e10vq

0000950135-07-004869.txt : 20070809 0000950135-07-004869.hdr.sgml : 20070809 20070809141358 ACCESSION NUMBER: 0000950135-07-004869 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070809 DATE AS OF CHANGE: 20070809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLMAN INC CENTRAL INDEX KEY: 0000812708 STANDARD INDUSTRIAL CLASSIFICATION: PLASTIC MAIL, SYNTH RESIN/RUBBER, CELLULOS (NO GLASS) [2820] IRS NUMBER: 041671740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10033 FILM NUMBER: 071039444 BUSINESS ADDRESS: STREET 1: 595 SHREWSBURY AVENUE CITY: SHREWSBURY STATE: NJ ZIP: 07702 BUSINESS PHONE: (732)212-3300 MAIL ADDRESS: STREET 1: P.O. BOX 31331 CITY: CHARLOTTE STATE: NC ZIP: 28231 10-Q 1 b66158wle10vq.htm WELLMAN, INC. e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10033

WELLMAN, INC.

(Exact name of registrant as specified in its charter)


Delaware		04-1671740

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1041 521 Corporate Center Drive
Fort Mill, South Carolina		29707

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (803) 835-2000

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 31, 2007, there were 32,874,382 shares of the registrant’s Class A common stock, $0.001 par value, outstanding and no shares of Class B common stock outstanding.

WELLMAN, INC.
INDEX


	Page No.
PART I – FINANCIAL INFORMATION

ITEM 1 – Financial Statements (Unaudited, except where noted)

Condensed Consolidated Statements of Operations - For the three and six months ended June 30, 2007 and 2006		3

Condensed Consolidated Balance Sheets - June 30, 2007 and December 31, 2006 (Audited)		4

Condensed Consolidated Statements of Stockholders ‘ Equity - For the six months ended June 30, 2007 and the year ended December 31, 2006 (Audited)		5

Condensed Consolidated Statements of Cash Flows - For the six months ended June 30, 2007 and 2006		6

Notes to Condensed Consolidated Financial Statements		7

ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

ITEM 3 – Quantitative and Qualitative Disclosures About Market Risk		28

ITEM 4 – Controls and Procedures		28

PART II — OTHER INFORMATION

ITEM 1 – Legal Proceedings		29

ITEM 4 – Submission of Matters to a Vote of Security Holders		30

ITEM 6 – Exhibits and Reports on Form 8-K		31

SIGNATURES		32
EX-10.2 WELLMAN, INC. FOURTH AMENDED AND RESTATED MANAGEMENT INCENTIVE COMPENSATION PLAN FOR THE EXECUTIVE GROUP
EX-10.12 EMPLOYMENT AGREEMENT DATED AS OF AUGUST 8, 2007 BETWEEN THE COMPANY AND STEVEN L. ATES
EX-10.13 EMPLOYMENT AGREEMENT DATED AS OF AUGUST 8, 2007 BETWEEN THE COMPANY AND IAN K.SHAW
EX-10.14 EMPLOYMENT AGREEMENT DATED AS OF AUGUST 8, 2007 BETWEEN THE COMPANY AND DAVID R. STYKA
EX-31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EX-31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EX-32.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EX-32.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


ITEM 1.		FINANCIAL STATEMENTS

WELLMAN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions, except per share data)


	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2007			2006			2007			2006
Net sales	$	333.7		$	345.2		$	688.2		$	671.2
Cost of sales		322.2			331.3			670.8			647.9

Gross profit		11.5			13.9			17.4			23.3
Selling, general and administrative expenses		12.1			13.0			25.8			26.9
Restructuring charges		0.2			1.1			3.1			1.5
Provision for uncollectible accounts		0.2			—			0.3			0.1
Other (income) expense, net		(8.5	)		1.1			(11.2	)		7.2

Operating income (loss)		7.5			(1.3	)		(0.6	)		(12.4	)
Interest expense, net		15.3			14.0			30.5			26.6

Loss from continuing operations before income taxes		(7.8	)		(15.3	)		(31.1	)		(39.0	)
Income tax expense (benefit)		—			(4.4	)		0.1			(12.6	)

Loss from continuing operations		(7.8	)		(10.9	)		(31.2	)		(26.4	)
Loss from discontinued operations, net of income taxes (benefit)		(3.6	)		(0.8	)		(4.5	)		(1.3	)

Net loss	$	(11.4	)	$	(11.7	)	$	(35.7	)	$	(27.7	)

Net loss attributable to common stockholders:
Net loss	$	(11.4	)	$	(11.7	)	$	(35.7	)	$	(27.7	)
Accretion		(3.8	)		(3.6	)		(7.5	)		(7.0	)

Net loss attributable to common stockholders	$	(15.2	)	$	(15.3	)	$	(43.2	)	$	(34.7	)

Basic and diluted net loss per common share:
Net loss attributable to common stockholders from continuing operations	$	(0.36	)	$	(0.46	)	$	(1.20	)	$	(1.05	)
Net loss attributable to common stockholders from discontinued operations		(0.11	)		(0.02	)		(0.14	)		(0.04	)

Net loss attributable to common stockholders	$	(0.47	)	$	(0.48	)	$	(1.34	)	$	(1.09	)


Dividends per common share	$	0.02		$	0.05		$	0.04		$	0.10

See Notes to Condensed Consolidated Financial Statements.

WELLMAN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)


	June 30,			December 31,
	2007			2006
	(Unaudited)			(Note 1)
ASSETS:
Current assets:
Cash and cash equivalents	$	—		$	—
Accounts receivable, less allowance of $2.6 in 2007 and $2.2 in 2006		185.6			190.7
Inventories		146.2			143.6
Prepaid expenses and other current assets		33.6			35.6

Total current assets		365.4			369.9
Property, plant and equipment, at cost:
Land, buildings and improvements		100.0			99.5
Machinery and equipment		1,045.9			1,041.2
Construction in progress		12.6			9.0

		1,158.5			1,149.7
Less accumulated depreciation		588.2			560.3

Property, plant and equipment, net		570.3			589.4
Other assets and deferred income taxes, net		47.7			34.0

	$	983.4		$	993.3


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	95.7		$	95.2
Accrued liabilities		32.3			38.8
Accrued liabilities associated with assets held for sale		—			10.7
Current portion of long-term debt		—			0.3

Total current liabilities		128.0			145.0
Long-term debt		599.5			579.3
Deferred income taxes and other liabilities		85.5			61.9

Total liabilities		813.0			786.2
Stockholders’ equity:
Series A preferred stock, $0.001 par value, 5,000,000 shares authorized, 4,502,143 shares issued and outstanding		70.5			67.5
Series B preferred stock, $0.001 par value; 6,700,000 shares authorized, issued and outstanding		104.9			100.4
Class A common stock, $0.001 par value; 100,000,000 shares authorized, 35,374,382 shares issued in 2007 and 35,202,944 in 2006		—			—
Class B common stock, $0.001 par value, 5,500,000 shares authorized, no shares issued		—			—
Paid-in capital		247.7			248.3
Common stock warrants		4.9			4.9
Accumulated other comprehensive income		29.3			28.4
Accumulated deficit		(237.4	)		(192.9	)
Less common stock in treasury at cost: 2,500,000 shares		(49.5	)		(49.5	)

Total stockholders’ equity		170.4			207.1

	$	983.4		$	993.3

See Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


																		Accumulated
	Series A				Series B				Class A							Common		Other
	Preferred				Preferred				Common				Paid-In			Stock		Comprehensive			Accumulated			Treasury
	Stock Issued				Stock Issued				Stock Issued				Capital			Warrants		Income			(Deficit)			Stock			Total
(in millions)	Shares		Amount		Shares		Amount		Shares		Amount
Balance at December 31, 2005		4.5	$	61.7		6.7	$	91.8		34.9	$	—	$	247.2		$	4.9	$	22.2		$	(61.5	)	$	(49.5	)	$	316.8
Net loss																						(112.4	)					(112.4	)
Currency translation adjustments																			6.5									6.5
Fair value of derivatives																			(0.3	)								(0.3	)

Total comprehensive loss																												(106.2	)
Cash dividends ($0.14 per share)																						(4.6	)					(4.6	)
Accretion				5.8				8.6														(14.4	)					—
Issuance of restricted stock, net										0.3		—		1.1														1.1

Balance at December 31, 2006		4.5		67.5		6.7		100.4		35.2		—		248.3			4.9		28.4			(192.9	)		(49.5	)		207.1
Net loss																						(35.7	)					(35.7	)
Fair value of derivatives																			(1.0	)								(1.0	)
Currency translation adjustments																			1.9									1.9

Total comprehensive loss																												(34.8	)
Cash dividends ($0.04 per share)																						(1.3	)					(1.3	)
Accretion				3.0				4.5														(7.5	)					—
Issuance of restricted stock, net										0.2		—		(0.6	)													(0.6	)

Balance at June 30, 2007 (unaudited)		4.5	$	70.5		6.7	$	104.9		35.4	$	—	$	247.7		$	4.9	$	29.3		$	(237.4	)	$	(49.5	)	$	170.4

See Notes to Condensed Consolidated Financial Statements.

WELLMAN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED)
(In millions)


	2007			2006
Cash flows from operating activities:
Net loss	$	(35.7	)	$	(27.7	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations, net of tax		4.5			1.3
Depreciation		25.9			25.9
Amortization		0.6			1.1
Amortization of acquisition costs of long-term raw material contract		7.8			7.8
Amortization in interest expense, net		2.2			2.1
Deferred income taxes and other		(1.0	)		(13.3	)
Changes in operating assets and liabilities		(4.6	)		(54.1	)


Net cash used in operating activities		(0.3	)		(56.9	)


Cash flows from investing activities:
Additions to property, plant and equipment		(6.1	)		(21.0	)

Net cash used in investing activities		(6.1	)		(21.0	)


Cash flows from financing activities:
Borrowings under long-term debt, net		20.4			89.9
Dividends paid on common stock		(1.3	)		(3.3	)
Debt issuance and financing costs		—			(2.3	)


Net cash provided by financing activities		19.1			84.3


Discontinued Operations:
Operating activities		(10.4	)		(5.4	)
Investing activities		(2.3	)		(0.9	)
Financing activities		—			(0.1	)


Net cash used in discontinued operations		(12.7	)		(6.4	)


Effect of exchange rate changes on cash and cash equivalents		—			—


Decrease in cash and cash equivalents		—			—
Cash and cash equivalents at beginning of period		—			—

Cash and cash equivalents at end of period	$	—		$	—

Supplemental cash flow data:
Cash paid during the period for:
Interest, net	$	29.2		$	24.6
Income taxes	$	0.6		$	0.4

See Notes to Condensed Consolidated Financial Statements.

WELLMAN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In millions, except per share data)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six-month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

The Condensed Consolidated Balance Sheet (“Balance Sheet”) at December 31, 2006 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in Wellman, Inc.’s annual report on Form 10-K for the year ended December 31, 2006. The Condensed Consolidated Financial Statements include Wellman, Inc. and the entities we control, and all material intercompany transactions have been eliminated. When used in these Condensed Consolidated Financial Statements, “Wellman,” “we,” “our,” and “us” each refers to Wellman, Inc. and entities it controls.

2. ACCOUNTING CHANGES AND RECENTLY ISSUED PRONOUNCEMENTS

Accounting Changes

On January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), “Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting and financial statement reporting for uncertainty in income taxes recognized by prescribing a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. A tax position that meets the recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The unrecognized tax benefit is defined as the difference between positions taken in the tax return and the recognized benefit in the financial statements. The effect of adoption was reported as a change in accounting principle. There was no effect on our accumulated deficit at January 1, 2007. We recorded a reduction of approximately $1.8 million in unrecognized tax benefits and an increase in our valuation allowance of approximately $1.8 million. As of January 1, 2007, after adopting FIN 48, we had uncertain tax liabilities of approximately $24.0 million which have been considered in determining the future utilization of tax carry-forwards. We recorded approximately $24.0 million to reflect the benefit of net operating losses and other tax carry-forwards and a corresponding $24.0 million of uncertain tax liabilities. If the tax positions that give rise to these uncertain tax liabilities were favorably resolved, then in our current situation, we would not record any tax benefit in our Statement of Operations unless we received a cash refund because of the corresponding reduction in our valuation allowance. There are an additional $2.0 million of uncertain tax benefits, which, if favorably resolved, would result in a tax benefit in our Statement of Operations. Our policy is to reflect any required interest expense and penalties under FIN 48 as a component of tax expense, and we had $0.2 million accrued for these liabilities at June 30, 2007. Our federal net operating loss carry-forward commenced in 1999 and may be adjusted until it

is utilized. Our major state and foreign jurisdictions have the potential for adjustments for periods after 2001.

In February 2007, we elected to participate in the Internal Revenue Service’s FIN 48 Initiative to expedite resolution of an uncertain tax position regarding our repatriation of foreign earnings. We have reached a tentative settlement with the Internal Revenue Service, pending review by the Joint Committee on Taxation. The tax effect will be recorded in the period of resolution as a discrete item. The tentative settlement will result in a cash tax refund and a tax benefit in our Statements of Operations of approximately $2.7 million. Our net deferred tax position will remain the same, because our unrecognized tax benefit relating to the repatriation of our foreign earnings and our tax carry-forwards, net of the valuation allowance, which are recorded in Other assets and deferred income taxes, net on our Condensed Consolidated Balance Sheets, will both change by approximately $20 million.

New Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”. This Statement defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. It will be effective for fiscal years beginning after November 15, 2007. We have not yet completed our evaluation of the effects of this standard.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.” This Statement permits entities to measure certain financial instruments and other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings (loss) at each subsequent reporting date. It will be effective for fiscal years beginning after November 15, 2007. We have not yet completed our evaluation of the effects of this standard.

3. INVENTORIES

Inventories consisted of the following:


	June 30,		December 31,
(In millions)	2007		2006
Raw materials	$	53.1	$	54.9
Finished and semi-finished goods		87.3		82.8
Supplies		5.8		5.9

	$	146.2	$	143.6

4. JOHNSONVILLE FIBERS CLOSURE

During the third quarter of 2006, we announced a plan to close our Johnsonville fibers operation with the intention of improving our operating results, reducing our working capital and lowering our overall debt. We closed 160 million pounds of polyester staple fiber capacity at our Johnsonville, South Carolina facility in the fourth quarter of 2006 and consolidated all of our U.S. polyester staple fiber production into our Palmetto facility, located in Darlington, South Carolina, which has an annual capacity of 500 million pounds. Certain equipment used to produce Wellstrand^®(specialty polyester and nylon coarse denier fibers), located at our Johnsonville facility, was sold during the second quarter of 2007.

