<PAGE> 1
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- --------------------------------------------------------------------------------
FORM 10-Q
----------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1998. COMMISSION FILE NUMBER 1-11804
THE GEON COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 34-1730488
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Geon Center, Avon Lake, Ohio 44012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (440) 930-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
As of July 31, 1998 there were 23,300,748 shares of common stock outstanding.
There is only one class of common stock.
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<PAGE> 2
Part I. Financial Information
Item 1. Financial Statements
THE GEON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Sales $ 330.7 $ 333.0 $ 655.2 $ 634.0
Operating costs and expenses:
Cost of sales 285.3 278.4 568.7 546.8
Selling and administrative 17.6 12.4 34.6 23.7
Depreciation and amortization 15.4 12.7 29.9 26.2
Employee separation -- 15.0 -- 15.0
-------- -------- ------- -------
Operating income 12.4 14.5 22.0 22.3
Interest expense (3.8) (2.4) (7.6) (5.6)
Interest income .3 .2 .9 .2
Other income (expense), net (.7) (1.9) 2.7 (2.9)
-------- -------- ------- -------
Income before income taxes 8.2 10.4 18.0 14.0
Income tax expense (3.4) (4.3) (7.4) (5.6)
-------- -------- ------- -------
Net income $ 4.8 $ 6.1 $ 10.6 $ 8.4
======== ======== ======= =======
Earnings per share of common stock:
Basic $ .21 $ .27 $ .46 $ .37
Diluted $ .20 $ .26 $ .45 $ .36
Number of shares used to compute earnings per share:
Basic 22.9 23.0 22.9 23.0
Diluted 23.6 23.7 23.6 23.6
Dividends paid per share of common stock
$ .125 $ .125 $ .25 $ .25
</TABLE>
<PAGE> 3
THE GEON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
June 30,
1998 December 31,
ASSETS (Unaudited) 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21.1 $ 49.1
Accounts receivable, net 98.5 110.8
Inventories 123.3 122.4
Deferred income taxes 17.4 20.7
Prepaid expenses 6.9 10.5
------------ ------------
Total current assets 267.2 313.5
Property, net 456.1 456.6
Deferred charges and other assets 125.6 102.8
------------ ------------
Total assets $ 848.9 $ 872.9
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank debt $ 77.5 $ 90.4
Accounts payable 147.3 159.1
Accrued expenses 60.2 63.3
Current portion of long-term debt .8 .8
------------ ------------
Total current liabilities 285.8 313.6
Long-term debt 136.1 136.4
Deferred income taxes 32.9 35.8
Postretirement benefits other than pensions 85.6 86.2
Other non-current liabilities 80.3 77.1
------------ ------------
Total liabilities 620.7 649.1
Stockholders' equity:
Preferred stock, 10.0 shares authorized, no shares issued -- --
Common stock, $.10 par, authorized 100.0 shares;
issued 28.0 shares in 1998 and 27.9 in 1997 2.8 2.8
Other stockholders' equity 225.4 221.0
------------ ------------
Total stockholders' equity 228.2 223.8
------------ ------------
Total liabilities and stockholders' equity $ 848.9 $ 872.9
============ ============
</TABLE>
<PAGE> 4
THE GEON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Six Months Ended,
June 30,
--------------------------
1998 1997
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10.6 $ 8.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Employee separation -- 15.0
Depreciation and amortization 29.9 26.2
Provision for deferred income taxes .7 1.0
Change in assets and liabilities:
Accounts receivable 27.3 (17.7)
Inventories 9.4 (3.6)
Accounts payable (19.8) 19.0
Accrued expenses and other (5.0) 9.0
------------ ------------
Net cash provided by operating activities 53.1 57.3
INVESTING ACTIVITIES
Business acquisitions, net of cash acquired (39.6) --
Purchases of property (16.0) (16.2)
Investment in and advances to equity affiliates (6.7) (34.9)
------------ ------------
NET CASH (USED) PROVIDED BY OPERATING AND INVESTING ACTIVITIES (9.2) 6.2
FINANCING ACTIVITIES
(Decrease) increase in short-term debt (12.9) 30.9
Repayment of long-term debt (.3) (.3)
Dividends (5.8) (5.8)
Repurchase of common stock -- (4.1)
Proceeds from issuance of common stock .1 --
------------ ------------
Net cash (used) provided by financing activities (18.9) 20.7
EFFECT OF EXCHANGE RATE CHANGES ON CASH .1 .2
------------ ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (28.0) 27.1
CASH AND CASH EQUIVALENTS AT JANUARY 1 49.1 17.9
------------ ------------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 21.1 $ 45.0
============ ============
</TABLE>
<PAGE> 5
THE GEON COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
(DOLLARS IN MILLIONS, SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
SHARE ADDITIONAL
COMMON HELD IN COMMON PAID-IN RETAINED
SHARES TREASURE TOTAL STOCK CAPITAL EARNINGS
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1997 27,877 4,559 $222.4 $2.8 $296.1 $62.4
Non-owner equity changes:
Net income 2.3 2.3
Other non-owner equity changes:
Translation adjustment (1.2)
Total non-owner equity changes 1.1
Stock based compensation and exercise of options 0.2 (2.0)
Cash dividends (2.9) (2.9)
----------------------------------------------------------------------------
BALANCE MARCH 31, 1997 27,877 4,559 $220.8 $2.8 $294.1 $61.8
Non-owner equity changes:
Net income 6.1 6.1
Other non-owner equity changes:
Translation adjustment (0.8)
Total non-owner equity changes 5.3
Repurchase of common stock 200 (4.1)
Stock based compensation and exercise of options 0.6 0.5
Cash dividends (2.9) (2.9)
----------------------------------------------------------------------------
BALANCE JUNE 30, 1997 27,877 4,759 $219.7 $2.8 $294.6 $65.0
============================================================================
BALANCE JANUARY 1, 1998 27,877 4,700 $223.8 $2.8 $295.8 $73.3
Non-owner equity changes:
Net income 5.8 5.8
Other non-owner equity changes:
Translation adjustment 2.2
Total non-owner equity changes 8.0
Stock based compensation and exercise of options 97.0 (29.0) (1.1) (2.6)
Cash dividends (2.9) (2.9)
----------------------------------------------------------------------------
BALANCE MARCH 31, 1998 27,974 4,671 $227.8 $2.8 $293.2 $76.2
Non-owner equity changes:
Net income 4.8 4.8
Other non-owner equity changes: -
Translation adjustment (2.4)
Total non-owner equity changes (2.4)
Stock based compensation and exercise of options 2 .9 0.9
Cash dividends (2.9) (2.9)
----------------------------------------------------------------------------
BALANCE JUNE 30, 1998 27,974 4,673 $228.2 $2.8 $294.1 $78.1
============================================================================
</TABLE>
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK OTHER NON-
HELD IN OWNER EQUITY
TREASURY CHARGES OTHER
-------------------------------------
<S> <C> <C> <C>
BALANCE JANUARY 1, 1997 $(115.7) $(21.9) $(1.3)
Non-owner equity changes:
Net income
Other non-owner equity changes:
Translation adjustment (1.2)
Total non-owner equity changes
Stock based compensation and exercise of options 2.0 0.2
Cash dividends
-------------------------------------
BALANCE MARCH 31, 1997 $(113.7) $(23.1) $(1.1)
Non-owner equity changes:
Net income
Other non-owner equity changes:
Translation adjustment (.8)
Total non-owner equity changes
Repurchase of common stock (4.1)
Stock based compensation and exercise of options 0.1
Cash dividends
------------------------------------
BALANCE JUNE 30, 1997 $(117.8) $(23.9) $(1.0)
====================================
BALANCE JANUARY 1, 1998 $(118.0) $(29.3) $(0.8)
Non-owner equity changes:
Net income
Other non-owner equity changes:
Translation adjustment 2.2
Total non-owner equity changes
Stock based compensation and exercise of options 1.4 0.1
Cash dividends
------------------------------------
BALANCE MARCH 31, 1998 $(116.6) $(27.1) $(0.7)
Non-owner equity changes:
Net income
Other non-owner equity changes:
Translation adjustment (2.4)
Total non-owner equity changes
Stock based compensation and exercise of options (0.1) 0.1
Cash dividends
------------------------------------
BALANCE JUNE 30, 1998 $(116.7) $(29.5) $(0.6)
====================================
</TABLE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A
The accompanying unaudited condensed consolidated financial statements of The
Geon Company (Company or Geon) have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information, footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair financial presentation have been included. Operating
results for the three and six month periods ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1997. Certain amounts for 1997 have been
reclassified to conform to the 1998 interim period presentation.
NOTE B
There are pending or threatened against the Company or its subsidiaries various
claims, lawsuits and administrative proceedings, all arising from the ordinary
course of business with respect to employment, commercial, product liability and
environmental matters, which seek remedies or damages. The Company believes that
any liability that may finally be determined should not have a material adverse
effect on the Company's consolidated financial position.
