UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934 (Amendment No.     )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

A. Schulman, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3550 West Market Street
Akron, Ohio 44333

 

 

November 6, 2009

 

To Our Stockholders:

 

You are cordially invited to attend the 2009 Annual Meeting of Stockholders to be held on Thursday, December 10, 2009, at 10:00 A.M., local time, at The Hilton Inn West, 3180 West Market Street, Akron, Ohio 44333.

 

Details of the business to be conducted at the 2009 Annual Meeting of Stockholders are provided in the attached Notice of Annual Meeting and Proxy Statement. As a stockholder, you are being asked to vote on a number of important matters. First, we are asking you to elect six Directors whose terms will expire at the 2010 Annual Meeting. Information regarding each of the proposed Director nominees, as well as the other Directors who will continue in office, is located in the enclosed Proxy Statement. Each of the Director nominees is currently serving as a Director of A. Schulman, Inc. (“A. Schulman”). Second, we are asking you to ratify our selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2010. Finally, we are asking you to adopt and approve our 2009 Employee Stock Purchase Plan, which, if approved, will provide eligible employees with an opportunity to make payroll deductions to purchase shares of A. Schulman common stock at a discount. The Board of Directors recommends that you vote “FOR” each of the Director nominees, “FOR” the selection of PricewaterhouseCoopers LLP and “FOR” the approval of the 2009 Employee Stock Purchase Plan.

 

Your vote on these matters is important, regardless of the number of shares you own, and all stockholders are cordially invited to attend the 2009 Annual Meeting in person. Whether or not you plan to attend the meeting in person, it is important that your shares be represented and voted. In order to ensure your shares are represented, we urge you to execute and return the enclosed form of Proxy, or that you submit your Proxy electronically through the Internet or by telephone promptly.

 

Sincerely,

 

 

Joseph M. Gingo

Chairman, President and Chief Executive Officer

 

3550 West Market Street
Akron, Ohio 44333

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

Notice is hereby given that the Annual Meeting of Stockholders of A. Schulman, Inc. (“A. Schulman” or the “Company”) will be held at The Hilton Inn West, 3180 West Market Street, Akron, Ohio 44333, on Thursday, December 10, 2009 at 10:00 A.M., local time, for the purpose of considering and acting upon the following matters, all of which are more completely set forth in the accompanying Proxy Statement:

 

 

Stockholders of record at the close of business on October 19, 2009 are entitled to notice of and to vote at the Annual Meeting and any adjournments thereof.

 

Your Board of Directors recommends that you vote “FOR” the election of each of the Director nominees listed in the Proxy Statement under “PROPOSAL 1 — ELECTION OF DIRECTORS,” “FOR” the ratification of PricewaterhouseCoopers LLP under “PROPOSAL 2 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM” and “FOR” the approval of A. Schulman’s 2009 Employee Stock Purchase Plan under “PROPOSAL 3 — ADOPTION AND APPROVAL OF A. SCHULMAN’S 2009 EMPLOYEE STOCK PURCHASE PLAN.”

 

By order of the Board of Directors,

 

 

David C. Minc
Vice President, General Counsel and Secretary

 

Akron, Ohio

November 6, 2009

 

 

 

 

IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS

 

The Securities and Exchange Commission permits companies to send a single set of annual disclosure documents to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if the company provides advance notice and follows certain procedures. In such cases, stockholders continue to receive a separate notice of the meeting and proxy card. This “householding” process reduces the volume of duplicate information and reduces printing and mailing expenses. A. Schulman, Inc. (“A. Schulman” or the “Company”) has not instituted householding for stockholders of record; however, a limited number of brokerage firms may have instituted householding for beneficial owners of A. Schulman common stock held through such brokerage firms. If your family has multiple accounts holding shares of A. Schulman common stock, you may have already received householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of the annual disclosure documents. The broker will arrange for delivery of a separate copy of the accompanying Proxy Statement or A. Schulman’s Annual Report promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON DECEMBER 10, 2009

 

The Proxy Statement, Form 10-K for the year ended August 31, 2009 and the 2009 Annual Report to stockholders are available at http://www.proxydocs.com/shlm.

 

3550 West Market Street
Akron, Ohio 44333

 

 

PROXY STATEMENT

 

November 6, 2009

 

GENERAL INFORMATION

 

The accompanying Proxy is being solicited by the Board of Directors of A. Schulman, Inc. (“A. Schulman” or the “Company”) for use at the 2009 Annual Meeting of Stockholders to be held on December 10, 2009 at 10:00 A.M., local time, and any adjournments thereof (the “2009 Annual Meeting”). The mailing address of the principal executive offices of A. Schulman is 3550 West Market Street, Akron, Ohio 44333. To obtain directions to attend the 2009 Annual Meeting, please contact A. Schulman at (330) 666-3751. This Proxy Statement and the accompanying form of Proxy were first mailed to stockholders on or about November 6, 2009.

 

Voting Rights; Quorum

 

Stockholders of record at the close of business on October 19, 2009 will be entitled to vote at the 2009 Annual Meeting. On that date, A. Schulman had issued and outstanding 26,094,481 shares of common stock, $1.00 par value (the “Common Stock”). Each share of Common Stock is entitled to one vote on all matters properly coming before the 2009 Annual Meeting. At least 13,047,241 shares of Common Stock must be represented at the meeting in person or by Proxy in order to constitute a quorum for the transaction of business. Abstentions and shares held by a nominee for a beneficial owner and which are represented in person or by Proxy at the 2009 Annual Meeting but not voted with respect to one or more proposals, will be counted as present for purposes of establishing a quorum.

 

Methods of Voting

 

Stockholders may vote on matters that are properly presented at the 2009 Annual Meeting in four ways:

 

 

For the 2009 Annual Meeting, A. Schulman is offering registered stockholders the opportunity to vote their shares electronically through the Internet or by telephone. Instead of submitting the enclosed Proxy Card by mail, stockholders may vote by telephone or via the Internet by following the procedures described on the enclosed Proxy Card. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their voting instructions, and to confirm that stockholders’ instructions have been recorded properly. The deadline for voting through the Internet or by telephone is 11:25 P.M. Eastern Time, on December 9, 2009. If you vote through the Internet, you may incur costs associated with electronic access, such as usage charges from Internet service providers and telephone companies.

 

Stockholders holding Common Stock in “street name” should follow the voting instructions provided by the broker, bank or other organization that holds their shares. For stockholders planning to attend the 2009 Annual Meeting and vote in person, ballots will be available. If a stockholder’s shares are held in the name of their broker, bank or another stockholder of record, such stockholder must bring an account statement or a letter from the stockholder of record indicating that they were the beneficial owner of the shares on October 19, 2009.

 

Voting of Proxies; Revocation

 

Shares represented by properly executed Proxies will be voted at the 2009 Annual Meeting, and if a stockholder has specified how the shares represented thereby are to be voted, they will be voted in accordance with such specification. It is intended that shares represented by the enclosed Proxy, on which no specification has been made, will be voted: (1) “FOR” the election of A. Schulman’s six Director nominees; (2) “FOR” the ratification of the Company’s selection of PricewaterhouseCoopers LLP as its independent registered public accounting firm for fiscal 2010; and (3) “FOR” the adoption and approval of A. Schulman’s 2009 Employee Stock Purchase Plan (the “2009 ESPP”).

 

Proxies may be revoked at any time before a vote is taken or the authority granted is otherwise exercised. Revocation may be accomplished by the execution of a later dated Proxy, or a later casted Internet or telephone vote, with regard to the same shares, or by giving notice in writing to the Corporate Secretary at A. Schulman, Inc., 3550 West Market Street, Akron, Ohio 44333, or in person at the 2009 Annual Meeting. Any stockholder who attends the 2009 Annual Meeting and revokes their Proxy may vote in person. However, attendance by a stockholder at the 2009 Annual Meeting alone will not have the effect of revoking a stockholder’s validly executed Proxy.

 

Vote Required

 

The vote required to approve each of the proposals that are scheduled to be presented at the 2009 Annual Meeting is as follows:

 

Stockholder Proposals for 2010 Annual Meeting of Stockholders

 

Any stockholder who intends to present a proposal at the annual meeting in fiscal 2010 must deliver such proposal to the Corporate Secretary at A. Schulman, Inc., 3550 West Market Street, Akron, Ohio 44333:

 

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

In July 2008, the Board of Directors approved, and recommended to the stockholders that they approve, a proposal to amend A. Schulman’s Certificate of Incorporation (the “Certificate of Incorporation”) to phase out the classification of the Board of Directors and to provide for the annual election of Directors. Under the terms of the proposal, those Directors previously elected for three-year terms would complete their three-year term, while Directors nominated for re-election at the 2008 Annual Meeting of Stockholders (the “2008 Annual Meeting”) would serve a one-year term expiring at the 2009 Annual Meeting. Ultimately, at the 2008 Annual Meeting, stockholders approved the proposed declassification amendment and the Board of Directors is currently in the middle of a tiered declassification process.

 

In accordance with the provisions of the Certificate of Incorporation and the By-Laws, the Board of Directors has currently fixed the number of Directors at 11. Previously, the Board of Directors had fixed the number of Directors at 12, however, with the resignation of James S. Marlen on April 30, 2009, the Board of Directors approved the reduction of the Board to 11 Directors. Consistent with prior Board reduction actions, the Board of Directors determined that a reduction in the number of Directors was appropriate in order to more closely align A. Schulman’s Board size with its business operations. Moreover, the Board of Directors determined that with the on-going declassification of A. Schulman’s Board of Directors, stockholders’ ability to influence and nominate candidates for election to the Board would not be negatively impacted by a size reduction.

 

The following table sets forth each nominee for election as a Director and each Director whose term will continue after the 2009 Annual Meeting. Additionally, the table provides a brief statement regarding the Director nominees and the continuing Directors, including each individual’s age, principal occupation and business experience during the past five years. Proxies cannot be voted for a greater number of persons than the number of nominees named in the Proxy Statement. Unless a stockholder requests that voting of that stockholder’s Proxy be withheld for any one or more of the nominees for Director in accordance with the instructions set forth on their Proxy Card, it is presently intended that shares represented by Proxies in the enclosed form will be voted for the election of each of the six Director nominees. All nominees appearing below have consented to being named in this Proxy Statement and to serve if elected. Should any nominee subsequently decline or be unable to accept such nomination to serve as a Director, an event that the Board of Directors does not now expect, the persons voting the shares represented by Proxies solicited hereby may vote such shares for a reduced number of nominees.

 

The election of the Director nominees requires the favorable vote of a plurality of all votes cast by the holders of Common Stock at a meeting at which a quorum is present. Broker non-votes and Proxies marked “withhold authority” will not be counted toward the election of Directors or toward the election of individual nominees specified in the form of Proxy and, thus, will have no effect other than that they will be counted for establishing a quorum.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THESE NOMINEES.

The following information concerning each nominee and each Director continuing in office is based in part on information received from the respective nominees and Directors and in part from A. Schulman’s records.

 

 

 

 

On November 11, 2008, A. Schulman entered into a standstill agreement (the “2008 Standstill Agreement”) with a group of investors led by Ramius LLC (collectively, the “Ramius Group”), in order to avoid a proxy contest for the election of Directors at the 2008 Annual Meeting. Pursuant to the 2008 Standstill Agreement, A. Schulman and the Ramius Group agreed to a process for filling the vacancy created by the resignation of Dr. Peggy G. Miller on November 7, 2008. Specifically, pursuant to the terms of the 2008 Standstill Agreement, A. Schulman agreed to form a Selection Committee, consisting of independent Directors Howard R. Curd (Chair), David G. Birney and Lee D. Meyer, to identify and recommend an independent Director to fill the vacancy created by Dr. Miller. In making its recommendation, the Selection Committee considered and interviewed a number of potential candidates, including candidates suggested by A. Schulman, members of the Board and the Ramius Group. Upon the recommendation of the Selection Committee, the Board of Directors unanimously voted to appoint Dr. Irvin D. Reid as a member of A. Schulman’s Board of Directors, to serve a term expiring at the 2009 Annual Meeting. For more information regarding the 2008 Standstill Agreement and the appointment of Dr. Reid, see A. Schulman’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on January 12, 2009. Directors Michael Caporale, Jr. and Lee D. Meyer were each nominated by the Ramius Group for election to the Board at the 2007 Annual Meeting of Stockholders.