During the year ended December 31, 2006, we recorded total charges related to the Johnsonville fibers closure of $33.3 million, approximately $29 million of which had no cash impact. In the first half of 2007, we reduced our accruals associated with the Johnsonville fibers closure by approximately $2.1 million, resulting primarily from our ability to sell some of the equipment and remaining inventory at prices greater than originally expected.

Included in the total charges of $33.3 million was an employee restructuring charge of $4.1 million, which related primarily to termination notifications given to approximately 360 union hourly and salaried positions on September 26, 2006. The following represents changes to the employee restructuring charges since the plan was adopted:


	Employee
	Restructuring
(In millions)	Charges
Accruals during the third quarter of 2006	$	4.1
Adjustments to accrual in fourth quarter of 2006		(0.2	)
Payments during 2006		(1.6	)

Remaining accrual at December 31, 2006		2.3
Payments in first quarter of 2007		(1.9	)

Remaining accrual at March 31, 2007		0.4
Payments in second quarter of 2007		(0.2	)

Remaining accrual at June 30, 2007	$	0.2

The remaining accrual of $0.2 million is expected to be paid out during the remainder of 2007.

5. RESTRUCTURING CHARGES

During the first quarter of 2007, we announced a restructuring of our organization. We expect to improve our ability to deliver high-quality, value added products to our customers and to operate with a more efficient cost structure. By combining our chemical-based operations into one segment, we will be able to eliminate duplicate costs and maximize our operating performance. As part of this reorganization, our chemical-based segment recorded a severance accrual of $2.9 million, which was reflected in Operating loss in our Condensed Consolidated Statements of Operations during the first quarter of 2007. The following represents changes to this accrual since the plan was adopted:


	Severance
(In millions)	Accrual
Accruals recorded in first quarter of 2007	$	2.9
Payments in first quarter 2007		(1.5	)

Accrual balance at March 31, 2007		1.4
Payments in second quarter of 2007		(1.2	)

Remaining accrual at June 30, 2007	$	0.2

The remaining accrual of $0.2 million is expected to be paid out during the remainder of 2007.

During the first quarter of 2006, we announced a plan to reduce costs in our European polyester staple fibers operations, which included reducing the number of positions and certain other changes. In conjunction with this plan, our recycled-based segment recorded a severance charge of $1.5 million in the first half of 2006, which was reflected in Operating loss in our Condensed Consolidated Statements of Operations. The following represented changes in the accruals:


	Severance
(In millions)	Accrual
Accruals recorded in first quarter of 2006	$	0.4

Accrual balance at March 31, 2006		0.4
Adjustments to accrual in second quarter of 2006		1.1
Payments in second quarter of 2006		(0.4	)

Remaining accrual at June 30, 2006	$	1.1

The remaining accrual was paid during the second half of 2006.

6. DISCONTINUED OPERATIONS

During the fourth quarter of 2006, after a review of our strategic alternatives, we made a decision to dispose of our European PET resins business. These assets, which were previously included in our chemical-based segment, met the criteria for, and were classified as “held for sale” in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets.”

On May 31, 2007, we sold our European PET resins business. The $29.1 million net loss on sale included an impairment loss of $19.1 million ($18.5 million after tax) recorded in 2006 to reduce the value of these assets to their fair value less expected costs of disposal. An expected net loss on disposal of $7.1 million was recorded in the fourth quarter of 2006, and an additional loss of $3.6 million was recorded in the first half of 2007. The loss was included in discontinued operations in our Condensed Consolidated Statements of Operations.

Results for discontinued operations consist of the following:


	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
(In millions)	2007			2006			2007			2006
Net sales	$	13.2		$	17.3		$	33.0		$	34.0

Loss from discontinued operations before income tax Benefit	$	(0.4	)	$	(1.5	)	$	(0.9	)	$	(2.6	)
Income tax benefit		—			(0.7	)		—			(1.3	)

Loss from discontinued operations, net		(0.4	)		(0.8	)		(0.9	)		(1.3	)

Loss on disposal of business		(3.2	)		—			(3.6	)		—
Income tax benefit		—			—			—			—

Loss on disposal of business, net		(3.2	)		—			(3.6	)		—

Loss from discontinued operations, net	$	(3.6	)	$	(0.8	)	$	(4.5	)	$	(1.3	)

7. BORROWINGS

During 2006 and the first five months of 2007, we had a total of $150.0 million in interest rate hedging agreements, which were entered into to reduce our exposure to floating rate debt. These matured in June and July 2007.

We entered into the following interest rate hedging agreements:

	•		In June 2007, we purchased a three year $50.0 million interest rate cap which provides that for quarterly periods when three-month LIBOR exceeds 6.50% on its reset date, we will receive the difference between the three-month LIBOR and 6.50% for such periods;

	•		In July 2007, we entered into a two year $50.0 million interest rate swap where we receive three-month LIBOR and pay 5.255% quarterly;

	•		In July 2007, we entered into a two year $50.0 million interest rate collar which provides that for quarterly periods when three-month LIBOR exceeds 6.00% on its reset date, we will receive the difference between the three-month LIBOR and 6.00%, and for quarterly periods when three-month LIBOR is less than 3.61% on its reset date, we will pay the difference between the three-month LIBOR and 3.61%.

8. OTHER (INCOME) EXPENSE, NET

Other (income) expense, net consisted of the following pretax amounts for the periods indicated:


	Three months ended						Six months ended
	June 30,						June 30,
(in millions)	2007			2006			2007			2006
Hurricane Katrina (proceeds) costs, net	$	(6.1	)	$	1.4		$	(5.9	)	$	7.1
Johnsonville fibers closure costs, net (See Note 4)		(1.1	)		—			(2.1	)		—
Legal and settlement costs		—			—			(1.9	)		—
Gain on sale of assets		(1.4	)		—			(1.4	)		—
Costs relating to anti-dumping activities, net		0.1			(0.3	)		0.1			0.1

	$	(8.5	)	$	1.1		$	(11.2	)	$	7.2

On August 27, 2005, we shut down our Pearl River facility in Hancock County, Mississippi, in anticipation of hurricane Katrina. The damages caused by the hurricane extended the temporary shutdown of the entire facility. The actual damages included direct damage to the plant site; fixed costs incurred during the shutdown period; incremental freight costs above our normal freight expense due to the disruption in rail service; infrastructure support to maintain an adequate living environment for both our employees and contract workers; inventory spoilage; rail car damage; and monthly lease cost related to rail cars that were damaged and inoperable. The facility re-started production in two phases. One production line, with an annual capacity of 280 million pounds, resumed production the week of October 31, 2005. The second production line, with the same annual capacity, started at the end of November, 2005. As of June 30, 2007, we incurred total costs of $32.1 million. We received $6.0 million of insurance proceeds in the second quarter of 2007 and $6.6 million of proceeds in the fourth quarter of 2006, attributable to hurricane Katrina, resulting in net cash costs of $19.5 million. These proceeds, which were included in net cash used in operating activities in our Consolidated Statement of Cash Flows for the respective periods, were used to pay down debt.

In addition to the costs listed above, hurricane Katrina also delayed the completion of our PET resin expansion at our Pearl River facility. As a result of this delay and 2 ¹/2 months of lost production at this facility, we incurred a substantial amount of lost profits.

We have insurance that covers substantially all of the costs described above as well as lost profits, based on the expected production of the facility, resulting from hurricane Katrina in excess of our $20 million deductible.

Legal costs consisted of fees and other expenses in connection with an investigation by the Department of Justice (which it has since abandoned) and related civil litigation. During the first quarter of 2007, we

reduced our accrual related to this accrued legal and settlement liability by $1.9 million. For additional information, see Note 11 and Part II. Item 1. “Legal Proceedings.”

In the second quarter of 2007, we sold the fiber assets at our Pearl River facility and recorded a net gain of approximately $1.4 million.

In October 2000, the U.S. Congress enacted the Continued Dumping and Subsidy Offset Act of 2000 (the “CDO”). Under the CDO, any anti-dumping duties collected are generally distributed in the fourth quarter to the injured companies who file claims to that effect. Costs incurred for defending the continuation of these anti-dumping duties totaled $0.1 million for the three and six months ended June 30, 2007.

9. NET LOSS PER COMMON SHARE

The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per common share for the periods indicated:


	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
(In millions)	2007			2006			2007			2006
Numerator for basic and diluted net loss attributable to common stockholders per common share:
Loss from continuing operations	$	(7.8	)	$	(10.9	)	$	(31.2	)	$	(26.4	)
Accretion (a)		(3.8	)		(3.6	)		(7.5	)		(7.0	)

Net loss attributable to common stockholders from continuing operations		(11.6	)		(14.5	)		(38.7	)		(33.4	)
Net loss attributable to common stockholders from discontinued operations		(3.6	)		(0.8	)		(4.5	)		(1.3	)

Net loss attributable to common stockholders	$	(15.2	)	$	(15.3	)	$	(43.2	)	$	(34.7	)

Denominator:
Denominator for basic net loss attributable to common stockholders per common share – weighted-average shares		32.3			31.9			32.3			31.9
Effect of dilutive securities:
Employee stock options, warrants, and restricted stock		—			—			—			—
Preferred stock – if converted (b)		—			—			—			—

Denominator for diluted net loss attributable to common stockholders per common share – adjusted weighted-average shares		32.3			31.9			32.3			31.9


(a)		On June 27, 2007, the conversion price for the Warburg Pincus preferred stock was set at $6.75. Accretion is the sum of (i) the greater of the stated increase in the liquidation preference or the fair market value of increase of the liquidation preference and (ii) the amortization of the reduction in book value of the preferred stock that resulted from the issuance of warrants.

(b)		These shares were not included in the EPS calculation, since their effect would have been anti-dilutive, but may be included under the if-converted method in future calculations.

10. DEFINED BENEFIT PLANS

The components of our net periodic pension cost are as follows for the periods indicated:


	Three Months Ended												Six Months Ended
	June 30,												June 30,
	2007						2006						2007						2006
(In millions)	Domestic			Foreign			Domestic			Foreign			Domestic			Foreign			Domestic			Foreign
Service cost	$	—		$	0.8		$	0.2		$	1.1		$	—		$	1.6		$	0.4		$	2.2
Interest cost		0.9			1.2			0.9			1.2			1.8			2.4			1.7			2.4
Expected return on assets		(0.9	)		(1.6	)		(0.8	)		(1.3	)		(1.8	)		(3.1	)		(1.6	)		(2.6	)
Curtailment gain		—			—			—			—			—			—			—			(0.1	)

Total net periodic pension expense	$	0.0		$	0.4		$	0.3		$	1.0		$	0.0		$	0.9		$	0.5		$	1.9

Employer contributions

Contributions to our defined benefit plans in 2007 are expected to be $7.5 million. We expect to contribute $6.7 million to our domestic defined benefit plans, and we have contributed $0.8 million to our foreign plans during 2007. As of June 30, 2007, $2.0 million has been contributed to our domestic plans. As a result of the sale of our foreign operations, we do not expect to make any future contributions to these foreign plans. For additional information on the sale of our European fibers businesses, see Note 14.

11. COMMITMENTS AND CONTINGENCIES

We have commitments and contingent liabilities, including legal proceedings, environmental liabilities, and various operating lease commitments.

Our operations are subject to extensive laws and regulations governing air emissions, wastewater discharges and solid and hazardous waste management activities. Our policy is to expense environmental remediation costs 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, we currently estimate our future non-capital expenditures related to environmental matters to range between approximately $2.6 million and $7.2 million on an undiscounted basis. In connection with these expenditures, we have accrued undiscounted liabilities of approximately $5.4 million at June 30, 2007 and $5.1 million at December 31, 2006, which are reflected as other noncurrent liabilities in our Condensed Consolidated Balance Sheets. These accruals represent our best estimate of probable non-capital environmental expenditures. These non-capital expenditures are expected to be incurred over the next 6 to 30 years. We do not expect to incur any significant future capital expenditures related to environmental matters.

The final resolution of these contingencies could result in expenses different than current accruals, and, therefore, could have an impact on our consolidated financial results in a future reporting period. However, we believe the ultimate outcome will not have a significant effect on our consolidated results of operations and financial position.

The following represents changes in accrued undiscounted liabilities for environmental remediation costs:


	Six Months Ended
	June 30,
(In millions)	2007			2006
Balance at beginning of period	$	5.1		$	6.6
Changes in remediation costs		0.5			(0.2	)
Expenditures		(0.2	)		(0.1	)

Balance at end of period	$	5.4		$	6.3

There are no environmental matters from which a material loss is reasonably possible in addition to amounts currently accrued.

We have entered into multiple raw material purchase agreements in the ordinary course of business, which may require a notice period for cancellation and may contain early cancellation penalties.

In January 2001, we received a document subpoena in connection with a federal grand jury investigation of pricing practices in the polyester staple fiber industry. We cooperated with the investigation by producing documents in response to this subpoena. In September 2004, the Department of Justice informed us that it abandoned the investigation and would not seek indictments against Wellman or any of its employees in connection with this investigation.

Following the public disclosure of the investigation, numerous producers of polyester staple fiber, including Wellman, were named in 24 federal actions brought by direct purchasers of polyester staple fiber asserting claims of violations of U.S. antitrust laws due to alleged price fixing and market allocation in the polyester staple fiber industry. Ten of these cases were brought as class actions. Direct and indirect purchasers also brought a class action against Wellman and certain other companies in Canada under Canadian law. All of these cases have been settled.

In addition to the cases discussed above, indirect purchasers of polyester staple fiber products filed 41 purported class actions alleging violations of federal antitrust laws, state antirust or unfair competition laws and certain state consumer protection acts in one federal court and various state courts. Each lawsuit alleged a conspiracy to fix prices of polyester staple fiber products. In addition, certain of the actions claim restitution, injunction against alleged illegal conduct and other equitable relief. These cases were filed in Arizona, California, the District of Columbia, Florida, Kansas, Massachusetts, Michigan, New Mexico, North Carolina South Dakota, Tennessee, West Virginia and Wisconsin and sought damages of unspecified amounts, attorneys’ fees and costs and other, unspecified relief. All of these cases have been settled, and the respective courts have approved the settlements. Except for the California settlement, these settlements are now final and the Company has been dismissed from all but two of the settled cases. Of the final two, one is expected to be dismissed on the Company’s motion for summary judgment while the other is awaiting execution by the court of a stipulated dismissal order. In California, the court has approved the settlement agreement. We expect that the court will enter the final approval order after it receives further documentation regarding an issue that has no impact on the Company.

We vehemently deny that we or our employees engaged in price fixing or customer allocation.

