<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 2000
REGISTRATION NO. 333-37344
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE GEON COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2821 34-1730488
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
<TABLE>
<S> <C>
GREGORY L. RUTMAN, ESQ.
VICE PRESIDENT, CHIEF LEGAL OFFICER AND SECRETARY
THE GEON COMPANY
ONE GEON CENTER ONE GEON CENTER
AVON LAKE, OHIO 44012-0122 AVON LAKE, OHIO 44012-0122
(440) 930-1000 (440) 930-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE INCLUDING AREA CODE, OF AGENT FOR SERVICE)
OFFICE)
</TABLE>
------------------------
M.A. HANNA COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3080 34-0232435
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
<TABLE>
<S> <C>
JOHN S. PYKE, JR., ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
M.A. HANNA COMPANY
SUITE 36-5000 SUITE 36-5000
200 PUBLIC SQUARE 200 PUBLIC SQUARE
CLEVELAND, OHIO 44114-2304 CLEVELAND, OHIO 44114-2304
(216) 589-4000 (216) 589-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE INCLUDING AREA CODE, OF AGENT FOR SERVICE)
OFFICE)
</TABLE>
------------------------
CONSOLIDATION CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
OHIO 2821 34-1929921
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
<TABLE>
<S> <C>
GREGORY L. RUTMAN, ESQ.
SECRETARY AND ASSISTANT TREASURER
C/O THE GEON COMPANY
ONE GEON CENTER ONE GEON CENTER
AVON LAKE, OHIO 44012-0122 AVON LAKE, OHIO 44012-0122
(440) 930-1000 (440) 930-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE INCLUDING AREA CODE, OF AGENT FOR SERVICE)
OFFICE)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
THOMAS A. ALDRICH, ESQ. LYLE G. GANSKE, ESQ.
THOMPSON HINE & FLORY LLP JONES DAY REAVIS & POGUE
3900 KEY TOWER 901 LAKESIDE AVENUE
127 PUBLIC SQUARE CLEVELAND, OHIO 44114
CLEVELAND, OHIO 44114-1216 (216) 586-7264
(216) 566-5749
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
Each Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until each Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
[GEON LOGO]
[M.A. Hanna Company]
CONSOLIDATION PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear Fellow Stockholders:
The Boards of Directors of The Geon Company and M.A. Hanna Company have
adopted a consolidation agreement that would result in the consolidation of
Geon, Hanna and Consolidation Corp., a newly formed Ohio corporation, to form
PolyOne Corporation, a new Ohio corporation. If we complete the consolidation,
Geon stockholders will receive two common shares of PolyOne for each share of
Geon common stock that they own and Hanna stockholders will receive one common
share of PolyOne for each share of Hanna common stock that they own. PolyOne
will issue or reserve for issuance 109,844,805 common shares in the
consolidation. After the consolidation, we estimate that approximately 50.1% of
PolyOne common shares will be owned by Geon stockholders and approximately 49.9%
of PolyOne common shares will be owned by Hanna stockholders.
The consolidation will bring together Geon's operating strengths with
Hanna's experience in multi-polymer compounding, colorants and distribution. We
believe that this combination will enable us to provide our customers with
better services and a broader range of products.
We cannot complete this consolidation unless Geon stockholders and Hanna
stockholders each adopt the consolidation agreement. We have each scheduled
special meetings for our stockholders to vote on this important matter. In
addition, at the special meetings, we will ask you to approve the PolyOne 2000
Stock Incentive Plan.
YOUR VOTE IS VERY IMPORTANT. Please take the time to vote by completing the
enclosed proxy card and returning it in the return envelope provided even if you
plan to attend your stockholders meeting. You may also vote your shares by
telephone or over the Internet by following the instructions on the proxy card.
You should note that if you sign, date and mail your proxy card, or grant your
proxy by telephone or over the Internet, without indicating how you wish to
vote, your proxy will be counted as a vote in favor of adoption of the
consolidation agreement and a vote in favor of approval of the PolyOne 2000
Stock Incentive Plan. If you hold your shares in the name of a bank or broker,
you should follow the instructions on the form you receive from your bank or
broker.
The dates, times and places of the meetings are:
<TABLE>
<S> <C>
FOR GEON STOCKHOLDERS: FOR HANNA STOCKHOLDERS:
August 29, 2000, 10:00 a.m., local time August 29, 2000, 11:00 a.m., local time
The Forum Conference and Education Center, Erie The Forum Conference and Education Center, Erie
Room Room
1375 East Ninth Street 1375 East Ninth Street
Cleveland, Ohio Cleveland, Ohio
</TABLE>
The enclosed joint proxy statement/prospectus provides you with detailed
information about the meetings, the proposed consolidation and the PolyOne 2000
Stock Incentive Plan. We encourage you to read the entire document carefully.
You may also obtain information about our companies from publicly available
documents that we have filed with the Securities and Exchange Commission.
<TABLE>
<S> <C>
Thomas A. Waltermire Phillip D. Ashkettle
Chairman, President and Chairman and
Chief Executive Officer Chief Executive Officer
The Geon Company M.A. Hanna Company
</TABLE>
<PAGE> 3
[GEON LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 29, 2000
------------------------
To the Stockholders of The Geon Company:
A special meeting of the stockholders of The Geon Company will be held at
The Forum Conference and Education Center, Erie Room, 1375 East Ninth Street,
Cleveland, Ohio, August 29, 2000 at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Consolidation, dated as of May 7, 2000, between The Geon Company and M.A.
Hanna Company, under which Geon, Hanna and Consolidation Corp., a newly
formed Ohio corporation, will consolidate to form PolyOne, a new Ohio
corporation. A copy of the consolidation agreement is attached to the joint
proxy statement/prospectus as Annex A.
2. To consider and vote on a proposal to approve the PolyOne 2000 Stock
Incentive Plan. A copy of the plan is attached to the joint proxy
statement/prospectus as Annex D.
3. To act on any other matters that may properly come before the special meeting
and any adjournment or postponement of the special meeting.
THE BOARD OF DIRECTORS OF GEON UNANIMOUSLY RECOMMENDS THAT
GEON STOCKHOLDERS VOTE FOR ADOPTION OF THE CONSOLIDATION AGREEMENT
AND FOR APPROVAL OF THE POLYONE 2000 STOCK INCENTIVE PLAN.
Stockholders of record at the close of business on July 17, 2000 are
entitled to notice of and to vote at the special meeting and any adjournment or
postponement of the special meeting.
Adoption of the consolidation agreement is a condition to the
consolidation. We will not complete the consolidation unless the consolidation
agreement is adopted by Geon stockholders.
All stockholders are cordially invited to attend the special meeting. It is
important that your shares be represented at the special meeting, whether or not
you plan to attend in person. Accordingly, please complete, sign, date and
return the enclosed proxy card in the enclosed envelope, which requires no
postage if mailed in the United States. You may also vote your shares by
telephone or over the Internet by following the instructions on the proxy card.
You may revoke your proxy in the manner described in the accompanying joint
proxy statement/prospectus at any time before the proxy has been voted at the
special meeting.
By order of the Board of Directors,
/s/ GREGORY A. RUTMAN
Gregory L. Rutman
Secretary
July , 2000
<PAGE> 4
[M.A. Hanna Company LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 29, 2000
------------------------
To the Stockholders of M.A. Hanna Company:
A special meeting of the stockholders of M.A. Hanna Company will be held at
The Forum Conference and Education Center, Erie Room, 1375 East Ninth Street,
Cleveland, Ohio 44114, August 29, 2000 at 11:00 a.m., local time, for the
following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Consolidation, dated as of May 7, 2000, between The Geon Company and M.A.
Hanna Company, under which Geon, Hanna and Consolidation Corp., a newly
formed Ohio corporation, will consolidate to form PolyOne, a new Ohio
corporation. A copy of the consolidation agreement is attached to the joint
proxy statement/prospectus as Annex A.
2. To consider and vote on a proposal to approve the PolyOne 2000 Stock
Incentive Plan. A copy of the plan is attached to the joint proxy
statement/prospectus as Annex D.
3. To act on any other matters that may properly come before the special meeting
and any adjournment or postponement of the special meeting.
THE BOARD OF DIRECTORS OF HANNA UNANIMOUSLY RECOMMENDS THAT
HANNA STOCKHOLDERS VOTE FOR ADOPTION OF THE CONSOLIDATION AGREEMENT
AND FOR APPROVAL OF THE POLYONE 2000 STOCK INCENTIVE PLAN
Stockholders of record at the close of business on July 14, 2000 are
entitled to notice of and to vote at the special meeting and any adjournment or
postponement of the special meeting.
Adoption of the consolidation agreement is a condition to the
consolidation. We will not complete the consolidation unless the consolidation
agreement is adopted by Hanna stockholders.
All stockholders are cordially invited to attend the special meeting. It is
important that your shares be represented at the special meeting, whether or not
you plan to attend in person. Accordingly, please complete, sign, date and
return the enclosed proxy card in the enclosed envelope, which requires no
postage if mailed in the United States. You may also vote your shares by
telephone or over the Internet by following the instructions on the proxy card.
You may revoke your proxy in the manner described in the accompanying joint
proxy statement/prospectus at any time before the proxy has been voted at the
special meeting.
By order of the Board of Directors,
/s/JOHN S. PYKE
John S. Pyke, Jr.
Secretary
July , 2000
<PAGE> 5
THE INFORMATION IN THIS PROSPECTUS IN NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 26, 2000
JOINT PROXY STATEMENT/PROSPECTUS
[GEON LOGO]
[M.A. HANNA COMPANY]
CONSOLIDATION PROPOSED
THE GEON COMPANY:
- New York Stock Exchange Symbol: GON
M.A. HANNA COMPANY:
- New York Stock Exchange Symbol: MAH
- Chicago Stock Exchange Symbol: MAH
CONSOLIDATION CORP:
- A newly formed Ohio corporation that is not publicly traded.
POLYONE CORPORATION:
- An Ohio corporation that will result from the consolidation of Geon, Hanna and
Consolidation Corp.
THE CONSOLIDATION:
- Upon approval and completion of the consolidation PolyOne will issue
109,844,805 PolyOne common shares.
- Geon stockholders will receive two common shares of PolyOne for each share of
Geon common stock that they own.
- Hanna stockholders will receive one common share of PolyOne for each share of
Hanna common stock that they own.
YOU SHOULD READ THE "RISK FACTORS" SECTION ON PAGE 13 FOR A DESCRIPTION OF
SOME OF THE RISKS YOU SHOULD CONSIDER IN EVALUATING THE CONSOLIDATION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE POLYONE COMMON SHARES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this joint proxy statement/prospectus is July , 2000,
and it is first being mailed to stockholders on or about July , 2000.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS................. 1
SUMMARY............................... 3
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA OF GEON AND HANNA.... 10
Selected Historical Financial Data
of Geon.......................... 10
Selected Historical Financial Data
of Hanna......................... 11
Unaudited Selected Condensed
Combined Pro Forma Financial Data
of PolyOne....................... 11
RISK FACTORS.......................... 13
THE CONSOLIDATION..................... 14
General............................. 14
Background to the Consolidation..... 14
Recommendation of the Geon Board and
Reasons for the Consolidation.... 16
Recommendation of the Hanna Board
and Reasons for the
Consolidation.................... 18
Treatment of Options................ 19
Exchange of Certificates............ 19
Effective Time...................... 20
Regulatory Approvals Required for
the Consolidation................ 20
Restrictions on Resales of PolyOne
Stock............................ 22
Accounting Treatment................ 22
Material Federal Income Tax
Consequences..................... 23
Dissenter's Rights.................. 24
Financial Projections............... 24
OPINIONS OF FINANCIAL ADVISORS........ 25
Opinion of Geon's Financial
Advisor.......................... 25
Opinion of Hanna's Financial
Advisor.......................... 33
THE SPECIAL MEETINGS.................. 38
Date, Times and Places.............. 38
Matters to be Considered at the
Special Meetings................. 38
Record Date; Stock Entitled to Vote;
Quorum........................... 38
Votes Required...................... 38
Resolicitation...................... 39
Share Ownership..................... 39
Voting of Proxies................... 39
AGREEMENT AND PLAN OF CONSOLIDATION... 41
General............................. 41
Closing; Effective Time............. 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consideration to be Received in the
Consolidation.................... 41
Conversion of Shares; Procedures for
Surrender of Certificates;
Fractional Shares................ 42
Representations and Warranties...... 43
Covenants........................... 43
Additional Agreements............... 46
Conditions to the Consummation of
the Consolidation................ 50
Termination, Amendment and Waiver... 51
INTERESTS OF CERTAIN PERSONS IN THE
CONSOLIDATION....................... 52
Interests of Geon Board of Directors
and Executive Officers........... 53
Interests of Hanna Board of
Directors and Executive
Officers......................... 56
Indemnification..................... 59
Long-Term Incentive Plan............ 59
PolyOne 2000 Stock Incentive Plan... 59
DIRECTORS AND EXECUTIVE OFFICERS OF
POLYONE AFTER THE CONSOLIDATION..... 60
Board of Directors.................. 60
Management.......................... 60
PRICE RANGE OF COMMON STOCK AND
DIVIDENDS........................... 62
INFORMATION ABOUT THE PARTIES......... 63
The Geon Company.................... 63
M.A. Hanna Company.................. 63
Consolidation Corp.................. 63
PolyOne Corporation................. 64
DESCRIPTION OF POLYONE CAPITAL
STOCK............................... 65
COMPARISON OF RIGHTS OF HOLDERS OF
GEON AND HANNA COMMON STOCK AND
POLYONE COMMON SHARES............... 66
Business Combinations............... 66
Appraisal Rights.................... 66
State Takeover Legislation.......... 67
Amendments to Certificates or
Articles of Incorporation........ 68
Amendments to By-laws and
Regulations...................... 68
Stockholder Action.................. 69
Special Stockholder Meetings........ 69
Cumulative Voting................... 69
Number and Election of Directors.... 70
</TABLE>
(i)
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Removal of Directors................ 70
Vacancies........................... 70
Liability and Indemnification of
Directors........................ 71
Constituencies Provisions........... 72
GEON EXECUTIVE COMPENSATION........... 73
HANNA EXECUTIVE COMPENSATION.......... 81
POLYONE 2000 STOCK INCENTIVE PLAN..... 89
Summary of the Plan................. 89
Federal Income Tax Consequences..... 93
Tax Consequences to Participants.... 93
Tax Consequences to PolyOne or
Subsidiary....................... 94
Vote Required to Approve the Plan... 94
LEGAL MATTERS......................... 94
EXPERTS............................... 94
SHAREHOLDER PROPOSALS................. 95
OTHER MATTERS......................... 95
INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS......................... 96
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION... 96
INCORPORATION BY REFERENCE............ 96
FORWARD-LOOKING STATEMENTS............ 98
UNAUDITED CONDENSED COMBINED PRO FORMA
FINANCIAL DATA...................... F-1
AUDITED BALANCE SHEET OF CONSOLIDATION
CORP................................ F-13
Annex A - Agreement and Plan of
Consolidation....................... 1-A
Annex B - Opinion of McDonald
Investments, a KeyCorp company...... 1-B
Annex C - Opinion of Salomon Smith
Barney Inc.......................... 1-C
Annex D - PolyOne 2000 Stock Incentive
Plan................................ 1-D
Annex E - Form of Articles of
Incorporation of PolyOne............ 1-E
Annex F - Form of Regulations of
PolyOne............................. 1-F
</TABLE>
(ii)
<PAGE> 8
QUESTIONS AND ANSWERS
Q: WHY ARE GEON AND HANNA PROPOSING THE CONSOLIDATION?
A: Our companies want to consolidate because we believe that by combining our
companies and their complementary strengths and common strategies we can
create a premier polymer services company and provide significant benefits
to our stockholders and customers alike. Both our companies believe that
polymer services companies succeed by being leaders in the business sectors
in which they compete. We believe that the unique fit of our two companies
in a broad range of customer and geographic markets will provide us with new
opportunities for growth. At the same time, in a consolidating industry, we
believe that being larger should increase our strategic options and lower
our average cost of capital.
Q: WHAT WILL HAPPEN IN THE CONSOLIDATION?
A: Geon and Hanna will combine their businesses through a transaction called a
consolidation. A new Ohio corporation that Geon and Hanna have formed for
this purpose will also be part of the consolidation. When the consolidation
becomes effective, a new Ohio corporation will result under the applicable
state corporation laws of Delaware and Ohio. This new corporation will be
named "PolyOne." Geon stockholders and Hanna stockholders will have their
common stock converted into newly issued common shares of PolyOne. We expect
that upon completion of the consolidation, former Geon stockholders will
hold approximately 50.1% of the outstanding shares of PolyOne and former
Hanna stockholders will hold approximately 49.9% of the outstanding shares
of PolyOne. For accounting purposes, the consolidation will be treated as a
purchase business combination with Geon as the acquiring enterprise. See
"The Consolidation -- Accounting Treatment."
Q: WHEN WILL THE CONSOLIDATION BE COMPLETED?
A: We are working to complete the consolidation as quickly as possible. We
expect to complete the consolidation during the third quarter of 2000.
However, delays in fulfilling closing conditions, including the receipt of
regulatory approvals, could delay the consolidation.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker to instruct
your broker to vote your shares.
Q: CAN I CHANGE MY VOTE AFTER SUBMITTING MY PROXY CARD?
A: Yes. If you submit a proxy in connection with this solicitation, you may
revoke your proxy at any time before it is voted. You may revoke your proxy
in writing or by appearing at the special meeting to vote in person. If you
instruct a broker to vote your shares, you must follow directions received
from your broker to change those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the consolidation is completed, we will send you written
instructions for transmitting your stock certificates in exchange for stock
certificates representing common shares of PolyOne.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
joint proxy statement/prospectus, please vote in one of the following ways:
- attend the stockholders meeting and vote in person,
- complete, sign, and mail your proxy card in the enclosed envelope,
- phone the toll-free number listed on your proxy card and follow the
recorded instructions, or
- go to the Internet website listed on your proxy card and follow the
instructions.
1
<PAGE> 9
If you sign and send in your proxy card or grant your proxy by telephone or
over the Internet without specifying how your shares should be voted, your
shares will be voted for the adoption of the consolidation agreement and
approval of the PolyOne 2000 Stock Incentive Plan.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the consolidation or if you need additional
copies of this joint proxy statement/prospectus or the enclosed proxy card,
you should contact:
Morrow & Co., Inc.
445 Park Avenue, 5th Floor
New York, New York 10022
800-566-9061
Banks and brokerage firms should call:
800-662-5200
2
<PAGE> 10
SUMMARY
This summary highlights some of the information from this joint proxy
statement/prospectus and does not contain all of the information that is
important to you. To understand the consolidation fully and for a more complete
description of the legal terms of the consolidation, we urge you to read
carefully this entire document, including the annexes and other documents to
which we have referred you. See "Where You Can Find More Information" for more
details. For your convenience, we have included page references parenthetically
to direct you to a more complete description of each topic presented in this
summary.
THE GEON COMPANY (Page 63)
One Geon Center
Avon Lake, Ohio 44012
(440) 930-1000
The Geon Company is a leading North American-based performance polymer
products and services company that produces compounds, specialty vinyl resins
and formulations, engineered calendered film, and other value-added products and
services. Over the past two years, Geon's strategy has shifted away from
commodity PVC resin production, focusing on performance polymer products and
related services. Geon has over 30 manufacturing plants and participates in
joint ventures in various countries. Geon operates in two business segments:
Performance Polymers and Services, and Resin and Intermediates. Geon employs
more than 3,100 people and had revenues of over $1.2 billion in 1999.
M.A. HANNA COMPANY (Page 63)
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114
(216) 589-4000
M.A. Hanna Company is a leading international specialty polymers company
with business segments in rubber processing, plastic processing, and
distribution. With 1999 revenues of over $2.3 billion, Hanna produces rubber and
plastic compounds, rubber color and additives, and plastic color and additives.
It also distributes plastic resin and plastic sheet, rod, tube, and film. Hanna
employs more than 7,000 associates in more than 25 countries.
On May 11, 2000, Hanna signed a definitive agreement to sell substantially
all of the assets of its wholly owned subsidiary Cadillac Plastic Group, Inc. to
General Electric Company. The transaction is expected to close in the third
quarter of 2000. The terms of the transaction were not disclosed. Cadillac
Plastic Group, with operations in North America, Asia, the United Kingdom and
the Netherlands, promotes, markets and distributes plastic engineered shapes and
is also involved in the fabrication and conversion of plastic products. Cadillac
Plastic Group's Richmond Aircraft Products business and its interests in three
joint ventures with Rohm GmbH & Co. were not included in the sale to General
Electric but strategic alternatives are being considered for these assets.
The businesses to be sold to General Electric had 1999 sales of $378
million, representing approximately 16% of Hanna's total revenues, and employs
approximately 1,100 of Hanna's associates. Hanna expects to take a one-time,
nonrecurring charge related to the write-down of goodwill and the associated tax
consequences in connection with the transaction. Hanna is evaluating possible
uses of the proceeds of the transaction, including debt repayment, acquisitions
and share repurchases. The sale is subject to regulatory approvals and is
targeted to close in the third quarter of 2000.
On July 19, 2000, Hanna announced that it had signed a definitive agreement
to sell its Richmond Aircraft Products unit, part of its Cadillac Plastic
subsidiary, to UMECO plc. The unit distributes films, bagging materials and
structural foam materials that are used primarily in the manufacture of parts
for the aerospace industry.
3
<PAGE> 11
THE CONSOLIDATION (Page 14)
We propose a consolidation in which Geon, a Delaware corporation, Hanna, a
Delaware corporation, and Consolidation Corp., a new Ohio corporation formed by
Geon and Hanna, will consolidate to form a new Ohio corporation, PolyOne
Corporation. PolyOne will have its headquarters in the State of Ohio in the
Greater Cleveland area. We expect to complete the consolidation during the third
quarter of 2000.
EXCHANGE OF CERTIFICATES (Page 19)
Geon Stockholders. Each of your shares of Geon common stock will
automatically be converted into two common shares of PolyOne. We refer to this
one-for-two exchange in the document as the "Geon exchange ratio." The Geon
exchange ratio will not change even if the market price of Geon common stock
increases or decreases between now and the date of the consolidation.
Hanna Stockholders. Each of your shares of Hanna common stock will
automatically be converted into one common share of PolyOne. We refer to this
one-for-one exchange in this document as the "Hanna exchange ratio." The Hanna
exchange ratio will not change even if the market price of Hanna common stock
increases or decreases between now and the date of the consolidation.
You will have to surrender your Geon common stock and Hanna common stock
certificates to receive book-entry statements or stock certificates representing
common shares of PolyOne. You will not need to do this, however, until you
receive written instructions after we complete the consolidation.
THE POLYONE 2000 STOCK INCENTIVE PLAN (Page 89)
We propose the approval of the PolyOne 2000 Stock Incentive Plan in order
to grant equity-based incentive awards to non-employee directors and employees
(including executive officers) of PolyOne that are linked to the long-term
performance of PolyOne to align their interests with the interests of PolyOne
shareholders.
OUR RECOMMENDATIONS TO STOCKHOLDERS (Geon, Page 16; Hanna, Page 18)
Geon Stockholders. The Geon board of directors believes that the
consolidation is fair to you and in your best interests, and unanimously
recommends that you vote FOR the proposal to adopt the agreement and plan of
consolidation and the related transactions and FOR the proposal to approve the
PolyOne 2000 Stock Incentive Plan.
Hanna Stockholders. The Hanna board of directors believes that the
consolidation is fair to you and in your best interests, and unanimously
recommends that you vote FOR the proposal to adopt the agreement and plan of
consolidation and the related transactions and FOR the proposal to approve the
PolyOne 2000 Stock Incentive Plan.
OPINIONS OF FINANCIAL ADVISORS (Geon, Page 25; Hanna, Page 33)
Geon Stockholders. Among other factors that Geon's board considered in
deciding to approve the consolidation, the board received an opinion from its
financial advisor, McDonald Investments Inc., a KeyCorp company, as to the
fairness, from a financial point of view, of the Geon exchange ratio to the
holders of Geon common stock. We have attached the full text of McDonald
Investments' written opinion, dated May 7, 2000, to this document as Annex B.
You should read this opinion completely to understand the assumptions made,
matters considered and limitations on the review undertaken by McDonald
Investments in providing its opinion. MCDONALD INVESTMENTS' OPINION IS ADDRESSED
TO THE GEON BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
WITH RESPECT TO ANY MATTER RELATING TO THE PROPOSED CONSOLIDATION.
Hanna Stockholders. In connection with the consolidation, the Hanna board
received a written opinion from Salomon Smith Barney Inc. as to the fairness,
from a financial point of view, of the Hanna exchange ratio provided for in the
consolidation agreement. The full text of Salomon Smith Barney's written
opinion, dated May 7, 2000, is attached to this document as Annex C. We
encourage you to read this opinion carefully in its entirety for a description
of the assumptions made, matters considered and limitations on the review
undertaken.
4
<PAGE> 12
SALOMON SMITH BARNEY'S OPINION IS ADDRESSED TO THE HANNA BOARD AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO ANY MATTER
RELATING TO THE PROPOSED CONSOLIDATION.
THE SPECIAL MEETINGS (Page 38)
Geon Stockholders. The Geon special meeting will be held on August 29,
2000, at 10:00 a.m., local time, at The Forum Conference and Education Center,
Erie Room, 1375 East Ninth Street, Cleveland, Ohio. At the Geon special meeting,
Geon will ask you to (1) adopt the agreement and plan of consolidation that
provides for the consolidation of Geon, Hanna, and Consolidation Corp. to form
PolyOne and (2) approve the PolyOne 2000 Stock Incentive Plan.
Hanna Stockholders. The Hanna special meeting will be held on August 29,
2000, at 11:00 a.m., local time, at The Forum Conference and Education Center,
Erie Room, 1375 East Ninth Street, Cleveland, Ohio. At the Hanna special
meeting, Hanna will ask you to (1) adopt the agreement and plan of consolidation
that provides for the consolidation of Geon, Hanna, and Consolidation Corp. to
form PolyOne and (2) approve the PolyOne 2000 Stock Incentive Plan.
RECORD DATE; VOTES REQUIRED (Page 38)
Geon Stockholders. You can vote at the Geon special meeting if you owned
Geon common stock at the close of business on July 17, 2000. On that date, there
were 24,327,115 shares of Geon common stock outstanding and entitled to vote.
You can cast one vote for each share of Geon common stock that you owned on that
date. In order to adopt the agreement and plan of consolidation and the related
transactions, the holders of at least a majority of the outstanding shares of
Geon common stock must vote in favor of doing so. In order to approve the
PolyOne 2000 Stock Incentive Plan, the holders of at least a majority of the
shares of Geon common stock that vote at the Geon stockholders meeting must vote
in favor of doing so. At the close of business on the record date, directors and
executive officers of Geon and their affiliates beneficially owned and were
entitled to vote 994,777 shares or approximately 4% of the Geon common stock
outstanding on that date.
Hanna Stockholders. You can vote at the Hanna special meeting if you owned
Hanna common stock at the close of business on July 14, 2000. On that date,
there were 48,484,738 shares of Hanna common stock outstanding and entitled to
vote. You can cast one vote for each share of Hanna common stock that you owned
on that date. In order to adopt the agreement and plan of consolidation and the
related transactions, the holders of at least a majority of the outstanding
shares of Hanna common stock must vote in favor of doing so. In order to approve
the PolyOne 2000 Stock Incentive Plan, the holders of at least a majority of the
shares of Hanna common stock that vote at the Hanna stockholders meeting must
vote in favor of doing so. At the close of business on the record date,
directors and executive officers of Hanna and their affiliates beneficially
owned and were entitled to vote 680,588 shares or approximately 1.4% of the
Hanna common stock outstanding on that date.
TAX-FREE TRANSACTION (Page 23)
We have received legal opinions to the effect that, assuming the
consolidation is consummated in accordance with the consolidation agreement, the
consolidation will be treated as a reorganization for U.S. federal income tax
purposes and that your exchange of shares of Geon common stock and Hanna common
stock for common shares of PolyOne will not cause you to recognize any gain or
loss for U.S. federal income tax purposes. These opinions are not binding on the
Internal Revenue Service, however, which could take a different view.
THIS TAX TREATMENT MAY NOT APPLY TO ALL STOCKHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE CONSOLIDATION TO YOU CAN BE COMPLICATED. THEY
WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN OUR CONTROL.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX
CONSEQUENCES OF THE CONSOLIDATION.
DISSENTERS' RIGHTS (Page 24)
Neither Geon stockholders nor Hanna stockholders are entitled to
dissenters' rights under Delaware law in connection with the consolidation.
5
<PAGE> 13
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (Page 66)
Stockholders can obtain quotes for shares of Geon common stock and Hanna
common stock in newspapers, on the Internet, or from their brokers. On May 5,
2000, the last trading day before we announced the consolidation, Geon common
stock closed at $24.00 per share and Hanna common stock closed at $11.8125 per
share. On July 24, 2000, a recent trading day prior to the printing of this
document, Geon common stock closed at $16.81 per share and Hanna common stock
closed at $8.44 per share.
GEON AND HANNA STOCK OPTIONS (Page 19)
When we complete the consolidation, each stock option to buy Geon common
stock or Hanna common stock granted under the stock option plans of Geon and
Hanna, respectively, that is outstanding and not yet exercised immediately
before completing the consolidation will become an option to purchase common
shares of PolyOne. Each stock option will continue to be governed by the terms
of the Geon or Hanna stock option plans, as the case may be, which PolyOne will
assume. We will adjust the number of common shares of PolyOne subject to new
stock options, as well as their exercise price, to reflect the respective
exchange ratios in the consolidation.
DIRECTORS AND EXECUTIVE OFFICERS OF POLYONE AFTER THE CONSOLIDATION (Page 60)
The present managements of our companies will share the responsibility of
managing PolyOne. The board of directors of PolyOne will have 12 members. Six of
the directors of PolyOne will be current Geon directors, and six of the
directors will be current Hanna directors. Phillip D. Ashkettle, currently
Hanna's Chairman, President and Chief Executive Officer, will serve as Chairman
and Chief Executive Officer of PolyOne, and Thomas A. Waltermire, currently
Geon's Chairman and Chief Executive Officer, will serve as President and Chief
Operating Officer of PolyOne. The parties intend that Mr. Waltermire will
succeed Mr. Ashkettle as Chief Executive Officer in 2002 and as Chairman in
2004.
CONDITIONS TO THE CONSUMMATION OF THE CONSOLIDATION (Page 50)
The completion of the consolidation depends on a number of conditions,
including approval of the agreement and plan of consolidation by both Geon
stockholders and Hanna stockholders and receipt of regulatory approvals.
Where the law permits, Geon or Hanna could elect to waive a condition to
its respective obligations to complete the consolidation even though that
condition has not been satisfied. We cannot be certain when (or if) the
conditions to the consolidation will be satisfied or waived or that we will
complete the consolidation.
TERMINATION OF THE AGREEMENT AND PLAN OF CONSOLIDATION (Page 51)
We can agree at any time to terminate the agreement and plan of
consolidation without completing the consolidation, even if the stockholders of
both our companies have approved it. Also, either of us can decide, without the
consent of the other, to terminate the agreement and plan of consolidation in a
number of other situations, including the final denial of a required regulatory
approval, specified circumstances relating to a competing consolidation, or the
failure to complete the consolidation by November 30, 2000.
AMENDMENT AND WAIVER (Page 51)
We may jointly amend the agreement and plan of consolidation, and each of
us may waive our right to require the other party to adhere to the terms and
conditions of the agreement, to the extent legally permissible. However, we may
not do so after our stockholders approve the consolidation agreement if the law
requires stockholder approval of the amendment unless we obtain that approval.
ACCOUNTING TREATMENT (Page 22)
The consolidation will be accounted for as a purchase business combination
under generally accepted accounting principles. Geon will be the acquiring
enterprise for accounting purposes.
6
<PAGE> 14
REGULATORY APPROVALS (Page 20)
Under the Hart-Scott-Rodino Act, we were required to give notification and
furnish information to the Federal Trade Commission and the Antitrust Division
of the Department of Justice and to wait the specified waiting period before we
could complete the consolidation. Each of Geon and Hanna filed the required
notification and report forms with the Federal Trade Commission and the
Antitrust Division on June 16, 2000. This began a 30-day waiting period, which
expired on July 16, 2000, with no action having been taken by either the Federal
Trade Commission or the Antitrust Division of the Department of Justice. We are
also required to obtain approvals from, and give notices to, other regulatory
agencies.
As of the date of this document, we have not received all of the required
approvals. While we do not know of any reason why we would not be able to obtain
the necessary approvals in a timely manner, we cannot be certain when or if we
will get them. We have agreed in the consolidation agreement, however, to use
our reasonable best efforts to obtain these approvals, including entering into
an agreement with governmental authorities regarding any antitrust matters in
connection with the consolidation.
INTERESTS OF CERTAIN PERSONS IN THE CONSOLIDATION THAT ARE DIFFERENT FROM YOUR
INTERESTS (Page 52)
Some of our executive officers and directors have interests in the
consolidation that are different from, or in addition to, their interests as
stockholders in our companies. These interests exist because of incentive stock
plans, employment agreements, severance arrangements, change of control
agreements and other agreements that the officers have entered into or will
enter into with Geon, Hanna and/or PolyOne. These agreements and plans will
provide the officers and directors with severance benefits if their employment
with PolyOne is terminated after the consolidation and other rights in
connection with the consolidation. Additionally, some of our officers and
directors will have rights under PolyOne's regulations.
Also, following the consolidation, PolyOne will indemnify, and provide
directors' and officers' insurance for, the directors and officers of Geon and
Hanna for events occurring before the consolidation, including events that are
related to the agreement and plan of consolidation. Additional interests of some
of our directors and officers are described under "Interests of Certain Persons
in the Consolidation" and "Directors and Executive Officers of PolyOne after the
Consolidation."
The members of our boards of directors knew about these additional
interests, and considered them, when they approved the consolidation agreement
and the consolidation.
COMPARATIVE PER SHARE DATA (Page 8)
The following table sets forth historical per share data of Geon and Hanna
and combined per share data on an unaudited pro forma combined basis. Pro forma
earnings per share and book value per share have been calculated assuming that
two common shares of PolyOne will be issued in exchange for one share of Geon
common stock and one common share of PolyOne will be issued in exchange for one
share of Hanna common stock. The information set forth below should be read in
conjunction with the selected historical financial data and the unaudited pro
forma combined financial information included elsewhere in this joint proxy
statement/prospectus, and the separate historical financial statements of Geon
and Hanna and the notes to those financial statements, incorporated by reference
in this joint proxy statement/prospectus. You should not rely on
7
<PAGE> 15
this pro forma data as being indicative of the results that would have been
actually obtained if the consolidation had been in effect for the
above-mentioned periods or the future results of the combined company.
<TABLE>
<CAPTION>
POLYONE HANNA GEON
GEON HANNA PRO FORMA EQUIVALENT EQUIVALENT
HISTORICAL(1) HISTORICAL COMBINED PRO FORMA PRO FORMA
------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Book value per common share
December 31, 1999....................... $14.12 $11.23 $-- $-- $--
March 31, 2000.......................... 14.53 11.28 9.57 9.57 19.14
Earnings Per Share
Basic
Year ended December 31, 1999......... $ 4.49 $ .79 $ .92 $ .92 $ 1.84
Three months ended March 31, 2000.... .59 .23 .28 .28 .56
Diluted
Year ended December 31, 1999......... $ 4.31 $ .79 $ .90 $ .90 $ 1.80
Three months ended March 31, 2000.... .57 .23 .27 .27 .54
Dividends per common share
Year ended December 31, 1999......... $ .50 $ .49 $ .346 $ .346 $ .692
Three months ended March 31, 2000.... .125 .125 .09 .09 .18
</TABLE>
---------------
(1) Geon's historical book value and earnings per share giving effect to the
Geon exchange ratio are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ ---------
<S> <C> <C>
Book value per common share, at period end.................. $7.06 $7.26
Earnings per share, for the period ended
Basic..................................................... 2.25 .29
Diluted................................................... 2.15 .28
</TABLE>
RECENT DEVELOPMENTS
Geon
On July 26, 2000, Geon released its 2000 second quarter unaudited operating
results which are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, 2000
--------------------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
--------------------
<S> <C>
Sales....................................................... $361.2
Operating Income............................................ 30.4 (1)
Net income.................................................. 14.8 (2)
Net income per share, diluted............................... 0.62 (2)
</TABLE>
---------------
(1) Includes the effects of the previously disclosed special charge of $4.2
million ($2.6 million, after tax), associated with the buyout of a Board of
Director's pension plan and restructuring costs associated with the closing
of an engineered films plant.
(2) Includes the after tax effects of the items discussed above and an after tax
charge of $0.5 million associated with the previously disclosed write-off of
costs associated with the indefinite postponement of a planned public debt
financing.
8
<PAGE> 16
Hanna
On July 10, 2000, Hanna announced that second quarter 2000 operating
earnings would be below Hanna's earlier expectations and below 23 cents per
share for the second quarter of 1999. In the announcement, Hanna identified
several specific factors that impacted operating earnings in the quarter:
- Hanna was generally unable to fully offset raw material cost increases
during the second quarter in its domestic processing business.
- Start-up and operating expenses for Hanna's new rubber compounding plant
in Mexico exceeded new business growth, leading to a loss in the quarter
for the new plant. In addition, a decrease in tire tolling business
occurred in the second quarter.
- The performance of the Cadillac Plastic business also remained below
expectations. On May 11, 2000, Hanna announced the sale of the largest
portion of the Cadillac business to GE Plastics, which is expected to
close in the third quarter, and that Hanna was pursuing strategic
alternatives for the other portions of the Cadillac business. Cadillac
Plastic's management team has been actively involved in the divestiture
process and many actions targeted to modify the overall operating
structure of Cadillac Plastic were put on hold during the divestiture
process.
On July 26, 2000, Hanna released its 2000 second quarter unaudited
operating results which are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, 2000
--------------------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
--------------------
<S> <C>
Sales....................................................... $606.8
Operating loss.............................................. (22.8)
Net loss.................................................... (31.0) (1)
Loss per share.............................................. (0.74)
</TABLE>
---------------
(1) One-time events included an after-tax loss of $52.3 million related to the
pending Cadillac Plastic divestiture, and a $10.5 million reduction in
income tax reserves related to a settlement of examinations of previously
filed tax returns. Operating earnings are $22.6 million, adjusted for these
one-time events.
9
<PAGE> 17
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA OF GEON AND HANNA
We are providing the following historical financial information to help you
analyze some of the financial aspects of the consolidation. The information is
only a summary and you should read it together with our historical financial
statements and related notes contained in our annual reports and other
information that we have filed with the Securities and Exchange Commission. See
"Where You Can Find More Information."
You should also read all of the selected historical financial data we
provide in the following tables together with the more detailed unaudited
condensed combined pro forma financial statements we provide in this document,
which you can find beginning at page F-1.
SELECTED HISTORICAL FINANCIAL DATA OF GEON
The selected historical financial data of Geon set forth below was derived
from the audited consolidated financial statements of Geon for each of the five
years in the period ended December 31, 1999. The selected historical financial
data of Geon for the three months ended March 31, 2000 and 1999 were derived
from the unaudited condensed consolidated financial statements of Geon.
The selected historical financial data should be read in conjunction with
the consolidated financial statements and related notes of Geon and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference into this document.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $ 345.5 $ 325.8 $1,261.2 $1,284.4 $1,250.0 $1,144.4 $1,267.8
Employee separation and
plant phase-out......... -- 1.1 0.5 14.6 15.0 -- 63.9
Operating income.......... 29.7 21.8 99.7 41.0 51.7 30.9 63.3
Income before
extraordinary item and
cumulative effect of
change in method of
accounting.............. 13.8 11.1 106.2 13.8 22.5 12.2 32.2
Net income(1)............. 13.8 9.6 104.7 13.8 22.5 12.2 32.2
BALANCE SHEET DATA (AT
PERIOD END):
Total assets.............. $1,196.9 $ 838.3 $1,162.6 $ 802.0 $ 872.9 $ 736.9 $ 752.0
Long-term debt............ 130.7 133.8 130.9 135.4 136.4 137.2 137.9
Stockholders' equity...... 345.8 224.4 334.7 214.1 223.8 222.4 208.9
OTHER DATA:
Earnings per share
Basic................... $ .59 $ .42 $ 4.49 $ .60 $ .98 $ .51 $ 1.28
Diluted................. .57 .40 4.31 .58 .95 .50 1.24
Dividends per common
share................... .125 .125 .50 .50 .50 .50 .50
</TABLE>
---------------
(1) Reflects the after tax effects of non-recurring items on net income
including the cumulative effect of a change in method of accounting for
start-up costs in the first quarter of 1999 of $1.5 million, the gain on the
OxyChem Transactions of $57.2 million and certain other non-recurring
charges of $3.5 million in the year ended December 31, 1999; and employee
separation and plant phase-out charges of $8.9 million in the year ended
December 31, 1998, $9.2 million in the year ended December 31, 1997 and
$39.1 million in the year ended December 31, 1995.
10
<PAGE> 18
SELECTED HISTORICAL FINANCIAL DATA OF HANNA
The selected historical financial data of Hanna set forth below was derived
from the audited consolidated financial statements of Hanna for each of the five
years in the period ended December 31, 1999. The selected historical financial
data of Hanna for the three months ended March 31, 2000 and 1999 were derived
from the unaudited condensed consolidated financial statements of Hanna.
The selected historical financial data should be read in conjunction with
the consolidated financial statements and related notes of Hanna and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference into this document.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $ 612.7 $ 580.6 $2,304.6 $2,285.9 $2,200.3 $2,066.2 $1,902.0
Income from continuing
operations before
extraordinary charge and
cumulative effect of
changes in accounting
principles.............. 10.2 7.7 35.4 30.3 64.6 59.2 56.7
Net income................ 10.2 7.7 35.4 28.3 64.6 53.8 102.0
BALANCE SHEET DATA (AT
PERIOD END):
Total assets.............. $1,617.1 $1,621.1 $1,590.6 $1,593.9 $1,469.0 $1,250.8 $1,231.6
Long-term debt............ 454.1 487.6 423.7 480.9 325.2 207.7 232.0
Stockholders' equity...... 552.3 538.3 549.5 538.5 539.3 508.3 484.8
OTHER DATA:
Earnings per share
Basic................... $ .23 $ .17 $ .79 $ .64 $ 1.43 $ 1.18 $ 2.19
Diluted................. .23 .17 .79 .63 1.40 1.15 2.15
Dividends per common
share................... .125 .12 .49 .46 .43 .40 .37
</TABLE>
UNAUDITED SELECTED CONDENSED COMBINED PRO FORMA FINANCIAL DATA OF POLYONE
The unaudited selected condensed combined pro forma financial data gives
effect to the consolidation of Geon and Hanna using the purchase method of
accounting under which Geon is the acquiring enterprise. The pro forma statement
of operations data reflects the combination of statement of operations data of
Geon for the year ended December 31, 1999, and the three months ended March 31,
2000, with statement of operations data of Hanna for the year ended December 31,
1999, and the three months ended March 31, 2000, respectively. The pro forma
balance sheet data reflects the combination of balance sheet data of Geon as of
March 31, 2000, with the balance sheet data of Hanna as of March 31, 2000. The
allocation of the purchase price reflected in the unaudited selected pro forma
combined financial data is preliminary. We urge you to read the selected pro
forma combined financial data in connection with the unaudited condensed
combined pro forma financial statements and notes beginning on page F-1.
The unaudited condensed combined pro forma financial statements of PolyOne
do not purport to be indicative of what PolyOne's financial condition or results
of operations would have been had the consolidation in fact been consummated as
of the assumed dates and for the periods presented, nor are they indicative of
the results of operations or financial condition for any future period or date.
In addition, PolyOne's unaudited pro forma condensed combined financial
statements do not reflect the profit improvements expected to result from the
consolidation of Geon and Hanna. As discussed elsewhere in this joint proxy
statement/prospectus, it is anticipated that PolyOne will capture at least $50
million annually of profit improvements. Profit improvements
11
<PAGE> 19
are expected in the following areas: market growth opportunities, improved
materials purchasing, improved efficiencies in operations and distribution and
reduced overhead costs. These profit improvements are expected to be fully
realized by 2002. The related costs of implementation have not been determined.
See "Where You Can Find More Information" and "Unaudited Condensed Combined
Pro Forma Financial Data."
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
------------------ -----------------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales................................................. $ 856.2 $3,163.9
Income before cumulative effect of a change in accounting
principle............................................... 25.6 84.3
Earnings per PolyOne share
Basic................................................... .28 .92
Diluted................................................. .27 .90
Total assets.............................................. 2,651.6
Long-term debt............................................ 443.0
Stockholders' equity...................................... 924.3
</TABLE>
12
<PAGE> 20
RISK FACTORS
In addition to the other information included and incorporated by reference
in this joint proxy statement/prospectus, you should carefully consider the
following factors in evaluating the proposals to be voted on at your special
stockholders meeting.
WE MAY NOT ACHIEVE THE INCREASES IN OPERATING INCOME WE EXPECT TO RESULT FROM
THE CONSOLIDATION OF GEON AND HANNA WHICH COULD ADVERSELY AFFECT THE RESULTS OF
OPERATIONS, CASH FLOW AND SHARE PRICE OF POLYONE.
The failure of PolyOne to realize the operating income improvements that we
anticipate from integrating Geon and Hanna's operations as fully or as quickly
as we expect may negatively impact PolyOne's results of operations, cash flow
and share price.
GEON STOCKHOLDERS AND HANNA STOCKHOLDERS MAY RECEIVE LESS VALUE FOR THEIR SHARES
IN THE CONSOLIDATION IF THE MARKET PRICES OF GEON SHARES AND HANNA SHARES FAIL
TO TRADE IN THE SAME RELATION TO EACH OTHER AT THE TIME OF THE CONSOLIDATION AS
THEY DID ON THE DATE THE RESPECTIVE EXCHANGE RATIOS WERE SET.
Because the number of PolyOne common shares that Geon stockholders and
Hanna stockholders will receive in the consolidation is fixed, fluctuations in
the market prices of Hanna common stock and Geon common stock prior to the
completion of the consolidation may result in more or less value for those
stockholders upon completion of the consolidation.
WE HAVE MADE STATEMENTS CONCERNING FUTURE FINANCIAL RESULTS OF POLYONE THAT ARE
SUBJECT TO RISKS AND UNCERTAINTIES, WHICH MAY CAUSE THESE RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN OUR STATEMENTS.
We have made forward-looking statements in this document that are subject
to risks and uncertainties. Forward-looking statements include information
concerning future financial results of Geon, Hanna or PolyOne. Forward looking
statements often begin with or include the phrases "we believe," "we expect" or
words of similar meaning. You should note that many factors may affect the
future financial results of Geon, Hanna or PolyOne. These factors could cause
those results to differ materially from the results expressed in our forward-
looking statements. These factors include:
- the risk that Geon and Hanna businesses will not be integrated
successfully;
- inability to achieve or delays in achieving savings related to
consolidation and restructuring programs;
- unanticipated delays in achieving or inability to achieve cost reduction
and employee productivity goals;
- costs related to the consolidation;
- inability to obtain or meet conditions imposed for regulatory approvals
for the consolidation;
- fluctuations in raw material prices and supply, in particular
fluctuations outside the normal range of industry cycles;
- the effect on our foreign operations of currency fluctuations, tariffs,
nationalization, exchange controls, limitations on foreign investment in
local businesses, and other political, economic and regulatory risks; and
- the risk that our analyses of these factors and their risks could be
incorrect or that the strategies developed to address them could be
unsuccessful.
13
<PAGE> 21
THE CONSOLIDATION
GENERAL
Geon and Hanna are furnishing this joint proxy statement/prospectus to
their stockholders in connection with the solicitation of proxies by their
boards of directors for use at their respective special stockholders' meetings.
At their special meetings, which will both be held on August 29, 2000,
stockholders of Geon and Hanna will be asked, among other things, to adopt the
consolidation agreement and approve the consolidation and the other transactions
contemplated under the consolidation agreement. The consolidation agreement
provides for the consolidation of Geon, Hanna and Consolidation Corp., a newly
formed Ohio corporation, to form PolyOne, where the separate corporate existence
of Geon, Hanna and Consolidation Corp. will cease.
BACKGROUND TO THE CONSOLIDATION
During the winter of 1997-1998, management and the Geon board conducted a
wide-ranging review of Geon's strategic direction. This review led to a new
strategic vision of a company focused on performance polymers and services. In
pursuit of this strategic vision, Geon undertook the transactions that resulted
in the creation of OxyVinyls, LP, Geon's joint venture with Occidental Chemical
Corporation, in April 1999.
Growth through acquisitions of performance polymers and services companies
was also an integral part of Geon's new strategy. As part of this strategy, Geon
successfully completed the acquisition of five privately held formulators and
one publicly held company (O'Sullivan Corporation) during 1998 and 1999.
Geon's management and board recognized from the outset of Geon's strategic
review process that a larger business combination with a company offering a good
strategic fit with Geon could accelerate realization of Geon's strategic goals.
Geon's management identified Hanna as a potentially attractive strategic
business combination partner. In order to better evaluate the potential of a
business combination with Hanna, Geon retained the investment banking firm of
McDonald Investments in August 1998.
In September 1998, representatives of Geon approached representatives of
Hanna, and between September 1998 and October 1998, representatives of Geon and
Hanna conducted informal discussions regarding a possible combination of the two
companies. In October 1998, Geon and Hanna entered into a standard
confidentiality agreement and began engaging in more in-depth exploratory
discussions regarding the strategic benefits of a possible combination of the
two companies. From October 1998 through mid-February 1999, Geon and Hanna,
along with their respective legal advisors, met several more times to discuss
various issues related to a possible combination. By mid-February, Geon and
Hanna decided that discussions had progressed to the point where a more formal
understanding about the exchange of information should be entered. On March 1,
1999, Geon and Hanna entered into a second confidentiality agreement that
prohibited the parties from, among other things, disclosing information obtained
during the course of their discussions. Over the next several weeks, the parties
discussed potential market and manufacturing profit improvement opportunities,
environmental issues and the financial results of both Geon and Hanna.
During the months of April and May 1999, Geon and Hanna met several times
to discuss each company's position with respect to the proposed combination, but
could not reach agreement on valuation. Consequently, discussions between the
companies terminated.
At the August 1999 Hanna board meeting, Mr. Phillip D. Ashkettle, President
and Chief Executive Officer of Hanna, reviewed Hanna's current position within
its industry and discussed with the board strategic alternatives to enhance long
term shareholder value, including resuming discussions with Geon.
On August 16, 1999, Mr. Ashkettle placed a call to Mr. Thomas A.
Waltermire, Chairman, President and Chief Executive Officer of Geon, proposing
that the two meet to discuss the possibility of resuming discussions concerning
a possible combination of Geon and Hanna.
Shortly after the call, each of Mr. Ashkettle and Mr. Waltermire discussed
their conversation with his board. After the discussions with the two sets of
directors, Geon management and Hanna management met with their
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<PAGE> 22
respective financial advisors and asked them to assist management in
establishing proposals consistent with the wishes of their boards.
On several occasions from late August 1999 through late October 1999, Mr.
Ashkettle and Mr. Waltermire, together with their management teams and financial
advisors, discussed various issues related to a proposed combination, including
profit improvement opportunities, valuations and staffing issues.
On October 24, 1999, the Geon board met with Geon's management and legal
and financial advisors to discuss various issues, including the proposed
transaction with Hanna. The Geon board reviewed the status of the proposed
transaction and approved continued discussions with Hanna.
Also on October 24, 1999, the Hanna board met with Hanna's management and
legal and financial advisors to discuss, among other things, trends in the
polymer services sector and financial and strategic alternatives for Hanna.
During the meeting, the Hanna board and management engaged in extensive
discussions about Hanna's business and future prospects, including its prospects
as an independent company. Hanna's financial advisor discussed with the Hanna
board financial and strategic alternatives available to Hanna, including
maintaining Hanna's current course as an independent company and the prospects
of a potential business combination. At the conclusion of the meeting, the Hanna
board approved continued discussions with Geon.
Following the Geon and Hanna board meetings, discussions continued between
Geon and Hanna concerning appropriate pricing terms for a proposed combination
of the two companies and the extent of various due diligence investigations to
be undertaken. After several discussions, the parties determined that they could
not agree on the terms of a transaction. Discussions between the parties
regarding a possible business combination terminated on November 2, 1999.
Although various attempts were made to resume discussions between the parties in
the following months, there was no progress.
During the intervening period, Geon's management and Hanna's management
continued to believe that a business combination made good strategic sense,
subject to negotiating acceptable terms and conditions for the transaction.
On April 10, 2000, Hanna's management and financial advisors met with
Hanna's board to discuss the industry trends facing Hanna, its options in
response to those trends, which included a possible business combination with
Geon, and structural governance and other issues to be considered in a merger of
equals transaction. At the close of the meeting, the Hanna board requested that
management outline the proposed terms of a proposed combination with Geon for
further review by the Hanna board. Following the meeting, Hanna's managements
reinitiated contact with Geon and resumed discussions regarding a possible
business combination.
On April 16, 2000, Hanna's board met again with Hanna's management and
financial advisors to discuss management's proposed terms. At the close of the
meeting, the Hanna board authorized management to pursue a possible combination
with Geon on the terms outlined by management. On April 17, 2000, the
managements of Geon and Hanna met to discuss terms and conditions for a possible
business combination including an exchange ratio.
On April 19, 2000, Geon's management, financial and legal advisors met with
the Geon board to discuss the status of discussions with Hanna, the structure of
a possible transaction with Hanna, and related financial, legal and management
issues. During the meeting, the Geon board authorized management to continue
discussions with Hanna.
On April 27, 2000, Hanna's legal counsel circulated a draft agreement for a
business combination with Geon. Over the course of the following week, Hanna's
legal counsel and Geon's legal counsel negotiated the terms of the transaction
documents; Geon and Hanna, along with their legal and financial advisors,
conducted intensive due diligence reviews; and Hanna's management and financial
advisors reviewed with the Hanna board the possible benefits of a combination
between Geon and Hanna.
On May 3, 2000, the Hanna board met with Hanna's financial advisors and
accountants to discuss the financial aspects and accounting treatment of the
proposed consolidation.
15
<PAGE> 23
On May 7, 2000, the Hanna board held a meeting to review with Hanna's
management and legal and financial advisors the status of the negotiations and
the proposed terms and conditions of the consolidation. During this meeting,
Hanna's management also reviewed the results of its due diligence investigation.
Hanna's outside legal counsel reviewed the material terms and conditions of the
consolidation agreement, as currently negotiated, and the legal duties and
responsibilities of the Hanna board in connection with the proposed
consolidation. Hanna's financial advisor reviewed its financial analysis of the
Hanna exchange ratio and delivered to the Hanna board an opinion to the effect
that, as of that date and based on and subject to the matters described in its
opinion, the Hanna exchange ratio was fair, from a financial point of view, to
the holders of Hanna common stock. The Hanna board carefully considered the
benefits and risks to Hanna and its stockholders of a consolidation with Geon.
Following a thorough discussion, the Hanna board unanimously determined that the
consolidation was in the best interests of the stockholders of Hanna and,
subject to Geon's approval, approved the consolidation and the consolidation
agreement, unanimously resolved to recommend that stockholders of Hanna vote to
adopt the consolidation agreement and authorized its executive officers to
execute the consolidation agreement.
Also on May 7, 2000, the Geon board held a meeting to review the proposed
terms of the consolidation and the conditions to the consolidation agreement.
During this meeting, Geon's management reviewed the status of the negotiations
and Geon's outside legal counsel reviewed the terms and conditions of the
consolidation agreement, as currently negotiated, and the legal duties and
responsibilities of the Geon board in connection with the proposed
consolidation. Geon's financial advisor presented an analysis of the financial
terms of the consolidation, including a discussion of valuation methodologies
and analyses used in evaluating the proposed consolidation. After its
presentation, Geon's financial advisor provided an opinion to the effect that,
on the date of its opinion and based upon and subject to the various
considerations set forth in its opinion, the Geon exchange ratio was fair, from
a financial point of view, to Geon's stockholders. The Geon board carefully
considered the benefits and risks to Geon and its stockholders of a
consolidation with Hanna. Following a thorough discussion, the Geon board
unanimously determined that the consolidation was in the best interests of the
stockholders of Geon and, subject to Hanna's approval, approved the
consolidation and the consolidation agreement, unanimously resolved to recommend
that stockholders of Geon vote to adopt the consolidation agreement and
authorized its executive officers to execute the consolidation agreement.
On the evening of May 7, 2000, the parties executed the consolidation
agreement. Prior to the commencement of trading on May 8, 2000, Geon and Hanna
issued a joint press release announcing the execution of the consolidation
agreement.
RECOMMENDATION OF THE GEON BOARD AND REASONS FOR THE CONSOLIDATION
THE GEON BOARD BELIEVES THAT THE CONSOLIDATION IS FAIR TO, AND IN THE BEST
INTERESTS OF, GEON AND GEON'S STOCKHOLDERS. ACCORDINGLY, THE GEON BOARD HAS
UNANIMOUSLY ADOPTED THE CONSOLIDATION AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT
GEON STOCKHOLDERS VOTE FOR ADOPTION OF THE CONSOLIDATION AGREEMENT AND THE
RELATED TRANSACTIONS.
The Geon board believes that the unique fit of two strong leaders in a
broad range of customer and geographic markets will provide new opportunities
for growth.
In reaching its decision to adopt the consolidation agreement, the Geon
board consulted with management of Geon, as well as with its financial and legal
advisors, and considered a variety of factors, including the following:
- The opportunity to enhance stockholder value by creating a premier
polymer services company with a wide range of proprietary polymer
technologies that would have a potentially larger market capitalization
and a broader stockholder base than Geon.
- The business, operations, financial condition, earnings and prospects of
each of Geon and Hanna. In making its determination, the Geon board took
into account the results of Geon's due diligence review of Hanna's
business.
- The expectation that the consolidation would result in opportunities for
profit improvement for the resulting company's operations, including
potential benefits from customer solution selling opportunities,
16
<PAGE> 24
increased purchasing power, overhead restructuring, and distribution and
operations improvements. The Geon board noted that, although no one can
ensure that the resulting company will achieve any particular level of
profit improvements, the management of Geon and Hanna had identified
profit improvement opportunities of at least $50 million per year by the
second full year of combined operations. See "Forward-Looking
Statements."
- The scale, scope, strength and diversity of operations and product lines
that could be achieved by combining Geon and Hanna, as illustrated by the
fact that, based on information available as of the date of the
consolidation agreement, the resulting company would be a $3.5 billion
North American and global polymer services company with international
sales representing 16% of the total.
- The complementary nature of the businesses of Geon and Hanna.
- The belief of senior management of Geon and its board that Geon and Hanna
share a common vision to deliver stockholder value and that their
managements and employees possess complementary skills and expertise.
- The historical market prices for Geon and Hanna common stock, which
indicated that a combination of the companies may lead to better market
appreciation of the value of the companies' businesses.
- The Geon board's belief that, as a result of its scale and the strength
of its balance sheet, the resulting company will have the flexibility to
pursue a more comprehensive range of strategic options, including
acquisitions.
- The structure of the consolidation and the terms of the consolidation
agreement, including the fact that the fixed Geon exchange ratio provides
certainty as to the number of common shares of the resulting company to
be issued in the consolidation and that Geon and Hanna intend that the
consolidation qualify as a tax-free reorganization for U.S. federal
income tax purposes.
- The fact that the consolidation agreement would, subject to some
limitations, permit Geon to terminate the consolidation agreement at the
same time it enters into an agreement with a third party that has made a
proposal to acquire Geon on terms that are more favorable to Geon's
stockholders than the proposed combination with Hanna upon payment of a
$25 million termination fee to Hanna.
- The proposed arrangements with members of management of Geon and Hanna,
including the fact that Mr. Ashkettle will serve as Chairman and Chief
Executive Officer of PolyOne and Mr. Waltermire will serve as President
and Chief Operating Officer and that Mr. Waltermire will succeed Mr.
Ashkettle as Chief Executive Officer in 2002 and as Chairman in 2004. See
"Directors and Executive Officers of PolyOne after the Consolidation."
- The opinion of McDonald Investments to the Geon board that, as of the
date of the consolidation agreement and based on and subject to the
matters described in its opinion, the Geon exchange ratio was fair, from
a financial point of view, to the holders of Geon common stock. See
"Opinions of Financial Advisors -- Opinion of Geon's Financial Advisor."
- The likelihood of the consolidation being approved by the appropriate
regulatory authorities. See " -- Regulatory Approvals Required for the
Consolidation."
The Geon board also considered countervailing factors in its deliberations
concerning the consolidation, including:
- The possible difficulties in integrating Geon's and Hanna's management
teams because of differences in their corporate cultures.
- The potential difficulties in integrating the two companies' worldwide
business operations and the obstacles likely to be encountered in
coordinating the consolidation.
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<PAGE> 25
- The historical trading prices of the Geon common stock and the Hanna
common stock and the fact that the Geon exchange ratio would be fixed and
not be subject to adjustment following the execution of the consolidation
agreement to reflect fluctuations in the market price.
In the view of the Geon board, these factors were not sufficient,
individually or in the aggregate, to outweigh the advantages of the
consolidation.
This discussion of the information and factors considered by the Geon board
is not intended to be exhaustive but includes all material factors considered by
the Geon board. In reaching its determination to adopt and recommend the
consolidation, the Geon board did not assign any relative or specific weights to
those factors, and individual directors may have given differing weights to
different factors. The Geon board is unanimous in its recommendation that Geon
stockholders vote FOR adoption of the consolidation agreement and approval of
the consolidation and the related transactions contemplated under the
consolidation agreement.
RECOMMENDATION OF THE HANNA BOARD AND REASONS FOR THE CONSOLIDATION
THE HANNA BOARD HAS DETERMINED THAT THE CONSOLIDATION IS FAIR TO AND IN THE
BEST INTERESTS OF HANNA AND ITS STOCKHOLDERS AND UNANIMOUSLY APPROVED THE
CONSOLIDATION AND THE CONSOLIDATION AGREEMENT. THE HANNA BOARD BELIEVES THAT THE
CONSOLIDATION PRESENTS A UNIQUE OPPORTUNITY TO CREATE A PREMIER COMPANY IN THE
POLYMER SERVICES INDUSTRY. THE HANNA BOARD UNANIMOUSLY RECOMMENDS TO ITS
STOCKHOLDERS THAT THEY VOTE FOR THE ADOPTION OF THE CONSOLIDATION AGREEMENT AND
APPROVAL OF THE CONSOLIDATION AND THE RELATED TRANSACTIONS CONTEMPLATED UNDER
THE CONSOLIDATION AGREEMENT.
In reaching its decision to approve the consolidation agreement, the Hanna
board consulted with Hanna management, as well as with its legal and financial
advisors, and considered a variety of factors, including the following:
- The creation of the largest polymer services company in the world, which
will provide a strong platform for future growth through acquisitions,
and which is expected to achieve annual operating earnings improvement of
at least $50 million by 2002. See "Forward Looking-Statement."
- The potential for a company with a larger market capitalization to
enhance its ability to make further acquisitions and to have increased
liquidity.
- The strong strategic fit between Hanna and Geon and the ability to
diversify revenue streams by combining complementary polymer businesses
and customers, including the ability to combine with a global vinyl
polymer technology leader to increase Hanna's global presence in the
polymer markets and the ability to increase Hanna's capability to provide
solutions to the wire and cable, business equipment, appliance and
construction markets.
- The current industry, economic and market conditions and trends and the
likelihood of continuing consolidation and increasing competition in the
industry and the corresponding decrease in the number of suitable
strategic combination partners for Hanna.
- The Hanna exchange ratio which results in approximately a 50/50 ownership
of PolyOne between Hanna and Geon stockholders.
- The historical market prices for Hanna and Geon common stock which
indicate that a combination of the companies may lead to better market
appreciation of the value of the companies' businesses.
- Historical and forecasted financial information relating to Hanna and
Geon, the results of Hanna's due diligence investigation of Geon and the
other information exchanges with Geon.
- The fact that the consolidation agreement would, subject to some
limitations, permit Hanna to terminate the consolidation agreement at the
same time it enters into an agreement with a third party that has made a
proposal to acquire Hanna on terms that are more favorable to Hanna's
stockholders than the proposed combination with Geon upon payment of a
$25 million termination fee to Geon.
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<PAGE> 26
- The proposed arrangements with members of management of Geon and Hanna,
including the fact that Mr. Ashkettle will serve as Chairman and Chief
Executive Officer of PolyOne and Mr. Waltermire will serve as President
and Chief Operating Officer and that Mr. Waltermire will succeed Mr.
Ashkettle as Chief Executive Officer in 2002 and as Chairman in 2004. See
"Directors and Executive Officers of PolyOne after the Consolidation."
- The opinion of Hanna's financial advisor to the Hanna board as to the
fairness, from a financial point of view, as of the date of its opinion,
of the Hanna exchange ratio as described below under "Opinions of
Financial Advisors -- Opinion of Hanna's Financial Advisor."
- The strong management team drawn from both Hanna and Geon and the shared
culture and entrepreneurial vision of the management and employees of
both companies.
The Hanna board also considered countervailing factors in its deliberations
concerning the consolidation, including:
- The possibility that the consolidation may not be value maximizing in the
short-term because of the potential disruption of Hanna's business that
might result from the announcement of the consolidation, the possible
difficulties of integrating the two companies' managements and corporate
cultures and the uncertainty regarding stockholders', customers' and
employees' perceptions of the consolidation.
- The fact that the consolidation exchange ratio was fixed and, therefore,
would not change as a result of fluctuations in the market price for
Hanna common stock or Geon common stock or otherwise.
- The possibility that the consolidation might not be completed.
In the view of the Hanna board these considerations were not sufficient,
individually or in the aggregate, to outweigh the advantages of the
consolidation.
The above discussion of the information and factors considered by the Hanna
board includes all material factors considered by the Hanna board. In view of
the wide variety of factors, both positive and negative, considered by the Hanna
board, the Hanna board did not find it practical to, and did not, quantify or
otherwise seek to assign relative weights to the specific factors considered.
After taking into consideration all of the factors set forth above as of the
date of this joint proxy statement/prospectus, the Hanna board continues to
believe that the consolidation is in the best interests of Hanna and its
stockholders and continues to recommend adoption of the consolidation agreement
and approval of the consolidation.
TREATMENT OF OPTIONS
Each existing option to purchase shares of Geon common stock or Hanna
common stock granted under an existing stock option plan of Geon or Hanna will
be converted automatically at the effective time of the consolidation into an
option to purchase the number of common shares of PolyOne based on the exchange
ratio for Geon or Hanna, as the case may be. The exercise price of each Geon
option and Hanna option will be adjusted accordingly; there will be no
repricings of these options other than this adjustment. Similarly, other
outstanding awards (including restricted stock, deferred stock and performance
shares) under any Geon stock plan or Hanna stock plan will be converted into the
same instrument of PolyOne and the terms adjusted as necessary to preserve the
value inherent in the awards. Additionally, PolyOne will reserve for issuance
the number of common shares of PolyOne that will become subject to the option
plans and issue the number of common shares of PolyOne to be issued in
connection with the other Geon or Hanna stock plans or other award plans. In any
event, stock options that are incentive stock options under the Internal Revenue
Code will be adjusted in the manner prescribed by the Internal Revenue Code.
EXCHANGE OF CERTIFICATES
As soon as practicable after the effective time of the consolidation, First
Chicago Trust Company of New York, the exchange agent, will mail a form of
transmittal letter to Geon and Hanna stockholders. This transmittal letter will
contain instructions regarding the surrender of certificates representing Geon
or Hanna common stock.
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<PAGE> 27
YOU SHOULD NOT SEND YOUR GEON OR HANNA COMMON STOCK CERTIFICATES WITH THE
ENCLOSED PROXY, AND YOU SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU
RECEIVE A LETTER OF TRANSMITTAL AFTER THE EFFECTIVE TIME OF THE CONSOLIDATION.
Until you surrender your Geon or Hanna stock certificates for exchange
after the effective time of the consolidation, you will accrue but will not be
paid dividends or other distributions that PolyOne declares after the effective
time of the consolidation with respect to common shares of PolyOne into which
your shares have been converted. When you surrender your certificates, PolyOne
will pay any unpaid dividends or other distributions, without interest. After
the effective time, there will be no transfers on the stock transfer books of
Geon or Hanna of shares of Geon or Hanna common stock, respectively, issued and
outstanding immediately prior to the effective time of the consolidation.
Certificates representing shares of Geon or Hanna common stock that you present
after the effective time of the consolidation will be canceled and exchanged for
a book-entry statement or a certificate representing the applicable number of
common shares of PolyOne.
None of Geon, Hanna, PolyOne or any other person will be liable to any
former holder of Geon or Hanna common stock for any amount properly delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
If a certificate for Geon or Hanna common stock has been lost, stolen or
destroyed, the exchange agent will issue the consideration properly issuable
under the consolidation agreement upon receipt of appropriate evidence of the
loss, theft or destruction, appropriate evidence of ownership of that
certificate by the claimant, and appropriate and customary indemnification.
For a description of Geon and Hanna common stock and a description of the
differences between the rights of the holders of Geon common stock, holders of
Hanna common stock, and holders of common shares of PolyOne, see "Description of
PolyOne Capital Stock" and "Comparison of Rights of Holders of Geon and Hanna
Common Stock and PolyOne Common Shares."
EFFECTIVE TIME
The effective time of the consolidation will be the time and date set forth
in the certificates that will be filed with the Secretary of State of the State
of Ohio and the Secretary of State of the State of Delaware or another date as
agreed by the parties. The closing date will occur on a date to be specified by
the parties. This date will be no later than the second business day after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
closing conditions set forth in the consolidation agreement, unless otherwise
agreed to by Geon and Hanna. Geon and Hanna each anticipate that the
consolidation will be completed during the third quarter of 2000. However, a
delay in obtaining the required regulatory approvals or in satisfying other
conditions to the consolidation could delay completion of the consolidation.
There can be no assurances as to whether, and on what date, Geon and Hanna will
obtain those approvals or that Geon and Hanna will complete the consolidation.
If the consolidation is not completed on or before November 30, 2000, either
Geon or Hanna may terminate the agreement, unless the failure to effect the
consolidation by that date is due to the failure of the party seeking to
terminate the consolidation agreement to perform any of its obligation under the
consolidation agreement. See " -- Regulatory Approvals Required for the
Consolidation" and "Agreement and Plan of Consolidation -- Conditions to
Consummation of the Consolidation."
REGULATORY APPROVALS REQUIRED FOR THE CONSOLIDATION
United States Antitrust Matters. Under the Hart-Scott-Rodino Act, we were
required to give notification and furnish information to the Federal Trade
Commission and the Antitrust Division of the Department of Justice and to wait
the specified waiting period before we could complete the consolidation. Each of
Geon and Hanna filed the required notification and report forms with the Federal
Trade Commission and the Antitrust Division on June 16, 2000. This began a
30-day waiting period, which expired on July 16, 2000, with no action having
been taken by either the Federal Trade Commission or the Antitrust Division of
the Department of Justice. The consolidation also is subject to state antitrust
laws and could be the subject of challenges by state attorneys general under
those laws, or by private parties under federal or state antitrust laws.
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<PAGE> 28
Foreign Antitrust Matters
Canadian Competition Act. The Competition Act is a federal statute of
Canada regulating mergers. Where the Competition Tribunal finds that a merger
prevents or lessens, or is likely to prevent or lessen, competition
substantially, the Competition Tribunal has the power to, among other things,
prohibit or dissolve the merger.
Additionally, certain consolidations (including (1) the acquisition of
voting shares that would result in a person (including its affiliates) owning
voting shares, that in the aggregate, carry more than twenty percent of the
votes attached to all outstanding voting shares of a corporation that has
publicly traded voting shares and (2) the amalgamation of two or more
corporations) which exceed monetary thresholds set forth in the Competition Act
may be subject to a pre-merger notification procedure.
Subject to certain exemptions set out in the Competition Act, notice of
a proposed consolidation must be given to the Commissioner of Competition
appointed under the Act and the appropriate waiting period set forth in the Act
must expire before the consolidation may be completed. The Competition Act
provides for either a "long form" or "short form" notice filing procedure. In
the event that a "long form" notice is filed, the prescribed waiting period is
42 days. If the "short form" notice is filed, the prescribed waiting period is
14 days, although the Commissioner has the option, during the 14 day waiting
period, to request a "long form" filing, which would extend the waiting period
for an additional 42 days from the date on which the "long form" is filed. The
Commissioner may apply to the Competition Tribunal for an order to, among other
things, prohibit a proposed merger or dissolve a completed merger. The
Commissioner retains the authority to apply to the Competition Tribunal for an
order for three years after substantial completion of the transaction. Geon and
Hanna filed a "short-form" pre-merger notification with the Commissioner in
respect of the consolidation on July 14, 2000. In connection with that filing,
Geon and Hanna also filed a request for an advance ruling certificate. Where an
advance ruling certificate is issued under section 102 of the Competition Act
and the transaction to which the advance ruling certificate relates is
substantially completed within one year after the advance ruling certificate is
issued, the Commissioner is prohibited from seeking an order of the Competition
Tribunal under the merger provisions of the Competition Act in respect of the
transaction solely on the basis of information that is the same or substantially
the same as the information on which the advance ruling certificate was issued.
Investment Canada Act. The purpose of the Investment Canada Act is to
provide for the review of significant investments in Canada by non-Canadians in
order to ensure benefit to Canada. Under the Investment Canada Act, notice of
most direct and indirect acquisitions of control of Canadian businesses by
non-Canadians must be given to the Director of Investments appointed under the
Investment Canada Act either before or within 30 days of the consolidation. Geon
and Hanna (or PolyOne) will file such a notice. Additionally, certain
acquisitions of control by non-Canadians of Canadian businesses exceeding
prescribed monetary thresholds require that an application for review be filed
by the non-Canadian, and that Ministerial approval be obtained. In some cases,
Ministerial approval must be obtained before the consolidation may close.
In those cases where Ministerial approval is required, the Minister has 45
days to determine whether to allow the investment. The Minister can unilaterally
extend the 45 day period by an additional 30 days by sending a notice to the
investor prior to the expiration of the initial 45 day period. Further
extensions are permitted if both the investor and the Minister agree. If no
approval, notice of disapproval, or notice of extension is received within the
applicable time, the investment is deemed approved.
In order to obtain Ministerial approval under the Investment Canada Act,
the Minister will have to be satisfied that the investment by the non-Canadian
is likely to be of net benefit to Canada.
If the Minister is not satisfied that an investment is likely to be of net
benefit to Canada, the non-Canadian must not implement the investment, or if the
investment has already been implemented, the investor must divest itself of
control of the Canadian business. The consolidation is not subject to review
under the Investment Canada Act. Accordingly Ministerial approval is not
required.
Other Jurisdictions. Geon and Hanna have determined that pre-merger
filings must also be made with government agencies in Germany, Italy and Mexico.
We are in the process of preparing the filing packages for
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<PAGE> 29
those jurisdictions. Geon and Hanna are not aware of any other foreign
governmental approvals or actions that would be required for completion of the
consolidation. However, we conduct business in a number of other foreign
countries, some of which have voluntary and/or post-consolidation notification
procedures. If any other approval or action is required, Geon and Hanna
currently contemplate that approval or action will be sought. There can be no
assurance, however, that we will obtain these additional approvals or actions.
RESTRICTIONS ON RESALES OF POLYONE STOCK
PolyOne common shares issued in the consolidation will not be subject to
any restrictions on transfer arising under the Securities Act of 1933, except
for common shares issued to any Geon or Hanna stockholder who may be deemed to
be an "affiliate" of Geon or Hanna, as the case may be, for purposes of Rule 145
under the Securities Act of 1933. The consolidation agreement requires Geon and
Hanna to identify each person whom it believes to be its affiliate, which
generally includes individuals or entities that control, are controlled by, or
are under common control with, Geon or Hanna, as the case may be, and would not
include stockholders who are not officers, directors, or principal stockholders
of Geon or Hanna. Additionally, Geon and Hanna have agreed to deliver or to
cause to be delivered to the other a representation letter from each of its
respective affiliates regarding restrictions under Rule 145. This joint proxy
statement/prospectus does not cover resales of PolyOne common shares received by
any person upon completion of the consolidation, and no person is authorized to
make any use of this proxy statement/prospectus in connection with any resale.
ACCOUNTING TREATMENT
The consolidation will be accounted for as a purchase business combination.
