-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gerOd+YO4c/T9niZH8ZbYoolrZlWTmuLOZbAOXqtJyeOt0bFMxvnFKsr0Z8NWNzd BX4lTWTagHN0mOp0d54Wgw== 0000908662-94-000006.txt : 19940328 0000908662-94-000006.hdr.sgml : 19940328 ACCESSION NUMBER: 0000908662-94-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLMAN INC CENTRAL INDEX KEY: 0000812708 STANDARD INDUSTRIAL CLASSIFICATION: 2820 IRS NUMBER: 041671740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-10033 FILM NUMBER: 94517817 BUSINESS ADDRESS: STREET 1: 1040 BROAD ST STE 302 CITY: SHREWSBURY STATE: NJ ZIP: 07702 BUSINESS PHONE: 9085427300 10-K 1 10K (BODY) ## ## ## -#- ## SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period for to Commission file number 0-15899 WELLMAN, INC. (Exact name of registrant as specified in its charter) Delaware 04-1761740 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1040 Broad Street, Suite 302 Shrewsbury, New Jersey 07702 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (908) 542-7300 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, New York Stock $.001 par value Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [] Aggregate market value of the voting stock held by nonaffiliates of the registrant, computed on the basis of $21.875 per share (the closing price of such stock on March 15, 1994 on the New York Stock Exchange): $709,095,734. The number of shares of the registrant's Common Stock, $.001 par value, and Class B Common Stock, $.001 par value, outstanding as of March 15, 1994 was 32,882,642 and -0-, respectively. DOCUMENTS INCORPORATED BY REFERENCE 1. Proxy Statement for the 1994 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission on or before April 30, 1994) is incorporated by reference in Part III hereof. PART I Item 1. Business Recent Developments In March 1993, the Company sold its 44% ownership interest in Wellstar Holding B.V. ("Wellstar"), a Netherlands-based manufacturer of PET beverage bottles, for a total consideration of approximately $33 million. The transaction resulted in a net gain, before applicable income taxes, of $12.4 million. The sale of Wellstar increased 1993 net earnings by approximately $7.3 million or $.22 per share. See Note 2 of the Notes to the Consolidated Financial Statements. General The principal business of Wellman, Inc. (which, together with its subsidiaries, is herein referred to as the "Company") is the manufacture and sale of polyester and nylon fibers and resins. The Company's Fibers Group manufactures and markets polyester and nylon staple fibers and partially-oriented yarn ("POY"). Polyester staple and POY production is sold under the Fortrel/ brand to major domestic yarn processors and integrated fabric mills for use in apparel, home furnishings and industrial applications. The Fibers Group also manufactures polyester and nylon staple fibers from waste raw materials, including fiber producer wastes, postconsumer PET soft drink bottles and film producer wastes, for use in the fiberfill, furniture, home furnishings, carpet, and industrial markets in the United States and Europe. The Company believes it is the largest recycler in the United States of post-consumer plastics and the largest producer of polyester staple fiber made from recycled feedstocks. The Company's Manufactured Products Group ("MPG") manufactures and markets PET resins, a portion of which is used in the Company's POY production, for use in polyester fibers and PET packaging. Prior to 1993, sales of PET resin were reported by the Company under the Fibers Division (which consists of the domestic operations of the Fibers Group). MPG also processes raw wool to produce wool top for worsted fabric manufacturing; anhydrous lanolin is a by-product of this production. MPG also manufactures nylon engineering resins, primarily from producer waste raw materials, for automotive, consumer and industrial uses. MPG converts polyester fiber into high-loft nonwoven battings which are used as filling primarily for the home furnishings industry, and manufactures needle-punched fabrics primarily for geotextile applications. In addition, MPG processes postconsumer plastics and certain producer wastes into suitable raw materials for the Company. It also markets recycled high density polyethylene ("HDPE") resins produced from the basecups of soft drink bottles. The Company manufactures and markets PET and other plastic thermoformed packaging products and PET sheet. New England CR Inc. ("CRInc") designs, equips, constructs and operates materials recovery facilities ("MRFs"). MRFs separate and process commingled recyclables reclaimed from households and commercial establishments through curbside recycling programs. CRInc holds the exclusive North American rights to distribute the patented Bezner automated materials sorting process, a German MRF sortation technology. CRInc also sells the recyclables from its MRFs and brokers recyclables for other parties. CRInc also operates glass beneficiation facilities in California and a polystyrene recycling facility in New Jersey. Raw Materials Fibers Group. The major raw materials used by the Company in the manufacture of polyester staple fiber and POY are purified terephthalic acid ("PTA") and monoethylene glycol ("MEG"), two petrochemicals, and various waste raw materials. The Company believes it is the largest producer of polyester staple fiber made from recycled feedstocks. The Company purchases PTA under an exclusive supply contract which expires December 31, 1995 with Amoco Chemical Corporation ("Amoco"). The Company purchases MEG under an exclusive supply contract with Oxy Chem Inc. which expires December 31, 1997. The prices of PTA and MEG have fluctuated in the past and may continue to do so in the future. Three categories of wastes are also utilized in the production of staple fibers: fiber producer waste, PET bottle waste and PET film waste. A material portion of fiber producer waste is purchased from fiber manufacturers that compete with the Company in the sale of fiber. The Company believes it is the largest U.S. recycler of postconsumer PET bottles, which are obtained from deposit return and curbside recycling programs. PET film waste is obtained from various audio, video, photographic, packaging and X-ray film producers. Fiber producer and film wastes represent off-quality production, trim and other wastes. The Company also uses virgin PET resin in polyester fiber production. The Company's Recycling Division is responsible for the procurement and processing of the waste raw materials. The availability of its petrochemical and waste raw materials is essential to the Company's fiber operations. While historically suppliers have provided adequate quantities of raw materials, the unavailability, scarcity or significantly increased cost of certain raw materials could have a material adverse effect on the Company. Manufactured Products Group. MPG utilizes PTA and MEG to manufacture PET resins and utilizes recycled PET bottles and producer waste feedstocks to produce nylon engineering and recycled HDPE resins. MPG utilizes raw wool and wool grease for the production of wool top and anhydrous lanolin, respectively. MPG also uses polyester fiber, supplied by the Company's Fibers Group and other polyester fiber producers, to manufacture nonwoven products. MPG utilizes virgin and recycled PET in the production of PET thermoformed packaging products and sheet. Products and Markets The following table presents the combined net sales (in millions) and percentage of net sales by business of the Company for the periods indicated. For purposes of this data, intercompany transactions have been eliminated and with respect to its Irish fiber subsidiary, Wellman International Limited ("WIL"), historical exchange rates have been applied to the data for the periods indicated. 1993 1992 1991 Net % of Net % of Net % of Sales Total Sales Total Sales Total Fibers Grp(1) $655.2 77.8% $674.5 81.5% $651.2 80.8% MPG(1)(2) $163.1 19.4 134.3 16.2 124.3 15.4 CRInc 23.8 2.8 19.4 2.3 30.2 3.8 TOTAL $842.1 100.0% $828.2 100.0% $805.7 100.0% (1) 1991 and 1992 sales were restated to include sales of PET resins, which were previously reported under the Fibers Division, in MPG. (2) Includes sales of Creative Forming, Inc. ("CFI") from November 18, 1992, the date of its acquisition by the Company. Fibers Group. Fibers Division. The Fibers Division produces polyester and nylon staple fibers and POY. Staple, the primary product produced, is multi-strand fiber cut into short lengths to simulate certain properties found in natural fibers such as cotton and wool and/or to meet the end product needs of the Company's customers. In 1993, approximately 35% of the Company's domestic polyester staple sales were to the apparel industry, approximately 22% to the home furnishings industry, 19% as fiberfill, 12% to the carpet industry, and the balance to nonwovens and industrial markets. The Company's domestic nylon staple production was utilized primarily by the carpet industry, with the balance used in specialty applications. The Fiber Division's staple products are manufactured at facilities in Darlington (Palmetto), Johnsonville and Marion, SC. Polyester textile staple, the Division's largest staple product, is produced at Palmetto from PTA and MEG and is sold primarily to textile mills and spinners for processing into fabric for a variety of applications, including apparel, home furnishings and industrial uses. The stated annual fiber production capacity of the Palmetto plant is approximately 450 million pounds. All other domestic polyester staple production occurs at the Johnsonville and Marion facilities. The primary end market for the production from these facilities is the fiberfill market, followed by the carpet and industrial markets. The Johnsonville plant, site of all domestic nylon staple fiber production, has approximately 255 million pounds of annual fiber production capacity, based on a product mix of 80% polyester and 20% nylon staple. The Marion facility has approximately 32 million pounds of annual polyester staple fiber production capacity. POY, a continuous polyester filament product, is sold by the Company to integrated textile mills and texturizers for further processing for use primarily in apparel, home furnishings and industrial applications. POY is produced at the Company's Fayetteville, NC plant from PET resin manufactured by the Company at its Palmetto plant. The Company's Fayetteville plant increased its stated annual POY production capacity to approximately 130 million pounds, or by 30%, in the first quarter of 1994. The Company's polyester textile staple and POY production is sold under the Fortrel/ brand. Wellman International Limited. The fiber production process of WIL, a wholly-owned subsidiary based in Mullagh, Republic of Ireland, is similar to that of the Company's Johnsonville plant. WIL also uses recycled raw materials, including producer fiber and film wastes and, to a lesser extent, postconsumer PET soft drink bottles, to produce polyester and nylon staple fibers. The majority of WIL's raw materials are producer wastes, some of which are obtained from suppliers who compete with it in the fibers business in Europe. Postconsumer PET bottles procured by WIL are processed at the Company's European PET bottle recycling facility, located in Spijk, the Netherlands. The maximum annual fiber production capacity of WIL is approximately 154 million pounds, based on a product mix of approximately 90% polyester and 10% nylon staple. WIL's polyester fibers are used primarily in fiberfill, nonwovens and industrial applications, while its nylon fibers are used mainly by the carpet industry. WIL exports, primarily to the United Kingdom and Europe, virtually all of its fiber production. Manufactured Products Group. Polymer Products Division. Located at the Palmetto plant, this Division utilizes PTA and MEG to produce approximately 220 million pounds of PET resin, the commodity bulk form in which pure polyester is transported and utilized. In 1993, approximately 47% of the Division's resin was used by the Fayetteville plant to produce POY. The remainder was sold to Hoechst Celanese Corp. ("HCC"), pursuant to the terms of a take or pay supply arrangement which expired in the second half of 1993, and to other customers. In the first quarter of 1994, the Company commenced operation of new solid stating equipment at Palmetto which will enable it to upgrade approximately 80 million pounds per year of its current PET resin production to higher-value PET bottle resin, which is used to manufacture PET packaging such as soft drink bottles. In addition, the new solid stating unit has capacity to upgrade an additional 80 million pounds per year of PET resin when the monomer and polymerization capacity at the Palmetto plant increases as described below. Monomer is the PET feedstock derived from PTA and MEG from which polyester textile staple fiber and PET resin is produced. The Company plans to expand monomer capacity by 400 million pounds, or over 55%, in late 1994. The Company also plans to add 160 million pounds of PET resin capacity in the second quarter of 1995. Wool Division. At the Wool Division's facility in Johnsonville, SC, raw wool is processed through sorting and blending operations, scoured, carded, combed, and packaged as wool top primarily for use in worsted fabric applications for apparel. The Wool Division's plant has the flexibility to process and blend various wool grades and to simultaneously run several different wool blends. As a by-product of the wool scouring process, wool grease is recovered which, in combination with wool grease purchased in the open market, is processed to produce anhydrous lanolin. The Company believes that it is the largest U.S. producer of anhydrous lanolin, which it sells to the pharmaceutical, cosmetics and industrial markets. Engineering Resins Division. The Engineering Resins Division, located in Johnsonville, SC, manufactures and markets nylon engineering resins to the injection molding industry. These resins, chiefly Nylon 6 and 66 and co-polymers of these types, are produced primarily from producer wastes and compounded and combined with various additives (glass, minerals, fire retardant, etc.) to impart desired performance characteristics. The Company serves a variety of markets with these compounded engineering resins, with the largest being automotive, followed by consumer products, industrial and other. Nonwovens Business. The Nonwovens business, located in Charlotte, NC, and Commerce, CA, utilizes polyester fiber to produce high-loft battings, primarily for the home furnishings industry, and needle-punched fabrics primarily for geotextile applications. High-loft battings are used for their cushioning and insulating properties in bedspreads, comforters, quilts and other similar products and are sometimes sold under the Fortrel/ brand. The largest customers of this product are vertically-integrated textile mills and independent bedspread and comforter manufacturers. Geotextile fabrics are used for soil reinforcement and filtration in various civil engineering applications, including landfill and pond linings and railroad and road stabilization. The Nonwovens business utilizes polyester staple fiber produced by the Fibers Group, as well as other fiber manufacturers, as raw material. Recycling Division. The Recycling Division processes postconsumer PET soft drink bottles and producer fiber and film wastes into usable raw materials for the Fibers and Engineering Resins Divisions and CFI. It also markets recycled HDPE resins, primarily to manufacturers of basecups for soft drink bottles. The Division consists of PET bottle and producer waste recycling operations in Johnsonville, SC and PET bottle recycling operations in Bridgeport, NJ, which was acquired in May 1993. In the third quarter of 1993, the Recycling Division expanded its annual capacity to recycle PET bottles at its Johnsonville location by over 70%, from 110 million pounds to 190 million pounds. Annual PET bottle recycling capacity in Bridgeport is approximately 50 million pounds. Creative Forming, Inc. Utilizing PET as well as other materials, Creative Forming, Inc. custom designs, manufactures and markets thermoformed plastic packaging products for the consumer products industry. It also produces PET sheet, utilizing both virgin and recycled raw materials, for use in its own thermoforming operations and for sale in the open market. CFI, which is based in Ripon, WI, expanded its capacity to produce sheet by 33% and installed coextrusion equipment in early 1994. New England CR Inc. CRInc designs, equips, constructs and operates materials recovery facilities ("MRFs"). MRFs separate and process commingled recyclables reclaimed from households and commercial establishments through curbside recycling programs. CRInc holds exclusive North American, United Kingdom and Irish rights to distribute the patented Bezner automated materials sorting process, a German MRF sortation technology. CRInc commenced operation of three MRFs in 1993 so that at year-end 1993, CRInc had 13 full-service MRFs operational. CRInc also sells the recyclables from its MRFs and brokers recyclables for other parties. CRInc also operates glass beneficiation facilities in California and a polystyrene recycling facility in New Jersey. Capital Investment Program Pursuant to its on-going long-term capital investment program, the Company's 1993 capital expenditures totaled approximately $105 million. The capital projects included in the 1993 expenditures were the installation of solid-stating equipment, expansion of PET bottle recycling and POY production capacity and equipment modernization at the Company's domestic fiber operations. The Company's 1994 capital expenditures are expected to total approximately $90 million, which will include the expansion of monomer and PET resin production capacity and continued equipment upgrades at the domestic fiber operations. Marketing The Company markets the majority of its products through a direct sales force consisting of approximately 50 sales personnel. For certain sales outside the United States, the Company utilizes representatives or agents. The Company also markets its polyester fibers through various activities, such as advertising, sales promotion, market analysis, product development and fashion forcasting directed to its customers and organizations downstream from its customers. As part of this effort, the Company's marketing personnel encourage downstream purchasers of apparel, home furnishings and other products to specify to their suppliers the use of Fortrel/ brand polyester in their products. Competitors Each of the Company's major fiber markets is highly competitive. The Company competes primarily on the basis of quality, service, brand identity and price. Several competitors are substantially larger than the Company and have substantially greater economic resources. The Company's primary competitors are E.I. DuPont de Nemours & Co.and the Hoechst Celanese division of Hoechst A.G. The Company believes it is currently the third-largest producer of polyester staple and POY in the United States, representing approximately 26% and 13%, respectively, of U.S. production capacity for these products. The Company also competes with Nan Ya Plastics Corp., which completed construction of a facility in 1993 to sell polyester staple and POY. The polyester staple fiber and POY markets have historically displayed price and volume cyclicality. The domestic polyester textile fiber markets are subject to changes in, among other factors, polyester fiber and/or textile product imports and consumer preferences, spending and retail sales patterns, which are driven by general economic conditions. Consequently, a downturn in either the domestic or global economy or an increase in imports of textile or polyester fiber products could adversely affect the Company's business. Research and Development The Company has approximately 75 U.S. employees devoted to research and development activities. The Company has entered into technology sharing arrangements from time to time with various parties. Foreign Activities Primarily through WIL, its Irish fiber subsidiary, the Company operates in international markets, primarily the United Kingdom and Western Europe. Since substantially all of WIL's sales are for export, changes in exchange rates may affect WIL's profit margins and sales levels. In addition, fluctuations between the United States dollar and Irish pound may also affect reported results. The Company's foreign business is subject to certain risks customarily attendant upon foreign operations and investments in foreign countries, including restrictive action by local governments, limitations on repatriating funds and changes in currency exchange rates. See Note 11 of the Notes to the Consolidated Financial Statements for additional information relating to the Company's foreign activities. Employees As of December 31, 1993, the Company employed approximately 3,600 persons in the United States and Europe. At December 31, 1993, approximately 790 U.S. employees were members of The Amalgamated Clothing and Textile Workers Union ("ACTWU"). The Company's contract with the ACTWU expires in July, 1996. In addition, approximately 351 of its Irish employees were represented by four unions. The wage agreements with these unions each expire on April 30, 1994. The Company believes that its relations with its employees are satisfactory. Environmental Matters The Company has determined that groundwater contamination exists at certain of its facilities. In 1986 contamination involving chlorinated solvents and hydrocarbon derivatives was found at its Johnsonville, SC facility, principally associated with a former drum storage site and an underground storage tank. In 1987, the Company entered into a consent order with the South Carolina Department of Health and Environmental Control ("SCDHEC") for remediation of the Johnsonville site. In September 1989, nitrate contamination of groundwater at the Johnsonville facility, primarily resulting from a wool dust stockpile, was also confirmed. Varying levels of groundwater contamination at the Palmetto plant, believed to have been the result of a leak in the chemical sewers and emergency ponds, were reported to SCDHEC by HCC prior to the acquisition of the plant by Fiber Industries, Inc. ("FI") in January 1988. Although no formal action to require remediation or penalties has been taken by the SCDHEC, the underground sewer lines have been replaced with a pumped above-ground system. HCC and Celanese Fibers Inc. ("Celanese") have completed at their expense the sewer line replacement and the replacement of two emergency waste ponds and a storm water pond at the Palmetto plant in order to prevent further groundwater contamination. Extraction systems for removal of groundwater contamination by the sewer lines and old emergency ponds and new emergency holding facilities have been installed at the expense of HCC and are presently in operation. In April 1991, the Company entered into a consent order with the SCDHEC over nitrate contamination of groundwater at the Company's Palmetto plant. Additional groundwater contamination, resulting from the leakage of 1,4 dioxane, a process by-product, was discovered at Palmetto in 1992. The Company has requested that SCDHEC defer action on the nitrate consent order based on the limited extent of the nitrate contamination. In September 1993, the Company entered into a second consent order with the SCDHEC over 1,4 dioxane contamination discovered at Palmetto in 1992. All requirements of this consent order (continued monitoring of the nitrate contamination, definition of the 1,4 dioxane plume, assessment of risk from the dioxane plume and development of a plan for groundwater remediation) have been met to date. The Company is also evaluating whether to repair or replace its wastewater treatment plant. In January 1994 the Company determined that its Palmetto plant was in violation of its wastewater permit with respect to biological oxygen demand parameters and toxicity. The Company has notified the SCDHEC of such violation and is undertaking remediation action. The cost of such remediation is not expected to be material. The Fayetteville plant was notified in 1987 of an "event of noncompliance" by the North Carolina Department of Environment, Health and Natural Resources ("NCDEHNR"), formerly the Department of Natural Resources and Community Development, due to an increase in total organic carbon levels in two of its six groundwater monitoring wells. On October 25, 1991 the Company received a Notice of Violation from the NCDEHNR with regard to groundwater monitoring results shared with them, showing chlorinated hydrocarbon contamination. One on-site source, a chemical wastewater sump, was identified and removed. Additional off-site sources are suspected. In August 1992, SCDHEC requested that the Palmetto plant submit a plan for compliance with the National Ambient Air Quality Standards ("NAAQS") for sulphur dioxide. The Company plans to install a new tall stack and related equipment at Palmetto in late 1994 or early 1995. Assessment of and remedial plans at the Company's sites are on-going. While it is often difficult to reasonably quantify future environmental-related expenditures, the Company currently estimates its non-capital expenditures related to environmental matters to range between $13.0 million and $25.0 million. Such expenditures are expected to occur over a significant number of future years. In connection with these expenditures, the Company has accrued $15.5 million at December 31, 1993, representing management's best estimate of probable non-capital environmental expenditures. In addition, capital expenditures aggregating approximately $10.0 million to $15.0 million may be required over the next several years related to currently existing environmental matters. See Notes 1 and 8 of the Company's Notes to Consolidated Financial Statements. The Company's plants are subject to numerous existing and proposed laws and regulations designed to protect the environment from wastes, emissions and hazardous substances. Except as discussed in the preceding paragraphs, the Company believes it is either in material compliance with all currently applicable regulations or is operating in accordance with the appropriate variances and compliance schedules or similar arrangements. The Company believes that compliance with current laws and regulations will not require significant capital expenditures other than as identified above or have a material adverse effect on its operations. Executive Officers of the Registrant The current executive officers of the Company are as follows: Name and Age Position Thomas M. Duff, 46 President, Chief Executive Officer and Director Clifford J. Christenson, 44 Executive Vice President Keith R. Phillips, 39 Vice President, Chief Financial Officer and Treasurer C.W. Beckwith, 62 Vice President and Director; Chief Executive Officer of WIL James P. Casey, 53 Vice President; President, Fibers Division Paul D. Apostol, 48 Vice President, Manufactured Products Group, Strategic Planning and Business Development Richard J. Kattar, 61 Vice President; President, New England CR Inc. Mark J. Rosenblum, 40 Vice President, Controller Ernest G. Taylor, 43 Vice President, Administration Officers are elected annually by the Board of Directors. Set forth below is certain information with respect to the Company's executive officers. Thomas M. Duff. Mr. Duff has been President of the Company since its inception in 1985. Clifford J. Christenson. Mr. Christenson has been Executive Vice President since October 4, 1993. Prior to that time he was Chief Financial Officer and Treasurer since he joined the Company in 1985 and Vice President since 1986. Keith R. Phillips. Mr. Phillips has been Vice President, Chief Financial Officer and Treasurer since October 4, 1993. Prior to joining the Company on October 1, 1993 he was a partner in Ernst & Young. C.W. Beckwith. Mr. Beckwith has been Vice President of Wellman and Chief Executive Officer of WIL since the acquisition of WIL in 1987. Prior to such time, he was managing director of WIL since 1972. James P. Casey. Mr. Casey has been President of the Fibers Division since October 4, 1993; prior to such time he was Vice President, Marketing since March 25, 1991. Prior to that time, he was Vice President of Marketing of FI and its predecessor companies. Paul D. Apostol. Mr. Apostol has been Vice President, Manufactured Products Group and Strategic Planning and Business Development since March 15, 1991. Prior to such time, Mr. Apostol was Vice President of Marketing of FI and its predecessor companies. Richard J. Kattar. Mr. Kattar has been Vice President since May 21, 1991. He has been President of CRInc since its inception in 1982. Mark J. Rosenblum. Mr. Rosenblum has been Vice President, Controller since September 1, 1989 and Controller since he joined the Company in 1985. Mr. Rosenblum is a certified public accountant. Ernest G. Taylor. Mr. Taylor has been Vice President in charge of Administration since January 1991. From November 1989 until 1991 he was Manager of Administration. Prior to such time, he was a manager of information systems for FI and its predecessor companies. Section 16 Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities ("insiders"), to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Insiders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to the Company, the Company believes that during 1993 all Section 16(a) filing requirements applicable to its insiders were complied with, except that a trust for which Mr. Apostol serves as trustee inadvertently failed to timely file an initial report of its holdings as required by Section 16. Item 2. Properties The location and general description of the principal properties owned or leased by the Company are set forth in the table below: Principal Square Location Function Footage Ownership Shrewsbury, NJ Corporate 7,600 Leased Johnsonville, SC Manufacturing 2,291,000 Owned and Warehouse Darlington, SC Manufacturing 1,015,000 Owned (Palmetto) and Warehouse Mullagh, Ireland (1) Manufacturing 340,633 Owned and Warehouse Fayetteville, NC Manufacturing 295,048 Owned and Warehouse Commerce, CA Fiber Converting 90,000 Leased Facility Marion, SC Manufacturing 247,500 Owned and Warehouse Charlotte, NC Fiber Converting 75,000 Owned Facility Administrative 55,020 Leased and Research Chelmsford, MA Sales and 13,750 Leased Administrative Ripon, WI Manufacturing and 106,000 Owned Warehouse Bridgeport, NJ Plastic Bottle Re- 80,000 Leased cycling Facility Spijk, The Neth- Plastic Bottle Re- 55,812 Leased erlands cycling Facility (1) WIL's lenders currently have a lien on this facility. Item 3. Legal Proceedings Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's Common Stock is listed on the New York Stock Exchange under the symbol WLM. The following table shows the high and low sales prices on the New York Stock Exchange as reported on its Composite Tape and the cash dividends paid on its Common Stock for the last two fiscal years. Year High Low Dividend 1993 First Quarter $23-3/4 $19-3/4 $0.03 Second Quarter $24-7/8 $18-1/8 $0.05 Third Quarter $22 $17-3/8 $0.05 Fourth Quarter $19-3/8 $16-1/4 $0.05 1992 First Quarter $31-1/2 $22-1/8 $0.03 Second Quarter $30-7/8 $20 $0.03 Third Quarter $24-5/8 $20 $0.03 Fourth Quarter $22-3/8 $16-1/2 $0.03 The Company had approximately 1,657 stockholders of record of Common Stock as of March 16, 1994. ## ## Item 6. Selected Financial Data
Years Ended December 31, (In thousands, except per share data) 1989(2) 1990 1991 1992 1993(3) Income Statement Data: Net sales . . . . . . . . . . . . . . . . . . . $437,777 $827,764 $805,664 $828,200 $842,064 Cost of sales . . . . . . . . . . . . . . . . . 312,137 618,519 623,546 639,664 679,182 Gross profit. . . . . . . . . . . . . . . . . . 125,640 209,245 182,118 188,536 162,882 Selling, general and administrative expenses. . 36,046 65,268 73,194 77,439 86,511 Interest expense. . . . . . . . . . . . . . . . 10,977 42,712 29,387 23,012 15,736 Gain on sale of Wellstar. . . . . . . . . . . . -- -- -- -- 12,386 Earnings before income taxes and cumulative effect of changes in accounting principles. . 78,617 101,265 79,537 88,085 73,021 Provision for income taxes. . . . . . . . . . . 25,564 39,141 32,954 35,801 32,567 Net earnings before cumulative effect of changes in accounting principles. . . . . . . 53,053 62,124 46,583 52,284 40,454 Cumulative effect of changes in accounting principles, net of income taxes . . . . . . . -- -- -- -- (9,010) Net earnings. . . . . . . . . . . . . . . . . . $53,053 $62,124 $46,583 $52,284 $31,444 Earnings (loss) per common share: Before cumulative effect of changes in accounting principles. . . . . . . . . . . . $1.79 $1.92 $1.43 $1.60 $1.23 Cumulative effect of changes in accounting principles, net of income taxes. . . . . . . -- -- -- -- (0.27) Net earnings. . . . . . . . . . . . . . . . . $1.79 $1.92 $1.43 $1.60 $0.96 Average common shares . . . . . . . . . . . . . 29,605 32,358 32,632 32,728 32,857 Dividends (1) . . . . . . . . . . . . . . . . . $ 3,389 $ 3,849 $ 3,887 $ 3,895 $ 5,885 Pro forma amounts assuming the effects of the changes in accounting principles are applied retroactively: Net earnings. . . . . . . . . . . . . . . . $53,053 $62,124 $46,583 $43,759 $40,454 Net earnings per share. . . . . . . . . . . $1.79 $1.92 $1.43 $1.34 $1.23 December 31, 1989(2) 1990 1991 1992 1993 Balance Sheet Data: Total assets. . . . . . . . . . . . . . . . . . $912,155 $944,974 $925,289 $996,583 $1,015,247 Notes payable and current maturities of long-term debt . . . . . . . . . . . . . . . $ 42,815 $ 33,375 $ 34,291 $ 24,688 $ 18,594 Long-term debt exclusive of current maturities. $395,529 $342,066 $269,590 $299,860 $294,173 Stockholders' equity. . . . . . . . . . . . . . $320,179 $393,609 $438,440 $483,268 $506,506 (1) The Company paid quarterly cash dividends of $0.025 beginning in the first quarter of 1989. In May 1989, the quarterly dividend was increased to $0.03 per share. In the second quarter of 1993, the quarterly dividend was increased to $0.05 per share. (2) Reflects the acquisition of Fiber Industries, Inc. on November 1, 1989. (3) 1993 net earnings reflect $15.9 million ($0.48 per share) of accounting changes and unusual and nonrecurring items. See also Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes 1, 2 and 3 of the Notes to the Consolidated Financial Statement.
## ## Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ACCOUNTING CHANGES During 1993, the Company adopted the provisions of the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) Abstract No. 93-5. EITF 93-5 provides that an environmental liability should be evaluated independently from any potential claim for recovery and that the loss arising from the recognition of an environmental liability should be reduced only when a claim for recovery is probable of realization. Current accounting standards provide a general presumption that disputed claims for recovery are not probable of realization. Under practice prior to the issuance of EITF 93-5, some companies, including the Company, offset reasonably possible recoveries against probable losses. As a result of the issuance of EITF 93-5, this accounting treatment is no longer permitted. The Company is obligated to remediate environmental problems which existed at some of its manufacturing facilities prior to their acquisition by the Company. The Company has escrow funds and indemnification agreements with the prior owners of these facilities, which may result in reimbursement of a significant portion of the environmental liabilities. However, as discussed above, the new accounting standards generally permit companies to record only uncontested claims for reimbursement of environmental liabilities. The change in accounting for environmental liabilities resulted in an after-tax cumulative effect charge of $6.8 million ($0.20 per share), net of the related income tax effect of $4.2 million. See Note 1 to the Consolidated Financial Statements. During 1993, the Company changed its method of applying the lower of cost or market rule to certain slow-moving and discontinued waste raw material inventory which is valued using the last in-first out (LIFO) dollar value method. In prior years, the Company used the aggregate method in applying the lower of cost or market rule to such inventories and in 1993 changed to the item-by-item method. The Company believes the new method of accounting is preferable because it provides a better matching of costs and revenue and results in a more conservative valuation of slow-moving and discontinued waste raw material inventory. This change in accounting for certain slow-moving and discontinued inventory resulted in an after-tax cumulative effect charge of $2.2 million ($0.07 per share), net of the related income tax effect of $1.3 million. In addition, this change decreased operating income in 1993 by approximately $4.0 million. See Note 1 to the Consolidated Financial Statements. RESULTS OF OPERATIONS -- 1993 COMPARED TO 1992 Net sales increased from $828.2 million in 1992 to $842.1 million in 1993. Increased sales at the Manufactured Products Group (MPG) more than offset lower sales of the Company's fiber businesses. The increase in sales at the MPG was primarily the result of the contribution of Creative Forming, Inc. (CFI), acquired in November 1992, and, to a lesser extent, higher sales at the Wool and Engineering Resins Divisions. Domestic fiber sales decreased due to lower polyester fiber selling prices, which more than offset higher domestic sales volumes. At Wellman International Limited (WIL), the Company's Irish fiber subsidiary, sales in U.S. dollars decreased due to the unfavorable impact of the decrease in value of the Irish punt against the U.S. dollar, which more than offset modest improvements in selling prices expressed in terms of local currency and sales volumes. At New England CRInc. (CRInc.), revenues increased primarily due to an increase in the number of operating material recovery facilities. Gross profit amounted to $162.9 million in 1993 compared to $188.5 million in 1992. Gross profit at the Company's fiber businesses decreased primarily due to lower domestic polyester fiber selling prices, and, to a lesser extent, higher costs of the Company's waste-based fiber business. At the MPG, gross profit increased primarily due to the contribution of CFI and an increase in gross profit at the Polymer Products Division. As a result of the foregoing, the Company's gross margin was approximately 19% in 1993 compared to 23% in 1992. In addition to the effect on 1993 earnings of the change in accounting for certain slow-moving and discontinued inventory mentioned earlier, gross profit was also adversely affected by unusual items, primarily related to inventory, development of a prototype materials recovery facility and expenses associated with the Company's on-going capital investment program, aggregating $11.6 million. Selling, general and administrative expenses were $86.5 million, or approximately 10% of sales, in 1993 compared to $77.4 million, or approximately 9% of sales in 1992. The increase was primarily due to the inclusion of CFI, including the amortization of intangible assets arising from the acquisition, and a decline in earnings from unconsolidated subsidiaries due to the sale of the Company's equity interest in Wellstar Holding, B.V. (Wellstar) in the first quarter of 1993. In addition, certain unusual charges aggregating $2.9 million were included in selling, general and administrative expenses in 1993. As a result of the foregoing, operating income was $76.4 million in 1993 compared to $111.1 million in 1992. Net interest expense for 1993 was $15.7 million compared to $23.0 million in 1992. This decrease was primarily the result of the decline in the Company's average interest rates on outstanding borrowings and, to a lesser extent, an increase in the amount of interest capitalized to property, plant and equipment commensurate with the Company's on-going capital investment program. In the first quarter of 1993, the Company sold its ownership interest in Wellstar for $33.0 million, resulting in a pre-tax gain of $12.4 million. The transaction resulted in an increase in 1993 net earnings of $7.3 million, or approximately $0.22 per share. In the third quarter of 1993, the Revenue Reconciliation Act of 1993 (the Act) was enacted, which included an increase in the maximum corporate tax rate from 34% to 35%. The provisions of Statement of Financial Accounting Standards No. 109 require that the impact of changes in tax legislation, including changes in tax rates, be recognized in the period of the change. Accordingly, the provision for income taxes reflects an increase in income tax expense of $2.7 million, representing a negative effect on net earnings of approximately $0.08 per share. As discussed above, 1993 net earnings were adversely effected by $15.9 million, or $0.48 per share, due to the net effect of changes in accounting principles and unusual and nonrecurring events. As a result of the foregoing, net earnings in 1993 were $31.4 million, or $0.96 per share, compared to $52.3 million, or $1.60 per share in 1992. OUTLOOK Demand for the Company's domestic polyester fiber products remained relatively stable in 1993. The previously announced expansion at the Company's Fayetteville plant should result in increased shipments of POY in 1994 as compared to 1993. Demand for the Company's other polyester fiber products is expected to remain stable in 1994. Domestic fiber selling prices declined, primarily in the last half of 1993, due to price competition from Far Eastern and domestic fiber producers and the start-up of a new Taiwanese-owned U.S. polyester fiber plant and the resultant pricing strategies of the Company's domestic competitors. Selling prices in the first quarter of 1994 appear to have stabilized at approximately year-end 1993 levels. RESULTS OF OPERATIONS -- 1992 COMPARED TO 1991 Net sales increased 3% from $805.7 million in 1991 to $828.2 million in 1992. This increase was primarily the result of higher domestic sales at the Fibers Division due to an increase in sales volumes for the Company's polyester fibers. At WIL, sales increased due to increased sales volumes and the favorable impact of an increase in the value of the Irish punt against the U.S. dollar, which more than offset lower selling prices in terms of local Irish currency. Sales at the MPG increased primarily due to the increase in direct wool sales activities at the Wool Division. The increases in sales discussed above were partially offset by lower revenues at CRInc. due to reduced construction activities. Gross profit amounted to $188.5 million in 1992 compared to $182.1 million in 1991. Gross profit increased for the Company's fiber businesses due to the increase in sales of polyester fiber discussed above, which more than offset higher costs. The increase in costs reflects the Company's on-going expansion and modernization of its Recycling Division, which processes waste raw materials for two of the Company's domestic fiber plants. Gross profit at the MPG was essentially unchanged in 1992 compared to 1991. The increase in gross profit at CRInc. was due to the increase in the number of operating material recovery facilities which resulted in higher margins. The Company's gross margin was approximately 23% in both 1992 and 1991. Selling, general and administrative expenses were $77.4 million in 1992 compared to $73.2 million in 1991, or approximately 9% of sales in each of the two years. The 6% increase in 1992 resulted primarily from increased costs associated with recycling activities, increased general and administrative expenses and increased expenses at CRInc., all of which more than offset the favorable impact of the sale of Wellman Machinery of Michigan in December 1992 and the increase in earnings from the Company's joint venture, Wellstar. As a result of the foregoing, operating income was $111.1 million in 1992 compared to $108.9 million in 1991. Net interest expense for 1992 was $23.0 million compared to $29.4 million in 1991. This decrease was the result of the decline in the Company's average amount of outstanding borrowings and lower weighted average interest rates on outstanding borrowings. As a result of the forgoing, net earnings in 1992 were $52.3 million, or $1.60 per share, compared to $46.6 million, or $1.43 per share, in 1991. LIQUIDITY AND CAPITAL RESOURCES The Company generated cash from operations of $95.3 million in 1993 compared to $95.9 million in 1992. Net cash used in investing activities amounted to $62.2 million in 1993 compared to $102.5 million in 1992. Capital spending amounted to $105.7 million in 1993, indicative of the Company's on-going capital investment program. In 1993, investing activities included proceeds of $33.0 million from the sale of Wellstar. Net cash used in financing activities amounted to $15.7 million for 1993 compared to $8.2 million of cash provided by financing activities in 1992. The Company's financing agreements contain normal financial and restrictive covenants, including restrictions on the payment of dividends and requirements with respect to working capital, net worth and debt to capitalization. The Company's capital investment program includes approximately $90.0 million in planned expenditures in 1994. The exact amount and timing of the capital spending is difficult to predict, however, as certain projects may extend into 1995 or beyond depending upon equipment delivery and construction schedules. The 1994 capital plan includes expansion of monomer and PET resin capacity at the Palmetto plant, and equipment upgrades at the Company's domestic fiber operations. See "Item 1. Business - Products and Markets" and "- Capital Investment Program". The Company believes that the financial resources available to it, including approximately $58.2 million available at December 31, 1993 under its $176.8 million bank credit facility, approximately $12.4 million of restricted cash resulting from the issuance of economic development revenue bonds (included in "Other assets, net" in the Company's balance sheet and earmarked to recycling-related capital expenditures) and internally generated funds, will be sufficient to meet its foreseeable working capital, capital expenditure and dividend payment requirements. ENVIRONMENTAL MATTERS The Company's operations are subject to extensive and changing federal and state environmental regulations governing air emissions, waste water discharges and solid and hazardous waste management activities. As discussed in Note 1 to the Company's Consolidated Financial Statements, the Company's policy is to accrue environmental and clean-up related costs of a non-capital nature when it is both probable that a liability has been incurred and the amount can be reasonably estimated. While it is often difficult to reasonably quantify future environmental related expenditures, the Company currently estimates its non-capital expenditures related to environmental matters will range between $13.0 million and $25.0 million. Such expenditures are expected to occur over a significant number of future years. In connection with these expenditures, the Company has accrued $15.5 million at December 31, 1993 ($2.5 million at December 31, 1992), representing management's best estimate of probable non-capital environmental expenditures. In addition, capital expenditures aggregating approximately $10.0 million to $15.0 million may be required over the next several years related to currently existing environmental matters. During 1993, costs associated with environmental remediation and on-going assessment were not significant. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In November 1992, the Financial Accounting Standards Board issued new rules that require accrual accounting over the employees' service period for post-employment benefits that accumulate, such as severance benefits, instead of recognizing an expense for those benefits when the termination decision is made. The Company does not provide these types of benefits and accordingly, will not be affected by these new rules. Item 8. Financial Statements and Supplementary Data WELLMAN, INC. Index to Financial Statements and Financial Statement Schedules Page Consolidated Statements of Income for the years 24 ended December 31, 1991, 1992 and 1993 Consolidated Balance Sheets at December 31, 1992 and 25 1993 Consolidated Statements of Stockholders' Equity 26 for the years ended December 31, 1991, 1992, and 1993 Consolidated Statements of Cash Flows for the years 27 ended December 31, 1991, 1992 and 1993 Notes to Consolidated Financial Statements 28 Consolidated schedules for the years ended December 31, 1991, 1992 and 1993: V -- Property, plant and equipment 45 VI -- Accumulated depreciation of plant and equipment 46 VIII -- Valuation and qualifying accounts 47 X -- Supplementary income statement information 48 All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and notes thereto. ## ## CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, (In thousands, except per share data) 1991 1992 1993 Net sales. . . . . . . . . . . . . . . . . . . $805,664 $828,200 $842,064 Cost of sales. . . . . . . . . . . . . . . . . 623,546 639,664 679,182 Gross profit . . . . . . . . . . . . . . . . 182,118 188,536 162,882 Selling, general and administrative expenses . 73,194 77,439 86,511 Operating income . . . . . . . . . . . . . . . 108,924 111,097 76,371 Interest expense . . . . . . . . . . . . . . . 29,387 23,012 15,736 Gain on sale of Wellstar . . . . . . . . . . . -- -- 12,386 Earnings before income taxes and cumulative effect of changes in accounting principles . 79,537 88,085 73,021 Provision for income taxes (Note 3): Current. . . . . . . . . . . . . . . . . . . 20,979 25,805 35,655 Deferred . . . . . . . . . . . . . . . . . . 11,975 9,996 (3,088) 32,954 35,801 32,567 Earnings before cumulative effect of changes in accounting principles . . . . . . . . . . 46,583 52,284 40,454 Cumulative effect of changes in accounting principles, net of income taxes (Note 1) . . . . . . . . . . . . . . . -- -- (9,010) Net earnings . . . . . . . . . . . . . . . . . $46,583 $52,284 $31,444 Earnings (loss) per common share: Before cumulative effect of changes in accounting principles . . . . . . . . . $1.43 $1.60 $1.23 Cumulative effect of changes in accounting principles (Note 1). . . . . -- -- (0.27) Net earnings . . . . . . . . . . . . . . . . $1.43 $1.60 $0.96 Average common shares. . . . . . . . . . . . . 32,632 32,728 32,857 Pro forma amounts assuming the effect of the changes in accounting principles are applied retroactively: Net earnings . . . . . . . . . . . . . . . $46,583 $43,759 $40,454 Net earnings per share . . . . . . . . . . $1.43 $1.34 $1.23 See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS December 31, (Dollar amounts in thousands) 1992 1993 Assets Current assets: Cash and cash equivalents. . . . . . . . . . . . . . . . $1,749 $18,751 Accounts receivable, less allowance of $4,443 in 1992 and $4,232 in 1993.. . . . . . . . . . . . . . 89,798 96,599 Inventories (Note 5) . . . . . . . . . . . . . . . . . . 152,152 133,391 Prepaid expenses and other current assets. . . . . . . . 7,579 4,995 Total current assets. . . . . . . . . . . . . . . . . 251,278 253,736 Investment in unconsolidated partially-owned companies (Note 2). . . . 17,584 -- Property, plant and equipment, at cost: Land, buildings and improvements . . . . . . . . . . . . 79,581 94,652 Machinery and equipment. . . . . . . . . . . . . . . . . 405,439 489,516 485,020 584,168 Less accumulated depreciation. . . . . . . . . . . . . . 129,010 163,627 Net property, plant and equipment . . . . . . . . . . 356,010 420,541 Cost in excess of net assets acquired. . . . . . . . . . . 318,258 309,395 Other assets, net. . . . . . . . . . . . . . . . . . . . . 53,453 31,575 $996,583 $1,015,247 Liabilities and Stockholders' Equity Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . $55,218 $51,882 Accrued liabilities (Note 6) . . . . . . . . . . . . . . 25,756 27,019 Deferred taxes on income (Note 3). . . . . . . . . . . . 3,470 482 Current portion of long-term debt (Note 7) . . . . . . . 24,688 18,594 Total current liabilities . . . . . . . . . . . . . . 109,132 97,977 Long-term debt (Note 7). . . . . . . . . . . . . . . . . . 299,860 294,173 Deferred taxes on income and other liabilities (Note 3). . 104,323 116,591 Total liabilities . . . . . . . . . . . . . . . . . . 513,315 508,741 Commitments and contingencies (Note 8) Stockholders' equity (Notes 4, 7, and 10): Common stock, $0.001 par value; 55,000,000 shares authorized, 32,523,650 shares issued and outstanding in 1992, 32,780,018 in 1993. . . . . . . . . . . . . . . 33 33 Class B common stock, $0.001 par value; 5,500,000 shares authorized; no shares issued . . . . . . . . . . -- -- Paid-in capital. . . . . . . . . . . . . . . . . . . . . 210,180 215,179 Foreign currency translation adjustments . . . . . . . . 7,416 96 Retained earnings. . . . . . . . . . . . . . . . . . . . 265,639 291,198 Total stockholders' equity. . . . . . . . . . . . . . 483,268 506,506 $996,583 $1,015,247 See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollar amounts in thousands)
Currency Common Stock Paid-in Translation Retained Shares Amount Capital Adjustments Earnings Total Balance at December 31, 1990 . . . . . . 32,355,059 $ 32 $207,110 $11,913 $ 174,554 $ 393,609 Exercise of stock options. . . . . . . . 35,456 136 136 Issuance of restricted stock . . . . . . 2,668 61 61 Tax effect of exercise of stock options. 254 254 Currency translation adjustments . . . . 1,684 1,684 Net earnings . . . . . . . . . . . . . . 46,583 46,583 Cash dividends . . . . . . . . . . . . . (3,887) (3,887) Balance at December 31, 1991 . . . . . . 32,393,183 32 207,561 13,597 217,250 438,440 Exercise of stock options. . . . . . . . 54,138 665 665 Contribution of common stock to employee stock ownership and benefit plans. . . . . . . . . . . . . . . . . 74,995 1 1,646 1,647 Issuance of restricted stock . . . . . . 1,334 30 30 Tax effect of exercise of stock options. 278 278 Currency translation adjustments . . . . (6,181) (6,181) Net earnings . . . . . . . . . . . . . . 52,284 52,284 Cash dividends . . . . . . . . . . . . . (3,895) (3,895) Balance at December 31, 1992 . . . . . . 32,523,650 33 210,180 7,416 265,639 483,268 Exercise of stock options. . . . . . . . 54,748 674 674 Contribution of common stock to employee stock ownership and benefit plans. . . . . . . . . . . . . . . . . 200,286 4,065 4,065 Issuance of restricted stock . . . . . . 1,334 26 26 Tax effect of exercise of stock options. 234 234 Currency translation adjustments . . . . (7,320) (7,320) Net earnings . . . . . . . . . . . . . . 31,444 31,444 Cash dividends . . . . . . . . . . . . . (5,885) (5,885) Balance at December 31, 1993 . . . . . . 32,780,018 $ 33 $215,179 $ 96 $ 291,198 $ 506,506 See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, (In thousands) 1991 1992 1993 Cash flows from operating activities: Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . $46,583 $52,284 $31,444 Adjustments to reconcile net earnings to net cash provided by operating activities: Cumulative effect of changes in accounting principles . . . -- -- 9,010 Depreciation. . . . . . . . . . . . . . . . . . . . . . . . 35,301 38,913 41,609 Amortization. . . . . . . . . . . . . . . . . . . . . . . . 11,967 12,764 16,313 Deferred taxes on income. . . . . . . . . . . . . . . . . . 11,975 9,996 (3,088) Gain on sale of Wellstar. . . . . . . . . . . . . . . . . . -- -- (12,386) Changes in assets and liabilities, net of effects from businesses acquired and cumulative effect of changes in accounting principles: Accounts receivable. . . . . . . . . . . . . . . . . . . (10,413) 5,156 (9,815) Inventories. . . . . . . . . . . . . . . . . . . . . . . (1,759) (19,764) 14,760 Prepaid expenses and other current assets. . . . . . . . 491 (3,250) 2,582 Accounts payable and accrued liabilities . . . . . . . . (82) 2,747 (925) Other. . . . . . . . . . . . . . . . . . . . . . . . . . (3,449) (2,922) 5,788 Net cash provided by operating activities. . . . . . . . . . . 90,614 95,924 95,292 Cash flows from investing activities: Businesses acquired. . . . . . . . . . . . . . . . . . . . . . -- (33,686) (8,780) Additions to property, plant and equipment . . . . . . . . . . (25,867) (39,705) (105,689) Proceeds from sale of Wellstar . . . . . . . . . . . . . . . . -- -- 33,000 Decrease (increase) in restricted cash . . . . . . . . . . . . 5,392 (29,149) 19,242 Net cash used in investing activities. . . . . . . . . . . . . (20,475) (102,540) (62,227) Cash flows from financing activities: Borrowings under long-term debt. . . . . . . . . . . . . . . . 105,000 62,700 17,454 Repayments of long-term debt . . . . . . . . . . . . . . . . . (176,062) (50,607) (27,314) Dividends paid on common stock . . . . . . . . . . . . . . . . (3,887) (3,895) (5,885) Net cash provided by (used in) financing activities. . . . . . (74,949) 8,198 (15,745) Effect of exchange rate changes on cash and cash equivalents . . 116 (554) (318) Increase (decrease) in cash and cash equivalents . . . . . . . . (4,694) 1,028 17,002 Cash and cash equivalents at beginning of year . . . . . . . . . 5,415 721 1,749 Cash and cash equivalents at end of year . . . . . . . . . . . $ 721 $1,749 $18,751 Supplemental cash flow data: Cash paid during the year for: Interest expense . . . . . . . . . . . . . . . . . . . . $29,688 $24,016 $19,103 Income taxes . . . . . . . . . . . . . . . . . . . . . . $22,658 $ 24,144 $33,874 See notes to consolidated financial statements.
