A. Schulman, Inc. DEF 14A
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:
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o Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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þ Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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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):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which
transaction applies:
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Aggregate number of securities to which
transaction applies:
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4) |
Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders
of A. Schulman, Inc. (the Corporation) will be held
at The Hilton Inn West, 3180 West Market Street, Akron, Ohio, on
Thursday, December 7, 2006 at 10:00 A.M., local time,
for the purpose of considering and acting upon:
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The election of four (4) Class II Directors for a
three-year term expiring in 2009;
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The ratification of the selection of PricewaterhouseCoopers LLP
as independent registered public accountant for the fiscal year
ending August 31, 2007;
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The approval of the A. Schulman, Inc. 2006 Incentive
Plan; and
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4.
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The transaction of any other business as may properly come
before the meeting and any adjournments thereof.
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Stockholders of record at the close of business on
October 18, 2006 are entitled to notice of and to vote at
the Annual Meeting and any adjournments thereof.
By order of the Board of Directors
Gary J. Elek
Secretary
Akron, Ohio
November 7, 2006
Your vote is important. Stockholders are requested to
complete, date, sign and return the enclosed proxy in the
envelope provided, which requires no postage if mailed in the
United States.
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, such 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. (the
Corporation) has not instituted householding for
stockholders of record; however, a limited number of brokerage
firms may have instituted householding for beneficial owners of
the Corporations shares of common stock held through such
brokerage firms. If your family has multiple accounts holding
shares of common stock of the Corporation, you already may have
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 this
Proxy Statement or the Corporations 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.
TABLE OF CONTENTS
3550 West
Market Street
Akron, Ohio 44333
November 7,
2006
The accompanying proxy is solicited by the Board of Directors of
A. Schulman, Inc. (the Corporation) for use at the
2006 Annual Meeting of Stockholders to be held on
December 7, 2006, and any adjournments thereof.
Stockholders of record at the close of business on
October 18, 2006 (the record date) will be entitled to vote
at the 2006 Annual Meeting. On that date the Corporation had
issued and outstanding 26,766,698 shares of common stock,
$1.00 par value (the Common Stock). Each such share
is entitled to one vote on all matters properly coming before
the 2006 Annual Meeting. At least 13,383,350 shares of
Common Stock of the Corporation must be represented at the
meeting in person or by proxy in order to constitute a quorum
for the transaction of business.
This Proxy Statement and the accompanying form of proxy were
first mailed to stockholders on or about November 7, 2006.
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the provisions of the Corporations
By-Laws, as amended (the By-Laws), and Restated
Certificate of Incorporation, as amended (the Certificate
of Incorporation), the Board of Directors has fixed the
number of Directors at twelve. The Directors of the Corporation
are currently divided into three classes, and the By-Laws
require that, to the extent possible, there be the same number
of Directors in each class. As a result of the retirement of
Robert A. Stefanko as a director of the Corporation in April
2006 and the appointment to the Board of James A. Mitarotonda
and David G. Birney in October 2005 and January 2006,
respectively, there are currently four Directors in
Class I, two Directors in Class II and five Directors
in Class III. In order to bring the Board into compliance
with the By-Laws, Dr. Paul Craig Roberts, a Class III
Director, has agreed to resign as a Director of the Corporation
effective the date of the 2006 Annual Meeting. Therefore, upon
election of the four nominees as Class II Directors, there
will be four Directors in each class. The Directors elected at
the 2006 Annual Meeting will be elected to serve for three-year
terms expiring in 2009 and until their respective successors are
duly elected and qualified.
Unless a stockholder requests that voting of that
stockholders proxy be withheld for any one or more of the
nominees for Director in accordance with the instructions set
forth on the proxy card, it presently is intended that shares
represented by proxies in the enclosed form will be voted for
the election as Directors of the four Class II nominees
named in the table on the following page. All of the members of
the Nominating and Corporate Governance Committee has
recommended, and the Board of Directors has approved, the
nomination of these nominees.
This year the Corporation is offering registered stockholders
the opportunity to vote their shares electronically through the
Internet or by telephone. Instead of submitting your vote by
mail on the enclosed proxy card, you may vote by telephone or
on line via the Internet by following the procedures
described on your Proxy Card. In order to vote on line or via
telephone, please have the enclosed Proxy Card in hand, and call
the number or go to the website listed on the Proxy Card and
follow the instructions. The telephone and Internet voting
procedures are designed to
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authenticate stockholders identities, to allow
stockholders to give their voting instructions and to confirm
that stockholders instructions have been recorded
properly. Stockholders voting through the Internet should
understand that they may bear certain costs associated with
Internet access, such as usage charges from Internet access
providers and telephone companies.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THESE
NOMINEES.
All nominees 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 the 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 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 the Corporations records.
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First
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Principal Occupation During Past Five Years
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Became
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Name of Nominee or Director
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and Age as of October 18, 2006
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Director
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Nominees to Serve Until 2009
Annual Meeting of Stockholders (Class II)
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James S.
Marlen(1)(2)
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Chairman of the Board of Ameron
International Corporation (construction and industrial
manufacturing) since 1995; President and Chief Executive Officer
of Ameron International Corporation since 1993; formerly, Vice
President, GenCorp., Inc. (aerospace, automotive, chemical and
plastics) and President, GenCorp. Polymer Products, a subsidiary
of GenCorp., Inc., 1988-1993; age 65
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1995
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Ernest J.
Novak, Jr.(1)
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Retired; formerly, Partner of
Ernst & Young LLP (public accounting), 1980-2003,
including most recently, Managing Partner of certain domestic
offices, 1986-2003; age 61
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2003
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Howard R. Curd
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Chairman of the Board and Chief
Executive Officer of Uniroyal Engineered Products, LLC (plastic
vinyl coated fabrics), since 2003; Trustee for Brothers Gourmet
Coffee, Inc., 2002-2006; Trustee to DeGeorgio, 2000-2003;
Chairman and Chief Executive Officer Uniroyal Technology
Corporation (compound semiconductor, plastic vinyl coated
fabrics and specialty chemical), 1992-2003; age 67
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Nominee
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Michael A. McManus, Jr.
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President, Chief Executive Officer
and a director of Misonix, Inc., (a medical device company)
since 1998; President and Chief Executive Officer of New York
Bancorp Inc. from 1991 to 1998 and a director from 1990 to 1998;
age 63
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Nominee
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First
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Principal Occupation During Past Five Years
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Name of Nominee or Director
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and Age as of October 18, 2006
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Director
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Continuing Directors Serving
Until 2008 Annual Meeting of Stockholders
(Class I)
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Dr. Peggy
Miller(2)(3)
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President, South Dakota State
University since January, 1998; formerly, Senior Fellow,
National Center for Higher Education 1996-1998; President, The
University of Akron 1992-1996; and Chancellor and Chief
Executive Officer, Indiana University Northwest, 1984-1992;
Age 69
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1994
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Willard R.
Holland(1)(2)(3)(4)
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Retired; formerly, Chairman of the
Board of FirstEnergy Corp. (electric utility), 1996-1999;
President and Chief Executive Officer, FirstEnergy Corp.,
1993-1999;
Chairman of the Board and Chief Executive Officer of FirstEnergy
Corp.s subsidiary, Pennsylvania Power Company,
1993-1999;
Chief Operating Officer, Ohio Edison Company, 1991-1993; and
Senior Vice President, Detroit Edison Company (electric
utility), 1988-1991; age 70
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1995
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John B.
Yasinsky(1)(2)
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Retired; formerly, Chairman and
Chief Executive Officer of Omnova Solutions, Inc. (decorative
and building products and performance chemicals), 1999-2001; and
Chairman, President and Chief Executive Officer of GenCorp.,
Inc. (aerospace, automotive, chemical and plastics), 1995-1999;
age 67
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2000
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David G.
Birney(3)
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Retired; formerly, President and
Chief Executive Officer of Solvay America, Inc. (chemicals,
plastics and pharmaceuticals), 2001-2006; and President and
Chief Executive Officer of Solvay Polymers, Inc. (plastics
company), 1987-2000; age 63
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2006
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Continuing Directors Serving
Until 2007 Annual Meeting of Stockholders
(Class III)
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Terry L.
Haines(4)
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President and Chief Executive
Officer of the Corporation since 1991 and Chairman of the Board
since 2006; formerly, Chief Operating Officer of the
Corporation, 1990-1991; age 60
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1990
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James A.
Karman(1)(3)
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Retired; formerly, Vice Chairman,
RPM International, Inc. (coatings, sealants and specialty
chemicals), 1999-2002; President of RPM International, Inc.,
1978-1999; and Chief Financial Officer of RPM International,
Inc., 1982-1993; age 69
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1995
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First
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Principal Occupation During Past Five Years
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Became
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Name of Nominee or Director
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and Age as of October 18, 2006
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Director
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Joseph M.
Gingo(2)(3)
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Executive Vice President, Quality
Systems and Chief Technical Officer of The Goodyear
Tire & Rubber Company (tire and rubber manufacturing)
since 2003; formerly, Senior Vice President for Technology and
Global Products Planning of The Goodyear Tire & Rubber
Company,
1999-2003;
Vice President and General Manager of The Goodyear
Tire & Rubber Companys Engineered Products
business unit,
1998-1999;
and Vice President of The Goodyear Tire and Rubber
Companys Asia operations,
1995-1998;
age 60
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2000
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James A
Mitarotonda(4)(5)
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Chairman of the Board, President
and Chief Executive Officer of Barington Capital Group, L.P. (an
investment firm) since 1991; President and Chief Executive
Officer since May 2006 of Dynabazaar, Inc.;
Co-Chief
Executive Officer and Co-Chairman, from April 2003 until May
2004, and sole Chief Executive Officer, from May 2004 until
October 2004, of LQ Corporation, Inc.; and from January 2001
until May 2004, President and Chief Executive Officer of MM
Companies, Inc. (now known as George Foreman Enterprises, Inc.);
age 52
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2005
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Member of Audit Committee |
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Member of Nominating and Corporate Governance Committee |
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Member of Compensation Committee |
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Member of Executive Committee |
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Mr. Mitarotonda was appointed to the Audit Committee
effective October 17, 2006 |
Mr. McManus and Mr. Curd were nominated to the Board
of Directors in connection with the Agreement, dated as of
October 25, 2006, between the Corporation and a group of
investors led by Barington Capital Group, L.P. (collectively,
the Barington Group). See CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS on p. 35 of this Proxy Statement.
Mr. Haines is a director of FirstMerit Corporation and
Ameron International Corporation. Mr. Holland is a director
of Davey Tree Expert Company. Mr. Karman is a director of
RPM International, Inc. Dr. Miller is a director of The
Lubrizol Corporation. Mr. Marlen is a director of Ameron
International Corporation and Parsons Corporation.
Mr. Novak is a director of BorgWarner Inc. and FirstEnergy
Corp. Mr. Yasinsky is a director of CMS Energy Corporation.
Mr. Mitarotonda is a director of Dynabazaar, Inc., and The
Pep Boys Manny, Moe & Jack. Mr. Birney
is a director of Tronox, Inc. Mr. McManus is a director of
American Home Mortgage Holdings, Inc., Novavax, Inc.,
LQ Corporation, Inc. and Misonix, Inc. In August of 2002,
Uniroyal Technical Corporation (UTC), of which
Mr. Curd was Chairman, Chief Executive Officer and a
director, filed for reorganization under Chapter 11 of the
Bankruptcy Code (11 U.S.C. 1101 et seq.). In October
2003, Mr. Curd purchased the assets of Uniroyal Engineered
Products from UTC through a Section 363 sale process at
which time Mr. Curd resigned his positions with UTC and
became Chairman and Chief Executive Officer of the acquiring
company, Uniroyal Engineered Products, LLC.
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Attendance
at Meetings
The Board of Directors held 14 meetings during the year ended
August 31, 2006. All incumbent Directors attended at least
75% of the total of all meetings of the Board of Directors and
any committees thereof on which such Director served during the
year. In accordance with the Corporations Corporate
Governance Guidelines for the Board of Directors, 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 Annual Meeting of Stockholders. All of the members of the
Board of Directors attended the 2005 Annual Meeting of
Stockholders on December 8, 2005, other than
Mr. Roberts and Mr. Birney (who was not then a member
of the Board of Directors).
Compensation
of Directors
Each Director who is not an employee of the Corporation receives
an annual Directors fee of $29,000, plus $1,500 for each
Board or Committee meeting attended. In addition, each Director
who serves as a Chair of the Audit Committee, the Compensation
Committee or the Nominating and Corporate Governance Committee,
receives an additional annual fee of $8,500, $7,500 and $6,000,
respectively. Through October 17, 2006, each Director had
the option under the 2002 Equity Incentive Plan to defer payment
of all or a specified portion of his or her Directors fees
and to receive, in lieu thereof, a number of units equivalent to
the amount to be paid, divided by the closing price of the
Common Stock on the last business day of the prior calendar
year. At the end of a Directors service to the Board of
Directors, the units are surrendered in exchange for a cash
payment in an amount determined by multiplying the number of
units times the market price of the Common Stock on the day
before the surrender date. On October 17, 2006, the Board
adopted the A. Schulman, Inc. Directors Deferred Units Plan (the
Directors Plan). Pursuant to the terms of the
Directors Plan, a non-employee Director may elect, prior to the
first day of any calendar year, to defer all or a portion of his
or her Director fees in that calendar year. Any Director who is
currently deferring fees pursuant to the terms of the 2002
Equity Incentive Plan will continue to defer fees in accordance
with the terms of the Directors Plan for the remainder of the
2006 calendar year. Deferred Director fees (Deferred
Fees) for each calendar quarter are aggregated and
credited to an account for each participating Director (the
Account) until the last day of each quarter (a
Valuation Date). In addition, the Account is
credited with the amount of any dividends that would have been
paid to the Director had he or she actually owned shares of
Common Stock equal to the number of units in the Account at the
time of the dividend payment. On each Valuation Date, all
amounts credited to the Account are converted into units by
dividing the amount in the Account by the closing price of a
share of Common Stock on the Valuation Date. Upon the earlier of
a Directors separation from service as a Director, a
change of control or a Directors disability, units will be
converted into cash based on the closing price of a share of
Common Stock on the date prior to the date that payment is made
and paid to the Director in a single lump sum.
On February 1, 2006, each non-employee Director received an
award of 2,000 restricted shares of Common Stock pursuant to the
Corporations 2002 Equity Incentive Plan. The restricted
stock grants vest on the fourth anniversary of the date awarded,
and the fair market value of the restricted shares granted to
each such non-employee Director on the February 1, 2006
grant date was $50,340 (based upon the $25.17 closing price of
the Common Stock on the date of grant).
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 the Corporation. In response to the
enactment of the Sarbanes-Oxley Act of 2002
(Sarbanes-Oxley) and other developments in corporate
governance, the Board of Directors reviewed during 2003 and 2004
the Corporations corporate governance policies and
committee charters to assure that the Board continues to meet
fully its responsibilities to the Corporations
stockholders and the investing public. The measures taken to
assure that this objective is met are described below.
Corporate
Governance Guidelines
The Board of Directors reviewed and adopted the
Corporations Corporate Governance Guidelines in 2004.
These Corporate Governance Guidelines, which are available on
the Corporations website at www.aschulman.com,
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are intended to assure that the Director qualifications,
Committee structure and overall Board processes provide good
corporate governance and independent oversight of the
Corporations management.
Director
Independence
Under the corporate governance listing standards of The Nasdaq
Stock Market LLC (sometimes referred to as NASDAQ)
and the Corporate Governance Guidelines, a majority of the
members of the Board of Directors must satisfy NASDAQs
criteria for independence. The Board has determined
that all Directors, other than Mr. Haines, and all nominees
are independent under applicable NASDAQ standards.
Board
Committees
The Board of Directors has established the following standing
Committees: Executive Committee, Audit Committee, Compensation
Committee and Nominating and Corporate Governance 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 of
Directors. In practice, the Executive Committee acts in place of
the full Board of Directors only when emergency issues or
scheduling make it difficult or impracticable to assemble the
full Board of Directors. All actions taken by the Executive
Committee must be reported at the next Board meeting. The
Executive Committee held no formal meetings during the year
ended August 31, 2006.
Audit
Committee
The Audit Committee operates under a written charter, adopted in
2004, that reflects the corporate governance reforms embodied by
the Securities and Exchange Commission (the SEC) and
the rules and listing standards of NASDAQ. The primary purpose
of the Audit Committee is to assist the Board in fulfilling its
responsibility to oversee the accounting and financial reporting
process of the Corporation, including the quality and integrity
of the Corporations financial statements and other
financial information provided by the Corporation to any
governmental or regulatory body, the public or other users
thereof; the Corporations compliance with legal and
regulatory requirements; the qualifications, independence and
performance of, and the Corporations relationship with,
its independent registered public accountant; the performance of
the Corporations systems of internal accounting and
financial controls; the performance of the Corporations
systems of internal auditing; and the annual independent audit
of the Corporations financial statements. The functions
performed by the Audit Committee include (i) reviewing the
financial statements with management and the independent
registered public accountant before publication;
(ii) reviewing with management and the independent
registered public accountant significant financial reporting
issues and judgments made in connection with the preparation of
the Corporations financial statements;
(iii) reviewing with the Chief Executive Officer and the
Chief Financial Officer any issues pertaining to the
certifications required to accompany the filing of the
Corporations Annual Report on
Form 10-K
and Quarterly Reports on
Form 10-Q,
and any other information required to be disclosed in connection
therewith; (iv) overseeing the Corporations internal
accounting and financial controls; (v) reviewing legal
matters that may have a material impact on the
Corporations financial statements or the
Corporations compliance policies; (vi) establishing
procedures for the proper handling of complaints concerning
accounting or auditing matters; (vii) considering the
compatibility of the independent registered public accountant
non-audit services with the independent registered public
accountants independence; (viii) reviewing and
approving in advance the annual audit plan and scope of work of
the independent registered public accountant and reviewing with
the independent registered public accountant any audit-related
concerns and managements response; (ix) being
directly responsible for the appointment, compensation,
retention and oversight of the Corporations independent
registered public accountant; and (x) pre-approving all
auditing services and permitted non-audit services to be
performed for the Corporation by the independent registered
public accountant. Additionally, the Audit Committee oversees
the Corporations program to comply with Section 404
of Sarbanes-Oxley, which requires the Corporation 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. The
Corporation believes that each member of the Audit Committee as
constituted satisfies this requirement. Members of the Committee
rely, without independent verification, on the information
provided to
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them and on the representations made by management and the
Corporations independent registered public accountant,
although each member of the Audit Committee has the authority to
engage and determine funding for independent advisors as deemed
necessary. Furthermore, the Audit Committees
considerations and discussions do not assure that the audit of
the Corporations financial statements has been carried out
in accordance with the standards of the Public Company
Accounting Oversight Board (United States), that the financial
statements are presented in accordance with the accounting
principles generally accepted in the United States or that the
Corporations auditor is in fact independent. A
more complete description of these and other Audit Committee
functions is contained in the Audit Committees Charter, a
copy of which is available on the Corporations website at
www.aschulman.com.
The Audit Committee held a total of 6 meetings during the year
ended August 31, 2006. The Audit Committee Chairman
reviewed with PricewaterhouseCoopers LLP and the
Corporations management the Corporations interim
financial results prior to the filing of each of the
Corporations 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 4200(a)(15)
of the NASDAQ listing standards. The Board has also determined
that the Chair of the Audit Committee, Ernest J. Novak, is an
audit committee financial expert as defined in
regulations adopted by the SEC.
Compensation
Committee
The Compensation Committee operates under a written charter
adopted in 2004. 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 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 the Corporation. As set forth in the Compensation
Committees charter, the functions to be performed by the
Compensation Committee include (i) setting the salary and
other compensation of the Chief Executive Officer and the other
executive officers of the Corporation; (ii) reviewing
incentive compensation pools for the Corporation prior to the
annual determination of individual cash and equity based
incentive awards; (iii) approving all employment or
change-in-control
severance agreements, annuity contracts and benefit or
perquisite plans or programs (other than broad-based employee
plans or programs) proposed for executive officers and certain
managers; (iv) periodically reviewing the
Corporations compensation programs and policies to align
them with the Corporations annual and long-term goals and
the interests of the stockholders; and (v) administering,
implementing and interpreting the Corporations long term
incentive plans, including stock option, restricted stock, stock
appreciation right, performance incentive, and similar plans and
arrangements. A more complete description of these and other
Compensation Committee functions is contained in the
Compensation Committees charter, which is available on the
Corporations website at www.aschulman.com.
The Compensation Committee held 5 meetings during the fiscal
year ended August 31, 2006. The Board has determined that
each of the members of the Compensation Committee is independent
as defined under Rule 4200(a)(15) of the NASDAQ listing
standards.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee operates under
a written charter adopted in 2004. The primary purpose of the
Nominating and Corporate Governance Committee is to identify
individuals qualified to become Directors, recommend to the
Board the candidates for election by stockholders or appointment
by the Board to fill a vacancy, recommend to the Board the
composition and Chairs of Board committees, develop and
recommend to the Board guidelines for effective corporate
governance, and lead an annual review of the performance of the
Board and each of its committees. A more complete description of
these and other Nominating and Corporate Governance Committee
functions is contained in the Nominating and Corporate
Governance Committees charter, which is available on the
Corporations website at www.aschulman.com.
In its role as the nominating body for the Board, the Nominating
and Corporate Governance Committee reviews the credentials of
potential Director candidates (including potential candidates
recommended by
7
stockholders in accordance with the Corporations
nominating process), conducts interviews and makes formal
recommendations to the Board for the annual election or interim
appointment of Directors. In making its recommendations, the
Committee considers a variety of factors, including whether the
individuals have demonstrated achievements in business,
education or public service. In addition, the 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 of Directors. The Committee also
considers whether the candidates possess the highest ethical
standards and a strong sense of professionalism, are prepared to
serve the interests of all the 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 the Corporation, the Committee considers
members of the executive management of the Corporation who have
or are in the position to have a broad base of information about
the Corporation and its business. The 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
directors those persons who are recommended to it in writing by
any stockholder. Any stockholder wishing to recommend an
individual to be considered by the 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. The
Corporation 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 5
meetings during the fiscal year ended August 31, 2006. The
Board has determined that each of the members of the Nominating
and Corporate Governance Committee is independent as defined
under Rule 4200(a) (15) of the NASDAQ listing
standards.
Code of
Conduct
The Board of Directors has adopted a Code of Conduct, available
on the Corporations website at www.aschulman.com,
applicable to the Corporations employees, officers and
directors. To further assure compliance, the Corporation
maintains a worldwide hotline that allows employees to report
confidentially any suspected violation of its Code of Conduct.
Executive
Sessions
Executive sessions of non-management Directors (consisting of
all Directors other than Mr. Haines) are regularly
scheduled and were held after each meeting of the Board of
Directors during the fiscal year ended August 31, 2006.