 

Directors James A. Mitarotonda, David G. Birney, Howard R. Curd, Michael A. McManus, Jr. and Stanley W. Silverman each were first appointed or nominated for election to the Board in connection with, or pursuant to a process described under, various agreements with a group of investors led by Barington Capital Group, L.P.

 

CORPORATE GOVERNANCE

 

The Board of Directors has long followed, both formally and informally, corporate governance principles designed to assure that the Board, through its membership, composition and committee structure, is able to provide informed, competent and independent oversight of A. Schulman.

 

Corporate Governance Guidelines

 

The Board of Directors has adopted Corporate Governance Guidelines for the Board of Directors (the “Corporate Governance Guidelines”). These Corporate Governance Guidelines, which are available on A. Schulman’s website at www.aschulman.com, are intended to assure that Director qualifications, committee structure and overall Board processes provide good corporate governance and independent oversight of A. Schulman’s management.

 

Director Independence

 

Under the corporate governance listing standards of the NASDAQ Stock Market, LLC (“NASDAQ”) and A. Schulman’s Corporate Governance Guidelines, a majority of the members of the Board of Directors must satisfy NASDAQ’s criteria for “independence.” The Board has determined that the Directors and nominees named below, which are all the Directors other than Mr. Gingo, are independent under applicable NASDAQ standards for the fiscal year ended August 31, 2009.

 

 

Board Committees

 

The Board of Directors has established the following standing Committees: (1) Executive Committee; (2) Audit Committee; (3) Compensation Committee; (4) Nominating and Corporate Governance Committee; and (5) Strategic Committee.

 

Executive Committee

 

The Executive Committee is authorized to act on behalf of the Board of Directors on all corporate actions for which applicable law does not require participation by the full Board. In practice, the Executive Committee acts in place of the full Board of Directors only when emergency issues or scheduling makes it difficult or impracticable to

assemble the full Board. All actions taken by the Executive Committee must be reported at the next Board meeting. The Executive Committee consists of Messrs. Gingo, Mitarotonda and Yasinsky. The Executive Committee did not hold any formal meetings during the fiscal year ended August 31, 2009.

 

Audit Committee

 

The Audit Committee operates under a written charter that reflects the corporate governance principles advocated by the Commission and the rules and listing standards of NASDAQ. The Audit Committee consists of Messrs. Novak (Chair), Caporale, Curd, Meyer, Reid and Silverman. The primary purposes of the Audit Committee are: (1) to assist the Board in fulfilling its responsibility to oversee the accounting and financial reporting processes of A. Schulman, including the quality and integrity of the Company’s financial statements and other financial information provided by A. Schulman to any governmental or regulatory body, the public or certain other users thereof; (2) to assist A. Schulman in fulfilling its compliance with legal and regulatory requirements; (3) to analyze and review the qualifications, independence and performance of, and A. Schulman’s relationship with, its independent registered public accounting firm; (4) to analyze and review the performance of A. Schulman’s systems of internal accounting and financial controls; (5) to analyze and review the effectiveness of A. Schulman’s processes of internal auditing; and (6) to assist the Board in monitoring A. Schulman’s independent registered public accounting firm in the annual independent audit of the Company’s financial statements and the effectiveness of A. Schulman’s internal control over financial reporting. The functions performed by the Audit Committee include: (i) reviewing the financial statements with management and A. Schulman’s independent registered public accounting firm before publication; (ii) reviewing with management and A. Schulman’s independent registered public accounting firm significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements; (iii) reviewing with A. Schulman’s Chief Executive Officer and Chief Financial Officer any issues pertaining to the certifications required to accompany the filing of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and any other information required to be disclosed in connection therewith; (iv) overseeing A. Schulman’s internal accounting and financial controls; (v) reviewing legal matters that may have a material impact on A. Schulman’s financial statements or the Company’s compliance policies; (vi) establishing procedures for the proper handling of complaints concerning accounting or auditing matters; (vii) considering the scope of non-audit services to be performed by A. Schulman’s independent registered public accounting firm; (viii) reviewing and approving in advance the annual audit plan and scope of work to be performed by the independent registered public accounting firm; (ix) overseeing the appointment, compensation, retention and independence of A. Schulman’s independent registered public accounting firm; (x) pre-approving all auditing services and permitted non-audit services to be performed for A. Schulman by the independent registered public accounting firm; and (xi) reviewing all related party transactions that are required to be reported under Item 404(a) of Regulation S-K. Additionally, the Audit Committee oversees A. Schulman’s program to comply with Section 404 of the Sarbanes-Oxley Act of 2002, which requires the Company to establish, maintain and assess adequate internal control structures and procedures for financial reporting.

 

NASDAQ rules require each member of the Audit Committee to be able to read and understand financial statements. A. Schulman believes that each member of the Audit Committee as constituted satisfies this requirement. Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management and A. Schulman’s independent registered public accounting firm, although each member of the Audit Committee has the authority to engage and determine funding for independent advisors as deemed necessary. Furthermore, the Audit Committee’s considerations and discussions do not assure: (1) that the audit of A. Schulman’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States); (2) that the financial statements are presented in accordance with the accounting principles generally accepted in the United States; or (3) that the Company’s independent registered public accounting firm is in fact “independent.” A more complete description of these and other Audit Committee functions is contained in the Audit Committee’s Charter, a copy of which is available on A. Schulman’s website at www.aschulman.com.

 

The Audit Committee held a total of seven meetings during the year ended August 31, 2009. The Audit Committee reviewed with PricewaterhouseCoopers LLP and management A. Schulman’s interim financial results prior to the filing of each of A. Schulman’s Quarterly Reports on Form 10-Q. The Board has determined that each of the members of the Audit Committee is independent as defined under Rule 5605(a)(2) and Rule 5605(c)(2)(A) of

the NASDAQ listing standards. The Board has also determined that the Chair of the Audit Committee, Ernest J. Novak, Jr., is an “audit committee financial expert” as defined in regulations adopted by the Commission.

 

Compensation Committee

 

The primary purpose of the Compensation Committee is to supervise and, to the extent consistent with the Corporate Governance Guidelines, exercise the powers of the Board of Directors with respect to overseeing the use of corporate assets in compensating executive officers. The Compensation Committee consists of Messrs. Yasinsky (Chair), Birney, Mitarotonda, Novak, and Silverman. The Compensation Committee has overall responsibility for executive succession planning (except for the Chief Executive Officer, which is the responsibility of the Nominating and Corporate Governance Committee), management development and approving and evaluating the incentive compensation plans, policies and programs of A. Schulman. As set forth in the Compensation Committee’s charter, the functions to be performed by the Compensation Committee include: (1) setting the salary and other compensation of the Chief Executive Officer and the other executive officers of A. Schulman; (2) reviewing incentive compensation pools for A. Schulman prior to the annual determination of individual cash and equity-based incentive awards; (3) approving all employment, change-in-control and severance agreements, as well as all annuity contracts and benefit or perquisite plans or programs (other than broad-based employee plans or programs), which are proposed for executive officers and certain managers; (4) periodically reviewing A. Schulman’s compensation programs and policies to align them with the Company’s annual and long-term goals and the interests of the stockholders; and (5) administering, implementing and interpreting A. Schulman’s long-term incentive plans, including stock option, restricted stock, stock appreciation right, performance incentives, and similar plans and arrangements. The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to one or more members of the Committee; provided, however, that such members must conduct business in accordance with the Compensation Committee Charter. In addition, the Compensation Committee may delegate to the Chief Executive Officer, or another executive designee, the authority to approve salary and other compensation for employees below the executive officer level in accordance with overall pools, policy guidelines and limits approved by the Committee. Pursuant to its charter, the Compensation Committee has the authority to retain special counsel, compensation consultants and other experts, as it deems appropriate, to carry out its functions and to approve the retention terms for any such counsel, consultants or experts. As permitted by the Compensation Committee Charter, the Compensation Committee retained Towers Perrin, Inc. (“Towers Perrin”) as its outside compensation consultant for fiscal 2009, to advise the Committee with respect to best practices and competitive trends in the area of executive compensation, as well as to provide guidance to the Committee in its evaluation of the compensation recommendations submitted by management. During fiscal 2009, the Compensation Committee determined the scope of work to be performed by Towers Perrin and the Committee has the sole authority to retain and terminate its outside compensation consultant. A more complete description of these and other Compensation Committee functions is contained in the Compensation Committee’s Charter, which is available on A. Schulman’s website at www.aschulman.com and in the Compensation Discussion and Analysis section of this Proxy Statement beginning on page 14. The Compensation Committee held seven meetings during the fiscal year ended August 31, 2009. The Board has determined that each of the members of the Compensation Committee is independent as defined under Rule 5605(a)(2) of the NASDAQ listing standards.

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of the Compensation Committee is, or has been, an employee or officer of A. Schulman. There are no interlocking relationships between A. Schulman and other entities that might affect the determination of the compensation of the Company’s executive officers.

 

Nominating and Corporate Governance Committee

 

The primary purposes of the Nominating and Corporate Governance Committee are: (1) to identify individuals qualified to become Directors; (2) to recommend to the Board the candidates for election by stockholders or appointment by the Board to fill a vacancy; (3) to recommend to the Board the composition and chairs of Board committees; (4) to develop and recommend to the Board guidelines for effective corporate governance; and (5) to lead an annual review of the performance of the Board and each of its committees. The Nominating and Corporate Governance Committee consists of Messrs. Birney (Chair), Caporale, McManus and Reid. A more complete description of these and other

Nominating and Corporate Governance Committee functions is contained in the Nominating and Corporate Governance Committee’s Charter, which is available on A. Schulman’s website at www.aschulman.com.

 

In its role as the nominating body for the Board of Directors, the Nominating and Corporate Governance Committee reviews the credentials of potential Director candidates (including potential candidates recommended by stockholders), conducts interviews and makes formal recommendations to the Board for the annual election or interim appointment of Directors. In making its recommendations, the Nominating and Corporate Governance Committee considers a variety of factors, including whether the individuals have demonstrated achievements in business, education or public service. In addition, the Nominating and Corporate Governance Committee considers whether candidates for Director possess the requisite intelligence, education and experience to make a significant contribution to the membership of the Board of Directors and bring a range of skills, diverse perspectives and backgrounds to the deliberations of the Board. The Board of Directors Candidate Guidelines are attached as Exhibit A to the Corporate Governance Guidelines, a copy of which is available on A. Schulman’s website at www.aschulman.com. The Nominating and Corporate Governance Committee also considers whether candidates possess the highest ethical standards and a strong sense of professionalism, are prepared to serve the interests of all stockholders and are able to make themselves available to the Board of Directors in the fulfillment of their duties. For those Director candidates who are also employees of A. Schulman, the Nominating and Corporate Governance Committee considers members of the executive management of the Company who have or are in the position to have a broad base of information about A. Schulman and its business. The Nominating and Corporate Governance Committee has in the past engaged a professional search firm (to which it paid a fee) to assist in identifying and evaluating potential nominees and may do so again in the future.