## ## Notes to Consolidated Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Wellman, Inc. and all wholly and majority-owned subsidiaries (the Company). All material intercompany transactions have been eliminated. Investments in unconsolidated partially-owned companies are accounted for using the equity method. Certain 1992 amounts have been reclassified to conform to the 1993 presentation. Revenue Recognition Sales to customers are recorded when goods are shipped. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for approximately $101,000,000 and $79,000,000 of inventory at December 31, 1992 and 1993, respectively, and the first-in, first-out (FIFO) and average cost methods for the remainder. Property, Plant and Equipment Property, plant and equipment is carried at cost. Depreciation is provided based on the estimated useful lives of the related assets and is computed on the straight-line method. Cost in Excess of Net Assets Acquired Cost in excess of net assets acquired is amortized on the straight-line method over 40 years. Accumulated amortization amounted to approximately $29,803,000 and $38,505,000 at December 31, 1992 and 1993, respectively. The carrying value of goodwill is reviewed if the facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of the goodwill will be reduced by the estimated shortfall of cash flows. Other Assets Other assets are comprised primarily of organization costs, deferred charges related to the Company's debt agreements and other intangible assets that are amortized over periods ranging from one to twenty years. Additionally, other assets include cash restricted for use obtained from borrowings under economic development revenue bonds in the amount of approximately $31,600,000 and $12,400,000 at December 31, 1992 and 1993, respectively. See Note 7. Environmental Expenditures Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Income Taxes Income taxes have been provided using the liability method in accordance with the Financial Accounting Standards Board's Statement No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred income taxes resulting from such differences are recorded based on the enacted tax rates that are currently expected to be in effect when the differences are expected to reverse. Cash and Cash Equivalents The carrying amounts reported in the balance sheets for cash and cash equivalents approximate their fair value. The Company considers all short term investments purchased with a maturity of three months or less to be cash equivalents for purposes of the consolidated statements of cash flows. Foreign Currency Translation The financial statements of foreign entities have been translated into U.S. dollar equivalents in accordance with Statement of Financial Accounting Standards No. 52. Adjustments resulting from the translation of the financial statements of foreign entities are excluded from the determination of income and accumulated in a separate component of stockholders' equity. Earnings Per Common Share Earnings per common share is based on the weighted average number of common and common equivalent shares outstanding. Accounting Changes Environmental Liabilities During 1993, the Financial Accounting Standards Board's Emerging Issues Task Force (EITF) issued EITF Abstract No. 93-5, "Accounting For Environmental Liabilities" (EITF 93-5). The Company adopted the provisions of EITF 93-5 in its 1993 Consolidated Financial Statements effective January 1, 1993. EITF 93-5 provides that an environmental liability should be evaluated independently from any potential claim for recovery (a two-event approach) and that the loss arising from the recognition of an environmental liability should be reduced only when a claim for recovery is probable of realization. Current accounting standards provide a general presumption that disputed claims for recovery are not probable of realization. Under practice prior to the issuance of EITF 93-5, some companies, including the Company, offset reasonably possible recoveries against probable losses. As a result of the issuance of EITF 93-5, this accounting treatment is no longer permitted. The cumulative effect as of January 1, 1993 of adopting the provisions of EITF 93-5 was a charge to net income of $6,820,000 ($0.20 per share), net of the income tax effect of $4,180,000. Excluding the cumulative effect, the impact of this change on 1993 net earnings and earnings per share was not material. The pro forma effect of applying this change retroactively would be a decrease in 1992 net earnings of approximately $6,300,000 ($0.19 per share). This change in accounting did not impact 1991 net earnings or earnings per share. Inventory Valuation During 1993, the Company changed its method of applying the lower of cost or market rule to certain slow-moving and discontinued waste raw material inventory which is valued using the LIFO dollar value method. In prior years, the Company used the aggregate method in applying the lower of cost or market rule to such inventories and in 1993 changed to the item-by-item method. The Company believes the new method of accounting is preferable because it provides a better matching of costs and revenue and results in a more conservative valuation of slow-moving and discontinued waste raw material inventory. The cumulative effect as of January 1, 1993 of this change in accounting is a charge to net earnings of $2,190,000 ($0.07 per share), net of the related income tax effect of $1,342,000. Excluding the cumulative effect, this change decreased net earnings for 1993 by approximately $2,500,000 ($0.08 per share). The pro forma effect of applying this change retroactively to 1992 would be a decrease in net earnings of approximately $2,225,000 ($0.07 per share). The pro forma effect on 1991 net earnings and earnings per share is not material. 2. INVESTMENT IN UNCONSOLIDATED PARTIALLY-OWNED COMPANIES In 1992 the investment in unconsolidated partially-owned companies consisted of the Company's 43.7% equity interest in Wellstar Holding, B.V. (Wellstar). Wellstar's subsidiary companies in The Netherlands, France and the United Kingdom are engaged in manufacturing plastic beverage bottles and other plastic containers. In March 1993, the Company sold its ownership interest in Wellstar for a total consideration of $33,000,000. The transaction resulted in a gain, before applicable income taxes, of approximately $12,386,000. The sale of Wellstar increased 1993 net earnings by approximately $7,300,000 or $0.22 per share. 3. INCOME TAXES For financial reporting purposes, earnings before income taxes and the cumulative effect of changes in accounting principles are as follows (in thousands): Years Ended December 31, 1991 1992 1993 United States. . . . . . . . . . . . $75,784 $82,647 $54,535 Foreign. . . . . . . . . . . . . . . 3,753 5,438 18,486 $79,537 $88,085 $73,021 Significant components of the provision for income taxes before the cumulative effect of the changes in accounting principles are as follows (in thousands): Years Ended December 31, 1991 1992 1993 Current: Federal. . . . . . . . . . . . . $15,985 $20,828 $30,310 State. . . . . . . . . . . . . . 4,070 4,057 4,357 Foreign. . . . . . . . . . . . . 924 920 988 $20,979 $25,805 $35,655 Deferred: Federal. . . . . . . . . . . . . $11,799 $9,700 $(2,566) State. . . . . . . . . . . . . . 314 296 (522) Foreign. . . . . . . . . . . . . (138) -- -- 11,975 9,996 (3,088) Total . . . . . . . . . . . . . . . . $32,954 $35,801 $32,567 As discussed in Note 1, deferred income tax benefits relating to the cumulative effect of changes in accounting principles in 1993 amounted to $5,522,000. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of these differences are as follows (in thousands): Years Ended December 31, 1992 1993 Inventory . . . . . . . . . . . . . . . . . . $4,116 $ 2,618 Depreciation. . . . . . . . . . . . . . . . . 82,925 81,310 Basis in foreign subsidiaries . . . . . . . . 2,167 3,248 Other . . . . . . . . . . . . . . . . . . . . 5,677 4,232 Total deferred tax liabilities. . . . . . . . 94,885 91,408 Pension . . . . . . . . . . . . . . . . . . . 4,285 4,601 State taxes . . . . . . . . . . . . . . . . . 4,212 3,743 Long-term liabilities . . . . . . . . . . . . 1,535 6,771 Other . . . . . . . . . . . . . . . . . . . . 4,089 4,139 Total deferred tax assets . . . . . . . . . . 14,121 19,254 Net deferred tax liabilities. . . . . . . . . $80,764 $72,154 Deferred income taxes have not been provided for approximately $56,118,000 of undistributed earnings of foreign entities which are considered to be permanently reinvested. Upon repatriation of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. Determination of the amount of unrecognized deferred U. S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation. The difference between the provision for income taxes before the cumulative effect of changes in accounting principles and income taxes computed at the statutory U. S. federal income tax rate is explained as follows: Years Ended December 31, 1991 1992 1993 Computed at statutory rate. . . 34.0% 34.0% 35.0% State taxes, net of federal benefit . . . . . . . . . . . 3.6 3.3 3.4 Differences in income tax rates between the United States and foreign countries . . . . . . (0.2) (0.4) (1.8) Amortization of cost in excess of net assets acquired. . . . 3.6 3.2 4.1 Effect of tax rate change on net deferred tax liabilities. -- -- 2.6 Other, net. . . . . . . . . . . 0.4 0.5 1.3 Effective tax rate. . . . . 41.4% 40.6% 44.6% 4. STOCKHOLDERS' EQUITY In 1991, 1992 and the first quarter of 1993, the Company paid quarterly cash dividends of $0.03 per share. In the second quarter of 1993, the quarterly dividend was increased to $0.05 per share. Approximately 375,000 and 3,588,000 common shares have been reserved for issuance in connection with certain of the Company's employee benefit plans and the Company's stock option plans, respectively. Of the 3,588,000 common shares reserved for issue in connection with stock option plans, 1,500,000 are subject to approval at the Company's Annual Meeting to be held in May 1994. See Notes 9 and 10. On August 6, 1991, the Board of Directors declared a dividend of one common stock purchase right (a Right) for each outstanding share of common stock. Each Right, when exercisable, will entitle the registered holder to purchase from the Company one share of common stock at an exercise price of $90 per share (the Purchase Price), subject to certain adjustments. The Rights are not represented by separate certificates and are only exercisable when a person or group of affiliated or associated persons acquires or obtains the right to acquire 15% or more of the Company's outstanding common shares (an Acquiring Person) or announces a tender or exchange offer that would result in any person or group beneficially owning 15% or more of the Company's outstanding common shares. In the event any person becomes an Acquiring Person, the Rights would give holders the right to buy, for the Purchase Price, common stock with a market value of twice the Purchase Price. The Rights expire on August 5, 2001, unless extended by the Board of Directors or redeemed earlier by the Company at a redemption price of $0.01 per Right. Although the Rights should not interfere with a business combination approved by the Board of Directors, they may cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Board, except pursuant to an offer conditioned on a substantial number of Rights being acquired. 5. INVENTORIES Inventories consist of the following (in thousands): December 31, 1992 1993 Finished and semi-finished goods. . $ 52,933 $ 53,083 Raw materials . . . . . . . . . . . 86,289 72,723 Supplies. . . . . . . . . . . . . . 12,930 12,467 152,152 138,273 Less adjustments of certain inventories to a LIFO basis . . . -- 4,882 Total . . . . . . . . . . . . . . . $152,152 $133,391 The replacement cost of the Company's inventories amounted to approximately $152,000,000 and $138,000,000 at December 31, 1992 and 1993, respectively. 6. ACCRUED LIABILITIES Accrued liabilities consist of the following (in thousands): December 31, 1992 1993 Payroll and other compensation. . . $ 4,776 $ 3,800 Benefit plans . . . . . . . . . . . 9,442 9,931 Property and other taxes. . . . . . 2,885 2,733 Insurance . . . . . . . . . . . . . 2,297 1,112 Interest. . . . . . . . . . . . . . 2,303 2,347 Other . . . . . . . . . . . . . . . 4,053 7,096 Total . . . . . . . . . . . . . . . $25,756 $27,019 7. LONG-TERM DEBT Long-term debt consists of the following (in thousands): December 31, 1992 1993 Reducing revolving credit and term loan facilities and loan note participations . . . . . . . $115,932 $118,559 Serialized senior unsecured notes . 100,000 100,000 Economic development revenue bonds . . . . . . . . . . . . . . 54,500 54,500 8.41% senior note payable, due on July 31, 2000. . . . . . . 30,000 30,000 14.5% senior promissory notes due through July 1, 1994. . . . . 8,700 2,900 Wellman International Limited debt. . . . . . . . . . . . . . . 14,706 6,099 Other . . . . . . . . . . . . . . . 710 709 324,548 312,767 Less amount due within one year . 24,688 18,594 Total . . . . . . . . . . . . . . . $299,860 $294,173 The reducing revolving credit and term loan facilities originally consisted of a $222,000,000 Reducing Revolving Credit Loan and a $178,000,000 Term Loan (collectively, the Facilities). The reducing revolving credit and term loan facilities mature on December 31, 1996 and June 30, 1995, respectively. As of December 31, 1993, the Company reduced the aggregate commitment on the Facilities from $400,000,000 to $176,759,000. Borrowings under each of the Facilities bear interest, at the Company's option, at the prime rate, the LIBOR or CD rate plus margins ranging from 0.50% to 0.75% on LIBOR loans and 0.625% to 0.875% on CD rate loans, determined on the basis of the Company's leverage ratio, as defined in the Facilities. The terms of the Reducing Revolving Credit Loan provide the Company the ability to borrow under competitive bid loans. Such borrowings, as well as borrowings under loan note participations (LNPs), reduce the availability under the Reducing Revolving Credit Loan and bear interest at the offering bank's prevailing interest rate. At December 31, 1993, the average interest rate on borrowings under the Facilities and LNPs was approximately 3.70%. The $100,000,000 of Serialized Senior Unsecured Notes bear interest at rates ranging between 9.02% and 9.26% (averaging 9.18%) and mature between May 1997 and May 1999. The WIL debt consists primarily of funds borrowed under multi-currency term loan facilities, of which approximately $750,000 is due in 1994 and the remainder in 2000. The interest rate floats based upon the banks' cost of funds and the currencies borrowed. At December 31, 1993, the average rate on WIL borrowings approximated 6.00%. The WIL debt is secured by assets of WIL. The economic development revenue bonds (the Bonds) bear interest at variable rates which cannot exceed 12.00% for certain issues and 15.00% for one issue. The Bonds mature as follows: $8,000,000 on December 1, 2010; $32,000,000 on December 1, 2012; $5,000,000 on April 1, 2017; and $9,500,000 on June 1, 2022. The Bonds are tenderable by the holders and are secured by letters of credit aggregating approximately $55,800,000 at December 31, 1993. The weighted average interest rate on the Bonds at December 31, 1993 was approximately 2.50%. The Bonds and certain borrowings under the Facilities and LNPs are classified as long term in accordance with the Company's intention and ability to refinance such obligations on a long term basis. The Company's financing agreements contain normal financial and restrictive covenants, including restrictions on the payment of dividends and requirements with respect to working capital, net worth and debt to capitalization. Under the most restrictive covenant, approximately $131,300,000 of retained earnings at December 31, 1993 is not restricted as to the payment of dividends. The carrying amounts of the Company's borrowings under its variable rate credit agreements approximate their fair value. The fair values of the Company's fixed rate credit agreements are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the Company's fixed rate debt exceeded its carrying value by approximately $15,000,000 at December 31, 1993. Prepayment of the fixed rate debt would result in significant penalties. The approximate annual maturities of long term debt, including the current portion, during each of the next five years and thereafter are as follows: 1994 -- $18,594,000; 1995 -- $46,410,000; 1996 -- $112,137,000; 1997 -- $20,148,000; 1998 -- $40,183,000; and thereafter -- $75,295,000. Although maturities of the Bonds range from 2010 to 2022, they have been included as maturities in 1995 and 1996 as they are tenderable by the holders, and the Company's present long term facilities mature during those years. During 1991, 1992 and 1993, the Company capitalized interest of $809,000, $304,000 and $2,375,000, respectively, as part of the cost of capital projects under construction. 8. COMMITMENTS AND CONTINGENCIES The Company's operations are subject to extensive and rapidly changing federal and state environmental regulations governing air emissions, waste water discharges and solid and hazardous waste management activities. As discussed in Note 1, the Company's policy is to accrue environmental and clean-up-related costs of a non-capital nature when it is both probable that a liability has been incurred and the amount can be reasonably estimated. While it is often difficult to reasonably quantify future environmental related expenditures, the Company currently estimates its non-capital expenditures related to environmental matters will range between $13,000,000 and $25,000,000. Such expenditures are expected to occur over a significant number of future years. In connection with these expenditures, the Company has accrued $15,500,000 at December 31, 1993 ($2,500,000 at December 31, 1992) representing management's best estimate of probable non-capital environmental expenditures. In addition, capital expenditures aggregating approximately $10,000,000 to $15,000,000 may be required over the next several years related to currently existing environmental matters. The Company believes that it is entitled to recover a portion of these expenditures under indemnification and escrow agreements. In connection with the 1992 acquisition of Creative Forming, Inc. (CFI), the Company may be required to make an additional payment in 1997 based primarily on CFI's 1995 and 1996 average earnings, as defined. The contingent payment, if any, will increase cost in excess of net assets acquired. At December 31, 1993, the Company had approximately $63,127,000 of outstanding letters of credit of which approximately $55,800,000 were outstanding as security for the Bonds, as discussed in Note 7. Approximate minimum rental commitments under non-cancelable leases (principally for buildings and equipment) during each of the next five years and thereafter are as follows: 1994 -- $4,235,000; 1995 -- $3,759,000; 1996 -- $2,976,000; 1997 -- $2,788,000; 1998 -- $2,773,000; and thereafter -- $5,832,000. Rent expense for cancelable and non-cancelable operating leases was $5,049,000, $4,797,000, and $6,295,000 for the years ended December 31, 1991, 1992 and 1993, respectively. 9. RETIREMENT PLANS The Company has defined benefit and defined contribution pension plans and an employee stock ownership plan (the ESOP) covering substantially all employees. Payments upon retirement or termination of employment under the defined contribution plans are based on vested amounts credited to individual accounts. The plans provide for Company contributions based on the earnings of eligible employees. Such contributions, excluding amounts contributed to the ESOP, amounted to approximately $3,556,000, $6,442,000 and $7,553,000 for the years ended December 31, 1991, 1992 and 1993, respectively. Company contributions to the ESOP amounted to approximately $1,847,000 and $2,249,000 for the years ended December 31, 1992 and 1993, respectively. The increase in total contributions in 1992 and 1993 compared to prior years is primarily due to the formation of the Wellman, Inc. Retirement Plan (WIRP) and the ESOP. The WIRP effectively consolidates retirement benefits for certain domestic employees. Accordingly, amendments to certain provisions of a domestic defined benefit plan were made effective on January 1, 1992. Benefits under the WIL defined benefit plan are based on employees' compensation and length of service, while benefits under defined benefit plans covering domestic employees are based on employees' compensation and length of service or at stated amounts based on length of service. The Company's policy is to fund amounts which are actuarially determined to provide the plans with sufficient assets to meet future benefit payment requirements. Assets of the plans are invested primarily in equity securities and commingled trust funds. The pension costs of the defined benefit plans consist of the following (in thousands): Years Ended December 31, 1991 1992 1993 Service cost. . . . . . . . . . $3,391 $ (706) $ (370) Interest cost on projected benefit obligations . . . . . 3,908 4,113 4,336 Less actual return on assets. . 3,236 (1,697) 7,512 Net amortization and deferral . 345 (5,009) 4,621 Total $4,408 $ 95 $1,075 The following table sets forth the funded status and amounts included in the Company's Consolidated Balance Sheets at December 31, 1992 and 1993 for its defined benefit pension plans (in thousands): December 31, 1992 1993 Actuarial present value of benefit obligations: Vested benefit obligations. . . . $ 27,600 $ 33,502 Accumulated benefit obligations . $ 27,907 $ 33,952 Projected benefit obligations . . $ 51,585 $ 52,913 Plan assets at fair market value. . 38,564 45,063 Funded status . . . . . . . . . . . (13,021) (7,850) Unrecognized net (gain) loss. . . . 1,990 (1,875) Unrecognized net asset at transition . . . . . . . . . . (50) (5) Unrecognized prior service cost . . (1,083) (1,395) Accrued pension costs . . . . . . . $(12,164) $(11,125) The unrecognized prior service cost relates primarily to amendments to the early retirement provisions of a domestic plan. Such amendments became effective January 1, 1992. At December 31, 1992 and 1993, assumed discount rates of 8% and 7.25%, respectively, and rates of increase in future compensation levels of 6% and 4.5%, respectively, were used in determining the actuarial present value of benefit obligations for the domestic plans. The assumed long-term rates of return on domestic plan assets were 8%. The assumptions used in calculating the actuarial present value of benefit obligations for WIL were discount rates of 9% and 7% and rates of increases in future compensation levels of 6.5% and 5% at December 31, 1992 and 1993, respectively. The assumed long-term rates of return on plan assets for WIL were 9%, 9% and 7% at December 31, 1991, 1992 and 1993, respectively. 10. STOCK OPTION PLANS The Company has stock option plans (the Plans) which authorize the grant of non-qualified stock options (NQSOs). The maximum number of common shares authorized for grant under the Plans is 3,588,000. Of the 3,588,000 common shares, 1,500,000 are subject to shareholder approval at the Company's Annual Meeting to be held in May 1994. For substantially all options granted in connection with the Plans, the option period extends for either ten years and one day from the date of grant, or 11 years from the date of grant, and the shares vest at 20% per year over the first five years. The option price at which options are granted under the Plans must be at least equal to the fair market value at the date of grant. Information regarding the NQSOs is as follows: 1991 1992 1993 Options outstanding at January 1 943,169 1,185,073 1,481,735 Options granted at prices of $19.875 in 1991, $20.625 in 1992 and $17.375 in 1993. . . . . 346,500 366,300 223,714* Options exercised at average prices of $3.83 in 1991, $12.28 in 1992 and $12.32 in 1993. . . . (35,456) (54,138) (54,748) Options canceled at average prices of $24.99 in 1991, $22.36 in 1992 and $20.42 in 1993 . . . (69,140) (15,500) (5,590) Options outstanding at December 31 at average prices of $19.38 in 1991, $19.92 in 1992 and $19.63 in 1993. . . . . . . . . . 1,185,073 1,481,735 1,645,111* Options exercisable at December 31 . . . . . . . . . . . 390,458 558,380 768,960 Options available for grant at December 31. . . . . . . . . . 568,924 218,124 -0-* *The options granted in 1993 and options outstanding at December 31, 1993 exclude options relating to 136,286 common shares. These options were granted by the Board of Directors pending shareholder authorization of additional common shares to the Plans. 11. BUSINESS SEGMENT AND GEOGRAPHIC AREAS The Company operates in one business segment: principally the manufacture and sale of polyester and nylon fibers and resins primarily for use in the apparel, home furnishings and other consumer products markets. Revenues and operating income for the years ended December 31, 1991, 1992 and 1993 and identifiable assets at the end of each year, classified by the major geographic areas in which the Company operates, are as follows (in thousands): Years Ended December 31, 1991 1992 1993 Net sales U.S. . . . . . . . . . . . . $711,862 $728,733 $ 754,882 Western Europe . . . . . . . 93,802 99,467 87,182 Total net sales. . . . . . $805,664 $828,200 $ 842,064 Operating income U.S. . . . . . . . . . . . . $103,733 $105,943 $ 69,305 Western Europe . . . . . . . 5,191 5,154 7,066 Total operating income. . . . . . . . . . 108,924 111,097 76,371 Interest expense . . . . . . . 29,387 23,012 15,736 Gain on sale of Wellstar . . . -- -- 12,386 Earnings before income taxes . . . . . . . . $ 79,537 $ 88,085 $ 73,021 Identifiable assets U.S. . . . . . . . . . . . . $834,020 $913,384 $ 927,330 Western Europe . . . . . . . 91,269 83,199 87,917 Total. . . . . . . . . . . $925,289 $996,583 $1,015,247 UNAUDITED QUARTERLY FINANCIAL DATA Quarterly financial information for the years ended December 31, 1992 and 1993 is summarized as follows: (In thousands, except per share data):
March 31, June 30, September 30, December 31, Total Quarter ended 1993(1) 1993 1993(1) 1993(1) 1993(1) Net sales $207,968 $214,005 $210,151 $209,940 $842,064 Gross profit $49,583 $46,046 $41,594 $25,659 $162,882 Earnings (loss) before cumulative effect of changes in accounting principles $21,804 $12,783 $7,056 $(1,189) $40,454 Net earnings (loss) $12,794 $12,783 $7,056 $(1,189) $31,444 Earnings (loss) per common share before cumulative effect of changes in accounting principles $0.66 $0.39 $0.21 ($0.04) $1.23 Net earnings (loss) per common share $0.39 $0.39 $0.21 ($0.04) $0.96 March 31, June 30, September 30, December 31, Total Quarter ended 1992 1992 1992 1992 1992 Net sales $207,529 $ 205,355 $212,382 $202,934 $828,200 Gross profit $47,295 $49,414 $46,962 $44,865 $188,536 Net earnings $12,453 $14,448 $12,763 $12,620 $52,284 Net earnings per common share $0.38 $0.44 $0.39 $0.39 $1.60 (1) 1993 Net earnings reflect $15.9 million ($0.48 per share) of accounting changes and unusual and nonrecurring items. In March 1993, the Company sold its ownership interest in Wellstar Holding, B.V. for $33.0 million. The resulting gain before applicable taxes, was approximately $12.4 million. As a result of the sale, 1993 net earnings increased by approximately $7.3 million ($0.22 per share). Net earnings for the quarter ended March 31, 1993 have been restated from amounts previously reported (net earnings $21.8 million; net earnings per share $0.66) to reflect the cumulative effect of changes in accounting principles for environmental liabilities and certain inventories ($9.0 million, net of the related tax effect). In the third quarter of 1993 the Revenue Reconciliation Act of 1993 was enacted which raised the maximum corporate tax rate from 34% to 35%. This resulted in $2.7 million ($0.08 per share) in additional taxes. In the fourth quarter of 1993, the Company incurred unusual charges aggregating $11.5 million ($0.35 per share) primarily related to inventory, development of a prototype materials recovery facility and expenses associated with the Company's on-going capital investment program. See also Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes 1, 2 and 3 of the Notes to Consolidated Financial Statements.