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 Corporate Secretary forwards those
communications directly to the Board member so addressed.
8
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the
Corporations previous or future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate this Proxy Statement or future filings
with the SEC, in whole or in part, the following report shall
not be deemed to be incorporated by reference into any such
filing.
This report describes the Corporations executive
compensation programs and the basis on which fiscal year 2006
compensation determinations were made by the Compensation
Committee in respect of the executive officers of the
Corporation, including the Chief Executive Officer and the other
executive officers named in the compensation tables in this
Proxy Statement.
The Compensation Committee is comprised entirely of Directors
the Board has determined to be independent under the NASDAQ
listing standards. The duties of the Compensation Committee
include determining the base salary level and bonus for the
Chief Executive Officer and for all other executive officers,
and approving the design and awards of all other elements of the
executive pay program. The Compensation Committee further
evaluates executive performance and addresses other matters
related to executive compensation.
Compensation
Policy and Overall Objectives
In determining the amount and composition of executive
compensation, the Compensation Committees goal is to
provide a compensation package that will enable the Corporation
to attract and retain talented executives, reward outstanding
performance and link the interests of the Corporations
executives to the interests of the Corporations
stockholders. In determining actual compensation levels, the
Compensation Committee considers all elements of the program in
total, but also evaluates whether the individual elements of the
compensation program target compensation levels at rates that
are reflective of current market practices. The Compensation
Committee believes that offering market-comparable pay
opportunities allows the Corporation to maintain a stable,
successful management team.
The key elements of the Corporations executive
compensation are base salary, annual bonuses and long-term
incentives. These key elements are addressed separately below.
In determining compensation, the Compensation Committee
considers all elements of an executives total compensation
package.
Competitive market data is provided periodically by an
independent compensation consultant. The data provided compares
the Corporations compensation practices to those of a
group of comparison companies. The Corporations market
data for compensation comparison purposes is comprised of a
group of diversified manufacturing companies that have national
and international business operations. The Compensation
Committee reviews and approves the selection of companies used
for compensation comparison purposes.
In evaluating the comparison group data for compensation
purposes, the Compensation Committee neither bases its decisions
on quantitative relative weights of various factors, nor follows
mathematical formulae. Rather, the Compensation Committee
exercises its discretion and makes its judgment after
considering the factors it deems relevant.
Base
Salaries
The Compensation Committee reviews each executives base
salary annually. Base salaries for executives initially are
determined by evaluating the executives respective levels
of responsibility, prior experience and breadth of knowledge,
internal equity issues and external pay practices. Determination
of increases to base salaries are driven by individual
performance and corporate profitability. Individual performance
is evaluated based on sustained levels of individual
contribution to the Corporation.
In determining Mr. Haines base salary in 2006, the
Compensation Committee considered the Corporations
financial performance for the prior year, Mr. Haines
individual performance and his long-term contributions to the
success of the Corporation. The Compensation Committee also
compared Mr. Haines base salary to the base salaries
of other chief executive officers within a peer group of
specialty chemical companies, including both
9
similarly-sized companies and other chemical and plastics
manufacturers recognized as broader competitors of the
Corporation. Mr. Haines base salary is reported in
the Summary Compensation Table below.
Annual
Bonuses
The Corporations bonus program promotes the
Corporations
pay-for-performance
philosophy by providing executives with direct financial
incentives in the form of annual cash bonuses based on
individual and Corporation performance. Annual bonus
opportunities allow the Corporation to communicate specific
goals that are of primary importance during the coming year and
motivate executives to achieve these goals. In addition, the
Compensation Committee confirmed that Mr. Haines has
discretionary authority to award bonuses for significant
accomplishments, from time to time, to employees, including
other executive officers, although in lesser amounts than would
be available under the Corporations bonus program.
Under the Corporations bonus program, the Corporation
established a total target award for each executive officer
approximately equal to the average award provided to persons
holding similar positions at comparable companies. The award was
measured by stated threshold, target and maximum percentages of
salary. The executive officers actual award was increased
or decreased for the total target award based upon both
Corporation financial results and individual performance.
One-half of the total target award potential was determined by
the financial performance of the Corporation, measured by levels
of operating income, net income or return on assets. For
Mr. Haines, the President, Chief Executive Officer and
Chairman of the Board, Mr. Stefanko, the retired Chief
Financial Officer and Executive Vice President
Finance and Administration and Mr. DeSantis, the current
Vice President Chief Financial Officer and
Treasurer, this financial performance portion of the bonus was
based upon the net income of the Corporation. For all other
executive officers, the financial performance portion of the
bonus was based on the Corporations operating income in
North America. The remaining one-half of the total target
award level was based upon each executive officers
individual performance as measured against personal goals
established for each executive officer. In 2006, the Corporation
met a level of financial performance goals established for
Messrs. Haines, Stefanko and DeSantis, but the North
American segment did not meet the financial performance goals
established under the bonus program for the other executive
officers. All of the executive officers met a level of their
respective personal goals, and Messrs. Rhodes, Andres and Elek
were also granted discretionary bonuses of $51,250, $19,400 and
$11,600. The 2006 bonus awards for Mr. Haines and the other
executive officers, which includes the discretionary bonuses,
are reported in the Summary Compensation Table below.
Long-Term
Incentives
The Corporations 2002 Equity Incentive Plan provides
long-term incentives to its executives. In keeping with the
Corporations commitment to provide a total compensation
package that includes at-risk components of pay, the
Compensation Committee makes annual decisions regarding
appropriate stock-based grants for each executive. When
determining these awards, the Compensation Committee considers
the Corporations financial performance in the prior year,
the executives respective levels of responsibility, prior
experience, and historical award data and compensation practices
at the comparison companies.
Options
On October 21, 2005, options to purchase shares of Common
Stock were granted to executive officers, including options to
purchase 130,000 shares granted to Mr. Haines. These
options, granted in fiscal 2006, were granted as compensation
for performance in fiscal 2005 pursuant to the 2002 Equity
Incentive Plan at an option price equal to the fair market value
($19.20) of such shares (which was determined under the 2002
Equity Incentive Plan as the closing price of the Common Stock
on October 21, 2005, the date of grant). At its
October 16, 2006 meeting, the Compensation Committee
elected to defer consideration of the grant of options to
executive officers, including Mr. Haines, for services
rendered in fiscal 2006 until after the 2006 Annual Meeting.
Executive officers will receive a benefit from the stock options
granted only if the stock price appreciates following the date
the options were granted. This design focuses executive officers
on the creation of stockholder value over the long term and
encourages equity ownership of the Corporation. Stock options
granted under the 2002 Equity Incentive Plan become exercisable
at the rate of 33% per year commencing on the first
anniversary of the
10
date of grant of the option, so long as the optionee remains
employed by the Corporation or a subsidiary, and expire on the
tenth anniversary of the date of grant.
Restricted
Stock
On October 21, 2005, restricted stock was awarded to
certain executive officers of the Corporation. No restricted
shares were awarded to Mr. Haines. This restricted stock
was awarded in fiscal 2006 as compensation for performance in
fiscal 2005 pursuant to the 2002 Equity Incentive Plan. No
restricted shares have been awarded to any executive officers in
fiscal 2007 as compensation for performance in fiscal 2006 as
the Compensation Committee has elected to defer consideration of
the grant of restricted stock awards until after the 2006 Annual
Meeting and consideration thereat of approval of the 2006
Incentive Plan. Restricted stock awarded under the 2002 Equity
Incentive Plan vests on the fourth anniversary of the date of
the awards. Dividends on restricted stock are accrued until the
restrictions lapse and are paid out thereafter. Because of its
vesting requirements, the Compensation Committee believes
restricted stock enhances the Corporations ability to
maintain a stable executive team which is focused on the
Corporations long-term success, and provides executives
with an immediate link to stockholder interests. In determining
restricted stock awards, the Compensation Committee considers
the Corporations financial performance for the prior year,
the executives individual performances and their
respective long-term contributions to the success of the
Corporation.
Supplemental
Executive Retirement Plan
The Corporations Supplemental Executive Retirement
Benefits Plan (the SERP) provides retirement
benefits to executive officers named as participants by the
Board. Mr. Haines and Mr. Stefanko are currently the
only officers of the Corporation named by the Board to
participate in the SERP although Mr. Stefanko retired on
November 1, 2006 and is therefore eligible for the benefits
described below. Under the SERP, a participant will earn a
pension benefit that is equal to 30% of his or her final average
plan compensation, plus an additional one percent for each year
of service, up to a maximum of thirty such years. Thus, a
participant who retires with 30 or more years of service will
receive an annual benefit equal to 60% of the participants
final average plan compensation. The pension benefits payable
under the SERP are reduced by the actuarial value of certain
other plan and deferred compensation that is payable to the
participant.
The following table shows estimated annual benefits payable on
retirement at age 65 to SERP participants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Years of Service
|
|
Compensation
|
|
|
15
|
|
|
20
|
|
|
25
|
|
|
30
|
|
|
35
|
|
|
$
|
200,000
|
|
|
$
|
90,000
|
|
|
$
|
100,000
|
|
|
$
|
110,000
|
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
$
|
300,000
|
|
|
$
|
135,000
|
|
|
$
|
150,000
|
|
|
$
|
165,000
|
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
$
|
400,000
|
|
|
$
|
180,000
|
|
|
$
|
200,000
|
|
|
$
|
220,000
|
|
|
$
|
240,000
|
|
|
$
|
240,000
|
|
$
|
500,000
|
|
|
$
|
225,000
|
|
|
$
|
250,000
|
|
|
$
|
275,000
|
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
$
|
600,000
|
|
|
$
|
270,000
|
|
|
$
|
300,000
|
|
|
$
|
330,000
|
|
|
$
|
360,000
|
|
|
$
|
360,000
|
|
$
|
700,000
|
|
|
$
|
315,000
|
|
|
$
|
350,000
|
|
|
$
|
385,000
|
|
|
$
|
420,000
|
|
|
$
|
420,000
|
|
$
|
800,000
|
|
|
$
|
360,000
|
|
|
$
|
400,000
|
|
|
$
|
440,000
|
|
|
$
|
480,000
|
|
|
$
|
480,000
|
|
$
|
900,000
|
|
|
$
|
405,000
|
|
|
$
|
450,000
|
|
|
$
|
495,000
|
|
|
$
|
540,000
|
|
|
$
|
540,000
|
|
$
|
1,000,000
|
|
|
$
|
450,000
|
|
|
$
|
500,000
|
|
|
$
|
550,000
|
|
|
$
|
600,000
|
|
|
$
|
600,000
|
|
$
|
1,100,000
|
|
|
$
|
495,000
|
|
|
$
|
550,000
|
|
|
$
|
605,000
|
|
|
$
|
660,000
|
|
|
$
|
660,000
|
|
For purposes of determining pension benefits payable under the
SERP, final average plan compensation is the participants
average annual compensation for the highest 36 month period
in the participants last 60 months of employment, and
takes into account the participants base salary and cash
bonuses.
The pension benefits payable under the SERP are reduced by the
actuarial equivalent of (1) the participants primary
social security benefits, (2) benefits payable to the
participant under each of the Corporations Profit Sharing
Plan and Non-Qualified Plan described below, and
(3) benefits payable to the participant under the deferred
11
compensation agreements described below (without regard to any
forfeiture of or other loss of benefits that may occur under
such arrangements on account of a termination for cause or any
other reason).
SERP benefits are payable as a monthly pension, generally
beginning at age 65 or after the participants
retirement, if later. If a participant retires at or after
age 55 with ten years of service, the Board may grant the
participant payment before age 65 in an actuarially reduced
amount. If a participant becomes totally and permanently
disabled and has ten years of service, the Board may grant the
participant payment before age 65 in an actuarially reduced
amount.
In general, SERP pension payments are payable to the participant
as a life annuity (i.e. for the lifetime of the participant).
Participants may elect to receive SERP pension payments in
various optional forms that are the actuarial equivalent of the
participants life annuity. However, a lump sum form of
payment may only be made with the consent of the Board.
As of August 31, 2006, the final average plan compensation
of Mr. Haines and Mr. Stefanko was $808,087 and
$568,807, respectively. As of August 31, 2006,
Mr. Haines had been credited with 40 years and
Mr. Stefanko had been credited with 34 years of
service for purposes of the SERP.
Deductibility
of Executive Compensation
The Committee has reviewed the qualifying compensation
regulations issued by the Internal Revenue Service (the
IRS) under Code Section 162(m), which provide
that no deduction is allowed for applicable employee
remuneration paid by a publicly held corporation to the chief
executive officer or any of the other four highest paid officers
of the corporation to the extent that the remuneration paid to
the employee exceeds $1.0 million for the applicable
taxable year, unless certain conditions are met. Compensation
pursuant to certain stock option plans and other performance
based compensation may be excluded from the $1.0 million
limit. Mr. Haines total compensation exceeded
$1.0 million during the Corporations 2006 fiscal year
and the excess amount was not deductible by the Corporation.
The Committee believes that stock options awarded under the 2002
Equity Incentive Plan and, if approved by stockholders, the 2006
Incentive Plan, will not count toward the Section 162(m)
limit. Stock options still outstanding under earlier Corporation
stock plans and restricted stock awards and dividend units are
not so exempt from the calculation. If compensation attributed
to the exercise or vesting of such options, restricted stock
awards or dividend units causes aggregate compensation to any
employee covered by Section 162(m) to exceed
$1.0 million in any calendar year, any amounts in excess of
$1.0 million may not be deductible to the Corporation.
While the Compensation Committee takes into account the
deductibility of compensation in designing executive officer
compensation, the Compensation Committee expects that the
Corporation will not be able to deduct a portion of
Mr. Haines compensation in fiscal 2007 as a result of
previously granted restricted stock awards which have vested
during fiscal 2007.
The Compensation Committee:
Willard R. Holland, Chair
David G. Birney
Joseph M. Gingo
James A. Karman
Dr. Peggy Miller
Dr. Paul Craig Roberts
12
COMPENSATION
OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid or to be
paid by the Corporation and its subsidiaries in respect of
services rendered during the Corporations last three
fiscal years to the Chief Executive Officer and each of the
other four most highly compensated executive officers (as
measured by salary and bonus) who were serving as executive
officers of the Corporation on August 31, 2006
(collectively, the Named Executive Officers).
Disclosure is also included for Mr. Stefanko, who retired
as an executive officer of the Corporation during 2006.
Summary
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Compensation(1)
|
|
|
Stock
|
|
|
Options
|
|
|
All Other
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Award(s)(2)
|
|
|
(#)(3)
|
|
|
Compensation
|
|
|
Terry L. Haines
|
|
|
2006
|
|
|
$
|
625,355
|
(4)
|
|
$
|
334,260
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
62,345
|
(5)
|
President, Chief Executive
|
|
|
2005
|
|
|
$
|
619,078
|
(4)
|
|
$
|
165,000
|
|
|
$
|
0
|
|
|
|
130,000
|
|
|
$
|
62,922
|
(6)
|
Officer and Chairman of the Board
|
|
|
2004
|
|
|
$
|
569,666
|
(4)
|
|
$
|
165,000
|
|
|
$
|
297,750
|
|
|
|
130,000
|
|
|
$
|
57,293
|
(7)
|
Robert A. Stefanko
|
|
|
2006
|
|
|
$
|
435,793
|
(4)
|
|
$
|
228,420
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
974,306
|
(5)
|
Formerly, Chairman of the Board,
|
|
|
2005
|
|
|
$
|
437,078
|
(4)
|
|
$
|
118,500
|
|
|
$
|
0
|
|
|
|
90,000
|
|
|
$
|
44,302
|
(6)
|
Chief Financial Officer and
Executive
|
|
|
2004
|
|
|
$
|
414,666
|
(4)
|
|
$
|
118,500
|
|
|
$
|
178,650
|
|
|
|
90,000
|
|
|
$
|
40,589
|
(7)
|
Vice President Finance
and Administration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul F.
DeSantis(8)
|
|
|
2006
|
|
|
$
|
167,821
|
|
|
$
|
240,000
|
(9)
|
|
$
|
0
|
|
|
|
60,000
|
|
|
$
|
17,871
|
(5)
|
Chief Financial Officer,
|
|
|
2005
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Vice President and Treasurer
|
|
|
2004
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Barry A. Rhodes
|
|
|
2006
|
|
|
$
|
224,542
|
|
|
$
|
120,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
23,543
|
(5)
|
Executive Vice
President Chief
|
|
|
2005
|
|
|
$
|
188,500
|
|
|
$
|
75,000
|
|
|
$
|
153,600
|
|
|
|
22,000
|
|
|
$
|
19,960
|
(6)
|
Operating Officer, North America
|
|
|
2004
|
|
|
$
|
175,000
|
|
|
$
|
60,000
|
|
|
$
|
138,950
|
|
|
|
22,000
|
|
|
$
|
18,589
|
(7)
|
Ronald G. Andres
|
|
|
2006
|
|
|
$
|
179,719
|
|
|
$
|
55,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
19,061
|
(5)
|
Vice President North
|
|
|
2005
|
|
|
$
|
177,500
|
|
|
$
|
60,000
|
|
|
$
|
134,400
|
|
|
|
20,000
|
|
|
$
|
18,860
|
(6)
|
American Operations
|
|
|
2004
|
|
|
$
|
165,000
|
|
|
$
|
55,000
|
|
|
$
|
119,100
|
|
|
|
20,000
|
|
|
$
|
17,589
|
(7)
|
Gary J.
Elek(10)
|
|
|
2006
|
|
|
$
|
173,745
|
|
|
$
|
46,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
18,463
|
(5)
|
Vice President
Corporate Controller
|
|
|
2005
|
|
|
$
|
171,600
|
|
|
$
|
35,000
|
|
|
$
|
57,600
|
|
|
|
10,000
|
|
|
$
|
18,270
|
(6)
|
and Secretary
|
|
|
2004
|
|
|
$
|
96,250
|
|
|
$
|
33,000
|
|
|
$
|
59,550
|
|
|
|
10,000
|
|
|
$
|
10,735
|
(7)
|
|
|
|
(1) |
|
Includes amounts earned in fiscal year, whether or not deferred.
Perquisites provided to each of the Named Executive Officers did
not exceed the lesser of $50,000 or 10% of total annual salary
and bonus for any Named Executive Officer, and therefore are not
included in these totals. Perquisites include tax preparation
expenses, motor vehicles, automobile fuel and country club
memberships. |
|
(2) |
|
In fiscal 2005, awards of restricted stock were made on
October 22, 2004 in respect of fiscal 2004, which
restricted stock awards were made under the 2002 Equity
Incentive Plan and are reflected above as 2004 restricted stock
awards, valued at the closing market price of the Common Stock
on the date of grant ($19.85). In fiscal 2006, awards of
restricted stock were made on October 21, 2005 in respect
of fiscal 2005 under the 2002 Equity Incentive Plan and are
reflected above as 2005 restricted stock awards, valued at the
closing market price of the Common Stock on the date of grant
($19.20). The total number of restricted shares held and the
aggregate market value (based upon the closing market price at
August 31, 2006 of $23.59) in respect of each Named
Executive Officer are as follows: Mr. Haines held
44,000 shares valued at $1,037,960; Mr. Stefanko held
27,000 shares valued at $636,930; Mr. Rhodes held
23,000 shares valued at $542,570; Mr. Andres held
21,000 shares valued at $495,390; and Mr. Elek held
6,000 shares valued at $141,540. Mr. DeSantis did not
hold any restricted shares. Dividends accrue but are not paid on
the restricted shares until the restrictions thereon lapse. |
|
(3) |
|
As described below under the heading, Compensation of
Executive Officers Stock Options, these
options were granted with respect to services rendered in the
fiscal year indicated. |
13
|
|
|
(4) |
|
Includes Directors fees received from the
Corporations Belgian subsidiary in the following amounts
for the years 2006, 2005 and 2004: $12,793, $14,078 and $19,666. |
|
(5) |
|
Amounts shown include the following: Corporation contributions
to Profit Sharing Plan $21,000 for each of
Messrs. Haines and Stefanko, $17,972 for Mr. Andres,
$21,000 for Mr. Rhodes and $16,782 for Mr. DeSantis
and $17,374 for Mr. Elek; amounts accrued by the
Corporation for the fiscal year ended August 31, 2006 under
non-qualified profit sharing plan $40,256 for
Mr. Haines, $21,300 for Mr. Stefanko; and $1,454 for
Mr. Rhodes; and Corporation payments of term life insurance
premiums $1,089 for each Named Executive Officer.
For Mr. Stefanko, the amount includes $930,917 which the
Corporation agreed in fiscal 2006 to pay to Mr. Stefanko in
fiscal 2007, pursuant to the terms of the Transition Agreement
dated April 17, 2006, between the Corporation and
Mr. Stefanko. |
|
(6) |
|
Amounts shown include the following: Corporation contributions
to Profit Sharing Plan $20,500 for each of
Messrs. Haines and Stefanko, $17,750 for Mr. Andres,
$18,850 for Mr. Rhodes and $17,160 for Mr. Elek;
amounts accrued by the Corporation for the fiscal year ended
August 31, 2005 under non-qualified profit sharing
plan $40,000 for Mr. Haines and $21,800 for
Mr. Stefanko; Corporation payments of term life insurance
premiums $1,110 for each Named Executive Officer;
and payments for tax gross-ups $1,312 for
Mr. Haines and $892 for Mr. Stefanko. |
|
(7) |
|
Amounts shown include the following: Corporation contributions
to Profit Sharing Plan $20,000 for each of
Messrs. Haines and Stefanko, $16,500 for Mr. Andres,
$17,500 for Mr. Rhodes and $9,625 for Mr. Elek;
amounts accrued by the Corporation for the fiscal year ended
August 31, 2004 under non-qualified profit sharing
plan $35,000 for Mr. Haines and $19,500 for
Mr. Stefanko; Corporation payments of term life insurance
premiums $1,089 for each Named Executive Officer;
and payments for tax gross-ups $1,204 for
Mr. Haines. |
|
(8) |
|
Mr. DeSantis commenced employment with the Corporation on
January 23, 2006. |
|
(9) |
|
Includes a $120,000 bonus paid upon commencement of employment. |
|
(10) |
|
Mr. Elek commenced employment with the Corporation on
February 1, 2004. |
Stock
Options
No stock options were granted to the Named Executive Officers
during fiscal 2006 except for options to purchase shares granted
to the Named Executive Officers on October 21, 2005 in
respect of fiscal 2005, which option awards were made under the
2002 Equity Incentive Plan and were reported in the Proxy
Statement for the 2005 Annual Meeting.