 

The Nominating and Corporate Governance Committee will consider recommendations for nomination to stand for election as Director those persons who are recommended to it in writing by any stockholder in accordance with the procedures for Stockholders to Recommend Candidates for Directors (which are available on A. Schulman’s website at www.aschulman.com). Any stockholder wishing to recommend an individual to be considered by the Nominating and Corporate Governance Committee as a nominee for election as a Director should send a signed letter of recommendation to the following address: A. Schulman, Inc., 3550 West Market Street, Akron, Ohio 44333, Attention: Chair of the Nominating and Corporate Governance Committee, c/o Corporate Secretary. Recommendation letters must state the reasons for the recommendation and contain the full name and address of each proposed nominee, as well as a brief biographical history setting forth past and present directorships, employments, occupations and civic activities. Any such recommendation should be accompanied by a written statement from the proposed nominee consenting to be named as a candidate and, if nominated and elected, consenting to serve as a Director. A. Schulman may also require a candidate to furnish additional information regarding his or her eligibility and qualifications. The Nominating and Corporate Governance Committee does not intend to evaluate candidates proposed by stockholders differently than it evaluates candidates that are suggested by Board members, executive officers or other sources.

 

The Nominating and Corporate Governance Committee held three meetings during the fiscal year ended August 31, 2009. The Board has determined that each of the members of the Nominating and Corporate Governance Committee is independent as defined under Rule 5605(a)(2) of the NASDAQ listing standards.

 

Strategic Committee

 

In accordance with A. Schulman’s 2007 Standstill Agreement with the Barington Group, the Board of Directors created an ad hoc Special Committee during 2008, in order to explore strategic alternatives to maximize and improve stockholder value. Consistent with its mandate, the Special Committee held meetings throughout 2008 in order to review and evaluate the strategic options available to A. Schulman. As a result of the beneficial and productive results achieved by the Special Committee, the Board of Directors determined to create a Strategic Committee as a permanent standing committee of the Company’s Board of Directors. The primary functions of the Strategic Committee are to investigate and evaluate strategic alternatives available to A. Schulman and to work with management on long-range strategic planning and the identification of potential new business opportunities. A more complete description of these and other Strategic Committee functions is contained in the Strategic Committee Charter, which is available on A. Schulman’s website at www.aschulman.com. The Strategic Committee consists of Messrs. Curd (Chair), McManus, Meyer, Mitarotonda and Yasinsky. The Strategic Committee held 11 meetings during fiscal 2009.

 

Attendance at Meetings

 

The Board of Directors held 10 meetings during the year ended August 31, 2009. All Directors, including both incumbent Directors and Directors who served for only a portion of fiscal 2009, attended at least 75% of the aggregate of all meetings of the Board of Directors and any committees thereof on which such Director served during the year. In accordance with the Corporate Governance Guidelines, Directors are expected to attend all meetings of the Board of Directors (although it is understood that, on occasion, a Director may not be able to attend a meeting). Directors are encouraged to attend the 2009 Annual Meeting. All of the members of the Board of Directors except for Dr. Irvin D. Reid, who was not yet a member of the Board, attended the 2008 Annual Meeting held on December 18, 2008.

 

Code of Conduct

 

The Board of Directors has adopted a Global Code of Conduct applicable to A. Schulman’s officers and employees and a Directors Code of Conduct, each of which is available on the Company’s website at www.aschulman.com. To further assure compliance, A. Schulman maintains a worldwide hotline that allows employees to report confidentially any suspected violation of its Global Code of Conduct. A. Schulman intends to satisfy the disclosure requirements regarding an amendment to or a waiver from a provision of its Global Code of Conduct that applies to the Company’s executive officers by posting such information on its website at www.aschulman.com.

 

Executive Sessions

 

Executive sessions of non-management Directors are regularly held at each meeting of the Board of Directors, including meetings during the fiscal year ended August 31, 2009.

 

Stockholder Communications with the Board of Directors

 

Stockholders may send communications to the Board of Directors by mail or courier delivery addressed as follows: A. Schulman, Inc., c/o Corporate Secretary, 3550 West Market Street, Akron, Ohio 44333. In general, the Corporate Secretary will forward all such communications to the Chair of the Nominating and Corporate Governance Committee. The Committee Chair in turn determines whether the communication should be forwarded to other members of the Board and, if so, forwards them accordingly. However, for communications addressed to a particular member of the Board or the Chair of a particular Board Committee, the Secretary forwards those communications directly to the Board member so addressed.

 

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

 

The following table sets forth information as of October 19, 2009 (except as otherwise indicated by footnote) regarding the beneficial ownership of shares of Common Stock by each Director and nominee, by each Named Executive Officer, by all Directors and executive officers as a group, and by each person known to A. Schulman to own 5% or more of its Common Stock. Unless otherwise indicated, each beneficial owner has sole power to vote and dispose of the number of shares set forth in the table:

 

 

 

 

Equity Compensation Plan Information

 

A. Schulman’s 2006 Incentive Plan authorizes the Company to issue Common Stock to its employees and non-employee Directors in exchange for consideration in the form of goods or services. The 2006 Incentive Plan currently authorizes A. Schulman to issue up to 3,472,686 shares of Common Stock to participants. Awards are also currently outstanding under A. Schulman’s 1992 Non-Employee Directors’ Stock Option Plan and 2002 Equity Incentive Plan (collectively, with the 2006 Incentive Plan, the “Equity Plans”). Information, as of August 31, 2009, on outstanding awards under the Equity Plans, and information on awards available for grant under the 2006 Incentive Plan, are set forth in the table below:

 

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

The following Compensation Discussion and Analysis describes the Compensation Committee’s executive compensation philosophy, objectives and programs, and explains the basis on which fiscal year 2009 compensation determinations were made by the Compensation Committee with respect to A. Schulman’s Named Executive Officers. For purposes of this discussion, references to “we,” “our” and “us” refer to A. Schulman. For fiscal 2009, our Named Executive Officers were as follows:

 

 

Compensation Committee Governance

 

The compensation program for our Named Executive Officers is overseen by the Compensation Committee of the Board of Directors. Compensation Committee members are appointed by the Board and meet the independence and other requirements of NASDAQ and other applicable laws and regulations. As described on page 8 of this Proxy Statement, the duties of the Compensation Committee include, among other things: (1) determining base salary levels and bonuses for our Named Executive Officers; (2) approving the design and award of all other elements of our executive compensation program; (3) evaluating the performance of our Named Executive Officers; (4) executive officer succession planning; and (5) addressing other matters related to executive compensation. The Compensation Committee meets as necessary to enable it to fulfill its responsibilities. The Chair of the Compensation Committee is responsible for the leadership of the Committee, presiding over Committee meetings, making Committee assignments, reporting the Committee’s actions to our Board of Directors from time to time and, with the assistance of management, setting the agenda for Committee meetings. The members of the Compensation Committee and the Committee’s specific functions are described in further detail on page 8 of this Proxy Statement and the Compensation Committee Charter is posted at www.aschulman.com.

 

Compensation Philosophy and Objectives

 

In determining the amount and composition of executive compensation, the Compensation Committee’s goal is to provide a pay for performance compensation package that will enable us to: (1) attract and retain talented executives; (2) reward outstanding individual and corporate performance; and (3) link the interests of our executive officers to the interests of our stockholders, with the ultimate goal of improving stockholder value. The Compensation Committee’s overall pay strategy is to provide a median market compensation opportunity for our Named Executive Officers at their targeted performance levels. The Compensation Committee attempts to align executive compensation with stockholders’ interests through the use of performance-based, at-risk compensation pay for a significant portion of each Named Executive Officer’s total compensation. Additionally, the Compensation Committee seeks to achieve executive retention through the use of a balance of pay mix and long-term equity vehicles. In order to emphasize pay that is dependent on performance and aligned with stockholder interests, we have adopted the following pay strategy:

 

 

In determining actual compensation levels for our Named Executive Officers, the Compensation Committee considers all elements of the compensation program in total and also evaluates whether the individual elements of our compensation program are reflective of current market practices and our stated compensation philosophy. The Compensation Committee believes that offering performance-based, market-comparable pay opportunities to our

Named Executive Officers, bearing in mind our relative size and performance, allows us to maintain a stable, successful management team.

 

The Compensation Committee has full discretion to adjust our compensation program, or any element thereof, at any time. It has been the practice of the Compensation Committee to discuss its compensation determinations with respect to the Chief Executive Officer with the full Board of Directors and to have the full Board (other than the Chief Executive Officer) approve such decisions. At times, however, the Board of Directors may adjust certain elements of our executive compensation program outside of the Compensation Committee’s recommendations.

 

In accordance with such discretion, in the latter half of 2009, the Compensation Committee, upon review and in consultation with its outside compensation consultant Towers Perrin, determined to modify its base salary and long-term incentive positioning policies for fiscal 2010. For fiscal 2010, the Compensation Committee has determined to adopt a median base salary and long-term incentive positioning policy, with the established goal of positioning both components at the 50th percentile of peer market levels. It is the opinion of the Compensation Committee that this adjustment to its prior compensation philosophy is appropriate based upon competitive market data and observable peer group practice.

 

Compensation Consultants

 

As permitted by the Compensation Committee Charter, the Compensation Committee retained Towers Perrin as its outside compensation consultant for fiscal 2009. The Compensation Committee engaged Towers Perrin to advise the Committee with respect to best practices and competitive trends in the area of executive compensation, as well as to provide guidance to the Compensation Committee in its evaluation of the compensation recommendations submitted by management in regards to the Named Executive Officers and other key personnel. During fiscal 2009, the Compensation Committee determined the scope of work to be performed by its outside consultant, and worked with Towers Perrin to establish A. Schulman’s fiscal 2009 compensation levels and objectives. Pursuant to the Compensation Committee Charter, the Compensation Committee has the sole authority to retain and terminate its outside compensation consultant. During fiscal 2009, Towers Perrin was engaged solely as a consultant to the Compensation Committee and did not provide consulting services directly to management.

 

Compensation Committee Delegation

 

Pursuant to the Compensation Committee Charter, the Committee may delegate its authority to subcommittees or to the Chair of the Compensation Committee when it deems such delegation appropriate and in our best interests. Additionally, pursuant to its charter, the Compensation Committee may delegate to the Chief Executive Officer, or other executive designee, the authority to approve salary and other compensation for employees below the executive officer level in accordance with overall pools, policy guidelines and limits approved by the Committee. During fiscal 2009, the Compensation Committee made no subcommittee delegations.

 

Setting Executive Compensation

 

At its first two regularly scheduled meetings of each fiscal year (typically in September and October), the Compensation Committee: (1) evaluates the performance of the Chief Executive Officer for the prior fiscal year; (2) reviews the Chief Executive Officer’s evaluation of the performance of the other Named Executive Officers for the prior fiscal year; (3) determines whether our Named Executive Officers will receive bonuses for the prior fiscal year based on the achievement of performance targets and their respective individual performance; and (4) establishes the components and levels of Named Executive Officer compensation (including the performance criteria for annual performance bonuses) for the current fiscal year. In the course of its deliberations, the Compensation Committee from time to time solicits the recommendations of our Chief Executive Officer and our other executive officers on various matters relating to executive compensation. However, the Compensation Committee makes all final determinations regarding the compensation program for the Named Executive Officers and, with respect to the Chief Executive Officer, seeks ratification of its decisions by the full Board of Directors.

 

Peer Group

 

To assist the Compensation Committee in making compensation decisions, Towers Perrin provided the Compensation Committee with competitive market data comparing our executive compensation practices to those of a specific group of comparison companies and compensation surveys. The peer group used for compensation comparison purposes was generally comprised of specialty chemical companies, including both similarly sized

companies within our geographic footprint and other chemical and plastics manufacturers recognized as our broader competitors. The Compensation Committee reviews and approves the selection of companies used for compensation comparisons on an annual basis. In fiscal year 2009, the peer group consisted of the following 22 companies (the “2009 Peer Group”):

 

 

In addition to the use of peer group data, the Compensation Committee reviewed compensation survey data in order to ensure that our executive compensation program, as a whole, is competitive. For fiscal 2009, the compensation survey data consisted of U.S.-based manufacturing companies of a comparable size to our business. For fiscal 2009, the Compensation Committee’s general approach was to target executive officer pay opportunities at the median of the 2009 Peer Group and the compensation survey data.