For accounting purposes, Geon will be the acquiring enterprise. At the time of
the closing of the consolidation, the holders of shares of common stock
outstanding of Geon will receive the larger portion of the voting rights of
PolyOne. The proportionate ownership interest of the Geon and Hanna stockholders
in PolyOne, based on shares of Geon and Hanna common stock outstanding as of
July 17, 2000 is as follows:
<TABLE>
<CAPTION>
COMMON RESULTING SHARE PERCENTAGE
SHARES EXCHANGE OWNERSHIP IN OWNERSHIP IN
OUTSTANDING RATIO POLYONE POLYONE
----------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Geon...................................... 24,327,115 2:1 48,654,230 50.1%
Hanna..................................... 48,434,997 1:1 48,434,997 49.9%
---------- -----
Total..................................... 97,089,227 100%
========== =====
</TABLE>
In addition, assuming the exercise of all stock options outstanding as of
July 17, 2000, giving effect to the exchange ratio, Geon would have an
additional 7,261,236 shares outstanding and Hanna would have an additional
4,411,159 shares outstanding.
Finally, Hanna may, depending on market conditions and other factors, buy
back shares of its voting common stock during the period from early July through
the date of the closing of the consolidation. Hanna would do so under the terms
of its existing board-authorized share repurchase program. The amount of such
share buy backs is estimated to be up to 750,000 shares, of which 50,000 shares
were repurchased as of July 17, 2000.
In the event that Hanna buys additional shares, the potential range of Geon
stockholders' ownership interest in PolyOne as of the date of closing, exclusive
of the stock options, is expected to range between 50.1% and 50.5%.
The purchase price will be allocated to Hanna's tangible and identified
intangible acquired assets and liabilities assumed based on their estimated fair
values at the date of acquisition, and any excess of the purchase price over
those estimated fair values will be accounted for as goodwill which will be
amortized over a 35 year period. The results of final valuations of inventories,
property, plant and equipment, investments in equity affiliates, intangible
assets, debt and employee benefit obligations as well as final estimates for any
severance and other charges, which may be material, related to the integration
of operations of the companies have not yet been completed. The preliminary
estimated allocation of the purchase price will be revised as additional
information becomes available.
22
<PAGE> 30
The unaudited pro forma financial information contained in this joint proxy
statement/prospectus has been prepared using the purchase method of accounting
to account for the consolidation. The preliminary estimated purchase price over
the fair value of tangible net assets acquired and liabilities assumed has
initially been reflected in the pro forma financial statements as "costs in
excess of net tangible assets acquired and other intangible assets" pending
further valuation of potential intangible assets upon closing. See "Summary" and
"Unaudited Condensed Combined Pro Forma Financial Data."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the consolidation to Geon stockholders and Hanna
stockholders who hold Geon common stock or Hanna common stock, respectively, as
a capital asset. The summary is based on the Internal Revenue Code of 1986,
Treasury Regulations issued under the Internal Revenue Code, and administrative
rulings and court decisions in effect as of the date of this joint proxy
statement/prospectus, all of which are subject to change at any time, possibly
with retroactive effect. This summary describes the material anticipated U.S.
federal income tax consequences of the consolidation but may not address U.S.
federal income tax considerations applicable to Geon stockholders and Hanna
stockholders subject to special treatment under U.S. federal income tax law.
Stockholders subject to special treatment include, for example, foreign persons,
financial institutions, dealers in securities, traders in securities who elect
to apply a mark-to-market method of accounting, insurance companies, tax-exempt
entities, holders who acquired their shares pursuant to the exercise of an
employee stock option or right or otherwise as compensation, and holders who
hold Geon common stock or Hanna common stock as part of a "hedge," "straddle,"
or "conversion transaction." In addition, no information is provided in this
document with respect to the tax consequences of the consolidation under
applicable foreign or state or local laws.
YOU ARE URGED TO CONSULT WITH YOUR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF THE CONSOLIDATION TO YOU, INCLUDING THE EFFECTS OF U.S. FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Consummation of the consolidation is conditioned upon there being delivered
to Geon an opinion of Thompson Hine & Flory LLP, counsel to Geon, and to Hanna
an opinion of Jones, Day, Reavis & Pogue, counsel to Hanna, that for U.S.
federal income tax purposes, under current law, assuming, among other things,
that the consolidation will take place as described in the consolidation
agreement, the consolidation will constitute a "reorganization" within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code, that Geon, Hanna,
Consolidation Corp. and PolyOne will each be a party to the reorganization
within the meaning of Section 368(b) of the Internal Revenue Code, and that none
of Geon, Hanna, Consolidated Corp or PolyOne will recognize any gain or loss as
a result of the consolidation. Consummation of the consolidation is also
conditioned on Geon receiving from Thompson Hine & Flory LLP, with respect to
Geon's stockholders, and Hanna receiving from Jones Day Reavis & Pogue, with
respect to Hanna's stockholders, further opinions of counsel that no Geon
stockholder will recognize gain or loss as a result of exchanging his or her
shares of Geon common stock for common shares of PolyOne and that no Hanna
stockholder will recognize gain or loss as a result of exchanging his or her
shares of Hanna common stock for common shares of PolyOne, respectively. Each of
Thompson Hine & Flory LLP and Jones Day Reavis & Pogue have delivered a tax
opinion to Geon or Hanna, as the case may be, dated as of June 29, 2000. In
rendering their opinions, each of the firms has relied upon (1) existing facts
and circumstances and have assumed that those facts and circumstances will not
change prior to the closing of the consolidation and (2) representations
contained in certificates of officers of Geon and Hanna. None of the tax
opinions delivered to the parties in connection with the consolidation as
described in this document is binding on the Internal Revenue Service or the
courts, and the parties do not intend to request a ruling from the Internal
Revenue Service with respect to the consolidation. Accordingly, there can be no
assurance that the Internal Revenue Service will not challenge the conclusions
reflected in those opinions or that a court will not sustain such challenge.
23
<PAGE> 31
Based upon the opinions described above, the following will be the material
U.S. federal income tax consequences of the consolidation:
- No gain or loss will be recognized by Geon, Hanna, Consolidation Corp.,
or PolyOne.
- No gain or loss will be recognized by Geon stockholders or Hanna
stockholders upon their receipt of PolyOne common shares in exchange for
their Geon common stock and their Hanna common stock.
- The tax basis of the common shares of PolyOne received by the Geon
stockholders and the Hanna stockholders will be the same as the tax basis
of their respective shares of Geon common stock and Hanna common stock
exchanged for PolyOne common shares.
- The holding period of the PolyOne common shares in the hands of Geon
stockholders and Hanna stockholders will include the holding period of
their Geon common stock and Hanna common stock, respectively, exchanged
for PolyOne common shares, provided that the Geon common stock and Hanna
common stock to be exchanged is held as a capital asset as of the
effective time of the consolidation.
DISSENTER'S RIGHTS
Neither Geon stockholders nor Hanna stockholders are entitled to
dissenter's rights under Delaware law in connection with the consolidation.
FINANCIAL PROJECTIONS
During the course of discussions between Geon and Hanna that led to the
execution of the consolidation agreement, each of Geon and Hanna provided the
other with certain business and financial information that was not publicly
available. Hanna and Geon also provided these forecasts to their respective
financial advisors. Set forth below is a summary of these forecasts. These
forecasts should be read together with the financial statements of Geon and
Hanna, as the case may be, referred to in this joint proxy statement/prospectus.
THESE FORECASTS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SECURITIES AND EXCHANGE COMMISSION
OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS REGARDING PROJECTIONS, OR GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
AND ARE INCLUDED IN THIS JOINT PROXY STATEMENT/PROSPECTUS AT THE REQUEST OF THE
COMMISSION'S STAFF ONLY BECAUSE THEY WERE PROVIDED BY EITHER GEON OR HANNA TO
THE OTHER. THE FORECASTS ARE SPECULATIVE IN NATURE AND ARE NOT MEANT TO PORTRAY
ALL OF THE POSSIBLE OUTCOMES. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE
FORECASTS ARE BASED UPON A VARIETY OF ESTIMATES AND ASSUMPTIONS (NOT ALL OF
WHICH WERE STATED IN THE FORECASTS AND NOT ALL OF WHICH WERE PROVIDED TO GEON OR
HANNA, AS THE CASE MAY BE) RELATING TO THE BUSINESSES OF GEON AND HANNA, WHICH
MAY NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT FINANCIAL, MARKET, ECONOMIC
AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES WHICH ARE DIFFICULT OR
IMPOSSIBLE TO PREDICT ACCURATELY, MANY OF WHICH ARE BEYOND THE CONTROL OF GEON
AND HANNA, AS THE CASE MAY BE. ACCORDINGLY, SHAREHOLDERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORECASTS. THERE CAN BE NO ASSURANCE THAT THESE
FORECASTS WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE
SHOWN. GENERALLY, THE FURTHER OUT THE PERIOD TO WHICH FINANCIAL PROJECTIONS
RELATE, THE MORE UNRELIABLE THOSE PROJECTIONS BECOME DUE TO THE NUMEROUS FACTORS
AND ASSUMPTIONS UPON WHICH FORECASTS ARE BASED, WHICH BECOME MORE DIFFICULT TO
ACCURATELY PREDICT. THE INCLUSION OF THE FORECASTS SET FORTH BELOW SHOULD NOT BE
REGARDED AS A REPRESENTATION BY HANNA OR ANY OF ITS RESPECTIVE AFFILIATES OR
REPRESENTATIVES OR BY GEON OR ANY OF ITS RESPECTIVE AFFILIATES OR
REPRESENTATIVES THAT THE FORECASTED RESULTS WILL BE ACHIEVED.
In the Spring of 2000, Geon provided Hanna with the following forecasted
consolidated income statement:
<TABLE>
<CAPTION>
2000 2001 2002
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues.................................................... $1,464 $1,529 $1,602
Operating Income............................................ 151 189 212
Net Income.................................................. 74 98 117
</TABLE>
24
<PAGE> 32
The forecast income statement was prepared by Geon's management in the
ordinary course of Geon's annual budgeting process and makes certain assumptions
regarding revenue growth, cost of goods sold and operating expenses (including
selling, general and administrative expenses) as a percentage of revenue and
income attributable to Geon's joint venture with Occidental Chemical
Corporation. Geon has not, and is under no obligation to, update this forecast
as of a more recent date.
In the Spring of 2000, Hanna provided Geon with the following forecasted
consolidated income statement:
<TABLE>
<CAPTION>
2000 2001 2002
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Sales....................................................... $2,057 $2,208 $2,359
Earnings before Interest and Taxes.......................... 104 124 149
Net Income.................................................. 49 63 80
</TABLE>
The forecast income statement was prepared by Hanna's management in the
ordinary course of Hanna's annual budgeting process and makes certain
assumptions regarding sales growth and cost of goods sold and operating expenses
(including selling, general and administrative expenses) as a percentage of
sales. Additionally, the forecast assumes the disposition of Hanna's Cadillac
Plastic Group. Hanna has not, and is under no obligation to, update these
forecasts as of a more recent date.
The prospective financial information included in this joint proxy
statement/prospectus has been prepared by, and is the responsibility of, Geon or
Hanna, as the case may be. Ernst & Young has neither examined nor compiled the
accompanying prospective financial information and, accordingly, Ernst & Young
does not express an opinion or any other form of assurance with respect thereto.
The Ernst & Young report incorporated by reference in this joint proxy
statement/prospectus relates to Geon's historical financial information. It does
not extend to the prospective financial information and should not be read to do
so.
The prospective financial information included in this joint proxy
statement/prospectus has been prepared by, and is the responsibility of, Hanna's
or Geon's management, as the case may be. PricewaterhouseCoopers LLP, has
neither examined nor compiled 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 in this joint proxy statement/prospectus
relates to Hanna's historical financial information. It does not extend to the
prospective financial information and should not be read to do so.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF GEON'S FINANCIAL ADVISOR
McDonald Investments was asked by Geon to render an opinion to the Geon
board as to the fairness to Geon's stockholders, from a financial point of view,
of the Geon exchange ratio set forth in the consolidation agreement. On May 7,
2000, McDonald Investments delivered an oral opinion, subsequently confirmed in
writing, to the effect that as of the date of its opinion, and based upon and
subject to the assumptions, limitations and qualifications contained in its
opinion, the Geon exchange ratio was fair to Geon's stockholders from a
financial point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF MCDONALD INVESTMENTS IS ATTACHED TO
THIS DOCUMENT AS ANNEX B. WE URGE YOU TO READ THAT OPINION CAREFULLY AND IN ITS
ENTIRETY FOR ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND
LIMITS OF THE REVIEW UNDERTAKEN IN ARRIVING AT THAT OPINION.
McDonald Investments was retained to serve as an advisor to the Geon board
and not as an advisor to or agent of any stockholder of Geon. McDonald
Investments' opinion was prepared for the Geon board and is directed only to the
fairness of the Geon exchange ratio to Geon's stockholders, from a financial
point of view, and does not address the merits of the decision by Geon to engage
in the consolidation or other business strategies considered by the Geon board,
nor does it address the board's decision to proceed with the consolidation.
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<PAGE> 33
McDonald Investments' opinion does not constitute a recommendation to any Geon
stockholder as to how that stockholder should vote at the Geon special meeting
of stockholders.
The Geon exchange ratio was determined in arm's-length negotiations between
Geon and Hanna, in which McDonald Investments advised Geon. No restrictions or
limitations were imposed by Geon on McDonald Investments with respect to the
investigations made or the procedures followed by McDonald Investments in
rendering its opinion.
In rendering its opinion, McDonald Investments reviewed, among other
things:
- a draft of the consolidation agreement;
- Geon's and Hanna's Annual Reports on Form 10-K for the last five fiscal
years and other publicly available information about Geon and Hanna;
- internal business and financial information, including projections,
furnished to McDonald Investments by Geon and Hanna management;
- publicly available information concerning historical stock prices and
trading volumes for Geon's common stock and Hanna's common stock;
- publicly available information for other companies that McDonald
Investments thought were comparable to Geon or Hanna and the trading
markets for those other companies' securities; and
- publicly available information about the nature and terms of other
business combination transactions that McDonald Investments considered
relevant to its analysis of this consolidation.
McDonald Investments also met with officers and employees of Geon and Hanna
to discuss the two companies' businesses and prospects that McDonald Investments
believed were relevant.
You should note that in rendering its opinion, McDonald Investments relied
upon the accuracy and completeness of all of the financial and other information
provided to it or publicly available. McDonald Investments also assumed and
relied upon the accuracy of representations and warranties of Geon and Hanna
contained in the consolidation agreement. McDonald Investments was not engaged
to, and did not independently attempt to, verify any of such information.
McDonald Investments also relied upon the managements of Geon and Hanna as to
the reasonableness and achievability of the financial and operating projections,
and the assumptions and bases for those projections provided to it, and assumed
that those projections, including without limitation projected cost savings and
operating profit opportunities resulting from the consolidation, reflect the
best currently available estimates and judgments of Geon's and Hanna's
management. McDonald Investments was not engaged to assess the reasonableness or
achievability of those projections or the assumptions underlying them and
expresses no view on those matters. McDonald Investments did not conduct a
physical inspection or appraisal of any of the assets, properties or facilities
of either Geon or Hanna, nor was it furnished with any evaluation or appraisal.
McDonald Investments also assumed that the conditions to the consolidation
as set forth in the consolidation agreement would be satisfied and that the
consolidation would be completed on a timely basis in the manner contemplated by
the consolidation agreement.
McDonald Investments' opinion is based on economic and market conditions
and other circumstances existing on the date of its opinion. McDonald
Investments' opinion does not address any matters after its opinion date,
including the value of PolyOne common shares at the time that these shares are
issued or afterwards. McDonald Investments's opinion is limited to the fairness,
as of the date of the opinion, from a financial point of view, of the Geon
exchange ratio, and does not address Geon's underlying business decision to
effect the consolidation or any other terms of the consolidation. McDonald
Investments was not engaged to assist Geon in assessing any alternative
transaction, nor was it asked to solicit indications of interest from other
parties concerning any alternative transaction.
You should understand that although subsequent developments may affect its
opinion, McDonald Investments does not have to update, revise or reaffirm its
opinion.
26
<PAGE> 34
McDonald Investments developed several analyses to evaluate the Geon
exchange ratio. The primary analyses underlying its opinion were an
accretion/dilution analysis, a value creation analysis, a market exchange ratio
analysis, and a discounted cash flow analysis. McDonald Investments also
considered other valuation analyses that focus on assessing the fairness of the
price paid in an acquisition transaction. Specifically, these analyses included
an analysis of selected public companies and an analysis of selected merger and
acquisition transactions. Although these latter two analytical techniques are
commonly accepted valuation techniques in the acquisition setting, McDonald
Investments believes that they are less relevant in the context of a merger of
equals. Nevertheless, the data generated by these techniques played an important
role in supporting its primary analyses.
The sale of Cadillac Plastics is reflected in some of the financial
analyses performed by McDonald Investments and is described below. In light of
their prospective nature, McDonald Investments' accretion/dilution, value
creation and discounted cash flow analyses give effect to the sale of Cadillac
Plastics. In contrast, McDonald Investments' market exchange ratio, comparable
public company and selected merger and acquisition transactions analyses, did
not reflect the sale of Cadillac Plastics because those analyses are based on
historical information.
The following is a brief summary of the analyses performed by McDonald
Investments to arrive at its opinion. This summary is not intended to be an
exhaustive description of the analyses performed by McDonald Investments but
includes all material factors considered by McDonald Investments in rendering
its opinion. McDonald Investments drew no specific conclusions from any of these
analyses, but subjectively factored its observations from these analyses into
its qualitative assessment of the relevant facts and circumstances.
Accretion/Dilution Analysis. McDonald Investments prepared a financial
model that consolidated the projected financial statements provided by Geon and
Hanna into a combined entity. By comparing the projected earnings per share of
PolyOne to Geon's projected earnings per share on a stand-alone basis, McDonald
Investments estimated the accretion or dilution resulting from the
consolidation. McDonald Investments conducted its accretion/dilution analysis
based on Geon's projections for the period from 2000 through 2003, and also
conducted an alternative analysis based on external analysts' earnings
estimates. Throughout this discussion of McDonald Investments' opinion,
financial analyses based on the projections provided by Geon and Hanna are
referred to as the "base case." Financial analyses based on external analysts'
estimates are referred to as the "external case."
McDonald Investments' analysis indicated that the consolidation was
slightly accretive to estimated earnings in 2001 and accretive to estimated
earnings for 2002 and 2003. It is important to note that this analysis assumes
the realization of profit improvements that management of Geon and Hanna expect
to achieve as a result of the consolidation.
Value Creation Analysis. Using the same model from its accretion/dilution
analysis, McDonald Investments developed a value creation analysis focusing on
the potential for multiple expansion resulting from the consolidation. McDonald
Investments' analysis of price to earnings multiples of specialty chemical and
commodity chemical companies indicated that the consolidation provided Geon with
the potential to expand its price to earnings multiple. This expansion relates
to the increased focus on specialty chemicals resulting from the contribution of
Hanna's diversified product portfolio. McDonald Investments' analysis of price
to earnings multiples indicated that:
- the specialty chemical peer group trades at a median price to
earnings multiple of 10.8x estimated 2000 earnings and 9.3x
estimated 2001 earnings, while the commodity peer group trades at a
median price to earnings multiple of 9.4x estimated 2000 earnings
and 8.4x estimated 2001 earnings;
- the commodity group trades at a median multiple of 14.4x last 12
months earnings, while the specialty chemical group trades at a
median multiple of 11.5x earnings; and
- Geon trades at a multiple of 11.1x 1999 earnings, 8.5x estimated
2000 earnings, and 7.5x estimated 2001 earnings, while Hanna trades
at a multiple of 15.2x 1999 earnings, 11.5x estimated 2000 earnings,
and 10.0x estimated 2001 earnings.
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<PAGE> 35
McDonald Investments' value creation analysis focused on the difference between
Geon's stand-alone projected stock price and PolyOne's projected stock price,
based on the multiple analysis described above. Assuming a price to earnings
multiple for PolyOne derived from a small capitalization specialty chemical peer
group, McDonald Investments' analysis indicated that the consolidation had the
potential to create value through profit improvements and multiple expansion by
amounts ranging from 11% by the end of 2000 to 35% by the end of 2002.
You should be aware that the projected increase in value indicated by this
analysis is the result of application of a multiple model to a given set of
assumptions about PolyOne's financial performance. No one can assure you that
PolyOne will perform in accordance with the projections set forth in the base
case or external case. Likewise, no one can assure you that historic price to
earnings multiple levels for the commodity or specialty chemical peer groups
will be maintained or as to any price that PolyOne's common shares might achieve
during any future periods. Consequently, the increase in value suggested by
McDonald Investments' value creation analysis may bear no relation to the actual
prices at which PolyOne's common shares will trade at any point in the future.
As previously noted, McDonald Investments has not expressed an opinion on the
value of PolyOne stock when it is issued or afterwards.
When preparing this analysis, McDonald Investments primarily used the same
peer groups that are listed in the first paragraph of the section captioned
"Analysis of Selected Publicly Traded Companies" that appears below.
Specifically, the commodity peer group is identical while the specialty chemical
peer group includes all of the same companies except one. Avery Dennison was
excluded for this analysis because it was an outlier and would potentially
overstate the difference in the average and median multiples between commodity
and special chemical companies.
Market Exchange Ratio Analysis. McDonald Investments reviewed the daily
closing prices of Geon's common stock and Hanna's common stock during the two
years preceding the date of the consolidation agreement. McDonald Investments
used this historical trading data to analyze the Geon exchange ratio implied by
the closing prices of the stocks of the two companies. McDonald Investments
analyzed the average and median exchange ratios implied by the two companies'
closing prices over the past two years. The following table summarizes this
analysis:
<TABLE>
<CAPTION>
TIME PERIOD AVERAGE EXCHANGE RATIO MEDIAN EXCHANGE RATIO
----------- ---------------------- ---------------------
<S> <C> <C>
24 Months 0.54 0.51
18 Months 0.47 0.48
12 Months 0.44 0.45
6 Months 0.43 0.39
3 Months 0.51 0.52
Current 5/5/00 0.49 0.49
</TABLE>
McDonald Investments' analysis indicated that an exchange ratio of 0.5 to
1.0 is consistent with the market's perception of the relative values of the two
companies over the past two years. The two stocks experienced a fairly
consistent average exchange ratio over the past two years. McDonald Investments
noted that over the past 16 months, Geon's stock price has been fairly volatile,
with swings of as much as 50% within a three month period. In contrast, with the
exception of a significant price increase during the second quarter of 1999 and
a decline during the third quarter of that year, Hanna's stock price has been
relatively stable over the past 16 months.
McDonald Investments also compared the trading prices of Geon's and Hanna's
common stock to specialty chemical and commodity chemical peer group indices. It
noted that Hanna's stock price correlated closely to the performance of the
specialty peer group, with the exception of the period from January to August
1999 when Hanna's stock traded at a premium to the peer group. McDonald
Investments noted that Geon experienced a nine-month period from May 1999 to
February 2000 during which it maintained a significantly higher market return
than either the specialty chemical or commodity chemical peer group.
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<PAGE> 36
Discounted Cash Flow Analysis. McDonald Investments performed a discounted
cash flow, analysis for the four-year period ending with fiscal year 2003 on the
operating cash flows of Geon under the base case and external case scenarios in
order to determine a per share equity value of Geon on a stand-alone basis.
McDonald Investments also performed a discounted cash flow analysis for the
four-year period ending with fiscal year 2003 on the operating cash flows of
Hanna under the base case and external case scenarios in order to determine a
per share equity value of Hanna. For purposes of its discounted cash flow
analysis of Geon, McDonald Investments also took into account the cash flows
represented by Geon's projected after-tax equity income from its participation
in the Occidental Chemical Corporation and the Olin Corporation joint ventures.
For Geon, the cash flows and terminal values were discounted using a discount
rate of 11.5% for its specialty chemical business and 12.5% for the joint
ventures. These discount rates represent McDonald Investments' estimate of the
weighted average cost of capital for a company with assets similar to Geon's.
McDonald derived implied exchange ratios from the relative values resulting
from its discounted cash flow analysis of the two companies. McDonald
Investments calculated Hanna's discounted cash flow on a stand-alone basis and
after credit for the profit improvements resulting from the consolidation. The
cash flows and terminal value were discounted using a discount rate of 11.5%,
which represents McDonald Investments' estimate of the weighted average cost of
capital for a company with assets similar to Hanna's.
McDonald Investments then compared the equity values of the two companies
in order to determine the exchange ratio implied by the discounted cash flow
analysis. McDonald Investments' discounted cash flow analysis of the two
companies indicated exchange ratios ranging from 0.49 to 1.0 to 0.76 to 1.0
(assuming, in the latter case, that Hanna was credited with the profit
improvements resulting from the transaction). McDonald Investments noted that on
a stand-alone basis, the exchange ratio implied by its discounted cash flow
analysis of the two companies approximated the Geon exchange ratio, and that
after crediting anticipated profit improvements associated with the
consolidation to Hanna, the exchange ratio implied by the discounted cash flow
analysis significantly exceeded the Geon exchange ratio.
Analysis of Selected Publicly Traded Companies. McDonald Investments
compared financial information for Geon and Hanna to corresponding information
for 19 publicly traded chemical companies. The companies were separated into
commodity and specialty chemical peer groups. The commodity chemical group
consisted of manufacturers of basic chemicals with standard or generic
specifications, such as chlorine, caustic soda, ethylene, acetylene and titanium
dioxide. The specialty chemical group consisted of manufacturers of modified
chemicals with specific performance characteristics, such as plastic additives,
resins and compounds, industrial films, and formulators. The eight companies in
the commodity peer group were: Borden Chemical and Plastics Limited Partnership,
Engelhard Corporation, Georgia Gulf Corporation, Lyondell Chemical Company,
Millenium Chemicals Inc., NL Industries, Inc., Olin Corporation, and Occidental
Petroleum Corporation. The 11 companies in the specialty chemical peer group
were: AEP Industries Inc., Albemarle Corporation, Avery Dennison Corporation,
Cytec Industries, Inc., Crompton Corporation, Ferro Corporation, H.B. Fuller
Company, Great Lakes Chemical Corporation, Rohm & Haas Company, A. Schulman,
Inc., and Solutia, Inc.
In selecting the companies to include in the specialty chemical peer group
and the commodity peer group, McDonald Investments sought to identify companies
that shared similar financial and operating characteristics with Geon and Hanna.
In particular, McDonald Investments sought to include companies that were
similar in size, services, products, markets, customers, competitors, raw
materials or manufacturing processes. In order to accomplish these objectives,
McDonald Investments researched databases providing information about companies
within specified standard industrial classification, or SIC, codes. McDonald
Investments refined this data by researching public filings made by those
companies, analysts reports and various financial databases. McDonald
Investments also sought input from both Geon and Hanna concerning the companies
that they identified as their peers. McDonald Investments further refined its
analysis by excluding certain companies that were substantially smaller or
larger than both Geon and Hanna, specifically, those with market capitalizations
less than $100 million or greater than $10 billion. Companies included in the
commodity chemical group had market capitalizations ranging from approximately
$150 million to $8.2 billion and last 12 month, or LTM, sales ranging from
approximately $600 million to $8.8 billion. Companies included in the specialty
chemical group had market capitalizations ranging from approximately $150
million to $8.3 billion and LTM sales ranging from approximately $700 million to
$6.1 billion.
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<PAGE> 37
McDonald Investments calculated and compared the market values and certain
ratios based on stock prices as of May 5, 2000, for the selected companies and
for Geon and Hanna. These ratios included enterprise value divided by last 12
months sales, earnings before interest, taxes, depreciation and amortization, or
EBITDA, and earnings before interest and taxes, or EBIT, and stock prices
divided by book value, last 12 months earnings per share, estimated 2000
earnings per share and estimated 2001 earnings per share. Enterprise value
represents the market value of common equity plus the book value of debt, less
cash and cash equivalents. Earnings per share projections for the selected
companies, Geon and Hanna were based upon the First Call Research Network
consensus research analyst estimates.
No company utilized in McDonald Investments' analysis of selected publicly
traded companies is identical to Geon or Hanna. Accordingly, this analysis
necessarily involves complex considerations and judgments concerning differences
in financial and operating characteristics of Geon, Hanna and other companies
included in the analysis.
<TABLE>
<CAPTION>
SUMMARY OF ANALYSIS OF SELECTED PUBLIC COMPANY VALUATION MULTIPLES
COMMODITY PEER GROUP
----------------------------------------------------------------------------------------------
MEAN MEDIAN GEON HANNA
------ ------ ----- -----
<S> <C> <C> <C> <C>
Enterprise Value/last 12 months Sales..................... 1.2x 1.2x 0.7x 0.4x
Enterprise Value/last 12 months EBITDA.................... 7.9x 7.5x 6.3x 6.3x
Enterprise Value/last 12 months EBIT...................... 13.4x 14.3x 9.5x 10.4x
Market/Book Value......................................... 2.4x 2.6x 1.8x 1.1x
Last 12 months Price/Earnings............................. 13.5x 12.3x 11.1x 15.2x
2000 Price/Earnings....................................... 9.3x 9.4x 8.5x 11.5x
2001 Price/Earnings....................................... 8.3x 8.4x 7.5x 10.0x
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ANALYSIS OF SELECTED PUBLIC COMPANY VALUATION MULTIPLES
SPECIALTY PEER GROUP
----------------------------------------------------------------------------------------------
MEAN MEDIAN GEON HANNA
------ ------ ----- -----
<S> <C> <C> <C> <C>
Enterprise Value/last 12 months Sales..................... 1.2x 1.2x 0.7x 0.4x
Enterprise Value/last 12 months EBITDA.................... 7.4x 6.4x 6.3x 6.3x
Enterprise Value/last 12 months EBIT...................... 11.0x 9.0x 9.5x 10.4x
Market/Book Value......................................... 2.7x 2.2x 1.8x 1.1x
Last 12 months Price/Earnings............................. 13.5x 11.6x 11.1x 15.2x
2000 Price/Earnings....................................... 12.5x 10.9x 8.5x 11.5x
2001 Price/Earnings....................................... 10.4x 9.4x 7.5x 10.0x
</TABLE>
McDonald Investments did not use this analysis to determine an implied
exchange ratio for the consolidation. Instead, McDonald Investments relied in
part on the information generated by this analysis to reach its conclusion that
the consolidation provided Geon with opportunities for multiple expansion. In
that regard, McDonald Investments noted that despite Geon's more specialized
performance polymers and services business, the analysis of publicly traded
companies suggests that Geon is currently valued similarly to companies in the
commodity peer group. If Occidental Petroleum, Lyondell and Engelhard (each of
which has a multi-billion dollar market capitalization) are excluded from the
peer group, the commodity peer group's median 2001 price to earnings ratio falls
to 6.8x, as compared to Geon's multiple of 7.5x. In contrast, Hanna enjoys
significantly higher price to earnings multiples than the companies in the
commodity peer group, and its price to earnings multiples for 2000 and 2001 fall
between the mean and median multiples for the specialty chemical group. This
data suggests that Hanna is being valued by the market as a specialty chemical
company.
Selected Transactions Analysis. McDonald Investments reviewed 13 merger and
acquisition transactions completed since January 1998, or currently pending,
involving manufacturers or producers of plastic films, chemical additives,
adhesives, coating resins, colorants, heat stabilizers and lubricants. The
transactions ranged in size from approximately $100 million in consideration to
approximately $6.0 billion, and the form of
30
<PAGE> 38
consideration varied from all-cash to all-stock transactions. Only one of the
transactions involved a merger of equals, with the balance being acquisition
transactions involving a payment of a control premium. Therefore, as with the
comparable companies analysis, McDonald Investments did not use this analysis to
develop an implied exchange ratio for the consolidation. Instead, it used this
analysis to provide the Geon board with a reference point for the market
multiples paid in acquisition transactions involving industry participants. In
that regard, McDonald Investments presented the data as if each of Geon and
Hanna were the "buyer" and the "seller" in the transaction. This presentation
indicated that if either company is regarded as selling to the other, it is
realizing a purchase price that is below the average price paid in comparable
transactions. However, if either company is viewed as the buyer in the
consolidation, this presentation indicates that it is acquiring the other at a
favorable price. Since neither Geon nor Hanna is a buyer or seller in this
consolidation, McDonald Investments did not place great weight on this analysis.
In order to identify comparable transactions, McDonald Investments
researched third party and its own proprietary databases of merger and
acquisition transactions. Selection criteria were similar to those employed in
McDonald Investments' comparable public companies analysis. Transactions were
evaluated for inclusion based on targets or acquirors with similar services,
products, markets, customers, competitors, raw materials or manufacturing
processes. McDonald Investments refined this analysis by excluding transactions
with enterprise values of less than $100 million and more than $10 billion.
Targets with values above or below this range were deemed to be too large or
small to be directly comparable to the consolidation. In order to obtain what it
believed to be a representative sample of industry transactions, McDonald
Investments determined to include transactions during the period from January 1,
1998 to May 5, 2000. Based on these criteria, McDonald identified the following
thirteen transactions as comparable to the consolidation.
<TABLE>
<CAPTION>
TARGET ACQUIROR
------ --------
<S> <C>
McWhorter Technologies, Inc. Eastman Chemical Company
Worldwide Polyols (Lyondell Chem.) Bayer AG
Vianova Resins (Deutsche Bank AG) Solutia Inc.
Furon Co Compagnie de Saint-Gobain SA
Witco Corp Crompton & Knowles Corp
O'Sullivan Corp Geon Co (The)
Imperial Chemical Industries PLC Huntsman Corp
Morton International Rohm & Haas Co
LeaRonal Inc Rohm & Haas Co
Canning (W.) PLC MacDermid Inc
Blessings Corp Huntsman Packaging Corp
Polycom Huntsman Inc Spartech Corp
Rheox Inc. (NL Industries Inc) Harrisons & Crosfield PLC
</TABLE>
For each of the transactions that it reviewed, McDonald Investments
calculated the ratio of enterprise value to last 12 months revenue, EBITDA and
EBIT prior to the announcement of the merger. It also calculated the ratio of
equity value to book value and last 12 months net income represented by the
purchase price paid in the transaction, as well as the premium paid in the
transaction by reference to the market price of the targets' securities one,
five and 30 days prior to announcement.
No transaction utilized in the comparable transactions analysis is
identical to the consolidation. Accordingly, such analysis necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of Geon and Hanna and other factors that could affect
the acquisition value of the companies to which they are being compared.
31
<PAGE> 39
<TABLE>
<CAPTION>
SUMMARY OF ANALYSIS OF SELECTED ACQUISITION TRANSACTIONS
-------------------------------------------------------------------------------------------------
M.A. HANNA
LTM ESTIMATES MEAN MEDIAN GEON AS BUYER AS BUYER
------------- ---- ------ ------------- ----------
<S> <C> <C> <C> <C>
Enterprise Value/Revenues....................... 1.5x 1.3x 0.4x 0.7x
Enterprise Value/EBITDA......................... 10.3x 10.4x 6.3x 6.3x
Enterprise Value/EBIT........................... 13.9.x 13.8x 10.4x 9.5x
Equity Value/Book Value......................... 2.9x 3.0x 1.1x 1.8x
Equity Value/Net Income......................... 18.8x 20.2x 15.2x 11.1x
One Day Premium................................. 32.0% 26.8% 1.6% (1.6%)
Five Day Premium................................ 35.8% 36.1% (4.9%) 5.1%
30 Day Premium.................................. 41.0% 46.7% (1.0%) 1.1%
</TABLE>
The actual results achieved by the resulting company may vary from
projected results, and the variations may be material.
Conclusion. The summary set forth above describes the principal elements of
the presentation made by McDonald Investments to the Geon Board on May 7, 2000.
The preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of these methods to the particular circumstances and, therefore, the opinion is
not readily susceptible to summary description. Each of the analyses conducted
by McDonald Investments was carried out in order to provide a different
perspective on the consolidation and add to the total mix of information
available. McDonald Investments did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support an
opinion as to fairness from a financial point of view. Rather, in reaching its
conclusion, McDonald Investments considered the results of the analyses in light
of each other and ultimately reached its opinion based upon the results of all
analyses taken as a whole. Except as indicated above, McDonald Investments did
not place particular reliance or weight on any individual analysis, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, McDonald
Investments believes that its analyses must be considered as a whole and that
selecting portions of its analysis and the factors considered by it, without
considering all analyses and factors, could create an incomplete or misleading
view of the evaluation process underlying its opinion. In performing its
analyses, McDonald Investments made numerous assumptions with respect to
industry performance, business and economic conditions and other matters. The
analyses performed by McDonald Investments are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by the analyses.
Engagement Letter. Under the terms of an engagement letter dated August 24,
1998, as amended on May 4, 2000, Geon agreed to pay McDonald Investments a fee
of $1,000,000 when McDonald Investments delivered a fairness opinion to the Geon
board. Geon also agreed to pay McDonald Investments a transaction fee of
$6,000,000, less the fee paid to McDonald Investments for rendering its opinion,
upon completion of the consolidation. Geon has also agreed to reimburse McDonald
Investments promptly for all out-of-pocket expenses, including the reasonable
fees and out-of-pocket expenses of counsel, incurred by McDonald Investments in
connection with its engagement, whether or not the consolidation is consummated,
and to indemnify McDonald Investments and related persons against liabilities in
connection with its engagement, including liabilities under federal securities
laws. The terms of the fee arrangement with McDonald Investments were negotiated
at arm's length between Geon and McDonald Investments, and the Geon board was
aware of the arrangement, including the fact that most of the fees payable to
McDonald Investments are contingent upon completion of the consolidation.
McDonald Investments may provide investment banking services to Geon and its
subsidiaries in the future.
In the ordinary course of business, McDonald Investments may actively trade
the securities of Geon and Hanna for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
those securities. McDonald Investments makes a market in the securities of Geon
and Hanna.
McDonald Investments, as part of its investment banking services, is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed
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<PAGE> 40
and unlisted securities, private placements and valuations for corporate and
other purposes. Geon selected McDonald Investments based on its experience in
transactions similar to the consolidation and its reputation in the retail and
investment communities.
OPINION OF HANNA'S FINANCIAL ADVISOR
Hanna retained Salomon Smith Barney to act as its exclusive financial
advisor in connection with the proposed consolidation. In connection with its
engagement, Hanna requested that Salomon Smith Barney evaluate the fairness,
from a financial point of view, to the holders of Hanna common stock of the
Hanna exchange ratio. On May 7, 2000, at a meeting of the Hanna board held to
evaluate the proposed consolidation, Salomon Smith Barney delivered to the Hanna
board an oral opinion, subsequently confirmed by delivery of a written opinion
dated May 7, 2000, to the effect that, as of that date and based on and subject
to the matters described in the opinion, the Hanna exchange ratio was fair, from
a financial point of view, to the holders of Hanna common stock. In arriving at
its opinion, Salomon Smith Barney:
- reviewed the consolidation agreement;
- held discussions with Hanna's senior officers, directors and other
representatives and advisors and Geon's senior officers and other
representatives and advisors concerning Hanna's and Geon's businesses,
operations and prospects;
- examined publicly available business and financial information relating
to Hanna and Geon as well as financial forecasts and other information
and data for Hanna and Geon which the managements of Hanna and Geon
provided to or otherwise discussed with Salomon Smith Barney, including
information relating to strategic implications and operational benefits
anticipated to result from the consolidation;
- reviewed the financial terms of the consolidation as described in the
consolidation agreement in relation to, among other things, current and
historical market prices and trading volumes of Hanna common stock and
Geon common stock, and Hanna's and Geon's financial condition, historical
and projected earnings and other operating data and capitalization;
- considered, to the extent publicly available, the financial terms of
other transactions recently effected which Salomon Smith Barney
considered relevant in evaluating the consolidation;
- analyzed financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Salomon
Smith Barney considered relevant in evaluating Hanna's and Geon's
operations;
- evaluated the potential pro forma financial impact of the consolidation
on PolyOne; and
- conducted other analyses and examinations and considered other financial,
economic and market criteria as Salomon Smith Barney deemed appropriate
in arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, on the accuracy and completeness of all financial and
other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. With respect to these
financial forecasts and other information and data, Hanna's and Geon's
managements advised Salomon Smith Barney that they were reasonably prepared on
bases reflecting their best currently available estimates and judgments as to
Hanna's and Geon's future financial performance and the strategic implications
and operational benefits anticipated to result from the consolidation.
Salomon Smith Barney assumed, with Hanna's consent, that the consolidation
will be treated as a tax-free reorganization for U.S. federal income tax
purposes. Salomon Smith Barney's opinion relates to the relative values of Hanna
and Geon. Salomon Smith Barney did not express any opinion as to what the value
of PolyOne common shares actually will be when issued in the consolidation or
the price at which PolyOne common shares will trade after the consolidation.
Salomon Smith Barney did not make and was not provided with an independent
evaluation or appraisal of Hanna's or Geon's assets or liabilities, contingent
or otherwise, and Salomon Smith Barney did not make any physical inspection of
Hanna's or Geon's properties or assets.
In connection with its opinion, Salomon Smith Barney was not requested to,
and did not, solicit third party indications of interest in the possible
acquisition of all or a part of Hanna. Salomon Smith Barney expressed no
33
<PAGE> 41
view as to, and its opinion does not address, the relative merits of the
consolidation as compared to any alternative business strategies that might
exist for Hanna or the effect of any other transaction in which Hanna might
engage. Salomon Smith Barney's opinion was necessarily based on information
available, and financial, stock market and other conditions and circumstances
existing and disclosed, to Salomon Smith Barney as of the date of its opinion.
Although Salomon Smith Barney evaluated the Hanna exchange ratio from a
financial point of view, Salomon Smith Barney was not asked to and did not
recommend the specific consideration payable in the consolidation, which was
determined through negotiation between Hanna and Geon. Hanna imposed no other
instructions or limitations on Salomon Smith Barney with respect to the
investigations made or procedures followed by Salomon Smith Barney in rendering
its opinion.
THE FULL TEXT OF SALOMON SMITH BARNEY'S WRITTEN OPINION DATED MAY 7, 2000,
WHICH DESCRIBES THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED TO THIS DOCUMENT AS ANNEX C AND IS INCORPORATED
INTO THIS DOCUMENT BY REFERENCE. SALOMON SMITH BARNEY'S OPINION IS ADDRESSED TO
THE HANNA BOARD AND RELATES ONLY TO THE FAIRNESS OF THE HANNA EXCHANGE RATIO
FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE
CONSOLIDATION OR ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO ANY MATTER RELATING TO THE
PROPOSED CONSOLIDATION.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The
following discussion of these analyses is a summary description of the material
financial analyses underlying Salomon Smith Barney's opinion. The preparation of
a fairness 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 fairness opinion is not readily susceptible to summary
description. Accordingly, Salomon Smith Barney 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, Salomon Smith Barney 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
Hanna and Geon. No company, transaction or business used in those analyses as a
comparison is identical to Hanna, Geon or the proposed consolidation, and an
evaluation of those 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
analyzed.
The estimates contained in Salomon Smith Barney'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. Accordingly, Salomon Smith Barney's analyses
and estimates are inherently subject to substantial uncertainty.
Salomon Smith Barney's opinion and analyses were only one of many factors
considered by the Hanna board in its evaluation of the consolidation and should
not be viewed as determinative of the views of Hanna's board or management with
respect to the Hanna exchange ratio or the proposed consolidation.
The following is a summary of the material financial analyses performed by
Salomon Smith Barney in connection with the rendering of its opinion dated May
7, 2000, to the Hanna board. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE
INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND SALOMON
SMITH BARNEY'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 SALOMON SMITH BARNEY'S FINANCIAL ANALYSES.
34
<PAGE> 42
Introduction. The Hanna exchange ratio of 1.0x and the Geon exchange ratio
of 2.0x reflect a pro forma equity ownership in PolyOne for each of Hanna's and
Geon's stockholders of approximately 50%. The Geon exchange ratio of 2.0x
reflects the difference in the number of outstanding shares of Hanna common
stock and Geon common stock since the total number of outstanding shares of
Hanna common stock is approximately twice the total number of outstanding shares
of Geon common stock. Accordingly, for those analyses in which Salomon Smith
Barney derived implied exchange ratios, Salomon Smith Barney divided the implied
per share equity reference range for Geon by the implied per share equity
reference range for Hanna resulting from those analyses, and Salomon Smith
Barney compared the implied exchange ratio reference ranges derived from those
analyses to the Geon exchange ratio. Financial data used in Salomon Smith
Barney's analyses, in the case of Hanna, were pro forma for the sale of Hanna's
wholly owned subsidiary Cadillac Plastic Group, Inc., which Hanna currently
intends to sell, and, in the case of Geon, were pro forma for acquisitions which
Geon consummated in 1999 and its OxyChem transactions which included the
formation of the OxyVinyls joint venture. In its analyses, Salomon Smith Barney
assumed that the market value of Geon's 24% interest in its OxyVinyls joint
venture approximated its cost basis.
Contribution Analysis. Salomon Smith Barney compared the relative
contributions of Hanna and Geon to various operational metrics of PolyOne, based
both on publicly available research analysts' estimates and internal estimates
of Hanna's and Geon's managements. Salomon Smith Barney reviewed calendar year
1999 and estimated calendar year 2000 earnings before interest, taxes,
depreciation and amortization, or EBITDA, and earnings before interest and
taxes, or EBIT, of PolyOne. Salomon Smith Barney also reviewed estimated
calendar years 2000 and 2001 net income and net income plus amortization. This
analysis indicated an implied contribution range for Hanna of approximately
39.2% to 58.7% and for Geon of approximately 41.3% to 60.8%, as compared to the
pro forma equity ownership in PolyOne of each of Hanna's and Geon's
stockholders, based on the Hanna exchange ratio and the Geon exchange ratio, of
approximately 50%.
Historical Exchange Ratio Analysis. Salomon Smith Barney performed a
historical exchange ratio analysis comparing the closing prices for Hanna common
stock and Geon common stock on May 5, 2000, and the average daily closing prices
of Hanna common stock and Geon common stock for the 30, 60, 90, 180 and 360
trading days preceding May 5, 2000. This analysis yielded an implied exchange
ratio range of 1.89x to 2.45x, as compared to the Geon exchange ratio of 2.0x.
<TABLE>
<CAPTION>
PERIOD IMPLIED EXCHANGE RATIO
------ ----------------------
<S> <C>
May 5, 2000................................................. 2.03x
30 trading days............................................. 1.89x
60 trading days............................................. 2.00x
90 trading days............................................. 2.29x
180 trading days............................................ 2.45x
360 trading days............................................ 2.20x
</TABLE>
Selected Companies Analysis. Using publicly available information, Salomon
Smith Barney analyzed the market values and trading multiples of Hanna, Geon and
selected publicly traded companies in the specialty chemicals industry, which is
the industry in which Hanna and Geon operate, with particular focus on companies
with a business focus on advanced materials, polymers or additives and a market
capitalization of approximately $100 million to $1.2 billion. Based on these
characteristics, Salomon Smith Barney selected the following eight publicly
traded companies in the specialty chemicals industry:
- Chemfab Corporation
- Cytec Industries, Inc.
- Ferro Corporation
- Hexcel Corporation
- McWhorter Technologies, Inc.
- Omnova Solutions Inc.
35
<PAGE> 43
- Spartech Corporation
- A. Schulman, Inc.
All multiples were based on closing stock prices on May 5, 2000 or, in the case
of McWhorter Technologies, Inc., May 3, 2000, which was the closing price of
McWhorter Technologies, Inc. common stock on the last trading day prior to
public announcement of Eastman Chemical Company's proposed acquisition of
McWhorter Technologies, Inc. Estimated financial data for Hanna, Geon and the
selected companies were based on publicly available financial statements and
research analysts' estimates. Salomon Smith Barney derived firm values,
calculated as equity market value, plus debt, less investments in unconsolidated
subsidiaries and cash, based on multiples of, among other things, latest 12
months EBITDA and EBIT, and equity market values based on multiples of estimated
calendar years 2000 and 2001 earnings per share. This analysis resulted in the
following implied exchange ratio ranges, as compared to the Geon exchange ratio
of 2.0x:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIO
----------------------
<S> <C>
Latest 12 months EBITDA..................................... 2.3x to 3.5x
Latest 12 months EBIT....................................... 3.0x to 4.1x
Estimated calendar year 2000 earnings per share............. 2.3x to 3.3x
Estimated calendar year 2001 earnings per share............. 2.3x to 3.1x
</TABLE>
Precedent Transactions. Using publicly available information, Salomon Smith
Barney reviewed the implied transaction value multiples paid or proposed to be
paid in selected transactions during the period 1996 to 2000 in the specialty
chemicals industry, which is the industry in which Hanna and Geon operate, with
particular focus on transactions having transaction values greater than $150
million and involving companies with a business focus on advanced materials,
polymers or additives. Based on these characteristics, Salomon Smith Barney
selected the following 10 transactions in the specialty chemicals industry:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- Eastman Chemical Company - McWhorter Technologies, Inc.
- Morgan Grenfell Development Capital - Ciba Specialty Chemicals AG
Ltd. (Deutsche Bank AG)
- Cie de Saint-Gobain SA - Furon Corporation
- Geon - O'Sullivan Corporation
- Crompton & Knowles Corporation - Witco Corporation
- Eastman Chemical Company - Lawter International, Inc.
- Morgan Grenfell Development Capital - Vianova Resins GmbH (Hoechst AG)
Ltd. (Deutsche Bank AG)
- Allied Signal Inc. - Astor Holdings Inc.
- Industri Kapital AB - Metsa-Serla OY-Chemicals Division Metsalitto Osuuskunta
- Elf Atochem, SA (Societe Nationale - Findley Adhesives Inc.
Elf-Aquitaine)
</TABLE>
All multiples were based on publicly available information for the relevant
transaction. Salomon Smith Barney derived implied transaction value multiples in
the selected transactions based on multiples of, among other things, latest 12
months EBITDA and EBIT. This analysis resulted in the following implied exchange
ratio ranges, as compared to the Geon exchange ratio of 2.0x:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE RATIO
----------------------
<S> <C>
Latest 12 months EBITDA..................................... 2.5x to 3.6x
Latest 12 months EBIT....................................... 2.1x to 2.8x
</TABLE>
Discounted Cash Flow Analyses. Salomon Smith Barney performed separate
discounted cash flow analyses of Hanna and Geon in order to estimate the
projected free cash flows that each could generate for estimated calendar years
2000 through 2004, based on internal estimates of Hanna's and Geon's
managements. The range of estimated terminal values was calculated by applying
selected terminal value multiples of 5.5x to 6.5x to
36
<PAGE> 44
Hanna's and Geon's fiscal year 2004 projected EBITDA. The cash flows and
terminal values were then discounted to present value using discount rates
ranging from 8.0% to 10.0%. This analysis resulted in an implied exchange ratio
range of 1.5x to 2.4x, as compared to the Geon exchange ratio of 2.0x.
Other Factors. In rendering its opinion, Salomon Smith Barney also reviewed
and considered other factors, including:
- historical trading prices of Hanna and Geon for the period May 4, 1997 to
May 4, 2000;
- a cross-ownership stockholder profile of Hanna and Geon;
- the present value of the potential cost savings and other profit
improvements anticipated by Hanna's and Geon's managements to result from
the consolidation, based on estimates of Hanna's and Geon's managements;
- the potential pro forma financial effect of the consolidation on Hanna's
and Geon's earnings per share and cash earnings per share for estimated
calendar years 2000 through 2002 relative to Hanna's and Geon's earnings
per share and cash earnings per share on a stand-alone basis;
- the strategic fit between Hanna and Geon;
- comparative trading multiples for speciality chemical companies based on
their market capitalization; and
- selected published research analysts' reports for Hanna and Geon.
Miscellaneous. Under the terms of its engagement, Hanna has agreed to pay
Salomon Smith Barney for its financial advisory services upon completion of the
consolidation an aggregate fee based on a percentage of the total consideration,
including liabilities assumed, payable in the consolidation. The fee payable to
Salomon Smith Barney is currently estimated to be approximately $4.1 million.
Hanna also has agreed to reimburse Salomon Smith Barney for reasonable travel
and other out-of-pocket expenses incurred by Salomon Smith Barney in performing
its services, including the reasonable fees and disbursements of its legal
counsel, and to indemnify Salomon Smith Barney and related persons against
liabilities, including liabilities under the federal securities laws, arising
out of its engagement.
Salomon Smith Barney has advised Hanna that, in the ordinary course of
business, Salomon Smith Barney and its affiliates may actively trade or hold the
securities of Hanna and Geon for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
those securities. In addition, Salomon Smith Barney and its affiliates,
including Citigroup Inc. and its affiliates, may maintain relationships with
Hanna, Geon and their affiliates.
Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by Hanna based on its experience and expertise. Salomon
Smith Barney 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.
37
<PAGE> 45
THE SPECIAL MEETINGS
DATE, TIMES AND PLACES
Geon. Geon will hold its special meeting at The Forum Conference and
Education Center, Erie Room, 1375 East Ninth Street, Cleveland, Ohio at 10:00
a.m., local time, on August 29, 2000.
Hanna. Hanna will hold its special meeting at The Forum Conference and
Education Center, Erie Room, 1375 East Ninth Street, Cleveland, Ohio, at 11:00
a.m., local time, on August 29, 2000.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
Geon. At Geon's special meeting, holders of Geon common stock will be asked
to (1) adopt the consolidation agreement and approve the consolidation and the
other transactions contemplated by the consolidation agreement and (2) approve
the PolyOne 2000 Stock Incentive Plan.
Hanna. At Hanna's special meeting, holders of Hanna common stock will be
asked to (1) adopt the consolidation agreement and approve the consolidation and
the other transactions contemplated by the consolidation agreement and (2)
approve the PolyOne 2000 Stock Incentive Plan.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Geon. Holders of record of Geon common stock at the close of business on
July 17, 2000, the record date for Geon's special meeting, are entitled to
notice of and to vote at Geon's special meeting. On the record date, 24,327,115
shares of Geon common stock were issued and outstanding and held by
approximately 3,500 holders of record. A majority of the shares of Geon common
stock issued and outstanding and entitled to vote on the record date must be
represented in person or by proxy at Geon's special meeting in order for a
quorum to be present for purposes of transacting business at Geon's special
meeting. Abstentions and broker non-votes (i.e., shares held by brokers in
street name that are not entitled to vote at the special meeting due to the
absence of specific instructions from the beneficial owners of those shares)
will be treated as present at the special meeting for purposes of determining
the presence or absence of a quorum for the transaction of business. In the
event that a quorum is not present at Geon's special meeting, it is expected
that the meeting will be adjourned or postponed to solicit additional proxies.
Holders of record of Geon common stock on the record date are each entitled to
one vote per share on each matter to be considered at Geon's special meeting.
Hanna. Holders of record of Hanna common stock at the close of business on
July 14, 2000, the record date for Hanna's special meeting, are entitled to
notice of and to vote at Hanna's special meeting. On the record date, 48,484,738
shares of Hanna common stock were issued and outstanding and held by
approximately 4,300 holders of record. A majority of the shares of Hanna common
stock issued and outstanding and entitled to vote on the record date must be
represented in person or by proxy at Hanna's special meeting in order for a
quorum to be present for purposes of transacting business at Hanna's special
meeting. Abstentions and broker non-votes will be treated as present at the
special meeting for purposes of determining the presence or absence of a quorum
for the transaction of business. In the event that a quorum is not present at
Hanna's special meeting, it is expected that the meeting will be adjourned or
postponed to solicit additional proxies. Holders of record of Hanna common stock
on the record date are each entitled to one vote per share on each matter to be
considered at Hanna's special meeting.
VOTES REQUIRED
Geon. The adoption of the consolidation agreement and approval of the
consolidation and the other transactions contemplated by the consolidation
agreement require the affirmative vote of the holders of at least a majority of
the shares of Geon common stock outstanding on the record date. Abstentions and
broker non-votes will have the same effect as a vote against this proposal. The
adoption of the PolyOne 2000 Stock Incentive Plan requires the affirmative vote
of holders of at least a majority of the shares of Geon common stock that vote
at the Geon special meeting. Abstentions and broker non-votes will not be
counted for purposes of this proposal.
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Hanna. The adoption of the consolidation agreement and approval of the
consolidation and the other transactions contemplated by the consolidation
agreement require the affirmative vote of the holders of at least a majority of
the shares of Hanna common stock outstanding on the record date. Abstentions and
broker non-votes will have the same effect as a vote against this proposal. The
approval of the PolyOne 2000 Stock Incentive Plan requires the affirmative vote
of the holders of at least a majority of the shares of Hanna common stock that
vote at the Hanna special meeting. Abstentions and broker non-votes will not be
counted for purposes of this proposal.
RESOLICITATION
Each of Geon and Hanna has retained the discretion in some situations, even
if stockholder approval has been obtained and the other conditions to the
consolidation agreement have been satisfied, to terminate or amend the
consolidation agreement or to waive some of its provisions. If Geon or Hanna
decides to terminate or amend the consolidation agreement or to waive any of its
provisions, it will be on the basis that its board believes the action to be in
the best interest of its stockholders.
If Geon and Hanna amend or waive the terms of the consolidation agreement
or waive any of its provisions and conclude that the amendment or waiver is not
material, we do not believe that it will be necessary to resolicit stockholders'
approval of the consolidation. Immaterial amendments to or waivers of the terms
of the consolidation agreement will not fundamentally alter the character of the
consolidation. If Geon and Hanna amend or waive the terms of the consolidation
agreement and the amendments or waivers are material in the aggregate, Geon and
Hanna will resolicit the approval of their stockholders. Under those
circumstances, Geon and Hanna would circulate revised proxy materials to their
stockholders.
SHARE OWNERSHIP
Geon. At the close of business on the record date, directors and executive
officers of Geon and their affiliates beneficially owned and were entitled to
vote 994,777 shares of Geon common stock, which represented approximately 4% of
the shares of Geon common stock outstanding on that date. Each of those
directors and executive officers has indicated his or her present intention to
vote, or cause to be voted, the Geon common stock owned by him or her FOR
adoption of the consolidation agreement and approval of the consolidation and
the other transactions contemplated by the consolidation agreement at Geon's
special meeting.
At the close of business on the record date, The Geon Company Share
Ownership Trust established by Geon owned and was entitled to vote 493,590
shares of Geon common stock, which represented approximately 2% of the shares of
the Geon common stock outstanding on that date.
Hanna. At the close of business on the record date, directors and executive
officers of Hanna and their affiliates beneficially owned and were entitled to
vote 680,588 shares of Hanna common stock, which represented approximately 1.4%
of the shares of Hanna common stock outstanding on that date. Each of those
directors and executive officers has indicated his or her present intention to
vote, or cause to be voted, the Hanna common stock owned by him or her FOR
adoption of the consolidation agreement and approval of the consolidation and
the other transactions contemplated by the consolidation agreement at Hanna's
special meeting.
At the close of business on the record date, the Associates Ownership Trust
established by Hanna owned and was entitled to vote 3,202,856 shares of Hanna
common stock, which represented approximately 6.6% of the shares of Hanna common
stock outstanding on that date.
VOTING OF PROXIES
Submitting Proxies. Geon and Hanna stockholders may submit their proxies by
attending their respective special meeting and voting their shares in person at
the meeting, or by completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage pre-paid envelope. If a written proxy card is
signed by a stockholder and returned without instructions, the shares
represented by the proxy will be voted for each of the proposals presented at
the Geon or Hanna special meeting, as applicable. Participants in The Geon
Company's Retirement Savings Plan will receive a separate voting instruction
card. Participants in Hanna's 401(k) Plan and Retirement Plan, its Capital
Accumulation Plan, the DH Compounding 401(K) Plan and Hanna's Associates
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Ownership Trust will receive a separate voting instruction card. A participant
must sign and return his or her card to the trustee of the trust related to the
plan in order to instruct the trustee on how to vote the shares held under the
respective trust.
Geon stockholders and Hanna stockholders may also submit their proxies by
telephone or over the Internet. The telephone and Internet voting procedures are
designed to authenticate votes cast by use of a personal identification number.
These procedures allow stockholders to appoint a proxy to vote their shares and
to confirm that their instructions have been properly recorded. Instructions for
voting by telephone and over the Internet are printed on the proxy cards.
Geon and Hanna stockholders whose shares are held in "street name" (i.e.,
in the name of a broker, bank or other record holder) must either direct the
record holder of their shares as to how to vote their shares or obtain a proxy
from the record holder to vote at their respective special meeting.
Revoking Proxies. Geon and Hanna stockholders of record may revoke their
proxies at any time prior to the time their proxies are voted at Geon's special
meeting or Hanna's special meeting, as the case may be. Proxies may be revoked
by written notice to Geon or Hanna, as applicable, by a later-dated proxy signed
and returned by mail or by attending Geon's special meeting or Hanna's special
meeting, as applicable, and voting in person. A participant under a plan may
revoke his or her voting instruction card before the trustee votes the shares
held by it by giving notice in writing to the trustee. Attendance at Geon's
special meeting or Hanna's special meeting, as applicable, will not in and of
itself constitute a revocation of a proxy. Geon and Hanna stockholders of record
may also revoke their proxies by a later-dated proxy using the telephone voting
procedures or the Internet voting procedures. Any written notice of a revocation
of a proxy must be sent so as to be delivered before the taking of the vote at
the applicable special meeting as follows:
<TABLE>
<S> <C>
FOR GEON STOCKHOLDERS, TO: FOR HANNA STOCKHOLDERS, TO:
The Geon Company M.A. Hanna Company
One Geon Center Suite 36-5000
Avon Lake, Ohio 44012-0122 200 Public Square
Attention: Corporate Secretary Cleveland, Ohio 44114-2304
Attention: Corporate Secretary
</TABLE>
Stockholders who require assistance in changing or revoking a proxy should
contact Morrow & Co., Inc. at the address or phone number provided in this joint
proxy statement/prospectus under the caption "Questions and Answers -- Who can
help answer my questions?"
General Information. If any other matters are properly presented at either
the Geon or Hanna special meeting for consideration, the persons named in the
enclosed form of proxy, and acting under that proxy, will have discretion to
vote or not vote on those matters in accordance with their best judgment, unless
authorization to use that discretion is withheld. Neither Geon nor Hanna is
aware of any matters expected to be presented at its respective special meeting
other than as described in its respective notice of special meeting.
The cost of solicitation of proxies will be paid by Geon for Geon proxies
and by Hanna for Hanna proxies. In addition to solicitation by mail, the
directors, officers and employees of Geon and Hanna may also solicit proxies
from stockholders by telephone, telecopy, telegram or in person. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries to send the proxy materials to beneficial owners; and Geon or Hanna,
as the case may be, will, upon request, reimburse those brokerage houses and
custodians for their reasonable expenses in so doing.
Geon and Hanna have each retained Morrow & Co., Inc. to aid in the
solicitation of proxies and to verify certain records related to the
solicitations. Morrow & Co., Inc. will receive a fee of $7,500 from Geon and
$10,000 from Hanna as compensation for its services and reimbursement for its
related out-of-pocket expenses. Geon and Hanna have agreed to indemnify Morrow &
Co., Inc. against liabilities arising out of or in connection with its
engagement.
Stockholders who submit proxy cards should not send in any stock
certificates with their proxy cards. A transmittal form with instructions for
the surrender of certificates representing shares of Geon common stock or Hanna
common stock will be mailed by PolyOne to former Geon and Hanna stockholders
shortly after the
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consolidation is completed. See "The Consolidation -- Exchange of Certificates,"
and "Agreement and Plan of Consolidation -- Conversion of Shares; Procedures for
Surrender of Certificates; Fractional Shares."
AGREEMENT AND PLAN OF CONSOLIDATION
GENERAL
This section of the joint proxy statement/prospectus describes the material
provisions of the consolidation agreement. A copy of the consolidation agreement
is attached as Annex A to this document. We encourage you to read the
consolidation agreement because it is the legal document that governs the
consolidation.
CLOSING; EFFECTIVE TIME
The closing of the consolidation will take place at 10:00 a.m. no later
than the second business day after satisfaction or waiver of the conditions set
forth in the consolidation agreement, unless another time or date is agreed to
by Geon and Hanna.
Subject to the provisions of the consolidation agreement, as soon as
practicable on or after the date of the consolidation, Geon and Hanna will file
certificates of consolidation and other appropriate documents with the Secretary
of State of Delaware and the Secretary of State of Ohio in accordance with the
relevant provisions of Ohio law and Delaware law, respectively. The
consolidation will become effective at the latest to occur of (1) the time that
the Delaware certificate of consolidation is filed with the Secretary of State
of the State of Delaware, (2) the time that the Ohio certificate of
consolidation is filed with the Secretary of State of the State of Ohio or (3)
any subsequent date or time that Geon and Hanna agree and specify in the
Delaware certificate of consolidation and the Ohio certificate of consolidation.
CONSIDERATION TO BE RECEIVED IN THE CONSOLIDATION
Conversion of Geon Common Stock. Except as described below, at the time of
and by virtue of the consolidation, and without any action on the part of any
stockholder of Geon, each issued and outstanding share of Geon common stock, and
each share of Geon common stock held in the treasury of Geon, will be converted
into the right to receive two validly issued, fully paid and nonassessable
PolyOne common shares.
Any share of Geon common stock owned by Geon or any subsidiary of Geon or
Hanna (other than shares of Geon common stock acquired by employee benefit trust
funds in the ordinary course and any shares of Geon common stock held in trust
accounts, managed accounts or in any similar trustee or fiduciary capacity) will
automatically be canceled and retired in the consolidation and will cease to
exist, and no consideration will be delivered in exchange for those shares.
Upon completion of the consolidation, all shares of Geon common stock will
no longer be outstanding, will automatically be canceled and retired and will
cease to exist. Each holder of shares of Geon common stock will cease to have
any rights with respect to those shares, except the right to receive the PolyOne
common shares.
Conversion of Hanna Common Stock. Except as described below, at the time of
and by virtue of the consolidation, and without any action on the part of any
stockholder of Hanna, each issued and outstanding share of Hanna common stock,
and each share of Hanna common stock held in the treasury of Hanna, will be
converted into the right to receive one validly issued, fully paid and
nonassessable PolyOne common share.
Any share of Hanna common stock owned by Geon or any subsidiary of Geon or
Hanna (other than shares of Hanna common stock acquired by employee benefit
trust funds in the ordinary course and any shares of Hanna common stock held in
trust accounts, managed accounts or in any similar trustee or fiduciary
capacity) will automatically be canceled and retired in the consolidation and
will cease to exist, and no consideration will be delivered in exchange for
those shares.
Upon completion of the consolidation, all shares of Hanna common stock will
no longer be outstanding, will automatically be canceled and retired and will
cease to exist. Each holder of shares of Hanna common stock will cease to have
any rights with respect to those shares, except the right to receive the PolyOne
common shares.
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Cancellation of Consolidation Corp. Common Shares. Consolidation Corp. will
be a new Ohio corporation that will be formed solely to participate in the
consolidation with Geon and Hanna. As a result of the consolidation, each common
share of Consolidation Corp. will automatically be canceled and retired and will
cease to exist, and no consideration will be delivered in exchange for those
shares.
CONVERSION OF SHARES; PROCEDURES FOR SURRENDER OF CERTIFICATES; FRACTIONAL
SHARES
The conversion of Geon and Hanna common stock into the right to receive
PolyOne common shares will occur automatically at the effective time of the
consolidation. As soon as practicable after the effective time of the
consolidation, First Chicago Trust Company of New York, the exchange agent for
the consolidation, will send a transmittal letter to each former stockholder of
Geon and Hanna. The transmittal letter will contain instructions with respect to
the surrender by Geon and Hanna stockholders of their stock certificates. YOU
SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY. The exchange
agent will mail to each stockholder who properly completes and returns a letter
of transmittal and surrenders his or her stock certificate formerly representing
Geon common stock or Hanna common stock a certificate reflecting the whole
number of PolyOne common shares issued to that stockholder in the consolidation.
After the consolidation, each certificate that previously represented
shares of Geon common stock and Hanna common stock will represent only the right
to receive PolyOne common shares into which those Geon and Hanna shares were
converted in the consolidation and the right to receive cash in lieu of
fractional PolyOne common shares as described below.
Holders of certificates previously representing shares of Geon common stock
and Hanna common stock will not be paid dividends or distributions on the
PolyOne common shares into which their Geon or Hanna shares have been converted
with a record date after the consolidation, and will not be paid cash in lieu of
fractional PolyOne common shares, until their certificates are surrendered to
the exchange agent. When their certificates are surrendered, any unpaid
dividends and any cash in lieu of fractional PolyOne common shares payable as
described below will be paid without interest.
If a transfer of ownership of Geon common stock or Hanna common stock has
been made that is not registered in the records of Geon's or Hanna's transfer
agent, as the case may be, a certificate representing the proper number of
PolyOne common shares may be issued to a person other than the person in whose
name the certificate so surrendered is registered. However, the certificate must
be properly endorsed or otherwise in proper form for transfer and the person
requesting a certificate issuance must either (1) pay any transfer or other
taxes required by reason of the issuance of PolyOne common shares to a person
other than the registered holder of that certificate or (2) establish to the
satisfaction of PolyOne that those taxes have been paid or are not applicable.
All PolyOne common shares issued upon conversion of shares of Geon common
stock and Hanna common stock and any cash paid in lieu of fractional PolyOne
common shares will be deemed to have been issued or paid in full satisfaction of
all rights pertaining to those shares of Geon common stock or Hanna common
stock, as the case may be. PolyOne, however, will still be obligated to pay any
dividends or make any other distributions with a record date prior to the
consolidation that have been declared or made by either Geon or Hanna on shares
of Geon common stock or Hanna common stock, respectively, on or prior to the
consolidation and which remain unpaid at the time of the consolidation.
No fractional PolyOne common share will be issued to any stockholder upon
surrender of certificates previously representing Geon common stock and Hanna
common stock. Instead, the exchange agent will pay to each of those stockholders
an amount in cash equal to the product obtained by multiplying the fractional
share interest to which the holder (after taking into account all shares of Geon
or Hanna common stock held at the effective time by such holder) would otherwise
be entitled by the closing price for a PolyOne common share on the New York
Stock Exchange Composite Transaction Tape on the first day PolyOne common shares
trade after the effective time of the consolidation.
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REPRESENTATIONS AND WARRANTIES
The consolidation agreement contains mutual representations and warranties
by each of Geon and Hanna relating to, among other things:
- corporate organization, standing and power;
- subsidiaries;
- capitalization;
- authorization, execution, delivery, performance and enforceability of,
required consents, approvals, orders and authorizations of governmental
authorities relating to, and noncontravention of agreements as a result
of, the consolidation agreement;
- documents filed by each of Geon and Hanna with the Securities and
Exchange Commission and other regulatory entities, the accuracy of
information contained in those documents and the absence of undisclosed
liabilities of each of Geon and Hanna;
- the accuracy of information supplied by each of Geon and Hanna in
connection with this joint proxy statement/prospectus and the S-4
registration statement of which this joint proxy statement/prospectus is
a part;
- absence of material changes or events with respect to each of Geon and
Hanna since December 31, 1999;
- compliance with applicable laws and litigation;
- absence of changes in benefit plans since December 31, 1999;
- matters relating to the Employee Retirement Income Security Act of 1974;
- tax matters;
- material contracts and noncompetition agreements;
- environmental matters;
- intellectual property matters;
- product liability claims;
- required stockholder votes in connection with the consolidation;
- satisfaction of state takeover statutes;
- the inapplicability of Geon's and Hanna's rights plans to the
consolidation;
- ownership by Geon of Hanna common stock or ownership by Hanna of Geon
common stock;
- opinions of financial advisors; and
- engagement of and payment of fees to brokers, investment bankers, finders
and financial advisors in connection with the consolidation agreement.
COVENANTS
Conduct of Business. Pursuant to the consolidation agreement, Geon and
Hanna have each agreed that, except as permitted or contemplated by the
consolidation agreement or as consented to by the other party, during the period
from the date of the consolidation agreement to the effective time of the
consolidation, each party will, and will cause its subsidiaries to:
- carry on their respective businesses in the ordinary course consistent
with past practice and in compliance in all material respects with all
applicable laws and regulations;
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<PAGE> 51
- use all reasonable efforts to preserve intact their current business
organizations, other than internal organizational realignments;
- use all reasonable efforts to keep available the services of their
current officers and other key employees; and
- preserve their relationships with those persons having business dealings
with them to the end that their goodwill and ongoing businesses will be
unimpaired at the time of the consolidation.
The consolidation agreement provides that Geon and its subsidiaries and
Hanna and its subsidiaries, without the consent of the other party, will not
take any action outside of the parameters specified in the consolidation
agreement relating to the following matters:
- declaring or paying dividends or recapitalizing or redeeming its capital
stock;
- issuing, selling or encumbering any shares of capital stock or options to
acquire any shares of its capital stock (except that Hanna is allowed to
repurchase up to 750,000 shares of Hanna common stock prior to the
consolidation);
- incurring indebtedness;
- satisfying claims or liabilities;
- modifying, amending or terminating material contracts;
- amending its organizational documents;
- selling, leasing or encumbering its property or assets (other than the
sale of Hanna's Cadillac Plastic Group);
- making acquisitions;
- increasing compensation, bonus or other benefits of directors, officer or
employees;
- changing accounting principles;
- making any tax elections;
- approving any takeover proposal from a third party;
- taking actions related to antitakeover measures; or
- licensing or otherwise disposing of intellectual property.
Coordination of Dividends. Geon and Hanna will coordinate with the other
regarding the declaration and payment of dividends in respect of Geon common
stock and Hanna common stock and the record dates and payment dates relating to
those dividends. Geon's and Hanna's intention in that regard is that no holder
of Geon common stock or Hanna common stock will receive two dividends, or fail
to receive one dividend, for any single calendar quarter with respect to its
shares, including PolyOne common shares that a holder receives in exchange for
shares of Geon common stock or Hanna common stock in the consolidation.
No Solicitation. The consolidation agreement provides that neither Geon nor
Hanna will, and will not authorize or permit any of their officers, directors,
employees or representatives to, directly or indirectly:
(1) solicit, initiate or encourage, or take any other action designed
to facilitate, any inquiries or the making of any takeover proposal (as
defined below); or
(2) participate in any discussions or negotiations regarding any
takeover proposal.
Geon and Hanna have agreed to immediately advise the other of any request
for information or any takeover proposal and to keep the other informed of the
status of any request for information or any takeover proposal.
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A "takeover proposal" is, other than the consolidation and the transactions
contemplated by the consolidation agreement, any inquiry, proposal or offer from
any person relating to any:
- direct or indirect acquisition or purchase of a business that constitutes
15% or more of the net revenues, net income or the assets of Geon or
Hanna, as the case may be, and its subsidiaries, taken as a whole;
- direct or indirect acquisition or purchase of 15% or more of any class of
equity securities of Geon or Hanna, as the case may be, and its
subsidiaries whose business constitutes 15% or more of the net revenues,
net income or assets of Geon and Hanna, as the case may be, and its
subsidiaries, taken as a whole;
- tender offer or exchange offer that if consummated would result in any
person beneficially owning 15% or more of any class of any equity
securities of Geon or Hanna, as the case may be, or any of their
respective subsidiaries whose business constitutes 15% or more of the net
revenues, net income or assets of Geon or Hanna, as the case may be, and
its subsidiaries taken as a whole; or
- merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Geon or Hanna,
as the case may be, or any of their respective subsidiaries whose
business constitutes 15% or more of the net revenues, net income or
assets of Geon or Hanna, as the case may be, and its subsidiaries taken
as a whole (other than, in the case of Hanna, the sale of Hanna's
Cadillac Plastic Group).
Notwithstanding these restrictions, if either board determines in good
faith, after consultation with outside counsel, that in order to act in a manner
consistent with its fiduciary duties to its stockholders under applicable law,
Geon or Hanna, as the case may be, may, in response to a superior proposal and
subject to providing written notice to the other party of its decision to take
such action and compliance with its obligation to advise the other party of any
request for information or of any takeover proposal:
(1) furnish information with respect to it and its subsidiaries to any
person making a superior proposal pursuant to a confidentiality agreement
that is no less restrictive than the confidentiality agreement between Geon
and Hanna (other than the standstill provisions contained therein); and
(2) participate in discussions or negotiations regarding the superior
proposal.
A "superior proposal" is any proposal made by a third party to acquire,
directly or indirectly, more than 66 2/3% of the combined voting power of the
then outstanding shares of either Geon common stock or Hanna common stock, as
the case may be, or all or substantially all the assets of Geon or Hanna and
otherwise on terms that the relevant board determines in its good faith
judgment, after consultation with a financial advisor of nationally recognized
reputation, to be more favorable to that company's stockholders than the
Geon-Hanna consolidation (after considering (1) any adjustment to the terms and
conditions of the consolidation proposed by the other party in response to such
takeover proposal and (2) the termination fee to be paid by the party accepting
the takeover proposal) and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the relevant board, is
reasonably capable of being obtained by that third party.