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities Underlying
|
|
Value of
|
|
|
Shares
|
|
|
|
Unexercised Options at
|
|
Unexercised
In-the-Money
|
|
|
Acquired on
|
|
Value
|
|
Fiscal Year-End
|
|
Options at Fiscal Year-End
|
Name
|
|
Exercise
|
|
Realized(1)
|
|
Exercisable/Unexercisable
|
|
Exercisable/Unexercisable(2)
|
|
Terry L. Haines
|
|
|
134,167
|
|
|
$
|
1,379,736
|
|
|
|
129,999/260,001
|
|
|
$
|
664,795
|
/$1,136,205
|
Robert A. Stefanko
|
|
|
45,000
|
|
|
$
|
460,950
|
|
|
|
90,000/180,000
|
|
|
$
|
446,400
|
/$786,600
|
Paul F. DeSantis
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0/60,000
|
|
|
$
|
0
|
/$0
|
Barry A. Rhodes
|
|
|
20,500
|
|
|
$
|
120,723
|
|
|
|
7,333/43,334
|
|
|
$
|
27,425
|
/$188,570
|
Ronald G. Andres
|
|
|
12,000
|
|
|
$
|
111,960
|
|
|
|
31,999/39,001
|
|
|
$
|
222,456
|
/$169,234
|
Gary J. Elek
|
|
|
0
|
|
|
$
|
0
|
|
|
|
3,333/16,667
|
|
|
$
|
12,465
|
/$68,835
|
|
|
|
(1) |
|
Amounts shown reflect the difference between the exercise price
paid by the executive officer for Common Stock acquired upon the
exercise of options and the fair market value of the Common
Stock on the date of exercise. |
14
|
|
|
(2) |
|
The value of unexercised stock options is based on the
difference between the exercise price of the options and the
closing price per share of Common Stock on August 31, 2006
of $23.59. |
Employment
Contracts and
Change-In-Control
Arrangements
The Corporation has employment agreements with
Messrs. Haines, DeSantis, Andres, Rhodes and certain other
senior personnel. The employment agreements of
Messrs. Haines, DeSantis, Andres and Rhodes have initial
three-year terms. Such agreements automatically are extended at
the end of each month for an additional month unless prior
notice of termination is given, to constitute at all times a
three-year agreement; provided, however, that no such monthly
extension shall occur after the last day of the calendar month
in which the executive officer turns 62. The employment
agreements provide that in the event employment is terminated
following a merger, consolidation, liquidation, or other change
in control (collectively, Change in Control) of the
Corporation for any reason, except for termination by the
Corporation for cause, termination for death or disability or
termination by the employee without good reason, the employee
shall be paid a lump sum amount equal to a multiple (equal to
the initial term of such agreement) of the sum of (i) the
higher of his annual salary payable prior to the event causing
the termination or salary payable prior to the Change in
Control, plus (ii) an amount equal to the higher of his
bonus earned in the preceding fiscal year or the average bonus
earned in the most recent three fiscal years. In addition, upon
such a termination of employment following a Change in Control,
each of the employment agreements provides that the employee
also will continue to receive certain insurance benefits not
provided to the employee by another source after termination,
for a period of time equal to the original term of such
employees employment agreement, and the employee will be
paid a lump sum amount equal to the sum of (i) any unpaid
annual incentive compensation previously awarded to the
employee, the payment of which was contingent only upon
continued employment, and (ii) a pro rata portion of his
bonus for the fiscal year in which the termination occurred.
Additionally, during the one-month period beginning with the
first day of the month immediately following the first
anniversary of a Change in Control, the employment agreement of
Mr. Haines provides that he may terminate his employment
for any reason and will still be entitled to the
Change-in-Control
payments described above. If the Corporation terminates an
employees employment without cause prior to the expiration
of the term of the employment agreement and prior to a Change in
Control, the employee shall receive his salary for the remaining
term of his employment agreement, plus a bonus each year for the
remaining term of his agreement in an amount equal to fifty
percent of his average annual bonus during the most recent five
calendar years of employment. If the employees employment
is terminated by reason of death, the Corporation shall pay a
lump sum amount equal to sixty percent of the employees
salary for 24 months. In addition, the amounts described
above payable under the employment agreement for Mr. Haines
shall be grossed up to cover certain taxes payable
by him on certain of the amounts paid to such employee in
respect of a Change in Control of the Corporation.
Notwithstanding the foregoing, in respect of the employment
agreements of Messrs. DeSantis, Andres and Rhodes, the
Corporation is not obligated to pay any amount that is in excess
of the maximum amount that it can deduct for federal income tax
purposes. These employment agreements may tend to discourage a
takeover attempt of the Corporation inasmuch as a Change in
Control of the Corporation could result in increased
compensation expense.
The Corporation has a qualified Profit Sharing Plan (the
Profit Sharing Plan) that provides that in any year
the Board of Directors, in its discretion, may authorize the
payment of contributions to the Corporations
Profit-Sharing Trust, which contributions are allocated among
participants. The maximum amount that may be allocated to a
participant generally is limited to the lesser of
(i) $40,000 or (ii) one hundred percent of the
participants compensation. Participation in the Profit
Sharing Plan is available to all salaried employees of the
Corporation (and participating subsidiaries) who are employed on
the last day of the Profit Sharing Plan year. Benefits under the
Profit Sharing Plan vest in accordance with a specified formula
that provides for partial vesting starting after three years of
employment with the Corporation and full vesting after seven
years of employment with the Corporation. The assets of the
Profit-Sharing Trust are invested and each participants
account reflects the aggregate investment performance of the
Trust assets. For the fiscal year ended August 31, 2006,
the amounts contributed to the Profit Sharing Plan accounts for
the Named Executive Officers were $21,000 for each of
Messrs. Haines and Stefanko, $17,972 for Mr. Andres,
$21,000 for Mr. Rhodes and $17,374 for Mr. Elek and
$16,782 for Mr. DeSantis.
The Corporation also has a non-qualified Profit Sharing Plan
(the Non-Qualified Plan) pursuant to which the
Corporation may accrue certain amounts for the benefit of the
Non-Qualified Plans participants, in order to restore
15
to such participants amounts not available to them under the
Profit Sharing Plan due to certain limitations thereunder.
Benefits under the Non-Qualified Plan vest in accordance with a
specified formula that provides for partial vesting starting
after three years of employment with the Corporation and full
vesting after seven years of employment with the Corporation. In
addition, upon a Change in Control of the Corporation, benefits
become fully vested. Amounts accrued by the Corporation 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 Profit Sharing Trust
pursuant to the Profit Sharing Plan. For the fiscal year ended
August 31, 2006, the amounts accrued (excluding the assumed
investment based performance earnings thereon) by the
Corporation pursuant to the Non-Qualified Plan for the benefit
of the persons listed in the Summary Compensation Table were
$40,000 for Mr. Haines, $21,300 for Mr. Stefanko and $1,454
for Mr. Rhodes.
The Corporation also has deferred compensation agreements with
Messrs. Haines and Stefanko, providing for the payment of
benefits for ten years following retirement, disability or death
in the annual amount of $100,000 for Mr. Haines and
$100,000 (under two agreements for $50,000 each) for
Mr. Stefanko. The effective dates of Mr. Haines
Agreement is 1991 and of Mr. Stefankos two agreements
are 1985 and 1991. No additional benefits are payable under the
agreements upon a Change in Control of the Corporation; however,
payment of all of the benefits of Messrs. Haines and
Stefanko will be accelerated in the event of a termination of
employment following certain Changes in Control. The Corporation
owns and is the beneficiary of life insurance policies upon the
lives of Messrs. Haines and Stefanko, in the amount of
$1,000,000 each.
In connection with Mr. Stefankos decision to retire
from the Corporation, the Corporation entered into a Transition
Agreement with Mr. Stefanko on April 17, 2006 (the
Transition Agreement). The Transition Agreement was
filed as Exhibit 99.1 to the Corporations Current
Report on
Form 8-K
filed with the SEC on April 21, 2006 and the summary below
is qualified in its entirety by reference to the complete text
of the Transition Agreement. Pursuant to the Transition
Agreement, Mr. Stefanko continued to receive the same
compensation provided under his then current employment
agreement through October 31, 2006, instead of
March 1, 2008 as anticipated under that agreement. As soon
as permitted after November 1, 2006 (which is expected to
be six months thereafter), the Corporation will pay
Mr. Stefanko a lump sum of $930,917. In addition to this
lump sum payment, the Corporation will facilitate payment or the
availability of any benefit or amount due under any program the
Corporation maintains and in which Mr. Stefanko
participates (including, without limitation, payments under the
1985 and 1991 Deferred Compensation Agreements, the Profit
Sharing Plan and the Non-Qualified Plan) but only to the extent
that such benefits were earned and vested on or before
November 1, 2006. The Transition Agreement also confirms
that effective November 1, 2006, Mr. Stefanko and his
spouse will be entitled to participate in the Corporations
retiree medical program and that in the event such program is
terminated or amended the Corporation will provide
Mr. Stefanko and his spouse with comparable coverage to
that being provided under the plan as it was in effect on
April 1, 2006. The Corporation has agreed to continue an
insurance policy on Mr. Stefankos life ($250,000
death benefit) through March 1, 2008. Thereafter, the
policy will be administered as if Mr. Stefanko had retired
at age 65. The Corporation will fully
gross-up
Mr. Stefanko for the effect of any excise tax under
Section 4999 of the Internal Revenue Code on payments made
or due to Mr. Stefanko, and Mr. Stefanko will be
entitled to retain his laptop computer, Blackberry handheld
device and cellular telephone, with access to his personal email
account, through March 1, 2008.
16
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of
October 18, 2006 (except as otherwise indicated by
footnote) in respect of 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 the Corporation to own five percent 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:
|
|
|
|
|
|
|
|
|
|
|
Total Beneficial
|
|
|
Percent of
|
|
Name
|
|
Ownership
|
|
|
Outstanding
|
|
|
Directors, Executive Officers
and Nominees
|
Terry L.
Haines(1)(2)
|
|
|
442,366
|
|
|
|
1.64
|
%
|
Robert A.
Stefanko(1)(2)(3)
|
|
|
283,662
|
|
|
|
1.05
|
|
Ronald G.
Andres(1)(2)(4)
|
|
|
93,099
|
|
|
|
*
|
|
Barry A.
Rhodes(1)(2)
|
|
|
59,366
|
|
|
|
*
|
|
Gary J.
Elek(1)(2)
|
|
|
15,999
|
|
|
|
*
|
|
Paul F.
DeSantis(1)(2)
|
|
|
1,834
|
|
|
|
*
|
|
Dr. Peggy
Miller(1)(2)
|
|
|
15,500
|
|
|
|
*
|
|
James S.
Marlen(1)(2)
|
|
|
17,000
|
|
|
|
*
|
|
Dr. Paul Craig
Roberts(1)(2)
|
|
|
17,000
|
|
|
|
*
|
|
Willard R.
Holland(1)(2)
|
|
|
17,500
|
|
|
|
*
|
|
James A.
Karman(1)(2)
|
|
|
18,500
|
|
|
|
*
|
|
Joseph M.
Gingo(1)(2)
|
|
|
14,500
|
|
|
|
*
|
|
John B.
Yasinsky(1)(2)(5)
|
|
|
16,500
|
|
|
|
*
|
|
Ernest J.
Novak, Jr.(1)(2)
|
|
|
9,700
|
|
|
|
*
|
|
David G.
Birney(1)(2)
|
|
|
2,000
|
|
|
|
*
|
|
James A.
Mitarotonda(2)(6)(7)
|
|
|
1,538,666
|
|
|
|
5.75
|
|
Howard R. Curd
|
|
|
0
|
|
|
|
0.00
|
|
Michael A. McManus, Jr.
|
|
|
0
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
All Directors and Executive
Officers as a group (20
persons)(1)(2)(3)
|
|
|
2,649,249
|
|
|
|
9.67
|
%
|
|
5% Or Greater
Stockholders
|
Royce & Associates
LLC(8)
|
|
|
3,048,007
|
|
|
|
11.39
|
%
|
1414 Avenue of Americas
|
|
|
|
|
|
|
|
|
New York, NY 10019
|
|
|
|
|
|
|
|
|
Barington Companies Offshore Fund,
Ltd.
|
|
|
2,816,536
|
|
|
|
10.52
|
%
|
Barington Companies Equity
Partners, L.P., Barington Investments, L.P., James A.
Mitarotonda, Starboard Value & Opportunity Fund, LLC,
Parche, LLC, RJG Capital Partners, D.B. Zwirn Special
Opportunities Fund, L.P., D.B. Zwirn Special Opportunities Fund,
Ltd. and HCM/Z Special Opportunities
LLC(7)
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors
Inc.(9)
|
|
|
2,656,218
|
|
|
|
9.92
|
%
|
1299 Ocean Avenue, 11th Floor
|
|
|
|
|
|
|
|
|
Santa Monica, CA 90401
|
|
|
|
|
|
|
|
|
Snyder Capital Management,
L.P./Snyder Capital Management,
Inc.(10)
|
|
|
1,496,076
|
|
|
|
5.59
|
%
|
350 California Street,
Suite 1460
|
|
|
|
|
|
|
|
|
San Francisco, CA 94104
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1% of the shares outstanding |
|
(1) |
|
Includes the following number of shares that are not owned, but
can be purchased within sixty days upon the exercise of options
granted under the Corporations 1991 Stock Incentive Plan,
1992 Non-Employee Directors Stock Option Plan
and/or 2002
Equity Incentive Plan: 259,999 by Terry L. Haines; 180,000 by |
17
|
|
|
|
|
Robert A. Stefanko; 50,999 by Ronald G. Andres; 28,666 by Barry
A. Rhodes; 9,999 by Gary J. Elek; 6,000 by each of
Dr. Peggy Miller, James A. Karman, Willard R. Holland, John
B. Yasinsky and Joseph M. Gingo; 4,500 by each of Dr. Paul
Craig Roberts and James S. Marlen; and 621,995 by all Directors
and executive officers as a group. |
|
(2) |
|
Includes the following number of restricted shares of Common
Stock awarded under the Corporations 1991 Stock Incentive
Plan, 1992 Non-Employee Directors Stock Option Plan
and/or 2002
Equity Incentive Plan: 31,000 for Terry L. Haines; 18,000 for
Robert A. Stefanko; 18,000 for Ronald G. Andres; 20,000 for
Barry A. Rhodes; 6,000 for Gary J. Elek; 8,000 for each of
Dr. Paul Craig Roberts, Dr. Peggy Miller, Willard R.
Holland, James A. Karman, James S. Marlen, John B. Yasinsky and
Joseph M. Gingo; 6,500 for Mr. Novak; 2,000 for each of
David G. Birney and James A. Mitarotonda and 171,500 for all
Directors and executive officers as a group. |
|
(3) |
|
Mr. Stefanko owns 47,496 shares jointly with his
spouse, and he has shared voting power with regard to those
shares. The Trust for Barbara J. Stefanko, Barbara J. Stefanko
Trustee, holds 29,166 shares. Barbara J. Stefanko is the
spouse of Robert A. Stefanko. |
|
(4) |
|
Mr. Andres owns 5,300 shares jointly with his spouse,
and he has shared voting and dispositive power with respect to
such shares. |
|
(5) |
|
Mr. Yasinsky owns 2,000 shares jointly with his
spouse, and he has shared voting and dispositive power with
respect to such shares. |
|
(6) |
|
Includes 500,259 shares of Common Stock held by Barington
Companies Equity Partners, L.P. (Barington),
672,300 shares held by Barington Companies Offshore Fund,
Ltd. (Barington Fund) and 364,107 shares
beneficially owned by Barington Investments, L.P.
(Barington Investments). Mr. Mitarotonda is the
sole stockholder and director of LNA Capital Corp.
(LNA), which is the general partner of Barington
Capital Group, L.P. (Barington Capital), which is
the majority member of Barington Companies Advisors, LLC
(Barington Advisors), Barington Companies Investors,
LLC (Barington Investors) and Barington Offshore
Advisors, LLC (Barington Offshore). Barington
Advisors is the investment advisor to Barington and the
investment advisor and general partner of Barington Investments.
Barington Investors is the general partner of Barington.
Barington Advisors may be deemed to have sole power to vote and
dispose of the shares owned by Barington Investments and shared
power with Barington Investors to vote and dispose of the shares
owned by Barington. Barington Offshore is the investment advisor
of Barington Fund. Barington Offshore may be deemed to have sole
power to vote and dispose of the shares owned by Barington Fund.
Also, Mr. Mitarotonda, LNA Capital Corp. and Barington
Capital each may be deemed to have sole power to vote and
dispose of the shares owned by Barington, Barington Fund and
Barington Investments. Mr. Mitarotonda disclaims beneficial
ownership of any such shares except to the extent of his
pecuniary interest therein. |
|
(7) |
|
As reported on a Schedule 13D/A filed with the Securities
and Exchange Commission on October 26, 2006, Barington,
Barington Fund, Barington Investments, Barington Advisors,
Barington Investors, Barington Offshore, Barington Capital, LNA,
Mr. Mitarotonda, Starboard Value & Opportunity
Fund, LLC (Starboard), Parche, LLC
(Parche), Admiral Advisors, LLC
(Admiral), Ramius Capital Group, L.L.C.
(Ramius), C4S & Co., L.L.C.
(C4S), Mr. Peter Cohen (Cohen),
Mr. Morgan Stark (Stark), Mr. Jeffrey
Solomon (Solomon), Mr. Thomas Strauss
(Strauss), RJG Capital Partners, L.P. (RJG
Partners), RJG Capital Management, LLC (RJG
Management), Mr. Ronald Gross (Gross),
D.B. Zwirn Special Opportunities Fund, L.P.(Zwirn
Fund L.P.), D.B. Zwirn Special Opportunities Fund,
Ltd. (Zwirn Fund Ltd.), HCM/Z Special
Opportunities LLC (HCM/Z), D.B. Zwirn &
Co., L.P.(Zwirn & Co.), DBZ GP, LLC
(DBZ), Zwirn Holdings, LLC (Zwirn
Holdings) and Mr. Daniel B. Zwirn (Zwirn)
beneficially own, in the aggregate, 2,816,536 shares of
Common Stock. As disclosed in the Schedule 13D/A, Barington
beneficially owns 500,259 shares, Barington Fund
beneficially owns 672,300 shares, Barington Investments
beneficially owns 364,107, Starboard beneficially owns
978,916 shares, Parche beneficially owns
186,454 shares, RJG Partners beneficially owns
12,500 shares, Zwirn Fund L.P. beneficially owns
8,630 shares, Zwirn Fund Ltd. beneficially owns
61,958 shares and HCM/Z beneficially owns
29,412 shares. Mr. Mitarotonda also beneficially owns
2,000 restricted shares of Common Stock granted to him under the
2002 Equity Incentive Plan. Mr. Mitarotonda is the sole
stockholder and director of LNA, which is the general partner of
Barington Capital, which is the majority member of Barington
Advisors, Barington Investors and |
18
|
|
|
|
|
Barington Offshore. Barington Advisors is the investment advisor
to Barington and the investment advisor and general partner of
Barington Investments. Barington Investors is the general
partner of Barington. Barington Advisors may be deemed to have
sole power to vote and dispose of the shares owned by Barington
Investments and shared power with Barington Investors to vote
and dispose of the shares owned by Barington. Barington Offshore
is the investment advisor of Barington Fund. Barington Offshore
may be deemed to have sole power to vote and dispose of the
shares owned by Barington Fund. Also, Mr. Mitarotonda may
be deemed to have sole power to vote and dispose of the shares
owned by Barington, Barington Fund and Barington Investments.
Mr. Mitarotonda disclaims beneficial ownership of any such
shares except to the extent of his pecuniary interest therein.
Mr. Mitarotonda may be deemed to have sole power to vote
and dispose of the 2,000 shares of restricted Common Stock
beneficially owned by him. C4S is the managing member of Ramius,
which is the sole member of Admiral, which is the managing
member of each of Starboard and Parche, and, accordingly, C4S,
Ramius and Admiral each may be deemed to have the power to vote
and dispose of the shares owned by Starboard and Parche.
Messrs. Cohen, Stark, Solomon and Strauss are the managing
members of C4S, and, accordingly, each may be deemed to share
the power to vote and dispose of the shares owned by Starboard
and Parche. Messrs. Cohen, Stark, Solomon and Strauss
disclaim beneficial ownership of such shares. Mr. Gross is
the managing member of RJG Management, which in turn is the
general partner of RJG Partners, and, accordingly,
Mr. Gross and RJG Management each may be deemed to have the
power to vote and dispose of the shares owned by RJG Partners.
Mr. Gross disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest therein.
Mr. Zwirn is the managing member of Zwirn Holdings, which
is the managing member of DBZ, which is the general partner of
Zwirn & Co., which is the manager of each of Zwirn
Fund L.P., Zwirn Fund Ltd., HCM/Z, and, accordingly,
Mr. Zwirn, Zwirn Holdings, DBZ and Zwirn & Co.
each may be deemed to have the power to vote and dispose of the
shares owned by Zwirn Fund L.P., Zwirn Fund Ltd. and
HCM/Z. Mr. Zwirn disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
The principal business address for each of Barington and
Barington Investments is 888 Seventh Avenue, 17th Floor, New
York, NY 10019. Barington Funds principal business address
is c/o Bison Financial Services LTD, Bison Court Road Town,
Tortola, British Virgin Islands. Starboards and
Parches principal business address is 666 Third Avenue,
26th Floor, New York, NY 10017. RJG Partners principal business
address is 11517 West Hill Drive, North Bethesda, Maryland
20852. Zwirn Fund L.P.s principal business address is 745
Fifth Avenue, 18th Floor, New York, New York 10151. Zwirn
Fund Ltd.s principal business address is c/o Goldman
Sachs (Cayman) Trust, Limited, P.O. Box 896 GT, George Town,
Harbour Centre, 2nd Floor, Grand Cayman, Cayman Island, British
West Indies. HCM/Zs principal business address is c/o
Highbridge Capital Corporation, Corporate Centre, 4th Floor, 27
Hospital Road, Grand Cayman, Cayman Islands, British West Indies. |
|
(8) |
|
As reported in a Schedule 13G/A dated January 31, 2006. |
|
(9) |
|
As reported in a Schedule 13G/A dated February 1, 2006
and filed with the SEC on February 6, 2006, Dimensional
Fund Advisors Inc. (Dimensional) is the
beneficial owner of and has the sole power to vote or direct the
voting of, and the sole power to dispose or direct the
disposition of, an aggregate of 2,656,218 shares of Common
Stock. According to the Schedule 13G, Dimensional is an
investment advisor registered under Section 203 of the
Investment Advisors Act of 1940, furnishes investment advice to
four investment companies registered under the Investment
Company Act of 1940, and serves as investment manager to certain
other commingled group trusts and separate accounts (the
Funds). As reported in the Schedule 13G,
Dimensional possesses investment
and/or
voting power over the Common Stock owned by the Funds, and may
be deemed to be the beneficial owner of such shares. However,
all such shares are owned by the Funds, and Dimensional
disclaims beneficial ownership of such shares in the
Schedule 13G/A. |
|
(10) |
|
As reported in a Schedule 13G/A dated and filed with the
SEC on February 15, 2006, by Snyder Capital Management,
L.P. (SCMLP) and Snyder Capital Management, Inc.
