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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
THE GEON COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[GEON LOGO]
THE GEON COMPANY
NOTICE OF 2000
ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
<PAGE> 3
THE GEON COMPANY
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
The Annual Meeting of Stockholders of The Geon Company will be held at The
Forum Conference and Education Center, 1375 E. Ninth Street, Cleveland, Ohio at
9:00 a.m. on Wednesday, April 19, 2000. The purposes of the meeting are:
1. To elect Directors;
2. To reapprove The Geon Company Senior Executive Management Incentive
Plan; and
3. To consider and transact any other business that may properly come
before the meeting.
Stockholders of record at the close of business on February 23, 2000, are
entitled to notice of and to vote at the meeting.
For the Board of Directors
/s/ Gregory L. Rutman
GREGORY L. RUTMAN
Secretary
March 15, 2000
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<PAGE> 4
THE GEON COMPANY
PROXY STATEMENT
The Board of Directors of The Geon Company (the "Company") respectfully
requests your proxy for use at the Annual Meeting of Stockholders to be held on
April 19, 2000, and at any adjournments of that meeting. This Proxy Statement is
to inform you about the matters to be acted upon at the meeting.
If you attend the meeting, you may vote your shares by ballot. If you do
not attend, your shares may still be voted at the meeting if you sign and return
the enclosed proxy card. Shares of Common Stock of the Company represented by a
properly signed card will be voted in accordance with the choices marked on the
card. If no choices are marked, the shares will be voted to elect the nominees
listed on pages 3 through 4, and to reapprove The Geon Company Senior Executive
Management Incentive Plan described on pages 20 through 23. You may revoke your
proxy before it is voted by giving notice to the Company in writing or orally at
the meeting. Participants in the Company's Retirement Savings Plan will receive
a separate voting instruction card. A participant must sign and return his or
her card to the trustee of the plan in order to instruct the trustee on how to
vote the shares held under the plan. A participant may revoke his or her voting
instruction card before the trustee votes the shares held by it by giving notice
in writing to the trustee.
This Proxy Statement and the enclosed proxy card and, for participants in
the Retirement Savings Plan, the voting instruction card, are being mailed to
stockholders on or about March 15, 2000. The Company's headquarters are located
at One Geon Center, Avon Lake, Ohio 44012. The Company's telephone number is
(440) 930-1000.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eight directors. As
of April 19, 2000, the Board of Directors will consist of seven directors,
following the retirement of Mr. William F. Patient. No successor is being
nominated to take his place. Each director serves for a one year term and until
a successor is duly elected and qualified, subject to the director's earlier
death, retirement, or resignation. The Board met ten times during the last
fiscal year.
A stockholder who wishes to suggest a director candidate for consideration
by the Nominating and Governance Committee must provide written notice to the
Secretary of the Company in accordance with the procedures specified in Article
I, Section 9 of the Company's By-Laws. Generally, the notice must be received by
the Secretary of the Company not less than 60 nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting. The notice must set
forth, as to each nominee, the name, age, principal occupations and employment
during the past five years, name and principal business of any corporation or
other organization in which such occupations and employment were carried on, and
a brief description of any arrangement or understanding between such person and
any others pursuant to which such person was selected as a nominee. The notice
must set forth, as to the stockholder giving the notice and any beneficial owner
on whose behalf the nomination is being made,
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<PAGE> 5
the name and address of, and the class and number of shares of the Company owned
by, such stockholder, beneficial owner, and any other stockholders believed to
be supporting such nominee.
The seven nominees for election as directors for terms expiring in 2001 and
a description of the business experience of each nominee appear below. Each of
the nominees is a current member of the Board. J. Douglas Campbell and James K.
Baker have been directors since 1993. Gale Duff-Bloom, D. Larry Moore and R.
Geoffrey P. Styles have been directors since 1994. Thomas A. Waltermire and
Farah M. Walters have been directors since 1998. William F. Patient, who has
served as a director since 1993, is not seeking re-election.
<TABLE>
<S> <C>
JAMES K. BAKER, age 68, served as Chief Executive Officer of Arvin Industries, Inc.,
J. K. BAKER PHOTO an auto parts supplier to the original equipment and replacement markets, from 1981
to 1993, and as Chairman from 1986 to February 1996. Mr. Baker also served as Vice
Chairman of Arvin Industries, Inc., until his retirement in April 1998. Mr. Baker
serves on the Boards of Directors of Cinergy Corp., Tokheim Corp., Amcast Industrial
Corp., and Veridian Corp., and served as Chairman of the United States Chamber of
Commerce.
