UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☐		Preliminary Proxy Statement
☐		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material Pursuant to §240.14a-12

A. Schulman, Inc.

(Name of Registrant as Specified in its Charter)

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

Payment of Filing Fee (Check the appropriate box):

 

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		(1)		Title of each class of securities to which transaction applies:
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		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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		(3)		Filing Party:
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May 11, 2018

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders of A. Schulman, Inc., which we refer to as A. Schulman or the Company, to be held on June 14, 2018, at 11:00 a.m. (ET), at the Sheraton Suites Akron Cuyahoga Falls, 1989 Front Street, Cuyahoga Falls, Ohio 44221.

At the special meeting, you will be asked to consider and vote upon (1) a proposal to adopt the Agreement and Plan of Merger, dated as of February 15, 2018, which we refer to as the merger agreement, among LyondellBasell Industries N.V., which we refer to as LyondellBasell, LYB Americas Holdco Inc., which we refer to as Merger Sub and which is a direct wholly owned subsidiary of LyondellBasell, and A. Schulman, pursuant to which Merger Sub will merge with and into A. Schulman (which we refer to as the merger) and A. Schulman will become a direct wholly owned subsidiary of LyondellBasell, (2) a non-binding advisory proposal to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement and (3) a proposal to adjourn the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

If the merger is completed, you will be entitled to receive (i) $42.00 in cash and (ii) one contingent value right, which we refer to as a “CVR”, in each case, without interest and less applicable withholding taxes, for each share of A. Schulman common stock you own (unless you have properly exercised your appraisal rights with respect to such shares). While no guaranty can be given that any additional proceeds will be received, each CVR will provide a holder with an opportunity to receive certain net proceeds, if any are recovered, from claims arising from the Company’s acquisition of its Citadel subsidiary or the acquisition by Citadel’s subsidiary, the Matrixx Group, Incorporated of its Lucent subsidiary, including certain ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary and the related government investigations.

The A. Schulman board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are advisable, fair to and in the best interests of A. Schulman and its stockholders, and approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement. The A. Schulman board of directors unanimously recommends that you vote (i) “FOR” the proposal to adopt the merger agreement, (ii) “FOR” the proposal to approve, by non-binding advisory vote, specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement and (iii) “FOR” the proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

The enclosed proxy statement provides detailed information about the special meeting, the merger agreement and the merger and the contingent value rights. A copy of the merger agreement is attached as Annex A to the proxy statement and the form of contingent value rights agreement (which we refer to as “form of CVR agreement”) is attached as Annex B to the proxy statement. The proxy statement also describes the actions and determinations of the A. Schulman board of directors in connection with its evaluation of the merger agreement and the merger. We encourage you to read the proxy statement and its annexes, including the merger agreement and the form of CVR agreement, carefully and in their entirety. You may also obtain more information about A. Schulman from documents we file with the Securities and Exchange Commission (which we refer to as the “SEC”) from time to time.

Whether or not you plan to attend the special meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the internet or by telephone. If you attend the special meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your broker how to vote in accordance with the voting instruction form you will receive from your broker, bank or other nominee.

Your vote is very important, regardless of the number of shares that you own. We cannot complete the merger unless the proposal to adopt the merger agreement is approved by the affirmative vote of the holders of a majority of the outstanding shares of A. Schulman common stock. The failure of any stockholder to vote in person by ballot at the special meeting, to submit a signed proxy card or to grant a proxy electronically over the internet or by telephone will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. If you hold your shares in “street name,” the failure to instruct your broker, bank or other nominee on how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

If you have any questions or need assistance voting your shares of A. Schulman common stock, please contact Georgeson LLC, our proxy solicitor, by calling (877) 668-1646 toll-free.

Thank you for your support of A. Schulman.

 

Neither the SEC nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated May 11, 2018 and, together with the enclosed form of proxy card, is first being mailed to stockholders of A. Schulman on or about May 15, 2018.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of A. Schulman, Inc., which we refer to as “A. Schulman” or the “Company,” is to be held on June 14, 2018, at 11:00 a.m. (ET), at the Sheraton Suites Akron Cuyahoga Falls, 1989 Front Street, Cuyahoga Falls, Ohio 44221, to consider and vote upon the following proposals:

 

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to adopt the Agreement and Plan of Merger, dated as of February 15, 2018, which we refer to as the “merger agreement” among LyondellBasell Industries N.V., which we refer to as LyondellBasell, LYB Americas Holdco Inc., which we refer to as Merger Sub, and A. Schulman;

 

2.

to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement; and

 

3.

to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

Your vote is very important. We cannot consummate the merger unless the proposal to adopt the merger agreement receives the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote thereon.

Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy or voting instructions by telephone or the internet prior to the special meeting to ensure that your shares of A. Schulman common stock will be represented and voted at the special meeting if you are unable to attend.

For the Company to complete the merger, Company stockholders holding a majority of the shares of A. Schulman common stock outstanding at the close of business on the record date and entitled to vote thereon must vote “FOR” the proposal to adopt the merger agreement. Failure to submit a signed proxy card, grant a proxy by phone or the internet or to vote in person by ballot at the Company special meeting will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. For more information concerning the special meeting, the merger agreement and the merger, please review the accompanying proxy statement, the copy of the merger agreement attached as Annex A thereto and the form of contingent value rights agreement (which we refer to as “form of CVR agreement”) attached as Annex B thereto.

The approval, on a non-binding advisory basis, of the proposal regarding specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement requires the affirmative vote of the holders of a majority of the Company common stock, present or represented by proxy, at the special meeting and entitled to vote thereon, at which a quorum is present. An abstention from voting will have the same effect as a vote “AGAINST” the proposal to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have no effect on this proposal.

The affirmative vote of the holders of a majority of the Company common stock, present or represented by proxy at the special meeting, whether or not a quorum is present, is required to approve the proposal to approve the

adjournment of the special meeting, if necessary or appropriate. An abstention from voting will have the same effect as a vote “AGAINST” the proposal to approve the adjournment of the special meeting. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have no effect on this proposal.

Only stockholders of record as of the close of business on May 7, 2018 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof. A list of stockholders entitled to vote at the special meeting will be available in our offices located at 3637 Ridgewood Road, Fairlawn, Ohio 44333, during regular business hours for a period of at least ten (10) days before the special meeting and at the place of the special meeting during the meeting.

The A. Schulman board of directors unanimously recommends that you vote (i) “FOR” the proposal to adopt the merger agreement, (ii) “FOR” the proposal to approve, by non-binding advisory vote, specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement and (iii) “FOR” the proposal to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

By Order of the Board of Directors,

 

Andrean R. Horton

Executive Vice President, Chief Legal Officer and

Secretary

May 11, 2018

Fairlawn, Ohio

Table of Contents

 

		Page
SUMMARY			1
QUESTIONS AND ANSWERS			14
FORWARD-LOOKING STATEMENTS			24
THE SPECIAL MEETING			26
Date, Time and Place of the Special Meeting			26
Purposes of the Special Meeting			26
Record Date and Quorum			27
Required Vote			27
Voting by the Company’s Directors and Executive Officers			28
Voting; Proxies; Revocation			28
Abstentions			30
Adjournments and Postponements			30
Solicitation of Proxies			30
Other Information			31
THE MERGER (PROPOSAL 1)			32
Parties Involved in the Merger			32
Certain Effects of the Merger			33
Background of the Merger			33
Recommendation of the A. Schulman Board of Directors and Reasons for the Merger			42
Opinion of A. Schulman’s Financial Advisor			46
Projected Financial Information			53
Interests of the Company’s Directors and Executive Officers in the Merger			56
Financing			65
Material U.S. Federal Income Tax Consequences of the Merger			65
Regulatory Clearances			70
Delisting and Deregistration of A. Schulman Common Stock			71
Expenses			71
Specific Enforcement			71
Litigation Relating to the Merger			71
THE MERGER AGREEMENT			72
Explanatory Note Regarding the Merger Agreement			72
Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers			72
When the Merger Becomes Effective			73
Effect of the Merger on A. Schulman Common Stock			73
Treatment of Company Equity Awards			73
Representations and Warranties			74
Conduct of Business Pending the Merger			77
Other Covenants and Agreements			79
Termination			87
Amendment; Extension; Waivers			89
Expenses			90
Jurisdiction			90
Specific Performance			90
Governing Law			90
FORM OF CONTINGENT VALUE RIGHTS AGREEMENT			91
Explanatory Note Regarding the Contingent Value Rights Agreement			91
Litigation Background			91
Purpose			92

 

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		Page
Contingent Value Rights			92
Rights of Holders of Contingent Value Rights			93
Funding of Escrow Expenses			93
Non-Transferability of Contingent Value Rights			93
CVR Committee Establishment and Authority			93
Actions of the CVR Committee			94
Replacement of Committee Members			94
Cooperation			95
Settlements			95
Calculation of Payments			95
Payment Procedures			96
Paying Agent			98
Amendments			98
Obligations on Consolidation			99
Termination			99
Specific Performance			99
Special Purpose Entity			99
LyondellBasell Commitment			100
Assignment			100
Third-Party Beneficiaries			100
ADVISORY VOTE ON MERGER-RELATED EXECUTIVE COMPENSATION (PROPOSAL 2)			101
The Non-Binding Advisory Proposal			104
ADJOURNMENT OF THE SPECIAL MEETING (PROPOSAL 3)			105
MARKET PRICES AND DIVIDEND DATA			106
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			107
APPRAISAL RIGHTS			109
Filing Written Demand			110
Notice by the Surviving Corporation			111
Filing a Petition for Appraisal			111
Determination of Fair Value			112
FUTURE STOCKHOLDER PROPOSALS			113
WHERE YOU CAN FIND ADDITIONAL INFORMATION			115

Annexes

 

Annex A — Agreement and Plan of Merger			A-1
Annex B — Form of CVR Agreement			B-1
Annex C — Opinion of Citigroup Global Markets Inc.			C-1
Annex D — Section  262 of the General Corporation Law of the State of Delaware			D-1

 

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QUESTIONS AND ANSWERS

The following questions and answers are intended to address briefly some commonly asked questions regarding the special meeting, the merger agreement and the transactions contemplated thereby. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the “Summary” preceding this section and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, all of which you should read carefully.

 

Q:	Why am I receiving this proxy statement?

A: On February 15, 2018, A. Schulman entered into the merger agreement providing for the merger of Merger Sub, with and into A. Schulman, with A. Schulman surviving the merger as a direct wholly owned subsidiary of LyondellBasell. You are receiving this proxy statement in connection with the solicitation of proxies by the A. Schulman board of directors in favor of the proposal to adopt the merger agreement and to approve the other proposals to be voted on at the special meeting.

 

Q:	What is the proposed transaction?

A: The proposed transaction is the acquisition of A. Schulman by LyondellBasell through the merger of Merger Sub with and into A. Schulman pursuant to the merger agreement. Following the effective time of the merger, A. Schulman will be privately held as a direct wholly owned subsidiary of LyondellBasell, and you will no longer own shares of A. Schulman common stock and instead will have only the right to receive the merger consideration.

 

Q:	What will I receive in the merger?

A: If the merger is completed, you will be entitled to receive (i) $42.00 in cash and (ii) one CVR, in each case, without interest and less applicable withholding taxes, for each share of A. Schulman common stock you own as of immediately prior to the effective time of the merger. While no guaranty can be given that any additional proceeds will be received, each CVR will represent the right to receive contingent cash payments from certain net proceeds, if any are recovered, from claims arising from the Company’s acquisition of its Citadel subsidiary or the acquisition by Citadel’s subsidiary, the Matrixx Group, Incorporated of its Lucent subsidiary, including certain ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary and the related government investigations. For example, if you own 100 shares of A. Schulman common stock, you will be entitled to receive $4,200.00 in cash and 100 CVRs in exchange for your shares of A. Schulman common stock (less any amount that may be withheld with respect to any applicable withholding taxes). You will not be entitled to receive shares in the surviving corporation or in LyondellBasell.

 

Q:	What is a CVR and how does it work?

A: While no guaranty can be given that any proceeds will be received, each CVR will represent the right to receive contingent cash payments from certain net proceeds, if any are recovered, relating to claims arising from A. Schulman’s acquisition of its Citadel subsidiary or the acquisition by Citadel’s subsidiary, the Matrixx Group, Incorporated of its Lucent subsidiary, including from certain ongoing litigation against the former owners of A. Schulman’s Citadel subsidiary and the former owners of A. Schulman’s Lucent subsidiary and the related government investigations. Any such payment will be subject to certain adjustments and deductions as described in the form of CVR agreement.

The CVRs do not represent an equity ownership interest in LyondellBasell, any constituent party to the merger or any of their affiliates. The CVRs will not be evidenced by a certificate or other instrument. The CVRs will not be transferable except in very limited circumstances. A paying agent will keep a register for the purpose of recording the CVRs and permitted transfers thereof.

 

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Subject to the terms and conditions of the form of CVR agreement, holders of CVRs will be entitled to (i) 85% of the resulting amount of (A) litigation proceeds plus (B) government action proceeds, (ii) minus the net tax cost, (iii) minus 85% of the Claims expenses, (iv) minus 85% of the amount of the LyondellBasell fee, unpaid and accrued as of the CVR payment date, (v) minus an amount equal to 85% of the customer claims, and (vi) minus 85% of the firm expenses, if any, (in each case for the items in clauses (ii) through (vi), without double counting any particular cost, fee, expense or claim, and only to the extent such amounts have not been taken into account in the calculation of a previous CVR payment amount actually paid to CVR holders pursuant to the form of CVR agreement); provided, however, that in calculating the CVR payment amount in respect of any CVR payment date prior to the final CVR payment date, the calculation of such CVR payment amount shall reflect reasonable estimates as of such CVR payment date, prepared by the CVR committee, of expected amounts of the items set forth in clauses (ii) through (v) above through the final CVR payment date. Notwithstanding the foregoing, A. Schulman (as then owned by LyondellBasell) will be entitled to the remaining 15% of such resulting amount (except with respect to the first $38.5 million in litigation proceeds and government action proceeds, which proceeds, less the claims expenses and customer claims, will be 100% for the benefit of the CVR holders).

The pro rata share of each CVR payment amount due to each holder will be determined by dividing (A) the CVR payment amount by (B) the sum of (i) the total number of CVRs outstanding on the CVR payment date, (ii) the total number of CVRs acquired by the Company or its affiliates as a result of a holder abandoning and transferring its remaining rights in a CVR to the Company and (iii) the total number of CVRs that would be distributed to holders of shares of Company convertible special stock that is outstanding on the CVR payment date, assuming conversion of such shares of Company convertible special stock to shares of Company common stock. Notwithstanding the foregoing, A. Schulman will be entitled to the remaining 15% of such resulting amount (except with respect to the first $38.5 million in litigation proceeds and government action proceeds, which proceeds, less actual claims expenses and customer claims, will be 100% for the benefit of the CVR holders).

For more information regarding the CVRs, see the section entitled “Form of Contingent Value Rights Agreement” beginning on page 91.

 

Q:	Is it possible that I will receive more than one payment under the CVR?

A: Yes; though there is no guaranty that any payment will be made to holders of CVRs, in respect of their contingent value rights, such holders may receive more than one payment under the CVR, pursuant to the terms of the form of CVR agreement. In the event you receive any cash payment as a holder of CVR, it is uncertain that there would be more than one such payment during the term of the form of CVR agreement. You may receive one payment, you may receive more than one payment or you may not receive any payment. Any payment to you is contingent on whether there are any net recoveries in respect of the claims arising from the Company’s acquisition of its Citadel subsidiary or the acquisition by Citadel’s subsidiary, the Matrixx Group, Incorporated of its Lucent subsidiary, including certain ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary, and the related government investigations, and such recoveries being in excess of certain costs and expenses (above the amount set aside in escrow) in accordance with the terms of the form of CVR agreement.

 

Q:	Is it possible that I will not receive any payment under the CVR?

A: Yes; there is no guaranty that you will receive any payment in respect of your CVR. Any payment to you as a holder of CVRs is contingent on whether there are any net recoveries in respect of the claims arising from the Company’s acquisition of its Citadel subsidiary or the acquisition by Citadel’s subsidiary, the Matrixx Group, Incorporated of its Lucent subsidiary, including certain ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary and the related government investigations, in accordance with the terms of the form of CVR agreement. You may not receive any payment in respect of your CVR if (i) no such proceeds are received, or (ii) if such proceeds do not exceed the amount of (1) net tax cost, (2) 85% of the claims expenses, (3) 85% of the amount of LyondellBasell fee,

 

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unpaid and accrued as of the CVR payment date, (4) 85% of the customer claims and (5) 85% of the firm expenses.

For information regarding payments in respect of CVRs, see the section entitled “Form of Contingent Value Rights Agreement — Calculation of Payments.”

 

Q:	Can I transfer my CVR?

A: You may not sell, assign, transfer, pledge, encumber or in any other manner transfer or dispose of, in whole or in part, directly or indirectly, your CVR, other than (i) through a transfer on death by will or intestacy, (ii) a transfer to an inter vivos or testamentary trust in which your CVR is to be passed to beneficiaries upon the death of the trustee, (iii) transfers made pursuant to a court order or by operation of law or (iv) through abandonment of all of your remaining rights in a CVR, which you may effect at any time, by transferring such CVR to A. Schulman without consideration therefor.

 

Q:	What will happen to the Company’s outstanding equity awards?

A: For information regarding the treatment of the Company’s outstanding equity awards, see the section entitled “The Merger Agreement — Treatment of Company Equity Awards” beginning on page 73.

 

Q:	What is included in these materials?

A: These materials include:

 

•

this proxy statement for the special meeting,

 

•

a proxy card or voting instruction form (enclosed with this proxy statement),

 

•

a copy of the merger agreement (attached as Annex A to this proxy statement),

 

•

a copy of the form of CVR agreement (attached as Annex B to this proxy statement),

 

•

the written opinion of Citigroup (attached as Annex C to this proxy statement), and

 

•

the full text of Section 262 of the DGCL (attached as Annex D to this proxy statement).

 

Q:	Where and when is the special meeting?

A: The special meeting will take place on June 14, 2018, at 11:00 a.m. (ET), at the Sheraton Suites Akron Cuyahoga Falls, 1989 Front Street, Cuyahoga Falls, Ohio 44221.

 

Q:	What proposals will be voted on at the special meeting?

A: There are three proposals scheduled to be voted on at the special meeting:

 

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to adopt the merger agreement;

 

•

to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement; and

 

•

to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

Q:	What is the A. Schulman board of directors’ voting recommendation?

A: The A. Schulman board of directors recommends that you vote your shares:

 

•

“FOR” the proposal to adopt the merger agreement;

 

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•

“FOR” the approval, on a non-binding advisory basis, of specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement; and

 

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“FOR” the proposal regarding adjournment of the special meeting.

For a discussion of the factors that the A. Schulman board of directors considered in determining to recommend the adoption of the merger agreement, please see the section entitled “The Merger (Proposal 1) — Recommendation of the A. Schulman Board of Directors and Reasons for the Merger.” In addition, in considering the recommendation of the A. Schulman board of directors with respect to the merger agreement, you should be aware that some of our directors and executive officers have interests that may be different from, or in addition to, the interests of Company stockholders generally. For a discussion of these interests, please see the section entitled “The Merger (Proposal 1) — Interests of the Company’s Directors and Executive Officers in the Merger.”

 

Q:	Who is entitled to vote at the special meeting?

A: All shares owned by you as of the record date, which is the close of business on May 7, 2018, may be voted by you. You may cast one vote per share of A. Schulman common stock that you held on the record date. These shares include shares that are:

 

•

held directly in your name as the stockholder of record; and

 

•

held for you as the beneficial owner through a broker, bank or other nominee.

On the record date, there were 29,526,887 shares of A. Schulman common stock issued and outstanding.

Holders of Company convertible special stock will not have any voting rights at the special meeting.

 

Q:	What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A: Many of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.

 

•

Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, EQ Shareowner Services, you are considered, with respect to those shares, the stockholder of record, and this proxy statement was sent directly to you by the Company. As the stockholder of record, you have the right to grant your voting proxy directly to certain officers of A. Schulman or to vote in person at the special meeting.

 

•

Beneficial Owner. If your shares are held in an account at a broker, bank or other nominee, like many of our stockholders, you are considered the beneficial owner of shares held in street name, and this proxy statement was forwarded to you by that organization. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares, and you are also invited to attend the special meeting, although only your broker, bank or other nominee will have the right to vote your shares at the special meeting, and only to the extent you have previously instructed it to do so.

 

Q:	What must I do if I want to attend the special meeting in person?

A: Attendance at the special meeting is limited to individuals who were stockholders as of the record date and admission will be on a first-come, first-served basis. Registration and seating will begin at 10:30 a.m. (ET). Each stockholder will be asked to present proof of identification, such as a driver’s license or passport, prior to admission to the special meeting. Beneficial owners of shares held in “street name” will need to bring proof of

 

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share ownership as of the record date, such as a bank or brokerage firm account statement or a letter from the intermediary holding your shares. Cameras, recording devices and other electronic devices will not be permitted at the special meeting.

 

Q:	If I am a stockholder of record of the Company’s shares, how do I vote?

A: If you are a stockholder of record, there are four ways you can vote:

 

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in person at the special meeting;

 

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via the internet, at the internet address provided on the proxy card;

 

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by telephone, by using the toll-free number listed on the proxy card; or

 

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by mail, by completing, signing and dating the proxy card and returning it in the enclosed postage-paid envelope.

 

Q:	If I am a beneficial owner of shares held in street name, how do I vote?

A: If you are a beneficial owner of shares held in street name, you will receive instructions from the holder of record as to how to vote your shares. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the special meeting, you should contact your broker, bank or other nominee to obtain a “legal proxy” or broker’s proxy card and bring it to the special meeting in order to vote. Please note that if you hold your shares through broker, bank or other nominee, such nominee cannot vote your shares unless you have given your nominee specific instructions as to how to vote. In order for your vote to be counted, please make sure that you submit your vote to your broker, bank or other nominee.

 

Q:	Will my shares of A. Schulman common stock held in “street name” or another form of record ownership be combined for voting purposes with shares I hold of record?

A: No. Because any shares of A. Schulman common stock you may hold in “street name” will be deemed to be held by a different stockholder of record than any shares of A. Schulman common stock you hold of record, any shares of A. Schulman common stock held in “street name” will not be combined for voting purposes with shares of A. Schulman common stock you hold of record. Similarly, if you own shares of A. Schulman common stock in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card or vote separately by telephone or internet with respect to those shares of A. Schulman common stock because they are held in a different form of record ownership. Shares of A. Schulman common stock held by a corporation or business entity must be voted by an authorized officer of the entity. Shares of A. Schulman common stock held in an individual retirement account must be voted under the rules governing such account.