(SCMI and, collectively with SCMLP, the
Filers). The Schedule 13G/A states the direct
parent company of SMI is IXIS Asset Management North America,
L.P. (formerly known as CDC IXIS Asset Management North America,
L.P.). IXIS Asset Management North America is ultimately owned
principally by three large affiliated French financial services
firms: the Caisse des Dépôts et Consignations
(CDC); the Caisse National des Caisses
dEpargne (CNCE), a financial institution owned
by the CDC and by the French regional savings banks known as the
Caisses dEpargne; and by CNP Assurances, a leading French
life insurance company. |
19
|
|
|
|
|
SCMI and IXIS Asset Management North America operate under an
understanding that all investment and voting decisions regarding
managed accounts are to be made by SCMI and SCMLP and not by
IXIS Asset Management North America or any entity controlling
it. Accordingly, SCMI and SCMLP do not consider IXIS Asset
Management North America or any entity controlling it to have
any direct or indirect control over the securities held in
managed accounts. As reported in the Schedule 13G/A, each
of SCMLP and SCMI have shared voting and dispositive power over
1,496,076 shares of Common Stock. |
PERFORMANCE
GRAPH
The following graph compares total stockholder returns in
respect of shares of Common Stock over the last five fiscal
years (i.e. the cumulative changes over the past five-year
period of $100 invested at August 31, 2001) to the
Standard & Poors 500 Stock Index (S&P
500) and the Standard & Poors 500 Specialty
Chemicals Index (S&P Specialty Chemicals). Total
return values for shares of Common Stock, S&P 500 and
S&P Specialty Chemicals were calculated based upon market
weighting at the beginning of the period and include
reinvestment of dividends on a quarterly basis. The stockholder
returns shown on the graph below are not necessarily indicative
of future performance.
The following graph shall not be deemed incorporated by
reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the
extent the Corporation specifically incorporates this
information by reference and otherwise shall not be deemed filed
under such Acts.
|
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8/01
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8/02
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8/03
|
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8/04
|
|
|
8/05
|
|
|
|
8/06
|
A. Schulman, Inc.
|
|
|
$
|
100.00
|
|
|
|
$
|
158.32
|
|
|
|
$
|
124.13
|
|
|
|
$
|
159.85
|
|
|
|
$
|
149.71
|
|
|
|
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$
|
198.96
|
|
S & P 500
|
|
|
$
|
100.00
|
|
|
|
$
|
82.01
|
|
|
|
$
|
91.90
|
|
|
|
$
|
102.42
|
|
|
|
$
|
115.28
|
|
|
|
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$
|
125.51
|
|
S & P Specialty Chemicals
|
|
|
$
|
100.00
|
|
|
|
$
|
110.00
|
|
|
|
$
|
115.21
|
|
|
|
$
|
132.82
|
|
|
|
$
|
145.27
|
|
|
|
|
$
|
171.63
|
|
|
|
|
|
|
|
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|
AUDIT
COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of the
Corporations previous or future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate this Proxy Statement or future filings
with the SEC, in whole or in part, the following report shall
not be deemed to be incorporated by reference into any such
filing.
20
The Audit Committee includes the following members of the Board
of Directors: Willard R. Holland, James A. Karman, James S.
Marlen, Ernest J. Novak, Jr. and John B. Yasinsky. In
addition, Mr. Mitarotonda became a member of the Audit
Committee effective October 17, 2006, after the date this
Audit Committee Report was adopted.
The Audit Committee has met, reviewed and discussed the audited
consolidated financial statements of the Corporation for the
fiscal year ended August 31, 2006, with the
Corporations management, who represented to the Audit
Committee that the financial statements were prepared in
accordance with accounting principles generally accepted in the
United States. The Audit Committee has discussed with
PricewaterhouseCoopers LLP, the Corporations independent
registered public accountant, the matters required to be
discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees), as amended and PCAOB
Auditing Standard No. 2 (An Audit of Internal Control Over
Financial Reporting Performed in Conjunction with an Audit of
Financial Statements).
The Audit Committee also has received the written disclosures
and the letter from PricewaterhouseCoopers LLP required by
Independence Standards Board Standard No. 1 (Independence
Discussion with Audit Committee), and the Audit Committee has
discussed the independence of PricewaterhouseCoopers LLP with
that firm.
Based upon the Audit Committees review and discussions
noted above, the Audit Committee recommended that the
Corporations audited financial statements be included in
the Corporations Annual Report on
Form 10-K
for the fiscal year ended August 31, 2006 for filing with
the SEC.
The Audit Committee:
Ernest J. Novak, Jr., Chair
Willard R. Holland
James A. Karman
James S. Marlen
John B. Yasinsky
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTANT
The Audit Committee of the Board of Directors of the Corporation
has selected PricewaterhouseCoopers LLP as independent
registered public accountant to examine the books, records and
accounts of the Corporation and its subsidiaries for the fiscal
year ending August 31, 2007. This selection is being
presented to stockholders for ratification or rejection at this
Annual Meeting. The Audit Committee and the Board of
Directors each recommends that such selection be ratified.
PricewaterhouseCoopers LLP was the independent registered public
accountant of the Corporation for the fiscal year ended
August 31, 2006, and is considered by the Audit Committee
and the Board of Directors to be well qualified. Representatives
of PricewaterhouseCoopers LLP will be present at the Annual
Meeting to make a statement if they desire to do so and will be
available to respond to appropriate questions.
For ratification, this proposal will require the affirmative
vote of the holders of a majority of the shares of Common Stock
represented at the Annual Meeting in person or by proxy. Votes
on the ratification of PricewaterhouseCoopers LLP marked
abstain and broker non-votes will not be counted as
votes cast, but will count toward the determination of the
presence of a quorum and have the same effect as votes cast
against the proposal. If the resolution is rejected, or if
PricewaterhouseCoopers LLP declines to act or becomes incapable
of acting as the independent registered public accountant of the
Corporation, or if its employment is discontinued, the Audit
Committee will appoint another public auditor, continued
employment of whom after the 2007 Annual Meeting of Stockholders
will be subject to ratification by the stockholders.
21
Fees
Billed by Independent Registered Public Accountant
Set forth below are the aggregate fees billed for professional
services rendered to the Corporation by PricewaterhouseCoopers
LLP, its independent registered public accountant for fiscal
2006 and fiscal 2005.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006
|
|
|
Fiscal 2005
|
|
|
Audit
Fees(1)
|
|
$
|
2,860,500
|
|
|
$
|
3,152,300
|
|
Audit-Related Fees
|
|
$
|
17,000
|
|
|
$
|
48,000
|
|
Tax
Fees(2)
|
|
$
|
847,000
|
|
|
$
|
1,048,000
|
|
All Other Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
Comprised of the aggregate fees for professional services
rendered by PricewaterhouseCoopers LLP in connection with its
integrated audit of the Corporations consolidated
financial statements and its internal control over financial
reporting, and its limited reviews of the Corporations
unaudited consolidated interim financial statements included in
the Corporations Quarterly Reports on
Form 10-Q,
as well as statutory audits of the Corporations
subsidiaries and consents to SEC filings. |
|
(2) |
|
Comprised of professional services rendered by
PricewaterhouseCoopers LLP for tax planning and advice and
domestic and international tax compliance and tax return
preparation. |
Pre-Approval
of Fees
The Audit Committee pre-approves the audit and non-audit
services performed by the independent registered public
accountant to assure that the provision of the services does not
impair the registered public accountants independence.
Unless a type of service to be provided by the independent
registered public accountant has received general pre-approval,
it requires specific pre-approval by the Committee. In addition,
any proposed services exceeding pre-approved cost levels require
specific Audit Committee pre-approval. The Audit Committee has
delegated pre-approval authority to its Chairman, provided that
the pre-approval is to be reviewed with the Audit Committee at
its next regular meeting.
PROPOSAL 3
APPROVAL OF THE A. SCHULMAN, INC. 2006 INCENTIVE PLAN
Purpose
of the A. Schulman, Inc. 2006 Incentive Plan and
Recommendation
The Corporation is asking its stockholders to approve the A.
Schulman, Inc. 2006 Incentive Plan (the 2006 Plan).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ALL
STOCKHOLDERS VOTE FOR APPROVAL OF THE 2006 PLAN.
Purpose
of the 2006 Plan
The 2006 Plan is intended to enhance the long-term financial
success of the Corporation and its related entities and to
increase stockholder value by:
|
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|
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|
Providing employees, consultants and non-employee directors
an opportunity to acquire and maintain an ownership interest in
the Corporation. The Corporation believes that
stockholders interests are best served if the compensation
paid to persons providing services to the Corporation and its
related entities depends, in significant part, on the growth of
the business of the Corporation and its related entities.
|
|
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|
Enabling the Corporation and its related entities to attract
and retain the services of outstanding employees, consultants
and non-employee directors upon whose judgment and special
efforts the successful conduct of the business of the
Corporation and its related entities is largely
dependent. The Corporation believes that the type
of awards available under the 2006 Plan will allow it
flexibility to tailor its incentive compensation program to
enhance the Corporations success as its business evolves.
|
22
The Corporation also believes that several provisions of the
2006 Plan enhance stockholders
interests. These include:
|
|
|
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|
Requiring that stock options and stock appreciation rights
(SARs) bear an exercise price equal to or greater
than the fair market value of the shares on the date the award
is granted;
|
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|
Prohibiting any repricing of stock options and SARs;
|
|
|
|
Limiting the total number of shares that may be issued under the
2006 Plan and requiring stockholder approval of any
authorization of additional shares;
|
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|
Limiting the awards that may be issued to each
participant; and
|
|
|
|
Canceling unvested awards issued to participants who engage in
conduct harmful to the Corporation or any of its related
entities.
|
Summary
of the 2006 Plan
The principal features of the 2006 Plan are summarized below.
The complete text of the 2006 Plan is included as
Appendix A to this Proxy Statement.
Administration
of the 2006 Plan
The Compensation Committee of the Board of Directors (the
committee) will administer all aspects of the 2006
Plan. The committee is comprised of at least three persons, each
of whom is a non-employee director as defined under
Rule 16b-3
of the Securities Exchange Act of 1934 and an outside
director within the meaning of Section 162(m) of the
Code, and, except as permitted by Code §162(m), who does
not receive remuneration from the Corporation or any related
entity in any capacity other than as a director.
The 2006 Plan authorizes the committee to, among other things:
|
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|
|
|
Construe and interpret the 2006 Plan consistent with its purpose;
|
|
|
|
Adopt, amend and rescind rules and regulations relating to the
2006 Plan;
|
|
|
|
Decide which employees, consultants and non-employee directors
of the Corporation or any of its related entities
(participants) will be granted awards;
|
|
|
|
Consistent with limits specified in the 2006 Plan, identify the
type of awards that may be issued to each participant from among
those awards available under the 2006 Plan and impose terms and
conditions on those awards; and
|
|
|
|
Administer performance-based awards, including specifying
objectives (based on performance criteria specified in the 2006
Plan) that must be met to earn the award and certifying that
those objectives have been met before the award is paid or
distributed.
|
To the extent permitted by law, the committee may delegate to
any person (including any employee) that it deems appropriate
ministerial duties associated with the 2006 Plan (such as
preparing and distributing award agreements reflecting the terms
and conditions specified by the committee). The committee also
may delegate the authority to grant awards covering up to
25,000 shares quarterly to participants (or prospective
participants) who are not employees whose compensation is (or
likely will be) subject to limited deductibility under Code
§162(m) (covered officers). However, the
committee may not otherwise delegate any discretionary
responsibilities (such as the certification that performance
objectives have been met) or any duty it is required to
discharge to ensure the deductibility of performance-based
compensation under Code §162(m).
Eligibility
for Awards Under the 2006 Plan
The 2006 Plan allows the committee to make awards to any
employee, consultant or non-employee director of the Corporation
or any of its related entities, although the Corporation
anticipates that only executives, key
23
managers and non-employee directors will be considered for
awards. There are approximately 115 executives and key
managers and a total of 11 non-employee directors who might
receive awards under the 2006 Plan. If the 2006 Plan is approved
by the Corporations stockholders, the committee expects
that it will grant awards to executive officers and key managers
of the Corporation after such approval. At present, however, the
amount and type of any such awards is not yet known. At this
time, the Corporation does not intend to make awards to
consultants, although the 2006 Plan allows the committee to do
so.
Limits on
Awards That May Be Made Under the 2006 Plan
The 2006 Plan allows the Corporation to make the following types
of awards: cash-based awards, incentive stock options (which
qualify for special income tax treatment under Code §422),
nonqualified stock options (which do not qualify for special
income tax treatment under Code §422), performance shares,
performance units, restricted stock, restricted stock units,
SARs, whole shares, and dividend equivalents, each of which is
defined in the 2006 Plan and described below.
Authorized Shares and Limitations on
Grants. The 2006 Plan authorizes the Corporation
to issue up to 3,472,686 of its shares to participants. This
number is comprised of (1) 1,750,000 newly authorized
shares, plus (2) any shares authorized to be granted under
the A. Schulman, Inc. 2002 Equity Incentive Plan (the
prior plan), but which have not been granted or
issued before the date stockholders approve the 2006 Plan and
any shares that are forfeited under the prior plan after the
date stockholders approve the 2006 Plan (approximately
1,722,686 shares). Information on outstanding awards under
the prior plan as of August 31, 2006 is set forth in the
table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
(a)
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
(b)
|
|
|
Remaining Available for
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
Future Issuance Under Equity
|
|
|
|
Upon Exercise of
|
|
|
Exercise
|
|
|
Compensation Plans
|
|
|
|
Outstanding
|
|
|
Price of Outstanding
|
|
|
(Excluding Securities
|
|
|
|
Options, Warrants
|
|
|
Options,
|
|
|
Reflected in Column
|
|
Plan Category
|
|
and Rights(1)
|
|
|
Warrants and Rights
|
|
|
(a))
|
|
|
Equity compensation plans approved
by security holders
|
|
|
1,568,276
|
|
|
$
|
18.93
|
|
|
|
1,722,686
|
|
Equity compensation plans not
approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,568,276
|
|
|
$
|
18.93
|
|
|
|
1,722,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The outstanding options do not have dividend equivalent rights
and are not transferable for value. |
The shares issued under the 2006 Plan may consist, in whole or
in part, of treasury shares or authorized and unissued shares
not reserved for any other purpose.
The number of shares authorized for issuance under the 2006 Plan
(1) will be conditionally reduced by 1.77 times the
number of shares underlying each award of performance shares,
performance share units, restricted stock, restricted stock
units and whole shares (collectively, full value
awards) and by the number of shares underlying any other
type of award and (2) will be absolutely reduced by 1.77
times the number of shares underlying each full value award and
by the number of shares underlying any other type of award. Any
shares associated with an award under the 2006 Plan that is
forfeited, terminated, exchanged or otherwise settled without
the issuance of shares or the payment of cash will be available
for future grants under the terms of the 2006 Plan. However, the
number of shares that may be issued under the 2006 Plan also
will be reduced by the number of shares underlying share-based
awards that are settled in cash (instead of shares) and the
number of shares tendered or attested to pay any exercise price
or taxes associated with an award that is settled or exercised.
24
In addition to limiting the total number of shares that may be
issued under its terms, the 2006 Plan imposes several other
limits on awards. These are as follows:
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During any fiscal year, no covered officer may receive options
covering more than 250,000 shares, SARs covering more than
250,000 shares, share-settled performance-based awards
covering more than 100,000 shares and cash-settled
performance-based awards equal to more than $2,500,000.
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During the term of the 2006 Plan, no more than
500,000 shares may be issued subject to incentive stock
options.
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Except as described in the section titled
Adjustments, none of these limits may be changed
without approval by the Corporations stockholders. The
committee has also committed to limit the number of awards
granted such that the average burn rate for the next three years
will be less than 2.11% of the issued and outstanding shares of
the Corporation.
Adjustments. If there is a corporate
transaction that affects the Corporations outstanding
shares, such as a share dividend, share split, recapitalization
(including payment of an extraordinary dividend), merger,
consolidation, combination, spin-off, distribution of assets to
stockholders, exchange of shares or other similar corporate
change affecting shares, the committee will make any adjustments
it believes is appropriate to the number of shares authorized to
be issued under the 2006 Plan and to the individual limitations
described in the preceding section. In these same circumstances,
the committee also will make adjustments to outstanding awards
previously made under the 2006 Plan that it believes appropriate
to preserve the value of the award. Any adjustment the committee
makes in this regard will be final and binding on all
participants.
Types of
Awards Available Under the 2006 Plan
The 2006 Plan allows the committee to grant several types of
awards. Each type of award available under the 2006 Plan is
described in this section and in the 2006 Plan itself.
Cash-Based Awards. A cash-based award gives a
participant the right to receive a specified amount of cash if
the terms and conditions described in the associated award
agreement are met. However, a cash-based award will be forfeited
to the extent that the applicable terms and conditions are not
met.
When a cash-based award is granted, the committee will establish
the terms and conditions that must be met if that award is to be
earned. These terms and conditions, which will be specified in
an award agreement, may provide that the award will be settled
if the participant maintains a service relationship with the
Corporation or a related entity for a specified period or if
specified performance objectives are met during the performance
period.
Options. An option gives a participant the
right to purchase a specified number of shares if the terms and
conditions described in the 2006 Plan and the associated award
agreement (including payment of the exercise price) are met and
the option is exercised before it expires. However, an option
will be forfeited to the extent that applicable terms and
conditions are not met before the option expires or to the
extent that the option is not exercised before it expires. Any
fractional share subject to an option will be cancelled without
the payment of any consideration to the affected participant if
(and when) that option is exercised.
The committee will establish the price at which a share may be
purchased by exercising an option (the exercise
price), although the exercise price may not be less than
the fair market value (as defined in the 2006 Plan) of a share
on the date the option is granted. Regardless of the foregoing,
the exercise price of an incentive stock option granted to an
employee who owns (as defined in the Code) stock of the
Corporation possessing more than 10 percent of all classes
of stock of the Corporation or any subsidiary (a 10%
Holder), determined under rules issued by the IRS, may not
be less than 110 percent of the fair market value of a
share on the grant date of the option.
When an option is granted, the committee will establish the
terms and conditions that must be met if the option is to be
exercisable. These terms and conditions, which will be specified
in an award agreement, may provide that the option will become
exercisable if the participant maintains a service relationship
with the Corporation or a related entity for a specified period
or if specified performance objectives are met. However, no
option may be
25
exercised more than ten years from the grant date (five years in
the case of incentive stock options issued to a 10% Holder).
The number of incentive stock options issued to any employee
that become exercisable for the first time in any year cannot
relate to shares having a fair market value (determined on the
grant date) of greater than $100,000.
An options exercise price may be paid in any way specified
in the associated award agreement, including payment in cash (or
a cash equivalent), a cashless exercise and tendering or
attesting shares the participant already owns as partial or full
payment of the exercise price.
Unless the associated award agreement specifies otherwise, a
participant who has been granted an option will have no voting
or dividend rights with respect to the shares covered by that
award unless those shares are issued to the participant.
Performance Shares. Performance shares give a
participant the right to receive a specified number of shares if
the terms and conditions described in the 2006 Plan and the
associated award agreement are met at the end of the performance
period. However, Performance Shares will be forfeited to the
extent that applicable terms and conditions are not met at the
end of the performance period.
When a performance share award is granted, the committee will
establish the terms and conditions that must be met to earn the
award. These terms and conditions, which will be specified in an
award agreement, may provide that the award will be settled if
the participant maintains a service relationship with the
Corporation or a related entity for a specified period or if
specified performance objectives are met during the performance
period. Any fractional share subject to a performance share
award will be cancelled without the payment of any consideration
to the affected participant when (and if) the award is settled.
Unless the associated award agreement specifies otherwise, a
participant who has been granted performance shares will have no
voting or dividend rights with respect to the shares covered by
that award until (and if) those shares are issued to the
participant.
Performance Units. Performance units give a
participant the right to receive cash equal to the fair market
value of a specified number of shares if the terms and
conditions described in the 2006 Plan and the associated award
agreement are met at the end of the performance period. However,
performance units will be forfeited to the extent that
applicable terms and conditions are not met at the end of the
performance period.
When a performance unit award is granted, the committee will
establish the terms and conditions that must be met to earn the
award. These terms and conditions, which will be specified in an
award agreement, may provide that the award will be settled if
the participant maintains a service relationship with the
Corporation or a related entity for a specified period or if
specified performance objectives are met during the performance
period. Any fractional share subject to a performance unit award
will be cancelled without the payment of any consideration to
the affected participant when (and if) the award is settled.
Unless the associated award agreement specifies otherwise, a
participant who has been granted performance units will have no
voting or dividend rights with respect to the shares covered by
that award.
Restricted Stock. Restricted stock are shares
which are subject to specified restrictions on transferability
and forfeitability. Any restrictions on transferability and
forfeitability will lapse at the end of the associated
restriction period only if the terms and conditions specified in
the Plan and the associated award agreement are met during the
restriction period. However, restricted stock will be forfeited
to the extent that applicable terms and conditions are not met
before the end of the restriction period.
When a restricted stock award is granted, the committee will
establish the terms and conditions that must be met to earn the
award. These terms and conditions, which will be specified in an
award agreement, may provide that the restrictions imposed will
lapse if the participant maintains a service relationship with
the Corporation or a related entity for a specified period or if
specified performance objectives are met during the restriction
period. In addition, no award of restricted stock which may be
earned other than through the attainment of specified
performance objectives may be earned more rapidly than
331/3 percent
annually beginning on the first anniversary of the date the
award of restricted stock is granted. Any fractional share
subject to a restricted stock award will be
26
cancelled without the payment of any consideration to the
affected participant when (and if) applicable restrictions lapse.
Unless the associated award agreement specifies otherwise,
during the restriction period, the shares subject to a
restricted stock award will be held in escrow until (and if) the
restrictions imposed lapse. However, and unless the associated
award agreement specifies otherwise, a participant who has been
granted restricted stock will have the right to receive
dividends on those shares and will have the right to vote those
shares during the restriction period.
Restricted Stock Units. Restricted stock units
give a participant the right to receive a specified number of
shares (or cash equal to the fair market value of those shares
when the award is settled) if the terms and conditions described
in the 2006 Plan and the associated award agreement are met
during the restriction period. However, restricted stock units
will be forfeited to the extent that applicable terms and
conditions are not met before the end of the restriction period.