The following represents changes in accrued legal and settlement liabilities related to the above-mentioned federal and class action lawsuits:


	Six Months Ended
	June 30,
(In millions)	2007			2006
Balance at beginning of period	$	3.6		$	4.9
Adjustments to accruals		(1.9	)		—
Payments		(1.2	)		(1.2	)

Balance at end of period	$	0.5		$	3.7

We are involved in various claims and legal actions arising in the ordinary course of business. We do not believe the ultimate disposition of this litigation will have a material adverse effect on our consolidated financial position or results of operations.


12.		FOREIGN CURRENCY TRANSLATION AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The financial statements of foreign subsidiaries have been translated into U.S. dollar equivalents in accordance with SFAS No. 52, “Foreign Currency Translation.” All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Income statement amounts have been translated using average exchange rates. The gains and losses resulting from the changes in exchange rates from period to period have been reported in other comprehensive income (loss). The effect on our Condensed Consolidated Statements of Operations of transaction gains and losses is insignificant for all periods presented.

Accumulated other comprehensive income is comprised of foreign currency translation and the effective portion of the gain (loss) for derivatives designated and accounted for as cash flow hedges. Substantially all of the earnings associated with the Company’s investments in foreign entities are considered to be permanently invested, and no provision for U.S. federal and state income taxes on those earnings or translation adjustments has been provided. Comprehensive loss was $(10.7) million and $(9.5) million for the three months ended June 30, 2007 and 2006, respectively, and $(34.8) million and $(22.9) million for the six months ended June 30, 2007 and 2006, respectively.


13.		SEGMENT INFORMATION

In the first quarter of 2007, we made a strategic decision to focus on our chemical-based PET resin and polyester staple fiber businesses. We changed our management organization and internal financial reporting structure to reflect and support our new strategy. We moved from a divisional product-based organization to a functional one, which allows us to better utilize our human resources, focus on serving our end markets, reduce operating and logistical costs, and improve efficiencies at our manufacturing facilities. As a result, our operations are now grouped into two reportable operating segments: a chemical-based segment and a recycled-based segment.

Our chemical-based segment manufactures and markets:

	•		PermaClear^®, PermaClear HP^®, and Thermaclear Ti^® solid-stated PET resin from chemical-based raw materials for use in the manufacturing of plastic beverage bottles and other food packaging and

	•		Fortrel^® chemical-based polyester staple fiber for use in home furnishing, non-woven, apparel, and industrial products.

Our recycled-based segment manufactures and markets:

•

Wellamid^® and Wellamid Ecolon^® recycled-based nylon engineering resin in the U.S. for use in the injection molding industry and

•

Recycled-based polyester staple fiber in Europe under the trade names of Wellbond^®, Wellene^®, and Fillwell^® for use in non-woven, home furnishing, and industrial products.

EBITDA, as defined, is the primary financial measure used by our Chief Operating Decision Maker (i.e., our Chief Executive Officer) to assess performance and allocate resources. As such, EBITDA, as defined, is the financial measurement under our internal financial reporting structure used to report segment profit (loss) under SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Intersegment transactions, which are not material, have been eliminated and historical exchange rates have been applied to the data.


	Chemical-		Recycled-
(In millions)	Based Segment		Based Segment			Total
Three months ended June 30, 2007
Revenues	$	284.0	$	49.7		$	333.7
Segment profit (loss) (a)		16.7		(0.1	)		16.6
Depreciation and amortization from continuing operations		15.4		1.9			17.3
Assets		773.1		140.0			913.1
Three months ended June 30, 2006 (Restated)
Revenues	$	275.5	$	69.7		$	345.2
Segment profit (a)		16.0		2.7			18.7
Depreciation and amortization from continuing operations		14.7		3.0			17.7
Assets		857.1		196.8			1,053.9

Six months ended June 30, 2007
Revenues	$	579.8	$	108.4		$	688.2
Segment profit (a)		21.5		1.4			22.9
Depreciation and amortization from continuing operations		30.7		3.6			34.3
Six months ended June 30, 2006 (Restated)
Revenues	$	527.4	$	143.8		$	671.2
Segment profit (a)		24.6		6.3			30.9
Depreciation and amortization from continuing operations		28.8		6.0			34.8


(a)		The measurement for segment profit (loss) is EBITDA, as defined.

Following are reconciliations to corresponding totals in the accompanying Condensed Consolidated Financial Statements:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2007			2006			2007			2006
Segment Profit (Loss) (a)
Total for reportable segments	$	16.6		$	18.7		$	22.9		$	30.9
Interest expense, net		(15.3	)		(14.0	)		(30.5	)		(26.6	)
Depreciation and amortization		(17.3	)		(17.7	)		(34.3	)		(34.8	)
Permitted Adjustments (1)		8.2			(2.3	)		10.8			(8.5	)

Loss from continuing operations before income tax Benefit	$	(7.8	)	$	(15.3	)	$	(31.1	)	$	(39.0	)

Assets
Total for reportable segments	$	913.1		$	1,053.9
Corporate assets (2)		70.3			82.0

	$	983.4		$	1,135.9


(1)		Permitted Adjustments are adjustments specified in our debt agreements, which are used in the calculation of EBITDA, as defined that is used to report our segment profit (loss). Permitted adjustments included the following for the periods indicated:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2007			2006			2007			2006
Permitted Adjustments:
Hurricane Katrina proceeds (costs), net (See Note 8)	$	6.1		$	(1.4	)	$	5.9		$	(7.1	)
Johnsonville fibers disposal costs, net (See Note 4)		1.1			—			2.1			—
Legal and settlement costs (See Note 8)		—			—			1.9			—
Gain on sale of assets (See Note 8)		1.4			—			1.4			—
Provision for uncollectible accounts		(0.2	)		—			(0.3	)		(0.1	)
Non-cash inventory reserves		—			(0.8	)		—			(1.2	)
Other		(0.2	)		(0.1	)		(0.2	)		(0.1	)

Total Permitted Adjustments	$	8.2		$	(2.3	)	$	10.8		$	(8.5	)


(2)		Corporate assets include cash, certain prepaid expenses, construction in progress, and certain other assets not allocated to the segments.

14. SUBSEQUENT EVENT

On July 26, 2007, we, entities that we control, and an affiliate of AURELIUS AG (“AURELIUS”) entered into a Sale and Purchase Agreement, where AURELIUS purchased our European fibers businesses for approximately $38 million in cash, subject to certain adjustments, including cash at closing and working capital.

We expect to incur certain expenses associated with the sale, totaling $2.6 million, the majority of which will be paid in the third quarter of 2007.


ITEM 2.		MANAGEMENT ‘S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT DEVELOPMENTS

Sale of European Recycled-Based Fibers Business

We expect to incur certain expenses associated with the sale, totaling $2.6 million, the majority of which will be paid in the third quarter of 2007.

New Organization

In the first quarter of 2007, we made a strategic decision to focus on our chemical-based PET resin and polyester staple fiber businesses. This allows us to capitalize on our two world-class, state-of-the-art facilities which utilize some of the latest technology to produce a wide variety of high quality, value-added products. The scale and flexibility of these facilities allow us to service the PET resin and fiber markets with the right products at competitive costs. We changed our management organization and internal financial reporting structure to reflect and support our new strategy. We moved from a divisional organization to a functional one, which allows us to better utilize our human resources, focus on serving our end markets, reduce operating and logistical costs, and improve efficiencies at our manufacturing facilities. As a result, our operations are now grouped into two reportable operating segments: a chemical-based segment and a recycled-based segment. We have previously announced that we are exploring strategic alternatives for our non-core business within the recycled-based segment.

GENERAL

Our operations are grouped into two reportable operating segments: a chemical-based segment and a recycled-based segment. Our chemical-based segment is principally engaged in the manufacturing and marketing of high-quality PermaClear^® polyethylene terephthalate (“PET”) packaging resin and Fortrel^® polyester staple fiber. This segment has stated annual operating capacity to manufacture approximately 1.9 billion pounds of polyester, consisting of 1.4 billion pounds of solid-stated PET resin and 0.5 billion pounds of polyester staple fiber. We manufacture these products at two facilities in the United States.

Our recycled-based segment is principally engaged in the manufacturing and marketing of Wellamid^{^®}and Wellamid Ecolon^® recycled-based nylon engineering resin for use in the injection molding industry. This segment has stated annual operating capacity to manufacture approximately 70 million pounds at our Johnsonville, S.C. facility. We are exploring strategic alternatives for this non-core business to allow us to improve our operating results, generate cash to pay down debt, and provide the highest possible return to our stockholders.

North American and global PET resin demand continues to grow, driven by new product applications, conversions from other packaging materials to PET, and overall growth in beverage and food consumption. Demand for polyester staple fiber is subject to changes in consumer preferences and spending and retail sales

patterns. Imports continue to negatively impact the United States polyester staple fiber and PET resin markets, adversely affecting our operating results.

Our financial results are primarily determined by our sales volume and raw material margin, which is the difference between net selling price and raw material cost. Both PET resin and polyester staple fiber volume and raw material margins increase or decrease as a result of supply and demand factors, competitive conditions, global economic and market conditions, export and import activity, and the prices of competing materials. Seasonal factors, such as weather and the vacation and holiday closings of our facilities or those of our customers, may also affect our operations. Given our substantial unit volumes, the impact on profitability of changes in raw material margins is significant. A one-cent per pound change in raw material margin on approximately 1.9 billion pounds of sales volume results in an annual change of approximately $19.0 million in pre-tax earnings.

IMPACT OF ACCOUNTING CHANGES AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), “Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting and financial statement reporting for uncertainty in income taxes recognized by prescribing a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. A tax position that meets the recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The unrecognized tax benefit is defined as the difference between positions taken in the tax return and the recognized benefit in the financial statements. The effect of adoption was reported as a change in accounting principle. There was no effect on our accumulated deficit at January 1, 2007. We recorded a reduction of approximately $1.8 million in unrecognized tax benefits and an increase in our valuation allowance of approximately $1.8 million. As of January 1, 2007, after adopting FIN 48, we had uncertain tax liabilities of approximately $24.0 million which have been considered in determining the future utilization of tax carry-forwards. We recorded approximately $24.0 million to reflect the benefit of net operating losses and other tax carry-forwards and a corresponding $24.0 million of uncertain tax liabilities. If the tax positions that give rise to these uncertain tax liabilities were favorably resolved, then in our current situation, we would not record any tax benefit in our Statement of Operations unless we received a cash refund because of the corresponding reduction in our valuation allowance. There are an additional $2.0 million of uncertain tax benefits, which, if favorably resolved, would result in a tax benefit in our Statement of Operations. Our policy is to reflect any required interest expense and penalties under FIN 48 as a component of tax expense, and we had $0.2 million accrued for these liabilities at June 30, 2007. Our federal net operating loss carry-forward commenced in 1999 and may be adjusted until it is utilized. Our major state and foreign jurisdictions have the potential for adjustments for periods after 2001.

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”. This Statement defines defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting

principles, and expands disclosures about fair value measurements. It will be effective for fiscal years beginning after November 15, 2007. We have not yet completed our evaluation of the effects of this standard.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115.” This Statement permits entities to measure certain financial instruments and other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings (loss) at each subsequent reporting date. It will be effective for fiscal years beginning after November 15, 2007. We have not yet completed our evaluation of the effects of this standard.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE MONTHS ENDED JUNE 30, 2006

The following table summarizes reasons for the changes in the second quarter of 2007 compared to the second quarter of 2006 for net sales, cost of sales, and gross profit.


	Chemical-			Recycled-
(In millions)	Based			Based (a)			Total
Net Sales
Sales volumes	$	(3.9	)	$	(22.6	)	$	(26.5	)
Net selling prices		12.4			0.7			13.1
Foreign currency translation		—			1.9			1.9

Increase (decrease) in net sales		8.5			(20.0	)		(11.5	)

Cost of Sales
Volume effect		(3.1	)		(20.7	)		(23.8	)
Raw material unit costs		9.6			0.8			10.4
Plant added unit costs		2.2			0.7			2.9
Foreign currency translation		—			1.4			1.4

Increase (decrease) in cost of sales		8.7			(17.8	)		(9.1	)

Decrease in gross profit	$	(0.2	)	$	(2.2	)	$	(2.4	)


(a)		This includes the results for our European recycled-based fibers business that was sold in July 2007. For additional information, see Note 14 to the Condensed Consolidated Financial Statements.

The decrease in volumes in the recycled-based segment is due to our strategic decision to close 160 million pounds of polyester staple fiber capacity at our Johnsonville, South Carolina facility in the fourth quarter of 2006 and a decline in demand for engineering resins attributable to a slow down in the U.S. auto industry.

Net selling prices in both the chemical-based and recycled based segments increased in response to higher raw material costs.

Cost of sales in the chemical-based segment increased due to higher raw material unit costs, resulting from higher purchase prices for chemical-based raw materials in the second quarter of 2007. Cost of sales in the recycled-based segment decreased due to lower volumes attributable to our decision to close 160 million pounds of polyester staple fiber capacity at our Johnsonville, South Carolina facility in the fourth quarter of 2006.

As a result of the foregoing, gross profit decreased $2.4 million to $11.5 million in the 2007 period from $13.9 million in the 2006 period.

Selling, general and administrative expenses decreased $0.9 million to $12.1 million, or 3.6% of net sales, in the 2007 period compared to $13.0 million, or 3.8% of net sales, in the 2006 period, primarily as a result of our cost reduction efforts.

We incurred restructuring charges of $0.2 million and $1.1 million for the three months ended June 30, 2007 and 2006, respectively, related to our corporate reorganization and cost reduction programs. For additional information, see Note 5 to the Condensed Consolidated Financial Statements.

Other (income) expense, net consisted of the following pretax amounts for the periods indicated:


	Three Months
	Ended June 30,
(In millions)	2007			2006
Hurricane Katrina (proceeds) costs, net	$	(6.1	)	$	1.4
Johnsonville fibers closure costs, net		(1.1	)		—
Gain on sale of assets		(1.4	)		—

Costs relating to anti-dumping activities, net		0.1			(0.3	)

	$	(8.5	)	$	1.1

The income in the three months ended June 30, 2007 is due primarily to the receipt of insurance proceeds of $6.0 million attributable to hurricane Katrina, $1.1 million of income from the reduction of accruals associated with our Johnsonville fibers closure, resulting primarily from our ability to sell some of the equipment and remaining inventory at prices greater than originally expected, and a net gain of $1.4 million from the sale of the fiber assets at our Pearl River facility. Expense for the prior year included $1.4 million of costs related to hurricane Katrina. For additional information on our Johnsonville fibers closure costs and hurricane Katrina costs, see Notes 4 and 8, respectively, to our Condensed Consolidated Financial Statements.

As a result of the foregoing, we reported operating income of $7.5 million in the 2007 period compared to an operating loss of $1.3 million in the 2006 period.

Interest expense, net was $15.3 million in the 2007 period compared to $14.0 million in the 2006 period. This increase was primarily due to higher debt balances.