 

Q:	What is the quorum requirement for the special meeting?

A: A quorum is necessary to hold a valid special meeting. A quorum exists if the holders of a majority of the Company’s common stock issued and outstanding and entitled to vote at the special meeting are present in person or represented by proxy. If a quorum is not present at the special meeting, the special meeting may be adjourned or postponed from time to time until a quorum is obtained.

If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for the purpose of determining whether a quorum is present at the special meeting.

 

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If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, these shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the special meeting.

 

Q:	What happens if I do not give specific voting instructions?

A: Stockholder of Record. If you are a stockholder of record and you submit a signed proxy card or submit your proxy by telephone or the internet, but do not specify how you want to vote your shares on a particular proposal, then the proxy holders will vote your shares in accordance with the recommendations of the A. Schulman board of directors on all matters presented in this proxy statement.

Beneficial Owners. If you are a beneficial owner of shares held in “street name,” under the rules of the NYSE, the broker, bank or other nominee that holds your shares may generally vote on routine matters but cannot vote without instructions on non-routine matters. The proposals to (i) adopt the merger, (ii) approve, on a non-binding advisory basis, of specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement and (iii) approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies are considered non-routine matters under applicable rules. If the broker, bank or other nominee that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the broker, bank or other nominee that holds your shares will inform the representative counting votes that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” Therefore, we urge you to give voting instructions to your broker. Shares represented by such “broker non-votes” will not be counted in determining whether there is a quorum. A “broker non-vote” will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Q:	What is the voting requirement to approve each of the proposals?

A: Adoption of the merger agreement would require Company stockholders holding a majority of the shares of A. Schulman common stock outstanding at the close of business on the record date and entitled to vote thereon must vote “FOR” the proposal to adopt the merger agreement. A failure to vote your shares of A. Schulman common stock or an abstention from voting will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

The approval, on a non-binding advisory basis, of the proposal regarding specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement would require Company stockholders holding a majority of the shares of A. Schulman common stock, present or represented by proxy at the special meeting and entitled to vote thereon, at which quorum is present, to vote “FOR” the proposal to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement. An abstention from voting will have the same effect as a vote “AGAINST” the proposal to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have no effect on this proposal.

The approval to adjourn the special meeting would require Company stockholders holding a majority of the shares of A. Schulman common stock, present or represented by proxy at the special meeting and entitled to vote thereon, whether or not a quorum is present, to vote “FOR” the proposal to approve the adjournment of the special meeting, if necessary or appropriate. An abstention from voting will have the same effect as a vote

 

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“AGAINST” the proposal to adjourn the meeting. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have no effect on this proposal.

 

Q:	How do A. Schulman’s directors and executive officers intend to vote?

A: We currently expect that the Company’s directors and executive officers will vote their shares in favor of the proposal to adopt the merger agreement and the other proposals to be considered at the special meeting; although they have no obligation to do so.

 

Q:	What effects will the merger have on the Company?

A: A. Schulman common stock is currently registered under the Exchange Act, and is listed on the Nasdaq under the symbol “SHLM.” As a result of the merger, the Company will cease to be a publicly traded company and will become a direct wholly owned subsidiary of LyondellBasell. Following the consummation of the merger, A. Schulman common stock will be delisted from the Nasdaq and deregistered under the Exchange Act.

 

Q:	When is the merger expected to be completed?

A: We and LyondellBasell are working toward completing the merger as quickly as possible. We cannot be certain when or if the conditions to the merger will be satisfied (or, to the extent permitted, waived). The merger cannot be completed until the conditions to closing are satisfied (or, to the extent permitted, waived), including the adoption of the merger agreement by Company stockholders and the receipt of certain regulatory clearances. Assuming timely receipt of the required regulatory clearances and satisfaction of other closing conditions, and although there can be no assurance, the parties hope to complete the regulatory review process in the third calendar quarter of 2018.

 

Q:	What happens if the merger is not completed?

A: If the merger agreement is not adopted by the Company’s stockholders, or if the merger is not completed for any other reason, the Company stockholders will not receive any payment for their shares of A. Schulman common stock in connection with the merger. Instead, the Company will remain a public company, and shares of A. Schulman common stock will continue to be registered under the Exchange Act, as well as listed and traded on the Nasdaq. In the event that the merger agreement is terminated, then, in certain specified circumstances, a termination fee of $50 million will be due and payable by A. Schulman to LyondellBasell. See the section entitled “The Merger Agreement — Termination — Termination Fee.”

 

Q:	What will happen if stockholders do not approve, on a non-binding advisory basis, the proposal on specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger?

A: The inclusion of this proposal is required by the SEC rules; however, the approval of this proposal is not a condition to the completion of the merger and the vote on this proposal is an advisory vote and will not be binding on the Company or LyondellBasell. If the merger agreement is adopted by the Company’s stockholders and the merger is completed, the merger-related compensation may be paid to the Company’s named executive officers even if stockholders fail to approve this proposal.

 

Q:	Can I revoke my proxy or change my vote?

A: Yes. You may revoke or change your proxy for any reason by:

 

•

providing a written notice of revocation that is received before the meeting to A. Schulman’s Corporate Secretary, Andrean R. Horton, at A. Schulman, Inc., 3637 Ridgewood Road, Fairlawn, Ohio 44333;

 

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•

delivering a valid, later-dated proxy either by telephone or online (your last delivery before the meeting begins will be counted);

 

•

completing, signing, dating and returning a new proxy card by mail to the Company before the special meeting; or

 

•

if you are a registered stockholder (or if you hold your shares in “street name” and have a proper legal proxy from your broker), attending the special meeting and voting in person.

Please note that simply attending the special meeting in person will not cause your previously granted proxy to be revoked. Shares held in “street name” may be voted in person by you at the special meeting only if you obtain a signed “legal proxy” from the stockholder of record giving you the right to vote the shares.

 

Q:	What happens if I do not vote or if I abstain from voting on the proposals?

A: The requisite number of shares to approve the proposal to adopt the merger agreement is based on the total number of shares of A. Schulman common stock outstanding on the record date, not just the shares that are voted. If you do not vote or abstain from voting on any of the proposals to adopt the merger agreement, to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement, or to adjourn the special meeting, it will have the same effect as a vote “AGAINST” each of the respective proposals.

 

Q:	What happens if I sell my shares of A. Schulman common stock before completion of the merger?

A: In order to receive the merger consideration, you must hold your shares of A. Schulman common stock through completion of the merger. Consequently, if you transfer your shares of A. Schulman common stock before completion of the merger, you will have transferred your right to receive the merger consideration in the merger.

The record date for stockholders entitled to vote at the special meeting is earlier than the consummation of the merger. If you transfer your shares of A. Schulman common stock after the record date but before the closing of the merger, you will have the right to vote at the special meeting although you will have transferred your right to receive the merger consideration in the merger.

 

Q:	Should I send in my stock certificates or other evidence of ownership now?

A: No. After the merger is completed, you will receive a letter of transmittal and related materials from the paying agent for the merger with detailed written instructions for exchanging your shares of A. Schulman common stock evidenced by stock certificates for the merger consideration. If your shares of A. Schulman common stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take in order to effect the surrender of your “street name” shares in exchange for the merger consideration. Do not send in your certificates now.

 

Q:	I do not know where my stock certificates are, how will I get the merger consideration for my shares?

A: If the merger is completed, the transmittal materials you will receive after the completion of the merger will include the procedures that you must follow if you cannot locate your stock certificates. This will include an affidavit that you will need to sign attesting to the loss of your stock certificates. You may also be required to post a bond as indemnity against any potential loss.

 

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Q:	Am I entitled to exercise dissenters’ or appraisal rights instead of receiving the merger consideration for my shares of A. Schulman common stock?

A: Under Section 262 of the DGCL, stockholders who do not vote for the adoption of the merger agreement have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery, but only if they fully comply with all applicable requirements of the DGCL, which are summarized in this proxy statement. Any appraisal amount determined by the court could be more than, the same as, or less than the value of the merger consideration. Any stockholder intending to exercise appraisal rights must, among other things, submit a written demand for appraisal to the Company before the vote on the proposal to adopt the merger agreement and such stockholder must not vote or otherwise submit a proxy in favor of the adoption of the merger agreement. Failure to comply exactly with the procedures and requirements specified under the DGCL will result in the loss of appraisal rights. The discussion of appraisal rights contained in this proxy statement is not a full summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL that is attached as Annex D to this proxy statement. For additional information, see the section entitled “Appraisal Rights.” Because of the complexity of the DGCL relating to appraisal rights, if you are considering exercising your appraisal rights, we encourage you to seek the advice of your own legal counsel.

 

Q:	Will I be subject to U.S. federal income tax upon the exchange of A. Schulman common stock for the merger consideration pursuant to the merger?

A: If you are a U.S. holder (as defined in the section entitled “The Merger (Proposal 1) — Material U.S. Federal Income Tax Consequences of the Merger”), the exchange of A. Schulman common stock for the merger consideration pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. The amount of gain or loss that you will recognize, as well as the timing and potentially the character of a portion of such gain or loss, depends on the U.S. federal income tax treatment of the receipt of, and payments with respect to, the CVRs, with respect to which there is substantial uncertainty. A Non-U.S. holder (as defined in the section entitled “The Merger (Proposal 1) — Material U.S. Federal Income Tax Consequences of the Merger”) will generally not be subject to U.S. federal income tax with respect to the exchange of A. Schulman common stock for the merger consideration pursuant to the merger unless such Non-U.S. holder has certain connections to the United States. Because particular circumstances may differ, we recommend that you consult your tax advisor to determine the U.S. federal income tax consequences relating to the merger and the receipt of, and payments with respect to, the CVRs in light of your particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction. A more complete description of the material U.S. federal income tax consequences of the merger is provided in the section entitled “The Merger (Proposal 1) — Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q:	What does it mean if I get more than one proxy card?

A: If your shares of A. Schulman common stock are registered differently or are held in more than one account, you will receive more than one proxy or voting instruction form. Please complete and return all of the proxy cards you receive (or submit each of your proxies by telephone or the internet, if available to you) to ensure that all of your shares of A. Schulman common stock are voted.

 

Q:	How many copies should I receive if I share an address with another stockholder?

A: Some banks, brokers and other nominee record holders may participate in the practice of “householding” proxy statements, annual reports and notices of internet availability of proxy materials. This means that a single set of our proxy materials, may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of our proxy materials to you if you write or call Georgeson by phone, toll-free at 877-668-1646, or in writing at 1290 Avenue of the Americas, 9th Floor, New York, New York 10104. In addition, stockholders who share a single address, but receive multiple copies of the proxy statement, may request that in the future they receive a single copy by contacting the Company at the address or phone number set forth in the prior sentence.

 

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Q:	Who will count the vote?

A: A representative of Broadridge Financial Solutions, Inc. will tabulate the votes.

 

Q:	Who will solicit and bear the cost of soliciting votes for the special meeting?

A: A. Schulman will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. A. Schulman has engaged Georgeson LLC, which we refer to as “Georgeson,” to assist in the solicitation of proxies for the A. Schulman special meeting. A. Schulman estimates that it will pay Georgeson a fee of approximately $13,000, plus reimbursement of certain expenses. In addition, the Company may reimburse its transfer agent, brokerage firms and other persons representing beneficial owners of shares of A. Schulman common stock for their expenses in forwarding solicitation material to such beneficial owners.

 

Q:	Where can I find the voting results of the special meeting?

A: A. Schulman will announce preliminary voting results at the special meeting and publish preliminary, or final results if available, in a Current Report on Form 8-K filed with the SEC within four (4) business days after the special meeting.

 

Q:	Where can I find more information about A. Schulman?

A: You can find more information about us from various sources described in the section entitled “Where You Can Find Additional Information.”

 

Q:	Who can help answer my other questions?

A: If you have more questions about the merger, or require assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card, please contact Georgeson, which is acting as the proxy solicitation agent and information agent for the Company in connection with the merger, or the Company.

Georgeson LLC

1290 Avenue of the Americas,

9th Floor, New York,

New York 10104

Banks, brokers and stockholders may call toll free: 877-668-1646

or

A. Schulman

3637 Ridgewood Road

Fairlawn, Ohio 44333

Attention: Investor Relations

Jennifer Beeman

If your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.

 

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FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are predictions based on expectations and projections about future events, and are not statements of historical fact. Forward-looking statements include statements concerning business strategy, plans and prospects, among other things, including anticipated trends and developments in and management plans for our business and the markets in which we operate. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” and “continue,” the negative or plural of these words and other comparable terminology. All forward-looking statements included in this proxy statement are based upon information available to us as of the filing date of this proxy statement, and we undertake no obligation to update any of these forward-looking statements for any reason. You should not place undue reliance on forward-looking statements. The forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. Important factors that could cause actual results to differ materially from those contained in any forward-looking statement include the factors identified in A. Schulman’s Annual Report on Form 10-K for the year ended August 31, 2017 (the “Form 10-K”), under the heading “Risk Factors,” as updated from time to time by A. Schulman’s Quarterly Reports on Form 10-Q and other documents of A. Schulman on file or in this proxy statement filed with the SEC by A. Schulman, and the following factors:

 

•

the risk that the merger may not be consummated in a timely manner, if at all;

 

•

the risk that there is no guaranty that any proceeds will be paid to stockholders pursuant to the form of CVR agreement;

 

•

the risk that the merger agreement may be terminated in certain circumstances that require A. Schulman to pay LyondellBasell a termination fee of $50 million;

 

•

risks related to the diversion of management’s attention from the Company’s ongoing business operations;

 

•

the effect of the announcement of the merger on the Company’s business relationships (including, without limitation, customers and suppliers), operating results and business generally;

 

•

risks related to obtaining the requisite consents to the merger, including, without limitation, the receipt of approval from the Company’s stockholders, the timing (including possible delays) and receipt of regulatory clearance and CFIUS approval from governmental authorities (including any conditions, limitations or restrictions placed on these approvals) and the risk that one or more governmental authority may deny or delay any such approval;

 

•

the conditions of the capital markets during the period covered by the forward-looking statements;

 

•

risks that the proposed merger disrupts our current plans and operations or affects our ability to retain or recruit key employees;

 

•

the amount of the costs, fees, expenses and charges related to the merger agreement or the merger;

 

•

risk that our stock price may decline significantly if the merger is not completed;

 

•

risks related to other business effects, including the effects of industry, market, economic, political or regulatory conditions, future exchange or interest rates or credit ratings, changes in tax laws, regulations, rates and policies or competitive development;

 

•

the nature, cost and outcome of pending and future litigation and other legal proceedings, including any such proceedings related to the merger and instituted against us and others; and

 

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•

the fact that the Company’s stockholders would forgo the opportunity to realize the potential long-term value of the successful execution of the Company’s current strategy as an independent company.

Consequently, all of the forward-looking statements we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including, but not limited to, (i) the information contained under this heading and (ii) the information contained under the headings “Risk Factors” and information in our consolidated financial statements and notes thereto included in our most recent filing on Form 10-K and subsequent periodic and interim report filings (see “Where You Can Find Additional Information” beginning on page 115). No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

 

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THE SPECIAL MEETING

We are furnishing this proxy statement to the Company’s stockholders as part of the solicitation of proxies by the A. Schulman board of directors for use at the special meeting or any adjournment or postponement thereof. This proxy statement provides the Company’s stockholders with the information they need to know to be able to vote or instruct their vote to be cast at the special meeting or any adjournment or postponement thereof.

Date, Time and Place of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the A. Schulman board of directors for use at the special meeting to be held on June 14, 2018, at 11:00 a.m. (ET), at the Sheraton Suites Akron Cuyahoga Falls, 1989 Front Street, Cuyahoga Falls, Ohio 44221, or at any adjournment or postponement thereof.

Attendance at the special meeting is limited to individuals who were stockholders as of the record date and their authorized representatives, and admission will be on a first-come, first-served basis. Registration and seating will begin at 10:30 a.m. (ET). Each stockholder will be asked to present proof of identification, such as a driver’s license or passport, prior to admission to the special meeting. Beneficial owners of shares held in “street name” who desire to attend the special meeting, will need to bring proof of share ownership as of the record date, such as a bank or brokerage firm account statement or a letter from the intermediary holding your shares. Cameras, recording devices and other electronic devices will not be permitted at the special meeting.

If you are a stockholder of record, you may vote in person at the special meeting by requesting a ballot when you arrive. You must bring valid picture identification such as a driver’s license or passport and may be requested to provide proof of stock ownership as of the record date. If you are a beneficial owner of shares held in “street name” and wish to vote in person at the special meeting, you must obtain a “legal proxy” from the organization that holds your shares. A “legal proxy” is a written document that will authorize you to vote your shares held in “street name” at the special meeting. Please contact the organization that holds your shares for instructions regarding obtaining a “legal proxy.”

Purposes of the Special Meeting

One purpose of the special meeting is for our stockholders to consider and vote upon the proposal to adopt the merger agreement. Our stockholders must adopt the merger agreement in order for the merger to occur. If our stockholders fail to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, and the material provisions of the merger agreement are summarized in the section of this proxy statement entitled “The Merger Agreement.”

In addition, the Company is providing its stockholders with the opportunity to cast a non-binding advisory vote on specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement, the value of which is disclosed in the table entitled “Golden Parachute Compensation” and the notes accompanying that table in the section of this proxy statement entitled “Advisory Vote on Merger-Related Executive Compensation (Proposal 2)” The non-binding advisory vote on specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement is separate and apart from the vote to adopt the merger agreement. Accordingly, a stockholder may vote to approve the executive compensation and vote not to adopt the merger agreement and vice versa. Because the vote on executive compensation is advisory in nature only, it will not be binding on either the Company or LyondellBasell. Accordingly, if the merger agreement is adopted by the Company’s stockholders and the merger is completed, the merger-related compensation may be paid to the Company’s named executive officers even if stockholders fail to approve the proposal.

Our stockholders are also being asked to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

 

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This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about May 15, 2018.

Record Date and Quorum

The holders of record of A. Schulman common stock as of the close of business on May 7, 2018, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. On the record date, 29,526,887 shares of A. Schulman common stock were outstanding.

The presence at the special meeting, in person or represented by proxy, of the holders of record of a majority of the Company’s capital stock issued and outstanding and entitled to vote at the close of business on the record date will constitute a quorum, permitting the Company to conduct its business at the special meeting. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting. However, if a new record date is set for an adjourned special meeting, then a new quorum will have to be established. Proxies received but marked as abstentions will be included in the calculation of the number of shares considered to be present for the purpose of determining a quorum at the special meeting. “Broker non-votes,” described below under the sub-heading “— Voting; Proxies; Revocation — Providing Voting Instructions by Proxy — Shares of A. Schulman Common Stock Held in “Street Name”,” will not be included in the calculation of the number of shares considered to be present for the purpose of determining a quorum at the special meeting.

Required Vote

Each share of A. Schulman common stock outstanding at the close of business on the record date is entitled to one vote on each of the proposals to be considered at the special meeting. On the record date, there were 29,526,887 shares of A. Schulman common stock issued and outstanding.

Holders of Company convertible special stock will not have any voting rights at the special meeting. Holders of the Company’s convertible special stock can convert their convertible special stock at any time before or after the closing date. If they convert prior to the closing date, they will receive shares of the Company’s common stock at the current conversion rate. Upon closing, the Company’s convertible special stock will become convertible into the merger consideration, with each share of the Company’s convertible special stock becoming convertible into the consideration that a holder of a number of shares of the Company’s common stock equal to the conversion rate would have been entitled to receive at closing. If a holder of the Company’s convertible special stock elects to convert during the period beginning at the open of business on the trading day immediately following the closing date and ending at the close of business on the 30th trading day following the closing date, they will be entitled to an increase in the conversion rate. After such 30th trading day, the increase to the conversion rate will no longer apply but the convertible special stock will remain convertible into the merger consideration.

For the Company to complete the merger, Company stockholders holding a majority of the shares of A. Schulman common stock outstanding at the close of business on the record date and entitled to vote thereon must vote “FOR” the proposal to adopt the merger agreement. A failure to vote your shares of A. Schulman common stock or an abstention from voting will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

The approval, on a non-binding advisory basis, of the proposal regarding specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement requires the affirmative vote of Company stockholders holding a majority of the shares of A. Schulman common stock, present or represented at the special meeting and entitled to vote thereon, at which a quorum is present. An abstention from voting will have the same effect as a vote

 

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“AGAINST” the proposal to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have no effect on this proposal.

The affirmative vote of Company stockholders holding a majority of the shares of A. Schulman common stock, present or represented at the special meeting and entitled to vote thereon, whether or not a quorum is present, is required to approve the proposal to approve the adjournment of the special meeting, if necessary or appropriate. An abstention from voting will have the same effect as a vote “AGAINST” the proposal to adjourn. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, a “broker non-vote” will arise and will have no effect on this proposal.

Voting by the Company’s Directors and Executive Officers

At the close of business on May 7, 2018, directors and executive officers of the Company were entitled to vote 1,022,034 shares of A. Schulman common stock, or approximately 3.5% of the shares of A. Schulman common stock issued and outstanding on that date. We currently expect that the Company’s directors and executive officers will vote their shares representing approximately 3.5% of the outstanding shares of A. Schulman common stock in favor of the proposal to adopt the merger agreement and in favor of the other proposals to be considered at the special meeting, although they have no obligation to do so.

Voting; Proxies; Revocation

Attendance

All holders of shares of A. Schulman common stock as of the close of business on May 7, 2018, the record date, including stockholders of record and beneficial owners of A. Schulman common stock registered in the “street name” of a broker, bank or other nominee, are invited to attend the special meeting. If you are a stockholder of record, please be prepared to provide proper identification, such as a driver’s license or passport. If you hold your shares in “street name,” you will need to provide proof of ownership, such as a recent account statement or voting instruction form provided by your broker, bank or other nominee or other similar evidence of ownership, along with proper identification.

Voting in Person

Stockholders of record will be able to vote in person at the special meeting. If you are not a stockholder of record, but instead hold your shares of A. Schulman common stock in “street name” through a broker, bank or other nominee, you must provide a “legal proxy” from the organization that holds your share in order to be able to vote in person at the special meeting.

Providing Voting Instructions by Proxy

To ensure that your shares of A. Schulman common stock are voted at the special meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the special meeting in person.

Shares of A. Schulman Common Stock Held by Record Holder

If you are a stockholder of record, you may provide voting instructions by proxy using one of the methods described below.

 

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Via the internet. You can vote over the internet by following the instructions on the proxy card.

 

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By Telephone. You can vote by telephone by following the instructions on the proxy card.

 

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By Mail. You can vote by mail by signing, dating and mailing the enclosed proxy card.