NOTE C
Components of inventories at June 30, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
(Dollars in millions) 1998 1997
---------------- -----------------
<S> <C> <C>
Finished products and in-process inventories $99.3 $107.8
Raw materials and supplies 44.7 48.7
---- ----
144.0 156.5
LIFO Reserve (20.7) (34.1)
------ ------
$123.3 $122.4
===== =====
</TABLE>
NOTE D
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," (SFAS 130). The pronouncement requires that an enterprise classify
items of other comprehensive income or "non-owner equity changes" as referred to
by the Company, by their nature in a financial statement and display the
accumulated non-owner equity changes separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet. The
Company adopted SFAS 130 on January 1, 1998. Certain reclassifications have been
made to the June 30, 1997 and December 31, 1997 financial statements to conform
to the requirements of this pronouncement.
NOTE E
In June 1998, the Company announced that it had signed a non-binding letter of
intent to enter into transactions with Occidental Chemical Corporation
(Oxychem), a subsidiary of Occidental Petroleum Corporation, which, if
completed, will create a joint venture of their polyvinyl chloride (PVC)
suspension resin businesses and related supporting operations to be owned 76
percent by Oxychem and 24 percent by Geon. The agreement provides for a
long-term supply arrangement of resin for Geon's vinyl compounding operations.
In addition, Geon will acquire Oxychem's vinyl compound and film business at
Burlington, NJ, and Pasadena, Texas, and the companies will form a second joint
venture devoted to powder compounding. The proposed transactions with Oxychem is
subject to a number of conditions, including the execution of definitive
documents, approval of the respective boards of directors and Geon shareholders,
and other necessary approvals.
<PAGE> 7
In June 1998, the Company completed the acquisition of Plast-O-Meric, Inc.,
(Plast-O-Meric) a privately held custom formulator of vinyl plastisols and
polyurethane systems. Also in June 1998, the Company acquired the Wilflex Ink
Division (Wilflex) of Flexible Products Company. Wilflex is a manufacturer and
marketer of vinyl plastisol ink products. The combined revenues of the acquired
companies was approximately $100 million for their most recently completed
fiscal years, and the companies employ approximately 300 people. Geon's
operating results for the second quarter of 1998 include one month of
Plast-O-Meric and Wilflex operations.
In June 1998, Geon and Orica Limited (formerly ICI Australia Limited) announced
approval of their intention to float their entire interests in the joint
venture company, Australian Vinyls Corporation Limited pending favorable market
conditions. Geon and Orica Limited have agreed that current market conditions
for a public offering are unfavorable. Geon holds a 37.4 percent share of the
joint venture.
NOTE F
In March 1998, the Company announced an agreement with Bayer Corporation under
which Bayer will utilize a pipeline to transport anhydrous chlorine (HCl) from
its plant in Baytown, Texas to Geon's VCM plant in LaPorte, Texas. Geon has
constructed an oxychlorination facility at LaPorte which will convert the
anhydrous chlorine for use in making VCM at its LaPorte Facility. Operation of
the pipeline and related facilities is anticipated to commence in the third
quarter of 1998.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INDUSTRY CONDITIONS:
Based on industry data, North American (U.S. and Canada) producer shipments of
polyvinyl chloride (PVC), including exports, are estimated to have increased 5%
in the second quarter of 1998 as compared to the first quarter of 1998 and were
about 9% higher than the second quarter of 1997. For the first six months of
1998, North American producer shipments are estimated to have increased 6% as
compared to the same period in 1997. Exports for the second quarter increased 9%
over the same period a year ago, and were 8% below the first quarter of 1998. A
softening in export activity to East Asia in the first half of 1998 was largely
offset by increased shipments to other world markets, in particular, South
America, Africa and the Middle East.
Capacity utilization (shipments/capacity) for North America was estimated at 94%
of effective capacity (87% of nameplate) during the second quarter of 1998, an
increase of 1% from the first quarter. Demand for the second quarter 1998 was
the highest seen by North American producers on record; nevertheless, the
capacity utilization rate was unchanged from second quarter 1997, due to 750
million pounds of capacity increase early in 1998 by two PVC resin suppliers.
Industry operating margins (the spread between PVC resin selling prices and
large buyer ethylene and chlorine costs as reported in industry trade journals
and newsletters) for the largest PVC resin market applications decreased
approximately 0.5 cent per pound in the second quarter of 1998 as compared to
the previous quarter and decreased 4.0 cents per pound as compared to the same
quarter of 1997. Price increases announced in the first and second quarter did
not occur due largely to declining raw material costs, capacity additions, and
weakness in export prices caused primarily by the economic dislocations in East
Asia.
The third quarter of 1998 began with PVC resin operating margins at historic
lows despite relatively strong demand. No price increases have been announced
for the third quarter, and it is anticipated that lower raw material costs, and
continued instability in East Asia will continue to put downward pressure on
global PVC pricing.
RESULTS OF OPERATIONS:
The Company had sales of $330.7 million in the second quarter of 1998, a 1%
decrease from the second quarter of 1997. The decline in sales primarily
reflects lower PVC resin selling prices which offset the majority of the volume
increases in PVC compounds and the inclusion of two plastisol formulators
acquired in June of 1998. The remainder of the decline is attributable to the
formation of the Australian Vinyls Corporation joint venture from a previously
consolidated subsidiary in the third quarter of 1997. Year-to-date sales were
$655.2 million, as compared with $634.0 million in 1997. After consideration of
the employee separation charge in 1997, year-to-date net income in 1998
declined $7.0 million as compared to 1997. Operating income for the first six
months, excluding the impact of the $15.0 million employee separation charge in
1997, declined by $15.3 million to $22.0. For the second quarter of 1998,
operating income declined by $17.1 million from the same period a year ago
(excluding the 1997 employee separation charge). This decrease in earnings is
due primarily to the decline in resin operating margins as discussed under
"Industry Conditions" above. In addition, costs associated with a scheduled
maintenance shutdown in the second quarter of 1998 at the Company's vinyl
chloride monomer plant in LaPorte, Texas unfavorably affected pretax earnings
by approximately $3.5 million in the quarter. This was partially offset by the
earnings of businesses acquired in the last year, including Synergistics
Industries Limited (Synergistics), Plast-O-Meric, and Wilflex. . Net income for
the quarter was $4.8 million or $1.3 million below the same period last year,
which included a one-time pretax employee separation charge of $15.0 million
($9.2 million after tax). Year-to-date net income was $10.6 million or an
increase of $2.2 million over the same period last year.
The Performance Polymer and Services business units, which includes PVC
compounds, specialty dispersion resins, plastisol formulators and Polymer
Diagnostics, Inc., had aggregate sales revenues 41% higher in the second
quarter of 1998 as compared to the same quarter last year, and 8% higher than
the previous quarter, due largely to the acquisitions of Synergistics in fourth
quarter of 1997 and Plast-O-Meric and Wilflex in June 1998. Second quarter 1998
suspension/mass resin volume shipments were approximately 6% higher than in the
first quarter and 2% higher than in the same quarter in 1997. Suspension/mass
resin selling prices decreased approximately 25% in the second quarter of 1998
from the same quarter last year.
<PAGE> 9
Selling, general and administrative expenses increased by $10.9 million from
1997 to $34.6 million in the first six months of 1998. The increase primarily
reflects additional expenses associated with the acquired businesses. Similarly,
depreciation and amortization has increased over the same periods last year as a
result of the additional depreciation on assets acquired as well as the
amortization expense related to acquisition goodwill.
INTEREST & OTHER EXPENSE:
Interest expense for the second quarter of 1998 increased $1.4 million from 1997
to $3.8 million. Year-to-date interest expense increased $2.0 million from 1997
to $7.6 million in 1998. This increase is a result of the higher average
short-term borrowings utilized to fund the aforementioned acquisitions. Other
income (expense), net was expense of $0.7 million for second quarter 1998 and
expense of $1.9 million in the same quarter last year. The decline in net
expense is primarily the result of earnings of equity affiliates in 1998,
including the Sunbelt chlor-alkali joint venture, which began operations in
December 1997. Similarly, year-to-date other income (expense), net was income of
$2.7 million for the first half of 1998 as compared to expense of $2.9 million
in 1997, largely due to the equity earnings from Sunbelt and Australian Vinyls
Corporation. Foreign currency losses for the second quarter of 1998 were $1.8
million, as compared with 0.8 million in the same quarter last year.
Year-to-date foreign currency losses were $0.5 million and $0.7 million in 1998
and 1997, respectively. Currency losses result primarily from fluctuations in
Australian currency.
TAXES:
Income tax expense for the first half of 1998 was approximately 41% of pre-tax
income, as compared with 40% for the first half of 1997. The increase in the
effective tax rate is due in part to non-deductible goodwill associated with the
Synergistics acquisition as well as the effect of a state income tax refund in
1997. The second quarter effective tax rate approximates the year-to-date rate.
CAPITAL RESOURCES AND LIQUIDITY:
During the six months ended June 30, 1998, the Company generated $53.1 million
of cash from operating activities as compared to $57.3 million during the same
period of 1997. The year-to-date 1998 earnings before non-cash charges were $9.4
million below last year. Operating working capital (accounts receivable plus
inventory less accounts payable) decreased by $16.9 million in the first half of
1998, compared with an increase of $2.3 million in 1997, largely as a result of
lower material costs and PVC resin pricing in 1998. Accrued expenses were
impacted by the timing of payments for income taxes, sales and use taxes, and
insurance.