 

Components of Executive Compensation

 

The key components of our executive compensation program, each of which is addressed separately below, are:

 

 

In determining an executive officer’s total compensation package, the Compensation Committee considers each of these key components and attempts to establish an appropriate balance between cash and non-cash compensation, and between short-term and long-term compensation. In addition, the Compensation Committee annually reviews the total compensation opportunity for our executive officers. The Compensation Committee attempts to position each executive’s total compensation opportunity near our peer market median in order to provide each executive officer with a competitive compensation opportunity and properly focus them on our long-term success. Each year, the Compensation Committee requests that its compensation consultant compare the total direct compensation (i.e., base salary + annual bonus target + estimated value of our long-term incentive grants) of our executive officers to the total compensation opportunities provided by our peer group, in order to help the Committee evaluate compensation determinations for the upcoming fiscal year. It is the opinion of the Compensation Committee that it is important to evaluate our executive compensation program vis-à-vis our peers in order to determine potential modifications based upon our compensation philosophy.

 

Base Salaries

 

Base salaries are intended to reward executive officers based upon their roles with A. Schulman and for their performance in those roles. The Compensation Committee reviews and approves each Named Executive Officer’s base salary annually. Base salaries for executive officers initially are determined by evaluating the officers’ respective levels of responsibility, prior experience and breadth of knowledge, and by taking into consideration internal equity issues and external pay practices. Determinations of base salary adjustments are driven primarily by competitive positioning and profitability, with the stated goal of maintaining executive officer salaries between the 40th and 50th percentile of market levels. For fiscal 2009, the base salary for each of our Named Executive Officers is provided in the Salary column of the Summary Compensation Table located on page 26.

 

In fiscal 2009, the Compensation Committee continued to implement its base salary positioning philosophy, attempting to position executive officer base salaries between the 40th and 50th percentile of our peer market, while simultaneously managing base salaries that exceed the peer market median back to our stated compensation range. Base salary increases granted in fiscal 2009 were either: (1) required pursuant to applicable law; or (2) were

warranted based upon outstanding personal performance. In targeting our base salary range at the 40th — 50th percentile, the Compensation Committee believes that we are able to properly motivate our executive officers and fulfill our goals of rewarding outstanding performance and achieving executive retention. It is the opinion of the Compensation Committee that by setting base salary levels at competitive rates, our executive officers are rewarded for undertaking positions of leadership and provided with an incentive to continue working for us. However, as base salary compensation is not typically subject to reduction or forfeiture based on corporate performance, the Compensation Committee believes that it should comprise only one component of our overall pay philosophy and that a majority of our executive compensation structure should be comprised of at-risk components.

 

Annual Bonuses

 

Our annual bonus program promotes our pay-for-performance philosophy by providing our Named Executive Officers with direct financial incentives in the form of annual cash bonuses based on our financial performance. Annual bonus opportunities allow us to communicate specific goals that are of primary importance during the coming year and to motivate executive officers to achieve these goals. The annual bonus program is designed to reward our Named Executive Officers for the achievement of specified corporate performance targets that the Compensation Committee believes align the interests of our Named Executive Officers with the interests of our stockholders. The Compensation Committee seeks to provide each Named Executive Officer with a median annual bonus opportunity, as compared to our peers.

 

2009 Bonus Program Modifications

 

In order to further align our annual bonus program with stockholder interests and peer group practice, the Compensation Committee, in consultation with Towers Perrin, implemented substantial revisions to our annual bonus program in fiscal 2009, which the Compensation Committee believes are more reflective of current market practices and our short- and long-term priorities. Specifically, during fiscal 2009, the Compensation Committee modified our annual bonus program as follows:

 

 

 

2009 Bonus Targets

 

In October 2008, the Board of Directors, upon the approval of the Compensation Committee, established the target bonus awards (expressed as a percentage of base salary) for each of the Named Executive Officers and established that each executive’s total bonus opportunity would be based upon the achievement of certain performance metrics. For fiscal 2009, the Board of Directors established the following target bonus opportunities for each Named Executive Officer:

 

 

In conjunction with establishing the target bonus opportunity for each Named Executive Officer, the Compensation Committee selected performance metrics for evaluating corporate performance, along with the respective weighting for each metric and the threshold, target, stretch, enhanced stretch and maximum performance goal levels. In selecting performance metrics for 2009, the Compensation Committee sought to establish corporate performance metrics that focused the Named Executive Officers on the key drivers of stockholder value and emphasized both our short- and long-term financial and strategic goals. In light of such objectives, the Compensation Committee established the following corporate performance metrics for 2009: (1) Net Income; (2) Operating Income; and (3) Days of Working Capital, excluding certain unusual, one-time in nature items. For Messrs. Gingo and DeSantis, the Compensation Committee determined that their respective annual bonus opportunities would be measured by our consolidated worldwide operations, with each performance metric receiving an equal one-third weighting. For Mr. Taylor, the Compensation Committee determined that his respective annual bonus opportunity would be based upon the performance of the Company’s consolidated worldwide operations and its Asian segment, with the following metric weighting: (1) Asian Operating Income — 49.5%; (2) Asian Days of Working Capital — 25.5%; (3) consolidated worldwide Net Income — 8.3%; (4) consolidated worldwide Operating Income — 8.3%; and (5) consolidated worldwide Days of Working Capital — 8.4%. For Messrs. Rzpeka and Belderbos, the Compensation Committee established that each executive’s annual bonus opportunity would be based upon the performance of the Company’s consolidated worldwide operations and its European segment, with the following metric weighting: (1) European Operating Income — 49.5%; (2) European Days of Working Capital — 25.5%; (3) consolidated worldwide Net Income — 8.3%; (4) consolidated worldwide Operating Income — 8.3%; and (5) consolidated worldwide Days of Working Capital — 8.4%. For all directly reporting executive officers, Mr. Gingo retained authority to adjust award payouts, based upon individual performance, up to 20% more than the calculated award amount or down to 0% of such award amount. Potential bonus awards, measured by reference to threshold, target and maximum percentages of salary for each Named Executive Officer are disclosed in the Grants Of Plan-Based Awards table located on page 27.

 

2009 Corporate Performance

 

For fiscal 2009, we utilized our budgeting model to set the performance levels for each of the performance metrics. The Compensation Committee believes that achieving the budget requires strong management performance and is deserving of a “stretch bonus,” of 125% of the targeted award. For 2009, the Compensation Committee determined that merely maintaining the 2008 level of performance would not have merited bonus compensation. As a result, the threshold performance level required for any bonus was set at 74% of the budget (which threshold level still exceeded 2008 performance) and the target was determined to be the midpoint between the threshold and the

budget. The maximum bonus level was set at 139% of the budget. The Compensation Committee believes that its targets are challenging but achievable with successful management performance.

 

2009 Performance Goals — Consolidated Worldwide (In Millions of U.S. Dollars)

 

 

2009 Performance Goals — Asia Business Segment (In Millions of U.S. Dollars)

 

 

2009 Performance Goals — European Business Segment (In Millions of U.S. Dollars⁽¹⁾)

 

 

 

 

Based upon our 2009 consolidated worldwide, Asian and European performance, Messrs. Gingo and DeSantis each received 51% of their total target bonus opportunity, while Mr. Taylor received 113% and Messrs. Rzepka and Belderbos each received 60%. The annual bonus payments made to our Named Executive Officers for fiscal year 2009 are reported in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation Column located on page 26.

 

Long-Term Incentives

 

As part of our executive compensation program, the Compensation Committee has historically made annual grants of long-term stock-based incentive awards to our Named Executive Officers (and other members of management), including grants of restricted stock, restricted stock units and performance shares. Long-term incentives are used by the Compensation Committee to: (1) balance the short-term focus of base salaries and the annual bonus program by tying equity-based rewards to performance achieved over multi-year periods; (2) ensure that each Named Executive Officer’s total compensation package includes an additional at-risk component of pay; (3) align compensation incentives with stockholder interests; and (4) provide our Named Executive Officers with long-term retention incentives. When making our annual equity-based awards to our Named Executive Officers, the Compensation Committee considers, but does not exclusively rely on any one of, the following: (i) our financial performance in the prior fiscal year; (ii) historical award data; (iii) compensation practices at peer group companies; and (iv) each Named Executive Officer’s respective individual performance, prior experience and levels of responsibility with, and contributions to, A. Schulman.

 

2009 Long-Term Incentive Program Modifications

 

During fiscal 2009, the Compensation Committee determined to restructure certain aspects of its prior long-term incentive program policies in order to place greater emphasis on overall performance by making a larger portion of each executive’s long-term incentive compensation subject to performance vesting criteria, as well as to take advantage of current taxation policies in the countries in which we operate. Specifically, during fiscal 2009, the Compensation Committee implemented the following modifications to our long-term incentive program:

 

 

 

Through consultation with Towers Perrin, the Compensation Committee believes that the modifications introduced in fiscal 2009 recalibrate our long-term incentive program to further emphasize corporate performance and are more reflective of current market practices. In addition, the Compensation Committee believes that its revised long-term incentive program provides our executive officers a meaningful opportunity to participate in the long-term performance of A. Schulman, while also taking advantage of the tax structures in place in the countries in which we conduct business.

 

Restricted Stock

 

On January 16, 2009, the Compensation Committee awarded shares of restricted stock to certain of our North American executives. Of the Named Executive Officers, Messrs. Gingo and DeSantis received awards of 22,600 and 6,200 shares of restricted stock, respectively, pursuant to the 2006 Incentive Plan. With respect to the restricted stock awarded to Messrs. Gingo and DeSantis, such shares vest ratably over time, subject to continued employment, on each of the first three anniversaries of the award grant date. During the restriction period, Messrs. Gingo and DeSantis may exercise full voting rights associated with their shares of restricted stock. In addition, during the restriction period, we will hold all dividends paid with respect to such shares of restricted stock until the restrictions on the underlying restricted stock have lapsed.

 

Restricted Stock Units

 

Pursuant to the terms of his employment agreement, the Compensation Committee awarded Mr. Gingo an award of 60,060 performance-based restricted stock units (30,030 with dividend rights) on January 16, 2009. Generally, under the 2006 Incentive Plan, restricted stock units are settled in cash in an amount equal to the fair market value of a share of our Common Stock on the applicable vesting date, multiplied by the number of restricted stock units to be settled. During the restriction period, holders of restricted stock units have no voting rights with respect to the shares of Common Stock underlying the restricted units. For those restricted stock units conferring dividend rights, we hold all dividends paid on the underlying shares of Common Stock and award such dividends with the cash settlement of underlying shares upon vesting.

 

In regards to the performance-based restricted stock units issued to Mr. Gingo, the vesting of such awards was made contingent upon our achievement of the performance criteria set forth in the 2009 Bonus Plan during fiscal 2009. With respect to each performance metric, the number of restricted stock units that could vest equaled: (1) 33.33% of the total units, multiplied by (2) the indicated percentage at the threshold, target, stretch, enhanced stretch and maximum performance levels set forth in the 2009 Bonus Plan; provided, however, that if a performance metric was not achieved or was achieved at a performance level that was less than threshold, all restricted stock units with respect to that performance metric would be forfeited. Based upon A. Schulman’s consolidated worldwide performance in fiscal 2009, Mr. Gingo received the settlement of 30,030 units, which occurred on October 26, 2009 at a price of $18.47. All performance-based restricted stock units awarded to Mr. Gingo that did not vest were forfeited.