When a restricted stock unit is granted, the committee will
establish the terms and conditions that must be met to earn the
award. These terms and conditions, which will be specified in an
award agreement, may provide that the restrictions imposed will
lapse if the participant maintains a service relationship with
the Corporation or a related entity for a specified period or if
specified performance objectives are met during the restriction
period. In addition, no award of a restricted stock unit which
may be earned other than through the attainment of specified
performance objectives may be earned more rapidly than
331/3 percent
annually beginning on the first anniversary of the date the
award of the restricted stock unit is granted. Any fractional
share subject to a restricted stock unit award will be cancelled
without the payment of any consideration to the affected
participant when (and if) the applicable restrictions lapse.
Unless the associated award agreement specifies otherwise, a
participant who has been granted restricted stock units will
have no voting or dividend rights with respect to the shares
covered by that grant unless those shares are issued to the
participant.
SARs. A SAR gives a participant the right to
receive the difference between the SARs exercise price and
the fair market value (as defined in the 2006 Plan) of a share
on the date the SAR is exercised, but only if the terms and
conditions described in the 2006 Plan and the associated award
agreement are met and the SAR is exercised before it expires.
However, a SAR will be forfeited to the extent that applicable
terms and conditions are not met before the SAR expires or to
the extent that the SAR is not exercised before it expires
(which may never be later than ten years after the grant date).
Any fractional share subject to a SAR will be cancelled without
the payment of any consideration to the affected participant
when (and if) that SAR is exercised.
When a SAR is granted, the committee will establish the terms
and conditions that must be met if the SAR is to become
exercisable. These terms and conditions, which will be specified
in an award agreement, may provide that the SAR will become
excisable if the participant maintains a service relationship
with the Corporation or a related entity for a specified period
or if specified performance objectives are met.
Unless the associated award agreement specifies otherwise, a
participant who has been granted a SAR has no voting or dividend
rights with respect to the shares covered by that award unless
those shares are issued to the participant.
Whole Share Awards. The committee may grant
awards of whole shares to any participant on any basis and
subject to any terms it deems appropriate.
Dividend Equivalents. Dividend equivalents
give a participant the right to receive the same dividends the
participant would have received had he or she actually owned the
shares underlying the dividend equivalent award, if the terms
and conditions described in the 2006 Plan and the associated
award agreement are met. However, dividend equivalents will be
forfeited to the extent that applicable terms and conditions are
not met.
When a dividend equivalent is granted, the committee will
establish the terms and conditions that must be met to earn the
award. These terms and conditions, which will be specified in an
award agreement, may provide that the dividend equivalent will
become earned if the participant maintains a service
relationship with the Corporation or a related entity for a
specified period or if specified performance objectives are met.
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If the terms and conditions specified in the associated award
agreement are met, dividend equivalents will be settled in cash
without any adjustment to reflect the time-value of money during
the period beginning on the date that the dividend would have
been paid had the participant actually owned the underlying
shares and the date the dividend equivalents are settled. The
date dividend equivalents are settled will be specified in the
associated award agreement.
Performance-Based Awards. A performance-based
award may be granted to any participant in any form of award and
the associated award agreement may specify that the award is
intended to be qualified performance-based compensation under
Code §162(m). As determined by the committee in its sole
discretion, the grant, vesting, exercisability
and/or
settlement of any performance-based award will be conditioned on
the attainment of performance objectives derived from one or
more of the following performance criteria over a performance
period:
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Net earnings;
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Earnings per share;
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Net sales growth;
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Net income (before and after taxes);
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Net income growth;
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Net operating profit;
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Return measures (including return on assets, capital, equity or
sales);
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Cash flow (including operating cash flow and free cash flow);
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Cash flow return on capital;
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Earnings before and after taxes, interest, depreciation
and/or
amortization;
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Gross or operating margins;
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Productivity ratios;
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Share price (including growth measures and total stockholder
returns);
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Expense targets; and
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Margins.
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Different performance criteria and performance objectives may be
applied to individual participants or to groups of participants
and, as specified by the committee, may be based on the results
achieved separately by the Corporation
and/or any
related entity, by any combination of the Corporation and
related entities or by any combination of segments, products or
divisions of the Corporation and related entities. In addition,
the performance objectives may be measured on an absolute or
cumulative basis or measured relative to selected peer companies
or a market index.
The committee will establish in writing the performance
objectives to be applied to each performance-based award issued
to a covered officer and the performance period over which their
attainment will be measured, the method for computing the
performance-based award that will be granted, vested,
exercisable
and/or
settled if (and to the extent that) the covered officer meets
those performance objectives and the covered officers or class
of covered officers to which the performance objectives apply.
Performance objectives relating to covered officers must be
established in writing while the outcome for that performance
period is substantially uncertain and no later than 90 days
after the beginning of the applicable performance period or, if
earlier, after 25 percent of the applicable performance
period has elapsed.
The committee will certify in writing whether the performance
objectives and other terms and conditions imposed on a
performance-based award granted to a covered officer have been
met at the end of the related performance period, and no
performance-based award will be granted, vested, exercisable
and/or
settled to or with respect to a covered officer until the
committee makes this certification.
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Once established, the committee may not revise any performance
objectives associated with a performance-based award granted to
a covered officer or increase the amount of the
performance-based award that may be granted, vested, exercisable
and/or
settled to or with respect to a covered officer if those
performance objectives are met. However, to the extent
consistent with Code §162(m), performance objectives
affecting covered officers may be calculated without regard to
extraordinary items or unforeseen events. In addition, the
committee may reduce or eliminate the amount of any cash-based
award that may be granted, vested, exercisable
and/or
settled to or with respect to a covered officer if the
performance objectives are met.
The committee may issue performance-based awards to participants
who are not covered officers either by following the procedures
described above for covered officers or by applying other
procedures that the committee believes are appropriate.
Award Agreements. The terms of each award will
be described in a written or electronic award agreement. By
accepting an award, a participant will have agreed to be bound
by the terms of the 2006 Plan and the award agreement describing
the terms and conditions of the award. If there is a conflict
between the terms of the 2006 Plan and the terms of the
associated award agreement, the terms of the 2006 Plan will
govern.
Effect of
Termination on 2006 Plan Awards
Awards Other Than Performance-Based
Awards. Unless the associated award agreement
provides otherwise, the following rules apply to all awards that
are not performance-based awards granted under the 2006 Plan to
a participant whose service terminates:
Death or Disability. If a participants
service terminates because of death or disability (as defined in
the 2006 Plan):
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All options and SARs (whether or not then exercisable) then held
by the participant at the time of termination will be
exercisable by the participant or the participants
beneficiaries at any time before the earlier of the normal
expiration date specified in the award agreement or
24 months after the participants death or disability.
However, an incentive stock option that is not exercised within
12 months after termination due to death or disability will
be treated as a nonqualified stock option.
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All dividend equivalents, restricted stock and restricted stock
units held by the participant will be fully vested at the time
of termination.
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All whole shares will vest or be forfeited as provided in the
associated award agreement.
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All other awards then held by the participant that are unvested
or that have not been earned or settled when the participant
terminates will be forfeited at the time of termination.
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Retirement. If a participants employment
(or, in the case of a non-employee director, his or her board
service) terminates because of retirement:
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All options and SARs (whether or not then exercisable) then held
by the participant will be fully exercisable on the retirement
date and may be exercised at any time before the earlier of the
normal expiration date specified in the award agreement or
24 months after the retirement date. However, an incentive
stock option that is not exercised within three months after the
retirement date will be treated as a nonqualified stock option.
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A pro rata portion of all dividend equivalents, restricted stock
and restricted stock units then held by the participant will be
vested on the retirement date determined by multiplying the
number of unvested dividend equivalents, restricted stock and
restricted stock units by a fraction, with the numerator equal
to the number of whole months between the date of grant and the
date of retirement and the denominator equal to the number of
whole months over which the award otherwise would vest.
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All whole shares will vest or be forfeited as provided in the
associated award agreement.
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All other awards then held by the participant that are unvested
or that have not been earned or settled when the participant
retires will be forfeited at the time of termination.
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For purposes of the 2006 Plan, retirement means
retirement as defined in the associated award
agreement or, if the term is not defined in the award agreement,
retirement as defined in any employment or change in
control agreement (but only within the context of the events
contemplated in any employment agreement or change in control
agreement) between the participant and the Corporation or any
related entity or, if the term is not defined in an agreement of
that type or if there is no employment or change in control
agreement covering the participant, (1) termination after
age 60, but only if the committee agrees to treat the
termination as retirement (in the case of an employee) and
(2) termination of service as a director after serving one
full term as an elected director and being nominated for
election to a second consecutive full term (in the case of a
director).
Involuntary Termination of Service for
Cause. Unless the associated award agreement
provides otherwise, all outstanding awards will be forfeited if
a participants service is terminated for cause (as defined
in the 2006 Plan) effective as of the date of the occurrence of
the event constituting cause.
Termination for any Other Reason. Generally,
all outstanding awards then held by a participant who terminates
for any reason other than death, disability or retirement or for
cause will be forfeited on the termination date. However, all
options and SARs then held by a participant who terminated for
any reason other than death, disability or retirement or for
cause and which are then exercisable may be exercised at any
time before the earlier of the expiration date specified in the
associated award agreement or 90 days after the termination
date and all options and SARs that are not then exercisable will
be forfeited on the termination date.
Performance-Based Awards. Unless the
associated award agreement specifies otherwise, if a
participants employment terminates because of death,
disability or retirement, a pro rata portion of all
performance-based awards held by the participant that are
subject to a pending performance period will be earned
determined by multiplying the amount the participant would have
been entitled to receive if the participants employment
had not terminated by a fraction, with the numerator equal to
the number of whole months between the date of grant and the
date of termination and the denominator equal to the number of
whole months over which the award otherwise would be earned. The
portion of the performance-based award that is earned will be
settled at the end of the related performance period, but only
if the committee certifies that the associated performance
objectives have been met.
Effect of
a Change in Control
Unless otherwise specified in the associated award agreement or
a change in control agreement between the Corporation or any
related entity and the participant, if the Corporation undergoes
a change in control (as defined in the 2006 Plan but generally
relating to a significant events affecting control of the
Corporation or a merger, consolidation of the Corporation or
other similar event), all of a participants awards will be
fully vested and exercisable and all performance objectives will
be treated as having been met.
Adoption,
Amendment and Termination of Plan and Award Agreements
Adoption of the 2006 Plan. The 2006 Plan was
approved by the Board on October 17, 2006, and will become
effective upon the approval by the affirmative vote of a
majority of the votes cast on this proposal at the 2006 Annual
Meeting. If approved by the Corporations stockholders, the
2006 Plan will remain in effect until December 7, 2016.
However, the committees authority to issue any
performance-based award to covered officers will terminate at
the time of the first annual meeting of the Corporations
stockholders that occurs in 2011.
Amendment and Termination of the 2006
Plan. The Board may terminate, suspend or amend
the 2006 Plan at any time without stockholder approval, except
to the extent that stockholder approval is required to satisfy
applicable requirements imposed by law or any securities
exchange, market or other quotation system on or through which
the Corporations securities are listed or traded. Also, no
amendment to the 2006 Plan may (1) result in the loss of a
committee members status as a non-employee
director as defined in
Rule 16b-3
under the Securities Exchange Act of 1934, with respect to any
employee benefit plan of the Corporation, or (2) without
the consent of the affected participant (and except as
specifically provided in the 2006 Plan or an award agreement),
adversely affect any award granted before the termination,
suspension or amendment. However, nothing restricts the
boards right to amend the 2006 Plan without any additional
consideration to affected participants to the extent necessary
to
30
avoid penalties arising under Code §409A, even if those
amendments reduce, restrict or eliminate rights granted under
the 2006 Plan or any award agreement before those amendments are
adopted.
Amendment and Termination of Award
Agreements. Without the mutual, written consent
of both the Corporation and the affected participant an award
agreement once issued, may not be amended except as specifically
provided in the 2006 Plan or the award agreement. However,
nothing restricts the committees right to amend an award
agreement without additional consideration to the affected
participant to the extent necessary to avoid penalties arising
under Code §409A, even if those amendments reduce, restrict
or eliminate rights granted under the award agreement before
those amendments are adopted.
U.S. Federal
Income Tax Consequences
The following is a brief summary of the general
U.S. federal income and employment tax consequences
relating to the 2006 Plan. This summary is based on
U.S. federal tax laws and regulations in effect on the date
of this proxy and does not purport to be a complete description
of the U.S. federal income or employment tax laws.
Cash-Based Award. A participant will not
recognize taxable income when a cash-based award is granted and
the Corporation will not receive a deduction at that time.
Instead, a participant will recognize ordinary income when the
cash-based award vests (i.e., when the participant can no longer
lose it) equal to the cash he or she receives at that time and
the Corporation generally will be entitled to a deduction equal
to the ordinary income that the participant recognizes. Also,
the same amount will be subject to employment taxes, including
social security and Medicare taxes.
Incentive Stock Options. Incentive stock
options are intended to qualify for special treatment available
under Code §422. A participant will not recognize any
income when an incentive stock option is granted or exercised
and the Corporation will not receive a deduction at either of
those times. Also, incentive stock options are not subject to
employment taxes.
If a participant acquires shares by exercising an incentive
stock option and continues to hold those shares for one year or,
if longer, until the second anniversary of the grant date (each
of these periods is called an ISO Holding Period),
the amount the participant receives when he or she disposes of
the shares minus the exercise price will be taxable at long-term
capital gain or loss rates (this is referred to as a
qualifying disposition), depending on whether the
amount the participant receives when he or she disposes of the
shares is greater or less than the exercise price he or she paid
to acquire those shares. Upon a qualifying disposition, the
Corporation is not entitled to a deduction.
If a participant disposes of the shares before the end of either
ISO Holding Period (this is referred to as a disqualifying
disposition), the participant will recognize ordinary
income equal to the excess, if any, of (i) the fair market
value of the shares on the date the incentive stock option was
exercised, or, if less, the amount received on the disposition,
over (ii) the exercise price. The Corporation will be
entitled to a deduction equal to the ordinary income that the
participant recognizes. The participants additional gain
will be taxable at long-term or short-term capital gain rates
(depending on whether he or she held the shares for more than
one year).
If a participant uses shares acquired by exercising an incentive
stock option (Delivered Shares) to pay the exercise
price of another incentive stock option, the participants
payment will be treated as a disqualifying disposition of the
Delivered Shares if the Delivered Shares are used to exercise an
incentive stock option before the end of their ISO Holding
Periods. This type of disposition generally will cause the
participant to recognize ordinary income on the Delivered Shares
equal to the difference between the exercise price of the
Delivered Shares and the fair market value of the Delivered
Shares at the time of exercise. The Corporation also will be
entitled to a deduction equal to the ordinary income that the
participant recognizes. Generally, a participant will not
recognize income, gain or loss in connection with the exercise
of an incentive stock option if he or she exercises an incentive
stock option using (i) shares that were not purchased
through an incentive stock option or (ii) Delivered Shares
that were purchased by exercising an incentive stock option that
satisfied the ISO Holding Periods.
If a participant exercises an incentive stock option using only
Delivered Shares to pay the exercise price, his or her basis in
the same number of new shares will be the same as his or her
basis in the Delivered Shares plus the
31
taxable income, if any, that the participant recognized on the
delivery of the Delivered Shares. Any additional new shares will
have a zero basis.
The rules that generally apply to incentive stock options do not
apply when calculating any alternative minimum tax liability.
When an incentive stock option is exercised, a participant must
treat the excess, if any, of the fair market value of the shares
on the date of exercise over the exercise price as an item of
adjustment for purposes of the alternative minimum tax. The
rules affecting the application of the alternative minimum tax
are complex and their effect depends on individual
circumstances, including whether a participant has items of
adjustment other than those derived from incentive stock options.
Nonqualified Stock Options. Nonqualified stock
options do not receive the special tax treatment afforded to
incentive stock options under the Code §422, although a
participant will not recognize any taxable income when a
nonqualified stock option is granted and the Corporation will
not receive a deduction at that time. However, unlike an
incentive stock option, when a nonqualified stock option is
exercised, a participant will recognize ordinary income equal to
the excess, if any, of the fair market value of the shares that
the participant purchased on the date of exercise over the
exercise price he or she paid to acquire the shares. Also,
unlike an incentive stock option, this same amount will be
subject to employment taxes, including social security and
Medicare taxes. If a participant uses shares or a combination of
shares and cash to pay the exercise price of a nonqualified
stock option, he or she will have ordinary income equal to the
value of the excess of the number of shares that the participant
purchases over the number of shares he or she surrenders, less
any cash the participant uses to pay the exercise price. This
same amount will be subject to employment taxes, including
social security and Medicare taxes. When a nonqualified stock
option is exercised, the Corporation will be entitled to a
deduction equal to the ordinary income that the participant
recognizes.
If the amount a participant receives when he or she disposes of
the shares acquired by exercising a nonqualified stock option is
greater than the exercise price the participant paid, the excess
will be treated as a long-term or short-term capital gain,
depending on whether the participant held the shares for more
than one year after he or she acquired them by exercising the
nonqualified stock option. But, if the amount a participant
receives when he or she disposes of the shares acquired by
exercising a nonqualified stock option is less than the exercise
price he or she paid, the difference will be treated as a
long-term or short-term capital loss, depending on whether the
participant held the shares for more than one year after he or
she acquired them by exercising the nonqualified stock option.
Performance Shares. A participant will not
recognize taxable income when the Corporation grants the
participant performance shares and the Corporation will not
receive a deduction at that time. However, if the participant
satisfies the conditions imposed on the award, he or she will
recognize ordinary income equal to the cash or the fair market
value of the shares he or she receives at the time of delivery.
Also, the same amount will be subject to employment taxes,
including social security and Medicare taxes. The Corporation
generally will be entitled to a deduction equal to the ordinary
income that the participant recognizes.
If the amount a participant receives when he or she disposes of
the shares acquired upon the settlement of a performance shares
award is greater than the value of the shares when the
participant received them, the excess will be treated as a
long-term or short-term capital gain, depending on whether the
participant held the shares for more than one year after they
were issued. But, if the amount the participant receives when he
or she disposes of these shares is less than the value of the
shares when they were issued, the difference will be treated as
a long-term or short-term capital loss, depending on whether the
participant held the shares for more than one year after they
were issued.
Performance Units. A participant will not
recognize taxable income when performance units are granted and
the Corporation will not receive a deduction at that time.
Instead, a participant will recognize ordinary income when the
performance units vest (i.e., when the participant can no longer
lose them) equal to the cash he or she receives at that time and
the Corporation generally will be entitled to a deduction equal
to the ordinary income that the participant recognizes. Also,
the same amount will be subject to employment taxes, including
social security and Medicare taxes.
Restricted Stock. Unless a participant makes
an election under Code §83(b), he or she will not recognize
taxable income when restricted stock is granted and the
Corporation will not receive a deduction at that time.
32
Instead, a participant will recognize ordinary income when the
shares of restricted stock vest (i.e., when the participant can
no longer lose them) equal to the fair market value of the
shares he or she receives when the restrictions lapse, less any
consideration paid for the restricted stock. The Corporation
also will be entitled to a deduction equal to the ordinary
income that the participant recognizes. Also, the same amount
will be subject to employment taxes, including social security
and Medicare taxes.
If the amount a participant receives when he or she disposes of
these shares is greater than the value of the shares when the
restricted stock vested, the excess will be treated as a
long-term or short-term capital gain, depending on whether the
participant held the shares for more than one year after the
restricted stock vested. But, if the amount the participant
receives when he or she disposes of these shares is less than
the value of the shares when the restricted stock vested, the
difference will be treated as a long-term or short-term capital
loss, depending on whether the participant held the shares for
more than one year after the restricted stock vested.
If a participant makes a Code §83(b) election, the
participant will recognize ordinary income on the grant date
equal to the fair market value of the shares of restricted stock
on the grant date, and the Corporation will be entitled to a
deduction equal to the ordinary income that the participant
recognizes at that time. Also, the same amount will be subject
to employment taxes, including social security and Medicare
taxes. However, the participant will not recognize taxable
income when (and if) the restrictions lapse. If a participant
earns the shares, any appreciation between the grant date and
the date the participant disposes of the shares will be treated
as a long-term or short-term capital gain, depending on whether
he or she held the shares for more than one year after the grant
date. But, if the amount the participant receives when he or she
disposes of these shares is less than the value of the shares on
the grant date, the difference will be treated as a long-term or
short-term capital loss, depending on whether he or she held the
shares for more than one year after the grant date. Also, a
participant may not take a tax deduction in connection with any
forfeiture of restricted stock subject to an Code §83(b)
election.
Restricted Stock Units. A participant will not
recognize taxable income when restricted stock units are granted
and the Corporation will not receive a deduction at that time.
Instead, a participant will recognize ordinary income when the
restricted stock units vest (i.e., when the participant can no
longer lose them) equal to the fair market value of the shares
or cash he or she receives when the restrictions lapse, less any
consideration paid for any shares received, and the Corporation
generally will be entitled to a deduction equal to the ordinary
income that the participant recognizes. Also, the same amount
will be subject to employment taxes, including social security
and Medicare taxes.
If the amount a participant receives when he or she disposes of
any shares received is greater than the value of the shares when
the restricted stock units vested, the excess will be treated as
a long-term or short-term capital gain, depending on whether the
participant held the shares for more than one year after the
restricted stock units vested. But, if the amount the
participant receives when he or she disposes of these shares is
less than the value of the shares when the restricted stock
units vested, the difference will be treated as a long-term or
short-term capital loss, depending on whether the participant
held the shares for more than one year after the restricted
stock vested.
SARs. A participant will not recognize any
taxable income when a SAR is granted and the Corporation will
not receive a deduction at that time. When a SAR is exercised, a
participant will recognize ordinary income equal to the cash
and/or fair
market value of the shares the participant received upon
exercise. The Corporation also will be entitled to a deduction
equal to the ordinary income that the participant recognizes.
Also, the same amount will be subject to employment taxes,
including social security and Medicare taxes. If the amount a
participant receives when he or she disposes of any shares
acquired upon the exercise of a SAR is greater than the value of
any shares acquired when the SAR was exercised, the excess will
be treated as a long-term or short-term capital gain, depending
on whether the participant held the shares for more than one
year after the SAR was exercised. But, if the amount the
participant receives when he or she disposes of the shares is
less than the value of the shares when the SAR was exercised,
the difference will be treated as a long-term or short-term
capital loss, depending on whether the participant held the
shares for more than one year after the SAR was exercised.
Whole Shares. A participant will recognize
ordinary income equal to the fair market value of the shares
subject to a whole share award when any terms and conditions
imposed on that grant have been met and the Corporation will
receive a deduction in the same amount at that time.
