exv10w2



 





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



 









 







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



 









 







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



 









 







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.



 









 





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



 









 







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.


 









 











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.



 









 





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.




 









 






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



 









 







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.



 









 





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	%