Exhibit 10.2
WELLMAN, INC.
Fifth Amended and Restated
Management Incentive Compensation Plan for the Executive Group
ARTICLE I NAME
1.1 The Plan shall be known as the “Wellman, Inc. Management Incentive
Compensation Plan for the Executive Group.”
ARTICLE II STATEMENT OF PURPOSE
2.1 The purpose of the Plan is to provide a system of incentive compensation
that will promote the maximization of shareholder value over the long-term. In
order to align management incentives with shareholder interests, this Plan will
tie incentive compensation to (i) an EBITDA Return and (ii) certain performance
goals. The EBITDA Return and the performance goals are stated in Exhibits A & B
respectively. Both of these are designed to reward management for taking
appropriate actions to increase shareholder value.
ARTICLE III DEFINITIONS
3.1 Plan Year means the fiscal year of the Company which is the calendar year.
3.2 Effective Date means (a) January 1, 1992 with respect to the original Plan,
(b) January 1, 1999 with respect to the amended and restated Plan, and
(c) January 1, 2001 with respect to the second amended and restated Plan,
(d) January 1, 2005 with respect to the third amended and restated Plan,
(e) July 1, 2007 with respect to the fourth amended and restated Plan and (f)
October 1, 2007 with respect to the fifth amended and restated plan.
3.3 Committee means the Compensation Committee of the Board of Directors of
Wellman, Inc. or any successor committee.
3.4 Cause means, when used with respect to the termination of the employment of
the Executive by the Company, termination due to (a) an act or acts of personal
dishonesty taken by the Executive and intended to result in substantial personal
enrichment of the Executive at the expense of the Company; (b) the Executive’s
continued failure to substantially perform his employment duties (other than any
such failure resulting from the Executive’s incapacity due to physical or mental
illness) which are demonstrably willful and deliberate on the Executive’s part
and which are not remedied in a reasonable period of time after receipt of
written notice from the Company; or (c) conviction of, or a plea of guilty or no
contest by, the Executive to a crime that constitutes a felony involving moral

 

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turpitude. No act or failure to act on the part of the Executive shall be
considered “willful” unless it is done, or omitted to be done, by the Executive
in bad faith or without reasonable belief that the Executive’s action or
omission was in the best interests of the Company.
3.5 Change of Control means:
(i) The acquisition (whether by tender offer, exchange offer or other business
combinations or by the purchase of shares or other securities, and whether in a
single transaction or multiple transactions), by any Person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the “Company Voting Securities”), provided,
however, that any acquisition by the Company or its subsidiaries, or any
employee benefit plan (or related trust) of the Company or its subsidiaries, or
any corporation with respect to which, following such acquisition, more than 50%
of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, shall not constitute a Change of Control and provided further, however, that
for the purposes of this Agreement the Convertible Preferred Stock shall be
considered Company Voting Securities based on the equivalent number of common
shares that could be voted at that time; or
(ii) Individuals who, as of January 1, 2007, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to January 1,
2007 who is elected by the Company’s shareholders or was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the

 

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directors of the Board (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(iii) Approval by the stockholders of the Company of (x) a reorganization,
merger or consolidation, in each case, with respect to which all or
substantially all of the Persons who were the respective beneficial owners of
the Outstanding Company Common Stock and Company Voting Securities immediately
prior to such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger or
consolidation, or (y) a complete liquidation or dissolution of the Company, or
(z) the sale or other disposition of all or substantially all of the assets of
the Company in one transaction or series of related transactions.
(iv) Anything in this Agreement to the contrary notwithstanding, if an event
that would, but for this paragraph, constitute a Change of Control results from
or arises out of a purchase or other acquisition of the Company, directly or
indirectly, by a Person in which the Executive has a direct or indirect equity
interest, such event shall not constitute a Change of Control; provided,
however, that the limitation contained in this sentence shall not apply to any
direct or indirect equity interest in a Person (1) which equity interest is part
of a class of equity interests which are publicly traded on any national
securities exchange or other market system, (2) received by the Executive,
without the Executive’s concurrence or consent, as a result of a purchase or
other acquisition of the Company by such corporation or other entity, or
(3) received by the Executive, without the Executive’s concurrence or consent,
in connection with a purchase or other acquisition of the Company by such Person
in respect of any stock options or performance awards granted to the Executive
by the Company.
3.6 Company means Wellman, Inc., a Delaware corporation.