Investing activities include the net cash paid of $39.6 million for acquisitions
of Plast-O-Meric and Wilflex in 1998. Purchases of property were $16.0 million
and $16.2 million for the first half of 1998 and 1997, respectively. Capital
expenditures for the full year of 1998 are projected to be approximately $50
million, or flat with 1997. Investing activities for the first half of 1998 also
included $6.7 million of investments in and advances to equity affiliates as
compared with $34.9 million in 1997. These primarily relate to the Sunbelt
chlor-alkali joint venture with Olin.
Financing activities in the first six months of 1998 reflect a decrease in
short-term debt of $12.9 million. During the same period in 1997, short-term
borrowings increased, primarily to fund the construction of the Sunbelt
chlor-alkali plant. In addition, in the first half of 1997, the Company
repurchased 200,000 shares of common stock for $4.1 million. As of June 30,
1998, 1.7 million shares are authorized for repurchase under an August 1996
Board of Directors resolution.
The Company believes it has sufficient funds to support dividends, debt service
requirements, normal capital expenditures, future acquisitions and expenditures
and advances associated with the Bayer HCL project, based on projected
operations, existing working capital facilities and other available permitted
borrowings.
YEAR 2000:
The Company has largely completed the conversion of its primary commercial and
financial information systems to an enterprise wide system which is year 2000
compliant. The Company is evaluating its other support systems and equipment and
may incur internal staff costs as well as consulting and other expenses to
upgrade or replace these systems. In addition, the Company is inquiring of major
suppliers and customers regarding their ability to meet Year 2000 requirements.
While much of the work and certain initial testing has been completed, the
formal review and
<PAGE> 10
testing is anticipated to be completed by the end of 1998. Future expenditures,
beyond those which the Company would incur in the normal course of maintaining
and upgrading its systems are not expected to be material. Certain factors that
may affect these forward-looking comments are discussed under "Cautionary Note
on Forward-Looking Statements".
ENVIRONMENTAL MATTERS:
The Company is subject to various federal, state and local environmental laws
and regulations concerning emissions to the air, discharges to waterways, the
release of materials into the environment, the generation, handling, storage,
transportation, treatment and disposal of waste materials or otherwise relating
to the protection of the environment.
The Company maintains a disciplined environmental and industrial safety and
health compliance program and conducts internal and external regulatory audits
at its plants in order to identify and categorize potential environmental
exposures and to assure compliance with applicable environmental, health and
safety laws and regulations. This effort has required and may continue to
require process or operational modifications, the installation of pollution
control devices and cleanups. The Company estimates capital expenditures related
to the limiting and monitoring of hazardous and non-hazardous wastes during 1998
to approximate $3 million to $5 million. Certain factors that may affect these
forward-looking comments are discussed under "Cautionary Note on Forward-Looking
Statements".
The Company believes that compliance with current governmental regulations will
not have a material adverse effect on its capital expenditures, earnings, cash
flow or liquidity. At June 30, 1998, the Company had accruals totaling
approximately $50 million to cover potential future environmental remediation
expenditures. Environmental remediation expenditures in 1998 are estimated to
approximate the level of 1997.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS:
This Quarterly Report contains statements concerning trends and other
forward-looking information affecting or relating to the Company and its
industry that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. Actual results may differ materially from such statements for a variety
of factors, including but not limited to (1) unanticipated changes in world,
regional, or U.S. PVC consumption growth rates affecting the Company's markets;
(2) unanticipated changes in industry capacity or in the rate at which
anticipated changes in industry capacity come online in the PVC , VCM &
chlor-alkali industries; (3) fluctuations in raw material prices and supply, in
particular fluctuations outside the normal range of industry cycles; (4)
unanticipated delays in achieving or inability to achieve cost reduction and
employee productivity goals; (5) unanticipated production outages; (6)
unanticipated changes in customer sales mix; and (7) the impact on the North
American vinyl markets and supply/demand balance resulting from the economic
situation in East Asia.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
None.
Part II - Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
None.
<PAGE> 11
Item 4. Submission of Matters to a Vote of Security Holders
The company held its Annual Meeting of Stockholders on May 7,
1998. As described in the 1998 Proxy Statement, the following
action was taken:
a) The nine nominees for directors were elected. The votes for
directors were as follows:
<TABLE>
<CAPTION>
Number of Shares Number of Share
Voted For Votes Withheld
--------- --------------
<S> <C> <C>
James K. Baker 20,824,606 195,236
Gale Duff-Bloom 20,814,005 205,837
J.A. Fred Brothers 20,859,963 159,879
J. Douglas Campbell 20,861,860 157,982
D. Larry Moore 20,852,904 166,938
John D. Ong 20,711,585 308,257
William F. Patient 20,859,460 178,382
R. Geoffrey Styles 20,859,579 160,263
Thomas A. Waltermire 20,823,809 196,033
</TABLE>
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 10.2 - 1995 Stock Option Plan,
amended and restated as of August 7, 1998
Exhibit 10.2a - 1998 Interim Stock Award
Plan
Exhibit 11 - Statement re Computation of Per
Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
In April and June 1998, the Company filed 8-K's related to
the acquisition of Plast-O-Meric, Inc., a privately held
custom formulator of vinyl plastisols and polyurethane
systems. The acquisition was completed in June 1998.
In May 1998, the Company filed an 8-K announcing the election
to its Board of Directors of Thomas A. Waltermire, president
and chief operating officer of Geon and Farah M. Walters,
president and chief executive officer of University Hospitals
Health System and University Hospitals of Cleveland.
In May 1998, the Company filed an 8-K announcing the
acquisition of the Wilflex Ink Division of Flexible Products
Company.
In June 1998, the Company filed an 8-K announcing the
approval by Geon and Orica Limited (formerly ICI Australia
Limited) of their intention to sell their entire interests in
the joint venture company, Australian Vinyls Corporation
Limited, through a public offering on the Australian Stock
Exchange, subject to completion of satisfactory underwriting
arrangements, price and market conditions.
On June 18, 1998, the Company filed an 8-K announcing that
second quarter earnings would be lower than security analysts
expectations.
<PAGE> 12
On June 26, 1998, the Company filed an 8-K announcing the
signing of a non-binding letter of intent to enter into
transactions with Occidental Chemical Corporation (OxyChem),
a subsidiary of Occidental Petroleum Corporation, which, if
completed will create a joint venture of their polyvinyl
chloride (PVC) suspension resin businesses and related
supporting operations. In addition, it was also announced
that Geon will acquire OxyChem's vinyl compound and film
businesses at Burlington, NJ, and Pasadena, Texas, and that
the companies will form a second joint venture devoted to
powder compounding.
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 14, 1998 THE GEON COMPANY
\S\W. D. WILSON
W. D. Wilson
Vice President and Chief Financial Officer,
(Principal Financial Officer)
\S\G. P. SMITH
G. P. Smith
Corporate Controller and Assistant Treasurer
(Principal Accounting Officer)
<PAGE> 1
EXHIBIT 10.2
THE GEON COMPANY
1995 INCENTIVE STOCK PLAN
(AS AMENDED AND RESTATED AS OF AUGUST 7, 1998)
1. PURPOSE. The Geon Company 1995 Incentive Stock Plan (the "Plan")
is designed to foster and promote the long-term growth and performance of the
Company by enhancing the Company's ability to attract and retain qualified
Directors and key employees and motivating Directors and key employees through
stock ownership and performance-based incentives. To achieve this purpose, this
Plan provides authority for the grant of Stock Options, Director Options,
Restricted Stock, Stock Equivalent Units, Stock Appreciation Rights,
Performance-Based Stock Awards, and other stock and performance-based
incentives.
2. DEFINITIONS.
(a) "Affiliate" -- This term has the meaning given to it in Rule
12b-2 under the Exchange Act.
(b) "Award" -- The grant of Stock Options, Director Options,
Restricted Stock, Stock Equivalent Units, Stock Appreciation Rights,
Performance-Based Stock Awards, and other stock and performance-based incentives
under this Plan.
(c) "Award Agreement" -- Any agreement between the Company and a
Participant that sets forth terms, conditions, and restrictions applicable to an
Award.
(d) "Board of Directors " -- The Board of Directors of the
Company,
(e) "Change of Control" --A "Change of Control" means:
(i) 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 (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of voting
securities of the Company where such acquisition causes such
Person to own 20% or more of the combined voting power of the
then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions
shall not be deemed to result in a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of subsection (c) below; provided,
further, that if any Person's beneficial ownership of the
Outstanding Company Voting Securities reaches or exceeds 20% as
a result of a transaction described in clause (i) or (ii) above,
and such Person subsequently acquires
<PAGE> 2
beneficial ownership of additional voting securities of the
Company, such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 20% or more of the
Outstanding Company Voting Securities; and provided, further,
that if at least a majority of the members of the Incumbent
Board 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 Company 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 Company Voting Securities, then no Change of
Control shall have occurred as a result of such Person's
acquisition; or
(ii) individuals who, as of November 6, 1996, 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 November
6, 1996 whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office 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; or
(iii) The approval by the shareholders of the Company of
a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another corporation
("Business Combination") or, if consummation of such Business
Combination is subject, at the time of such approval by
shareholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or
implicitly by consummation); 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 Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation that as a result of such transaction
owns the Company or all or substantially all of the Company'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 Company Voting Securities, (ii) no Person (excluding
any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or
<PAGE> 3
more of, respectively, the then outstanding shares of common
stock 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
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(f) "Change of Control Price" -- the higher of (i) the highest
reported sales price, regular way, of a share of Common Stock in any transaction
reported on the New York Stock Exchange Composite Tape or other national
exchange on which such shares are listed or on NASDAQ during the 60-day period
prior to and including the date of a Change of Control or (ii) if the Change of
Control is the result of a tender or exchange offer or a Business Combination,
the highest price per share of Common Stock paid in such tender or exchange
offer or Business Combination; provided, however, that, in the case of Incentive
Stock Options and Stock Appreciation Rights relating to Incentive Stock Options,
the Change of Control Price shall be in all cases the Fair Market Value of the
Common Stock on the date such Incentive Stock Option or Stock Appreciation Right
is exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Board.