In addition, except as expressly permitted by the consolidation agreement,
neither the Geon board nor the Hanna board, nor any committee of either board,
may:
- withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to the other party, the approval or recommendation by that
board or that committee of the consolidation or the consolidation
agreement;
- approve or recommend, or propose publicly to approve or recommend, any
takeover proposal; or
- cause either Geon or Hanna, as the case may be, to enter into any
acquisition agreement related to any takeover proposal, including any
letter of intent, agreement in principle or other similar agreement.
Notwithstanding these restrictions, if either board determines in good
faith, after consultation with outside counsel, that in light of a superior
proposal it is necessary to do so in order to act in a manner consistent with
its fiduciary duties to its stockholders under applicable law, it may terminate
the consolidation agreement in order to
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concurrently enter into an acquisition agreement with respect to a superior
proposal. Before terminating the consolidation agreement as allowed by the
preceding sentence, however,
(1) at least three business days must have elapsed following delivery
to the other party of written notice advising it that the board is prepared
to accept a superior proposal, and during that three-day period, the party
wishing to terminate the consolidation agreement has negotiated in good
faith with the other party to make such adjustments in the terms and
conditions of the consolidation as would enable the parties to proceed with
the consolidation on such adjusted terms;
(2) at the end of this three-day period, the board continues to
reasonably believe that the proposed takeover proposal is a superior
proposal; and
(3) the party wishing to terminate the consolidation agreement pays
the termination fee described below.
Rights Agreements. Each party will take all further action reasonably
requested in writing by the other party (including redeeming the rights
immediately prior to the effective time of the consolidation or further amending
the rights agreement) in order to render its rights agreement inapplicable to
the consolidation and the other transactions contemplated by the consolidation
agreement.
ADDITIONAL AGREEMENTS
Regulatory Approvals. Each of Geon and Hanna agreed to (1) make the
required filings under the Hart-Scott-Rodino Act with respect to the
consolidation and the other transactions contemplated by the consolidation
agreement within 10 days after the date of the consolidation agreement, (2)
comply at the earliest practicable date with any request under the
Hart-Scott-Rodino Act for additional information, documents or other materials
received by the party from the Federal Trade Commission or the Department of
Justice or any other governmental entity in respect of those filings or the
consolidation and the other transactions contemplated by the consolidation
agreement, and (3) cooperate with the other party in connection with making any
filing under the Hart-Scott-Rodino Act and in connection with any filings,
conferences or other submissions related to resolving any investigation or other
inquiry by any governmental entity under the Hart-Scott-Rodino Act with respect
to the consolidation and the other transactions contemplated by the
consolidation agreement.
In furtherance of the covenants of the parties described above, each of
Geon and Hanna have agreed to use their reasonable best efforts to resolve the
objections, if any, that may be asserted with respect to the transactions
contemplated by the consolidation agreement under any antitrust law. In
connection with the foregoing, if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by the
consolidation agreement as violative of any antitrust law, each of Geon and
Hanna agreed to cooperate in all respects with each other and use its respective
reasonable best efforts to contest and resist any such action or proceeding and
to have vacated, lifted, reversed or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent, that is in effect
and that prohibits, prevents or restricts consummation of the transactions
contemplated by the consolidation agreement, including, without limitation,
vigorously defending in litigation on the merits any claim asserted in any court
by any party through a final and nonappealable judgment.
If any objections are asserted with respect to the transactions
contemplated by the consolidation agreement under any antitrust law or if any
suit is instituted by any governmental entity or any private party challenging
any of the transactions contemplated by the consolidation agreement as violative
of any antitrust law, each of Geon and Hanna have agreed to use their reasonable
best efforts to resolve the objections or challenge that the governmental entity
or private party may have to the transactions under the antitrust law to permit
consummation of the transactions contemplated by the consolidation agreement.
Each of Geon and Hanna (and, to the extent required by any governmental entity,
its respective subsidiaries and affiliates over which it exercises control)
agreed to pursue a resolution with any governmental entity and, if acceptable to
any governmental entity, enter into a settlement, undertaking, consent decree,
stipulation or other agreement with the governmental entity regarding antitrust
matters in connection with the transactions contemplated by the consolidation
agreement. None of Geon, Hanna, Consolidation Corp. or PolyOne would be required
to enter into any settlement that
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requires Geon, Hanna, Consolidation Corp. and/or PolyOne to sell or dispose of
any significant assets of Geon and its subsidiaries, Hanna and its subsidiaries,
Consolidation Corp. and/or PolyOne and its subsidiaries.
Stock Options, Performance Shares and Restricted Stock. At the time of the
consolidation, each outstanding employee and non-employee director stock option
under Geon's stock plans and Hanna's stock plans will be converted into an
option to purchase the number of PolyOne common shares equal to the applicable
consolidation exchange ratio for that company multiplied by the number of shares
of Geon common stock or Hanna common stock, as the case may be, which could have
been obtained prior to the consolidation upon the exercise of that option. The
converted option will have an exercise price per share equal to the exercise
price for each share of Geon common stock or Hanna common stock, as the case may
be, subject to the converted option divided by the applicable consolidation
exchange ratio. Upon completion of the consolidation, PolyOne will assume the
obligations of Geon under Geon's stock plans and Hanna under Hanna's stock
plans. The other terms of each converted option, and the plans under which they
were issued, will continue to apply in accordance with their terms.
At the time of the consolidation, each outstanding award, including
restricted stock, deferred stock and performance shares, under any of Geon's
stock plans or Hanna's stock plans will be converted into the same instrument of
PolyOne. The awards will be converted, in each case, only with those adjustments
to the terms of the awards as are necessary to preserve the value inherent in
the awards with no detrimental effects on the holders of the awards. PolyOne
will assume the obligations of Geon and Hanna under those awards. The other
terms of these awards, and the plans or agreements under which they were issued,
will continue to apply in accordance with their terms.
Geon and Hanna have agreed in the consolidation agreement that each of
their respective employee incentive or benefit plans, programs and arrangements
and non-employee director plans will be amended, to the extent necessary, to
reflect the transactions contemplated by the consolidation agreement, including
the conversion of shares of Geon common stock or Hanna common stock held or to
be awarded or paid pursuant to their benefit plans, programs or arrangements
into PolyOne common shares on a basis consistent with the transactions
contemplated by the consolidation agreement.
Indemnification and Insurance. PolyOne will, to the fullest extent legally
permitted, indemnify each person who is now, or has been at any time prior to
the date of the consolidation agreement, or who becomes prior to the
consolidation, an officer, director or employee of Geon or Hanna or any of its
subsidiaries against any losses, expenses, claims, damages or liabilities:
- arising out of acts or omissions occurring at or before the
effective time that are based on or arise out of the fact that that person
is or was a director, officer or employee of Geon or Hanna or any of their
subsidiaries or served as a fiduciary under or with respect to any employee
benefit plan of Geon or Hanna; and
- to the extent they are based on or arise out of the transactions
contemplated by the consolidation agreement.
In addition, from and after the effective time of the consolidation,
directors and officers of Geon and Hanna who become directors or officers of
PolyOne will be entitled to indemnification under PolyOne's articles of
incorporation and regulations, as they may be amended from time to time in
accordance with their terms and applicable law.
For six years after the effective time, PolyOne will maintain directors'
and officers' liability insurance covering acts or omissions occurring prior to
the consolidation with respect to those persons who are currently covered by
Geon's and Hanna's directors' and officers' liability insurance policy. The
terms of the insurance, including coverage and amount, will be no less favorable
than those of the policies of Geon and Hanna in effect on the date of the
consolidation agreement. PolyOne will not be required to pay aggregate premiums
for the insurance described in this paragraph in excess of 200% of the aggregate
premiums paid by Geon and Hanna in 1999. However, if the annual premiums of the
insurance policy exceed that amount, PolyOne will be obligated to obtain a
policy with the best coverage available, in the reasonable judgment of PolyOne's
board, for a cost up to but not exceeding that amount. In addition, for six
years after the effective time, PolyOne will maintain fiduciary
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liability insurance policies for employees who serve or have served as
fiduciaries under any benefit plan of Geon and Hanna with coverages and in
amounts no less favorable than those of policies of Geon and Hanna in effect on
the date of the consolidation agreement. See "Interests of Certain Persons in
the Consolidation -- Indemnification."
Fees and Expenses. Except as otherwise described below, whether or not the
consolidation is completed, all fees and expenses incurred in connection with
the consolidation, the consolidation agreement and the transactions contemplated
by the consolidation agreement will be paid by the party incurring those fees or
expenses, except that Geon and Hanna will each pay one-half of the costs of
printing and filing the S-4 registration statement relating to this joint proxy
statement/prospectus.
If:
(1) the consolidation agreement is terminated by either party in order
to enter into a superior proposal;
(2) a takeover proposal (changing the definition of that term by
substituting 35% for 15% in each instance) has been made for Geon or Hanna
and not publicly withdrawn prior to that party's special stockholders
meeting, that party's stockholders fail to adopt the consolidation
agreement, and that party terminates the consolidation agreement and enters
into or consummates a takeover proposal within 18 months after termination
of the consolidation agreement; or
(3) the consolidation agreement is terminated by either party because
the other party's board of directors, or any committee thereof, has
withdrawn or modified or proposed publicly to withdraw or modify, in a
manner adverse to the terminating party, its approval or recommendation of
the consolidation or the consolidation agreement, approved or recommended a
takeover proposal or resolved to do any of the foregoing,
the terminating party in the case of items (1) and (2), or the party whose board
took such action in the case item (3), will pay the other party a fee equal to
$25 million.
If the consolidation agreement is terminated at such time that the
consolidation agreement is terminable by either party (but not both parties)
because the other party's representations or warranties contained in the
consolidation agreement are inaccurate or because the other party has failed to
perform any of its covenants or other agreements contained in the consolidation
agreement, then the party whose representations or warranties are inaccurate or
who has breached its covenants or other agreements contained in the
consolidation agreement will promptly (but not later than two business days
after receipt of notice from the other party) pay to the other party an amount
equal to all documented out-of-pocket expenses and fees incurred by the other
party (including, without limitation, fees and expenses payable to all legal,
accounting, financial, public relations and other professional advisors arising
out of or in connection with or related to the consolidation or the other
transactions contemplated by the consolidation agreement) not to exceed $2
million in the aggregate. If the consolidation agreement is terminated by a
party as a result of a willful breach by the other party, the non-breaching
party may pursue any remedies available to it at law or in equity and will, in
addition to its out-of-pocket expenses (which will be paid as specified above
and will not be limited to $2 million), be entitled to recover such additional
amounts as such non-breaching party may be entitled to receive at law or in
equity.
Affiliates. Each of Geon and Hanna has agreed to provide to the other party
not less than 45 days prior to the effective time a list of names and addresses
of each person who, in the reasonable judgment of Geon or Hanna, as the case may
be, is an affiliate within the meaning of Rule 145 under the Securities Act of
1933. Geon and Hanna have also agreed to deliver to each other not less than 30
days prior to the effective time an affiliate letter in the form attached as an
exhibit to the consolidation agreement, executed by each of their affiliates.
PolyOne will be entitled to place legends on the certificates evidencing the
PolyOne common shares to be received by Geon's and Hanna's affiliates and to
issue appropriate stop transfer instructions to the transfer agent for the
PolyOne common shares, consistent with the terms of the affiliate letters. See
"The Consolidation -- Restrictions on Resales of PolyOne Stock."
New York Stock Exchange Listing. The parties agreed to use their reasonable
best efforts to cause the PolyOne common shares issuable to the Geon and Hanna
stockholders in the consolidation to be approved for listing on the New York
Stock Exchange, subject to official notice of issuance.
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Stockholder Litigation. Each party agreed to give the other party
reasonable opportunity to participate in the defense of any stockholder
litigation against Geon or Hanna and their respective directors relating to the
consolidation.
Tax Treatment. The parties agreed to use reasonable best efforts to cause
the consolidation to qualify as a tax-free reorganization under Section
368(a)(1)(A) of the Internal Revenue Code and to obtain the opinions of their
respective tax advisors.
Standstill Agreements; Confidentiality Agreements. With some exceptions,
during the period from the date of the consolidation agreement through the
effective time, neither Geon nor Hanna will terminate, amend, modify or waive
any provision of any confidentiality or standstill agreement to which it or any
of its respective subsidiaries is a party, other than:
- the confidentiality agreement, dated March 1, 1999, entered into between
Geon and Hanna, pursuant to its terms or by written agreement of Geon and
Hanna;
- confidentiality agreements under which Geon or Hanna, as the case may be,
does not provide any confidential information to third parties; or
- standstill agreements that do not relate to the equity securities of Geon
or any of its subsidiaries or equity securities of Hanna or any of its
subsidiaries, as the case may be.
With some exceptions, during that period, Geon and Hanna will enforce, to
the fullest extent permitted under applicable law, the provisions of each of
those agreements to which it is a party, including by obtaining injunctions to
prevent any violations of those agreements and to enforce specifically the terms
and provisions of the agreements in any court of the United States of America or
of any state having jurisdiction.
Employee Benefit Plans; Employment Agreements. Each party will adopt
amendments to its employee benefit plans reasonably requested by the other party
as may be necessary in order to ensure that that party's employee benefit plans
cover only employees and former employees (and their dependents and
beneficiaries) of that party and its subsidiaries following the consolidation.
With respect to any Geon common stock held by any Geon employee benefit plan or
any Hanna common stock held by any Hanna employee benefit plan, each as of the
date of the consolidation agreement or after that time Geon and Hanna, as the
case may be, will take all actions necessary or appropriate (including such
actions as are reasonably requested by the other party) to ensure that all
participant voting procedures contained in the employee benefit plans relating
to such shares, and all applicable provisions of the Employee Retirement Income
Security Act of 1974, are complied with in full.
PolyOne will honor and assume all obligations under both parties' employee
benefit plans and all written employment agreements, severance agreements and
other similar agreements with employees of Geon and Hanna as in effect on the
date of the consolidation agreement, including without limitation, the
employment agreements to be entered into between Hanna and Phillip D. Ashkettle
and between Geon and Thomas A. Waltermire.
PolyOne Corporate Office. Geon and Hanna have agreed to undertake a study
to determine a new location in the Greater Cleveland, Ohio area for PolyOne's
corporate offices.
Consolidation Corp. Geon and Hanna have agreed to cause Consolidation Corp.
to:
- be duly organized,
- issue one common share to each of Geon and Hanna,
- duly and validly approve and take all corporate action required to be
taken by the board of directors and shareholders of Consolidation Corp.
under Ohio law for the consummation of the transactions contemplated by
the consolidation agreement, and
- take all necessary action so that no takeover statute is applicable to
the consolidation and the other transactions contemplated by the
consolidation agreement.
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CONDITIONS TO THE CONSUMMATION OF THE CONSOLIDATION
Geon's and Hanna's obligations to effect the consolidation are subject to
the satisfaction or waiver of various conditions on or before the date on which
the consolidation is to be effected. These conditions include, in addition to
other customary closing conditions, the following:
- Geon stockholders and Hanna stockholders having adopted the consolidation
agreement;
- all material governmental, regulatory, judicial or administrative
consents, filings, and notices required of Geon, Hanna, and any of their
subsidiaries to consummate the consolidation and the other transactions
contemplated by the consolidation agreement having been obtained, made or
sent, as the case may be;
- no judgment, order, law or other rule or regulation entered, promulgated,
enforced or issued by any court or other governmental or administrative
body of competent jurisdiction or other legal restraint or prohibition
being in effect preventing the completion of the consolidation or which
otherwise is reasonably likely to have a material adverse effect on
PolyOne; provided, that each of the parties have used their reasonable
best efforts to prevent the entry of any restraint described above and to
quickly appeal any of those restraints that may be entered;
- the S-4 registration statement, of which this joint proxy
statement/prospectus forms a part, having become effective under the
Securities Act of 1933 and not being the subject of any order, or of any
proceeding seeking an order, suspending the effectiveness of the
registration statement;
- PolyOne common shares issuable as contemplated by the consolidation
agreement having been approved for listing on the New York Stock
Exchange, subject to official notice of issuance;
- the waiting or similar period applicable to the completion of the
consolidation under the Hart-Scott-Rodino Act or any applicable foreign
antitrust laws having terminated or expired;
- Consolidation Corp. having been duly organized and having duly and
validly approved and taken all corporate action required to be taken
under Ohio law for the consummation of the transactions contemplated by
the consolidation agreement;
- the representations and warranties made by the other party in the
consolidation agreement being true on the date of the consolidation
agreement and being true on the effective date as if they were made on
that date, unless they were originally stated to be true as of a
specified earlier date, in which case they must still have been true on
that date, unless their failure to be true would not have, individually
or in the aggregate, a material adverse effect on the other party;
- the other party having performed in all material respects all obligations
required to be performed by it under the consolidation agreement on or
before the date of the consolidation;
- Geon and Hanna having received from their respective legal counsel an
opinion to the effect that the consolidation will constitute a
"reorganization" within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code, that Geon, Hanna, Consolidation Corp. and PolyOne
will each be a party to the reorganization within the meaning of Section
368(b) of the Internal Revenue Code, that none of Geon, Hanna,
Consolidation Corp. or PolyOne will recognize any gain or loss for United
States federal income tax purposes as a result of the effectiveness of
the consolidation, and that no stockholder of Geon or Hanna will
recognize any gain or loss for U.S. federal income tax purposes as a
result of exchanging shares of Geon common stock or Hanna common stock,
as the case may be, for PolyOne common shares upon the effectiveness of
the consolidation. Geon and Hanna have received these opinions from their
respective legal counsel. (see "The Consolidation -- Material Federal
Income Tax Consequences"); and
- at any time after the date of the consolidation agreement no material
adverse change having occurred relating to the other party; provided that
this condition shall no longer be applicable following stockholder
approval.
"Material adverse change" and "material adverse effect" mean, when used in
connection with either party, (1) any change, effect, event, occurrence or state
of facts that, after considering any insurance coverage and any
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reserves provided for in that party's financial statements, is, or would
reasonably be expected to be, materially adverse to the business, financial
condition or results of operations of that party and its subsidiaries taken as a
whole, other than any change, effect, event or occurrence (A) relating to the
economy or securities markets of the United States or any other region in
general or (B) resulting from entering into the consolidation agreement or the
consummation of the transactions contemplated by that agreement or the
announcement of the consolidation, or (2) any change, effect, event, occurrence
or state of facts that could reasonably be expected to materially impair or
delay the ability of that party to perform its obligations under the
consolidation agreement, and the terms "material" and "materially" have
correlative meanings.
TERMINATION, AMENDMENT AND WAIVER
The consolidation agreement may be terminated at any time prior to the
completion of the consolidation:
- by mutual written consent of Geon and Hanna;
- by either Geon or Hanna;
(1) if the consolidation has not been completed by November 30, 2000,
except that the right to terminate the consolidation agreement will not be
available to any party whose failure to perform any of its obligations
under the consolidation agreement results in the failure of the
consolidation to be completed by November 30, 2000;
(2) if the adoption by Geon stockholders of the consolidation
agreement has not been obtained at Geon's special meeting;
(3) if the adoption by Hanna stockholders of the consolidation
agreement has not been obtained at Hanna's special meeting; or
(4) if any judgment, order, law or other rule or regulation of any
court or other governmental or administrative body that prevents the
completion of the consolidation or which otherwise is reasonably likely to
have a material adverse effect on PolyOne is in effect and has become final
and nonappealable, except that the party seeking to terminate the
consolidation agreement must have used reasonable best efforts to prevent
and remove it;
- by Hanna, if any representation or warranty of Geon is inaccurate or Geon
breaches or fails to perform in any material respect any of its covenants
or other agreements contained in the consolidation agreement, which
inaccuracy, breach or failure to perform would give rise to a material
adverse change relating to Geon and is not cured within 30 days after
written notice of the inaccuracy, breach or failure or is incapable of
being cured by Geon;
- by Hanna, if the Hanna board has entered into an agreement relating to a
superior proposal or Hanna has completed a superior proposal (as
defined), except that Hanna must have first complied with all of the
requirements set forth in the consolidation agreement, including payment
of the $25 million termination fee to Geon;
- by Hanna if (1) the board of directors of Geon or any of its committees
has withdrawn or modified or proposed publicly to withdraw or modify, in
a manner adverse to Hanna, its approval or recommendation of the
consolidation or the consolidation agreement, or approved or recommended
any takeover proposal or (2) the board of directors of Geon has resolved
to take those actions specified in the previous sentence;
- by Geon, if any representation or warranty of Hanna is inaccurate or
Hanna breaches or fails to perform in any material respect any of its
covenants or other agreements contained in the consolidation agreement,
which inaccuracy, breach or failure to perform would give rise to a
material adverse change relating to Hanna and is not cured within 30 days
after written notice of the inaccuracy, breach or failure or is incapable
of being cured by Hanna;
- by Geon, if the Geon board has entered into an agreement relating to a
superior proposal or Geon has completed a superior proposal (as defined),
except that Geon must have first complied with all of the
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requirements set forth in the consolidation agreement, including the
payment of the $25 million termination fee to Hanna;
- by Geon if (1) the board of directors of Hanna or any of its committees
has withdrawn or modified or proposed publicly to withdraw or modify, in
a manner adverse to Geon, its approval or recommendation of the
consolidation or the consolidation agreement, or approved or recommended
any takeover proposal or (2) the board of directors of Hanna has resolved
to take any action specified in the previous sentence.
In the event of termination of the consolidation agreement by either Geon
or Hanna, the consolidation agreement will become void and have no effect,
without any liability or obligation on the part of Geon or Hanna, other than:
- in connection with any brokerage or advisory fees of any kind incurred by
either Geon or Hanna;
- the obligation of Geon and Hanna to keep all nonpublic information
connected with the consolidation confidential; and
- the agreement between Geon and Hanna to each pay their own fees and pay
one-half of the costs of the S-4 registration statement relating to this
joint proxy statement/prospectus, which provisions will survive the
termination of the consolidation agreement.
Nothing in the consolidation agreement, however, will relieve Geon or Hanna
from any liability for any willful and material breach by that party of any of
its representation, warranties, covenants or agreements set forth in the
consolidation agreement.
Amendment. The consolidation agreement may be amended by Geon and Hanna at
any time before or after the adoption of the consolidation agreement by the Geon
and Hanna stockholders, except that, after those approvals, Geon and Hanna may
not make any amendment that by law requires further approval by either Geon or
Hanna without the further approval of those stockholders. The consolidation
agreement may not be amended except by an instrument in writing signed on behalf
of both Geon and Hanna. See "The Special Meetings -- Resolicitation."
Extension; Waiver. At any time prior to the consolidation, Geon or Hanna
may:
- extend the time for the performance of any of the obligations or other
acts of the other party;
- waive any inaccuracies in the representations and warranties of the other
party contained in the consolidation agreement or in any document
delivered pursuant to the consolidation agreement; or
- except for the prohibitions described in the first sentence of the
immediately preceding paragraph, waive compliance by the other party of
the agreements or conditions contained in the consolidation agreement.
Any agreement on the part of Geon or Hanna to any extension or waiver will
be valid only if set forth in an instrument in writing signed on behalf of that
party. The failure of Geon or Hanna to assert any of its rights under the
consolidation agreement or otherwise will not constitute a waiver of those
rights. See "The Special Meetings -- Resolicitation."
INTERESTS OF CERTAIN PERSONS IN THE CONSOLIDATION
In considering the recommendation of the boards of directors of Geon and
Hanna with respect to the consolidation, Geon and Hanna stockholders should be
aware that certain members of Geon's and Hanna's executive management and
members of their respective boards of directors may have interests in the
consolidation that are in addition to their interests as Geon stockholders or
Hanna stockholders generally. Certain executive officers and directors of each
of Geon and Hanna will serve as executive officers and directors of the
resulting company following the consolidation.
In addition, completion of the consolidation will constitute a change in
control of Geon and Hanna for purposes of determining the entitlement of certain
of their respective executive officers to severance and other
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benefits. Thomas A. Waltermire and Phillip D. Ashkettle will enter into
agreements that will provide employment and severance benefits from PolyOne
following the consolidation.
The Geon board and the Hanna board were aware of these interests and
considered them, among other matters, in approving the consolidation agreement
and the transactions contemplated by the agreement.
INTERESTS OF GEON BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Thomas A. Waltermire's Employment Arrangement. In connection with the
consolidation, Geon and Mr. Waltermire intend to enter into an employment
agreement effective on the date of the consolidation. At the time the
consolidation agreement was signed, Geon and Mr. Waltermire tentatively agreed
to the terms set forth in this summary regarding his employment with PolyOne.
Mr. Waltermire's employment agreement will be for the term beginning upon the
completion of the consolidation and ending on December 31, 2004. Mr. Waltermire
will be a member of PolyOne's board of directors and will serve as PolyOne's
President and Chief Operating Officer through December 31, 2001, after which
time he also will become PolyOne's Chief Executive Officer. Following the 2004
annual meeting of PolyOne shareholders, Mr. Waltermire will also become Chairman
of the PolyOne board. Mr. Waltermire will assume each of these positions earlier
if Mr. Ashkettle ceases to hold that position for any reason.
Mr. Waltermire's initial base salary will be $575,000, subject to annual
review and subject to adjustment after Mr. Ashkettle's salary has been
determined. Mr. Waltermire will participate in PolyOne's annual incentive plan,
which has not yet been developed. The targeted annual payout under the incentive
plan will be equal to at least 75% of Mr. Waltermire's base salary with an
actual payout of between 0% and 200% of the target annual payout.
Mr. Waltermire will also participate in PolyOne's long-term incentive plan
with opportunities for incentive compensation at the highest level paid to
PolyOne executives.
Under the employment agreement, Mr. Waltermire also will be entitled to
participate in all PolyOne pension and welfare benefit plans that are made
available to senior level executives, including medical, disability, pension,
vacation and expense reimbursement plans and policies, as well as other
executive benefits. Mr. Waltermire will be entitled to reimbursement for legal
fees that he incurred in connection with the negotiation and preparation of his
employment agreement.
The PolyOne board may terminate Mr. Waltermire's employment with or without
cause, only upon the affirmative vote of three-quarters of all of the
nonemployee members of the whole board. If Mr. Waltermire is terminated by
PolyOne without "cause" (as defined) or if Mr. Waltermire terminates his
employment for "good reason" (as defined), in each case, prior to the earlier of
January 1, 2005, or the date on which he becomes Chairman of the PolyOne board,
he will be entitled to a severance package consisting of:
- His base salary through the actual termination date.
- A lump sum payment equal to three times the sum of his base salary plus
the relevant annual incentive compensation (as defined). If the
termination occurs prior to December 31, 2001, the multiplier would be
increased from three to three plus X/12, where X is the number of full or
partial months from the date of termination to December 31, 2001.
- Special credit and payout under his supplemental executive retirement
plan.
- Pro rata payout of annual incentive compensation based on the target for
the year of termination.
- Immediate vesting and payment of awards under long-term incentive plans.
- Settlement of deferred compensation arrangements, if any.
- Removal of all restrictions on restricted stock.
- Continued participation in health and welfare benefit arrangements until
the later of December 31, 2004, or the third anniversary of the date of
his termination of employment, or a lump sum cash payment equal to the
cash equivalent of such benefits on an after-tax basis.
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- Continuation of all fringe benefits until the later of December 31, 2004,
or the third anniversary of the date of his termination of employment.
If Mr. Waltermire is terminated by PolyOne for cause or if Mr. Waltermire
terminates his employment without good reason, he will be entitled to a
severance package consisting of:
- His base salary through the actual termination date.
- A lump sum payment of the balance of all fully earned but unpaid awards.
- Settlement of deferred compensation arrangements, if any.
- All other accrued but unpaid amounts that may be payable under the terms
of any other existing arrangement.
If Mr. Waltermire dies or becomes disabled during the term of his
employment agreement, he will be entitled to the following:
- His base salary through the date of his death or disability.
- His annual incentive compensation for the year of his termination of
employment, calculated at the target rate but on a pro rata basis to
reflect the portion of the year during which he worked.
- All restrictions on his restricted stock will lapse.
- Payment for unused vacation time.
- A lump sum payment for the balance of all fully earned but unpaid awards.
- Settlement of any deferred compensation arrangement, or any other
arrangement, in accordance with their terms.
In the event that any payment made to Mr. Waltermire under his employment
agreement is subject to excise tax under Section 4999 of the Internal Revenue
Code, a gross-up payment will be made to place him in the same net-after-tax
position as would have been the case if no excise tax were imposed. Mr.
Waltermire would also be entitled to reasonable legal fees incurred to enforce
his rights under the employment agreement following any termination of
employment other than a termination by PolyOne for cause or a termination by Mr.
Waltermire without good reason. The employment agreement would also provide that
Mr. Waltermire will be subject to certain non-compete, non-solicitation and
non-disclosure covenants.
Geon an Mr. Waltermire are currently negotiating the final terms of his
employment agreement.
Change of Control Triggers. Geon's executive officers and/or directors
participate in several benefit plans pursuant to which their rights to certain
benefits under the plans may vest upon a "change of control" (as that term is
defined in each plan). The contemplated consolidation falls within the
definition of "change of control" under Geon's plans discussed in this section.
The primary effects of the change of control on the participating Geon officers
under the plans is summarized below.
- Under Geon's incentive stock plans described under this heading, the
approval by stockholders of the consolidation will have the following
effects:
- All previously unexercisable stock appreciation rights and stock
options (except for the challenge grant stock appreciation rights
discussed below) will become fully exercisable.
- All restrictions on restricted stock and other stock-based awards will
lapse.
- Each optionee will be entitled, for a period of 60 days after the
change of control, to surrender his option in consideration for a cash
payment equal to the "spread" between the exercise price and the "fair
market value" of each share of stock covered by the option.
- Time-vested options and performance shares issued under Geon's incentive
stock plans will be treated as described above. However, challenge grant
stock appreciation rights, or SARs, will become exercisable only if the
change of control price (as defined in the incentive stock plan) exceeds
one of the threshold prices specified in the grant agreement, and then
only to the extent provided with respect to that threshold price.
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- Following the change of control, board members who participate in Geon's
Deferred Compensation Plan for Non-Employee Directors will automatically
begin to receive the payment of their accounts.
- Under Geon's Senior Executive Management Incentive Plan, upon the change
of control, Geon will be required, within five days, to make an "Interim
Payment" in cash to participants, in an amount equal to a pro-rated
portion of the greater of (1) the participant's last full-year Management
Incentive Plan payment or (2) the participant's level of incentive
opportunity in effect prior to the change of control for the calendar
year in which the change of control occurs, assuming that all Performance
Targets (as defined) were achieved at the maximum performance level.
Additionally, restrictions on restricted stock issued under the plan will
lapse upon the change of control.
- Geon also is a party to change of control agreements with some of its
officers under which the consolidation will commence a "Period of
Employment" (as defined in the change of control agreements). This
"Period of Employment" provision essentially locks in each participant's
salary and benefits during the period, which in most cases will be at
least 24 months and could last as long as 48 months. If the 50/50 split
between the Geon members and the Hanna members of PolyOne's
post-transaction board is maintained for at least two years after the
consolidation with no changes in personnel among the former Geon
directors on PolyOne's post-transaction board, the Period of Employment
would be 48 months following the consolidation. Whether and which
benefits provided under the change of control agreements would actually
have to be paid will depend on whether the respective participants are
actually or constructively terminated by PolyOne following the
consolidation under circumstances that would entitle them to be paid. In
general, an executive terminated under circumstances entitling him to
payment under the change of control agreement will be entitled to three
years of base salary and bonus and other fringe benefits for a comparable
period. If any payment made to an officer under a change of control
agreement is subject to excise tax under Section 4999 of the Internal
Revenue Code, Geon will make a gross-up payment to put the officer in the
same net-after-tax position that he or she would have been in if the
excise tax were not imposed. See "Geon Executive
Compensation -- Management Continuity Agreements."
The table below presents the amounts payable to Geon's executive officers
and directors under the plans, agreements and arrangements described above
following a change of control, assuming that each of the triggering events
described above is triggered.
<TABLE>
<CAPTION>
SHARES STOCK
UNDER OPTIONS CASH UNDER
LONG-TERM CASH UNDER SUBJECT TO CHANGE
NAME OF EXECUTIVE INCENTIVE INCENTIVE ACCELERATED RESTRICTED OF CONTROL
OFFICER OR DIRECTOR PLANS (1) PLANS (2) VESTING (3) STOCK (4) AGREEMENTS (5)
------------------- ------------ ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Thomas A. Waltermire............... 15,686 $460,000 134,964 36,345 $6,926,000
W. David Wilson.................... 7,470 143,000 64,268 7,331 2,819,000
Donald P. Knechtges................ 7,470 133,000 64,268 7,522 3,146,000
V. Lance Mitchell.................. 7,470 141,000 64,268 7,456 2,364,000
Gregory L. Rutman.................. 7,470 129,000 64,268 6,780 3,076,000
Diane J. Davie..................... 6,000 121,000 50,000 4,722 2,015,000
Dennis A. Cocco.................... 3,478 68,000 9,974 2,400 545,000
Kenneth M. Smith................... 5,124 79,000 14,696 3,231 393,000
Denis L. Belzile................... 3,278 94,000 9,401 2,924 433,000
Gregory P. Smith................... 4,787 52,000 13,730 2,999 341,000
Jean M. Miklosko................... 2,695 31,000 7,728 1,491 231,000
James Baker........................ -- -- 2,500 -- --
Gale Duff-Bloom.................... -- -- 2,500 -- --
J. Douglas Campbell................ -- -- 2,500 -- --
D. Larry Moore..................... -- -- 2,500 -- --
</TABLE>
55
<PAGE> 63
<TABLE>
<CAPTION>
SHARES STOCK
UNDER OPTIONS CASH UNDER
LONG-TERM CASH UNDER SUBJECT TO CHANGE
NAME OF EXECUTIVE INCENTIVE INCENTIVE ACCELERATED RESTRICTED OF CONTROL
OFFICER OR DIRECTOR PLANS (1) PLANS (2) VESTING (3) STOCK (4) AGREEMENTS (5)
------------------- ------------ ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
R. Geoffrey P. Styles.............. -- -- 2,500 -- --
Farah M. Walters................... -- -- 2,500 -- --
</TABLE>
---------------
(1) Represents performance shares granted under Geon's Long-Term Incentive Plan
which become issuable upon a change of control.
(2) Represents "Interim Payments" made to participants in Geon's Management
Incentive Plan and Senior Management Incentive Plan following a change of
control, assuming an August 31, 2000 change of control date.
(3) Represents unvested options which will vest upon a change of control,
assuming an August 31, 2000 change of control date.
(4) Represents restricted stock which will become unrestricted upon a change of
control, assuming an August 31, 2000 change of control date.
(5) Represents the estimated payments that would be made in the case of an
employee's actual or constructive termination following a change of control.
Geon does not expect to make any payments to Messrs. Waltermire, Wilson,
Knechtges, Mitchell, Rutman, Cocco, Belzile, or K. Smith or Ms. Davie
because each of them has been appointed to an executive position with
PolyOne, effective following the consummation of the consolidation.
INTERESTS OF HANNA BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Phillip D. Ashkettle's Employment Agreement. In connection with the
consolidation, Hanna and Mr. Ashkettle intend to enter into an amendment to his
existing employment agreement that will take effect only upon completion of the
consolidation. At the time the consolidation agreement was signed, Hanna and Mr.
Ashkettle tentatively agreed to the following terms regarding his employment
with PolyOne:
- Mr. Ashkettle will serve as Chief Executive Officer of PolyOne through
December 31, 2001, and will serve as Chairman of PolyOne through the
annual shareholders' meeting in 2004. PolyOne will employ Mr. Ashkettle
as an executive consultant until he reaches age 60 in July 2005.
- PolyOne will pay Mr. Ashkettle an initial base salary of at least
$650,000 per year while he is Chairman and Chief Executive Officer. This
salary may be increased, but not decreased, when reviewed by PolyOne's
Compensation Committee. After Mr. Ashkettle retires as Chief Executive
Officer, he will receive $500,000 per year, but no incentive
compensation, while he serves as Chairman of the board of PolyOne and
$250,000 per year while he is an executive consultant to PolyOne.
- Mr. Ashkettle will participate in PolyOne's long-term incentive plan
while Chief Executive Officer and he will continue to "build credit for
time worked" while he performs as Chairman of PolyOne. However, he will
not be eligible for any new awards once he resigns as Chief Executive
Officer of PolyOne.
- Mr. Ashkettle will be entitled to receive reimbursement for country club
initiation fees and assessments upon attaining age 60.
- Mr. Ashkettle may be entitled to reimbursement up to $500,000 for any
capital loss on the sale of his residence for a specified period after he
resigns as Chief Executive Officer of PolyOne.
- Subject to limitations, Mr. Ashkettle will receive a payment of
$3,000,000 at the time he resigns as Chief Executive Officer of PolyOne
in consideration of his early departure from PolyOne. If Mr. Ashkettle's
resignation as Chief Executive Officer of PolyOne is delayed, this amount
will be reduced by certain amounts that Mr. Ashkettle receives as a
result of the delay.
- PolyOne will grant Mr. Ashkettle an option to purchase 250,000 PolyOne
common shares during his term as Chairman or Chief Executive Officer.
56
<PAGE> 64
- Mr. Ashkettle has agreed that the consolidation will not trigger a
"change in control" as that term is defined in Mr. Ashkettle's June 14,
1999, change in control employment agreement.
Hanna and Mr. Ashkettle are currently negotiating the final terms of the
amendment to Mr. Ashkettle's employment agreement.
Change of Control Triggers. Hanna's officers and directors participate in
several benefit plans and agreements pursuant to which their rights to certain
benefits under those plans and agreements are affected by a "change of control"
(as defined in each plan or agreement). The consolidation will result in the
occurrence of a change of control under the plans and agreements described
below. The primary effects of a change of control under these plans and
agreements on the affected Hanna officers and directors is summarized below.
Change of Control Employment Agreements. Hanna has in place existing change
of control employment agreements with ten key employees. These agreements become
operative upon a change of control of Hanna. For this purpose, a change of
control will occur upon the consummation of the consolidation.
The agreements provide that the employees will remain employed by Hanna in
their customary positions beginning upon the occurrence of a change of control
(1) for an initial term of three years which, unless otherwise elected by Hanna
or the employee, is automatically extended for an additional one-year period on
the first anniversary of the change of control and each anniversary after that
time or (2) until the employee's death or attainment of age 65, if sooner.
During this employment period the employee will receive a base salary at least
equal to the annual rate in effect at the time of the change of control, plus
any increases that may be awarded, and a bonus under Hanna's bonus plan at least
equal to the average of the annual bonuses (in some cases, the highest bonus)
paid to him under the plan during the three years preceding the change of
control. In addition, during this employment period the employee will be
entitled to participate in all of Hanna's benefit programs in which he was
participating at the time of the change of control.
If the employee's employment is terminated for any reason other than death,
disability, retirement or cause (as defined in the agreement) during the
employment term, the employee is entitled to receive a payment equal to the
present value of the sum of the salary and bonus due to the employee for the
remainder of his employment term (in some cases 18 months if longer). The
employee is also entitled to a payment equal to the present value of his
benefits under Hanna's welfare benefit plans for the remainder of his employment
term (or 18 months if longer) and an amount equal to the present value of the
incremental benefits to which the employee would have been entitled under
certain Hanna retirement plans if he had been employed during the three-year
period following the employee's termination of employment, or, in some cases,
benefits under Hanna's welfare benefit plans for the remainder of his employment
term and service credit under Hanna retirement plans as if he had been employed
during the remainder of the employment term.
The employee is also entitled to legal fees in some instances. In the event
of a change of control, Hanna is required to transfer amounts to a rabbi trust
to fund the payments due under certain of the agreements. If any payment made to
an employee is subject to the excise tax under Section 4999 of the Internal
Revenue Code, a gross-up payment will be made to place the employee in the same
net-after-tax position as would have been the case if the Section 4999 excise
tax were not imposed. Hanna is entitled to offset against amounts due to the
employee any compensation payments made to the employee by another employer
under certain conditions.
Stock Options, Restricted Stock and Performance Shares. All previously
unexercised stock options granted under Hanna's Long-Term Incentive Plan become
fully exercisable upon the occurrence of a change of control. For this purpose,
the consolidation will result in a change of control. Hanna has also awarded
restricted stock and performance shares under its Long-Term Incentive Plan;
these awards do not contain change of control provisions. Under the terms of the
plan and award agreements, each outstanding Hanna stock option, restricted stock
award and performance share award will be converted automatically at the
effective time into a corresponding award of PolyOne common shares, on terms
adjusted as necessary to preserve the value inherent in the awards. See "The
Consolidation -- Treatment of Options."
Other Plans and Agreements Containing Change of Control Provisions. Hanna's
executives participate in several other benefit plans and agreements under which
their rights to some benefits under those plans and agreements are affected by a
"change of control" (as that term is defined in each plan or agreement).
57
<PAGE> 65
- Some executives are entitled to defer compensation under Hanna's
Voluntary Non-Qualified Deferred Compensation Plan. During the one-year
period following the occurrence of a change of control, the covered
executives may elect to receive a lump sum distribution under the plan.
The consolidation will result in a change of control under these
agreements.
- Hanna has also entered into deferred compensation agreements (with a
related split-dollar life insurance component) and supplemental death
benefit agreements with certain executives. These agreements provide that
upon a change of control, (1) the rights of the covered executives will
continue in full force and effect so long as the executive continues to
pay certain required premiums and (2) the agreements cannot be
unilaterally amended or terminated by Hanna. The consolidation will
result in a change of control under these agreements.
- Some executives are entitled to retirement benefits under Hanna's
Supplemental Retirement Benefit Plan. Within 30 days after the occurrence
of a "potential change of control," Hanna is required to establish and
fund a rabbi trust to provide for the payment of benefits under the plan.
The execution of the consolidation agreement resulted in a potential
change of control for this purpose. In addition, upon the occurrence of a
change of control, the covered executives may elect to receive a lump sum
distribution equal to their benefits under the plan, reduced by ten
percent of their benefits (which will be forfeited). The consummation of
the consolidation would result in the occurrence of a change of control
under the plan.
The table below presents the amounts payable to Hanna's executive officers
and directors under the plans, agreements and arrangements described above
following a change in control, assuming each of the triggering events described
above is triggered.
<TABLE>
<CAPTION>
SHARES UNDER STOCK OPTIONS CASH UNDER
LONG-TERM SUBJECT TO DEFERRED CHANGE
NAME OF EXECUTIVE INCENTIVE ACCELERATED RESTRICTED COMPENSATION OF CONTROL
OFFICER OR DIRECTOR PLANS (1) VESTING (2) STOCK (3) AGREEMENTS (4) AGREEMENTS (5)
------------------- ------------ ------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Phillip D. Ashkettle...... 26,928 520,833 -- $ -- $2,028,100
Lani L. Beach............. 1,903 57,983 85 937,500 685,800
Michael S. Duffey......... 2,502 83,223 371 937,500 844,900
Peter B. Eckle............ 1,093 51,004 -- -- 613,600
Robert A. Garda........... -- 15,000 -- -- --
Jeffrey R. Gwinnell....... 1,964 49,445 4,000 781,000
Garth W. Henry............ 3,066 92,429 1,114 1,276,100 1,014,700
David H. Hoag............. -- 15,000 -- -- --
David Baker Lewis......... -- 7,500 -- -- --
Thomas E. Lindsey......... 1,630 17,640 364 649,700 552,300
John S. Pyke Jr........... 2,341 69,279 -- 1,656,700 768,400
Michael L. Rademacher..... 724 19,524 4,000 -- 516,300
Christopher R. Sachs...... 1,206 13,044 187 -- 518,500
</TABLE>
---------------
(1) Represents performance shares granted under Hanna's Long-Term Incentive Plan
which become issuable based upon actions taken by the Compensation Committee
of its Board of Directors.
(2) Represents unvested options which will vest upon a change of control.
(3) Represents restricted shares which will become unrestricted based upon
actions taken by the Compensation Committee of Hanna's Board of Directors.
(4) Represents total amounts that will be paid commencing at age 62.
(5) Represents the after tax payments that would be made in the case of an
employee's termination following a change in control. Hanna does not expect
to make any payments to Messrs. Ashkettle, Eckle and Rademacher because each
of them has been appointed to an executive position with PolyOne, effective
following the
58
<PAGE> 66
consummation of the consolidation. Mr. Henry has been appointed to an
executive position with PolyOne, however, Hanna and Mr. Henry have agreed
that, under certain circumstances, he would receive a change in control
payment.
INDEMNIFICATION
Geon and Hanna have agreed that after the effective time of the
consolidation, PolyOne will indemnify, to the fullest extent not prohibited by
law, all officers, directors and employees of Geon and Hanna and their
respective subsidiaries against losses, expenses (including reasonable
attorney's fees), claims or damages arising out of actions or omissions
occurring at or prior to the effective time that are based on or arise out of
the fact that such person is or was an officer, director or employee of Geon or
Hanna or their respective subsidiaries. In addition, from and after the
effective time of the consolidation, the directors and officers of Geon and
Hanna who become directors and officers of PolyOne will be entitled to
indemnification under PolyOne's amended and restated articles of incorporation
and regulations. The parties have agreed to cause PolyOne to maintain officer
and director insurance for persons currently covered by either Geon's or Hanna's
directors' and officers' liability insurance policy for a period of six years
from the consummation of the consolidation.
At the effective time of the consolidation, the articles and regulations
attached to the consolidation agreement would become the articles and
regulations of PolyOne. Some of the officers and directors of Geon and Hanna
have indemnification rights and other rights under the regulations. See
"Directors and Executive Officers of PolyOne after the Consolidation."
LONG-TERM INCENTIVE PLAN
Geon and Hanna intend to implement a long-term incentive plan for PolyOne
senior management. The equity based awards under the plan will be based on
targeted earnings plan achievements, capture of profit improvements and
shareholder returns.
POLYONE 2000 STOCK INCENTIVE PLAN
Officers, employees and non-employee directors of PolyOne selected by its
Compensation and Organization Committee will be eligible to receive awards under
the PolyOne 2000 Stock Incentive Plan. It is not possible to determine specific
awards that may be made in the future under the plan. See "PolyOne 2000 Stock
Incentive Plan."
59
<PAGE> 67
DIRECTORS AND EXECUTIVE OFFICERS OF POLYONE AFTER THE CONSOLIDATION
BOARD OF DIRECTORS
At the effective time of the consolidation, PolyOne's board of directors
will consist of Mr. Ashkettle, Mr. Waltermire and ten outside directors selected
equally from the current boards of Geon and Hanna.
The PolyOne directors will be:
<TABLE>
<CAPTION>
CONTINUING GEON DIRECTORS CONTINUING HANNA DIRECTORS
------------------------- ----------------------------
<S> <C>
James K. Baker Phillip D. Ashkettle
Gale Duff-Bloom Wayne R. Embry
J. Douglas Campbell Robert A. Garda
D. Larry Moore Gordon D. Harnett
Thomas A. Waltermire David H. Hoag
Farah M. Walters Marvin L. Mann
</TABLE>
Under the provisions of PolyOne's regulations, either the board or the
shareholders may change the size of the board to no fewer than six or more than
18 directors; provided, however, that through the date of the annual
shareholders meeting in 2004 each increase or decrease in the size of the board
would be by a multiple of two. Additionally, the board would only be able to
change the size of the board by two-thirds vote of the whole board (i.e., the
number of directors that PolyOne would have when there are no board vacancies)
and the shareholders would only be able to change the size of the board by the
affirmative vote of shareholders holding three-fourths of the voting power of
PolyOne represented at the meeting or if the proposed change was recommended by
two-thirds of the whole board, by the affirmative vote of shareholders holding
at least a majority of the voting power of PolyOne represented at the meeting.
MANAGEMENT
Geon and Hanna have agreed that Phillip D. Ashkettle will be Chairman of
PolyOne's board through the 2004 annual shareholders meeting. On the date that
Mr. Ashkettle ceases to be the Chairman, which will be no later than the date of
the 2004 annual shareholders meeting, Thomas A. Waltermire will become the
Chairman of PolyOne's board. If the board establishes an Executive Committee,
Mr. Ashkettle and Mr. Waltermire would each serve on the committee and the
Chairman of the board would also serve as the Chairman of the Executive
Committee.
Additionally, at the effective time of the consolidation, (1) Mr. Ashkettle
will become Chief Executive Officer of PolyOne and, subject to his earlier
death, retirement, resignation or removal pursuant to the terms of the
regulations, would serve in this capacity until December 31, 2001, and (2) Mr.
Waltermire will become President and Chief Operating Officer and, subject to his
earlier death, retirement, resignation or removal pursuant to the terms of the
regulations, will serve in this capacity until December 31, 2001. If Mr.
Ashkettle ceases to be Chief Executive Officer at any time prior to December 31,
2001, and Mr. Waltermire is then serving as President and Chief Operating
Officer, Mr. Waltermire automatically will become the Chief Executive Officer.
Effective January 1, 2002, or earlier if Mr. Ashkettle ceases to be Chief
Executive Officer, Mr. Waltermire will become the Chief Executive Officer of
PolyOne and will hold that position through the 2004 annual shareholders meeting
and after that time until his successor is elected, subject to Mr. Waltermire's
earlier death, retirement, resignation or removal pursuant to the terms of
PolyOne's regulations.
The duties, authorities, responsibilities and reporting relationships of
Mr. Ashkettle and Mr. Waltermire during these periods will be as described in
their employment agreements. See "Interests of Certain Persons in the
Consolidation -- Interests of Geon Board of Directors and Executive Officers,"
and "-- Interests of Hanna Board of Directors and Executive Officers." Through
the date of the 2004 annual shareholders meeting, the board will be prohibited
from removing either Mr. Ashkettle or Mr. Waltermire from any position held
pursuant to his employment agreement except by the affirmative vote of
three-fourths of the whole board (excluding any board members who are also
officers of PolyOne).
On June 5, 2000, Geon and Hanna announced the additional appointments to
PolyOne's senior management team as set forth below. The appointments will take
effect upon the closing of the consolidation.
60
<PAGE> 68
<TABLE>
<CAPTION>
NAME POLYONE POSITION
---- ----------------
<S> <C>
Denis L. Belzile..................... Vice President
Dennis A. Cocco...................... Vice President
Diane J. Davie....................... Vice President
Peter B. Eckle....................... Vice President
Garth W. Henry....................... Vice President
Glenn E. Higby....................... Director - Quality, Environment and Safety
Donald J. Knechtges.................. Vice President
V. Lance Mitchell.................... Vice President
John E. Quinn........................ Vice President
Michael L. Rademacher................ Vice President
Gregory L. Rutman.................... Vice President, Secretary and Assistant Treasurer
Kenneth M. Smith..................... Vice President
W. David Wilson...................... Vice President and Chief Financial Officer
</TABLE>
61
<PAGE> 69
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Geon common stock is listed on the New York Stock Exchange and traded under
the symbol "GON." Hanna common stock is listed on the New York Stock Exchange
and traded under "MAH." The table set forth below includes, for the periods
indicated, (1) the high and low sales prices per share of Geon common stock and
Hanna common stock, in each case as reported on the New York Stock Exchange
Composite Transaction Tape, and (2) the cash dividends declared per share of
Geon common stock and Hanna common stock.
<TABLE>
<CAPTION>
GEON COMMON STOCK HANNA COMMON STOCK
----------------------------- -----------------------------
MARKET PRICE MARKET PRICE
---------------- CASH ---------------- CASH
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter................... $23.50 $19.94 $.125 $25.56 $19.75 $.1125
Second Quarter.................. 24.63 19.25 .125 24.69 17.88 .1125
Third Quarter................... 26.00 17.44 .125 18.25 9.75 .1125
Fourth Quarter.................. 24.25 16.25 .125 15.94 10.56 .1200
1999
First Quarter................... $25.88 $21.56 $.125 $13.13 $10.31 $.1200
Second Quarter.................. 37.00 22.94 .125 17.31 12.38 .1200
Third Quarter................... 35.75 25.00 .125 16.81 10.50 .1200
Fourth Quarter.................. 33.50 24.69 .125 11.75 9.13 .1250
2000
First Quarter................... $34.50 $17.06 $.125 $12.31 $ 9.75 $.1250
Second Quarter.................. 26.00 17.38 .125 13.94 8.81 .1250
Third Quarter
(through July 24, 2000)...... 19.38 16.13 -- 9.88 7.94 --
</TABLE>
On May 5, 2000, the last trading day prior to the public announcement of
the consolidation, the closing price per share of Geon common stock quoted on
the New York Stock Exchange Composite Transaction Tape was $24.00 and the
closing price per share of Hanna common stock reported on the NYSE Composite
Transaction Tape was $11.81. On July 24, 2000, a recent trading day prior to the
date of this document, the closing price per share of Geon common stock reported
on the NYSE Composite Transaction Tape was $ 16.81 and the closing price per
share of Hanna common stock reported on the NYSE Composite Transaction Tape was
$ 8.44. WE URGE STOCKHOLDERS TO OBTAIN CURRENT MARKET QUOTATIONS PRIOR TO MAKING
ANY DECISION WITH RESPECT TO THE CONSOLIDATION.
As of July 17, 2000, there were approximately 3,500 holders of record of
Geon common stock and approximately 4,300 holders of record of Hanna common
stock.
Prior to the effective time, Geon and Hanna have agreed to coordinate
regarding the declaration and payment of dividends on Geon common stock and
Hanna common stock and the record dates and payment dates relating to such
dividends.
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<PAGE> 70
INFORMATION ABOUT THE PARTIES
THE GEON COMPANY
Geon is a leading North American-based performance polymer products and
services company that produces compounds, specialty vinyl resins and
formulations, engineered calendered film, and other value-added products and
services. Geon is a leader in delivering value to customers through its
strengths in polymer technology, manufacturing and supply chain processes,
information technology, environmental and safety performance, overall quality
and operational excellence. Over the past two years, the Company's strategy has
shifted away from commodity PVC resin production, focusing on performance
polymer products and related services. Geon has accomplished this transformation
through a series of acquisitions and joint ventures, including the formation of
OxyVinyls, LP (OxyVinyls) to which Geon contributed its PVC resin manufacturing
assets, Geon's partnership with Occidental Chemical Corporation (OxyChem), and
the acquisition of O'Sullivan Corporation and five formulator businesses in 1998
and 1999.
Geon has 30 manufacturing plants in the United States, Canada, England and
Australia. Geon also participates in joint ventures with operations in the
United States, Canada, Australia, England, Singapore and Colombia. Geon operates
in two business segments: Performance Polymers and Services, and Resin and
Intermediates, employs more than 3,100 people and had revenues of over $1.2
billion in 1999.
M.A. HANNA COMPANY
Hanna is a leading international specialty polymers company having over 60
facilities located through-out the world, 1999 revenues in excess of $2.3
billion and employees numbering over 7,000 located in more than 25 countries.
Hanna conducts is operations through business segments in rubber
processing, plastic processing, and distribution. Through its rubber processing
businesses, Hanna engages in the custom compounding of rubber materials to the
specifications of manufacturers of rubber products and produces rubber colorants
and additives for the rubber industry as a whole. Through its plastic processing
businesses, Hanna engages in the custom compounding of plastic materials to the
specifications of manufacturers of molded plastic products, manufactures custom
formulated colorants for customers in the plastic industry and produces
specialty colorants and additives for the automobile, vinyl building products,
textile, wire and cable and other industries. Through its distribution business,
Hanna distributes thermoplastic resins for major resin producers and engages in
the worldwide distribution of engineered plastic sheet, rod, tube and film
products to industrial and retail customers as well as cutting and machining
plastic products to customers' specifications.
On May 11, 2000, Hanna signed a definitive agreement to sell substantially
all of the assets of its wholly owned subsidiary, Cadillac Plastic Group, Inc.,
to General Electric Company. The terms of the transaction were not disclosed.
Cadillac Plastic Group, with operations in North America, Asia, the United
Kingdom and the Netherlands, promotes, markets and distributes plastic
engineered shapes and is also involved in the fabrication and conversion of
plastic products. Cadillac Plastic Group's Richmond Aircraft Products business
and its interests in three joint ventures with Rohm GmbH & Co. were not included
in the sale to General Electric but strategic alternatives are being considered
for these assets. The businesses to be sold to General Electric had 1999 sales
of $378 million, representing 16% of Hanna's total revenues, and employed
approximately 1,100 of Hanna's associates.
On July 19, 2000, Hanna signed a definitive agreement to sell its Richmond
Aircraft Products unit to UMECO plc. The unit distributes films, bagging
materials and structural foam materials that are used primarily in the
manufacture of parts for the aerospace industry. Richmond Aircraft had 1999
revenues of approximately $27 million, representing approximately 1% of Hanna's
total revenues, and employed approximately 25 of Hanna's associates.
CONSOLIDATION CORP.
Consolidation Corp. was formed as an Ohio corporation for the sole purpose
of completing the consolidation and incorporating the resulting corporation in
Ohio. Prior to the consolidation, Consolidation Corp. will not have conducted
any operations. Geon and Hanna each own 50% of Consolidation Corp.'s outstanding
capital stock. The principal executive offices of Consolidation Corp. are
located at One Geon Center, Avon Lake, Ohio 44012. Its phone number is (440)
930-1000.
63
<PAGE> 71
POLYONE CORPORATION
As a result of the consolidation, PolyOne will be formed by operation of
law at the effective time and will be the resulting corporation. PolyOne will be
an Ohio corporation with articles in the form attached to the consolidation
agreement as Exhibit A and regulations in the form attached to the consolidation
agreement as Exhibit B.
64
<PAGE> 72
DESCRIPTION OF POLYONE CAPITAL STOCK
At the effective time, the authorized capital stock of PolyOne will consist
of: (a) 400,000,000 common shares, and (b) 40,000,000 preferred shares. The
holders of common shares of PolyOne will be entitled to receive dividends as may
be declared from time to time by the board of PolyOne out of funds legally
available for those dividends. The holders of PolyOne common shares will be
entitled to one vote per share on all matters submitted to a vote of
shareholders. Holders of PolyOne common shares will be entitled to receive, upon
any liquidation of PolyOne, all remaining assets available for distribution to
shareholders after satisfaction of PolyOne's liabilities and the preferential
rights of any preferred stock that may then be issued and outstanding. The
outstanding common shares of PolyOne to be issued in the consolidation will be
fully paid and nonassessable. The holders of PolyOne common shares will have no
preemptive, conversion or redemption rights. See "Comparison of Rights of
Holders of Geon and Hanna Common Stock and PolyOne Common Shares."
65
<PAGE> 73
COMPARISON OF RIGHTS OF HOLDERS OF GEON AND HANNA
COMMON STOCK AND POLYONE COMMON SHARES
Upon the consummation of the consolidation, stockholders of Geon, a
Delaware corporation and Hanna, a Delaware corporation, will become shareholders
of PolyOne, an Ohio corporation. Differences between the laws of Delaware and
those of Ohio, and among the Geon and Hanna certificates and by-laws, and the
PolyOne articles and regulations, and the existence of certain other documents
setting forth additional stockholders' rights, will result in several changes in
the rights of stockholders of Geon and Hanna when the consolidation is
completed. A summary of the material changes is set forth below. The
identification of specific differences is not meant to indicate that other
differences do not exist. Consequently, we urge you to read the Geon and Hanna
certificates and by-laws and the PolyOne articles and regulations.
A copy of the Geon Certificate is included as an exhibit to the Annual
Report on Form 10-K filed by Geon with the Commission on March 27, 1997, and a
copy of the Geon by-laws is included as an exhibit to the Form 10-Q filed by
Geon with the Commission on August 9, 1996, as amended by an exhibit to the
Quarterly Report on Form 10-Q filed by Geon with the Commission on August 16,
1999. A copy of the Hanna certificate is included as an exhibit to the Annual
Report on Form 10-K filed by Hanna with the Commission on March 24, 1997, and a
copy of the Hanna by-laws is included as an exhibit to the Current Report on
Form 8-K filed by Hanna with the Commission on November 10, 1997. Copies of the
PolyOne articles and regulations are included as exhibits to the consolidation
agreement.
BUSINESS COMBINATIONS
Generally, under Ohio law, the approval by the affirmative vote of holders
of two-thirds of the voting power of a corporation entitled to vote on the
matter is required for mergers, consolidations, majority share acquisitions,
combinations involving the issuance of shares with one-sixth or more of the
voting power of the corporation, and any transfers of all or substantially all
of the assets of a corporation unless the articles of incorporation of the
corporation specify a different proportion (which cannot be less than a
majority). The PolyOne articles do not contain any provision that alters the
effect of Ohio law in this regard.
Under Delaware law, the approval by the affirmative vote of holders of a
majority of the voting power of a corporation entitled to vote is required for
mergers, consolidations and transfers of all or substantially all of the assets
of the corporation. Neither the Geon certificate nor the Hanna certificate
contain any provision to alter the effect of the Delaware Law in this regard.
But see "-- State Takeover Legislation."
APPRAISAL RIGHTS
Under Ohio law, dissenting shareholders are entitled to appraisal rights in
connection with the transfer of all or substantially all of the assets of a
corporation and in connection with certain amendments to a corporation's
articles of incorporation. Shareholders of an Ohio corporation are also entitled
to appraisal rights if the corporation is merged or consolidated into a
surviving or new entity or if the corporation becomes the surviving corporation
in a merger with another Ohio corporation and in connection therewith the
surviving corporation issues shares having one-sixth or more of its voting power
to shareholders of the corporation which is being merged into it.
Under Delaware Law, generally, stockholders of a Delaware corporation are
entitled to appraisal rights in the event of a merger into or consolidation with
another corporation or entity. However, appraisal rights are not available to
holders of (1) shares listed on a national securities exchange, designated as a
national market system security on the Nasdaq National Market or held of record
by more than 2,000 stockholders or (2) shares of a surviving corporation of a
merger if the merger did not require the approval of the stockholders of such
corporation, unless, in either case, the holders of such stock are required
pursuant to the terms of the merger to accept anything other than (a) shares of
stock of the surviving corporation, (b) shares of stock of another corporation
which are also listed on a national securities exchange, designated as national
market securities on the Nasdaq National Market or held of record by more than
2,000 holders, or (c) cash in lieu of fractional shares of such stock. A
Delaware corporation may provide in its certificate of incorporation that
appraisal rights are available as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the
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corporation is a constituent corporation, or the sale of all or substantially
all of the corporation's assets. Neither Geon stockholders nor Hanna
stockholders have any appraisal rights in connection with the consolidation
because they are receiving stock of PolyOne, which will be listed on the New
York Stock Exchange.
STATE TAKEOVER LEGISLATION
Transactions Involving Interested Shareholders. Section 1704.02 of Ohio law
prohibits any Chapter 1704 transaction (as defined below) for a period of three
years from the date on which a shareholder first becomes an interested
shareholder unless the directors of the corporation approved the transaction
prior to the shareholder becoming an interested shareholder or approved the
transaction pursuant to which the shareholder became an interested shareholder.
A "Chapter 1704 transaction" is defined in Ohio law to include a variety of
transactions such as mergers, consolidations, combinations or majority share
acquisitions between an Ohio corporation and an "interested shareholder" or an
affiliate of an interested shareholder. An interested shareholder is defined
generally as any person who, directly or indirectly, beneficially owns 10% or
more of the outstanding voting stock of the corporation. After the three-year
period, a Chapter 1704 transaction is prohibited unless certain fair price
provisions are complied with, the directors of the corporation approved the
purchase of shares which made the shareholder an interested shareholder, or the
shareholders of the corporation approve the transaction by the affirmative vote
of two-thirds of the voting power of the corporation or such other percentage
set forth in the articles of incorporation of the corporation provided that a
majority of the disinterested shareholders approve the transaction.
Control Share Acquisitions. Section 1701.831 of Ohio law generally
prohibits transactions pursuant to which a person obtains one-fifth or more but
less than one-third of all the voting power of a corporation, one-third or more
but less than a majority of all of the voting power of a corporation, or a
majority or more of all the voting power of a corporation (a "control share
acquisition"), unless the shareholders approve the transaction at a special
meeting, at which a quorum is present, by both the affirmative vote of a
majority of the voting power of the corporation and by the affirmative vote of a
majority of the voting power of the corporation excluding the voting power of
interested shares. A corporation can provide in its articles of incorporation or
regulations that Section 1701.831 does not apply to control share acquisitions
of its shares. Neither the PolyOne articles nor its regulations contain any
provisions to alter the effect of 1701.831 of Ohio law.
Business Combinations with Interested Stockholders. Under Delaware law, a
corporation is prohibited from engaging in any business combination (as defined
below) with an interested stockholder or any entity if the transaction is caused
by the interested stockholder for a period of three years from the date on which
the stockholder first becomes an interested stockholder unless (1) the directors
approved such transaction prior to the stockholder becoming an interested
stockholder or approved the purchase pursuant to which the stockholder became an
interested stockholder or (2) upon the consummation of the transaction pursuant
to which the stockholder became an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation. Delaware
law defines the term "business combination" to include transactions such as
mergers, consolidations or transfers of 10% or more of the assets of the
corporation and defines the term "interested stockholder" generally as any
person who, directly or indirectly, beneficially owns 15% or more of the
outstanding voting stock of the corporation or was the owner of 15% or more of
the outstanding voting stock of the corporation at any time during the
three-year period immediately prior to the date in question. A corporation can
expressly elect not to be governed by the business combination statute in its
certificate of incorporation or by-laws. Neither the Hanna certificate nor
by-laws contain any provision to alter the effect of Delaware law in this
regard.
The Geon certificate requires an affirmative vote of not less than 80% of
the votes entitled to be cast by the holders of all then outstanding shares of
voting stock, voting together as a single class, to affect a business
combination with a substantial stockholder. An 80% vote shall not be required
where all the conditions of one of the following have been satisfied: (1) the
business combination was recommended by a majority of the disinterested
directors present at a meeting of the board at which a quorum is present, or (2)
the amount of cash and value of other consideration to be received by Geon
Common Stockholders is at least equal to the higher of (A) the highest per share
price paid by the substantial stockholder within the two years prior to the
first public announcement of the terms of the proposed combination, or (B) the
fair market value per share of common stock
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on the date of the announcement of the business combination or the date on which
the substantial stockholder became a substantial stockholder. A substantial
stockholder is generally a stockholder who has in the aggregate 20% or more of
the voting power of the corporation, or is an affiliate or assignee or has
otherwise succeeded to any shares which were, within the two years prior to the
business combination, beneficially owned by a substantial stockholder. For
purposes of this section, a business combination is:
- a merger or consolidation with a substantial stockholder, or another
corporation which is, or after the merger would be, an affiliate or
associate of a substantial stockholder;
- any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any substantial stockholder or affiliate of a
substantial stockholder involving assets or securities of the corporation
or any subsidiary having a value of $5,000,000 or more;
- the adoption of any plan or proposal for the liquidation or dissolution
of the corporation proposed by or on behalf of any substantial
stockholder or his affiliate; or
- any reclassification of securities or recapitalization of the
corporation, or any merger of consolidation of the corporation with any
of its subsidiaries or any other transaction which has the effect of
increasing the proportionate share of any stock of any subsidiary that is
beneficially owned by any substantial stockholder or his affiliate.
AMENDMENTS TO CERTIFICATES OR ARTICLES OF INCORPORATION
Under Ohio law, an amendment to the articles of incorporation requires the
affirmative vote of two-thirds of the voting power of a corporation unless a
greater or lesser percentage (which cannot be less than a majority) is specified
in the corporation's articles of incorporation. The PolyOne articles do not
contain any provisions to alter the effect of Ohio law in this regard.
Under Delaware law, to amend a corporation's certificate of incorporation,
the directors of the corporation and a majority of the voting power of the
corporation must approve the amendment. The Hanna certificate does not contain
any provisions to alter the effect of Delaware law in this regard. The Geon
certificate also does not alter the effect of Delaware law in this regard,
except that an affirmative vote of not less than 80% of the votes entitled to be
cast by the holders of all then outstanding shares of voting stock, voting
together as a single class, shall be required to amend, repeal, or adopt any
provision inconsistent with Article Sixth (relating to business combinations
with substantial stockholders) of the Geon certificate. An 80% vote shall not be
required for any amendment, repeal or adoption recommended by a majority of
disinterested directors of the board.
AMENDMENTS TO BY-LAWS AND REGULATIONS
Under Ohio law, the power to adopt, alter and repeal the regulations of a
corporation is vested in the shareholders. These actions can be taken by the
affirmative vote of a majority of the voting power of the corporation at a
meeting held for that purpose, or without a meeting upon written consent of
two-thirds of the voting power, unless the articles of incorporation or
regulations provide for a greater percentage. The PolyOne regulations may be
adopted, altered or repealed by the affirmative vote of (1) two-thirds of the
stock entitled to vote at a regular or special meeting of the stockholders if
there is included in the notice of the meeting the proposed amendment or repeal
of the regulations, or (2) by the written consent of stockholders holding
two-thirds of the voting power of PolyOne. The articles or regulations may
specify a lesser percentage (not to be less than a majority). Notwithstanding
the previous sentence, some provisions of the PolyOne regulations may not be
modified, amended or repealed while they remain in effect, pursuant to their
terms, unless adopted by the affirmative vote of stockholders exercising
three-quarters of the voting power of PolyOne.
Under Delaware law, the power to adopt, alter and repeal the by-laws is
vested in the stockholders unless the certificate of incorporation vests such
power in the directors. Vesting this power in the directors does not divest the
stockholders of power to adopt, alter or repeal the by-laws. The Hanna by-laws
may be amended or repealed by the affirmative vote of (1) two-thirds of the
stock entitled to vote at a regular or special meeting of the stockholders if
there is included in the notice of the meeting the proposed amendment or repeal
of the by-law, or (2) a majority of the Hanna board at any regular or special
meeting if notice of the proposed amendment or repeal
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is included in the notice of the meeting. The Geon by-laws may be amended or
repealed by the affirmative vote of (1) a majority of the stock entitled to vote
at a regular or special meeting of the stockholders if there is included in the
notice of the meeting, or waiver of notice, the proposed amendment or repeal of
the by-law, unless all the holders entitled to vote are present at the meeting,
or (2) a majority of the entire Geon board at any regular or special meeting if
notice of the proposed amendment or repeal is included in the notice of the
meeting, the waiver of notice, or if every director is present at the meeting.
STOCKHOLDER ACTION
Under Ohio law, unless a corporation's articles of incorporation or
regulations prohibit the taking of action without a meeting, any action required
or permitted to be taken at a meeting of the shareholders may be taken without a
meeting with the affirmative vote in a writing setting forth the action signed
by all shareholders who would be entitled to notice of a meeting. The PolyOne
articles and the PolyOne regulations do not prohibit the taking of action by the
shareholders without a meeting.
Under Delaware law, unless a corporation's certificate of incorporation
provides otherwise, any action to be taken or which can be taken at a meeting of
stockholders may be taken without a meeting if a consent in writing setting
forth the action is signed by all of the stockholders having the minimum number
of votes necessary to authorize such action at a meeting. The Hanna certificate
and by-laws do not prohibit the taking of action by the stockholders without a
meeting. The Geon certificate and by-laws permit the taking of action by the
stockholders without a meeting, and without notice or vote, if prior to taking
action, a written consent setting forth the action is signed by the holders of
record of all shares of stock issued and outstanding and entitled to vote.
SPECIAL STOCKHOLDER MEETINGS
Ohio law provides that a special meeting of shareholders may be called by
the chairman of the board, the president, the directors at a meeting, or a
majority of the directors without a meeting, persons holding 25% or more of the
shares entitled to vote at the special meeting (unless the articles of
incorporation or regulations specify a greater or lesser percentage but not more
than a majority) or those other officers or persons specified in the articles of
incorporation or regulations. The PolyOne regulations provide that a special
meeting of the stockholders may be called only by (1) the Chairman of the board
of directors, (2) the secretary within 10 calendar days after receipt of the
written request of a majority of PolyOne directors that the corporation would
have if there were no vacancies on the board, (3) the President or (4) any
person or persons holding not less than 50% of the shares entitled to vote at
the meeting. Special meetings of holders of the outstanding preferred stock, if
any, may be called in the manner and for the purposes provided in the resolution
or resolutions providing for the issuance of the preferred stock.
Delaware law provides that a special meeting of stockholders may be called
by the board of directors or by those persons specified in the certificate of
incorporation or bylaws. The Hanna by-laws provide that a special meeting of the
stockholders may be called only by (1) the chairman of the board of directors,
or (2) the secretary within 10 calendar days after receipt of the written
request of a majority of Hanna directors that the corporation would have if
there were no vacancies on the board. Special meetings of holders of the
outstanding preferred stock, if any, may be called in the manner and for the
purposes provided in the resolution or resolutions providing for the issuance of
the preferred stock. The Geon by-laws provide that a special meeting of the
stockholders may be called by the board of directors or by the Chief Executive
Officer at such times and at such place either within or without the State of
Delaware.
CUMULATIVE VOTING
Under Ohio law, unless otherwise provided in a corporation's articles of
incorporation, each shareholder is entitled to cumulate such shareholder's votes
in the election of directors if the shareholder gives notice to the corporation.
The PolyOne articles prohibit cumulative voting by shareholders.
Delaware law permits the certificate of incorporation of a corporation to
provide that in all elections of directors each stockholder is entitled to
cumulate such stockholder's votes. Neither the Geon certificate nor the Hanna
certificate provides for cumulative voting.
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NUMBER AND ELECTION OF DIRECTORS
Under Ohio law, the number of directors of a corporation may not be less
than three (unless the corporation has less than three shareholders). Ohio law
permits the articles of incorporation or regulations of a corporation to contain
provisions classifying the directors into two or three classes consisting of not
less than three directors in each class (unless the corporation has less than
three directors in which event less than three directors may be in each class).
The term of each class need not be the same but no term for any class may exceed
three years. The PolyOne regulations fix the number of directors at no fewer
than six and no greater than 18, provided that through the date of the annual
meeting of the shareholders in 2004, each increase or decrease is in multiples
of two. Subject to the above restrictions, the number of directors may be
increased or decreased by an affirmative vote of two-thirds of the entire board,
or generally, by an affirmative vote of the shareholders exercising
three-quarters of the voting power of the corporation. Neither the PolyOne
articles or regulations provide for classified directors.
Delaware law provides that a corporation may have one or more directors and
permits the certificate of incorporation or bylaws to contain provisions
classifying the directors into two or three classes. Under Delaware law, there
is no minimum number of directors that must be in each class. The Hanna by-laws
provide that the Hanna board shall consist of the number of directors so
designated only by (1) a majority of the whole board, or (2) the affirmative
vote of the holders of at least 80% of the voting stock of the corporation,
voting together as a single class. These provisions are subject to the rights,
if any, of any series of preferred stock to elect additional directors under
circumstances specified in the preferred stock designation. The Geon by-laws
provide that the Geon board shall consist of not less than three and no more
than 21 directors, as determined by the board from time to time. The number of
directors may be changed by the affirmative vote of the whole board or of at
least a majority of the holders of record of the shares of stock of the
corporation, issued and outstanding and entitled to vote. No decrease in the
number of board members shall decrease the term of a board member.
REMOVAL OF DIRECTORS
Ohio law provides that if shareholders do not have the right to vote
cumulatively, the shareholders may remove any or all directors without cause by
the affirmative vote of a majority of the voting power, unless the articles of
incorporation or regulations require a vote greater than a majority or provide
that no director may be removed from office at all. In the event of such
removal, the shareholders may elect a new director at the same meeting for the
unexpired term of the director removed. Failure to elect a new director is
deemed to create a vacancy. Neither the PolyOne articles nor the PolyOne
regulations contain any provisions to alter the effect of Ohio law in this
regard.
Delaware law provides that any or all directors may be removed with or
without cause by the affirmative vote of a majority of the voting power entitled
to elect directors unless the board of directors is classified, in which case a
director may only be removed for cause, provided that the certificate of
incorporation does not provide otherwise. Neither the Geon certificate nor the
Geon by-laws contain provisions to alter the effect of Delaware law in this
regard. Neither the Hanna certificate nor the Hanna by-laws contain provisions
to alter the effect of Delaware law in this regard.
VACANCIES
Under Ohio law, unless the articles of incorporation or regulations provide
otherwise, the remaining directors (even if less than a majority of the
authorized number of directors) may by the affirmative vote of a majority of the
remaining directors fill any vacancy on the board of directors for the unexpired
term. A vacancy exists if the shareholders do not elect the number of authorized
directors or if the shareholders increase the number of directors and fail at
the meeting at which the number of directors was increased to elect additional
directors. The PolyOne regulations provide that subject to the rights, if any,
of the holders of any series of preferred shares to elect additional directors
under circumstances specified in the preferred share designation, newly created
directorships created as a result of an increase in the number of directors or a
vacancy shall be filled by an election, at any time through the 2002 annual
meeting date, solely by an affirmative vote of a majority of the remaining
directors, or the single remaining director, even if the number of the directors
does not constitute a quorum.