3.7   Additional Definitions, specifically related to the computation of the
EBITA Return are in Exhibit C.

ARTICLE IV PLAN ADMINISTRATION
4.1 The Plan shall be administered by the Committee which shall have exclusive
and absolute authority and discretion to interpret the Plan, to establish and
modify rules for the administration of the Plan, to impose such conditions and
restrictions as it determines appropriate with respect to the Plan and to take
such other actions and make such other

 

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determinations as it may deem necessary or advisable for the implementation and
administration of the Plan. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the participants, the Company and all other interested persons. The
Committee may delegate certain responsibilities to the Chief Executive Officer
or Chief Financial Officer as the Committee so designates. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan.
4.2 This Plan may be amended, suspended or terminated any time at the sole
discretion of the Board of Directors of Wellman, Inc., provided, however, that
no such change in the Plan shall be effective to eliminate or diminish the
distribution of any award earned by a Plan participant before the date of such
amendment, suspension or termination. Notice of any such amendment, suspension
or termination shall be given promptly to each Plan participant.
ARTICLE V PARTICIPATION
5.1 The participants in the Plan consist of those employees who are executives
identified by the Committee.
ARTICLE VI DESCRIPTION OF PLAN OPERATION
6.1 A target percentage will be assigned to each Plan participant by the
Committee annually (the “target percentage”). The target percentage will be the
percentage of salary a Plan participant will be eligible to earn in bonus if he
achieves (i) corporate performance goals measured by an EBITDA return on assets
and (ii) performance goals. These targets will be determined in the sole
discretion of the Committee. The targeted bonus percentages for the CEO and
other positions that may be named executive officers are listed in Exhibit D.
The amount of the bonus payable hereunder to each Plan participant will be
calculated annually in 2007 and quarterly in 2008 and the Committee
determination of the Compensation Committee will be final.
Bonuses hereunder will be calculated annually in 2007 and quarterly in 2008.
Bonuses for 2007 will be paid on or before March 15, 2008 and bonus thereafter
will be paid within 5 days of the filing of the Form 10-Q or 10-K for that
quarter as applicable.
ARTICLE VII CHANGE IN STATUS DURING THE PLAN YEAR
7.1 Disability means that the Executive has been unable, for the period
specified in the Company’s disability plan for senior executives, but not less
than a period of 180 consecutive days, to perform the Executive’s duties under
this Agreement, as a result of physical or mental illness or injury. A
participant shall receive a pro rata bonus based on the number of full months
worked for the year in which the disability started. The payment shall be made
at the regular time for making bonus payments.

 

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7.2 Death. A participant’s beneficiary (as designated for this plan or if not
specifically designated for this plan, the beneficiary(ies) designated for the
corporate life insurance program) shall receive a pro rata bonus based on the
number of full months worked for the Plan Year in which they die. The payment
will be made at the regular time for making bonus payments.
7.3 Retirement. A participant who retires from the Company upon or after
reaching age 55 shall receive a pro rata bonus based on the number of full
months worked for the Plan Year in which he/she retires. The payment will be
made at the regular time for making bonus payments.
7.4 Resignation or Termination for Cause. Termination of employment for Cause or
voluntary termination by a participant results in the forfeiture of any award
for the Plan Year in which employment terminates.
7.5 Termination without Cause. A participant who is terminated for reasons other
than those described above will receive a pro rata portion of that Plan Year’s
award. The payment will be made at the regular time for making bonus payments or
as mutually agreed by the Committee and the terminated participant.
7.6 No Guarantee. Participation in the Plan provides no guarantee that a bonus
under the Plan will be paid in any Plan Year. Similarly, the payment of a bonus
under the Plan in one Plan Year or selection as a participant is no guarantee
that a bonus under the Plan will be paid in any subsequent Plan Year.
ARTICLE VIII GENERAL PROVISIONS
8.1 Withholding of Taxes. The Company shall have the right to withhold the
amount of taxes which, in the determination of the Company, are required to be
withheld under law with respect to any amount due or paid under the Plan.
8.2 Expenses. All expenses and costs in connection with the adoption and
administration of the Plan shall be borne by the Company.
8.3 No Prior Right or Offer. Except and until expressly granted pursuant to the
Plan, nothing in the Plan shall be deemed to give any employee any contractual
or other right to participate in the benefits of the Plan.
8.4 Disputed Claims for Benefits. In the event a participant (a “claimant”) has
a dispute with respect to any of the benefits provided hereunder, the claimant
shall submit evidence satisfactory to the Committee of facts establishing his
entitlement to a payment under the Plan. Any claim with respect to any of the
benefits provided under the Plan shall be made in writing within ninety (90)
days of the payment date. Failure by the claimant to submit his or her claim
within such ninety (90) day period