GALE DUFF-BLOOM, age 60, is President of Company Communications and Corporate Image
G. DUFF-BLOOM PHOTO of J.C. Penney Company, Inc., a major retailer, and has served in this position
since June 1999. Ms. Duff-Bloom joined J.C. Penney in 1969 and was elected Vice
President and Director of Investor Relations in 1988. In 1990, Ms. Duff-Bloom was
appointed to the positions of Senior Vice President and Associate Director of
Merchandising. In 1993, she was appointed Executive Vice President and Director of
Administration, and, in 1995, she was appointed Senior Executive Vice President and
Director of Personnel and Company Communications. In February 1996, Ms. Duff-Bloom
was appointed President of Marketing and Company Communications, and in June 1999,
she was appointed to her current position. Ms. Duff-Bloom serves on the Board of
Directors of Chase Bank of Texas. She is the most recent past Chair of The National
Council of the Better Business Bureau.
J. DOUGLAS CAMPBELL, age 58, served as President and Chief Executive Officer and a
J. D. CAMPBELL Director of Arcadian Corporation, a nitrogen chemicals and fertilizer manufacturer,
PHOTO until his retirement in 1997. Mr. Campbell joined Arcadian Corporation as President
and Chief Executive Officer in December 1992. From 1966 until joining Arcadian
Corporation in 1992, Mr. Campbell held various positions with Standard Oil (Ohio)
and British Petroleum, most recently as Deputy Chief Executive Officer of BP
Chemicals.
</TABLE>
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<TABLE>
<S> <C>
D. LARRY MOORE, age 63, served as President and Chief Operating Officer of Honeywell,
D. L. MOORE PHOTO Inc., a multinational manufacturer of controls for use in homes, buildings, industry,
and space and aviation, until his retirement in 1997. In 1987, Mr. Moore became Vice
President of Honeywell, Inc.'s Commercial Flight Systems Group, and in 1989 he became
President of Honeywell, Inc.'s Space and Aviation business. In 1990, he became
Executive Vice President and Chief Operating Officer of Honeywell, Inc.'s Industrial
and Space and Aviation businesses. In April 1993, he was elected President and Chief
Operating Officer. Mr. Moore serves on the Boards of Directors of Reynolds Metals
Company, Cordant Technologies Inc., and Howmet Corporation.
R. GEOFFREY P. STYLES, age 69, served as Vice Chairman of the Royal Bank of Canada
R. G. P. STYLES until his retirement in December 1987. He is currently Chairman and a Director of
PHOTO Grosvenor International Holdings Ltd. Mr. Styles is also a Director of several Canadian
corporations, including Echo Bay Mines Ltd. and Onex Corporation, and was a Director of
The Royal Trust Company until his retirement in March 2000.
THOMAS A. WALTERMIRE, age 50, is Chairman of the Board, Chief Executive Officer, and
T. A. WALTERMIRE President. He has served as Chief Executive Officer since May 1999 and as Chairman of
PHOTO the Board since August 1999. From February 1998 to May 1999, Mr. Waltermire served as
President and Chief Operating Officer of the Company. From May 1997 to February 1998,
Mr. Waltermire served as Executive Vice President and Chief Operating Officer and from
October 1993 until May 1997 as Chief Financial Officer of the Company. Mr. Waltermire
joined the Company as Senior Vice President and Treasurer in March 1993 just prior to
the Company's initial public offering in April 1993. Prior to joining the Company, Mr.
Waltermire held various operating and financial positions with The B.F.Goodrich
Company.
FARAH M. WALTERS, age 55, is President and Chief Executive Officer of University
F. M. WALTERS Hospitals Health System and University Hospitals of Cleveland, and has served in these
PHOTO capacities since 1992. Ms. Walters joined University Hospitals in 1986. She held
positions of increasing responsibility until her appointment as Chief Executive Officer
in 1992. Ms. Walters is a Director of LTV Corporation, Kerr-McGee Corporation and
University HealthSystem Consortium in Chicago, Illinois.
</TABLE>
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COMMITTEES OF THE BOARD OF DIRECTORS; ATTENDANCE
The present members of the Audit Committee are Ms. Duff-Bloom and Messrs.
Campbell, Moore, and Styles. Mr. Styles serves as Chairperson of the Committee.
The Audit Committee meets with appropriate Company financial and legal personnel
and independent public accountants to review the internal controls of the
Company and its financial reporting. The Audit Committee recommends to the Board
of Directors the appointment of the independent public accountants to serve as
auditors in examining the corporate accounts of the Company. The Audit Committee
met four times during the last fiscal year.