If you submit a signed proxy card or submit your proxy by telephone or the internet, but do not specify how you want to vote your shares on a particular proposal, then the proxy holders will vote your shares in accordance with the recommendations of the A. Schulman board of directors on all matters presented in this proxy statement. With respect to any other matters properly presented for a vote at the special meeting, the proxy holders will vote your shares in accordance with their best judgment. If you fail to return your proxy card and you are a holder of record on the record date, unless you attend the special meeting and vote in person, the effect will be that your shares of A. Schulman common stock will not be considered present at the special meeting for purposes of determining whether a quorum is present at the special meeting, will have the same effect as a vote against the proposal to adopt the merger agreement and, assuming a quorum is present, will not affect the proposal, on a non-binding advisory basis, to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement, or the vote regarding the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies.

Shares of A. Schulman Common Stock Held in “Street Name”

If your shares are held in the name of a bank, broker or other holder of record, you will receive instructions from the holder of record as to how to vote your shares. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the special meeting, you should contact your broker or agent to obtain a “legal proxy” or broker’s proxy card and bring it to the special meeting in order to vote.

In accordance with the rules of the Nasdaq, brokers, banks and other nominees who hold shares of A. Schulman common stock in “street name” for their customers do not have discretionary authority to vote the shares with respect to the proposal to adopt the merger agreement, the non-binding advisory proposal to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement, or the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies. Accordingly, if brokers, banks or other nominees do not receive specific voting instructions from the beneficial owner of such shares, they may not vote such shares with respect to these proposals. Under such circumstance, a “broker non-vote” would arise. “Broker non-votes,” if any, will not be considered present at the special meeting for purposes of determining whether a quorum is present at the special meeting, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement and, assuming a quorum is present, will have no effect (x) on the proposal to approve, on a non-binding advisory basis, specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement or (y) on the adjournment proposal. Thus, for shares of A. Schulman common stock held in “street name,” only shares of A. Schulman common stock affirmatively voted “FOR” the proposal to adopt the merger agreement will be counted as a vote in favor of such proposal.

Revocation of Proxies

Any person giving a proxy pursuant to this solicitation has the power to revoke and change it at any time before it is voted. If you are a stockholder of record, you may revoke your proxy at any time before the vote is taken at the special meeting by:

 

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providing a written notice of revocation that is received before the Company special meeting to A. Schulman’s Corporate Secretary, Andrean R. Horton, at A. Schulman, Inc., 3637 Ridgewood Road, Fairlawn, Ohio 44333;

 

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delivering a valid, later-dated proxy either by telephone or online (our last delivery before the meeting begins will be counted);

 

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completing, signing, dating and returning a new proxy card by mail to the Company before the special meeting; or

 

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if you are a registered stockholder (or if you hold shares in “street names” and have a proper legal proxy from your broker), attending the special meeting and voting in person.

Please note, however, that only your last-dated proxy will count. Attending the Company special meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card or by sending a written notice of revocation to A. Schulman, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by A. Schulman before the Company special meeting.

If you hold your shares in “street name” through a broker, bank or other nominee, you will need to follow the instructions provided to you by your broker, bank or other nominee in order to revoke your proxy or submit new voting instructions.

Abstentions

An abstention occurs when a stockholder attends a meeting, either in person or by proxy, but abstains from voting. Abstentions will be included in the calculation of the number of shares of A. Schulman common stock present or represented at the special meeting for purposes of determining whether a quorum has been achieved. Abstaining from voting will have the same effect as a vote “AGAINST” the respective proposal to adopt the merger agreement, to approve specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement and to adjourn the special meeting.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed if necessary or appropriate, including for the purpose of soliciting additional proxies. In the event that a sufficient number of shares of A. Schulman common stock is present or represented, in person or by proxy, and voted in favor of the proposal to adopt the merger agreement at the special meeting such that the Company stockholder approval shall have been obtained, the Company does not anticipate that it will adjourn or postpone the special meeting.

The special meeting may be adjourned by the affirmative vote of the holders of a majority of the votes cast in respect of shares of A. Schulman common stock present in person or represented by proxy at the special meeting and entitled to vote at the special meeting or as otherwise permitted by law. Any adjournment or postponement of the special meeting will allow the Company’s stockholders who have already sent in their proxies to revoke them at any time before their use at the special meeting that was adjourned or postponed.

Solicitation of Proxies

The A. Schulman board of directors is soliciting your proxy, and the Company will bear the cost of this solicitation of proxies. This includes the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. A. Schulman has engaged Georgeson LLC, which we refer to as “Georgeson,” to assist in the solicitation of proxies for the Company special meeting. A. Schulman estimates that it will pay Georgeson a fee of approximately $13,000, plus reimbursement of certain expenses. In addition, the Company may reimburse its transfer agent, brokerage firms and other persons representing beneficial owners of shares of A. Schulman common stock for their expenses in forwarding solicitation material to such beneficial owners.

 

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Other Information

You should not return your stock certificate or send documents representing A. Schulman common stock with the proxy card. If the merger is completed, the paying agent for the merger will send to you a letter of transmittal and related materials and instructions for exchanging your shares of A. Schulman common stock.

 

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THE MERGER (PROPOSAL 1)

The description of the merger in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. You are encouraged to read the merger agreement carefully and in its entirety.

Parties Involved in the Merger

A. Schulman, Inc.

A. Schulman, Inc., which we refer to as “A. Schulman,” the “Company,” “we,” “us,” or “our,” is an international supplier of high-performance plastic compounds, composites and resins. The Company was founded in 1928 and has been providing innovative solutions to meet its customers’ demanding requirements through proprietary and custom-formulated products. The Company’s customers span a wide range of markets, such as packaging, mobility, building & construction, electronics & electrical, agriculture, personal care & hygiene, custom services and sports, leisure & home. The Company has a strong presence in global markets, and provides new and enhanced product solutions that result in a product portfolio that is strongly positioned in the markets it serves. The company employs approximately 5,200 people and has 54 manufacturing facilities globally. A. Schulman’s principal executive offices are located at 3637 Ridgewood Road, Fairlawn, Ohio 44333, and our telephone number is (330) 666-3751.

A. Schulman is a Delaware corporation and A. Schulman common stock, par value $1.00 per share, trades on the Nasdaq Stock Market, which we refer to as the “Nasdaq,” under the symbol “SHLM.”

Additional information about A. Schulman is contained in our public filings, which are incorporated by reference herein. See “Where You Can Find Additional Information.”

LyondellBasell Industries N.V.

LyondellBasell Industries N.V., which we refer to as “LyondellBasell,” a public limited liability company (a naamloze vennootschap) formed under the laws of The Netherlands, is one of the largest plastics, chemicals and refining companies in the world. Driven by its 13,000 employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, and improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road. LyondellBasell sells products into approximately 100 countries and is the world’s largest licensor of polyolefin and polypropylene technologies. LyondellBasell’s principal executive offices are located at 4th Floor, One Vine Street, London, W1J 0AH, The United Kingdom. LyondellBasell’s telephone number at that office is +44 (0) 207 220 2600.

LyondellBasell’s shares are listed on the New York Stock Exchange, which we refer to as the “NYSE,” under the symbol “LYB.”

Additional information about LyondellBasell can be found at www.lyondellbasell.com. The information provided on or accessible through LyondellBasell’s website is not part of or incorporated by reference in this proxy statement.

LYB Americas Holdco Inc.

LYB Americas Holdco Inc., a Delaware corporation and a direct wholly owned subsidiary of LyondellBasell, which we refer to as “Merger Sub,” was formed solely for the purpose of engaging in the transactions contemplated by the merger agreement (as defined below). Upon completion of the merger (as defined below), Merger Sub will merge with and into A. Schulman and will cease to exist.

 

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Certain Effects of the Merger

If the merger agreement is adopted by the Company’s stockholders and certain other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into the Company with the Company being the surviving corporation in the merger (which we refer to as the “merger”).

Upon the consummation of the merger, each share of A. Schulman common stock issued and outstanding immediately before the effective time of the merger (other than shares owned or held in treasury by A. Schulman or any direct or indirect wholly owned subsidiary of A. Schulman and owned by LyondellBasell or any direct or indirect wholly owned subsidiary of LyondellBasell (including Merger Sub), which in each case will be cancelled for no consideration, and other than shares with respect to which the stockholder has properly exercised its appraisal rights) will be cancelled and converted into the right to receive (i) $42.00 in cash, plus (ii) one CVR, in each case, without interest and less applicable withholding taxes. While no guaranty can be given that any additional proceeds will be received, each CVR will provide a holder with an opportunity to receive certain net proceeds, if any are recovered, from claims arising from the Company’s acquisition of its Citadel subsidiary or the acquisition by Citadel’s subsidiary, the Matrixx Group, Incorporated of its Lucent subsidiary, including certain ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary and the related government investigations.

A. Schulman common stock is currently registered under the Exchange Act and is listed on the Nasdaq under the symbol “SHLM.” As a result of the merger, the Company will cease to be a publicly traded company and will be a direct wholly owned subsidiary of LyondellBasell. Following the consummation of the merger, A. Schulman common stock will be delisted from the Nasdaq and deregistered under the Exchange Act, in each case in accordance with applicable law, rules and regulations.

Background of the Merger

The senior management and board of directors of A. Schulman actively monitor and assess developments in the chemical industry. As part of its ongoing evaluation of A. Schulman’s business, A. Schulman’s board of directors, together with senior management, regularly reviews and assesses A. Schulman’s performance, risks, opportunities and strategy, including reviews of opportunities to increase stockholder value. A. Schulman has focused on increasing stockholder value by implementing both organic and non-organic growth initiatives, including acquisitions. A. Schulman’s growth strategy is a set of initiatives aimed, among other things, at increasing its ability to leverage its innovative products into different geographic markets and explore adjacent markets and applications to increase sales volume and improve the profitability of A. Schulman’s product mix.

Additionally, senior management and board of directors of A. Schulman regularly review and evaluate the possibility of pursuing various strategic alternatives and relationships as part of the Company’s ongoing efforts to strengthen its businesses and maximize value for its stockholders, taking into account economic, regulatory, competitive and other conditions.

From 2008 until 2015, A. Schulman successfully completed ten acquisitions. On June 1, 2015, as part of its expansion efforts, A. Schulman acquired all of the issued and outstanding shares of Citadel Plastics, Inc. (“Citadel”), a privately held portfolio company of certain private equity firms, for $801.6 million, which acquisition allowed A. Schulman to expand its engineered plastics business in North America and to supply engineered composites on a global basis. As a result of the financing related to the Citadel acquisition, which resulted in A. Schulman having outstanding debt of approximately $1.1 billion, A. Schulman’s strategic focus shifted toward deleveraging its balance sheet from such debt, while continuing to seek organic growth.

In June 2016, after identifying quality reporting issues affecting certain product lines at two (2) manufacturing facilities that had formerly been part of Lucent Polymers, Inc. (“Lucent”), an indirect wholly owned subsidiary of Citadel acquired by A. Schulman as part of the Citadel acquisition, A. Schulman and two of its subsidiaries filed

 

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a complaint in the Delaware Court of Chancery against the former owners of Citadel and certain former executives of each of Citadel and Lucent (the “Citadel litigation”), alleging breach of contract, fraudulent inducement, civil conspiracy, breaches of fiduciary duties and violations of “blue sky” laws in Illinois, Ohio, California and Indiana.

On November 22, 2016, The Matrixx Group, Inc. (“Matrixx”), an indirect subsidiary of A. Schulman, filed a lawsuit in the Delaware Court of Chancery against the former owners of Lucent and certain former executives of Lucent arising out of alleged false statements made in connection with Citadel’s December 2013 acquisition of Lucent (the “Matrixx Litigation”). Matrixx and one of its subsidiaries has asserted claims for breach of contract, fraud, conspiracy and breach of fiduciary duty.

Both the Citadel Litigation and the Matrixx Litigation remain pending. In addition, there are ongoing parallel investigations being undertaken by the United States Attorney’s Office for the Southern District of Indiana and the SEC that the Company understands relate to the allegations made by the Company in the Citadel Complaint arising out of the Company’s acquisition of Citadel (including Citadel’s subsidiary, Lucent). On September 6, 2017, the Federal Bureau of Investigation, Indianapolis division, notified A. Schulman’s counsel that the Company was a potential victim of a crime.

On August 18, 2016, Joseph Gingo, A. Schulman’s current chairman, president and chief executive officer, resumed his role as president and chief executive officer of the Company, with a goal of improving the performance of A. Schulman and assessing its strategic execution. Mr. Gingo has been a member of A. Schulman’s board of directors since 2000. Mr. Gingo served as A. Schulman’s chairman, president and chief executive officer from 2008 until his retirement as president and chief executive officer at the end of 2014 (he continued as chairman). Following downward revisions to earning guidance for 2016 and a decrease in the Company’s stock price, the then-chief executive officer, who was hired to replace Mr. Gingo upon Mr. Gingo’s retirement, mutually agreed with the board of directors to relinquish his officer role and his directorship, and Mr. Gingo was hired again as the Company’s president and chief executive officer. Soon after his being re-hired as president and chief executive officer, Mr. Gingo began to conduct a comprehensive review of the Company’s business plan and near- and long-term global end market trends.

On September 13, 2016, A. Schulman engaged Citigroup to assist the Company with reviewing its business plan, and near- and long-term global end market trends.

On October 14, 2016, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup in attendance. At the meeting, Citigroup representatives discussed with the Company’s board of directors their review and analysis of A. Schulman’s fiscal 2017 budget and long range business plan. Their review also provided a preliminary valuation of the Company.

In November 2016, A. Schulman engaged Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”) to act as its outside legal counsel.

On December 9, 2016, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. Citigroup representatives (i) reviewed the mergers and acquisitions environment, both generally, and with respect to the chemical industry, in particular, (ii) provided financial perspectives regarding the Company and its stock performance, and (iii) provided perspectives regarding potential strategic alternatives available to A. Schulman. Citigroup representatives noted several inquiries received from financial sponsors and strategic buyers regarding a potential sale of A. Schulman. At the meeting, the board of directors discussed with Citigroup the challenges the Company was facing with respect to certain businesses in the execution of its plan, and Citigroup representatives recommended that the board of directors review A. Schulman’s current situation to understand whether the Company was experiencing normal, expected problems, or if A. Schulman’s issues were more significant and could impact its financial forecast.

 

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Following further discussions, A. Schulman’s board of directors recommended that each of the board of directors and Citigroup review A. Schulman’s current situation and report back to the board at the next board meeting.

On February 10, 2017, A. Schulman’s board of directors met to discuss its considerations for a potential sale of the Company, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, Skadden attorneys discussed the fiduciary duties of directors in considering whether to explore a potential sale transaction. Mr. Gingo then reviewed with the board of directors the potential concerns with the Company’s 2017 fiscal year budget and long-range plan. Following Mr. Gingo’s presentation, Mr. John Richardson, A. Schulman’s executive vice president and chief financial officer, reviewed the fiscal year 2017 forecast with the board of directors. Citigroup representatives next updated A. Schulman’s board of directors on their ongoing review of the Company, including its execution on its business plan, and discussing A. Schulman’s share price, comparing it with peer companies and reviewing the mergers and acquisitions market in general. Citigroup representatives recommended, based on their review and analysis, not to initiate a potential sale process at that time and to reassess the situation after the conclusion of the third quarter of the 2017 fiscal year. Following discussions with senior management and Citigroup, the board of directors determined that A. Schulman should defer commencing exploring a potential sale of the Company and revisit such determination at later meetings of the board of directors after the board of directors had determined that the challenges in the Company’s business had been adequately addressed.

On March 30, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, a Citigroup representative provided Citigroup’s update regarding the general mergers and acquisitions environment. In response to feedback from members of senior management that certain issues remained with the execution on portions of the Company’s business plan, the Citigroup representatives emphasized the importance of demonstrating A. Schulman’s ability to assess its business on a near term basis with any potential buyer. Mr. Gingo discussed with A. Schulman’s board of directors that he had received an indication of interest from a private equity firm, Party 1, to potentially acquire A. Schulman, noting that such indication of interest did not include a proposed valuation. Following further discussion, A. Schulman’s board of directors expressed their desire to fully understand the strategic alternatives available to the Company in light of the current financial situation of A. Schulman. The board of directors requested that Citigroup assist the Company in preparing (i) an examination of the Company’s fiscal year 2017 and five-year plan, in collaboration with senior management, (ii) an assessment of strategic alternatives available to A. Schulman, such as divesting certain business units, and (iii) a financial analysis of A. Schulman based on certain financial information provided to Citigroup by senior management. After further discussion, A. Schulman’s board of directors agreed to defer commencing exploring a possible sale of the Company until Citigroup presented certain additional requested information to the board of directors.

On June 15, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, Citigroup representatives reviewed the Company’s stock price over time; the Citigroup representatives believed that the Company’s current stock price reflected the market’s continued confidence in the ability of A. Schulman’s senior management to improve operations. Citigroup representatives also noted the strong mergers and acquisitions market, in general, including in the chemical industry specifically. Citigroup representatives next discussed their review of the fiscal year 2017 and long range plan. Citigroup representatives reviewed potential strategic alternatives for the Company and explained that, based on their review, a potential sale of certain assets of A. Schulman would likely be dilutive to the Company’s 2018 earnings per share given the high firm value to EBITDA multiple that would be required for the selected divestitures to have no impact on 2018 earnings per share and that a potential sale of the entire Company could provide the most value for the Company and its stockholders. Considering the Company’s debt levels, Citigroup also discussed the possibility of the Company doing a potential equity raise and continuing to execute on its current business plan, but noted that equity offerings are most commonly used to finance an acquisition or support a deteriorating credit profile, neither of which was relevant in the case of the Company. Citigroup representatives further discussed the potential timeline of any potential sale process and noted that some of the financial sponsors to whom Citigroup was considering reaching out (if and when A. Schulman’s

 

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board of directors authorized contact) had previously indicated an interest in potentially acquiring A. Schulman. In a series of discussions following Citigroup’s review, A. Schulman’s board of directors concluded that it was in the best interests of A. Schulman and its stockholders for the senior management to explore a potential sale process as an alternative to remaining a standalone Company, and requested that Citigroup and the Company’s senior management begin taking the steps to prepare to engage in such a process. In parallel, the board of directors and its nominating and governance committee formed a “search committee” to consider potential search firms, review candidates and consider appropriate timing related to the chief executive officer succession in the event the Company continued on a standalone basis.

On July 19, 2017, A. Schulman’s board of directors met with members of senior management and representatives of Citigroup in attendance. At the meeting, the board of directors reviewed the preliminary financial information for June. Mr. Gingo indicated that because of margin compression in the Company’s business, the board of directors should support senior management’s desire to revise its annual earnings guidance and enact cost savings. At the meeting, Citigroup representatives discussed the timeline for the budget and a potential strategic transaction. Following discussion, the A. Schulman board of directors concurred with management’s decision to move forward with adjusting the Company’s annual earnings guidance and enacting additional cost savings.

On July 20, 2017, A. Schulman issued a press release announcing that it had revised its fiscal 2017 guidance and lowered its full-year 2017 adjusted net income guidance range to $1.60 to $1.70 per diluted share and adjusted EBITDA to $200 to $204 million. In its statement, the Company noted that the revision was driven by margin compression in the Company’s European business as well as weakened operating results from previous forecasts in certain other regions.

On August 14, 2017, Cruiser Capital Advisors, LLC (“Cruiser”) and Kingdon Capital Management, L.L.C. (“Kingdon”) filed a joint Schedule 13D with the SEC (the “Schedule 13D”) disclosing beneficial ownership of approximately 9% of the outstanding common stock of A. Schulman.

On August 17, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, the board of directors and its advisors discussed Cruiser’s and Kingdon’s Schedule 13D and certain implications thereof. A Citigroup representative reviewed with the board of directors the list of financial sponsors and strategic buyers identified by Citigroup with input from A. Schulman’s senior management to whom Citigroup could potentially reach out on behalf of A. Schulman, discussing that several such parties had previously expressed an interest in acquiring the Company, including two (2) private equity firms (one of whom was Party 1) and two (2) strategic bidders. A. Schulman’s board of directors determined to continue exploring a potential sale of A. Schulman.

On August 22, 2017, A. Schulman formalized its engagement of Citigroup as its exclusive financial adviser in connection with a possible sale of the Company.

On August 23, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, Mr. Gingo informed the board of a recent meeting among certain members of the Company’s senior management, certain members of the board of directors and representatives of each of Cruiser and Kingdon. Also at the meeting, Ernest Novak, a member of A. Schulman’s board of directors, advised the directors that he encountered an executive of an investment advisory firm, who informed Mr. Novak that such executive was asked to participate in a potential takeover of A. Schulman. No further communication was received from this person.

Following discussion at the August 23 board of directors meeting and a series of additional meetings, A. Schulman’s board of directors determined to enter into a cooperation agreement dated September 7, 2017, with Cruiser and Kingdon, pursuant to which A. Schulman appointed each of Allen Spizzo and Carol Eicher (whom Cruiser and Kingdon had requested to be appointed to the Company’s board of directors) to A. Schulman’s board of directors, and to enter into a services agreement with Dr. William Joyce (whom Cruiser

 

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and Kingdon had originally requested to be appointed to the Company’s board of directors, together with one additional candidate).

From August to September 2017, at the direction of A. Schulman’s board of directors, Citigroup conducted an outreach to twenty-seven (27) financial sponsors and strategic third parties identified by Citigroup with input from A. Schulman’s senior management (the “First Wave Bidders”), including the four (4) potential parties who previously expressed an interest in acquiring the Company. This initial outreach resulted in twenty-two (22) parties executing confidentiality agreements (each of which contained customary standstill provisions) with the Company and receiving the confidential information presentation.

On October 4, 2017, The Wall Street Journal published an article speculating that A. Schulman was engaging in a sale process (the “WSJ Article”).

On October 10, 2017, out of the twenty-two (22) parties that entered into confidentiality agreements, five (5) First Wave Bidders submitted preliminary, non-binding indications of interest, with bids ranging from $34 to $40 per share. Out of such five (5) indications of interest, three (3) bids were submitted from private equity funds to acquire the entire Company and two (2) bids were submitted from a private equity firm and a strategic bidder, to acquire segments of the Company without indicating any price. The other contacted parties declined to proceed further for varying reasons.