(g) "Code" -- The Internal Revenue Code of 1986, or any law that
supersedes or replaces it, as amended from time to time.
(h) "Committee" -- The Compensation Committee of the Board of
Directors, or any other committee of the Board of Directors that the Board of
Directors authorizes to administer this Plan. The Committee will be constituted
in a manner that satisfies all applicable legal requirements, including
satisfying the disinterested administration standard set forth in Rule 16b-3 and
the outside director requirement under Section 162(m).
(i) "Common Stock" or "stock"-- Common Stock, $.10 par value, of
the Company, including authorized and unissued shares and treasury shares.
(j) "Company" -- The Geon Company, a Delaware corporation, and
its direct and indirect subsidiaries.
(k) "Continuing Director" -- A Director following a Change of
Control who was a Director prior to such Change of Control or who was
recommended or elected to succeed a Continuing Director by a majority of the
Continuing Directors then in office.
(l) "Director" -- A director of the Company.
<PAGE> 4
(m) "Director Option" -- A right to purchase Common Stock
granted to a Director pursuant to Section 7.
(n) "Exchange Act"-- The Securities Exchange Act of 1934, as
amended, or any law that supersedes or replaces it, as the same may be amended
from time to time.
(o) "Fair Market Value" of Common Stock -- The Fair Market Value
of a share of Common Stock on any particular date means the mean of the high and
low prices of the Common Stock on the relevant date or, if no sale was made on
such date, then on the next preceding day on which such a sale was made (a) if
the Common Stock is listed on the New York Stock Exchange, as reported on the
New York Stock Exchange Composite Transactions listing (or similar report), or
(b) if the Common Stock is listed on the NASDAQ National Market System, then as
reported on such system, or (c) if not listed on either the New York Stock
Exchange or the NASDAQ National Market System, as determined by the Board or
Committee.
(p) "Incentive Stock Option"-- A Stock Option that meets the
requirements of Section 422 of the Code.
(q) "Non-Employee Director" -- A Director who is not an employee
of the Company.
(r) "Notice of Award"-- Any notice by the Committee to a
Participant that advises the Participant of the grant of an Award or sets forth
terms, conditions, and restrictions applicable to an Award.
(s) "Participant" -- Any person to whom an Award has been
granted under this Plan.
(t) "Performance-Based Stock Award" -- A Stock Award granted to
a Participant pursuant to Section 8.
(u) "Restricted Stock" -- An Award of Common Stock subject to
restrictions or risk of forfeiture.
(v) "Rule 16b-3" -- Rule 16b-3 under the Exchange Act as the
same may be amended, modified, superseded or replaced from time to time.
(w) "Section 162(m) " -- Section 162(m) of the Code, together
with the regulations promulgated by the Internal Revenue Service thereunder, as
the same may be amended, modified, superseded or replaced from time to time.
(x) "Stock Appreciation Right" -- This term has the meaning
given to it in Section 6(b)(ii).
<PAGE> 5
(y) "Stock Award" -- This term has the meaning given to it in
Section 6(b)(iii).
(z) "Stock Equivalent Unit" -- An Award that is valued by
reference to the value of Common Stock.
(aa) "Stock Option" -- This term has the meaning given to it in
Section 6(b)(iv).
3. ELIGIBILITY. All key employees of the Company and its Affiliates,
including officers whether or not Directors, are eligible for the grant of
Awards (other than Director Options). The selection of key employees to receive
Awards (other than Director Options) will be within the discretion of the
Committee. More than one Award may be granted to the same key employee.
All Non-Employee Directors are eligible for the grant of Director
Options, as provided in Section 7. Non-Employee Directors are not, however,
eligible for the grant of any Awards other than Director Options.
4. COMMON STOCK AVAILABLE FOR AWARDS; ADJUSTMENT.
(a) NUMBER OF SHARES OF COMMON STOCK. Subject to adjustment as
provided for in Section 4(d), the aggregate number of shares of Common Stock
that may be subject to Awards granted under this Plan shall be 2,500,000 shares
of Common Stock. The assumption of awards granted by an organization acquired by
the Company, or the grant of Awards under this Plan in substitution for any such
awards, will not reduce the number of shares of Common Stock available for the
grant of Awards under this Plan.
Common Stock Subject to an Award that expires or is forfeited,
terminated, or canceled will again be available for grant under this Plan,
without reducing the number of shares of Common Stock available for grant of
Awards under this Plan, except to the extent that the availability of those
shares of Common Stock would cause this Plan or any Awards granted under this
Plan to fail to qualify for the exemption provided by Rule 16b-3.
Notwithstanding the foregoing, Common Stock subject to awards of Stock Options
and Stock Appreciation Rights to Participants who are employees which expire or
are forfeited, terminated, or canceled in the same year such Award is granted
will, upon such expiration or forfeiture, termination, or cancellation, continue
to be counted against the maximum number of shares with respect to which Options
and Stock Appreciation Rights may be granted under this Plan in such year to
such Participants holding the expired or forfeited, terminated or canceled Stock
Options or Stock Appreciation Rights.
(b) LIMITATIONS ON CERTAIN AWARDS. (i) The aggregate number of
shares of Common Stock that may be issued upon exercise of Incentive Stock
Options is 2,000,000.
(ii) The maximum number of shares with respect to which Options
(including Incentive Stock Options) and Stock Appreciation Rights may be granted
under this Plan in any
<PAGE> 6
one fiscal year is (A) 100,000 as to any individual Participant who is an
employee (other than the Chief Executive Officer or the Chief Operating Officer
of the Company) and (B) 205,000 as to any individual Participant who is the
Chief Executive Officer or the Chief Operating Officer of the Company.
(iii) The aggregate number of shares of Restricted Stock (other than
Restricted Stock which is a Performance-Based Stock Award) that may be awarded
under this Plan is 2,000,000.
(c) NO FRACTIONAL SHARES. No fractional shares will be issued, and
the Committee will determine the manner in which the value of fractional shares
will be treated.
(d) ADJUSTMENT. In the event of any change in the number of shares
of Common Stock by reason of a merger, consolidation, reorganization,
recapitalization, or similar transaction, or in the event of a stock dividend,
stock split, or distribution to stockholders (other than normal cash dividends),
the Committee will adjust the number and class of shares that may be issued
under this Plan, the number and class of shares subject to outstanding Awards,
the exercise price applicable to outstanding Awards, and the Fair Market Value
of the shares of Common Stock and other value determinations applicable to
outstanding Awards.
5. ADMINISTRATION.
(a) COMMITTEE. This Plan will be administered by the Committee. The
Committee will, subject to the terms of this Plan, have the authority to: (i)
select the eligible employees who will receive Awards, (ii) grant Awards (other
than Director Options), (iii) determine the number and types of Awards to be
granted to employees, (iv) determine the terms, conditions, vesting periods, and
restrictions applicable to Awards (other than Director Options), (v) adopt,
alter, and repeal administrative rules and practices governing this Plan, (vi)
interpret the terms and provisions of this Plan and any Awards granted under
this Plan, (vii) prescribe the forms of any Notices of Award, Award Agreements,
or other instruments relating to Awards, and (viii) otherwise supervise the
administration of this Plan. All decisions by the Committee will be made with
the approval of not less than a majority of its members.
(b) DELEGATION. The Committee may delegate any of its authority to
any other person or persons that it deems appropriate, provided the delegation
does not cause this Plan or any Awards granted under this Plan to fail to
qualify for the exemption provided by Rule 16b-3 under the Exchange Act.
(c) DECISIONS FINAL. All decisions by the Committee, and by any
other person or persons to whom the Committee has delegated authority, will be
final and binding on all persons.
<PAGE> 7
6. AWARDS.
(a) GRANT OF AWARDS. The Committee will determine the type or types
of Awards to be granted to each Participant and will set forth in the related
Notice of Award or Award Agreement the terms, conditions, vesting periods, and
restrictions applicable to each Award. Awards may be granted singly or in
combination or tandem with other Awards, except to the extent that any grants in
combination or tandem would impair the exemption for performance based
compensation provided for under Section 162(m). Awards may also be granted in
replacement of, or in substitution for, other awards granted by the Company,
whether or not granted under this Plan, except that, with respect to
Performance-Based Stock Awards, the new Award must also be wholly contingent on
the attainment of performance goals established by the Committee; without
limiting the foregoing, if a Participant pays all or part of the exercise price
or taxes associated with an Award by the transfer of Common Stock or the
surrender of all or part of an Award (including the Award being exercised), the
Committee may, in its discretion, grant a new Award (which, in the case of
Awards intended to replace Performance-Based Stock Awards, must also be wholly
contingent on the attainment of performance goals established by the Committee)
to replace the shares of Common Stock that were transferred or the Award that
was surrendered. The Company may assume awards granted by an organization
acquired by the Company or may grant Awards in replacement of, or in
substitution for, any such awards.