The present members of the Compensation Committee are Mss. Duff-Bloom and
Walters and Messrs. Baker and Moore. Ms. Duff-Bloom serves as Chairperson of the
Committee. The Compensation Committee reviews and approves compensation and
benefits afforded the executive officers and highly-compensated personnel of the
Company. The Committee also has oversight responsibilities for all broad-based
compensation and benefit programs of the Company. The Compensation Committee met
five times during the last fiscal year.
The present members of the Nominating and Governance Committee are Ms.
Duff-Bloom and Messrs. Baker and Campbell. Mr. Campbell serves as Chairperson of
the Committee. The Nominating and Governance Committee recommends to the Board
of Directors candidates for nomination as directors of the Company. The
Nominating and Governance Committee is also authorized to recommend to the Board
of Directors a successor to the Chairman of the Board, Chief Executive Officer,
President and Chief Operating Officer, if any, of the Company and, together with
the Chief Executive Officer, to plan and monitor the development of candidates
for executive personnel positions reporting to the Chief Executive Officer. The
Nominating and Governance Committee met three times during the last fiscal year.
The present members of the Environmental, Health, and Safety Committee are
Messrs. Campbell, Moore, Patient, and Styles. Mr. Moore serves as Chairperson of
the Committee. The Environmental, Health, and Safety Committee exercises
oversight with respect to the Company's environmental, health, and safety
policies and practices and its compliance with related laws and regulations. The
Environmental, Health, and Safety Committee met twice during the last fiscal
year.
The present members of the Financial Policy Committee are Ms. Walters and
Messrs. Baker, Patient, and Styles. Mr. Baker serves as Chairperson of the
Committee. The Financial Policy Committee reviews the policies underlying the
Company's financial planning to assure adequacy and soundness of the Company's
capital plans, reviews proposed major financing activities prior to action by
the Board of Directors, and reviews methods under consideration by the Company
for financing proposed major investments prior to action by the Board of
Directors. The Financial Policy Committee met twice during the last fiscal year.
During the last fiscal year, each incumbent Director attended at least 75%
of the meetings of the Board of Directors and of the Committees on which he or
she served.
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COMPENSATION OF DIRECTORS
The Company pays Directors unaffiliated with the Company an annual retainer
of $25,000, quarterly in arrears, and annually grants to such Directors
unrestricted stock under the 1999 Incentive Stock Plan equal to $15,000. The
Company grants the stock quarterly and determines the number of shares to be
granted by dividing the dollar value by the arithmetic average of the high and
low stock price on the last trading day of each quarter. The Company also pays
fees of $1,000 for each Board and Committee meeting attended. In addition, the
Chairperson of each Committee receives a fixed annual retainer of $3,000. The
Company reimburses Directors for their expenses associated with each meeting
attended.
The Company grants each new Director who is not an employee of the Company
at the time of his or her initial election or appointment as a Director an
option to acquire 5,000 shares of Common Stock. Each Director receives an annual
Director option to acquire 1,500 shares of Common Stock upon re-election to the
Board, effective as of the date of the Annual Meeting.
Each Director who is not an employee of the Company may defer payment of
all or a portion of his or her compensation as a Director under the Company's
Non-Employee Directors' Deferred Compensation Plan (the "Directors' Deferred
Compensation Plan"). A Director may defer the compensation as cash or elect to
have it converted into Common Stock of the Company (at a rate equal to 125% of
the cash compensation amount). Deferred compensation, whether in the form of
cash or Common Stock, is held in trust for the participating Directors. Interest
earned on the cash amounts and dividends on the Common Stock accrue for the
benefit of the participating Directors. The Company encourages Directors to
defer at least 50% of their fees into Common Stock of the Company.
The Company will eliminate the existing Director retirement program as to
each unaffiliated Director who is elected at the 2000 Annual Meeting of
Stockholders. The Company will compensate these Directors for their accrued
service by buying out the current actuarial value of their retirement plan
benefits of 10% of their annual retainer for each full and partial year of
service. The Company will pay the computed value into the Directors' Deferred
Compensation Plan in Common Stock of the Company at a rate equal to 125% of the
cash compensation amount.