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Delaware law permits a majority of the remaining directors to fill any
vacancy resulting from an increase in the authorized number of directors elected
by all the stockholders voting as a single class. If the holders of any class of
shares are entitled by the certificate of incorporation to elect one or more
directors, any vacancies of directors elected by the class shall be filled by
the affirmative vote of a majority of the remaining directors elected by the
class. The Hanna by-laws provide that subject to the rights, if any, of the
holders of any series of preferred shares to elect additional directors under
circumstances specified in the preferred share designation, newly created
directorships created as a result of an increase in the number of directors or a
vacancy shall be filled by an election, at any time through the 2002 annual
meeting date, solely by an affirmative vote of a majority of the remaining
directors, even if the number of such directors does not constitute a quorum, or
by a sole remaining director. The Geon by-laws provide that whenever any vacancy
shall have occurred in the board by reason other than removal of a director by
the stockholders with or without cause, it shall be filled by a majority vote of
the remaining directors, even though less than a quorum.
LIABILITY AND INDEMNIFICATION OF DIRECTORS
Ohio law provides, with certain limited exceptions, that a director may be
held liable in damages for his acts or omissions as a director only if it is
proved by clear and convincing evidence that he undertook the act or omission
with deliberate intent to cause injury to the corporation or with reckless
disregard for its best interests.
Under Ohio law, Ohio corporations may indemnify directors from liability if
the director acted in good faith and in a manner reasonably believed by the
director to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal actions, if the director had no reason to believe
his action was unlawful. In the case of an action by or on behalf of a
corporation, indemnification may not be made (1) if the person seeking
indemnification is adjudged liable for negligence or misconduct, unless the
court in which the action was brought determines such person is fairly and
reasonably entitled to indemnification or (2) if liability asserted against the
person concerns certain unlawful distributions. The indemnification provisions
of Ohio law require indemnification of a director who has been successful on the
merits or otherwise in defense of any action, suit or proceeding that he was a
party to by reason of the fact that he is or was a director of the corporation.
The indemnification authorized by Ohio law is not exclusive and is in addition
to any other rights granted to directors under the articles of incorporation or
regulations of the corporation or to any agreement between the directors and the
corporation.
The PolyOne articles provide for the indemnification of directors of
PolyOne to the maximum extent permitted by Ohio law, and as may be limited by
the regulations. The regulations provide that PolyOne (1) shall indemnify any
person who was or is a party or is threatened to be made a party to any pending,
threatened, or completed action, whether civil, criminal, or administrative
(other than actions by or in the right of PolyOne) by reason of the fact that he
or she is or was a director or officer of PolyOne, and (2) may indemnify any
person who was or is a party or is threatened to be made a party to any pending,
threatened, or completed action, whether civil, criminal, or administrative
(other than actions by or in the right of PolyOne) by reason of the fact that he
or she is or was an employee or agent of PolyOne, or was acting on PolyOne's
request as an employee, agent, officer, or director of another corporation,
partnership, trust, or other enterprise, as long as that person acted in good
faith. PolyOne shall also indemnify any person who was or is a party or is
threatened to be made a party to any pending, threatened, or completed action or
suit by or in the right of PolyOne to procure a judgment in its favor by reason
of the fact that he or she is or was a director or officer of PolyOne, and
PolyOne may indemnify any person who was or is a party or is threatened to be
made a party to any pending, threatened, or completed action or suit by or in
the right of PolyOne to procure a judgment in its favor by reason of the fact
that he or she is or was an employee or agent of PolyOne, or was acting on
PolyOne's request as an employee, agent, officer, or director of another
corporation, partnership, trust, or other enterprise, as long as that person
acted in good faith and in manner he or she reasonably believed was in the best
interest of PolyOne. However, no indemnity is available in respect of any claim,
issue, or matter as to which that person shall have been adjudged to be liable
for negligence or misconduct on the performance of his or her duties to PolyOne,
unless and only to the extent that a court of common pleas, or another court in
which the suit was brought, determines that in view of the circumstances
surrounding the case, that person is fairly and reasonably entitled to
indemnity.
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Under Delaware law, Delaware corporations may indemnify directors from
liability if the director acted in good faith and in a manner reasonably
believed by the director to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal actions, if the director had no
reason to believe his action was unlawful. In the case of an action by or on
behalf of a corporation, indemnification may not be made if the person seeking
indemnification is adjudged liable, unless the court in which the action was
brought determines the person is fairly and reasonably entitled to
indemnification. The indemnification provisions of Delaware law require
indemnification of a director who has been successful on the merits or otherwise
in defense of any action, suit or proceeding that he was a party to by reason of
the fact that he is or was a director of the corporation. The indemnification
authorized by Delaware law is not exclusive and is in addition to any other
rights granted to directors under the certificate of incorporation or by-laws of
the corporation or to any agreement between the directors and the corporation.
The Hanna certificate provides that no director of Hanna shall be
personally liable to Hanna or its stockholders for or with respect to any acts
or omissions in the performance of his or her duties to Hanna. Each person who
serves, agreed to serve, or has served as a director or officer of Hanna, or
each such person who at the request of the Hanna board or an officer of Hanna
served as an employee or agent of Hanna, or as an agent, employee, director, or
officer of another corporation, partnership, trust, or other enterprise shall be
indemnified by Hanna to the full extent allowable by Delaware law.
Notwithstanding the general indemnification provision, Hanna reserves the right
to contract with any person for greater, or different, indemnity protection.
The Geon by-laws provide that Geon (1) shall indemnify any person who was
or is a party or is threatened to be made a party to any pending, threatened, or
completed action, whether civil, criminal, or administrative (other than actions
by or in the right of Geon) by reason of the fact that he or she is or was a
director or officer of Geon, and (2) may indemnify any person who was or is a
party or is threatened to be made a party to any pending, threatened, or
completed action, whether civil, criminal, or administrative (other than actions
by or in the right of Geon) by reason of the fact that he or she is or was an
employee or agent of Geon, or was acting on Geon's request as an employee,
agent, officer, or director of another corporation, partnership, trust, or other
enterprise, as long as that person acted in good faith. Geon shall also
indemnify any person who was or is a party or is threatened to be made a party
to any pending, threatened, or completed action or suit by or in the right of
Geon to procure a judgment in its favor by reason of the fact that he or she is
or was a director or officer of Geon, and Geon may indemnify any person who was
or is a party or is threatened to be made a party to any pending, threatened, or
completed action or suit by or in the right of Geon to procure a judgment in its
favor by reason of the fact that he or she is or was an employee or agent of
Geon, or was acting on Geon's request as an employee, agent, officer, or
director of another corporation, partnership, trust, or other enterprise, as
long as that person acted in good faith and in manner he or she reasonably
believed was in the best interest of Geon. However, no indemnity is available in
respect of any claim, issue, or matter as to which the person shall have been
adjudged to be liable for negligence or misconduct on the performance of his or
her duties to Geon, unless and only to the extent that a court of common pleas,
or another court in which the suit was brought, determines that in view of the
circumstances surrounding the case, that person is fairly and reasonably
entitled to indemnity.
CONSTITUENCIES PROVISIONS
Section 1701.59 of Ohio law permits a director, in determining what that
director reasonably believes to be the best interests of the corporation, to
consider, in addition to the interests of the corporation's shareholders, any of
the following:
- the interests of the corporation's employees, suppliers, creditors, and
customers;
- the economy;
- the community and societal considerations; and
- the long-term as well as short-term interests of the corporation and its
shareholders, including the possibility that these interests may be best
served by the continued independence of the corporation.
Delaware law contains no comparable provision to Section 1701.59 of Ohio
law.
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GEON EXECUTIVE COMPENSATION
The following table sets forth the compensation received for the three
years ended December 31, 1999, by Geon's former and current Chief Executive
Officers and the persons who were at December 31, 1999, Geon's four other most
highly paid executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------- --------------------- PAYOUTS
OTHER OPTIONS/ LTIP ALL
ANNUAL RESTRICTED SARS PAYOUTS OTHER
NAME AND COMPEN- STOCK (# OF (# OF COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION(2) AWARDS(3) SHARES) SHARES)(4) SATION(5)
------------------ ---- -------- -------- --------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William F. Patient, 1999 $384,615 $310,000 $46,314 $ -0- $ -0- $ -0- $37,397
Former Chairman of the Board 1998 623,269 500,000 53,570 253,000 105,000 10,921 61,397
and Chief Executive Officer(6) 1997 580,000 350,000 79,639 -0- 36,000 -0- 51,100
Thomas A. Waltermire, 1999 522,576 550,000 40,553 -0- -0- -0- 57,693
Chairman of the Board, 1998 390,192 270,000 46,360 -0- 202,446 4,100 36,372
Chief Executive Officer 1997 298,173 182,500 39,736 -0- 11,700 -0- 26,151
and President(6)
W. David Wilson 1999 241,154 214,500 25,068 -0- -0- -0- 23,432
Vice President, Chief 1998 219,231 130,900 26,475 -0- 96,402 1,628 18,998
Financial Officer 1997 177,952 91,300 5,739 -0- 4,000 -0- 16,264
Donald P. Knechtges, 1999 239,711 187,000 35,462 -0- -0- -0- 22,964
Senior Vice President, 1998 232,115 137,500 59,243 -0- 96,402 3,546 41,647
Technology and Business 1997 222,500 114,400 30,330 -0- 9,800 -0- 37,942
Development
V. Lance Mitchell, 1999 239,038 174,375 64,335 -0- -0- -0- 22,742
Vice President, General 1998 213,654 140,625 20,030 -0- 96,402 1,470 19,510
Manager, Compounds 1997 154,610 72,300 5,456 -0- 6,300 -0- 11,904
Gregory L. Rutman, 1999 229,231 176,000 33,394 -0- -0- -0- 21,339
Vice President, General 1998 209,423 114,400 50,810 -0- 96,402 3,093 40,022
Counsel and Secretary 1997 195,000 87,750 35,196 -0- 7,000 -0- 36,660
</TABLE>
---------------
(1) The $310,000 payment to Mr. Patient in 1999 represents an incentive award he
received in recognition of his performance in the transformation of Geon in
1999. All other amounts in this column represent the aggregate bonus
payments to the named executive under Geon's Senior Executive Management
Incentive Plan (the "Senior Executive MIP") or Geon's Management Incentive
Plan (the "MIP") for 1999, 1998 and 1997. The Senior Executive MIP and the
MIP provided that a minimum of 40% of the named executives' bonus awards, if
any, under the plan would be paid in the form of restricted stock awarded
under Geon's incentive stock plans. The participant may also elect to
receive all or any portion of the balance in the form of restricted stock.
For each $1 of the bonus amount paid in the form of restricted stock, $1.25
worth of restricted stock is awarded. The portion of the award, if any, not
paid in restricted stock is paid in cash. Under the terms of the restricted
stock award, the restricted stock awarded may not be transferred for the
three-year period following the date of award. In the event a participant
leaves the employ of Geon prior to the lapse of the restrictions (other than
by reason of death, disability or retirement), the participant will forfeit
up to 100% of the 25% premium received in respect of the award. The amount
of cash (including payments in respect of fractional shares) and the market
value and number of the shares of restricted stock received by the named
executive officers, respectively, in respect of the 1999 bonus payments for
each of the named executive officers is as follows: T.A. Waltermire, $13 and
$549,987 (16,988 shares); W.D. Wilson, $118,019 and $97,481 (3,011 shares);
D.P. Knechtges, $102,013 and $84,984 (2,125 shares); V.L. Mitchell, $77,509
and $96,866 (2,992 shares); and G.L. Rutman, $96,001 and $79,999 (2,471
shares). For 1998, such amounts were as follows: W.F. Patient, $9 and
$499,991 (21,390 shares); T.A. Waltermire, $19 and $269,981 (11,550 shares);
W.D. Wilson, $71,411 and $59,489 (2,545 shares); D.P. Knechtges, $74,995 and
$62,505 (2,674 shares); V.L. Mitchell, $62,505 and $78,119 (3,342 shares);
and G.L. Rutman, $62,414 and $51,986 (2,224 shares). For 1997, such amounts
were as follows: W.F. Patient, $6 and $349,994 (14,973 shares); T.A.
Waltermire, $11 and $182,489 (7,807 shares); W.D. Wilson, $49,809 and
$41,491 (1,775 shares); D.P. Knechtges, $62,414 and $51,986 (2,224 shares);
V.L. Mitchell, $49,018 and $23,283 (1,122 shares); and G.L. Rutman, $39,013
and $48,737 (2,085 shares).
73
<PAGE> 81
(2) For 1999, amounts include tax gross-ups on personal benefits as follows:
W.F. Patient, $19,792; T.A. Waltermire, $15,602; W.D. Wilson, $9,548; D.P.
Knechtges, $13,065; V.L. Mitchell, $15,310; and G.L. Rutman, $12,606. For
1998, amounts include tax gross-ups on personal benefits as follows: W.F.
Patient, $14,566; T.A. Waltermire, $12,591; W.D. Wilson, $8,205; D.P.
Knechtges, $15,811; V.L. Mitchell, $6,900; and G.L. Rutman, $13,818. For
1997, amounts include tax gross-ups on personal benefits as follows: W.F.
Patient, $32,909; T.A. Waltermire, $15,447; W.D. Wilson, $1,741; D.P.
Knechtges, $12,284; V.L. Mitchell, $0; and G.L. Rutman, $9,548.
(3) In 1998, William F. Patient was awarded 11,000 shares of restricted stock
and 105,000 options in lieu of participation in Geon's 1998-2000 Long-Term
Incentive Plan. Except as described in footnote 1, there were no other
awards of restricted stock in 1999, 1998 or 1997 to the named executive
officers other than those awarded under the Senior Executive MIP or the MIP.
(4) Amounts for 1998 represent the number of shares paid out to the named
executive on January 1, 1998 in respect of performance shares awarded to the
named executive in 1995 under Geon's 1995-1997 Long-Term Incentive Plan. The
number of shares awarded was based on Geon's achievement of performance
objectives specified under the plan for the three-year period ended December
31, 1997, and are net of withholding taxes.
(5) Amounts for 1999 represent, respectively, Geon's cash contributions on
behalf of the named executives to Geon's Retirement Savings Plan, amounts
accrued under a benefit restoration plan providing for benefits in excess of
the amounts permitted to be contributed under the Retirement Savings Plan
(and amounts accrued with respect to the Senior Executive MIP and the MIP),
and premium payments by Geon under a split dollar life insurance program as
follows: W.F. Patient, $9,600, $27,797, and $0; T.A. Waltermire, $9,600,
$13,364, and $0; W.D. Wilson, $9,600, $13,832, and $0; D.P. Knechtges,
$9,600, $13,364, and $0; V.L. Mitchell, $9,600, $13,142, and $0; and G.L.
Rutman, $9,600, $11,739, and $0. For 1998, such amounts are as follows: W.F.
Patient, $9,600, $51,797, and $0; T.A. Waltermire, $9,600, $26,772, and $0;
W.D. Wilson, $9,600, $9,398, and $0; D.P. Knechtges, $9,600, $11,071, and
$20,976; V.L. Mitchell, $9,600, $9,910, and $0; and G.L. Rutman, $9,600,
$7,802, and $22,620. For 1997, such amounts were as follows: W.F. Patient,
$9,000, $42,100, and $0; T.A. Waltermire, $9,000, $17,151, and $0; W.D.
Wilson, $9,500, $6,764, and $0; D.P. Knechtges, $9,000, $7,966, and $20,976;
V.L. Mitchell, $9,500, $2,404, and $0; and G.L. Rutman, $9,500, $4,540, and
$22,620.
(6) Mr. Patient served as Chief Executive Officer until May 1999, and as
Chairman of the Board until August 1999. Mr. Waltermire began serving as
Chief Executive Officer in May 1999 and as Chairman of the Board in August
1999.
74
<PAGE> 82
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTION/SARS OPTIONS/SARS
AT FY-END AT FY-END
(# OF SHARES) ($) (2)
SHARES ACQUIRED VALUE --------------- --------------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (# OF SHARES) ($) (1) UNEXERCISABLE UNEXERCISABLE
---- --------------- ---------- --------------- --------------------
<S> <C> <C> <C> <C>
W. F. Patient........ 44,783 $ 672,591 382,516/35,000 $ 4,530,075/415,625
T. A. Waltermire..... 14,075 99,267 119,091/205,295 1,491,112/2,440,015
W. D. Wilson......... 4,094 36,985 61,533/97,302 808,259/1,156,136
D. P. Knechtges...... 10,000 172,500 81,901/98,801 968,469/1,175,061
V. L. Mitchell....... 0 0 13,300/97,902 113,225/1,163,711
G. L. Rutman......... 21,772 282,814 79,001/98,501 965,919/1,171,224
</TABLE>
---------------
(1) Represents the difference between the option exercise price and the last
sale price of a share of Geon's common stock as reported on the New York
Stock Exchange on the date prior to exercise.
(2) Based on the last sale price of a share of Geon common stock of $32 1/2 as
reported on the New York Stock Exchange on December 31, 1999. The ultimate
realization of profit, if any, on the sale of common stock underlying the
option is dependent upon the market price of the shares on the date of sale.
RETIREMENT PENSIONS
Geon has in effect a pension plan for salaried employees which provides
pensions payable at retirement to each eligible employee. The plan makes
available a pension which is paid from funds provided through contributions by
Geon and contributions by the employee, if any, made prior to 1972. The amount
of an employee's pension depends on a number of factors including Final Average
Earnings ("FAE") and years of credited service to Geon. The following chart
shows the annual pension amounts currently available to employees who retire
with the combinations of FAE and years of credited service shown in the chart,
which should be read in conjunction with the notes following the chart. As of
January 1, 1989, the plan generally provides a benefit of 1.15% of FAE times all
years of pension credit plus 0.45% of FAE in excess of covered compensation
times years of pension credit up to 35 years. In addition, employees who were
actively at work on December 31, 1989, may receive an additional pension credit
of 4 years (up to a maximum of 24 years) of pension credit. Benefits become
vested after 5 years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------------------------
FINAL 15 20 25 30 35
AVERAGE ------------------- ------------------- -------- -------- --------
EARNINGS (1) (2) (1) (2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 21,768 $ 27,573 $ 29,025 $ 34,830 $ 36,281 $ 43,537 $ 50,793
$ 200,000 45,768 57,973 61,025 73,230 76,281 91,537 106,793
$ 300,000 69,768 88,373 93,025 111,630 116,281 139,537 162,793
$ 400,000 93,768 118,773 125,025 150,030 156,281 187,537 218,793
$ 500,000 117,768 149,173 157,025 188,430 196,281 235,537 274,793
$ 600,000 141,768 179,573 189,025 226,830 236,281 283,537 330,793
$ 700,000 165,768 209,973 221,025 265,230 276,281 331,537 386,793
$ 800,000 189,768 240,373 253,025 303,630 316,281 379,537 442,793
$ 900,000 213,768 270,773 285,025 342,030 356,281 427,537 498,793
$1,000,000 237,768 301,173 317,025 380,430 396,281 475,537 554,793
$1,100,000 261,768 331,573 349,025 418,830 436,281 523,537 610,793
$1,200,000 285,768 361,973 381,025 457,230 476,281 571,537 666,793
$1,300,000 309,768 392,373 413,025 495,630 516,281 619,537 722,793
$1,400,000 333,768 422,773 445,025 534,030 556,281 667,537 778,793
</TABLE>
75
<PAGE> 83
---------------
(1) Assumes actively employed January 1, 1990 and after.
(2) Includes an additional 4 years of service applicable to pre-January 1, 1990
employees.
(3) The pension plan uses either a "final average earnings" formula or a
"service credit" formula to compute the amount of an employee's pension,
applying the formula which produces the higher amount. The above chart was
prepared using the FAE formula, since the service credit formula would
produce lower amounts than those shown. Under the FAE formula, a pension is
based on the highest four consecutive calendar years of an employee's
earnings. Earnings include salary, overtime pay, holiday pay, vacation pay,
and certain incentive payments including annual cash bonuses, but exclude
awards under long-term incentive programs and the Geon match in Geon's
savings plans. As of December 31, 1999, final average earnings for the
individuals named in the Summary Compensation Table were as follows: W.F.
Patient -- $842,548.20; T.A. Waltermire -- $495,533.80; D.P.
Knechtges -- $319,096.22; W.D. Wilson -- $258,219.14; G.L. Rutman --
$279,807.73; and V.L. Mitchell -- $247,005.80.
(4) In computing the pension amounts shown, it was assumed that an employee
would retire at age 65 and elect to receive a five year certain and
continuous annuity under the pension plan and that the employee would not
elect any of the available "survivor options," which would result in a lower
annual pension. Pensions are not subject to any reduction for Social
Security or any other offset amounts.
(5) As of December 31, 1999, the six executive officers named in the cash
compensation table had the following years of credited service under the
pension plan or subsidiary plans or supplemental agreements: W.F. Patient,
10 years, 2 months; T.A. Waltermire, 25 years, 6 months; W.D. Wilson, 21
years, 11 months; D.P. Knechtges, 34 years, 6 months; V.L. Mitchell, 10
years, 7 months; and G.L. Rutman, 25 years, 2 months.
(6) W. F. Patient became vested in benefits immediately and earned an additional
benefit equal to 1.6 percent of his final average annual earnings for each
year with Geon. These additional benefits are payable under an unfunded,
non-qualified supplemental plan.
(7) Benefits shown in the chart that exceed the level of benefits permitted to
be paid from a tax-qualified pension plan under the Internal Revenue Code
and certain additional benefits not payable under the qualified pension plan
because of certain exclusions from compensation are payable under an
unfunded, non-qualified supplemental pension plan.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Geon's Compensation Committee is currently comprised of Gale Duff-Bloom,
its Chairperson, James K. Baker, D. Larry Moore, and Farah M. Walters.
The Committee's responsibilities include, but are not limited to, reviewing
and approving executive compensation, including base salary, cash bonuses, and
stock incentive awards for the Chief Executive Officer and all other executive
officers of Geon, as well as oversight responsibilities for all broad-based
compensation and benefit programs of Geon.
General Compensation Philosophy. The Committee believes that the total
compensation package for executive officers should be market-based and
performance-oriented, tying a significant amount of compensation to short and
long-term financial and strategic objectives, including increases in stockholder
value. The Committee established the following guiding principles for Geon's
executive compensation program:
- A significant portion of executive officers' total compensation will
depend on the Company's annual and long-term performance, including
creation of stockholder value.
- Non-cash compensation programs will be designed to provide
stock-based incentives which will encourage stock ownership by
executives in order to better align stockholder and executive
interests.
- Significant ownership of Geon's common stock by executive officers
will be encouraged.
76
<PAGE> 84
Executive Compensation
Base Salaries. In 1999, Geon established salaries based on salaries of
comparable positions included in published surveys and a survey of a group of
companies provided by the Committee's independent executive compensation
consultant, Pearl Meyer & Partners, Inc. The survey prepared by Pearl Meyer &
Partners, Inc. includes companies that generally compete with Geon for executive
talent and from whom Geon may recruit future executives. This comparison group
also includes companies from many different industries and therefore differs
from the group of companies used in the performance graph appearing below under
the heading "Geon Stock Performance." The companies used in the performance
graph are generally the companies with which Geon competes for capital and may
be considered useful and appropriate for comparing Geon's stock performance.
Incentive Compensation
Deduction Limitation on Executive Compensation. Section 162(m) of the
Internal Revenue Code and the regulations promulgated under that section
("Section 162(m)") preclude a publicly-held corporation from taking a deduction
for certain compensation in excess of $1 million paid or accrued with respect to
certain executive officers. It is the Committee's intent that Geon's executive
compensation program be designed to allow maximum possible deductibility of
executive compensation paid by Geon.
Geon's Senior Executive MIP was originally submitted to stockholders for
their approval at the 1995 Annual Meeting and was submitted to stockholders for
their reapproval at the 2000 Annual Meeting. The Senior Executive MIP provides
for awards that are wholly contingent on the attainment of performance goals
established by the Committee, eliminates the Committee's discretion to increase
the amount of incentive awards, and provides for administration by a committee
of outside directors. The Committee believes that the Senior Executive MIP has
in the past satisfied and will continue to satisfy the Internal Revenue
Service's requirements for "performance-based" compensation under Section
162(m). Under Section 162(m), performance-based compensation is not subject to
the deductibility limitation imposed by current Internal Revenue Service
regulations.
Cash and Stock Incentives. The executive officers, including the Chief
Executive Officer, are eligible annually to receive bonus awards, consisting of
restricted stock or a combination of both restricted stock and cash, under the
Senior Executive MIP, the MIP, or Geon's 1999 Incentive Stock Plan. Each year
the Committee establishes performance measures to be used to determine an
appropriate payout, if any, under the Senior Executive MIP and the MIP. Target
awards, stated as a percentage of salary, are determined by the Committee at the
beginning of the plan year, although the Committee retains the discretion to
reduce the awards depending on an executive officer's (including the Chief
Executive Officer) individual performance and Geon's performance in meeting
established goals. The Senior Executive MIP and the MIP also establish threshold
performance levels below which no incentives will be paid.
Geon's 1999 Incentive Stock Plan includes provisions for the award of
performance-based compensation that would not be subject to the deductibility
limitations of Section 162(m). The Committee will continue to monitor its
compensation policy, including compensation, if any, paid under the Senior
Executive MIP, the MIP, and the 1999 Incentive Stock Plan, for maximum
deductibility under Section 162(m).
The performance measures used for 1999 under the Senior Executive MIP and
the MIP were based on Geon's and business-units' operating income, certain
non-financial performance measures, and relative total return to stockholders,
as applicable to each participant. Geon's actual performance exceeded threshold
levels for each of the enumerated performance measures and, on average, was
approximately 118% of target. This compares favorably to 1998 performance which
was approximately 88% of target.
Under the terms of the Senior Executive MIP and the MIP, as more fully
described in footnote 1 to the Summary Compensation Table, a mandatory deferral
of 40% of any award under the Senior Executive MIP or the MIP to the executive
officers, including the Chief Executive Officer, is made in the form of
restricted stock awarded under the 1999 Stock Incentive Plan. Executive officers
who receive awards under the Senior Executive MIP and the MIP may elect to
receive the balance of those awards in the form of restricted stock, so that up
to
77
<PAGE> 85
100% of any award under the Senior Executive MIP or the MIP may be paid in the
form of restricted stock. To the extent that any award is paid in the form of
restricted stock, that payment is enhanced by a 25% premium, i.e., for every
$100 otherwise payable under the Senior Executive MIP to an executive, $125
worth of restricted stock is awarded to that executive. With respect to 1999
awards to executive officers under the Senior Executive MIP and the MIP,
approximately 52% of those awards were paid in the form of restricted stock.
In 1998, the Committee granted long-term performance awards under Geon's
1998-2000 Long-Term Incentive Plan. Under the 1998-2000 Long-Term Incentive
Plan, the Committee granted to executive officers incentive awards in the form
of Time-Vested Options, Performance Shares and Challenge Grant Stock
Appreciation Rights ("SARs"). Time-Vested Options are stock options that will
vest December 31, 2003, unless accelerated based upon the stock price
performance of Geon. Performance Shares are awards of common stock based upon
Geon's three-year performance ending December 31, 2000, relative to targets
approved by the Committee for cumulative normalized earnings per share and
relative total stockholder return. These awards may be 0% to 200% of established
targets. Challenge Grant SARs are SARs that will vest only upon the achievement
of certain stock prices at specified times. The 1998-2000 Long-Term Incentive
Plan is intended to align the interests of the executive officers with those of
Geon and its stockholders and to encourage superior performance over time.
Chief Executive Officer. Mr. Patient received an incentive award of
$310,000 in recognition of his performance in the transformation of Geon in 1999
as well as the smooth transition of the leadership of Geon to Mr. Waltermire.
Mr. Waltermire received a salary increase effective upon his becoming Chief
Executive Officer in May 1999. The Committee based the increase upon its review
of Mr. Waltermire's existing compensation arrangements, compensation of chief
executive officers of companies comparable to Geon, and the performance of Mr.
Waltermire and Geon.
Mr. Waltermire participates in the Senior Executive MIP under similar terms
and conditions as other executive officers and as described above. Based on Geon
performance, including record earnings, and a review of Mr. Waltermire's
individual performance, Mr. Waltermire received an award of $440,000 under the
Senior Executive MIP. This award represents approximately 91% of his salary. As
more fully described in footnote 1 to the Summary Compensation Table, 100% of
this amount was deferred in the form of restricted stock.
The Compensation Committee of the Board
of Directors
Gale Duff-Bloom, Chairperson
James K. Baker
D. Larry Moore
Farah M. Walters
February 3, 2000
78
<PAGE> 86
MANAGEMENT CONTINUITY AGREEMENTS
Geon has entered into management continuity agreements (the "Continuity
Agreements") with certain employees, including all of the executive officers
named in the Summary Compensation Table. The purpose of the Continuity
Agreements is to encourage the individuals to carry out their duties in the
event of the possibility of a "change of control" of Geon. The Continuity
Agreements do not provide any assurance of continued employment unless there is
a change of control. The Continuity Agreements generally provide for a two-year
period of employment commencing upon a change of control, which generally is
deemed to have occurred if: (1) any person becomes the beneficial owner of 20%
or more of the combined voting power of Geon's outstanding securities (subject
to certain exceptions), (2) there is a change in the majority of the Board of
Directors of Geon, (3) certain corporate reorganizations occur where the
existing stockholders do not retain more than 60% of the common stock and
combined voting power of the outstanding voting securities of the surviving
entity or (4) there is stockholder approval of a complete liquidation or
dissolution of Geon. The consolidation will result in a change of control.
The Continuity Agreements generally provide for the continuation of
employment of the individuals in the same positions and with the same
responsibilities and authorities that they possessed immediately prior to the
change of control and with the same benefits and level of compensation,
including average annual increases. If the individual's employment is terminated
by Geon or its successor for reasons other than "cause" or is terminated
voluntarily by the individual for "good reason" (in each case as defined in the
Continuity Agreements), generally the individual would be entitled to receive:
(1) compensation for a period of up to three years, commencing at the
individual's base salary rate in effect at the time of the termination and
including average annual increases thereafter, (2) the continuation of all
employee benefits and perquisites and (3) a lump sum equal to the total of (A)
up to three times the individual's annualized incentive compensation, which
shall be equal to the greater of that paid with respect to the calendar year
prior to termination or the "target incentive amount" (as defined in the
Continuity Agreements) for the year of the change of control or the year of
termination and (B) up to three times the "calculated market value" of the
"restricted stock" and "performance stock" awarded to the individual in Geon's
most recent "plan cycle" (in each case as defined in the Continuity Agreements).
The Continuity Agreements also provide for a tax gross-up for any excise tax due
under the Internal Revenue Code for any payments or distributions made under the
agreements.
GEON STOCK PERFORMANCE
Following is a graph which compares the five-year cumulative return from
investing $100 on December 31, 1994, in each of shares of the common stock of
Geon, the S&P 500 index, and the S&P Chemicals index, with dividends assumed to
be reinvested when received. The S&P Chemicals index includes a broad range of
chemical manufacturers. Because of the relationship of Geon's business within
the chemical industry, it is felt that comparison with this broader index is
also appropriate.
79
<PAGE> 87
COMPARISON OF CUMULATIVE TOTAL RETURN TO STOCKHOLDERS
DECEMBER 30, 1994 TO DECEMBER 31, 1999
[GRAPH]
<TABLE>
<CAPTION>
S&P 500 S&P CHEMICALS THE GEON COMPANY
------- ------------- ----------------
<S> <C> <C> <C>
12/30/94 100.00 100.00 100.00
12/29/95 137.54 130.53 90.75
12/31/96 169.09 169.52 74.65
12/31/97 225.48 209.31 90.99
12/31/98 289.93 195.85 91.71
12/31/99 350.93 232.45 131.94
</TABLE>
COMPENSATION OF DIRECTORS
Geon pays directors unaffiliated with Geon an annual retainer of $25,000,
quarterly in arrears, and annually grants to directors unrestricted stock under
its 1999 Incentive Stock Plan equal to $15,000. Geon grants the stock quarterly
and determines the number of shares to be granted by dividing the dollar value
by the arithmetic average of the high and low stock price on the last trading
day of each quarter. Geon also pays fees of $1,000 for each Board and Committee
meeting attended. In addition, the Chairperson of each Committee receives a
fixed annual retainer of $3,000. Geon reimburses directors for their expenses
associated with each meeting attended.
Geon grants each new director who is not an employee of Geon at the time of
his or her initial election or appointment as a director an option to acquire
5,000 shares of Geon common stock. Each director receives an annual director
option to acquire 1,500 shares of Geon common stock upon re-election to the Geon
Board, effective as of the date of the Annual Meeting.
Each director who is not an employee of Geon may defer payment of all or a
portion of his or her compensation as a director under Geon's Non-Employee
Directors' Deferred Compensation Plan (the "Directors' Deferred Compensation
Plan"). A director may defer the compensation as cash or elect to have it
converted into Geon common stock (at a rate equal to 125% of the cash
compensation amount). Deferred compensation, whether in the form of cash or
common stock, is held in trust for the participating directors. Interest earned
on the cash amounts and dividends on the common stock accrue for the benefit of
the participating directors. Geon encourages directors to defer at least 50% of
their fees into common stock of Geon.
Geon eliminated the existing director retirement program as to each
unaffiliated director who was elected at the 2000 Annual Meeting of
Stockholders. Geon compensated these directors for their accrued service by
buying out the then current actuarial value of their retirement plan benefits of
10% of their annual retainer for each full
80
<PAGE> 88
and partial year of service. Geon paid the computed value into the Directors'
Deferred Compensation Plan in Geon common stock at a rate equal to 125% of the
cash compensation amount.
HANNA EXECUTIVE COMPENSATION
The following table sets forth the compensation for the chief executive
officers who held office in 1999 and the four other most highly compensated
executive officers, for services rendered in all capacities to Hanna and its
subsidiaries for the last three years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------- -------------------------------------
AWARDS PAYOUTS
------------------------ ----------
OTHER RESTRICTED
NAME AND ANNUAL STOCK NUMBER OF LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS($)(2) OPTIONS PAYOUTS(3) COMPENSATION(4)
------------------ ---- -------- -------- --------------- ------------ --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phillip D. Ashkettle 1999 $357,083 $481,000 $343,928 0 100,000 N/A 0
Chairman & Chief Executive 1998 N/A N/A N/A N/A N/A N/A N/A
Officer (from 6/14/99) 1997 N/A N/A N/A N/A N/A N/A N/A
M. D. Walker 1999 $500,000 0 $ 3,446 0 100,000 0 $445,089
Chairman & Chief Executive 1998 $115,705 0 0 0 100,000 $120,334 $460,017
Officer (from 10/7/98 to 1997 $330,000 $215,000 $ 3,446 41,715 100,000 $453,600 $246,654
6/14/99) and Chairman from
6/14/99 to 12/31/99)
G. W. Henry 1999 $301,000 $180,000 $ 88,309 6,278 58,520 $ 50,251 $ 47,204
Executive Vice President
of 1998 $258,333 $ 40,000 $ 74,551 3,846 42,667 $ 61,520 $ 60,412
Worldwide Plastics 1997 $236,667 $155,000 $ 71,015 8,434 15,625 $ 91,665 $ 59,460
M. S. Duffey 1999 $249,260 $136,000 $ 286 0 55,769 0 $ 27,370
Senior Vice President,
Finance 1998 $238,700 $ 25,000 $ 455 2,040 34,062 $ 32,400 $ 29,261
& Administration & CFO 1997 $213,333 $117,000 $ 791 5,947 13,896 $ 64,638 $ 29,019
J. S. Pyke, Jr. 1999 $233,295 $127,500 $ 525 0 43,209 0 $ 62,150
Vice President, General 1998 $226,125 $ 27,500 $ 1,419 3,846 31,929 $ 61,520 $ 80,971
Counsel & Secretary 1997 $216,667 $117,000 $ 950 9,558 13,583 $103,950 $ 82,043
</TABLE>
---------------
(1) The column reports Hanna's reimbursement for the Medicare taxes incurred by
the named officers on accrued non-qualified plan benefits. In addition, the
column reports reimbursement to Mr. Ashkettle in connection with his
employment by Hanna of $85,161 for club initiation fees and dues, $93,222
for legal fees and tax reimbursements on those fees and $53,292 for moving
expenses and Hanna also paid relocation fees of $109,375. The column also
reports reimbursement to Mr. Henry of moving expenses and payments to
equalize cost-of-living and housing differences in connection with an
assignment outside of his home country in the amounts of $520 in 1997 and
$1,388 in 1998, and relocation fees, moving expenses and tax reimbursements
on those expenses and club dues aggregating $88,240 in 1999. The aggregate
amount of perquisites and personal benefits provided to the other officers
did not exceed the disclosure threshhold established by the Securities and
Exchange Commission.
(2) The column reports grants of restricted stock to the named individuals
during the fiscal year. The value of the awards shown in the table is
determined by multiplying the number of shares awarded by the closing market
price for the stock on the award date. The total number of restricted shares
and the value of those shares at the end of the last fiscal year, based on
the year-end closing price for the stock, held by Messrs. Walker, Henry,
Duffey, and Pyke were 3,999/$43,739, 1,528/$16,713, 785/$8,586, and
1,121/$12,261, respectively. Restricted shares are issued at the same time
payouts are made under Hanna's 1988 Long-Term Incentive Plan ("LTIP") equal
in value to 25% of the value of the Hanna common stock component of the LTIP
payout; neither the restricted shares nor the other shares issued at the
same time may be transferred for four years, at which time the restrictions
lapse. The named officers receive dividends on their restricted shares at
the same time and frequency as all stockholders.
(3) Payout in cash and market value of Hanna common stock paid under Hanna's
LTIP in the year following the three-year performance period ending December
31, 1998, 1997, and 1996.
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<PAGE> 89
(4) The column reports matching contributions made by Hanna under the Hanna
401(k) and Retirement Plan of $43,749, $29,121, $22,982, and $21,743 for
Messrs. Walker, Henry, Duffey, and Pyke, respectively, and the dollar value
of split dollar life insurance premiums paid in the amounts of $38,261,
$18,083, $4,388, and $40,407 for Messrs. Walker, Henry, Duffey, and Pyke,
respectively. This column also reports distributions to Mr. Walker of
$312,983 from the non-qualified retirement plan and $50,096 from the
Voluntary Non-Qualified Deferred Compensation Plan.
Hanna's Voluntary Non-Qualified Deferred Compensation Plan, approved by
stockholders in 1995, provides that executives whose total annual cash
compensation exceeds $150,000 may elect to defer up to 25% of his or her salary
and up to 100% of his or her short-term compensation and to allocate the
deferral to a cash account ("Cash Account") or an account maintained in shares
of Hanna common stock (the "Stock Account"). Balances in the Cash Account earn
interest quarterly at a rate equal to 125% of the Moody's Corporate Bond Yield
Index. As cash dividends are declared on Hanna common stock, the executive's
Stock Account is credited with additional shares of Hanna common stock
equivalent to cash dividends paid on the balance of shares in the Stock Account.
All deferrals to the Stock Account are "matched" by a 25% premium in the form of
additional shares of Hanna common stock. When the executive retires, dies or
becomes disabled, the full balance in the Cash Account and Stock Account is
distributed to the executive, and if employment terminates for any other reason,
a partial distribution will be made. Mr. Pyke has elected to participate in the
Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE AT
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM
------------------------------------------------------ ----------------------------
PERCENT OF OPTION EXPIRATION
OPTIONS TOTAL OPTIONS EXERCISE DATE OF
NAME GRANTED(#) GRANTED PRICE OPTION 5% 10%
---- ----------- ------------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
P. D. Ashkettle...... 100,000 11.45% $15.9375 06/14/09 $1,002,301 $2,540,027
M. D. Walker......... 100,000 11.45% $11.3125 03/02/09 $ 711,437 $1,802,921
G. W. Henry.......... 58,520 6.70% $10.6250 12/01/09 $ 391,031 $ 990,949
M. S. Duffey......... 55,769 6.39% $10.6250 12/01/09 $ 372,649 $ 944,365
J. S. Pyke, Jr....... 43,209 4.95% $10.6250 12/01/09 $ 288,723 $ 731,680
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FISCAL YEAR-END(#) FISCAL YEAR-END
SHARES ACQUIRED VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ON EXERCISE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
---- --------------- ---------- --------------------- --------------------
<S> <C> <C> <C> <C>
P. D. Ashkettle............. -- $ -- --(E) $ --(E)
100,000(U) $ --(U)
M. D. Walker................ -- $ -- 697,072(E) $58,984(E)
166,666(U) $ --(U)
G. W. Henry................. 6,750 $62,232.98 92,136(E) $ 7,078(E)
92,429(U) $18,288(U)
M. S. Duffey................ -- $ -- 61,055(E) $ --(E)
83,223(U) $17,428(U)
J. S. Pyke, Jr.............. 12,375 $41,680.24 89,297(E) $ 9,437(E)
69,279(U) $13,503(U)
</TABLE>
82
<PAGE> 90
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE BASED PLANS
PERIOD ----------------------------------------------------
NUMBER OF UNTIL THRESHOLD NUMBER TARGET NUMBER MAXIMUM NUMBER
PERFORMANCE MATURATION OF PERFORMANCE OF PERFORMANCE OF PERFORMANCE
NAME SHARE UNITS(#) OR PAYOUT SHARE UNITS(#) SHARE UNITS(#) SHARE UNITS(#)
---- -------------- ----------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
P. D. Ashkettle...... 111,074 3 years 55,537 111,074 222,148
M. D. Walker......... -- -- -- --
G. W. Henry.......... 6,912 3 years 3,456 6,912 13,824
M. S. Duffey......... 5,681 3 years 2,841 5,681 11,362
J. S. Pyke, Jr....... 5,274 3 years 2,637 5,274 10,548
</TABLE>
The number of Performance Shares shown in the table above represent
performance shares granted pursuant to Hanna's 1988 Long-Term Incentive Plan as
amended. Performance Shares represent the right to receive payments under the
plan at the end of the three-year performance period commencing January 1, 2000.
The number of performance shares earned by the named officers at the end of the
three-year cycle will be determined by the Compensation and Organization
Committee and will be based on achievement against earnings per share growth and
return on shareholder equity measures. If the EPS and ROSE targets are met, the
target number of performance shares will be paid out. If the results exceed
target performance, the number of performance shares paid will range between the
target number and the maximum number of performance shares shown in the above
table. If, on the other hand, results are less than target performance, the
number of performance shares paid will range between the target number and the
threshold number of performance shares. If performance after the three-year
performance period fails to reach threshold levels, no performance shares will
be paid to any of the named officers. Payments will be determined based on the
market value of Hanna common stock at the end of the performance period at which
time a portion of the award will be paid in shares of Hanna common stock and a
portion in cash.
DEFINED BENEFIT RETIREMENT PLANS
The Salaried Employees Retirement Income Plan ("SERIP") is a
non-contributory pension plan covering all officers employed by Hanna prior to
January 1, 1999 and certain other salaried employees of Hanna. Effective
December 31, 1998 SERIP was closed to new participants, benefit accruals ceased
and the benefits of the participants were frozen. Upon reaching the normal
retirement date (age 65), each participant in SERIP generally is entitled to
receive monthly for life a basic benefit equal to the greater of (1) the
participant's highest average monthly compensation (including bonuses and
overtime) for 60 consecutive months out of the final 120 months of his or her
employment or (2) 1/12th of the average of his or her annual compensation
(including bonuses and overtime) during any five annual periods in which he or
she received the highest compensation included within the final ten annual
periods of his or her employment prior to January 1, 1999, which is then
multiplied by 2% for the first 20 years of credited service and 1% for the next
20 years of credited service. In addition, benefits are provided for early
retirement and to surviving spouses.
Hanna has adopted an excess benefits plan to pay retirement benefits which
but for limitations under the Employee Retirement Income Security Act of 1974
and the Internal Revenue Code would have been paid under SERIP and will continue
to accrue non-qualified benefits for the executive officers for up to a 5-year
period in connection with the freezing of SERIP. These benefits will be paid out
of the general funds of Hanna or trust funds established for this purpose.
The following table shows estimated annual benefits payable upon retirement
to participants in specified remuneration and years-of-service classifications
under Hanna's above-mentioned two pension plans for salaried
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<PAGE> 91
employees. Benefits payable under the qualified pension plan are not subject to
any deduction for Social Security benefits.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION YEARS OF SERVICE AT AGE 65
FOR LAST 5 YEARS ----------------------------------------------------
OF EMPLOYMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 90,000 $120,000 $135,000 $150,000 $165,000
500,000 150,000 200,000 225,000 250,000 275,000
700,000 210,000 280,000 315,000 350,000 385,000
900,000 270,000 360,000 405,000 450,000 495,000
1,100,000 330,000 440,000 495,000 550,000 605,000
</TABLE>
The credited years of service for retirement benefits for Messrs. Duffey,
Henry, Pyke and Walker are 5, 24, 31 and 23, respectively.
BOARD COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Hanna's executive compensation program is structured and administered to
drive and incent a level of performance necessary to achieve Hanna's vision,
support Hanna's internal culture and operating environment and reinforce its
human resource management values. The objectives of the executive compensation
program are to:
- Establish a pay-for-performance philosophy and policy that places a
meaningful portion of each executive's compensation at risk with the
stockholders, commensurate with the executive's ability to impact bottom
line results;
- Motivate and incent executives to achieve a level of performance
consistent with Hanna's strategic business objectives and reward them for
their achievement;
- Provide total compensation opportunities which are market competitive,
are subject to associated downside risk and offer significant upside
opportunities based on performance, thus enabling Hanna to compete for
and retain outstanding, talented and highly motivated executives who are
vital to Hanna's long-term success;
- Align the interests of executives with the long-term interest of
stockholders through incentive-award opportunities that are linked to the
long-term performance of Hanna and that result in ownership of Hanna
common stock; and
- Retain the skills that are critical to the future success of the Company.
Hanna's executive compensation program is comprised of three principal
components: base salary; annual incentive compensation; and long-term incentive
compensation. As an executive's level of responsibility increases, a greater
portion of his or her potential total compensation opportunity is based on
performance incentives (including stock-based awards), and less on salary; this
approach may result in variability in the executive's actual total cash
compensation level from year to year if there are variations in Hanna's
performance.
The executive total compensation program is designed to be competitive with
the total compensation programs of a broad base of industrial companies with
annual sales levels comparable to Hanna. In order to assess competitive total
compensation programs and establish total compensation opportunities for Hanna
executives, the Committee receives the advice of an independent compensation
consultant and utilizes data contained in independent compensation surveys such
as the Watson Wyatt Data Services' Top Management Report, the Towers Perrin
Compensation Data Bank (Cash Compensation and Long-Term Incentive Plan Surveys),
the Conference Board's report on Top Executive Compensation and Hewitt's Project
777 Executive Compensation Study.
Hanna's total compensation program is structured to provide total
compensation opportunities that are commensurate with Hanna's ability to
demonstrate consistently outstanding performance. In order to drive and
84
<PAGE> 92
reward for a consistent high level of performance, Hanna's total compensation
systems are designed to deliver a total compensation opportunity that is above
average. Hanna targets executive total compensation opportunities for its
executives' outstanding performance at the 65th percentile of total compensation
opportunities afforded to executives performing similar responsibilities in
competitive companies. On the other hand, the total compensation systems are
also designed to be responsive in the event Hanna's actual performance falls
below expectations vis-a-vis the annual operating plan and/or industry
comparisons.
Base Salaries. Hanna targets its executives' base salaries to the median,
or 50th percentile, of base salaries reported in the published surveys
referenced above by comparable companies.
The Committee annually reviews the base salaries of executive officers.
Prior to the meeting at which the annual review occurs, the Committee is
furnished with data on the current total compensation and total compensation
history of each executive officer, current survey data for comparable positions
at comparable industrial companies and individual performance appraisal ratings
by the Chief Executive Officer for each executive officer except himself. At the
meeting the Committee reviews all available data and considers adjustments; in
1999 it made selective adjustments in executive officers' salaries.
Annual Incentive Compensation for 1999. Because Hanna did not fully achieve
its earnings plan for 1999, the Committee approved payments at 80% of target to
the executive officers based on Hanna's performance. The Committee also approved
individual awards for certain executive officers which reflected the executive's
performance for the year.
1999 Long-Term Incentive Plan Awards. Under Hanna's stockholder-approved
Long-Term Incentive Plan, the Committee grants stock options and long-term
incentive plan performance units ("LTIP Units") in the form of Performance
Shares annually to cover a three-year performance period. Awards are based on a
pay grade level formula which takes into account relevant long-term award data
as reported by a broad base of industrial companies in the Towers Perrin
Compensation Data Bank Long-Term Incentive Plan Survey.
In December 1999 the Committee made grants of non-qualified stock options
at a purchase price equal to 100% of the fair market value of Hanna common stock
on the grant date and awards of LTIP Units in the form of Performance Shares for
a three-year performance period beginning on January 1, 2000. The Committee will
establish target performance measures to be attained for the performance period,
with threshold and maximum achievement levels.
1999 Long-Term Incentive Plan Payments. The Committee applied the compound
annual earnings per share growth and three-year average return on stockholders'
equity performance measures established for the three-year performance period
ending December 31, 1998 against actual performance and determined that the
performance was below threshholds, so that executive officers were not entitled
to a payout of LTIP Units for that performance period, but that certain business
unit participants had earned payouts for that period. The Committee elected to
make a portion of the payment to each business unit participant entitled to a
payout in cash and a portion in shares of Hanna common stock, and awarded each
participant shares of restricted Hanna common stock equal in value to 25% of the
common stock portion of the payment. The terms of the restricted stock require
the participant to hold the restricted stock and the stock issued in partial
payment of the LTIP Unit award for four years, at which time the restrictions
lapse.
Chief Executive Officers' Compensation. Mr. M. D. Walker served as Chief
Executive Officer until June 14, 1999, when Mr. Phillip D. Ashkettle was elected
his successor. Mr. Walker's base pay was not increased in 1999 and he did not
receive any incentive compensation for 1999. The Committee awarded Mr. Walker a
non-qualified stock option to purchase 100,000 shares of common stock at the
closing price on March 2, 1999.
Mr. Walker has agreed to provide consulting services to Hanna through June
30, 2002 and in that connection Hanna provides an off-site office and
administrative support.
Mr. Ashkettle was recruited to join Hanna as President and Chief Executive
Officer. In connection with the negotiations to employ Mr. Ashkettle, Hanna
obtained advice from independent consultants and advisors with respect to the
development of a total compensation opportunity for Mr. Ashkettle. Mr.
Ashkettle's base salary and incentive compensation and the size of his stock
option grants were determined based on competitive practices
85
<PAGE> 93
among (1) companies of similar size in the specialty chemicals industry, (2) the
need to employ an experienced chief executive officer from the specialty
chemicals industry and (3) the need to replace certain compensation which Mr.
Ashkettle forfeited upon resigning from his previous employer. Apart from base
salary and the replacement compensation and benefits, Mr. Ashkettle's
compensation is tied to the performance of Hanna and Hanna's common stock price
during his tenure and Mr. Ashkettle's contributions to the growth and
profitability of Hanna.
Mr. Ashkettle's base salary for 1999 reflects payment at the minimum rate
agreed in his Employment Agreement. His annual incentive compensation award for
1999 was determined by the Compensation and Organization Committee based in part
on the assumption that Mr. Ashkettle would have earned an annual incentive
compensation award at target at his previous employer for service with that
employer and in part on Hanna's 1999 performance measured against its earnings
plan, similar to the other executive officers.
Pursuant to the terms of his Employment Agreement and in accordance with
Hanna's Long-Term Incentive Plan, Mr. Ashkettle was granted on June 14, 1999 a
non-qualified stock option to purchase 100,000 shares of Hanna's common stock
and 40,613 LTIP Units in the form of Performance Shares for the performance
period 1999-2001, which are subject to the same option terms and conditions
applicable to other participants in the Long-Term Incentive Plan and the same
target performance measures established for the other executive officers for the
same performance period. In addition, Hanna also granted Mr. Ashkettle on June
14, 1999 a sign-on non-qualified stock option to purchase 531,250 shares of
Hanna's common stock at the closing price on that date of $15.9375 per share. On
December 1, 1999 Mr. Ashkettle was granted a non-qualified stock option to
purchase 100,000 shares of Hanna's common stock, and 70,461 LTIP Units in the
form of Performance Shares for the performance period 2000-2002, in connection
with the annual grants to all participants under Hanna's prior plan. As part of
his Employment Agreement, Hanna will provide Mr. Ashkettle with certain other
compensation and benefits to replace forfeited compensation and benefits, as
more fully described in the section below entitled "Employment Agreements."
Stock Ownership Guidelines. Stock ownership guidelines have been
established for participants in Hanna's Long-Term Incentive Plan which
encourages them to acquire a guideline value of Hanna common stock. The
guidelines are expressed as a multiple of base salary. The multiples range from
three times base salary for the Chief Executive Officer to .5 times base salary
for the non-officer, key manager participants in the Plan. Under the policy
there will be no penalty for failure to achieve the expected levels of ownership
but if a participant does not hold the guideline value of Hanna common stock at
the end of a three-year period, up to one-half of his or her annual incentive
compensation award will be paid in shares of Hanna common stock until the
expected stock ownership value is achieved. The Committee monitors attainment of
the guidelines.
Deductibility of Executive Compensation. Internal Revenue Code Section
162(m) and regulations thereunder respecting the non-deductibility of certain
executive compensation payments in excess of $1 million did not affect the
deductibility of Hanna compensation payments in 1999 and are not expected to
affect materially the deductibility of compensation payments in 2000. In
connection with the agreements negotiated when he joined Hanna, Mr. Ashkettle
agreed to defer certain elements of his compensation. The deferred compensation
will be paid to Mr. Ashkettle after retirement, at which time the deductibility
of such compensation will not be subject to Section 162(m).
Compensation and Organization
Committee
M. L. Mann, Chair
C. A. Cartwright
W. R. Embry
J. T. Eyton
R. W. Pogue
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<PAGE> 94
EMPLOYMENT AGREEMENTS
On June 14, 1999, Hanna entered into an employment agreement with Mr.
Phillip D. Ashkettle by which Hanna agreed to employ Mr. Ashkettle for a period
of three years, initially as President and Chief Executive Officer. The term of
the employment agreement automatically extends for one-year periods on each
anniversary of June 14, 1999 unless either Hanna or Mr. Ashkettle gives notice
otherwise.
Under the terms of the agreement, Mr. Ashkettle is entitled to an annual
base salary of at least $650,000. Hanna agreed to review Mr. Ashkettle's annual
base salary beginning in the fall of 2000 and adjust his salary in accordance
with Hanna's administrative practices for its executive officers.
The agreement also provided that Mr. Ashkettle would be entitled to annual
incentive compensation based on Mr. Ashkettle's attainment of targets for
performance and contributions to the success of Hanna as determined by Hanna's
Compensation and Organization Committee. These awards would be at least 85% of
his base salary, with a potential payout range from 0% to 200% of the target.
To compensate Mr. Ashkettle for the loss of certain payments and benefits
which he forfeited by terminating employment with his previous employer, Hanna
agreed to pay him $1,500,000 in February of each of 2000 and 2001. These
payments are required to be made one-half in cash and one-half in shares of
Hanna's common stock. Mr. Ashkettle agreed to defer receipt of these payments
until his retirement. The timing of these payments, however, would accelerate
upon a change of control (as defined in the agreement) of Hanna. In addition to
other consideration, in lieu of having these payments accelerate upon completion
of the consolidation, Mr. Ashkettle's current employment agreement will be
amended as described in "Interests of Certain Persons in the
Consolidation -- Interests of Hanna Board of Directors and Executive Officers;
Phillip D. Ashkettle's Employment Agreement."
Hanna also entered into a supplemental retirement agreement with Mr.
Ashkettle, replacing a similar agreement with his prior employer. Under the
terms of the agreement, Mr. Ashkettle is entitled to receive annual payments of
$526,000 for life commencing on Mr. Ashkettle's retirement from Hanna if he
retires on or after December 31, 2005. Under certain circumstances, Mr.
Ashkettle could receive those annual payments even if he retires before December
31, 2005. If Mr. Ashkettle dies after attaining age 55 but before the
supplemental retirement benefit commences, Mr. Ashkettle's wife will receive a
survivor benefit commencing on January 1, 2006 for her life. The timing of these
payments, however, would accelerate upon a change of control (as defined in the
agreement) of Hanna. In addition to other consideration, in lieu of having these
payments accelerate upon completion of the consolidation, Mr. Ashkettle's
current employment agreement will be amended as described in "Interests of
Certain Persons in the Consolidation -- Interests of Hanna Board of Directors
and Executive Officers; Phillip D. Ashkettle's Employment Agreement."
Hanna also entered into a nonqualified deferred compensation agreement with
Mr. Ashkettle under which he is entitled to defer portions of his compensation.
Compensation deferred under the agreement will be distributable upon a change in
control. The consummation of the consolidation would be a change in control.
In the event Mr. Ashkettle is terminated by Hanna without cause, he will
generally be entitled to a severance payment equal to the base salary and annual
incentive compensation payments at target for the balance of his employment
period, his stock options will become fully vested and exercisable and he will
be entitled to receive payment for his performance shares as earned, prorated
for his service during the relevant performance period. Hanna will also provide
the supplemental retirement payments described above.
Mr. Ashkettle also entered into a change in control agreement.
Hanna has entered into amended and restated employment agreements with
certain executive officers, including the named executive officers, which become
operative only upon a "change in control" of Hanna, as defined in the
agreements. See "Interests of Certain Persons in the Consolidation -- Interests
of Hanna Board of Directors and Executive Officers."
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<PAGE> 95
COMPENSATION AND ORGANIZATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation and Organization Committee interlocks or insider
participation.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN*
AMONG M.A. HANNA COMPANY, THE S&P 500 INDEX
AND THE S&P CHEMICALS (SPECIALTY) INDEX
[GRAPH]
<TABLE>
<CAPTION>
S&P CHEMICALS (SPECIALTY) S&P 500 M.A. HANNA COMPANY
------------------------- ------- ------------------
<S> <C> <C> <C>
12/94 100.00 100.00 100.00
12/95 131.00 138.00 120.00
12/96 135.00 169.00 144.00
12/97 167.00 226.00 169.00
12/98 142.00 290.00 85.00
12/99 157.00 351.00 78.00
</TABLE>
---------------
* $100 Invested on 12/31/94 in stock or index. Including reinvestment of
dividends. Fiscal year ending December 31.
This performance graph assumes that the value of the investment in Hanna
and each index was $100 on December 31, 1994 and that all dividends were
reinvested.
DIRECTORS' COMPENSATION
Directors who are not full-time employees of Hanna are compensated for
their services by payment of a quarterly retainer fee of $6,750 and a fee of
$1,300 for each Board meeting attended. They also receive a fee of $1,100 for
each committee meeting attended when the meeting occurs on the same day as a
Board meeting and $1,500 when the meeting occurs on a day when no Board meeting
is held; Chairs of Board committees are paid an additional quarterly retainer
fee of $750. Executive Committee members who are not full-time employees of
Hanna are paid an additional quarterly retainer fee of $1,250. Directors who are
also full-time employees of Hanna are not compensated for their services as
directors and members of Board committees.
Under the Directors' Deferred Fee Plan, which was approved by stockholders,
non-employee directors are required to defer a minimum of 25% of their quarterly
Board retainer fee into a Deferred Benefit Account
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<PAGE> 96
maintained in Units, which are accounting units equal in value to one share of
Hanna common stock. Directors may also elect to defer the balance of his or her
retainer fees and meeting fees to the Units account or a cash account. The Units
account is credited with additional units equal in value to cash dividends paid
on the common stock equivalent to the balance of units in the Unit account and
the cash account is credited with interest equal to interest payable on 1-year
U.S. Treasury bills. Each Deferred Benefit Account maintained in Units is
credited after the end of each year with additional units equal in value to 25%
of the value of the units credited to each Deferred Benefit Account during the
year. The Deferred Benefits Accounts are paid to Directors at the termination of
their service or, at the director's election, at his or her death.
One-time grants of options to purchase shares of Hanna's common stock were
granted in 1991 to all non-employee directors then in office and thereafter to
non-employee directors at the time of their election to the Board at an option
price equal to the closing sale price of the common stock on the New York Stock
Exchange on the date of grant. The amount of shares subject to the one-time
grant, adjusted for stock splits, is currently 22,500. One-third of the grant
becomes exercisable after the director has served for one year from the date of
grant, an additional one-third after two years and the balance after three years
of service.
A non-qualified retirement plan for non-employee Directors was terminated
effective May 1, 1997, and no further benefits will accrue under the plan from
that date for incumbent or future Directors. Each Director then in office who
would have been entitled to receive a benefit under the terminated plan received
an amount of restricted common stock of Hanna equal to the net present value on
May 1, 1997 of the benefit he or she would have received under the terminated
plan, and the restrictions shall lapse upon the Director's termination of
service.
Effective May 1, 1998 the non-employee Directors' compensation includes an
annual award of $15,650 in the form of restricted Hanna Company common stock,
valued at 100% of the market value of common stock on May 1. In general, the
restricted shares vest only if the Director serves at least five years on the
Board, with payment on the Director's retirement from the Board. If the
Director's service is terminated for actions opposed to the best interests of
Hanna, the restricted shares will be forfeited. This compensation in restricted
shares is intended to confirm the mutuality of interest among all stockholders,
including the Directors, and maintain director compensation at competitive
levels which may be adjusted as appropriate.
POLYONE CORPORATION 2000 STOCK INCENTIVE PLAN
Geon and Hanna desire to establish a stock incentive plan for PolyOne to
align the interests of PolyOne executives with the long-term interests of
PolyOne shareholders through incentive-award opportunities that are linked to
the long-term performance of PolyOne and that result in the executives'
ownership of PolyOne common shares. In order to foster PolyOne's ability to
attract, retain and motivate officers, employees (or individuals who have agreed
to become employees) and Non-Employee Directors, the Geon and Hanna boards have
approved the stock incentive plan and recommend that the plan be submitted to
their respective stockholders for approval at the special meetings.
A summary description of the plan is set forth below. A full text of the
plan is annexed to this joint proxy statement/prospectus as Annex D. Capitalized
words in the summary have the same meaning as the defined terms in the plan in
Annex D, unless the context dictates otherwise. We urge you to read the plan in
its entirety because it is the legal document that governs the terms of awards
to be granted pursuant to the plan.
SUMMARY OF THE PLAN
Plan Limits. The maximum number of common shares that may be issued or
transferred (1) upon exercise of Option Rights or Appreciation Rights, (2) in
payment of Performance Units or Performance Shares that have been earned, (3) as
Restricted Shares and released from the substantial risk of forfeiture, (4) as
Deferred Shares, (5) as awards to Non-Employee Directors, (6) in payment of
other share-based awards granted under the Plan or, (7) in payment of dividend
equivalents paid with respect to awards made under the Plan, may not exceed, in
the aggregate, 4,500,000 common shares, which may be shares of original
issuance, treasury shares, or shares from the Associates Ownership Trust or The
Geon Company Share Ownership Trust, or a combination of those shares.
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These limits are subject to adjustments as provided in the plan for stock
splits, stock dividends, recapitalizations and other similar events.
Upon the payment of any option price by the transfer to PolyOne of common
shares or upon satisfaction of tax withholding obligations or any other payment
made or benefit realized under the plan by the transfer or relinquishment of
common shares, there shall be deemed to have been issued or transferred only the
net number of shares actually issued or transferred by PolyOne. Upon the payment
in cash of a benefit provided by any award under the plan, any common shares
that were covered by the award shall again be available for issuance or transfer
under the plan.
The number of shares actually issued or transferred by PolyOne upon
exercise of Incentive Stock Options will not exceed 3,000,000; no participant
may be granted Option Rights and Appreciation Rights for more than 250,000
common shares during any calendar year and no participant will be granted Option
Rights and Appreciation Rights in the aggregate for more than 1,000,000 common
shares during any consecutive five years; the number of Performance Shares that
may be paid out under the plan, and the number of Restricted Shares, Deferred
Shares and common shares awarded with respect to other share-based awards, shall
not exceed, in the aggregate, 1,000,000 (excluding all awards of Restricted
Shares to Non-Employee Directors). The limitations contained in this paragraph
are all subject to adjustment as provided in the plan.
Notwithstanding any other provision of the Plan to the contrary, in no
event shall any Participant in any calendar year receive an award of Performance
Shares, Performance Units or Restricted Stock specifying Management Objectives
having an aggregate maximum value as of their respective dates of grant in
excess of $2,500,000. Moreover, in no event shall any Participant earn dividend
equivalents in any one calendar year specifying Management Objectives having a
value in excess of $250,000.
Option Rights. Option Rights may be granted which entitle the Optionee to
purchase common shares at a price not less than its fair market value on the
date determined by the Committee. The option price is payable in cash, by the
actual or constructive transfer of common shares owned by the Optionee not less
than 6 months, Restricted Shares provided that the common shares received upon
exercise of such Option Rights shall be subject to the same risks of forfeiture
or restrictions on transfer as may correspond to the Restricted Shares
surrendered, or any combination of these methods. Any grant of Option Rights may
provide for the deferred payment of the option price on the sale through a bank
or broker of some or all of the shares obtained from the exercise.
Option Rights granted under the plan may be Option Rights that are intended
to qualify as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code or Option Rights that are not intended to so qualify or
combinations thereof. Except in the case of incentive stock options, the
Committee may provide for the payment of dividend equivalents to the Optionee on
either a current or deferred or contingent basis or may provide that such
equivalents shall be credited against the option price.
No Option Rights may be exercised more than 10 years from the date of
grant. Each grant to an employee must specify the period of continuous
employment that is necessary before the Option Rights become exercisable and may
provide for the earlier exercisability of the Option Rights in the event of
retirement or death or disability of the participant. Any grant of Option Rights
may specify Management Objectives (as described below) that must be achieved as
a condition to exercise the rights.
Appreciation Rights. Appreciation Rights provide to participants an
alternative means of realizing the benefits of Option Rights. They represent the
right to receive from PolyOne an amount, determined by the Committee and
expressed as a percentage not exceeding 100%, of the difference between the base
price established for the Rights and the market value of the common shares on
the date the rights are exercised. Appreciation Rights can be tandem (i.e.,
granted with Option Rights to provide an alternative to exercise of the Option
Rights) or freestanding. Tandem Appreciation Rights may only be exercised at a
time when the related Option Right is exercisable and the spread is positive,
and the related Option Right must be surrendered for cancellation. Free-standing
Appreciation Rights must have a base price per Right that is not less than the
fair market value of the common shares on the date of grant, must specify the
period of continuous employment that is necessary before the Appreciation Rights
become exercisable (except that they may provide for the earlier exercise of the
Appreciation Rights in the event of retirement or death or disability of the
participant) and may not
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be exercisable more than 10 years from the date of grant. Any grant of
Appreciation Rights may specify that the amount payable by PolyOne on exercise
of an Appreciation Right may be paid in cash, in common shares or in any
combination of cash or shares, and may either grant to the recipient or retain
in the Committee the right to elect among those alternatives. Any grant of
Appreciation Rights may provide for the payment of dividend equivalents in the
form of cash or common shares paid on a current, deferred or contingent basis.
Any grant of Appreciation Rights may specify Management Objectives that must be
achieved as a condition to the exercise the rights.
Performance Units and Performance Shares. A Performance Unit is the
equivalent of $1.00 and a Performance Share is the equivalent of 1 common share.
The participant to whom a Performance Unit or Performance Share is granted will
be given one or more Management Objectives to meet within a specified period of
not less 3 years (the "Performance Period"). The specified Performance Period
may be subject to earlier termination in the event of retirement or death or
disability of the participant. A minimum level of acceptable achievement will
also be established by the Committee. If by the end of the Performance Period,
the participant has achieved the specified Management Objectives, the
participant will be deemed to have fully earned the Performance Units or
Performance Shares. If the participant has not achieved the Management
Objectives, but has attained or exceeded the predetermined minimum level of
acceptable achievement, the participant will be deemed to have partly earned the
Performance Units or Performance Shares in accordance with a predetermined
formula. To the extent earned, the Performance Units or Performance Shares will
be paid to the participant at the time and in the manner determined by the
Committee in cash, common shares or any combination of cash and common shares.
The grant may provide for the payment of dividend equivalents in cash or in
common shares on a current, deferred or contingent basis.
Restricted Shares. Restricted Shares constitute an immediate transfer of
ownership to the recipient in consideration of the performance of services. The
participant has dividend and voting rights on these shares. Restricted Shares
must be subject to a "substantial risk of forfeiture" of the shares, within the
meaning of Section 83 of the Internal Revenue Code, for a period of at least
three years to be determined by the Committee on the date of the grant. In order
to enforce these forfeiture provisions, the transferability of Restricted Shares
will be prohibited or restricted in the manner prescribed by the Committee on
the date of grant for the period during which these forfeiture provisions are to
continue. The Committee may provide for the earlier termination of the
forfeiture provisions in the event of retirement or death or disability of the
participant.
Any grant of Restricted Shares may specify Management Objectives which, if
achieved, will result in termination or early termination of the restrictions
applicable to the shares. Any of these grants must also specify in respect of
specified Management Objectives, a minimum acceptable level of achievement and
must set forth a formula for determining the number of Restricted Shares on
which restrictions will terminate if performance is at or above the minimum
level, but below full achievement of the specified Management Objectives.
Deferred Shares. Deferred Shares constitute an agreement to issue shares to
the recipient in the future in consideration of the performance of services, but
subject to the fulfillment of those conditions that the Committee may specify.
The participant has no right to transfer any rights under his or her award and
no right to vote the Deferred Shares. The Committee must fix a deferral period
of at least one year at the time of grant, and may provide for the earlier
termination of the deferral period in the event of retirement or death or
disability of the participant. The Committee may authorize the payment of
dividend equivalents on the Deferred Shares, in cash or in common shares, on a
current, deferred or contingent basis.
Other Awards. Other awards may be granted that are denominated or payable
in, valued in whole or in part by reference to, or otherwise based on, or
related to, common shares. In addition, cash awards, as an element of or
supplement to any other award granted under this plan, may also be granted.
Common shares may also be granted as a bonus or in lieu of obligations of
PolyOne or a subsidiary to pay cash or deliver other property under the plan or
under other plans or compensatory arrangements.
Management Objectives. The plan requires that the Committee establish
"Management Objectives" for purposes of Performance Units and Performance
Shares. When so determined by the Committee, Option Rights, Appreciation Rights,
Restricted Shares and dividend equivalents may also specify Management
Objectives. Management Objectives may be described in terms of either
company-wide objectives or objectives that are
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related to the performance of the individual participant or subsidiary,
division, department or function within PolyOne or a subsidiary in which the
participant is employed. Management Objectives applicable to any award to a
participant who is, or is determined by the Committee likely to become, a
"covered employee" within the meaning of 162(m)(3) of the Internal Revenue Code
shall be limited to specified levels of growth in one or more of the following:
revenues, earnings before operations, earnings before or after interest and
taxes, net income, cash flow, earnings per share, debt to capital ratio,
economic value added, return on total capital, return on invested capital,
return on equity, return on assets, total return to stockholders earnings before
or after interest, depreciation, amortization or extraordinary or special items,
return on investment, free cash flow, cash flow return on investment (discounted
or otherwise), net cash provided by operations, cash flow in excess of cost of
capital, operating margin, profit margin, stock price and/or strategic business
criteria consisting of one or more objectives based on meeting specified product
development, strategic partnering, research and development, market penetration,
geographic business expansion goals, cost targets, customer satisfaction,
employee satisfaction, management of employment practices and employee benefits,
supervision of litigation and information technology, and goals relating to
acquisitions or divestitures of subsidiaries, affiliates and joint ventures.
Except in the case of such a covered employee, if the Committee determines that
a change in the business, operations, corporate structure or capital structure
of PolyOne, or the manner in which it conducts its business, or other events or
circumstances render the Management Objectives unsuitable, the Committee may
modify the Management Objectives, in whole or in part, as the Committee deems
appropriate and equitable. Additionally, even in the case of a covered employee,
a Management Objective can be modified if the modification would not result in
PolyOne's loss of the otherwise available exemption of the award under Section
162(m).
Awards to Non-Employee Directors. Non-Employee Directors may from time to
time be granted Option Rights and may be awarded Restricted Shares. Each grant
of Option Rights will be made on the same terms and conditions as described
above except that the plan stipulates that the Option Rights will vest equally
over three years with accelerated vesting in the event of termination of
service, other than by death or disability, as to the Option Rights that would
be vested on a date which is six months and a day after the termination of
service. Grants of Restricted Shares will be made consistent with the provisions
described above.
Eligibility. Officers and employees (including individuals who have
received offers to become employees) of PolyOne and its subsidiaries, as
determined by the Committee, may be selected to receive benefits under the plan.
In addition, Non-Employee Directors of PolyOne will be eligible for grants of
Option Rights and Restricted Shares as described above under the heading "Awards
to Non-Employee Directors."
Transferability. The Committee, in its sole discretion, may provide for
transferability of particular awards under the plan. Otherwise, Option Rights
and other derivative securities awarded under the plan will not be transferable
by a participant other than by will or the laws of descent and distribution. Any
award made under the plan may provide that any common shares issued or
transferred as a result of the award will be subject to further restrictions
upon transfer.
Adjustments. The number of shares covered by outstanding Option Rights,
Appreciation Rights, Performance Shares and Deferred Shares and the prices per
share applicable thereto, are subject to adjustment in certain situations as
provided in the plan.
Foreign Employees. The Committee may provide for special terms for awards
to participants who are foreign nationals or who are employed by PolyOne or any
subsidiary outside the United States as the Committee may deem necessary or
appropriate to accommodate differences in local law, tax policy or custom.
Administration. The board of directors, as constituted from time to time,
or a committee or subcommittee of the board, will administer and interpret the
plan. The board of directors may take any action under the plan that would
otherwise be the responsibility of the Committee and all references in this
summary of the plan to the Committee shall be deemed to be references to the
board of directors.
Amendments and Other Matters. The plan may be amended by the Committee so
long as any amendment that must be approved by the shareholders of PolyOne in
order to comply with applicable law or the rules of the New York Stock Exchange
is not effective until the approval has been obtained.
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The Committee may not, without the further approval of the shareholders of
PolyOne, authorize the amendment of any outstanding Option Right to reduce the
option price. Furthermore, no Option Right may be cancelled and replaced with
awards having a lower option price without further approval of the shareholders
of PolyOne. The Committee may cancel, rescind, suspend, withhold or otherwise
limit or restrict any unexpired, unpaid or deferred award at any time if a
participant is not in compliance with the agreement or document evidencing the
award and the plan or if the participant engages in any "detrimental activity",
which is defined in Section 16 of the plan to include generally any conduct or
an act which is determined to be injurious, detrimental or prejudicial to any
interest of PolyOne.
The Committee may permit participants to elect to defer the issuance of
common shares or the settlement of awards in cash under the plan. The Committee
also may provide that deferral settlements include payment or crediting of
interest on the deferred amounts or the payment or crediting of dividend
equivalents where the deferral amounts are denominated in common shares.
Plan Benefits. Currently, it is not possible to determine specific amounts
that may be awarded in the future under the plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of some of the Federal income tax
consequences of transactions under the plan based on the Internal Revenue Code,
as presently in effect. This summary is not intended to be complete and does not
describe state or local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
Non-qualified Stock Options. In general, (1) no income will be recognized
by an Optionee at the time a non-qualified Option Right is granted; (2) at the
time of exercise of a nonqualified Option Right, ordinary income will be
recognized by the Optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise; and (3) at the time of sale of shares
acquired pursuant to the exercise of a non-qualified Option Right, appreciation
(or depreciation) in value of the shares after the date of exercise will be
treated as capital gain (or loss) depending on how long the shares have been
held.
Incentive Stock Options. No income generally will be recognized by an
Optionee upon the grant or exercise of an incentive stock option. However, the
excess of the fair market value of the shares on the exercise date over the
option price will be included in the Optionee's income for purposes of the
alternative minimum tax. If common shares are issued to the Optionee pursuant to
the exercise of an incentive stock option, and if no disqualifying disposition
of such shares is made by such Optionee within two years after the date of the
grant or within one year after the transfer of such shares to the Optionee, then
upon sale of the shares, any amount realized in excess of the option price will
be taxed to the Optionee as a capital gain and any loss sustained will be a
capital loss.
If common shares acquired upon exercise of an incentive stock option are
disposed of prior to the expiration of either holding period described above,
the Optionee generally will recognize ordinary income in the year of disposition
in an amount equal to the excess (if any) of the fair market value of such
shares at the time of exercise (or if less, the amount realized on the
disposition of the shares in a sale or exchange) over the option price paid for
the shares. Any further gain (or loss) realized by the Optionee generally will
be taxed as either short-term or long-term capital gain (or loss) depending on
the holding period.