 

Performance Shares

 

In connection with the grant of restricted stock to certain of our North American executives, the Compensation Committee also awarded performance shares to Messrs. Gingo and DeSantis, pursuant to the 2006 Incentive Plan, in the following amounts: Mr. Gingo — 86,600 shares (43,300 with dividend rights); and Mr. DeSantis — 23,800 shares (11,900 with dividend rights). Under the 2006 Incentive Plan, performance shares give the recipient the right to receive a specified number of shares of our Common Stock only if certain terms and conditions are met. Specifically, performance shares awarded to Messrs. Gingo and DeSantis may vest on January 16, 2012 based upon the following performance criteria: (1) the performance of the Common Stock relative to a group of peer companies in the S&P Special Chemicals Index, as measured by total shareholder returns from January 16, 2009 to January 16, 2012 (the “Performance Period”); and (2) whether our total shareholder returns during the Performance Period are positive or negative. All performance shares that do not vest on January 16, 2012 will be forfeited. In regards to dividend rights, we utilize two types of performance shares: (1) shares that provide the award recipient with

dividend rights during the Performance Period; and (2) shares that do not provide dividend rights with respect to the underlying shares. For those performance shares conferring dividend rights, we hold all dividends paid on the underlying shares of Common Stock and award such dividends with the underlying shares upon vesting, subject to the same risk of forfeiture.

 

Time- and Performance-Based Cash Awards

 

It has generally been the policy of the Compensation Committee to grant our European Named Executive Officers awards of time- and performance-based restricted stock units, as compared to restricted stock and performance shares, based upon certain tax treatment considerations. However, in fiscal 2009, the Compensation Committee determined to change its grants of time- and performance-based restricted stock units to time- and performance-based cash awards in order to take advantage of additional tax structure advantages in the European nations in which we conduct business operations. Consequently, in conjunction with our grant of restricted stock and performance shares to certain of our North American executives, the Compensation Committee awarded both time- and performance-based cash awards to certain of our foreign executives, including Messrs. Rzepka and Belderbos. In regards to time-based cash awards, the Compensation Committee issued awards of $106,725 and $47,766 to Messrs. Rzepka and Belderbos, respectively. Similar to awards of restricted stock, time-based cash awards vest ratably over time, subject to continued employment, on each of the first three anniversaries of the award grant date. In addition to the time-based cash awards, the Compensation Committee also approved the issuance of performance-based cash awards to Messrs. Rzepka and Belderbos, the amounts of which are set forth in the Grants of Plan-Based Awards table located on page 27 of this Proxy Statement. In regards to Messrs. Rzepka and Belderbos, the vesting of all performance-based cash awards is contingent upon the same vesting criteria as the performance shares issued to our North American executives.

 

Timing of Grants

 

The Compensation Committee generally determines equity grants at a meeting that immediately precedes our release of earnings results during the second quarter of each fiscal year. Since the information in these earnings releases has not yet been incorporated into the market price of our Common Stock, the Compensation Committee has historically set the grant date as of the fifth business day after the release of the earnings information. While this introduces some level of variability in our cost incurred in making awards and the value of the awards to our Named Executive Officers, the Compensation Committee believes that this practice helps to ensure that information in its possession when determining award grants is reflected in the grant date stock price. For future grants, the Compensation Committee will continue to adhere to its current policy of scheduling award grants at least five business days after the release of earnings information.

 

Retirement and Other Benefits

 

The retirement and benefits program component of our executive compensation program includes: (1) payment of certain perquisites and other personal benefits; (2) participation in a qualified retirement plan; and (3) participation in a non-qualified retirement plan. We also maintain other post-retirement benefit plans, such as a 401(k) plan, health care plans and life insurance benefits, that are available to certain of our U.S. employees, including certain of our Named Executive Officers, on a non-discriminatory basis. The objectives of our retirement and benefits programs are: (i) to provide the Named Executive Officers with reasonable and competitive levels of protection against contingencies, including retirement, death and disability, which could interrupt their employment and income received from us; and (ii) reward the Named Executive Officers for continued service with us.

 

Periodically, the Compensation Committee reviews how each element of our retirement and benefits program functions to achieve the Compensation Committee’s goals. At the discretion of the Compensation Committee, these programs may be modified, supplemented or removed. In general, the Compensation Committee looks at competitive market practices and the costs of each of these programs, and weighs those cost against the stated objectives for maintaining retirement and other benefits. The components of the fiscal year 2009 retirement and benefits program for the Named Executive Officers are discussed individually below.

 

Perquisites and Personal Benefits

 

During the course of fiscal 2008, we eliminated most perquisites and personal benefits that previously had been extended to our North American Named Executive Officers. Consequently, during fiscal 2009, the only personal

benefit that was provided to our North American Named Executive Officers was a mandatory physical examination to help ensure the health and welfare of our key personnel. In regards to our Asian and European Named Executive Officers, we continued to provide such executives with certain perquisites and personal benefits, which we believe are consistent with the compensation practices in the markets in which they serve. Specifically, in fiscal 2009, we continued to provide our Asian European Named Executive Officers with the payment of certain automobile, fuel and insurance costs as well as certain insurance and communication-related expenses.

 

Qualified Retirement Plan

 

We have a qualified retirement plan for certain of our North American executives (the “Retirement Plan”) pursuant to which the Board of Directors, in its discretion, may authorize the payment of contributions to our Retirement Plan Trust to be allocated among participants. The maximum annual amount that may be allocated to a participant under the Retirement Plan generally is limited to the lesser of: (1) $40,000; or (2) 100% of the participant’s compensation. Participation in the Retirement Plan is available to all of our U.S. salaried and non-represented employees (and participating subsidiaries) who are employed as of the last day of the Retirement Plan year. Benefits under the Retirement Plan vest in accordance with a specified formula that provides for partial vesting starting after two years of employment with us and full vesting after seven years of employment with us. The assets of the Retirement Plan Trust are invested and each participant’s account reflects the aggregate investment performance of the Trust assets. During fiscal 2009, we reduced by 3% amounts allocated to participants in the Retirement Plan and reallocated such amount in the form of a 3% safe harbor contribution to participants in the Company’s 401(k) plan. The amounts contributed by us to the Retirement Plan accounts for our North American Named Executive Officers for the fiscal 2009 year are reported in the Summary Compensation Table located on page 26.

 

Non-Qualified Retirement Plan

 

We also maintain a non-qualified retirement plan for certain of our North American executives (the “Non-Qualified Plan”) pursuant to which the Compensation Committee may accrue certain amounts for the benefit of plan participants in order to provide such participants with benefits not available to them under the Retirement Plan, due to certain tax-law driven compensation limitations. Benefits under the Non-Qualified Plan vest and become non-forfeitable in accordance with a specified formula that provides for partial vesting starting after two years of employment with us and full vesting after seven years of employment with us. In addition, upon a Change-in-Control (as defined in the Non-Qualified Plan), participants’ benefits under the Non-Qualified Plan become fully vested and non-forfeitable. Moreover, if a participant’s employment is terminated for any reason within two years of the occurrence of a Change-in-Control, payment of such participant’s vested account balance shall be made in a lump sum payment within five days of such termination. Amounts accrued by us under the Non-Qualified Plan for the benefit of each participant reflect the investment performance that would have been realized had a corresponding amount been invested for the benefit of such participant during such year in the Retirement Plan. The amounts accrued (excluding the assumed investment based performance earnings thereon) by us pursuant to the Non-Qualified Plan for the benefit of our North American Named Executive Officers for fiscal year 2009 are disclosed in the Summary Compensation Table located on page 26. This plan was originated and maintained in order to provide benefits to North American executives who are not able to fully participate in the Retirement Plan. The Compensation Committee believes that maintaining this plan keeps our retirement package competitive.

 

European Retirement Plans

 

We maintain defined benefit plans for certain of our foreign employees. Messrs. Taylor, Rzepka and Belderbos each participate in these defined benefit plans on the same non-discriminatory basis as other foreign employees who are participants. Additional information for these plans can be found in the Pension Benefits table located on page 33 and the accompanying narrative description.

 

Supplemental Executive Retirement Plan

 

Our Supplemental Executive Retirement Plan (the “SERP”), which the Compensation Committee administers, provides retirement benefits to two of our former executive officers who were previously named as participants by resolution of the Board of Directors. The SERP was originally adopted in 2004 after a change in tax laws reduced the benefits that we otherwise would have provided to certain of our former executive officers. No current executive

officers are active participants in the SERP and it is the current opinion of the Compensation Committee that no new SERP participants will be named.

 

Employment Agreements and Change-In-Control Arrangements

 

The Compensation Committee carefully considers the use and conditions of our employment agreements. The Compensation Committee recognizes that employment agreements containing severance and change-in-control arrangements are often necessary to attract prospective executives who forego significant compensation and opportunities at the companies they are leaving, or who face relocation expenses in order to accept employment with us. Generally, executives are not willing to accept such risks and costs without protection in the event that their employment with us is terminated due to unanticipated changes, including a change-in-control. The Compensation Committee believes that our current employment agreements serve to protect stockholder interests by assuring that we will have the continued dedication, undivided loyalty and objective advice from key executives in the event of a proposed transaction, or the threat of a transaction, which could result in a change-in-control. All of our employment agreements, however, only provide payments to an employee if his or her employment is terminated as a result of (or within a specified period after) a change-in-control, (i.e., a double trigger). The Compensation Committee does not believe that employees should receive additional compensation merely as a result of a change-in-control and believes that our employment agreements provide our executive officers with adequate protection to ensure that change-in-control offers will be evaluated in the best interest of the stockholders without fear that a transaction could cost his or her job without compensation. The Compensation Committee recognizes, however, that these employment agreements may tend to discourage a takeover attempt as a change-in-control could trigger increased compensation expense.

 

During fiscal 2009, the Compensation Committee reviewed the change-in-control elements of its outstanding employment agreements and determined to amend the employment agreements of Messrs. Gingo and DeSantis in order to re-calibrate the change-in-control elements applicable to each executive. In regards to Mr. Gingo, A. Schulman and Mr. Gingo agreed to expand the non-competition/non-solicitation provisions within his employment agreement for a period of one year under all possible termination scenarios. As part of this non-competition/non-solicitation expansion, certain amounts previously payable to Mr. Gingo under certain termination scenarios were re-allocated as consideration for his expanded non-competition/non-solicitation obligations, which have the ultimate effect of decreasing the negative tax impact of the change-in-control provision located in Mr. Gingo’s employment agreement. In regards to Mr. DeSantis, A. Schulman and Mr. DeSantis also agreed to expand the non-competition/non-solicitation protection provisions within his employment agreement for a period of one year under all possible termination scenarios and certain amounts previously payable to Mr. DeSantis under certain termination scenarios were re-allocated as consideration for his expanded non-competition/non-solicitation obligations. Furthermore, we also determined to provide Mr. DeSantis with a partial excise tax gross-up payment upon termination. Specifically, in the event that any payment, benefit or right to be paid or distributed to Mr. DeSantis, in connection with a change-in-control or termination, is subject to an excise tax imposed by Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”). A. Schulman shall provide Mr. DeSantis with an excise tax gross-up payment equal to the amount of such excise tax imposed. We agreed to provide Mr. DeSantis with this partial tax gross-up benefit as compensation for the shortening of the contractual term provided under his employment agreement from three years to one, and for the expanded non-competition/non-solicitation obligations. Additionally, in extending partial tax-gross up benefits to Mr. DeSantis, we sought to align the tax benefits provided to Mr. DeSantis with those provided to Mr. Gingo.

 

In addition to the use of employment agreements, the Compensation Committee has authorized the use of separate change-in-control agreements with certain key executive personnel, who currently do not have employment agreements with us. While the Compensation Committee believes that it is in our best interest to retain most of our employees on an “at will” basis, the Committee also recognizes that we will not be able to retain key personnel without providing certain protections in the event of a change-in-control. Like the change-in-control provisions utilized in our employment agreements, all of our separate change-in-control agreements provide payments to covered employees only if his or her employment is terminated as a result of (or within a specified period after) a change-in-control. The Compensation Committee believes that such agreements help to mitigate the fear of job loss associated with potential change-in-control transactions and allow our key executive personnel to evaluate such offers in an appropriate fashion.