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OWNERSHIP OF COMMON STOCK
The following table shows the number of shares of Common Stock beneficially
owned on February 23, 2000 (including options exercisable within 60 days of that
date) by each of the Directors and nominees, each of the executive officers
named in the Summary Compensation Table on page 13, and by all Directors and
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES(1)
---- ---------
<S> <C>
James K. Baker.............................................. 24,305(2)(3)
Gale Duff-Bloom............................................. 12,556(2)(3)
J. Douglas Campbell......................................... 19,023(2)(3)
Donald P. Knechtges......................................... 111,027(2)(3)
V. Lance Mitchell........................................... 30,484(2)(3)
D. Larry Moore.............................................. 13,076(2)(3)
William F. Patient.......................................... 462,634(2)(3)
Gregory L. Rutman........................................... 122,258(2)(3)
R. Geoffrey P. Styles....................................... 11,000(2)(3)
Thomas A. Waltermire........................................ 203,896(2)(3)
Farah M. Walters............................................ 6,155(3)
W. David Wilson............................................. 92,910(2)(3)
12 Directors and executive officers as a group.............. 1,109,324(2)(3)
</TABLE>
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(1) Except as otherwise stated in the notes below, beneficial ownership of the
shares held by each individual consists of sole voting power and sole
investment power, or of voting power and investment power that is shared
with the spouse of the individual. It includes the approximate number of
shares credited to the named executives' accounts in the Company's
Retirement Savings Plan, a tax-qualified defined contribution plan. No
Director, nominee or executive officer, other than William F. Patient,
beneficially owned on February 23, 2000, more than 1% of the outstanding
Common Stock of the Company. As of that date, Mr. Patient beneficially owned
approximately 1.91% of the outstanding Common Stock and the Directors and
executive officers as a group beneficially owned approximately 4.50% of the
outstanding Common Stock.
(2) Includes shares with respect to which the following Directors and executive
officers have only sole voting power as follows: J.K. Baker, 16,305 shares;
G. Duff-Bloom, 4,556 shares; J.D. Campbell, 11,023 shares; D.P. Knechtges,
26,727 shares; V.L. Mitchell, 15,684 shares; D.L. Moore, 5,076 shares; W.F.
Patient, 80,118 shares; G.L. Rutman, 41,158 shares; R.G.P. Styles, 3,000
shares; T.A. Waltermire, 81,956 shares; F.M. Walters, 1,155 shares; W.D.
Wilson, 30,477 shares; and the Directors and executive officers as a group,
317,235 shares. With respect to Ms. Duff-Bloom and Messrs. Baker, Campbell,
and Moore, these shares are held under the Directors' Deferred Compensation
Plan.
(3) Includes shares the individuals have a right to acquire on or before April
23, 2000, as follows: each of the Directors upon the exercise of director
options, 8,000 shares, with the exception of Ms. Walters who has the right
to acquire 5,000 shares and Mr. Waltermire who is not eligible to receive
director options, D.P. Knechtges, 84,300 shares; V.L. Mitchell, 14,800
shares; W.F. Patient, 382,516 shares; G.L. Rutman, 81,100 shares; T.A.
Waltermire, 121,940 shares; W.D. Wilson, 62,433 shares; and the Directors
and executive officers as a group, 792,089 shares.
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The following table shows certain information with respect to all persons
who, as of February 23, 2000, were known by the Company to beneficially own more
than five percent of the outstanding shares of Common Stock of the Company based
on information provided in Schedule 13G filings with the Securities and Exchange
Commission (the "Commission"):
<TABLE>
<S> <C> <C>
FMR Corp. ............................................ 3,036,300(1) 12.81%
82 Devonshire Street
Boston, Massachusetts 02109
Harris Associates L.P................................. 2,026,750(2) 8.54%
Harris Associates, Inc.
Two North LaSalle Street
Suite 500
Chicago, Illinois 60602-3790
Harris Associates Investment Trust............... (2)
Two North LaSalle Street Suite 500
Chicago, Illinois 60602-3790
J.P. Morgan & Co. Incorporated........................ 1,500,075(3) 6.3%
60 Wall Street
New York, New York 10260
Mellon Financial Corp................................. 2,001,627(4) 8.44%
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258-0001
Boston Group Holdings, Inc....................... (4)
c/o Mellon Financial Corporation
One Mellon Center
Pittsburgh, Pennsylvania 15258
The Boston Company, Inc.......................... (4)
c/o Mellon Financial Corporation
One Mellon Center
Pittsburgh, Pennsylvania 15258
The Boston Company, Asset Management, Inc........ (4)
c/o Mellon Financial Corporation
One Mellon Center
Pittsburgh, Pennsylvania 15258
State Street Bank and Trust Company, as Trustee for
The Geon Company Retirement Savings Plan............ 2,490,755(5) 10.5%
225 Franklin Street
Boston, Massachusetts 02110
</TABLE>
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(1) As of February 11, 2000, based upon information contained in a Schedule 13G
filed with the Commission. FMR Corp., as a holding company reporting on
behalf of its subsidiaries, has sole voting power with respect to 12,300 of
these shares and has sole dispositive power with respect to all of these
shares.