33
Code §162(m). As described above, awards
granted under the 2006 Plan may qualify as
performance-based compensation under Code
§162(m) to preserve federal income tax deductions by the
Corporation with respect to annual compensation required to be
taken into account under Code §162(m) that is in excess of
$1,000,000 and paid to one of the Corporations covered
officers. To qualify as performance-based compensation, options
and other awards must be granted under the 2006 Plan by a
committee consisting solely of two or more outside
directors (as defined under IRS regulations) and satisfy
the 2006 Plans limit on the total number of shares that
may be awarded during any fiscal year. In addition, for awards
other than options to qualify as performance-based
compensation, the granting, vesting, exercisability
and/or
settlement of the award, as the case may be, must be contingent
upon satisfying one or more of the performance criteria
described above, as established and certified by a committee
consisting solely of two or more outside directors.
Code §§280G and 4999. Code
§§280G and 4999 impose penalties on persons who pay
and persons who receive excess parachute payments. A parachute
payment is the value of any amount that is paid to a
disqualified individual (such as an officer or
highly paid employee of the Corporation or its related entities)
on account of a change in control. An excess parachute payment
occurs when a parachute payment that is equal to or greater than
300 percent of the participants taxable compensation
averaged over the five calendar years ending before the change
in control (or over the participants entire period of
employment if that period is less than five calendar years).
This average is called the Base Amount. In that
case, the excess parachute payment is equal to the amount by
which the parachute payments exceed the participants Base
Amount.
Some participants in the 2006 Plan may receive parachute
payments in connection with a change in control. If this
happens, the value of each participants parachute payment
from the 2006 Plan must be combined with other parachute
payments that the same participant is entitled to receive under
other agreements or plans with the Corporation or any related
entity, such as an employment agreement or a change in control
or displacement agreement. If the combined value of all
parachute payments results in an excess parachute payment, the
participant must pay an excise tax equal to 20 percent of
the excess parachute payment. This tax is due in addition to
other federal, state and local income, wage and employment
taxes. Also, neither the Corporation nor any related entity
would be able to deduct the amount of any participants
excess parachute payment and the $1,000,000 limit on deductible
compensation under Code §162(m) would be reduced by the
amount of the excess parachute payment.
The 2006 Plan addresses excess parachute payment penalties in
two ways. Initially, the Corporation will consider causing
substitute awards to be issued as a means of avoiding parachute
payment penalties. However, if this is not feasible and a
participant in the 2006 Plan receives an excess parachute
payment, the value of the payment under the 2006 Plan will be
reduced to avoid the excess parachute penalties unless a
separate agreement (such as an employment or change in control
agreement) with the Corporation or a related entity provides for
a different approach.
Code §409A. In 2004, the Code was amended
to add Code §409A, which creates new rules for amounts
deferred under nonqualified deferred compensation plans. Code
§409A includes a broad definition of nonqualified deferred
compensation plans which may extend to various types of awards
granted under the 2006 Plan. The proceeds of any grant that is
subject to Code §409A are subject to a 20 percent
excise tax if those proceeds are distributed before the
recipient separates from service or before the occurrence of
other specified events, such as death, disability or a change of
control, all as defined in Code §409A. The IRS has not
finalized regulations describing the effect of Code §409A
on the types of awards that may be issued under the 2006 Plan.
The committee intends to administer the 2006 Plan to avoid or
minimize the effect of Code §409A and, if necessary, will
amend the 2006 Plan to comply with Code §409A before
December 31, 2006 (or a later date specified by the IRS).
IRS CIRCULAR 230 DISCLOSURE: In order to
ensure compliance with requirements imposed by the
U.S. Internal Revenue Service, we inform you that any
federal tax advice contained in this communication (including
any attachments) is not intended or written to be used, and it
cannot be used, by any taxpayer for the purpose of
(i) avoiding penalties that may be imposed under the
U.S. Internal Revenue Code or (ii) promoting,
marketing, or recommending to another person, any transaction or
other matter addressed herein.
34
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Terry Haines Jr. and Thomas Leonhard, the son and
son-in-law,
respectively, of Terry L. Haines, the Chairman, President and
Chief Executive Officer of the Corporation, are employed by the
Corporation as sales representatives. Their respective 2006 and
2005 wages were $82,778 and $78,400 for Mr. Haines Jr. and
$70,735 and $67,000 for Mr. Leonhard. In addition, Chris
Andres, the son of Ronald G. Andres, the Corporations Vice
President North American Operations, is employed as
a project manager. His wages for 2006 and 2005 were $65,000 and
$50,205, respectively. The Audit Committee has approved each of
these relationships.
In October 2005, the Corporation reached an agreement with a
group of investors led by Barington Capital Group, L.P. (the
Barington Group) (the 2005 Agreement).
Under the terms of the 2005 Agreement, among other things, the
Barington Group withdrew its notice of intent to nominate
persons for election as Directors at the Corporations 2006
Annual Meeting of Stockholders and agreed to abide by certain
standstill provisions until the Corporations 2007 Annual
Meeting (the Standstill Period), while the
Corporation, through its Board of Directors, expanded the size
of the Board from 10 to 12 and appointed James A. Mitarotonda, a
member of the Barington Group, to serve as a Class III
Director with a term expiring at the 2007 Annual Meeting of
Stockholders. The Corporation also agreed to initiate and
consummate a self-tender offer by April 30, 2006.
On February 21, 2006, the Corporation announced that its
Board of Directors approved a modified Dutch auction self-tender
offer for up to 8.75 million shares of its Common Stock, at
a price between $21.00 and $24.00 per share. The
Corporation commenced the self-tender offer on March 1,
2006 and it expired on April 11, 2006. On April 25,
2006, the Corporation announced the final results of the
self-tender offer in which the Corporation accepted for purchase
2,071,585 shares at a price of $24.00 per share for a
total of approximately $49.7 million.
On May 30, 2006, the Barington Group filed Amendment
No. 9 to its
Schedule 13-D
disclosing certain changes among group members and in the
aggregate beneficial ownership of Common Stock. The Barington
Group disclosed its position that completion of the self-tender
offer by the Corporation without repurchasing
8,750,000 shares of Common Stock constituted a failure of
the Corporation to fulfill its obligations under the 2005
Agreement, and, therefore, the Standstill Period terminated
after the close of business on April 30, 2006. Among other
things, termination of the Standstill Period eliminated certain
restrictions on the ability of Barington Group members to
purchase additional shares of Common Stock and to solicit
proxies in connection with the 2006 Annual Meeting.
On October 25, 2006, the Corporation reached another
agreement (the 2006 Agreement) with the Barington
Group which owned as of October 18, 2006, the record date
for the 2006 Annual Meeting, approximately 10.5% of the
Corporations Common Stock. Under the terms of the 2006
Agreement, the Barington Group withdrew a notice of its intent
to nominate certain persons for election as Directors at the
2006 Annual Meeting, agreed to dismiss a lawsuit it had filed
against the Corporation in Delaware seeking to enforce its
rights as a stockholder to inspect and copy certain books,
records and documents of the Corporation, and agreed to abide by
certain standstill provisions until the Corporations 2007
Annual Meeting. The Corporation agreed, among other things, to
nominate James S. Marlen, Ernest J. Novak, Jr., Howard R.
Curd and Michael A. McManus, Jr. as nominees for election
as Class II Directors of the Corporation at the 2006 Annual
Meeting and to redeem the rights issued to the
Corporations stockholders under its Rights Agreement on or
prior to the 2006 Annual Meeting. The 2006 Agreement also
superseded the 2005 Agreement, except with respect to
Sections 5(d), 6(a) and 9 of the 2005 Agreement.
The foregoing descriptions of certain of the terms of the 2005
Agreement and 2006 Agreement are qualified in their entirety by
reference to the full text of the agreements, each of which are
attached as Exhibit 99.2 to the
Forms 8-K
filed by the Corporation with the SEC on October 24, 2005
and October 25, 2006, respectively
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporations officers and Directors, and
persons who own more than ten percent of the Corporations
Common Stock, to file reports of ownership and changes in
ownership with the SEC. To the Corporations knowledge,
based solely on its review of the copies of such forms received
by the Corporation, all such persons timely filed their
respective reports during the year ended August 31, 2006,
except that Mr. Holland reported two acquisitions of
phantom stock in lieu of Directors fees,
35
each in the amount of 35.03 shares, one and two days late,
respectively, on December 12, 2005; Mr. Stefanko
reported the sale of 4,000 shares of the Common Stock two
days late on November 3, 2005; and Mr. Mitarotonda was
16 days late in reporting his initial ownership of shares
upon his appointment to the Board of Directors and also reported
his acquisition of 8,993 shares one day late on
May 11, 2006.
OTHER
MATTERS
The Board of Directors knows of no matters to be presented for
action at the 2006 Annual Meeting other than those described in
this Proxy Statement. The Corporations By-Laws describe
procedures, including minimum notice provisions, for stockholder
nomination of Directors and submission of other stockholder
business to be transacted at any Annual Meeting. A copy of the
pertinent By-Law provisions is available on request to the
Corporate Secretary at A. Schulman, Inc., 3550 West Market
Street, Akron, Ohio 44333. If any such stockholder proposals or
other business to be transacted properly come before the 2006
Annual Meeting, it is intended that shares represented by
proxies solicited hereby will be voted in respect thereof in
accordance with the best judgment of the proxy holders.
GENERAL
INFORMATION
Voting of
Proxies
Shares represented by properly executed proxies will be voted at
the 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 proxies on which no specification has been made
will be voted (i) for the election of Directors,
(ii) for the ratification of the selection of the
independent registered public accountant and (iii) for the
approval of the 2006 Plan.
Stockholder
Proposals
Any stockholder who intends to present a proposal at the annual
meeting in the year 2007 must deliver the proposal to the
Corporate Secretary at A. Schulman, Inc., 3550 West Market
Street, Akron, Ohio 44333:
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Not later than July 12, 2007, if the proposal is submitted
for inclusion in the Corporations proxy materials for that
meeting pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934; or
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Not earlier than September 9, 2007 and not later than
October 9, 2007 if the proposal is submitted pursuant to
the Corporations By-Laws. The Corporation reserves the
right to exercise discretionary voting authority on such
proposal if a stockholder has failed to submit the proposal
within such September 9, 2007 through October 9, 2007
time period.
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A copy of the Corporations By-Laws is available on request
to the Corporate Secretary at A. Schulman, Inc., 3550 West
Market Street, Akron, Ohio 44333.
Revocation
of Proxies
A proxy 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 or in open meeting.
36
Solicitation
of Proxies
The cost of soliciting the accompanying proxy will be borne by
the Corporation. The Corporation may reimburse brokers,
nominees, fiduciaries and custodians their reasonable expenses
for sending proxy material to principals and obtaining their
instructions. In addition to solicitation by mail, proxies may
be solicited in person, by telephone or telegraph or by
officers, Directors and regular employees of the Corporation.
Further, the Corporation has retained Georgeson Shareholder to
perform solicitation services in connection with this Proxy
Statement. For such services, the Corporation will pay Georgeson
Shareholder a fee of approximately $7,000 and will be reimbursed
for certain
out-of-pocket
expenses and indemnified against certain liabilities incurred in
connection with this proxy solicitation.
By order of the Board of Directors
Gary J. Elek
Secretary
November 7, 2006
37
Appendix A
A.
SCHULMAN, INC.
2006 INCENTIVE PLAN
1.00
PURPOSE
The Plan is intended to foster and promote the long-term
financial success of the Company and Related Entities and to
increase stockholder value by [1] providing Participants
an opportunity to acquire and maintain an ownership interest in
the Company and [2] enabling the Company and Related
Entities to attract and retain the services of outstanding
individuals upon whose judgment and special efforts the
successful conduct of the Groups business is largely
dependent.
2.00
DEFINITIONS
When used in the Plan, the following words, terms and phrases
have the meanings given to them in this section unless another
meaning is expressly provided elsewhere in this document or
clearly required by the context. When applying these definitions
and any other word, term or phrase used in the Plan, the form of
any defined term or of any word, term or phrase will include any
and all of its other forms.
Act. The Securities Exchange Act of 1934, as
amended, or any successor statute of similar effect even if the
Company is not subject to the Act.
Annual Meeting. The annual meeting of the
Companys stockholders.
Award. Any Dividend Equivalent, Cash-Based
Award, Incentive Stock Option, Nonqualified Stock Option,
Performance Share, Performance Unit, Restricted Stock,
Restricted Stock Unit, Stock Appreciation Right or Whole Share
granted under the Plan.
Award Agreement. The written or electronic
agreement between the Company and each Participant that
describes the terms and conditions of each Award. If there is a
conflict between the terms of the Plan and the terms of any
Award Agreement, the terms of the Plan will govern.
Beneficial Owner. A beneficial
owner as defined in
Rule 13d-3
under the Act.
Board. The Companys board of directors.
Business Combination. With respect to the
payment, exercise or settlement of any Award subject to
Code §409A, a change in control as defined
under Code §409A.
Cash-Based Award. An Award granted under
Section 13.00.
Cause. Unless otherwise specified in the
associated Award Agreement or in any employment agreement
between the Participant and the Company or any Related Entity or
in any change in control agreement between the Participant and
the Company or any Related Entity (but only within the context
of the events contemplated by the employment agreement or change
in control agreement, as applicable):
[1] Gross neglect of duties the Participant owes to
the Company or to the Participants Service Recipient;
[2] The Participant knowingly committing misfeasance
or knowingly permitting nonfeasance of duties in any material
respect; or
[3] The Participant commits a felony.
Change in Control. With respect to the
payment, exercise or settlement of any Award not subject to
Code §409A and unless otherwise specified in the
associated Award Agreement or in any employment agreement
between the Participant and the Company or any Related Entity or
in any change in control agreement between the
A-1
Participant and the Company or any Related Entity (but only
within the context of the events contemplated by the employment
agreement or change in control agreement, as applicable):
[1] Any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its
Affiliates other than in connection with the acquisition by the
Company or its Affiliates of a business) representing
25 percent or more of either the then outstanding Shares of
common stock of the Company or the combined voting power of the
Companys then outstanding securities; or
[2] The following individuals cease for any reason
to constitute a majority of the number of persons then serving
on the Board (Board Members): individuals who, on
the date hereof, constitute the Board and any new Board Member
(other than a Board Member whose initial assumption of office is
in connection with an actual or threatened election contest,
including, but not limited to, a consent solicitation relating
to the election of Board Members) whose appointment or election
by the Board or nomination for election by the Companys
stockholders was approved by a vote of at least two-thirds of
the Board Members then still in office who either were Board
Members on the date hereof or whose appointment, election or
nomination for election was previously so approved; or
[3] The stockholders of the Company approve a merger
or consolidation of the Company with any other corporation or
approve the issuance of voting securities of the Company in
connection with a merger or consolidation of the Company (or any
direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than [a] a
merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any subsidiary of the Company, at least 75 percent of
the combined voting power of the voting securities of the
Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation or
[b] a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company or its Subsidiaries other
than in connection with the acquisition by the Company or its
Subsidiaries of a business) representing 25 percent or more
of either the then outstanding shares of common stock of the
Company or the combined voting power of the Companys then
outstanding securities; or
[4] The stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Companys assets, other than a
sale or disposition by the Company of all or substantially all
of the Companys assets, other than a sale or disposition
by the Company of all or substantially all of the Companys
assets to an entity, at least 75 percent of the combined
voting power of the voting securities of which are owned by
stockholders in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no Change in Control
shall be deemed to have occurred if there is consummated any
transaction or series of integrated transactions immediately
following which the record holders of the common Shares of the
Company immediately prior to such transaction or series of
transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or transaction
which would otherwise constitute a Change in Control (a
Transaction) shall not constitute a Change in
Control for purposes of this Plan if, with respect to a
Participant, the Participant participates as an equity investor
in the acquiring entity or any of its Affiliates (the
Acquiror). For purposes of the preceding sentence,
such Participant shall not be deemed to have participated as an
equity investor in the Acquiror by virtue of [a]
obtaining Beneficial Ownership of any equity interest in the
Acquiror as a result of the grant to the Participant of an
incentive compensation award under one or more incentive plans
of the Acquiror (including, but not limited to, the conversion
in connection with the Transaction of incentive
A-2
compensation awards of the Company into incentive compensation
awards of the Acquiror), on terms and conditions substantially
equivalent to those applicable to other executives of the
Company immediately prior to the Transaction, after taking into
account normal differences attributable to job responsibilities,
title and similar matters, [b] obtaining Beneficial
Ownership of any equity interest in the Acquiror on terms and
conditions substantially equivalent to those obtained in the
Transaction by all other stockholders of the Company or [c]
passive ownership of less than 3 percent of the stock
of the Acquiror.
For purposes of this definition, Person has the
meaning given in Section 3(a)(9) of the Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that
the term will not include [a] the Company or any Related
Entity, [b] a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any
Related Entity, [c] an underwriter temporarily holding
securities pursuant to an offering of those securities, or
[d] a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
Code. The Internal Revenue Code of 1986, as
amended or superseded, and all pertinent regulations and rulings
directly related to the Plan and published IRS rulings of
general application issued under the Code.
Committee. The Boards Compensation
Committee which also constitutes a compensation
committee within the meaning of Treas.
Reg. §1.162-27(c)(4). The Committee will be comprised
of at least three persons [1] each of whom is [a]
an outside director, as defined in Treas.
Reg. §1.162-27(e)(3)(i) and [b] a
non-employee director within the meaning of
Rule 16b-3
under the Act and [2] none of whom may receive
remuneration from the Company or any Related Entity in any
capacity other than as a director, except as permitted under
Treas. Reg. §1.162-27(e)(3)(ii).
Company. A. Schulman, Inc., a Delaware
corporation, and any and all successors to it.
Consultant. Any person who performs services
for the Company or any Related Entity other than an Employee or
a Director. A persons status as a Consultant will be
determined as of the Grant Date of each Award made to that
person.
Covered Officer. Those Employees whose
compensation is (or likely will be) subject to limited
deductibility under Code §162(m) as of the last day of
any calendar year.
Director. A person who, on an applicable Grant
Date, [1] is an elected member of the Board or of a
Related Board (or has been appointed to the Board or to a
Related Board to fill an unexpired term and will continue to
serve at the expiration of that term only if elected by
stockholders) and [2] is not an Employee. A persons
status as a Director will be determined as of the Grant Date of
each Award made to that person.
Disability. Unless otherwise specified in the
associated Award Agreement or in any employment agreement
between the Participant and the Company or any Related Entity or
in any change in control agreement between the Participant and
the Company or any Related Entity (but only within the context
of the events contemplated by the employment agreement or change
in control agreement, as applicable):
[1] With respect to the payment, exercise or
settlement of any Award that is (or becomes) subject to
Code §409A, disabled as defined under
Code §409A; and
[2] With respect to any Award not described in
subsection [1] of this definition, disability as
defined in Code §22(e)(3).
Disability will be determined by the Committee in good faith
upon receipt of sufficient medical advice from one or more
individuals, selected by the Committee, who are qualified to
give professional medical advice.
Dividend Equivalents. An Award granted under
Section 14.00.
Effective Date. The date the Plan is adopted
by the Board subject to approval by the Companys
stockholders at the first Annual Meeting after the date the
Board adopts the Plan subject to approval by the Companys
stockholders. However, other than Restricted Stock, no Awards
will be granted or Shares issued under the Plan unless and until
the Companys stockholders approve the Plan. Between the
date the Board approves the Plan and the date the Companys
stockholders vote to approve the Plan, the Committee may issue
Restricted Stock, subject to
A-3
the terms of Sections 5.00 and 8.00 and contingent on
approval of the Plan by the Companys stockholders. If the
Companys stockholders approve the Plan, the Committee may
grant Awards subject to the Plans terms and any
conditionally granted Restricted Stock Awards will be deemed to
have been granted, subject to restrictions described in the
associated Award Agreement, as of the Grant Date. If the
Companys stockholders do not approve the Plan, [1]
this document will have no force or effect and it will be
revoked as of the Effective Date and [2] any
conditionally granted Restricted Stock will be revoked as of the
Grant Date.
Employee. Any person who performs services for
the Company or any Related Entity as a common-law employee. A
persons status as an Employee will be determined as of the
Grant Date of each Award made to that person. A worker who is
classified as other than a common law employee but who is
subsequently reclassified as a common-law employee of the
Company or any Related Entity for any reason and on any basis
will be treated as a common-law employee only from the date that
reclassification occurs and will not retroactively be
reclassified as an Employee for any purpose under the Plan.
Exercise Price. The amount, if any, a
Participant must pay to exercise an Option or the amount upon
which the value of a Stock Appreciation Right is based.
Expiration Date. The last date that an Option
or Stock Appreciation Right may be exercised.
Fair Market Value. The value of one Share on
any relevant date, determined under the following rules:
[1] If the Shares are traded on an exchange, the
reported closing price on the relevant date, if it
is a trading day, otherwise on the next trading day;
[2] If the Shares are traded
over-the-counter
with no reported closing price, the mean between the highest and
lowest selling prices on the relevant date, if it is a trading
day, otherwise on the next trading day; or
[3] If neither subsections [1] or [2] of this
definition apply, the fair market value as determined by the
Committee in good faith and consistent with any applicable
provisions under the Code.
Full Value Award. Performance Shares,
Performance Units, Restricted Stock, Restricted Stock Units and
Whole Shares.
Grant Date. The date an Award is granted.
Group. The Company and all Related Entities.
The composition of the Group will be determined as of any
relevant date.
Group Member. Each entity that is a member of
the Group.
Incentive Stock Option. An Option that, on the
Grant Date, meets the conditions imposed under
Code §422 and is not subsequently modified in a manner
inconsistent with Code §422.
Key Employee. A specified employee
as defined under Code §409A.
Nonqualified Stock Option. Any Option that is
not an Incentive Stock Option.
Option. An Award granted under
Section 6.00. An Option may be either [1] an
Incentive Stock Option or [2] a Nonqualified Stock Option.
Participant. Any Employee, Consultant or
Director to whom an Award has been granted and which is still
outstanding.
Performance-Based Award. An Award granted
subject to Section 15.00.
Performance Criteria. The criteria described
in Section 15.02.
Performance Period. The period over which the
Committee will determine if applicable Performance Criteria have
been met.
Performance Share. An Award granted under
Section 11.00.
Performance Unit. An Award granted under
Section 12.00.
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Plan. The A. Schulman, Inc. 2006 Incentive
Plan.
Plan Year. The Companys fiscal year.
Prior Plan. The A. Schulman, Inc. 2002 Equity
Incentive Plan. Upon approval of the Plan by the Companys
stockholders, no more awards will be granted under the Prior
Plan, although awards may be granted under the Prior Plan up to
the date the Companys stockholders approve the Plan, and
the Prior Plan will remain in effect after the Companys
stockholders approve the Plan for purposes of determining any
grantees right to awards issued under the Prior Plan
before that date. If the Companys stockholders do not
approve the Plan, the Prior Plan will remain in effect until the
expiration date specified in its governing documents.
Related Board. The board of directors of any
incorporated Related Entity or the governing body of any
unincorporated Related Entity.