Our effective tax rate for the three months ending June 30, 2007 on the loss from continuing operations was less than 1.0% compared to 28.8% on the net loss from continuing operations for the three months ended June 30, 2006. Our tax rate changed due to our inability to provide a tax benefit for federal net operating losses originating in 2007.

As a result of the foregoing, we reported a net loss from continuing operations of $7.8 million, or $0.36 per diluted share, for the three months ended June 30, 2007, compared to a net loss from continuing operations of $10.9 million, or $0.46 per diluted share, for the three months ended June 30, 2006.

During the fourth quarter of 2006, after a review of our strategic alternatives, we made a decision to dispose of our European PET resins business, which we sold on May 31, 2007. The net loss on sale, which included an impairment loss of $19.1 million ($18.5 million after tax) recorded in 2006 to reduce the value of these asset to their fair value less expected costs of disposal, was $29.1 million. For the three months ended June 30, 2007, the loss from discontinued operations, net of tax, was $3.6 million, or $0.11 per diluted share, compared to a loss from discontinued operations, net of tax, of $0.8 million, or $0.02 per diluted share, for the three months ended June 30, 2006. For additional information, including a breakdown of the results for discontinued operations, see Note 6 to the Condensed Consolidated Financial Statements.

On June 27, 2007, the conversion price for the Warburg Pincus preferred stock was set at $6.75. Accretion is the sum of (i) the greater of the stated increase in the liquidation preference or the fair market value of increase of the liquidation preference and (ii) the amortization of the reduction in book value of the preferred stock that resulted from the issuance of warrants. This amount was $3.8 million and $3.6 million for the three months ended June 30, 2007 and 2006, respectively.

As a result of the foregoing, we reported a net loss attributable to common stockholders of $15.2 million, or $0.47 per diluted share, for the 2007 period, compared to a net loss attributable to common stockholders of $15.3 million, or $0.48 per diluted share, for the 2006 period.

SIX MONTHS ENDED JUNE 30, 2007 COMPARED TO SIX MONTHS ENDED JUNE 30, 2006

The following table summarizes reasons for the changes in the six months ended June 30, 2007 compared to the six months ended June 30, 2006 for net sales, cost of sales, and gross profit.


	Chemical-			Recycled-
(In millions)	Based			Based (a)			Total
Net Sales
Sales volumes	$	41.4		$	(41.6	)	$	(0.2	)
Net selling prices		11.0			1.5			12.5
Foreign currency translation		—			4.7			4.7

Increase (decrease) in net sales		52.4			(35.4	)		17.0

Cost of Sales
Volume effect		36.5			(38.1	)		(1.6	)
Raw material unit costs		16.5			1.7			18.2
Plant added unit costs		1.4			0.4			1.8
Foreign currency translation		—			4.5			4.5

Increase (decrease) in cost of sales		54.4			(31.5	)		22.9

Decrease in gross profit	$	(2.0	)	$	(3.9	)	$	(5.9	)


(a)		This includes the results for our European recycled-based fibers business that was sold in July 2007. For additional information, see Note 14 to the Condensed Consolidated Financial Statements.

The increase in sales volumes in the chemical-based segment occurred due to an increase in our PET resin capacity, resulting from the successful completion of our Pearl River facility expansion in 2006, which we were able to sell due to increased demand in the PET resins market, an improved trade balance, and delays in expansions by our competitors. The decrease in volumes in the recycled-based segment is due to our strategic decision to close 160 million pounds of polyester staple fiber capacity at our Johnsonville, South

Carolina facility in the fourth quarter of 2006 and a decline in demand for engineering resins attributable to a slow down in the U.S. auto industry.

Cost of sales increased due to higher volumes and raw material unit costs in our chemical-based segment in the first half of 2007. This was partially offset by lower costs in the recycled-based segment due to lower volumes.

As a result of the foregoing, gross profit decreased $5.9 million to $17.4 million in the 2007 period from $23.3 million in the 2006 period.

Selling, general and administrative expenses decreased $1.1 million to $25.8 million, or 3.7% of net sales, in the 2007 period compared to $26.9 million, or 4.0% of net sales, in the 2006 period, primarily as a result of our cost reduction efforts.

We incurred restructuring charges of $3.1 million and $1.5 million for the six months ended June 30, 2007 and 2006, respectively, related to our corporate reorganization and cost reduction programs. For additional information, see Note 5 to the Condensed Consolidated Financial Statements.

Other (income) expense, net consisted of the following pretax amounts for the periods indicated:


	Six Months
	Ended June 30,
(In millions)	2007			2006
Hurricane Katrina (proceeds) costs, net	$	(5.9	)	$	7.1
Johnsonville fibers closure costs, net (See Note 4)		(2.1	)		—
Legal and settlement costs		(1.9	)		—
Gain on sale of assets		(1.4	)		—
Costs relating to anti-dumping activities, net		0.1			0.1

	$	(11.2	)	$	7.2

The income in the six months ended June 30, 2007 is due primarily to the receipt of insurance proceeds of $6.0 million in the second quarter of 2007 attributable to hurricane Katrina, $2.1 million of income from the reduction of accruals associated with our Johnsonville fibers closure resulting primarily from our ability to sell some of the equipment and remaining inventory at prices greater than originally expected, $1.9 million from the reduction in our accrual for legal and settlement costs, and a net gain of $1.4 million from the sale of the fiber assets at our Pearl River facility. For additional information on our Johnsonville fibers closure costs and our legal and settlement costs, see Notes 4 and 8, respectively, to our Condensed Consolidated Financial Statements. Expense for the prior year included $7.1 million of costs related to hurricane Katrina. For additional information on hurricane Katrina, see Note 8 to the Condensed Consolidated Financial Statements.

As a result of the foregoing, we reported an operating loss of $0.6 million in the 2007 period compared to an operating loss of $12.4 million in the 2006 period.

Interest expense, net was $30.5 million in the 2007 period compared to $26.6 million in the 2006 period. This increase was primarily due to higher debt balances and higher interest rates.

Our effective tax rate for the six months ending June 30, 2007 on the loss from continuing operations was less than 1.0% compared to 32.3% on the net loss from continuing operations for the six months ended June 30, 2006. Our tax rate changed due to our inability to provide a tax benefit for federal net operating losses originating in 2007.

As a result of the foregoing, we reported a net loss from continuing operations of $31.2 million, or $1.20 per diluted share, for the six months ended June 30, 2007, compared to a net loss from continuing operations of $26.4 million, or $1.05 per diluted share, for the six months ended June 30, 2006.

During the fourth quarter of 2006, after a review of our strategic alternatives, we made a decision to dispose of our European PET resins business, which we sold on May 31, 2007. The net loss on sale, which included an impairment loss of $19.1 million ($18.5 million after tax) recorded in 2006 to reduce the value of these asset to their fair value less expected costs of disposal, was $29.1 million. For the six months ended June 30, 2007, the loss from discontinued operations, net of tax, was $4.5 million, or $0.14 per diluted share, compared to a loss from discontinued operations, net of tax, of $1.3 million, or $0.04 per diluted share, for the six months ended June 30, 2006. For additional information, including a breakdown of the results for discontinued operations, see Note 6 to the Condensed Consolidated Financial Statements.

On June 27, 2007, the conversion price for the Warburg Pincus preferred stock was set at $6.75. Accretion is the sum of (i) the greater of the stated increase in the liquidation preference or the fair market value of increase of the liquidation preference and (ii) the amortization of the reduction in book value of the preferred stock that resulted from the issuance of warrants. This amount was $7.5 million and $7.0 million for the six months ended June 30, 2007 and 2006, respectively.

As a result of the foregoing, we reported a net loss attributable to common stockholders of $43.2 million, or $1.34 per diluted share, for the 2007 period, compared to a net loss attributable to common stockholders of $34.7 million, or $1.09 per diluted share, for the 2006 period.

OUTLOOK

The following statements are forward-looking statements and should be read in conjunction with “Forward-Looking Statements; Risks and Uncertainties” below.

In the first quarter of 2007, we made a strategic decision to focus on our U.S. chemical-based PET resin and polyester staple fiber business. We changed our management organization and internal financial reporting structure to reflect and support our new strategy. We have moved from a divisional organization to a functional one, which is allowing us to better utilize our human resources, focus on our end markets, reduce operating and logistical costs and improve efficiencies at our manufacturing facilities. In 2007, we expect to reduce costs by $4 to $6 million from 2006 levels due to changes in our organization in support of this new strategy, excluding any changes in our European operations. As part of this strategy, we sold our European businesses and have begun exploring strategic alternatives for our Engineering Resins business.

As a result of the Johnsonville fibers closure in the fourth quarter of 2006, we expect our fiber sales volume to be lower in 2007 than in 2006. In addition, we expect that imports of polyester staple fiber, apparel and downstream textiles will continue to negatively impact our polyester staple fiber sales.

Our operating results are primarily determined by our sales volume and raw material margin, which is impacted by competitive issues, including the differential in raw material costs between the U.S. and Asia, the NAFTA net trade balance and industry capacity utilization. We expect that polyester raw material costs in the U.S. in the second half of 2007 will be less volatile than in the second half of 2006. However, supplies of paraxylene (PX), the precursor of purified teraphthalic acid (PTA), are expected to remain tight in the second half of 2007 and any supply disruptions could result in unexpected cost increases. Any unanticipated changes in the price of our raw materials could have a significant effect on our profitability.

Purified isophthalic acid (PIA) is an additive which is necessary to produce PET resin because it lowers the melting point and the crystallization rate of PET resin. Flint Hills Resources LP (“Flint Hills”), the largest U.S. supplier of PIA, has not been able to obtain an adequate supply of meta-xylene, the raw material for PIA production, and, in March 2007, declared force majeure, putting its PIA customers on allocation. Due to continued problems with meta-xylene production, the Flint Hills force majeure on PIA has been extended through October. Flint Hills is expected to obtain sufficient meta-xylene by November to resume full PIA production. To date, our PET resin production has not been limited due to a lack of PIA supply, and we expect that we will continue to have an adequate supply of PIA at competitive prices.

PTA is the primary raw material used to produce PET resin and polyester fiber. Acetic acid is used in the production of PTA. Celanese declared force majeure on acetic acid in May 2007. As a result, Petrocel, a Mexican PTA producer, has declared force majeure on PTA due to the lack of acetic acid. At this time, the duration of the force majeures on acetic acid and PTA, as well as the allocations, are not known. We have an adequate supply of PTA, since BP Amoco, our sole supplier of PTA, has captive acetic acid supply.

We expect our PET resin volumes in the second half of 2007 to be lower than in the first half of 2007 due to seasonality and because during the first quarter of 2007 we sold product out of inventory built during the fourth quarter of 2006. We do not expect the PIA and PTA supply issues to have a negative impact on our production during the second half of 2007. However, the shortages of PIA and PTA may result in lower levels of polyester fiber and/or PET resin production in the industry.

Recent announcements of significant PET resin capacity additions may adversely impact PET resin margins in future periods.

In the second half of 2007, we expect to receive additional insurance proceeds relating to costs and lost profits resulting from hurricane Katrina, an IRS tax refund in the amount of $2.7 million, and a payment related to the continued Dumping and Subsidy Offset Act of 2000 (the “CDO”), which is expected to be lower than the amount received in 2006. These receipts will be used to pay down debt.

CAPITAL RESOURCES AND LIQUIDITY

Net cash used in operations was $0.3 million for the six months ended June 30, 2007, compared to net cash used in operations of $56.9 million for the six months ended June 30, 2006. This cash usage in 2007 is due primarily an increase in working capital of $12.5 million. The significant use of cash of $56.9 million for the six months ended June 30, 2006, is attributable to the resumption of production at our Pearl River facility following hurricane Katrina.

Net cash used in investing activities amounted to $6.1 million in the 2007 period compared to $21.0 million in the 2006 period, consisting entirely of capital expenditures. The decrease in the 2007 period is due to our completion of the expansion of our PET resin capacity at our Pearl River facility in 2006.

Net cash provided by financing activities amounted to $19.1 million in the 2007 period compared to $84.3 million in the 2006 period.

We have a $225 million U.S. Revolving Credit Facility that we use to manage our daily cash flows. At June 30, 2007 we had aggregate borrowings of $150.8 million and outstanding letters of credit of $6.4 million under this facility, which resulted in aggregate availability of approximately $61 million. At June 30, 2007, we also had $22 million available under our European Revolving Credit Facility. In July 2007, we sold our European fibers operations and used the net proceeds to reduce the outstanding balance of our U.S. Revolving Credit Facility. If the sale had occurred on June 30, 2007, our availability at that date would have been approximately $95 million (taking into consideration the net effect of the net proceeds and the termination of our European Revolving Credit Facility). Because our Consolidated

Fixed Charge Ratio as defined in our U.S. Revolving Credit Facility was less than 1.0:1.0 for the quarter ended June 30, 2007, we will not be permitted to have Availability as defined in our U.S. Revolving Credit Facility below $45 million for more than eight consecutive days during the third quarter of 2007. Availability as defined under our U.S. Revolving Credit Facility has never dropped below $45.0 million.

Our U.S. Revolving Credit Facility uses EBITDA, as defined as the numerator in the determination of our Consolidated Fixed Charge Coverage Ratio (as defined in our U.S. Revolving Credit Facility). In addition, our First and Second Lien Term Loans use EBITDA, as defined, in covenants that limit our ability to incur more than $35 million in additional debt, to pay dividends to our investors, and to make other types of restricted payments, such as investments.

We have provided the non-GAAP measure of EBITDA, as defined because our major debt agreements use this measurement as a key component which affects our liquidity, our ability to incur additional indebtedness, make investments, and make certain restricted payments, such as dividends. It is also an important measurement tool for (1) financial institutions that provide us with capital; (2) investors; and (3) our Board and management. In each instance, we use EBITDA, as defined, because it excludes items that are not expected to impact the long-term cash flow of the business and are not an indication of our ongoing operating performance. In addition, EBITDA, as defined, is a measure frequently used to value an enterprise and to enable investors to analyze the efficiency of our operations and to compare and/or rank us with other companies with differing capital structures. We also believe it assists investors in analyzing our future ability to pay dividends, which is a key component in many investment decisions. Our Board, CEO (our chief operating decision maker), and senior management use EBITDA, as defined, to evaluate the operating performance of our segments and determine incentive compensation for employees throughout the organization.

Despite the importance of EBITDA, as defined, we recognize that this non-GAAP financial measure does not replace the presentation of our GAAP financial results and is not intended to represent cash flows or an alternative to net income. EBITDA, as defined, is simply provided as supplemental information and an additional measurement tool to assist our management and certain investors in analyzing our performance.