Under the terms of our 2006 Incentive Plan, unless specified otherwise in the associated award agreement or in a separate employment or change-in-control agreement: (1) all of a participant’s awards will be fully vested and exercisable upon a Business Combination or Change-in-Control (as such terms are defined in the 2006 Incentive Plan); and (2) all performance objectives will be deemed to have been met as of the date of the Business Combination or Change-in-Control. Except with respect to Messrs. Gingo and DeSantis (for whom we will provide a partial gross-up), if we conclude that any payment or benefit due to a Named Executive Officer would be subject to the excise tax imposed by Section 4999 of the Code, then we will consider: (i) the feasibility of offering substitute awards that would not constitute “parachute payments” under Section 280G of the Code and that would not generate penalties under Section 409A of the Code; and (ii) to the extent that a substitution is not feasible or that the payments and benefits due to the participant still would be subject to the excise tax imposed by Section 4999 of the Code, we will reduce the payments and benefits due to a participant to the greatest amount that would not generate an excise tax under Section 409A of the Code.

 

Pursuant to the terms of our 2002 Equity Incentive Plan, upon the occurrence of a Change-in-Control (as such term is defined in the 2002 Equity Incentive Plan), unless we determine otherwise in a participant’s award agreement: (1) all stock options shall become immediately vested and exercisable; (2) any restrictions imposed on restricted stock or restricted stock units shall lapse; (3) the vesting of all awards denominated in shares of Common Stock shall be accelerated and be paid out within 30 days following the Change-in-Control; (4) awards denominated in cash shall be paid to participants in cash within 30 days following the Change-in-Control; and (5) all awards shall become non-cancelable (i.e., such awards cannot be cancelled without the participant receiving appropriate compensation as determined by the Compensation Committee).

 

Tax and Accounting Considerations

 

As a general matter, the Compensation Committee considers the various tax and accounting implications of the different compensation vehicles that are employed and the Compensation Committee seeks to structure executive compensation in a tax efficient manner.

 

Deductibility of Executive Compensation

 

Section 162(m) of the Code prohibits us from taking a federal income tax deduction for compensation paid in excess of $1.0 million in any taxable year to our Named Executive Officers, unless certain conditions are met. Exceptions are made for qualified performance-based compensation, among other things. As part of its role, the Compensation Committee annually considers the deductibility of executive compensation under Section 162(m) in structuring our executive compensation program. The Compensation Committee believes, however, that compensation and benefit decisions should be primarily driven by the needs of our business, rather than by tax considerations. Accordingly, the Compensation Committee may choose to award compensation that does not meet the requirements of Section 162(m) where, in its judgment, such payments are necessary to achieve its compensation philosophy and objectives. Because our U.S. operations are not currently profitable, the inability to deduct compensation in excess of $1.0 million does not have any effect on our current year earnings.

 

Nonqualified Deferred Compensation

 

Section 409A of the Code, which took effect on January 1, 2005, imposes certain restrictions on amounts deferred under nonqualified deferred compensation plans and a 20% excise tax on amounts that are subject to, but do not comply with, Section 409A. Section 409A includes a broad definition of nonqualified deferred compensation plans, which may extend to various plans and arrangements that we maintain. On April 10, 2007, the Treasury Department and the Internal Revenue Service (the “IRS”) issued final regulations relating to the treatment of nonqualified deferred compensation plans under Section 409A. During fiscal 2009, we amended many of our compensation plans to comply with Section 409A of the Code.

 

Statement of Financial Accounting Standards No. 123(R)

 

When determining amounts of long-term incentive grants to the Named Executive Officers and other employees, the Compensation Committee examines the accounting cost associated with the grants. Under Statement of Financial Accounting Standard No. 123(R), Share-Based Payment (“SFAS 123(R)”), grants of stock options, restricted stock, restricted stock units and other share-based payments result in an accounting charge.

Stock Ownership Guidelines

 

In 2006, the Compensation Committee adopted stock ownership guidelines for our executive officers. These guidelines require that, within a five year period from the date of its adoption or, if later, the date a person becomes an executive officer, the Chief Executive Officer will maintain share ownership in value equal to approximately five times his base salary, while all other executive officers are expected to hold shares in value equal to approximately three times their base salary. As has been stated previously, the Compensation Committee bases a large part of its compensation philosophy on aligning the interests of our executive officers and our stockholders. Such efforts could be undermined in the event that executive officers sold all or a large part of their awards at vesting. In determining compliance with these guidelines, the Compensation Committee considers the beneficial ownership of our executive officers as required to be reported in a proxy statement.

 

Compensation of Directors

 

The Compensation Committee is also responsible for determining compensation for our non-employee Directors. Generally, the Compensation Committee structures Director compensation in a fashion to attract and retain high quality individuals to serve on the Board of Directors, to compensate such individuals for the time and energy expended in providing us their expertise and, in part, to provide Directors with compensation that is tied to the performance of our Common Stock. On an annual basis, the Compensation Committee requests that its compensation consultant evaluate our current Director compensation levels relative to our peers. Generally, it is the overall goal of the Compensation Committee to position Director compensation at a median market level. During fiscal 2009, upon consultation and review with Towers Perrin, the Compensation Committee determined to leave its Director compensation levels unchanged. Director compensation levels are reflected in the Director Compensation table located on page 41. During fiscal 2009, each non-employee Director was awarded 2,500 director restricted stock units with a grant date fair value of $34,025 per Director. These restricted stock unit awards are fully vested as of the grant date and shall be settled in shares of Common Stock on a 1-to-1 basis, no later than 60 days after the third anniversary of the award grant date. The Compensation Committee has adopted guidelines requiring each Director to maintain share ownership in value equal to approximately five times his or her base retainer on and after the fifth year of service on the Board of Directors. In reviewing each Director’s share ownership, the Compensation Committee considers the beneficial ownership of each Director as required to be reported in a proxy statement. Mr. Gingo, who is currently the only employee Director, does not receive additional compensation for service on our Board of Directors.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the foregoing Compensation Discussion and Analysis be included in this Proxy Statement.

 

Respectfully submitted,

 

Compensation Committee

 

John B. Yasinsky (Chair)
David G. Birney
James A. Mitarotonda
Ernest J. Novak, Jr.
Stanley W. Silverman

 

COMPENSATION TABLES

 

Summary Compensation Table

 

The table below provides information regarding the compensation of A. Schulman’s: (1) Chief Executive Officer; (2) Chief Financial Officer; and (3) three other most highly compensated executive officers as of August 31, 2009.

 

 

 

 

Grants of Plan Based-Awards

 

 

 

 

2009 Named Executive Officer Compensation Components

 

Base Salary

 

In fiscal 2009, the Compensation Committee continued to implement its base salary positioning philosophy, attempting to position executive officer base salaries between the 40th and 50th percentile of our peer market, while simultaneously managing base salaries that exceed the peer market median back to our stated compensation range. Base salary increases granted in fiscal 2009 were either: (1) required pursuant to applicable law; or (2) were warranted based upon outstanding personal performance. In targeting our base salary range at the 40th — 50th percentile, the Compensation Committee believes that A. Schulman is able to properly motivate its executive officers and fulfill its goals of rewarding outstanding performance and achieving executive retention. It is the opinion of the Compensation Committee that by setting base salary levels at competitive rates, A. Schulman’s executive officers are rewarded for undertaking positions of leadership and provided with an incentive to continue working for the Company. However, as base salary compensation is not typically subject to reduction or forfeiture based on corporate performance, the Compensation Committee believes that it should comprise only one component of its overall pay philosophy and that a majority of A. Schulman’s executive compensation structure should be comprised of at-risk components.

 

Annual Bonuses

 

Under the annual bonus program, the Compensation Committee establishes the award formulas and the performance goals to be measured in order to determine the cash performance bonus that may be earned by each Named Executive Officer for that year, including the maximum cash bonus each will be eligible to receive. The bonuses that each of the Named Executive Officers could have earned are set forth in the Grants of Plan-Based Awards table located on page 27, and the bonuses actually paid are set forth in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column located on page 26.

 

In October 2008, the Board of Directors, upon the approval of the Compensation Committee, established the target bonus awards for each of the Named Executive Officers and established that each executives total bonus opportunity would be based upon the achievement of certain corporate performance metrics. Fiscal 2009 bonus targets for each Named Executive Officer are disclosed on page 18 of this Proxy Statement.

 

In conjunction with establishing the target bonus opportunity for each Named Executive Officer, the Compensation Committee selected performance metrics for evaluating corporate performance, along with the respective weighting for each metric and the threshold, target, stretch, enhanced stretch and maximum performance goal levels. In selecting performance metrics for 2009, the Compensation Committee sought to establish corporate performance metrics that focused the Named Executive Officers on the key drivers of stockholder value and

emphasized both our short- and long-term financial and strategic goals. In light of such objectives, the Compensation Committee established the following corporate performance metrics for 2009: (1) Net Income; (2) Operating Income; and (3) Days of Working Capital, excluding certain unusual, one-time in nature items. For Messrs. Gingo and DeSantis, the Compensation Committee determined that their respective annual bonus opportunities would be measured by our consolidated worldwide operations, with each performance metric receiving an equal one-third weighting. For Mr. Taylor, the Compensation Committee determined that his respective annual bonus opportunity would be based upon the performance of the Company’s consolidated worldwide operations and its Asian segment, with the following metric weighting: (1) Asian Operating Income — 49.5%; (2) Asian Days of Working Capital — 25.5%; (3) consolidated worldwide Net Income — 8.3%; (4) consolidated worldwide Operating Income — 8.3%; and (5) consolidated worldwide Days of Working Capital — 8.4%. For Messrs. Rzpeka and Belderbos, the Compensation Committee established that each executive’s annual bonus opportunity would be based upon the performance of the Company’s consolidated worldwide operations and its European segment, with the following metric weighting: (1) European Operating Income — 49.5%; (2) European Days of Working Capital — 25.5%; (3) consolidated worldwide Net Income — 8.3%; (4) consolidated worldwide Operating Income — 8.3%; and (5) consolidated worldwide Days of Working Capital — 8.4%. For all directly reporting executive officers, Mr. Gingo retained authority to adjust award payouts, based upon individual performance, up to 20% more than the calculated award amount or down to 0% of such award amount.

 

For fiscal 2009, A. Schulman utilized its budgeting model to set the performance levels for each of the performance metrics. The Compensation Committee believes that achieving the budget requires both strong management performance and is deserving of a “stretch bonus” or 125% of the targeted award. For a detailed discussion regarding fiscal 2009 corporate performance, see pages 18-19 of the Compensation Discussion and Analysis.

 

Restricted Stock

 

On January 16, 2009, the Compensation Committee awarded shares of restricted stock to certain North American executives. Of the Named Executive Officers, Messrs. Gingo and DeSantis each received awards of restricted stock pursuant to the 2006 Incentive Plan, the amounts of which are set forth in column (i) in the Grants of Plan-Based Awards table located on page 27. With respect to the restricted stock awarded to Messrs. Gingo and DeSantis, such shares vest ratably over time, subject to continued employment, on each of the first three anniversaries of the award grant date. During the restriction period, Messrs. Gingo and DeSantis may exercise full voting rights associated with their shares of restricted stock. In addition, during the restriction period, A. Schulman will hold all dividends paid with respect to such shares of restricted stock until the restrictions on the underlying restricted stock have lapsed.

 

Restricted Stock Units

 

On January 16, 2009, the Compensation Committee issued an awards of performance-based restricted stock units to Mr. Gingo in accordance with the provisions of the 2006 Incentive Plan and pursuant to the terms of his employment agreement. Specifically, the Compensation Committee awarded Mr. Gingo an award of 60,060 performance-based restricted stock units (30,030 with dividend rights). Under the 2006 Incentive Plan, cash-based restricted stock units are settled in cash in an amount equal to the fair market value of a share of our Common Stock on the applicable vesting date, multiplied by the number of restricted stock units to be settled. During the restriction period, Mr. Gingo has no voting rights with respect to the shares of Common Stock underlying the restricted units. For those restricted stock units conferring dividend rights, we hold all dividends paid on the underlying shares of Common Stock and award such dividends with the cash settlement of underlying shares upon vesting. In regards to the performance-based restricted stock units issued to Mr. Gingo, the vesting and settlement of such awards was contingent upon A. Schulman’s achievement of certain world wide corporate performance metrics, as disclosed on page 20 of the Compensation Discussion and Analysis section.