On October 11, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, a Citigroup representative reviewed the outreach to potential bidders and stated that Citigroup had received additional expressions of interest from potential bidders following the publication of the WSJ Article. At the meeting, Citigroup representatives presented a list of certain potential “second wave” bidders (the “Second Wave Bidders”), including bidders that initiated contact with Citigroup as well as potential bidders that Citigroup believes might be interested in pursuing a potential transaction to acquire A. Schulman. Citigroup representatives stated that nine (9) confidentiality agreements had been sent to Second Wave Bidders, noting that, although Citigroup anticipated some interest from the group of Second Wave Bidders, not all were likely to submit bids. Citigroup representatives then reviewed the initial preliminary, non-binding indications of interest that Citigroup had received from First Wave Bidders. Citigroup representatives noted that Party 5, a financial bidder, had submitted a bid ranging from $34 to $35 per share, Party 1, a financial bidder, had submitted a bid without indicating a specific price, but indicating that its indication was at current market to a modest premium to market and Party 6, a financial bidder, had submitted a bid ranging from $38 to $40 per share. Citigroup representatives further noted that Party 7, a financial bidder, had expressed an interest in distribution, engineered plastics and engineered composites portion of A. Schulman’s business only, and that Party 8, a strategic bidder, who had expressed interest directly to Mr. Gingo in 2016, expressed an interest in engineered plastics and masterbatch portion of A. Schulman’s business and noted its willingness to seek to secure a partner to buy the remaining segments of the Company. Following Citigroup’s review, A. Schulman’s board of directors concluded to direct Citigroup to reach out to twenty-eight (28) additional financial sponsors and strategic bidders, such bidders being the Second Wave Bidders, to cease further discussions with Party 7 and Party 8 as the board of directors believed that it was not in the best interest of the Company to sell only the portions of the Company in which those parties were interested, and to continue exploring a potential transaction with Parties 1, 5 and 6.

During the week of October 16, 2017, senior management of the Company held separate management presentations regarding A. Schulman with representatives of three (3) First Wave Bidders, specifically Party 1, Party 5 and Party 6.

By late October 2017, fifteen (15) Second Wave Bidders, including LyondellBasell on October 27, 2017, had executed confidentiality agreements (each of which contained customary standstill provisions) with the Company.

On November 9, 2017, two (2) First Wave Bidders; Party 5 and Party 6, submitted preliminary, non-binding indications of interest, reconfirming their value for the Company, with bids ranging from $32 to $36 per share,

 

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and three (3) Second Wave Bidders, Party 9 (a strategic bidder), Party 10 (a strategic bidder) and LyondellBasell, submitted preliminary, non-binding indications of interest, with bids ranging from $39 to $50.24 per share, with LyondellBasell’s bid ranging from $39 to $41 per share.

On November 10, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, a Citigroup representative reviewed the confirmation of the initial preliminary, non-binding indications of interest submitted by each of Party 5 and Party 6, each a private equity firm. The Citigroup representative noted that Party 1 was no longer interested in continuing with a potential transaction to acquire A. Schulman and did not submit a reconfirmation of value for the Company, Party 5, which initially submitted a bid ranging from $34 to $35 per share, reconfirmed at a bid range of $32 to $33 per share, and Party 6, which initially submitted a bid ranging from $38 to $40 per share, reconfirmed its bid at $36 per share, noting that its reconfirmation assumed that the Company’s stockholders would also receive contingent value rights entitling them to receive any proceeds (net of certain expenses) from certain ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary and the related government investigations. Citigroup representatives reviewed the initial, preliminary, non-binding indications of interest from three (3) Second Wave Bidders: Party 9, a strategic bidder, with a bid of $48.50 per share, Party 10, a strategic bidder, with a bid of $50.24 per share, and LyondellBasell, with a bid range of $39 to $41 per share. Citigroup representatives also noted that management presentations for those Second Wave Bidders would be scheduled for the week of November 13, 2017. Following Citigroup’s review, A. Schulman’s board of directors discussed, among other things, profiles of the Second Wave Bidders, strategic fit, competitive concerns, potential regulatory hurdles, and level of interest in, and ability to consummate, a potential transaction. Senior management and Citigroup representatives expressed their concerns as to whether Party 9 and Party 10 would submit a final bid at their initial price level. A. Schulman’s board of directors unanimously concluded to (i) proceed with the management presentations with each of Party 9, Party 10 and LyondellBasell, (ii) terminate discussions with Party 5 given its low reconfirmed non-binding, preliminary indication of interest and (iii) continue discussions with Party 6.

During the week of November 13, 2017, A. Schulman’s senior management held management presentations with each of the three (3) Second Wave Bidders, Party 9, Party 10 and LyondellBasell and asked such bidders to confirm their bids by December 20, 2017.

Starting in November 2017 and continuing into February 2018, LyondellBasell performed its due diligence of the Company.

From December 6, 2017 to January 18, 2018, LyondellBasell conducted global site visits at twenty (20) of A. Schulman’s facilities located in Germany, France, Belgium, United States, Mexico, Malaysia, United Kingdom, Brazil, Italy and China.

Also in December 2017, Party 6 and Party 10 each conducted global site visits at certain A. Schulman’s facilities.

On December 7, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, Citigroup representatives discussed the management presentations that were conducted with Party 9, Party 10 and LyondellBasell, noting that Party 9 had informed Citigroup that it was not interested in continuing to pursue a potential transaction to acquire the Company following such management presentation. Citigroup representatives noted that Party 10 had favorably received the management presentation and that Party 6 remained in the process and was conducting its due diligence. Citigroup representatives also stated that LyondellBasell appeared to have favorably received the management presentation and engaged significant internal and external resources to conduct its due diligence. Citigroup representatives next stated that the Second Wave Bidders’ reconfirmations of value were requested by December 20, 2017 and that bidders were asked to include the purchase price, financing plans, intentions for the business, the remaining outstanding diligence requests and an estimate of timing to execute a definitive merger agreement. The board of directors and its advisors discussed the regulatory approvals that would be required by

 

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the remaining bidders, and concern was expressed with respect to Party 10’s ability to obtain the necessary approvals in a timely manner. A representative of Skadden and senior management then reviewed with the board of directors the proposed terms of the merger agreement and the form of CVR agreement, which would be provided to bidders, and the board of directors discussed comments and concerns. At the meeting, Dr. Joyce discussed his views as to how improvements to “quote-to-cash,” “quick change” transitions in manufacturing, and inventory and purchasing could support a higher value and share price for the Company.

On December 20, 2017, Party 6 and Party 10 each informed Citigroup that they were not interested in a potential transaction to acquire the Company and withdrew from the process. LyondellBasell reaffirmed its previously submitted preliminary, non-binding indication of interest at $39 to $41 per share, and reiterated its interest in a potential transaction to acquire the Company.

On December 22, 2017, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. At the meeting, Citigroup representatives reported on the diligence performed by each of Party 6, Party 10 and LyondellBasell. A Citigroup representative reported that LyondellBasell remained in the process and had reaffirmed its preliminary, non-binding indication of interest at a range of $39 to $41 per share. A representative of Skadden reviewed the terms of the proposed form of CVR agreement with the board of directors, following up on concerns raised by the board at the prior meeting. At the board of director meeting, Dr. Joyce referred to Party 2, a private equity firm that had reviewed a potential transaction with A. Schulman in the initial stages of the sale process, but had determined not to proceed at that time. Dr. Joyce reported to the board of directors that, while he was attending a meeting unrelated to the Company but relating to Party 2, a representative of Party 2 expressed possible interest in again exploring a potential acquisition of A. Schulman. Following discussion of procedures to be followed in any such meeting, A. Schulman’s board of directors authorized Dr. Joyce, together with a representative of Citigroup, to meet with Party 2.

On January 5, 2018, Dr. Joyce, Citigroup representatives and representatives of Party 2 met to discuss Party 2’s renewed interest in a potential acquisition of A. Schulman. At that meeting, Party 2 had expressed interest and indicated that it would bid in January 2018.

On January 22, 2018, Shearman & Sterling LLP (“Shearman”), LyondellBasell’s outside counsel, provided revised drafts of the merger agreement and the form of CVR agreement, which reflected LyondellBasell’s comments to such agreements, in accordance with the bid procedures that Citigroup had provided to LyondellBasell.

On January 25, 2018, following review of LyondellBasell’s drafts of the merger agreement and the form of CVR agreement with members of the A. Schulman senior management team, Skadden representatives provided feedback regarding certain terms of such drafts to Shearman.

Also on January 25, 2018, following a diligence review, Party 2 declined to submit a bid to acquire the Company, indicating to Citigroup that it could not offer more than a price of $34 to $35 per share, leaving LyondellBasell as the sole remaining bidder.

On January 26, 2018, Citigroup sent LyondellBasell the Forecasts (which is described in the section entitled “The Merger (Proposal 1) –– Projected Financial Information”). The Forecast included profitability and working capital adjustments to certain non-public, unaudited prospective financial information that the Company’s senior management had previously prepared and shared with LyondellBasell.

On January 31, 2018, LyondellBasell submitted a letter to A. Schulman containing a definitive, binding proposal to acquire all of the equity interests of A. Schulman for $41 plus one CVR per share and further revised drafts of the merger agreement and the form of CVR agreement.

 

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On February 1, 2018, A. Schulman’s board of directors met, with members of senior management and representatives of Skadden and Citigroup in attendance, to discuss LyondellBasell’s proposal. At the meeting, Citigroup representatives summarized Citigroup’s outreach to and discussions with potential bidders and provided a preliminary review of the financial aspects of LyondellBasell’s proposal and preliminary financial analyses with respect to A. Schulman. Citigroup noted that multiple bidders were concerned about whether the Company’s systems could allow extraction of the information necessary to implement the cost saving initiatives that were proposed by Dr. Joyce in a reasonable timeframe. These bidders believed that there was long-term potential but it would be a very long, time-intensive and expensive process to extract savings and thought it would take a great deal longer than proposed by the board’s advisor. In its financial analyses, Citigroup relied on certain precedent transactions with certain comparable companies to evaluate A. Schulman’s status among its peers. The board requested that Citigroup consider showing comparisons with certain other precedent transactions at its next meeting. Skadden representatives discussed certain legal matters and reviewed the key terms of LyondellBasell’s revised drafts of the merger agreement and the form of CVR agreement. During such meeting, independent, non-executive members of the board of directors met separately with representatives of Skadden, during which certain members of the board of directors expressed their belief that a higher price per share could be obtained. After discussion regarding price as well as transaction terms, A. Schulman’s board of directors reconvened with the representatives of Citigroup and instructed Citigroup to consider whether other industry specific transactions should be taken into account in Citigroup’s financial analysis, and communicate to LyondellBasell’s financial advisors that the board of directors remained willing to continue discussions regarding a potential transaction if it would be at a higher price and if certain specified terms reflected in the merger agreement and the form of CVR agreement were more favorable to A. Schulman, including with respect the nature and scope of A. Schulman’s representations and warranties, LyondellBasell’s obligations in connection with seeking regulatory approvals, A. Schulman’s non-solicitation obligations, triggers for paying and the amount of a termination fee and the composition and authority of the committee under the form of CVR agreement and the calculation and timing of payments under the CVRs. Later that day and during the following day, Citigroup representatives delivered that message to and engaged in subsequent conversations with LyondellBasell’s financial advisors.

On February 2, 2018 and on February 3, 2018, representatives of Skadden and Shearman negotiated the terms of the merger agreement and the form of CVR agreement, including those specific terms identified by A. Schulman’s board of directors.

On February 5, 2018, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. During such meeting, representatives of Citigroup and Skadden provided an update regarding the discussions with LyondellBasell’s advisors. Representatives of Citigroup advised that LyondellBasell’s advisors had indicated they were working on a response to the comments raised on behalf of A. Schulman. Representatives of Citigroup also provided additional information with its comparable companies and precedent transactions analysis as requested by the board of directors.

On February 6, 2018, LyondellBasell provided written feedback to A. Schulman regarding the specific terms of the merger agreement and the form of CVR agreement that had been identified by A. Schulman’s board of directors, including with respect to LyondellBasell’s obligations in connection with seeking regulatory approvals, triggers for paying and the amount of a termination fee, the authority of the committee and the initial escrow amount under the form of CVR agreement, and the calculation and timing of payments under the CVRs. A. Schulman’s and LyondellBasell’s advisors discussed these responses.

On February 7, 2018, A. Schulman provided a response to LyondellBasell’s positions on the specific terms of the merger agreement and the form of CVR agreement, in accordance with the guidance provided by A. Schulman’s board of directors.

On February 8, 2018, LyondellBasell’s financial advisors communicated to Citigroup that LyondellBasell requested revised drafts of the merger agreement and the form of CVR agreement before LyondellBasell would be willing to provide a “best and final” offer.

 

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On February 9, 2018, Skadden provided Shearman revised drafts of the merger agreement and the form of CVR agreement.

On February 11, 2018, LyondellBasell submitted a letter to A. Schulman containing its “best and final” definitive, binding proposal to acquire all of the equity interests of A. Schulman for $42 plus one CVR per share, and provided revised drafts of the merger agreement and the form of CVR agreement. The proposal provided that the first $38.5 million of proceeds (less certain expenses and other deductions) recovered in the litigation and related government investigations specified in the form of CVR agreement would be paid to the holders of CVRs and, thereafter, the proceeds from the litigation and related government investigations (less expenses and other deductions) would be paid 85% to the holders of CVRs and 15% would be retained by A. Schulman, as then owned by LyondellBasell. Other material open issues at such time under the terms of the transaction agreements included triggers for paying and the amount of a termination fee, the end date and length of extensions thereof if necessary to obtain regulatory approvals, the authority of the committee under the form of CVR agreement, and the calculation and timing of payments under the CVRs.

Later in the day on February 11, 2018, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance to discuss LyondellBasell’s “best and final” proposal. During the meeting, representatives of Citigroup and Skadden provided an update to the board of directors regarding, among other things, discussions with LyondellBasell’s advisors. Skadden representatives also discussed certain legal matters and reviewed the key terms of LyondellBasell’s drafts of the merger agreement and the form of CVR agreement. Following discussions, A. Schulman’s board of directors informed Citigroup representatives that the board of directors had determined to continue negotiating the terms of the merger agreement and the form of CVR agreement with LyondellBasell as discussed at the meeting.

On February 12, 2018, representatives of Shearman and Skadden further discussed the terms of the merger agreement and the form of CVR agreement.

On February 13, 2018, Skadden provided Shearman revised drafts of the merger agreement and the form of CVR agreement.

On February 14, 2018, Mr. Gingo and Mr. Stephen Doktycz, Senior Vice President, Strategic Planning and Transactions for LyondellBasell, spoke by telephone to discuss certain remaining open points in the merger agreement and the form of CVR agreement, including with respect to triggers for paying and the amount of a termination fee, the end date and length of extensions thereof if necessary to obtain regulatory approvals, the authority of the committee under the form of CVR agreement, and the calculation and timing of payments under the CVRs. Following that conversation, Shearman provided revised drafts of the merger agreement and the form of CVR agreement.

In the evening of February 14, 2018, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. Skadden representatives reviewed legal matters and the terms of the merger agreement and the form of CVR agreement, including the outcome of discussions on open issues as of the prior board meeting. Representatives of Citigroup reviewed its financial analyses in connection with the merger.

On February 14, 2018, following A. Schulman’s board of directors’ meeting, and into February 15, 2018, representatives of the parties further negotiated and reached resolution on the final remaining open points in the merger agreement and the form of CVR agreement.

In the early morning of February 15, 2018, A. Schulman’s board of directors met, with members of senior management and representatives of Citigroup and Skadden in attendance. Representatives of Citigroup and Skadden provided an update to the directors regarding the resolution of the open points in the merger agreement and the form of CVR agreement. Citigroup then rendered its oral opinion to the A. Schulman board of directors,

 

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subsequently confirmed by delivery of a written opinion, dated February 15, 2018, that, as of such date and based upon and subject to the factors, procedures, qualifications, limitations and assumptions set forth in such opinion, the merger consideration to be received by holders of shares of A. Schulman’s common stock (other than excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders (as described in the section below entitled “ –– Opinion of A. Schulman’s Financial Advisor”). After discussing the proposed transaction and considering the presentations by Skadden and Citigroup, the A. Schulman board of directors unanimously determined the transaction with LyondellBasell to be advisable and in the best interests of A. Schulman’s stockholders, determined to approve the merger agreement and resolved to recommend adoption of the merger agreement by A. Schulman’s stockholders. Following the meeting, A. Schulman and LyondellBasell confirmed to each other that their respective boards of directors had approved the transaction, and, a short time later, the merger agreement was executed by the parties.

On February 15, 2018, prior to the opening of trading of A. Schulman’s common stock on the Nasdaq and LyondellBasell’s common stock on the NYSE, LyondellBasell and A. Schulman issued a joint press release announcing the execution of the merger agreement. Consequently, A. Schulman’s senior management team contacted the remaining chief executive officer succession candidates to inform them that the chief executive officer search had been suspended.

Recommendation of the A. Schulman Board of Directors and Reasons for the Merger

Recommendation of our Board of Directors

The A. Schulman board of directors, after considering the various factors described below, (i) unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable, fair to and in the best interests of A. Schulman and its stockholders, (ii) declared the merger agreement advisable under Delaware law and (iii) unanimously approved, adopted and authorized the merger agreement and the transactions contemplated by the merger agreement, including the merger.

The A. Schulman board of directors unanimously recommends that you vote (i) “FOR” the proposal to adopt the merger agreement, (ii) “FOR” the proposal to approve, by non-binding advisory vote, specified compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger and contemplated by the merger agreement and (iii) “FOR” the proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.

Reasons for the Merger

In recommending that stockholders vote in favor of the proposal to adopt the merger agreement, the A. Schulman board of directors considered a number of factors, including, but not limited to, the following (not necessarily in order of relative importance):

 

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Compelling Value: That in light of its consideration of A. Schulman’s business and operations, historical results of operations, strategic business plans and financial projections, opportunities and risks or uncertainties in executing A. Schulman’s strategic plans, current and historical trading prices of the A. Schulman common stock, and multiples of earnings and EBITDA represented by the enterprise value of A. Schulman and the historical premia to various stock trading prices implied by the merger consideration of $42.00 per share and one CVR (with a potential future value), the A. Schulman board of directors believed that the merger consideration of $42.00 per share and one CVR (with a potential future value) offered compelling value to the A. Schulman stockholders.

 

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Multiples of various EBITDA and adjusted EBITDA measures represented by the enterprise value of A. Schulman implied by the $42.00 per share merger consideration were:

 

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10.5x based on A. Schulman’s last twelve (12) months adjusted EBITDA, as further adjusted at the direction of management for certain one-time items and the impact of the operational challenges;

 

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9.9x based on A. Schulman’s estimated adjusted EBITDA for the 2018 fiscal year based on Wall Street estimates; and

 

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9.7x based on A. Schulman’s estimated adjusted EBITDA for the 2018 fiscal year based on A. Schulman senior management estimates.

The multiples of price to earnings (known as the price earnings ratio) implied by the $42.00 per share merger consideration were:

 

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19.1x based on Wall Street estimates consensus estimate for the 2018 fiscal year; and

 

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18.5x based on A. Schulman senior management’s estimate for the 2018 fiscal year.

The $42.00 per share merger consideration represented a premium to historic trading prices, including a premium of approximately:

 

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8.7% over the closing sale price of $38.65 on the Nasdaq on February 14, 2018, the last trading day prior to the announcement of the merger agreement;

 

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41.2% over the closing sale price of $29.75 on the Nasdaq on June 14, 2017, the last trading day prior to the A. Schulman board of directors’ decision to commence a strategic review of the Company;

 

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56.4% over the closing sale price of $26.85 on August 11, 2017, the last trading day prior to the filing of a Schedule 13D by Cruiser and Kingdon;

 

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2.6% over the 52-week high ($40.95) of A. Schulman common stock as of February 14, 2018;

 

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68.0% over the 52-week low ($25.00) of A. Schulman common stock as of February 14, 2018; and

 

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12.0% over the ninety (90) day volume-weighted average price ($37.49) of A. Schulman common stock as of February 14, 2018.

 

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Best Available Alternative for Maximizing Stockholder Value: A. Schulman board of directors believed that (i) the merger consideration of $42.00 per share and one CVR (with a potential future value) was more favorable to A. Schulman stockholders than the continued operation of A. Schulman on a standalone basis, based on the A. Schulman board of directors’ understanding of A. Schulman’s business and operations, its current and historical results of operations, financial prospects and conditions, and the determination that continued operation of the Company on a standalone basis (including consideration of certain operational improvements that were suggested by the board of directors’ consultant) was not sufficiently likely to produce, on a risk-adjusted basis, values that would create more value for stockholders than the merger consideration offered by LyondellBasell, in light of the difficulties of achieving a higher value and share price for the Company, which achievement would be uncertain and would require significant improvements in the Company’s business processes, and would require significant costs and time, (ii) taking into account the perspectives provided by its financial advisor and A. Schulman’s senior management, it was not likely that another party would be willing to pursue a transaction at a value in excess of the value offered by LyondellBasell and (iii) the merger consideration of $42.00 per share and one CVR (with a potential future value) was the best value reasonably available to A. Schulman stockholders.

 

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Appropriate Time to Engage in Sale of A. Schulman: While A. Schulman’s business is strong and continues to present opportunities for growth, as competition in the plastics industry has increased, including competition from larger global companies with greater resources than A. Schulman, there are

 

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increasing challenges to maintaining A. Schulman’s historic growth rate and profitability as a standalone company, especially because of the level of debt that A. Schulman continued to bear as a result of the Citadel acquisition; and to achieve a meaningful increase in A. Schulman’s share price, A. Schulman would need to transform itself into more of a specialty plastics company, which transformation would take considerable cost, which could be challenging as a result of the Company’s debt level, and time to fully realize and there would be no guarantees that such transformation could be successfully achieved.

 

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Thorough Review of Strategic Alternatives: A. Schulman’s board of directors considered the results of the extensive review of strategic alternatives, including the fact that A. Schulman’s financial advisors undertook a robust and extensive pre-signing process seeking to sell all of A. Schulman in an effort to maximize the price A. Schulman stockholders would receive as consideration in any such strategic alternative.

 

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Certainty of Value: The fact that a substantial portion of the proposed merger consideration is cash, so that the transaction provides A. Schulman stockholders certainty of value and liquidity for their shares, while eliminating the effect of long-term business and execution risk to A. Schulman stockholders.

 

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Contingent Value Right: The fact that (i) the proposed merger consideration includes a CVR and that the provisions of the form of CVR agreement provide for the pursuit of the ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary and the support of related government investigations, thereby providing the opportunity for the Company’s stockholders to receive certain net proceeds, if any are recovered, from such litigation and government investigations and (ii) although there is no guaranty that the outcome of the litigation would result in any proceeds, the timing should be adequate to collect what is likely, if any, to be collected.

 

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Financial Analyses of Citigroup and Receipt of Fairness Opinion: The financial analyses of Citigroup in connection with the merger and the oral opinion of Citigroup to the A. Schulman board of directors, subsequently confirmed by delivery of a written opinion dated February 15, 2018, that, as of such date and based upon and subject to the factors and assumptions set forth in such opinion, the merger consideration to be received by holders of shares of A. Schulman’s common stock (other than excluded shares) pursuant to the merger agreement was fair from a financial point of view to such holders, as more fully described below under the section “— Opinion of A. Schulman’s Financial Advisor.”