 

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shall bar the claimant from any claim for benefits under the Plan. In reaching
its decision, the Committee shall have complete discretionary authority to
determine all questions arising in the interpretation and administration of the
Plan, to construe the terms of the Plan, including any doubtful or disputed
terms and the eligibility of a participant for benefits.
8.5 Rights Personal to Employee. Any rights provided to an employee under the
Plan shall be personal to such employee, shall not be transferable (except by
will or pursuant to the laws of descent or distribution), and shall be
exercisable, during his or her lifetime, only by such employee.
8.6 Confidentiality. Specific details of any calculations under the Plan must
remain confidential and because of the individuality of the awards, participants
should not share information with each other.
8.7 Wellman, Inc. Profit Sharing Plan or Other Plans. Participants in the
Wellman, Inc. Management Incentive Compensation Plan are not eligible to
participate in the Wellman, Inc. Bonus or Profit Sharing Plan.
8.8 Change of Control. Upon any Change of Control, unless the Committee in its
sole discretion determines otherwise prior to the Change of Control, the
benefits of the Plan will be paid to all participants within 45 days of the
Change of Control date. Plan payments will be based on the full Plan Year’s
forecasted results as defined in the most recent financial forecast presented to
the Board prior to the Change of Control date using the most recent annual base
salary of each participant.
8.9 No Continued Employment. Neither the establishment of the Plan, the
assignment of targets nor the grant of an award hereunder shall be deemed to
constitute an express or implied contract of employment for any period of time
or in any way abridge the rights of the Company to determine the terms and
conditions of employment or to terminate the employment of any employee with or
without cause at any time.
8.10 No Vested Rights. Except as otherwise provided herein, no employee or other
person shall have any claim or right (legal, equitable, or otherwise) to any
award, allocation, or distribution and no officer or employee of the Company or
any other person shall have any authority to make representations or agreements
to the contrary. No interest conferred herein to a participant shall be
assignable or subject to claim by a participant’s creditors.
8.11 Not Part of Other Benefits. The benefits provided in this Plan shall not be
deemed a part of any other benefit provided by the Company to its employees. The
Company assumes no obligation to Plan participants except as specified herein.
This is a complete statement of the terms and conditions of the Plan.

 

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Exhibit A –
Payout Percentages Based on EBITDA Return

          EBITDA         Payout   Return   Percentage
11.0% or less
    0 %
11.7%
    5 %
13.5%
    8 %
14.6%
    15 %
15.8%
    40 %
17.0%
    100 %
18.1%
    140 %
19.3%
    175 %
20.5%
    200 %
21.7%
    225 %
22.8%
    245 %

Payout Percentages for Performance Goals
The amounts an individual can earn based on achieving performance goals are
between 0% and 245% of the targeted bonus relating to performance goals.
Performance goals have a minimum, a target and a maximum objective. If all the
maximum performance goals are achieved or exceeded, an individual will earn 245%
of their targeted bonus based on performance goals. If all of the targeted
performance goals are achieved, an individual will earn 100% of their targeted
bonus based on performance goals. If all of the targeted performance goals are
at or below the minimum levels specified, an individual will not earn any bonus
for their performance goals. Results between these levels will be determined
proportionally based on the table — Payout Percentage Based on EBITDA Return.
The payout percentage determines the amount of the incentive payment that is
based on the EBITDA return (as opposed to the performance portion). The portion
of the incentive payment that is based on the EBITDA return is computed by
multiplying the executives salary times the Target Award Percentage (See
Exhibit D) times the allocation of the target award to the EBITDA return portion
(see Exhibit D) times the payout percentage above.