Our Debt Agreements contain financial and restrictive covenants. The terms of our U.S. Revolving Credit Facility require that we maintain Availability (as defined in our U.S. Revolving Credit Facility) of at least $45.0 million or maintain a Fixed Charge Coverage Ratio of at least 1.0:1.0. As of June 30, 2007, our Fixed Charge Coverage Ratio under our U.S. Revolving Credit Facility was 0.61 to 1.0. The Fixed Charge Coverage Ratio, as defined under our U.S. Revolving Credit Facility, is the sum of the prior four quarters’ earnings (loss) from continuing operations before interest, taxes, non-cash charges (primarily depreciation and amortization), extraordinary gains or losses and non-recurring and non-operational items divided by the sum of cash taxes, cash interest expense, capital expenditures and certain payments related to our equity for the same period. There are other restrictions in our U.S. Revolving Credit Facility which include limitations on capital expenditures, asset sales and dispositions, the incurrence or guarantee of additional debt, acquisitions, certain payments and investments, affiliate and subsidiary transactions, payment of dividends, repurchase of stock, and excess cash.

Our major Debt Agreements limit our common stock dividend to no more than $0.09 per share in each quarter. Our First and Second Lien Term Loans (the “Term Loans”) limit Restricted Payments (as defined in the Term Loans) to $15.0 million over the life of the financings when the Fixed Charge Coverage Ratio (as defined in the Term Loans) is below 3 to 1. Restricted Payments include dividend payments, stock redemption payments, principal payments of subordinated debt prior to its maturity and certain investments. The Fixed Charge Coverage Ratio (as defined in the Term Loans) is the sum of the prior four quarters’ earnings (loss) from continuing operations before interest, taxes, non-cash charges (primarily depreciation and amortization), extraordinary gains or losses and non-recurring and non-operational items divided by interest expense exclusive

of any amortization or discounts related to the February 2004 Financing. As of June 30, 2007, our Fixed Charge Coverage Ratio under the Term Loans was 0.81 to 1.0, and we have used $12.2 million of the $15.0 million limitation on Restricted Payments. We are in compliance with all debt covenants.

Our Fixed Charge Coverage Ratio as defined in our U.S. Revolving Credit Facility is calculated as follows:


	For the Quarter Ended
	Sept. 30,			Dec. 31,			Mar. 31,			Jun. 30,
(In Millions)	2006			2006			2007			2007			Total
Fixed Charges
Cash interest expense	$	14.8		$	14.8		$	14.7		$	14.5		$	58.8
Capital expenditures		4.6			4.3			2.5			3.6			15.0
Cash payment of taxes		0.3			(0.6	)		0.4			0.2			0.3
Dividend payments		0.6			0.7			0.7			0.6			2.6

Total Fixed Charges	$	20.3		$	19.2		$	18.3		$	18.9		$	76.7

EBITDA, as defined
Loss from continuing operations	$	(35.5	)	$	(21.8	)	$	(23.4	)	$	(7.8	)	$	(88.5	)
Income tax expense (benefit)		(20.8	)		(3.3	)		0.1			—			(24.0	)
Interest expense, net		15.9			15.5			15.2			15.3			61.9
Depreciation and amortization		17.1			16.3			17.0			17.3			67.7
Permitted Adjustments (a)		37.6			2.9			(2.6	)		(8.2	)		29.7

EBITDA, as defined	$	14.3		$	9.6		$	6.3		$	16.6		$	46.8

Consolidated Fixed Charge Coverage Ratio														0.61


(a)		Permitted Adjustments are adjustments specified in our Debt Agreements which are used in the calculation of EBITDA, as defined. The following table details Permitted Adjustments for the periods indicated:


	For the Quarter Ended
	Sept. 30,		Dec. 31,			Mar. 31,			Jun. 30,
(In Millions)	2006		2006			2007			2007			Total
Goodwill impairment	$	—	$	33.4		$	—		$	—		$	33.4
Pension actuarial gain		—		(22.2	)		—			—			(22.2	)
Hurricane Katrina (proceeds) costs, net		0.9		(6.6	)		0.2			(6.1	)		(11.6	)
Johnsonville fibers disposal costs, net		34.1		(2.4	)		(1.0	)		(1.1	)		29.6
Legal and settlement costs		—		—			(1.9	)		—			(1.9	)
Gain on sale of assets		—		—			—			(1.4	)		(1.4	)
Other		2.6		0.7			0.1			0.4			3.8

Total Permitted Adjustments	$	37.6	$	2.9		$	(2.6	)	$	(8.2	)	$	29.7

We have debt maturing in 2009 that would normally be refinanced in 2008. As a result of recent credit problems in the sub-prime lending market, current corporate credit spreads have increased, and it has become increasingly difficult to obtain financing. If the corporate debt markets do not improve, then it may be difficult for us to refinance our debt with terms and conditions that are comparable to our current debt.

We are rated by Moody’s Investors Service (Moody’s) and Standard & Poor’s Ratings Services (“S&P”). Our current corporate ratings by Moody’s and S&P are B3 and B-, respectively, both with negative outlooks. Each agency has additional ratings and other information relating to specific debt instruments and our financial condition.

FORWARD-LOOKING STATEMENTS; RISKS AND UNCERTAINTIES

Statements contained in this Form 10-Q that are not historical facts, including those made in the “Outlook” section above, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “expects,” “anticipates,” and similar expressions are intended to identify forward-looking statements. These statements are made as of the date of this report based upon current expectations, and we undertake no obligation to update this information. These forward-looking statements involve certain risks and uncertainties, including, but not limited to: reduced raw material margins; availability and cost of raw materials; reduced sales volumes; increase in costs; volumes of textile imports; prices and volumes of polyester staple fiber and PET resin imports; the actions of our competitors; the financial condition of our customers; availability of financing, changes in financial markets, interest rates, credit ratings, tax risks; inability to execute our strategy; environmental risks and foreign currency exchange rates; natural disasters; regulatory changes; U.S., European, Asian and global economic conditions; work stoppages; levels of production capacity and profitable operations of assets; prices of competing products; acts of terrorism; and maintaining the operations of our existing production facilities. Actual results may differ materially from those expressed herein. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results may result in fluctuations in the price of our common stock.

For a more complete description of the prominent risks and uncertainties inherent in our business, see our Form 10-K for the year ended December 31, 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

For information about our derivative financial instruments, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” of our Form 10-K for the year ended December 31, 2006.

ITEM 4. CONTROLS AND PROCEDURES

	(a)		Based on an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2007, both the Chief Executive Officer and the Chief Financial Officer of the Company concluded that the Company’s disclosure controls and procedures, as defined in Rules 13a—14(c) and 15d — 14(c) promulgated under the Securities Exchange Act of 1934, were effective on that date.

	(b)		Based upon an evaluation of whether any change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act) that materially affected, or is reasonably likely to materially affect, such internal control occurred during the period covered by this Report, both the Chief Executive Officer and the Chief Financial Officer of the Company concluded that no such change occurred.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We vehemently deny that we or our employees engaged in price fixing or customer allocation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

	(a)		Our Annual Meeting of Stockholders was held on May 15, 2007.

	(b)		See (c) 1. below for the names of each director elected at the meeting.

	(c)		At the Annual Meeting of Stockholders, the stockholders voted on the following matters:

	1.		The votes for election of six directors by stockholders of common stock to serve for a term of one year, expiring at the 2008 Annual Meeting of Stockholders, or until their successors are elected and qualified were as follows:


Name	For		Against/Withheld
Thomas M. Duff		28,621,005	1,658,499
James B. Baker		28,500,374	1,779,130
Richard F. Heitmiller		28,446,315	1,833,189
David J. McKittrick		28,859,133	1,420,371
James E. Rogers		28,548,230	1,731,274
Roger A. Vandenberg		28,501,647	1,777,857

			As a result, all of the above nominees were elected to the Board. (*)

	2.		The vote for election of one director by stockholders of Preferred Stock to serve for a term of one year, expiring at the 2008 Annual Meeting of Stockholders, or until his successor is elected and qualified was as follows:


Name	For		Against/Withheld
Kevin Kruse		11,202,143		0

	3.		The combined vote for the proposal to ratify the selection by the Board of Directors of Ernst & Young LLP as independent auditors to examine our consolidated financial statements for the fiscal year ending December 31, 2007: 45,418,001 votes cast for, 171,259 votes cast against, and 57,988 abstentions. As a result, the Board’s selection of Ernst & Young LLP was approved. (*)

	4.		The combined vote for the adoption of the Wellman, Inc. Equity Incentive Plan effective June 1, 2007: 32,459,691 votes cast for, 1,319,919 votes cast against, and 112,536 abstentions. As a result, the Wellman, Inc. Equity Incentive Plan, effective June 1, 2007, was adopted.

	(*)		No other proposals were made from those present at the Annual Stockholders Meeting, including the stockholder proposal to auction Wellman, Inc., for which proxies were solicited.

	(*)		Under the rules of the New York Stock Exchange, brokers holding shares in street name have the authority to vote certain matters when they have not received instructions from the beneficial owners. Brokers that did not receive such instructions were entitled to vote on each of the above proposals. As a result, broker non-votes had no effect on the outcome of these proposals.

	(d)		Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits.

	4(a)		Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrant has not filed herewith any instrument with respect to long-term debt, which does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

	10.2		Wellman, Inc. Fourth Amended and Restated Management Incentive Compensation Plan for the Executive Group

	10.12		Employment Agreement dated as of August 8, 2007 between the Company and Steven L. Ates

	10.13		Employment Agreement dated as of August 8, 2007 between the Company and Ian K. Shaw.

	10.14		Employment Agreement dated as of August 8, 2007 between the Company and David R. Styka.

	31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements 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.


		WELLMAN, INC.

Dated August 9, 2007		By /s/ Keith R. Phillips
		Chief Financial Officer and
		Vice President
		(Principal Financial Officer)

Dated August 9, 2007		By /s/ David R. Styka
		Chief Accounting Officer,
		Vice President and Controller
		(Principal Accounting Officer)

EX-10.2 2 b66158wlexv10w2.htm EX-10.2 WELLMAN, INC. FOURTH AMENDED AND RESTATED MANAGEMENT INCENTIVE COMPENSATION PLAN FOR THE EXECUTIVE GROUP exv10w2

Exhibit 10.2

WELLMAN, INC.
Fourth Amended and Restated
Management Incentive Compensation Plan for the Executive Group


ARTICLE I		NAME

1.1 The Plan shall be known as the “Wellman, Inc. Management Incentive Compensation Plan for the Executive Group.”


ARTICLE II		STATEMENT OF PURPOSE

2.1 The purpose of the Plan is to provide a system of incentive compensation that will promote the maximization of shareholder value over the long-term. In order to align management incentives with shareholder interests, this Plan will tie incentive compensation to (i) an EBITDA based return on assets and (ii) certain performance goals. Both of these are designed to reward management for taking appropriate actions to increase shareholder value.


ARTICLE III		DEFINITIONS

3.1 Plan Year means the fiscal year of the Company which is the calendar year.

3.2 Effective Date means (a) January 1, 1992 with respect to the original Plan, (b) January 1, 1999 with respect to the amended and restated Plan, and (c) January 1, 2001 with respect to the second amended and restated Plan, (d) January 1, 2005 with respect to the third amended and restated Plan, and (e) July 1, 2007 with respect to the fourth amended and restated Plan.

3.3 Committee means the Compensation Committee of the Board of Directors of Wellman, Inc. or any successor committee.

3.4 Cause means, when used with respect to the termination of the employment of the Executive by the Company, termination due to (a) an act or acts of personal dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Company; (b) the Executive’s continued failure to substantially perform his employment duties (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness) which are demonstrably willful and deliberate on the Executive’s part and which are not remedied in a reasonable period of time after receipt of written notice from the Company; or (c) conviction of, or a plea of guilty or no contest by, the Executive to a crime that constitutes a felony involving moral turpitude. No act or failure to act on the part of the Executive shall be considered “willful”

unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.

3.5 Change of Control means:

(i) The acquisition (whether by tender offer, exchange offer or other business combinations or by the purchase of shares or other securities, and whether in a single transaction or multiple transactions), by any Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company Voting Securities”), provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change of Control and provided further, however, that for the purposes of this Agreement the Convertible Preferred Stock shall be considered Company Voting Securities based on the equivalent number of common shares that could be voted at that time; or

(ii) Individuals who, as of January 1, 2007, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to January 1, 2007 who is elected by the Company’s shareholders or was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the

directors of the Board (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or

(iii) Approval by the stockholders of the Company of (x) a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the Persons who were the respective beneficial owners of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or (y) a complete liquidation or dissolution of the Company, or (z) the sale or other disposition of all or substantially all of the assets of the Company in one transaction or series of related transactions.

(iv) Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a Person in which the Executive has a direct or indirect equity interest, such event shall not constitute a Change of Control; provided, however, that the limitation contained in this sentence shall not apply to any direct or indirect equity interest in a Person (1) which equity interest is part of a class of equity interests which are publicly traded on any national securities exchange or other market system, (2) received by the Executive, without the Executive’s concurrence or consent, as a result of a purchase or other acquisition of the Company by such corporation or other entity, or (3) received by the Executive, without the Executive’s concurrence or consent, in connection with a purchase or other acquisition of the Company by such Person in respect of any stock options or performance awards granted to the Executive by the Company.

3.6 Company means Wellman, Inc., a Delaware corporation.


ARTICLE IV		PLAN ADMINISTRATION

4.1 The Plan shall be administered by the Committee which shall have exclusive and absolute authority and discretion to interpret the Plan, to establish and modify rules for the administration of the Plan, to impose such conditions and restrictions as it determines appropriate with respect to the Plan and to take such other actions and make such other determinations as it may deem necessary or advisable for the implementation and administration of the Plan. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the participants, the

Company and all other interested persons. The Committee may delegate certain responsibilities to the Chief Executive Officer or Chief Financial Officer as the Committee so designates. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan.

4.2 This Plan may be amended, suspended or terminated any time at the sole discretion of the Board of Directors of Wellman, Inc., provided, however, that no such change in the Plan shall be effective to eliminate or diminish the distribution of any award earned by a Plan participant before the date of such amendment, suspension or termination. Notice of any such amendment, suspension or termination shall be given promptly to each Plan participant.


ARTICLE V		PARTICIPATION

5.1 The participants in the Plan consist of those employees who are executives identified by the Committee.


ARTICLE VI		DESCRIPTION OF PLAN OPERATION

6.1 A target percentage will be assigned to each Plan participant by the Committee annually (the “target percentage”). The target percentage will be the percentage of salary a Plan participant will be eligible to earn in bonus if he achieves (i) corporate performance goals measured by an EBITDA return on assets and (ii) performance goals. These targets will be determined in the sole discretion of the Committee.

The amount of the bonus payable hereunder to each Plan participant will be determined by the Committee in its sole discretion.