(2) As of February 7, 2000, based upon information contained in a Schedule 13G
filed with the Commission. Of the 2,026,750 shares beneficially owned by
Harris Associates L.P. ("Harris"), as a registered investment adviser,
together with Harris Associates, Inc., Harris' sole general partner, Harris
has sole dispositive power with respect to 988,150 shares, shared
dispositive power with respect to 1,038,600 shares and shared voting power
with respect to all of these shares. Included in the 2,026,750 shares with
respect to which Harris has shared voting and investment power are 956,600
shares beneficially owned by the Harris Associates Investment Trust ("Harris
Trust"), through its various series. Harris Trust, a registered investment
company for which Harris serves as investment adviser, shares voting and
dispositive power with respect to these 956,600 shares with Harris.
(3) As of February 10, 2000, based upon information contained in a Schedule 13G
filed with the Commission. J.P. Morgan & Co. Incorporated, as a holding
company reporting on behalf of its subsidiaries, has sole voting power with
respect to 1,139,150 of these shares and has sole dispositive power with
respect to all of these shares.
(4) As of January 27, 2000, based upon information contained in a Schedule 13G
filed with the Commission. Mellon Financial Corp., as a holding company
reporting on behalf of its subsidiaries, has sole voting power with respect
to 1,494,052 of these shares, shared voting power with respect to 160,775 of
these shares, sole dispositive power with respect to 1,766,752 of these
shares and shared dispositive power with respect to 212,375 of these shares.
Included in the 2,001,627 are 1,578,260 (6.65% of the outstanding Common
Stock of the Company) beneficially owned by its subsidiary, The Boston
Company, Inc., a holding company reporting on behalf of its subsidiaries.
The Boston Company, Inc. has sole voting power with respect to 83,900 of
these shares and shares dispositive power with respect to 135,500 of these
shares with Mellon Financial Corp.
(5) As of February 10, 2000, based upon information contained in a Schedule 13G
filed with the Commission. State Street Bank and Trust Company, as Trustee
for The Geon Company Retirement Savings Plan and for various collective
investment funds for employee benefit plans and other index accounts, as a
bank, has sole voting power with respect to 217,308 of these shares, shared
voting power with respect to 2,273,447 of these shares, sole dispositive
power with respect to 2,490,675 of these shares, and shared dispositive
power with respect to 80 of these shares.
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EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
currently comprised of Gale Duff-Bloom, its Chairperson, James K. Baker, D.
Larry Moore, and Farah M. Walters.
The Committee's responsibilities include, but are not limited to, reviewing
and approving executive compensation, including base salary, cash bonuses, and
stock incentive awards for the Chief Executive Officer and all other executive
officers of the Company, as well as oversight responsibilities for all broad-
based compensation and benefit programs of the Company.
GENERAL COMPENSATION PHILOSOPHY
The Committee believes that the total compensation package for executive
officers should be market-based and performance-oriented, tying a significant
amount of compensation to short and long-term financial and strategic
objectives, including increases in stockholder value. The Committee established
the following guiding principles for the Company's executive compensation
program:
- A significant portion of executive officers' total compensation will
depend on the Company's annual and long-term performance, including
creation of stockholder value.
- Non-cash compensation programs will be designed to provide
stock-based incentives which will encourage stock ownership by
executives in order to better align stockholder and executive
interests.
- Significant ownership of Company Common Stock by executive officers
will be encouraged.
EXECUTIVE COMPENSATION
BASE SALARIES
In 1999, the Company established salaries based on salaries of comparable
positions included in published surveys and a survey of a group of companies
provided by the Committee's independent executive compensation consultant, Pearl
Meyer & Partners, Inc. The survey prepared by Pearl Meyer & Partners, Inc.
includes companies that generally compete with the Company for executive talent
and from whom the Company may recruit future executives. This comparison group
also includes companies from many different industries and therefore differs
from the group of companies used in the performance graph appearing below under
the heading "Company Stock Performance" on page 19. The companies used in the
performance graph are generally the companies with which the Company competes
for capital and may be considered useful and appropriate for comparing the
Company's stock performance.
INCENTIVE COMPENSATION
Deduction Limitation on Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder ("Section 162(m)") preclude a publicly-held corporation from taking a
deduction for certain compensation in excess of $1 million paid
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or accrued with respect to certain executive officers. It is the Committee's
intent that the Company's executive compensation program be designed to allow
maximum possible deductibility of executive compensation by the Company.