(b) TYPES OF AWARDS. Awards may include, but are not limited to, the
following:
(i) DIRECTOR OPTION -- A right to purchase Common Stock granted
to a Director pursuant to Section 7.
(ii) STOCK APPRECIATION RIGHT -- A right to receive a payment,
in cash or Common Shares, equal to the excess of (A) the Fair Market
Value of a specified number of shares of Common Stock on the date the
right is exercised over (B) the Fair Market Value on the date the right
is granted. The right may be conditioned upon the occurrence of certain
events, such as a Change of Control of the Company, or may be
unconditional, as determined by the Committee.
(iii) STOCK AWARD -- An Award that is made in Common Stock,
Restricted Stock, or Stock Equivalent Units or that is otherwise based
on, or valued in whole or in part by reference to, the Common Shares,
including Performance-Based Stock Awards. All or any part of any Stock
Award may be subject to such conditions, restrictions, and risks of
forfeiture, as and to the extent established by the Committee and, with
respect to Performance-Based Stock Awards, such conditions and
restrictions as may be required under Section 162(m), so that the
Performance-Based Stock Awards constitute performance-based compensation
thereunder. Stock Awards may be based on the Fair Market Value of the
Common Stock, or on other specified values or methods of valuation, as
determined by the Committee.
<PAGE> 8
(iv) STOCK OPTION -- A right to purchase a specified number of
shares of Common Stock, during a specified period, and at a specified
exercise price, all as determined by the Committee. A Stock Option may
be an Incentive Stock Option or a Stock Option that does not qualify as
an Incentive Stock Option (a "non-qualified Stock Option"). In addition
to the terms, conditions, vesting periods, and restrictions established
by the Committee, Incentive Stock Options must comply with the
requirements of Section 422 of the Code. The exercise price of a Stock
Option, including a non-qualified Stock Option, may be no less than the
Fair Market Value of the Common Shares on the date the Stock Option is
granted.
(v) PERFORMANCE-BASED STOCK AWARDS -- A Stock Award granted to a
Participant pursuant to Section 8.
7. DIRECTOR OPTIONS.
(a) GRANT OF DIRECTOR OPTIONS; NUMBER OF SHARES OF COMMON STOCK.
Upon approval of this Plan at the 1995 Annual Meeting of Stockholders, each
Non-Employee Director of the Company will receive a Director Option for 5,000
shares of Common Stock on the date of such meeting. Each Non-Employee Director
who first becomes a Director at any time thereafter, will receive a Director
Option for 5,000 shares of Common Stock on the date that he or she is first
elected or appointed as a Non-Employee Director. Each Director who ceases to be
an employee of the Company during his or her term in office will receive a
Director Option on the date that he or she is first elected as a Director after
ceasing to be an employee. Each Non-Employee Director who receives a Director
Option under this Plan and continues in office will receive an additional
Director Option for 1,000 shares of Common Stock annually on each anniversary
date of the date on which the previous Director Option was received. No action
by the Committee will be required to effect the grant of these Director Options.
Notwithstanding the provisions of Section 14, the number of shares of Common
Stock to which the annual Director Options relates may not be amended more than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act, as amended, or the rules thereunder.
(b) EXERCISE PRICE. The purchase price of the Common Stock subject
to each Director Option will be the Fair Market Value of the Common Shares at
the date of grant.
(c) DATE DIRECTOR OPTIONS BECOME EXERCISABLE. Each Director Option
will become exercisable one year after the date of grant or upon the earlier
occurrence of a Change of Control.
(d) EXPIRATION DATE. Unless terminated earlier pursuant to the next
sentence, each Director Option will terminate, and the right of the holder to
purchase Common Stock upon exercise of the Director Option will expire, at the
close of business on the tenth anniversary date of the date of grant. Each
Director Option will terminate, and the right of the holder to purchase Common
Stock upon exercise of the Director Option will expire, upon the completion of a
transaction of the type identified in Sections 2(e) (3) and (4), but only if
provision satisfactory to
<PAGE> 9
the Committee is made for the payment to the holder of the Director Option of
the excess of (i) the Fair Market Value of the Common Stock subject to the
Director Option immediately prior to the completion of the transaction over (ii)
the exercise price.
(e) NOT INCENTIVE STOCK OPTIONS. None of the Director Options will
be Incentive Stock Options.
(f) CONTINUOUS SERVICE AS A DIRECTOR. No Director Option may be
exercised unless the Non-Employee Director to whom the Director Option was
granted has continued to be a Non-Employee Director from the time of grant
through the time of exercise, except as provided in this Section 7(f ).
(i) If the service in office of a Non-Employee Director is
terminated due to the death of the Non-Employee Director, the
Non-Employee Director's estate, executor, administrator, personal
representative, or beneficiary will have the right to exercise the
Director Option in whole or in part prior to the earlier of (i) 12
months after the date of the holder's death and (ii) the expiration of
the Director Option.
(ii) If a Non-Employee Director ceases to be a Non-Employee
Director by reason of his employment by the Company, the Director Option
granted to that Non-Employee Director will be treated the same as Stock
Options held by employees and will continue to be exercisable prior to
the expiration of the Director Option, subject to the limitations on
exercise following termination of employment established by the
Committee pursuant to Section 12.
(iii) If the service in office of a Non-Employee Director is
terminated for any reason other than those set forth in Sections 7(f)(i)
and 7(f)(ii), the holder of the Director Option may exercise the
Director Option in whole or in part only with the consent of the
Committee. In any such event, the consent of the Committee must be
obtained and the Director Option exercised prior to the earlier of (i)
three months after the date of the termination of service in office of a
Non-Employee Director and (ii) the expiration of the Director Option.
<PAGE> 10
8. PERFORMANCE-BASED STOCK AWARDS.
(a) PERFORMANCE-BASED STOCK AWARDS. The Committee may, in its
discretion, grant Stock Awards valued by reference to shares of Common Stock
that are wholly contingent on the attainment of performance goals established by
the Committee from time to time. The performance goals will relate to one or
more of the following performance measures, as determined by the Committee for
each applicable performance period: (i) return to stockholders, (ii) cash flow,
(iii) return on equity, (iv) Company created income (for example, income due to
Company initiated cost reductions or productivity improvements), (v) sales
growth, (vi) earnings and earnings growth, (vii) return on assets, (viii) stock
price, (ix) earnings per share, (x) market share, (xi) customer satisfaction,
and (xii) safety and/or environmental performance. Any such performance goals
and the applicable performance measures will be determined by the Committee at
the time of grant and reflected in a written award agreement. The number or
value of Performance-Based Stock Awards that will be paid out to any Participant
at the end of the applicable performance period, which may be one year or longer
as determined by the Committee, will depend on the extent to which the Company
attains the established performance goals.
(b) MAXIMUM AMOUNT OF PERFORMANCE-BASED STOCK AWARDS. No participant
who is an employee may be awarded Performance-Based Stock Awards in any one
fiscal year in excess of an aggregate of 50,000 shares of Common Stock. The
maximum dollar value, based on the Fair Market Value of the number of shares of
Common Stock awarded, of any Performance-Based Stock Award to any Participant
who is an employee shall not exceed $1,200,000 in any one fiscal year.
9. DEFERRAL OF PAYMENT.
With the approval of the Committee, the delivery of the Common
Stock, cash, or any combination thereof subject to an Award (other than Director
Options) may be deferred, either in the form of installments or a single future
delivery. The Committee may also permit selected Participants to defer the
payment of some or all of their Awards, as well as other compensation, in
accordance with procedures established by the Committee to assure that the
recognition of taxable income is deferred under the Code. Deferred amounts may,
to the extent permitted by the Committee, be credited as cash or Stock
Equivalent Units. The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and dividend equivalents on
Stock Equivalent Units.
10. PAYMENT OF EXERCISE PRICE. The exercise price of a Stock Option,
Director Option, and any Stock Award for which the Committee has established an
exercise price may be paid in cash, by the transfer of Common Stock, by the
surrender of all or part of an Award (including the Award being exercised), or
by a combination of these methods, as and to the extent permitted by the
Committee. The Committee may prescribe any other method of paying the exercise
price that it determines to be consistent with applicable law and the purpose of
this Plan.
<PAGE> 11
In the event shares of Restricted Stock are used to pay the exercise
price of a Stock Award, a number of the shares of Common Stock issued upon the
exercise of the Award equal to the number of shares of Restricted Stock used to
pay the exercise price will be subject to the same restrictions as the
Restricted Stock,
11. TAXES ASSOCIATED WITH AWARD. Prior to the payment of an Award, the
Company may withhold, or require a Participant to remit to the Company, an
amount sufficient to pay any Federal, state, and local taxes associated with the
Award. The Committee may, in its discretion and subject to such rules as the
Committee may adopt, permit a Participant to pay any or all taxes associated
with the Award in cash, by the transfer of Common Stock, by the surrender of all
or part of an Award (including the Award being exercised), including
Performance-Based Stock Awards, or by a combination of these methods. The
Committee may permit a Participant to pay any or all taxes associated with an
Incentive Stock Option in cash, by the transfer of Common Stock, or by a
combination of these methods.