Bonuses hereunder will be paid on or before March 15 following the Plan Year.


ARTICLE VII		CHANGE IN STATUS DURING THE PLAN YEAR

7.1 Disability means that the Executive has been unable, for the period specified in the Company’s disability plan for senior executives, but not less than a period of 180 consecutive days, to perform the Executive’s duties under this Agreement, as a result of physical or mental illness or injury. A participant shall receive a pro rata bonus based on the number of full months worked for the year in which the disability started. The payment shall be made at the regular time for making bonus payments.

7.2 Death. A participant’s beneficiary (as designated for this plan or if not specifically designated for this plan, the beneficiary(ies) designated for the corporate life insurance program) shall receive a pro rata bonus based on the number of full months worked for the Plan Year in which they die. The payment will be made at the regular time for making bonus payments.

7.3 Retirement. A participant who retires from the Company upon or after reaching age 55 shall receive a pro rata bonus based on the number of full months worked for the Plan Year in which he/she retires. The payment will be made at the regular time for making bonus payments.

7.4 Resignation or Termination for Cause. Termination of employment for Cause or voluntary termination by a participant results in the forfeiture of any award for the Plan Year in which employment terminates.

7.5 Termination without Cause. A participant who is terminated for reasons other than those described above will receive a pro rata portion of that Plan Year’s award. The payment will be made at the regular time for making bonus payments or as mutually agreed by the Committee and the terminated participant.

7.6 No Guarantee. Participation in the Plan provides no guarantee that a bonus under the Plan will be paid in any Plan Year. Similarly, the payment of a bonus under the Plan in one Plan Year or selection as a participant is no guarantee that a bonus under the Plan will be paid in any subsequent Plan Year.


ARTICLE VIII		GENERAL PROVISIONS

8.1 Withholding of Taxes. The Company shall have the right to withhold the amount of taxes which, in the determination of the Company, are required to be withheld under law with respect to any amount due or paid under the Plan.

8.2 Expenses. All expenses and costs in connection with the adoption and administration of the Plan shall be borne by the Company.

8.3 No Prior Right or Offer. Except and until expressly granted pursuant to the Plan, nothing in the Plan shall be deemed to give any employee any contractual or other right to participate in the benefits of the Plan.

8.4 Disputed Claims for Benefits. In the event a participant (a “claimant”) has a dispute with respect to any of the benefits provided hereunder, the claimant shall submit evidence satisfactory to the Committee of facts establishing his entitlement to a payment under the Plan. Any claim with respect to any of the benefits provided under the Plan shall be made in writing within ninety (90) days of the annual Plan payment date. Failure by the claimant to submit his or her claim within such ninety (90) day period shall bar the claimant from any claim for benefits under the Plan. In reaching its decision, the Committee shall have complete discretionary authority to determine all questions arising in the interpretation and administration of the Plan, to construe the terms of the Plan, including any doubtful or disputed terms and the eligibility of a participant for benefits.

8.5 Rights Personal to Employee. Any rights provided to an employee under the Plan shall be personal to such employee, shall not be transferable (except by will or pursuant to

the laws of descent or distribution), and shall be exercisable, during his or her lifetime, only by such employee.

8.6 Confidentiality. Specific details of any calculations under the Plan must remain confidential and because of the individuality of the awards, participants should not share information with each other.

8.7 Wellman, Inc. Profit Sharing Plan or Other Plans. Participants in the Wellman, Inc. Management Incentive Compensation Plan are not eligible to participate in the Wellman, Inc. Bonus or Profit Sharing Plan.

8.8 Change of Control. Upon any Change of Control, unless the Committee in its sole discretion determines otherwise prior to the Change of Control, the benefits of the Plan will be paid to all participants within 45 days of the Change of Control date. Plan payments will be based on the full Plan Year’s forecasted results as defined in the most recent financial forecast presented to the Board prior to the Change of Control date using the most recent annual base salary of each participant.

8.9 No Continued Employment. Neither the establishment of the Plan, the assignment of targets nor the grant of an award hereunder shall be deemed to constitute an express or implied contract of employment for any period of time or in any way abridge the rights of the Company to determine the terms and conditions of employment or to terminate the employment of any employee with or without cause at any time.

8.10 No Vested Rights. Except as otherwise provided herein, no employee or other person shall have any claim or right (legal, equitable, or otherwise) to any award, allocation, or distribution and no officer or employee of the Company or any other person shall have any authority to make representations or agreements to the contrary. No interest conferred herein to a participant shall be assignable or subject to claim by a participant’s creditors.

8.11 Not Part of Other Benefits. The benefits provided in this Plan shall not be deemed a part of any other benefit provided by the Company to its employees. The Company assumes no obligation to Plan participants except as specified herein. This is a complete statement of the terms and conditions of the Plan.

EX-10.12 3 b66158wlexv10w12.htm EX-10.12 EMPLOYMENT AGREEMENT DATED AS OF AUGUST 8, 2007 BETWEEN THE COMPANY AND STEVEN L. ATES exv10w12

Exhibit 10.12

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”), dated as of August 8, 2007, is made by and between WELLMAN, INC. (the “Company”), and Steven L. Ates (the “Executive”).

WITNESSETH

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued service and dedication of the Executive.

WHEREAS, the Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control;

WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s executive management, including the Executive, to their assigned duties with the Company, without distraction in the face of potentially disruptive circumstances arising from the possibility of a Change of Control;

WHEREAS, the Company has determined that the payments and benefits contemplated by this Agreement are to be paid for services currently performed by the Executive;

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Company and the Executive hereby agree as follows:

1. Definitions.

“Affiliate” means, with respect to any Person, any other Person controlling, controlled by, or under direct or indirect common control with such Person. For the purposes of this definition “control”, when used with respect to any specified Person, shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled by” shall have the meanings correlative to the foregoing.

“Cause” means, when used with respect to the termination of the employment of the Executive by the Company, termination due to (a) an act or acts of personal dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Company; (b) the Executive’s continued failure to substantially perform the Executive’s employment duties (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness) which are demonstrably willful and deliberate on the Executive’s part and which are not remedied in a reasonable period of time after receipt of written notice from the Company; or (c) conviction of, or a plea of guilty or no contest by, the Executive to a crime that constitutes a felony involving moral turpitude. No act or failure to act on the part

of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company.

“Change of Control” means:

(i) The acquisition (whether by tender offer, exchange offer or other business combination or by the purchase of shares or other securities (including from the Company), and whether in a single transaction or multiple transactions), by any Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company Voting Securities”), provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the Persons who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change of Control and provided further, however, that for the purposes of this Agreement the Convertible Preferred Stock shall be considered Company Voting Securities based on the equivalent number of shares of common stock of the Company that could be voted at that time; or

(iii) The Company entering into (x) a reorganization, merger, consolidation or other business combination, in each case, with respect to which all or substantially all of the Persons who were the respective beneficial owners of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such reorganization, merger, business combination or

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consolidation do not, following such reorganization, merger, business combination or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger, business combination or consolidation, or (y) a complete liquidation or dissolution of the Company, or (z) the sale or other disposition of all or substantially all of the assets of the Company in one transaction or series of related transactions.

(iv) Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a Person in which the Executive has a direct or indirect equity interest, such event shall not constitute a Change of Control; provided, however, that the limitation contained in this sentence shall not apply to any direct or indirect equity interest in a Person (1) which equity interest is part of a class of equity interests which are publicly traded on any national securities exchange or other market system, (2) received by the Executive, without the Executive’s concurrence or consent, as a result of a purchase or other acquisition of the Company by such corporation or other entity, or (3) received by the Executive, without the Executive’s explicit concurrence or consent, in connection with a purchase or other acquisition of the Company by such Person in respect of any stock options or performance awards granted to the Executive by the Company.

“Change of Control Period” means the 24-month period following a Change of Control; provided, that for purposes of this Agreement there can be no more than one Change of Control Period.

“Code” means the Internal Revenue Code of 1986, as amended.

“Convertible Preferred Stock” means the Company’s Series A Preferred Stock and Series B Preferred Stock with a par value of $0.001 per share issued and outstanding from time to time.

“Cumulative Annual Bonus” is the most recent two Annual Bonuses paid or payable to the Executive within 24 months preceding a Change of Control.

“Date of Termination” means the date of the Executive’s death, the Disability Effective Date, or the date on which the termination of the Executive’s employment by the Company for Cause or without Cause or by the Executive for Good Reason or without Good Reason is effective, as the case may be.

“Disability” means that the Executive has been unable, for the period specified in the Company’s disability plan for senior executives, but not less than a period of 180 consecutive days, to perform the Executive’s duties under this Agreement, as a result of physical or mental illness or injury.

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“Disability Effective Date” has the meaning given such term in Section 5.1.

“Employment Period” means the period commencing on the date hereof and ending one and one half years after the anniversary of such date; provided, however, that commencing on the date that is one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the “Renewal Date”), the Employment Period shall be automatically extended without any action required of either party to this Agreement so as to terminate one and one half years from such Renewal Date, unless at least 180 days prior to the applicable Renewal Date, either party gives written notice to the other that it wishes not to extend the Employment Period (the “Non-Renewal Notice”) in which event the Employment Period will expire one and one half years from the date of the Non-Renewal Notice. The expiration of the Employment Period resulting from the delivery of a Non-Renewal Notice will not be deemed a termination of the Executive’s employment without Cause. Notwithstanding the foregoing, unless the Employment Period has already terminated, the Employment Period shall be automatically extended upon a Change of Control so as to terminate two years from the date of the Change of Control.

“Fiscal Period” shall mean a full calendar year.

“Good Reason” means the Executive’s termination of the Executive’s employment during the Change of Control Period for any one or more of the following reasons: (a) the assignment to the Executive of any duties inconsistent with the Executive’s position, authority, duties or responsibilities as contemplated by Section 3 of this Agreement, or any other action by the Company which results in a diminution in such position, authority, comparable duties or responsibilities, excluding for these purposes an isolated, insubstantial or inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (b) any failure by the Company to comply with any of the provisions of Section 4 of this Agreement (including (i) adopting a bonus plan that does not have substantially similar terms and payments for comparable performance, and (ii) providing Welfare Benefit Plans, Vacation and Fringe Benefits and Perquisites that are in the aggregate less favorable to the Executive than those in effect 90 days before the Change of Control) other than an isolated, insubstantial or inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (c) the Company’s requiring the Executive to be based at any office or location other than the location where the Executive was employed immediately preceding the date of the Change of Control or any office or location more than 50 miles from such location and in no event shall the Executive be required to travel outside such location more often than 45 days in any calendar year; (d) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or (e) any failure by the Company to comply with and satisfy Section 9.3 of this Agreement. “Good Reason” shall also mean the Executive’s termination of the Executive’s employment at any time if the Company terminates the Executive’s employment other than as expressly permitted by this Agreement.

“Notice of Termination” shall mean either a Notice of Termination for Cause under Section 5.2, Notice of Termination without Good Reason under Section 5.3, or a Notice of Termination for Good Reason under Section 5.4.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association or joint venture.

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2. Term of Employment. Subject to the terms and provisions set forth in this Agreement, the Company shall continue to employ the Executive, and the Executive agrees to remain in the employ of the Company, for the Employment Period, unless either party terminates the Executive’s employment pursuant to the terms of this Agreement.

3. Position and Duties.

3.1 Positions and Duties. During the Employment Period, the Executive shall be employed and shall serve as a senior corporate officer with such duties and responsibilities as are customarily assigned to a Vice President.

3.2 Best Efforts. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote substantially all their attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive under this Agreement, use the Executive’s reasonable best efforts to carry out such responsibilities faithfully and efficiently. It shall not be considered a violation of the foregoing for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement.

4. Compensation and Other Benefits. The Executive’s compensation during the Employment Period shall be determined by the Board upon recommendation of the committee of the Board having responsibility for approving the compensation of senior executives, subject to the provisions below:

4.1 Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Base Salary”) at a rate of not less than 15% lower than $190,000. The Base Salary shall be payable in accordance with the Company’s regular payroll practices for its senior executives, as in effect from time to time. During the Employment Period, the Executive’s Base Salary will be reviewed at least annually by the Board, and the Board may, in its sole discretion, increase the Base Salary. Any increase in the Base Salary shall not limit or reduce any other obligation of the Company under this Agreement. The term “Base Salary” shall thereafter refer to the Base Salary as so increased.

4.2 Annual Bonus. With respect to each year during the Employment Period, the Executive shall be designated as a participant in the Company’s Management Incentive Bonus Plan or any similar bonus plan for senior executives (the “Bonus Plan”), which provides for bonus payments to the Executive, and subject to meeting the criteria of the Bonus Plan established by the Board in its discretion, shall receive the bonus award provided for therein (the “Annual Bonus”). Each such Annual Bonus shall be paid not later than the 15^th day of the third month of the Fiscal Period for which the Annual Bonus is awarded, unless the Executive elects to defer the receipt of such Annual Bonus pursuant to a Company deferred compensation plan, if any.

4.3 Incentive, Retirement, and Savings Plans. During the Employment Period, the Executive shall participate in all incentive, pension, retirement, supplemental retirement, savings, stock option, restricted stock and other stock grant and equity compensation plans, as well

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as all other employee benefit plans and programs, which are made available from time to time by the Company for the benefit of similarly situated senior executives of the Company.

4.4 Welfare Benefit Plans. During the Employment Period, the Executive and their spouse and other eligible dependents shall participate in, and be covered by, all of the health and other welfare benefit plans, practices, policies and programs that are made available from time to time by the Company for the benefit of senior executives and/or other employees of the Company, collectively the “Welfare Benefit Plans”.

4.5 Expense Reimbursement. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses, including reasonable business travel expenses, incurred by the Executive in performing the Executive’s duties and responsibilities under this Agreement in accordance with the policies, programs, procedures and practices of the Company as in effect at the time the expense was incurred, as the same may be changed from time to time.

4.6 Vacation and Fringe Benefits. During the Employment Period, the Executive shall be entitled to vacation days each Fiscal Period at such times which do not materially interfere with the performance of the Executive’s duties and responsibilities under this Agreement in accordance with the vacation policy of the Company. In addition, during the Employment Period, the Executive shall be eligible to benefit from such fringe benefits, in accordance with the policies, programs, procedures and practices of the Company, as may be in effect and provided from time to time to senior executives and/or other employees of the Company, collectively the foregoing are referred to as “Vacation and Fringe Benefits”

4.7 Perquisites. During the Employment Period the Company will also pay for $1 million of term life insurance assuming the Executive is insurable at standard rates and pay for the Executive to have an annual physical examination, both in accordance with the Company’s current policy, collectively the foregoing are referred to as “Perquisites”.