The Company's Senior Executive Management Incentive Plan (the "Senior
Executive MIP") was originally submitted to stockholders for their approval at
the 1995 Annual Meeting and is being submitted to stockholders for their
reapproval at the 2000 Annual Meeting. The Senior Executive MIP provides for
awards that are wholly contingent on the attainment of performance goals
established by the Committee, eliminates the Committee's discretion to increase
the amount of incentive awards, and provides for administration by a committee
of outside directors. The Committee believes that the Senior Executive MIP has
in the past satisfied and will, subject to stockholder reapproval at the 2000
Annual Meeting, continue to satisfy the Internal Revenue Service's requirements
for "performance-based" compensation under Section 162(m). Under Section 162(m),
performance-based compensation is not subject to the deductibility limitation
under current Internal Revenue Service regulations.
Cash and Stock Incentives. The executive officers, including the Chief
Executive Officer, are eligible annually to receive bonus awards, consisting of
restricted stock or a combination of both restricted stock and cash, under the
Company's Senior Executive MIP, Management Incentive Plan ("MIP"), or 1999
Incentive Stock Plan. Each year the Committee establishes performance measures
to be used to determine an appropriate payout, if any, under the Senior
Executive MIP and the MIP. Target awards, stated as a percentage of salary, are
determined by the Committee at the beginning of the plan year, although the
Committee retains the discretion to reduce such award depending on an executive
officer's (including the Chief Executive Officer) individual performance and the
Company's performance in meeting established goals. The Senior Executive MIP and
the MIP also establish threshold performance levels below which no incentives
will be paid.
The 1999 Incentive Stock Plan includes provisions for the award of
performance-based compensation that would not be subject to the deductibility
limitations. The Committee will continue to monitor its compensation policy,
including compensation, if any, paid under the Senior Executive MIP, the MIP,
and the 1999 Incentive Stock Plan, for deductibility under Section 162(m).
The performance measures used for 1999 under the Senior Executive MIP and
the MIP were based on Company and business-unit operating income, certain
non-financial performance measures, and relative total return to stockholders,
as applicable to each participant. The Company's performance exceeded threshold
levels for each of the enumerated performance measures and, on average, was
approximately 118% of target. This compares favorably to 1998 performance which
was approximately 88% of target.
Under the terms of the Senior Executive MIP and the MIP, as more fully
described in footnote 1 to the Summary Compensation Table appearing on page 13,
a mandatory deferral of 40% of any award under the Senior Executive MIP or the
MIP to the executive officers, including the Chief Executive Officer, is made in
the form of restricted stock awarded under the 1999 Stock Incentive Plan.
Executive officers who receive awards under the Senior Executive MIP and the MIP
may elect to receive the balance of any such award in the form of restricted
stock, so that up to 100% of any award under the Senior Executive MIP or the MIP
may be paid in the form of restricted stock. To the extent that any
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award is paid in the form of restricted stock, that payment is enhanced by a 25%
premium, i.e., for every $100 otherwise payable under the Senior Executive MIP
to an executive, $125 worth of restricted stock is awarded to that executive.
With respect to 1999 awards to executive officers under the Senior Executive MIP
and MIP, approximately 52% of those awards were paid in the form of restricted
stock.
In 1998, the Committee granted long-term performance awards under the
1998-2000 Long-Term Incentive Plan. Under the 1998-2000 Long-Term Incentive
Plan, the Committee granted to executive officers incentive awards in the form
of Time-Vested Options, Performance Shares and Challenge Grant Stock
Appreciation Rights ("SARs"). Time-Vested Options are stock options that will
vest December 31, 2003, unless accelerated based upon the stock price
performance of the Company. Performance Shares are awards of Common Stock based
upon the Company's three-year performance ending December 31, 2000, relative to
targets approved by the Committee for cumulative normalized earnings per share
and relative total shareholder return. Such awards may be 0% to 200% of
established targets. Challenge Grant SARs are SARs that will vest only upon the
achievement of certain stock prices at specified times. The 1998-2000 Long-Term
Incentive Plan is intended to align the interests of the executive officers with
those of the Company and its stockholders and to encourage superior performance
over time.
CHIEF EXECUTIVE OFFICER
Mr. Patient received an incentive award of $310,000 in recognition of his
performance in the transformation of the Company in 1999 as well as the smooth
transition of the leadership of the Company to Mr. Waltermire.
Mr. Waltermire received a salary increase effective upon his becoming Chief
Executive Officer in May 1999. The Committee based the increase upon its review
of Mr. Waltermire's existing compensation arrangements, compensation of chief
executive officers of companies comparable to the Company, and the performance
of Mr. Waltermire and the Company.