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of a tandem Appreciation Right or a freestanding
Appreciation Right. When the Appreciation Right is exercised, the participant
normally will be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any unrestricted common shares received on the exercise.
Performance Units and Performance Shares. No income generally will be
recognized upon the grant of Performance Units or Performance Shares. Upon
payment in respect of the earn-out of Performance Units or
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Performance Shares, the recipient generally will be required to include as
taxable ordinary income in the year of receipt an amount equal to the amount of
cash received and the fair market value of any unrestricted common shares
received.
Restricted Shares. The recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares (reduced by an amount, if any, paid by the participant for the
Restricted Shares) at such time as the shares are no longer subject to
forfeiture or restrictions on transfer for purposes of Section 83 of the
Internal Revenue Code ("Restrictions"). However, a participant who so elects
under Section 83(b) of the Internal Revenue Code within 30 days of the date of
receipt of the shares will have taxable ordinary income on the date of receipt
of the shares equal to the excess of the fair market value of the shares
(determined without regard to the Restrictions) over the purchase price, if any,
of the Restricted Shares. If a Section 83(b) election has not been made, any
dividends received with respect to Restricted Shares that are subject to the
Restrictions generally will be treated as compensation that is taxable as
ordinary income to the participant.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
common shares on the date that the shares are transferred to the participant
under the award (reduced by any amount paid by the participant for the Deferred
Shares), and the capital gain/loss holding period for the shares will also
commence on the date that the shares are transferred to the participant.
TAX CONSEQUENCES TO POLYONE OR SUBSIDIARY
To the extent that a participant recognizes ordinary income in the
circumstances described above, PolyOne or the subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, the amount recognized as income meets the
test of reasonableness, is an ordinary and necessary business expense, is not an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code and is not disallowed by the limitation on certain executive
compensation under Section 162(m) of the Internal Revenue Code.
VOTE REQUIRED TO APPROVE THE PLAN
A favorable vote of the majority of votes cast on the matter by each of the
Geon stockholders and the Hanna stockholders is necessary for approval of the
plan.
Each of the Geon Board and the Hanna Board unanimously recommends a vote
FOR the approval of the PolyOne 2000 Stock Incentive Plan.
LEGAL MATTERS
The validity of the common shares of PolyOne to be issued in connection
with the consolidation will be passed upon for PolyOne by Thompson Hine & Flory
LLP, Cleveland, Ohio. Certain legal matters regarding the U.S. federal income
tax consequences of the consolidation will be passed upon for Hanna by Jones Day
Reavis & Pogue, Cleveland, Ohio, and for Geon by Thompson Hine & Flory LLP,
Cleveland, Ohio.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Geon's consolidated
financial statements and financial schedule included or incorporated by
reference in Geon's Annual Report on Form 10-K for the year ended December 31,
1999, as set forth in their reports, which are incorporated by reference in this
document which, as to the year 1999 is based in part on the report of other
auditors. Geon's financial statements and schedule are incorporated by reference
in reliance upon such reports, given on their authority as experts in accounting
and auditing.
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Ernst & Young LLP, independent auditors, have audited Consolidation Corp.'s
balance sheet at June 30, 2000, as set forth in their report. We've included
those financial statements in this document in reliance on their report, given
on their authority as experts in accounting and auditing.
The financial statements and financial statement schedule incorporated in
this joint proxy statement/ prospectus by reference to the Annual Report of Form
10-K of Hanna for the year ended December 31, 1999, have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in auditing and accounting.
The financial statements of OxyVinyls, LP included in Geon's Annual Report
on Form 10-K for the year ended December 31, 1999, and incorporated by reference
in this document have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report, and are incorporated in reliance upon
the authority of that firm as experts in accounting and auditing in giving said
report.
The financial statements of the OxyChem Transferred Businesses included in
Geon's Current Report on Form 8-K dated May 13, 1999, and incorporated by
reference in this document have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report, and are incorporated in
reliance upon the authority of that firm as experts in accounting and auditing
in giving said report.
The financial statements of O'Sullivan Corporation included in Geon's
Current Report on Form 8-K/A dated September 20, 1999, and incorporated by
reference in this document have been audited by Yount, Hyde & Barbour, P.C.,
independent auditors, as indicated in their report, and are incorporated in
reliance upon the authority of that firm as experts in accounting and auditing
in giving said report.
SHAREHOLDER PROPOSALS
Shareholders of PolyOne may submit proposals to be considered for
shareholder action at the 2001 annual meeting of shareholders if they do so in
accordance with applicable regulations of the Securities and Exchange
Commission. Any of these proposals must be received by the Secretary of PolyOne
no later than November 15, 2000, in order to be considered for inclusion in
PolyOne's 2001 annual meeting proxy materials. If a shareholder desires to bring
business before the 2001 annual meeting of shareholders that is not a proposal
submitted to PolyOne for inclusion in PolyOne's proxy statement, notice must be
received by the Secretary of PolyOne on or before the later of the 90th day
before the day of the 2001 annual meeting or 10 days after public announcement
of the 2001 annual meeting.
Geon and Hanna will hold their 2001 annual meetings of stockholders only if
the consolidation is not completed before the time of the meetings. In the event
that these meetings are held, any proposals of stockholders intended to be
presented at the 2001 annual meetings of stockholders must be received by the
Secretary of Geon and the Secretary of Hanna no later than November 15, 2000,
and November 24, 2000, respectively, in order to be considered for inclusion in
the proxy materials relating to those meetings.
OTHER MATTERS
As of the date of this joint proxy statement/prospectus, the Geon board and
the Hanna board know of no matters that will be presented for consideration at
the Geon special meeting or the Hanna special meeting, respectively, other than
as described in this joint proxy statement/prospectus. If any other matters do
properly come before either special meeting or any adjournments or postponements
of those special meetings and are voted upon, the enclosed proxies will be
deemed to confer discretionary authority on the individuals named as proxies to
vote the shares represented by those proxies as to any of those other matters.
The individuals named as proxies intend to vote or not to vote in accordance
with the recommendation of the respective managements of Geon and Hanna.
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Representatives of Ernst & Young LLP will be present at the Geon special
meeting and representatives of PricewaterhouseCoopers LLP will be present at the
Hanna special meeting. In each case, those representatives will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
WHERE YOU CAN FIND MORE INFORMATION
Geon and Hanna file annual, quarterly, and special reports, proxy
statements, and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements, or other information the
companies file at the Securities and Exchange Commission's public reference
rooms maintained by the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the
Securities and Exchange Commission at Seven World Trade Center, Suite 1300, New
York, New York 10048 and in the Citicorp Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661. Copies of this information may be obtained by
mail from the Public Reference Section of the Securities and Exchange Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. The Geon and Hanna filings with the
Securities and Exchange Commission are also available to the public from
commercial document retrieval services and at the web site maintained by the
Securities and Exchange Commission at http://www.sec.gov.
Geon and Hanna have filed with the Securities and Exchange Commission an
S-4 registration statement with respect to the PolyOne common shares to be
issued to holders of Geon and Hanna common stock under the consolidation
agreement. This joint proxy statement/prospectus constitutes the prospectus of
PolyOne that is filed as part of the registration statement. Other parts of the
registration statement are omitted from this joint proxy statement/prospectus in
accordance with the rules and regulations of the Securities and Exchange
Commission. Copies of the registration statement, including exhibits, may be
inspected, without charge, at the offices of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be
obtained from the Securities and Exchange Commission at prescribed rates.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS TO VOTE ON THE CONSOLIDATION. NEITHER GEON NOR HANNA HAVE
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THE JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, AND
THE MAILING OF THE JOINT PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS SHALL NOT
CREATE ANY IMPLICATION TO THE CONTRARY.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows the companies to "incorporate
by reference" information into this joint proxy statement/prospectus. This means
that Geon and Hanna can disclose important information to you by referring you
to another document filed separately with the Commission. The information
incorporated by reference is considered to be a part of this joint proxy
statement/prospectus, except for any information that is superseded by
information that is included directly in this document.
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This joint proxy statement/prospectus incorporates by reference the
documents listed below that Geon and Hanna have previously filed with the
Commission. These documents contain important information about Geon and Hanna
and their respective financial conditions.
<TABLE>
<S> <C>
GEON'S FILINGS WITH THE COMMISSION PERIOD/FILING DATE
Current Report on Form 8-K.................................. Filed May 13, 1999
Current Report on Form 8-K/A................................ Filed September 20, 1999
Annual Report on Form 10-K.................................. Year ended December 31, 1999
Quarterly Report on Form 10-Q............................... Quarter ended March 31, 2000
Current Report on Form 8-K.................................. Filed April 7, 2000
Current Report on Form 8-K.................................. Filed April 20, 2000
Current Report on Form 8-K.................................. Filed April 27, 2000
Current Report on Form 8-K.................................. Filed May 9, 2000
Current Report on Form 8-K.................................. Filed May 9, 2000
Current Report on Form 8-K.................................. Filed June 6, 2000
Current Report on Form 8-K.................................. Filed June 20, 2000
Current Report on Form 8-K.................................. Filed July 10, 2000
Current Report on Form 8-K.................................. Filed July 21, 2000
Current Report on Form 8-K.................................. Filed July 26, 2000
HANNA'S FILINGS WITH THE COMMISSION PERIOD/FILING DATE
Annual Report on Form 10-K.................................. Year ended December 31, 1999
Quarterly Report on Form 10-Q............................... Quarter ended March 31, 2000
Current Report on Form 8-K.................................. Filed May 9, 2000
Current Report on Form 8-K.................................. Filed May 11, 2000
Current Report on Form 8-K.................................. Filed July 26, 2000
</TABLE>
You may already have received some of the documents incorporated by
reference, but you may obtain any of them from Geon, Hanna or the Securities
Exchange Commission. We are also incorporating by reference any additional
documents that we file with the Securities Exchange Commission between the date
of this document and the date of the Geon and Hanna special meetings. Any
statements contained in this document or in a document incorporated or deemed to
be incorporated by reference is modified or superseded for the purposes of this
document to the extent that a statement contained in this document or in any
subsequently filed document that is or is deemed to be incorporated by reference
in this document modifies or supersedes that statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this document.
Documents incorporated by reference are available from Geon and Hanna
without charge, excluding all exhibits unless an exhibit has been specifically
incorporated by reference in this document. You may obtain documents
incorporated by reference by writing or calling:
<TABLE>
<S> <C>
The Geon Company M.A. Hanna Company
One Geon Center Suite 36-5000
Avon Lake, Ohio 44012-0122 200 Public Square
(440) 930-1000 Cleveland, Ohio 44114-2304
Attention: Gregory L. Rutman, Esq. (216) 589-4000
Attention: John S. Pyke, Jr., Esq.
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM GEON OR HANNA, PLEASE DO SO BY
AUGUST 15, 2000 TO RECEIVE THEM BEFORE THE SPECIAL MEETINGS. GEON AND HANNA WILL
SEND THE REQUESTED DOCUMENTS BY FIRST-CLASS MAIL WITHIN ONE BUSINESS DAY OF
RECEIVING ANY TIMELY REQUEST.
97
<PAGE> 105
This joint proxy statement/prospectus is being furnished to:
(1) Geon stockholders in connection with the solicitation of proxies
by the Geon Board for use at Geon's special meeting. Each copy of this
joint proxy statement/prospectus mailed to Geon stockholders is accompanied
by a form of proxy for use at Geon's special meeting. This joint proxy
statement/prospectus also serves as a prospectus for holders of Geon common
stock in connection with the PolyOne common shares to be issued upon
completion of the consolidation.
(2) Hanna stockholders in connection with the solicitation of proxies
by the Hanna Board for use at Hanna's special meeting. Each copy of this
joint proxy statement/prospectus mailed to Hanna stockholders is
accompanied by a form of proxy for use at Hanna's special meeting. This
joint proxy statement/ prospectus also serves as a prospectus for holders
of Hanna common stock in connection with the PolyOne common shares to be
issued upon completion of the consolidation.
Geon has supplied all information contained or incorporated by reference in
this joint proxy statement/prospectus relating to Geon, and Hanna has supplied
all such information relating to Hanna.
FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus (including information included or
incorporated by reference in this document) contains forward-looking statements
within the meaning of Section 21E of the Securities Act of 1934, including,
without limitation, statements concerning the completion of the consolidation
and plans, objectives, future operations and business of the combined company.
Forward-looking statements often begin with or include the phrases "we believe,"
"we expect," or words of similar meaning. Although we believe our expectations
reflected in these forward-looking statements are based on reasonable
assumptions, our expectations may not prove to be correct. Important factors
that could cause actual results to differ materially from the expectations
reflected in our forward-looking statements, include, among others:
- the risk that Geon and Hanna businesses will not be integrated
successfully;
- inability to achieve or delays in achieving savings related to
consolidation and restructuring programs;
- unanticipated delays in achieving or inability to achieve cost reduction
and employee productivity goals;
- costs related to the consolidation;
- inability to obtain or meet conditions imposed for regulatory approvals
for the consolidation;
- fluctuations in raw material prices and supply, in particular
fluctuations outside the normal range of industry cycles;
- the effect on our foreign operations of currency fluctuations, tariffs,
nationalization, exchange controls, limitations on foreign investment in
local businesses, and other political, economic and regulatory risks; and
- the risk that our analyses of these factors and their risks could be
incorrect or that the strategies developed to address them could be
unsuccessful.
See "Where You Can Find More Information."
98
<PAGE> 106
UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA
The following unaudited condensed combined pro forma financial statements
(the pro forma financial statements) and explanatory notes have been prepared to
give effect to the consolidation. The consolidation is being accounted for as a
purchase business combination as defined by Accounting Principles Board Opinion
No. 16. Geon is the acquiring enterprise for purposes of accounting for the
consolidation. At the time of the closing of the consolidation, the holders of
shares of common stock outstanding of Geon will receive a larger portion of the
voting interest in PolyOne. Additionally, common share repurchases before
closing by Hanna under its existing board-authorized share repurchase program
will further increase the former Geon common stockholders voting interest in
PolyOne.
In accordance with Article 11 of Regulation S-X under the Securities Act,
an unaudited condensed combined pro forma balance sheet (the pro forma balance
sheet) as of March 31, 2000 and unaudited condensed combined pro forma
statements of income (the pro forma statements of income) for the three months
ended March 31, 2000 and the year ended December 31, 1999, have been prepared to
reflect the acquisition of Hanna by Geon and the formation of PolyOne. For both
the pro forma balance sheet and all periods included in the pro forma statements
of income, the average number of common and common equivalent shares gives
effect to the exchange ratio of one share of Geon for two shares of PolyOne and
one share of the Hanna for one share of PolyOne.
The following unaudited condensed combined pro forma financial statements
have been prepared based upon the historical financial statements of Geon and
Hanna. Additionally, the pro forma financial statements reflect certain balance
sheet and statement of income reclassifications made to conform Geon's and
Hanna's presentations to the PolyOne's presentation. The condensed combined pro
forma financial statements should be read in conjunction with (a) the historical
consolidated financial statements of Geon as of December 31, 1999 and 1998 and
for each of the three years in the period ended December 31, 1999, and the
unaudited condensed consolidated financial statements as of March 31, 2000 and
for the three month periods ended March 31, 2000 and 1999; and (b) the
historical consolidated financial statements of Hanna as of December 31, 1999
and 1998 and for each of the three years in the period ended December 31, 1999,
and the unaudited consolidated financial statements as of March 31, 2000, and
for the three month periods ended March 31, 2000 and 1999.
The pro forma balance sheet was prepared by combining the historical
unaudited consolidated balance sheet data as of March 31, 2000 for Geon and the
historical unaudited consolidated balance sheet data as of March 31, 2000 for
Hanna, adjusted to reflect the intended sale of Hanna's Cadillac Plastic Group
("Cadillac"). Cadillac is reported as a component of Hanna's distribution
segment, which also includes Hanna's resin distribution business with 1999 and
first quarter 2000 revenues of approximately $483 million and $129 million,
respectively. In connection with the intended sale of Cadillac, which is
expected to close in the third quarter of 2000, Hanna expects to write off $49.2
million of goodwill and other intangibles. If the intended sale were not
consummated, Hanna would seek additional acquirors for the Cadillac business.
The pro forma balance sheet reflects the historical unaudited financial position
of Geon and Hanna, adjusted to present the consolidation as if it had occurred
at March 31, 2000.
The pro forma statements of income have been prepared utilizing the
historical consolidated income statement data for both Geon and Hanna assuming
the consolidation had occurred on January 1, 1999. The pro forma statements of
income have been adjusted to present the significant transactions and
acquisitions of Geon during 1999 and the divestitures to be made by Hanna during
2000 as if they had occurred on January 1, 1999. The pro forma statements of
income for the year ended December 31, 1999 has been prepared by combining the
historical consolidated statements of income data of Geon and of Hanna for the
year ended December 31, 1999. The pro forma statement of income for the three
month period ended March 31, 2000 has been prepared by combining the historical
consolidated unaudited statement of income data of Geon and Hanna for the three
month period ended March 31, 2000.
In addition to giving effect to the consolidation, the pro forma financial
statements reflect the financial results of prior transactions, as determined to
be significant by management of Geon and which are not included for the entire
period in the historical December 31, 1999 consolidated statement of income of
Geon, in accordance with Article 3 of Regulation S-X. For Geon, the significant
transactions include the transactions that
F-1
<PAGE> 107
Geon completed with Occidental Chemical Corporation ("OxyChem"), which are
referred to collectively as the OxyChem Transactions, which consist of the
formation of OxyVinyls LP, the acquisition by Geon of OxyChem's Burlington, New
Jersey PVC engineered film and pellet compound plant and its Pasadena, Texas
specialty pellet compound business and the formation of PVC Powder Blends LP
(collectively referred to as "Acquired Businesses") and the acquisition of the
O'Sullivan Corporation ("O'Sullivan"). The pro forma statement of income for the
year ended December 31, 1999 includes the effects of the OxyChem Transactions
and the results of operations of O'Sullivan as if the transactions had been
consummated on January 1, 1999. In addition, the pro forma statements of income
reflect the effects of Hanna's intended sale of its Cadillac business as of
January 1, 1999, the net estimated proceeds of which were assumed to be used to
repay a portion of Hanna's long-term debt.
The pro forma financial statements should be read in conjunction with the
historical financial statements of Geon and Hanna which are incorporated by
reference into this document.
The pro forma financial statements are provided for illustrative purposes
only, and are not necessarily indicative of the operating results or financial
position that would have occurred if the consolidation and the purchase and sale
transactions described above had been consummated at the beginning of the
periods or on the dates indicated, nor are they necessarily indicative of any
future operating results or financial position. The pro forma financial
statements do not include any adjustments related to any restructuring charges,
profit improvements, potential costs savings or one-time charges which may
result from the consolidation or the final result of final valuations of
inventories, property, plant and equipment, investments in equity affiliates,
intangible assets, debt and employee benefit obligations. Geon and Hanna are
currently developing plans to integrate the operations of the companies, which
may involve costs including severance and other charges, which may be material.
The anticipated PolyOne profit improvements generated by these actions of at
least $50 million annually are expected to be fully realized by 2002. Profit
improvements are expected in the following areas -- market growth opportunities;
improved materials purchasing; improved efficiencies in operations and
distribution and reduced overhead costs. Integration teams will be formed to
develop detailed implementation programs and the related costs of implementation
which have not been determined. The pro forma financial statements include an
adjustment related to Hanna's intended sale of Cadillac. Hanna is currently in
the process of sale negotiations and the final sale proceeds estimated in this
document may change based on finalization of these negotiations. If the final
sales proceeds are different than that assumed in the pro forma financial
statements, goodwill, long-term debt, interest expense, goodwill amortization
and tax expense would change.
Upon closing of the consolidation, PolyOne will undertake a process to
determine the fair value at the date of acquisition of the tangible and
intangible assets acquired and liabilities assumed of Hanna. PolyOne expects
that the process of determining the fair value of most assets and liabilities
will be substantially completed by January 2001, subject to the finalization of
any restructuring plans relating to Hanna that are developed in connection with
the consolidation, and any contingencies which are identified which may require
future adjustment to arrive at a final purchase price allocation. As a result of
this process, Geon and Hanna anticipate that the amount initially classified as
PolyOne's "costs in excess of net tangible assets acquired and other intangible
assets" in the pro forma financial statements, which for purposes of the pro
forma income statement is being amortized over a 35-year period, will be
reclassified to the tangible and identified intangible assets acquired, based on
their estimated fair values at the date of acquisition. These tangible and
identified intangible assets will be depreciated and amortized over their
estimated useful lives. The excess of the purchase price over the fair value of
the tangible and the identified intangible assets acquired will be classified as
goodwill which will be amortized over a 35-year period. As a result, the actual
amount of depreciation and amortization expense may be materially different from
that presented in the pro forma income statements. Any changes in the sales
proceeds received for Cadillac and the costs of any Hanna related restructuring
plans, which management may commit to in connection with the consolidation will
be included in the determination of the purchase price and the amount of
resulting goodwill. Costs associated with implementing profit improvement
programs initiated subsequent to the consummation of the consolidation will be
charged to PolyOne's earnings.
The consolidation has not been consummated as of the date of the
preparation of these pro forma financial statements and there can be no
assurances that the consolidation will be consummated in the future.
F-2
<PAGE> 108
POLYONE
UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET
AT MARCH 31, 2000
<TABLE>
<CAPTION>
UNAUDITED
------------------------------------------------------------------------------
HANNA
(CADILLAC) CONSOLIDATION POLYONE POLYONE
GEON ADJUSTED RECLASSIFICATION PRO FORMA COMBINED
HISTORICAL PRO FORMA (12) ADJUSTMENTS ADJUSTMENTS PRO FORMA (1)
---------- -------------- ---------------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents....... $ 40.4 $ 34.6 $ -- $ -- $ 75.0
Accounts receivable............. 142.0 325.3 467.3
Inventories..................... 169.5 187.9 8.5(2) 365.9
Deferred income tax assets...... 27.8 23.0(3) (3.3)(10) 47.5
Other current assets............ 6.1 41.4 (23.0)(3) 24.5
-------- -------- ------- ------- --------
Total Current Assets.... 385.8 589.2 -- 5.2 980.2
Property, plant and equipment,
net.......................... 342.5 318.4 90.0(4) 750.9
Investment in equity
affiliates................... 273.8 123.8 (104.3)(3) 293.3
Costs in excess of net tangible
assets acquired and other
intangible assets............ 176.0 381.5 317.6(6) 493.6
(381.5)(7)
Deferred charges and other non-
current assets............... 18.8 104.3(3) 10.5(5) 133.6
-------- -------- ------- ------- --------
TOTAL ASSETS.................... $1,196.9 $1,412.9 $ -- $ 41.8 $2,651.6
======== ======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Short-term bank debt............ $ 256.1 $ 3.5 $ -- $ -- $ 259.6
Accounts payable................ 140.5 340.6 (119.0)(3) 12.5(8) 374.6
Accrued expenses................ 57.6 119.0(3) 176.6
Current portion of long-term
debt......................... 0.4 3.8 4.2
-------- -------- ------- ------- --------
Total Current
Liabilities........... 454.6 347.9 -- 12.5 815.0
Long-term debt.................. 130.7 324.2 (11.9)(9) 443.0
Deferred income tax
liabilities.................. 115.1 5.1(3) 24.3(10) 144.5
Post retirement benefits other
than pensions................ 83.7 78.8(3) (26.2)(5) 136.3
Other non-current liabilities,
including pensions........... 60.8 205.4 (118.8)(3) 147.4
Minority interests in
consolidated subsidiaries.... 6.2 34.9(3) 41.1
-------- -------- ------- ------- --------
Total Liabilities....... 851.1 877.5 -- (1.3) 1,727.3
-------- -------- ------- ------- --------
Total Shareholders' Equity...... 345.8 535.4 -- 43.1(11) 924.3
-------- -------- ------- ------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY......... $1,196.9 $1,412.9 $ -- $ 41.8 $2,651.6
======== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-3
<PAGE> 109
POLYONE
UNAUDITED CONDENSED COMBINED PRO FORMA INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
UNAUDITED
------------------------------------------------------------------------------------
HANNA
(CADILLAC) CONSOLIDATION POLYONE POLYONE
GEON ADJUSTED RECLASSIFICATION PRO FORMA COMBINED
HISTORICAL PRO FORMA (19) ADJUSTMENTS ADJUSTMENTS PRO FORMA (1)
---------- -------------- ---------------- ----------- -------------
(DOLLARS AND SHARES IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.................... $345.5 $510.7 $ -- $ -- $856.2
Operating costs and expenses:
Cost of sales........... 300.8 421.8 (7.8)(3) 714.8
Selling and
administrative........ 24.2 60.1 (4.0)(3) (0.2)(13) 80.1
Depreciation and
amortization.......... 9.5 3.3 11.8(3) 1.1(14) 24.6
2.3(15)
(3.4)(16)
(Income) loss from
equity affiliates..... (18.7) (18.7)
------ ------ ----- ---- ------
Total operating costs and
expenses................... 315.8 485.2 -- (0.2) 800.8
------ ------ ----- ---- ------
Operating income............. 29.7 25.5 0.2 55.4
Interest expense............. (7.0) (5.8) (0.2)(17) (13.0)
Other net.................... (0.1) (0.9) (1.0)
------ ------ ----- ---- ------
Income before income taxes... 22.6 18.8 -- 0.0 41.4
------ ------ ----- ---- ------
Income tax expense........... (8.8) (7.4) 0.4(18) (15.8)
------ ------ ----- ---- ------
Net income................... $ 13.8 $ 11.4 $ -- $0.4 $ 25.6
====== ====== ===== ==== ======
Pro Forma Earnings per Share
Data:
Number of shares issued
and outstanding (20):
Basic................. 23.5 44.9 91.9
Diluted............... 24.2 45.0 93.4
Earnings per share (20):
Basic................. $ 0.59 $ 0.25 $ 0.28
Diluted............... $ 0.57 $ 0.25 $ 0.27
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-4
<PAGE> 110
POLYONE
UNAUDITED CONDENSED COMBINED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNAUDITED
--------------------------------------------------------------------------------
HANNA
GEON (CADILLAC) CONSOLIDATION POLYONE POLYONE
ADJUSTED ADJUSTED RECLASSIFICATION PRO FORMA COMBINED
PRO FORMA (21) PRO FORMA (22) ADJUSTMENTS ADJUSTMENTS PRO FORMA (1)
-------------- -------------- ---------------- ----------- -------------
(DOLLARS AND SHARES IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales...................... $1,264.9 $1,899.0 $ -- $ -- $3,163.9
Operating costs and expenses:
Cost of sales........... 1,047.5 $1,562.4 (30.3)(3) 2,579.6
Selling and
administrative....... 92.3 225.4 (15.6)(3) (0.9)(13) 301.2
Depreciation and
amortization......... 40.0 13.5 45.9(3) 4.5(14) 99.6
9.1(15)
(13.4)(16)
Employee separation and
plant phase-out...... 0.5 0.5
(Income) loss from
equity affiliates.... (11.0) (11.0)
-------- -------- ------ ------ --------
Total operating costs and
expenses..................... 1,169.3 1,801.3 -- (0.7) 2,969.9
-------- -------- ------ ------ --------
Operating income............... 95.6 97.7 0.7 194.0
Interest expense............... (22.9) (22.2) (1.0)(17) (46.1)
Other, net..................... (1.5) 0.7 (0.8)
-------- -------- ------ ------ --------
Income before income taxes and
cumulative effect of change
in accounting for start-up
costs........................ 71.2 76.2 -- (0.3) 147.1
Income tax expense............. (29.1) (35.5) 1.8(18) (62.8)
-------- -------- ------ ------ --------
Income before cumulative effect
of a change in accounting
principle.................... $ 42.1 $ 40.7 $ -- $ 1.5 $ 84.3
======== ======== ====== ====== ========
Pro Forma Earnings per Share
Data:
Number of shares issued and
outstanding (20):
Basic................... 23.3 44.6 91.2
Diluted................. 24.3 44.7 93.3
Earnings per share (20):
Basic................... $ 1.81 $ 0.91 $ .92
Diluted................. $ 1.73 $ 0.91 $ .90
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
F-5
<PAGE> 111
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(1) The unaudited pro forma financial statements do not give effect to any
restructuring costs, nor any potential cost savings or other profit
improvements that could result from the consolidation. PolyOne is in the
process of developing its plan to integrate the operations of Geon and
Hanna, which may include certain exit costs. As a result of this plan and
to the extent this plan does not qualify for purchase accounting treatment,
a charge, which may be material but which cannot now be quantified, is
expected to be recognized in the period in which such a restructuring
occurs. PolyOne will undertake a study to determine the allocation of the
total purchase price to the various tangible and intangible assets acquired
and the liabilities assumed. These pro forma financial statements reflect a
preliminary allocation of purchase price which is subject to change based
on finalization of the fair value of the tangible and intangible assets
acquired and liabilities assumed as of the acquisition date. The
preliminary estimated fair value of the assets acquired and the liabilities
assumed in the consolidation are as follows:
<TABLE>
<S> <C>
Tangible assets acquired at fair value $1,137.1
Costs in excess of the net tangible assets of the
acquired business 317.6
Acquisition costs (7.3)
Liabilities assumed (868.9)
--------
Total purchase price - see note 11 $ 578.5
========
</TABLE>
These pro forma financial statements are not necessarily indicative of the
operating results or financial position that would have occurred had the
consolidation been consummated at the dates indicated, nor necessarily
indicative of future operating results or financial position.
(2) Represents the preliminary adjustment to record inventories at estimated
fair values as required by the purchase method of accounting.
(3) To reflect certain balance sheet and statement of income reclassifications
made to conform Geon's and Hanna's presentations to PolyOne's presentation.
(4) Represents the preliminary net adjustment to property, plant and equipment
based on estimated fair values as required by the purchase method of
accounting.
(5) Reflects preliminary adjustment to record pension assets and post
retirement obligations at estimated fair value by eliminating any
unrecognized gains and any related amortization recorded in the results of
operations as required by the purchase method of accounting.
(6) Reflects the preliminary estimated adjustment for the costs in excess of
the net tangible assets of the acquired business at estimated fair value.
PolyOne will undertake a study to determine the allocation of the total
purchase price to the various assets acquired and liabilities assumed in
order to allocate the total purchase price to the various intangible
assets, if any, acquired. Management believes, on a preliminary basis,
there may be intangible assets, such as organized workforce, brand names
and patents and technology, among others which will be evaluated. Any
excess not attributable to intangible assets will be reflected as goodwill.
The sensitivity of the valuations regarding the above can be significant.
Accordingly, PolyOne intends to continue to evaluate the assets acquired
and liabilities assumed and, as a result, the allocation of the purchase
price among the tangible and intangible assets is subject to change.
(7) Represents the elimination of the historical goodwill from Hanna.
(8) Represents the accrual of estimated costs directly related to the
consolidation including investment banking, legal, accounting and other.
(9) Represents the reduction in long-term debt based on preliminary estimated
fair values under the purchase method of accounting.
(10) Represents deferred income taxes at a tax rate of 39.0% resulting from
financial reporting and tax reporting basis difference in assets acquired
and liabilities assumed in the consolidation.
F-6
<PAGE> 112
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS --
CONTINUED
(DOLLARS IN MILLIONS)
(11) Reflects the conversion of all outstanding Geon common stock into PolyOne
common shares at a conversion ratio of one share of Geon common stock for
two common shares of PolyOne. Also reflects the conversion of Hanna common
stock into PolyOne common shares at a conversion ratio of one share of
Hanna common stock into one common share of PolyOne. Additionally, this
adjustment reflects the adjustment to shareholders' equity for the purchase
price which was calculated by multiplying Hanna's outstanding shares of
common stock of 48,479,000 at May 8, 2000, and Geon's average price per
share of common stock of $23.43, by a conversion ratio of .50 which
represents an average market price per share based on two days before, day
of, and two days after announcement of the consolidation for an aggregate
value of $567.9. This valuation also assumes Hanna's stock options vest at
time of consolidation and are converted using the same ratio as for the
outstanding common shares and applying a Black Scholes valuation model
resulting in an aggregate value of $10.6.
(12) This adjustment relates to Hanna's intended sale of Cadillac. Hanna is
currently in the process of sales negotiations and the final sale proceeds
estimated in these financials may change based upon finalization of those
negotiations. The balance sheet at March 31, 2000 for Hanna (Cadillac)
Adjusted Pro Forma was calculated as follows:
<TABLE>
<CAPTION>
HANNA
--------------------------------------
CADILLAC ADJUSTED
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................... $ 34.6 $ -- $ 34.6
Accounts receivable..................................... 397.4 (72.1)(a) 325.3
Inventories............................................. 249.0 (61.1)(a) 187.9
Other................................................... 44.3 (2.9)(a) 41.4
-------- ------- --------
Total Current Assets............................ 725.3 (136.1) 589.2
Property, plant and equipment, net...................... 331.9 (13.5)(a) 318.4
Other Assets
Goodwill and other intangibles....................... 430.7 (49.2)(a) 381.5
Investments and other................................ 129.2 (6.5)(a) 123.8
1.1(a)
-------- ------- --------
TOTAL ASSETS.............................................. $1,617.1 $(204.2) $1,412.9
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable........................................... $ 3.5 $ -- $ 3.5
Accounts payable and accrued liabilities................ 395.4 (54.8)(a) 340.6
Current portion of long-term debt....................... 3.8 -- 3.8
-------- ------- --------
Total Current Liabilities....................... 402.7 (54.8) 347.9
Other Liabilities....................................... 208.0 (2.6)(a) 205.4
Long term debt.......................................... 454.1 (129.9)(b) 324.2
Total Stockholders' Equity.............................. 552.3 (147.9)(a) 535.4
131.0(c)
-------- ------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................ $1,617.1 $(204.2) $1,412.9
======== ======= ========
</TABLE>
(a) Represents the historical costs of assets that will be sold and
liabilities that will be assumed in connection with the sale of
Cadillac to General Electric, UMECO plc, and others, taken from the
books and records of the Cadillac business. The remaining assets and
liabilities, consisting primarily of cash, accruals for income taxes
and post retirement benefits, are reflected in the Adjusted Pro Forma
amounts.
F-7
<PAGE> 113
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS --
CONTINUED
(DOLLARS IN MILLIONS)
The Cadillac business, which is reported as a component of Hanna's
distribution segment, is intended to be sold prior to completion of the
consolidation.
(b) Represents the assumed paydown of the revolving credit facility of
Hanna with proceeds from the sale of Cadillac.
(c) Represents the estimated cash proceeds from the sale of Cadillac less
estimated closing costs and taxes paid.
(13) Represents the adjustment for Hanna to record pension and post retirement
benefit expense based upon preliminary estimated fair value actuarial
valuations as required by the purchase method of accounting.
(14) Represents the preliminary incremental depreciation expense due to the
preliminary estimated fair value adjustment of the acquired property, plant
and equipment of Hanna under the purchase method of accounting calculated
utilizing the straight line method using 15 and 40 years for machinery and
equipment and buildings, respectively.
(15) Represents the adjustment to recognize amortization of costs in excess of
net tangible assets of acquired business over 35 years utilizing the
straight line method.
(16) Reflects the effect of the elimination of Hanna's historical goodwill
amortization.
(17) Represents the debt discount amortization as a result of the preliminary
estimated fair value adjustments to long-term debt. This discount is being
amortized over the remaining life of the debt using the effective interest
method.
(18) Represents the adjustment to record the income tax effect of pro forma
adjustments excluding amortization of costs in excess of net tangible
assets acquired utilizing a tax rate of 39% that would be applicable to the
pro forma adjustments.
(19) This adjustment relates to Hanna's intended sale of Cadillac. Hanna is
currently in the process of sales negotiations and the final sale proceeds
estimated herein may change based upon finalization of those negotiations.
For the quarter ended March 31, 2000 the Hanna (Cadillac) Adjusted Pro
Forma statement of income was calculated as follows:
<TABLE>
<CAPTION>
HANNA
--------------------------------------
CADILLAC ADJUSTED
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net Sales.................................................. $612.7 $(102.0)(a) $510.7
Costs and expenses:
Cost of sales............................................ 504.2 (82.4)(a) 421.8
Selling and administrative............................... 79.1 (19.2)(a) 60.1
0.2(b)
Interest on debt......................................... 8.1 (0.5)(a) 5.8
(1.8)(c)
Amortization of intangibles.............................. 3.8 (0.5)(a) 3.3
Other -- net............................................. 0.3 0.6(a) 0.9
------ ------- ------
Total operating costs and expenses......................... 595.5 (103.6) 491.9
------ ------- ------
Income before income taxes................................. 17.2 1.6 18.8
Income tax expense......................................... (7.0) (.4) (7.4)
------ ------- ------
Net Income................................................. $ 10.2 $ 1.2 $ 11.4
====== ======= ======
</TABLE>
(a) Represents the elimination of the historical operating results taken
from the books and records of the Cadillac business for the quarter
ended March 31, 2000. The Cadillac business is a stand alone business
and has its own corporate staffs including finance, information
technology and human resources. Accordingly, corporate costs are not
allocated to the Cadillac business. The Cadillac business, which is
F-8
<PAGE> 114
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS --
CONTINUED
(DOLLARS IN MILLIONS)
reported as a component of Hanna's distribution segment, is intended to
be sold prior to the completion of the consolidation.
(b) Represents the historical other post retirement benefits expense
included in the operating results as discussed in (a). These
liabilities will be retained by Hanna.
(c) Represents the estimated reduction in interest expense associated with
the estimated reduction in debt resulting from the net cash received
from the sale of Cadillac.
(20) Pro forma per share data are based on the number of Geon common and common
equivalent shares that would have been outstanding had the consolidation
occurred on the date presented.
(21) For the year ended December 31, 1999 for Geon:
<TABLE>
<CAPTION>
GEON
----------------------------------------------------------------------------------------------
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
DEDUCT ADD FOR THE FOR THE
GEON PVC ACQUIRED OXYCHEM HISTORICAL O'SULLIVAN ADJUSTED
HISTORICAL BUSINESS(A) BUSINESSES TRANSACTIONS O'SULLIVAN(J) ACQUISITION PRO FORMA
---------- ----------- ---------- ------------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales............................ $1,261.2 $186.8 $56.8 $42.7(b) $91.0 $ -- $1,264.9
Operating costs and expenses:
Cost of sales.................. 1,037.9 164.2 55.3 42.7(b) 74.7 -- 1,047.5(r)
3.0(c)
(1.9)(d)
Selling and administrative..... 88.4 7.9 2.2 3.1(c) 8.7 (2.2)(k) 92.3
Depreciation and
amortization................. 44.4 9.1 -- -- 3.1 0.6(l) 40.0
0.9(m)
0.1(n)
Employee separation and plant
phase-out.................... 0.5 -- -- -- -- -- 0.5
Income (loss) from equity
affiliates................... (9.7) -- -- (1.3)(e) -- (11.0)
-------- ------ ----- ----- ----- ------- --------
Total operating costs and
expenses....................... 1,161.5 181.2 57.5 45.6 86.5 (0.6) 1,169.3
-------- ------ ----- ----- ----- ------- --------
Operating income................. 99.7 5.6 (0.7) (2.9) 4.5 0.6 95.6
Interest expense................. (17.7) 1.7(f) -- (6.3)(o) (22.9)
(0.6)(g)
Interest income.................. 2.1 0.8 (0.8)(p) 2.1
Other expense, net............... (3.6) (0.2) 0.2(d) 0.1 (3.6)
(0.1)(h)
Gain on formation of joint
ventures, net of formation
costs.......................... 93.5 -- (93.5)(t)
-------- ------ ----- ----- ----- ------- --------
Income before income taxes and
cumulative effect of change in
accounting..................... 174.0 5.6 (0.9) (1.7) 5.4 (100.0) 71.2
Income tax expense............... (67.8) (2.2) 0.4 0.6(i) (3.3) 38.8(q) (29.1)
-------- ------ ----- ----- ----- ------- --------
Income before cumulative effect
of a change in accounting
(s)............................ $ 106.2 $ 3.4 $(0.5) $(1.1) $ 2.1 $ (61.2) $ 42.1
======== ====== ===== ===== ===== ======= ========
</TABLE>
(a) Reflects the elimination of the historical operating results of the
Geon PVC business for the four months ended April 30, 1999 included in
the historical operating results of Geon for the year ended December
31, 1999.
F-9
<PAGE> 115
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS --
CONTINUED
(DOLLARS IN MILLIONS)
(b) To reverse the historical elimination in consolidation of revenue and
cost of sales related to the sale of PVC and VCM from the Geon PVC
business to the other operations of Geon.
(c) Represents overhead and selling, general and administrative expenses
historically allocated to the Geon PVC business that were not
transferred to OxyVinyls.
(d) Reflects the reversal of costs associated with obligations and assets
of the Acquired Businesses which were not transferred to Geon and
adjusts PVC resin costs to the OxyVinyls PVC supply contract with
OxyChem as follows (the pro forma adjustments for the year ended
December 31, 1999 reflect the adjustments relating to the operating
results for the four month period ended April 30, 1999.):
<TABLE>
<S> <C>
Adjust PVC resin costs to the supply contract (represents an
adjustment to OxyChem's historical transfer prices to
reflect the pricing terms of its PVC supply contract with
OxyVinyls) (classified as cost of goods sold) $ 1.9
Reverse OxyChem's allocation of the discount from the sale
of receivables pursuant to a receivables sales agreement
which was terminated and total trade receivables from
customers transferred to PVC Powder Blends LP and Geon
(classified as other expense) 0.2
-----
Total $ 2.1
=====
</TABLE>
(e) To reflect the sum of Geon's 24% share of the pro forma OxyVinyls
(earnings) loss for the period and the amortization of the difference
between the carrying value of Geon's investment in and its underlying
equity in OxyVinyls. The pro forma adjustments for the year ended
December 31, 1999 reflect the adjustments relating to the operating
results for the four month period ended April 30, 1999. Such (earnings)
loss is computed as follows:
<TABLE>
<S> <C>
Pre-tax (income) loss contributed by:
Geon PVC business $(5.6)
OxyChem PVC business 1.1
Pro forma adjustments of OxyVinyls 1.4
-----
Total pre-tax (earnings) loss $(3.1)
Geon's ownership in OxyVinyls 24%
-----
Geon's share of the OxyVinyls' (earnings) losses (0.7)
Amortization of the difference between Geon's investment
in and underlying equity in OxyVinyls (0.6)
-----
Geon's pro forma equity (earnings) losses from OxyVinyls $(1.3)
=====
</TABLE>
<TABLE>
<S> <C>
OxyVinyls' Pro Forma adjustments are comprised of the
following items:
Adjust PVC and VCM pricing to supply contracts represents
adjustments to the historical PVC and VCM pricing of
the Geon PVC business and the OxyChem PVC business to
reflect the pricing terms of the PVC and VCM supply
contracts between OxyVinyls and the parent companies. $ 3.9
Reverse interest expense on debt and the cost of accounts
receivable sales agreement not contributed to OxyVinyls (1.9)
Interest on OxyVinyls debt (represents OxyVinyls' interest
expense relating to the $104 million paid to Geon and
to finance initial working capital requirements) 2.0
Adjust depreciation on assets contributed by Geon that
were written up to fair values and to reflect OxyVinyls
depreciation methods and useful lives (2.6)
-----
Total $ 1.4
=====
</TABLE>
F-10
<PAGE> 116
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS --
CONTINUED
(DOLLARS IN MILLIONS)
(f) Reflects the reduction in interest expense associated with the $78
million reduction in debt resulting from the cash received from
OxyVinyls in conjunction with the formation of OxyVinyls at an
estimated short-term borrowing rate of 6.5%. A 25 basis point increase
or decrease in the estimated borrowing rate would change pro forma
interest expense by less than $0.1.
(g) Includes incremental interest expense based on the $27 paid to OxyChem
for the acquisition of the PVC engineered flexible vinyl film and
specialty pellet compound business at an estimated borrowing rate of
6.5%. A 25 basis point increase or decrease in the estimated borrowing
rate would change pro forma interest expense by less than $0.1.
(h) Represents the minority interest related to OxyChem's 10% interest in
Powder Blends.
(i) To record the tax effect of the pro forma adjustments utilizing a tax
rate of 39%.
(j) Reflects the historical operating results of O'Sullivan for the period
January 1, 1999 through the date of the acquisition by Geon on July 7,
1999.
(k) Represents acquisition related transaction costs incurred by O'Sullivan
prior to its acquisition by Geon.
(l) Represents incremental depreciation expense due to the write-up of the
acquired property, plant and equipment of O'Sullivan to fair value
under the purchase method of accounting.
(m) Represents the incremental amortization due to the application of
purchase accounting in the O'Sullivan acquisition resulting from the
excess of the purchase price paid over net assets acquired. Goodwill is
being amortized over 35 years.
(n) Represents the incremental amortization expense due to the write-up of
the acquired workforce intangible assets of O'Sullivan to fair value
under the purchase method of accounting. The workforce intangible asset
is being amortized over 20 years.
(o) Includes incremental interest expense based on the imputed funding
required to effect the acquisition of O'Sullivan at an estimated
borrowing rate of 8.00%. A 25 basis point increase or decrease in the
estimated borrowing rate would change pro forma interest expense by
$0.2.
(p) To reflect the reduction of interest income resulting from the
application of O'Sullivan's cash against the initial amount borrowed by
Geon to effect the O'Sullivan acquisition.
(q) To record the tax effect of the pro forma adjustments using a tax rate
of 39%, exclusive of those items which are not deductible for income
tax purposes.
(r) Includes the one-time incremental cost of sales of $3.2 due to the
write-up of inventory for businesses acquired under the purchase method
of accounting.
(s) Excludes the cumulative effect of change in method of accounting for
start-up costs.
(t) Reflects the elimination of the one-time gain resulting from the
formation of the OxyChem Transactions.
(22) This adjustment relates to Hanna's intended sale of Cadillac. Hanna is
currently in the process of sales negotiations and the final sale proceeds
estimated in these financials may change based upon finalization of
F-11
<PAGE> 117
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS --
CONTINUED
(DOLLARS IN MILLIONS)
those negotiations. For the year ended December 31, 1999, Hanna (Cadillac)
adjusted pro forma statement of income was calculated as follows:
<TABLE>
<CAPTION>
HANNA
-------------------------------------
HANNA
(CADILLAC)
CADILLAC ADJUSTED
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Net sales......................................... $2,304.6 $ (405.6)(a) $1,899.0
Costs and expenses:
Cost of goods sold.............................. 1,886.0 (323.6)(a) 1,562.4
Selling and administrative...................... 305.3 (80.4)(a) 225.4
0.5(b)
Interest on debt................................ 31.7 (2.1)(a) 22.2
(7.4)(c)
Amortization of intangibles..................... 15.3 (1.8)(a) 13.5
Other -- net.................................... (2.3) 1.6(a) (0.7)
-------- ---------- --------
Total operating costs and expenses................ 2,236.0 (413.2) 1,822.8
-------- ---------- --------
Income before income taxes........................ 68.6 7.6 76.2
Income tax expense................................ (33.2) (2.3) (35.5)
-------- ---------- --------
Net income........................................ $ 35.4 $ 5.3 $ 40.7
======== ========== ========
</TABLE>
---------------
(a) Represents the elimination of the historical operating results taken
from the books and records of the Cadillac business, which is reported
as a component of Hanna's distribution segment, for the year ended
December 31, 1999. The Cadillac business is a stand alone business and
has its own corporate staffs including finance, information technology
and human resources. Accordingly, corporate costs are not allocated to
the Cadillac business. The Cadillac business is intended to be sold
prior to the completion of the consolidation.
(b) Represents the historical other post retirement benefits expense
included in the operating results as discussed in (a). These
liabilities will be retained by Hanna.
(c) Represents the reduction in interest expense associated with the
reduction in debt resulting from the cash received from the sale of
Cadillac.
F-12
<PAGE> 118
REPORT OF INDEPENDENT AUDITORS
To Consolidation Corp.
We have audited the accompanying balance sheet of Consolidation Corp. as of
June 30, 2000. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the balance sheet is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Consolidation Corp. at June 30,
2000, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Cleveland, Ohio
July 24, 2000
F-13
<PAGE> 119
CONSOLIDATION CORP.
BALANCE SHEET
JUNE 30, 2000
<TABLE>
<S> <C>
Total assets................................................ $ 0
======
Stockholders' equity:
Common stock (no par value; 200 shares authorized and zero
outstanding, 200 shares subscribed).................... $ 200
Receivable from The Geon Company.......................... (100)
Receivable from M.A. Hanna Company........................ (100)
------
Total stockholders' equity.................................. $ 0
======
</TABLE>
See accompanying notes.
F-14
<PAGE> 120
CONSOLIDATION CORP.
NOTES TO BALANCE SHEET
JUNE 30, 2000
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DESCRIPTION OF BUSINESS
Consolidation Corp. was formed on June 2, 2000 for the purpose of
completing the consolidation of The Geon Company (Geon) and M. A. Hanna Company
(Hanna). Geon and Hanna are collectively referred to as the Predecessor
Companies. The Predecessor Companies are producers and marketers of performance
and specialty polymer products and services.
BASIS OF PRESENTATION
Each of the Predecessor Companies has subscribed for 50% of Consolidation
Corp.'s capital stock, such receivable has been classified as a component of
stockholders' equity. Consolidation Corp. has not conducted any operations.
Accordingly, statements of operations, changes in stockholders' equity and cash
flows would not provide meaningful information and have been omitted.
F-15
<PAGE> 121
ANNEX A
AGREEMENT AND PLAN OF CONSOLIDATION
BY AND BETWEEN
M. A. HANNA COMPANY
AND
THE GEON COMPANY
DATED AS OF MAY 7, 2000
1-A
<PAGE> 122
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1. THE CONSOLIDATION................................ 7-A
Section 1.1. The Consolidation........................ 7-A
Section 1.2. Closing.................................. 7-A
Section 1.3. Effective Time........................... 7-A
Section 1.4. Effects of the Consolidation............. 8-A
Section 1.5. Articles of Incorporation and
Regulations........................................... 8-A
Section 1.6. Statutory Agent.......................... 8-A
Article 2. EFFECT OF THE CONSOLIDATION ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES..................................... 8-A
Section 2.1. Effect on Capital Stock.................. 8-A
(a) Cancellation of Certain Stock................... 8-A
(b) Conversion of Hanna Common Stock................ 8-A
(c) Conversion of Geon Common Stock................. 9-A
(d) Conversion of Treasury Stock.................... 9-A
Section 2.2. Exchange of Certificates................. 9-A
(a) Exchange Agent.................................. 9-A
(b) Exchange Procedures............................. 9-A
(c) Distributions with Respect to Unexchanged
Shares.............................................. 10-A
(d) No Further Ownership Rights..................... 10-A
(e) No Fractional Shares............................ 10-A
(f) Termination of Exchange Fund.................... 11-A
(g) No Liability.................................... 11-A
(h) Investment of Exchange Fund..................... 11-A
(i) Lost Certificates............................... 11-A
Section 2.3. Certain Adjustments...................... 11-A
Section 2.4. Further Assurances....................... 11-A
Section 2.5. Appraisal Rights......................... 11-A
Article 3. REPRESENTATIONS AND WARRANTIES................... 12-A
Section 3.1. Representations and Warranties of Geon... 12-A
(a) Organization, Standing and Corporate Power...... 12-A
(b) Subsidiaries.................................... 12-A
(c) Capital Structure............................... 12-A
(d) Authority; Noncontravention..................... 13-A
(e) Reports; Undisclosed Liabilities................ 14-A
(f) Information Supplied............................ 14-A
(g) Absence of Certain Changes or Events............ 15-A
(h) Compliance with Applicable Laws; Litigation..... 15-A
(i) Absence of Changes in Benefit Plans............. 15-A
(j) ERISA Compliance................................ 15-A
(k) Taxes........................................... 17-A
(l) Certain Contracts............................... 17-A
(m) Environmental Matters............................ 18-A
(n) Intellectual Property........................... 19-A
(o) Products Liability Claims....................... 19-A
(p) Voting Requirements............................. 19-A
(q) State Takeover Statutes......................... 19-A
(r) Rights Agreement................................ 19-A
(s) Ownership of Hanna Capital Stock................ 19-A
(t) Opinion of Financial Advisor.................... 20-A
(u) Brokers......................................... 20-A
Section 3.2. Representations and Warranties of
Hanna................................................. 20-A
(a) Organization, Standing and Corporate Power...... 20-A
(b) Subsidiaries.................................... 20-A
(c) Capital Structure............................... 20-A
(d) Authority; Noncontravention..................... 21-A
</TABLE>
2-A
<PAGE> 123
<TABLE>
<S> <C>
(e) Reports; Undisclosed Liabilities................ 22-A
(f) Information Supplied............................ 22-A
(g) Absence of Certain Changes or Events............ 23-A
(h) Compliance with Applicable Laws; Litigation..... 23-A
(i) Absence of Changes in Benefit Plans............. 23-A
(j) ERISA Compliance................................ 23-A
(k) Taxes........................................... 25-A
(l) Certain Contracts............................... 25-A
(m) Environmental Matters............................ 25-A
(n) Intellectual Property........................... 26-A
(o) Products Liability Claims....................... 26-A
(p) Voting Requirements............................. 26-A
(q) State Takeover Statutes......................... 26-A
(r) Rights Agreement................................ 26-A
(s) Ownership of Geon Capital Stock................. 27-A
(t) Opinion of Financial Advisor.................... 27-A
(u) Brokers......................................... 27-A
Article 4. COVENANTS RELATING TO CONDUCT OF BUSINESS........ 27-A
Section 4.1. Conduct of Business...................... 27-A
(a) Conduct of Business by Geon..................... 27-A
(b) Conduct of Business by Hanna.................... 29-A
(c) Coordination of Dividends....................... 31-A
(d) Other Actions................................... 31-A
(e) Advice of Changes............................... 31-A
(f) Control of Other Party's Business............... 31-A
Section 4.2. No Solicitation by Geon.................. 31-A
Section 4.3. No Solicitation by Hanna................. 33-A
Section 4.4. Rights Agreements........................ 34-A
Article 5. ADDITIONAL AGREEMENTS............................ 35-A
Section 5.1. Preparation of the Form S-4 and the Joint
Proxy Statement; Stockholders Meetings................ 35-A
Section 5.2. Letters of Geon's Accountants............ 36-A
Section 5.3. Letters of Hanna's Accountants........... 36-A
Section 5.4. Access to Information; Confidentiality... 36-A
Section 5.5. Reasonable Best Efforts; Cooperation..... 36-A
Section 5.6. Stock Options, Restricted Stock and
Employment Agreements................................. 38-A
Section 5.7. Indemnification.......................... 39-A
Section 5.8. Fees and Expenses........................ 40-A
Section 5.9. Public Announcements..................... 41-A
Section 5.10. Affiliates............................... 41-A
Section 5.11. NYSE Listing............................. 42-A
Section 5.12. Stockholder Litigation................... 42-A
Section 5.13. Tax Treatment............................ 42-A
Section 5.14. Standstill Agreements; Confidentiality
Agreements............................................ 42-A
Section 5.15. Employee Benefit Plans; Employment
Agreements............................................ 42-A
Section 5.16. Resulting Corporation Corporate Office... 43-A
Section 5.17. Post-Consolidation Board of Directors and
Officers.............................................. 43-A
Section 5.18. Section 16(b)............................ 43-A
Section 5.19. Consolidation Corp....................... 43-A
Article 6. CONDITIONS PRECEDENT............................. 43-A
Section 6.1. Conditions to Each Party's Obligation to
Effect the Consolidation.............................. 43-A
(a) Stockholder Approvals........................... 43-A
(b) Governmental and Regulatory Approvals........... 44-A
(c) No Injunctions or Restraints.................... 44-A
(d) Form S-4........................................ 44-A
(e) NYSE Listing.................................... 44-A
(f) HSR Act......................................... 44-A
</TABLE>
3-A
<PAGE> 124
<TABLE>
<S> <C>
(g) Consolidation Corp.............................. 44-A
Section 6.2. Conditions to Obligations of Hanna....... 44-A
(a) Representations and Warranties.................. 44-A
(b) Performance of Obligations of Geon.............. 44-A
(c) Tax Opinion..................................... 44-A
(d) No Material Adverse Change...................... 45-A
Section 6.3. Conditions to Obligations of Geon........ 45-A
(a) Representations and Warranties.................. 45-A
(b) Performance of Obligations of Hanna............. 45-A
(c) Tax Opinion..................................... 45-A
(d) No Material Adverse Change...................... 45-A
Section 6.4. Frustration of Closing Conditions........ 45-A
Article 7. TERMINATION, AMENDMENT AND WAIVER................ 45-A
Section 7.1. Termination.............................. 45-A
Section 7.2. Effect of Termination.................... 46-A
Section 7.3. Amendment................................ 46-A
Section 7.4. Extension; Waiver........................ 46-A
Section 7.5. Procedure for Termination, Amendment,
Extension or Waiver................................... 47-A
Article 8. GENERAL PROVISIONS............................... 47-A
Section 8.1. Nonsurvival of Representations and
Warranties............................................ 47-A
Section 8.2. Notices.................................. 47-A
Section 8.3. Definitions.............................. 47-A
Section 8.4. Interpretation........................... 48-A
Section 8.5. Counterparts............................. 48-A
Section 8.6. Entire Agreement: No Third-Party
Beneficiaries......................................... 48-A
Section 8.7. Governing Law............................ 48-A
Section 8.8. Assignment............................... 49-A
Section 8.9. Consent to Jurisdiction.................. 49-A
Section 8.10. Headings................................. 49-A
Section 8.11. Severability............................. 49-A
</TABLE>
<TABLE>
<S> <C>
Geon Disclosure Schedules
Schedule 3.1(c) Summary of Outstanding Options and Awards
Schedule 3.1(c)(iv) Stock Plans
Schedule 3.1(d) Authority, Noncontravention
Schedule 3.1(i) Changes in Benefit Plans
Schedule 3.1(j) ERISA Compliance
Schedule 3.1(l) Non Competition Undertakings
Schedule 3.1(l) Agreements in Excess of $100 Million
Schedule 3.1(m) Environmental
Hanna Disclosure Schedules
Schedule 3.2(c) Summary of Outstanding Options and Awards
Schedule 3.2(c)(iv) Stock Plans
Schedule 3.2(d) Authority; Noncontravention
Schedule 3.2(l) Certain Contracts
Schedule 4.1(b) Conduct of Business
</TABLE>
4-A
<PAGE> 125
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Adjusted Option............................................. 5.6(a)
Adjustment Event............................................ 2.3
Affiliate................................................... 8.3(a)
Antitrust Law............................................... 5.5(f)
Certificates................................................ 2.2(b)
Cleanup..................................................... 3.1(m)(iv)
Closing..................................................... 1.2
Closing Date................................................ 1.2
Code........................................................ Recitals
Confidentiality Agreement................................... 5.4
Consolidation............................................... Recitals
Consolidation Consideration................................. 2.1(c)
Consolidation Corp.......................................... Recitals
Control..................................................... 8.3(a)
Delaware Certificate of Consolidation....................... 1.3
DGCL........................................................ 1.1
Effective Time.............................................. 1.3
Environmental Claim......................................... 3.1(m)(v)
Environmental Laws.......................................... 3.1(m)(vi)
ERISA....................................................... 3.1(j)(i)
ERISA Affiliate............................................. 3.1(j)(iii)
Exchange Act................................................ 3.1(d)
Exchange Agent.............................................. 2.2(a)
Exchange Fund............................................... 2.2(a)
Foreign Antitrust Laws...................................... 3.1(d)
Form S-4.................................................... 3.1(f)(i)
Geon........................................................ Recitals
Geon Acquisition Agreement.................................. 4.2(b)
Geon Adjusted Option........................................ 5.6(a)
Geon Authorized Preferred Stock............................. 3.1(c)
Geon Award.................................................. 3.1(c)
Geon Benefit Plans.......................................... 3.1(i)
Geon Common Stock........................................... Recitals
Geon Consolidation Consideration............................ 2.1(c)
Geon Disclosure Schedule.................................... 3.1
Geon Employee Stock Options................................. 3.1(c)
Geon Exchange Ratio......................................... 2.1(c)
Geon Filed SEC Documents.................................... 3.1
Geon Intellectual Property.................................. 3.1(n)
Geon Measurement Date....................................... 3.1(c)
Geon Permits................................................ 3.1(h)
Geon Rights Agreement....................................... 3.1(r)
Geon SEC Documents.......................................... 3.1(e)
Geon Stock Plans............................................ 3.1(c)
Geon Stockholder Approval................................... 3.1(p)
Geon Stockholders Meeting................................... 5.1(b)
Geon Superior Proposal...................................... 4.2(b)
Geon Takeover Proposal...................................... 4.2(a)
Geon Termination Fee........................................ 5.8(b)
Governmental Entity......................................... 3.1(d)
Hanna....................................................... Recitals
Hanna Acquisition Agreement................................. 4.3(b)
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Hanna Adjusted Option....................................... 5.6(a)
Hanna Authorized Preferred Stock............................ 3.2(c)
Hanna Award................................................. 3.2(c)
Hanna Benefit Plans......................................... 3.2(i)
Hanna Common Stock.......................................... Recitals
Hanna Consolidation Consideration........................... 2.1(b)
Hanna Disclosure Schedule................................... 3.2
Hanna Employee Stock Options................................ 3.2(c)
Hanna Exchange Ratio........................................ 2.1(b)
Hanna Filed SEC Documents................................... 3.2
Hanna Intellectual Property................................. 3.2(n)
Hanna Measurement Date...................................... 3.2(c)
Hanna Permits............................................... 3.2(h)
Hanna Rights Agreement...................................... 3.2(r)
Hanna SEC Documents......................................... 3.2(e)
Hanna Stock Plans........................................... 3.2(c)
Hanna Stockholder Approval.................................. 3.2(p)
Hanna Stockholder Meeting................................... 5.1(c)
Hanna Superior Proposal..................................... 4.3(b)
Hanna Takeover Proposal..................................... 4.3(a)
Hanna Termination Fee....................................... 5.8(c)
Hazardous Materials......................................... 3.1(m)(vii)
HSR Act..................................................... 3.1(d)
Indemnified Liabilities..................................... 5.7(a)
Indemnified Party(ies)...................................... 5.7(a)
IRS......................................................... 3.1(j)(ii)
Joint Proxy Statement....................................... 3.1(d)
Knowledge................................................... 8.3(b)
Liens....................................................... 3.1(b)
Material Adverse Change..................................... 8.3(c)
Material Adverse Effect..................................... 8.3(c)
Material Contract........................................... 8.3(d)
Material(ly)................................................ 8.3(c)
NYSE........................................................ 2.2(e)(ii)
OGCL........................................................ 1.1
Ohio Certificate of Consolidation........................... 1.3
Out-of-Pocket Expenses...................................... 5.8(d)
Person...................................................... 8.3(e)
Release..................................................... 3.1(m)(viii)
Restraints.................................................. 6.1(c)
Resulting Corporation....................................... 1.1
Resulting Corporation Shares................................ 2.1(b)
SEC......................................................... 3.1(b)
Securities Act.............................................. 3.1(d)
Settlement.................................................. 5.5(g)
Subsidiary.................................................. 8.3(f)
Takeover Statute............................................ 3.1(q)
Tax Certificates............................................ 5.5(c)
Taxes....................................................... 3.1(k)(v)
</TABLE>
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AGREEMENT AND PLAN OF CONSOLIDATION
AGREEMENT AND PLAN OF CONSOLIDATION (this "Agreement"), dated as of May 7,
2000, by and between M. A. Hanna Company, a Delaware corporation ("Hanna"), and
The Geon Company, a Delaware corporation ("Geon").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Hanna and Geon have approved
the consolidation of Hanna, Geon and a corporation to be formed under the laws
of the State of Ohio ("Consolidation Corp."), upon the terms and subject to the
conditions set forth in this Agreement (the "Consolidation"), whereby (i) each
issued and outstanding share of common stock, par value $1.00 per share, of
Hanna ("Hanna Common Stock"), other than any shares of Hanna Common Stock owned
by Geon or any direct or indirect subsidiary of Hanna or Geon, will be converted
into the right to receive the Hanna Consolidation Consideration, (ii) each
issued and outstanding share of common stock, par value $0.10 per share, of Geon
("Geon Common Stock"), other than any shares of Geon Common Stock owned by Hanna
or any direct or indirect subsidiary of Hanna or Geon, will be converted into
the right to receive the Geon Consolidation Consideration and (iii) each issued
and outstanding common share of Consolidation Corp. will be canceled;
WHEREAS, the respective Boards of Directors of Geon and Hanna have each
determined that the Consolidation and the other transactions contemplated hereby
are consistent with, and in furtherance of, their respective business strategies
and goals; and
WHEREAS, for federal income tax purposes, it is intended that the
Consolidation qualify as a reorganization under the provisions of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE 1.
THE CONSOLIDATION
Section 1.1. THE CONSOLIDATION. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL") and Ohio General Corporation Law (the
"OGCL"), Hanna, Geon and Consolidation Corp. will consolidate into a new Ohio
corporation (the "Resulting Corporation") at the Effective Time and the separate
corporate existence of Hanna, Geon and Consolidation Corp. will thereupon cease.
Section 1.2. CLOSING. The closing of the Consolidation (the "Closing")
will take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver
(subject to applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article 6,
unless another time or date is agreed to by the parties hereto. The Closing will
be held at the offices of Jones, Day, Reavis & Pogue, North Point, 901 Lakeside
Avenue, Cleveland, Ohio 44114 or such other location as the parties hereto shall
agree to in writing. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
Section 1.3. EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall (i) file
a Certificate of Consolidation (the "Delaware Certificate of Consolidation") in
such form as is required by and executed in accordance with the relevant
provisions of the DGCL, (ii) file a Certificate of Consolidation (the "Ohio
Certificate of Consolidation") in such form as is required by and executed in
accordance with the relevant provisions of the OGCL and (iii) make all other
filings or recordings required under the DGCL and OGCL. The Consolidation will
become effective at the latest to occur of (i) such time as the Delaware
Certificate of Consolidation is duly filed with the Secretary of State of the
State of Delaware, (ii) such time as the Ohio Certificate of Consolidation is
duly filed with the
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Secretary of State of the State of Ohio or (iii) at such subsequent date or time
as Geon and Hanna agree and specify in the Delaware Certificate of Consolidation
and the Ohio Certificate of Consolidation (the date and time the Consolidation
becomes effective being the "Effective Time").
Section 1.4. EFFECTS OF THE CONSOLIDATION. The Consolidation will have the
effects set forth in the DGCL and OGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of Geon, Hanna and Consolidation Corp. will
vest in the Resulting Corporation, and all debts, liabilities and duties of
Geon, Hanna and Consolidation Corp. will become the debts, liabilities and
duties of the Resulting Corporation.
Section 1.5. ARTICLES OF INCORPORATION AND REGULATIONS. The articles of
incorporation of the Resulting Corporation will be in substantially the form set
forth as Exhibit A attached hereto, until thereafter further changed or amended
as provided therein or by applicable law. The regulations of the Resulting
Corporation will be in substantially the form set forth as Exhibit B attached
hereto, until thereafter further changed or amended as provided by the
certificate of incorporation, the regulations or applicable law.
Section 1.6. STATUTORY AGENT. The statutory agent upon whom any process,
notice or demand against Hanna, Geon, Consolidation Corp. or the Resulting
Corporation may be served will be the statutory agent set forth in articles of
incorporation attached hereto as Exhibit A.
ARTICLE 2.
EFFECT OF THE CONSOLIDATION ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.1. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Consolidation and without any action on the part of the holder of any
shares of capital stock of Hanna, Geon or Consolidation Corp.:
(a) Cancellation of Certain Stock. Each share of Hanna Common Stock
that is owned by Geon or any direct or indirect subsidiary of Hanna or Geon
(other than shares of Hanna Common Stock acquired by employee benefit trust
funds in the ordinary course and any shares of Hanna Common Stock held in
trust accounts, managed accounts or in any similar trustee or fiduciary
capacity) will automatically be canceled and retired and will cease to
exist, and no consideration will be delivered in exchange therefor. Each
share of Geon Common Stock that is owned by Hanna or any direct or indirect
subsidiary of Hanna or Geon (other than shares of Geon Common Stock
acquired by employee benefit trust funds in the ordinary course and any
shares of Geon Common Stock held in trust accounts, managed accounts or in
any similar trustee or fiduciary capacity) will automatically be canceled
and retired and will cease to exist, and no consideration will be delivered
in exchange therefor. Each common share of Consolidation Corp. will
automatically be canceled and retired and will cease to exist, and no
consideration will be delivered in exchange therefor.
(b) Conversion of Hanna Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of Hanna Common Stock (other than shares to be
canceled in accordance with Section 2.1(a) or converted in accordance with
Section 2.1(d)) will be converted into the right to receive one (the "Hanna
Exchange Ratio") fully paid and nonassessable common share ("Resulting
Corporation Shares") of the Resulting Corporation (the "Hanna Consolidation
Consideration"). As of the Effective Time, all such shares of Hanna Common
Stock will no longer be outstanding and will automatically be canceled and
retired and will cease to exist, and each holder of a certificate
representing any such shares of Hanna Common Stock will cease to have any
rights with respect thereto, except the right to receive the Hanna
Consolidation Consideration and any cash in lieu of fractional Resulting
Corporation Shares to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.2, without
interest.
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(c) Conversion of Geon Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of Geon Common Stock (other than shares to be
canceled in accordance with Section 2.1(a) or converted in accordance with
Section 2.1(d)) will be converted into the right to receive two (the "Geon
Exchange Ratio") fully paid and nonassessable Resulting Corporation Shares
(the "Geon Consolidation Consideration," and together with the Hanna
Consolidation Consideration, the "Consolidation Consideration"). As of the
Effective Time, all such shares of Geon Common Stock will no longer be
outstanding and will automatically be canceled and retired and will cease
to exist, and each holder of a certificate representing any such shares of
Geon Common Stock will cease to have any rights with respect thereto,
except the right to receive the Geon Consolidation Consideration and any
cash in lieu of fractional Resulting Corporation Shares to be issued or
paid in consideration therefor upon surrender of such certificate in
accordance with Section 2.2, without interest.
(d) Conversion of Treasury Stock. Subject to the last sentence of this
Section 2.1(d), each share of Hanna Common Stock held in the treasury of
Hanna will be converted into one fully paid and nonassessable Resulting
Corporation Share and each share of Geon Common Stock held in the treasury
of Geon will be converted into two Resulting Corporation Shares. As of the
Effective Time, all such shares of Hanna Common Stock and Geon Common Stock
will no longer be outstanding and will automatically be canceled and
retired and will cease to exist. No fractional Resulting Corporation Shares
will be issued upon conversion of such treasury stock and any such
fractional interests will be canceled and retired and will cease to exist,
and no consideration will be delivered in exchange therefor.
Section 2.2. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. First Chicago Trust Company of New York or such
other national bank or trust company as shall be designated by Geon and
Hanna prior to the Effective Time (the "Exchange Agent"), will act as agent
of the Resulting Corporation for purposes of, among other things, mailing
and receiving transmittal letters and distributing certificates for
Resulting Corporation Shares, and cash in lieu of fractional Resulting
Corporation Shares, to Hanna stockholders and Geon stockholders. As of the
Effective Time, the Resulting Corporation shall enter into an agreement
with the Exchange Agent that will provide that the Resulting Corporation
shall deposit with the Exchange Agent as of the Effective Time, for the
benefit of the holders of shares of Hanna Common Stock and Geon Common
Stock, for exchange in accordance with this Article 2, through the Exchange
Agent, certificates representing Resulting Corporation Shares (such
Resulting Corporation Shares, together with any dividends or distributions
with respect thereto with a record date after the Effective Time, and any
cash payable in lieu of any fractional Resulting Corporation Shares being
hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of Hanna Common Stock and
Geon Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent will mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Hanna Common Stock or Geon Common Stock
(the "Certificates") whose shares were converted into the right to receive
the Consolidation Consideration pursuant to Section 2.1(b) or (c), (i) a
letter of transmittal (which will specify that delivery will be effected,
and risk of loss and title to the Certificates will pass, only upon
delivery of the Certificates to the Exchange Agent and will be in such form
and have such other provisions as Geon and Hanna may reasonably specify)
and (ii) instructions for use in surrendering the Certificates in exchange
for the Consolidation Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate will be
entitled to receive in exchange therefor a certificate representing that
number of whole Resulting Corporation Shares that such holder has the right
to receive pursuant to the provisions of this Article 2, certain dividends
or other distributions, if any, in accordance with Section 2.2(c) and cash
in lieu of any fractional Resulting Corporation Share in accordance with
Section 2.2(e), and the Certificate so surrendered will be canceled. A
certificate representing the proper number of Resulting Corporation Shares
may be issued to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate is
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properly endorsed or otherwise in proper form for transfer and the person
requesting such issuance pays any transfer or other taxes required by
reason of the issuance of Resulting Corporation Shares to a person other
than the registered holder of such Certificate or establishes to the
satisfaction of the Resulting Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate will be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Consolidation
Consideration that the holder thereof has the right to receive in respect
of such Certificate pursuant to the provisions of this Article 2, certain
dividends or other distributions, if any, in accordance with Section 2.2(c)
and cash in lieu of any fractional Resulting Corporation Share in
accordance with Section 2.2(e). No interest will be paid or will accrue on
any cash payable to holders of Certificates pursuant to the provisions of
this Article 2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Resulting Corporation Shares with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to Resulting Corporation Shares
represented thereby, and, in the case of Certificates, no cash payment in
lieu of fractional shares will be paid to any such holder pursuant to
Section 2.2(e), and all such dividends, other distributions and cash in
lieu of fractional Resulting Corporation Shares will be paid by the
Resulting Corporation to the Exchange Agent and will be included in the
Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Article 2. Subject to the effect of applicable escheat
or similar laws, following surrender of any such Certificate there will be
paid to the holder of the certificate representing whole Resulting
Corporation Shares issued in exchange therefor, without interest, (i) at
the time of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect
to such whole Resulting Corporation Shares and, in the case of
Certificates, the amount of any cash payable in lieu of a fractional
Resulting Corporation Share to which such holder is entitled pursuant to
Section 2.2(e) and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole Resulting Corporation Shares.
(d) No Further Ownership Rights. All Resulting Corporation Shares
issued upon the surrender for exchange of Certificates in accordance with
the terms of this Article 2 (including any cash paid pursuant to Section
2.2(e)) will be deemed to have been issued (and paid) in full satisfaction
of all rights pertaining to the shares of Hanna Common Stock or Geon Common
Stock theretofore represented by such Certificates, subject, however, to
Geon's or Hanna's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Hanna or Geon on such shares of Hanna Common Stock
or Geon Common Stock which remain unpaid at the Effective Time, and there
will be no further registration of transfers on the stock transfer books of
the Resulting Corporation of the shares of Hanna Common Stock or Geon
Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Resulting Corporation or the Exchange Agent for any reason, they will be
canceled and exchanged as provided in this Article 2, except as otherwise
provided by law.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional Resulting
Corporation Shares will be issued upon the surrender for exchange of
Certificates, no dividend or distribution of the Resulting Corporation
will relate to such fractional share interests and such fractional share
interests will not entitle the owner thereof to vote or to any rights of
a shareholder of the Resulting Corporation.
(ii) Each holder of Hanna Common Stock or Geon Common Stock
entitled to receive a fractional Resulting Corporation Share will
receive in lieu thereof an amount in cash equal to the product obtained
by multiplying (A) the fractional share interest to which such former
holder (after taking into account all shares of Hanna Common Stock or
Geon Common Stock held at the Effective Time by such holder) would
otherwise be entitled by (B) the closing price for a Resulting
Corporation Share as reported on the New York Stock Exchange, Inc.
("NYSE") Composite
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Transaction Tape (as reported in The Wall Street Journal, or, if not
reported thereby, any other authoritative source) on the first day
Resulting Corporation Shares trade after the Effective Time.
(iii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Certificates with respect to
any fractional share interests, the Exchange Agent shall make available
such amounts to such holders of Certificates subject to and in
accordance with the terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six
months after the Effective Time will be delivered to the Resulting
Corporation, upon demand, and any holders of the Certificates who have not
theretofore complied with this Article 2 will thereafter look only to the
Resulting Corporation for payment of their claim for Consolidation
Consideration, any dividends or distributions with respect to Resulting
Corporation Shares and any cash in lieu of fractional Resulting Corporation
Shares.
(g) No Liability. Neither the Resulting Corporation nor the Exchange
Agent will be liable to any person in respect of any Resulting Corporation
Shares, any dividends or distributions with respect thereto, any cash in
lieu of fractional Resulting Corporation Shares or any cash from the
Exchange Fund, in each case, delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by the Resulting
Corporation, on a daily basis. Any interest and other income resulting from
such investments will be paid to the Resulting Corporation.