5. Termination of Employment.

5.1 Death or Disability. The Executive’s employment, and the Employment Period, shall terminate automatically upon the Executive’s death. The Company shall be entitled to terminate the Executive’s employment because of the Executive’s Disability during the Employment Period. A termination of the Executive’s employment by the Company for Disability shall be communicated to the Executive by written notice, and shall be effective on the 30^th day after receipt of such notice by the Executive (“Disability Effective Date”) at which time the Employment Period shall end, unless the Executive returns to full-time performance of the Executive’s duties before the Disability Effective Date.

5.2 Termination by the Company. The Company may terminate the Executive’s employment hereunder for Cause or without Cause at any time during the Employment Period at which time the Employment Period shall end. The Company shall give the Executive written notice of its intention to terminate the Executive’s employment and the effective date of Executive’s termination of employment, and for terminations for Cause the notice shall set forth in

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reasonable detail the specific conduct of the Executive that it considers to constitute Cause and the specific provisions of this Agreement on which it relies (the “Notice of Termination for Cause”).

5.3 Termination by Executive. The Executive may terminate their employment hereunder without the Company’s approval at any time during the Employment Period without Good Reason upon not less than 60 nor more than 90 days advance written notice to the Company stating the date on which the Employment Period shall end (the “Notice of Termination without Good Reason”). A termination of the Executive’s employment by the Executive without Good Reason shall be effected by giving the Company written notice of the termination and setting forth the date of such termination. Notwithstanding the foregoing, the Company may elect to have any such termination become effective immediately or at such other date, not later than the date specified in the Notice of Termination without Good Reason, as the Company may determine, however it will continue the Executive’s Base Salary, Welfare Benefit Plans, Vacation and Fringe Benefits, and Perquisites through the date specified by the Executive for their termination in such Notice unless the Company terminates the Executive’s employment pursuant to another section of this Agreement prior to such date.

5.4 Termination by Executive for Good Reason. During the Change of Control Period, the Executive may terminate their employment hereunder for Good Reason by giving the Company written notice (“Notice of Termination for Good Reason”) of the termination, setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which the Executive relies. The failure by the Executive to set forth in the Notice of Termination for Good Reason any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing the Executive’s rights hereunder.

6. Obligations of the Company upon Termination of Employment.

6.1 Termination upon Death or Disability. If an Executive’s employment is terminated by death or the Company terminates the Executive’s employment for Disability the Company shall:

(a) pay to the Executive (or in the event of termination of employment by reason of the Executive’s death, the Executive’s legal representative or the Executive’s estate if no representative has been appointed) in a lump sum in cash, within 30 days after the Date of Termination, or as otherwise provided in this Section 6.1, any portion of the Executive’s Base Salary through the Date of Termination that has not been paid plus any unpaid Annual Bonus, deferred compensation, if any, or other payments due the Executive,

(b) pay to the Executive a prorata portion of any bonus the Executive would have earned in that year (based on the days covered by the Agreement in that year divided by the number of days in the year) as if he had been employed for the full year, payable at time specified in Section 4.2, and

(c) make available to the Executive (or the Executive’s eligible dependents) any rights to continued health and welfare benefits provided by law (i.e., COBRA) or payable to the

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Executive under the terms of such plans and programs in effect immediately prior to the Executive’s death or Disability.

Anything in this Agreement to the contrary notwithstanding, if the Executive’s death or Disability occurs during the Change of Control Period, the Executive or Executive’s family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its Affiliates to disabled executives or the surviving families of peer executives of the Company and such Affiliates under such plans, programs, practices and policies relating to family disability or death benefits, if any, as in effect with respect to other peer executives and their families at any time during the 90-day period immediately preceding the Change of Control or, if more favorable to the Executive and/or the Executive’s family, as in effect on the date of the Executive’s death or disability with respect to other peer executives of the Company and its Affiliates and their families.

6.2 Termination by the Executive other than for Good Reason. If the Executive voluntarily terminates employment during the Employment Period, other than during the Change of Control Period for Good Reason, the Company shall pay to the Executive any portion of the Executive’s Base Salary through the Date of Termination that has not been paid, plus any other amounts due the Executive under this Agreement within 30 days and the Executive shall have any rights to continued health and welfare benefits provided by law (i.e., COBRA) or payable to the Executive under the terms of such plans and programs in effect immediately prior to the Date of Termination. If the Executive voluntarily terminates employment during the Employment Period, other than during the Change of Control Period for Good Reason, then the Executive shall not be entitled to any Annual Bonus for the Fiscal Period that includes the Executive’s Date of Termination.

6.3 Termination by the Company for Cause. If the Executive’s employment is terminated by the Company for Cause during the Employment Period, the Company shall pay to the Executive any portion of the Executive’s Base Salary through the Date of Termination that has not been paid, plus any other amounts due the Executive under this Agreement within 30 days and the Executive shall have any rights to continued health and welfare benefits to the extent provided by law (i.e., COBRA) or payable to the Executive under the terms of such plans and programs as in effect immediately prior to the Notice of Termination. If the Executive is terminated for Cause during the Employment Period, then the Executive shall not be entitled to any Annual Bonus for the Fiscal Period that includes the date of the Notice of Termination for Cause.

6.4 Termination by the Company other than for Cause. If the Executive’s employment is terminated by the Company other than for Cause or due to death or Disability during the Employment Period and not during a Change of Control Period, the Company shall:

(a) pay to the Executive, in a lump sum within thirty days after the Date of Termination, an amount equal to 1.5 times the Executive’s Base Salary for the Fiscal Period in which the Date of Termination occurs in lieu of any severance under the Company’s Severance Plan,

(b) pay to the Executive a prorata portion of any bonus the Executive would have earned in that Fiscal Period (based on the days covered by the Agreement divided by the number

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of days in that Fiscal Period) as if he had been employed for the full Fiscal Period payable at the time specified in Section 4.2,

(c) pay 18 months of health and welfare (COBRA) benefits that provide the Executive with coverage comparable to other executives that are employed by the Company during that time, and

(d) reimburse the executive for outplacement services incurred within one year of the Date of Termination no later than 30 days after receipt of appropriate documentation, for an amount not greater than the lesser of (i) 7.5% of the Executive’s Base Salary or (ii) $25,000.

6.5 Termination following a Change of Control. If (a) contemporaneously with or during the Change of Control Period, the Executive’s employment is terminated (i) by the Company or a successor entity other than for Cause or (ii) by the Executive for Good Reason or (b) if the Executive’s employment with the Company is terminated or the Executive ceases to be an officer of the Company prior to the date on which a Change of Control occurs and it is reasonably demonstrated that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or in anticipation of the Change of Control, the Company shall:

(a) pay to the Executive, in a lump sum within thirty days after the Date of Termination, an amount equal to (i) two (2) times the Base Salary and (ii) the Cumulative Annual Bonus;

(b) continue benefits described in Sections 4.4, 4.6 and 4.7 of this Agreement to the Executive or the Executive’s family from the Date of Termination through the end of the Change of Control Period, or such longer period as any plan, program, practice or policy may provide, at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Sections 4.4, 4.6 and 4.7 of this Agreement if the Executive’s employment had not been terminated, in accordance with the most favorable plans, practices, programs or policies of the Company and its Affiliates applicable to other peer executives and their families during the 90-day period immediately preceding the Date of Termination, or, if more favorable to the Executive, as in effect at any time thereafter with respect to other peer executives of the Company and its Affiliates and their families. For purposes of determining the amount an Executive is going to receive, the Executive shall be considered as eligible for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Change of Control Period and to have retired on the last day of such period; and

(c) reimburse the executive for outplacement services incurred within one year of the Date of Termination no later than 30 days after receipt of appropriate documentation, for an amount not greater than the lesser of (i) 7.5% of the Executive’s Base Salary or (ii) $25,000.

6.6 Non Disparagement. The Company agrees that the Company will not make any negative of disparaging comments about the Executive unless required by legal process to do so.

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7. Effect of Termination. The provisions of this Section 7 shall apply in the event of termination of the Executive’s employment, pursuant to Section 5 or otherwise.

7.1 Payment in Full. Payment by the Company to Executive of any Base Salary and other specified amounts or benefits which are due the Executive (or, as the case may be, the Executive’s designated beneficiary, estate, surviving spouse or dependents) under the applicable termination provision of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 shall constitute the entire obligation of the Company to the Executive under this Agreement, except that nothing in this Section 7.1 is intended or shall be construed to affect the rights and obligations of the Company (or its Affiliates), on the one hand, and the Executive, on the other, with respect to any option plans, option agreements, restricted stock grants, awards or agreements, subscription agreements, stockholders agreements, employee benefit plans or other equity arrangements or agreements to the extent said rights or obligations survive termination of employment under the provisions of documents relating thereto. The Executive shall only be eligible to receive the benefits of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 of this Agreement and shall not be entitled to receive benefits under more than one such section. The Company’s obligation to provide payment and/or benefits set forth herein shall be conditioned upon the Executive’s (or the Executive’s executor or legal representative) execution of a Separation and Release Agreement consistent with the terms of this Agreement in a form agreeable to the Company.

7.2 Termination of Benefits. Except as set forth above and for any right of continuation of health coverage at the Executive’s cost to the extent provided by Sections 601 through 608 of ERISA, all of the Executive’s rights to any benefits under the Welfare Benefit Plans shall terminate pursuant to the terms of the applicable benefit plans based on the Date of Termination.

7.3 Return of Property. Within a reasonable time after the Date of Termination of employment, the Executive shall return to the Company all of the Company’s property of which he is in possession, including, without limitation, any material and documentation that constitutes Confidential Information, credit cards, computers, and keys.

8. Executives Commitment to the Company.

8.1 Confidentiality. The Executive shall not, during the Employment Period or for two years after the Employment Period (and for an indefinite period for Confidential Information composed of trade secrets of the Company), disclose any Confidential Information (as such term is defined herein) to any Person for any reason or purpose whatsoever, other than in connection with the performance of the Executive’s duties under this Agreement. The term “Confidential Information” shall mean all confidential information of or relating to the Company and any of its Affiliates, including without limitation, financial information and data, business plans and information regarding prospects and opportunities (such as, by way of example only, client and customer lists and acquisition, disposition, expansion, product development and other strategic plans), but does not include any information that is or becomes public knowledge by means other than the Executive’s breach or nonobservance of the Executive’s obligations described in this Section 8.1. Notwithstanding the foregoing, the Executive may disclose such Confidential Information as he may be legally required to do so on the advice of counsel in connection with any legal or regulatory proceeding; provided, however, that the Executive shall provide the Company with prior written notice of any such required or potentially required

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disclosure and shall cooperate with the Company and use their best efforts under such circumstances to obtain appropriate confidential treatment of any such Confidential Information that may be so required to be disclosed in connection with any such legal or regulatory proceeding. In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement during or with respect to the Change of Control Period.

8.2 Litigation. The Executive agrees to cooperate fully with the Company, or its assignee, and counsel for the Company, or its assignee, in any and all matters involving litigation, administrative proceedings, arbitration or governmental investigations. The Executive’s cooperation shall include being reasonably available for, without limitation, interviews, depositions, and trial testimony. To the extent that the Executive’s cooperation involves travel, the Company or its assignee will reimburse the Executive for their reasonable travel expenses. To the extent that the Executive’s cooperation requires him to incur out-of-pocket expenses, including without limitation reasonable attorney’s fees, the Company or its assignee will reimburse such expenses, provided they are reasonable and supported by reasonable documentation. The Executive will make available, at the expense of the Company or its assignee, copies of all documents and files requested by the Company in connection with this duty of cooperation, excluding only those documents and files which are subject to any attorney-client privilege, work product doctrine, or other legal protection from disclosure that is held solely by the Executive in their individual capacity, as opposed to any privilege or legal protection from disclosure held by the Company.

8.3 Compliance with Securities Laws. The Executive agrees not to directly or indirectly buy or sell the Company stock or other securities as long as he possesses “material non-public information” as that term is defined by interpretations of the Securities Exchange Act of 1934 and the rules and regulations there under. Without limiting the generality of the foregoing, the Executive further agrees to abide by the Company’s Insider Trading policy as in effect during the Employment Period until three (3) business days after the public release of the financial results for the fiscal quarter ending after the Executive’s Date of Termination.

8.4 Position as Officer and Director. Upon the Executive’s termination of employment the Executive shall resign as an Officer/Director from the Company and all Affiliates and any administrative roles in any plans sponsored by the Company and its Affiliates and will execute all instruments and documents requested by the Company to effectuate this.

8.5 Non Compete. The Executive agrees not to directly or indirectly compete with the business of the Company and its successors and assigns during the Employment Period and for a period of one year following the Executive’s termination of employment. The term “not compete” as used herein shall mean that the Executive shall not own, manage, operate, consult or be an employee in a business that has operations in the United States that are substantially similar to or competitive with the business activity of the Company or any of its Affiliates at the Executive Termination Date. Notwithstanding the foregoing the Executive may own up to 5% of any stock or security that is publicly traded on any national securities exchange or other market system.

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8.6 Non-Solicitation. The Executive agrees for a period of one year from the Executive’s Termination Date that the Executive will not without the prior written approval of the Company directly or indirectly: (i) solicit for hire any employees of the Company or any Affiliate, or (ii) induce any employee of the Company or any Affiliate to terminate their relationship with the Company or Affiliate. The foregoing will not apply to individuals hired as a result of the use of an independent employment agency (so long as the agency was not directed to solicit a particular individual) or as a result of the use of a general solicitation not specifically directed to Company or its Affiliate’s employees.

8.7 Non Disparagement. The Executive agrees that the Executive will not make any negative of disparaging comments about the Company unless required by legal process to do so.

8.8 Injunctive Relief. The Executive acknowledges and agrees that the Company will have no adequate remedy at law, and would be irreparably harmed, if the Executive breaches or threatens to breach any of the provisions of this Section 8. The Executive agrees that the Company shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach of this Section 8, and to specific performance of each of the terms of this Section 8 in addition to any other legal or equitable remedies that the Company may have. The Executive further agrees that he shall not, in any equity proceeding relating to the enforcement of the terms of this Section 8, raise the defense that the Company has an adequate remedy at law.

8.9 Special Severability. The terms and provisions of this Section 8 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, and neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected.

9. Successors.

9.1 The Executive. This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive, other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s heirs, beneficiaries and/or legal representatives.

9.2 The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

9.3 Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place and the Executive will consent to such successor’s assumption. As used in this Agreement, “Company” shall mean the Company as previously defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.

10. Full Settlement; Mitigation. The Company’s obligation to make the payments provided for in, and otherwise to perform its obligations under, this Agreement shall not be

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affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against the Executive or others other than a claim, right or action for fraud after the individual is judicially determined to have committed such action. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced, regardless of whether the Executive obtains other employment.