Mr. Waltermire participates in the Senior Executive MIP under similar terms
and conditions as other executive officers and as described above. Based on
Company performance, including record earnings, and a review of Mr. Waltermire's
individual performance, Mr. Waltermire received an award of $440,000 under the
Senior Executive MIP. This award represents approximately 91% of his salary. As
more fully described in footnote 1 to the Summary Compensation Table appearing
on page 13, 100% of this amount was deferred in the form of restricted stock.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Gale Duff-Bloom, Chairperson
James K. Baker
D. Larry Moore
Farah M. Walters
February 3, 2000
12
<PAGE> 15
The following table sets forth the compensation received for the three
years ended December 31, 1999 by the Company's Chief Executive Officer and the
persons who were at December 31, 1999 the four other most highly paid executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- --------------------- ----------
OTHER OPTIONS/ LTIP ALL
ANNUAL RESTRICTED SARS PAYOUTS OTHER
NAME AND COMPEN- STOCK (# OF (# OF COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION(2) AWARDS(3) SHARES) SHARES)(4) SATION(5)
------------------ ---- ---------- ---------- --------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William F. Patient, Former 1999 $384,615 $310,000 $46,314 $ -0- $ -0- $ -0- $37,397
Chairman of the Board and 1998 623,269 500,000 53,570 253,000 105,000 10,921 61,397
Chief Executive Officer(6) 1997 580,000 350,000 79,639 -0- 36,000 -0- 51,100
Thomas A. Waltermire, 1999 522,576 550,000 40,553 -0- -0- -0- 57,693
Chairman of the Board, 1998 390,192 270,000 46,360 -0- 202,446 4,100 36,372
Chief Executive Officer 1997 298,173 182,500 39,736 -0- 11,700 -0- 26,151
and President(6)
W. David Wilson 1999 241,154 214,500 25,068 -0- -0- -0- 23,432
Vice President, Chief 1998 219,231 130,900 26,475 -0- 96,402 1,628 18,998
Financial Officer 1997 177,952 91,300 5,739 -0- 4,000 -0- 16,264
Donald P. Knechtges, 1999 239,711 187,000 35,462 -0- -0- -0- 22,964
Senior Vice President, 1998 232,115 137,500 59,243 -0- 96,402 3,546 41,647
Technology and Business 1997 222,500 114,400 30,330 -0- 9,800 -0- 37,942
Development
V. Lance Mitchell, 1999 239,038 174,375 64,335 -0- -0- -0- 22,742
Vice President, General 1998 213,654 140,625 20,030 -0- 96,402 1,470 19,510
Manager, Compounds 1997 154,610 72,300 5,456 -0- 6,300 -0- 11,904
Gregory L. Rutman, 1999 229,231 176,000 33,394 -0- -0- -0- 21,339
Vice President, General 1998 209,423 114,400 50,810 -0- 96,402 3,093 40,022
Counsel and Secretary 1997 195,000 87,750 35,196 -0- 7,000 -0- 36,660
</TABLE>
- ---------------
(1) The $310,000 payment to Mr. Patient in 1999 represents an incentive award he
received in recognition of his performance in the transformation of the
Company in 1999. All other amounts in this column represent the aggregate
bonus payments to the named executive under the Senior Executive MIP or the
MIP for 1999, 1998 and 1997. The Senior Executive MIP and the MIP provided
that a minimum of 40% of the named executives' bonus awards, if any, under
the plan would be paid in the form of restricted stock awarded under the
Company's incentive stock plans. The participant may also elect to receive
all or any portion of the balance in the form of restricted stock. For each
$1 of the bonus amount paid in the form of restricted stock, $1.25 worth of
restricted stock is awarded. The portion of the award, if any, not paid in
restricted stock is paid in cash. Under the terms of the restricted stock
award, the restricted stock awarded may not be transferred for the
three-year period following the date of award. In the event a participant
leaves the employ of the Company prior to the lapse of the restrictions
(other than by reason of death, disability or retirement), the participant
will forfeit up to 100% of the 25% premium received in respect of the award.
The amount of cash (including payments in respect of fractional shares) and
the market value and number of the shares
13
<PAGE> 16
of restricted stock received by the named executive officers, respectively,
in respect of the 1999 bonus payments for each of the named executive
officers is as follows: T.A. Waltermire, $13 and $549,987 (16,988 shares);
W.D. Wilson, $118,019 and $97,481 (3,011 shares); D.P. Knechtges, $102,013
and $84,984 (2,125 shares); V.L. Mitchell, $77,509 and $96,866 (2,992
shares); and G.L. Rutman, $96,001 and $79,999 (2,471 shares). For 1998, such
amounts were as follows: W.F. Patient, $9 and $499,991 (21,390 shares); T.A.