Related Entity. Any entity that is or becomes
related to the Company through common ownership as determined
under Code §414(b) or (c) but modified as
permitted under rules issued under any Code section relevant to
the purpose for which the definition is applied.
Restricted Stock. An Award granted under
Section 8.00.
Restricted Stock Unit. An Award granted under
Section 9.00.
Restriction Period. The period over which the
Committee will determine if a Participant has met conditions
placed on Restricted Stock or Restricted Stock Units.
Retirement. Unless otherwise specified in the
associated Award Agreement or in any employment agreement
between the Participant and the Company or any Related Entity or
in any change in control agreement between the Participant and
the Company or any Related Entity (but only within the context
of the events contemplated in any employment agreement or change
in control agreement, if applicable):
[1] With respect to Participants who are Employees,
Termination after age 60; and
[2] With respect to Participants who are Directors,
Termination of service as a Director [a] after serving
one full term as an elected Director and [b] being
nominated for election to a second consecutive full term.
Separation from Service. A separation
from service as defined under Code §409A.
Service Recipient. The Group Member with whom
an Employee, Consultant or Director has a direct service
relationship.
Shares. Shares of common stock, par value
$1.00 per share, of the Company or any security of the
Company issued in substitution, exchange or in place of these
shares.
Stock Appreciation Right (SAR). An
Award granted under Section 10.00.
Subsidiary. A subsidiary
corporation as defined under Code §424(f).
Termination.
[1] If a Participant is an Employee, a termination
of the Employees common-law employment relationship with
the Company and all Related Entities for any reason, although a
Termination will not occur if the Employee becomes a Consultant
who provides bona fide services to the Company or any Related
Entity;
[2] If a Participant is a Consultant, a termination
of the Consultants service relationship with the Company
and all Related Entities for any reason; and
[3] If a Participant is a Director, a termination of
the Directors service on the Board and any Related Board
for any reason.
Whole Share. An Award granted under
Section 7.00.
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3.00
PARTICIPATION
3.01 Awards.
[1] Consistent with the terms of the Plan and
subject to Section 3.02, the Committee will [a]
decide which Employees, Consultants and Directors will be
granted Awards and [b] establish the types of Awards to
be granted and the terms and conditions relating to those Awards.
[2] The Committee may establish different terms and
conditions [a] for each type of Award granted, [b]
for each Participant receiving the same type of Award and
[c] for the same Participant for each Award received,
whether or not those Awards are granted at different times.
[3] In the sole discretion of the Committee, and
consistent with applicable law, Awards also may be made, subject
to the restrictions set forth in 4.04 and in connection with a
corporate transaction as defined under
Code §424, in assumption of, or in substitution for,
outstanding awards previously granted by the Company or any
Related Entity or a company acquired by the Company or with
which the Company combines.
3.02 Conditions of Participation. By accepting
an Award, each Participant agrees:
[1] To be bound by the terms of the Award Agreement
and the Plan and to comply with other terms and conditions
imposed on the Award; and
[2] That the Board or the Committee, as appropriate,
may amend the Plan and any Award Agreement without any
additional consideration to the extent necessary to avoid
penalties arising under Code §409A, even if those
amendments reduce, restrict or eliminate rights granted under
the Plan or an outstanding Award Agreement.
4.00
ADMINISTRATION
4.01 Duties. The Committee is responsible for
administering the Plan and has all powers appropriate and
necessary to that purpose. Consistent with the Plans
objectives, the Committee may adopt, amend and rescind rules and
regulations relating to the Plan and has complete discretion to
make all other decisions necessary or advisable for the
administration and interpretation of the Plan. Any action by the
Committee will be final, binding and conclusive for all purposes
and upon all persons.
4.02 Delegation of Duties. In its sole
discretion, the Committee may delegate any ministerial duties
associated with the Plan to any person that it deems appropriate
and the authority to grant Awards covering up to
25,000 Shares quarterly to Participants (or prospective
Participants) who are not Covered Officers. However, and except
to the extent provided in the preceding sentence, the Committee
may not delegate any discretionary duties assigned to it or any
duty that the Committee is required to discharge to comply with
Code §162(m) or other applicable laws.
4.03 Award Agreement. As soon as
administratively feasible after the Grant Date, the Committee
will prepare and deliver or cause to be prepared and delivered
an Award Agreement to each affected Participant. The Award
Agreement will describe:
[1] The terms of the Award, including, to the extent
applicable, [a] the type of Award, [b] when and
how the Award may be exercised, [c] any Exercise Price
associated with the Award and [d] how the Award will or
may be settled; and
[2] To the extent different from the terms of the
Plan, any other terms and conditions affecting the Award.
4.04 Restriction on Repricing. No Award
(including Options and SARs) may be repriced. For
purposes of this restriction, repricing means any of
the following or any other action that has the same effect:
[1] lowering the Exercise Price of an Option or SAR after
it is granted, [2] any other action that is treated as a
repricing under generally accepted accounting principles or
[3] canceling an Option at a time when its Exercise Price
exceeds the Fair Market Value of the underlying stock, in
exchange for another Option, Restricted Stock or other Award,
unless the cancellation and exchange occurs in connection with a
merger, acquisition, spin-off or other similar corporate
transaction.
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5.00
LIMITS ON STOCK SUBJECT TO AWARDS
5.01 Number of Authorized Shares of
Stock. Subject to Section 5.03, the
aggregate number of Shares reserved and available for Awards or
which may be used to provide a basis of measurement for or to
determine the value of an Award may not be more than the sum of:
[1] The number of Shares that, on the date the Plan
is approved by the Companys stockholders, are authorized
to be granted under the Prior Plan but which are not then
subject to outstanding awards under the Prior Plan; plus
[2] The number of Shares that, on the date the Plan
is approved by the Companys stockholders, are subject to
awards issued under the Prior Plan but which are subsequently
forfeited under the terms of the Prior Plan; plus
[3] 1,750,000.
If the Companys stockholders do not approve the Plan, the
Prior Plan will remain in effect until the expiration date
specified in its governing documents. Any Shares described in
this section, including those described in Sections 5.01[1]
and [2], may be subject to Awards issued under the terms and
conditions described in the Plan and Award Agreements issued
under the Plan.
The Shares to be delivered under the Plan may consist, in whole
or in part, of Treasury Shares or authorized but unissued Shares
not reserved for any other purpose.
5.02 Reduction Ratio. As appropriate, the
limits imposed under Sections 5.01, 5.04 and 5.05 will be:
[1] Conditionally reduced by the number of Shares
underlying each Award (including SARs) that is not a Full Value
Award and by 1.77 times the number of Shares underlying each
Award that is a Full Value Award; and
[2] Absolutely reduced by [a] the number of
Shares underlying any exercised or settled Award (including
SARs) that is not a Full Value Award and [b] 1.77 times
the number of Shares underlying any settled Full Value
Award; and
[3] Increased by the number of Shares by which the
limits imposed under Sections 5.01, 5.04 and 5.05 were
conditionally reduced when any Award (including SARs) was
granted that is forfeited, cancelled, terminated, relinquished,
exchanged or otherwise settled without issuing Shares or without
the payment of cash or a cash equivalent.
The number of Shares (if any) withheld to pay any Exercise Price
or to satisfy any tax withholding obligation associated with the
exercise or settlement of an Award (or part of an Award) will
not be recredited to the number of authorized Shares.
5.03 Adjustment in Capitalization. If, after
the Effective Date, there is a Share dividend or Share split,
recapitalization (including payment of an extraordinary
dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of Shares or
other similar corporate change affecting Shares, the Committee
will appropriately adjust [1] the number of Shares that
may be issued subject to Awards that may or will be granted to
Participants during any period, [2] the aggregate number
of Shares available for Awards or subject to outstanding Awards
(as well as any share-based limits imposed under the Plan),
[3] the respective Exercise Price, number of Shares and
other limitations applicable to outstanding or subsequently
granted Awards and [4] any other factors, limits or terms
affecting any outstanding or subsequently granted Awards.
5.04 Limits on Incentive Stock
Options. Subject to Section 5.03, of the
Shares authorized under Section 5.01, up to 500,000 may be
issued subject to Incentive Stock Options.
5.05 Limits on Awards to Covered
Officers. Subject to Section 5.03, during
any Plan Year, no Covered Officer may be granted [1]
Options covering more than 250,000 Shares,
including Awards that are deemed to have been cancelled
under Treas. Reg. §1.162-27(e)(2)(vi)(B), [2]
SARs covering more than 250,000 Shares,
including Awards that are deemed to have been cancelled under
Treas. Reg. §1.162-27(e)(2)(vi)(B), [3]
Performance-Based
A-7
Awards that are to be settled in Shares covering more than
100,000 Shares and [4] more than $2,500,000 in cash
paid in settlement of Performance-Based Awards.
6.00
OPTIONS
6.01 Nature of Award. An Option gives a
Participant the right to purchase a specified number of Shares
if the terms and conditions described in the Plan and the
associated Award Agreement (including paying the Exercise Price)
are met before the Expiration Date. However, an Option will be
forfeited to the extent that applicable terms and conditions
have not been met before the Expiration Date or to the extent
that the Option is not exercised before the Expiration Date.
6.02 Granting Options. At any time during
the term of the Plan, the Committee may grant [1]
Incentive Stock Options to Employees of the Company or of
any Subsidiary and [2] Nonqualified Stock Options to
Employees, Consultants and Directors. The Award Agreement
associated with each Option grant will describe the Exercise
Price, the Expiration Date (which may never be later than the
tenth anniversary of the Grant Date), the first date that the
Option may be exercised, procedures for exercising the Option
and any other terms and conditions affecting the Option and may
specify that the Option is a Performance-Based Award under
Section 15.00.
6.03 Exercise Price. Except as provided
in Section 6.04[4] or to the extent necessary to implement
Section 3.01[3], each Option will bear an Exercise Price at
least equal to the Fair Market Value of a Share on the Grant
Date.
6.04 Special Rules Affecting Incentive Stock
Options. Regardless of any other Plan provision:
[1] No provision of the Plan relating to Incentive
Stock Options will be interpreted, amended or altered, nor will
any discretion or authority granted under the Plan be exercised,
in a manner that is inconsistent with Code §422.
[2] The aggregate Fair Market Value of the Shares
(determined as of the Grant Date) with respect to which
Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year (under all option plans
of the Company and all Related Entities) may not be greater than
$100,000 [or other amount specified in Code §422(d)],
as calculated under Code §422.
[3] No Incentive Stock Option may be exercised after
the tenth anniversary of its Grant Date [or the fifth
anniversary of its Grant Date in the case of an Incentive Stock
Option granted to a 10% Owner (as defined below)].
[4] The Exercise Price of an Incentive Stock Option
may never be less than 100 percent (110 percent in the
case of a 10% Owner) of the Fair Market Value of a Share
underlying the Incentive Stock Option, measured as of the Grant
Date.
For purposes of this section, a 10% Owner means any
Employee who, at the time an Incentive Stock Option is granted,
owns (or is treated as owning) [as defined in
Code §424(d)] more than ten percent of the total
combined voting power of all classes of stock of the Company or
of any Subsidiary.
6.05 Exercising Options. An Option may be
exercised only if all applicable terms and conditions have been
met before the Expiration Date and only by sending to the
Committee (or its designee) a completed exercise notice (in the
form prescribed by the Committee) along with payment of the
Exercise Price in accordance with the method or methods
described in the associated Award Agreement. Options may be
exercised only to purchase whole Shares; the portion of any
Option to purchase a fractional Share will be cancelled without
any consideration to the affected Participant.
6.06 Rights Associated With
Options. Unless otherwise specified in the
associated Award Agreement, a Participant will have no voting or
dividend rights with respect to the Shares underlying an
unexercised Option.
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7.00
WHOLE SHARES
At any time during the term of the Plan, the Committee may grant
Whole Shares to Employees, Consultants and Directors, although
no more than 250,000 Shares may be issued as Whole Shares.
Whole Shares may be granted on any basis and subject to any
terms and conditions that the Committee or the Board, as the
case may be, believes to be appropriate.
8.00
RESTRICTED STOCK
8.01 Nature of Award. Restricted Stock are
Shares issued on the Awards Grant Date which are subject
to specified restrictions on transferability and forfeitability.
Any restrictions on transferability and forfeitability will
lapse at the end of the associated Restriction Period only if
the terms and conditions specified in the Plan and the
associated Award Agreement are met during the Restriction
Period. However, Restricted Stock will be forfeited to the
extent that applicable terms and conditions have not been met
before the end of the Restriction Period.
8.02 Granting Restricted Stock. At any time
during the term of the Plan, the Committee may grant Restricted
Stock to Employees, Consultants and Directors. The Award
Agreement associated with each Restricted Stock grant will
describe the terms and conditions that must be met during the
Restriction Period if the Award is to be earned and settled and
any other terms and conditions affecting the Restricted Stock
and may specify that the Restricted Stock is a Performance-Based
Award under Section 15.00.
8.03 Earning Restricted Stock. Restricted
Stock will be held by the Company as escrow agent and will be:
[1] Forfeited, if the applicable terms and
conditions have not been met; or
[2] Released from escrow and distributed to the
Participant as soon as administratively feasible after the last
day of the Restriction Period, if the applicable terms and
conditions have been met.
Unless specifically provided otherwise in this Plan, the Award
Agreement relating to Restricted Stock that is not a
Performance-Based Award may not provide that the Restricted
Stock will be earned more rapidly than
331/3
percent annually beginning on the first anniversary of the Grant
Date.
Any fractional Share of Restricted Stock will be cancelled
without any consideration to the affected Participant.
8.04 Rights Associated With Restricted
Stock. During the Restriction Period and unless
otherwise specified in the associated Award Agreement, each
Participant to whom Restricted Stock has been issued:
[1] May exercise full voting rights associated with
that Restricted Stock; and
[2] Will be entitled to receive all dividends and
other distributions paid with respect to that Restricted Stock,
although any dividends or other distributions paid in Shares
will be subject to the same restrictions on transferability and
forfeitability as the Shares of Restricted Stock with respect to
which they were issued.
9.00
RESTRICTED STOCK UNITS
9.01 Nature of Award. Restricted Stock Units
give a Participant the right to receive a specified number of
Shares (or cash equal to the Fair Market Value of those Shares)
if the terms and conditions described in the Plan and the
associated Award Agreement are met during the Restriction
Period. However, Restricted Stock Units will be forfeited to the
extent that applicable terms and conditions have not been met
before the end of the Restriction Period.
9.02 Granting Restricted Stock Units. At any
time during the term of the Plan, the Committee may grant
Restricted Stock Units to Employees, Consultants and Directors.
The Award Agreement associated with each Restricted Stock Unit
grant will describe the terms and conditions that must be met
during the Restriction Period if the Award is to be earned and
settled, the form in which the Award will be settled if it is
earned and any other terms and conditions affecting the
Restricted Stock Units and may specify that the Restricted Stock
Units are a Performance-Based Award under Section 15.00.
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9.03 Earning Restricted Stock
Units. Restricted Stock Units will be:
[1] Forfeited, if the applicable terms and
conditions have not been met; or
[2] Settled in the manner described in
Section 9.04, if the applicable terms and conditions have
been met.
Unless specifically provided otherwise in this Plan, the Award
Agreement relating to Restricted Stock Units that are not a
Performance-Based Award may not provide that the Restricted
Stock Units will be earned more rapidly than
331/3 percent
annually beginning on the first anniversary of the Grant Date.
9.04 Settling Restricted Stock Units. As soon
as administratively feasible after the applicable terms and
conditions have been met, Restricted Stock Units will be settled
[1] in full Shares equal to the number of Restricted
Stock Units to be settled and all Restricted Stock Units
relating to fractional Shares will be cancelled without any
consideration to the affected Participant, [2] for cash
equal to the whole number of Restricted Stock Units to be
settled, multiplied by the Fair Market Value of a Share on the
settlement date and all Restricted Stock Units relating to
fractional Shares will be cancelled without any consideration to
the affected Participant or [3] in a combination of
Shares and cash computed under Sections 9.04[1] and [2].
The method of settling Restricted Stock Units will be described
in the associated Award Agreement.
9.05 Rights Associated With Restricted Stock
Units. During the Restriction Period and unless
specified otherwise in the associated Award Agreement, a
Participant will have no voting or dividend rights with respect
to the Shares underlying Restricted Stock Units.
10.00
STOCK APPRECIATION RIGHTS
10.01 Nature of Award. A SAR gives a
Participant the right to receive the difference between the
SARs Exercise Price and the Fair Market Value of a Share
on the date the SAR is exercised, but only if the terms and
conditions described in the Plan and the associated Award
Agreement are met before the Expiration Date. However, a SAR
will be forfeited to the extent that applicable terms and
conditions have not been met before the Expiration Date or to
the extent that the SAR is not exercised before the Expiration
Date.
10.02 Granting SARs. At any time during the
term of the Plan, the Committee may grant SARs to Employees,
Consultants and Directors. The Award Agreement associated with
each SAR grant will describe the Exercise Price, the Expiration
Date (which may never be later than the tenth anniversary of the
Grant Date), the first date that the SAR may be exercised,
procedures for exercising the SAR, the form in which the SAR
will be settled if the SAR is earned and any other terms and
conditions affecting the SAR and may specify that the SAR is a
Performance-Based Award under Section 15.00.
10.03 Exercise Price. Except to the extent
necessary to implement Section 3.01[3], each SAR will bear
an Exercise Price at least equal to the Fair Market Value of a
Share on the Grant Date.
10.04 Exercising and Settling SARs. SARs may
be exercised only if all applicable terms and conditions have
been met before the Expiration Date and only by sending to the
Committee (or its designee) a completed exercise notice (in the
form prescribed by the Committee). As soon as administratively
feasible after the SARs are exercised, SARs will be settled in
[1] full Shares equal to the difference between the Fair
Market Value of a Share on the date the SARs are exercised and
the Exercise Price, multiplied by [a] the number of SARs
being exercised, and divided by [b] the Fair Market Value
of a Share on the date the SARs are exercised, [2] cash
equal to [a] the difference between the Fair Market Value
of a Share on the date the SARs are exercised and the Exercise
Price, multiplied by [b] the whole number of SARs being
exercised or [3] a combination of full Shares and cash
computed under Sections 10.04[1] and [2]. The method of
settling SARs will be specified in the associated Award
Agreement. However, in no case may SARs relating to fractional
Shares be exercised; any SAR relating to a fractional Share will
be automatically cancelled without any consideration to the
affected Participant.
10.05 Rights Associated With SARs. Unless
specified otherwise in the associated Award Agreement, a
Participant will have no voting or dividend rights with respect
to the Shares underlying an unexercised SAR.
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11.00
PERFORMANCE SHARES
11.01 Nature of Award. Performance Shares give
a Participant the right to receive a specified number of Shares
if the terms and conditions described in the Plan and the
associated Award Agreement (including those based on Performance
Criteria) are met at the end of the Performance Period. However,
Performance Shares will be forfeited to the extent that
applicable terms and conditions have not been met at the end of
the Performance Period.
11.02 Granting Performance Shares. The
Committee may grant Performance Shares to Employees, Consultants
and Directors. The Award Agreement associated with each
Performance Share grant will describe the terms and conditions
that must be met at the end of the Performance Period if the
Award is to be earned and settled (including any performance
objectives), the duration of the Performance Period, the number
of Performance Shares subject to the Award and any other terms
and conditions affecting the Performance Shares and may specify
that the Performance Shares are a Performance-Based Award under
Section 15.00.
11.03 Earning Performance Shares. After the
end of a Performance Period, the Committee will certify the
extent to which each Participant has or has not met applicable
performance objectives and other terms and conditions specified
in the associated Award Agreement. Performance Shares will be
settled or forfeited depending on the extent to which the
applicable performance objectives have been met at the end of
the Performance Period. As soon as administratively feasible
after the Committees certification, a Participant will
receive one Share for each Performance Share earned, and any
fractional Share relating to an earned Performance Share will be
cancelled without any consideration to the affected Participant.
11.04 Rights Associated With Performance
Shares. During the Performance Period and unless
specified otherwise in the associated Award Agreement, a
Participant will have no voting or dividend rights with respect
to Shares underlying the Performance Shares.
12.00
PERFORMANCE UNITS
12.01 Nature of Award. Performance Units give
a Participant the right to receive cash equal to the Fair Market
Value of a specified number of Shares if the terms and
conditions described in the Plan and the associated Award
Agreement (including those based on Performance Criteria) are
met at the end of the Performance Period. However, Performance
Units will be forfeited to the extent that applicable terms and
conditions have not been met at the end of the Performance
Period.
12.02 Granting Performance Units. The
Committee may grant Performance Units to Employees, Consultants
and Directors. The Award Agreement associated with each
Performance Unit grant will describe the terms and conditions
that must be met at the end of the Performance Period if the
Award is to be earned and settled (including any performance
objectives), the duration of the Performance Period, the number
of Performance Units subject to the Award and any other terms
and conditions affecting the Performance Units and may specify
that the Performance Units are a Performance-Based Award under
Section 15.00.
12.03 Earning Performance Units. After the end
of a Performance Period, the Committee will certify the extent
to which each Participant has or has not met applicable
performance objectives and other terms and conditions specified
in the associated Award Agreement. Performance Units will be
settled or forfeited depending on the extent to which the
applicable performance objectives have been met at the end of
the Performance Period. As soon as administratively feasible
after the Committees certification, each Participant will
receive cash equal to the number of Performance Units to be
settled, multiplied by the Fair Market Value of a Share on the
settlement date.
12.04 Rights Associated With Performance
Units. During the Performance Period and unless
specified otherwise in the associated Award Agreement, a
Participant will have no voting or dividend rights with respect
to the Performance Units or the Shares underlying the
Performance Units.
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13.00
CASH-BASED AWARDS
The Committee may grant Cash-Based Awards to Employees,
Consultants and Directors. The Award Agreement associated with
each Cash-Based Award grant will describe the terms and
conditions affecting the Cash-Based Award and may specify that
the Cash-Based Award is a Performance-Based Award under
Section 15.00.
14.00
DIVIDEND EQUIVALENTS
14.01 Nature of Award. Dividend Equivalents
give a Participant the right to receive the same dividends the
Participant would have received had he or she actually owned the
Shares underlying the Dividend Equivalent Award but only if the
terms and conditions described in the associated Award Agreement
are met. If those conditions are not met, the Dividend
Equivalent will be forfeited.
14.02 Granting Dividend Equivalents. At any
time during the term of the Plan, the Committee may grant
Dividend Equivalents to Employees, Consultants and Directors.
The Award Agreement associated with each Dividend Equivalent
grant will describe the terms and conditions that must be met if
the Award is to be earned and settled, the form in which the
Award will be settled if it is earned and any other terms and
conditions affecting the Dividend Equivalents and may specify
that the Dividend Equivalents are a Performance-Based Award
under Section 15.00.