 

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Opportunity to Receive Company Takeover Proposals and to Terminate the Transaction in Order to Accept a Superior Company Proposal: A. Schulman’s right, in circumstances specified in the merger agreement, to respond to and negotiate unsolicited takeover proposals made before the time A. Schulman’s stockholders approve the proposal to adopt the merger agreement and to terminate the merger agreement in specified circumstances relating to a superior proposal subject to payment to LyondellBasell of a termination fee of $50 million, which amount the directors believed to be reasonable under the circumstances, taking into account the range of such termination fees in similar transactions, and the improbability that a fee of such size would be a meaningful deterrent to company takeover proposals.

 

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Appraisal Rights: The fact that appraisal rights under the DGCL are available to holders of A. Schulman’s common stock who comply with all of the required procedures under the DGCL, which allows such holders to seek appraisal of the fair value of their shares of A. Schulman’s common stock as determined by the Delaware Court of Chancery, as more fully described below under the section “Appraisal Rights.”

 

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High Likelihood of Completion: That the A. Schulman board of directors considered the likelihood of completion of the merger to be high, particularly in light of the terms of the merger agreement and the closing conditions, including: the absence of a financing condition in the merger agreement and the representation of LyondellBasell in the merger agreement that as of a reasonable time prior to the

 

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closing of the merger, it will have sufficient available funds necessary to consummate the merger; and the commitment of LyondellBasell to use its reasonable best efforts to take certain actions (subject to agreed limitations) to obtain regulatory clearance for consummation of the merger.

 

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Arm’s-Length Terms and Other Factors Related to the Merger Agreement: The A. Schulman board of directors’ view that the merger agreement was the product of arm’s-length negotiation and contained customary terms and conditions, and its consideration of a number of other factors pertaining to the merger agreement, including (i) the termination provisions in the merger agreement, including the fact that the end date under the merger agreement (which may be extended under specified circumstances to allow for regulatory approvals to be obtained) on or after which either party, subject to specified exceptions, can terminate the merger agreement, allows for sufficient time to consummate the merger, (ii) subject to the terms and conditions set forth in the merger agreement, the ability of the A. Schulman board of directors to change its recommendation to the A. Schulman stockholders upon the occurrence of an intervening event that was not known to, or reasonably foreseeable by, A. Schulman’s board of directors as of or prior to February 15, 2018, and (iii) A. Schulman’s ability to specifically enforce LyondellBasell’s obligations under the merger agreement, including LyondellBasell’s obligations to consummate the merger, and A. Schulman’s ability to seek damages upon any breach by LyondellBasell of the merger agreement.

The A. Schulman board of directors also considered a number of uncertainties and risks concerning the merger, including the following:

 

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The fact that A. Schulman stockholders will have no equity participation in A. Schulman following the merger, will not participate in any future earnings or growth or increase in value of A. Schulman and will not participate in any potential future sale of A. Schulman to a third party.

 

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The fact that the announcement and pendency of the merger, or the failure to complete the merger, may cause substantial harm to A. Schulman’s relationships with its employees (including making it more difficult to attract and retain key personnel and the possible loss of key management, sales and other personnel), suppliers and customers. The A. Schulman board of directors recognized that such factors could cause A. Schulman’s business, sales, operations and financial results to suffer during the executory period or in the event the merger was not consummated.

 

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The risk that the merger might not be completed and the possible adverse effect of the resulting public announcement of termination of the merger agreement on the trading price of A. Schulman common stock.

 

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The requirement that under certain circumstances A. Schulman could be required to pay LyondellBasell a termination fee of $50 million (including if the A. Schulman board of directors recommends a superior proposal and LyondellBasell terminates the merger agreement).

 

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The fact that there is no guaranty of recovering any net proceeds from the ongoing litigation against the former owners of the Company’s Citadel subsidiary and the former owners of the Company’s Lucent subsidiary and the related government investigations.

 

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The provisions of the form of CVR agreement that provide, among other matters, that (i) holders of CVRs, after receipt of the first $38.5 million in litigation proceeds and government action proceeds, will only be entitled to 85% of the net litigation proceeds and government action proceeds and (ii) a fee will be paid to LyondellBasell, for its time supporting the litigation and government actions, from the escrow assets and deducted from any payment to holder of CVR rights and (iii) customer claims expenses will be paid out from the escrow assets and deducted from any payment to holder of CVR rights.

 

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The restrictions on the conduct of A. Schulman’s business prior to the consummation of the merger, including the requirement that A. Schulman conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent A. Schulman from undertaking business opportunities

 

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that may arise before the completion of the merger and that, absent the merger agreement, A. Schulman might have pursued.

 

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The fact that the merger would be a taxable transaction to A. Schulman’s stockholders for U.S. federal income tax purposes and the fact that the tax treatment of the CVRs is not certain.

 

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The fact that under the terms of the merger agreement, A. Schulman is unable to solicit, initiate, knowingly encourage or facilitate other takeover proposals during the pendency of the merger.

 

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Subject to certain conditions, in the event of receipt of a superior proposal, LyondellBasell’s ability to cause A. Schulman to negotiate in good faith with LyondellBasell regarding revisions to the merger agreement, which A. Schulman’s board of directors must consider in good faith and determine in consultation with its financial advisor and outside legal counsel whether the superior proposal continues to constitute a superior proposal after considering the terms of any revisions proposed by LyondellBasell.

 

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The fact that A. Schulman stockholders may vote down the merger agreement at the meeting of A. Schulman stockholders held for such purpose.

 

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The significant costs involved in connection with entering into the merger agreement and completing the merger and the substantial time and effort of A. Schulman’s senior management required to complete the merger, which may disrupt A. Schulman’s business operations and divert employees’ attention away from A. Schulman’s day-to-day business operations.

 

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The fact that the completion of the merger will require CFIUS approval and antitrust clearance in the United States, the European Union, the People’s Republic of China, Russia, Mexico, Turkey and Brazil.

 

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The fact that A. Schulman’s directors and officers may have interests in the merger that may be different from, or in addition to, those of A. Schulman’s other stockholders (see below under the section “ — Interests of the Company’s Directors and Executive Officers in the Merger”).

The foregoing discussion is not meant to be exhaustive, but summarizes the material factors considered by the A. Schulman board of directors in its consideration of the merger. After considering these and other factors, the A. Schulman board of directors concluded that the potential benefits of the merger outweighed the uncertainties and risks. In view of the variety of factors considered by the A. Schulman board of directors and the complexity of these factors, the A. Schulman board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each member of the A. Schulman board of directors applied his or her own personal business judgment to the process and may have assigned different weights to different factors. Based upon the totality of the information presented to and considered by the A. Schulman board of directors, the A. Schulman board of directors unanimously approved the merger agreement and the consummation of the merger in accordance with the terms and subject to the conditions of the merger agreement and recommends that A. Schulman stockholders adopt the merger agreement.

Opinion of A. Schulman’s Financial Advisor

A. Schulman retained Citigroup as its financial advisor in connection with the merger. In connection with this engagement, A. Schulman requested that Citigroup evaluate the fairness, from a financial point of view, of the merger consideration to be received in the merger by holders of shares of A. Schulman’s common stock (other than excluded shares). On February 15, 2018, at a meeting of the A. Schulman board of directors held to evaluate the merger and at which the merger agreement was approved, Citigroup delivered to the A. Schulman board of directors an oral opinion, confirmed by delivery of a written opinion, dated February 15, 2018, to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citigroup as set forth in its written opinion, the merger consideration to be received by holders of shares of A. Schulman’s common stock (other than excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

 

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The full text of Citigroup’s written opinion, dated February 15, 2018, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citigroup in rendering its opinion, is attached to this proxy statement as Annex C and is incorporated herein by reference in its entirety. The summary of Citigroup’s opinion set forth below is qualified in its entirety by reference to the full text of the opinion. We urge you to read the opinion carefully and in its entirety. Citigroup’s opinion was provided to the A. Schulman board of directors (in its capacity as such) in connection with its evaluation of the merger and was limited to the fairness, from a financial point, as of the date of the opinion, to the holders of shares of A. Schulman’s common stock (other than excluded shares) of the merger consideration. Citigroup’s opinion did not address any other aspects or implications of the merger, the merger agreement, the form of CVR agreement or the CVR. Citigroup was not requested to, and accordingly did not, express any opinion as to the fairness of the arrangements relating to the CVR or the value of the CVR. Citigroup’s opinion did not address the underlying business decision of A. Schulman to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for A. Schulman or the effect of any other transaction in which A. Schulman might engage. Citigroup’s opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed merger or otherwise.

In arriving at its opinion, Citigroup, among other things:

 

•

reviewed drafts of the merger agreement and the form of CVR agreement, each dated February 14, 2018;

 

•

held discussions with certain senior officers, directors and other representatives and advisors of A. Schulman and certain senior officers and other representatives and advisors of LyondellBasell concerning the business, operations and prospects of A. Schulman;

 

•

examined certain publicly available business and financial information relating to A. Schulman as well as certain financial forecasts, including the Forecasts (as defined below), and other information and data relating to A. Schulman, including certain estimates prepared by the senior management of A. Schulman as to the net operating losses and other tax attributes of A. Schulman, which were provided to or discussed with Citigroup by the senior management of A. Schulman;

 

•

reviewed the financial terms of the merger as set forth in the merger agreement in relation to, among other things, current and historical market prices and trading volumes of A. Schulman’s common stock; the historical and projected earnings and other operating data of A. Schulman; and the capitalization and financial condition of A. Schulman;

 

•

considered, to the extent publicly available, the financial terms of certain other transactions which Citigroup considered relevant in evaluating the merger;

 

•

analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citigroup considered relevant in evaluating those of A. Schulman; and

 

•

conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citigroup deemed appropriate in arriving at its opinion.

In rendering its opinion, Citigroup assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citigroup and upon the assurances of the senior management of A. Schulman that it was not aware of any relevant information that was omitted or that remained undisclosed to Citigroup. With respect to the financial forecasts, including the Forecasts, and other information and data provided to or otherwise reviewed by or discussed with Citigroup relating to A. Schulman, Citigroup was advised by A. Schulman’s senior management that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the senior management of

 

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A. Schulman as to the future financial performance of A. Schulman, including the potential impact of recent changes in U.S. tax laws and regulations, as to which Citigroup expressed no view or opinion. Citigroup further noted in its opinion that (i) the financial and operating performance data and the historical share price data it reviewed for the companies with publicly traded equity securities that it deemed to be relevant to its analysis and (ii) the financial terms of certain business combinations and other transactions that it deemed relevant to its analysis might not, in whole or in part, reflect the potential impact of such recent changes in U.S. tax laws and regulations on such financial and operating performance or financial terms, as applicable. In connection with Citigroup’s engagement and at the direction of A. Schulman, Citigroup approached, and held discussions with, selected third parties to solicit indications of interest in the possible acquisition of A. Schulman.

Citigroup assumed, with A. Schulman’s consent, that the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third-party approvals, consents and releases for the merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on A. Schulman or the merger. In addition, representatives of A. Schulman advised Citigroup, and Citigroup assumed, that the final terms of the merger agreement and the form of CVR agreement would not vary materially from those set forth in the drafts reviewed by Citigroup. Citigroup did not make and it was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of A. Schulman, nor did Citigroup make any physical inspection of the properties or assets of A. Schulman. Citigroup was not requested to and did not express any opinion as to the fairness of the arrangements relating to the CVR or the value of the CVR. Citigroup did not make any assessment of the status or the potential outcome of any outstanding litigation or investigation involving A. Schulman (including the Citadel Litigation, the Matrixx Litigation and any Government Action, each as defined in the form of CVR agreement) and excluded any potential proceeds of any such litigations or investigations from its analysis. In addition, Citigroup did not express any opinion as to the terms of the form of CVR agreement or the CVR or as to whether or when any amount payable with respect to the CVR will be paid. Citigroup also expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, whether relative to the merger consideration or otherwise. Citigroup’s opinion was necessarily based upon information available to Citigroup, and financial, economic, market and other conditions and circumstances existing, as of the date of its opinion. The issuance of Citigroup’s opinion was authorized by Citigroup’s fairness opinion committee.

In preparing its opinion, Citigroup performed a variety of financial and comparative analyses, including those described below. This summary of these analyses is not a complete description of Citigroup’s opinion or the analyses underlying, and factors considered in connection with, Citigroup’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. Citigroup arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Citigroup believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In its analyses, Citigroup considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of A. Schulman. No company, business or transaction used in Citigroup’s analyses as a comparison is identical or directly comparable to A. Schulman or the merger. An evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions reviewed.

 

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The estimates contained in Citigroup’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citigroup’s analyses are inherently subject to substantial uncertainty.

Citigroup was not requested to, and it did not, recommend the specific consideration payable in the merger. The type and amount of consideration payable in the merger was determined through negotiations between A. Schulman and LyondellBasell and the decision to enter into the merger agreement was solely that of the A. Schulman board of directors. Citigroup’s opinion was only one of many factors considered by the A. Schulman board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the board of directors or the senior management of A. Schulman with respect to merger or the consideration payable in the merger or any other aspect of the transactions contemplated by the merger agreement.

The following is a summary of the material financial analyses presented to the A. Schulman board of directors in connection with the delivery of Citigroup’s opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Citigroup’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Citigroup’s financial analyses.

Comparable Companies Analysis

Citigroup performed a comparable companies analysis, which is an analysis designed to estimate an implied value of a company through an analysis of the public valuation and trading multiples of similar publicly traded companies. Citigroup reviewed financial and stock market information of A. Schulman and the comparable publicly traded companies described below (collectively, the “comparable companies”). No publicly traded company is identical to A. Schulman, but these companies were selected because, among other reasons, they possessed certain financial, operational or business characteristics that, in Citigroup’s view (which took into account input from A. Schulman’s board of directors), were sufficiently comparable to those of A. Schulman or otherwise relevant for purposes of comparison.

 

•

Cabot Corporation

 

•

Ferro Corporation

 

•

Huntsman Corporation

 

•

Kraton Corporation

 

•

OMNOVA Solutions Inc.

 

•

PolyOne Corporation

Citigroup reviewed, among other information, firm values of the comparable companies, calculated as fully diluted equity values (based on closing stock prices of the comparable companies on February 14, 2018) plus debt, less cash and cash equivalents and other adjustments, as a multiple of fiscal year 2018 estimated EBITDA. The observed multiples of firm value to fiscal year 2018 estimated EBITDA for the comparable companies ranged from a low of 7.7x to a high of 10.9x (with a median of 8.7x), with such multiple for Cabot Corporation being 9.1x, for Ferro Corporation being 9.7x, for Huntsman Corporation being 7.7x, for Kraton Corporation being 8.4x, for OMNOVA Solutions Inc. being 8.1x and for PolyOne Corporation being 10.9x. Based on its professional judgment and experience, and taking into consideration the observed multiples for the comparable

 

49

companies, Citigroup then applied a selected range of multiples of firm value to fiscal year 2018 estimated EBITDA of 7.7x to 8.7x, derived from the comparable companies, to corresponding fiscal year 2018 estimated EBITDA of A. Schulman to calculate an implied firm value reference range for A. Schulman. Citigroup selected this range because it believed that A. Schulman was more comparable to companies on the lower end of the range of the observed multiples. Fiscal year 2018 estimated EBITDA of the comparable companies were based on publicly available Wall Street research analysts’ estimates and other financial data of the comparable companies were based on public filings and other information. All of the observed multiples were adjusted to account for A. Schulman’s fiscal year end of August 31. The fiscal year 2018 estimated EBITDA of A. Schulman of $233 million was provided by, and used by Citigroup at the direction of, senior management of A. Schulman. Other financial data of A. Schulman were based on public filings and financial information provided by the senior management of A. Schulman. This analysis indicated an implied firm value reference range for A. Schulman of approximately $1,794 million to $2,033 million, from which the following approximate implied per share equity value reference range for A. Schulman was derived, as compared to the merger consideration (excluding the CVR) to be received in the merger.

 

Implied Per Share Equity Value Reference Range*		Merger Consideration (excluding the CVR)
$27.00 — $34.75		$42

 

*	Rounded to the nearest $0.25.

Precedent Transactions Analysis

Citigroup performed a precedent transactions analysis, which is an analysis designed to estimate an implied value of a company through an analysis of the multiples paid in acquisitions of similar companies and businesses. Citigroup reviewed, to the extent publicly available, financial information for selected precedent transactions in the chemical industry announced between May 2007 and October 2017 with a range of approximate transaction values of $72 million to $11.6 billion (collectively, the “precedent transactions”).

The precedent transactions were chosen because they involved companies with financial, operational or business characteristics that, in Citigroup’s view, made them sufficiently comparable to A. Schulman and/or the transactions contemplated by the merger agreement or otherwise relevant for purposes of comparison. For each of the precedent transactions, Citigroup calculated the transaction value as a multiple of the target’s last twelve months (or LTM) EBITDA as of the time of the announcement of the transaction. The observed multiples for the precedent transactions are set forth in the table below and ranged from 5.3x to 12.5x.

 

50

Announcement Date		Target		Acquiror		Transaction Value / LTM EBITDA
October 2, 2017		Accella Performance Materials Inc.		Carlisle Companies Incorporated			11.5	x
September 19, 2017		Polyamide business of Solvay S.A.		BASF SE			7.0	x
March 27, 2017		Diversey Care (subdivision of Sealed Air Corporation)		Bain Capital			10.5	x
March 8, 2017		GE Water (subdivision of General Electric Corporation)		SUEZ Environment			12.5	x
September 26, 2016		Chemtura Corporation		Lanxess AG			9.8	x
September 13, 2016		Continental Structural Plastics		Teijin Limited			10.3	x
July 20, 2016		Den Braven Group		Arkema Inc.			11.0	x
March 21, 2016		Nexeo Solutions Holdings, LLC		WL Ross Holding Corporation			9.5	x
February 3, 2016		Certain TPE assets of Kraton Corporation		PolyOne Corporation			9.0	x
September 21, 2015		Argotec LLC		Schweitzer-Mauduit International Inc.			9.3	x
June 4 2014		Certain specialty plastics assets of Ferro Corporation		A. Schulman			5.7	x
March 25, 2013		Specialty PVC business of PolyOne Corporation		Mexichem, S.A.B. de C.V.			5.3	x
October 24, 2012		Spartech Corporation		PolyOne Corporation			7.4	x
February 8, 2012		Wavin B.V.		Mexichem, S.A.B. de C.V.			7.6	x
January 27, 2012		Solutia Inc.		Eastman Chemical Company			9.0	x
September 30, 2011		ColorMatrix Group, Inc.		PolyOne Corporation			11.1	x
May 21, 2007		GE Plastics (subdivision of General Electric Corporation)		Saudi Basic Industries Corporation			9.5	x

Based on its professional judgment and experience, and taking into consideration the observed multiples for the precedent transactions, Citigroup then applied a selected range of multiples of 8.5x to 10.5x to derive an implied equity value per share for A. Schulman. Financial data of the precedent transactions were based on public filings and other information. Financial data of A. Schulman were based on financial information provided by, and used by Citigroup at the direction of, senior management of A. Schulman. Citigroup applied the 8.5x to 10.5x range of transaction value / LTM EBITDA multiples to A. Schulman’s estimated adjusted LTM EBITDA for the last twelve (12) months for the quarter ending November 30, 2017, further adjusted for certain one-time items and operational challenges (as provided by, and used by Citigroup at the direction of, senior management of A. Schulman), indicating an implied firm value reference range for A. Schulman of approximately $1,821 million to $2,250 million, from which the following approximate implied per share equity value reference range for A. Schulman was derived, as compared to the merger consideration (excluding the CVR) to be received in the merger:

 

Implied Per Share Equity Value Reference Range*		Merger Consideration (excluding the CVR)
$27.75 – $42.00		$42

 

*	Rounded to the nearest $0.25.

 

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Discounted Cash Flow Analysis

Citigroup performed a discounted cash flow analysis of A. Schulman, which is an analysis designed to estimate an implied value of a company by calculating the present value of the estimated future unlevered, after-tax free cash flows of that company over the projection period and the terminal value of that company at the end of the projection period. Citigroup performed this analysis using a cycle average methodology, as described below.

Citigroup performed a discounted cash flow analysis of A. Schulman by calculating the estimated present value of the unlevered, after-tax free cash flows that A. Schulman was forecasted to generate on a risk-adjusted basis for the nine months ending August 31, 2018 and the fiscal years ending August 31 from 2019 through 2022, as provided by senior management of A. Schulman and as further described in “Projected Financial Information” below. Based on its professional judgment and experience and taking into consideration the average LTM EBITDA multiples for A. Schulman over the last five years (8.5x), Citigroup calculated terminal values for A. Schulman by applying multiples ranging from 8.0x to 9.0x to the average EBITDA for the fiscal years ending August 31, 2017 (actual) through August 31, 2022 (following 2017, estimated for each year through 2022), normalizing capital expenditures and depreciation assumptions. Citigroup then discounted to present value (as of November 30, 2017) the unlevered, after-tax free cash flows and implied estimated terminal value using discount rates ranging from 9.0% to 10.1%, derived from a calculation of the weighted average cost of capital of A. Schulman, which Citigroup performed utilizing the capital asset pricing model with inputs that Citigroup determined were relevant based on publicly available data and Citigroup’s professional judgment. This analysis indicated an implied firm value reference range for A. Schulman of approximately $1,945 million to $2,209 million, from which the following approximate implied per share equity value reference range for A. Schulman was derived (after applying certain tax attributes), as compared to the merger consideration (excluding the CVR) to be received in the merger:

 

Implied Per Share Equity Value Reference Range*		Merger Consideration (excluding the CVR)
$32.50 – $41.00		$42

*	Rounded to the nearest $0.25.

Other Information

Citigroup observed certain additional factors that were not considered part of Citigroup’s financial analysis with respect to its opinion but were noted for informational purposes for the A. Schulman board of directors, including the following:

 

•

historical intraday trading prices of A. Schulman’s common stock during the 52-week period ended February 14, 2018, which reflected prices of $25.00 to $40.95 per share;

 

•

share price targets for A. Schulman’s common stock in Wall Street research analyst reports, discounted using a discount rate of 11.2%, representing the midpoint of A. Schulman’s cost of equity, which indicated low and high share price targets of $37.00 to $40.50 per share (rounded to the nearest $0.25), derived from undiscounted share price targets of $41.00 to $45.00 per share (rounded to the nearest $0.25); and

 

•

premiums paid in certain precedent transactions announced since 2007 involving public companies where the target company received consideration that was in cash. Citigroup observed a range of the annual median implied premiums to the unaffected stock prices paid in such transactions of 22.3% to 36.0%. Based on its professional judgment and experience, Citigroup then applied a slightly broader premium range of 20.0% to 40.0% to the closing price of A. Schulman’s common stock of $26.85 per share on August 11, 2017 (the business day before Cruiser Capital and Kingdon Capital jointly filed a Schedule 13D indicating an aggregate ownership interest of 8.78% in A. Schulman), which premium range indicated implied equity values per share of $32.25 to $37.50 (rounded to the nearest $0.25).