REPORT OF INDEPENDENT AUDITORS Board of Directors Wellman, Inc. We have audited the accompanying consolidated balance sheets of Wellman, Inc. as of December 31, 1993 and 1992, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 8. These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We did not audit the financial statements and schedules of a wholly-owned subsidiary of the Company, which statements reflect total assets constituting 6% in 1993 and 8% in 1992 and total revenues constituting 10% in 1993 and 11% in 1992 and 1991 of the related consolidated totals. Those statements and schedules were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to data included for the Company's wholly-owned subsidiary, is based solely on the report of other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wellman, Inc. at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, based on our audits and the report of other auditors, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 1 to the financial statements, in 1993 the Company changed its method of accounting for recoveries related to environmental liabilities and its method of valuing certain inventories. ERNST & YOUNG Charlotte, North Carolina February 15, 1994 SCHEDULE V WELLMAN, INC. AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT Years ended December 31, 1991, 1992, and 1993 (In thousands)
Year ended December 31, 1991 =============================================================================================================== Balance at Balance at Beginning End of Classification of Year Additions(a) Retirements Other(b) Year - --------------------------------------------------------------------------------------------------------------- Land, Buildings and improvements $ 69,968 $ 6,899 $2,408 $(1,846) $ 72,613 Machinery and equipment 350,130 18,968 1,573 221 367,746 ------- ------- ------ ------ -------- $420,098 $25,867 $3,981 $(1,625) $440,359 ======== ======= ======= ======= ======= Year ended December 31, 1992 =============================================================================================================== Balance at Balance at Beginning End of Classification of Year Additions(a) Retirements Other(b) Year - --------------------------------------------------------------------------------------------------------------- Land, buildings and improvements $ 72,613 $ 9,673 $ 2,169 $ ( 536) $ 79,581 Machinery and equipment 367,746 52,652 11,795 (3,164) 405,439 -------- ------- ------ ------ -------- $440,359 $62,325 $13,964 $(3,700) $485,020 ======= ======= ====== ====== ======= Year ended December 31, 1993 =============================================================================================================== Balance at Balance at Beginning End of Classification of Year Additions(a) Retirements Other(b) Year - --------------------------------------------------------------------------------------------------------------- Land, buildings and improvements $ 79,581 $ 16,202 $ 95 $(1,036) $ 94,652 Machinery and equipment 405,439 94,437 5,001 (5,359) 489,516 -------- -------- ------ ------ -------- $485,020 $110,639 $5,096 $(6,395) $584,168 ======== ======== ====== --==== ======== (a) Includes the effects of businesses acquired. (b) Primarily foreign currency translation adjustments.
SCHEDULE VI WELLMAN, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION OF PLANT AND EQUIPMENT Years Ended December 31, 1991, 1992, and 1993 (In thousands)
Year ended December 31, 1991 ================================================================================================== Balance at Balance at Beginning End of Classification of Year Additions Retirements Other(a) Year - -------------------------------------------------------------------------------------------------- Land, buildings and improvements $ 9,476 $ 3,217 $ 909 $( 113) $ 11,671 Machinery and equipment 59,566 32,084 908 ( 499) 90,243 ------- ------- ------- ------- ------- $69,042 $35,301 $1,817 $( 612) $101,914 ======= ======= ======= ======= ======= Year ended December 31, 1992 ================================================================================================== Balance at Balance at Beginning End of Classification of Year Additions Retirements Other(a) Year - -------------------------------------------------------------------------------------------------- Land, buildings and improvements $11,671 $ 3,617 $ 1,866 $ (263) $ 13,159 Machinery and equipment 90,243 35,296 8,198 (1,490) 115,851 ------- ------- ------- ------ ------- $101,914 $38,913 $10,064 $(1,753) $129,010 ======= ======= ======= ====-= ======= Year ended December 31, 1993 ================================================================================================== Balance at Balance at Beginning End of Classification of Year Additions Retirements Other(a) Year - -------------------------------------------------------------------------------------------------- Land, buildings and improvements $ 13,159 $ 4,743 $ 51 $ 160 $ 18,011 Machinery and equipment 115,851 36,866 3,910 (3,191) 145,616 ------- ------- ------ ------ ------- $129,010 $41,609 $3,961 $(3,031) $163,627 ======= ======= ====== ====== ======= (a) Primarily foreign currency translation adjustments.
SCHEDULE VIII WELLMAN, INC. VALUATION AND QUALIFYING ACCOUNTS For The Years Ended December 31, 1991, 1992, and 1993 (In thousands)
Balance at Charged to Balance Beginning Costs and at End Description of Year Expenses Other Deductions of Year Allowance for doubtful accounts receivable: Year ended December 31, 1991 $4,184 $ 51 $ 1,315(a) $ 205(b) $ 5,345 ====== ====== ======= ====== ======= Year ended December 31, 1992 $5,345 $ 646 $ (39)(a) $1,509(b) $ 4,443 ====== ====== ======= ======= ======= Year ended December 31, 1993 $4,443 $ 702 $ (60)(a) $ 853(b) $ 4,232 ====== ====== ========= ======= ======= (a) Primarily foreign currency translation adjustments. (b) Accounts written off.
SCHEDULE X WELLMAN, INC. SUPPLEMENTARY INCOME STATEMENT INFORMATION For The Years Ended December 31, 1991, 1992, and 1993 (In thousands) ================================================================= 1991 1992 1993 - ----------------------------------------------------------------- Maintenance and repairs $33,479 $36,721 $37,959 ======= ======= ======= Amortization of intangible assets $11,967 $12,764 $16,313 ======= ======= ======= Other amounts are less than 1 percent of sales. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant "Election of Directors" in the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before April 30, 1994 is hereby incorporated by reference herein. Item 11. Executive Compensation "Compensation of Directors and Officers" in the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before April 30, 1994 is hereby incorporated by reference herein. Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. Item 12. Security Ownership of Certain Beneficial Owners and Management "Introduction" and "Election of Directors" in the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before April 30, 1994 is hereby incorporated by reference herein. Item 13. Certain Relationships and Related Transactions "Compensation of Directors and Officers" in the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before April 30, 1994 is hereby incorporated by reference herein. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. Financial Statements The financial statements included in Item 8 are filed as part of this annual report. 2. Financial Statement Schedules The financial statement schedules included in Item 8 are filed as part of this annual report. 3. Exhibits Exhibit Number Description 3(a)(1) Restated Certificate of Incorporation (Exhibit 3.1 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 3(a)(2) Certificate of Amendment to Restated Certificate of Incorporation (Exhibit 3(a)(2) of the Company's Registration Statement on Form S-4, File No. 33-31043, incorporated by reference herein) 3(a)(3) Certificate of Amendment to Restated Certificate of Incorporation (Exhibit 28 of the Company's Registration Statement on Form S-8, File No. 33-38491, incorporated by reference herein) 3(a)(4) Certificate of Amendment to Restated Certificate of Incorporation 3(b) By-Laws, as amended 4(a) Loan Agreement dated December 7, 1990 by and between the Company and Fleet National Bank, as agent, and certain other financial institutions (Exhibit 4(a) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 4(b) Note and Stock Purchase Agreement dated July 31, 1985, among the Company, the Prudential Insurance Company of Amer ("Prudential") and Teachers Insurance and Annuity Association of America ("Teachers") (Exhibit 4.6 of the Company's Registration Statement on Form S-1, File No. 33-23988, incorporated by reference herein) 4(c) Letter Agreement dated June 10, 1987 between the Company and Teachers (Exhibit 19.2 of the Company's Form 10-Q for the Quarter ended June 30, 1987 incorporated by reference herein) 4(d) Letter Agreement dated October 2, 1989 between the Company and Teachers (Exhibit 4(c) of the Company's Form 8-K for the event dated November 1, 1989 incorporated by reference herein) 4(e) Letter Agreement dated June 10, 1987 between the Company and Prudential (Exhibit 19.3 of the Company's Form 10-Q for the Quarter ended June 30, 1987 incorporated by reference herein) 4(f) Letter Agreement dated October 2, 1989 between the Company and Prudential (Exhibit 4(d) of the Company's Form 8-K for the event dated November 1, 1989 incorporated by reference herein) 4(g) Letter Agreement dated March 20, 1990 between the Company and Prudential (Exhibit 4(g) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(h) Letter Agreement dated March 20, 1990 between the Company and Teachers (Exhibit 4(h) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(i) Letter Agreement dated December 7, 1990 between the Company and Prudential (Exhibit 4(i) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(j) Letter Agreement dated December 7, 1990 between the Company and Teachers (Exhibit 4(j) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(k) Amendment Agreement dated February 27, 1992 between the Company and Prudential (Exhibit 4(k) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(l) Amendment Agreement dated February 27, 1992 between the Company and Teachers (Exhibit 4(l) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(m) Facilities dated December 19, 1991 between WIL and Ulster Investment Bank Limited (Exhibit 4(m) of the Company's Form 10-Q for the quarter ended June 30, 1992 incorporated by reference herein) 4(n) Registration Rights Agreement dated as of August 12, 1985 by and among the Company, Teachers, Prudential, Narragansett First Fund, Thomas M. Duff, John L. Dings, Alex Holder, Calvin Hughes, and Frank McGuire (Exhibit 4.7 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 4(o) Loan Agreement between South Carolina Jobs - Economic Development Authority (the "Authority") and the Company dated as of December 1, 1990 (Exhibit 4(n) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 4(p) First Supplemental Loan Agreement between the Authority and the Company dated as of April 1, 1991 (Exhibit 4(a) of the Company's Form 10-Q for the quarter ended June 30, 1991 incorporated by reference herein) 4(q) Note Purchase Agreement dated as of June 14, 1991 between the Company and the Purchasers named in Schedule I thereto (Exhibit 4(b) of the Company's Form 10-Q for the quarter ended June 30, 1991 incorporated by reference herein) 4(r) Rights Agreement dated as of August 6, 1991 between the Company and First Chicago Trust Company of New York, as Rights Agent (Exhibit 1 to the Company's Form 8-K dated as of August 6, 1991 incorporated by reference herein) 4(s) Loan Agreement between the Authority and the Company, dated as of June 1, 1992 (Exhibit 4(u) of the Company's Form 10-Q for the quarter ended June 30, 1992 incorporated by reference herein) 4(t) Note Purchase Agreement between the Company and Teachers dated July 28, 1992 (Exhibit 4(v) of the Company's Form 10-Q for the quarter ended June 30, 1992 incorporated by reference herein) 4(u) Loan Agreement between the Authority and the Company, dated as of December 1, 1992 (Exhibit 4(w) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 4(v) Promissory Note dated May 15, 1992 of the Company to the City of Florence, SC (Exhibit 4(x) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 4(w) Loan note participations with the Sumitomo Bank, Limited, dated July 27, 1992, Buliner Handels-und Frankfurter Bank dated June 15, 1992, Banco di Napoli dated September 14, 1992, Istituto Bancario San Paolo di Torino S.p.A. dated January 4, 1992, Continental Bank N.A. dated November 26, 1991 (Exhibit 4(y) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 4(x) Promissory Note dated August 9, 1993 of the Company to First Fidelity Bank, National Bank (Exhibit 4(z) of the Company's Form 10-Q for the quarter ended September 30, 1993 incorporated by reference herein) 4(y) Commercial Purpose Loan Note dated August 11, 1993 to Chemical Bank New Jersey, National Association 4(z) Promissory Note dated June 18, 1993 of the Company to Fleet National Bank Executive Compensation Plans and Arrangements 10(a) Wellman, Inc. 1985 Incentive Stock Option Plan, as amended (Exhibit 4(a) of the Company's Registration Statement on Form S-8/S-3, File No. 33-17196, incorporated by reference herein) 10(b)(1) Employment Agreement dated as of January 1, 1990 between the Company and Thomas M. Duff (Exhibit 10(e) of the Company's Form 10-K for the year ended December 31, 1989 incorporated by reference herein) 10(b)(2) Amendment to Employment Agreement dated as of January 1, 1993 between the Company and Thomas M. Duff (Exhibit 19 to the Company's Form 10-Q for the quarter ended March 31, 1993 incorporated by reference herein) 10(c)(1) Employment Agreement dated as of January 1, 1990 between the Company and Clifford J. Christenson (Exhibit 10(f) of the Company's Form 10-K for the year ended December 31, 1989 incorporated by reference herein) 10(c)(2) First Amendment to Employment Agreement dated as of January 1, 1993 between the Company and Clifford J. Christenson (Exhibit 10(c)(2) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 10(d) Service Agreement dated as of June 26, 1991 between Wellman International Investments Limited and Charles William Beckwith (Ehibit 10(g) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 10(e) Employment Agreement dated as of October 1, 1991 between the Company and James P. Casey (Ehibit 10(j) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 10(f) Employment Agreement dated as of April 1, 1992 between the Company and Paul D. Apostol (Exhibit 10(f) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 10(g) Directors Stock Option Plan dated as of December 2, 1991 (Exhibit 4(a) of the Company's Registration Statement on Form S-8, File No. 33-44822 incorporated by reference herein) 10(h) Management Incentive Compensation Plan 10(i) Summary of Executive Life Insurance Plan (Exhibit 10.22 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 10(j)(1) Amended and Restated Restricted Stock Agreement dated November 17, 1988 between the Company and Peter H. Conze (Exhibit 10(x)(1) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(2) Amended and Restated Restricted Stock Agreement dated December 5, 1988 between the Company and Richard F. Heitmiller (Exhibit 10(x)(2) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(3) Restricted Stock Agreement dated March 31, 1989 between the Company and Jonathan M. Nelson (Exhibit 10(w)(4) of the Company's Registration Statement on Form S-4, File No. 33-31043, incorporated by reference herein) 10(j)(4) Restricted Stock Agreement dated March 31, 1989 between the Company and Roger A. Vandenberg (Exhibit 10(w)(5) of the Company's Registration Statement on Form S-4, File No. 33-31043, incorporated by reference herein) 10(j)(5) Restricted Stock Agreement dated as of August 9, 1990 between the Company and Allan R. Dragone (Exhibit 10(x)(5) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(6) Restricted Stock Agreement dated as of August 9, 1990 between the Company and Raymond C. Tower (Exhibit 10(x)(6) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(7) Restricted Stock Agreement dated September 21, 1993 between the Company and James E. Rogers Other Material Agreements 10(k) Environmental Agreement dated as of August 8, 1985, by and among the Company, Arthur O. Wellman, Jr., and Edward R. Sacks (Exhibit 10.12 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 10(l) Post-Closing Escrow Agreement dated August 12, 1985 by and among the Company, Arthur O. Wellman, Jr., Edward R. Sacks and certain other parties (Exhibit 10.2 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 10(m) Guarantee of indebtedness of Wellman Fibers Limited to National Westminster Bank PLC (Exhibit 10(r) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 10(n) Letter Agreement, relating to certain environmental matters, dated August 17, 1987, by and among FI, HCC and Celanese (Exhibit 10.3 of FI's Registration Statement on Form S-1, File No. 33-20626, incorporated herein by reference) 10(o) Trademark Assignment and License, dated January 28, 1988, by and among FI, HCC and Celanese (Exhibit 10.14 of FI's Registration Statement on Form S-1, File No. 33-20626, incorporated herein by reference) 18 Letter of Ernst & Young re change in accounting principles 21 Subsidiaries of the Company 23(a) Consent of Ernst & Young 23(b) Consent of KPMG Stokes Kennedy Crowley 99 Report of KPMG Stokes Kennedy Crowley (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 24, 1994. WELLMAN, INC. By /s/ Thomas M. Duff President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on March 24, 1994. Signatures Title /s/ Thomas M. Duff President, Chief Executive Officer Thomas M. Duff and Director (Principal Executive Officer) /s/ Keith R. Phillips Vice President, Chief Financial Keith R. Phillips Officer and Treasurer (Principal Financial Officer) /s/ Mark J. Rosenblum Vice President, Controller Mark J. Rosenblum (Principal Accounting Officer) /s/ C. William Beckwith Director C. William Beckwith /s/ Peter H. Conze Director Peter H. Conze /s/ Allan R. Dragone Director Allan R. Dragone /s/ Richard F. Heitmiller Director Richard F. Heitmiller /s/ Jonathan M. Nelson Director Jonathan M. Nelson /s/ James E. Rogers Director James E. Rogers /s/ Raymond C. Tower Director Raymond C. Tower /s/ Roger A. Vandenberg Director Roger A. Vandenberg EXHIBIT INDEX Exhibit Number Description 3(a)(1) Restated Certificate of Incorporation (Exhibit 3.1 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 3(a)(2) Certificate of Amendment to Restated Certificate of Incorporation (Exhibit 3(a)(2) of the Company's Registration Statement on Form S-4, File No. 33-31043, incorporated by reference herein) 3(a)(3) Certificate of Amendment to Restated Certificate of Incorporation (Exhibit 28 of the Company's Registration Statement on Form S-8, File No. 33-38491, incorporated by reference herein) 3(a)(4) Certificate of Amendment to Restated Certificate of Incorporation 3(b) By-Laws, as amended 4(a) Loan Agreement dated December 7, 1990 by and between the Company and Fleet National Bank, as agent, and certain other financial institutions (Exhibit 4(a) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 4(b) Note and Stock Purchase Agreement dated July 31, 1985, among the Company, the Prudential Insurance Company of America ("Prudential") and Teachers Insurance and Annuity Association of America ("Teachers") (Exhibit 4.6 of the Company's Registration Statement on Form S-1, File No. 33-23988, incorporated by reference herein) Exhibit Number Description 4(c) Letter Agreement dated June 10, 1987 between the Company and Teachers (Exhibit 19.2 of the Company's Form 10-Q for the Quarter ended June 30, 1987 incorporated by reference herein) 4(d) Letter Agreement dated October 2, 1989 between the Company and Teachers (Exhibit 4(c) of the Company's Form 8-K for the event dated November 1, 1989 incorporated by reference herein) 4(e) Letter Agreement dated June 10, 1987 between the Company and Prudential (Exhibit 19.3 of the Company's Form 10-Q for the Quarter ended June 30, 1987 incorporated by reference herein) 4(f) Letter Agreement dated October 2, 1989 between the Company and Prudential (Exhibit 4(d) of the Company's Form 8-K for the event dated November 1, 1989 incorporated by reference herein) 4(g) Letter Agreement dated March 20, 1990 between the Company and Prudential (Exhibit 4(g) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(h) Letter Agreement dated March 20, 1990 between the Company and Teachers (Exhibit 4(h) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(i) Letter Agreement dated December 7, 1990 between the Company and Prudential (Exhibit 4(i) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) Exhibit Number Description 4(j) Letter Agreement dated December 7, 1990 between the Company and Teachers (Exhibit 4(j) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(k) Amendment Agreement dated February 27, 1992 between the Company and Prudential (Exhibit 4(k) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(l) Amendment Agreement dated February 27, 1992 between the Company and Teachers (Exhibit 4(l) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 4(m) Facilities dated December 19, 1991 between WIL and Ulster Investment Bank Limited (Exhibit 4(m) of the Company's Form 10-Q for the quarter ended June 30, 1992 incorporated by reference herein) 4(n) Registration Rights Agreement dated as of August 12, 1985 by and among the Company, Teachers, Prudential, Narragansett First Fund, Thomas M. Duff, John L. Dings, Alex Holder, Calvin Hughes, and Frank McGuire (Exhibit 4.7 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 4(o) Loan Agreement between South Carolina Jobs - Economic Development Authority (the "Authority") and the Company dated as of December 1, 1990 (Exhibit 4(n) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) Exhibit Number Description 4(p) First Supplemental Loan Agreement between the Authority and the Company dated as of April 1, 1991 (Exhibit 4(a) of the Company's Form 10-Q for the quarter ended June 30, 1991 incorporated by reference herein) 4(q) Note Purchase Agreement dated as of June 14, 1991 between the Company and the Purchasers named in Schedule I thereto (Exhibit 4(b) of the Company's Form 10-Q for the quarter ended June 30, 1991 incorporated by reference herein) 4(r) Rights Agreement dated as of August 6, 1991 between the Company and First Chicago Trust Company of New York, as Rights Agent (Exhibit 1 to the Company's Form 8-K dated as of August 6, 1991 incorporated by reference herein) 4(s) Loan Agreement between the Authority and the Company, dated as of June 1, 1992 (Exhibit 4(u) of the Company's Form 10-Q for the quarter ended June 30, 1992 incorporated by reference herein) 4(t) Note Purchase Agreement between the Company and Teachers dated July 28, 1992 (Exhibit 4(v) of the Company's Form 10-Q for the quarter ended June 30, 1992 incorporated by reference herein) 4(u) Loan Agreement between the Authority and the Company, dated as of December 1, 1992 (Exhibit 4(w) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) Exhibit Number Description 4(v) Promissory Note dated May 15, 1992 of the Company to the City of Florence, SC (Exhibit 4(x) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 4(w) Loan note participations with the Sumitomo Bank, Limited, dated July 27, 1992, Buliner Handels-und Frankfurter Bank dated June 15, 1992, Banco di Napoli dated September 14, 1992, Istituto Bancario San Paolo di Torino S.p.A. dated January 4, 1992, Continental Bank N.A. dated November 26, 1991 (Exhibit 4(y) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 4(x) Promissory Note dated August 9, 1993 of the Company to First Fidelity Bank, National Bank (Exhibit 4(z) of the Company's Form 10-Q for the quarter ended September 30, 1993 incorporated by reference herein) 4(y) Commercial Purpose Loan Note dated August 11, 1993 to Chemical Bank New Jersey, National Association 4(z) Promissory Note dated June 18, 1993 of the Company to Fleet National Bank Executive Compensation Plans and Arrangements 10(a) Wellman, Inc. 1985 Incentive Stock Option Plan, as amended (Exhibit 4(a) of the Company's Registration Statement on Form S-8/S-3, File No. 33-17196, incorporated by reference herein) Exhibit Number Description 10(b)(1) Employment Agreement dated as of January 1, 1990 between the Company and Thomas M. Duff (Exhibit 10(e) of the Company's Form 10-K for the year ended December 31, 1989 incorporated by reference herein) 10(b)(2) Amendment to Employment Agreement dated as of January 1, 1993 between the Company and Thomas M. Duff (Exhibit 19 to the Company's Form 10-Q for the quarter ended March 31, 1993 incorporated by reference herein) 10(c)(1) Employment Agreement dated as of January 1, 1990 between the Company and Clifford J. Christenson (Exhibit 10(f) of the Company's Form 10-K for the year ended December 31, 1989 incorporated by reference herein) 10(c)(2) First Amendment to Employment Agreement dated as of January 1, 1993 between the Company and Clifford J. Christenson (Exhibit 10(c)(2) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 10(d) Service Agreement dated as of June 26, 1991 between Wellman International Investments Limited and Charles William Beckwith (Ehibit 10(g) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 10(e) Employment Agreement dated as of October 1, 1991 between the Company and James P. Casey (Ehibit 10(j) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) Exhibit Number Description 10(f) Employment Agreement dated as of April 1, 1992 between the Company and Paul D. Apostol (Exhibit 10(f) of the Company's Form 10-K for the year ended December 31, 1992 incorporated by reference herein) 10(g) Directors Stock Option Plan dated as of December 2, 1991 (Exhibit 4(a) of the Company's Registration Statement on Form S-8, File No. 33-44822 incorporated by reference herein) 10(h) Management Incentive Compensation Plan 10(i) Summary of Executive Life Insurance Plan (Exhibit 10.22 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 10(j)(1) Amended and Restated Restricted Stock Agreement dated November 17, 1988 between the Company and Peter H. Conze (Exhibit 10(x)(1) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(2) Amended and Restated Restricted Stock Agreement dated December 5, 1988 between the Company and Richard F. Heitmiller (Exhibit 10(x)(2) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(3) Restricted Stock Agreement dated March 31, 1989 between the Company and Jonathan M. Nelson (Exhibit 10(w)(4) of the Company's Registration Statement on Form S-4, File No. 33-31043, incorporated by reference herein) Exhibit Number Description 10(j)(4) Restricted Stock Agreement dated March 31, 1989 between the Company and Roger A. Vandenberg (Exhibit 10(w)(5) of the Company's Registration Statement on Form S-4, File No. 33-31043, incorporated by reference herein) 10(j)(5) Restricted Stock Agreement dated as of August 9, 1990 between the Company and Allan R. Dragone (Exhibit 10(x)(5) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(6) Restricted Stock Agreement dated as of August 9, 1990 between the Company and Raymond C. Tower (Exhibit 10(x)(6) of the Company's Form 10-K for the year ended December 31, 1990 incorporated by reference herein) 10(j)(7) Restricted Stock Agreement dated September 21, 1993 between the Company and James E. Rogers Other Material Agreements 10(k) Environmental Agreement dated as of August 8, 1985, by and among the Company, Arthur O. Wellman, Jr., and Edward R. Sacks (Exhibit 10.12 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) 10(l) Post-Closing Escrow Agreement dated August 12, 1985 by and among the Company, Arthur O. Wellman, Jr., Edward R. Sacks and certain other parties (Exhibit 10.2 of the Company's Registration Statement on Form S-1, File No. 33-13458, incorporated by reference herein) Exhibit Number Description 10(m) Guarantee of indebtedness of Wellman Fibers Limited to National Westminster Bank PLC (Exhibit 10(r) of the Company's Form 10-K for the year ended December 31, 1991 incorporated by reference herein) 10(n) Letter Agreement, relating to certain environmental matters, dated August 17, 1987, by and among FI, HCC and Celanese (Exhibit 10.3 of FI's Registration Statement on Form S-1, File No. 33-20626, incorporated herein by reference) 10(o) Trademark Assignment and License, dated January 28, 1988, by and among FI, HCC and Celanese (Exhibit 10.14 of FI's Registration Statement on Form S-1, File No. 33-20626, incorporated herein by reference) 18 Letter of Ernst & Young regarding change in accounting principles 21 Subsidiaries of the Company 23(a) Consent of Ernst & Young 23(b) Consent of KPMG Stokes Kennedy Crowley 99 Report of KPMG Stokes Kennedy Crowley EX-3 2 10K EX3 Exhibit 3(a)(1) RESTATED CERTIFICATE OF INCORPORATION OF WELLMAN, INC. (formerly named WS Subsidiary, Inc.) Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware Wellman, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation") hereby certifies as follows: 1. That the name of the Corporation is Wellman, Inc. 2. That the Certificate of Incorporation of the Corporation was filed in the office of the Secretary of State of the State of Delaware on the 11th day of July, 1985 and was amended and restated by a Restated Certificate of Incorporation filed in the office of the Secretary of State of Delaware on the 6th day of August, 1985, which Restated Certificate of Incorporation was amended by an Amendment thereto dated as of April 30, 1987 filed in the Office of the Secretary of State of Delaware on the 11th day of May, 1987 (the "Amendment"). 3. That this Restated Certificate of Incorporation restates and integrates and further amends the Restated Certificate of Incorporation of this Corporation filed on August 6, 1985, as amended by the Amendment. 4. That the amendment to the Restated Certificate of Incorporation effected hereby is (i) to change the authorized capital stock of the Corporation to 30,000,000 shares, consisting of 24,500,000 shares of Common Stock, par value $.001 per share, 5,500,000 shares of Class B Common Stock, par value $.001 per share, and to provide for the rights, privileges, powers and preferences of each such class or series of shares, (ii) to provide for special voting requirements for certain business combinations and (iii) to require the Corporation to offer to purchase the outstanding shares of its capital stock upon the occurrence of certain events. Upon effectuation of said amendment, and without any further act of the Corporation or the holders of any of its capital stock, (i) each share of the currently outstanding Common Stock, par value $1.00 per share, Class A Participating Preferred Stock, par value $1.00 per share, Class D Participating Preferred Stock, par value $1.00 per share, and Class E Participating Preferred Stock, par value $1.00 per share, shall be converted into 108 fully paid and non-assessable shares of Common Stock, par value $.001 per share, and (ii) each share of the currently outstanding Class B Participating Preferred Stock, par value $1.00 per share, and Class C Participating Preferred Stock, par value $1.00 per share, shall be converted into 108 shares of Class B Common Stock, par value $.001 per share. 5. That the capital of the Corporation shall not be reduced under or by reason of the foregoing amendment of the Restated Certificate of Incorporation of the Corporation. 6. That the Board of Directors of the Corporation adopted resolutions proposing and declaring advisable and in the best interest of the Corporation the restatement of and amendment to the Restated Certificate of Incorporation of the Corporation, and recommended the adoption of such restatement and amendment by the stockholders of the Corporation. 7. That the restatement of and further amendment to the Restated Certificate of Incorporation have been duly adopted by the unanimous written consent of the stockholders of the Corporation, in accordance with the applicable provisions of Section 228, 242, and 245 of the General Corporation Law of the State of Delaware. 