 1999 through 2002 for deferrals of base pay
earned during those calendar quarters and on the last calendar day of the year
in which any deferred bonus is earned.

(b) For purposes of Section 4.1 and this Section 4.2, any Participant who
receives a hardship withdrawal from the Wellman, Inc. Retirement Plan or the
Wellman, Inc. Employee Stock Ownership Plan shall be prohibited from having any
deferred compensation contributions made to this Plan and all others plans
maintained by the Company for a twelve (12) month period beginning as of the
first day of the month following receipt of the hardship withdrawal.

4.3 Termination of Directors Retirement and Deferred Compensation Plans. Subject
to the discretion of the Committee, non-employee director Participants shall
receive Restricted Stock as set forth below in satisfaction of any amounts
payable to them in connection with the termination of the Wellman, Inc.
Directors Retirement Plan and the Wellman, Inc. Directors Deferred Compensation
Plan. In the case of the Directors Retirement Plan, the number of shares of
Restricted Stock issued in exchange for the accrued benefit as of December 31,
1997 shall be equal to the accrued benefit divided by 85% of the average of the
highest and lowest sales prices of the Common Stock as reported on the New York
Stock Exchange on the date the Plan is approved by the stockholders and on each
of the fifteen (15) Business Days before and after that date. In the case of the
Directors Deferred Compensation Plan, the number of shares of Restricted Stock
issued in exchange for the accrued benefit on the date the plan is terminated
shall be equal to the number of shares of phantom stock held in the Directors
Deferred Compensation Plan on the date this Plan is approved by the
stockholders.

SECTION V. SECTION V. RIGHTS AND TERMS OF RESTRICTED STOCK

5.1 Terms of Restricted Stock

(a) Each Restricted Stock Award granted pursuant to the Plan will provide for
the exchange for the exchange of the applicable Participant's deferred
compensation for Restricted Stock within fifteen (15) months after the date of
grant. The Restricted Stock shall be issued as soon as administratively possible
after a Participant's compensation is actually deferred and exchanged for
Restricted Stock pursuant to a Restricted Stock Award. In the event a
Participant is granted a Restricted Stock Award and compensation is not actually
deferred for whatever reason, no Restricted Stock shall be issued.

(b) Each grant of a Restricted Stock Award pursuant to subsections 4.1 and 4.2
and each issuance of Restricted Stock pursuant to subsection 4.3 shall be
embodied in an agreement signed by the Participant and the Company (the
"Agreement"). The Agreement (i) shall provide that the Restricted Stock Award
and any Restricted Stock issuable thereunder or hereunder shall be subject to
the provisions of the Plan, (ii) shall provide that Participants who received
Restricted Stock Awards pursuant to subsections 4.1 (b) and 4.2 shall not be
able to sell stock (except shares acquired upon exercise of an option granted
pursuant to a stock option plan of the Company and disposed of within 30 days of
such exercise) during the period these Restricted Stock Awards are exercisable
unless they receive permission of the Committee (which will generally be granted
only if there are extenuating circumstances), and (iii) shall contain such other
provisions as the Committee may prescribe not inconsistent with the Plan.

(c) All Restricted Stock Awards granted and Restricted Stock issued pursuant to
this Plan shall be subject to the following restrictions: (i) a Participant
shall not be entitled to delivery of a certificate evidencing the shares of
Restricted Stock until the expiration or termination of the Restricted Period
and the satisfaction of any and all other conditions specified in the Agreement
applicable to such shares of Restricted Stock; (ii) none of the Restricted Stock
Awards or shares of Restricted Stock may be sold, transferred, assigned, pledged
or otherwise encumbered or disposed of during the Restricted Period and until
the satisfaction of any and all other conditions specified in the Agreement
applicable to such Restricted Stock; and (iii) any Restricted Stock Awards or
shares of Restricted Stock which are forfeited shall be returned to the Company
and all rights of the Participant with respect to such Restricted Stock Awards
or shares of Restricted Stock shall terminate without further obligation on the
part of the Company upon the occurrence of any of the events set forth below in
subsection 5.4.

 

5.2 Custody of Shares of Restricted Stock; Rights with Respect to Stock.

(a) Any certificates representing shares of Restricted Stock issued under the
Plan shall be issued in the Participant's name but shall be held by the Company
during the Restricted Period. The Company shall serve as attorney-in-fact for
the Participant during the Restricted Period with full power and authority in
the Participant's name to assign and convey to the Company any shares of
Restricted Stock held by the Company for such Participant if the Participant
forfeits the shares under the terms of the Restricted Stock. Each certificate
representing shares of Restricted Stock may bear a legend referring to the Plan
and the risk of forfeiture of the shares and stating that such shares are
nontransferable until all restrictions have been satisfied and the legend has
been removed.

(b) Upon the purchase of Restricted Stock pursuant to the Plan and the issuance
of a certificate or certificates representing such Restricted Stock, the
Participant shall thereupon be a stockholder and have all rights of a
stockholder with respect to such shares, including the right to vote and receive
all dividends or other distributions made or paid with respect to such shares;
provided, however, that such Restricted Stock and any new, additional or
difference securities the Participant may become entitled to receive with
respect to such Restricted Stock by virtue of a stock - split, dividend or other
change in the corporate or capital structure of the Company, shall be subject to
the restrictions described in subsection 5.1 hereof.