 

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Miscellaneous

A. Schulman has agreed to pay Citigroup for its services in connection with the merger a fee of 1.00% of the aggregate transaction value, which is approximately $22.5 million (excluding amounts, if any, payable in respect of the CVRs), $2 million of which became payable upon delivery of Citigroup’s opinion and approximately $20.5 million of which is payable contingent upon consummation of the merger, provided, however, that any such fee payable in respect of the CVRs will become payable only upon the actual payment of amounts pursuant to the terms of the form of CVR agreement. In addition, A. Schulman has agreed to reimburse Citigroup for expenses incurred by Citigroup in performing its services, and to indemnify Citigroup and related parties against certain liabilities, including under federal securities laws, arising out of Citigroup’s engagement.

Citigroup and its affiliates in the past have provided, currently are providing and in the future may provide, services to A. Schulman and LyondellBasell unrelated to the proposed merger, for which services Citigroup and such affiliates have received and expect to receive compensation, including, during the three-year period prior to December 31, 2017, having (i) acted as joint bookrunner for a bond offering by LyondellBasell in February 2015, (ii) acted as co-manager for an offering of convertible securities of A. Schulman in April 2015, (iii) acted as joint bookrunner for an offering of senior notes by A. Schulman in May 2015, (iv) acted as joint bookrunner or joint arranger for A. Schulman under term loan and revolving credit facilities since June 2015, (v) acted as co-manager for an offering of senior notes by LyondellBasell in February 2017, and (vi) acted as joint lead arranger and bookrunner for LyondellBasell under a revolving credit facility since April 2016. In the ordinary course of its business, Citigroup and its affiliates may actively trade or hold the securities of A. Schulman and LyondellBasell for its own account or for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citigroup and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with A. Schulman, LyondellBasell and their respective affiliates. In the three-year period prior to December 31, 2017, Citigroup and its affiliates derived aggregate revenues of approximately $1.3 million from A. Schulman and certain of its affiliates and approximately $4.0 million from LyondellBasell and certain of its affiliates for investment banking services unrelated to the merger.

A. Schulman selected Citigroup as its financial advisor in connection with the merger based on Citigroup’s reputation, experience and familiarity with A. Schulman and its business. Citigroup is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

Projected Financial Information

A. Schulman does not, on a routine basis, publicly disclose long-term projections as to future financial performance due to, among other reasons, the unpredictability of the underlying assumptions and estimates, though A. Schulman has in the past provided investors with full-year financial guidance which may cover areas such as net sales, adjusted EBITDA, and adjusted earnings per share, among other items, which it may update from time to time during the relevant year. However, in connection with the evaluation of the proposed merger, A. Schulman provided its board of directors, LyondellBasell and their respective advisors with certain non-public, unaudited prospective financial information prepared by A. Schulman’s senior management for the fiscal years 2018–2022. Such non-public, unaudited prospective financial information included the Company’s 2018 budget and projections that were reviewed by the board of directors in August 2017 and October 2017 and subsequently shared with prospective bidders. In early 2018, such projections were updated, among other things, to reflect the impact of certain planned operational improvements initially suggested by A. Schulman’s consultant, Dr. William Joyce, and discussed with the Company’s board of directors. Such improvements were reviewed by senior management, considered achievable in the timeframe reflected, and management began to implement such changes. The Company’s 2018 budget and updated projections, which together we refer to as the “Forecasts,” were shared with A. Schulman’s board of directors as well as with LyondellBasell prior to its submission of its offer on January 31, 2018, and are summarized below.

 

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The Forecasts were not prepared with a view to public disclosure and are included in this proxy statement only because such information was made available as described above. The Forecasts were not prepared with a view to compliance with generally accepted accounting principles as applied in the United States, which we refer to as GAAP, the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information included in this document has been prepared by, and is the responsibility of, the Company’s management. PricewaterhouseCoopers LLP, the Company’s independent accountant, has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report, incorporated by reference, relates to the Company’s previously issued financial statements. It does not extend to the prospective financial information and should not be read to do so. The Forecasts included in this proxy statement have been prepared by, and are the responsibility of, A. Schulman’s management. The Forecasts were prepared solely for the internal use of A. Schulman and are subjective in many respects.

Although a summary of the Forecasts is presented with numerical specificity, they reflect numerous assumptions and estimates as to future events made by A. Schulman’s senior management, which it believes were reasonable at the time the Forecasts were prepared, taking into account the relevant information available to management at such time. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. Important factors that may affect actual results and cause the Forecasts not to be achieved include general economic conditions, accuracy of certain accounting assumptions, timing of business investments, changes in actual or projected cash flows, competitive pressures and changes in tax or other laws or regulations. In addition, the Forecasts do not take into account any circumstances or events occurring after the date that they were prepared and do not give effect to the merger. As a result, there can be no assurance that the Forecasts will be realized, and actual results may be materially better or worse than those contained in the Forecasts. The inclusion of this information should not be regarded as an indication that the A. Schulman board of directors, A. Schulman’s senior management team, Citigroup or any other recipient of this information considered, or now considers, the Forecasts to be material information of A. Schulman, or predictive of actual future results nor should it be construed as financial guidance, and it should not be relied upon as such. The summary of the Forecasts is not included in this proxy statement in order to induce any stockholder to vote in favor of the proposal to adopt the merger agreement or any of the other proposals to be voted on at the special meeting or to influence any stockholder to make any investment decision with respect to the merger, including whether or not to seek appraisal rights with respect to the shares of A. Schulman’s common stock.

The Forecasts should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding A. Schulman contained in A. Schulman’s public filings with the SEC. The Forecasts were reviewed by A. Schulman’s senior management with, and considered by, A. Schulman’s board of directors in connection with its evaluation and approval of the merger.

The Forecasts are forward-looking statements. For information on factors that may cause A. Schulman’s future results to materially vary, see “Forward-Looking Statements” on page 24.

Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility to update or otherwise revise the Forecasts to reflect circumstances existing after the date when A. Schulman prepared the Forecasts or to reflect the occurrence of future events or changes in general economic of industry conditions, even in the event that any of the assumptions underlying the Forecasts are shown to be in error.

In light of the foregoing factors and the uncertainties inherent in the Forecasts, stockholders are cautioned not to rely on the Forecasts included in this proxy statement.

 

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Certain of the measures included in the Forecasts may be considered non-GAAP financial measures, as noted below. These non-GAAP financial measures are useful to investors and management in understanding current profitability levels and liquidity that may serve as a basis for evaluating future performance and facilitating comparability of results. In addition, certain non-GAAP financial measures are a component of the Company’s annual and long-term employee incentive plans. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by A. Schulman may not be comparable to similarly titled amounts used by other companies. The non-GAAP financial measures used in the Forecasts were relied upon by Citigroup for purposes of its fairness opinion and by the board of directors in connection with its consideration of the merger. Financial measures provided to a financial advisor are excluded from the definition of non-GAAP financial measures and therefore, are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not relied upon by Citigroup for purposes of its fairness opinion or by the board of directors in connection with its consideration of the merger. Accordingly, we have not provided a reconciliation of the financial measures included in the Forecasts.

Certain Forecasts and Terminal Year EBITDA

 

		Projected Fiscal Year Ending August 31(1),																				Terminal Year Adj.(2)
($ in millions)		2018E*				2019E				2020E				2021E				2022E
Net Third Party Sales(3)		$	2,016			$	2,836			$	2,968			$	3,099			$	3,226			$	2,881
EBITDA(4)		$	177			$	261			$	278			$	299			$	319			$	268
EBIT(5)		$	115			$	180			$	197			$	218			$	239			$	226
NOPAT(6)		$	86			$	135			$	148			$	164			$	179			$	170
Unlevered Free Cash Flow(7)		$	111			$	138			$	153			$	179			$	205			$	160

 

*	Represents FY2018 budget for the nine (9) months ended August 31, 2018.

(1)

This table reflects selected measures from the A. Schulman Forecasts from 2018E through 2022E as provided to Citigroup in connection with its financial analyses summarized under “— Opinion of A. Schulman’s Financial Advisor.” The Forecasts were also provided to LyondellBasell in connection with its due diligence review of a possible transaction in January 2018, with certain differences in presentation as compared to the Forecasts provided to Citigroup noted below in footnotes 5 and 7. Significant assumptions utilized to prepare the projected financial information include, among other assumptions, revenue growth rates based on economic forecasts and Company business plans, raw material costs held relatively flat as a percentage of sales, and capital spending based on the planned capital projects.

(2)

Terminal Year Adj. — Citigroup calculated the terminal values for A. Schulman using 2018E through 2022E Forecasts provided by A. Schulman and applying multiples ranging from 8.0x to 9.0x to the average EBITDA for fiscal years ending August 31, 2017 (actual) through August 31, 2022, normalizing capital expenditures and depreciation assumptions.

(3)	Net Third-Party Sales — Net Third-Party Sales represents gross sales to unaffiliated customers less sales discounts and allowances.

(4)

EBITDA (Earnings before interest, tax, depreciation and amortization) is defined for purposes of the Forecasts as non-GAAP net income available to common stockholders before interest expense, income tax expense, depreciation and amortization. Additionally EBITDA excludes non-controlling interest, convertible special stock dividends, foreign currency transaction gains and losses, and other income/expense. EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity.

(5)

EBIT (Earnings before interest and tax) is defined for purposes of the Forecasts as non-GAAP operating income, including certain other items of income and expenses which were not included in the EBIT provided by A. Schulman to LyondellBasell. EBIT is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity.

 

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(6)

NOPAT (Net operating profit after tax at an estimated 25%) is defined for purposes of the Forecasts as earnings before interest and taxes (EBIT) adjusted for the impact of taxes. NOPAT is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity.

(7)

Unlevered Free Cash Flow is defined for purposes of the Forecasts as “NOPAT” plus depreciation and amortization, less capital expenditure and changes in net working capital accounts as well as certain other adjustments. Unlevered Free Cash Flow is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity. The Forecasts provided by A. Schulman to LyondellBasell did not include Unlevered Free Cash Flow.

Interests of the Company’s Directors and Executive Officers in the Merger

In considering the recommendation of the A. Schulman board that A. Schulman stockholders vote to adopt the merger agreement, A. Schulman stockholders should be aware that the directors and executive officers of A. Schulman have certain interests in the transaction that may be different from, or in addition to, the interests of A. Schulman stockholders generally. The A. Schulman board was aware of these interests and considered them, among other things, in evaluating the merger agreement and the transaction and in recommending that the A. Schulman stockholders adopt the merger agreement.

Treatment of A. Schulman Equity Compensation Awards

Treatment of Options

At the effective time, each then-outstanding Company option, whether vested or unvested, will be cancelled and converted into the right to receive (i) a cash amount equal to the product of the excess, if any, of $42 over the per-share exercise price of such Company option, multiplied by the total number of shares of A. Schulman common stock underlying such Company option and (ii) one CVR for each share of A. Schulman common stock underlying such Company option, in each case, without interest and subject to any applicable tax withholding. Company options with a per-share exercise price equal to or greater than the per-share amount will be cancelled without consideration.

 

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The following table shows, as of April 30, 2018, with respect to A. Schulman’s named executive officers (as identified in A. Schulman’s Proxy Statement on Schedule 14A filed with the SEC on October 27, 2017) and each other executive officer who served as an executive officer of A. Schulman at any point in time on or following September 1, 2016: (1) the number of shares of A. Schulman common stock underlying each Company option, (2) the value of vested Company options and (3) the value of accelerated vesting with respect to unvested Company options as of the effective time. The following table assumes a stock price of $42.00 per share. The reflected values do not include the value of any CVRs payable with respect to any Company option because the payments, if any, that may become payable pursuant to the terms of the form of CVR agreement, is not currently determinable. None of the directors of A. Schulman who served as a director of A. Schulman at any point in time on or following September 1, 2016, hold outstanding Company options.

 

Name		Shares Underlying Vested Company Options (#)				Value of Vested Company Options ($)				Shares Underlying Unvested Company Options (#)				Value of Unvested Company Options ($)				Total Value of Company Options ($)
Executive Officers
Joseph M. Gingo			—			$	—				78,430			$	520,945			$	520,945
John W. Richardson			—			$	—				34,440			$	228,747			$	228,747
Joseph Levanduski(1)			—			$	—				—			$	—			$	—
Heinrich Lingnau-Schneider			—			$	—				17,230			$	114,437			$	114,437
Gary A. Miller			—			$	—				22,500			$	121,249			$	121,249
Gustavo Perez			—			$	—				14,600			$	90,218			$	90,218
Other Executive Officers (9)			—			$	—				69,890			$	442,973			$	442,973

 

(1)	Joseph Levanduski resigned and terminated employment with A. Schulman as of October 31, 2016.

Treatment of Performance Stock Units and Restricted Stock Units

At the effective time, each then-outstanding Company RSU and Company PSU, whether vested or unvested, will be cancelled and converted into the right to receive (i) a cash amount equal to the product of the number of shares of A. Schulman common stock underlying such Company RSU or Company PSU (with the number of shares underlying Company PSUs determined at target achievement levels), multiplied by $42 and (ii) one CVR for each share of A. Schulman common stock underlying such Company RSU or Company PSU (with the number of shares underlying Company PSUs determined at target achievement levels), in each case, without interest and subject to any applicable tax withholding.

 

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The following table shows, as of April 30, 2018, with respect to A. Schulman’s named executive officers (as identified in A. Schulman’s proxy statement on Schedule 14A filed with the SEC on October 27, 2017) and each other executive officer who served as an executive officer of A. Schulman at any point in time on or following September 1, 2016: (1) the number of shares of A. Schulman common stock underlying each Company RSU and Company PSU, (2) the value of vested Company RSUs and Company PSUs and (3) the value of accelerated vesting with respect to Company RSUs and Company PSUs as of the effective time. The following table assumes a stock price of $42.00 per share. The reflected values do not include the value of any CVRs payable with respect to any Company RSU or Company PSU because the payments, if any, that may become payable pursuant to the terms of the form of CVR agreement are not currently determinable. None of the directors of A. Schulman who served as a director of A. Schulman at any point in time on or following September 1, 2016, hold outstanding Company RSUs or PSUs.

 

Name		Shares Underlying Company RSUs (#)(1)				Value of Company RSUs ($)(2)				Shares Underlying Company PSUs (#)				Value of Company PSUs ($)(2)				Total Value of Company RSUs and PSUs ($)
Executive Officers
Joseph M. Gingo			83,334			$	3,500,028				51,830			$	2,176,860			$	5,676,888
John W. Richardson			44,544			$	1,870,848				22,420			$	941,640			$	2,812,488
Joseph Levanduski			—			$	—				—			$	—			$	—
Heinrich Lingnau-Schneider			8,160			$	342,720				18,880			$	792,960			$	1,135,680
Gary A. Miller			7,550			$	317,100				20,770			$	872,340			$	1,189,440
Gustavo Perez			7,330			$	307,860				17,180			$	721,560			$	1,029,420
Other Executive Officers (9)			31,750			$	1,333,500				82,690			$	3,472,980			$	4,806,480

 

(1)	Of the number of Company RSUs shown for Mr. Gingo, 41,667 are subject to vesting on September 22, 2018. Of the number of Company RSUs shown for Mr. Richardson, 16,667 are subject to vesting on October 1, 2018.

(2)	The reflected value does not include the value of accrued dividend equivalent rights with respect to unvested Company RSUs and Company PSUs.

Treatment of Restricted Shares

At the effective time, each then-outstanding Company restricted share, whether vested or unvested, will be cancelled and converted into the right to receive (i) $42.00 per share and (ii) one CVR, in each case, without interest and subject to any applicable tax withholding.

 

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The following table shows, as of April 30, 2018, with respect to A. Schulman’s named executive officers (as identified in A. Schulman’s Proxy Statement on Schedule 14A filed with the SEC on October 27, 2017) and each other executive officer who served as an executive officer of A. Schulman at any point in time on or following September 1, 2016: (1) the number of shares of A. Schulman common stock underlying each Company restricted share and (2) the value of accelerated vesting with respect to each such Company restricted share as of the effective time. The following table assumes a stock price of $42.00 per share. The reflected values do not include the value of any CVRs payable with respect to any Company restricted share because the payments, if any, that may become payable pursuant to the terms of the form of CVR agreement are not currently determinable. None of the directors of A. Schulman who served as a director of A. Schulman at any point in time on or following September 1, 2016, hold outstanding Company restricted shares.

 

Name		Shares Underlying Company Restricted Shares (#)				Value of Company Restricted Shares ($)(1)
Executive Officers
Joseph M. Gingo			—			$	—
John W. Richardson			—			$	—
Joseph Levanduski			—			$	—
Heinrich Lingnau-Schneider			—			$	—
Gary A. Miller			1,890			$	79,380
Gustavo Perez			—			$	—
Other Executive Officers (9)			5,482			$	230,244

 

(1)	The reflected value does not include the value of cash dividends accrued with respect to unvested restricted shares.

Company ESPP

Pursuant to the merger agreement, as soon as reasonably practicable after February 15, 2018, A. Schulman, the A. Schulman board of directors or the appropriate committee thereof shall adopt resolutions or take other actions as may be required to provide that the “offering” (as defined in the A. Schulman 2009 Employee Stock Purchase Plan (which we refer to as the “Company ESPP”)) in effect as of February 15, 2018 will be the final offering (such period, the “final offering”) and no further offering will commence pursuant to the Company ESPP after February 15, 2018. In addition, each individual participating in the final offering on February 15, 2018 will not be permitted to (i) increase his or her payroll contribution rate pursuant to the Company ESPP from the rate in effect when the final offering commenced or (ii) make separate non-payroll contributions to the Company ESPP on or following February 15, 2018, except as may be required by applicable law. Prior to the effective time, A. Schulman shall take all actions that may be necessary to, effective upon the consummation of the merger, (A) cause the final offering, to the extent that it would otherwise be outstanding at the effective time, to be terminated no later than five (5) business days prior to the date on which the effective time occurs; (B) make any pro rata adjustments that may be necessary to reflect the final offering, but otherwise treat the final offering as a fully effective and completed offering for all purposes pursuant to the Company ESPP; and (C) cause the exercise (as of no later than five (5) business days prior to the date on which the effective time occurs) of each outstanding purchase right pursuant to the Company ESPP.

On such exercise date, the Company must apply the funds credited as of such date pursuant to the Company ESPP within each participant’s payroll withholding account to the purchase of whole shares of A. Schulman common stock in accordance with the terms of the Company ESPP, and such shares of A. Schulman common stock will be outstanding shares of A. Schulman common stock and entitled to the merger consideration in accordance with the terms of the merger agreement. A. Schulman, the A. Schulman board of directors or a committee thereof must adopt such resolutions as are necessary to terminate the Company ESPP effective as of immediately prior to, and conditional upon the occurrence of, the effective time.

 

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Quantification of Equity Compensation Awards

See the section entitled “Advisory Vote on Merger-Related Executive Compensation (Proposal 2)” beginning on page 101 of this proxy statement for information regarding unvested equity compensation awards for the named executive officers in accordance with Item 402(t) of the SEC’s Regulation S-K based on the assumptions described in such section, including the assumption that the effective time occurs on November 15, 2018, that all named executive officers experience a covered termination at such time and that the price per share of A. Schulman common stock is equal to $42.00.

Annual Incentives

Pursuant to the merger agreement, immediately prior to the effective time, A. Schulman may, in its sole discretion, pay to each participant in an annual incentive plan or program a cash bonus for the year in which the closing occurs based on actual achievement through the closing date, prorated based on the number of days each participant was employed during the performance period through the closing date. Promptly following the effective time, LyondellBasell must establish an annual incentive plan or plans for the remainder of the year in which the effective time occurs, which must provide employees who continue to remain employed with A. Schulman or its subsidiaries (each, a “continuing Company employee”) with a bonus opportunity at least equal to that provided under the applicable A. Schulman annual incentive plan or program, prorated for the remainder of the year.

The following table shows the value of the prorated annual incentive that would be payable to A. Schulman’s named executive officers and each other executive officer of A. Schulman who served as an executive officer of A. Schulman at any point in time on or following September 1, 2016, assuming a closing of the merger occurring on April 30, 2018. Because actual achievement through the closing date is not currently determinable, the figures below are based on target level of achievement.

 

Name		Prorated Annual Incentive ($)
Executive Officers
Joseph M. Gingo		$	613,333
John W. Richardson		$	233,333
Joseph Levanduski		$	—
Heinrich Lingnau-Schneider(1)		$	195,998
Gary A. Miller		$	215,625
Gustavo Perez(1)		$	134,763
Other Executive Officers (9)(1)		$	961,325

 

(1)

The amounts for Messrs. Lingnau-Schneider and Pérez and one other executive officer were translated to U.S. dollars from the Euro for Mr. Lingnau-Schneider, from the Mexican Peso for Mr. Pérez and from the Australian Dollar for the other executive officer, using the following foreign exchange rates as of end of day April 30, 2018: (i) 1.2079 Euro:USD, (ii) 0.053010 MXCP:USD and (iii) 0.754325 AUD:USD. The April 30, 2018 end of day foreign currency exchange rates from the Euro to the U.S. Dollar and from the AUD to the U.S. Dollar are obtained from the European Central Bank, and the foreign currency exchange rate from the Mexico Peso to the U.S. Dollar is obtained from Banco de Mexico.

Employment Agreements

Messrs. Gingo and Richardson are each party to an employment agreement with A. Schulman that provides for certain severance payments and benefits on a covered termination. The payments and benefits that A. Schulman’s executive officers may receive on a covered termination, including the potential value of such payments and benefits, are described below.

 

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Joseph M. Gingo Employment Agreement

In connection with the re-appointment of Mr. Gingo to president and chief executive officer effective August 18, 2016, A. Schulman entered into an employment agreement with Mr. Gingo effective September 22, 2016, for a term of two (2) years through August 31, 2018, with the option by A. Schulman to extend the term for an additional year upon ninety (90) days written notice (which we refer to as the “Gingo agreement”). As permitted by the provisions of the Gingo agreement and the merger agreement, on March 27, 2018, the Gingo agreement was amended to extend the expiration date to the earlier of August 31, 2019 and thirty (30) days following the closing.