(i) Lost Certificates. If any Certificate has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Resulting Corporation, the posting by such person of a bond in such
reasonable amount as the Resulting Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Consolidation Consideration and, if
applicable, any dividends and distributions on shares of Geon Common Stock
deliverable in respect thereof and any cash in lieu of fractional shares,
in each case, due to such person pursuant to this Agreement.
Section 2.3. CERTAIN ADJUSTMENTS. If after the date hereof and on or prior
to the Effective Time the outstanding shares of Geon Common Stock or Hanna
Common Stock are changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities is declared thereon with a
record date within such period, or any similar event occurs (any such action, an
"Adjustment Event"), the Geon Exchange Ratio or Hanna Exchange Ratio, as the
case may be, will be adjusted accordingly to provide to the holders of Geon
Common Stock or Hanna Common Stock, as the case may be, the same economic effect
and percentage ownership of Resulting Corporation Shares as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend or similar event.
Section 2.4. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Resulting Corporation will be authorized to
execute and deliver, in the name and on behalf of Hanna, Geon and Consolidation
Corp., any deeds, bills of sale, assignments or assurances and to take and do,
in the name and on behalf of Hanna, Geon and Consolidation Corp., any other
actions and things to vest, perfect or confirm of record or otherwise in the
Resulting Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets acquired or to be acquired by the Resulting
Corporation as a result of, or in connection with, the Consolidation.
Section 2.5. APPRAISAL RIGHTS. In accordance with Section 262 of the DGCL,
no appraisal rights are available to the holders of shares of Hanna Common Stock
or Geon Common Stock in connection with the Consolidation.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF GEON. Except as disclosed
in the Geon SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Geon Filed SEC
Documents") or as set forth on the appropriate section of the Disclosure
Schedule delivered by Geon to Hanna prior to the execution of this Agreement
(the "Geon Disclosure Schedule"), Geon hereby represents and warrants to Hanna
as follows:
(a) Organization, Standing and Corporate Power. Each of Geon and its
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may
be, and authority to carry on its business as now being conducted, except,
as to subsidiaries, for those jurisdictions where the failure to be so
organized, existing or in good standing individually or in the aggregate
would not have a material adverse effect on Geon. Each of Geon and its
subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in
each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate would not have a material adverse effect on Geon. Geon has made
available to Hanna prior to the execution of this Agreement complete and
correct copies of its certificate of incorporation and by-laws, each as
amended to date.
(b) Subsidiaries. All the outstanding shares of capital stock of, or
other equity interests in, each Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X of the Securities and Exchange Commission (the
"SEC")) of Geon (i) have been validly issued and are fully paid and
nonassessable, (ii) are owned directly or indirectly by Geon, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") and
(iii) are free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or other
ownership interests), except in the case of clauses (ii) and (iii) for any
Liens or restrictions that would not have a material adverse effect on
Geon.
(c) Capital Structure. The authorized capital stock of Geon consists
of (i) 100,000,000 shares of Geon Common Stock and (ii) 10,000,000 shares
of preferred stock, without par value ("Geon Authorized Preferred Stock").
At the close of business on May 5, 2000 (the "Geon Measurement Date"): (i)
24,332,625 shares of Geon Common Stock were issued and outstanding; (ii)
3.642,823 shares of Geon Common Stock were held by Geon in its treasury;
(iii) no shares of Geon Authorized Preferred Stock were issued or
outstanding; and (iv) 4,925,956 shares of Geon Common Stock were reserved
for issuance pursuant to the plans as set forth in Section 3.1(c)(iv) of
the Geon Disclosure Schedule (collectively, the "Geon Stock Plans"), of
which 4,208,856 shares are subject to outstanding employee stock options or
other rights to purchase or receive Geon Common Stock granted under the
Geon Stock Plans (collectively, the "Geon Employee Stock Options"). All
outstanding shares of capital stock of Geon are, and all shares which may
be issued will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except (i) as set
forth in this Section 3.1(c), (ii) for changes since the Geon Measurement
Date resulting from the issuance of shares of Geon Common Stock pursuant to
the Geon Employee Stock Options, (iii) for outstanding rights issued
pursuant to the Geon Rights Agreement, and (iv) as permitted by Section
4.1(a)(ii), (x) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of Geon, (B) any
securities of Geon convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of Geon or (C) any warrants,
calls, options or other rights to acquire from Geon or any Geon subsidiary,
and no obligation of Geon or any Geon subsidiary to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of Geon and (y) there
are no outstanding obligations of Geon or any Geon subsidiary to
repurchase, redeem or otherwise acquire any such securities or, other than
agreements entered into with
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respect to the Geon Stock Plans in effect as of the close of business on
the Geon Measurement Date, to issue, deliver or sell, or cause to be
issued, delivered or sold, any such securities. Section 3.1(c) of the Geon
Disclosure Schedule provides a summary of the number of Geon Employee Stock
Options and each award (including restricted stock, deferred stock and
performance shares) outstanding under the Geon Stock Plans (each, a "Geon
Award") as of the close of business on the Geon Measurement Date. Neither
Geon nor any Geon subsidiary is a party to any voting agreement with
respect to the voting of any such securities. There are no outstanding (A)
securities of Geon or any Geon subsidiary convertible into or exchangeable
or exercisable for shares of capital stock or other voting securities or
ownership interests in any Geon subsidiary, (B) warrants, calls, options or
other rights to acquire from Geon or any Geon subsidiary, and no obligation
of Geon or any Geon subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible
into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any Geon subsidiary or (C)
obligations of Geon or any Geon subsidiary to repurchase, redeem or
otherwise acquire any such outstanding securities of Geon subsidiaries or
to issue, deliver or sell, or cause to be issued, delivered or sold, any
such securities.
(d) Authority; Noncontravention. Geon has all requisite corporate
power and authority to enter into this Agreement and, subject to the Geon
Stockholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Geon and the
consummation by Geon of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Geon, subject
to the Geon Stockholder Approval. This Agreement has been duly executed and
delivered by Geon and, assuming the due authorization, execution and
delivery by Hanna, constitutes a legal, valid and binding obligation of
Geon, enforceable against Geon in accordance with its terms. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of a benefit under, or result in
the creation of any Lien upon any of the properties or assets of Geon or
any of its subsidiaries under, (i) the certificate of incorporation or
by-laws of Geon or the comparable organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to Geon or any of
its subsidiaries or their respective properties or assets or (iii) subject
to the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Geon or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not have a material
adverse effect on Geon. No consent, approval, order or authorization of,
action by or in respect of, or registration, declaration or filing with,
any federal, state, local or foreign government, any court, administrative,
regulatory or other governmental agency, commission or authority or any
non-governmental U.S. or foreign self-regulatory agency, commission or
authority or any arbitral tribunal (each, a "Governmental Entity") is
required by Geon or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Geon or the consummation by
Geon of the transactions contemplated hereby, except for: (1) the filing
with the SEC of (A) a proxy statement relating to the Geon Stockholders
Meeting (such proxy statement, together with the proxy statement relating
to the Hanna Stockholders Meeting, in each case as amended or supplemented
from time to time, the "Joint Proxy Statement"), and (B) such reports under
Section 13(a), 13(d), 15(d) or 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as may be required in connection
with this Agreement and the transactions contemplated hereby; (2) the
filing with and declaration of the effectiveness by the SEC of the Form
S-4, (3) the filing of the Delaware Certificate of Consolidation with the
Secretary of State of the State of Delaware and the Ohio Certificate of
Consolidation with the Secretary of State of Ohio and appropriate documents
with the relevant authorities of other states in which Geon is qualified to
do business and such filings with Governmental Entities to satisfy the
applicable requirements of state securities or "blue sky" laws;
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(4) such filings with and approvals of the NYSE to permit Resulting
Corporation Shares that are to be issued in the Consolidation and under the
Hanna Stock Plans and Geon Stock Plans to be listed on the NYSE; (5) the
filing of a premerger notification and report form by Geon under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR
Act"); (6) such filings, consents, approvals, orders or authorizations
required to be made or obtained pursuant to the laws of any non-U.S.
jurisdiction relating to antitrust matters or competition ("Foreign
Antitrust Laws"); (7) the filing with the Pension Benefit Guaranty
Corporation of any notice required under Section 4043 of ERISA; and (8)
such consents, approvals, orders or authorizations the failure of which to
be made or obtained individually or in the aggregate would not have a
material adverse effect on Geon.
(e) Reports; Undisclosed Liabilities. Geon has filed all required
reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC since
January 1, 1997 (the "Geon SEC Documents"). As of their respective dates,
the Geon SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Geon SEC
Documents, and none of the Geon SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any Geon SEC
Document has been revised or superseded by a later filed Geon Filed SEC
Document, none of the Geon SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Geon included in the Geon SEC Documents comply as to form, as
of their respective dates of filing with the SEC, in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects
the consolidated financial position of Geon and its consolidated
subsidiaries as of the dates thereof and the consolidated results of
operations and cash flows of Geon and its consolidated subsidiaries for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments). Except (A) as reflected in such
financial statements or in the notes thereto, (B) for liabilities incurred
in the ordinary course of business consistent with past practice or (C) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, neither Geon nor any of its subsidiaries has any
liabilities or obligations of any nature which, individually or in the
aggregate, would have a material adverse effect on Geon.
(f) Information Supplied. None of the information supplied or to be
supplied by Geon specifically for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC in
connection with the issuance of Resulting Corporation Shares in the
Consolidation (the "Form S-4") will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Joint Proxy Statement will, at the date it is first mailed to Geon's
stockholders or at the time of the Geon Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 and the Joint Proxy Statement will comply as to
form in all material respects with the requirements of the Securities Act
and the Exchange Act, respectively, and the rules and regulations
thereunder, except that no representation or warranty is made by Geon with
respect to statements made or incorporated by reference therein based on
information supplied by Hanna specifically for inclusion or incorporation
by reference in the Form S-4 or the Joint Proxy Statement.
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(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since December 31, 1999, Geon and its subsidiaries have conducted
their business only in the ordinary course or as disclosed in any Geon
Filed SEC Document, and there has not been, (1) any material adverse effect
on Geon or (2) any action taken that if taken after the date of this
Agreement would be or result in a violation of Section 4.1(a).
(h) Compliance with Applicable Laws; Litigation. Geon, its
subsidiaries and employees hold all permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental
Entities that are required for the operation of the businesses of Geon and
its subsidiaries (collectively, the "Geon Permits"), except where the
failure to have any such Geon Permits individually or in the aggregate
would not have a material adverse effect on Geon. Geon and its subsidiaries
are in compliance with the terms of the Geon Permits and all applicable
statutes, laws, ordinances, rules and regulations, except where the failure
so to comply individually or in the aggregate would not have a material
adverse effect on Geon. As of the date of this Agreement, no action,
demand, requirement or investigation by any Governmental Entity and no
suit, action or proceeding by any person, in each case with respect to Geon
or any of its subsidiaries or any of their respective properties, is
pending or, to the knowledge of Geon, threatened, other than, in each case,
those the outcome of which individually or in the aggregate would not
reasonably be expected to have a material adverse effect on Geon.
(i) Absence of Changes in Benefit Plans. Since December 31, 1999,
there has not been any adoption or amendment in any material respect by
Geon or any of its subsidiaries of any collective bargaining agreement or
any material bonus, pension (within the meaning of Section 3(2) of ERISA),
profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, equity-based,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical, life, severance, welfare (within the meaning of
Section 3(1) of ERISA) or other plan, arrangement or understanding
providing benefits to any current or former employee, officer, consultant
or director of Geon or any of its subsidiaries (collectively, the "Geon
Benefit Plans"), or any material change in any actuarial or other
assumption used to calculate funding obligations with respect to any Geon
Benefit Plans, or any change in the manner in which contributions to any
Geon Benefit Plans are made or the basis on which such contributions are
determined.
(j) ERISA Compliance.
(i) With respect to the Geon Benefit Plans, no event has occurred
and, to the knowledge of Geon, there exists no condition or set of
circumstances, in connection with which Geon or any of its subsidiaries
could be subject to any liability that individually or in the aggregate
would have a material adverse effect on Geon under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
or any other applicable law.
(ii) Each Geon Benefit Plan has been administered in accordance
with its terms, all applicable laws, including ERISA and the Code, and
the terms of all applicable collective bargaining agreements, except for
any failures so to administer any Geon Benefit Plan that individually or
in the aggregate would not reasonably be expected to have a material
adverse effect on Geon. Geon, its subsidiaries and all the Geon Benefit
Plans are in compliance with the applicable provisions of ERISA, the
Code and all other applicable laws and the terms of all applicable
collective bargaining agreements, except for any failures to be in such
compliance that individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Geon. Each Geon Benefit
Plan that is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue
Service ("IRS") that it is so qualified. To the knowledge of Geon, no
event has occurred since the date of any determination letter from the
IRS that is reasonably likely to affect adversely the qualified status
of any such Geon Benefit Plan, except for any occurrence that
individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Geon, and to the knowledge of Geon,
all contributions to, and payments from, such Geon Benefit Plans that
are required to be made in accordance with such
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plans, ERISA or the Code have been timely made other than any failures
that individually or in the aggregate would not reasonably be expected
to have a material adverse effect on Geon.
(iii) Except to the extent any of the following either individually
or in the aggregate would not reasonably be expected to have a material
adverse effect on Geon, (x) neither Geon nor any trade or business,
whether or not incorporated (an "ERISA Affiliate") of Geon, which
together with Geon would be deemed to be a single employer within the
meaning of Section 4001(b) of ERISA, has incurred any liability under
Title IV of ERISA and no condition exists that presents a risk to Geon
or any ERISA Affiliate of Geon of incurring any such liability (other
than liability for benefits or premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), (y) no Geon Benefit Plan
has incurred an "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code) whether or not waived
and (z) to the knowledge of Geon, there are not any facts or
circumstances that would materially change the funded status of any Geon
Benefit Plan that is a "defined benefit" plan (as defined in Section
3(35) of ERISA) since the date of the most recent actuarial report for
such plan. No Geon Benefit Plan is a multiemployer plan within the
meaning of Section 3(37) of ERISA and no liability has been incurred by
Geon and its ERISA Affiliates under such a plan, except for any such
liability that would not reasonably be expected to have a material
adverse effect on Geon.
(iv) Neither Geon nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to
persons employed by Geon or any of its subsidiaries and no collective
bargaining agreement is being negotiated by Geon or any of its
subsidiaries, in each case that is material to Geon and its subsidiaries
taken as a whole. As of the date of this Agreement, there is no labor
dispute, strike or work stoppage against Geon or any of its subsidiaries
pending or, to the knowledge of Geon, threatened which may interfere
with the respective business activities of Geon or any of its
subsidiaries, except where such dispute, strike or work stoppage
individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Geon. As of the date of this
Agreement, (x) to the knowledge of Geon, none of Geon, any of its
subsidiaries or any of their respective representatives or employees has
committed any unfair labor practice in connection with the operation of
the respective businesses of Geon or any of its subsidiaries, and (y)
there is no charge or complaint against Geon or any of its subsidiaries
by the National Labor Relations Board or any comparable governmental
agency pending or threatened in writing, except for any occurrence that
individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Geon.
(v) No Geon Benefit Plan provides medical benefits (whether or not
insured) with respect to current or former employees after retirement or
other termination of service the cost of which is material to Geon and
its subsidiaries taken as a whole.
(vi) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event,
(A) entitle any current or former employee, officer or director of Geon
or any ERISA Affiliate of Geon to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (B) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee, officer or director or
(C) constitute a "change of control" under any Geon Benefit Plan.
(vii) With respect to each Geon Benefit Plan: (x) no actions,
suits, claims or disputes are pending or, to the knowledge of Geon,
threatened, other than claims for benefits made in accordance with the
terms of such Geon Benefit Plan, except for such actions, suits, claims
or disputes that individually or in the aggregate would not reasonably
be expected to have a material adverse effect on Geon; (y) no audits are
pending with any governmental or regulatory agency and to the knowledge
of Geon there are no facts which could give rise to any liability in the
event of such an audit that either individually or in the aggregate
would have a material adverse effect on Geon; and (z) to the knowledge
of Geon, all reports and returns required to be filed with any
governmental agency or distributed to any participant in any Geon
Benefit Plan have been so duly
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filed or distributed other than any failure to file or distribute such
reports or returns that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on Geon.
(viii) Geon has not incurred any liability under Code Section 4975,
and no fact exists which could result in a liability to Geon under Code
Section 4975 that would reasonably be expected to have a material
adverse effect on Geon.
(k) Taxes.
(i) Each of Geon and its subsidiaries has filed all material tax
returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed,
granted and have not expired, and all such returns and reports are
complete and correct in all material respects, except to the extent that
such failures to file, to have extensions granted that remain in effect
or to be materially complete or correct individually or in the aggregate
would not have a material adverse effect on Geon. Geon and each of its
subsidiaries has paid (or Geon has paid on its behalf) all taxes shown
as due on such returns and reports. Except as would not have a material
adverse effect on Geon, the most recent financial statements contained
in the Geon Filed SEC Documents reflect, and the financial statements
contained in the Geon SEC Documents filed after the date of this
Agreement will reflect, an adequate reserve for all taxes due and owing
by Geon and its subsidiaries for all taxable periods and portions
thereof through the dates of such financial statements that remain
unpaid as of those dates, which reserve was, and will be, computed in a
manner consistent with Geon's past practice.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Geon or any of its subsidiaries that have not been paid
or adequately reserved for, except for deficiencies that individually or
in the aggregate would not have a material adverse effect on Geon.
(iii) Neither Geon nor any of its subsidiaries has taken any action
or knows of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Consolidation from qualifying as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
(iv) To the knowledge of Geon, no stockholder of Geon has entered
into any plan or arrangement or taken any action with respect to
Resulting Corporation Shares that such stockholder will receive upon
completion of the Consolidation which would cause such stockholder to
fail to satisfy the continuity of interest requirement applicable to a
Section 368(a)(1)(A) reorganization.
(v) As used in this Agreement, "taxes" include all (x) federal,
state, local or foreign net and gross income, alternative or add-on
minimum, environmental, gross receipts, ad valorem, value added, goods
and services, capital stock, profits, license, single business,
employment, severance, stamp, unemployment, customs, property, sales,
excise, use, occupation, service, transfer, payroll, franchise,
withholding and other fiscal levies or similar governmental duties,
charges, fees, levies or assessments including any interest, penalties
or additions with respect thereto, (y) liability for the payment of any
amounts of the type described in clause (x) as a result of being a
member of an affiliated, consolidated, combined or unitary group, and
(z) liability for the payment of any amounts as a result of being party
to any tax sharing agreement or as a result of any express or implied
obligation to indemnify any other person with respect to the payment of
any amounts of the type described in clause (x) or (y).
(l) Certain Contracts. Except as permitted pursuant to Section 4.1(a),
neither Geon nor any of its subsidiaries is a party to or bound by (i) any
agreement relating to the incurring of indebtedness (including sale and
leaseback and capitalized lease transactions and other similar financing
transactions but excluding commercial paper) providing for payment or
repayment in excess of $100.0 million, (ii) any material contract or (iii)
any non-competition agreement or any other agreement or obligation which
purports to limit in any material respect the manner in which, or the
localities in which, all or any substantial portion of the business of Geon
and its subsidiaries, taken as a whole, or, after the Effective Time, the
business of Hanna and its subsidiaries, taken as a whole, is or would be
conducted.
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(m) Environmental Matters.
(i) Prior to the date of this Agreement, neither Geon nor any of
its subsidiaries has received any communication (written or oral),
whether from a Governmental Entity, citizens' group, employee or
otherwise, alleging that Geon or any of its subsidiaries is not in
compliance with applicable Environmental Laws, other than those
instances of noncompliance that individually or in the aggregate would
not reasonably be expected to have a material adverse effect on Geon.
(ii) There is no Environmental Claim pending or, to the knowledge
of Geon, threatened, against Geon or any of its subsidiaries or, to the
knowledge of Geon, against any person whose liability for any
Environmental Claim Geon or any of its subsidiaries has or may have
retained or assumed either contractually or by operation of law, other
than those Environmental Claims that individually or in the aggregate
would not reasonably be expected to have a material adverse effect on
Geon.
(iii) There are no present or, to the knowledge of Geon, past
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the Release or presence of any Hazardous
Material at any property, that could reasonably be expected to result in
liability under any Environmental Law against Geon or any of its
subsidiaries or, to the knowledge of Geon, for any person whose
liability for any Environmental Claim Geon or any of its subsidiaries
has or may have retained or assumed either contractually or by operation
of law, other than those liabilities that individually or in the
aggregate would not reasonably be expected to have a material adverse
effect on Geon.
(iv) As used herein, the term "Cleanup" means all actions required
to (w) cleanup, remove, treat, manage or remediate Hazardous Materials
in the indoor or outdoor environment; (x) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment;
(y) perform pre-remedial studies and investigations and post-remedial
monitoring and care; or (z) respond to any government requests for
information or documents in any way relating to cleanup, removal,
treatment or remediation or potential cleanup, removal, treatment or
remediation of Hazardous Materials in the indoor or outdoor environment.
(v) As used herein, the term "Environmental Claim" means any
written claim, action, cause of action, investigation or written notice
by any person alleging potential liability or responsibility (including,
without limitation, potential liability for investigatory costs, Cleanup
costs, governmental response costs, natural resources damages, property
damages, personal injuries, fines or penalties) arising out of, based on
or resulting from (x) the presence or Release of any Hazardous Materials
at any location, whether or not owned or operated by Geon or any of its
subsidiaries or Hanna or any of its subsidiaries, as the case may be, or
(y) circumstances forming the basis of any violation of any
Environmental Law.
(vi) As used herein, the term "Environmental Laws" means all
federal, state, local and foreign laws and regulations relating to
pollution or protection of the environment, including, without
limitation, laws relating to Releases or threatened Release of Hazardous
Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials.
(vii) As used herein, the term "Hazardous Materials" means all
substances defined as Hazardous Substances, Hazardous Waste, Oils,
Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. sec. 300.5, or defined as such by,
or regulated as such under, any Environmental Law, including all matters
adversely affecting air, ground, ground water and/or environmental
quality or safety, including, without limitation, petroleum,
petroleum-derived products, underground storage tanks and asbestos.
(viii) As used herein, the term "Release" means any release, spill,
emission, discharge, leaking, pumping, injection, deposit, disposal,
dispersal, leaching or migration into the environment
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(including, without limitation, ambient air, surface water, groundwater
and surface or subsurface strata) or into or out of any property
(including the abatement or discarding of barrels or other containers
containing Hazardous Materials), including the movement of Hazardous
Materials through, on or in the air, soil, surface water, ground water
or property.
(n) Intellectual Property. Geon and its subsidiaries own or have a
binding, enforceable right to use all material letters patent, patent
applications, trade names, brand names, trademarks, service marks,
trademark and service mark registrations and applications, copyright
registrations and applications, both domestic and foreign, presently owned,
possessed, used or held by Geon and its subsidiaries (the "Geon
Intellectual Property"). To the knowledge of Geon, neither the conduct of
Geon's or any of its subsidiaries' business nor any of the products sold or
services provided by Geon or any of its subsidiaries in connection
therewith (other than those infringements or violations of rights which
individually or in the aggregate would not reasonably be expected to have a
material adverse effect on Geon) infringes upon or is inconsistent with the
intellectual property rights of any other person. To the knowledge of Geon,
neither the conduct of any other person's business, nor the nature of any
of the products it sells or services it provides, infringes upon or is
inconsistent with any Geon Intellectual Property, other than those
infringements or violations of rights which individually or in the
aggregate would not reasonably be expected to have a material adverse
effect on Geon.
(o) Products Liability Claims. There are no product liability claims
or causes of action pending or, to the knowledge of Geon, threatened
alleging personal injury or property damage from products or materials sold
by Geon or any of its subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on Geon.
(p) Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Geon Common Stock
at the Geon Stockholders Meeting is the only vote of the holders of any
class or series of Geon's capital stock necessary to adopt this Agreement
and approve the Consolidation and the other transactions contemplated
hereby (the "Geon Stockholder Approval"). The Board of Directors of Geon
has duly and validly approved and taken all corporate action required to be
taken by the Geon Board of Directors for the consummation of the
transactions contemplated by this Agreement and, as of the date of this
Agreement, has recommended that Geon's stockholders adopt this Agreement
and approve the Consolidation and the other transactions contemplated
hereby.
(q) State Takeover Statutes. The Geon Board of Directors has taken all
necessary action so that no "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (each, a
"Takeover Statute") (including the interested stockholder provisions
codified in Section 203 of the DGCL) or any applicable anti-takeover
provision in Geon's certificate of incorporation or by-laws is applicable
to the Consolidation and the other transactions contemplated by this
Agreement. To the knowledge of Geon, no other state takeover statute is
applicable to the Consolidation or the other transactions contemplated by
this Agreement.
(r) Rights Agreement. The Rights Agreement, dated as of May 28, 1993,
by and between Geon and The Bank of New York, as rights agent, (the "Geon
Rights Agreement") has been amended to (i) render the Geon Rights Agreement
inapplicable to the Consolidation and the other transactions contemplated
by this Agreement and (ii) ensure that (x) none of Consolidation Corp.,
Hanna or its wholly owned subsidiaries is an Acquiring Person (as defined
in the Geon Rights Agreement), (y) a Distribution Date, a Triggering Event
or a Stock Acquisition Date (as such terms are defined in the Geon Rights
Agreement) does not occur solely by reason of the execution of this
Agreement, the consummation of the Consolidation, or the consummation of
the other transactions contemplated by this Agreement and (z) it will
expire or otherwise terminate immediately prior to the Effective Time.
(s) Ownership of Hanna Capital Stock. Except for shares owned by the
Geon Benefit Plans or shares held or managed for the account of another
person or as to which Geon is required to act as a fiduciary or in a
similar capacity, as of the date hereof, neither Geon nor, to its knowledge
without independent investigation, any of its affiliates (i) beneficially
owns (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding
for
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the purpose of acquiring, holding, voting or disposing of, in each case,
more than 1% of the outstanding shares of capital stock of Hanna.
(t) Opinion of Financial Advisor. The Board of Directors of Geon has
received the opinion of McDonald Investments Inc., dated the date of this
Agreement, to the effect that, as of such date, the Geon Exchange Ratio for
the conversion of Geon Common Stock into Resulting Corporation Shares
pursuant to the Consolidation is fair from a financial point of view to
holders of shares of Geon Common Stock, a signed copy of which opinion will
be made available to Hanna promptly after the date hereof.
(u) Brokers. Except for McDonald Investments Inc., no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Geon.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF HANNA. Except as disclosed
in the Hanna SEC Documents filed and publicly available prior to the date of
this Agreement (as amended to the date of this Agreement, the "Hanna Filed SEC
Documents") or as set forth on the appropriate section of the Disclosure
Schedule delivered by Hanna to Geon prior to the execution of this Agreement
(the "Hanna Disclosure Schedule"), Hanna hereby represents and warrants to Geon
as follows:
(a) Organization, Standing and Corporate Power. Each of Hanna and its
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may
be, and authority to carry on its business as now being conducted, except,
as to subsidiaries, for those jurisdictions where the failure to be so
organized, existing or in good standing individually or in the aggregate
would not have a material adverse effect on Hanna. Each of Hanna and its
subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in
each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate would not have a material adverse effect on Hanna. Hanna has made
available to Geon prior to the execution of this Agreement complete and
correct copies of its certificate of incorporation and by-laws, each as
amended to date.
(b) Subsidiaries. All the outstanding shares of capital stock of, or
other equity interests in, each Significant Subsidiary of Hanna (i) have
been validly issued and are fully paid and nonassessable, (ii) are owned
directly or indirectly by Hanna, free and clear of all Liens and (iii) are
free of any other restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests), except in the case of clauses (ii) and (iii) for any Liens or
restrictions that would not have a material adverse effect on Hanna.
(c) Capital Structure. The authorized capital stock of Hanna consists
of (i) 100,000,000 shares of Hanna Common Stock and (ii) 5,000,000 shares
of Cumulative Series A Preferred Stock, without par value ("Hanna
Authorized Preferred Stock"). At the close of business on May 5, 2000 (the
"Hanna Measurement Date"): (i) 66,212,836 shares of Hanna Common Stock were
issued and outstanding; (ii) 17,733,532 shares of Hanna Common Stock in the
aggregate were held by Hanna in its treasury; (iii) no shares of Hanna
Preferred Stock were issued and outstanding; and (iv) 3,998,995 shares of
Hanna Common Stock were reserved for issuance pursuant to the plans set
forth in Section 3.2(c)(iv) of the Hanna Disclosure Schedule (collectively,
the "Hanna Stock Plans"), of which 3,998,995 shares are subject to
outstanding employee stock options or other rights to purchase or receive
Hanna Common Stock granted under the Hanna Stock Plans (collectively,
"Hanna Employee Stock Options"). All outstanding shares of capital stock of
Hanna are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except (i) as set forth in this Section 3.2(c), (ii) for
changes since the Hanna Measurement Date resulting from the issuance of
shares of Hanna Common Stock pursuant to the Hanna Employee Stock
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Options, (iii) with respect to the Associates Ownership Trust, (iv) for
outstanding rights issued pursuant to the Hanna Rights Agreement, and (v)
as permitted by Section 4.1(b)(ii), (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of Hanna, (B) any securities of Hanna convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities of Hanna or (C) any warrants, calls, options or other rights to
acquire from Hanna or any Hanna subsidiary, and no obligation of Hanna or
any Hanna subsidiary to issue, any capital stock, voting securities or
securities convertible into or exchangeable or exercisable for capital
stock or voting securities of Hanna and (y) there are no outstanding
obligations of Hanna or any Hanna subsidiary to repurchase, redeem or
otherwise acquire any such securities or, other than agreements entered
into with respect to the Hanna Stock Plans in effect as of the close of
business on the Hanna Measurement Date, to issue, deliver or sell, or cause
to be issued, delivered or sold, any such securities. Neither Hanna nor any
Hanna subsidiary is a party to any voting agreement with respect to the
voting of any such securities. Section 3.2(c) of the Hanna Disclosure
Schedule provides a summary of the number of Hanna Employee Stock Options
and each award (including restricted stock, deferred stock and performance
shares) outstanding under the Hanna Stock Plans (each, an "Hanna Award") as
of the close of business on the Hanna Measurement Date. There are no
outstanding (A) securities of Hanna or any Hanna subsidiary convertible
into or exchangeable or exercisable for shares of capital stock or other
voting securities or ownership interests in any Hanna subsidiary, (B)
warrants, calls, options or other rights to acquire from Hanna or any Hanna
subsidiary, and no obligation of Hanna or any Hanna subsidiary to issue,
any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable or exercisable for any
capital stock, voting securities or ownership interests in, any Hanna
subsidiary or (C) obligations of Hanna or any Hanna subsidiary to
repurchase, redeem or otherwise acquire any such outstanding securities of
Hanna subsidiaries or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities.
(d) Authority; Noncontravention. Hanna has all requisite corporate
power and authority to enter into this Agreement and, subject to the Hanna
Stockholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Hanna and the
consummation by Hanna of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Hanna,
subject to the Hanna Stockholder Approval. This Agreement has been duly
executed and delivered by Hanna and, assuming the due authorization,
execution and delivery by Geon, constitutes a legal, valid and binding
obligation of Hanna, enforceable against Hanna in accordance with its
terms. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or constitute a default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Hanna or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Hanna or the comparable
organizational documents of any of its subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license or similar
authorization applicable to Hanna or any of its subsidiaries or their
respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Hanna or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii),
any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not have a material adverse effect
on Hanna. No consent, approval, order or authorization of, action by, or in
respect of, or registration, declaration or filing with, any Governmental
Entity is required by Hanna or any of its subsidiaries in connection with
the execution and delivery of this Agreement by Hanna or the consummation
by Hanna of the transactions contemplated hereby, except for: (1) the
filing with the SEC of (A) the Joint Proxy Statement relating to the Hanna
Stockholders Meeting and (B) such reports under Section 13(a), 13(d), 15(d)
or 16(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby; (2) the filing and
declaration of effectiveness by the SEC of the Form S-4, (3) the filing of
the
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Delaware Certificate of Consolidation with the Secretary of State of the
State of Delaware and the Ohio Certificate of Consolidation with the
Secretary of State of the State of Ohio and appropriate documents with the
relevant authorities of other states in which Hanna is qualified to do
business and such filings with Governmental Entities to satisfy the
applicable requirements of state securities or "blue sky" laws; (4) such
filings and approvals of the NYSE to permit Resulting Corporation Shares
that are to be issued in the Consolidation and under the Hanna Stock Plans
and Geon Stock Plans to be listed on the NYSE, (5) the filing of a
premerger notification and report form by Hanna under the HSR Act; (6) such
filing, consents, approvals, orders or authorizations required to be made
or obtained pursuant to Foreign Antitrust Laws; (7) the filing under the
Pension Benefit Guaranty Corporation of any notice required under ERISA
Section 4043; and (8) such consents, approvals, orders or authorizations
the failure of which to be made or obtained individually or in the
aggregate would not have a material adverse effect on Hanna.
(e) Reports; Undisclosed Liabilities. Hanna has filed all required
reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC since
January 1, 1997 (the "Hanna SEC Documents"). As of their respective dates,
the Hanna SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable
to such Hanna SEC Documents, and none of the Hanna SEC Documents when filed
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in
any Hanna SEC Document has been revised or superseded by a later filed
Hanna Filed SEC Document, none of the Hanna SEC Documents contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Hanna included in the Hanna SEC
Documents comply as to form, as of their respective dates of filing with
the SEC, in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of
Hanna and its consolidated subsidiaries as of the dates thereof and the
consolidated statements of income, stockholders' equity and cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). Except (A) as reflected in
such financial statements or in the notes thereto, (B) for liabilities
incurred in the ordinary course of business consistent with past practices
or (C) for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, neither Hanna nor any of its subsidiaries
has any liabilities or obligations of any nature which, individually or in
the aggregate, would have a material adverse effect on Hanna.
(f) Information Supplied. None of the information supplied or to be
supplied by Hanna specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) the Joint Proxy
Statement will, at the date it is first mailed to Hanna's stockholders or
at the time of the Hanna Stockholders Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Form S-4
and the Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Securities Act and the Exchange Act,
respectively, and the rules and regulations thereunder, except that no
representation or warranty is made by Hanna with respect to statements made
or incorporated by reference therein based on information supplied by Geon
specifically for inclusion or incorporation by reference in the Form S-4 or
the Joint Proxy Statement.
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(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby, since December 31, 1999, Hanna and its subsidiaries have conducted
their business only in the ordinary course or as disclosed in any Hanna
Filed SEC Document, and there has not been (1) any material adverse effect
on Hanna or (2) any action taken that if taken after the date of the
Agreement would be or result in a violation of Section 4.1(b).
(h) Compliance with Applicable Laws; Litigation. Hanna, its
subsidiaries and employees hold all permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental
Entities that are required for the operation of the businesses of Hanna and
its subsidiaries (collectively, the "Hanna Permits") except where the
failure to have any such Hanna Permits individually or in the aggregate
would not have a material adverse effect on Hanna. Hanna and its
subsidiaries are in compliance with the terms of the Hanna Permits and all
applicable statutes, laws, ordinances, rules and regulations, except where
the failure so to comply individually or in the aggregate would not have a
material adverse effect on Hanna. As of the date of this Agreement, no
action, demand, requirement or investigation by any Governmental Entity and
no suit, action or proceeding by any person, in each case with respect to
Hanna or any of its subsidiaries or any of their respective properties, is
pending or, to the knowledge of Hanna, threatened, other than, in each
case, those the outcome of which individually or in the aggregate would not
reasonably be expected to have a material adverse effect on Hanna.
(i) Absence of Changes in Benefit Plans. Since December 31, 1999,
there has not been any adoption or amendment in any material respect by
Hanna or any of its subsidiaries of any collective bargaining agreement or
any material bonus, pension (within the meaning of Section 3(2) of ERISA),
profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, equity-based,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical, life, severance, welfare (within the meaning of
Section 3(1) of ERISA) or other plan, arrangement or understanding
providing benefits to any current or former employee, officer, consultant
or director of Hanna or any of its subsidiaries (collectively, the "Hanna
Benefit Plans"), or any material change in any actuarial or other
assumption used to calculate funding obligations with respect to any Hanna
Benefit Plans, or any change in the manner in which contributions to any
Hanna Benefit Plans are made or the basis on which such contributions are
determined.
(j) ERISA Compliance.
(i) With respect to the Hanna Benefit Plans, no event has occurred
and, to the knowledge of Hanna, there exists no condition or set of
circumstances, in connection with which Hanna or any of its subsidiaries
could be subject to any liability that individually or in the aggregate
would have a material adverse effect on Hanna under ERISA, the Code or
any other applicable law.
(ii) Each Hanna Benefit Plan has been administered in accordance
with its terms, all applicable laws, including ERISA and the Code, and
the terms of all applicable collective bargaining agreements, except for
any failures so to administer any Hanna Benefit Plan that individually
or in the aggregate would not reasonably be expected to have a material
adverse effect on Hanna. Hanna, its subsidiaries and all the Hanna
Benefit Plans are in compliance with the applicable provisions of ERISA,
the Code and all other applicable laws and the terms of all applicable
collective bargaining agreements, except for any failures to be in such
compliance that individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Hanna. Each Hanna Benefit
Plan that is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the IRS that it is so
qualified. To the knowledge of Hanna, no event has occurred since the
date of any determination letter from the IRS that is reasonably likely
to affect adversely the qualified status of any such Hanna Benefit Plan,
except for any occurrence that individually or in the aggregate would
not reasonably be expected to have a material adverse effect on Hanna,
and to the knowledge of Hanna, all contributions to, and payments from,
such Hanna Benefit Plans that are required to be made in accordance with
such plans, ERISA or the Code have been timely made other than any
failures that individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Hanna.
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(iii) Except to the extent any of the following either individually
or in the aggregate would not reasonably be expected to have a material
adverse effect on Hanna, (x) neither Hanna nor any ERISA Affiliate of
Hanna, which together with Hanna would be deemed to be a single employer
within the meaning of Section 4001(b) of ERISA, has incurred any
liability under Title IV of ERISA and no condition exists that presents
a risk to Hanna or any ERISA Affiliate of Hanna of incurring any such
liability (other than liability for benefits or premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course), (y) no
Hanna Benefit Plan has incurred an "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the Code)
whether or not waived and (z) to the knowledge of Hanna, there are not
any facts or circumstances that would materially change the funded
status of any Hanna Benefit Plan that is a "defined benefit" plan (as
defined in Section 3(35) of ERISA) since the date of the most recent
actuarial report for such plan. No Hanna Benefit Plan is a multiemployer
plan within the meaning of Section 3(37) of ERISA and no liability has
been incurred by the Hanna and its ERISA Affiliates under such a plan,
except for any such liability that would not reasonably be expected to
have a material adverse effect on Geon.
(iv) Neither Hanna nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to
persons employed by Hanna or any of its subsidiaries and no collective
bargaining agreement is being negotiated by Hanna or any of its
subsidiaries, in each case that is material to Hanna and its
subsidiaries taken as a whole. As of the date of this Agreement, there
is no labor dispute, strike or work stoppage against Hanna or any of its
subsidiaries pending or, to the knowledge of Hanna, threatened which may
interfere with the respective business activities of Hanna or any of its
subsidiaries, except where such dispute, strike or work stoppage
individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Hanna. As of the date of this
Agreement, to the knowledge of Hanna, none of Hanna, any of its
subsidiaries or any of their respective representatives or employees has
committed any unfair labor practice in connection with the operation of
the respective businesses of Hanna or any of its subsidiaries, and there
is no charge or complaint against Hanna or any of its subsidiaries by
the National Labor Relations Board or any comparable governmental agency
pending or threatened in writing, except for any occurrence that
individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Hanna.
(v) No Hanna Benefit Plan provides medical benefits (whether or not
insured) with respect to current or former employees after retirement or
other termination of service the cost of which is material to Hanna and
its subsidiaries taken as a whole.
(vi) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event,
(A) entitle any current or former employee, officer or director of Hanna
or any ERISA Affiliate of Hanna to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (B) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee, officer or director or
(C) constitute a "change of control" under any Hanna Benefit Plan.
(vii) With respect to each Hanna Benefit Plan: (x) no actions,
suits, claims or disputes are pending or, to the knowledge of Hanna,
threatened, other than claims for benefits made in accordance with the
terms of such Hanna Benefit Plan, except for such actions, suits, claims
or disputes that individually or in the aggregate would not reasonably
be expected to have a material adverse effect on Hanna; (y) no audits
are pending with any governmental or regulatory agency and to the
knowledge of Hanna there are no facts which could give rise to any
liability in the event of such an audit that either individually or in
the aggregate would have a material adverse effect on Hanna; and (z) to
the knowledge of Hanna, all reports and returns required to be filed
with any governmental agency or distributed to any participant in any
Hanna Benefit Plan have been so duly filed or distributed other than any
failure to file or distribute such reports or returns that that
individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Hanna.
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(viii) Hanna has not incurred any liability under Code Section
4975, and no fact exists which could result in a liability to Hanna
under Code Section 4975 that would reasonably be expected to have a
material adverse effect on Hanna.
(k) Taxes.
(i) Each of Hanna and its subsidiaries has filed all material tax
returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed,
granted and have not expired, and all such returns and reports so filed
are complete and correct in all material respects, except to the extent
that such failures to file, to have extensions granted that remain in
effect or to be materially complete or correct individually or in the
aggregate would not have a material adverse effect on Hanna. Hanna and
each of its subsidiaries has paid (or Hanna has paid on its behalf) all
taxes shown as due on such returns and reports. Except as would not have
a material adverse effect on Hanna, the most recent financial statements
contained in the Hanna Filed SEC Documents reflect, and the financial
statements contained in the Hanna SEC Documents filed after the date of
this Agreement will reflect, an adequate reserve for all taxes due and
owing by Hanna and its subsidiaries for all taxable periods and portions
thereof through the dates of such financial statements that remain
unpaid as of those dates, which reserve was, and will be, computed in a
manner consistent with Hanna's past practice.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Hanna or any of its subsidiaries that have not been
paid or adequately reserved for, except for deficiencies that
individually or in the aggregate would not have a material adverse
effect on Hanna.
(iii) Neither Hanna nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that
is reasonably likely to prevent the Consolidation from qualifying as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
(iv) To the knowledge of Hanna, no stockholder of Hanna has entered
into any plan or arrangement or taken any action with respect to
Resulting Corporation Shares that such stockholder will receive upon
completion of the Consolidation which would cause such stockholder to
fail to satisfy the continuity of interest requirement applicable to a
Section 368(a)(1)(A) reorganization.
(v) Hanna will not be required to recognize any material amount of
taxable income for United States federal income tax purposes as a result
of the application of the provisions of Section 1.1502-1 et seq. of the
Treasury Regulations under the Code to Hanna and its subsidiaries as a
consequence of the termination of the Hanna "affiliated group," as such
term is defined in Section 1504(a) of the Code, upon completion of the
Consolidation.
(l) Certain Contracts. Except as permitted pursuant to Section 4.1(b),
neither Hanna nor any of its subsidiaries is a party to or bound by (i) any
agreement relating to the incurring of indebtedness (including sale and
leaseback and capitalized lease transactions and other similar financing
transactions but excluding commercial paper) providing for payment or
repayment in excess of $100.0 million, (ii) any material contract or (iii)
any non-competition agreement or any other agreement or obligation which
purports to limit in any material respect the manner in which, or the
localities in which, all or any substantial portion of the business of
Hanna and its subsidiaries, taken as a whole, or, after the Effective Time,
the business of Geon and its subsidiaries, taken as a whole, is or would be
conducted.
(m) Environmental Matters.
(i) Prior to the date of this Agreement, neither Hanna nor any of
its subsidiaries has received any communication (written or oral),
whether from a Governmental Entity, citizens' group, employee or
otherwise, alleging that Hanna or any of its subsidiaries is not in
compliance with applicable Environmental Laws, other than those
instances of noncompliance that individually or in the aggregate would
not reasonably be expected to have a material adverse effect on Hanna.
(ii) There is no Environmental Claim pending or, to the knowledge
of Hanna, threatened, against Hanna or any of its subsidiaries or, to
the knowledge of Hanna, against any person whose
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liability for any Environmental Claim Hanna or any of its subsidiaries
has or may have retained or assumed either contractually or by operation
of law, other than those Environmental Claims that individually or in
the aggregate would not reasonably be expected to have a material
adverse effect on Hanna.
(iii) There are no present or, to the knowledge of Hanna, past
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the Release or presence of any Hazardous
Material at any property, that could reasonably be expected to result in
liability under any Environmental Law for Hanna or any of its
subsidiaries or, to the knowledge of Hanna, for any person whose
liability for any Environmental Claim Hanna or any of its subsidiaries
has or may have retained or assumed either contractually or by operation
of law, other than those liabilities that individually or in the
aggregate would not reasonably be expected to have a material adverse
effect on Hanna.
(n) Intellectual Property. Hanna and its subsidiaries own or have a
binding, enforceable right to use all material letters patent, patent
applications, trade names, brand names, trademarks, service marks,
trademark and service mark registrations and applications, copyright
registrations and applications, both domestic and foreign, presently owned,
possessed, used or held by Hanna and its subsidiaries (the "Hanna
Intellectual Property"). To the knowledge of Hanna, neither the conduct of
Hanna's or any of its subsidiaries' business nor any of the products sold
or services provided by Hanna or any of its subsidiaries in connection
therewith (other than those infringements or violations of rights which
individually or in the aggregate would not reasonably be expected to have a
material adverse effect on Hanna) infringes upon or is inconsistent with
the intellectual property rights of any other person. To the knowledge of
Hanna, neither the conduct of any other person's business, nor the nature
of any of the products it sells or services it provides, infringes upon or
is inconsistent with any Hanna Intellectual Property, other than those
infringements or violations of rights which individually or in the
aggregate would not reasonably be expected to have a material adverse
effect on Hanna.
(o) Products Liability Claims. There are no product liability claims
or causes of action pending or, to the knowledge of Hanna, threatened
alleging personal injury or property damage from products or materials sold
by Hanna or its subsidiaries that, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on Hanna.
(p) Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Hanna Common
Stock at the Hanna Stockholders Meeting is the only vote of the holders of
any class or series of Hanna's capital stock necessary to adopt this
Agreement and approve the Consolidation and the other transactions
contemplated hereby (the "Hanna Stockholder Approval"). The Board of
Directors of Hanna has duly and validly approved and taken all corporate
action required to be taken by the Hanna Board of Directors for the
consummation of the transactions contemplated by this Agreement and, as of
the date of this Agreement, has recommended that Hanna's stockholders adopt
this Agreement and approve the Consolidation and the other transactions
contemplated hereby.
(q) State Takeover Statutes. The Board of Directors of Hanna has taken
all necessary action so that no Takeover Statute (including the interested
stockholder provisions codified in Section 203 of the DGCL) or any
applicable anti-takeover provision in the Hanna's certificate of
incorporation or by-laws is applicable to the Consolidation and the other
transactions contemplated by this Agreement. To the knowledge of Hanna, no
other state takeover statute is applicable to the Consolidation or the
other transactions contemplated by this Agreement.
(r) Rights Agreement. The Rights Agreement, dated as of December 4,
1991, by and between Hanna and First Chicago Trust Company of New York
(f/k/a Ameritrust Company National Association), as rights agent (the
"Hanna Rights Agreement"), has been amended to (i) render the Hanna Rights
Agreement inapplicable to the Consolidation and the other transactions
contemplated by this Agreement and (ii) ensure that (x) none of
Consolidation Corp., Geon or its wholly owned subsidiaries is an Acquiring
Person (as defined in the Hanna Rights Agreement), (y) a Distribution Date,
a Triggering
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Event or a Share Acquisition Date (as such terms are defined in the Hanna
Rights Agreement) does not occur solely by reason of the execution of this
Agreement, the consummation of the Consolidation, or the consummation of
the other transactions contemplated by this Agreement and (z) it will
expire or otherwise terminate immediately prior to the Effective Time.
(s) Ownership of Geon Capital Stock. Except for shares owned by Hanna
Benefit Plans or shares held or managed for the account of another person
or as to which Hanna is required to act as a fiduciary or in a similar
capacity, as of the date hereof, neither Hanna nor, to its knowledge
without independent investigation, any of its affiliates (i) beneficially
owns (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each
case, more than 1% of the outstanding shares of capital stock of Geon.
(t) Opinion of Financial Advisor. The Board of Directors of Hanna has
received the opinion of Salomon Smith Barney Inc., dated the date of this
Agreement, to the effect that, as of such date, the Hanna Exchange Ratio
for the conversion of Hanna Common Stock into Resulting Corporation Shares
pursuant to the Consolidation is fair from a financial point of view to
holders of shares of Hanna Common Stock, a signed copy of which opinion
will be made available to Geon promptly after the date hereof.
(u) Brokers. Except for Salomon Smith Barney Inc., no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Hanna.
ARTICLE 4.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1. CONDUCT OF BUSINESS.
(a) Conduct of Business by Geon. Except as set forth in Section 4.1(a)
of the Geon Disclosure Schedule, as otherwise expressly contemplated by
this Agreement or as consented to by Hanna, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, Geon shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary
course consistent with past practice and in compliance in all material
respects with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable best efforts to preserve intact
their current business organizations (other than internal organizational
realignments), use all reasonable best efforts to keep available the
services of their current officers and other key employees and preserve
their relationships with those persons having business dealings with them
to the end that their goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing
(but subject to the above exceptions), during the period from the date of
this Agreement to the Effective Time, Geon shall not, and shall not permit
any of its subsidiaries to:
(i) (x) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of Geon to its parent, or by a
subsidiary that is partially owned by Geon or any of its subsidiaries if
Geon or any such subsidiary receives or is to receive its proportionate
share thereof, and other than the regular quarterly cash dividends with
respect to the Geon Common Stock, declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its
capital stock, (y) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock,
except for issuances of the Geon Common Stock upon the exercise of the
Geon Employee Stock Options under the Geon Stock Plans or in connection
with other awards under the Geon Stock Plans, in each case, outstanding
as of the Geon Measurement Date and in accordance with their present
terms or issued pursuant to Section 4.1(a)(ii) or (z) except pursuant to
agreements entered into with respect to the Geon Stock Plans that are in
effect as of the close of business on the Geon
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Measurement Date, purchase, redeem or otherwise acquire any shares of
capital stock of Geon or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject
to any Lien any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities, other than (x) the issuance of shares of Geon Common Stock
permitted by Section 4.1(a)(vii) and (y) the issuance of Geon Common
Stock or options to purchase shares of Geon Common Stock upon the
exercise of Geon Employee Stock Options or in connection with other
awards under the Geon Stock Plans outstanding as of the Geon Measurement
Date and in accordance with their present terms or, after consulting
with Hanna, granted after the date hereof so long as the amount of Geon
Common Stock subject to Geon Employee Stock Options and/or other awards
under the Geon Stock Plans granted after the Geon Measurement Date do
not exceed 5,000 shares of Geon Common Stock in the aggregate;
(iii) incur any long-term indebtedness (whether evidenced by a note
or other instrument, pursuant to a financing lease, sale-leaseback
transaction, or otherwise) in excess of $25 million or incur short-term
indebtedness other than under lines of credit existing on the date
hereof;
(iv) satisfy any claims or liabilities other than the satisfaction
in the ordinary course of business consistent with past practice and in
accordance with their terms or in an amount not to exceed $5 million in
the aggregate;
(v) other than in the ordinary course of business consistent with
past practice, modify, amend or terminate any material contract;
(vi) amend its certificate of incorporation, by-laws or other
comparable organizational documents, or, in the case of Geon, merge or
consolidate with any person;
(vii) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person, except for such acquisitions for
which the aggregate consideration (including indebtedness directly or
indirectly assumed) is not more than $25 million;
(viii) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, other than (x) in the ordinary course of business consistent
with past practice or (y) for an aggregate consideration (including
indebtedness directly or indirectly assumed) in excess of $25 million;
(ix) (A) grant any key employee of Geon or its subsidiaries any
increase in compensation, bonus or other benefits, except for normal
increases in the ordinary course of business consistent with past
practice or as required under any employment agreements in effect as of
the date of the most recent audited financial statements included in the
Geon Filed SEC Documents, (B) grant any current or former director or
executive officer of Geon or its subsidiaries any increase in
compensation, bonus or other benefits except as required under any
employment agreements in effect as of the date of the most recent
audited financial statements included in the Geon Filed SEC Documents,
(C) grant to any such current or former director, executive officer or
key employee any increase in severance or termination pay or (D) enter
into or amend any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such
current or former director, executive officer or key employee, other
than in the ordinary course of business consistent with past practice;
(x) except insofar as may be required by a change in generally
accepted accounting principles, change the accounting methods,
principles or practices of Geon that materially affect its assets,
liabilities or results of operations;
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(xi) make any tax election (including any tax election that affects
any tax attributes of Geon) that individually or in the aggregate would
reasonably be expected to have a material adverse effect on Geon or
settle or compromise any material income tax liability;
(xii) except as provided in Section 4.2 (A) amend, modify or waive
any provision of the Geon Rights Agreement or take any action to redeem
the rights issued thereunder or render the rights issued thereunder
inapplicable to a transaction or (B) approve a Geon Takeover Proposal,
other than the Consolidation and the other transactions contemplated by
this Agreement, for purposes of Section 203 of the DGCL or any
applicable anti-takeover provision in Geon's certificate of
incorporation or by-laws, other than to permit another transaction that
the Board of Directors of Geon has determined is a Geon Superior
Proposal;
(xiii) license (other than pursuant to agreements outstanding as of
the date hereof), transfer or otherwise dispose of, or permit to lapse,
any rights in the material Geon Intellectual Property described in the
Geon Filed SEC Documents; or
(xiv) authorize, or commit or agree to take, any of the foregoing
actions;
provided, however, that the limitations set forth in this Section 4.1(a)
(other than clause (vi)) shall not apply to any transaction to which the
only parties are Geon and any wholly owned subsidiary or subsidiaries of
Geon.
(b) Conduct of Business by Hanna. Except as set forth in Section
4.1(b) of the Hanna Disclosure Schedule, as otherwise expressly
contemplated by this Agreement or as consented to by Geon, such consent not
to be unreasonably withheld or delayed, during the period from the date of
this Agreement to the Effective Time, Hanna shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary
course consistent with past practice and in compliance in all material
respects with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable best efforts to preserve intact
their current business organizations (other than internal organizational
realignments), use all reasonable best efforts to keep available the
services of their current officers and other key employees and preserve
their relationships with those persons having business dealings with them
to the end that their goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing
(but subject to the above exceptions), during the period from the date of
this Agreement to the Effective Time, Hanna shall not, and shall not permit
any of its subsidiaries to:
(i) (x) other than dividends and distributions by a direct or
indirect wholly owned subsidiary of Hanna to its parent, or by a
subsidiary that is partially owned by Hanna or any of its subsidiaries
if Hanna or any such subsidiary receives or is to receive its
proportionate share thereof, and other than the regular quarterly cash
dividends with respect to the Hanna Common Stock, declare, set aside or
pay any dividends on, or make any other distributions in respect of, any
of its capital stock, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock, except for issuances of Hanna Common Stock upon the exercise of
the Hanna Employee Stock Options under the Hanna Stock Plans or in
connection with other awards under the Hanna Stock Plans, in each case,
outstanding as of the Hanna Measurement Date, and in accordance with
their present terms or issued pursuant to Section 4.1(b)(ii) or (z)
except pursuant to agreements entered into with respect to the Hanna
Stock Plans that are in effect as of the close of business on the Hanna
Measurement Date, purchase, redeem or otherwise acquire any shares of
capital stock of Hanna or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject
to any Lien any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities, other than the issuance of Hanna Common Stock or the options
to purchase shares of Hanna Common Stock upon the exercise of the Hanna
Employee Stock Options or in connection with other awards under the
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Hanna Stock Plans outstanding as of the Hanna Measurement Date and in
accordance with their present terms or, after consulting with Geon,
granted after the date hereof so long as the amount of Hanna Common
Stock subject to the Hanna Employee Stock Options and/or other awards
under the Hanna Stock Plans granted after the Hanna Measurement Date do
not exceed 5,000 shares of Hanna Common Stock in the aggregate;
(iii) incur any long-term indebtedness (whether evidenced by a note
or other instrument, pursuant to a financing lease, sale-leaseback
transaction, or otherwise) in excess of $25 million or incur short-term
indebtedness other than under lines of credit existing on the date
hereof;
(iv) satisfy any claims or liabilities other than the satisfaction
in the ordinary course of business consistent with past practice and in
accordance with their terms or in an amount not to exceed $5 million in
the aggregate;
(v) other than in the ordinary course of business consistent with
past practice, modify, amend or terminate any material contract;
(vi) amend its certificate of incorporation, by-laws or other
comparable organizational documents, or in the case of the Hanna, merge
or consolidate with any person;
(vii) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person, except for such acquisitions for
which the aggregate consideration (including indebtedness directly or
indirectly assumed) is less than $25 million;
(viii) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets other than (x) in the ordinary course of business consistent with
past practice or (y) for an aggregate consideration (including
indebtedness directly or indirectly assumed) in excess of $25 million;
(ix) (A) grant any key employee of Hanna or its subsidiaries any
increase in compensation, bonus or other benefits, except for normal
increases in the ordinary course of business consistent with past
practice or as required under any employment agreements in effect as of
the date of the most recent audited financial statements included in the
Hanna Filed SEC Documents, (B) grant any current or former director or
executive of Hanna or its subsidiaries any increase in compensation,
bonus or other benefits except as required under any employment
agreements in effect as of the date of the most recent audited financial
statements included in the Hanna Filed SEC Documents, (C) grant to any
such current or former director, executive officer or key employee any
increase in severance or termination pay, or (D) enter into or amend any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director,
executive officer or key employee, other than in the ordinary course of
business consistent with past practice;
(x) except insofar as may be required by a change in generally
accepted accounting principles, change the accounting methods,
principles or practices of Hanna that materially affect its assets,
liabilities or results of operations;
(xi) make any tax election (including any tax election that affects
any tax attributes of Hanna) that individually or in the aggregate would
reasonably be expected to have a material adverse effect on Hanna or
settle or compromise any material income tax liability;
(xii) except as provided in Section 4.3, (A) amend, modify or waive
any provision of the Hanna Rights Agreement or take any action to redeem
the rights issued thereunder or render the rights issued thereunder
inapplicable to a transaction or (B) approve an Hanna Takeover Proposal,
other than the Consolidation and the other transactions contemplated by
this Agreement, for purposes of Section 203 of the DGCL or any
applicable anti-takeover provision in the Hanna's certificate of
incorporation or by-laws, other than to permit another transaction that
the Board of Directors of Hanna has determined is a Hanna Superior
Proposal;
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(xiii) license (other than pursuant to agreements outstanding as of
the date hereof), transfer or otherwise dispose of, or permit to lapse,
any rights in the material Hanna Intellectual Property described in
Hanna Filed SEC Documents; or
(xiv) authorize, or commit or agree to take, any of the foregoing
actions;
provided, however, that the limitations set forth in this Section 4.1(b)
(other than clause (vi)) shall not apply to any transaction to which the
only parties are Hanna and any wholly owned subsidiary or subsidiaries of
Hanna.
(c) Coordination of Dividends. Each of Hanna and Geon shall coordinate
with the other regarding the declaration and payment of dividends in
respect of the Hanna Common Stock and the Geon Common Stock and the record
dates and payment dates relating thereto, it being the intention of Hanna
and Geon that any holder of Geon Common Stock or Hanna Common Stock shall
not receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to its shares of the Geon Common Stock and/or
shares of Hanna Common Stock, including Resulting Corporation Shares that a
holder receives in exchange for shares of Hanna Common Stock or Geon Common
Stock pursuant to the Consolidation.
(d) Other Actions. Except as required by law, Geon and Hanna shall
not, and shall not permit any of their respective subsidiaries to,
voluntarily take any action that would reasonably be expected to result in
any of the conditions to the Consolidation set forth in Article 6 not being
satisfied.
(e) Advice of Changes. Geon and Hanna shall promptly advise the other
party orally and in writing to the extent it has knowledge of any change or
event having, or which, insofar as can reasonably be foreseen, would
reasonably be expected to have, a material adverse effect on such party or
on the truth of their respective representations and warranties or the
ability of the conditions set forth in Article 6 to be satisfied; provided,
however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with
respect thereto) or the conditions to the obligations of the parties under
this Agreement.
(f) Control of Other Party's Business. Nothing contained in this
Agreement gives Hanna, directly or indirectly, the right to control or
direct Geon's operations prior to the Effective Time. Nothing contained in
this Agreement gives Geon, directly or indirectly, the right to control or
direct Hanna's operations prior to the Effective Time. Prior to the
Effective Time, each of Hanna and Geon shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision
over its respective operations.
Section 4.2. NO SOLICITATION BY GEON.
(a) Geon shall not, nor shall it permit any of its subsidiaries to,
nor shall it authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Geon Takeover Proposal or (ii) participate in any
discussions or negotiations regarding any Geon Takeover Proposal; provided,
however, that, if at any time, the Board of Directors of Geon determines in
good faith, after consultation with outside counsel, that it is necessary
to do so in order to act in a manner consistent with its fiduciary duties
to Geon's stockholders under applicable law, Geon may, in response to a
Geon Superior Proposal which was not solicited by it or which did not
otherwise result from a breach of this Section 4.2(a) and subject to
providing prior written notice of its decision to take such action to Hanna
and compliance with Section 4.2(c), (x) furnish information with respect to
Geon and its subsidiaries to any person making a Geon Superior Proposal
pursuant to a customary confidentiality agreement (as determined by Geon
after consultation with its outside counsel) that is no less restrictive
than the Confidentiality Agreement (other than the standstill provisions
contained therein) and (y) participate in discussions or negotiations
regarding such Geon Superior Proposal. For purposes of this Agreement,
"Geon Takeover Proposal" means any inquiry, proposal or offer from any
person relating to
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any (w) direct or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or the assets of
Geon and its subsidiaries, taken as a whole, (x) direct or indirect
acquisition or purchase of 15% or more of any class of equity securities of
Geon or of 15% or more of any class of equity securities of any of its
subsidiaries whose business constitutes 15% or more of the net revenues,
net income or assets of Geon and its subsidiaries, taken as a whole, (y)
tender offer or exchange offer that if consummated would result in any
person beneficially owning 15% or more of any class of equity securities of
Geon or any of its subsidiaries whose business constitutes 15% or more of
the net revenues, net income or assets of Geon and its subsidiaries, taken
as a whole, or (z) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Geon or any of its subsidiaries whose business constitutes 15% or more of
the net revenues, net income or assets of Geon and its subsidiaries, taken
as a whole, other than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.2 or Section 5.1,
neither the Board of Directors of Geon nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Hanna, the approval or recommendation by such Board of Directors
or such committee of this Agreement, the Consolidation or the transactions
contemplated hereby, (ii) approve or recommend, or propose publicly to
approve or recommend, any Geon Takeover Proposal or (iii) cause Geon to
enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "Geon Acquisition Agreement")
related to any Geon Takeover Proposal. Notwithstanding the foregoing, in
the event that the Board of Directors of Geon determines in good faith,
after consultation with outside counsel, that in light of a Geon Superior
Proposal it is necessary to do so in order to act in a manner consistent
with its fiduciary duties to Geon's stockholders under applicable law, the
Board of Directors of Geon may (subject to this and the following
sentences) terminate this Agreement in order to concurrently enter into
such Geon Acquisition Agreement with respect to a Geon Superior Proposal;
provided, however, that Geon may not terminate this Agreement pursuant to
this Section 4.2(b) unless and until (i) three business days have elapsed
following the delivery to Hanna of a written notice of such determination
by the Board of Directors of Geon and (x) Geon has delivered to Hanna the
written notice required by Section 4.2(c) below and (y) during such three
business day period, Geon otherwise cooperates with Hanna with respect to
the Geon Takeover Proposal that constitutes a Geon Superior Proposal with
the intent of enabling Hanna to engage in good faith negotiations to make
such adjustments in the terms and conditions of the Consolidation as would
enable Hanna to proceed with the Consolidation on such adjusted terms, (ii)
at the end of such three business day period the Board of Directors of Geon
continues reasonably to believe that the Geon Takeover Proposal constitutes
a Geon Superior Proposal and (iii) Geon pays the Geon Termination Fee as
provided in Section 5.8. For purposes of this Agreement, a "Geon Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 66 2/3% of the combined voting power of the
shares of Geon Common Stock then outstanding or all or substantially all
the assets of Geon and otherwise on terms which the Board of Directors of
Geon determines in its good faith judgment (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable
to Geon's stockholders than the Consolidation (after considering (1) any
adjustment to the terms and conditions of the Consolidation proposal by
Hanna in response to a Geon Takeover Proposal and (2) the Geon Termination
Fee) and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of Directors of Geon, is
reasonably capable of being obtained by such third party.
(c) In addition to the obligations of Geon set forth in paragraphs (a)
and (b) of this Section 4.2, Geon shall immediately advise Hanna orally and
in writing of any request for information or of any Geon Takeover Proposal,
the material terms and conditions of such request or Geon Takeover Proposal
and the identity of the person making such request or Geon Takeover
Proposal. Geon will keep Hanna reasonably informed of the status and
details (including amendments and proposed amendments) of any such request
or Geon Takeover Proposal.
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(d) Nothing contained in this Section 4.2 shall prohibit Geon from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure
to Geon's stockholders if, in the good faith judgment of the Board of
Directors of Geon, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, except as expressly permitted by paragraph (b) of
this Section 4.2 in connection with a Geon Superior Proposal, neither Geon
nor its Board of Directors nor any committee thereof shall withdraw or
modify, or propose publicly to withdraw or modify, its position with
respect to this Agreement, the Consolidation or the transactions
contemplated hereby, or approve or recommend, or propose publicly to
approve or recommend, a Geon Takeover Proposal.
Section 4.3. NO SOLICITATION BY HANNA.
(a) Hanna shall not, nor shall it permit any of its subsidiaries to,
nor shall it authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Hanna Takeover Proposal or (ii) participate in any
discussions or negotiations regarding any Hanna Takeover Proposal;
provided, however, that, if at any time, the Board of Directors of Hanna
determines in good faith, after consultation with outside counsel, that it
is necessary to do so in order to act in a manner consistent with its
fiduciary duties to Hanna's stockholders under applicable law, Hanna may,
in response to an Hanna Superior Proposal which was not solicited by it or
which did not otherwise result from a breach of this Section 4.3(a) and
subject to providing prior written notice of its decision to take such
action to Geon and compliance with Section 4.3(c), (x) furnish information
with respect to Hanna and its subsidiaries to any person making an Hanna
Superior Proposal pursuant to a customary confidentiality agreement (as
determined by Hanna after consultation with its outside counsel) that is no
less restrictive than the Confidentiality Agreement (other than the
standstill provisions contained therein) and (y) participate in discussions
or negotiations regarding such Hanna Superior Proposal. For purposes of
this Agreement, "Hanna Takeover Proposal" means any inquiry, proposal or
offer from any person relating to any (w) direct or indirect acquisition or
purchase of a business that constitutes 15% or more of the net revenues,
net income or the assets of Hanna and its subsidiaries, taken as a whole,
(x) direct or indirect acquisition or purchase of 15% or more of any class
of equity securities of Hanna or of 15% or more of any class of equity
securities of any of its subsidiaries whose business constitutes 15% or
more of the net revenues, net income or assets of Hanna and its
subsidiaries, taken as a whole, (y) tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of
any class of equity securities of Hanna or any of its subsidiaries whose
business constitutes 15% or more of the net revenues, net income or assets
of Hanna and its subsidiaries, taken as a whole, or (z) merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Hanna or any of its
subsidiaries whose business constitutes 15% or more of the net revenues,
net income or assets of Hanna and its subsidiaries, taken as a whole, other
than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.3 or Section 5.1,
neither the Board of Directors of Hanna nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Geon, the approval or recommendation by such Board of Directors
or such committee of this Agreement, the Consolidation or the transactions
contemplated hereby, (ii) approve or recommend, or propose publicly to
approve or recommend, any Hanna Takeover Proposal or (iii) cause Hanna to
enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Hanna Acquisition
Agreement") related to any Hanna Takeover Proposal. Notwithstanding the
foregoing, in the event that the Board of Directors of Hanna determines in
good faith, after consultation with outside counsel, that in light of an
Hanna Superior Proposal it is necessary to do so in order to act in a
manner consistent with its fiduciary duties to Hanna's stockholders under
applicable law, the Board of Directors of Hanna may (subject to this and
the
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following sentences) terminate this Agreement in order to concurrently
enter into such Hanna Acquisition Agreement with respect to an Hanna
Superior Proposal; provided, however, that Hanna may not terminate this
Agreement pursuant to this Section 4.3(b) unless and until (i) three
business days have elapsed following the delivery to Geon of a written
notice of such determination by the Board of Directors of Hanna and (x) the
Hanna has delivered to Geon the written notice required by Section 4.3(c)
below and (y) during such three business day period, Hanna otherwise
cooperates with Geon with respect to the Hanna Takeover Proposal that
constitutes an Hanna Superior Proposal with the intent of enabling Geon to
engage in good faith negotiations to make such adjustments in the terms and
conditions of the Consolidation as would enable Geon to proceed with the
Consolidation on such adjusted terms, (ii) at the end of such three
business day period the Board of Directors of Hanna continues reasonably to
believe that the Hanna Takeover Proposal constitutes an Hanna Superior
Proposal and (iii) Hanna pays the Hanna Termination Fee as provided in
Section 5.8. For purposes of this Agreement, an "Hanna Superior Proposal"
means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 66 2/3% of the combined voting power of the
shares of Hanna Common Stock then outstanding or all or substantially all
the assets of Hanna and otherwise on terms which the Board of Directors of
Hanna determines in its good faith judgment (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable
to Hanna's stockholders than the Consolidation (after considering (1) any
adjustment to the terms and conditions of the Consolidation proposed by
Geon in response to an Hanna Takeover Proposal and (2) the Hanna
Termination Fee) and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of
Hanna, is reasonably capable of being obtained by such third party.
(c) In addition to the obligations of Hanna set forth in paragraphs
(a) and (b) of this Section 4.3, Hanna shall immediately advise Geon orally
and in writing of any request for information or of any Hanna Takeover
Proposal, the material terms and conditions of such request or Hanna
Takeover Proposal and the identity of the person making such request or
Hanna Takeover Proposal. Hanna will keep Geon reasonably informed of the
status and details (including amendments and proposed amendments) of any
such request or Hanna Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall prohibit Hanna from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure
to Hanna's stockholders if, in the good faith judgment of the Board of
Directors of Hanna, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, except as expressly permitted by paragraph (b) of
this Section 4.3 in connection with an Hanna Superior Proposal, neither
Hanna nor its Board of Directors nor any committee thereof shall withdraw
or modify, or propose publicly to withdraw or modify, its position with
respect to this Agreement, the Consolidation or the transactions
contemplated hereby, or approve or recommend, or propose publicly to
approve or recommend, an Hanna Takeover Proposal.
Section 4.4. RIGHTS AGREEMENTS. The Geon Board of Directors will take all
further action (in addition to that referred to in Section 3.1(r) hereof)
reasonably requested in writing by Hanna (including redeeming the Rights (as
defined in the Geon Rights Agreement) immediately prior to the Effective Time or
further amending the Geon Rights Agreement) in order to render the Geon Rights
Agreement inapplicable to the Consolidation and the other transactions
contemplated hereby to the extent provided herein and in the Geon Rights
Agreement. The Hanna Board of Directors will take all further action (in
addition to that referred to in Section 3.2(r) hereof) reasonably requested in
writing by Geon (including redeeming the Rights (as defined in the Hanna Rights
Agreement) immediately prior to the Effective Time or further amending the Hanna
Rights Agreement) in order to render the Hanna Rights Agreement inapplicable to
the Consolidation and the other transactions contemplated hereby to the extent
provided herein and in the Hanna Rights Agreement.
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ARTICLE 5.
ADDITIONAL AGREEMENTS
Section 5.1. PREPARATION OF THE FORM S-4 AND THE JOINT PROXY STATEMENT;
STOCKHOLDERS MEETINGS.
(a) As soon as practicable following the date of this Agreement, Geon
and Hanna shall prepare and file with the SEC the Joint Proxy Statement and
the Form S-4, in which the Joint Proxy Statement will be included as a
prospectus. Each of Geon and Hanna shall use reasonable best efforts to
have the Form S-4 declared effective under the Securities Act as promptly
as practicable after such filing. Geon will use all reasonable best efforts
to cause the Joint Proxy Statement to be mailed to Geon's stockholders, and
Hanna will use all reasonable best efforts to cause the Joint Proxy
Statement to be mailed to Hanna's stockholders, in each case as promptly as
practicable after the Form S-4 is declared effective under the Securities
Act. Except as required by applicable law, (i) Hanna shall cause the Joint
Proxy Statement to contain the recommendation of the Hanna Board of
Directors that the stockholders of Hanna adopt this Agreement and the
Consolidation and the transactions contemplated hereby and (ii) Geon shall
cause the Joint Proxy Statement to contain the recommendation of the Geon
Board of Directors that the stockholders of Geon adopt this Agreement and
the Consolidation and the transactions contemplated hereby. Geon and Hanna
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable
state securities laws in connection with the issuance of Resulting
Corporation Shares in the Consolidation and each party shall furnish all
information concerning itself and the holders of its common stock as may be
reasonably requested by the other party in connection with any such action.
No filing of, or amendment or supplement to, the Joint Proxy Statement or
the Form S-4 will be made by Hanna or Geon without providing the other
party the opportunity to review and comment thereon. Each party will advise
the other party, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the
qualification of Resulting Corporation Shares issuable in connection with
the Consolidation for offering or sale in any jurisdiction, or any request
by the SEC for amendment of the Joint Proxy Statement or the Form S-4 or
comments thereon and responses thereto or requests by the SEC for
additional information. If at any time prior to the Effective Time any
information relating to Geon or Hanna, or any of their respective
affiliates, officers or directors, should be discovered by Geon or Hanna
which should be set forth in an amendment or supplement to any of the Form
S-4 or the Joint Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party that
discovers such information shall promptly notify the other party hereto and
an appropriate amendment or supplement describing such information will be
promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of Geon and Hanna.
(b) Geon shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Geon Stockholders Meeting") for the purpose of obtaining
the Geon Stockholder Approval. Without limiting the generality of the
foregoing, but subject to its rights pursuant to Section 4.2 and Section
7.1(g), Geon agrees that its obligations pursuant to the first sentence of
this Section 5.1(b) will not be affected by the commencement, public
proposal, public disclosure or communication to Geon of any Geon Takeover
Proposal.
(c) Hanna shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Hanna Stockholders Meeting") for the purpose of
obtaining the Hanna Stockholder Approval. Without limiting the generality
of the foregoing but subject to its rights pursuant to Section 4.3 and
Section 7.1(d), Hanna agrees that its obligations pursuant to the first
sentence of this Section 5.1(c) shall not be affected by the commencement,
public proposal, public disclosure or communication to Hanna of any Hanna
Takeover Proposal.
(d) Hanna and Geon will use all reasonable best efforts to hold the
Geon Stockholders Meeting and the Hanna Stockholders Meeting on the same
date and as soon as practicable after the date hereof.
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Section 5.2. LETTERS OF GEON'S ACCOUNTANTS. Geon shall use reasonable best
efforts to cause to be delivered to Hanna two letters from Geon's independent
accountants, one dated a date within two business days before the date on which
the Form S-4 shall become effective and one dated a date within two business
days before the Closing Date, each addressed to Hanna, in form and substance
reasonably satisfactory to Hanna and customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
Section 5.3. LETTERS OF HANNA'S ACCOUNTANTS. Hanna shall use reasonable
best efforts to cause to be delivered to Geon two letters from Hanna's
independent accountants, one dated a date within two business days before the
date on which the Form S-4 shall become effective and one dated a date within
two business days before the Closing Date, each addressed to Geon, in form and
substance reasonably satisfactory to Geon and customary in scope and substance
for comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
Section 5.4. ACCESS TO INFORMATION; CONFIDENTIALITY. To the extent
permitted by applicable law and subject to the Agreement dated March 1, 1999,
between Hanna and Geon (the "Confidentiality Agreement"), each of Geon and Hanna
shall, and shall cause each of its respective subsidiaries to, afford to the
other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party, reasonable access during
normal business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of Geon and Hanna shall, and shall cause each of its
respective subsidiaries to, furnish promptly to the other party (a) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as such other party may reasonably request. Any review pursuant to
this Section 5.4 shall be for the purposes of confirming the accuracy of any
representation or warranty contained in this Agreement given by Hanna to Geon,
or by Geon to Hanna, and facilitating transition planning. Each of Geon and
Hanna will hold, and will cause its respective officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to hold,
any nonpublic information in accordance with the terms of the Confidentiality
Agreement.