 

Performance Shares

 

In connection with the grant of restricted stock to certain North American executives, the Compensation Committee also awarded performance shares to Messrs. Gingo and DeSantis pursuant to the 2006 Incentive Plan in the following amounts: Mr. Gingo — 86,600 shares (43,300 with dividend rights); and Mr. DeSantis — 23,800 shares (11,900 with dividend rights). As disclosed on page 20 of this Proxy Statement, performance

shares give the recipient the right to receive a specified number of shares of our Common Stock only if certain terms and conditions are met as of the end of the performance period. In regards to dividend rights, A. Schulman utilizes two types of performance shares: (1) shares that provide the award recipient with dividend rights during the vesting period; and (2) shares that do not provide dividend rights with respect to the underlying shares. For those performance shares conferring dividend rights, A. Schulman holds all dividends paid on the underlying shares of Common Stock and awards such dividends with the underlying shares upon vesting.

 

Time- and Performance-Based Cash Awards

 

In conjunction with the grant of restricted stock and performance shares to certain North American executives, the Compensation Committee awarded both time- and performance-based cash awards to certain foreign executives, including Messrs. Rzepka and Belderbos, pursuant to the 2006 Incentive Plan. In regards to time-based cash awards, the Compensation Committee issued awards of $106,725 and $47,766 to Messrs. Rzepka and Belderbos, respectively. Similar to awards of restricted stock, time-based cash awards vest ratably over time, subject to continued employment on each of the first three anniversaries of the award grant date. In addition to the time-based cash awards, the Compensation Committee also approved the issuance of performance-based cash awards to Messrs. Rzepka and Belderbos, the amounts of which are set forth in the Grants of Plan-Based Awards table located on page 27 of this Proxy Statement. In regards to Messrs. Rzepka and Belderbos, the vesting of all performance-based cash awards is contingent upon the same vesting criteria as the performance shares issued to A. Schulman’s North American Named Executive Officers.

 

Outstanding Equity Awards at Fiscal Year-End

 

 

 

 

 

Option Exercises and Stock Vested

 

 

 

 

Pension Benefits

 

 

 

 

European Pension Plans

 

Each of the European Named Executive Officers participate in pension plans that are generally available to employees within the country of the applicable plan. For Mr. Rzepka, his pension benefits are calculated at a rate of 0.8% of his final pensionable salary up to the applicable social security pension ceiling per year of service with a maximum of 20% and an additional 1.6% of pensionable salary for that portion exceeding the social security pension ceiling, with a maximum of 60%. Under German law, Mr. Rzepka’s benefits under the plan are fully vested and include a widow’s pension of 50% of the amount payable. If Mr. Rzepka’s employment terminates prior to his reaching age 65, his benefits would be reduced based upon his total years of service divided by the number of years of service he would need to reach age 65. Mr. Rzepka’s spouse is entitled to receive 50% of his pension upon his death in service or during retirement.

 

For Mr. Belderbos, his pension benefits are payable to him at retirement in a lump sum equal to the formula (70% x pensionable salary — estimated state pension) x N/40 x F. Pensionable salary is the average of his final 5 annual salaries, with the annual salaries being measured as 14.12 times his monthly January salary. The estimated state pension is estimated based on that which is available to a single person with a complete career. N is the number of years of service (up to a maximum of 40) and F is a conversion factor equal to 12.3514. Mr. Belderbos’ benefits under this plan are fully vested and, should his employment terminate prior to retirement age, he would be eligible to receive the greater of the accrued reserves attributable to him under the pension plan (plus any required profit sharing) and the minimum required under Belgian law. If Mr. Belderbos dies during service, his spouse will be entitled to a lump sum payment calculated under a reduced formula (42% x pensionable salary) and offset by any estimated widow’s state payment, provided that the lump sum can not be less than one times his pensionable salary.

 

Mr. Taylor is currently receiving benefits under his pension plan, based upon two-thirds of his final salary and is fully vested in those amounts. Portions of his pension (approximately one-third) are subject to adjustment for inflation. Upon Mr. Taylor’s death, his widow is entitled to receive two-thirds of his pre-commutation pension. Mr. Taylor’s pension benefits relate to his prior service in A. Schulman’s European operations.

Non-qualified Deferred Compensation

 

 

 

 

Employment Agreements

 

A. Schulman currently maintains employment agreements with certain members of its senior executive personnel. Of the Named Executive Officers, A. Schulman currently has entered into employment agreements with Messrs. Gingo, DeSantis and Taylor, the material terms of which are outlined below. In regards to Messrs. Rzepka and Belderbos, A. Schulman does not currently maintain employment agreements with such individuals, however, each have executed Change-in-Control Agreements with the Company.

 

Employment Agreement of Mr. Gingo

 

On December 17, 2007, A. Schulman entered into an employment agreement with Joseph M. Gingo (the “Gingo Agreement”) to retain him as its President and Chief Executive Officer, which was subsequently amended on December 17, 2008 and January 9, 2009. As amended, the term of the Gingo Agreement ends on December 31, 2011; provided, however, at December 31, 2009, the Gingo Agreement shall automatically be extended for an additional year to December 31, 2012 because neither Mr. Gingo nor A. Schulman provided notice to the other of non-extension prior to October 1, 2009.

 

As amended, the Gingo Agreement provides for a base salary of $775,000.00, which may be increased during the term at the discretion of the Board of Directors. Mr. Gingo is also eligible for participation in A. Schulman’s bonus program for senior executives, with an initial target level of 70%, with leverage ranging from zero to 200% based upon performance metrics to be established by Mr. Gingo and the Compensation Committee and approved by the Board of Directors. Additionally, upon commencement of his employment on January 1, 2008, Mr. Gingo received a lump sum payment of $750,000, and he is entitled to receive additional lump sum cash payments of $250,000 on January 1, 2009, January 1, 2010 and December 31, 2010, subject to his continued employment. In the event that Mr. Gingo’s employment is terminated for any reason, other than termination for Cause (as defined in the Gingo Agreement) by A. Schulman or his voluntary resignation, each remaining unpaid cash bonus will become immediately due and will be paid to Mr. Gingo within 30 days of termination.

 

In addition to the lump sum cash payments, Mr. Gingo is also entitled to receive performance-based restricted stock unit grants, totaling $1.5 million in initial grant value. Specifically, the restricted stock units to be issued to Mr. Gingo are as follows: (1) on February 29, 2008, Mr. Gingo received $333,000 (grant value) of restricted stock units; (2) on January 10, 2009, Mr. Gingo received $500,000 (grant value) of restricted stock units (“RSU Award 2”); and (3) on January 16, 2010, Mr. Gingo shall receive $667,000 (grant value) of restricted stock units (“RSU Award 3”). In the event Mr. Gingo’s employment is terminated: (i) without Cause or for Good Reason following a Change-in-Control (as such terms are defined in the Gingo Agreement); (ii) due to Resignation for Cause (as defined in the Gingo Agreement); or (iii) without Cause prior to a Change-in-Control, and RSU Award 3 has not been issued, then Mr. Gingo is entitled to be paid an amount equal to the aggregate initial share grant value of RSU Award 3 within 90 days of his termination. A. Schulman agreed to provide Mr. Gingo such performance-based

restricted stock units as a way of making him whole for the long-term incentive compensation that the Company believes would have been payable to Mr. Gingo had he remained at his prior employer until retirement. In regards to the January 16, 2009 grant, A. Schulman and Mr. Gingo agreed to have vesting contingent upon the same performance metrics as under the Company’s fiscal 2009 bonus plan. As a result of fiscal 2009 performance, Mr. Gingo settled approximately 30,030 performance-based restricted stock units on October 26, 2009 for a total value of $554,654.

 

Each year during the term of the Gingo Agreement, Mr. Gingo is eligible to receive an award of performance-based restricted shares or restricted stock units as long-term incentive compensation under the 2006 Incentive Plan. Specifically, each award of performance-based restricted shares or restricted stock units shall be based on a target grant value of 200% of Mr. Gingo’s base salary, with vesting based upon performance metrics to be agreed upon by the Compensation Committee and Mr. Gingo and approved by the full Board of Directors. However, in regards to fiscal 2009, Mr. Gingo expressly waived his right to a minimum amount and agreed to an award of approximately 66,667 shares of restricted stock or performance shares, which equaled the same award level as the prior year’s grant. Ultimately, in fiscal 2009, A. Schulman awarded Mr. Gingo 22,600 shares of time-based restricted stock and a target award of 44,300 performance shares as long-term incentive compensation.

 

Additionally, Mr. Gingo is entitled to receive all fringe benefits made generally available to A. Schulman’s executives in accordance with the Company’s policies and is eligible to participate in all other employee compensation and benefit plans available generally to executives of A. Schulman at a level appropriate for his position. During fiscal 2008, the Compensation Committee determined to eliminate most perquisites for North American Named Executive Officers, including the use of company cars.

 

Upon termination of Mr. Gingo’s employment, Mr. Gingo may be entitled to receive certain post-termination benefits depending upon whether such termination is by A. Schulman without Cause, in relation to a Change-in-Control, or by reason of Mr. Gingo’s death or Disability (as such terms are defined in the Gingo Agreement). In the event that A. Schulman terminates Mr. Gingo’s employment without Cause prior to the expiration of the Gingo Agreement and prior to a Change-in-Control, Mr. Gingo shall receive his salary for the remaining term of the Gingo Agreement, plus a bonus for each year of the remaining term, each of which shall be equal to either the greater of: (1) $490,000; or (2) the average annual bonus during the most recent three calendar years of Mr. Gingo’s employment or such shorter period during which Mr. Gingo has been employed. Additionally, Mr. Gingo shall receive an amount equal to up to one year’s base salary plus one year’s annual bonus in consideration of (and subject to Mr. Gingo’s continued compliance with) the confidentiality, non-competition and non-solicitation provisions of the Gingo Agreement. In the event that Mr. Gingo is terminated by reason of death, A. Schulman shall pay a lump sum amount equal to 60% of Mr. Gingo’s salary for 24 months to a designated beneficiary. In the event that Mr. Gingo becomes Disabled during the term of the Gingo Agreement, A. Schulman shall pay Mr. Gingo 60% of his base salary during the period of his Disability (not to exceed 24 months). After six months of Disability, A. Schulman shall have the right to terminate Mr. Gingo; provided, however that the 60% payments shall continue for the remainder of the 24 month period.

 

The Gingo Agreement also provides that, in the event Mr. Gingo is terminated following a Change-in-Control event for any reason, except: (1) termination by A. Schulman for Cause; (2) termination by reason of death or Disability; or (3) termination by Mr. Gingo without Good Reason (as such terms are defined in the Gingo Agreement), Mr. Gingo shall be paid a lump sum amount equal to: (i) Mr. Gingo’s base salary in effect divided by 12 and multiplied by the number of full months remaining on the term; and (ii) the average annual bonus earned by Mr. Gingo in the immediately preceding fiscal years multiplied by the number of fiscal years remaining under the term when a bonus was not paid. In addition, Mr. Gingo shall remain entitled to receive any of the aforementioned unpaid lump sum cash or RSU awards that have not been issued or paid. Additionally, Mr. Gingo shall receive an amount equal to up to one year’s base salary plus one year’s annual bonus in consideration of (and subject to Mr. Gingo’s continued compliance with) the confidentiality, non-competition and non-solicitation provisions of the Gingo Agreement. Finally, Mr. Gingo shall also continue to receive certain insurance benefits (reduced to the extent comparable benefits are actually provided without cost to him by another source after termination) from the date of termination through the remainder of the term of the Gingo Agreement.