Pursuant to the Gingo agreement, in the event A. Schulman terminates Mr. Gingo’s employment without cause or Mr. Gingo elects a resignation for cause prior to the expiration of the Gingo agreement (as each term is defined in the Gingo agreement), regardless of whether such termination occurs prior to or following a change-in-control, Mr. Gingo will receive the following payments and benefits commencing within sixty (60) days following termination of employment: (i) salary continuation for the remaining term of the Gingo agreement, payable in accordance with A. Schulman’s regular payroll practices, and (ii) bonus(es) with respect to each August 31 occurring during the remaining term payable on each October 31 in an amount equal to Mr. Gingo’s annual base salary in effect on the date of termination. In addition, a termination of Mr. Gingo’s employment prior to expiration of the Gingo agreement for any reason other than a termination by the Company for cause is treated as a retirement, upon which Mr. Gingo is entitled to full vesting of each then-outstanding Company RSU and pro rata initial vesting of each then-outstanding Company PSU (based on the number of whole months from the date of grant through the termination date divided by 36) (subject to final settlement based on actual performance over the applicable performance period).

In addition to the above, upon a termination of Mr. Gingo’s employment following a change-in-control, Mr. Gingo becomes entitled to full vesting of each then-outstanding PSU with the number of shares underlying Company PSUs determined at target achievement levels as described above in the section entitled “— Interests of the Company’s Directors and Executive Officers in the Merger — Treatment of A. Schulman Equity Compensation Awards.”

Assuming a termination of employment without cause by A. Schulman or a resignation for cause by Mr. Gingo and closing of the merger occurring on April 30, 2018 (in which case the term of the Gingo agreement would expire May 30, 2018), Mr. Gingo would be entitled to receive (1) salary continuation through thirty (30) days following the closing with a value equal to $76,667, (2) vesting of 83,334 Company RSUs and (3) initial vesting of 51,830 Company PSUs (subject to final settlement based on actual performance over the applicable performance period). The value of the treatment of equity awards held by Mr. Gingo in connection with the completion of the merger is described above in the section entitled “— Interests of the Company’s Directors and Executive Officers in the Merger — Treatment of A. Schulman Equity Compensation Awards.”

Assuming a termination of employment without cause by A. Schulman or a resignation for cause by Mr. Gingo on April 30, 2018, and that the closing of the merger does not occur, pursuant to his employment agreement, the cash portion of Mr. Gingo’s severance entitlements would be (1) salary continuation through August 31, 2019 with a value equal to $1,226,667, (2) a bonus on October 31, 2018 and 2019 equal to $920,000 each, (3) vesting of 83,334 Company RSUs and (4) initial vesting of 51,830 Company PSUs (subject to final settlement based on actual performance over the applicable performance period).

Pursuant to the confidentiality, non-competition and non-solicitation provisions of the Gingo agreement, for a period of one (1) year following any termination of Mr. Gingo’s employment, Mr. Gingo may not, directly or indirectly, either as an individual for his own account or as an investor, or other participant in, or as an employee, agent, or representative of, any other business enterprise: (i) solicit, employ, entice, take away or interfere with, or attempt to solicit, employ, entice, take away or interfere with, any employee who was employed by A. Schulman or any of its affiliates within six (6) months of the date of termination of Mr. Gingo’s employment; or (ii) engage, participate in, finance, aid or be connected with any enterprise that competes with the business of A. Schulman.

 

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Pursuant to the terms of the Gingo agreement, Mr. Gingo is not entitled to receive any tax gross up for any excise tax imposed upon him under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”). In the event that any payments or benefits paid or payable to Mr. Gingo pursuant to the Gingo agreement or any other plan, program or arrangement maintained by A. Schulman would constitute a “parachute payment” within the meaning of Section 280G of the Code, Mr. Gingo is entitled to receive the greater of: (i) one dollar less than the amount which would cause the payments and benefits to constitute a “parachute payment;” or (ii) the amount of such payments and benefits, after taking into account all federal, state and local taxes, including the excise tax imposed under Section 4999 of the Code payable by Mr. Gingo on such payments and benefits, if such amount would be greater than the cut-back amount, after taking into account all federal, state and local taxes.

John W. Richardson Employment Agreement

A. Schulman entered into an employment agreement with Mr. Richardson effective October 1, 2016, pursuant to which Mr. Richardson was appointed initially as executive vice president, finance effective October 1, 2016 and was appointed as executive vice president, chief financial officer effective November 1, 2016 for a term of two (2) years through October 31, 2018, with the option by Mr. Richardson to extend the term for an additional year upon ninety (90) days written notice (which we refer to as the “Richardson agreement”). On March 27, 2018, Mr. Richardson exercised his option to extend the term of the Richardson agreement to October 31, 2019.

Pursuant to the Richardson agreement, in the event A. Schulman terminates Mr. Richardson’s employment without cause or Mr. Richardson elects a resignation for cause, in each case, prior to the expiration of the Richardson agreement and prior to a change in control (as each term is defined in the Richardson agreement), Mr. Richardson will receive the following payments and benefits commencing within sixty (60) days following termination of employment: (i) salary continuation for the longer of until the end of the term or a period of twelve (12) months, payable in accordance with A. Schulman’s regular payroll practices, and (ii) bonus(es) with respect to each August 31 occurring during the remaining term payable on each October 31 in an amount equal to Mr. Richardson’s annual base salary in effect on the date of termination. In addition, a termination of Mr. Richardson’s employment prior to expiration of the Richardson agreement for any reason other than a termination by the Company for cause is treated as a retirement, upon which Mr. Richardson is entitled to (i) vesting in full of each then-outstanding RSU granted in 2016, (ii) pro rata vesting of each then-outstanding Company RSU granted in 2017 and 2018 (based on the number of whole months from the date of grant through the termination date divided by 36) and (iii) pro rata initial vesting of each then-outstanding Company PSU (subject to final settlement based on actual performance over the applicable performance period).

Pursuant to the Richardson agreement, in the event A. Schulman terminates Mr. Richardson’s employment without cause or Mr. Richardson elects a resignation for cause, in each case, prior to the expiration of the Richardson agreement and within two (2) years following a change-in-control, Mr. Richardson will be entitled to receive the following payments and benefits: (i) a lump sum cash payment (payable within thirty (30) days following the later of the date of termination and the change-in-control) equal to two times the sum of: (1) the greater of Mr. Richardson’s base salary (a) in effect immediately prior to the occurrence of the event or circumstance upon which the termination is based, or (b) in effect immediately prior to the change-in-control event; and (2) the greater of (a) the annual bonus earned by Mr. Richardson in respect of A. Schulman’s prior fiscal year, (b) the average annual bonus so earned in respect of the two fiscal years immediately preceding the fiscal year in which the change-in-control occurs, or (c) $350,000; and (ii) certain insurance benefits for eighteen (18) months from the date of termination. The treatment of equity awards held by Mr. Richardson in connection with the completion of the merger is described above in the section entitled “— Interests of the Company’s Directors and Executive Officers in the Merger — Treatment of A. Schulman Equity Compensation Awards.”

Assuming a termination of employment without cause by A. Schulman or a resignation for cause by Mr. Richardson and the closing of the merger occurring on April 30, 2018, Mr. Richardson will be entitled to receive (1) a lump sum cash payment equal to $1,700,000 and (2) insurance benefits with a value of $1,988.

 

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The value of the treatment of equity awards held by Mr. Richardson in connection with the completion of the merger is described above in the section entitled “— Interests of the Company’s Directors and Executive Officers in the Merger — Treatment of A. Schulman Equity Compensation Awards.” Assuming a termination of employment without cause by A. Schulman or a resignation for cause by Mr. Richardson occurring on April 30, 2018, and that the closing of the merger does not occur, Mr. Richardson will be entitled to receive (1) salary continuation with a value equal to $750,000, (2) a bonus on October 31, 2018 and 2019 equal to $500,000 each, (3) vesting of 36,212 Company RSUs and (4) initial vesting of 5,755 Company PSUs, subject to final settlement based on actual performance over the applicable performance period.

Pursuant to the confidentiality, non-competition and non-solicitation provisions of the Richardson agreement, for a period of one (1) year following any termination of Mr. Richardson’s employment, Mr. Richardson may not, directly or indirectly, either as an individual for his own account or as an investor, or other participant in, or as an employee, agent, or representative of, any other business enterprise: (i) solicit, employ, entice, take away or interfere with, or attempt to solicit, employ, entice, take away or interfere with, any employee who was employed by A. Schulman or any of its affiliates within six (6) months of the date of termination of Mr. Richardson’s employment; or (ii) engage, participate in, finance, aid or be connected with any enterprise that competes with the business of A. Schulman.

Pursuant to the terms of the Richardson agreement, Mr. Richardson is not entitled to receive any tax gross up for any excise tax imposed upon him under Sections 280G and 4999 of the Code. In the event that any payments or benefits paid or payable to Mr. Richardson pursuant to the Richardson agreement or any other plan, program or arrangement maintained by A. Schulman would constitute a “parachute payment” within the meaning of Section 280G of the Code, Mr. Richardson is entitled to receive the greater of: (i) one dollar less than the amount which would cause the payments and benefits to constitute a “parachute payment”; or (ii) the amount of such payments and benefits, after taking into account all federal, state and local taxes, including the excise tax imposed under Section 4999 of the Code payable by Mr. Richardson on such payments and benefits, if such amount would be greater than the cut-back amount, after taking into account all federal, state and local taxes.

Change-in-Control Agreements

On September 22, 2016, A. Schulman entered into change-in-control agreements with certain of A. Schulman’s executive officers, including Messrs. Lingnau-Schneider, Miller, and Pérez (the “change-in-control agreements”). The change-in-control agreements are structured as double-trigger agreements and provide that in the event (i) a covered executive is terminated by A. Schulman without cause, or (ii) a covered executive resigns from A. Schulman for good reason (as such terms are defined in the change-in-control agreements), in each case, within two (2) years following a change-in-control, such covered executive will be entitled to the following: (1) continued payment of compensation and the provision of benefits through the date of termination; (2) an amount equal to any accrued, but unused vacation days; (3) a lump sum amount equal to two times the sum of (a) the covered executive’s base salary for the calendar year immediately preceding the year in which the date of termination occurs, and (b) the covered executive’s annual target bonus for the fiscal year in which termination occurs; and (4) the continuation of certain insurance benefits for a period of eighteen (18) months after the date of termination.

Pursuant to the confidentiality, non-competition and non-solicitation provisions of the change-in-control agreements, in the event that a covered executive becomes entitled to receive compensation under their respective change-in-control agreement, then for a period of one (1) year such covered executive may not, directly or indirectly, either as an individual for his own account or as an investor, or other participant in, or as an employee, agent, or representative of, any other business enterprise: (i) solicit, employ, entice, take away or interfere with, or attempt to solicit, employ, entice, take away or interfere with, any employee who was employed by A. Schulman or any of its affiliates during the term of the change-in-control agreement; or (ii) engage, participate in, finance, aid or be connected with any enterprise that competes with the business of A. Schulman.

 

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Under the terms of the change-in-control agreements, covered executives are not entitled to receive any tax gross up for any excise tax imposed upon them under Sections 280G and 4999 of the Code. In the event that any payments or benefits paid or payable to a covered executive pursuant to their change-in-control agreement would constitute a “parachute payment” within the meaning of Section 280G of the Code, then such covered executive will receive the greater of: (i) one dollar less than the amount which would cause the payments and benefits to constitute a “parachute payment”; or (ii) the amount of such payments and benefits, after taking into account all federal, state and local taxes, including the excise tax imposed under Section 4999 of the Code payable by the covered executive on such payments and benefits, if such amount would be greater than the cut-back amount, after taking into account all federal, state and local taxes.

The following table shows the value of the severance that would be payable pursuant to the change-in-control agreements to A. Schulman’s named executive officers and each other executive officer of A. Schulman who served as an executive officer of A. Schulman at any point in time on or following September 1, 2016 assuming a closing of the merger occurring on April 30, 2018.

 

Name		Cash Severance				Insurance Benefit Continuation				Total Severance
Executive Officers
Joseph Levanduski		$	—			$	—			$	—
Heinrich Lingnau-Schneider(1)		$	1,492,600			$	—			$	1,492,600
Gary A. Miller		$	1,509,375			$	24,254			$	1,533,629
Gustavo Perez(1)		$	1,168,692			$	36,842			$	1,205,534
Other Executive Officers (9)(1)		$	8,497,028			$	176,690			$	8,673,718

 

(1)

The amounts for Messrs. Lingnau-Schneider and Pérez and one other executive officer were translated to U.S. dollars from the Euro for Mr. Lingnau-Schneider, from the Mexican Peso for Mr. Pérez and from the Australian Dollar for the other executive officer, using the following foreign exchange rates as of end of day April 30, 2018: (i) 1.2079 Euro:USD, (ii) 0.053010 MXCP:USD and (iii) 0.754325 AUD:USD. The April 30, 2018 end of day foreign currency exchange rates from the Euro to the U.S. Dollar and from the AUD to the U.S. Dollar are obtained from the European Central Bank, and the foreign currency exchange rate from the Mexico Peso to the U.S. Dollar is obtained from Banco de Mexico.

280G Mitigation Actions

As described above, the Gingo agreement, Richardson agreement and change-in-control agreements provide for a “best net” approach in the event the executive officer could be subject to excise taxes due to Section 280G of the Internal Revenue Code, which we refer to as the 280G Excise Tax. Based on information available to date, certain executives may, absent any mitigating actions, be subject to the 280G Excise Tax.

While A. Schulman will be permitted to take certain actions to reduce the amount of any potential “excess parachute payments” for “disqualified individuals” (each as defined in Section 280G of the Code), A. Schulman’s compensation committee has not yet approved any specific actions to mitigate the possible impact of Section 280G of the Code on A. Schulman and certain of the executives.

Other Employee Arrangements

Pursuant to the merger agreement, LyondellBasell must provide each continuing Company employee with the following during the period commencing at the effective time and ending on the first anniversary of the closing date (the “Continuation Period”): (1) base salary and wage rate that are no less favorable than those provided immediately prior to the effective time; (2) target level cash incentive compensation opportunities that are no less favorable than those provided immediately prior to the effective time; and (3) other compensation and benefits (excluding the value of any equity incentive compensation opportunities) that are no less favorable in the

 

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aggregate than those provided immediately prior to the effective time. LyondellBasell must also provide each continuing Company employee with severance benefits during the Continuation Period that are no less favorable than (i) those provided to similarly situated employees of LyondellBasell and its subsidiaries at the time of termination of employment or (ii) in certain cases, those provided under any applicable law or A. Schulman severance plans, policies or practices as in effect immediately prior to the effective time, if greater.

Following the closing, LyondellBasell must give continuing Company employees credit for years of service with A. Schulman before the effective time for all purposes with respect to LyondellBasell benefit plans (including for purposes of vesting, eligibility to participate and level of benefits, but not for purposes of defined benefit pension accrual or other post-employment benefits), except to the extent such credit would cause a duplication of benefits for the same period of service. LyondellBasell must also cause each continuing Company employee to be eligible to participate, without any waiting time, in any and all LyondellBasell benefit plans to the extent coverage under such LyondellBasell benefit plan is replacing comparable coverage under an A. Schulman benefit plan. In addition, with respect to medical, dental, pharmaceutical and vision benefits, LyondellBasell must waive all pre-existing condition exclusions and actively-at-work requirements for continuing Company employees and their dependents (to the extent such conditions were waived or inapplicable under A. Schulman benefit plans) and must take into account any eligible expenses incurred by any continuing Company employees or their dependents during the portion of the plan year prior to the effective time under A. Schulman benefit plans for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable under LyondellBasell benefit plans.

Financing

The merger is not conditioned upon receipt of financing by LyondellBasell. LyondellBasell and Merger Sub have represented to the Company that they will collectively have sufficient funds at a reasonable time prior to the closing of the merger to pay the merger consideration, to repay or refinance any indebtedness required to be repaid or refinanced as a result of the merger and to pay any other amount required or payable by LyondellBasell and Merger Sub under the merger agreement.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of the material U.S. federal income tax consequences relating to the merger applicable to Company stockholders whose shares are converted into the right to receive the merger consideration in the merger. This summary is not a complete analysis of all potential U.S. federal income tax consequences, nor does it address any tax consequences arising under any state, local or foreign tax laws or U.S. federal estate or gift tax laws. This summary is based on current provisions of the Code, existing, proposed and temporary Treasury regulations thereunder and administrative and judicial interpretations thereof. All of the foregoing are subject to change, and changes could apply retroactively and could affect the tax consequences described below. This summary deals only with shares held as capital assets within the meaning of Section 1221 of the Code. This summary does not address all aspects of U.S. federal income taxation which may be relevant to particular Company stockholders in light of their individual circumstances, such as stockholders subject to special tax rules including, without limitation, the following:

 

•

financial institutions;

 

•

insurance companies;

 

•

brokers, dealers or traders in securities, currencies or notional principal contracts;

 

•

tax-exempt entities;

 

•

persons that hold shares as part of a “hedging” or “conversion” transaction or as a position in a “straddle” or as part of a “synthetic security” or other integrated transaction for U.S. federal income tax purposes;

 

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•

regulated investment companies;

 

•

real estate investment trusts;

 

•

U.S. holders (as defined below) that have a “functional currency” other than the U.S. dollar;

 

•

stockholders who exercise appraisal rights;

 

•

stockholders that acquired (or will acquire) shares through exercise of employee stock options or otherwise as compensation;

 

•

U.S. expatriates; and

 

•

controlled foreign corporations and passive foreign investment companies.

This discussion is for general information only and does not purport to be a comprehensive analysis or description of all potential U.S. federal income tax consequences of the merger. In particular, this discussion does not address any U.S. federal tax consequences other than U.S. federal income tax consequences (including any U.S. federal estate, gift, alternative minimum or Medicare taxes) or any state, local, or non-U.S. tax consequences. We urge you to consult your tax advisor with respect to the particular U.S. federal, state and local or foreign tax consequences of the merger and the receipt of CVR payments to you.

If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) holds shares, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership that holds shares, you should consult your tax advisor regarding the tax consequences relevant to the merger and the receipt of CVR payments.

U.S. Holders

For purposes of this summary, a “U.S. holder” is a beneficial owner of Company shares who or that is, for U.S. federal income tax purposes:

(i) an individual who is a citizen or resident of the United States;

(ii) a corporation (or other entity taxable as a corporation) that is created in, or organized under the law of, the United States or any state or political subdivision thereof;

(iii) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or

(iv) a trust, (a) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (b) that has otherwise validly elected to be treated as United States person under the Code.

General

Treatment as Open versus Closed Transaction

The receipt of the merger consideration by a U.S. holder whose Company shares are converted into the right to receive the merger consideration in the merger will be a taxable transaction for U.S. federal income tax purposes. The amount of gain or loss that a U.S. holder recognizes, and the timing and potentially the character of a portion of such gain or loss, depends on the U.S. federal income tax treatment of the receipt of the CVRs, with respect to which there is substantial uncertainty.

The receipt of the merger consideration, which consists of cash and CVRs, may be treated as either an “open transaction” or a “closed transaction” for U.S. federal income tax purposes. The installment method of reporting

 

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any gain attributable to the receipt of CVRs will not be available because the Company’s common stock is traded on an established securities market. The following sections discuss the U.S. federal income tax consequences of the receipt of the merger consideration in the event the receipt of and payments made with respect to, the CVRs is treated as an open transaction and, alternatively, in the event the receipt of the CVRs is treated as a closed transaction. There is no authority directly addressing whether the receipt of, and payments made with respect to, contingent payment rights with characteristics similar to the CVRs will be taxed as “open transactions” or “closed transactions.” We urge you to consult your tax advisor with respect to the proper treatment and characterization of the receipt of, and payments made with respect to, the CVRs.

Imputed Interest under Section 483

Under either “open transaction” or “closed transaction” treatment, a CVR payment may be treated as a payment under a contract for the sale or exchange of the Company shares to which Section 483 of the Code applies if at least one (1) payment is due more than one (1) year after the consummation of the merger. If Section 483 of the Code applies, a portion of any CVR payment that is due more than six (6) months after the consummation of the merger will be treated as interest and subject to U.S. federal income tax as ordinary income. The interest amount will equal the excess of the amount received over its present value at the consummation of the merger, calculated using the relevant applicable federal rate as the discount rate. The applicable federal rate is published monthly by the U.S. Internal Revenue Service, which we refer to as the “IRS”. The relevant applicable federal rate will be the lower of the lowest applicable federal rate in effect during the three (3) month period ending with the month that includes the date on which the merger agreement was signed or the lowest applicable federal rate in effect during the three (3) month period ending with the month that includes the date of the consummation of the merger. The maturity range of the relevant applicable federal rate will correspond to the period from the date of the consummation of the merger, to the date the amount is received or deemed received. A U.S. holder of a CVR must include in its gross income interest pursuant to Section 483 of the Code using such U.S. holder’s regular method of accounting (such amount being taken into account when paid, in the case of a cash method holder, and when fixed, in the case of an accrual method holder). The portion of the CVR payment that is not treated as interest under Section 483 of the Code will generally be taxed either as ordinary income or as gain or loss from the sale of a capital asset, as discussed below.

Treatment as Closed Transaction

The Merger

The receipt of the merger consideration is generally treated as a “closed transaction” if the value of the CVRs can be “reasonably ascertained” at the time of their receipt. Under the “closed transaction” approach, a U.S. holder would recognize a capital gain or loss upon the merger equal to the difference, if any, between (a) the amount of cash and the fair market value as of the date of the consummation of the merger of the CVRs received pursuant to the merger and (b) such U.S. holder’s adjusted tax basis in the Company shares converted into the right to receive the merger consideration in the merger. Gain or loss will be determined separately for each identifiable block of Company shares (i.e., Company shares acquired at the same cost in a single transaction) surrendered in exchange for the merger consideration. Capital gain or loss, if any, will be long-term with respect to Company shares in which the U.S. holder has a holding period longer than one (1) year as of the date of the consummation of the merger. Long-term capital gains of individuals are eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses.

If the transaction is treated as a “closed transaction” for U.S. federal income tax purposes, a U.S. holder’s initial tax basis in the CVRs will equal the fair market value of the CVRs on the date of the consummation of the merger. The holding period of the CVRs will generally begin on the day following the date of the consummation of the merger.

 

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CVR Payments

If the transaction is treated as a “closed transaction,” the U.S. federal income tax treatment of future CVR payments is not clear. There is no authority directly addressing the treatment of contingent payment rights similar to the CVR payments. A portion of any CVR payments may be treated as interest under Section 483 of the Code, as discussed above. To the extent not treated as interest under Section 483 of the Code, CVR payments may be treated under one of a number of alternative approaches. Under one approach, any such payments may be treated as a nontaxable return of capital and reduce a U.S. holder’s tax basis in its CVRs until such basis has been reduced to zero, and any future payments would be taxable in full. Alternatively, it is possible that a portion of each such payment might be considered taxable income, with the remaining portion reducing a U.S. holder’s tax basis in its CVRs until such basis has been reduced to zero, after which any future payments would be taxable in full. A U.S. holder would generally be entitled to a loss if, at the time it is determined that there will be no more CVR payments, such U.S. holder has any remaining tax basis in the CVRs. It is not clear whether the taxable payments described in this paragraph would be characterized as capital gain or ordinary income, but it is likely that any loss would be a capital loss.