5.3 Distribution of Restricted Stock. If a Participant who receives shares of
Restricted Stock under the Plan remains in the continuous employment or service
of the Company during the entire Restricted Period and otherwise does not
forfeit such shares pursuant to subsection 5.4 hereof, all restrictions
applicable to the shares of Restricted Stock shall lapse upon expiration of the
Restricted Period, and a certificate or certificates representing the shares of
Common Stock that were granted to the Participant in the form of shares of
Restricted Stock shall be delivered to the Participant.

5.4 Forfeiture.

(a) If a Participant's service or employment is terminated before the expiration
of the Restricted Period by the Company without Cause or by reason of
Retirement, Disability or death of the Participant, the Committee shall
determine when the restrictions applicable to the shares of Restricted Stock
held by the Company for such Participant shall lapse, giving appropriate
consideration to each individual situation, provided that in no event shall the
restrictions continue longer than those in effect on the date of such
termination. On each of the respective dates, the certificate or certificates
representing the shares of Common Stock upon which the restrictions have lapsed
shall be delivered to the Participant (or in the event of the Participant's
death, to his Beneficiary).

(b) If a Participant's service or employment is terminated before the expiration
of the Restricted Period by the Company for Cause or by the Participant at any
time, the Participant shall forfeit all Restricted Stock and shall receive a
cash payment equal to the lower of 85% of the Fair Market Value of the
Restricted Stock or the deferred compensation used to acquire the Restricted
Stock.

(c) In the case of any consultant Participant, any events of forfeiture shall be
determined by the Committee in its sole discretion (including but not limited to
confidentiality and competitive issues) and shall be set forth in the Agreement
with respect to the Restricted Stock Award granted to such consultant.

(d) If a Participant's service is terminated for any reason before a Restricted
Stock Award is exchanged for Restricted Stock, then the Participant shall
forfeit all rights under the Restricted Stock Award.

5.5 Change of Control. Upon any Change of Control, unless the Committee in its
sole discretion determines otherwise prior to the Change of Control, all
restrictions applicable to shares of Restricted Stock shall immediately lapse
and the certificate or certificates representing the shares of Common Stock that
were granted to the Participants in the form of shares of Restricted Stock shall
be delivered to the Participants. In addition, each Participant shall have the
right to deliver to the Company cash and receive unrestricted Common Stock for
any unexchanged Restricted Stock Award.

5.6 Waiver of Restrictions. The Committee, in its sole discretion, may at any
time waive any or all restrictions with respect to any Restricted Stock Award or
shares of Restricted Stock.

SECTION VI. MISCELLANEOUS

6.1 Termination and Amendment. The Board at any time may amend or terminate the
Plan. Notwithstanding any expiration or termination of the Plan, unless
otherwise determined by the Committee, the provisions relating to Restricted
Stock Awards and Restricted Stock contained in Sections II, III, IV, V and VI
shall continue to apply with respect to all Restricted Stock Awards or shares of
Restricted Stock outstanding as of the date of expiration or termination.

6.2 Withholding. Each Participant shall pay to the Company any amount necessary
to satisfy applicable federal, state or local tax withholding requirements
attributable to the grant of a Restricted Stock Award, the issuance of
Restricted Stock under the Plan, or upon the vesting of such Restricted Stock,
promptly upon notification of the amount due. If these amounts are not paid when
requested, then at the election of the Committee, these amounts may be withheld
from the shares of Common Stock that otherwise would be distributed to such
Participant pursuant to the Plant.

6.3 Legal and Other Requirements. The grant of Restricted Stock Awards and the
distribution of shares of Restricted Stock shall be subject to the condition
that if at any time the Company determines in its discretion that the
satisfaction of withholding tax or other tax liabilities, or the listing,
registration or qualification of any shares of Common Stock upon any securities
exchange or under any federal or state law, or the consent or approval of any
regulatory body, is necessary or desirable as a condition of, or in connection
with such grant or distribution, then in any such event, such grant or
distribution shall not be effective unless such liabilities have been satisfied
or such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company.

6.4 Choice of Law. The Plan, its validity, interpretation and administration and
the rights and obligations of all persons having an interest therein shall be
governed by and construed in accordance with the laws of the State of Delaware,
except to the extent that such laws may be preempted by federal law.

6.5 Fractional Shares. The Company shall not be required to issue or deliver any
fractional share of Restricted Stock issuable under this Plan but shall round
each issuance of shares of Restricted Stock hereunder up to the nearest whole
share.

6.6 No Employment Contract. The Plan shall not confer upon any Participant any
right to continued employment by the Company nor shall the Plan in any way
interfere with the right of the Company to terminate the employment of any
Participant at any time.

6.7 Section 83(b) Elections. A Participant who files an election with the
Internal Revenue Service to include the fair market value of any shares of
Restricted Stock in gross income during a Restricted Period shall promptly
furnish the Company with a copy of such election together with the amount of any
federal, state, local or other taxes required to be withheld (if any) to enable
the Company to claim an income tax deduction with respect to such election.