 

Pursuant to the confidentiality, non-competition and non-solicitation provisions of the Gingo Agreement, for a period of one year following any termination of Mr. Gingo’s employment, Mr. Gingo will not, directly or indirectly,

either as an individual for his own account or as an investor, or other participant in, or as an employee, agent, or representative of, any other business enterprise: (1) solicit, employ, entice, take away or interfere with, or attempt to solicit, employ, entice, take away or interfere with, any employee of A. Schulman; or (2) engage, participate in, finance, aid or be connected with any enterprise that competes with the business of the Company. The geographical limitations on the foregoing restrictions on Mr. Gingo include any country in which A. Schulman is doing business as of Mr. Gingo’s termination date.

 

The amounts described above under the Gingo Agreement shall be “grossed up” to the extent Mr. Gingo is subject to an excise imposed under Sections 280G and 4999 of the Code, as a result of certain amounts payable to him in respect of a Change-in-Control.

 

Employment Agreement of Mr. DeSantis

 

On January 4, 2006, A. Schulman entered into an employment agreement with Paul F. DeSantis (the “DeSantis Agreement”) to retain him as its Vice President, Treasurer and Chief Financial Officer, which was subsequently amended on December 17, 2008. As amended, the term of the DeSantis Agreement ends on December 31, 2009 (the “Initial Term”); provided, however, that the DeSantis Agreement shall automatically be extended for a term of one year (an “Extended Term”) unless either party shall give notice to the other of non-extension not less than 30 days prior to the expiration of the Initial Term or any Extended Term.

 

Under the terms of the DeSantis Agreement, Mr. DeSantis is provided a fixed base salary (as in effect on December 17, 2008), which may be increased during the term at the discretion of the Board of Directors. Mr. DeSantis is also eligible for participation in A. Schulman’s bonus program for senior executives, with an initial target level of 50%. Additionally, upon commencement of his employment, Mr. DeSantis received a grant of 60,000 nonqualified stock options and a bonus of $120,000. Mr. DeSantis is also entitled to receive all fringe benefits made generally available to the A. Schulman’s executives in accordance with the A. Schulman’s policies and is eligible to participate in all other employee compensation and benefit plans available generally to executives of A. Schulman at a level appropriate for his position.

 

Upon termination of Mr. DeSantis’ employment, Mr. DeSantis may be entitled to receive certain post-termination benefits depending upon whether such termination is by A. Schulman without Cause, in relation to a Change-in-Control, or by reason of Mr. DeSantis’ death or Disability (as such terms are defined in the DeSantis Agreement). In the event that A. Schulman terminates Mr. DeSantis’ employment without Cause prior to the expiration of the DeSantis Agreement and prior to a Change-in-Control, Mr. DeSantis shall receive his salary for a period of one year after termination, plus a bonus payment in a lump sum equal to 50% of his average annual bonus during the most recent five calendar years of employment, in consideration of (and subject to Mr. DeSantis’ continued compliance with) the confidentiality, non-competition and non-solicitation provisions of the DeSantis Agreement. In the event that Mr. DeSantis is terminated by reason of death, A. Schulman shall pay a lump sum amount equal to 60% of his salary for a period of 24 months to a designated beneficiary. In the event that Mr. DeSantis becomes Disabled during the term of the DeSantis Agreement, A. Schulman shall pay Mr. DeSantis 60% of his base salary during the period of his Disability (not to exceed 24 months). After six months of Disability, A. Schulman shall have the right to terminate Mr. DeSantis; provided, however, that the 60% payments shall continue for the remainder of the 24-month period.

 

The DeSantis Agreement also provides that, in the event Mr. DeSantis is terminated following a Change-in-Control event for any reason except: (1) termination by A. Schulman for Cause; (2) termination by reason of death or Disability; or (3) termination by Mr. DeSantis without Good Reason, Mr. DeSantis shall be paid a lump sum amount equal to three times the sum of: (i) the higher of his annual base salary payable immediately (a) prior to the event causing the termination or (b) the Change-in-Control; plus (ii) an amount equal to the higher of his annual bonus earned in the fiscal year preceding the date of termination or the average annual bonus earned by him in the three fiscal years immediately preceding the Change-in-Control. One-third of such lump sum payment shall be in consideration of (and subject to Mr. DeSantis’ continued compliance with) the confidentiality, non-competition and non-solicitation provisions of the DeSantis Agreement. In addition, Mr. DeSantis shall be paid a lump sum amount equal to the sum of: (1) any unpaid annual incentive compensation previously awarded for any completed fiscal year preceding the termination, the payment of which was contingent only upon continued employment to a subsequent date; and (2) a pro rata portion of his deemed annual bonus for the fiscal year in which the termination occurred. Mr. DeSantis will also continue to receive certain insurance benefits (reduced to the extent

comparable benefits are actually provided without cost to him by another source after termination) for a period of 36 months following the date of termination.

 

For a period of one year following any termination of Mr. DeSantis’ employment, Mr. DeSantis shall not, directly or indirectly, either as an individual for his own account or as an investor, or other participant in, or as an employee, agent, or representative of, any other business enterprise: (1) solicit, employ, entice, take away or interfere with, or attempt to solicit, employ, entice, take away or interfere with, any employee of A. Schulman; or (2) engage, participate in, finance, aid or be connected with any enterprise that competes with the business of the Company. The geographical limitations on the foregoing restrictions on Mr. DeSantis include any country in which A. Schulman is doing business as of Mr. DeSantis’ termination date.

 

The amounts described above under the DeSantis Agreement shall be “grossed up” to the extent Mr. DeSantis is subject to an excise imposed under Sections 280G and 4999 of the Code, as a result of certain amounts payable to him in respect of a Change-in-Control.

 

Employment Agreement of Mr. Taylor

 

On May 28, 2003, A. Schulman entered into an employment agreement with Jack B. Taylor (the “Taylor Agreement”), which was subsequently amended on August 31, 2008 and August 28, 2009, in conjunction with Mr. Taylor’s continuing appointment as General Manager and Chief Operating Officer — Asia. As amended, the term of the Taylor Agreement ends on December 31, 2011, provided, however, that either Mr. Taylor or A. Schulman may terminate the Taylor Agreement on December 31, 2010 upon 60 days notice.

 

As amended, the Taylor Agreement provides Mr. Taylor with a base salary of 200,000 Euros, which may be modified during the term of the Taylor Agreement. Mr. Taylor is also eligible for participation in A. Schulman’s bonus program for senior executives, with a 50% bonus potential, and is also entitled to participate in all employee compensation and benefit plans available generally to employees of A. Schulman on a level appropriate to his position. Additionally, Mr. Taylor is entitled to receive certain equity award grants, the material terms of which are to be determined by the Compensation Committee, provided that Mr. Taylor remains employed with the Company through the term of the Taylor Agreement. Moreover, Mr. Taylor is entitled to receive all employee benefits available generally to employees of A. Schulman having comparable levels of responsibility. Finally, Mr. Taylor is authorized to incur reasonable expenses for promoting the business of A. Schulman, including expenses for entertainment, travel and similar items, and shall receive reimbursement for all such expenses.

 

Upon termination of Mr. Taylor’s employment, Mr. Taylor may be entitled to receive certain post-termination benefits depending upon whether such termination is by A. Schulman without Cause, in relation to a Change-in-Control, or by reason of Mr. Taylor’s death or Disability (as such terms are defined in the Taylor Agreement). In the event that A. Schulman terminates Mr. Taylor’s employment without Cause prior to the expiration of the Taylor Agreement and prior to a Change-in-Control, Mr. Taylor shall receive his salary for the remaining term of the Taylor Agreement, plus a bonus for each year of the remaining term in an amount equal to 50% of his average annual bonus during the most recent five calendar years of employment. In the event that Mr. Taylor’s employment is terminated by reason of his death, A. Schulman shall pay, in addition to all compensation and benefits earned by Mr. Taylor prior to his death, a lump sum payment equal to 60% of his salary for a period of 24 months to a designated beneficiary. In the event that Mr. Taylor becomes Disabled during the term of the Taylor Agreement, A. Schulman shall pay Mr. Taylor 60% of his base salary during the period of his Disability (not to exceed 24 months). After six months of Disability, A. Schulman shall have the right to terminate Mr. Taylor; provided, however, that the 60% payments shall continue for the remainder of the 24-month period.

 

The Taylor Agreement also provides that, in the event Mr. Taylor is terminated following a Change-in-Control event for any reason except: (1) termination by A. Schulman for Cause; (2) termination by reason of death or Disability; or (3) termination by Mr. Taylor without Good Reason, Mr. Taylor shall be paid (in lieu of any further salary or severance benefit payments) a lump sum amount equal to three times the sum of: (i) the higher of his annual base salary payable immediately prior to (a) the event causing the termination or (b) the Change-in-Control; plus (ii) an amount equal to the higher of his annual bonus earned in the fiscal year preceding the date of termination or the average annual bonus earned by him in the three fiscal years immediately preceding the Change-in-Control. In addition, Mr. Taylor shall be paid a lump sum amount equal to the sum of: (1) any unpaid annual incentive compensation previously awarded for any completed fiscal year preceding the termination, the payment of which

was contingent only upon continued employment to a subsequent date; and (2) a pro rata portion of his deemed annual bonus for the fiscal year in which the termination occurred. Mr. Taylor will also continue to receive certain insurance benefits (reduced to the extent comparable benefits are actually provided without cost to him by another source after termination) for a period of 36 months following the date of termination.

 

For a period of three years following any termination of Mr. Taylor’s employment (which occurs prior to a Change-in-Control), Mr. Taylor shall not, directly or indirectly, either as an individual for his own account or as an investor, or other participant in, or as an employee, agent, or representative of, any other business enterprise: (1) solicit, employ, entice, take away or interfere with, or attempt to solicit, employ, entice, take away or interfere with, any employee of A. Schulman; or (2) engage, participate in, finance, aid or be connected with any enterprise that competes with the business of the Company. The geographical limitations on the foregoing restrictions on Mr. Taylor include any country in which A. Schulman is doing business as of Mr. Taylor’s termination date.

 

Change-in-Control Agreements

 

A. Schulman has substantially similar change-in-control agreements with Bernard Rzepka and Walter Belderbos (collectively, the “CIC Agreements”), in order to provide them with certain benefits in the event of a Change-in-Control (as such term is defined in the CIC Agreements). The CIC Agreements each provide that, in the event the executive is terminated following a Change-in-Control event for any reason except: (1) termination by A. Schulman for Cause; (2) termination by reason of death or Disability; or (3) termination by the executive without Good Reason, the executive will be paid (in lieu of any further salary or severance benefit payments) a lump sum amount equal to three times the sum of: (i) the higher of (a) the executive’s annual base salary payable immediately prior to the event causing the termination or (b) the Change-in-Control; plus (ii) an amount equal to the higher of (A) the executive’s annual bonus earned in the fiscal year preceding the date of termination or (B) the average annual bonus earned by the executive in the three fiscal years immediately preceding the Change-in-Control (as such terms are defined in the CIC Agreements). In addition, the executive will be paid a lump sum amount equal to the sum of: (1) any unpaid annual incentive compensation previously awarded for any completed fiscal year preceding the termination, the payment of which was contingent only upon continued employment to a subsequent date; and (2) a pro rata portion of the executive’s deemed annual bonus for the fiscal year in which the termination occurred. The executive will also continue to receive certain insurance benefits (reduced to the extent comparable benefits are actually provided without cost to the executive by another source after termination) for a period of 36 months following the date of termination.

 

Potential Payments upon Termination or Change-in-Control

 

Pursuant to the terms of each Named Executive Officer’s respective employment/change-in-control agreement, each Named Executive Officer is entitled to certain benefits depending upon the nature of their separation from service with A. Schulman. The table below represents amounts that would be payable or benefits owed to each of the Named Executive Officers as of August 31, 2009, upon termination of their employment as a result of the scenarios indicated in each column. The amounts were calculated assuming the termination occurred on August 31, 2009.