14.03 Earning Dividend Equivalents. Dividend
Equivalents will be:
[1] Forfeited, if the applicable terms and
conditions have not been met; or
[2] Settled in the manner described in
Section 14.04, if the applicable terms and conditions have
been met.
14.04 Settling Dividend Equivalents. If the
terms and conditions specified in the associated Award Agreement
are met, Dividend Equivalents will be settled in cash without
any adjustment to reflect the time-value of money during the
period beginning on the date that the dividend would have been
paid had the Participant actually owned the underlying Shares
and the date the Dividend Equivalents are settled. The date
Dividend Equivalents are settled will be specified in the
associated Award Agreement.
15.00
PERFORMANCE-BASED AWARDS
15.01 Nature of the Award. A Performance-Based
Award may be granted to any Participant in any form of Award,
and the associated Award Agreement may specify that the Award is
intended to be qualified performance-based compensation under
Code §162(m). As determined by the Committee in its
sole discretion, the grant, vesting, exercisability
and/or
settlement of any Performance-Based Award will be conditioned on
the attainment of performance objectives derived from one or
more Performance Criteria over a Performance Period.
15.02 Performance Criteria.
[1] The performance objectives relating to a
Performance-Based Award will be derived from one or more of the
following Performance Criteria:
[a] Net earnings;
[b] Earnings per Share;
[c] Net sales;
[d] Net income (before and after taxes);
[e] Net income;
[f] Net operating profit;
[g] Return measures (including return on assets,
capital, equity or sales);
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[h] Cash flow (including operating cash flow and
free cash flow);
[i] Cash flow return on capital;
[j] Earnings before and after taxes, interest,
depreciation
and/or
amortization;
[k] Gross or operating margins;
[l] Productivity ratios;
[m] Share price (including total stockholder return);
[n] Expense targets; and
[o] Margins.
[2] Different Performance Criteria may be applied to
individual Participants or to groups of Participants and, as
specified by the Committee, may be based on the results achieved
[a] separately by the Company
and/or any
Related Entity, [b] by any combination of the Company and
its Related Entities or [c] by any combination of
segments, products or divisions of the Company and Related
Entities. In addition, the performance objectives may be
measured on an absolute or cumulative basis or measured relative
to selected peer companies or a market index.
15.03 Establishing Performance Objectives.
[1] With respect to Participants who are Covered
Officers, the Committee will establish in writing
[a] the performance objectives to be applied to each
Performance-Based Award granted to a Covered Officer and the
Performance Period over which their attainment will be measured,
[b] the method for computing the Performance-Based
Award that will be granted, vested, exercisable
and/or
settled if (and to the extent that) the Covered Officer meets
those performance objectives and [c] the Covered Officer
or class of Covered Officers meets to which the performance
objectives apply.
[2] Performance objectives relating to Covered
Officers must be established in writing [a] while the
outcome for that Performance Period is substantially uncertain
and [b] no later than 90 days after the beginning of
the applicable Performance Period or, if earlier, after
25 percent of the applicable Performance Period has elapsed.
[3] The Committee may grant Performance-Based Awards
to Participants who are not Covered Officers either by [a]
following the procedures described in Sections 15.03[1]
and [2] or [b] by following any other procedure the
Committee believes is appropriate.
15.04 Certification of Performance. The
Committee will certify in writing whether the performance
objectives and other terms and conditions imposed on a
Performance-Based Award granted to a Covered Officer have been
met at the end of the related Performance Period and no
Performance-Based Award will be granted, vested, exercisable
and/or
settled to or with respect to a Covered Officer until the
Committee makes this certification. The Committee may adopt this
same procedure (or apply another procedure it believes to be
appropriate) to establish whether the terms and conditions
associated with Performance-Based Awards granted to Participants
who are not Covered Officers have been met.
15.05 Modifying Performance-Based Awards. Once
established, the Committee may not revise any performance
objectives associated with a Performance-Based Award granted to
a Covered Officer or increase the amount of the
Performance-Based Award that may be granted, vested, exercisable
and/or
settled to or with respect to a Covered Officer if those
performance objectives are met. However, to the extent
consistent with Code §162(m), performance objectives
affecting Covered Officers may be calculated without regard to
extraordinary items or unforeseen events. In addition, the
Committee may reduce or eliminate the amount of any Cash-Based
Award that may be granted, vested, exercisable
and/or
settled if the performance objectives are met.
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16.00
TERMINATION/OTHER LIMITS ON EXERCISABILITY
16.01 Effect of Termination on Awards Other Than
Performance-Based Awards. Unless specified
otherwise in the associated Award Agreement or the Plan, the
following treatment will apply to Awards other than
Performance-Based Awards upon a Termination:
[1] Retirement. If a Participant
Terminates due to Retirement:
[a] All Options and SARs then held by the Participant
(whether or not then exercisable) will be fully exercisable on
the Retirement date and may be exercised at any time before the
earlier of [i] the Expiration Date specified in the Award
Agreement or [ii] 24 months after the Retirement
date. However, an Incentive Stock Option that is not exercised
within three months after the Retirement date will be treated as
a Nonqualified Stock Option.
[b] A prorata portion of all Dividend Equivalents,
Restricted Stock and Restricted Stock Units granted to the
Participant will be vested on the Retirement date. The amount
vested will equal the number of Restricted Stock, Restricted
Stock Units and Dividend Equivalents that are, by their terms,
unvested at Retirement multiplied by the number of whole months
between the Grant Date and the Retirement date and divided by
the number of whole months specified in the Award Agreement over
which the Award otherwise would vest.
[c] All Whole Shares will vest or be forfeited as
provided in the Award Agreement.
[d] All other Awards granted to the Participant that
have not been designated as Performance-Based Awards and which
are unvested or have not been earned or settled when the
Participant Retires will be forfeited on the Retirement date.
[2] Death or Disability. If a
Participant Terminates due to death or Disability:
[a] All Options and SARs then held by the
Participant (whether or not then exercisable) will be fully
exercisable on the Termination date and may be exercised at any
time before the earlier of [i] the Expiration Date
specified in the Award Agreement or [ii] 24 months
after Termination due to death or Disability. However, an
Incentive Stock Option that is not exercised within
12 months after Termination due to death or Disability will
be treated as a Nonqualified Stock Option.
[b] All outstanding Dividend Equivalents, Restricted
Stock and Restricted Stock Units granted to the Participant will
be vested on the Termination date.
[c] All Whole Shares will vest or be forfeited as
provided in the Award Agreement.
[d] All other Awards granted to the Participant that
have not been designated as Performance-Based Awards and which
are unvested or have not been earned or settled when the
Participant dies or Terminates due to Disability will be
forfeited on the Termination date.
[3] Cause. When (and if) a
Participant commits an act that constitutes Cause, all Awards
that are outstanding (whether or not then exercisable) will be
forfeited on the date of that occurrence.
[4] Termination for any Other
Reason. If a Participant Terminates for any
reason not described in Section 16.01[1], [2] or [3],
[a] all outstanding unvested Awards that have not been
designated as Performance-Based Awards will be forfeited on the
Termination date and [b] all vested Options and SARs then
held by a Terminating Participant and that have not been
designated as Performance-Based Awards may be exercised before
the earlier of [i] 90 days after Termination or
[ii] the Expiration Date specified in the associated
Award Agreement.
16.02 Effect of Termination on Performance-Based
Awards. Unless specified otherwise in the
associated Award Agreement:
[1] A Participant who Terminates due to death,
Disability or Retirement will receive a prorata portion of all
Performance-Based Awards then held by the Participant that are
then subject to a pending Performance Period will be settled at
the end of that Performance Period but only if at the end of the
pending Performance
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Period, the Committee certifies that the associated performance
objectives have been met. The portion of the Award to be settled
under this section will be the amount of the Award that would
have been due if the Participant had not Terminated due to
death, Disability or Retirement multiplied by the number of
whole months between the Grant Date and the Termination date and
divided by the number of whole months specified in the Award
Agreement over which the Award otherwise will be earned.
[2] A Participant who Terminates for any reason
other than death, Disability or Retirement during a pending
Performance Period will forfeit any Award that otherwise might
have been earned during that Performance Period, whether or not
the performance objectives established for that Performance
Period are met at any time during that Performance Period.
16.03 Code §409A. Regardless of any
other provision in the Plan or any Award Agreement:
[1] Subject to Section 16.03[2], if a
Participants Termination is not a Separation from Service,
the payment, exercise or settlement of any Award subject to
Code §409A will not be made or permitted before the
Participant Separates from Service.
[2] If a Participant is a Key Employee, the payment,
exercise or settlement of any Award subject to
Code §409A will not be made or permitted earlier than
the first day that it may be paid, exercised or settled without
generating penalties under Code §409A.
16.04 Other Limits on Exercisability. Unless
otherwise specified in the associated Award Agreement or other
written agreement between an Employee or a Consultant and the
Company or any Related Entity and regardless of any other Plan
provision, all Awards granted to an Employee or a Consultant
that have not been exercised or settled will be forfeited if the
Employee or Consultant:
[1] Without the Committees written consent,
which may be withheld for any reason or for no reason, serves
(or agrees to serve) as an officer, director, consultant or
employee of any proprietorship, partnership, corporation or
limited liability company or becomes the owner of a business or
a member of a partnership that competes with any portion of the
Companys or a Related Entitys business or renders
any service to entities that compete with any portion of the
Companys or a Related Entitys business;
[2] Refuses or fails to consult with, supply
information to, or otherwise cooperate with, the Company or any
Related Entity after having been requested to do so; or
[3] Deliberately engages in any action that the
Committee concludes could harm the Company or any Related Entity.
17.00
EFFECT OF BUSINESS COMBINATION OR CHANGE IN CONTROL
17.01 Exercise and Settlement. Upon, as
appropriate and depending on whether the Award is or is not
subject to Code §409A, a Business Combination or a
Change in Control and, unless specified otherwise in the
associated Award Agreement or in a separate change in control
agreement (or written agreement of similar import), all of a
Participants Awards will be [1] fully vested and
exercisable and [2] all performance objectives will be
deemed to have been met as of the date of the Business
Combination or Change in Control.
17.02 Effect of Code §280G. Unless
specified otherwise in the associated Award Agreement or in
another written agreement between the Participant and the
Company or a Related Entity, if the Company concludes that any
payment or benefit due to a Participant under the Plan, when
combined with any other payment or benefit due to the
Participant from the Company or any other entity (collectively,
the Payor), would be subject to the excise tax
imposed by Code §4999:
[1] The Payor will consider the feasibility of
offering substitute awards that would not constitute
parachute payments under Code §280G and
that would not generate penalties under
Code §409A; and
[2] 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
Code §4999, the Payor will reduce the payments and
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benefits due to the Participant under the Plan to the greater of
$0.00 or an amount that is $1.00 less than the amount that
otherwise would generate the excise tax under
Code §4999.
If the reduction described in Section 17.02[2] applies,
within ten business days of the effective date of the event
generating the payments and benefits [or, if later, the date of
the change in control (as defined in Code §280G)], the
Payor will apprise the Participant of the amount of the
reduction (Notice of Reduction). Within ten business
days of receiving the Notice of Reduction, the Participant may
specify to the Payor how and against which benefit or payment
source the reduction is to be applied (Notice of
Allocation). The Payor will be required to implement these
directions within ten business days of receiving the Notice of
Allocation. If the Payor has not received a Notice of Allocation
from the Participant within ten business days of the date of the
Notice of Reduction, the Payor will apply the reduction
described in this section proportionately based on the amounts
otherwise payable under the Plan. If a Notice of Allocation has
been returned but is not sufficient to fully implement the
reduction described in this section, the Payor will apply the
reduction on the basis of the reductions specified in that
Notice of Allocation.
18.00
TERMINATION, SUSPENSION AND AMENDMENT OF PLAN AND AWARD
AGREEMENTS
18.01 Termination, Suspension or Amendment of the
Plan. The Board may terminate, suspend or amend
the Plan at any time without stockholder approval except to the
extent that stockholder approval is required to satisfy
applicable requirements imposed by [1] applicable
requirements of the law or [2] any securities exchange,
market or other quotation system on or through which the
Companys securities are listed or traded. Also, no Plan
amendment may [3] result in the loss of a Committee
members status as a non-employee director as
defined in
Rule 16b-3
under the Act with respect to any employee benefit plan of the
Company, or [4] without the consent of the affected
Participant (and except as specifically provided in the Plan or
the Award Agreement), adversely affect any Award granted before
the termination, suspension or amendment. However, nothing in
this section will restrict the Boards right to amend the
Plan without any additional consideration to affected
Participants to the extent necessary to avoid penalties arising
under Code §409A, even if those amendments reduce,
restrict or eliminate rights granted under the Plan or any Award
Agreement before those amendments are adopted.
18.02 Amendment and Termination of Award
Agreements. Without the mutual written consent of
both the Company and the affected Participant, once issued, an
Award Agreement may not be amended except as specifically
provided in the Plan or the Award Agreement. However, nothing in
this section will restrict the Committees right to amend
an Award Agreement without additional consideration to the
affected Participant to the extent necessary to avoid penalties
arising under Code §409A, even if those amendments
reduce, restrict or eliminate rights granted under the Award
Agreement before those amendments are adopted.
19.00
MISCELLANEOUS
19.01 Assignability. Except as described in
this section or as provided in Section 19.02, an Award may
not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, except by will or the laws of descent
and distribution and, during a Participants lifetime, may
be exercised only by the Participant or the Participants
guardian or legal representative. However, with the permission
of the Committee, a Participant or a specified group of
Participants may transfer Awards (other than Incentive Stock
Options) to a revocable inter vivos trust of which the
Participant is the settlor, or may transfer Awards (other than
Incentive Stock Options) to any member of the Participants
immediate family, any trust, whether revocable or irrevocable,
established solely for the benefit of the Participants
immediate family, any partnership or limited liability company
whose only partners or members are members of the
Participants immediate family or an organization described
in Code §501(c)(3) (Permissible
Transferees). Any Award transferred to a Permissible
Transferee will continue to be subject to all of the terms and
conditions that applied to the Award before the transfer and to
any other rules prescribed by the Committee. A Permissible
Transferee may not retransfer an Award except by will or the
laws of descent and distribution and then only to another
Permissible Transferee.
19.02 Beneficiary Designation. Each
Participant may name a beneficiary or beneficiaries (who may be
named contingently or successively) to receive or to exercise
any vested Award that is unpaid or unexercised at the
Participants death. Unless otherwise provided in the
beneficiary designation, each designation made will revoke all
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prior designations made by the same Participant, must be made on
a form prescribed by the Committee and will be effective only
when filed in writing with the Committee. If a Participant has
not made an effective beneficiary designation, the deceased
Participants beneficiary will be his or her surviving
spouse or, if none, the deceased Participants estate. The
identity of a Participants designated beneficiary will be
based only on the information included in the latest beneficiary
designation form completed by the Participant and will not be
inferred from any other evidence.
19.03 No Guarantee of Continuing
Services. Except as otherwise specified in the
Plan, nothing in the Plan may be construed as:
[1] Interfering with or limiting the right of the
Company or any Service Provider to Terminate any Employee or
Consultant at any time;
[2] Conferring on any Participant any right to
continue as an Employee, Consultant or Director;
[3] Guaranteeing that any Employee, Consultant or
Director will be selected to be a Participant; or
[4] Guaranteeing that any Participant will receive
any future Awards.
19.04 Tax Withholding. The Service Recipient
or other responsible person will withhold or collect any amount
required to be remitted in advance payment of any taxes
associated with the exercise or settlement of any Award. Subject
to Code §409A, this amount may be [1] withheld
from other amounts due to the Participant, [2] withheld
from the value of any Award being settled or any Shares being
transferred in connection with the exercise or settlement of an
Award or from any compensation or other amount owing to the
Participant or [3] collected directly from the
Participant.
19.05 Indemnification. Each individual who is
or was a member of the Committee (or to whom any duties have
been delegated under Section 4.02) is entitled, in good
faith, to rely on or to act upon any report or other information
furnished by any executive officer, other officer or other
employee of the Company or any Related Entity, the
Companys independent auditors, consultants or any other
agents assisting in the administration of the Plan. Committee
members (and any person to whom any duties have been delegated
under Section 4.02) and any officer of the Company or any
Related Entity acting at the direction or in behalf of the
Committee or a delegee will not be personally liable for any
action or determination taken or made in good faith with respect
to the Plan and will, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any act
or determination just described.
19.06 No Limitation on Compensation. Nothing
in the Plan is to be construed to limit the right of the Company
or any Related Entity to establish other plans or to pay
compensation to its employees, consultants or directors, in cash
or property, in a manner not expressly authorized under the Plan.
19.07 Requirements of Law. The grant of Awards
and the issuance of Shares will be subject to all applicable
laws, rules and regulations (including applicable federal and
state securities laws) and to all required approvals of any
governmental agencies or national securities exchange, market or
other quotation system. Certificates for Shares delivered under
the Plan may be subject to any stock transfer orders and other
restrictions that the Committee believes to be advisable under
the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange or other recognized
market or quotation system upon which the Shares are then listed
or traded, or any other applicable federal or state securities
law. The Committee may cause a legend or legends to be placed on
any certificates issued under the Plan to make appropriate
reference to restrictions within the scope of this section.
19.08 Governing Law. The Plan, and all
agreements hereunder, will be construed in accordance with and
governed by the laws (other than laws governing conflicts of
laws) of the State of Ohio except to the extent that the
Delaware General Corporation Law is mandatorily applicable.
19.09 No Impact on Benefits. Awards are not
compensation for purposes of calculating a Participants
rights under any employee benefit plan that does not
specifically require the inclusion of Awards in calculating
benefits.
19.10 Term of the Plan. The Plan will be
effective on the Effective Date. Subject to Section 18.00,
the Plan will continue until the tenth anniversary of the
Effective Date. However, the Committees authority to issue
any
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Performance-Based Awards to Covered Officers will expire no
later than the first Annual Meeting that occurs in the fifth
year following the year in which the Companys stockholders
approve the Plan.
19.11 Rights as Stockholders. Unless otherwise
specified in the associated Award Agreement or as otherwise
specifically provided in the Plan, Shares acquired through an
Award [1] will bear all dividend and voting rights
associated with all Shares and [2] will be transferable,
subject to applicable federal securities laws, the requirements
of any national securities exchange or system on which Shares
are then listed or traded or any blue sky or state securities
laws.
19.12 Successors. The Plan will be binding on
all successors and assigns of the Company and a Participant,
including without limitation, the estate of the Participant and
the executor, administrator or trustee of the estate, or any
receiver or trustee in bankruptcy or representative of the
Participants creditors.
19.13 International Employees. To provide the
same motivation to materially increase stockholder value and to
enable the Company to attract and retain the services of
outstanding managers at its international locations, the Company
will adopt incentives for its foreign locations that provide, as
closely as possible, the same motivational effect as Awards
provided to domestic Participants. Also, the Committee may grant
Awards to Employees who are subject to the tax laws of nations
other than the United States under terms and conditions that
differ from other Awards granted under the Plan but which are
required to comply with applicable foreign tax laws.
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Vote by Telephone
Have your
proxy card available when you call the
Toll-Free Number 1-888-693-8683 using a touch-tone
phone and follow the simple instructions to record
your vote.
Vote by Internet
Have your
proxy card available when you access the
website www.cesvote.com and follow the simple
instructions presented to record your vote.
Vote by Mail
Please mark,
sign and date your proxy card and
return it in the postage-paid envelope provided
or return to: National City Bank, P.O. Box 535300,
Pittsburgh, PA 15253.
Vote by Telephone
Call
Toll-Free using a
Touch-Tone Phone:
1-888-693-8683
Vote by Internet
Access the website and
cast your vote:
http://www.cesvote.com
Vote by Mail
Return your proxy
in the postage-paid
envelope provided.
Vote 24 hours a day, 7 days a week!
If
you vote by telephone or Internet, please do not send your proxy by
mail.
If voting by mail, Proxy must be signed and dated below.
ê Please fold and
detach card at perforation before mailing ê
A. SCHULMAN, INC.
This Proxy is Solicited on Behalf of the Board of Directors of
A. Schulman, Inc. for the Annual Meeting of Stockholders to be Held
on December 7, 2006 |
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The undersigned hereby appoints
TERRY L. HAINES, PAUL F. DESANTIS, and GARY J. ELEK and each of them
as Proxies, each with the full power to appoint his substitute, and
hereby authorizes them to represent and to vote all of the shares of
Common Stock of A. Schulman, Inc. the undersigned is entitled to vote
at the Annual Meeting of Stockholders of A. Schulman, Inc. to be held
on December 7, 2006 and at any adjournments and postponements
thereof, in the manner specified on this proxy card and as fully as
the undersigned could do if personally present at the meeting.
Receipt of a separate Notice of Annual Meeting and Proxy Statement is
acknowledged by return of the Card.
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You are encouraged to specify your choices by
marking the appropriate boxes, SEE REVERSE SIDE, but you need not
mark any boxes if you wish to vote in accordance with the Board of
Directors recommendations. The Proxies cannot vote your shares
unless you sign and return this Card.
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Dated: ______________________, 2006 |
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Signature |
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Signature (if held jointly) |
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NOTE: Please sign exactly as your
name appears hereon. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, trustee,
administrator, or guardian, please give title as such. If stockholder
is a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership
name by authorized person. |
PLEASE
SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
YOUR VOTE IS IMPORTANT
If you do not vote by
telephone or Internet, please sign and date this proxy card and return it promptly
in the enclosed postage-paid envelope so your shares may be represented at the
Annual Meeting of Stockholders.
êPlease
fold and detach card at perforation before mailing.ê
This proxy is solicited on behalf of the Board
of Directors of A. Schulman, Inc. This proxy will be voted as directed, but if no instructions are
specified, this proxy will be voted FOR Proposals 1, 2 and 3.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
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1. |
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Election of Class II Directors: |
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Nominees: |
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(1) Howard R. Curd |
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(2) James S. Marlen |
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(3) Michael A. McManus, Jr. |
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(4) Ernest J. Novak, Jr. |
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FOR all nominees listed above |
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WITHHOLD AUTHORITY to vote for all nominees listed above
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FOR all nominees listed
above except as marked to the contrary below |
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To withhold authority to vote for any individual nominee, mark FOR all nominees listed above
except as marked to the contrary below and write that nominees name on the line below. |
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2. |
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To ratify the selection
of PricewaterhouseCoopers LLP as independent registered public
accountants for the year ending August 31, 2007. |
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o FOR
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o AGAINST
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o ABSTAIN |
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3. |
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To approve the A. Schulman, Inc. 2006 Incentive Plan. |
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o FOR
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o AGAINST
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o ABSTAIN |
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The Proxies are authorized
to vote in their discretion upon such other business as may properly
come before the meeting. |
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This proxy, when properly executed, will be voted in the manner directed herein. |
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(Please
sign and date the proxy card on the reverse side.)