11. Indemnification. The Company shall pay or indemnify the Executive to the full extent permitted by law and the by-laws of the Company for all expenses, costs, liabilities and legal fees which the Executive may incur in the discharge of the Executive’s duties hereunder.

12. Miscellaneous.

12.1 Applicable Law. This Agreement shall, to the extent not superseded by federal law, be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflict of laws.

12.2 Amendments/Waiver. This Agreement may not be amended, waived, or modified otherwise than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives. No waiver by any party to this Agreement of any breach of any term, provision or condition of this Agreement by the other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, or any prior or subsequent time.

12.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given when received by hand-delivery to the other party, by overnight courier, or by registered or certified mail, return receipt requested, postage prepaid, addressed, addressed as follows:

If to the Executive:

Steven L. Ates
3217 Colvard Park Way
Charlotte, N.C. 28269

If to the Company:

The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Wellman, Inc.
1041 521 Corporate Center Drive
Fort Mill, South Carolina 29707-7151

With a copy to:

Douglas Gray, Esq.
Edwards Angell Palmer & Dodge, LLP

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2800 Financial Plaza
Providence, RI 02903

or to such other addresses as either party furnishes to the other in writing in accordance with this Section 12.3. Notices and communications shall be effective when actually received by the addressee.

12.4 Withholding. The Company may withhold from any amounts payable under this Agreement such taxes as shall be required to be withheld pursuant to any applicable law or regulation.

12.5 Strict Compliance. The Executive’s or Company’s failure to insist upon strict compliance with any provisions of, or to assert, any right under, this Agreement shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Agreement.

12.6 Enforceability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

12.7 Captions; Counterparts. The captions of this Agreement are for convenience of reference only, are not part of the terms of this Agreement and shall have no force or effect in the application or interpretation thereof. This Agreement may be executed in several counterparts, each of which shall be deemed an original and said counterparts shall constitute but one and the same instrument.

12.8 Entire Agreement. This Agreement contains the entire agreement between the parties to this Agreement concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto. Specifically this Agreement replaces and supersedes in its entirety any prior the Employment Agreement between the Company and the Executive.

12.9 Survivorship. The obligations of the Company and the Executive under Sections 6, 7, 8, 9, 10, 11, and 12 shall survive the expiration or termination for any reason of this Agreement.

12.10 Assignment. The rights and benefits of the Executive under this Agreement may not be anticipated, assigned, alienated or subject to the attachment, garnishment, levy, execution or other legal or equitable process except as required by law. Any attempt by the Executive to anticipate, alienate, assign, sell, transfer, pledge, encumber or charge the same shall be void.

12.11 Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plans,

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programs, policies or practices provided by the Company or any of its Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreements with the Company or any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its Affiliates at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement.

12.12 Arbitration. The Executive and the Company both agree to submit any disputes under this Agreement to binding arbitration with a mutually agreeable arbitrator and to make their best efforts to settle any disputes within 90 days. In the event this does not occur and the Executive has cooperated in the arbitration process the Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof, plus in each case interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code.

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IN WITNESS WHEREOF, the Executive has hereunto set their hand and, pursuant to the authorization of its Board, the Company has caused this Agreement to be executed in its name and on its behalf by a duly authorized officer, as of the date set forth above.


WELLMAN, INC.
By:	/s/ Keith R. Phillips
	Name:	Keith R. Phillips
	Title:	Chief Financial Officer

EXECUTIVE
/s/ Steven L. Ates
Steven L. Ates

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EX-10.13 4 b66158wlexv10w13.htm EX-10.13 EMPLOYMENT AGREEMENT DATED AS OF AUGUST 8, 2007 BETWEEN THE COMPANY AND IAN K.SHAW exv10w13

Exhibit 10.13

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”), dated as of August 8, 2007, is made by and between WELLMAN, INC. (the “Company”), and Ian K. Shaw (the “Executive”).

WITNESSETH

WHEREAS, the Company has determined that the payments and benefits contemplated by this Agreement are to be paid for services currently performed by the Executive;

1. Definitions.

“Change of Control” means:

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(iv) Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a Person in which the Executive has a direct or indirect equity interest, such event shall not constitute a Change of Control; provided, however, that the limitation contained in this sentence shall not apply to any direct or indirect equity interest in a Person (1) which equity interest is part of a class of equity interests which are publicly traded on any national securities exchange or other market system, (2) received by the Executive, without the Executive’s concurrence or consent, as a result of a purchase or other acquisition of the Company by such corporation or other entity, or (3) received by the Executive, without the Executive’s explicit concurrence or consent, in connection with a purchase or other acquisition of the Company by such Person in respect of any stock options or performance awards granted to the Executive by the Company.

“Change of Control Period” means the 24-month period following a Change of Control; provided, that for purposes of this Agreement there can be no more than one Change of Control Period.

“Code” means the Internal Revenue Code of 1986, as amended.

“Convertible Preferred Stock” means the Company’s Series A Preferred Stock and Series B Preferred Stock with a par value of $0.001 per share issued and outstanding from time to time.

“Cumulative Annual Bonus” is the most recent two Annual Bonuses paid or payable to the Executive within 24 months preceding a Change of Control.

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“Disability Effective Date” has the meaning given such term in Section 5.1.

“Fiscal Period” shall mean a full calendar year.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association or joint venture.

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3. Position and Duties.

4.1 Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Base Salary”) at a rate of not less than 15% lower than $180,000. The Base Salary shall be payable in accordance with the Company’s regular payroll practices for its senior executives, as in effect from time to time. During the Employment Period, the Executive’s Base Salary will be reviewed at least annually by the Board, and the Board may, in its sole discretion, increase the Base Salary. Any increase in the Base Salary shall not limit or reduce any other obligation of the Company under this Agreement. The term “Base Salary” shall thereafter refer to the Base Salary as so increased.

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as all other employee benefit plans and programs, which are made available from time to time by the Company for the benefit of similarly situated senior executives of the Company.

4.7 Perquisites. During the Employment Period the Company will also pay 9.5% of the Executive’s Base Salary for life insurance premiums and pay for the Executive to have an annual physical examination, all of the above in accordance with the Company’s current policy, collectively the foregoing are referred to as “Perquisites”.

5. Termination of Employment.

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6. Obligations of the Company upon Termination of Employment.

6.1 Termination upon Death or Disability. If an Executive’s employment is terminated by death or the Company terminates the Executive’s employment for Disability the Company shall:

(c) make available to the Executive (or the Executive’s eligible dependents) any rights to continued health and welfare benefits provided by law (i.e., COBRA) or payable to the

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Executive under the terms of such plans and programs in effect immediately prior to the Executive’s death or Disability.

(b) pay to the Executive a prorata portion of any bonus the Executive would have earned in that Fiscal Period (based on the days covered by the Agreement divided by the number

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of days in that Fiscal Period) as if he had been employed for the full Fiscal Period payable at the time specified in Section 4.2,

(c) pay 18 months of health and welfare (COBRA) benefits that provide the Executive with coverage comparable to other executives that are employed by the Company during that time, and

(a) pay to the Executive, in a lump sum within thirty days after the Date of Termination, an amount equal to (i) two (2) times the Base Salary and (ii) the Cumulative Annual Bonus;

6.6 Non Disparagement. The Company agrees that the Company will not make any negative of disparaging comments about the Executive unless required by legal process to do so.

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7. Effect of Termination. The provisions of this Section 7 shall apply in the event of termination of the Executive’s employment, pursuant to Section 5 or otherwise.

8. Executives Commitment to the Company.

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8.7 Non Disparagement. The Executive agrees that the Executive will not make any negative of disparaging comments about the Company unless required by legal process to do so.

9. Successors.

9.2 The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

10. Full Settlement; Mitigation. The Company’s obligation to make the payments provided for in, and otherwise to perform its obligations under, this Agreement shall not be

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12. Miscellaneous.

If to the Executive:

Ian K. Shaw
2812 Cypress Bend Road
Florence, S.C. 29506

If to the Company:

The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Wellman, Inc.
1041 521 Corporate Center Drive
Fort Mill, South Carolina 29707-7151

With a copy to:

Douglas Gray, Esq.
Edwards Angell Palmer & Dodge, LLP

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2800 Financial Plaza
Providence, RI 02903

12.4 Withholding. The Company may withhold from any amounts payable under this Agreement such taxes as shall be required to be withheld pursuant to any applicable law or regulation.

12.9 Survivorship. The obligations of the Company and the Executive under Sections 6, 7, 8, 9, 10, 11, and 12 shall survive the expiration or termination for any reason of this Agreement.

12.11 Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plans,

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WELLMAN, INC.
By:	/s/ Keith R. Phillips
	Name:	Keith R. Phillips
	Title:	Chief Financial Officer

EXECUTIVE
/s/ Ian K. Shaw
Ian K. Shaw

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EX-10.14 5 b66158wlexv10w14.htm EX-10.14 EMPLOYMENT AGREEMENT DATED AS OF AUGUST 8, 2007 BETWEEN THE COMPANY AND DAVID R. STYKA exv10w14

Exhibit 10.14

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”), dated as of August 8, 2007, is made by and between WELLMAN, INC. (the “Company”), and David R. Styka (the “Executive”).

WITNESSETH

WHEREAS, the Company has determined that the payments and benefits contemplated by this Agreement are to be paid for services currently performed by the Executive;

1. Definitions.

“Change of Control” means:

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(iv) Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a Person in which the Executive has a direct or indirect equity interest, such event shall not constitute a Change of Control; provided, however, that the limitation contained in this sentence shall not apply to any direct or indirect equity interest in a Person (1) which equity interest is part of a class of equity interests which are publicly traded on any national securities exchange or other market system, (2) received by the Executive, without the Executive’s concurrence or consent, as a result of a purchase or other acquisition of the Company by such corporation or other entity, or (3) received by the Executive, without the Executive’s explicit concurrence or consent, in connection with a purchase or other acquisition of the Company by such Person in respect of any stock options or performance awards granted to the Executive by the Company.

“Change of Control Period” means the 24-month period following a Change of Control; provided, that for purposes of this Agreement there can be no more than one Change of Control Period.

“Code” means the Internal Revenue Code of 1986, as amended.

“Convertible Preferred Stock” means the Company’s Series A Preferred Stock and Series B Preferred Stock with a par value of $0.001 per share issued and outstanding from time to time.

“Cumulative Annual Bonus” is the most recent two Annual Bonuses paid or payable to the Executive within 24 months preceding a Change of Control.

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“Disability Effective Date” has the meaning given such term in Section 5.1.

“Fiscal Period” shall mean a full calendar year.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association or joint venture.

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3. Position and Duties.

4.1 Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Base Salary”) at a rate of not less than 15% lower than $162,000. The Base Salary shall be payable in accordance with the Company’s regular payroll practices for its senior executives, as in effect from time to time. During the Employment Period, the Executive’s Base Salary will be reviewed at least annually by the Board, and the Board may, in its sole discretion, increase the Base Salary. Any increase in the Base Salary shall not limit or reduce any other obligation of the Company under this Agreement. The term “Base Salary” shall thereafter refer to the Base Salary as so increased.

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as all other employee benefit plans and programs, which are made available from time to time by the Company for the benefit of similarly situated senior executives of the Company.

5. Termination of Employment.

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6. Obligations of the Company upon Termination of Employment.

6.1 Termination upon Death or Disability. If an Executive’s employment is terminated by death or the Company terminates the Executive’s employment for Disability the Company shall:

(c) make available to the Executive (or the Executive’s eligible dependents) any rights to continued health and welfare benefits provided by law (i.e., COBRA) or payable to the

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Executive under the terms of such plans and programs in effect immediately prior to the Executive’s death or Disability.

(b) pay to the Executive a prorata portion of any bonus the Executive would have earned in that Fiscal Period (based on the days covered by the Agreement divided by the number

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of days in that Fiscal Period) as if he had been employed for the full Fiscal Period payable at the time specified in Section 4.2,

(c) pay 18 months of health and welfare (COBRA) benefits that provide the Executive with coverage comparable to other executives that are employed by the Company during that time, and

(a) pay to the Executive, in a lump sum within thirty days after the Date of Termination, an amount equal to (i) two (2) times the Base Salary and (ii) the Cumulative Annual Bonus;

6.6 Non Disparagement. The Company agrees that the Company will not make any negative of disparaging comments about the Executive unless required by legal process to do so.

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7. Effect of Termination. The provisions of this Section 7 shall apply in the event of termination of the Executive’s employment, pursuant to Section 5 or otherwise.

8. Executives Commitment to the Company.

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8.7 Non Disparagement. The Executive agrees that the Executive will not make any negative of disparaging comments about the Company unless required by legal process to do so.

9. Successors.

9.2 The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

10. Full Settlement; Mitigation. The Company’s obligation to make the payments provided for in, and otherwise to perform its obligations under, this Agreement shall not be

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12. Miscellaneous.

If to the Executive:

David R. Styka
205 Rosedale Lane
Matthews, N.C. 28105

If to the Company:

The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Wellman, Inc.
1041 521 Corporate Center Drive
Fort Mill, South Carolina 29707-7151

With a copy to:

Douglas Gray, Esq.
Edwards Angell Palmer & Dodge, LLP

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2800 Financial Plaza
Providence, RI 02903

12.4 Withholding. The Company may withhold from any amounts payable under this Agreement such taxes as shall be required to be withheld pursuant to any applicable law or regulation.

12.9 Survivorship. The obligations of the Company and the Executive under Sections 6, 7, 8, 9, 10, 11, and 12 shall survive the expiration or termination for any reason of this Agreement.

12.11 Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plans,

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WELLMAN, INC.
By:	/s/ Keith R. Phillips
	Name:	Keith R. Phillips
	Title:	Chief Financial Officer

EXECUTIVE
/s/ David R. Styka
David R. Styka

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EX-31.1 6 b66158wlexv31w1.htm EX-31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 exv31w1

Exhibit 31.1

CERTIFICATIONS

I, Thomas M. Duff, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Wellman, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.



Date August 9, 2007	By:	/s/ Thomas M. Duff
		Chief Executive Officer

EX-31.2 7 b66158wlexv31w2.htm EX-31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 exv31w2

Exhibit 31.2

CERTIFICATIONS

I, Keith R. Phillips, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Wellman, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.



Date August 9, 2007	By:	/s/ Keith R. Phillips
		Chief Financial Officer

EX-32.1 8 b66158wlexv32w1.htm EX-32.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 exv32w1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Wellman, Inc. (the “Company”) hereby certifies that the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2007 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report or “filed” for any purpose whatsoever.

Date: August 9, 2007



	/s/ Thomas M. Duff
	Chief Executive Officer

EX-32.2 9 b66158wlexv32w2.htm EX-32.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 exv32w2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Date: August 9, 2007



	/s/ Keith R. Phillips
	Chief Financial Officer

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