 

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Exhibit B
Performance Goals
2007

          Goal   Weighting
Safety Targets based on OSHA ratings
    15.0 %
Sales Volume Targets for PET resin
    7.5 %
Sales Volume Targets for polyester staple fiber
    7.5 %
Operational and SG&A spending (non-plant)
    15.0 %
Direct Plant Cash Spending — Fibers
    7.5 %
Direct Plant Cash Spending — Resins
    7.5 %
Customer Satisfaction
    15.0 %
Debt Reduction
    25.0 %
 
     
 
    100.0 %
 
     

2008

          Goal   Weighting
Safety Targets based on OSHA ratings
    15.0 %
Sales Volume Targets for PET resin
    7.5 %
Sales Volume Targets for polyester staple fiber
    7.5 %
Operational and SG&A spending (non-plant)
    15.0 %
Direct Plant Cash Spending
    15.0 %
Customer Satisfaction
    15.0 %
Working Capital Target(s)
    25.0 %
 
     
 
    100.0 %
 
     

The specific details of the Performance Goals are established annually by the
Compensation Committee.

 

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Exhibit C
Definitions
Accounts Payable are the Accounts Payable reported on the balance sheet for the
applicable period in the Company’s Public Filings
Accrued Liabilities are the Accrued Liabilities reported on the balance sheet
for the applicable period in the Company’s Public Filings
Adjusted EBITDA is the Gross Profit less SG&A Expense plus D&A plus Incentive
Compensation.
Average Net Assets are the Net Assets for December 31st of the previous fiscal
year plus the Net Assets at the end of each fiscal period in the current year
divided by thirteen.
Bonus Plan is a plan that provides incentive compensation to all employees that
are not participants in the MIP or similar plans.
Cash is the cash reported on the balance sheet for the applicable period in the
Company’s Public Filings.
CIP is construction in progress reported on the balance sheet for the applicable
period in the Company’s Public Filings.
Current Assets are the current assets reported on the balance sheet for the
applicable period in the Company’s Public Filings.
D&A is the depreciation and amortization reported on the statement of cash flows
for the applicable period in the Company’s public filings but only to the extent
is reduces Gross Profit or increases SG&A Expense.
EBITDA Return is a percentage which is calculated by dividing Adjusted EBITDA
for a fiscal year divided by the Average Net Assets.
Environmental Reserves are the estimated future liabilities that are recorded on
the balance sheet for the applicable period in the Company’s Pubic Filings.
Executive Officers are the officers designated as executive officers in the
Company’s most recently filed Form 10-K.
Gross Profit is the Gross Profit reported on the income statement for the
applicable period in the Company’s Public Filings.
Idle Assets are any property plant and equipment that has not been utilized for
28 consecutive days on the last day of each Fiscal Period

 

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Incentive Compensation is the sum of the any amounts reflected as an expense
reducing gross profit or increasing SG&A expenses relating to incentive
compensation earned in the MIP and the Bonus Plan and the Profit Sharing Plan.
Long Term Receivables are any amounts due from either current or former
customers that are included in Other Assets as reported in the Company’s Public
Filings.
MIP is a plan that provides incentive compensation to senior management
including the Executive Officers that is accrued pursuant to the MIP or similar
plan.
Net Assets are the Current Assets less Cash plus Net PP&E less CIP less Idle
Assets plus the Prepaid Raw Material Contract plus Long Term Receivables less
Accounts Payable less Accrued Liabilities less Environmental Reserves.
Net PP&E is the Property Plant and Equipment less the related accumulated
depreciation reported on the balance sheet for the applicable period in the
Company’s Public Filings.
Prepaid Raw Material Contract is the amount related to a prepayment for a raw
material contract that are included in Other Current Asset and Other Assets
reduced by the related amortization, all as reported in the Company’s Public
Filings.
Profit Sharing Plan is the plan that provides incentive compensation to all
exempt employees that are not participants in the MIP, Wellman Bonus Plan or
similar plans.
Public Filings are the applicable Form 10-K or 10-Q that is initially filed with
the SEC.
SG&A Expense is the selling, general and administrative expense reported on the
income statement for the applicable period in the Company’s Public Filings.

 

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Exhibit D
Targeted Award Percentages of Named Executive Officers

         
Chief Executive Officer
    65 %
Chief Financial Officer, Chief Accounting Officer, Vice President of
Manufacturing, Vice President of Business Operations, Vice President of Sales,
Vice President of Strategic Planning and Raw Material Procurement, and Vice
President of Human Resources
    50 %

Allocation of Targeted Awards

                      2007   2008
EBITDA Return
    75 %     50 %
Performance Objectives
    25 %     50 %