12. TERMINATION OF EMPLOYMENT. Subject to Section 13, if the employment
of a Participant terminates for any reason, all unexercised, deferred, and
unpaid Awards may be exercisable or paid only in accordance with rules
established by the Committee. Subject to the foregoing exception, these rules
may provide, as the Committee deems appropriate, for the expiration,
continuation, or acceleration of the vesting of all or part of the Awards.
13. CHANGE OF CONTROL. In the event of a Change of Control of the
Company, unless and to the extent otherwise determined by the Board of
Directors, (i) all Stock Appreciation Rights and Stock Options then outstanding
will become fully exercisable as of the date of the Change of Control and (ii)
all restrictions and conditions applicable to Restricted Stock and other Stock
Awards, including Performance-Based Stock Awards, will be deemed to have been
satisfied as of the date of the Change of Control. Any such determination by the
Board of Directors that is made after the occurrence of a Change of Control will
not be effective unless a majority of the Directors then in office are
Continuing Directors and the determination is approved by a majority of the
Continuing Directors.
Notwithstanding any other provision of this Plan, during the 60-day
period from and after a Change of Control (the "Exercise Period"), unless the
Committee shall determine otherwise at the time of grant, an optionee shall have
the right, whether or not the Stock Option is fully exercisable and in lieu of
the payment of the exercise price for the shares of Common Stock being purchased
under the Stock Option and by giving notice to the Company, to elect (within the
Exercise Period) to surrender all or part of the Stock Option to the Company and
to receive cash, within 30 days of such notice, in an amount equal to the amount
by which the Change of Control Price per share of Common Stock on the date of
such election shall exceed the exercise price per share of Common Stock under
the Stock Option (the "Spread") multiplied by the number of shares of Common
Stock granted under the Stock Option as to which the right granted under this
Section shall have been exercised.
<PAGE> 12
14. AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN; AMENDMENT OF
OUTSTANDING AWARDS.
(a) AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN. The Board of
Directors may amend, suspend, or terminate this Plan at any time. Stockholder
approval for any such amendment will be required only to the extent necessary to
preserve the exemption provided by Rule 16b-3 for this Plan and Awards granted
under this Plan.
(b) AMENDMENT OF OUTSTANDING AWARDS. The Committee may, in its
discretion, amend the terms of any Award (other than a Director Option),
including, waiving, in whole or in part, any restrictions or conditions
applicable to, or accelerating the vesting of, any Award, prospectively or
retroactively, but no such amendment may impair the rights of any Participant
without his or her consent or cause Awards intended to qualify as performance
based compensation under Section 162(m) to fail to so qualify.
15. AWARDS TO FOREIGN NATIONALS AND EMPLOYEES OUTSIDE THE UNITED STATES.
To the extent that the Committee deems appropriate to comply with foreign law or
practice and to further the purpose of this Plan, the Committee may, without
amending this Plan, (i) establish special rules applicable to Awards granted to
Participants who are foreign nationals, are employed outside the United States,
or both, including rules that diff er from those set forth in this Plan, and
(ii) grant Awards to such Participants in accordance with those rules.
16. NONASSIGNABILITY. Unless otherwise determined by the Committee, (i)
no Award granted under this Plan may be transferred or assigned by the
Participant to whom it is granted other than by will, pursuant to the laws of
descent and distribution, or pursuant to a qualified domestic relations order
and (ii) an Award granted under this Plan may be exercised, during the
Participant's lifetime, only by the Participant or by the Participant's guardian
or legal representative; except that, no Incentive Stock Option may be
transferred or assigned pursuant to a qualified domestic relations order or
exercised, during the Participant's lifetime, by the Participant's guardian or
legal representative.
17. GOVERNING LAW. The interpretation, validity, and enforcement of this
Plan will, to the extent not governed by the Code or the securities laws of the
United States, be governed by the laws of the State of Ohio.
18. RIGHTS OF EMPLOYEES. Nothing in this Plan will confer upon any
Participant the right to continued employment by the Company or limit in any way
the Company's right to terminate any Participant's employment at will.
19. EFFECTIVE AND TERMINATION DATES.
(a) EFFECTIVE DATE. This Plan will become effective on the date it
is approved by the stockholders.
(b) TERMINATION DATE. This Plan will continue in effect until
terminated by the Board of Directors
<PAGE> 1
EXHIBIT 10.2a
THE GEON COMPANY
1998 INTERIM STOCK AWARD PLAN
1. PURPOSE. The Geon Company 1998 Interim Stock Award Plan (the "Plan")
is designed to foster and promote the long-term growth and performance of the
Company by enhancing the Company's ability to attract and retain qualified key
employees and motivating key employees through stock ownership and
performance-based incentives. To achieve this purpose, this Plan provides
authority for the grant of Stock Options, Restricted Stock, Stock Equivalent
Units, Stock Appreciation Rights, Performance-Based Stock Awards, and other
stock and performance-based incentives.
2. DEFINITIONS.
(a) "Affiliate" -- This term has the meaning given to it in Rule
12b-2 under the Exchange Act.
(b) "Award" -- The grant of Stock Options, Restricted Stock, Stock
Equivalent Units, Stock Appreciation Rights, Performance-Based Stock Awards, and
other stock and performance-based incentives under this Plan.
(c) "Award Agreement" -- Any agreement between the Company and a
Participant that sets forth terms, conditions, and restrictions applicable to an
Award.
(d) "Board of Directors " -- The Board of Directors of the Company,
(e) "Change of Control" --A "Change of Control" means:
(i) 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 (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of voting securities of the
Company where such acquisition causes such Person to own 20% or more
of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not be deemed to result in a Change of
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of subsection (c) below;
provided, further, that if any Person's beneficial ownership of the
Outstanding Company Voting Securities reaches or exceeds 20% as a
result of a transaction described in clause (i) or (ii) above, and
such Person subsequently acquires
<PAGE> 2
beneficial ownership of additional voting securities of the Company,
such subsequent acquisition shall be treated as an acquisition that
causes such Person to own 20% or more of the Outstanding Company
Voting Securities; and provided, further, that if at least a
majority of the members of the Incumbent Board 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 Company 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 Company Voting Securities, then no Change of Control
shall have occurred as a result of such Person's acquisition; or
(ii) individuals who, as of November 6, 1996, 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 November 6, 1996 whose
election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
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; or
(iii) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company or the
acquisition of assets of another corporation ("Business
Combination") or, if consummation of such Business Combination is
subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of
such consent (either explicitly or implicitly by consummation);
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 Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of
such transaction owns the Company or all or substantially all of the
Company'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 Company Voting Securities, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
<PAGE> 3
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
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(f) "Change of Control Price" -- the higher of (i) the highest
reported sales price, regular way, of a share of Common Stock in any transaction
reported on the New York Stock Exchange Composite Tape or other national
exchange on which such shares are listed or on NASDAQ during the 60-day period
prior to and including the date of a Change of Control or (ii) if the Change of
Control is the result of a tender or exchange offer or a Business Combination,
the highest price per share of Common Stock paid in such tender or exchange
offer or Business Combination; provided, however, that, in the case of Incentive
Stock Options and Stock Appreciation Rights relating to Incentive Stock Options,
the Change of Control Price shall be in all cases the Fair Market Value of the
Common Stock on the date such Incentive Stock Option or Stock Appreciation Right
is exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Board.
(g) "Code" -- The Internal Revenue Code of 1986, or any law that
supersedes or replaces it, as amended from time to time.
(h) "Committee" -- The Compensation Committee of the Board of
Directors, or any other committee of the Board of Directors that the Board of
Directors authorizes to administer this Plan. The Committee will be constituted
in a manner that satisfies all applicable legal requirements, including
satisfying the disinterested administration standard set forth in Rule 16b-3 and
the outside director requirement under Section 162(m).
(i) "Common Stock" or "stock"-- Common Stock, $.10 par value, of the
Company, including authorized and unissued shares and treasury shares.
(j) "Company" -- The Geon Company, a Delaware corporation, and its
direct and indirect subsidiaries.
(k) "Continuing Director" -- A Director following a Change of
Control who was a Director prior to such Change of Control or who was
recommended or elected to succeed a Continuing Director by a majority of the
Continuing Directors then in office.
<PAGE> 4
(l) "Director" -- A director of the Company.
(m) "Exchange Act"-- The Securities Exchange Act of 1934, as
amended, or any law that supersedes or replaces it, as the same may be amended
from time to time.
(n) "Fair Market Value" of Common Stock -- The Fair Market Value of
a share of Common Stock on any particular date means the mean of the high and
low prices of the Common Stock on the relevant date or, if no sale was made on
such date, then on the next preceding day on which such a sale was made (a) if
the Common Stock is listed on the New York Stock Exchange, as reported on the
New York Stock Exchange Composite Transactions listing (or similar report), or
(b) if the Common Stock is listed on the NASDAQ National Market System, then as
reported on such system, or (c) if not listed on either the New York Stock
Exchange or the NASDAQ National Market System, as determined by the Board or
Committee.
(o) "Incentive Stock Option"-- A Stock Option that meets the
requirements of Section 422 of the Code.
(p) "Non-Employee Director" -- A Director who is not an employee of
the Company.
(q) "Notice of Award"-- Any notice by the Committee to a Participant
that advises the Participant of the grant of an Award or sets forth terms,
conditions, and restrictions applicable to an Award.
(r) "Participant" -- Any person to whom an Award has been granted
under this Plan.