8. That the text of the Restated Certificate of Incorporation is hereby restated and amended in its entirety to read in full as follows: FIRST: Name. The name of the Corporation is Wellman, Inc. SECOND: Delaware Office and Registered Agent. The registered office of the Corporation in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of the registered agent of the Corporation as said address is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. THIRD: Purposes. The purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, including, but not limited to, the acquisition of other corporations and the manufacture, sale and distribution directly or through one or more subsidiaries of fibers, filaments, and other fibrous substances or materials. FOURTH: Capital Stock. The total number of shares of stock which the Corporation is authorized to issue is 30,000,000 as follows: 24,500,000 shares of Common Stock with a par value of $.001 per share and 5,500,000 shares of Class B Common Stock with a par value of $.001 per share. A. Common Stock The powers, designations, preferences, and relative, participating, optional and other rights of the Common Stock and the Class B Common Stock shall be identical in all respects except as follows: 1. Voting Rights. (a) Election of Directors. Holders of Class B Common Stock, as such, shall have no voting rights with respect to the election of Directors, and shares of Class B Common Stock shall not be included in determining the number of shares entitled to be voted on such matter. (b) Other Voting Rights. Holders of the Class B Common Stock, as such, shall have no right to vote on any other matters to be voted on by the stockholders of the Corporation, and the shares of Class B Common Stock shall not be included in determining the number of shares entitled to be voted on such matters; provided, however, that (i) the holders of Class B Common Stock shall have the right to vote as a separate class on the matters specified in Section 242(b)(2) of the Delaware General Corporation Law, and (ii) the shares of Class B Common Stock shall be included in determining the number of shares entitled to be voted on, and the holders thereof as such, voting together with the holders of the Common Stock, an as a separate class, shall be entitled to one vote per share on all matters on which the holders of Voting Shares (as defined in Article SEVENTH) are entitled to vote pursuant to Article SEVENTH hereof, and on all matters required to be submitted to a vote of the stockholders under the General Corporation Law of the State of Delaware except for the election of directors. 2. Conversion Rights. Shares of Class B Common Stock may, at the election of the holder thereof in connection with, but only in connection with, a sale thereof to a purchaser which is not an affiliate (as defined by the Securities Exchange Act of 1934) of such holder, be converted into an equal number of fully paid and non-assessable shares of Common Stock. Any such conversion shall be exercised by the surrender by the holder to the Corporation at its principal office of the certificate or certificates representing the shares being converted accompanied by a written notice of conversion stating therein the name or names in which it wishes the certificate or certificates for Common Stock to be issued; provided, however, upon the conversion of the Class B Common Stock, a certification shall be given that such conversion is in connection with the sale of such shares to a person other than an affiliate of such holder. In case such notices shall specify a name or names other than that of the holder, such notice shall be accompanied by payment of any and all transfer taxes payable upon the issue of the Common Stock in such name or names. As soon as practicable after such surrender of such certificate or certificates, the Corporation shall issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. The Corporation shall at all times reserve and keep available out of its authorized and unissued shares of Common Stock, solely for issuance upon the conversion of shares of the Class B Common Stock as herein provided, such number of shares of Common Stock as shall from time to time be issuable upon all of the shares of Class B Common Stock at the time outstanding. Upon the conversion of any shares of Class B Common Stock into shares of Common Stock hereunder the shares of Class B Common Stock so converted shall thereupon become authorized but unissued shares of such Class B Common Stock. B. Conversion of Shares Outstanding on Effective Date of this Article FOURTH. Upon the effective date of this Article FOURTH, and without further action on the part of the Board of Directors or holders of any outstanding shares of the capital stock of the Corporation, (1) each share of the currently outstanding Common Stock, par value $1.00 per share, Class A Participating Preferred Stock, par value $1.00 per share, Class D Participating Preferred Stock, par value $1.00 per share, and Class E Participating Preferred Stock, par value $1.00 per share, shall be converted into one hundred eight (108) fully paid and non-assessable shares of Common Stock, par value $.001 per share, and (2) each share of the currently outstanding Class B Participating Preferred Stock, par value $1.00 per share, and Class C Participating Preferred Stock, par value $1.00 per share, shall be converted into one hundred eight (108) fully paid and non-assessable shares of Class B Common Stock, par value $.001 per share. FIFTH: Duration of Existence. The Corporation is to have perpetual existence. SIXTH: Board of Directors. A. Number of Directors. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors of the Corporation that shall constitute the Board of Directors shall be not less than three (3) nor more than thirteen (13) unless otherwise determined from time to time by resolution adopted by the affirmative vote of at least 80% of the Board of Directors. B. Power to Amend By-Laws. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, alter, amend or repeal the By-laws of the Corporation. The books of the Corporation (subject to the provisions of the laws of the State of Delaware) may be kept outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors. Elections of directors need not be by ballot unless the By-laws so provide. SEVENTH: A. Definitions and Related Matters as to Certain Business Combinations and Obligation of Corporation to Offer to Purchase Stock. 1.1 Affiliate. An "Affiliate" of, or a Person "affiliated with", a specified Person, means a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. 1.2 Associate. The term "Associate" used to indicate a relationship with any Person means: (a) Any corporation or organization (other than the Corporation or a Subsidiary of the Corporation) of which such Person is an officer or general partner or is, directly or indirectly, the beneficial owner of ten percent or more of any class of equity securities; (b) Any trust or other estate in which such Person has a ten percent or greater beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; (c) Any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person; or (d) Any investment company registered under the Investment Company Act of 1940 for which such Person or any Affiliate or Associate of such Person serves as investment adviser. 1.3 Beneficial Owner. A Person shall be considered the "Beneficial Owner" of any shares of stock (whether or not owned of record): (a) With respect to which such Person or any Affiliate or Associate of such Person directly or indirectly has or shares (i) voting power, including the power to vote or to direct the voting of such shares of stock, and/or (ii) investment power, including the power to dispose of or to direct the disposition of such shares of stock; (b) Which such Person or any Affiliate or Associate of such Person has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, and/or (ii) the right to vote pursuant to any agreement, arrangement or understanding (whether such right is exercisable immediately or only after the passage of time); or (c) Which are Beneficially Owned within the meaning of (a) or (b) of this Section 1.3 by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding, written or oral, with respect to acquiring, holding, voting or disposing of any shares of stock of the Corporation or any Subsidiary of the Corporation or acquiring, holding or disposing of all or substantially all, or any Substantial Part, of the assets or businesses of the Corporation or a Subsidiary of the Corporation. For the purpose only of determining whether a Person is the Beneficial Owner of a percentage specified in this Article SEVENTH of the outstanding Voting Shares, such shares shall be deemed to include any Voting Shares which may be issuable pursuant to any agreement, arrangement or understanding or upon the exercise of the conversion rights, exchange rights, warrants, options or otherwise and which are deemed to be beneficially owned by only such Person pursuant to the foregoing provisions of this Section 1.3. 1.4 Business Combination. A "Business Combination" means: (a) The sale, exchange, lease, transfer or other disposition to or with a Related Person or any Affiliate or Associate of such Related Person by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of its or their assets (including, without limitation, any securities issued by a Subsidiary) other than in the ordinary course of business; (b) The purchase, exchange, lease or other acquisition by the Corporation or any of its Subsidiaries (in a single transaction or a series of related transactions) of all or substantially all, or any Substantial Part, of the assets or business of a Related Person or any Affiliate or Associate of such Related Person other than in the ordinary course of business; (c) Any merger or consolidation of the Corporation or any Subsidiary thereof into or with a Related Person or any Affiliate or Associate of such Related Person, irrespective of which Person is the surviving entity in such merger or consolidation; (d) Any reclassification of securities, recapitalization or other transaction effected by the Corporation (other than a redemption in accordance with the terms of the security redeemed) which has the effect, directly or indirectly, of increasing the proportionate amount of Voting Shares of the Corporation or any Subsidiary thereof which are Beneficially Owned by a Related Person, or any partial or complete liquidation, spinoff, split-off or split up of the Corporation or any Subsidiary thereof in which a Related Person or any Affiliate or Associate of a Related Person receives a Substantial Part of the assets or business of the Corporation and its Subsidiaries; provided, however, that this Section 1.4(d) shall not apply to a redemption of less than 1% of the Voting Shares in any calendar year; or (e) The acquisition upon the original issuance thereof of Beneficial Ownership by a Related Person of Voting Shares or securities convertible into Voting Shares or any voting securities or securities convertible into voting securities of any Subsidiary of the Corporation, or the acquisition upon the original issuance thereof of Beneficial Ownership by a Related Person of any rights, warrants or options to acquire any of the foregoing or any combination of the foregoing Voting Shares or voting securities of a Subsidiary of the Corporation. As used in this definition, a "series of related transactions" shall be deemed to include not only a series of transactions with the same Related Person but also a series of separate transactions with a Related Person or any Affiliate or Associate of such Related Person. Anything in this definition to the contrary notwithstanding, this definition shall not be deemed to include any transaction of the type set forth in Sections 1.4(a) through 1.4(c) above between or among any two or more Subsidiaries of the Corporation or the Corporation and one or more Subsidiaries of the Corporation. 1.5 Date of Determination. The term "Date of Determination" means: (a) the date on which a binding agreement (except for the fulfillment of conditions precedent, including, without limitation, votes of stockholders to approve such transaction) is entered into by the Corporation, as authorized by its Board of Directors, and another Person providing for any Business Combination; or (b) If such an agreement as referred to in Section 1.5(a) above is amended so as to make it less favorable to the Corporation and its stockholders, the date on which such amendment is approved by the Board of Directors of the Corporation; or (c) In cases where neither Section 1.5(a) or (b) above shall be applicable, the record date for the determination of stockholders of the Corporation entitled to notice of and to vote upon the transaction in question. A majority of the Board of Directors acting in good faith shall have the power and duty to determine the Date of Determination as to any transaction under this Article SEVENTH. Any such determination shall be conclusive and binding for all purposes of this Article. 1.6 Person. The term "Person" shall mean any individual, partnership, corporation, group or other entity (other than the Corporation, any Subsidiary of the Corporation for itself or as a trustee holding stock for the benefit of employees of the Corporation or its Subsidiaries, or any one of them, pursuant to one or more employee benefit plans or arrangements). When two or more Persons act as a partnership, limited partnership, syndicate, association or other group for the purpose of acquiring, holding or disposing of shares of stock, such partnership, syndicate, association or group shall be deemed a "Person". 1.7 Related Person. "Related Person" means any Person which is the Beneficial Owner, as of the Date of Determination or immediately prior to the consummation of a Business Combination, or both, of forty percent (40%) or more of the Voting Shares, or any Person who is an Affiliate of the Corporation and at any time within eighteen months preceding the Date of Determination was the Beneficial Owner of forty percent (40%) or more of the then outstanding Voting Shares. 1.8 Substantial Part. The term "Substantial Part" as used with reference to the assets of the Corporation or any Subsidiary or of any Related Person means assets having a value of more than ten percent of the total consolidated assets of the Corporation and its Subsidiaries as of the end of the Corporation's most recent fiscal year ending prior to the time the determination is being made. 1.9 Subsidiary. "Subsidiary" shall mean any corporation or entity of which the Person in question owns not less than 50% of any class of equity securities, directly or indirectly. 1.10 Voting Shares. "Voting Shares" shall mean shares of the Corporation's capital stock entitled to vote generally in the election of directors and the Class B Common Stock and any other shares which by their terms may be converted into shares of the Corporation's capital stock entitled to vote generally in the election of directors. 1.11 Certain Determinations With Respect to Article SEVENTH. (a) A majority of the Board of Directors acting in good faith shall have the conclusive power and authority to determine, for the purposes of this Article SEVENTH, on the basis of information known to them: (i) the number of Voting Shares of which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate or Associate of another, (iii) whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of "Beneficial Owner" as hereinabove defined, (iv) whether the assets subject to any Business Combination constitute a "Substantial Part" as hereinabove defined, (v) whether two or more transactions constitute a "series of related transactions" as hereinabove defined, (vi) any matters referred to in subsection 1.11(b) below, and (vii) such other matters with respect to which a determination is required under this Article SEVENTH. Any such determination shall be final and binding for all purposes hereunder. (b) A Related Person shall be deemed to have acquired a Voting Share of the Corporation at the time when such Related Person became the Beneficial Owner thereof. B. Approval of Certain Business Combinations. Whether or not a vote of the stockholders is otherwise required in connection with the transaction, neither the Corporation nor any of its Subsidiaries shall become a party to any Business Combination without prior compliance with the provisions of Section 1.1 and 1.2 herein below, in addition to any additional vote as may be required by applicable law. 1.1 Prior Approval by the Board of Directors. Such Business Combination was approved by the Board of Directors of the Corporation by the affirmative vote of a majority of the Board of Directors of the Corporation. 1.2 Approval by Stockholders Who Are Not Related Persons. A proxy statement complying with the requirements of the Securities Exchange Act of 1934 shall have been mailed to all holders of Voting Shares for the purpose of soliciting stockholder approval of such Business Combination and such Business Combination shall be approved, at the stockholders meeting called for such purpose, by the affirmative vote of a majority of the Voting Shares held by stockholders other than the Related Person and Affiliates and Associates of such Related Person, voting as a single class. C. Obligation of Corporation to Offer To Purchase Shares From Minority Stockholders. Within sixty (60) days after any Person (the "Control Person") becomes the Beneficial Owner of seventy-five percent (75%) or more of the Voting Shares ("75% Ownership"), the Corporation shall offer to purchase for cash all of the following securities which are not beneficially owned by the Control Person or Affiliates or Associates of the Control Person (collectively the "Minority Shares") at the highest per share price (including brokerage commissions, transfer taxes and soliciting dealers' fees) which the Control Person or any of such Control Person's Affiliates or Associates paid in acqui any Voting Shares during the preceding eighteen (18) month period (the "Highest Per Share Price"): (x) all of the outstanding shares of capital stock of the Corporation, (y) all capital stock of the Corporation issuable upon the conversion of outstanding securities convertible into capital stock of the Corporation ("Convertible securities"), provided the holder thereof shall convert such Securities into capital stock of the Corporation in accordance with the terms of such Convertible Securities simultaneously with the holder's acceptance of the Corporation's offer to purchase the capital stock issuable upon the conversion of such Securities, and (z) all capital stock of the Corporation issuable upon the exercise of outstanding options, warrants or other rights to acquire capital stock of the Corporation (collectively "Rights"), provided the holder thereof exercises such Rights and pays any required exercise price or other required consideration relating to exercise of such Rights simultaneously with the holder's acceptance of the Corporation's offer to purchase the capital stock issuable upon the exercise of such Rights. For purposes of determining the Highest Per Share price, if the consideration paid in any acquisition of Voting Shares consisted, in whole or in part, of consideration other than cash, the board of directors of the Corporation shall take such action, as in its judgment it deems appropriate, to establish the cash value of such consideration, but such valuation shall not be less than the cash value, if any, ascribed to such consideration the Control Person. In making such determination the board of directors may engage such persons, including investment banking firms and the independent accountants who have reported on the most recent financial statement of the Corporation, and utilize employees and agents of the Corporation who will, in the judgment of the board of directors, be of assistance to the board of directors. Equitable adjustment shall be made in the Highest Per Share Price to give effect to stock dividends, stock splits and similar transactions. The Corporation shall give written notice to each holder of Minority Shares (the "Notice") within 20 days after the Corporation first has knowledge that 75% Ownership has been obtained. 1.1 Option of Holders of Minority Shares to Sell. Each of the holders of Minority Shares (a "Minority Stockholder") shall have an irrevocable option (an "Option") to sell to the Corporation all or any portion of the Minority Shares held by such Minority Stockholder at the time of the exercise of such Option (including Minority Shares issuable upon the conversion of Convertible Securities or exercise of Rights simultaneously with the exercise of the Option), upon the following terms and conditions: (a) The Option shall be exercisable at any time during the 60 day period following the Notice, or if no Notice is given, during the 60 day period following the date such Minority Stockholder has actual knowledge that 75% Ownership has been obtained (the "Option Period"); (b) The Option may be exercised at any time during the Option Period by a Minority Stockholder delivering or mailing written notice to the President or Secretary of the Corporation (the "Sale Notice") of his election specifying the number of Minority Shares such Minority Stockholder will sell to the Corporation; (c) The consideration to be paid for each Minority Share upon the exercise of the Option shall be the Highest Per Share Price; (d) Subject to the provisions of paragraphs (e) and (f) hereof, the closing of the purchase and sale of all of the Minority Shares as to which Options are exercised shall take place at the Corporation's principal office one hundred twenty (120) days after the date of the Notice, or if no Notice is given, as to each Minority Stockholder, 60 days after the date of such Minority Stockholder's Sale Notice (or the next business day if any such day is a Saturday, Sunday or legal holiday). At the closing, the Minority Stockholder shall deliver such instruments and documents as shall be necessary or appropriate to transfer the Minority Shares being sold. At the Closing the Corporation shall purchase the Minority Shares of the Minority Stockholders exercising their Option and shall deliver or cause to be delivered the purchase price to each selling Minority Stockholder by a check of the Corporation; (e) The closing date for the purchase and sale of the Minority Shares subject to the Option shall be subject to deferral if additional time is necessary for the Corporation to fulfill the requirements of any applicable Federal or state securities laws, but the Corporation shall have the right to defer such purchase on such basis only so long as the Corporation shall be diligently and continuously pursuing all steps and shall be taking all action necessary to fulfill such requirements. (f) Notwithstanding paragraphs (a) through (e), if the purchase by the Corporation of all or a portion of the Minority Shares would result in a default or violation under any agreement or instrument evidencing Existing Debt (as hereinafter defined) or under which Existing Debt shall have been incurred or would violate Section 160 of the Delaware General Corporation Law (the "Act") the obligation of the Corporation to purchase that portion of the Minority Shares as would cause such default or violation shall be deferred (with interest accruing on the unpaid amount at an annual rate equal to the fluctuating prime rate of interest announced from time to time by Fleet National Bank, Providence, Rhode Island) until such time as the purchase thereof shall not result in such a default or violation. The term "Existing Debt" means indebtedness for borrowed money incurred under or pursuant to an agreement or instrument in effect as of the date on which this Article SEVENTH first becomes effective. The Corporation shall give the Minority Stockholders written notice within sixty (60) days after its receipt of the Sale Notice of the Corporation's right to defer the purchase of the Minority Shares; and from time to time thereafter as soon as the Corporation shall be permitted to purchase any or all of such Minority Shares as to which an Option is exercised without causing a default under any of the agreements or instruments evidencing its Existing Debt or under which Existing Debt shall have been incurred and without violating Section 160 of the Act, the Corporation shall forthwith give notice to the Minority Stockholder, setting a time, place and date (which is not more than 15 days after the date of such notice) for the closing of the purchase of the Minority Shares as to which the Sale Option was exercised. In the event less than all of the Minority Shares as to which Options have been exercised are to be purchased, all purchases shall be made pro rata from each Minority Stockholder exercising an Option based upon the number of Minority Shares as to which such Option was exercised. D. Amendments to this Article SEVENTH. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Restated Certificate of Incorporation or the Bylaws of the Corporation), and in addition to such additional vote required by applicable law, this Article SEVENTH shall not be amended, altered, changed or repealed without the affirmative vote as to all stock held by the holders of 80% or more of the outstanding Voting Shares, voting as a single class. EIGHTH: Indemnification. The Corporation shall indemnify its officers, directors, employees and agents to the fullest extent permitted by the General Corporation Law of Delaware and the Corporation's By-laws. NINTH: Meetings. Meetings of stockholders may be held within or without the State of Delaware, as the By-laws may provide. The books of the Corporation may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the corporation. Special meetings of the stockholders of the Corporation may be called only by the Board of Directors, the President of the Corporation, the holders of a majority of the outstanding Common Stock, or by the holders of a majority of the outstanding Common Stock and Class B Common Stock. TENTH. Reservation of Right to Amend Certificate. The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in this Restated Certificate of Incorporation, in the manner (i) now or hereafter prescribed by law, and (ii) as has otherwise been provided in this Restated Certificate of Incorporation; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Restated Certificate of Incorporation; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Restated Certificate of Incorporation in their present form or as hereafter amended are granted subject to the right reserved in this Article TENTH. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Restated Certificate of Incorporation or the Bylaws of the Corporation), this Article TENTH shall not be amended, altered, changed or repealed without the affirmative vote as to all stock held by the holders of 80% or more of the outstanding shares of the Corporation's capital stock entitled to vote generally in the election of directors, voting separately as a class. ELEVENTH. Limitation on Director's Liability. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability, (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) f acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, and (iv) for any transaction from which the director derived an improper personal benefit. IN WITNESS WHEREOF, said Wellman, Inc. has caused this certificate to be signed by Thomas M. Duff, President and attested by David K. Duffell its Secretary this 1st day of June, 1987. Wellman, Inc. By/s/ Thomas M. Duff Thomas M. Duff ATTEST BY: /s/ David K. Duffell David K. Duffell Secretary Exhibit 3(a)(2) CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF WELLMAN, INC. * * * * * * Wellman, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Wellman, Inc. resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof; and that the Board of Directors of Wellman, Inc., by the unanimous written consent of its members, filed with the minutes of the board, duly adopted resolutions amending the resolutions relating to the amendment of the corporation's Restated Certificate of Incorporation. The amended resolution setting forth the proposed amendment is as follows: VOTED: That Article FOURTH of the Corporation's Restated Certificate of Incorporation be amended to read in its entirety as set forth in Exhibit A attached hereto and incorporated herein; that such amendment is hereby declared advisable; and that such amendment be considered at the 1989 Annual Meeting of Stockholders. SECOND: That thereafter, pursuant to a resolution of its Board of Directors, the 1989 Annual Meeting of Stockholders of Wellman, Inc. was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which Annual Meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Wellman, Inc. has caused this certificate to be signed by Clifford J. Christenson, its Vice President, and attested by Laura N. Wilkinson, its Assistant Secretary, this 18th day of May, 1989. WELLMAN, INC. By/s/ Clifford J. Christenson Clifford J. Christenson Vice President ATTEST: By/s/ Laura N. Wilkinson Laura N. Wilkinson Assistant Secretary EXHIBIT A Amendment to Restated Certificate of Incorporation FOURTH. Capital Stock. The total number of shares of stock which the Corporation is authorized to issue is 45,500,000 as follows: 40,000,000 shares of Common Stock with a par value of $.001 per share and 5,500,000 shares of Class B Common Stock with a par value of $.001 per share. A. Common Stock The powers, designations, preferences, and relative, participating, optional and other rights of the Common Stock and the Class B Common Stock shall be identical in all respects except as follows: 1. Voting Rights (a) Election of Directors. Holders of Class B Common Stock, as such, shall have no voting rights with respect to the election of Directors, and shares of Class B Common Stock shall not be included in determining the number of shares entitled to be voted on such matter. (b) Other Voting Rights. Holders of the Class B Common Stock, as such, shall have no right to vote on any other matters to be voted on by the stockholders of the Corporation, and the shares of Class B Common Stock shall not be included in determining the number of shares entitled to be voted on such matters; provided, however, that (i) the holders of Class B Common Stock shall have the right to vote as a separate class on the matters specified in Section 242(b)(2) of the Delaware General Corporation Law, and (ii) the shares of Class B Common Stock shall be included in determining the number of shares entitled to be voted on, and the holders thereof, as such, voting together with the holders of the Common Stock, and not as a separate class, shall be entitled to one vote per share on all matters on which the holders of Voting Shares (as defined in Article SEVENTH) are entitled to vote pursuant to Article SEVENTH hereof, and on all matters required to be submitted to a vote of the stockholders under the General Corporation Law of the State of Delaware except for the election of directors. 