Due to the legal and factual uncertainty regarding the valuation and tax treatment of the CVRs, you are urged to consult your tax advisor concerning the tax consequences of the receipt of, and payments made with respect to, the CVRs.

Treatment as Open Transaction

The Merger

The receipt of the merger consideration is generally treated as an “open transaction” if the value of the CVRs cannot be “reasonably ascertained” at the time of their receipt. It is the position of the IRS, as reflected in Treasury Regulations, that only in “rare and extraordinary cases” is the value of property so uncertain as to warrant “open transaction” treatment. If treated as an “open transaction,” a U.S. holder generally recognizes capital gain upon consummation of the merger in an amount equal to the excess, if any, of the amount of cash received over such U.S. holder’s adjusted tax basis in the Company shares converted into the right to receive the merger consideration in the merger. Gain recognized in the transaction must be determined separately for each identifiable block of Company shares converted pursuant to the merger (i.e., Company shares acquired at the same cost in a single transaction). Any such gain will generally be long-term capital gain if the Company shares were held for more than one (1) year prior to such disposition. No loss would be recognized by a U.S. holder as of the date of the consummation of the merger.

If the transaction is treated as an “open transaction” for U.S. federal income tax purposes, the CVRs will not be taken into account in determining the U.S. holder’s taxable gain upon receipt of the initial cash consideration, and a U.S. holder will take no tax basis in the CVRs, but would be subject to tax on CVR payments as discussed below.

CVR Payments

If the merger consideration is treated as an “open transaction,” a portion of such payments would generally be treated as interest income under Section 483 of the Code (as described above) and the balance, in general, as additional consideration for the disposition of the Company shares. The treatment of the portion of any CVR payments not treated as interest under Section 483 of the Code will depend on whether or not the amount of cash received by the U.S. holder in the merger is less than the U.S. holder’s tax basis in its Company shares. If the cash received by the U.S. holder in the merger is equal to or greater than a U.S. holder’s tax basis in its Company shares, then all payments received or accrued on the CVRs would be taxable in accordance with such U.S. holder’s regular method of accounting. If the cash received in the merger is less than a U.S. holder’s tax basis in the Company shares, then payments received or accrued on the CVRs (to the extent not treated as interest under Section 483 of the Code, as discussed above) would not be taxable until the total payments such U.S. holder

 

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received or accrued (including those in the merger) are equal to such U.S. holder’s tax basis in the Company shares, and all subsequent payments on the CVRs would be taxable. It is likely that all CVR payments that are taxable under this paragraph would be taxable as capital gain to the extent not treated as ordinary interest income under Section 483 of the Code (as discussed above), and such gain would be long term capital gain if the U.S. holder’s holding period for the Company shares as of the date of the consummation of the merger is more than one (1) year. At the time that it is determined that no additional CVR payments will be made, a U.S. holder would generally be entitled to a capital loss equal to any excess of such holder’s tax basis in the Company shares over the sum of (i) the cash such holder received as of the date of the consummation of the merger and (ii) any CVR payments that such U.S. holder received (to the extent not treated as interest under Section 483 of the Code, as discussed above).

Non-U.S. Holders

For purposes of this summary, a “Non-U.S. holder” is a beneficial owner of Company shares that is not a U.S. holder and is not a partnership or other entity classified as a partnership for U.S. federal income tax purposes.

The following discussion applies only to Non-U.S. holders, and assumes that no item of income, gain, deduction or loss derived by the Non-U.S. holder in respect of the Company shares at any time is effectively connected with the conduct of a United States trade or business.

The receipt of the merger consideration by a Non-U.S. holder whose Company shares are converted into the right to receive the merger consideration in the merger will not be subject to U.S. federal income tax unless:

 

•

the Non-U.S. holder is an individual that holds Company shares as a capital asset and is present in the United States for 183 or more days in the taxable year that includes the consummation of the merger and certain other conditions exist; or

 

•

the Non-U.S. holder held, directly or indirectly, more than five percent (5%) of the Company shares at any time during the five-year period ending on the date of the consummation of the merger and the Company is or has been a United States real property holding corporation for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the consummation of the merger and the period that the Non-U.S. holder held the Company shares.

The Company believes it has not been and is not, and does not anticipate becoming, a United States real property holding corporation prior to the date of the consummation of the merger for U.S. federal income tax purposes.

The Company intends to take the position that CVR payments to Non-U.S. holders are not subject to U.S. withholding tax (other than backup and FATCA withholding, as discussed below). Nevertheless, a change in applicable law, or certain adverse determinations by an applicable taxing authority, may cause CVR payments to be subject to U.S. withholding tax. U.S. federal withholding tax is generally 30%, unless reduced or eliminated by an applicable treaty. Non-U.S. holders are encouraged to consult their tax advisors regarding the potential application of U.S. withholding tax with respect to the CVR payments.

Information Reporting and Backup Withholding

A Non-U.S. holder may be subject to backup withholding on the receipt of the merger consideration and CVR payments, unless the Non-U.S. holder certifies under penalties of perjury on an appropriate IRS Form W-8 or Form W-8 BEN-E that such Non-U.S. holder is not a United States person or the Non-U.S. holder otherwise establishes an exemption from backup withholding in a manner satisfactory to the paying agent. In addition, under the Code, the Company may be required to annually report to the IRS and to each Non-U.S. holder the amount of the merger consideration and any CVR payments paid to such Non-U.S. holder, regardless of whether any tax was actually withheld. Copies of the information returns reporting the merger consideration and such CVR payments and the amount withheld, if any, may also be made available to the tax authorities in the country in which the Non-U.S. holder resides under the provisions of an applicable income tax treaty.

 

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Backup withholding is not an additional tax. To the extent that any amounts withheld under the backup withholding tax rules from a payment to a U.S. holder or Non-U.S. holder result in an overpayment of tax, the amount of such overpayment may be refunded or allowed as a credit against that holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.

Foreign Account Tax Compliance Act

In certain circumstances, legislation commonly known as the Foreign Account Tax Compliance Act (“FATCA”) imposes a withholding tax of 30% on U.S.-source interest and dividend income, and, after December 31, 2018, on the gross proceeds of a disposition of property of a type that can produce U.S.-source interest and dividend income, held by or through certain non-U.S. financial institutions (including investment funds), unless such institution (i) enters into, and complies with, an agreement with the IRS to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons or by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (ii) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. authorities. Similarly, interest and dividends payable on and, after December 31, 2018, gross proceeds from the disposition of property of a type that can produce U.S.-source interest and dividend income received by a Company stockholder that is a non-financial non-U.S. entity that does not qualify under certain exemptions will generally be subject to withholding at a tax rate of 30%, unless such entity either (i) certifies that such entity does not have any “substantial United States owners” or (ii) provides certain information regarding the entity’s “substantial United States owners,” which the payor will generally be required to provide to the IRS. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which the Company shares or CVRs are held will affect the determination of whether such withholding is required. Holders should consult their tax advisors regarding the possible implications of the FATCA rules in their particular situations.

THE FOREGOING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE DISCUSSION OF THE POTENTIAL TAX CONSEQUENCES OF THE MERGER OR THE OWNERSHIP OF CVRS. HOLDERS OF COMPANY SHARES ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME, ESTATE, GIFT AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES. NOTHING IN THIS DISCUSSION IS INTENDED TO BE, OR SHOULD BE CONSTRUED AS, TAX ADVICE.

Regulatory Clearances

Required Approvals

Under the merger agreement, the merger cannot be completed until the approval required under CFIUS has been obtained, the applicable waiting periods under the HSR Act have expired or been terminated, approval under the EU Merger Regulation and the following clearances or approvals under applicable antitrust laws have been obtained, including in the European Union, the People’s Republic of China, Russia, Mexico, Turkey and Brazil.

A. Schulman and LyondellBasell filed their respective HSR Act notifications on March 5, 2018. On March 16, 2018, A. Schulman and LyondellBasell each received notice that the FTC granted early termination of the applicable waiting period under the HSR Act. Accordingly, the regulatory condition relating to the expiration or termination of the waiting period (and any extension thereof) under the HSR Act in respect of the merger has been satisfied.

 

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On April 30, 2018 the Brazilian competition authority (CADE) published their approval of the transaction without restrictions. In a decision dated May 4, 2018, the Turkish Competition Authority also unconditionally cleared the transaction.

In early May, A. Schulman and LyondellBasell filed a joint voluntary CFIUS notice.

The parties have made all other required notifications and filings, including in draft form where applicable, and are seeking the remaining necessary approvals and clearances, under applicable foreign antitrust laws and CFIUS. As of the date of this proxy statement, the outstanding regulatory approvals are EU, People’s Republic of China, Mexico, Russia and CFIUS. Although there can be no assurance, the parties hope to complete the regulatory review process in the third calendar quarter of 2018.

Commitments to Obtain Approvals

A. Schulman and LyondellBasell have agreed to use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary under applicable law to consummate the merger, including (i) making all necessary filings with governmental authorities or third parties, (ii) requesting early termination of the waiting period under the HSR Act applicable to the merger and using reasonable best efforts to obtain the HSR clearance and all other consents of governmental authorities that are necessary to consummate the merger as promptly as reasonable practicable and (iii) using reasonable best efforts to obtain consents, approvals or waivers from third parties that are necessary to consummate the merger, subject to certain limitations described in the section “The Merger Agreement –– Other Covenants and Agreements — Efforts to Complete the Merger; Regulatory Approvals.”

Delisting and Deregistration of A. Schulman Common Stock

If the merger is completed, A. Schulman common stock will be delisted from the Nasdaq and deregistered under the Exchange Act.

Expenses

Except as otherwise provided in the merger agreement, whether or not the merger is consummated, all expenses incurred in connection with the merger, the merger agreement and the other transactions contemplated by the merger agreement will be paid by the party incurring or required to incur such expenses.

Specific Enforcement

In addition to any other remedy that may be available to any of the parties, including monetary damages, each of A. Schulman, LyondellBasell and Merger Sub is entitled to seek an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement.

Litigation Relating to the Merger

On April 26, 2018, a complaint relating to the merger was filed in the United States District Court for the District of Delaware by a purported stockholder captioned Barmack v. A. Schulman, Inc., et al., Civil Action No. 1:18-cv-00639. On April 30, 2018, a purported class action complaint relating to the merger was filed in the United States District Court for the Northern District of Ohio on behalf of a putative class of A. Schulman’s stockholders captioned Rosenblatt v. A. Schulman, Inc., et al., Civil Action No. 5:18-cv-00992. Both complaints state that the preliminary proxy statement is false and misleading and assert claims for violations of Section 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9 against A. Schulman and its directors. The complaints seek, among other things, injunctive relief preventing the consummation of the merger, damages and an award of plaintiff’s expenses and attorney’s fees. Although both complaints request injunctive relief, neither plaintiff has filed a motion to enjoin the merger at this time. The Company believes that these lawsuits lack merit.

 

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THE MERGER AGREEMENT

Below is a summary of the material provisions of the merger agreement, a copy of which is attached to this proxy statement as Annex A and which is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read carefully the merger agreement in its entirety, as the rights and obligations of the parties thereto are governed by the express terms of the merger agreement and not by this summary or any other information contained in this proxy statement.

Explanatory Note Regarding the Merger Agreement

The following summary of the Agreement and Plan of Merger, dated as of February 15, 2018, among LyondellBasell, Merger Sub and A. Schulman, which we refer to as the “merger agreement”, and the copy of the merger agreement attached as Annex A to this proxy statement, are intended to provide information regarding the terms of the merger agreement and are not intended to provide any factual information about A. Schulman or modify or supplement any factual disclosures about A. Schulman in its public reports filed with the SEC. Any material facts in A. Schulman’s public reports previously filed with the SEC that are incorporated by reference into this proxy statement that contradict the factual disclosures about A. Schulman contained in the representations and warranties in the merger agreement shall modify such factual disclosures. In particular, the merger agreement and the related summary are not intended to be disclosures regarding any facts and circumstances relating to A. Schulman. The merger agreement contains representations and warranties by, and covenants of A. Schulman, LyondellBasell and Merger Sub that were made only for purposes of the merger agreement and as of specified dates. The representations, warranties and covenants in the merger agreement were made solely for the benefit of the parties to the merger agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in A. Schulman’s public disclosures. Investors are not third-party beneficiaries under the merger agreement.

Additional information about A. Schulman may be found elsewhere in this proxy statement and A. Schulman’s other public filings. See “Where You Can Find Additional Information.”

Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers

At the effective time of the merger, Merger Sub will merge with and into A. Schulman in accordance with the DGCL. By virtue of the merger, at the effective time, the separate corporate existence of Merger Sub will cease and A. Schulman will continue as the surviving corporation in the merger. At the effective time of the merger, all of the property, rights, privileges, immunities, powers and franchises of A. Schulman and Merger Sub will vest in the surviving corporation, and all debts, liabilities and duties of A. Schulman and Merger Sub will become the debts, liabilities and duties of the surviving corporation, all as provided under the DGCL. As of the effective time of the merger, the certificate of incorporation and bylaws of the surviving corporation will be amended and restated to be the same as the certificate of incorporation and bylaws of Merger Sub that are in effect immediately before the effective time, until thereafter amended in accordance with the DGCL, except that the name of the surviving corporation will be “A. Schulman, Inc.” and the effective date of the bylaws will be the closing date.

Subject to applicable law, the directors of Merger Sub immediately prior to the effective time shall be the initial directors of the surviving corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. The officers of A. Schulman immediately prior to the

 

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effective time shall be the initial officers of the surviving corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

When the Merger Becomes Effective

The closing of the merger will take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York on a date that is as soon as practicable, which date shall be no later than the third (3rd) business day after the satisfaction or waiver of the conditions to the closing set forth in the merger agreement (other than any such conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions), unless another time, date or place is mutually agreed to in writing by the parties.

Substantially concurrently with the closing of the merger, A. Schulman will file a certificate of merger that has been duly executed and acknowledged with the Secretary of State of the State of Delaware as provided under the DGCL. The merger will become effective at such time as the certificate of merger is duly filed with the Secretary of State of the State of Delaware or on such other date and time as may be agreed to in writing by the parties and specified in the certificate of merger.

Effect of the Merger on A. Schulman Common Stock

At the effective time of the merger, each share of A. Schulman common stock outstanding immediately prior to the effective time of the merger (other than (i) issued and outstanding shares of common stock of the Company held in A. Schulman’s treasury or held by A. Schulman or any wholly owned subsidiary of A. Schulman immediately before the effective time, (ii) shares of the Company common stock held by LyondellBasell, Merger Sub or any wholly owned subsidiary of LyondellBasell immediately before the effective time and (iii) shares of Company common stock held by holders who properly exercise appraisal rights with respect thereto, which shares described in (i) and (ii) will be cancelled and will cease to exist, and no consideration will be delivered in exchange therefor, and which shares described in (iii) will be cancelled and retired and will cease to exist, and such holders will be entitled only to such rights as may be granted to them under Section 262 of the DGCL) will be converted into and will thereafter represent the right to receive (i) $42.00 in cash and (ii) one contractual CVR, subject to and in accordance with the form of CVR agreement, in each case, without any interest thereon, and subject to any applicable withholding taxes.

At the effective time of the merger, each share of Merger Sub common stock outstanding immediately prior to the effective time of the merger will be converted into one (1) share of common stock, par value $0.01 per share, of the surviving corporation and will constitute the only outstanding shares of capital stock of the surviving corporation as of immediately after the closing.

Treatment of Company Equity Awards

Treatment of Options

At the effective time, each then-outstanding Company option, whether vested or unvested, will be cancelled and converted into the right to receive (i) a cash amount, without interest, equal to the product of the excess, if any, of $42 over the per-share exercise price of such Company option, multiplied by the total number of shares of A. Schulman common stock underlying such Company option and (ii) one CVR for each share of A. Schulman common stock underlying such Company option, in each case, without interest and subject to any applicable tax withholding. Company options with a per-share exercise price equal to or greater than the per-share amount will be cancelled without consideration.

Treatment of Performance Stock Units and Restricted Stock Units

At the effective time, each then-outstanding Company RSU and Company PSU, whether vested or unvested, will be converted into the right to receive (i) a cash amount equal to the product of the number of shares of

 

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A. Schulman common stock underlying such Company RSU or Company PSU (with the number of shares underlying Company PSUs determined at target achievement levels), multiplied by $42 and (ii) one CVR for each share of A. Schulman common stock underlying such Company RSU or Company PSU (with the number of shares underlying Company PSUs determined at target achievement levels), in each case, without interest and subject to any applicable tax withholding.

Treatment of Restricted Shares

At the effective time, each then-outstanding Company restricted share, whether vested or unvested, will be converted into the right to receive (i) $42.00 and (ii) one CVR, in each case, without interest and subject to any applicable tax withholding.

Company ESPP

Pursuant to the merger agreement, as soon as reasonably practicable after February 15, 2018, A. Schulman, the A. Schulman board of directors or the appropriate committee thereof shall adopt resolutions or take other actions as may be required to provide that (a) the “Offering” (as defined in the Company ESPP) in effect as of February 15, 2018 will be the final Offering (such period, the “Final Offering”) and no further Offering will commence pursuant to the Company ESPP after February 15, 2018. In addition, each individual participating in the Final Offering on February 15, 2018 will not be permitted to (i) increase his or her payroll contribution rate pursuant to the Company ESPP from the rate in effect when the Final Offering commenced or (ii) make separate non-payroll contributions to the Company ESPP on or following February 15, 2018, except as may be required by applicable law. Prior to the effective time, A. Schulman will take all actions that may be necessary to, effective upon the consummation of the merger; (A) cause the Final Offering, to the extent that it would otherwise be outstanding at the effective time, to be terminated no later than five (5) business days prior to the date on which the effective time occurs; (B) make any pro rata adjustments that may be necessary to reflect the Final Offering, but otherwise treat the Final Offering as a fully effective and completed Offering for all purposes pursuant to the Company ESPP; and (C) cause the exercise (as of no later than five (5) business days prior to the date on which the effective time occurs) of each outstanding purchase right pursuant to the Company ESPP.

On such exercise date, the Company must apply the funds credited as of such date pursuant to the Company ESPP within each participant’s payroll withholding account to the purchase of whole shares of A. Schulman common stock in accordance with the terms of the Company ESPP, and such shares of A. Schulman common stock will be outstanding shares of A. Schulman common stock and entitled to the merger consideration in accordance with the terms of the merger agreement. A. Schulman, the A. Schulman board of directors or a committee thereof must adopt such resolutions as are necessary to terminate the Company ESPP effective as of immediately prior to, and conditional upon the occurrence of, the effective time.

Representations and Warranties

The merger agreement contains representations and warranties of A. Schulman, LyondellBasell and Merger Sub.

Some of the representations and warranties in the merger agreement are qualified by materiality qualifications or a “Company material adverse effect” qualification with respect to A. Schulman or a “parent material adverse effect” with respect to LyondellBasell. For purposes of the merger agreement, a “Company material adverse effect” with respect to A. Schulman means any fact, circumstance, effect, change, event or development (i) that has had, or would reasonably be expected to have, a materially adverse effect on the business, assets, liabilities properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole or (ii) that prevents or materially delays, or would reasonably be expected to prevent or materially delay, the consummation by the Company of the merger or the other transactions contemplated by the merger agreement;

 

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provided, however, that, in the case of (i), “Company material adverse effect” shall not be deemed to include the impact of:

 

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changes affecting the industries in which the Company or any of its subsidiaries operates;

 

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changes in economy, laws or politics or changes affecting any securities, credit, financial or other capital markets condition, in each case in the United States, in any foreign jurisdiction or in any specific geographic area;

 

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changes arising directly or indirectly from, or otherwise related to, changes in interest or currency exchange rates;

 

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any failure by any of the Company’s subsidiaries to meet any projection or any other internal or public projection, budget, forecast, estimate or prediction in respect of revenues, earnings or other financial or operating metrics for any period (provided that the underlying causes of any such failure may be considered in determining whether a Company material adverse effect has occurred to the extent not otherwise excluded by another exception in the merger agreement);

 

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the announcement, execution or delivery of the merger agreement or the pendency of the merger agreement; provided that this shall not apply with respect to the representations and warranties relating to the absence of conflicts and consents, except to the extent the underlying substances of such representations and warranties arise after the execution of the merger agreement, including (i) any action taken by any of the Company’s subsidiaries that is required, or expressly permitted pursuant to the merger agreement, or is consented to in writing by LyondellBasell, or any action taken by LyondellBasell or any of its affiliates to obtain any consent from any governmental authority to the consummation of the merger, and in each case, the result of any such actions, (ii) any claim arising out of or related to the merger agreement (including any stockholder litigation), (iii) a change that arises out of or relates to the identity of LyondellBasell or any of its affiliates as the acquirer of the Company, (iv) any change in supplier, employee, financing source, stockholder, regulatory, partner or similar relationships resulting therefrom or (v) any comments or other communications by LyondellBasell of its intentions with respect to the surviving corporation or the business of the Company;

 

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changes in the price or availability of commodities;

 

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changes in the market price, credit rating or trading volume of shares of the Company common stock on the Nasdaq or any change in the credit ratings or the ratings outlook for any of the Company’s subsidiaries (provided that the underlying causes of any such change may be considered in determining whether a Company material adverse effect has occurred to the extent not otherwise excluded by another exception in the merger agreement);

 

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any change in applicable law, regulation or GAAP (or authoritative interpretation thereof); and

 

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changes in geopolitical conditions, outbreak or escalation of hostilities, declared or undeclared acts of war, cyber-attacks, sabotage or terrorism, epidemics or pandemics (including any escalation or general worsening of any of the foregoing) or national or international emergency in the United Sates or any other country or region of the world occurring after the date of the merger agreement.

However, with respect to the exceptions described in the first, second, third, sixth, eighth and ninth bullet points above, such exceptions will only apply to the extent that such fact, circumstance, effect, change, event or development does not have a disproportionate impact on A. Schulman and its subsidiaries, taken as a whole, as compared to other companies in the industries in which A. Schulman and its subsidiaries operate.

For the purpose of the merger agreement, a “material adverse effect” with respect to LyondellBasell, which we refer to as a “parent material adverse effect” means any fact, circumstance, change, event or development that has or would reasonably be expected to have a material and adverse effect on the ability of LyondellBasell or Merger Sub to consummate, or that would reasonably be expected to prevent or materially impeded, interfere with or delay LyondellBasell or Merger Sub’s consummation of, the transactions contemplated by the merger agreement.

 

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