Section 5.5. REASONABLE BEST EFFORTS; COOPERATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other party in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Consolidation and the other
transactions contemplated by this Agreement, including (i) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and
filings and the taking of all steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated
or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and
to fully carry out the purposes of, this Agreement. Nothing set forth in
this Section 5.5(a) will limit or affect actions permitted to be taken
pursuant to Sections 4.2 and 4.3.
(b) In connection with and without limiting the foregoing, Geon and
Hanna shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the
Consolidation, this Agreement or any of the other transactions contemplated
hereby and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Consolidation, this Agreement or any
of the other transactions contemplated hereby, take all action necessary to
ensure that the Consolidation and the other transactions contemplated
hereby may be consummated as promptly as
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practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Consolidation and
the other transactions contemplated by this Agreement.
(c) Each of Hanna and Geon shall cooperate with each other in
obtaining opinions of Jones, Day, Reavis & Pogue, counsel to Hanna, and
Thompson Hine & Flory LLP, counsel to Geon, dated as of the Closing Date,
to the effect that the Consolidation will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code. In connection
therewith, each of Hanna and Geon shall deliver to Jones, Day, Reavis &
Pogue and Thompson Hine & Flory LLP customary representation letters in
form and substance reasonably satisfactory to such counsel (the
representation letters referred to in this sentence are collectively
referred to as the "Tax Certificates").
(d) Each of Hanna and Geon shall consult and cooperate with the other
with respect to significant developments in its business and shall give
reasonable consideration to the other's views with respect thereto.
(e) Each of Hanna and Geon shall (i) make the filings required of such
party under the HSR Act with respect to the Consolidation and the other
transactions contemplated by this Agreement within ten days after the date
of this Agreement, (ii) comply at the earliest practicable date with any
request under the HSR Act for additional information, documents or other
materials received by such party from the Federal Trade Commission or the
Department of Justice or any other Governmental Entity in respect of such
filings or the Consolidation and the other transactions contemplated by
this Agreement, and (iii) cooperate with the other party in connection with
making any filing under the HSR Act and in connection with any filings,
conferences or other submissions related to resolving any investigation or
other inquiry by any such Governmental Authority under the HSR Act with
respect to the Consolidation and the other transactions contemplated by
this Agreement.
(f) In furtherance and not in limitation of the covenants of the
parties contained in Section 5.5(e), each of Hanna and Geon shall use its
reasonable best efforts to resolve such objections if any, as may be
asserted with respect to the transactions contemplated hereby under any
Antitrust Law. In connection with the foregoing, if any administrative or
judicial action or proceeding, including any proceeding by a private party,
is instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Hanna and Geon shall cooperate in all respects with each other and use its
respective reasonable best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement, including,
without limitation, vigorously defending in litigation on the merits any
claim asserted in any court by any party through a final and nonappealable
judgment. For purposes of this Agreement, "Antitrust Law" means the Sherman
Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other federal, state and foreign,
if any, statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition through
merger or acquisition.
(g) If any objections are asserted with respect to the transactions
contemplated hereby under any Antitrust Law or if any suit is instituted by
any government authority or any private party challenging any of the
transactions contemplated hereby as violative of any Antitrust Law, each of
Hanna and Geon shall use its reasonable best efforts to resolve such
objections or challenge as such governmental authority or private party may
have to such transactions under such Antitrust Law so as to permit
consummation of the transactions contemplated by this Agreement. In
furtherance and not in limitation of the foregoing, each of Hanna and Geon
(and, to the extent required by any governmental authority, its respective
subsidiaries and affiliates over which it exercises control) shall be
required to pursue a resolution with any governmental authority and, if
acceptable to any governmental authority, enter into a settlement,
undertaking, consent decree, stipulation or other agreement with such
governmental authority regarding antitrust matters in connection with the
transactions contemplated by this Agreement (each, a
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"Settlement"). Notwithstanding anything else contained in this Agreement,
none of Hanna, Geon, the Consolidation Corp. or the Resulting Corporation
shall be required to enter into any Settlement that requires Hanna, Geon,
the Consolidation Corp. and/or the Resulting Corporation to sell or dispose
of any significant assets of Hanna and its subsidiaries, Geon and its
subsidiaries, the Consolidation Corp. and/or the Resulting Corporation and
its subsidiaries.
Section 5.6. STOCK OPTIONS, RESTRICTED STOCK AND EMPLOYMENT AGREEMENTS.
(a) As of the Effective Time, (i) each outstanding Hanna Employee
Stock Option will be converted into an option (an "Hanna Adjusted Option")
to purchase the number of Resulting Corporation Shares equal to the number
of shares of Hanna Common Stock subject to such Hanna Employee Stock Option
immediately prior to the Effective Time multiplied by the Hanna Exchange
Ratio (rounded to the nearest whole number of Resulting Corporation
Shares), at an exercise price per share equal to the exercise price for
each such share of Hanna Common Stock subject to such option divided by the
Hanna Exchange Ratio (rounded down to the nearest whole cent), and all
references in each such option to Hanna shall be deemed to refer to the
Resulting Corporation, where appropriate, (ii) each outstanding Geon
Employee Stock Option will be converted into an option (a "Geon Adjusted
Option," and together with the Hanna Adjusted Options, an "Adjusted Option"
or the "Adjusted Options") to purchase the number of Resulting Corporation
Shares equal to the number of shares of Geon Common Stock subject to such
Geon Employee Stock Option immediately prior to the Effective Time
multiplied by the Geon Exchange Ratio (rounded to the nearest whole number
of Resulting Corporation Shares), at an exercise price per share equal to
the exercise price for each such share of Geon Common Stock subject to such
option divided by the Geon Exchange Ratio (rounded down to the nearest
whole cent), and all references in each such option to Geon shall be deemed
to refer to the Resulting Corporation, where appropriate, and (iii) the
Resulting Corporation shall assume the obligations of Hanna under the Hanna
Stock Plans and Geon under the Geon Stock Plans. The other terms of each
Adjusted Option, and the plans or agreements under which they were issued,
shall continue to apply in accordance with their terms. The date of grant
of each Adjusted Option shall be the date on which the corresponding Hanna
Employee Stock Option or Geon Employee Stock Option, as the case may be,
was granted. Notwithstanding the foregoing, with respect to each Hanna
Employee Stock Option or Geon Employee Stock Option that is an incentive
stock option (within the meaning of Section 422(b) of the Code), no
adjustment shall be made that would be a modification (within the meaning
of Section 424(h) of the Code) to such option.
(b) To the extent that there are any outstanding Hanna Awards or Geon
Awards at the Effective Time, then, as of the Effective Time, (i) each such
Hanna Award or Geon Award shall be converted into the same instrument of
the Resulting Corporation, in each case with such adjustments (and no other
adjustments) to the terms of such Hanna Awards or Geon Awards, as the case
may be, as are necessary to preserve the value inherent in such Hanna
Awards or Geon Awards with no detrimental effects on the holder thereof and
(ii) the Resulting Corporation shall assume the obligations of Hanna under
the Hanna Awards and Geon under the Geon Awards. The other terms of each
Hanna Award and Geon Award, and the plans or agreements under which they
were issued, shall continue to apply in accordance with their terms.
(c) Geon and Hanna agree that each of the Geon Stock Plans and Hanna
Stock Plans shall be amended, to the extent necessary, to reflect the
transactions contemplated by this Agreement, including, but not limited to
the conversion of shares of the Hanna Common Stock and Geon Common Stock
held or to be awarded or paid pursuant to such benefit plans, programs or
arrangements into Resulting Corporation Shares on a basis consistent with
the transactions contemplated by this Agreement. Geon and Hanna agree to
submit the amendments to the Hanna Stock Plans or the Geon Stock Plans to
their respective stockholders, if such submission is determined to be
necessary by counsel to Geon or Hanna after consultation with one another;
provided, however, that such approval shall not be a condition to the
consummation of the Consolidation.
(d) The Resulting Corporation shall (i) reserve for issuance the
number of Resulting Corporation Shares that will become subject to the
benefit plans, programs and arrangements referred to in this
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Section 5.6 and (ii) issue or cause to be issued the appropriate number of
Resulting Corporation Shares pursuant to applicable plans, programs and
arrangements, upon the exercise or maturation of rights existing thereunder
on the Effective Time or thereafter granted or awarded. As soon as
practicable after the Effective Time, the Resulting Corporation shall
prepare and file with the SEC a registration statement on Form S-8 (or
other appropriate form) registering a number of Resulting Corporation
Shares necessary to fulfill the Resulting Corporation's obligations under
this Section 5.6. Such registration statement shall be kept effective (and
the current status of the prospectus required thereby shall be maintained)
for at least as long as Adjusted Options, the Hanna Awards or the Geon
Awards remain outstanding.
(e) As soon as practicable after the Effective Time, the Resulting
Corporation shall deliver to the holders of the Hanna Employee Stock
Options, Hanna Awards, Geon Employee Stock Options and Geon Awards
appropriate notices setting forth such holders' rights pursuant to the
Hanna Stock Plans or Geon Stock Plans, as the case may be, and the
agreements evidencing the grants of such Hanna Employee Stock Options,
Hanna Awards, Geon Employee Stock Options and Geon Awards and that such
Hanna Employee Stock Options, Hanna Awards, Geon Employee Stock Options and
Geon Awards and the related agreements shall be assumed by the Resulting
Corporation and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section after giving effect to
the Consolidation).
Section 5.7. INDEMNIFICATION.
(a) From and after the Effective Time, the Resulting Corporation
shall, to the fullest extent not prohibited by applicable law, indemnify,
defend and hold harmless each person who is now, or has been at any time
prior to the date hereof, or who becomes prior to the Effective Time, an
officer, director or employee of Geon or any of its subsidiaries or Hanna
or any of its subsidiaries (each, an "Indemnified Party" and collectively,
the "Indemnified Parties") against (i) all losses, expenses (including
reasonable attorneys' fees and expenses), claims, damages or liabilities
or, subject to the proviso of the next succeeding sentence, amounts paid in
settlement, arising out of actions or omissions occurring at or prior to
the Effective Time (and whether asserted or claimed prior to, at or after
the Effective Time) that are, in whole or in part, based on or arising out
of the fact that such person is or was a director, officer or employee of
Geon or any of its subsidiaries or Hanna or any of its subsidiaries or
served as a fiduciary under or with respect to any employee benefit plan
(within the meaning of Section 3(3) of ERISA) at any time maintained by or
contributed to by Geon or any of its subsidiaries or Hanna or any of its
subsidiaries ("Indemnified Liabilities"), and (ii) all Indemnified
Liabilities to the extent they are based on or arise out of or pertain to
the transactions contemplated by this Agreement. In the event of any such
loss, expense, claim, damage or liability (whether or not arising before
the Effective Time), (i) the Resulting Corporation shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties, which
counsel shall be reasonably satisfactory to the Resulting Corporation,
promptly after statements therefor are received and otherwise advance to
such Indemnified Party upon request reimbursement of documented expenses
reasonably incurred, (ii) the Resulting Corporation will cooperate in the
defense of such matter and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the
standards set forth under applicable law and the certificate of
incorporation or by-laws shall be made by independent counsel mutually
acceptable to the Resulting Corporation and the Indemnified Party;
provided, however, that the Resulting Corporation shall not be liable for
any settlement effected without its written consent (which consent shall
not be unreasonably withheld or delayed). In the event that any Indemnified
Party is required to bring any action to enforce rights or to collect
moneys due under this Agreement and is successful in such action, the
Resulting Corporation shall reimburse such Indemnified Party for all of its
expenses in bringing and pursuing such action. In addition, from and after
the Effective Time, directors and officers of Geon or Hanna who become
directors or officers of the Resulting Corporation will be entitled to
indemnification under the Resulting Corporation's articles of incorporation
and regulations, as the same may be amended from time to time in accordance
with their terms and applicable law.
(b) In the event that the Resulting Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
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consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such
case, proper provision will be made so that the successors and assigns of
the Resulting Corporation assume the obligations set forth in this Section
5.7.
(c) For six years after the Effective Time, the Resulting Corporation
shall maintain in effect directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with
respect to those persons who are currently covered by Geon's and Hanna's
directors' and officers' liability insurance policy on terms with respect
to such coverage and amount no less favorable than those of the policies of
Geon and Hanna in effect on the date hereof; provided, however, that in no
event shall the Resulting Corporation be required to pay aggregate premiums
for insurance under this Section 5.7(c) in excess of 200% of the aggregate
premiums paid by Geon and Hanna in 1999 for such purpose; provided,
further, that if the annual premiums of such insurance coverage exceed such
amount, the Resulting Corporation shall be obligated to obtain a policy
with the best coverage available, in the reasonable judgment of the Board
of Directors of the Resulting Corporation, for a cost up to but not
exceeding such amount. In addition, for six years after the Effective Time,
the Resulting Corporation shall maintain in effect fiduciary liability
insurance policies for employees who serve or have served as fiduciaries
under or with respect to any employee benefit plans described in Section
5.7(a) with coverages and in amounts no less favorable than those of the
policies of Geon and Hanna in effect on the date hereof.
(d) The provisions of this Section 5.7 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not
in substitution for, any other rights to indemnification or contribution
that any such person may have by contract or otherwise.
Section 5.8. FEES AND EXPENSES.
(a) Except as provided in this Section 5.8, all fees and expenses
incurred in connection with the Consolidation, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
fees or expenses, whether or not the Consolidation is consummated, except
that each of Hanna and Geon shall bear and pay one-half of the costs and
expenses incurred in connection with the filing, printing and mailing of
the Form S-4 and the Joint Proxy Statement (including SEC filing fees).
(b) If (i) this Agreement is terminated by Geon pursuant to Section
7.1(g), then, immediately prior to such termination, Geon shall pay Hanna a
fee equal to $25 million (the "Geon Termination Fee"), payable by wire
transfer of same day funds, (ii)(x) a Geon Takeover Proposal shall have
been made known to Geon or any of its subsidiaries or has been made
directly to its stockholders generally or any person shall have publicly
announced an intention (whether or not conditional) to make a Geon Takeover
Proposal which, in any such case, has not been publicly withdrawn prior to
the Geon Stockholders Meeting, (y) thereafter, this Agreement is terminated
by either Geon or Hanna pursuant to Section 7.1(b)(ii), and (z) within 18
months of such termination Geon or any of its subsidiaries enters into any
Geon Acquisition Agreement or consummates any Geon Takeover Proposal (for
the purposes of the foregoing proviso the terms "Geon Acquisition
Agreement" and "Geon Takeover Proposal" shall have the meanings assigned to
such terms in Section 4.2 except that the references to "15%" in the
definition of "Geon Takeover Proposal" in Section 4.2(a) shall be deemed to
be references to "35%" and "Geon Takeover Proposal" shall only be deemed to
refer to a transaction involving Geon, or with respect to assets (including
the shares of any subsidiary) Geon and its subsidiaries, taken as a whole,
and not any of its subsidiaries alone), then Geon shall pay Hanna the Geon
Termination Fee, payable by wire transfer of same day funds, no later than
two days after the first to occur of the execution of a Geon Acquisition
Agreement or the consummation of a Geon Takeover Proposal, or (iii) this
Agreement is terminated by Hanna pursuant to Section 7.1(e), then Geon
shall pay Hanna the Geon Termination Fee, payable by wire transfer of same
day funds, no later than two days after such termination. Geon acknowledges
that the agreements contained in this Section 5.8(b) are an integral part
of the transactions contemplated by this Agreement, and that, without these
agreements, Hanna would not enter into this Agreement.
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(c) If (i) this Agreement is terminated by Hanna pursuant to Section
7.1(d), then, immediately prior to such termination, Hanna shall pay Geon a
fee equal to $25 million (the "Hanna Termination Fee"), payable by wire
transfer of same day funds, (ii) (x) an Hanna Takeover Proposal shall have
been made known to Hanna or any of its subsidiaries or has been made
directly to its stockholders generally or any person shall have publicly
announced an intention (whether or not conditional) to make an Hanna
Takeover Proposal which, in any such case, has not been publicly withdrawn
prior to the Hanna Stockholders Meeting, (y) thereafter, this Agreement is
terminated by either Geon or Hanna pursuant to Section 7.1(b)(iii), and (z)
within 18 months of such termination Hanna or any of its subsidiaries
enters into any Hanna Acquisition Agreement or consummates any Hanna
Takeover Proposal (for the purposes of the foregoing proviso the terms
"Hanna Acquisition Agreement" and "Hanna Takeover Proposal" shall have the
meanings assigned to such terms in Section 4.3 except that the references
to "15%" in the definition of "Hanna Takeover Proposal" in Section 4.3(a)
shall be deemed to be references to "35%" and "Hanna Takeover Proposal"
shall only be deemed to refer to a transaction involving Hanna, or with
respect to assets (including the shares of any subsidiary) Hanna and its
subsidiaries, taken as a whole, and not any of its subsidiaries alone),
then Hanna shall pay Geon the Hanna Termination Fee, payable by wire
transfer of same day funds, no later than two days after the first to occur
of the execution of an Hanna Acquisition Agreement or the consummation of
an Hanna Takeover Proposal, or (iii) this Agreement is terminated by Geon
pursuant to Section 7.1(h), then Hanna shall pay Geon the Hanna Termination
Fee, payable by wire transfer of same day funds, no later than two days
after such termination. Hanna acknowledges that the agreements contained in
this Section 5.8(c) are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, Geon would not enter
into this Agreement.
(d) If this Agreement is terminated at such time that this Agreement
is terminable pursuant to either (but not both) of Section 7.1(c) or
Section 7.1(f), then the party whose representations or warranties are
inaccurate or who has breached its covenants or other agreements contained
in this Agreement shall promptly (but not later than two business days
after receipt of notice from the other party) pay to the other party an
amount equal to all documented out-of-pocket expenses and fees incurred by
the other party (including, without limitation, fees and expenses payable
to all legal, accounting, financial, public relations and other
professional advisors arising out of or in connection with or related to
the Consolidation or the other transactions contemplated by this Agreement)
not to exceed $2 million in the aggregate ("Out-of-Pocket Expenses");
provided, however, that, if this Agreement is terminated by a party as a
result of a willful breach by the other party, the non-breaching party may
pursue any remedies available to it at law or in equity and shall, in
addition to its Out-of-Pocket Expenses (which shall be paid as specified
above and shall not be limited to $2 million), be entitled to recover such
additional amounts as such non-breaching party may be entitled to receive
at law or in equity.
Section 5.9. PUBLIC ANNOUNCEMENTS. Hanna and Geon will consult with each
other before issuing, and provide each other the opportunity to review, comment
upon and concur with, any press release or other public statements with respect
to the transactions contemplated by this Agreement, including the Consolidation,
and shall not issue any such press release or make any such public statement
prior to such consultation, except as either party may determine is required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
Section 5.10. AFFILIATES. Not less than 45 days prior to the Effective
Time, each party shall deliver to the other party a list of names and addresses
of each person who, in such party's reasonable judgment, is an affiliate (within
the meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act) of such party. Each party shall provide the other party such
information and documents as such other party shall reasonably request for
purposes of reviewing such list. Each party shall deliver or cause to be
delivered to the other party, not later than 30 days prior to the Effective
Time, an affiliate letter in the form attached hereto as Exhibit 5.10, executed
by each of the affiliates of such party identified in the foregoing list. The
Resulting Corporation shall be entitled to place legends as specified in such
affiliate letters on the certificates
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evidencing any of Resulting Corporation Shares to be received by the affiliates
of Hanna and Geon pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Resulting
Corporation Shares, consistent with the terms of such letters.
Section 5.11. NYSE LISTING. The parties shall use their reasonable best
efforts to cause Resulting Corporation Shares issuable to Hanna's and Geon's
stockholders as contemplated by this Agreement to be approved for listing on the
NYSE, subject to official notice of issuance, as promptly as practicable after
the date hereof, and in any event prior to the Closing Date.
Section 5.12. STOCKHOLDER LITIGATION. Each of Geon and Hanna shall give
the other the reasonable opportunity to participate in the defense of any
stockholder litigation against Geon or Hanna, as applicable, and its directors
relating to the transactions contemplated by this Agreement.
Section 5.13. TAX TREATMENT. Each of Hanna and Geon shall use reasonable
best efforts to cause the Consolidation to qualify as a reorganization under the
provisions of Section 368(a)(1)(A) of the Code and to obtain the opinions of
counsel referred to in Sections 6.2(c) and 6.3(c), including, without
limitation, forbearing from taking any action that would cause the Consolidation
not to qualify as a reorganization under the provisions of Section 368(a)(1)(A)
of the Code.
Section 5.14. STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS. Except as
provided in Section 4.2 or 4.3, during the period from the date of this
Agreement through the Effective Time, neither Geon nor Hanna shall terminate,
amend, modify or waive any provision of any confidentiality or standstill
agreement to which it or any of its respective subsidiaries is a party, other
than (a) the Confidentiality Agreement, pursuant to its terms or by written
agreement of the parties thereto (b) confidentiality agreements under which Geon
or Hanna, as the case may be, does not provide any confidential information to
third parties or (c) standstill agreements that do not relate to the equity
securities of Geon or any of its subsidiaries or Hanna or any of its
subsidiaries, as the case may be. Except as provided in Section 4.2 or 4.3,
during such period, Geon or Hanna, as the case may be, shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having jurisdiction.
Section 5.15. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.
(a) Geon shall adopt such amendments to the Geon Benefit Plans as
reasonably requested by Hanna as may be necessary in order to ensure that
the Geon Benefit Plans cover only employees and former employees (and their
dependents and beneficiaries) of Geon and Geon subsidiaries following the
Effective Time. With respect to any Geon Common Stock held by any Geon
Benefit Plan as of the date of this Agreement or thereafter, Geon shall
take all actions necessary or appropriate (including such actions as are
reasonably requested by Hanna) to ensure that all participant voting
procedures contained in the Geon Benefit Plans relating to such shares, and
all applicable provisions of ERISA, are complied with in full.
(b) Hanna shall adopt such amendments to the Hanna Benefit Plans as
reasonably requested by Geon as may be necessary in order to ensure that
the Hanna Benefit Plans cover only employees and former employees (and
their dependents and beneficiaries) of Hanna and Hanna subsidiaries
following the Effective Time. With respect to any Hanna Common Stock held
by any Hanna Benefit Plan as of the date of this Agreement or thereafter,
Hanna shall take all actions necessary or appropriate (including such
actions as are reasonably requested by Geon) to ensure that all participant
voting procedures contained in the Hanna Benefit Plans relating to such
shares, and all applicable provisions of ERISA, are complied with in full.
(c) The Resulting Corporation shall honor and assume all obligations
under Hanna Benefit Plans, Geon Benefit Plans and all written employment
agreements, severance agreements and other similar agreements with
employees of Hanna and Geon as in effect on the date of this Agreement,
including without limitation, the employment agreements entered into
between Hanna and Phillip D. Ashkettle and between Geon and Thomas A.
Waltermire.
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(d) Within the time period permitted under ERISA Section 4043, Geon
shall file with the Pension Benefit Guaranty Corporation any notice that is
required under ERISA Section 4043 with respect to each Geon Benefit Plan,
and Hanna shall file with the Pension Benefit Guaranty Corporation any
notice that is required under ERISA Section 4043 with respect to each Hanna
Benefit Plan.
Section 5.16. RESULTING CORPORATION CORPORATE OFFICE. Promptly after the
date hereof, Hanna and Geon will undertake a study to determine a new location
for the Resulting Corporation's corporate offices for its senior executive
officers.
Section 5.17. POST-CONSOLIDATION BOARD OF DIRECTORS AND OFFICERS.
(a) As of the Effective Time, the persons serving on the Board of
Directors of the Resulting Corporation will be Phillip D. Ashkettle, James
K. Baker, Gale Duff-Bloom, J. Douglas Campbell, Wayne R. Embry, Robert A.
Garda, Gordon D. Harnett, David M. Hoag, Marvin L. Mann, D. Larry Moore,
Thomas A. Waltermire and Farah M. Walters, and such persons will hold
office until their successors are duly elected and qualified or until their
earlier death, resignation or removal in accordance with the Resulting
Corporation's regulations set forth as Exhibit B hereto. In the event that,
prior to the Effective Time, any person so selected to serve on the Board
of Directors of the Resulting Corporation after the Effective Time is
unable or unwilling to serve in such position, the Board of Directors which
selected such person shall designate another of its members to serve in
such person's stead.
(b) As of the Effective Time, the Chairman and Chief Executive Officer
of the Resulting Corporation will be Phillip D. Ashkettle, the President
and Chief Operating Officer of the Resulting Corporation will be Thomas A.
Waltermire,and the senior officers of the Resulting Corporation will be
those individuals recommended to the Board of Directors of the Resulting
Corporation by the Chairman and Chief Executive Officer and the President
and Chief Operating Officer of the Resulting Corporation, and such persons
will hold office until their respective successors are duly elected and
qualified or until their earlier death, resignation or removal in
accordance with the Resulting Corporation's regulations set forth as
Exhibit B hereto.
Section 5.18. SECTION 16(B). (a) Hanna and Geon shall take all such steps
reasonably necessary to cause the transactions contemplated hereby and any other
dispositions of equity securities of Hanna or Geon (including derivative
securities) or acquisitions of the Resulting Corporation equity securities
(including derivative securities) in connection with this Agreement by each
individual who (a) is a director or officer of Hanna or Geon or (b) at the
Effective Time, will become a director or officer of the Resulting Corporation,
to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 5.19. CONSOLIDATION CORP. Promptly after the date of this
Agreement, Hanna and Geon shall cause Consolidation Corp. to (i) be duly
organized, (ii) issue one common share to each of Geon and Hanna in exchange for
payment of the par value thereof, or, if such common shares do not have a par
value, for $1 per common share, which payment Hanna and Geon shall timely make
to Consolidation Corp., (iii) duly and validly approve and take all corporate
action required to be taken by the Board of Directors and shareholders of
Consolidation Corp. under the OGCL for the consummation of the transactions
contemplated by this Agreement and (iv) take all necessary action so that no
Takeover Statute is applicable to the Consolidation and the other transactions
contemplated by this Agreement.
ARTICLE 6.
CONDITIONS PRECEDENT
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
CONSOLIDATION. The respective obligation of each party to effect the
Consolidation is subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Stockholder Approvals. Each of the Geon Stockholder Approval and
the Hanna Stockholder Approval shall have been obtained.
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(b) Governmental and Regulatory Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental Entity required of
Geon, Hanna or any of their subsidiaries or Consolidation Corp. to
consummate the Consolidation and the other transactions contemplated
hereby, the failure of which to be obtained or taken is reasonably expected
to have a material adverse effect on the Resulting Corporation, shall have
been obtained in form and substance reasonably satisfactory to each of
Hanna and Geon.
(c) No Injunctions or Restraints. No judgment, order, decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated, enforced
or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the
Consolidation or (ii) which otherwise is reasonably likely to have a
material adverse effect on the Resulting Corporation; provided, however,
that each of the parties shall have used its reasonable best efforts to
prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(e) NYSE Listing. Resulting Corporation Shares issuable to Hanna's and
Geon's stockholders as contemplated by this Agreement shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(f) HSR Act. The waiting or similar period (including any extension
thereof) applicable to the consummation of the Consolidation under the HSR
Act, and any Foreign Antitrust Law shall have expired or been terminated.
(g) Consolidation Corp. Consolidation Corp. shall have been duly
organized and shall have duly and validly approved and taken all corporate
action required to be taken by the Board of Directors and shareholders of
Consolidation Corp. under the OGCL for the consummation of the transactions
contemplated by this Agreement.
Section 6.2. CONDITIONS TO OBLIGATIONS OF HANNA. The obligation of Hanna
to effect the Consolidation is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of Geon set forth herein shall be true and correct both when made and at
and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) would not
have, individually or in the aggregate, a material adverse effect on Geon.
(b) Performance of Obligations of Geon. Geon shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Hanna shall have received from Jones, Day, Reavis &
Pogue, counsel to Hanna, an opinion dated as of the Closing Date, to the
effect that the Consolidation will constitute a "reorganization" within the
meaning of Section 368(a)(1)(A) of the Code, that Hanna, Geon,
Consolidation Corp. and the Resulting Corporation will each be a party to
such reorganization within the meaning of Section 368(b) of the Code, that
none of Hanna, Geon, Consolidation Corp. or the Resulting Corporation will
recognize any gain or loss for United States federal income tax purposes as
a result of the effectiveness of the Consolidation, and that no stockholder
of Hanna will recognize any gain or loss for United States federal income
tax purposes as a result of exchanging his shares of Hanna Common Stock for
Resulting Corporation Shares (excluding any fractional Resulting
Corporation Share converted upon the Consolidation into cash) upon the
effectiveness of the Consolidation. In rendering such opinion, counsel for
Hanna may require delivery of, and rely upon, the Tax Certificates.
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(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change
relating to Geon; provided, however, that this condition shall no longer be
applicable following the Hanna Stockholder Approval.
Section 6.3. CONDITIONS TO OBLIGATIONS OF GEON. The obligation of Geon to
effect the Consolidation is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of Hanna set forth herein shall be true and correct both when made and at
and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
date), except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) would not
have, individually or in the aggregate, a material adverse effect on Hanna.
(b) Performance of Obligations of Hanna. Hanna shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date.
(c) Tax Opinion. Geon shall have received from Thompson Hine & Flory
LLP counsel to Geon, an opinion dated as of the Closing Date, to the effect
that the Consolidation will constitute a "reorganization" within the
meaning of Section 368(a)(1)(A) of the Code, that Hanna, Geon,
Consolidation Corp. and the Resulting Corporation will each be a party to
such reorganization within the meaning of Section 368(b) of the Code, and
that none of Geon, Hanna, Consolidation Corp. or the Resulting Corporation
will recognize any gain or loss for United States federal income tax
purposes as a result of the effectiveness of the Consolidation, and that no
stockholder of Geon will recognize any gain or loss for United States
federal income tax purposes as a result of exchanging his shares of Geon
Common Stock for Resulting Corporation Shares (excluding any fractional
Resulting Corporation Share converted upon the Consolidation into cash)
upon the effectiveness of the Consolidation. In rendering such opinion,
counsel for Geon may require delivery of, and rely upon, the Tax
Certificates.
(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change
relating to Hanna; provided, however, that this condition shall no longer
be applicable following the Geon Stockholder Approval.
Section 6.4. FRUSTRATION OF CLOSING CONDITIONS. Neither Hanna nor Geon may
rely on the failure of any condition set forth in Section 6.1, 6.2 or 6.3, as
the case may be, to be satisfied if such failure was caused by such party's
failure to use reasonable best efforts to consummate the Consolidation and the
other transactions contemplated by this Agreement, as required by and subject to
Section 5.5.
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Geon Stockholder
Approval or the Hanna Stockholder Approval:
(a) by mutual written consent of Hanna and Geon;
(b) by either Hanna or Geon:
(i) if the Consolidation shall not have been consummated by
November 30, 2000; provided, however, that the right to terminate this
Agreement pursuant to this Section 7.1(b)(i) shall not be available to
any party whose failure to perform any of its obligations under this
Agreement results in the failure of the Consolidation to be consummated
by such time;
(ii) if the Geon Stockholder Approval shall not have been obtained
at a Geon Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof,
(iii) if the Hanna Stockholder Approval shall not have been
obtained at an Hanna Stockholders Meeting duly convened therefor or at
any adjournment or postponement thereof, or
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(iv) if any Restraint having any of the effects set forth in
Section 6.1(c) shall be in effect and shall have become final and
nonappealable; provided, however, that the party seeking to terminate
this Agreement pursuant to this Section 7.1(b)(iv) shall have used
reasonable best efforts to prevent the entry of and to remove such
Restraint;
(c) by Hanna, if any representations or warranty of Geon shall be
inaccurate or Geon shall have breached or failed to perform any of its
covenants or other agreements contained in this Agreement, which
inaccuracy, breach or failure to perform would give rise to a material
adverse change relating to Geon and (A) is not cured within 30 days after
written notice thereof or (B) is incapable of being cured by Geon;
(d) by Hanna in accordance with Section 4.3(b); provided, however,
that, in order for the termination of this Agreement pursuant to this
Section 7.1(d) to be deemed effective, Hanna shall have complied with all
provisions contained in Section 4.3, including the notice provisions
therein, and the applicable requirements, including the payment of the
Hanna Termination Fee, of Section 5.8;
(e) by Hanna if (i) the Board of Directors of Geon or any committee
thereof shall have withdrawn or modified or proposed publicly to withdraw
or modify, in a manner adverse to Hanna, its approval or recommendation of
the Consolidation or this Agreement, or approved or recommended any Geon
Takeover Proposal or (ii) the Board of Directors of Geon shall have
resolved to do any of the foregoing;
(f) by Geon, if any representation or warranty of Hanna shall be
inaccurate or Hanna shall have breached or failed to perform any of its
covenants or other agreements contained in this Agreement, which
inaccuracy, breach or failure to perform would give rise to a material
adverse change relating to Hanna and (A) is not cured within 30 days after
written notice thereof or (B) is incapable of being cured by Hanna;
(g) by Geon in accordance with Section 4.2(b); provided, however,
that, in order for the termination of this Agreement pursuant to this
Section 7.1(g) to be deemed effective, Geon shall have complied with all
provisions of Section 4.2, including the notice provisions therein, and the
applicable requirements, including the payment of the Geon Termination Fee,
of Section 5.8; or
(h) by Geon if (i) the Board of Directors of Hanna or any committee
thereof shall have withdrawn or modified or proposed publicly to withdraw
or modify, in a manner adverse to Geon, its approval or recommendation of
the Consolidation or this Agreement, or approved or recommended any Hanna
Takeover Proposal or (ii) the Board of Directors of Hanna shall have
resolved to do any of the foregoing.
Section 7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Geon or Hanna as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of Hanna or Geon, other than the provisions of Section
3.1(u), Section 3.2(u), the last sentence of Section 5.4, Section 5.8, Section
5.9, this Section 7.2 and Article 8, which provisions will survive such
termination; provided, however, that nothing herein shall relieve any party from
any liability for any willful and material breach by such party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
Section 7.3. AMENDMENT. This Agreement may be amended by the parties at
any time before or after the Geon Stockholder Approval or the Hanna Stockholder
Approval; provided, however, that after any such approval, there shall not be
made any amendment that by law requires further approval by the stockholders of
Geon or Hanna without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
Section 7.4. EXTENSION; WAIVER. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part
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of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
Section 7.5. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 7.1 shall, in order to be
effective, require, in the case of Hanna or Geon, action by its Board of
Directors or, with respect to any amendment to this Agreement, action by its
Board of Directors or any duly authorized committee of its Board of Directors to
the extent permitted by law.
ARTICLE 8.
GENERAL PROVISIONS
Section 8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section 8.2. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
<TABLE>
<S> <C> <C>
(a) if to Hanna, to: M. A. Hanna Company
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114-2305
Telecopy No.: (216) 589-4034
Attention: General Counsel
with a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Telecopy No.: (216) 579-0212
Attention: Lyle G. Ganske, Esquire
(b) if to Geon, to: The Geon Company
One Geon Center
Avon Lake, Ohio 44012-0122
Telecopy No.: (440) 930-1002
Attention: Chief Legal Officer
with a copy to: Thompson Hine & Flory LLP
1900 Key Center
127 Public Square
Cleveland, Ohio 44114
Telecopy No.: (216) 566-5800
Attention: Thomas A. Aldrich, Esquire
</TABLE>
Section 8.3. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person, where "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract or otherwise;
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(b) "knowledge" of any person which is not an individual means the
knowledge of one or more of such person's directors or executive officers;
(c) "material adverse change" or "material adverse effect" means, when
used in connection with any person, (i) any change, effect, event,
occurrence or state of facts that, after considering any insurance coverage
and any reserves provided for in such person's financial statements, is, or
would reasonably be expected to be, materially adverse to the business,
financial condition or results of operations of such party and its
subsidiaries taken as a whole, other than any change, effect, event or
occurrence (A) relating to the economy or securities markets of the United
States or any other region in general or (B) resulting from entering into
this Agreement or the consummation of the transactions contemplated hereby
or the announcement thereof, or (ii) any change, effect, event, occurrence
or state of facts that could reasonably be expected to materially impair or
delay the ability of such party to perform its obligations under this
Agreement, and the terms "material" and "materially" have correlative
meanings;
(d) "material contract" has the meaning set forth in Item 601(b)(10)
of Regulation S-K of the SEC
(e) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(f) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person, and, in the case of Geon, also means
each of the joint ventures listed on Section 8.3(f) of the Geon Disclosure
Schedule.
Section 8.4. INTERPRETATION. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
Section 8.5. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
Section 8.6. ENTIRE AGREEMENT: NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein), and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article 2, Section 5.6 and Section 5.7, are not intended to confer
upon any person other than the parties any rights or remedies.
Section 8.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO REGARDLESS OF THE
LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS
THEREOF; PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY MATTER SET FORTH IN
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THIS AGREEMENT THAT RELATES TO ACTIONS TO BE TAKEN UNDER THE DGCL, SUCH MATTER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE DGCL.
Section 8.8. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 8.9. CONSENT TO JURISDICTION. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Ohio or any Ohio state court, in either case located in
the Northern District of Ohio, in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the State of Ohio or an Ohio state court, in either case located in the
Northern District of Ohio.
Section 8.10. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.11. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
* * * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Consolidation to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
THE GEON COMPANY
By: /s/ Thomas A. Waltermire
------------------------------------
Name: Thomas A. Waltermire
Title: Chairman, Chief Executive
Officer and President
M. A. HANNA COMPANY
By: /s/ Phillip D. Ashkettle
------------------------------------
Name: Phillip D. Ashkettle
Title: Chairman, Chief Executive
Officer and President
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ANNEX B
May 7, 2000
Board of Directors
The Geon Company
One Geon Center
Avon Lake, Ohio 44012-0122
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of The Geon Company ("Geon") of the Geon Exchange
Ratio (as defined below) set forth in the Agreement and Plan of Consolidation
dated as of May 7, 2000 (the "Agreement") by and between Geon and M.A. Hanna
Company ("Hanna").
Under the terms of the Agreement, and subject to the conditions set forth
therein, Geon, Hanna, and a corporation to be formed under the laws of the State
of Ohio (the "Consolidation Corp.") will consolidate (the "Consolidation") into
a new Ohio corporation (the "Resulting Corporation") and the separate corporate
existence of Geon, Hanna and Consolidation Corp. will cease. At the effective
time of the Consolidation, each share of Hanna's Common Stock, $1.00 par value
(the "Hanna Common Stock"), issued and outstanding immediately prior to the
effective time (other than certain shares owned by Geon or any direct or
indirect subsidiary of Hanna or Geon) will be converted into the right to
receive one Common Share of the Resulting Corporation. Each share of Geon's
Common Stock, $.10 par value (the "Geon Common Stock"), issued and outstanding
immediately prior to the effective time (other than certain shares owned by Geon
or any direct or indirect subsidiary of Hanna or Geon) will be converted into
the right to receive two Common Shares of the Resulting Corporation (the "Geon
Exchange Ratio").
McDonald Investments Inc., as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
In connection with rendering this opinion, we have reviewed and analyzed,
among other things, the following: (i) a draft of the Agreement, including the
exhibits and schedules thereto; (ii) certain publicly available information
concerning Geon, including the Annual Reports on Form 10-K of Geon for each of
the years in the five year period ended December 31, 1999; (iii) certain
publicly available information concerning Hanna, including the Annual Reports on
Form 10-K of Hanna for each of the years in the five year period ended December
31, 1999; (iv) certain other internal information, primarily financial in
nature, including projections, concerning the business and operations of Geon
and Hanna furnished to us by the managements of the respective companies for
purposes of our analysis; (v) certain publicly available information concerning
the trading of, and the trading market for, the Geon Common Stock and the Hanna
Common Stock; (vi) certain publicly available information with respect to
certain other companies that we believe to be comparable to Geon or to Hanna and
the trading markets for certain of such other companies' securities; and (vii)
certain publicly available information concerning the nature and terms of
certain other transactions that we consider relevant to our inquiry. We have
also met with certain officers and employees of Geon and Hanna to discuss the
business and prospects of Geon and Hanna, as well as other matters we believe
relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have assumed and relied upon
the representations and warranties of Geon and Hanna contained in the Agreement.
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Board of Directors
May 7, 2000
Page 2
We have not been engaged to, and have not independently attempted to, verify any
of such information. We have also relied upon the managements of Geon and Hanna
as to the reasonableness and achievability of the financial and operating
projections (and the assumptions and bases therefor) provided to us and, with
your consent, we have assumed that such projections, including without
limitation projected cost savings and operating synergies from Consolidation,
reflect the best currently available estimates and judgments of such respective
managements of Geon and Hanna. We have not been engaged to assess the
reasonableness or achievability of such projections or the assumptions on which
they were based and express no view as to such projections or assumptions. In
addition, we have not conducted a physical inspection or appraisal of any of the
assets, properties or facilities of either Geon or Hanna nor have we been
furnished with any such evaluation or appraisal. We have also assumed that the
conditions to the Consolidation as set forth in the Agreement would be
satisfied, that the Consolidation would be consummated on a timely basis in the
manner contemplated by the Agreement, and that the Consolidation would be
treated as a tax-free reorganization for federal income tax purposes.
It should be noted that this opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof and does not address any matters subsequent to such date,
including the value of the Resulting Corporation's Common Shares at the time of
issuance or afterward. In addition, our opinion is, in any event, limited to the
fairness, as of the date hereof, from a financial point of view, of the Geon
Exchange Ratio and does not address Geon's underlying business decision to
effect the Consolidation or any other terms of the Agreement. We were not
engaged to assist Geon in assessing any alternative transaction or to solicit
indications of interest from other parties concerning any such transaction.
We have acted as financial advisor to Geon in connection with the
Consolidation and will receive from Geon a fee for our services, contingent upon
the consummation of the Consolidation, as well Geon's agreement to indemnify us
under certain circumstances. We will also receive a fee for rendering this
opinion.
In the ordinary course of our business, we may actively trade securities of
both Geon and Hanna our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this opinion is directed to the Board of Directors
and senior management of Geon and may not be disclosed, summarized, excerpted
from or otherwise publicly referred to without our prior written consent. Our
opinion does not constitute a recommendation to any stockholder of Geon as to
how such stockholder should vote at the stockholders' meeting held in connection
with the Consolidation.
Based upon and subject to the foregoing and such other matters as we
consider relevant, it is our opinion that as of the date hereof, the Geon
Exchange Ratio is fair, from a financial point of view, to the stockholders of
Geon.
Very truly yours,
/s/ McDONALD INVESTMENTS INC.
McDONALD INVESTMENTS INC.
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ANNEX C
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
May 7, 2000
The Board of Directors
M.A. Hanna Company
200 Public Square
Suite 36-5000
Cleveland, Ohio 44114-2304
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the common stock of M.A. Hanna Company ("Hanna") of
the Hanna Exchange Ratio (defined below) provided for in the Agreement and Plan
of Consolidation, dated as of May 7, 2000 (the "Agreement"), by and between
Hanna and The Geon Company ("Geon"). As more fully described in the Agreement,
(i) Hanna, Geon and a corporation to be formed ("Consolidation Corp.") will
consolidate into a newly formed corporation ("Newco" and, such consolidation,
the "Consolidation") pursuant to which (i) each outstanding share of the common
stock, par value $1.00 per share, of Hanna ("Hanna Common Stock") will be
converted into the right to receive one (the "Hanna Exchange Ratio") common
share of Newco ("Newco Common Shares") and (ii) each outstanding share of the
common stock, par value $0.10 per share, of Geon will be converted into two
Newco Common Shares.
In arriving at our opinion, we reviewed the Agreement and held discussions
with certain senior officers, directors and other representatives and advisors
of Hanna and certain senior officers and other representatives and advisors of
Geon concerning the businesses, operations and prospects of Hanna and Geon. We
examined certain publicly available business and financial information relating
to Hanna and Geon as well as certain financial forecasts and other information
and data for Hanna and Geon which were provided to or otherwise discussed with
us by the respective managements of Hanna and Geon, including information
relating to certain strategic implications and operational benefits anticipated
to result from the Consolidation. We reviewed the financial terms of the
Consolidation as set forth in the Agreement in relation to, among other things:
current and historical market prices and trading volumes of Hanna Common Stock
and Geon Common Stock; the financial condition and historical and projected
earnings and other operating data of Hanna and Geon; and the capitalization of
Hanna and Geon. We considered, to the extent publicly available, the financial
terms of other transactions recently effected which we considered relevant in
evaluating the Consolidation and analyzed certain financial, stock market and
other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of Hanna
and Geon. We also evaluated the potential pro forma financial impact of the
Consolidation on Newco. In addition to the foregoing, we conducted such other
analyses and examinations and considered such other financial, economic and
market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of Hanna and Geon that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Hanna and Geon
as to the future financial performance of Hanna and Geon and the strategic
implications and operational benefits anticipated to result from the
Consolidation. We also have assumed, with your consent, that the Consolidation
will be treated as a tax-free reorganization for federal income tax purposes.
Our opinion, as set forth herein, relates to the relative values of Hanna and
Geon. We are not expressing any opinion as to what the value of Newco Common
Shares actually will be when issued pursuant to the Consolidation or the price
at which Newco Common Shares will trade subsequent to the Consolidation. We have
not made or been provided with an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Hanna or Geon
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The Board of Directors
M.A. Hanna Company
May 7, 2000
Page 2
nor have we made any physical inspection of the properties or assets of Hanna or
Geon. In connection with our opinion, we were not requested to, and we did not,
solicit third party indications of interest in the possible acquisition of all
or a part of Hanna. We express no view as to, and our opinion does not address,
the relative merits of the Consolidation as compared to any alternative business
strategies that might exist for Hanna or the effect of any other transaction in
which Hanna might engage. Our opinion is necessarily based upon information
available to us, and financial, stock market and other conditions and
circumstances existing and disclosed to us, as of the date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to Hanna in
connection with the proposed Consolidation and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Consolidation. In the ordinary course of our business, we and our affiliates
may actively trade or hold the securities of Hanna and Geon for our own account
or for the account of our customers and, accordingly, may at any time hold a
long or short position in such securities. In addition, we and our affiliates
(including Citigroup Inc. and its affiliates) may maintain relationships with
Hanna, Geon and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Hanna in its evaluation of the proposed
Consolidation, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed Consolidation.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Hanna Exchange Ratio is
fair, from a financial point of view, to the holders of Hanna Common Stock.
Very truly yours,
/s/ SALOMON SMITH BARNEY INC.
SALOMON SMITH BARNEY INC.
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ANNEX D
POLYONE CORPORATION 2000 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to attract, retain and motivate
Directors, officers and employees of PolyOne Corporation (the "Company") and its
Subsidiaries and to provide to such persons incentives and rewards for superior
performance and contribution.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5 of this
Plan, and shall include both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Base Price" means the price to be used as the basis for determining the
Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem
Appreciation Right.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the Committee described in Section 17 of the Plan.
"Common Shares" means the Common Shares, par value $0.10, of the Company or
any security into which such Common Shares may be changed by reason of any
transaction or event of the type referred to in Section 12 of this Plan.
"Covered Employee" means a Participant who is, or is determined by the
Committee to be likely to become, a "covered employee" within the meaning of
Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Committee on which a grant
of Option Rights, Appreciation Rights, Performance Units or Performance Shares
or a grant or sale of Restricted Shares or Deferred Shares shall become
effective.
"Deferral Period" means the period of time during which Deferred Shares are
subject to deferral limitations under Section 8 of this Plan.
"Deferred Shares" means an award made pursuant to Section 8 of this Plan of
the right to receive Common Shares at the end of a specified Deferral Period.
"Director" means a member of the Board of Directors of the Company.
"Evidence of Award" means an agreement, certificate, resolution or other
type or form of writing or other evidence approved by the Committee which sets
forth the terms and conditions of the Option Rights, Appreciation Rights,
Performance Units, Performance Shares, Restricted Shares, Deferred Shares or
awards to Non-Employee Directors. An Evidence of Award may be in an electronic
medium, may be limited to a notation on the books and records of the Company
and, with the approval of the Committee, need not be signed by a representative
of the Company or a Participant.
"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right.
"Incentive Stock Options" means Option Rights that are intended to qualify
as "incentive stock options" under Section 422 of the Code or any successor
provision.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of Performance Units or Performance Shares or, when so determined by the
Committee, Option Rights, Appreciation Rights and Restricted Shares pursuant to
this Plan. Management Objectives may be described in terms of Company-wide
objectives or objectives that are related to the performance of the individual
Participant or of the Subsidiary, division, department, region or function
within the Company or Subsidiary in which the Participant is employed. The
Management Objectives may be made relative to the performance of other
corporations. The Management Objectives
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applicable to any award to a Covered Employee shall be based on specified levels
of or growth in one or more of the following criteria: revenues, earnings from
operations, earnings before or after interest and taxes, net income, cash flow,
earnings per share, debt to capital ratio, economic value added, return on total
capital, return on invested capital, return on equity, return on assets, total
return to shareholders earnings before or after interest, depreciation,
amortization or extraordinary or special items, return on investment, free cash
flow, cash flow return on investment (discounted or otherwise), net cash
provided by operations, cash flow in excess of cost of capital, operating
margin, profit margin, stock price and/or strategic business criteria consisting
of one or more objectives based on meeting specified product development,
strategic partnering, research and development, market penetration, geographic
business expansion goals, cost targets, customer satisfaction, employee
satisfaction, management of employment practices and employee benefits,
supervision of litigation and information technology, and goals relating to
acquisitions or divestitures of subsidiaries, affiliates and joint ventures.
Management Objectives may be stated as a combination of the listed factors.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances (including those
events and circumstances described in Section 12 of this Plan) render the
Management Objectives unsuitable, the Committee may in its discretion modify
such Management Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and
equitable, except in the case of a Covered Employee where such action would
result in the loss of the otherwise available exemption of the award under
Section 162(m) of the Code. In such case, the Committee shall not make any
modification of the Management Objectives or minimum acceptable level of
achievement.
"Market Value per Share" means, as of any particular date, the fair market
value of the Common Shares as determined by the Committee.
"Non-Employee Director" means a Director who is not an employee of the
Company or any Subsidiary.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an Option
Right.
"Option Right" means the right to purchase Common Shares upon exercise of
an option granted pursuant to Section 4 or Section 9 of this Plan.
"Participant" means a person who is selected by the Committee to receive
benefits under this Plan and who is at the time any employee of the Company or
any of its Subsidiaries (including an executive officer), a Non-Employee
Director or a person who has been offered employment by the Company or a
Subsidiary, provided that such prospective employee may not receive any payment
or exercise the right relating to any award until such person has commenced
employment with the Company or a Subsidiary.
"Performance Period" means, in respect of a Performance Unit or Performance
Share, a period of time established pursuant to Section 6 of this Plan within
which the Management Objectives relating to such Performance Share or
Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the equivalent
of one Common Share awarded pursuant to Section 6 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit equivalent
to $1.00 awarded pursuant to Section 6 of this Plan.
"Plan" means this PolyOne Corporation 2000 Stock Incentive Plan, as
originally adopted by M.A. Hanna Company and The Geon Company, and as amended
and restated from time to time, and as the same may be further amended.
"Restricted Shares" means Common Shares granted or sold pursuant to Section
7 or Section 9 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 7 has
expired.
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"Spread" means the excess of the Market Value per Share on the date when an
Appreciation Right is exercised, or on the date when Option Rights are
surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or
Free-Standing Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity which is
designated by the Committee and in which the Company has a direct or indirect
ownership or other equity interest, provided, however, that for purposes of
determining whether any person may be a Participant for purposes of any grant of
Incentive Stock Options, "Subsidiary" means any corporation in which at the time
the Company owns or controls, directly or indirectly, more than 50 percent of
the total combined voting power represented by all classes of stock issued by
such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted pursuant to
Section 5 of this Plan that is granted in tandem with an Option Right.
"Voting Power" means at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
3. Shares Available Under the Plan. (a) Subject to adjustment as provided
in Section 3(b) and Section 12 of this Plan, the number of Common Shares that
may be issued or transferred (i) upon the exercise of Option Rights or
Appreciation Rights, (ii) as Restricted Shares and released from substantial
risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of
Performance Units or Performance Shares that have been earned, (v) as awards to
Non-Employee Directors, (vi) in payment of awards granted under Section 10 of
the Plan or (vii) in payment of dividend equivalents paid with respect to awards
made under the Plan shall not exceed in the aggregate 4,500,000 Common Shares,
plus any shares described in Section 3(b). Such shares may be shares of original
issuance, treasury shares, shares from the Associates Ownership Trust, shares
from The Geon Company Share Ownership Trust or a combination of the foregoing.
(b) The Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in the case of
tandem or substitute awards) and make adjustments in the number of Common Shares
available in Section 3(a) above or otherwise specified in the Plan or in any
award granted hereunder if the number of Common Shares actually delivered
differs from the number of Common Shares previously counted in connection with
an award. Common Shares subject to an award that is canceled, expired,
forfeited, settled in cash or is otherwise terminated without a delivery of
Common Shares to the Participant will again be available for awards, and Common
Shares withheld in payment of the exercise price or taxes relating to an award
and Common Shares equal to the number surrendered in payment of any exercise
price or taxes relating to an award shall be deemed to constitute Common Shares
not delivered to the Participant and shall be deemed to again be available for
awards under the Plan. This Section 3(b) shall apply to the number of Common
Shares reserved and available for Incentive Stock Options only to the extent
consistent with applicable Treasury regulations relating to Incentive Stock
Options under the Code.
(c) Notwithstanding anything in this Section 3, or elsewhere in this Plan,
to the contrary and subject to adjustment as provided in Section 12 of this
Plan, (i) the aggregate number of Common Shares actually issued or transferred
by the Company upon the exercise of Incentive Stock Options shall not exceed
3,000,000 Common Shares; (ii) no Participant shall be granted Option Rights and
Appreciation Rights, in the aggregate, for more than 250,000 Common Shares
during any calendar year and no Participant shall be granted Option Rights and
Appreciation Rights, in the aggregate, for more than 1,000,000 Common Shares
during any consecutive 5 years; and (iii) the number of Performance Shares that
may be granted and paid out under this Plan, and the number of Restricted
Shares, Deferred Shares and Common Shares awarded under Section 10 of the Plan
(after taking forfeitures into account and excluding all awards of Restricted
Shares to Non-Employee Directors pursuant to Section 9 of this Plan) shall not
exceed, in the aggregate, 1,000,000.
(d) Notwithstanding any other provision of this Plan to the contrary, in no
event shall any Participant in any calendar year receive an award of Performance
Shares, Performance Units or Restricted Shares specifying Management Objectives
having an aggregate maximum value as of their respective Dates of Grant in
excess
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of $2,500,000. Moreover, in no event shall any Participant earn dividend
equivalents in any one calendar year specifying Management Objectives having a
value in excess of $250,000.
4. Option Rights. The Committee may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase shares of Common Stock. Each such grant may utilize any or
all of the authorizations, and shall be subject to all of the limitations,
contained in the following provisions:
(a) Each grant shall specify the number of shares of Common Stock to which
it pertains, subject to adjustments as provided in Section 12 of this Plan.
(b) Each grant shall specify an Option Price per share, which may not be
less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify whether the Option Price shall be payable (i)
in cash or by check acceptable to the Company, (ii) by the actual or
constructive transfer to the Company of Common Shares owned by the Optionee not
less than 6 months (or other consideration authorized pursuant to Section 4(d))
having a value at the time of exercise equal to the total Option Price, or (iii)
by a combination of such methods of payment.
(d) The Committee may determine, at or after the Date of Grant, that
payment of the Option Price of any Option Right (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted Shares or
other Common Shares that are forfeitable or subject to restrictions on transfer.
Unless otherwise determined by the Committee at or after the Date of Grant,
whenever any Option Price is paid in whole or in part by means of any of the
forms of consideration specified in this Section 4(d), the Common Shares
received upon the exercise of the Option Rights shall be subject to the same
risks of forfeiture or restrictions on transfer as may correspond to any that
apply to the consideration surrendered; provided, however, that such risks of
forfeiture or restrictions on transfer shall apply only to the same number of
Common Shares received by the Optionee as applied to the forfeitable or
restricted Common Shares surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the Option Price from the
proceeds of sale through a bank or broker on a date satisfactory to the Company
of some or all of the shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the election
of the Optionee, in installments, with or without interest, upon terms
determined by the Committee.
(g) Successive grants may be made to the same Participant whether or not
any Option Rights previously granted to such Participant remain unexercised.
(h) Each grant shall specify the period or periods of continuous service by
the Optionee with the Company or any Subsidiary that is necessary before the
Option Rights or installments thereof will become exercisable.
(i) Any grant of Option Rights may specify Management Objectives that must
be achieved as a condition to the exercise of such rights.
(j) Option Rights granted under this Plan may be (i) options, including,
without limitation, Incentive Stock Options, that are intended to qualify under
particular provisions of the Code, (ii) options that are not intended so to
qualify, or (iii) combinations of the foregoing.
(k) The exercise of an Option Right shall result in the cancellation on a
share-for-share basis of any Tandem Appreciation Right authorized under Section
5 of this Plan.
(l) No Option Right shall be exercisable more than 10 years from the Date
of Grant.
(m) Each grant of Option Rights shall be evidenced by an Evidence of Award
which shall contain such terms and provisions, consistent with this Plan and
applicable sections of the Code, as the Committee may approve.
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(n) The Committee may, at or after the Date of Grant of any Option Rights
(other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents shall be credited against the Option Price.
5. Appreciation Rights. (a) The Committee may authorize the granting (i) to
any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted
hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A
Tandem Appreciation Right shall be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount
determined by the Committee, which shall be expressed as a percentage of the
Spread (not exceeding 100 percent) at the time of exercise. Tandem Appreciation
Rights may be granted at any time prior to the exercise or termination of the
related Option Rights; provided, however, that a Tandem Appreciation Right
awarded in relation to an Incentive Stock Option must be granted concurrently
with such Incentive Stock Option. A Free-Standing Appreciation Right shall be a
right of the Participant to receive from the Company an amount determined by the
Committee, which shall be expressed as a percentage of the Spread (not exceeding
100 percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(i) Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in cash, in Common Shares or
in any combination thereof and may either grant to the Participant or
retain in the Committee the right to elect among those alternatives.
(ii) Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Committee at
the Date of Grant.
(iii) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
(iv) Each grant of an Appreciation Right shall be evidenced by an
Evidence of Award, which shall describe such Appreciation Right, identify
any related Option Right, state that such Appreciation Right is subject to
all the terms and conditions of this Plan, and contain such other terms and
provisions, consistent with this Plan and applicable sections of the Code,
as the Committee may approve.
(v) Any grant may provide for the payment to the Participant of
dividend equivalents thereon in cash or Common Shares on a current,
deferred or contingent basis.
(c) Any grant of Tandem Appreciation Rights shall provide that such Rights
may be exercised only at a time when the related Option Right is also
exercisable and at a time when the Spread is positive, and by surrender of the
related Option Right for cancellation.
(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant shall specify in respect of each Free-Standing
Appreciation Right a Base Price, which shall be equal to or greater or less
than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant regardless
of whether any Free-Standing Appreciation Rights previously granted to the
Participant remain unexercised; and
(iii) No Free-Standing Appreciation Right granted under this Plan may
be exercised more than 10 years from the Date of Grant.
6. Performance Units and Performance Shares. The Committee may also
authorize the granting to Participants of Performance Units and Performance
Shares that will become payable (or payable early) to a Participant upon
achievement of specified Management Objectives. Each such grant may utilize any
or all of the authorizations, and shall be subject to all of the limitations,
contained in the following provisions:
(a) Each grant shall specify the number of Performance Units or
Performance Shares to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment shall be made in the case of a Covered
Employee where
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such action would result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance Unit or
Performance Share shall be such period of time (not less than 3 years)
commencing with the Date of Grant as shall be determined by the Committee
at the time of grant.
(c) Any grant of Performance Units or Performance Shares shall specify
Management Objectives which, if achieved, will result in payment or early
payment of the award, and each grant may specify in respect of such
specified Management Objectives a minimum acceptable level of achievement
and shall set forth a formula for determining the number of Performance
Units or Performance Shares that will be earned if performance is at or
above the minimum level, but falls short of full achievement of the
specified Management Objectives. The grant of Performance Units or
Performance Shares shall specify that, before the Performance Shares or
Performance Units shall be earned and paid, the Committee must determine
that the Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Units or Performance Shares that have been earned. Any grant
may specify that the amount payable with respect thereto may be paid by the
Company to the Participant in cash, in Common Shares or in any combination
thereof, and may either grant to the Participant or retain in the Committee
the right to elect among those alternatives.
(e) Any grant of Performance Units may specify that the amount payable
or the number of Common Shares issued with respect thereto may not exceed
maximums specified by the Committee at the Date of Grant. Any grant of
Performance Shares may specify that the amount payable with respect thereto
may not exceed a maximum specified by the Committee at the Date of Grant.
(f) Unless otherwise determined by the Committee at the time of the
award or thereafter, if a Participant's employment has terminated because
of death, disability or retirement at or after normal retirement age (or
earlier with the consent of the Committee) under a retirement plan of the
Company or a Subsidiary prior to the end of the Performance Period, the
extent to which an Performance Unit or Performance Share shall be deemed to
have been earned, as calculated at the end of the Performance Period, shall
be determined as if such Participant's employment had not terminated and
the result shall be multiplied by a fraction, the numerator of which is the
number of days such Participant was employed during the Performance Period
and the denominator of which is the total number of days in the Performance
Period. If a Participant's employment terminates for any reason other than
as described in the preceding sentence, the Eligible Employee shall be
deemed not to have earned the Performance Unit or Performance Share unless
the Committee determines otherwise in its sole discretion (in which event
the extent to which the Performance Unit or Performance Share shall be
deemed to have been earned shall not exceed the amount determined pursuant
to the preceding sentence).
(g) Each grant of Performance Units or Performance Shares shall be
evidenced by an Evidence of Award, which shall contain such terms and
provisions, consistent with this Plan and applicable sections of the Code,
as the Committee may approve.
(h) The Committee may, at or after the Date of Grant of Performance
Shares, provide for the payment of dividend equivalents to the holder
thereof on either a current or deferred or contingent basis, either in cash
or in additional Common Shares.
7. Restricted Shares. The Committee may also authorize the grant or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the limitations,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture
and restrictions on transfer hereinafter referred to.
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(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is
less than Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period of
not less than 3 years to be determined by the Committee at the Date of
Grant.
(d) Each such grant or sale shall provide that during the period for
which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted
in the manner and to the extent prescribed by the Committee at the Date of
Grant (which restrictions may include, without limitation, rights of
repurchase or first refusal in the Company or provisions subjecting the
Restricted Shares to a continuing substantial risk of forfeiture in the
hands of any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives
that, if achieved, will result in termination or early termination of the
restrictions applicable to such shares. Each grant may specify in respect
of such Management Objectives a minimum acceptable level of achievement and
may set forth a formula for determining the number of Restricted Shares on
which restrictions will terminate if performance is at or above the minimum
level, but falls short of full achievement of the specified Management
Objectives.
(f) Any such grant or sale of Restricted Shares may require that any
or all dividends or other distributions paid thereon during the period of
such restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced by an
Evidence of Award, which shall contain such terms and provisions,
consistent with this Plan and applicable sections of the Code, as the
Committee may approve. Unless otherwise directed by the Committee, all
certificates representing Restricted Shares shall be held in custody by the
Company until all restrictions thereon shall have lapsed, together with a
stock power or powers executed by the Participant in whose name such
certificates are registered, endorsed in blank and covering such Shares.
8. Deferred Shares. The Committee may also authorize the granting or sale
of Deferred Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements
contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the
fulfillment of such conditions during the Deferral Period as the Committee
may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is
less than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral Period of
not less than 1 year, as determined by the Committee at the Date of Grant.
(d) During the Deferral Period, the Participant shall have no right to
transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them, but
the Committee may, at or after the Date of Grant, authorize the payment of
dividend equivalents on such Shares on either a current or deferred or
contingent basis, either in cash or in additional Common Shares.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
Evidence of Award, which shall contain such terms and provisions,
consistent with this Plan and applicable sections of the Code, as the
Committee may approve.
9. Awards to Non-Employee Directors. The Committee may, from time to time
and upon such terms and conditions as it may determine, authorize the granting
to Non-Employee Directors of Option Rights and may also authorize the grant or
sale of Restricted Shares to Non-Employee Directors.
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(a) Each grant of Option Rights awarded pursuant to this Section 9 shall be
upon terms and conditions consistent with Section 4 of this Plan and shall be
evidenced by an Evidence of Award, which shall contain such terms and
provisions, consistent with this Plan and applicable sections of the Code, as
the Committee may approve. Each grant shall specify an Option Price per share,
which shall not be less than the Market Value per Share on the Date of Grant.
Each such Option Right granted under the Plan shall expire not more than 10
years from the Date of Grant and shall be subject to earlier termination as
hereinafter provided. Unless otherwise determined by the Committee, such Option
Rights shall be subject to the following additional terms and conditions:
(i) Each grant shall specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 3 of this plan.
(ii) Each such Option Right shall become exercisable to the extent of
one-third of the number of shares covered thereby 1 year after the Date of
Grant and to the extent of an additional one-third of such shares after
each of the next two successive years thereafter.
(iii) In the event of the termination of service on the Board of
Directors of the Company by the holder of any such Option Rights, other
than by reason of disability or death, the then outstanding Option Rights
of such holder may be exercised to the extent that they would be
exercisable on the date that is six months and one day after the date of
such termination and shall expire six months and one day after such
termination, or on their stated expiration date, whichever occurs first.
(iv) In the event of the death or disability of the holder of any such
Option Rights, each of the then outstanding Option Rights of such holder
may be exercised at any time within 1 year after such death or disability,
but in no event after the expiration date of the term of such Option
Rights.
(v) If a Non-Employee Director subsequently becomes an employee of the
Company or a Subsidiary while remaining a member of the Board of Directors
of the Company, any Option Rights held under the Plan by such individual at
the time of such commencement of employment shall not be affected thereby.
(vi) Option Rights may be exercised by a Non-Employee Director only
upon payment to the Company in full of the Option Price of the Common
Shares to be delivered. Such payment shall be made in cash or in Common
Shares then owned by the optionee for at least six months, or in a
combination of cash and such Common Shares.
(b) Each grant or sale of Restricted Shares pursuant to this Section 9
shall be upon terms and conditions consistent with Section 7 of this Plan.
10. Other Awards. (a)The Committee is authorized, subject to limitations
under applicable law, to grant to any Participant such other awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Common Shares or factors that may influence
the value of Common Shares, including, without limitation, convertible or
exchangeable debt securities, other rights convertible or exchangeable into
Common Shares, purchase rights for Common Shares, awards with value and payment
contingent upon performance of the Company or business units thereof or any
other factors designated by the Committee, and awards valued by reference to the
book value of Common Shares or the value of securities of, or the performance of
specified Subsidiaries or affiliates or other business units of, the Company.
The Committee shall determine the terms and conditions of such awards. Common
Shares delivered pursuant to an award in the nature of a purchase right granted
under this Section 10 shall be purchased for such consideration, paid for at
such times, by such methods, and in such forms, including, without limitation,
cash, Common Shares, other awards, notes or other property, as the Committee
shall determine.
(b) Cash awards, as an element of or supplement to any other award granted
under this Plan, may also be granted pursuant to this Section 10 of the Plan.
(c) The Committee is authorized to grant Common Shares as a bonus, or to
grant Common Shares or other awards in lieu of obligations of the Company or a
Subsidiary to pay cash or deliver other property
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under the Plan or under other plans or compensatory arrangements, subject to
such terms as shall be determined by the Committee.
11. Transferability. (a) Except as otherwise determined by the Committee,
no Option Right, Appreciation Right or other derivative security granted under
the Plan shall be transferable by a Participant other than by will or the laws
of descent and distribution. Except as otherwise determined by the Committee,
Option Rights and Appreciation Rights shall be exercisable during the Optionee's
lifetime only by him or her or by his or her guardian or legal representative.
(b) The Committee may specify at the Date of Grant that part or all of the
Common Shares that are (i) to be issued or transferred by the Company upon the
exercise of Option Rights or Appreciation Rights, upon the termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Units or Performance Shares or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 7 of this Plan, shall be subject to further restrictions on transfer.
12. Adjustments. The Committee may make or provide for such adjustments in
the numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Performance Shares, Deferred Shares and share-based awards described in
Section 10 of the Plan granted hereunder, in the Option Price and Base Price
provided in outstanding Appreciation Rights, and in the kind of shares covered
thereby, as the Committee, in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or enlargement of the rights
of Participants or Optionees that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, or (b) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets (including, without limitation, a
special or large non-recurring dividend), issuance of rights or warrants to
purchase securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. Moreover, in the event of any such
transaction or event, the Committee, in its discretion, may provide in
substitution for any or all outstanding awards under this Plan such alternative
consideration as it, in good faith, may determine to be equitable in the
circumstances and may require in connection therewith the surrender of all
awards so replaced. The Committee may also make or provide for such adjustments
in the numbers of shares specified in Section 3 of this Plan as the Committee in
its sole discretion, exercised in good faith, may determine is appropriate to
reflect any transaction or event described in this Section 12; provided,
however, that any such adjustment to the number specified in Section 3(c)(i)
shall be made only if and to the extent that such adjustment would not cause any
Option intended to qualify as an Incentive Stock Option to fail so to qualify.
13. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide for
the elimination of fractions or for the settlement of fractions in cash.
14. Withholding Taxes. The Company shall have the right to deduct from any
payment under this Plan an amount equal to the federal, state and local and
foreign taxes which in the opinion of the Company are required to be withheld by
it with respect to such payment and to the extent that the amounts available to
the Company for such withholding are insufficient, it shall be a condition to
the receipt of such payment or the realization of such benefit that the
Participant or such other person make arrangements satisfactory to the Company
for payment of the balance of such taxes required to be withheld. At the
discretion of the Committee, such arrangements may include relinquishment of a
portion of such benefit. In no event, however, shall the Company accept Common
Shares for payment of taxes in excess of required tax withholding rates, except
that, in the discretion of the Committee, a Participant or such other person may
surrender Common Shares owned for more than 6 months to satisfy any tax
obligations resulting from any such transaction.
15. Foreign Employees. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for awards to Participants who are foreign nationals or who are
employed by the Company or any Subsidiary outside of the United States of
America as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to or amendments, restatements or alternative versions
of this Plan as it may consider necessary or appropriate for such purposes,
without
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thereby affecting the terms of this Plan as in effect for any other purpose, and
the Corporate Secretary or other appropriate officer of the Company may certify
any such document as having been approved and adopted in the same manner as this
Plan. No such special terms, supplements, amendments or restatements, however,
shall include any provisions that are inconsistent with the terms of this Plan
as then in effect unless this Plan could have been amended to eliminate such
inconsistency without further approval by the shareholders of the Company.
16. Cancellation and Rescission of Awards. (a) Unless the Evidence of Award
specifies otherwise, the Committee may cancel, rescind, suspend, withhold or
otherwise limit or restrict any unexpired, unpaid or deferred award at any time
if the Participant is not in compliance with all applicable provisions of the
agreement evidencing the award and the Plan, or if the Participant engages in
any "Detrimental Activity." For purposes of this Section 16, "Detrimental
Activity" shall include: (i) the rendering of services for any organization or
engaging directly or indirectly in any business which is competitive with the
business of the Company, or which organization or business, or the rendering of
service to such organization or business, is or becomes otherwise prejudicial to
or in conflict with the interests of the Company; (ii) activity that results in
termination of the Participant's employment for cause; (iii) a violation of the
Company's Code of Conduct; (iv) the Participant being convicted of, or entering
a guilty plea, with respect to a crime, whether or not connected with the
Company; or (v) any other conduct or act determined to be injurious, detrimental
or prejudicial to any interest of the Company. For purposes of this Section 16,
"Detrimental Activity" shall also include (x) the making of any statement that
would cause the Company or its current or former Directors, officers, agents or
shareholders embarrassment or humiliation or otherwise cause or contribute to
such persons being held in disrepute by the Company's employees, suppliers,
customers or the general public or (y) any attempt, directly or indirectly, to
solicit or induce any employee, customer or supplier of the Company or its
affiliates to terminate its employment, patronage or other association with the
Company.
(b) Upon exercise, payment or delivery pursuant to an Award, the
Participant shall certify in a manner acceptable to the Company that he or she
is in compliance with the terms and conditions of the Plan. In the event a
Participant fails to comply with the provisions of paragraph (a) of this Section
16 prior to, or during the 6 months after, any exercise, payment or delivery
pursuant to an Award, such exercise, payment or delivery may be rescinded within
2 years thereafter. In the event of any such rescission, the Participant shall
pay the Company the amount of any gain realized or payment received as a result
of the rescinded exercise, payment or delivery, in such manner and on such terms
and conditions as may be required, and the Company shall be entitled to set-off
against the amount of any such gain any amount owed by the Participant to the
Company.
17. Administration of the Plan. (a) This Plan shall be administered by one
or more Committees (or subcommittees thereof) consisting of not less than two
Directors appointed by the Board of Directors of the Company. A majority of the
Committee shall constitute a quorum, and the action of the members of the
Committee present at any meeting at which a quorum is present, or acts
unanimously approved in writing, shall be the acts of the Committee. The Board
of Directors of the Company may perform any function of the Committee hereunder,
in which case the term "Committee" shall refer to the Board of Directors of the
Company. The foregoing notwithstanding, the Board of Directors of the Company
shall perform the functions of the Committee for purposes of granting awards
under the Plan to Non-Employee Directors, provided, however, that authority with
respect to other aspects of awards granted to Non-Employee Directors shall not
be exclusive to the Board of Directors of the Company.
(b) The interpretation and construction by the Committee of any provision
of this Plan or of any agreement, notification or document evidencing the grant
of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Units, Performance Shares or any awards granted under Section 10 of
the Plan and any determination by the Committee pursuant to any provision of
this Plan or of any such agreement, notification or document shall be final and
conclusive. No member of the Committee shall be liable for any such action or
determination made in good faith.
18. Amendments and Other Matters. (a) The Board of Directors of the Company
may at any time and from time to time amend the Plan in whole or in part;
provided, however, that any amendment which must be
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approved by the shareholders of the Company in order to comply with applicable
law or the rules of the New York Stock Exchange or, if the Common Shares are not
traded on the New York Stock Exchange, the principal national securities
exchange upon which the Common Shares are traded or quoted, shall not be
effective unless and until such approval has been obtained. No such amendment
shall (i) increase the maximum number of shares specified in Paragraph 3 of the
Plan (except that adjustments authorized by Paragraph 11 of this Plan shall not
be limited by this provision) or (ii) permit the granting of Option Rights or
Appreciation Rights with exercise or grant prices lower than 100% of the Market
Value per Share on the date of the Award. Presentation of this Plan or any
amendment thereof for shareholder approval shall not be construed to limit the
Company's authority to offer similar or dissimilar benefits under other plans or
otherwise with or without shareholder approval. Without limiting the generality
of the foregoing, the Board of Directors may amend this Plan to eliminate
provisions which are no longer necessary as a result in changes in tax or
securities laws or regulations, or in the interpretation thereof.
(b) The Committee shall not, without the further approval of the
shareholders of the Company, authorize the amendment of any outstanding Option
Right to reduce the Option Price. Furthermore, no Option Right shall be
cancelled and replaced with awards having a lower Option Price without further
approval of the shareholders of the Company. This Section 18(b) is intended to
prohibit the repricing of "underwater" Option Rights and shall not be construed
to prohibit the adjustments provided for in Section 12 of this Plan.
(c) The Committee also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of this Plan. The Committee also may provide that deferred issuances and
settlements include the payment or crediting of dividend equivalents or interest
on the deferral amounts.
(d) The Committee may condition the grant of any award or combination of
awards authorized under this Plan on the deferral by the Participant of his or
her right to receive a cash bonus or other compensation otherwise payable by the
Company or a Subsidiary to the Participant.