(s) "Performance-Based Stock Award" -- A Stock Award granted to a
Participant pursuant to Section 7.
(t) "Restricted Stock" -- An Award of Common Stock subject to
restrictions or risk of forfeiture.
(u) "Rule 16b-3" -- Rule 16b-3 under the Exchange Act as the same
may be amended, modified, superseded or replaced from time to time.
(v) "Section 162(m) " -- Section 162(m) of the Code, together with
the regulations promulgated by the Internal Revenue Service thereunder, as the
same may be amended, modified, superseded or replaced from time to time.
(w) "Stock Appreciation Right" -- This term has the meaning given to
it in Section 6(b)(ii).
(x) "Stock Award" -- This term has the meaning given to it in
Section 6(b)(iii).
<PAGE> 5
(y) "Stock Equivalent Unit" -- An Award that is valued by reference
to the value of Common Stock.
(z) "Stock Option" -- This term has the meaning given to it in
Section 6(b)(iv).
3. ELIGIBILITY. All key employees of the Company and its Affiliates,
including officers whether or not Directors, are eligible for the grant of
Awards. The selection of key employees to receive Awards will be within the
discretion of the Committee. More than one Award may be granted to the same key
employee. Non-Employee Directors are not, however, eligible for the grant of any
Awards.
4. COMMON STOCK AVAILABLE FOR AWARDS; ADJUSTMENT.
(a) NUMBER OF SHARES OF COMMON STOCK. Subject to adjustment as
provided for in Section 4(d), the aggregate number of shares of Common Stock
that may be subject to Awards granted under this Plan shall be 250,000 shares of
Common Stock. The assumption of awards granted by an organization acquired by
the Company, or the grant of Awards under this Plan in substitution for any such
awards, will not reduce the number of shares of Common Stock available for the
grant of Awards under this Plan.
Common Stock Subject to an Award that expires or is forfeited,
terminated, or canceled will again be available for grant under this Plan,
without reducing the number of shares of Common Stock available for grant of
Awards under this Plan, except to the extent that the availability of those
shares of Common Stock would cause this Plan or any Awards granted under this
Plan to fail to qualify for the exemption provided by Rule 16b-3.
Notwithstanding the foregoing, Common Stock subject to awards of Stock Options
and Stock Appreciation Rights to Participants who are employees which expire or
are forfeited, terminated, or canceled in the same year such Award is granted
will, upon such expiration or forfeiture, termination, or cancellation, continue
to be counted against the maximum number of shares with respect to which Options
and Stock Appreciation Rights may be granted under this Plan in such year to
such Participants holding the expired or forfeited, terminated or canceled Stock
Options or Stock Appreciation Rights.
(b) LIMITATIONS ON CERTAIN AWARDS. (i) The aggregate number of
shares of Common Stock that may be issued upon exercise of Incentive Stock
Options is 200,000.
(ii) The maximum number of shares with respect to which Options
(including Incentive Stock Options) and Stock Appreciation Rights may be granted
under this Plan in any one fiscal year is (A) 50,000 as to any individual
Participant who is an employee (other than the Chief Executive Officer or the
Chief Operating Officer of the Company) and (B) 100,000 as to any individual
Participant who is the Chief Executive Officer or the Chief Operating Officer of
the Company.
<PAGE> 6
(iii) The aggregate number of shares of Restricted Stock (other than
Restricted Stock which is a Performance-Based Stock Award) that may be awarded
under this Plan is 200,000.
(c) NO FRACTIONAL SHARES. No fractional shares will be issued, and
the Committee will determine the manner in which the value of fractional shares
will be treated.
(d) ADJUSTMENT. In the event of any change in the number of shares
of Common Stock by reason of a merger, consolidation, reorganization,
recapitalization, or similar transaction, or in the event of a stock dividend,
stock split, or distribution to stockholders (other than normal cash dividends),
the Committee will adjust the number and class of shares that may be issued
under this Plan, the number and class of shares subject to outstanding Awards,
the exercise price applicable to outstanding Awards, and the Fair Market Value
of the shares of Common Stock and other value determinations applicable to
outstanding Awards.
5. ADMINISTRATION.
(a) COMMITTEE. This Plan will be administered by the Committee. The
Committee will, subject to the terms of this Plan, have the authority to: (i)
select the eligible employees who will receive Awards, (ii) grant Awards, (iii)
determine the number and types of Awards to be granted to employees, (iv)
determine the terms, conditions, vesting periods, and restrictions applicable to
Awards, (v) adopt, alter, and repeal administrative rules and practices
governing this Plan, (vi) interpret the terms and provisions of this Plan and
any Awards granted under this Plan, (vii) prescribe the forms of any Notices of
Award, Award Agreements, or other instruments relating to Awards, and (viii)
otherwise supervise the administration of this Plan. All decisions by the
Committee will be made with the approval of not less than a majority of its
members.
(b) DELEGATION. The Committee may delegate any of its authority to
any other person or persons that it deems appropriate, provided the delegation
does not cause this Plan or any Awards granted under this Plan to fail to
qualify for the exemption provided by Rule 16b-3 under the Exchange Act.
(c) DECISIONS FINAL. All decisions by the Committee, and by any
other person or persons to whom the Committee has delegated authority, will be
final and binding on all persons.
6. AWARDS.
<PAGE> 7
(a) GRANT OF AWARDS. The Committee will determine the type or types
of Awards to be granted to each Participant and will set forth in the related
Notice of Award or Award Agreement the terms, conditions, vesting periods, and
restrictions applicable to each Award. Awards may be granted singly or in
combination or tandem with other Awards. Awards may also be granted in
replacement of, or in substitution for, other awards granted by the Company,
whether or not granted under this Plan, except that, with respect to
Performance-Based Stock Awards, the new Award must also be wholly contingent on
the attainment of performance goals established by the Committee; without
limiting the foregoing, if a Participant pays all or part of the exercise price
or taxes associated with an Award by the transfer of Common Stock or the
surrender of all or part of an Award (including the Award being exercised), the
Committee may, in its discretion, grant a new Award (which, in the case of
Awards intended to replace Performance-Based Stock Awards, must also be wholly
contingent on the attainment of performance goals established by the Committee)
to replace the shares of Common Stock that were transferred or the Award that
was surrendered. The Company may assume awards granted by an organization
acquired by the Company or may grant Awards in replacement of, or in
substitution for, any such awards.
(b) TYPES OF AWARDS. Awards may include, but are not limited to,
the following:
(i) STOCK APPRECIATION RIGHT -- A right to receive a payment,
in cash or Common Shares, equal to the excess of (A) the Fair Market
Value of a specified number of shares of Common Stock on the date
the right is exercised over (B) the Fair Market Value on the date
the right is granted. The right may be conditioned upon the
occurrence of certain events, such as a Change of Control of the
Company, or may be unconditional, as determined by the Committee.
(ii) STOCK AWARD -- An Award that is made in Common Stock,
Restricted Stock, or Stock Equivalent Units or that is otherwise
based on, or valued in whole or in part by reference to, the Common
Shares, including Performance-Based Stock Awards. All or any part of
any Stock Award may be subject to such conditions, restrictions, and
risks of forfeiture, as and to the extent established by the
Committee. Stock Awards may be based on the Fair Market Value of the
Common Stock, or on other specified values or methods of valuation,
as determined by the Committee.
(iii) STOCK OPTION -- A right to purchase a specified number
of shares of Common Stock, during a specified period, and at a
specified exercise price, all as determined by the Committee. A
Stock Option may be an Incentive Stock Option or a Stock Option that
does not qualify as an Incentive Stock Option (a "non-qualified
Stock Option"). In addition to the terms, conditions, vesting
periods, and restrictions established by the Committee, Incentive
Stock Options must comply with the requirements of Section 422 of
the Code. The exercise price of an Incentive Stock Option may be no
less than the Fair Market Value of the Common Shares on the date the
Stock Option is granted.
<PAGE> 8
(iii) PERFORMANCE-BASED STOCK AWARDS -- A Stock Award granted
to a Participant pursuant to Section 7.
7. PERFORMANCE-BASED STOCK AWARDS.
(a) PERFORMANCE-BASED STOCK AWARDS. The Committee may, in its
discretion, grant Stock Awards valued by reference to shares of Common Stock
that are wholly contingent on the attainment of performance goals established by
the Committee from time to time. The performance goals will relate to one or
more of the following performance measures, as determined by the Committee for
each applicable performance period: (i) return to stockholders, (ii) cash flow,
(iii) return on equity, (iv) Company created income (for example, income due to
Company initiated cost reductions or productivity improvements), (v) sales
growth, (vi) earnings and earnings growth, (vii) return on assets, (viii) stock
price, (ix) earnings per share, (x) market share, (xi) customer satisfaction,
and (xii) safety and/or environmental performance. Any such performance goals
and the applicable performance measures will be determined by the Committee at
the time of grant and reflected in a written award agreement. The number or
value of Performance-Based Stock Awards that will be paid out to any Participant
at the end of the applicable performance period, which may be one year or longer
as determined by the Committee, will depend on the extent to which the Company
attains the established performance goals.