2. Conversion Rights. Shares of Class B Common Stock may, at the election of the holder thereof in connection with, but only in connection with, a sale thereof to a purchaser which is not an affiliate (as defined by the Securities Exchange Act of 1934) of such holder, be converted into an equal number of fully paid and non-assessable shares of Common Stock. Any such conversion shall be exercised by the surrender by the holder to the Corporation at its principal office of the certificate or certificates representing the shares being converted accompanied by a written notice of conversion stating therein the name or names in which it wishes the certificate or certificates for Common Stock to be issued; provided, however, that upon the conversion of the Class B Common Stock, a certification shall be given that such conversion is in connection with the sale of such shares to a person other than an affiliate of such holder. In case such notice shall specify a name or names other than that of the holder, such notice shall be accompanied by payment of any and all transfer taxes payable upon the issue of the Common Stock in such name or names. As soon as practicable after such surrender of such certificate or certificates, the Corporation shall issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. The Corporation shall at all times reserve and keep available out of its authorized and unissued shares of Common Stock, solely for issuance upon the conversion of shares of the Class B Common Stock as herein provided, such number of shares of Common Stock as shall from time to time be issuable upon all of the shares of Class B Common Stock at the time outstanding. Upon the conversion of any shares of Class B Common Stock into shares of Common Stock hereunder the shares of Class B Common Stock so converted shall thereupon become authorized but unissued shares of such Class B Common Stock. B. Conversion of Shares Outstanding on Effective Date of this Article FOURTH. Upon the effective date of this Article FOURTH, and without further action on the part of the Board of Directors or holders of any outstanding shares of the capital stock of the Corporation, (1) each share of the currently outstanding Common Stock, par value $1.00 per share, Class A Participating Preferred Stock, par value $1.00 per share, Class D Participating Preferred Stock, par value $1.00 per share and Class E Participating Preferred Stock, par value $1.00 per share, shall be converted into one hundred eight (108) fully paid and non-assessable shares of Common Stock, par value $.001 per share, and (2) each share of the currently outstanding Class B Participating Preferred Stock, par value $1.00 per share, shall be converted into one hundred eight (108) fully paid and non-assessable shares of Class B Common Stock, par value $.001 per share. Exhibit 3(a)(3) CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF WELLMAN, INC. * * * * * * Wellman, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Wellman, Inc. resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof; and that the Board of Directors of Wellman, Inc., by the unanimous written consent of its members, filed with the minutes of the board, duly adopted resolutions amending the resolutions relating to the amendment of the corporation's Restated Certificate of Incorporation. The amended resolution setting forth the proposed amendment is as follows: VOTED: That the first paragraph of Article FOURTH of the Corporation's Restated Certificate of Incorporation be amended to read in its entirety as set forth in Exhibit A attached hereto and incorporated herein; that such amendment is hereby declared advisable; and that such amendment be considered at the 1990 Annual Meeting of Stockholders. SECOND: That thereafter, pursuant to a resolution of its Board of Directors, the 1990 Annual Meeting of Stockholders of Wellman, Inc. was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which Annual Meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Wellman, Inc. has caused this certificate to be signed by J. Russell MacDonald, its Vice President, and attested by Laura N. Wilkinson, its Assistant Secretary, this 30th day of May, 1990. WELLMAN, INC. By /s/ J. Russell MacDonald J. Russell MacDonald Vice President ATTEST: By /s/ Laura N. Wilkinson Laura N. Wilkinson Assistant Secretary EXHIBIT A Amendment to Restated Certificate of Incorporation FOURTH. Capital Stock. The total number of shares of stock which the corporation is authorized to issue is 55,500,000 as follows: 50,000,000 shares of Common Stock with a par value of $.001 per share and 5,500,000 shares of Class B Common Stock with a par value of $.001 per share. Exhibit 3(a)(4) CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF WELLMAN, INC. * * * * * * Wellman, Inc., a coporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Wellman, Inc. resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof; and that the Board of Directors of Wellman, Inc., by the unanimous written consent of its members, filed with the minutes of the board, duly adopted resolutions amending the resolutions relating to the amendment of the corporation's Restated Certificate of Incorporation. The amended resolution setting forth the proposed amendment is as follows: VOTED: That the first paragraph of Article FOURTH of the corporation's Restated Certificate of Incorporation be amended to read in its entirety as set forth in Exhibit A attached hereto and incorporated herein; that such amendment is hereby declared advisable; and that such amendment be considered at the 1993 Annual Meeting of Stockholders. SECOND: That thereafter, pursuant to a resolution of its Board of Directors, the 1993 Annual Meeting of Stockholders of Wellman, Inc. was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which Annual Meeting the necessary numer of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Wellman, Inc. has caused this certificate to be signed by Mark J. Rosenblum, its Vice President, and attested by Laura N. Wilkinson, its Assistant Secretary, this 16th day of February, 1994. WELLMAN, INC. /s/ Mark J. Rosenblum Mark J. Rosenblum Vice President ATTEST: By/s/ Laura N. Wilkinson Laura N. Wilkinson Assistant Secretary EXHIBIT A Amendment to Restated Certificate of Incorporation FOURTH. Capital Stock. The total number of shares of stock which the Corporation is authorized to issue is 60,500,000 as follows: 55,000,000 shares of Common Stock with a par value of $.001 per share and 5,500,000 shares of Class B Common Stock with a par value of $.001 per share. Exhibit 3(b) WELLMAN, INC. RESTATED BY-LAWS ARTICLE I. OFFICES SECTION 1.01. Registered Office. The registered office of the Corporation in the State of Delaware shall be at Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of the resident agent in charge thereof shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware. SECTION 1.02. Other Offices. The Corporation may also have an office in Clark, New Jersey, and at such other place or places either within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation require. ARTICLE 2. MEETINGS OF STOCKHOLDERS SECTION 2.01. Place of Meetings. All meetings of the stockholders of the Corporation shall be held at such place either within or without the State of Delaware as shall be fixed by the Board of Directors and specified in the respective notices or waivers of notice of said meetings. SECTION 2.02. Annual Meetings. (a) The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may come before the meeting shall be held at the principal office of the Corporation in the State of Delaware, or such place as shall be fixed by the Board of Directors, at ten o'clock in the forenoon, local time, on the third Tuesday in May in each year, if not a legal holiday at the place where such meeting is to be held, and if a legal holiday, then on the next succeeding business day not a legal holiday at the same hour. (b) In respect of the annual meeting for any particular year the Board of Directors may, by resolution fix a different day, time or place (either within or without the State of Delaware) for the annual meeting. (c) If the election of directors shall not be held on the day designated herein or the day fixed by the Board, as the case may be, for any annual meeting, or on the day of any adjourned session thereof, the Board of Directors shall cause the election to be held at a special meeting as soon thereafter as conveniently may be. At such special meet stockholders may elect the directors and transact other business with the same force and effect as at an annual meeting duly called and held. SECTION 2.03 Special Meetings. A special meeting of the stockholders for any purpose or purposes may be called at any time by the President or by order of the Board of Directors and must be called by the Secretary upon the request in writing of any stockholder holding of record at least fifteen percent of the outstanding shares of stock of the Corporation entitled to vote at such meeting. SECTION 2.04. Notice of Meetings. (a) Except as otherwise required by statute, notice of each annual or special meeting of the stockholders shall be given to each stockholder of record entitled to vote at such meeting not less than ten days nor more than fifty days before the day on which the meeting is to be held by delivering written notice thereof to him personally or by mailing such notice, postage prepaid, addressed to him at his post-office address last shown in the records of the Corporation or by transmitting notice thereof to him at such address by telegraph, cable or any other available method. Every such notice shall state the time and place of the meeting and, in case of a special meeting, shall state briefly the purposes thereof. (b) Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy or who shall in person or by attorney thereunto authorized, waive such notice in writing or by telegraph, cable or any other available method either before or after such meeting. Notice of any adjourned meeting of the stockholders shall not be required to be given except when expressly required by law. SECTION 2.05. Quorum. (a) At each meeting of the stockholders, except where otherwise provided by statute, the Certificate of Incorporation or these By-Laws, the holders of record of a majority of the issued and outstanding shares of a stock of the Corporation entitled to vote at such meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. (b) In the absence of a quorum a majority in interest of the stockholders of the Corporation entitled to vote, present in person or represented by proxy or, in the absence of all such stockholders, any officer entitled to preside at, or act as secretary of, such meeting, shall have the power to adjourn the meeting from time to time, until stockholders holding the requisite amount of stock shall be present or represented. At any such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.06. Organization. At each meeting of the stockholders the President, any Vice President, or any other officer designated by the Board of Directors, shall act as chairman, and the Secretary or an Assistant Secretary of the Corporation, or in the absence of the Secretary and all Assistant Secretaries, a person whom the chairman of such meeting shall appoint shall act as secretary of the meeting and keep the minutes thereof. SECTION 2.07. Voting. (a) Except as otherwise provided by law or by the Certificate of Incorporation or these By-Laws, at every meeting of the stockholders each stockholder shall be entitled to one vote, in person or by proxy, for each share of capital stock of the Corporation registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 9.03 of these By-Laws as the record date for the determination of stockholders entitled to vote at such meeting; or (ii) if no such record date shall have been fixed, then the record date shall be at the close of business on the day next preceding the day on which notice of such meeting is given. (b) Persons holding stock in a fiduciary capacity shall be entitled to vote the shares so held. In the case of stock held jointly by two or more executors, administrators, guardians, conservators, trustees or other fiduciaries, such fiduciaries may designate in writing one or more of their number to represent such stock and vote the shares so held, unless there is a provision to the contrary in the instrument, if any, defining their powers and duties. (c) Persons whose stock is pledged shall be entitled to vote thereon until such stock is transferred on the books of the Corporation to the pledgee, and thereafter only the pledgee shall be entitled to vote. (d) Any stockholder entitled to vote may do so in person or by his proxy appointed by an instrument in writing subscribed by such stockholder or by his attorney thereunto authorized, or by a telegram, cable or any other available method delivered to the secretary of the meeting; provided, however, that no proxy shall be voted after three years from its date, unless said proxy provides for a longer period. (e) At all meetings of the stockholders, all matters (except where other provision is made by law or by the Certificate of Incorporation or these By-Laws) shall be decided by the vote of a majority in interest of the stockholders entitled to vote thereon, present in person or by proxy, at such meeting, a quorum being present. SECTION 2.08. Inspectors. The chairman of the meeting may at any time appoint two or more inspectors to serve at a meeting of the stockholders. Such inspectors shall decide upon the qualifications of voters, accept and count the votes for and against the questions presented, report the results of such votes, and subscribe and deliver to the secretary of the meeting a certificate stating the number of shares of stock issued and outstanding and entitled to vote thereon and the number of shares voted for and against the questions presented. The inspectors need not be stockholders of the Corporation, and any director or officer of the Corporation may be an inspector on any question other than a vote for or against his election to any position with the Corporation or on any other question in which he may be directly interested. Before acting as herein provided each inspector shall subscribe an oath faithfully to execute the duties of an inspector with strict impartiality and according to the best of his ability. SECTION 2.09. List of Stockholders. (a) It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger to prepare and make, or cause to be prepared and made, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of stockholder. Such list shall be open during ordinary business hours to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the election, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. (b) Such list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. (c) Upon the willful neglect or refusal of the directors to produce such list at any meeting for the election of directors they shall be ineligible for election to any office at such meeting. (d) The stock ledger shall be conclusive evidence as to who are the stockholders entitled to examine the stock ledger and the list of stockholders required by this Section 2.09 on the books of the Corporation or to vote in person or by proxy at any meeting of stockholders. SECTION 2.10. Introduction of Business at a Meeting of Stockholders. (a) At an annual or special meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before an annual or special meeting of stockholders. To be properly brought before an annual or special meeting of stockholders, business must be (i) in the case of a special meeting, specified in the notice of the special meeting (or any supplement thereto) given by the officer o the Corporation calling such meeting or by or at the direction of the Board, or (ii) in the case of an annual meeting, properly brought before the meeting by or at the direction of the Board, or otherwise properly brought before the annual meeting by a stockholder. For business to be properly brought before an annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to the Secretary of the Corporation, or mailed to and received at the principal executive offices of the Corporation by the Secretary, not less than 30 days prior to the date of the annual meeting; provided, however, that if less than 40 days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be so delivered or received not later than the close of business on the 7th day following the earlier of (i) the day on which such notice of the meeting was mailed, or (ii) the day on which such public disclosure was made. (b) A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before an annual meeting of stockholders (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business and any other stockholders known by such stockholder to be supporting such proposal, (iii) the class and number of shares of the Corporation which are beneficially owned by such stockholder on the date of such stockholder's notice and by any other stockholders known by such stockholder to be supporting such proposal on the date of such stockholder's notice, and (iv) any material interest of the stockholder in such proposal. (c) Notwithstanding anything in the By-laws to the contrary, no business shall be conducted at a meeting of stockholders except in accordance with the procedures set forth in this Section 2.10. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the business was not properly brought before the meeting in accordance with the procedures prescribed by the By-laws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 2.11. Notwithstanding Section 2.07(e) of these By-laws, at all meetings of the stockholders, any matter properly brought before the meeting by a stockholder in accordance with Section 2.10 of these By-laws shall be decided by the vote of a majority of total quorum. For purposes of the foregoing, an abstention from voting on such a matter or a broker non-vote shall have the same legal effect as a vote "against" the matter. ARTICLE 3. BOARD OF DIRECTORS SECTION 3.01. General Powers. The business, property and affairs of the Corporation shall be managed by the Board of Directors. SECTION 3.02. Number, Qualifications and Term of Office. (a) The number of directors of the Corporation which shall constitute the whole Board of Directors shall be such number, not less than one (1) nor more than nine (9) as from time to time shall be fixed by the Board of Directors. (b) A director need not be a stockholder. Each director shall hold office until the annual meeting of the stockholders next following his election and until his successor shall have been elected and shall qualify, or until his death, or until he shall resign, or until he shall have been removed in the manner hereinafter provided. SECTION 3.03. Election of Directors. At each meeting of the stockholders for the election of directors at which a quorum is present, the persons, not exceeding the authorized number of directors, receiving the greatest number of votes of the stockholders entitled to vote thereon, present in person or by proxy, shall be the directors. In the case of any increases in the number of directors, the additional director or directors may be elected either at the meeting of the Board of Directors or of the stockholders which each increase is voted, or at any subsequent annual, regular or special meeting of the Board of Directors or stockholders. SECTION 3.04. Quorum and Manner of Acting. (a) Except as otherwise provided by statute or by the Certificate of Incorporation, a majority of the directors at the time in office shall constitute a quorum for the transaction of business at any meeting and the affirmative action of a majority of the directors present at any meeting at which a quorum is present shall be required for the taking of any action by the Board of Directors. (b) In the event one or more of the directors shall be disqualified to vote at such meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no event shall the quorum as adjusted be less than one third of the total number of directors. (c) In the absence of a quorum at any meeting of the Board such meeting need not be held; or a majority of the directors present thereat or, if no director be present, the Secretary may adjourn such meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. SECTION 3.05. Offices, Place of Meeting and Records. The Board of Directors may hold meetings, have an office or offices and keep the books and records of the Corporation at such place or places within or without the State of Delaware as the Board may from time to time determine. The place of meeting shall be specified or fixed in the respective notices or waivers of notice thereof, except where otherwise provided by statute, by the Certificate of Incorporation or these By-Laws. SECTION 3.06. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable following each annual election of directors. Such meeting shall be called and held at the place and time specified in the notice or waiver of notice thereof as in the case of a special meeting of the Board of Directors. SECTION 3.07. Regular Meetings. Regular meetings of the Board of Directors shall be held at such places and at such times as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at said place at the same hour on the next succeeding business day. Notice of regular meetings need not be given. SECTION 3.08. Special Meetings; Notice. Special meetings of the Board of Directors shall be held whenever called by the President or by any two (2) of the directors. Notice of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent to him at his residence or at such place of business by telegraph, cable or other available means, or shall be delivered personally or by telephone, not later than one day before the day on which the meeting is to be held. Each such notice shall state the time and place of the meeting but need not state the purposes thereof except as otherwise herein expressly provided. Notice of any such meeting need not be given to any director, however if waived by him in writing or by telegraph, cable or otherwise, whether before or after such meeting shall be held, or if he shall be present at such meeting. SECTION 3.09. Organization. At each meeting of the Board of Directors the President or, in his absence, a director chosen by a majority of the directors present, shall act as chairman. The Secretary or, in his absence an Assistant Secretary or, in the absence of the Secretary and all Assistant Secretaries, a person whom the chairman of such meeting shall appoint shall, act as secretary of such meeting and keep the minutes thereof. SECTION 3.10. Order of Business. At all meetings of the Board of Directors business shall be transacted in the order determined by the Board. SECTION 3.11. Removal of Directors. Except as otherwise provided in the Certificate of Incorporation or in these By-Laws, any director may be removed, either with or without cause, at any time, by the affirmative vote of the holders of record of a majority of the issued and outstanding stock entitled to vote for the election of directors of the Corporation given at a special meeting of the stockholders called and held for the purpose; and the vacancy in the Board caused by any such removal may be filled by such stockholders at such meetings in the manner hereinafter provided or, if the stockholders at such meeting shall fail to fill such vacancy, as in these By-Laws provided. SECTION 3.12. Resignation. Any director of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the President, any Vice President or the Secretary of the Corporation. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.13. Vacancies. Any vacancy in the Board of Directors caused by death, resignation, removal, disqualification, an increase in the number of directors, or any other cause may be filled by majority action of the remaining directors then in office, though less than a quorum, or by the stockholders of the Corporation at the next annual meeting or any special meeting called for the purpose, and each director so elected shall hold office until the next annual election of directors and until his successor shall be duly elected and qualified or until his death or until he shall resign or shall have been removed in the manner herein provided. SECTION 3.14. Compensation. Each director, in consideration of his serving as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at directors' meetings, or both, as the Board of Directors shall from time to time determine, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving proper compensation therefor. ARTICLE 4. COMMITTEES SECTION 4.01. Executive Committee. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, appoint an Executive Committee to consist of not less than two (2) nor more than five (5) members of the Board of Directors, including the President, and shall designate one of the members as its chairman. Notwithstanding any limitation on the size of the Executive Committee, the Committee may invite members of the Board to attend one at a time at its meetings. For the purpose of the meeting he so attends, the invited director shall be entitled to vote on matters considered at such meeting and shall receive the Executive Committee fee for such attendance. At anytime one additional director may be invited to an Executive Committee meeting in addition to the rotational invitee and in such case such additional invitee shall also be entitled to vote on matters considered at such meeting and shall receive the Executive Committee fee for such attendance. Each member of the Executive Committee shall hold office, so long as he shall remain a director, until the first meeting of the Board of Directors held after the next annual meeting of the Board of Directors held after the next annual election of directors and until his successor is duly appointed and qualified. The chairman of the Executive Committee or, in his absence, a member of the Committee chosen by a majority of the members present shall preside at meetings of the Executive Committee and the Secretary or an Assistant Secretary of the Corporation, or such other person as the Executive Committee shall from time to time determine, shall act as secretary of the Executive Committee. The Board of Directors, by action of the majority of the whole Board, shall fill vacancies in the Executive Committee. SECTION 4.02. Powers. During the intervals between the meetings of the Board of Directors, the Executive Committee shall have and may exercise all of the powers of the Board of Directors in all cases in which specific directions shall not have been given by the Board of Directors. SECTION 4.03. Procedure; Meetings; Quorum. The Executive Committee shall fix its own rules of procedure subject to the approval of the Board of Directors, and shall meet at such times and at such place or places as may be provided by such rules. At every meeting of the Executive Committee the presence of a majority of all the members shall be necessary to constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution. In the absence of a quorum at any meeting of the Executive Committee such meet need not be held, or a majority of the members present thereat or, if no members be present, the secretary of the meeting may adjourn such meeting from time to time until a quorum be present. SECTION 4.04. Compensation. Each member of the Executive Committee shall be entitled to receive from the Corporation such fee, if any, as shall be fixed by the Board of Directors, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties. SECTION 4.05. Other Board Committees. The Board of Directors may from time to time, by resolution passed by a majority of the whole Board, designate one or more committees in addition to the Executive Committee, each committee to consist of two or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution or in the By-Laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power to change the members of any committee at any time, to fill vacancies and to discharge any such committee, either with or without cause, at any time. SECTION 4.06. Alternates. The President may designate one or more directors as alternate members of any committee who may act in the place and stead of members who temporarily cannot attend any such meeting. SECTION 4.07. Additional Committees. The Board of Directors may from time to time create such additional committees of directors, officers, employees or other persons designated by it (or any combination of such persons) for the purpose of advising the Board, the Executive Committee and the officers and employees of the Corporation in all such matters as the Board shall deem advisable and with such functions and duties as the Board shall by resolutions prescribe. A majority of all the members of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have the power to change the members of any committee at any time, to fill vacancies and to discharge any such committee, either with or without cause, at any time. ARTICLE 5. ACTION BY CONSENT SECTION 5.01. Consent by Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if prior to such action a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board or such committee. SECTION 5.02. Consent by Stockholders. Any action required or permitted to be taken at any meeting of the stock holders may be taken without a meeting upon the written consent of the holders of shares of stock entitled to vote who hold the number of shares which in the aggregate are at least equal to the percentage of the total vote required by statute or the Certificate of Incorporation or these By-Laws for the proposed corporate action. ARTICLE 6. OFFICERS SECTION 6.01. Number. The principal officers of the Corporation shall be a President, Chief Executive Officer, Chief Financial Officer, one or more Vice Presidents (the number thereof and variations in title to be determined by the Board of Directors), a Treasurer and a Secretary. In addition, there may be such other or subordinate officers, agents and employees as may be appointed in accordance with the provisions of Section 6.03. Any two or more officers, except those of President and Secretary, may be held by the same person. SECTION 6.02. Election, Qualifications and Term of Office. Each officer of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 6.03, shall be elected annually by the Board of Directors and shall hold office until his successor shall have been duly elected and qualified, or until his death, or until he shall have resigned or shall have been removed in the manner herein provided. The Chairman of the Board and the President shall be and remain directors. SECTION 6.03. Other Officers. The Corporation may have such other officers, agents, and employees as the Board of Directors may deem necessary, including a Controller, one or more Assistant Controllers, one or more Assistant Treasurers and one or more Assistant Secretaries, each of whom shall hold office for such period, have such authority, and perform such duties as the Board of Directors or the President may from time to time determine. The Board of Directors may delegate to any principal officer the power to appoint or remove any such subordinate officers, agents, or employees. SECTION 6.04. Removal. Any officer may be removed, either with or without cause, by the vote of a majority of the whole Board of Directors or, except in case of any officer elected by the Board of Directors, by any committee of officers upon whom the power of removal may be conferred by the Board of Directors. SECTION 6.05. Resignation. Any officer may resign at any time by giving written notice to the Board of Directors or the President. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6.06. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed in these By-Laws for regular election or appointment to such office. SECTION 6.07. Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the Board of Directors. Subject to definition by the Board of Directors, he shall have general executive powers and such specific powers and duties as from time to time may be conferred upon or assigned to him by the Board of Directors. SECTION 6.08. President. Subject to the powers of the Chief Executive Officer, the President shall have general executive powers and shall perform such duties as from time to time may be conferred upon or assigned to him by the Board of Directors or the Chief Executive Officer. In the absence of the Chief Executive Officer, the President shall preside at meetings of the Board of Directors. SECTION 6.09. Vice President. Each Vice President shall have such powers and perform such duties as the Board of Directors or the Executive Committee may from time to time prescribe or as shall be assigned to him by the President. SECTION 6.10. Chief Financial Officer. The Chief Financial Officer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation, and shall deposit all such funds to the credit of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of these By-Laws; he shall disburse the funds of the Corporation as may be ordered by the Board of Directors or the Executive Committee, making proper vouchers for such disbursements, and shall render to the Board of Directors or the stockholders, whenever the Board may require him so to do, a statement of all his transactions as Chief Financial Officer or the financial condition of the Corporation; and, in general, he shall perform all the duties as from time to time may be assigned to him by the Board of Directors, any committee of the Board designated by it so to act or the President. SECTION 6.11. Secretary. The Secretary shall record or cause to be recorded in books provided for the purpose the minutes of the meetings of the stockholders, the Board of Directors, and all committees of which a secretary shall not have been appointed; shall see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law; shall be custodian of all corporate records (other than financial) and of the seal of the Corporation and see that the seal is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-Laws; shall keep, or cause to be kept, the list of stockholders as required by Section 2.09, which include the post-office addresses of the stockholders and the number of shares held by them, respectively, and shall make or cause to be made, all proper changes therein, shall see that the books, reports, statements, certificates and all other documents and records required by law are properly kept and filed; and, in general, shall perform all duties incident to the office of Secretary and such other duties as may from time to time be assigned to him by the Board of Directors, the Executive Committee or the President. SECTION 6.12. Treasurer. The Treasurer shall have such powers and perform such duties as the Board of Directors or the Executive Committee may from time to time prescribe or shall be assigned to him by the President or Chief Financial Officer. SECTION 6. 13. Salaries. The salaries of the principal officers of the Corporation shall be fixed from time to time by the Board of Directors or a special committee thereof, and none of such officers shall be prevented from receiving a salary by reason of the fact that he is a director of the Corporation. ARTICLE 7. INDEMNIFICATION OF DIRECTORS AND OFFICERS (a) Right to Indemnification. Each person who was or is made a party, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether criminal, administrative or investigative by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of anot corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against all expenses, liability and loss (including attorneys fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that the Corporation shall indemnify any such person seeking indemnity in connection with any action, suit or proceeding (or part thereof) initiated by such person only if such action, suit or proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Such right shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer. including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Section or otherwise. (b) Right of Claimant to Bring Suit. If a claim under paragraph (a) is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the cla is proper in the circumstances because he or she has met the applicable standards of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant had not met such applicable standards of conduct, shall be a defense to the action or create a presumption that claimant had not met the applicable standards of conduct. (c) Non-Exclusivity of Rights. The rights conferred on any person by paragraphs (a) and (b) shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. ARTICLE 8. CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 8.01. Execution of Contracts. Unless the Board of Directors or the Executive Committee shall otherwise determine, the President, any Vice President or the Treasurer, and the Secretary or any Assistant Secretary, may enter into any contract or execute any contract or other instrument, the execution of which is not otherwise specifically provided for, in the name and on behalf of the Corporation. The Board of Directors, or any committee designated thereby with power so to act, except as otherwise provided in these By-Laws, may authorize any other or additional officer or officers or agent or agents of the Corporation, and such authority may be general or confined to specific instances. Unless authorized so to do by these By-Laws or by the Board of Directors or by any such committee, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or to any amount. SECTION 8.02. Loans. No loan shall be contracted on behalf of the Corporation, and no evidence of indebtedness shall be issued, endorsed or accepted in its name, unless authorized by the Board Directors or Executive Committee or other committee designated by the Board to act. Such authority may be general or confined to specific instances. When so authorized, the officer or officers thereunto authorized may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes or other evidences of indebtedness of the Corporation, and, when authorized as aforesaid, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, may mortgage, pledge, hypothecate or transfer any real or personal property at any time owned or held by the Corporation, and to that end execute instruments of mortgage or pledge or otherwise transfer such property. SECTION 8.03. Checks, Drafts, etc. All checks, drafts, bills of exchange or other orders for the payment of money, obligations, notes, or other evidence of indebtedness, bills of lading, warehouse receipts and insurance certificates of the Corporation, shall be signed or endorsed by such officer or officers, agent or agents, attorney or attorneys, employee or employees, of the Corporation as shall from time to time be determined by resolution of the Board of Directors or Executive Committee or other committee designated by the Board so to act. SECTION 8.04. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors or Executive Committee or other committee designated by the Board so to act may from time to time designate, or as may be designated by any officer or officers or agent or agents of the Corporation to whom such power may be delegated by the Board of Directors or Executive Committee or other committee designated by the Board so to act and, for the purpose of such deposit and for the purposes of collection for the account of the Corporation may be endorsed, assigned and delivered by any officer, agent or employee of the Corporation or in such other manner as may from time to time be designated or determined by resolution of the Board of Directors or Executive Committee or other committee designated by the Board so to act. SECTION 8.05. Proxies in Respect of Securities of Other Corporations. Unless otherwise provided by resolution adopted by the Board of Directors or the Executive Committee or other committee so designated to act by the Board, the President or any Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation, association or trust any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, association or trust, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation, association or trust, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. ARTICLE 9. BOOKS AND RECORDS SECTION 9.01. Place. The books and records of the Corporation may be kept at such places within or without the State of Delaware as the Board of Directors may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or agent designated by the Board of Directors. SECTION 9.02. Addresses of Stockholders. Each stockholder shall furnish to the Secretary of the Corporation or to the transfer agent of the Corporation an address at which notices of meetings and all other corporate notices may be served upon or mailed to him, and if any stockholder shall fail to designate such address, corporate notices may be served upon him by mail, postage prepaid, to him at his post-office address last known to the Secretary or to the transfer agent of the Corporation or by transmitting a notice thereof to him at such address by telegraph, cable or other available method. SECTION 9.03. Record Dates. The Board of Directors may fix in advance a date, not exceeding fifty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of any rights, or the date when any change or conversion or exchange of capital stock of the Corporation shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting or any adjournment thereof, or entitled to receive payment of any such dividend or to any such allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of capital stock of the Corporation, or to give such consent, and in each such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to notice of, or to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. SECTION 9.04. Audit of Books and Accounts. The books and accounts of the Corporation shall be audited at least once in each fiscal year by certified public accountants of good standing selected by the Board of Directors. ARTICLE 10. SHARES AND THEIR TRANSFER SECTION 10.01. Certificates of Stock. Every owner of stock of the Corporation shall be entitled to have a certificate certifying the number of shares owned by him in the Corporation and designating the class of stock to which such shares belong, which shall otherwise be in such form as the Board of Directors shall prescribe. Every such certificate shall be signed by the President or a Vice President, and the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Corporation; provided, however, that where such certificate is signed or countersigned by a transfer agent or registrar the signatures of such officers of the Corporation and the seal of the Corporation may be in facsimile form. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the person or persons who signed such certificate or whose facsimile signature or signatures shall have been used thereof had not ceased to be such officer or officers of the Corporation. SECTION 10.02. Record. A record shall be kept of the name of the person, firm or corporation owning the stock represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, and the date thereof, and, in case of cancellation, the date of cancellation. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. SECTION 10.03. Transfer of Stock. Transfers of shares of the stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized, and on the surrender of the certificate or certificates for such shares properly endorsed. SECTION 10.04. Transfer Agent and Registrar; Regulations. The Corporation shall, if and whenever the Board of Directors or Executive Committee shall so determine, maintain one or more transfer offices or agencies, each in charge of a transfer agent designated by the Board of Directors, where the shares of the capital stock of the Corporation shall be directly transferable, and also if and whenever the Board of Directors shall so determine, maintain one or more by the Board of Directors, where such shares of stock shall be registered. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with these By-Laws, concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. SECTION 10.05. Lost, Destroyed or Mutilated Certificates. In case of the alleged loss or destruction or the mutilation of a certificate representing capital stock of the Corporation, a new certificate may be issued in place thereof, in the manner and upon such terms as the Board of Directors may prescribe. ARTICLE 11. SEAL The Board of Directors shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and the words and figures "Incorporated 1985, Delaware. ARTICLE 12. FISCAL YEAR The fiscal year of the Corporation shall commence on the first day of January, except as otherwise provided from time to time by the Board of Directors. ARTICLE 13. WAIVER OF NOTICE Whenever any notice whatever is required to be given by statute, these By-Laws or the Certificate of Incorporation, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE 14. AMENDMENTS These By-Laws may be altered, amended or repealed, in whole or in part, and new By-Laws may be adopted, in whole or in part, by the affirmative vote of a majority of the whole Board of Directors given at any meeting. No amendment may be made unless the By-Laws, as amended, is consistent with the requirements of law and of the Certificate of Incorporation. EX-4 3 10K EX4 Exhibit 4(y) COMMERCIAL PURPOSE LOAN NOTE $15,000,000.00 August 11, 1993 FOR VALUE RECEIVED, the undersigned (each jointly and severally if more than one person and hereinafter referred to as "Debtor") promises to pay to the order of CHEMICAL BANK NEW JERSEY, NATIONAL ASSOCIATION (hereinafter "Bank"), at any of its banking offices the Principal sum of the aggregate unpaid principal amount of all advances made hereunder up to Fifteen Million ($15,000,000.00) Dollars to be paid as follows: Principal payable not more than 90 days after the date of each advance made hereunder. Interest from the date hereof shall accrue on the unpaid Principal balance hereof at a fixed rate of interest as quoted and shall be payable upon maturity. This line of credit shall have a final maturity date of June 30, 1994, at which time all then outstanding principal, interest and any other sums which may be due and owing shall be payable in full. This is a Master Note. Under and subject to the terms and provisions of this Note, Bank will consider Debtor's credit requests from time to time, up to the maximum amount of the Note. Credit availability, is, in addition, subject to the Bank's receipt and continuing satisfaction with current financial and other information, which current information will be furnished to the Bank from time to time as it may reasonably request or require. Bank shall make appropriate entries in its accounting records of charges payable hereunder and all payments made by Debtor on account of such advances and such charges; such records shall be conclusive absent manifest error. DISBURSEMENT OF PROCEEDS - Each Debtor hereby represents and warrants to Bank that the principal of this Note will be used solely for business, commercial or agricultural purposes and agrees that any disbursement of the Principal of this Note, or any portion thereof, to any one or more Debtors, shall be conclusively deemed to constitute disbursement of such Principal to and for the benefit of all Debtors. PREPAYMENTS - Upon at least three (3) business days' prior written notice to Bank, Debtor may prepay the Loan in whole or in part at any time, in multiples of $100,000, accompanied by the interest accrued on the amount prepaid through the date of the prepayment, however, Debtor shall also directly reimburse Bank at the time of any such prepayment for any loss incurred or to be incurred by Bank in the redeployment of the funds associated with the Loan. Prepayments may be subject to a rate indemnification fee which may be calculated as follows: The difference between the Loan rate and the current yield on a U.S. Treasury obligation with a maturity approximately equal to the remaining fixed rate period, times the total amount of principal prepaid on the Loan, times the remaining Interest Period (360 day basis), discounted to present value. DEFINITIONS - All amounts due under this Note, including any renewals, extensions and/or modifications thereof, together with all other existing and future liabilities and obligations of the Debtor or any one of them, whether absolute or contingent, of any nature whatsoever and out of whatever transactions arising are hereinafter collectively referred to as the "Liabilities". "Obligor", as used herein, shall mean Debtor, and all endorsers, sureties, and guarantors. EVENTS OF DEFAULT - Each of the following shall be an "Event of Default" hereunder: (1) the nonpayment when due of any amount payable under this Note, or of any amount when due under or on any of the liabilities (if such payment default exceeds $2,500,000.00) or if there is a payment default under the Credit Agreement dated December 17, 1990, as amended, between Debtor and Fleet Bank, as Agent, and other participating financial institutions; (2) the failure of any Obligor to observe or perform any agreement of any nature whatsoever with Bank; (3) if any Obligor becomes insolvent or makes an assignment for the benefit of creditors, or if any petition is filed by or against any Obligor under any provision of any state or federal law or statute alleging that such Obligor is insolvent or unable to pay debts as they mature or under any provision of the United States Bankruptcy Code; (4) the entry of any judgment in excess of $2,500,000 against any Obligor which remains unsatisfied for fifteen (15) days; (5) the issuing of any attachment, levy or garnishment against any property of any Obligor not discharged or bonded within 30 days; (6) the occurrence of any substantial change in the financial condition of any Obligor which, in the sole, reasonable judgment of Bank, is materially adverse; (7) the dissolution, merger, consolidation or reorganization of any Obligor which is a corporation or partnership when the Obligor is not the surviving party; (8) the death, incarceration or adjudication of legal incompetence of any Obligor who is a natural person; (9) if any information or signature furnished to Bank by any Obligor at any time in connection with any of the Liabilities to the Bank, or in connection with any guaranty or surety agreement applicable to any of the liabilities to the Bank, is false or incorrect; or (10) the failure of any Obligor to timely furnish to Bank such financial other information as Bank may reasonably request or require. BANK'S RIGHTS UPON DEFAULT - Notwithstanding anything to the contrary contained herein or elsewhere, or the fact that Debtor may be required to make Principal and/or interest payments from time to time, in addition, upon the occurrence of any Event of Default, Bank may: (1) accelerate the maturity of this Note and demand immediate payment of all outstanding Principal and accrued interest. (2) make a late charge of not less than $10.00 nor more than 1% of any amount due and unpaid for a period of 10 days or more. (3) upon five (5) days written notice to Debtor, begin accruing interest, in addition to any interest provided for above, at a rate not to exceed one percent (1%) per annum on the unpaid Principal balance, provided, however, that no interest shall accrue hereunder in excess of the maximum amount of interest then allowed by law. Debtor agrees to pay such accrued interest upon demand. The default rate set forth herein is strictly a measure of liquidated damages to Bank based upon Bank's excess costs involved in the redeployment of funds and is not meant to be construed as a penalty. MISCELLANEOUS - Debtor agrees to timely furnish to Bank such publically available financial and other information as it may reasonably request or require. Debtor hereby waives protest, notice of protest, presentment, dishonor, notice of dishonor, demand, and notice of demand. If this Note is placed in the hands of an attorney for collection, Debtor shall reimburse Bank for any and all reasonable attorneys fees whether or not suit be brought, together with all actual costs and expenses of any legal proceedings. Interest shall be calculated hereunder for the actual number of days that the Principal is outstanding, based on a year of three hundred sixty (360) days, unless otherwise specified. If this Note bears interest at a rate based on the Prime Rate charged by Bank from time to time, changes in the rate of interest hereon shall become effective on the days on which Bank announces changes in its Prime Rate. Bank's Prime Rate of interest shall mean that rate of interest (which is not necessarily the lowest rate of interest charged by the Bank) so designated and established by Bank as that rate may change from time to time. The rights and privileges of Bank under this Note shall inure to the benefit of its successors and assigns. All representations, warranties and agreements of Obligor made in connection with this Note shall bind Obligor's personal representatives, heirs, successors and assigns. If any provision of this Note shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, but this Note shall be construed as such invalid or unenforceable provision had never been contained herein. The waiver of any Event of Default or the failure of Bank to exercise any right or remedy to which it may be entitled shall not be deemed a waiver of any subsequent Event of Default or of Bank's right to exercise that or any other right or remedy to which Bank is entitled. The undersigned hereby authorizes Bank to disclose financial or other publicly available information about the undersigned to any present, future or prospective participant, or successor in interest in any loan, advance or other financial accommodation to Borrower from Bank, or any regulatory body or agency having jurisdiction over Bank. This Note has been delivered to and accepted by Bank in and shall be governed by the laws of the State of New Jersey. The parties agree to the jurisdiction of the federal and state courts located in New Jersey in connection with any matter arising hereunder, including the collection and enforcement hereof. Debtor waives trial by jury. The Additional Provisions, if any, below, are hereby made a part hereof and are incorporated herein. Debtor has duly executed this Note the day and year written on the first page hereof, and has hereunto set Debtor's hand and seal. WELLMAN, INC. (co-borrower) By: /s/ Audrey Goodman Assistant Treasurer Attest: /s/ Debra L. Geyser FIBER INDUSTRIES, INC. (co-borrower) By: /s/ Audrey Goodman Assistant Treasurer Attest: /s/ Debra L. Geyser NEW ENGLAND CR INC. (co-borrower) By: /s/ Audrey Goodman Assistant Treasurer Attest: /s/ Debra L. Geyser PRINCE, INC. (co-borrower) By: /s/ Audrey Goodman Assistant Treasurer Attest: /s/ Debra L. Geyser Exhibit 4(z) PROMISSORY NOTE (Demand Line of Credit) $5,000,000.00 June 18, 1993 111 Westminster St. Providence, RI The Undersigned promise(s) to pay to the order of Fleet National Bank, a national banking association (the "Bank"), at its office at the above address, or at such other place as the Bank may specify in writing to the Undersigned, principal in the amount of Five Million Dollars ($5,000,000) or, if less, the aggregate unpaid principal amount due hereunder as shown on records of the Bank, and interest at the rate specified below. Until a default occurs, interest shall be payable commencing June 30, 1993 and continuing monthly thereafter. Interest shall be calculated on the actual basis of a year consisting of 360 days, at the rate of Zero percent (0%) per annum above the Bank's Prime rate and shall change with such change in the Prime Rate. The Prime Rate is the rate of interest designated from time to time by the Bank as being its prime rate of interest. If a competent judicial or governmental authority should determine that the rate of interest under this Note exceeds a maximum rate permitted by applicable law or regulation, each payment of interest that exceeds such maximum rate shall be deemed a voluntary prepayment of principal. The Undersigned and every other party endorsing or guaranteeing this Note (collectively, the "Obligors") agree that the Bank shall have a right of set-off with respect to all deposits or other sums credited by or due from the Bank to the Obligors. In the event of any default under this Note, regardless of the adequacy of collateral, without any demand or notice, except as required by applicable law, the Bank may apply or set-off such deposits or other sums and may sell or dispose of any or all of the securities or other property held by the Bank and may exercise any and all of the rights it may have under the Rhode Island Uniform Commercial Code, as in effect from time to time. The rights of the Bank under this Note are in addition to, and not exclusive of, any other rights it may have with respect to such deposits, sums, securities or other property under other agreements or applicable principles of law. The Bank shall have no duty to take steps to preserve rights against prior parties as to such securities or other property. The Obligors further agree that they shall pay on demand all expenses of the Bank, including reasonable attorneys' fees, incurred in the collection or enforcement of its rights under this Note or any security for it; to the fullest extent permissible, they waive presentment, demand for payment, protest and notice of nonpayment, and all other demands or notices otherwise required by law in connection with the delivery, acceptance, performance, default or enforcement of this Note; they consent to any extension or postponement of the time of payment or any other indulgence, any amendment or modification of any agreement, any substitution, exchange or release of collateral or to the additional release of any other party or person primarily or secondarily liable hereunder; no consent or waiver by the Bank with respect to any actions or failure to act which, without consent, would constitute a breach of any provision of this Note, shall be valid and binding unless in writing and signed by the Bank; and no delay or omission of the Bank in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. This note is subject to a letter regarding fixed interest rate elections of even date herewith. An event of default shall have occurred under this Note if: (a) An Event of Default under the Loan Agreement (as amended from time to time) between Wellman, Inc. and the Bank (as agent) dated December 7, 1990 (together with any of its successor agreements) occurs, (b) The Loan Agreement ceases to be in effect and there is no other credit agreement in place between the Bank and Wellman, and (c) Interest on this note is not paid within ten days of its due date. When an event of default occurs, this Note and all interest accrued hereon shall become due and payable forthwith and the payment and acceptance of any sum on account of this Note, shall not be considered a waiver of such right of election. Notwithstanding this, the Bank reserves the right to cancel any unused portion of this line at any time without notice. The Obligors agree that this Note shall be governed by the laws of the State of Rhode Island. They consent to jurisdiction and service of process, which may be effected by certified mail, in the courts of the State of Rhode Island and in the courts of the United States having jurisdiction thereof. WELLMAN, INC. Witness: /s/ Audrey Goodman Assistant Treasurer /s/ Anne Barra June 30, 1994 Wellman, Inc. 1040 Broad Street Shrewsbury, NJ 07702 Attn: Clifford J. Christenson Chief Financial Officer Re: $5,000,000 Demand Line of Credit Note of even date herewith payable to the order of Fleet National Bank (the "Note") Gentlemen: This letter sets forth the basis on which Fleet National Bank (the "Bank") is willing to offer Wellman, Inc. (the "Borrower") a fixed rate on the outstanding principal amount of the Note. From time to time, Borrower may request (as set forth within) the Bank to quote a fixed interest rate for a specified term on all or the portion specified in the Borrower's request of the outstanding principal amount under the Note. The Bank, in its sole discretion, may quote a fixed rate to the Borrower and a term for which the Bank is willing to make such fixed rate available to the Borrower. The Borrower shall accept or reject such offer on the date such offer is received from the Bank by telephonic acceptance or rejection (followed immediately if accepted by written or telecopied acceptance) specifying the fixed interest rate, the term and the amount of principal to be subject to such fixed rate. Any such accepted fixed rate is hereinafter called the "Fixed Rate" and any such accepted fixed rate term is hereinafter called the "Fixed Rate Term". Once a Fixed Rate becomes applicable, such Fixed Rate shall remain in effect for the corresponding Fixed Rate Term and shall apply only to the amount of principal offered by the Bank an accepted by the Borrower. The Note bears interest at the Bank's prime rate per annum (the "Floating Rate"). Any outstanding amount of principal as to which a Fixed Rate is not in effect in accordance herewith shall bear interest at the Floating Rate. The minimum principal amount subject to a Fixed Rate election shall be $250,000; provided however, that there shall be no more than six (6) Fixed Rate elections in effect at any time. On the last day of any Fixed Rate Term then in effect, the Borrower may contact the undersigned (or such other officer of the Bank as the undersigned may designate) by telephone, at which time the Bank shall inform the Borrower of any Fixed Rate and Fixed Rate Term and amount of principal as to which same may be applicable, which the Bank is then prepared to offer to the Borrower and the Borrower shall immediately elect whether or not to accept same as set forth above. If, upon the expiration date of any Fixed Rate Term, a new Fixed Rate and Fixed Rate Term are not agreed upon as to the outstanding principal amount of the Note which was subject to the Fixed Rate in question, and provided there is outstanding principal, the Floating Rate shall thereupon and thereafter be deemed the applicable interest rate payable under the Note as to such outstanding principal amount, until such later date as a Fixed Rate and Fixed Rate Term are agreed upon as set forth above. Upon the Borrower making any election to accept a Fixed Rate for a Fixed Rate Term, the Borrower shall that day mail or telecopy to the Bank a letter verifying (i) the first day of the Fixed Rate Term agreed upon, (ii) the Fixed Rate agreed upon, (iii) the Fixed Rate Term agreed upon and (iv) the outstanding amount of principal to be subject to said Fixed Rate and Fixed Rate Term. The Bank shall incur no liability to the Borrower in acting upon any telephone instructions which the recipient thereof believes in good faith to have been given by any person whom the Borrower may designate to the Bank, in writing, as being so authorized. In addition, the Bank shall be entitled to rely upon any such verification letter signed by Clifford J. Christenson, Audrey Goodman, or any such other authorized person. The Borrower shall be permitted to prepay without premium or penalty in whole or in part any outstanding principal amount of the Note which is subject to a Floating Rate at any time upon written notice to the Bank. PREPAYMENT - FIXED RATE LOAN PROCEEDS Notwithstanding anything to the contrary contained in the Note or in any other agreement executed in connection therewith, the Borrower shall be permitted to prepay outstanding principal under the Note subject to a Fixed Rate only in accordance with the following: (a) Voluntary Prepayment. The Borrower shall be permitted to voluntarily prepay, in whole or in part, any such principal amount subject to a Fixed Rate at any time, subject to giving the Bank not less than two (2) days prior written notice thereof, and, subject to the Borrower's payment to the Bank of a prepayment premium in an amount computed as provided below. In the event of any such voluntary prepayment, the date upon which such computation of said prepayment premium shall be based (the "Determination Date") shall be the date upon which such prepayment is made. (b) Involuntary Prepayment. If the maturity of the Note shall be accelerated, by reason of its cross-default with Wellman's existing Loan Agreement (as defined in the Note) or the occurrence of any event of default under the Note, then upon the Bank's demand made at any time thereafter the Borrower shall pay to the Bank a prepayment premium in an amount computed as provided below. In such event the Determination Date upon which the computation of said prepayment premium shall be based shall be such date as may be selected by the Bank, in its sole discretion, within the period commencing with the date of such acceleration of the Note and ending on the last day of the applicable Fixed Rate Term. In the event of such acceleration of the Note, an involuntary prepayment of all such principal amounts subject to a Fixed Rate shall be deemed to have occurred upon the Determination Date selected by the Bank, regardless of whether funds are actually received by the Bank. (c) Prepayment Premium. The prepayment premium to be paid by the Borrower shall be computed as follows: The latest published rate preceding the Determination Date for United States Treasury Notes or Bills (Bills on a discounted basis shall be converted to a bond equivalent) as published weekly in the Federal Reserve Statistical Release with a maturity date closest to the expiration date of the applicable Fixed Rate Term shall be subtracted from the applicable Fixed Rate. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amou will be divided by 360 and multiplied by the number of days remaining between the Determination Date and the expiration date of the applicable Fixed Rate Term (the "Unexpired Term"). Said amount shall be reduced to present value calculated by using the above referenced United States Treasury Note or Bill rate and assuming that said amount will be paid in equal monthly installments over the Unexpired Term, commencing 30 days after the Determination Date. The resulting amount shall be the prepayment premium due to the Bank. In the event that more than one Fixed Rate or Fixed Rate Term is applicable to outstanding principal under the Note, then separate computations shall be made of the prepayment premium applicable to each Fixed Rate and Fixed Rate Term and the prepayment premium payable to the Borrower to the Bank shall be the sum of the amounts so determined. Interest on any loans that bear a Fixed Rate shall be due at maturity of the applicable period, while interest on Floating Rate loans shall be due monthly. If the above meets with the Borrower's approval, please so signify in the space provided below on the enclosed copy of this letter. Very truly yours, FLEET NATIONAL BANK By: /s/ William Fed The above term and conditions are hereby accepted and agreed to. Witness: WELLMAN, INC. /s/Anne Barra By:/s/ Audrey Goodman Audrey Goodman Assistant Treasurer EX-10 4 10K EX10 ## ## ## -#- ## Exhibit 10(h) WELLMAN, INC. MANAGEMENT INCENTIVE COMPENSATION PLAN EXECUTIVE GROUP NOVEMBER, 1992 TABLE OF CONTENTS ARTICLE I NAME ARTICLE II STATEMENT OF PURPOSE ARTICLE III PLAN ADMINISTRATION ARTICLE IV PARTICIPATION ARTICLE V DEFINITIONS ARTICLE VI DESCRIPTION OF BONUS BANK ARTICLE VII CHANGE IN STATUS DURING THE PLAN YEAR ARTICLE VIII GENERAL PROVISIONS ARTICLE IX LIMITATIONS ARTICLE I NAME The Plan shall be known as the "Wellman, Inc. Management Incentive Compensation Plan." ARTICLE II STATEMENT OF PURPOSE 2.1 The purpose of the Plan is to provide a system of incentive compensation which will promote the maximization of shareholder value over the long-term. In order to align management incentives with shareholder interests, this Plan will tie incentive compensation to Economic Value Added (EVA) and, thereby, reward management for increasing value and penalize management for reducing value. 2.2. EVA is the performance measure of value creation. EVA reflects the benefits and cost of capital employed. Managers create value when they employ capital in an endeavor that generates a return that exceeds the cost of the capital employed. Managers destroy value when they employ capital in an endeavor that generates a return that is less than the cost of capital employed. ARTICLE III PLAN ADMINISTRATION 3.1 The Incentive Compensation Committee ("Committee") shall be responsible for the design, selection of Participants, administration, and interpretation of the Plan. The Committee will consist of the President and Chief Executive Officer, the Vice President and Chief Financial Officer, and the Vice President of Administration. 3.2 This Plan may be amended, suspended or terminated at any time at the sole discretion of the Board of Directors of Wellman, Inc. ("Board") upon the recommendation of the Committee, provided, however, that no such change in the Plan shall be effective to eliminate or diminish the distribution of any Award that has been allocated to the Bank of a Participant prior to the date of such amendment, suspension or termination. Notice of any such amendment, suspension or termination shall be given promptly to each Participant. ARTICLE IV PARTICIPATION 4.1 The Executive Group is comprised of those employees who are primarily Officers, Vice Presidents, and other senior executives identified by the Board of Directors. 4.2 The committee will nominate and the Board must approve any new employees who are to be included in the Plan. ARTICLE V DEFINITIONS 5.1 "Plan Year" is the fiscal year of the Company which is the calendar year. 5.2 "Effective Date" is January 1, 1992. 5.3 "Eligibility" means the earliest a new participant can be included. This is the first Plan Year following his/her hire date. 5.4 "Participating Group" means a business division or group of business divisions which are uniquely identified for the purpose of calculating EVA and EVA based bonus awards. Some Participants' awards may be derived from a combination of two or more different Participating Groups. For the purpose of this plan, the initial Participating Groups are listed as follows: Company (Consolidated) Fibers Division Manufactured Products Group Nonwovens Bonded Fibers Engineering Resins Recycling Polymer Wool New England CRInc. 5.5 "Capital" means the net investment employed in the operations of each Participating Group. The components of Capital are as follows: Accounts Receivable (Net) Inventory Property, Plant, and Equipment (Net) Goodwill and other Assets Less: Accounts Payable* Less: Accrued Liabilities* Equals: Capital *Collectively referred to as the non-interest bearing current liabilities (NIBCL's) EVA is calculated based on average Capital employed. The annual average Capital is the result of aggregating the ending capital at December 31 of the prior year with the ending capital at the end of each month in the current year and dividing the result by 13. 5.6 "Cost of Capital" means the weighted average of the before tax cost of debt and equity for the year in question. For 1992, 1993, and 1994 it is fixed at 14.7% percent. 5.7 "Capital Charge" is the cost of employing Capital in the business of each Participating Group. The Capital Charge equals the following: Average Capital Times: Cost of Capital Equals: Capital Charge 5.8 "Net Operating Profit" or NOP means the earnings attributable to the capital employed in the Participating Group. The components of NOP are as follows: Sales/Operating Revenues Less: Cost of Sales/Costs associated with Sales/Revenues Less: Selling, General and Administrative Expenses Equals: Net Operating Profit 5.9 "Economic Value Added" or EVA means the NOP that remains after subtracting the Capital Charge, expressed as follows: NOP Less: Capital Charge Equals: EVA EVA may be positive or negative. 5.10 "Actual EVA" means the EVA as calculated for each Participating Group for the Plan Year in question. 5.11 "Baseline EVA" means the level of EVA needed for the Group to receive the amount of the Base Unit Value in the year of inception. The Baseline EVA for the 1992 is set at the expected EVA based primarily upon the Annual Operating Plan. After the first year, the Base-Line EVA is revised according to the following formula: Baseline EVA = Last Year's Baseline + Last Year's Actual EVA 2 5.12 "Base Unit Value" means the portion of the Total Unit Value which is independent of performance corresponding to the Baseline EVA 5.13 "Performance Unit Value" is the value attached to EVA performance falling above or below the Baseline EVA (Actual EVA less Baseline EVA). 5.14 "Total Unit Value" is the value per unit, which is determined as the sum of two components: Total Unit Value = Base Unit Value + Performance Unit Value 5.15 "Salary" means the participant's weighted average base salary for the entire Plan Year. 5.16 "Target Bonus Percentage" is assigned to each Participant by the Committee based on their relative job position. 5.17 "Number of Units" is calculated by multiplying the Participant's salary times his/her Target Bonus Percentage. Number of Units = Salary x Target Bonus Percentage 5.18 "Individual Award" means the bonus earned* by a Participant in a given year and is calculated by multiplying the Total Unit Value times the Participant's Number of Units. Individual Award = Total Unit Value x Number of Units for that Participant Awards due are paid to Participants in March for the prior Plan Year. *Note that if the Total Unit Value is greater than $1.50 for that year, only the $1.50 gets paid that year. The excess goes to the Bonus Bank. 5.19 The Individual Award associated with the Company Participating Group will not be paid unless there is at least one quarterly payment made to employees under the Wellman, Inc. Profit Sharing Plan. The Individual Award is also reduced by the total amount of Profit Sharing paid to the Participant for the Plan Year. Should there be no quarterly payments under the Profit Sharing Plan, the award associated with the Company Participating Group will be deposited into the Bonus Bank. An Individual Award based on any other Participating Group will be paid even if no quarterly Profit Sharing Plan payments are paid. ARTICLE VI DESCRIPTION OF BONUS BANK 6.1 A "Bonus Bank" concept encourages a long-term commitment by Participants to the Company. An "Extraordinary award" shall be credited to an "at risk" deferred account for each Participant. The level of payout is contingent on sustained high performance and continued employment. 6.2 "Bonus Bank" means, with respect to each Participant, a bookkeeping record of an account to which Extraordinary Awards are credited and negative values are debited. 6.3 "Extraordinary Award" means that portion of an annual award in excess of $1.50 times the number of Bonus Units held by the participant. This amount is always paid to the Bonus Bank and will be used to reduce negative balances, if any. 6.4 "Bank Balance" means, with respect to each Participant, a bookkeeping record of the net balance of the amounts credited to and debited against such Participant's Bonus Bank. A Participant's Bank Balance shall initially be equal to zero. The Bonus Bank does not pay interest on positive balances or charge interest on negative balances. Although a Bonus Bank may, as a result of negative EVA, have a deficit, no Plan Participant shall be required, at any time, to reimburse his/her Bonus Bank. Negative Bank Balances will be offset only by positive bank deposits resulting from Extraordinary Awards. 6.5 "Available Balance" means the Bank Balance at the beginning of the Plan Year. 6.6 "Payout Percentage" is 33 1/3 percent. 6.7 "Payout" means amount of the Available Balance that may be paid out in cash to the Participant. The Payout is calculated as follows: Available Balance Times: Payout Percentage (33 1/3%) Equals: Payout The Payout is subtracted from the Bank Balance when it is paid to the Participant in March. ARTICLE VIII CHANGE IN STATUS DURING THE PLAN YEAR 7.1 Transfers. Participants who transfer from one participating Group in the Company to another shall have their award determined by the EVA performance for the specific months the Participant is employed in each participating Group. The Bonus Bank balance will be unaffected as a result of the transfer. 7.2 Disability. A participant shall be deemed "permanently disabled" if, because of physical or mental condition, the Participant is unable for a period of at least one year to perform the principal duties of his/her occupation as determined by a physician selected by the Committee. A Participant shall receive full payment of his or her Bank Balance and a pro rata bonus based on the number of full months worked for the year in which the disability started. The former payment shall be made one year after the start of the disability and the latter at the regular time for making bonus payments (March). 7.3 Death. A Participant's beneficiary, as designated for the life insurance program, shall receive full payment of his/her Bank Balance and a pro rata bonus based on the number of full months worked for the Plan year in which they die. The former payment will be made within six weeks of the death and the latter payment shall be made at the regular time for making bonus payments (March). 7.4 Retirement. A Participant who retires from the Company upon or after reaching age 55 shall receive full payment of his or her Bank Balance and a pro rata bonus for the year in which he/she retires. The former payment will be made within six weeks of retirement and the latter payment shall be made at the regular time for making bonus payments (March). 7.5 Resignation or Termination for Cause. Separation for these reasons results in the forfeiture of the balance in a Participant's Bonus Bank and any award for the Plan Year in which employment ends. "Cause" shall mean: (i) any act or acts of the Participant constituting a felony under the laws of the United States, any state thereof or any foreign jurisdiction; (ii) any material breach by the Participant of any employment agreement with the Company or the policies of the Company or the willful and persistent (after written notice to the Participant) failure or refusal of the participant to comply with any lawful directives of the Board; (iii) a course of conduct amounting to gross neglect, willful misconduct or dishonesty; or (iv) any misappropriation of material property of the Company by the Participant or any misappropriation of a corporate or business opportunity of the Company by the Participant. 7.6 Termination without Cause. A Participant who is terminated for reasons other than those described above will have any positive Bank Balance in his/her Bonus Bank paid in full at the time of separation. A pro rata portion of that year's award shall also be paid in full at the regular time for making bonus payments. 7.7 Breach of Agreement. Notwithstanding any other provision of the Plan or any other agreement, in the event that a Participant shall breach any non-competition agreement with the Company the balance in such Participant's Bonus Bank shall be forfeited. 7.8 No Guarantee. Participation in the Plan provides no guarantee that a bonus under the Plan will be paid. Similarly, the payment of an Award under the plan in one Plan Year or selection as a Participant is no guarantee that a bonus under the plan will be paid in the subsequent Plan Year. The success of the Company as measured by the achievement of EVA, shall determine the extent to which Participants shall be entitled to receive bonuses hereunder. ARTICLE VIII GENERAL PROVISIONS 8.1 Withholding of Taxes. The Company shall have the right to withhold the amount of taxes, which in the determination of the Company, are required to be withheld under law with respect to any amount due or paid under the Plan. 8.2 Expenses. All expenses and costs in connection with the adoption and administration of the Plan shall be borne by the Company. 8.3 No prior Right or Offer. Except and until expressly granted pursuant to the Plan, nothing in the Plan shall be deemed to give any employee any contractual or other right to participate in the benefits of the Plan. 8.4 Disputed Claims for Benefits. In the event a Participant (a "claimant") has a dispute with respect to any of the benefits provided hereunder, the claimant shall submit evidence satisfactory to the Committee of facts establishing his entitlement to a payment under the Plan. Any claim with respect to any of the benefits provided under the Plan shall be made in writing within ninety (90) days of the event which the claimant asserts entitles him or her to benefits. Failure by the claimant to submit his or her claim within such ninety (90) day period shall bar the claimant from any claim for benefits under the Plan. In reaching its decision, the Committee shall have complete discretionary authority to determine all questions arising in the interpretation and administration of the Plan, to construe the terms of the Plan, including any doubtful or disputed terms and the eligibility of a Participant for benefits. 8.5 Action Taken in Good Faith; Indemnification. The Committee may employ attorneys, consultants, accountants or other persons and the Company's directors and officers shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all employees who have received awards, the Company and all other interested parties. No member of the Committee, nor any officer, director, employee or representative of the Company, or any of its affiliates acting on behalf of or in conjunction with the Committee, shall be personally liable for any action, determination, or interpretation, whether of commission or omission, taken or made with respect to the Plan, except in circumstances involving actual bad faith or willful misconduct. In addition to such other rights of indemnification as they may have as members of the Board, as members of the Committee or as officers or employees of the Company, all members of the Committee and each any officer, employee or representative of the Company or any of its subsidiaries acting on their behalf shall be fully indemnified and protected by the Company with respect to any such action, determination or interpretation against the reasonable expenses, including attorneys' fees actually and necessarily incurred, in connection with the defense of any civil or criminal action, suit or proceeding or in connection with any appeal therein, to which they or any of them any be a party by reason of any action taken or failure to act under or in connection with the Plan or an award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by Company) paid by them in satisfaction of a judgment in any action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person claiming indemnification shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by any person claiming indemnification to repay such amount unless it shall ultimately be determined that such member is entitled to be indemnified as provided in this Section. 8.6 Rights Personal to Employee. Any rights provided to an employee under the Plan shall be personal to such employee, shall not be transferable (except by will or pursuant to the laws of descent or distribution), and shall be exercisable, during his or her lifetime, only by such employee. 8.7 Plan Termination or Suspension. Upon termination of the Plan or suspension for a period of more than 90 days, the Bank Balance of each Participant shall be distributed as soon as practicable but in no event later than 90 days from such event. The Committee, in its sole discretion, may accelerate distribution of the Bank Balance, in whole or in part, at any time without penalty. 8.8 Confidentiality. Specific details of the Plan must remain confidential and because of the individuality of the Awards, Participants should not share information with each other. ARTICLE IX LIMITATIONS 9.1 No Continued Employment. Neither the establishment of the plan or the grant of an award hereunder shall be deemed to constitute an express or implied contract of employment for any period of time or in any way abridge the rights of the Company to determine the terms and conditions of employment or to terminate the employment of any employee with or without cause at any time. 9.2 No Vested Rights. Except as otherwise provided herein, no employee or other person shall have any claim of right (legal, equitable, or otherwise) to any award, allocation, or distribution or any right, title, or vested interest in any amounts in his/her Bonus Bank and no officer or employee of the Company or any Participating Group or any other person shall have any authority to make representations or agreements to the contrary. No interest conferred herein to a Participant shall be assignable or subject to claim by a Participant's creditors. 9.3 Not Part of Other Benefits. The benefits provided in this plan shall not be deemed a part of any other benefit provided by the Company to its employees. The Company assumes no obligation to Plan Participants except as specified herein. This is a complete statement, along with the Schedules and Appendices attached hereto, of the terms and conditions of the Plan. 9.4 Other Plans. Nothing contained herein shall limit the Company or the Committee's power to grant bonuses to employees of the Company, whether or not Participants in this Plan. Exhibit 10(j)(7) RESTRICTED STOCK AGREEMENT THIS AGREEMENT is entered into as of the 21st day of September, 1993, by and between WELLMAN, INC., a Delaware corporation (the "Corporation"), and James E. Rogers, resident of Virginia (the "Director"). WHEREAS, the Director currently serves as a member of the Board of Directors of the Corporation (the "Board"); and WHEREAS, the Corporation wishes to provide long-term incentives to the Director to remain as a director of the Corporation and to devote his best efforts to the interests of the Corporation's stockholders; and WHEREAS, in order to provide such incentive, the Corporation wishes to grant to the Director shares of the Corporation's common stock, $.01 par value (the "Stock"), on the terms and conditions herein, the parties hereto agree as follows: 1. Definitions. a. "Non-Vested Shares" shall mean all the shares of Stock that have not become Vested Shares pursuant to the provisions of Section 2 hereof. b. "Vested Shares" shall mean those shares of Stock that shall vest according to the schedule set forth in Section 2(a) hereof. c. "Vesting Date" shall mean the date on which Non-Vested Shares become Vested Shares as provided in the vesting schedule set forth in Section 2(a) hereof. 2. Incentive. a. The Corporation shall issue to the Director 2,000 shares of Stock (the "Incentive Stock") which shall vest in accordance with the following schedule: Number of Shares of Stock becoming Vested Vesting Date 667 September 21, 1994 667 September 21, 1995 666 September 21, 1996 b. Notwithstanding anything else contained in this Agreement, the Director shall not vest as to that portion of the Incentive Stock that is scheduled to vest on a Vesting Date specified in Section 2(a) hereof, unless the Director has served as a director of the Corporation for the twelve month period prior to such Vesting Date. c. In the event of any change in the Stock by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares or of any similar change affecting the Stock, then in any such event the number and kind of shares subject to this Agreement shall be appropriately adjusted consistent with such change in such manner as the Corporation may deem equitable to prevent substantial dilution or enlargement of the rights granted to the Director hereunder. 3. Issuance of Stock. The Corporation shall issue a certificate or certificates representing the Incentive Stock to the Director, with the legend required by Section 4 thereon, as soon as practicable after the execution of this Agreement by the Director. 4. Securities Restrictions. a. The Corporation shall place the following legend upon the certificates representing the Incentive Stock: "The shares of stock represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). The stock may not be sold, transferred, pledged, or hypothecated unless the stock proposed to be transferred has been effectively registered under the Act, or the corporation shall have received an opinion of counsel satisfactory to it to the effect that registration thereof for purposes of transfer is not required under the Act." b. The Director acknowledges that the Incentive Stock has not been registered under the Securities Act of 1933 or any state securities statute (collectively, the "Securities Acts"), and therefore may not be resold unless they are registered under such Securities Acts or unless an exemption from such registration is available. Prior to any transfer of any shares of Incentive Stock which are not registered under an effective registration statement under any such Securities Act (other than a transfer pursuant to Rule 144 or any comparable rule under such Securities Acts), the holder thereof will give written notice to the Corporation of such holder's intention to effect such transfer and shall describe the manner and circumstances of the proposed transfer in sufficient detail to enable counsel to render the opinion referred to in the legend placed on the back of the certificate. c. The Corporation will pay the reasonable fees and disbursements of counsel in connection with all opinions rendered pursuant to this Section 4. d. The restrictions imposed by this Section 4 upon the transferability of the shares of Incentive Stock shall cease and terminate as to any particular security (i) when such securities shall have been effectively registered under the Act and disposed of in accordance with the registration statement covering such securities, or (ii) when, in the opinion of independent counsel for the holder thereof experienced in Securities Acts' matters, such restrictions are no longer required in order to assure compliance with the Securities Acts. Whenever such restrictions shall terminate as to any securities, the holder thereof shall be entitled to receive from the Corporation, without expense (other than transfer taxes, if any), new securities of like tenor not bearing the legend set forth in Section 4(a) hereof. 5. Miscellaneous. a. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective administrators, executors, legal representatives, successors, and assigns (including remote, as well as immediate, successors to and assignees of said parties). b. Any and all notices, designations, consents, offers, acceptances, or any other communication provided for herein shall be given in writing by registered, certified or regular delivery mail, Federal Express or comparable overnight delivery service, telecopy, telex or by personal delivery, which shall be addressed to the Corporation and the Director, at their addresses appearing on the signature page hereto or to such other address as may be designated by him or it. c. The invalidity or unenforceability of any particular provision of this Agreement shall not effect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. d. This Agreement shall not be interpreted as an Agreement that the Director shall be nominated to the Board or elected as a Director, except as the stockholders of the Corporation shall vote at any meeting designated for such election, and the Director shall not have any right to be retained on the Board of the Corporation by virtue of this Agreement. e. Upon the (a) resignation or termination of the Director from the Board for any reason or (b) failure of the Director to be reelected to the Board or (c) the vesting of all of the Stock issued hereunder, all of the Director's rights hereunder shall cease and terminate other than rights of the Director of the Vested Shares. Upon the occurrence of the events set forth in (a) and (b) above prior to the vesting of all of the Incentive Stock, the Director shall surrender his stock certificate or certificates issued hereunder representing or including any Non-Vested Shares to the Company and the Company shall cancel such certificate or certificates relating to any Non-Vested Shares and shall cause the transfer agent to issue a new stock certificate or certificates to the Director for any Vested Shares included in such surrendered certificate or certificates. f. This Agreement may be altered, amended or terminated only by written instrument signed by both parties hereto. g. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. h. This Agreement may be executed by the parties hereto in several counterparts, and each counterpart, when so executed, shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year set forth above. WELLMAN, INC. By /s/ Clifford J. Christensen Clifford J. Christenson Vice President & Treasurer /s/ James E. Rogers James E. Rogers EX-18 5 10K EX18 ## ## Exhibit 18 February 15, 1994 Mr. Keith R. Phillips Chief Financial Officer Wellman, Inc. 1040 Broad Street Suite 302 Shrewsbury, NJ 07702 Dear Sir: Note 1 of Notes to the Consolidated Financial Statements of Wellman, Inc. included in its Annual Report on Form 10-K for the year ended December 31, 1993 describes a change in the method of applying the lower of cost or market rule to certain slow moving and discontinued waste raw material inventory which is costed using the last-in, first-out (LIFO) method. In prior years, the Company used the aggregate by pool method in applying the lower of cost or market rule to such inventories and in 1993 changed to the item-by-item method. You have advised us that you believe that the change is to a preferable method in your circumstances because it provides a better matching of costs and revenues and results in a more conservative valuation of the slow moving and discontinued waste raw material inventory. There are no authoritative criteria for determining a "preferable" inventory valuation method based on the particular circumstances; however, we conclude that the change in the method of applying the lower of cost or market rule to slow moving and discontinued waste raw material inventory which is costed using the LIFO method is to an acceptable alternative method, which, based on your business judgment to make this change for the reasons cited above, is preferable in your circumstances. Very truly yours, ERNST & YOUNG EX-21 6 10K EX21 Exhibit 21 SUBSIDIARIES Company Name Jurisdiction of Incorporation Fiber Industries Delaware Prince, Inc. Delaware Warehouse Assoc., Inc. Delaware Josdav Delaware New England CR., Inc. Massachusetts Materials Recovery, Inc. Massachusetts Materials Recovery of California Massahcusetts Brokering Recyclables, Inc. Massachusetts Recycling Plastics, Inc. Massachusetts Creative Forming, Inc. Wisconsin Wellman, Inc. VEBA Not Incorp. Wellman Scholarship Foundation, Inc. South Carolina Wellman, Inc. PAC New Jersey ALG, Inc. Delaware Wellman International Ireland Investments, LTD Wellman International, LTD Ireland Wellman Fibres, LTD United Kingdom Middlewich, Limited Ireland Shobara Company Ireland Wellman International Germany Handelagesellschaft, mbh Crinc-Wellman Limited Great Britain Wellman UK Holdings, Limited Great Britain Canada Crinc, LTD Canada Wellman Exports, V.I. U.S. Virgin Islands Wellman Recycling Holland EX-23 7 10K EX23 Exhibit 23(a) Consent of Independent Auditors We consent to the incorporation by reference in Registration Statements (Form S-8, Nos. 33-17196, 33-44822, 33-44877, 33-44876 and Form S-3, No. 33-36001) pertaining to various stock option and employee savings plans of Wellman, Inc. of our report dated February 15, 1994, with respect to the consolidated financial statements and financial statement schedules included in this Annual Report (Form 10-K) of Wellman, Inc. ERNST & YOUNG Charlotte, North Carolina March 25, 1994 Exhibit 23(b) Consent of Independent Auditors We consent to the incorporation by reference in Registration Statements (Form S-8, Nos. 33-17196, 33-44822, 33-44877, 33-44876 and Form S-3, No. 33-36001) pertaining to various stock option and employee savings plans of Wellman, Inc. of our report dated 17 February 1994, with respect to the consolidated financial statements of Wellman International Limited and subsidiary at 31 December 1993 and 1992, and for each of the three years in the period ended 31 December 1993, included in this Annual Report (Form 10-K) of Wellman, Inc. KPMG Stokes Kennedy Crowley Chartered Accountants Registered Auditors Dublin, Ireland 25 March, 1994 EX-99 8 10K EX99 ## ## Exhibit 99 REPORT OF INDEPENDENT AUDITORS TO MEMBERS OF WELLMAN INTERNATIONAL LIMITED We have audited the accompanying consolidated balance sheets of Wellman International Limited and subsidiary at 31 December 1993 and 1992, and the related consolidated profit and loss accounts, retained earnings, and changes in financial position for each of the three years in the period ended 31 December 1993, all expressed in Irish pounds (not presented separately herewith). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and enclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above, expressed in Irish pounds, present fairly, in all material respects, the consolidated financial position of Wellman International Limited and subsidiary at 31 December 1993 and 1992, and the consolidated results of operations and changes in financial position for each of the three years in the period ended 31 December 1993 in conformity with accounting principles generally accepted in the United States of America. /s/KPMG Stokes Kennedy Crowley KPMG Stokes Kennedy Crowley Chartered Accountants Registered Auditors Dublin, Ireland 17 February 1994 -----END PRIVACY-ENHANCED MESSAGE-----