(e) In case of termination of employment by reason of death, disability or
normal or early retirement, or in the case of hardship or other special
circumstances, of a Participant who holds an Option Right or Appreciation Right
not immediately exercisable in full, or any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer has
not lapsed, or any Deferred Shares as to which the Deferral Period has not been
completed, or any Performance Units or Performance Shares which have not been
fully earned, or who holds Common Shares subject to any transfer restriction
imposed pursuant to Section 7 of this Plan, the Committee may, in its sole
discretion, accelerate the time at which such Option Right or Appreciation Right
may be exercised or the time at which such substantial risk of forfeiture or
prohibition or restriction on transfer will lapse or the time when such Deferral
Period will end or the time at which such Performance Units or Performance
Shares will be deemed to have been fully earned or the time when such transfer
restriction will terminate. In addition, the Committee may waive any other
limitation or requirement under any award described in the preceding sentence,
except in the case of a Covered Employee where such action would result in the
loss of the otherwise available exemption of the award under Section 162(m) of
the Code. In such case, the Committee shall not make any modification of the
Management Objectives or minimum acceptable level of achievement. With respect
to any Participant the Committee may, in its sole discretion, accelerate the
time at which any Option Right or Appreciation Right may be exercised or the
time when a Performance Unit or Performance Share shall be deemed to have been
fully earned or the time when a substantial risk of forfeiture or prohibition on
transfer of Restricted Shares shall lapse or the time when a Deferral Period
shall end in connection with a change in control of the Company. In addition,
the Committee may, in its sole discretion, modify any Option Right or
Appreciation Right to extend the period following termination of a Participant's
employment or service to the Company or any Subsidiary during which such award
will remain outstanding and be exercisable, provided that no such extension
shall result in any award being exercisable more than ten years after the Date
of Grant.
(f) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Company or any
Subsidiary, nor shall it interfere in any way with any right the
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Company or any Subsidiary would otherwise have to terminate such Participant's
employment or other service at any time.
(g) To the extent that any provision of this Plan would prevent any Option
Right that was intended to qualify as an Incentive Stock Option from qualifying
as such, that provision shall be null and void with respect to such Option
Right. Such provision, however, shall remain in effect for other Option Rights
and there shall be no further effect on any provision of this Plan.
(h) This Plan shall continue in effect until the date on which all Common
Shares available for issuance or transfer under this Plan have been issued or
transferred and the Company has no further obligation hereunder.
(i) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right or title to any assets, funds or
property of the Company or any Subsidiary, including without limitation, any
specific funds, assets or other property which the Company or any Subsidiary may
set aside in anticipation of any liability under the Plan. A Participant shall
have only a contractual right to an award or the amounts, if any, payable under
the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing
contained in the Plan shall constitute a guarantee that the assets of the
Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(j) This Plan and each Evidence of Award shall be governed by the laws of
the State of Ohio, excluding any conflicts or choice of law rule or principle
that might otherwise refer construction or interpretation of the Plan to the
substantive law of another jurisdiction.
(k) If any provision of the Plan is or becomes invalid, illegal or
unenforceable in any jurisdiction, or would disqualify the Plan or any award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended or limited in scope to conform to applicable laws
or, in the discretion of the Committee, it shall be stricken and the remainder
of the Plan shall remain in full force and effect.
(l) Notwithstanding any other provision of the Plan to the contrary, a
Participant's rights and the Committee's continuing authority with respect to
any award shall be limited to the extent necessary to ensure that any Option
Right or other award of a type that the Committee has intended to be subject to
fixed accounting with a measurement date at the Date of Grant or the date
performance conditions are satisfied under APB 25 shall not become subject to
"variable" accounting solely due to the existence of such rights or authority,
unless the Committee specifically determines that the award shall remain
outstanding despite such "variable" accounting.
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ANNEX E
ARTICLES OF INCORPORATION
OF
POLYONE CORPORATION
FIRST: The name of the Corporation is: PolyOne Corporation.
SECOND: The place in the State of Ohio where the principal office of the
Corporation shall be located is in the City of Cleveland, County of Cuyahoga.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be formed under the General Corporation Law
of the State of Ohio as from time to time in effect.
FOURTH: The total authorized capital stock of the Corporation shall be four
hundred forty million (440,000,000) shares consisting of four hundred million
(400,000,000) common shares, par value $.01 per share (the "Common Shares"), and
forty million (40,000,000) preferred shares, par value $.01 per share (the
"Series Preferred Shares").
The preferences, relative, participating, optional or other special rights,
qualifications, limitations, restrictions, voting powers and privileges of each
class of the Corporation's capital stock shall be as follows:
I. COMMON SHARES
(a) Issuance. Common Shares may be issued from time to time in such amounts
and for such purposes as shall be determined by the Board of Directors of the
Corporation.
(b) Voting Rights. Except as otherwise required by law and the provisions
of these Articles of Incorporation and except as provided by the resolution or
resolutions of the Board of Directors creating or amending any series of the
Series Preferred Shares, the holders of the Common Shares of the Corporation
possess full voting power for the election of directors and for all other
purposes.
(c) Dividends. Subject to the requirements of law, these Articles of
Incorporation, as amended from time to time, and the resolution or resolutions
of the Board of Directors creating or modifying any series of the Series
Preferred Shares, the holders of Common Shares shall, after payment in full of
all dividends to which holders of the Series Preferred Shares shall be entitled,
be entitled to receive such dividends as and when the same may be declared from
time to time by the Board of Directors of the Corporation out of funds legally
available therefor.
(d) Liquidation. Subject to the requirements of law, these Articles of
Incorporation, as amended from time to time, and the resolution or resolutions
of the Board of Directors creating or modifying any series of the Series
Preferred Shares, the holders of the Common Shares shall, in the event of any
liquidation, dissolution or other winding up of the Corporation, whether
voluntary or involuntary, and after all holders of the Series Preferred Shares
shall have been paid in full the amounts to which they respectively shall be
entitled, be entitled to receive all the remaining assets of the Corporation of
whatever kind, such assets to be distributed pro rata to the holders of the
Common Shares.
II. SERIES PREFERRED SHARES
(a) Issuance. The Series Preferred Shares may be issued in one or more
series as shall from time to time be created and authorized to be issued by the
Board of Directors as hereinafter provided.
(b) Authority of the Board of Directors. The Board of Directors is hereby
expressly authorized, by resolution or resolutions from time to time adopted to
amend these Articles of Incorporation to provide for the issuance of any series
of the Series Preferred Shares and to determine, to the extent not otherwise
provided by law, the designations, powers, preferences and relative,
participating, optional and other special
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rights, if any, of the shares of each series of the Series Preferred Shares, and
the qualifications, limitations and restrictions thereof, including (but without
limiting the generality of the foregoing) any of the following:
(i) the number of shares to constitute such series (which number may
at any time, or from time to time, be increased or decreased by the Board
of Directors, notwithstanding that shares of the series may be outstanding
at the time of such increase or decrease, unless the Board of Directors
shall have otherwise provided in creating such series) and the distinctive
name and serial designation thereof;
(ii) the annual dividend rate or rates and the date on which the first
dividend on shares of such series shall be payable and all subsequent
dividend payment dates;
(iii) whether dividends are to be cumulative or non-cumulative, the
participating or other special rights, if any, with respect to the payment
of dividends and the date from which dividends on all shares of such series
issued prior to the record date for the first dividend shall be cumulative
(such dividends shall be cumulative only if and to the extent set forth in
a certificate filed pursuant to law);
(iv) whether any series shall be subject to redemption and, if so, the
manner of redemption and the redemption price or prices for such series,
which may consist of a redemption price or scale of redemption prices
applicable only to redemption for a sinking fund (which terms as used in
this clause shall include any fund or provisions for the periodic purchase
or retirement of shares), and a different redemption price or scale of
redemption prices applicable to any other redemption;
(v) whether or not the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, and, if so, whether
such purchase, retirement or sinking fund shall be cumulative or
non-cumulative, the extent to and the manner in which such fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or for other corporate purposes and the terms and provisions
relative to the operation thereof;
(vi) the terms, if any, upon which shares of such series shall be
convertible into, or exchangeable for, or shall have rights to purchase or
other privileges to acquire shares of any other class or of any other
series of the same or any other class, including the price or prices or the
rate or rates of conversion, exchange, purchase or acquisition and the
terms of adjustment, if any;
(vii) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or
making of other distributions on, and upon the purchase, redemption, or
other acquisition of, the Common Shares or any other series or class of
stock of the Corporation ranking junior to the shares of such series,
either as to dividends or upon liquidation;
(viii) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issuance of any additional
shares of any class (including additional shares of such series of the
Series Preferred Shares) ranking on a parity with or prior to the shares of
such series either as to dividends or upon liquidation; and
(ix) the voting rights of any such series, if any, which may be full,
limited, or denied.
FIFTH: The business of the Corporation shall be managed under the direction
of the Board of Directors except as otherwise provided by law. The number of
Directors of the Corporation shall be fixed from time to time by, or in the
manner provided in, the Code of Regulations. Election of Directors need not be
by written ballot unless the Code of Regulations of the Corporation shall so
provide.
SIXTH:
(a) A Director of the Corporation shall under no circumstances have any
personal liability to the Corporation or its Shareholders for monetary damages
for breach of fiduciary duty as a Director except for those breaches and acts or
omissions with respect to which the General Corporation Law of the State of
Ohio, as from time to time amended, expressly provides that this provision shall
not eliminate or limit such personal liability of Directors. Neither the
modification nor repeal of this paragraph (a) of this Article SIXTH nor any
amendment to the General Corporation Law of the State of Ohio that does not have
retroactive
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application shall limit the right of Directors hereunder to exculpation from
personal liability for any act or omission occurring prior to such amendment,
modification or repeal.
(b) The Corporation shall indemnify each Director and Officer of the
Corporation to the fullest extent permitted by applicable law, except as may be
otherwise provided in the Code of Regulations of the Corporation. Neither the
modification nor repeal of paragraph (b) of this Article SIXTH nor any amendment
to the General Corporation Law of the State of Ohio that does not have
retroactive application shall limit the right of Directors and Officers
hereunder to indemnification with respect to any act or omission occurring prior
to such modification, amendment or repeal.
SEVENTH: Except as may be otherwise provided in any designation of the
terms of Series Preferred Shares, Shareholders of the Corporation shall not have
the right to vote cumulatively in the election of Directors.
EIGHTH: Except as may be otherwise provided in any designation of the terms
of Series Preferred Shares, Shareholders of the Corporation shall not have the
pre-emptive right, by reason of their status as Shareholders, to purchase
securities offered or sold by the Corporation.
NINTH: The Corporation, by action of its Board of Directors, and without
action by its Shareholders, may, from time to time, purchase its own shares of
any class in accordance with the provisions of the General Corporation Law of
the State of Ohio; and such purchase may be made either in the open market, or
at public or private sales, in such manner and amounts, from such holder or
holders of outstanding shares of the Corporation and at such price as the Board
of Directors shall, from time to time, determine.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in these Articles of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred upon Shareholders
herein are granted subject to this reservation. Notwithstanding anything to the
contrary contained in these Articles of Incorporation, the affirmative vote of
the holders of at least three-quarters of the voting power of the Corporation,
voting together as a single class, shall be required to amend or repeal, or
adopt any provision inconsistent with, Article FIFTH, Article SEVENTH, Article
EIGHTH, Article NINTH, or this Article TENTH; provided, however, that this
Article TENTH shall not alter the voting entitlement of shares that, by virtue
of any Preferred Share Designation, are expressly entitled to vote on any
amendment to these Articles of Incorporation.
ELEVENTH: Any and every statute of the State of Ohio hereafter enacted,
whereby the rights, powers or privileges of corporations or of the Shareholders
of corporations organized under the laws of the State of Ohio are increased or
diminished or in any way affected, or whereby effect is given to the action
taken by any number, less than all, of the Shareholders of any such corporation,
shall apply to the Corporation and shall be binding not only upon the
Corporation but upon every Shareholder of the Corporation to the same extent as
if such statute had been in force at the date of filing these Articles of
Incorporation in the office of the Secretary of State of Ohio.
TWELFTH: The Corporation hereby appoints CT Corporation System to be its
statutory agent upon whom any process, notice or demand required or permitted by
statute to be served upon the Corporation may be served. The complete address of
the agent is: 1300 East 9th St., Cleveland, Ohio 44114.
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ANNEX F
POLYONE CORPORATION
REGULATIONS
(EFFECTIVE AS OF THE EFFECTIVE DATE OF THE CONSOLIDATION)
SHAREHOLDERS' MEETINGS
1. Time and Place of Meetings. All meetings of the Shareholders for the
election of Directors or for any other purpose will be held at such time and
place, within or without the State of Ohio, as may be designated by the Board
or, in the absence of such designation, by the Chairman, the President, or the
Secretary, and stated in the notice of the meeting. The Board may postpone and
reschedule any previously scheduled annual or special meeting of the
Shareholders.
2. Annual Meeting. An annual meeting of the Shareholders will be held at
such date and time as may be designated from time to time by the Board, at which
the Shareholders will elect by a plurality vote the Directors to succeed those
whose terms expire at such meeting and will transact such other business as may
properly be brought before the meeting in accordance with Regulation 8.
3. Special Meetings. (a) Special meetings of the Shareholders may be called
only by (i) the Chairman, (ii) the President, (iii) the Secretary within 10
calendar days after receipt of the written request of a majority of the total
number of Directors that the Corporation would have if there were no vacancies
(the "Whole Board") or (iv) any person or persons who hold not less than 50% of
all the shares entitled to be voted at such meeting. Any such request by a
majority of the Whole Board must be sent to the Chairman and the Secretary and
must state the purpose or purposes of the proposed meeting. Special meetings of
holders of the outstanding Preferred Shares, if any, may be called in the manner
and for the purposes provided in the resolution or resolutions providing for the
issuance of such Preferred Shares (collectively, a "Preferred Share
Designation").
(b) Upon written request by any person or persons entitled to call a
meeting of Shareholders delivered in person or by registered mail to the
Chairman, the President or the Secretary, such Officer shall forthwith cause
notice of the meeting to be given to the Shareholders entitled to notice of such
meeting in accordance with Regulation 4. If such notice shall not be given
within 60 days after the delivery or mailing of such request, the person or
persons requesting the meeting may fix the time of the meeting and give, or
cause to be given, notice in the manner provided in Regulation 4.
4. Notice of Meetings. Except as otherwise provided by law, written notice
of every meeting of Shareholders, stating the place, date and hour of the
meeting, and in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given not less than 7 nor more than 60 calendar
days before the date of the meeting to each Shareholder of record entitled to
vote at such meeting. If such notice is mailed, it shall be addressed to the
Shareholders at their respective addresses as they appear on the records of the
Corporation, and notice shall be deemed to have been given on the day so mailed.
When a meeting is adjourned to another place, date, or time, written notice need
not be given of the adjourned meeting if the place, date, and time thereof are
announced at the meeting at which the adjournment is taken; provided, however,
that if the adjournment is for more than 30 calendar days, or if after the
adjournment a new record date is fixed for the adjourned meeting, written notice
of the place, date, and time of the adjourned meeting must be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which properly could have been transacted at the original meeting.
5. Inspectors. The Board shall appoint one or more inspectors of election
to act at each meeting of Shareholders and to make a written report thereof. The
Board may designate one or more persons as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a
meeting of Shareholders, the presiding Officer of the meeting shall appoint one
or more substitute inspectors.
6. Quorum. Except as otherwise provided by law or in a Preferred Share
Designation, the holders of a majority of the shares issued and outstanding and
entitled to vote thereat, present in person or represented by
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proxy, will constitute a quorum at all meetings of the Shareholders for the
transaction of business thereat. If, however, a quorum is not present or
represented at any meeting of Shareholders, the holders of a majority of the
voting shares represented at such meeting will have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented.
7. Voting. Except as otherwise provided by law, by the Articles of
Incorporation, or in a Preferred Share Designation, each Shareholder will be
entitled at every meeting of the Shareholders to one vote for each share having
voting power standing in the name of such Shareholder on the books of the
Corporation on the record date for the meeting and such votes may be cast either
in person or by proxy. A Shareholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary. The vote upon election of any Director shall be
by ballot. The vote upon any other question brought before the meeting of
Shareholders may be by voice vote, unless otherwise required by the Articles of
Incorporation or the Regulations or unless the Chairman or the holders of a
majority of the outstanding shares of all classes entitled to vote thereon
present in person or by proxy at such meeting otherwise determine. Every vote
taken by written ballot will be counted by the inspectors of election. When a
quorum is present at any meeting, the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter, and which has actually been voted,
will be the act of the Shareholders, except in the election of Directors or as
otherwise provided in these Regulations, the Articles of Incorporation, a
Preferred Share Designation, or by law. An abstention shall not represent a vote
cast.
8. Order of Business. (a) The Chairman, or such other Officer of the
Corporation designated by a majority of the Whole Board, will call meetings of
the Shareholders to order and will act as the presiding Officer thereof. Unless
otherwise determined by the Board prior to the meeting, the presiding Officer of
the meeting of the Shareholders will also determine the order of business and
have the authority in his or her sole discretion to regulate the conduct of any
such meeting, including without limitation by imposing restrictions on the
persons (other than Shareholders of the Corporation or their duly appointed
proxies) who may attend any such Shareholders' meeting, by ascertaining whether
any Shareholder or his or her proxy may be excluded from any meeting of the
Shareholders based upon any determination by the presiding Officer, in his or
her sole discretion, that any such person has unduly disrupted or is likely to
disrupt the proceedings thereat, and by determining the circumstances in which
any person may make a statement or ask questions at any meeting of the
Shareholders.
(b) At an annual meeting of the Shareholders, only such business will be
conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given in accordance with
Regulation 4, (ii) otherwise properly brought before the meeting by the
presiding Officer or by or at the direction of a majority of the Whole Board, or
(iii) otherwise properly requested to be brought before the meeting by a
Shareholder of the Corporation in accordance with Regulation 8(c).
(c) For business to be properly requested by a Shareholder to be brought
before an annual meeting, the Shareholder must (i) be a Shareholder of the
Corporation of record at the time of the giving of the notice for such annual
meeting provided for in these Regulations, (ii) be entitled to vote at such
meeting, and (iii) have given timely notice thereof in writing to the Secretary.
To be timely, a Shareholder's notice must be delivered to or mailed and received
by the Secretary at the principal executive offices of the Corporation not less
than 60 nor more than 90 calendar days prior to the first anniversary of the
date on which the Corporation first mailed its proxy materials for the preceding
year's annual meeting of Shareholders; provided, however, that in the case of
(1) the Corporation's 2001 annual meeting of Shareholders and (2) any subsequent
annual meeting where the date of the annual meeting is delayed by more than 60
days calendar days after the anniversary of the preceding year's annual meeting,
then, in each such case, notice by the Shareholder to be timely must be so
delivered not later than the close of business on the later of the 90th calendar
day prior to such annual meeting or the 10th calendar day following the day on
which public announcement of the date of such meeting is first made. A
Shareholder's notice to the Secretary must set forth as to each matter the
Shareholder proposes to bring before the annual meeting (A) a description in
reasonable detail of the business
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desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (B) the name and address, as they appear on
the Corporation's books, of the Shareholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made, (C) the class
and number of shares of the Corporation that are owned beneficially and of
record by the Shareholders proposing such business and by the beneficial owner,
if any, on whose behalf the proposal is made, and (D) any material interest of
such Shareholder proposing such business and the beneficial owner, if any, on
whose behalf the proposal is made in such business. Notwithstanding the
foregoing provisions of this Regulation 8(c), a Shareholder must also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder with respect to the matters
set forth in this Regulation 8(c). For purposes of this Regulation 8(c) and
Regulation 12, "public announcement" means disclosure in a press release
reported by the Dow Jones News Service or comparable national news service or in
a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to sections 13, 14, or 15(d) of the Securities Exchange Act
of 1934, as amended, or furnished to Shareholders. Nothing in this Regulation
8(c) will be deemed to affect any rights of Shareholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended.
(d) At a special meeting of Shareholders, only such business may be
conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given in accordance with
Regulation 4 or (ii) otherwise properly brought before the meeting by the
presiding Officer or by or at the direction of a majority of the Whole Board.
(e) The determination of whether any business sought to be brought before
any annual or special meeting of the Shareholders is properly brought before
such meeting in accordance with this Regulation 8 will be made by the presiding
Officer of such meeting. If the presiding Officer determines that any business
is not properly brought before such meeting, he or she will so declare to the
meeting and any such business will not be conducted or considered.
DIRECTORS
9. Function. The business and affairs of the Corporation will be managed
under the direction of its Board.
10. Number, Election and Terms of Directors. (a) At the effective time of
the merger of M.A. Hanna Company ("Hanna") into The Geon Company ("Geon") (the
"Effective Time"), the number of Directors of the Corporation shall be twelve.
(b) The Board or the Shareholders may from time to time, in the manner set
forth below in this Section 10(b), fix or change the size of the Board to a
total number of no fewer than six Directors and no more than 18 Directors;
provided that, through the date of the Corporation's annual meeting of
Shareholders in 2004 (the "2004 Annual Meeting Date"), each increase or decrease
in the size of the Board shall be by two or a multiple of two. The Board may,
subject to the limitations contained in the immediately preceding sentence
regarding the number of Directors and the requirement that any increase or
decrease in the number of Directors be effected by a multiple of two, fix or
change the number of Directors by the affirmative vote of two-thirds of the
Whole Board. The Shareholders may, subject to the limitations contained in the
first sentence of this paragraph regarding the number of Directors and the
requirement that any increase or decrease in the number of Directors be effected
by a multiple of two, fix or change the number of Directors at a meeting of the
Shareholders called for the purpose of electing Directors (i) by the affirmative
vote of the holders of shares entitling them to exercise three-quarters of the
voting power of the Corporation represented at the meeting and entitled to elect
Directors or (ii) if the proposed change in the number of Directors is
recommended by two-thirds of the Whole Board, by the affirmative vote of the
holders of shares entitling them to exercise a majority of the voting power of
the Corporation represented at the meeting and entitled to elect Directors. No
reduction in the number of Directors shall of itself have the effect of
shortening the term of any incumbent Director. If the Board increases the number
of Directors, it may fill the vacancy or
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vacancies created by the increase in the number of Directors for the respective
unexpired terms in accordance with the provisions of Regulation 13. If the
Shareholders increase the number of Directors and fail to fill the vacancy or
vacancies created thereby, the Board may fill such vacancy or vacancies for the
respective unexpired terms in accordance with the provisions of Regulation 13.
(c) Directors shall hold office until their successors are chosen and
qualified, or until their earlier death, retirement, resignation, or removal.
(d) The foregoing provisions of this Regulation 10 are subject to the
provisions of any Preferred Share Designation to the contrary that may be
adopted with the approval of three-quarters of the Whole Board.
11. Chairman of the Board, Chairman of the Executive Committee, and
Chairmen of Other Committees.
(a) In General. Except as provided below in this Regulation 11, the
Board may from time to time select from its members one or more individuals
to serve as Chairman of the Board, Chairman of the Executive Committee (if
the Board appoints an Executive Committee), and Chairman of any of the
other committees of the Board. Except as provided in Regulation 11(b) and
11(c), the positions of Chairman of the Board, Chairman of the Executive
Committee, and Chairman of any other committee of the Board are not Officer
positions (and the Corporation shall have no Officer position known as
Chairman of the Board), but are strictly Director positions, the sole
authority and responsibility of which is to preside at meetings of the
Shareholders, the Board, or the applicable committee, as the case may be.
The Chairman of the Board shall, if present, preside at meetings of the
Board and at meetings of the Shareholders. In the absence of the Chairman
of the Board, the President shall preside at such meetings.
(b) Chairman of the Board Through 2004 Annual Meeting Date. It is
intended that Phillip D. Ashkettle ("Ashkettle") shall be Chairman of the
Board through the 2004 Annual Meeting Date or his earlier failure to
continue to be a Director of the Corporation, whether as a result of his
death, resignation, removal, or failure to be re-elected at the expiration
of his term as Director. On the 2004 Annual Meeting Date, Ashkettle shall
cease to be Chairman of the Board, unless he shall have earlier ceased to
hold that position. It is intended that Thomas A. Waltermire ("Waltermire")
shall become Chairman of the Board on the date (which in no event shall be
later than the 2004 Annual Meeting Date) on which Ashkettle ceases to be
Chairman of the Board, subject, in all cases, to Waltermire's earlier
failure to continue to be a Director of the Corporation, whether as a
result of his death, resignation, removal, or failure to be re-elected at
the expiration of his term as Director. If, for any reason, Ashkettle
ceases to hold the position of Chairman of the Board at any time before the
2004 Annual Meeting Date, it is intended that Waltermire shall immediately
assume the position of Chairman of the Board, provided that he is then a
Director. So long as Waltermire remains a Director of the Corporation and
has not assumed the position of Chairman of the Board, no individual (other
than Waltermire or any other person designated by him) shall be designated
vice chairman or deputy chairman (or any other position or title of similar
import) of the Board.
(c) Chairman of the Executive Committee. If the Board establishes an
Executive Committee in accordance with Regulation 20, it is intended that
(i) each of Ashkettle and Waltermire shall be a member of the Executive
Committee as long as he is a member of the Board; (ii) the Chairman of the
Board shall also be Chairman of the Executive Committee; and (iii) through
the 2004 Annual Meeting Date, so long as Waltermire remains a Director but
is not Chairman of the Board, no individual (other than Waltermire or any
other person designated by him) shall be designated as vice chairman or
deputy chairman (or any other position or title of similar import) of the
Executive Committee. The Board shall have the power at any time by the
affirmative vote of at least three-quarters of the Whole Board to change
the membership of, to fill all vacancies in, and to discharge the Executive
Committee, with or without cause.
(d) The provisions of Regulations 11(b) and 11(c) shall apply through
the 2004 Annual Meeting Date.
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12. Nominations. Only individuals who are nominated in accordance with the
following procedures shall be eligible for election as Directors. Subject to the
provisions of any Preferred Share Designation, nominations for the election of
Directors may be made only:
(a) through the date of the Corporation's annual meeting of
Shareholders to be held in 2002 (the "2002 Annual Meeting Date"), by the
affirmative vote of three-quarters of the Whole Board and three-quarters of
the members of the Nominating Committee, if any, then in office; provided,
however, that if the Nominating Committee is unable, for any reason, to
approve by the requisite vote a nomination for election of a particular
Director or Directors, the nomination shall be made instead by the
affirmative vote of a majority of the Whole Board and three-quarters of the
members of a committee to be comprised of (i) in the case of a nomination
for election to fill a Director position that was held, immediately after
the Effective Time, by an individual who had been a Director of M.A. Hanna
Company up until the Effective Time (a "Former Hanna Director"), all of the
Directors then in office who either are Former Hanna Directors or were
elected to fill a Director position originally held, immediately after the
Effective Time, by a Former Hanna Director, and (ii) in the case of a
nomination for election to fill a Director position that was held,
immediately after the Effective Time, by an individual who had been a
Director of The Geon Company up until the Effective Time (a "Former Geon
Director"), all of the Directors then in office who either are Former Geon
Directors or were elected to fill a Director position originally held,
immediately after the Effective Time, by a Former Geon Director; provided,
further, that, in the case of a nomination for election to fill a Director
position that resulted from an increase in the size of the Board after the
Effective Time in accordance with Regulation 13, such nomination shall be
made by the affirmative vote of three-quarters of the Whole Board if the
Nominating Committee is unable, for any reason, to approve by the requisite
vote a nomination to fill such Director position,
(b) after the 2002 Annual Meeting Date, by the affirmative vote of
two-thirds of the Whole Board, and
(c) whether before or after the 2002 Annual Meeting Date, by any
Shareholder who is a Shareholder of record at the time of giving of notice
of an annual meeting of Shareholders who is entitled to vote for the
election of Directors at that meeting and who complies with the procedures
set forth below in the remainder of this Regulation 12.
All nominations by Shareholders must be made pursuant to timely notice in proper
written form to the Secretary. To be timely, a Shareholder's notice must be
delivered to or mailed and received by the Secretary at the principal executive
offices of the Corporation not less than 60 nor more than 90 calendar days prior
to the first anniversary of the date on which the Corporation first mailed its
proxy materials for the preceding year's annual meeting of Shareholders;
provided, however, that in the case of (1) the Corporation's 2001 annual meeting
of Shareholders and (2) any subsequent annual meeting where the date of the
annual meeting is delayed by more than 60 days calendar days after the
anniversary of the preceding year's annual meeting, then, in each such case,
notice by the Shareholder to be timely must be so delivered not later than the
close of business on the later of the 90th calendar day prior to such annual
meeting or the 10th calendar day following the day on which public announcement
of the date of such meeting is first made. To be in proper written form, such
Shareholder's notice must set forth or include (i) the name and address, as they
appear on the Corporation's books, of the Shareholder giving the notice and of
the beneficial owner, if any, on whose behalf the nomination is made; (ii) a
representation that the Shareholder giving the notice is a holder of record of
shares of the Corporation entitled to vote at such annual meeting and intends to
appear in person or by proxy at the annual meeting to nominate the person or
persons specified in the notice; (iii) the class and number of shares of the
Corporation owned beneficially and of record by the Shareholder giving the
notice and by the beneficial owner, if any, on whose behalf the nomination is
made; (iv) a description of all arrangements or understandings between or among
any of (A) the Shareholder giving the notice, (B) the beneficial owner on whose
behalf the notice is given, (C) each nominee, and (D) any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the Shareholder giving the notice; (v) such other
information regarding each nominee proposed by the Shareholder giving the notice
as would be required to be included in a proxy statement filed pursuant to the
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proxy rules of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board; and (vi) the signed
consent of each nominee to serve as a Director of the Corporation if so elected.
At the request of the Board, any person nominated by the Board for election as a
Director must furnish to the Secretary that information required to be set forth
in a Shareholder's notice of nomination which pertains to the nominee. The
presiding Officer of any annual meeting will, if the facts warrant, determine
that a nomination was not made, in accordance with the procedures prescribed by
this Regulation 12, and if he or she should so determine, he or she will so
declare to the meeting and the defective nomination will be disregarded.
Notwithstanding the foregoing provisions of this Regulation 12, a Shareholder
must also comply with all applicable requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder with respect to
the matters set forth in this Regulation 12.
13. Newly Created Directorships and Vacancies. Subject to the rights, if
any, of the holders of any series of Preferred Shares to elect additional
Directors under circumstances specified in a Preferred Share Designation, newly
created directorships resulting from any increase in the number of Directors and
any vacancies on the Board resulting from death, resignation, disqualification,
removal, or other cause will be filled by election, (a) at any time through the
2002 Annual Meeting Date, as provided in paragraph (a) of Regulation 12, and (b)
after the 2002 Annual Meeting Date, solely by the affirmative vote of a majority
of the remaining Directors then in office, even though less than a quorum of the
Board, or by a sole remaining Director. Any Director elected in accordance with
the preceding sentence will hold office for the remainder of the term and until
such Director's successor is elected and qualified. No decrease in the number of
Directors constituting the Board will shorten the term of an incumbent Director.
14. Resignation; Removal. Any Director may resign at any time by giving
written notice of his or her resignation to the Chairman or the Secretary. Any
resignation will be effective upon actual receipt by any such person or, if
later, as of the date and time specified in such written notice. Except as may
be otherwise provided in any Preferred Stock Designation, Directors may be
removed from the Board of Directors by the Shareholders only for cause. For
purposes of this Regulation 14, cause for removal shall exist only if it is
proved by clear and convincing evidence in a court of competent jurisdiction
that a Director's action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the Corporation or
undertaken with reckless disregard for the best interests of the Corporation.
15. Regular Meetings. Regular meetings of the Board may be held immediately
after the annual meeting of the Shareholders and at such other time and place
either within or without the State of Ohio as may from time to time be
determined by the Board. Notice of regular meetings of the Board need not be
given.
16. Special Meetings. Special meetings of the Board may be called by the
Chairman or the President on one day's notice to each Director by whom such
notice is not waived, given either personally or by mail, telephone, telecopier,
or similar medium of communication, and will be called by the Chairman or the
President in like manner and on like notice on the written request of five or
more Directors. Special meetings of the Board may be held at such time and place
either within or without the State of Ohio as is determined by the Board or
specified in the notice of any such meeting.
17. Quorum. At all meetings of the Board, a majority of the total number of
Directors then in office will constitute a quorum for the transaction of
business. Except for the designation of committees as provided in these
Regulations and except for actions required by these Regulations or the Articles
of Incorporation to be taken by a majority or some greater proportion of the
Whole Board, the act of a majority of the Directors present at any meeting at
which there is a quorum will be the act of the Board. If a quorum is not present
at any meeting of the Board, the Directors present thereat may adjourn the
meeting from time to time to another place, time or date, without notice other
than announcement at the meeting, until a quorum is present. The provisions of
this Regulation 17 notwithstanding, the Board may not approve, or take any
action that would otherwise constitute, a "Change of Control" as that term is
defined in Regulation 45, unless such action is approved by at least
three-quarters of the Whole Board.
18. Participation in Meetings by Telephone Conference. Members of the Board
or any committee designated by the Board may participate in a meeting of the
Board or any such committee, as the case may
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be, by means of telephone or video conference or similar means by which all
persons participating in the meeting can hear each other, and such participation
in a meeting will constitute presence in person at the meeting.
19. Nominating Committee. This Regulation 19 shall remain in effect through
the 2002 Annual Meeting Date. It is intended that through the 2002 Annual
Meeting Date, the Board, by resolution adopted by the affirmative vote of at
least two-thirds of the Whole Board, will designate annually as the members of
the Nominating Committee of the Board (the "Nominating Committee") four
individuals, two of whom shall be Former Hanna Directors (one of whom shall be
Ashkettle so long as he remains a Director) and two of whom shall be Former Geon
Directors (one of whom shall be Waltermire so long as he remains a Director).
The Nominating Committee shall act as such for all purposes of these Regulations
through the 2002 Annual Meeting, including acting in the nomination of
individuals to serve as Directors as provided in Regulation 12. The Board shall
have the power at any time by the affirmative vote of at least three-quarters of
the Whole Board to change the membership of, to fill all vacancies in, and to
discharge the Nominating Committee, with or without cause.
20. Other Committees. The provisions of this Regulation 20 shall be subject
to the provisions of Regulation 11 with respect to any Executive Committee that
may be established by the Board and to the provisions of Regulation 19 with
respect to the Nominating Committee through the 2002 Annual Meeting Date.
Subject to those provisions, the Board may designate one or more committees,
each to consist of one or more Directors. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the Board
to act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board, shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all documents which may require it; but
no such committee shall have the power or authority in reference to the
following matters: (i) approving or adopting, or recommending to the
Shareholders, any action or matter expressly required by the Ohio General
Corporation Law to be submitted to Shareholders for approval or (ii) adopting,
amending, or repealing any Regulation of the Corporation.
21. Compensation. The Board may establish the compensation and
reimbursement policies for Directors with respect to membership on the Board and
on committees of the Board, attendance at meetings of the Board or committees of
the Board, and for other services by Directors to the Corporation or any of its
subsidiaries.
22. Bylaws. The Board may adopt bylaws, that are not inconsistent with the
Articles of Incorporation or these Regulations, for the conduct of meetings and
the oversight of the management of the business and affairs of the Corporation.
NOTICES
23. Generally. Except as otherwise provided by law, these Regulations or
the Articles of Incorporation, whenever by law or under the provisions of these
Regulations or the Articles of Incorporation notice is required to be given to
any Director or Shareholder, it will not be construed to require personal
notice, but such notice may be given in writing, by mail, addressed to such
Director or Shareholder, at the address of such Director or Shareholder as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice will be deemed to be given at the time when the same is deposited in
the United States mail. Notices to Directors may also be given by overnight
courier service, telephone, telecopier, or similar medium of communication or as
otherwise may be permitted by these Regulations.
24. Waivers. Whenever any notice is required to be given by law or under
the provisions of these Regulations or the Articles of Incorporation, a waiver
thereof in writing, signed by the person or persons
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entitled to such notice, whether before or after the time of the event for which
notice is to be given, will be deemed equivalent to such notice. Attendance of a
person at a meeting will constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
OFFICERS
25. Number and Term of Office. The Corporation shall have a Chief Executive
Officer, a President, a Treasurer, and a Secretary, and may have a Chief
Operating Officer, one or more Vice Presidents, one or more of whom may be
designated as Executive or Senior Vice Presidents or by similar titles, and such
other Officers or agents, subordinate to the Chief Executive Officer and the
President, with such titles as the Board may from time to time determine, each
to have such authority, functions, or duties as in these Regulations provided or
as the Board may from time to time determine, and, except as provided in
Regulation 26, each to hold office for such term as may be prescribed by the
Board and until such his or her successor shall have been chosen and shall
qualify or until his or her death, retirement, resignation, or removal as
provided in Regulation 30. Subject to the provisions of Regulation 26, one
person may hold and perform the duties of any two or more of offices but no
Officer shall execute, acknowledge, or verify any instrument in more than one
capacity if the instrument is required by law, the Articles of Incorporation, or
these Regulations to be executed, acknowledged, or verified by two or more
Officers.
26. Division of Responsibilities between Chairman of the Board and Chief
Executive Officer and President and Chief Operating Officer. These regulations
contemplate that (a) Ashkettle will be Chairman of the Board and Chief Executive
Officer of the Corporation from the Effective Time through December 31, 2001 and
will remain as Chairman of the Board through the 2004 Annual Meeting Date and
(b) Waltermire will be President and Chief Operating Officer of the Corporation
through December 31, 2001 and will become Chief Executive Officer of the
Corporation on January 1, 2002 and will remain as President, Chief Executive
Officer, and Chief Operating Officer through the 2004 Annual Meeting Date. For
as long as Ashkettle and Waltermire remain in those positions, the respective
duties and responsibilities of the Chairman of the Board, Chief Executive
Officer, President and Chief Operating Officer shall be as set forth in the
Duties and Responsibilities Chart attached to these Regulations as Annex A and
incorporated herein by this reference. No action shall be taken by the Board to
modify, amend, or fail to honor the terms of the Duties and Responsibilities
Chart, or of any employment agreements presently or hereafter in effect between
the Corporation and Ashkettle or Waltermire, during their respective terms
except on the affirmative vote of three-quarters of the Whole Board.
27. Chief Executive Officer, President, and Chief Operating Officer Through
December 31, 2001. At the Effective Time, Ashkettle shall become Chief Executive
Officer of the Corporation and, subject to his earlier death, retirement,
resignation, or removal pursuant to Regulation 30, Ashkettle shall remain as
Chief Executive Officer through December 31, 2001. At the Effective Time,
Waltermire shall become the President and Chief Operating Officer of the
Corporation and, subject to his earlier death, retirement, resignation, or
removal pursuant to Regulation 30, Waltermire shall remain President and Chief
Operating Officer through December 31, 2001. During such portion of the period
commencing at the Effective Time and ending on December 31, 2001 that Ashkettle
remains as Chief Executive Officer and Waltermire remains as President and Chief
Operating Officer, the duties, authorities, responsibilities, and reporting
relationships of each of them shall be as provided in the Duties and
Responsibilities Chart. If at any time before December 31, 2001 Ashkettle ceases
for any reason to be Chief Executive Officer of the Corporation and, at that
time, Waltermire is serving as President and Chief Operating Officer, Waltermire
shall thereupon and without further action by the Board become Chief Executive
Officer of the Corporation.
28. Chief Executive Officer, President, and Chief Operating Officer from
not later than January 1, 2002. Effective January 1, 2002 or on such earlier
date, if any, on which Ashkettle ceases to be Chief Executive Officer,
Waltermire shall become Chief Executive Officer of the Corporation and he shall
hold that title and position through the 2004 Annual Meeting Date and thereafter
until his successor is elected, subject to his
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earlier death, retirement, resignation, or removal pursuant to Regulation 30. At
any time before the 2004 Annual Meeting Date during which (a) Waltermire is
Chief Executive Officer, President, and Chief Operating Officer and (b)
Ashkettle is Chairman of the Board, their respective duties (Waltermire as Chief
Executive Officer, President, and Chief Operating Officer and Ashkettle as
Chairman of the Board), shall be as provided in the Duties and Responsibilities
Chart.
29. Authority and Duties of Officers. Subject to the provisions of
Regulations 26, 27 and 28, the Officers of the Corporation shall have such
authority and shall perform such duties as are customarily incident to their
respective offices, or as may be determined by the Board, regardless of whether
such authority and duties are customarily incident to such offices.
30. Removal. Except as provided in the last sentence of this Regulation 30,
any Officer may at any time be removed, either with or without cause, by the
Board or any authorized committee thereof, or, except in the case of any Officer
elected by the Board or an authorized committee thereof, by any superior Officer
upon whom such power may be conferred by the Board or any authorized committee
thereof, in any case without prejudice to the contract rights, if any, of such
Officer. Notwithstanding the foregoing, through the 2004 Annual Meeting Date,
the Board shall not remove either Ashkettle or Waltermire from any position held
by them as contemplated by the Duties and Responsibilities Chart except by the
affirmative vote of three-quarters of the Whole Board (excluding any employees
of the Corporation serving on the Board of Directors), and in any case without
prejudice to the contract rights of either of them.
31. Resignation. Any Officer may resign at any time by giving notice to the
Board, the Chief Executive Officer, the President, or the Secretary of the
Corporation. Any such resignation shall take effect at the date of receipt of
such notice or at any later date specified therein and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
32. Vacancies. Except as provided in Regulation 27 with respect to a
vacancy in the office of Chief Executive Officer, a vacancy in any office
because of death, retirement, resignation, removal, or any other cause may be
filled in the manner prescribed in these Regulations for election to such
office.
33. Compensation. Subject to the respective contractual rights of Ashkettle
and Waltermire under any employment agreements presently or hereafter in effect
between either of them and the Corporation, the compensation of the Chief
Executive Officer, President, Chief Operating Officer, and agents of the
Corporation who are also Directors of the Corporation will be fixed by the Board
or a committee of the Board delegated that responsibility by the Board. The
Board may fix, or delegate the power to fix, the compensation of other Officers
to a committee of the Board or an Officer of the Corporation.
INDEMNIFICATION
34. Actions by Others. The Corporation (1) shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he or she is or was a Director or an
Officer of the Corporation and (2) except as otherwise required by Regulation
36, may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he or she is
or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, Officer, employee, agent of, or
participant in another corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit, or proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he
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or she reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
35. Actions by or in the Right of the Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a Director or Officer of the Corporation, and the Corporation may
indemnify any person who was or is a party or is threatened to made a party to
any threatened, pending, or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was an employee or agent of the Corporation or is or was serving at
the request of the Corporation as a Director, Officer, employee, agent of, or
participant in another corporation, partnership, joint venture, trust, or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that the court of common pleas or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court of common pleas or such other court shall deem proper.
36. Successful Defense. To the extent that a person who is or was a
Director, Officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit, or proceeding referred
to in Regulations 34 or 35, or in defense of any claim, issue, or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
37. Successful Defense. To the extent that a person who is or was a
Director, Officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit, or proceeding referred
to in Regulations 34 or 35, or in defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
38. Specific Authorization. To obtain indemnification under Regulations 34
through 46 (the "Indemnification Regulations"), a claimant shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to the claimant and is reasonably
necessary to determine whether and to what extent the claimant is entitled to
indemnification. Any indemnification under Regulations 34 or 35 (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the Director, Officer,
employee or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in said Regulations 34 and 35. Such
determination shall be made by (a) the Shareholders, (b) the Board by a majority
vote of a quorum consisting of Disinterested Directors, or (c) (1) even if such
quorum is not obtainable, if a quorum of Disinterested Directors so directs or
(2) if a Change of Control shall have occurred, by an Independent Counsel in a
written opinion, which Independent Counsel shall be selected by a majority vote
of a quorum of Disinterested Directors or, if a Change of Control shall have
occurred, by the claimant. If it is so determined that the claimant is entitled
to indemnification, payment to the claimant shall be made within 10 days after
such determination.
39. Suit Against Corporation. If a claim under the Indemnification
Regulations is not paid in full by the Corporation within 30 days after a
written claim pursuant to Regulation 38 has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not
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met the standard of conduct which makes it permissible under the Ohio General
Corporation Law or the Indemnification Regulations for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board, Independent Counsel or Shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Ohio General Corporation Law or
the Indemnification Regulations, nor an actual determination by the Corporation
(including its Board, Independent Counsel or Shareholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
40. Corporation Bound. If a determination shall have been made pursuant to
Regulation 38 that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to Regulation 39.
41. Preclusion. The Corporation shall be precluded from asserting in any
judicial proceeding commenced pursuant to Regulation 39 that the procedures and
presumptions of the Indemnification Regulations are not valid, binding, and
enforceable and shall stipulate in such proceeding that the Corporation is bound
by all the provisions of the Indemnification Regulations.
42. Right of Indemnity not Exclusive. The indemnification and advancement
of expenses provided by the Indemnification Regulations shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Regulation, agreement, vote of Shareholders or disinterested
Directors, or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a Director, Officer, employee or agent and
shall inure to the benefit of the heirs, executors, and administrators of such a
person.
43. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, Officer, employee, or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, Officer, employee, or agent of or participant in another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability under the
provisions of the Indemnification Regulations, Section 1701.13(E) of the Ohio
General Corporation Law or otherwise.
44. Invalidity of any Provisions of this Article. The invalidity or
unenforceability of any provision of the Indemnification Regulations shall not
affect the validity or enforceability of the remaining provisions of the
Indemnification Regulations, and, to the fullest extent possible, such
provisions of the Indemnification Regulations (including, without limitation,
each such portion of any of the Indemnification Regulations containing any such
provision held to be invalid, illegal, or unenforceable) shall be construed so
as to give effect to the intent manifested by the provision held invalid,
illegal, or unenforceable.
45. Definitions. For purposes of the Indemnification Regulations:
(A) "Change of Control" means:
(1) the acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of voting
securities of the Corporation where such acquisition causes such Person
to own 20% or more of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote generally in the
election of Directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this paragraph (1), the
following acquisitions shall not be deemed to result in a Change of
Control: (i) any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation, or (iv)
any acquisition by any corporation pursuant to a transaction that
complies with clauses (i), (ii), and (iii) of paragraph (3) below;
provided, further, that if any Person's beneficial ownership of the
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Outstanding Corporation Voting Securities reaches or exceeds 20% as a
result of a transaction described in clause (i) or (ii) above, and such
Person subsequently acquires beneficial ownership of additional voting
securities of the Corporation, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20% or more of
the Outstanding Corporation Voting Securities; and provided, further,
that if at least a majority of the members of the Incumbent Board (as
defined below) determines in good faith that a Person has acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of the Outstanding Corporation Voting
Securities inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares so that such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) less than 20% of the Outstanding Corporation Voting
Securities, then no Change of Control shall have occurred as a result of
such Person's acquisition; or
(2) Individuals who, as of the Effective Time, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
Director subsequent to the Effective Time, whose election, or nomination
for election by the Corporation's Shareholders, was approved by a vote
of at least a majority of the Directors then comprising the Incumbent
Board shall be considered a member of the Incumbent Board, except that,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of Directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be considered a member of the
Incumbent Board; or
(3) the consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of the Corporation or the acquisition of assets of another corporation
("Business Combination"); excluding, however, such a Business
Combination pursuant to which (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding common shares and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of Directors, as the case may be, of
the Corporation resulting from such Business Combination (including,
without limitation, a corporation that as a result of such transaction
owns the Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Corporation Voting
Securities, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding common shares of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination, and (iii) at least a majority of the members
of the board of Directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(4) approval by the Shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
(B) "Disinterested Director" means a Director of the Corporation who
is not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
(C) "Independent Counsel" means a law firm, a member of a law firm, or
an independent practitioner, experienced in matters of corporation law that
or who, under the applicable standards of professional conduct then
prevailing, would not have a conflict of interest in representing either
the
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Corporation or the claimant in an action to determine the claimant's rights
under the Indemnification Regulations.
46. Notice. Any notice, request, or other communication required or
permitted to be given to the Corporation under the Indemnification Regulations
shall be in writing and either delivered in person or sent by telecopy, telex,
telegram, overnight mail, or courier service, or certified or registered mail,
postage prepaid, return receipt requested to the Secretary of the Corporation
and shall be effective only upon receipt by the Secretary.
SHARES
47. Certificates. The shares of stock of the Corporation will be
represented by certificates, provided that the Board may provide by resolution
or resolutions that some or all of any or all classes or series of its shares
shall be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board,
every holder of shares represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of, the Corporation by the Chairman of the Board, or the President
or a Vice President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
and class of shares registered in certificate form. Any or all of the signatures
on the certificate may be a facsimile. In case any Officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be such Officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or it were such Officer, transfer agent, or registrar at
the date of issue.
48. Classes of Shares. The designations, preferences, and relative
participating, optional or other special rights of the various classes of shares
or series thereof, and the qualifications, limitations, or restrictions thereof,
will be set forth in full or summarized on the face or back of the certificates
which the Corporation issues to represent its shares or, in lieu thereof, such
certificates will set forth the office of the Corporation from which the holders
of certificates may obtain a copy of such information.
49. Lost, Stolen or Destroyed Certificates. The Secretary may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon making of an affidavit of that fact, satisfactory to
the Secretary, by the person claiming the share certificate to be lost, stolen
or destroyed. As a condition precedent to the issuance of a new certificate or
certificates, the Secretary may require the owners of such lost, stolen, or
destroyed certificate or certificates to give the Corporation a bond in such sum
and with such surety or sureties as the Secretary may direct as indemnity
against any claims that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen, or destroyed or the issuance of
the new certificates.
50. Record Dates. (a) In order that the Corporation may determine the
Shareholders entitled to notice of or to vote at any meeting of Shareholders or
any adjournment thereof, the Board may fix a record date, which will not be more
than 60 calendar days before the date of such meeting. If no record date is
fixed by the Board, the record date for determining Shareholders entitled to
notice of or to vote at a meeting of Shareholders will be at the close of
business on the calendar day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the calendar day next
preceding the day on which the meeting is held. A determination of Shareholders
of record entitled to notice of or to vote at a meeting of the Shareholders will
apply to any adjournment of the meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the Shareholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the Shareholders entitled to exercise any rights in respect of any
change, conversion or exchange of shares, or for the purpose of any other lawful
action, the Board may fix a record date, which record date will not be more than
60 calendar days prior to such action.
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If no record date is fixed, the record date for determining Shareholders for any
such purpose will be at the close of business on the calendar day on which the
Board adopts the resolution relating thereto.
(c) The Corporation will be entitled to treat the person in whose name any
share is registered as the owner thereof for all purposes, and will not be bound
to recognize any equitable or other claim to, or interest in, such share on the
part of any other person, whether or not the Corporation has notice thereof,
except as expressly provided by applicable law.
GENERAL
51. Fiscal Year. The fiscal year of the Corporation will be the calendar
year or such other fiscal year as may be fixed from time to time by the Board.
52. Seal. The corporate seal shall have inscribed thereon the name of the
Corporation and the words "Corporate Seal, Ohio". The corporate seal of the
Corporation may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
53. Reliance Upon Books, Reports, and Records. Each Director, each member
of a committee designated by the Board, and each Officer of the Corporation
will, in the performance of his or her duties, be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports, or statements presented to the Corporation by any of the
Corporation's Officers or employees, or committees of the Board, or by any other
person or entity as to matters the Director, committee member, or Officer
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
54. Amendments. Except as otherwise provided by law or by the Articles of
Incorporation or these Regulations, these Regulations or any of them may be
amended in any respect or repealed at any time (i) by the Shareholders at a
meeting held for that purpose, provided notice of the proposed amendment or
repeal be contained in the notice of the meeting, by the affirmative vote of the
holders of shares entitling them to exercise two-thirds of the voting power of
the Corporation on the proposal or (ii) by the written consent of the holders of
shares entitling them to exercise two-thirds of the voting power of the
Corporation on the proposal. The provisions of this Regulation 54
notwithstanding , the Shareholders may not modify any of Regulations 10, 11, 12,
26, 27 and 28 while those provisions remain in effect pursuant to their terms
without the affirmative vote of the holders of shares entitling them to exercise
three-quarters of the voting power of the Corporation on the proposal or
three-quarters of the Whole Board, as the case may be.
14-F
<PAGE> 203
ANNEX A
DUTIES AND RESPONSIBILITIES CHART
Respective Duties and Responsibilities of
Chairman, Chief Executive Officer, President, and Chief Operating Officer
following the Effective Time
FIRST STAGE: From the Effective Time through December 31, 2001, Phillip D.
Ashkettle and Thomas A. Waltermire will be the two most senior executive officer
of the Corporation (assuming they both remain in the employ of the Corporation
through that time), and the titles, duties, and responsibilities of Chairman,
Chief Executive Officer, President, and Chief Operating Officer will be divided
between them, and their relationship will be, as set forth in parts I and II
below:
I. Ashkettle shall be Chairman of the Board and Chief Executive Officer.
<TABLE>
<S> <C> <C>
a. Accountable to the Board of Directors
b. Direct Reports
i. President/Chief Operating Officer (partnership role)
ii. Merger & Acquisition Function
iii. External Affairs (Industry, Political, Community)
iv. Corporate Secretary
v. Health, Safety, Environment & Quality
c. Principal Accountabilities
i. Drive growth of the portfolio via acquisitions, joint
ventures, and creative combinations
ii. Operates the company "incubator" for home grown new
businesses
iii. Represents the company before key industry and public
audiences
iv. Chairs and administers board functions
d. Shared Accountabilities (Shared between Ashkettle and Waltermire)
i. Establishment of the merger implementation process
ii. Represent the company with investors and analysts
iii. Board communications
iv. Recommendations re: selection of new board members
e. Supporting Roles (Waltermire primary responsiblities)
i. Vision communication
ii. In company networking and communication
iii. Organization effectiveness, cross business team sharing
iv. Contacts with key customers and suppliers
v. Development of customer/market-focused organization
</TABLE>
15-F
<PAGE> 204
II. Thomas A. Waltermire shall be President and Chief Operating Officer.
<TABLE>
<S> <C> <C>
a. Accountable to Chief Executive Officer and to Board of Directors
b. Direct Reports
i. Business Team Leaders
ii. Chief Financial Officer
iii. General Counsel
iv. Chief Information Officer
v. Chief Technology Officer
vi. Chief Human Resources Officer
c. Principal Accountabilities
i. Business performance
ii. Financial strategy
iii. Accelerated organic growth
iv. Organizational effectiveness, cross team sharing
v. In-company networking and communications
vi. Legal, regulatory and process compliance
vii. Merger implementation
viii. E-business strategies and relationships
d. Shared Accountabilities
i. Establishment of the merger implementation process
ii. Represent the company with investors and analysts
iii. Board communications
iv. Recommendations re selection of new board members
e. Supporting Roles (Ashkettle primary responsibilities)
i. Vice-chair of the Strategy Council
ii. Support the execution of the portfolio growth strategy
iii. Represent the company before key industry and public
audiences
</TABLE>
SECOND STAGE: Pursuant to actions taken by the Board of Directors in connection
with the consolidation, Waltermire will be named Chief Executive Officer
effective January 1, 2002, succeeding Ashkettle in that role, and Ashkettle will
continue thereafter as Chairman of the Board (with no other title) through the
date of PolyOne's annual meeting of shareholders held in 2004. For so long as
Waltermire is Chief Executive Officer and Ashkettle is Chairman of the Board,
Ashkettle's role as Chairman will involve external contacts for the company,
board leadership, and a supporting board level role in the areas for which he
was previously responsible.
THIRD STAGE: Ashkettle will retire as Board Chairman and from the Board of
Directors at PolyOne's annual meeting of shareholders in 2004.
16-F
<PAGE> 205
July__, 2000
To Our Stockholders:
You are cordially invited to attend the Special Meeting of Stockholders to be
held at The Forum Conference and Education Center, Erie Room, 1375 E. Ninth
Street, Cleveland, Ohio, at 10:00 a.m. on Tuesday, August 29, 2000.
The Notice of Special Meeting of Stockholders and the Joint Proxy
Statement/Prospectus describe the matters to be acted upon at the meeting. If we
complete the consolidation, Geon stockholders will receive two common shares of
PolyOne Corporation for each share of Geon common stock that they own.
Regardless of the number of shares you own, your vote on these matters is
important. Whether or not you plan to attend the meeting, we urge you to vote
over the internet, by telephone, or by marking your choices on the attached
proxy card and signing, dating, and returning it in the envelope provided. If
you decide to vote in person at the meeting, you will have an opportunity to
revoke your proxy and vote personally by ballot.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE BOX PROVIDED ON THE PROXY
CARD.
We look forward to seeing you at the meeting.
THOMAS A. WALTERMIRE
Chairman of the Board,
Chief Executive Officer
and President
--------------------------------------------------------------------------------
THE GEON COMPANY
PROXY
SPECIAL MEETING OF STOCKHOLDERS, AUGUST 29, 2000
This Proxy is Solicited on Behalf of the Corporation's Board of Directors
The undersigned hereby appoints Thomas A. Waltermire and Gregory L. Rutman,
and each of them jointly and severally, Proxies, with full power of
substitution, to vote, as designated on the reverse side, all shares of common
stock of The Geon Company held of record by the undersigned on July 17, 2000, at
the Special Meeting of Stockholders to be held on August 29, 2000, or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
AGREEMENT AND PLAN OF CONSOLIDATION AND "FOR" THE APPROVAL OF THE POLYONE 2000
STOCK INCENTIVE PLAN. The shares represented by this Proxy will be voted as
specified on the reverse side. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED ON
THE REVERSE SIDE, THIS PROXY WILL BE VOTED "FOR" THE ADOPTION OF THE AGREEMENT
AND PLAN OF CONSOLIDATION AND "FOR" THE APPROVAL OF THE 2000 STOCK INCENTIVE
PLAN.
(Continued and to be dated and signed on the reverse side.)
THE GEON COMPANY
P.O. BOX 11343
NEW YORK, N.Y. 10203-0343
<PAGE> 206
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GEON COMPANY
<S> <C> <C> <C>
TELEPHONE INTERNET MAIL
--------- -------- ----
1-800-648-2106 http://proxy.shareholder.com/gon
- Using any touch-tone telephone - Go to the website address listed - Mark, sign and date your
call the number listed above. above. proxy card.
- Have your Proxy Form in hand. OR - Have your Proxy Form in hand. OR - Detach your proxy card.
- Enter your Control Number - Enter your Control Number - Return your proxy card in the
located in the box below. located in the box below. postage-paid envelope provided.
- Follow the simple recorded - Follow the simple instructions.
instructions.
Your internet or telephone vote authorizes the named
proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card. If
you have submitted your proxy by the Internet or
telephone there is no need for you to mail back
your proxy card.
1-800-648-2106
CALL TOLL-FREE TO VOTE
-------------------------------------------
CONTROL NUMBER
FOR INTERNET/TELEPHONE VOTING
--------------------------------------------
</TABLE>
DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY THE INTERNET OR TELEPHONE
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1. Adoption of the Agreement FOR AGAINST ABSTAIN In their discretion, the Proxies
and Plan of Consolidation [ ] [ ] [ ] are authorized to vote upon such
other business as may properly come
2. Approval of the PolyOne FOR AGAINST ABSTAIN before the meeting or any
2000 Stock Incentive Plan [ ] [ ] [ ] adjournment thereof and matters
incident to the conduct of the meeting.
I Will Attend [ ]
the Meeting
Change of [ ]
Address and/or
Comments Mark Here
NOTE: Please sign exactly as
the name appears on this card.
Joint owners should each sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer and affix
corporate seal. If a
partnership, please sign in
partnership name by general
partner.
Dated: , 2000
----------------
--------------------------- (SEAL)
Signature(s)
--------------------------- (SEAL)
Signature if held jointly
</TABLE>
PLEASE DETACH HERE Votes MUST be indicated
YOU MUST DETACH THIS PORTION OF THE PROXY CARD (x) in Black or Blue
BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE ink [X]
Please mark, sign, date and return this proxy
card promptly using the enclosed envelope.
<PAGE> 207
July __, 2000
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders to be held
at The Forum Conference and Education Center, Erie Room, 1375 E. Ninth Street,
Cleveland, Ohio, at 11:00 a.m. on Tuesday, August 29, 2000.
The Notice of Special Meeting of Stockholders and the Joint Proxy
Statement/Prospectus describe the matters to be acted upon at the meeting. If we
complete the consolidation, Hanna stockholders will receive one common share of
PolyOne for each share of Hanna common stock that they own.
Regardless of the number of shares you own, your vote on these matters is
important. Whether or not you plan to attend the meeting, we urge you to vote
through the internet, by telephone, or by marking your choices on the attached
proxy card and signing, dating, and returning it in the envelope provided. If
you decide to vote in person at the meeting, you will have an opportunity to
revoke your proxy and vote personally by ballot.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE BOX PROVIDED ON THE PROXY
CARD.
We look forward to seeing you at the meeting.
PHILLIP D. ASHKETTLE
Chairman and
Chief Executive Officer
Detach Proxy Card Here
--------------------------------------------------------------------------------
[X] Please mark your vote as in this example.
This proxy when properly executed will be voted in the manner directed. If
no direction is made, this proxy will be voted FOR proposals 1 and 2.
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1. Adoption of the Agreement FOR AGAINST ABSTAIN In their discretion, the Proxies
and Plan of Consolidation [ ] [ ] [ ] are authorized to vote upon such
other business as may properly come
2. Approval of the PolyOne FOR AGAINST ABSTAIN before the meeting or any
2000 Stock Incentive Plan [ ] [ ] [ ] adjournment and matters incident to
the conduct of the meeting.
I will attend [ ]
the meeting
Change of [ ]
Address
The signer hereby revokes all proxies previously given by the
signer to vote at the meeting or any adjournments.
NOTE: Please sign exactly as
your name appears on this card.
Joint owners should each sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by general
partner.
DATE: , 2000
----------------
---------------------------
SIGNATURE(S)
</TABLE>
FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL
<PAGE> 208
--------------------------------------------------------------------------------
M.A. HANNA COMPANY
Suite 36-500, 200 Public Square
Cleveland, Ohio 44114-2304
SPECIAL MEETING OF STOCKHOLDERS, AUGUST 29, 2000
This Proxy is Solicited on Behalf of the Corporation's Board of Directors
The undersigned hereby appoints Phillip D. Ashkettle and John S. Pyke, Jr.,
and each of them jointly and severally, Proxies, with full power of
substitution, to vote, as designated on the reverse side, all shares of Common
Stock of M.A. Hanna Company held of record by the undersigned on July 14, 2000,
at the Special Meeting of Stockholders to be held on August 29, 2000, or any
adjournment of the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" FOR THE ADOPTION OF THE
AGREEMENT AND PLAN OF CONSOLIDATION AND "FOR" THE APPROVAL OF THE POLYONE 2000
STOCK INCENTIVE PLAN. The shares represented by this Proxy will be voted as
specified on the reverse side. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED ON
THE REVERSE SIDE, THIS PROXY WILL BE VOTED "FOR" THE ADOPTION OF THE AGREEMENT
AND PLAN OF CONSOLIDATION AND "FOR" THE APPROVAL OF THE 2000 STOCK INCENTIVE
PLAN.
(Continued and to be dated and signed on the reverse side.)
--------------------------------------------------------------------------------
VOTE BY INTERNET OR THE TELEPHONE
QUICK - EASY - IMMEDIATE
M.A. Hanna Company encourages you to take advantage of two new cost-effective
and convenient ways to vote your shares.
You may not vote your proxy 24 hours a day, 7 days a week, using either a
touch-tone telephone or through the Internet.
Your Internet or telephone vote authorizes the proxies named on the above proxy
card to vote your shares in the same manner as if you marked, signed and
returned your proxy card.
VOTE THROUGH
THE INTERNET: -Read the accompanying Joint Proxy Statement/Prospectus.
-Have your voter control number printed in the box
above just below the perforation available.
-Log on to http://www.eproxyvote.com/mah
-Follow the instructions and cast your vote.
OR
VOTE BY PHONE: -Read the accompanying Joint Proxy Statement/Prospectus.
-Have your voter control number printed in the box above
just below the perforation available.
-Using a touch-tone phone, call the toll-free number
1-877-779-8683.
-Follow the recorded instructions to cast your vote.
OR
VOTE BY MAIL: Mark, sign and date your proxy card and return it
in the postage-paid envelope.
IF YOU ARE VOTING BY TELEPHONE OR THROUGH THE INTERNET,
PLEASE DO NOT MAIL YOUR PROXY CARD.
<PAGE> 209
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
PolyOne will be an Ohio corporation. Section 1701.13 of Ohio law contains
detailed provisions on indemnification of directors and officers of an Ohio
corporation against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative.
Article Sixth of PolyOne's articles will, at the consummation of the
consolidation, provide for indemnification of directors and officers. The
provision provides that a director of PolyOne will not be personally liable to
PolyOne or its shareholders for monetary damages for breach of fiduciary duty as
a director, except to the extent that an exemption from liability or limitation
is not permitted under Ohio law, as that law exists or may hereafter be amended.
Article Sixth provides that any director or officer will, to the fullest extent
permitted by Ohio law, be indemnified except as may be otherwise provided in the
PolyOne regulations.
Regulations 34 - 46 of PolyOne's regulations will, at the consummation of
the consolidation, provide for indemnification of directors and officers, in
substantially the same manner as that provided by Ohio law.
Geon and Hanna are Delaware corporations. Section 145 of Delaware law
contains detailed provisions on indemnification of directors and officers of a
Delaware corporation against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative.
Article Seventh of Geon's certificate provides for indemnification of
directors and officers. The provision states that a director of Geon shall not
be personally liable to Geon or its shareholders for monetary damages for breach
of fiduciary duty as a director, except to the extent that such exemption from
liability or limitation thereof is not permitted under Delaware law, as that law
exists or may hereafter be amended. Such Article Seventh, also provides that any
director or officer, shall to the fullest extent permitted by Delaware law, be
indemnified, except as may be otherwise provided in the Geon's by-laws.
Article Thirteenth of Hanna's certificate provides for indemnification of
directors. The provision states that to the fullest extent permitted by Delaware
law or any other applicable laws, as presently or hereafter in effect, no
director shall be personally liable to Hanna or its stockholders for or with
respect to any acts or omissions in the performance of his or her duties as a
director of Hanna. Article Fourteenth of Hanna's certificate provides for
indemnification of each person who is or was or had agreed to become a director
or officer of Hanna, or each such person who is or was serving or had agreed to
serve at the request of Hanna's board or an officer of Hanna as an employee or
agent of Hanna or as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of such person) to the fullest
extent permitted by Delaware law or any other applicable laws.
Following shareholder approval of a form of indemnification agreement in
1987, Hanna entered into indemnification agreements with all of its directors
except Mr. Eyton and all of its executive officers to specify the extent to
which indemnitees may receive indemnification under circumstances in which
indemnity may not otherwise be provided under Delaware law. Under the
indemnification agreement, an indemnitee will be entitled to indemnification as
provided by section 145 of Delaware law and to indemnification for any amount
which the indemnitee is or becomes legally obligated to pay relating to or
arising out of any claim made against such person because of an act, a failure
to act or neglect or breach of duty, including any actual or alleged error,
misstatement or misleading statement, which such person commits, suffers,
permits or acquiesces in while acting in the indemnitee's position within Hanna.
The indemnification agreements provide specific procedures for securing
indemnification and Hanna is required to make payments in connection with
II-1
<PAGE> 210
any claim against the indemnitee only to the extent expressly provided by law.
Hanna's by-laws do not contain a provision on indemnification.
Article V of Geon's by-laws provides for indemnification of (1) directors,
officers, and employees or agents of Geon serving at the request of the board of
directors or an officer; and (2) directors, officers, employees or agents of
another corporation, partnership, joint venture, trust or other enterprise,
serving at the request of the board of directors or an officer of Geon, in any
actions by others and in any actions by or in the right of Geon, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of Geon.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<C> <S>
2.1 Agreement and Plan of Consolidation, dated as of May 7,
2000, by and between M.A. Hanna Company and The Geon
Company, included as Annex A in the Joint Proxy Statement/
Prospectus included as part of this Registration Statement.
3.1 Form of Articles of Incorporation of PolyOne, included as
Annex E to the Joint Proxy Statement/Prospectus included as
part of this Registration Statement.
3.2 Form of Regulations of PolyOne, included as Annex F to the
Joint Proxy Statement/Prospectus included as part of this
Registration Statement.
4.1+ Amendment No. 1 to Rights Agreement dated May 7, 2000, by
and between Geon and The Bank of New York as Rights Agent.
4.2+ Amendment No. 1 to Rights Agreement dated as of May 7, 2000,
by and between Hanna and First Chicago Trust Company of New
York.
5.1 Opinion of Thompson Hine & Flory LLP as to the legality of
the shares being issued.
8.1 Opinion of Thompson Hine & Flory LLP as to certain tax
matters.
8.2 Opinion of Jones Day Reavis & Pogue as to certain tax
matters.
10.1 PolyOne 2000 Stock Incentive Plan, included as Annex D to
the Joint Proxy Statement/Prospectus included as part of
this Registration Statement.
23.1 Consent of Ernst & Young LLP relating to the audited
financial statements of Geon.
23.2 Consent of PricewaterhouseCoopers LLP relating to the
audited financial statements of Hanna.
23.3 Consent of Arthur Andersen LLP relating to the audited
financial statements of OxyVinyls, LP.
23.4 Consent of Arthur Andersen LLP relating to the audited
financial statements of OxyChem Transferred Businesses.
23.5 Consent of Yount, Hyde & Barbour P.C. relating to the
audited financial statements of O'Sullivan Corporation.
23.6 Consent of Ernst & Young LLP relating to the audited balance
sheet of Consolidation Corp.
23.7 Consent of Thompson Hine & Flory LLP (included in Exhibits
5.1 and 8.1).
23.8 Consent of Jones Day Reavis & Pogue (included in Exhibit
8.2).
24.1+ Power of Attorney of Directors and Officers of Geon.
24.2+ Power of Attorney of Directors and Officers of Hanna.
99.1+ Consent of McDonald Investments, a KeyCorp company.
</TABLE>
II-2
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<C> <S>
99.2+ Consent of Salomon Smith Barney Inc.
</TABLE>
---------------
+ Previously filed.
(b) Not applicable.
(c) The opinions of McDonald Investments, a KeyCorp company, and Salomon
Smith Barney Inc., are included as Annex B and Annex C, respectively,
to the Joint Proxy Statement/Prospectus included as part of this
Registration Statement.
ITEM 22. UNDERTAKINGS.
Each undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of each
of the Registrants' annual reports pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(g)(1) Each undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(g)(2) Each undersigned Registrant hereby undertakes that every prospectus:
(i) that is filed pursuant to paragraph 1 immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment
II-3
<PAGE> 212
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each registrant pursuant to the foregoing provisions, or otherwise, each
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer or controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
Each undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
Each undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a consolidation, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE> 213
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Geon has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on July 26, 2000.
The Geon Company
(Registrant)
By: /s/ GREGORY L. RUTMAN
------------------------------------
Name: Gregory L. Rutman
Title: Vice President, Chief
Legal Officer and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas A. Waltermire* Chairman of the Board, President, July 26, 2000
------------------------------------------------ Chief Executive Officer, and
Thomas A. Waltermire Director
/s/ W. David Wilson* Vice President and Chief Financial July 26, 2000
------------------------------------------------ Officer (Principal Financial
W. David Wilson Officer)
/s/ Gregory P. Smith* Controller (Principal Accounting July 26, 2000
------------------------------------------------ Officer)
Gregory P. Smith
/s/ James K. Baker* Director July 26, 2000
------------------------------------------------
James K. Baker
/s/ Gale Duff-Bloom* Director July 26, 2000
------------------------------------------------
Gale Duff-Bloom
/s/ J. Douglas Campbell* Director July 26, 2000
------------------------------------------------
J. Douglas Campbell
/s/ D. Larry Moore* Director July 26, 2000
------------------------------------------------
D. Larry Moore
/s/ R. Geoffrey P. Styles* Director July 26, 2000
------------------------------------------------
R. Geoffrey P. Styles
/s/ Farah M. Walters* Director July 26, 2000
------------------------------------------------
Farah M. Walters
* By /s/ Gregory L. Rutman
------------------------------------------------
Gregory L. Rutman, attorney-in-fact
</TABLE>
II-5
<PAGE> 214
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hanna has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on July 26, 2000.
M.A. Hanna Company
(Registrant)
By: /s/ JOHN S. PYKE, JR.
------------------------------------
Name: John S. Pyke, Jr.
Title: Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ P. D. Ashkettle* Chairman, Chief Executive Officer July 26, 2000
------------------------------------------------ (Principal Executive Officer), and
P. D. Ashkettle Director
/s/ M. S. Duffey* Senior Vice President Finance and July 26, 2000
------------------------------------------------ Administration (Principal Financial
M. S. Duffey Officer)
/s/ T. E. Lindsey* Controller (Principal Accounting July 26, 2000
------------------------------------------------ Officer)
T. E. Lindsey
/s/ C. A. Cartwright* Director July 26, 2000
------------------------------------------------
C. A. Cartwright
/s/ W. R. Embry* Director July 26, 2000
------------------------------------------------
W. R. Embry
/s/ J. T. Eyton* Director July 26, 2000
------------------------------------------------
J. T. Eyton
/s/ R. A. Garda* Director July 26, 2000
------------------------------------------------
R. A. Garda
Director July 26, 2000
------------------------------------------------
G. D. Harnett
/s/ D. H. Hoag* Director July 26, 2000
------------------------------------------------
D. H. Hoag
Director July 26, 2000
------------------------------------------------
G. D. Kirkham
</TABLE>
II-6
<PAGE> 215
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ D. B. Lewis* Director July 26, 2000
------------------------------------------------
D. B. Lewis
/s/ M. L. Mann* Director July 26, 2000
------------------------------------------------
M. L. Mann
/s/ M. D. Walker* Director July 26, 2000
------------------------------------------------
M. D. Walker
*By /s/ John S. Pyke, Jr.
------------------------------------------------
John S. Pyke, Jr., attorney-in-fact
</TABLE>
II-7
<PAGE> 216
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Consolidation
Corp. has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Cleveland, State of
Ohio, on July 26, 2000.
Consolidation Corp.
(Registrant)
By: /s/ Gregory L. Rutman
------------------------------------
Name: Gregory L. Rutman
Title: Secretary and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gregory L. Rutman Secretary, Assistant Treasurer, and July 26, 2000
------------------------------------------------ Director
Gregory L. Rutman
/s/ John S. Pyke, Jr. Assistant Secretary, Assistant July 26, 2000
------------------------------------------------ Treasurer, and Director
John S. Pyke, Jr.
/s/ W. David Wilson President and Treasurer July 26, 2000
------------------------------------------------ (Principal Executive, Financial and
W. David Wilson Accounting Officer)
</TABLE>
II-8
<PAGE> 217
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<C> <S>
2.1 Agreement and Plan of Consolidation, dated as of May 7,
2000, by and between M.A. Hanna Company and The Geon
Company, included as Annex A in the Joint Proxy Statement/
Prospectus included as part of this Registration Statement.
3.1 Form of Articles of Incorporation of PolyOne, included as
Annex E to the Joint Proxy Statement/Prospectus included as
part of this Registration Statement.
3.2 Form of Regulations of PolyOne, included as Annex F to the
Joint Proxy Statement/Prospectus included as part of this
Registration Statement.
4.1+ Amendment No. 1 to Rights Agreement dated May 7, 2000, by
and between Geon and The Bank of New York as Rights Agent.
4.2+ Amendment No. 1 to Rights Agreement dated as of May 7, 2000,
by and between Hanna and First Chicago Trust Company of New
York.
5.1 Opinion of Thompson Hine & Flory LLP as to the legality of
the shares being issued.
8.1 Opinion of Thompson Hine & Flory LLP as to certain tax
matters.
8.2 Opinion of Jones Day Reavis & Pogue as to certain tax
matters.
10.1 PolyOne 2000 Stock Incentive Plan, included as Annex D to
the Joint Proxy Statement/Prospectus included as part of
this Registration Statement.
23.1 Consent of Ernst & Young LLP relating to the audited
financial statements of Geon.
23.2 Consent of PricewaterhouseCoopers LLP relating to the
audited financial statements of Hanna.
23.3 Consent of Arthur Andersen LLP relating to the audited
financial statements of OxyVinyls, LP.
23.4 Consent of Arthur Andersen LLP relating to the audited
financial statements of OxyChem Transferred Businesses.
23.5 Consent of Yount, Hyde & Barbour P.C. relating to the
audited financial statements of O'Sullivan Corporation.
23.6 Consent of Ernst & Young LLP relating to the audited balance
sheet of Consolidation Corp.
23.7 Consent of Thompson Hine & Flory LLP (included in Exhibits
5.1 and 8.1).
23.8 Consent of Jones Day Reavis & Pogue (included in Exhibit
8.2).
24.1+ Powers of Attorney of Directors and Officers of Geon.
24.2+ Powers of Attorney of Directors and Officers of Hanna.
99.1+ Consent of McDonald Investments, a KeyCorp company.
99.2+ Consent of Salomon Smith Barney Inc.
</TABLE>
---------------
+ Previously filed.
II-9