(b) MAXIMUM AMOUNT OF PERFORMANCE-BASED STOCK AWARDS. No participant
who is an employee may be awarded Performance-Based Stock Awards in any one
fiscal year in excess of an aggregate of 50,000 shares of Common Stock. The
maximum dollar value, based on the Fair Market Value of the number of shares of
Common Stock awarded, of any Performance-Based Stock Award to any Participant
who is an employee shall not exceed $1,200,000 in any one fiscal year.
8. DEFERRAL OF PAYMENT.
With the approval of the Committee, the delivery of the Common
Stock, cash, or any combination thereof subject to an Award may be deferred,
either in the form of installments or a single future delivery. The Committee
may also permit selected Participants to defer the payment of some or all of
their Awards, as well as other compensation, in accordance with procedures
established by the Committee to assure that the recognition of taxable income is
deferred under the Code. Deferred amounts may, to the extent permitted by the
Committee, be credited as cash or Stock Equivalent Units. The Committee may also
establish rules and procedures for the crediting of interest on deferred cash
payments and dividend equivalents on Stock Equivalent Units.
<PAGE> 9
9. PAYMENT OF EXERCISE PRICE. The exercise price of a Stock Option and
any Stock Award for which the Committee has established an exercise price may be
paid in cash, by the transfer of Common Stock, by the surrender of all or part
of an Award (including the Award being exercised), or by a combination of these
methods, as and to the extent permitted by the Committee. The Committee may
prescribe any other method of paying the exercise price that it determines to be
consistent with applicable law and the purpose of this Plan.
In the event shares of Restricted Stock are used to pay the exercise
price of a Stock Award, a number of the shares of Common Stock issued upon the
exercise of the Award equal to the number of shares of Restricted Stock used to
pay the exercise price will be subject to the same restrictions as the
Restricted Stock,
10. TAXES ASSOCIATED WITH AWARD. Prior to the payment of an Award, the
Company may withhold, or require a Participant to remit to the Company, an
amount sufficient to pay any Federal, state, and local taxes associated with the
Award. The Committee may, in its discretion and subject to such rules as the
Committee may adopt, permit a Participant to pay any or all taxes associated
with the Award in cash, by the transfer of Common Stock, by the surrender of all
or part of an Award (including the Award being exercised), including
Performance-Based Stock Awards, or by a combination of these methods. The
Committee may permit a Participant to pay any or all taxes associated with an
Incentive Stock Option in cash, by the transfer of Common Stock, or by a
combination of these methods.
11. TERMINATION OF EMPLOYMENT. Subject to Section 12, if the employment
of a Participant terminates for any reason, all unexercised, deferred, and
unpaid Awards may be exercisable or paid only in accordance with rules
established by the Committee. Subject to the foregoing exception, these rules
may provide, as the Committee deems appropriate, for the expiration,
continuation, or acceleration of the vesting of all or part of the Awards.
12. CHANGE OF CONTROL. In the event of a Change of Control of the
Company, unless and to the extent otherwise determined by the Board of
Directors, (i) all Stock Appreciation Rights and Stock Options then outstanding
will become fully exercisable as of the date of the Change of Control and (ii)
all restrictions and conditions applicable to Restricted Stock and other Stock
Awards, including Performance-Based Stock Awards, will be deemed to have been
satisfied as of the date of the Change of Control. Any such determination by the
Board of Directors that is made after the occurrence of a Change of Control will
not be effective unless a majority of the Directors then in office are
Continuing Directors and the determination is approved by a majority of the
Continuing Directors.
Notwithstanding any other provision of this Plan, during the 60-day
period from and after a Change of Control (the "Exercise Period"), unless the
Committee shall determine otherwise at the time of grant, an optionee shall have
the right, whether or not the Stock Option is fully exercisable and in lieu of
the payment of the exercise price for the shares of Common Stock being purchased
under the Stock Option and by giving notice to the Company, to elect (within the
Exercise Period) to surrender all or part of the Stock Option to the Company and
to receive cash, within 30 days of such notice, in an amount equal to the amount
by which the
<PAGE> 10
Change of Control Price per share of Common Stock on the date of such election
shall exceed the exercise price per share of Common Stock under the Stock Option
(the "Spread") multiplied by the number of shares of Common Stock granted under
the Stock Option as to which the right granted under this Section shall have
been exercised.
13. AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN; AMENDMENT OF
OUTSTANDING AWARDS.
(a) AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN. The Board of
Directors may amend, suspend, or terminate this Plan at any time. Stockholder
approval for any such amendment will be required only to the extent necessary to
preserve the exemption provided by Rule 16b-3 for this Plan and Awards granted
under this Plan.
(b) AMENDMENT OF OUTSTANDING AWARDS. The Committee may, in its
discretion, amend the terms of any Award, including, waiving, in whole or in
part, any restrictions or conditions applicable to, or accelerating the vesting
of, any Award, prospectively or retroactively, but no such amendment may impair
the rights of any Participant without his or her consent or cause Awards
intended to qualify as performance based compensation under Section 162(m) to
fail to so qualify.
14. AWARDS TO FOREIGN NATIONALS AND EMPLOYEES OUTSIDE THE UNITED
STATES. To the extent that the Committee deems appropriate to comply with
foreign law or practice and to further the purpose of this Plan, the Committee
may, without amending this Plan, (i) establish special rules applicable to
Awards granted to Participants who are foreign nationals, are employed outside
the United States, or both, including rules that diff er from those set forth in
this Plan, and (ii) grant Awards to such Participants in accordance with those
rules.
15. NONASSIGNABILITY. Unless otherwise determined by the Committee, (i)
no Award granted under this Plan may be transferred or assigned by the
Participant to whom it is granted other than by will, pursuant to the laws of
descent and distribution, or pursuant to a qualified domestic relations order
and (ii) an Award granted under this Plan may be exercised, during the
Participant's lifetime, only by the Participant or by the Participant's guardian
or legal representative; except that, no Incentive Stock Option may be
transferred or assigned pursuant to a qualified domestic relations order or
exercised, during the Participant's lifetime, by the Participant's guardian or
legal representative.
16. GOVERNING LAW. The interpretation, validity, and enforcement of
this Plan will, to the extent not governed by the Code or the securities laws of
the United States, be governed by the laws of the State of Ohio.
17. RIGHTS OF EMPLOYEES. Nothing in this Plan will confer upon any
Participant the right to continued employment by the Company or limit in any way
the Company's right to terminate any Participant's employment at will.
<PAGE> 11
18. EFFECTIVE AND TERMINATION DATES.
(a) EFFECTIVE DATE. This Plan will become effective on the date of
its adoption by the Board of Directors.
(b) TERMINATION DATE. This Plan will continue in effect until
terminated by the Board of Directors.
<PAGE> 1
EXHIBIT 11
The Geon Company
Earnings Per Share (EPS)
(In millions, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE:
Number of Shares:
-----------------
Average shares of common stock outstanding 23.3 23.4 23.3 23.4
Less: Average shares of contingently issuable restricted stock outstanding (0.4) (0.4) (0.4) (0.4)
-------- -------- -------- --------
Total common shares outstanding for basic EPS 22.9 23.0 22.9 23.0
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE:
Number of Shares:
-----------------
Average shares of common stock outstanding 23.3 23.4 23.3 23.4
Net effect of dilutive stock options - based on treasury stock
method using average market price .3 .3 .3 .2
-------- -------- -------- --------
Total common and common equivalent shares outstanding for diluted EPS 23.6 23.7 23.6 23.6
======== ======== ======== ========
Net income per share of common stock
Basic $ .21 $ .27 .46 $ .37
======== ======== ======== ========
Diluted $ .20 $ .26 .45 $ .36
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE GEON COMPANY AND SUBSIDIARIES AS OF JUNE 30,
1998 AND DECEMBER 31, 1997 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME FOR
THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 99
<ALLOWANCES> 2
<INVENTORY> 124
<CURRENT-ASSETS> 267
<PP&E> 1,207
<DEPRECIATION> 751
<TOTAL-ASSETS> 849
<CURRENT-LIABILITIES> 286
<BONDS> 136
0
0
<COMMON> 3
<OTHER-SE> 225
<TOTAL-LIABILITY-AND-EQUITY> 849
<SALES> 655
<TOTAL-REVENUES> 655
<CGS> 569
<TOTAL-COSTS> 633
<OTHER-EXPENSES> (4)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 18
<INCOME-TAX> 7
<INCOME-CONTINUING> 11
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11
<EPS-PRIMARY> .46
<EPS-DILUTED> .45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF THE GEON COMPANY AND SUBSIDIARIES AS OF JUNE 30,
1997 AND DECEMBER 31, 1996 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME FOR
THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10
<SECURITIES> 35
<RECEIVABLES> 91
<ALLOWANCES> 3
<INVENTORY> 110
<CURRENT-ASSETS> 277
<PP&E> 1,192
<DEPRECIATION> 748
<TOTAL-ASSETS> 799
<CURRENT-LIABILITIES> 249
<BONDS> 137
0
0
<COMMON> 3
<OTHER-SE> 217
<TOTAL-LIABILITY-AND-EQUITY> 799
<SALES> 634
<TOTAL-REVENUES> 634
<CGS> 573
<TOTAL-COSTS> 612
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 14
<INCOME-TAX> 6
<INCOME-CONTINUING> 8
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8
<EPS-PRIMARY> .37
<EPS-DILUTED> .36
<FN>
RESTATED FOR THE ADOPTION OF SFAS NO. 128
</FN>
</TABLE>