Waltermire, $19 and $269,981 (11,550 shares); W.D. Wilson, $71,411 and
$59,489 (2,545 shares); D.P. Knechtges, $74,995 and $62,505 (2,674 shares);
V.L. Mitchell, $62,505 and $78,119 (3,342 shares); and G.L. Rutman, $62,414
and $51,986 (2,224 shares). For 1997, such amounts were as follows: W.F.
Patient, $6 and $349,994 (14,973 shares); T.A. Waltermire, $11 and $182,489
(7,807 shares); W.D. Wilson, $49,809 and $41,491 (1,775 shares); D.P.
Knechtges, $62,414 and $51,986 (2,224 shares); V.L. Mitchell, $49,018 and
$23,283 (1,122 shares); and G.L. Rutman, $39,013 and $48,737 (2,085 shares).
(2) For 1999, amounts include tax gross-ups on personal benefits as follows:
W.F. Patient, $19,792; T.A. Waltermire, $15,602; W.D. Wilson, $9,548; D.P.
Knechtges, $13,065; V.L. Mitchell, $15,310; and G.L. Rutman, $12,606. For
1998, amounts include tax gross-ups on personal benefits as follows: W.F.
Patient, $14,566; T.A. Waltermire, $12,591; W.D. Wilson, $8,205; D.P.
Knechtges, $15,811; V.L. Mitchell, $6,900; and G.L. Rutman, $13,818. For
1997, amounts include tax gross-ups on personal benefits as follows: W.F.
Patient, $32,909; T.A. Waltermire, $15,447; W.D. Wilson, $1,741; D.P.
Knechtges, $12,284; V.L. Mitchell, $0; and G.L. Rutman, $9,548.
(3) In 1998, William F. Patient was awarded 11,000 shares of restricted stock
and 105,000 options in lieu of participation in the Company's 1998-2000
Long-Term Incentive Plan. Except as described in footnote 1, there were no
other awards of restricted stock in 1999, 1998 or 1997 to the named
executive officers other than those awarded under the Senior Executive MIP
or MIP.
(4) Amounts for 1998 represent the number of shares paid out to the named
executive on January 1, 1998 in respect of performance shares awarded to the
named executive in 1995 under the Company's 1995-1997 Long-Term Incentive
Plan. The number of shares awarded was based on the Company's achievement of
performance objectives specified under such plan for the three-year period
ended December 31, 1997, and are net of withholding taxes.
(5) Amounts for 1999 represent, respectively, the Company's cash contributions
on behalf of the named executives to the Company's Retirement Savings Plan,
amounts accrued under a benefit restoration plan providing for benefits in
excess of the amounts permitted to be contributed under the Retirement
Savings Plan (and amounts accrued with respect to the Senior Executive MIP
and MIP), and premium payments by the Company under a split dollar life
insurance program as follows: W.F. Patient, $9,600, $27,797, and $0; T.A.
Waltermire, $9,600, $13,364, and $0; W.D. Wilson, $9,600, $13,832, and $0;
D.P. Knechtges, $9,600, $13,364, and $0; V.L. Mitchell, $9,600, $13,142, and
$0; and G.L. Rutman, $9,600, $11,739, and $0. For 1998, such amounts are as
follows: W.F. Patient, $9,600, $51,797, and $0; T.A. Waltermire, $9,600,
$26,772, and $0; W.D. Wilson, $9,600, $9,398, and $0; D.P. Knechtges,
$9,600, $11,071, and $20,976; V.L. Mitchell, $9,600, $9,910, and $0; and
G.L. Rutman, $9,600, $7,802, and $22,620. For 1997, such amounts were as
follows: W.F. Patient, $9,000, $42,100, and $0; T.A. Waltermire, $9,000,
$17,151, and $0; W.D. Wilson, $9,500, $6,764, and $0; D.P. Knechtges,
$9,000, $7,966, and $20,976; V.L. Mitchell, $9,500, $2,404, and $0; and G.L.
Rutman, $9,500, $4,540, and $22,620.
14
<PAGE> 17
(6) Mr. Patient served as Chief Executive Officer until May 1999, and as
Chairman of the Board until August 1999. Mr. Waltermire began serving as
Chief Executive Officer in May 1999 and as Chairman of the Board in August
1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTION/SARS OPTIONS/SARS
AT FY-END AT FY-END
(# OF SHARES) ($) (2)
SHARES ACQUIRED --------------- --------------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (# OF SHARES) ($) (1) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
W. F. Patient........ 44,783 $672,591 382,516/35,000 $ 4,530,075/415,625
T. A. Waltermire..... 14,075 99,267 119,091/205,295 1,491,112/2,440,015
W. D. Wilson......... 4,094 36,985 61,533/97,302 808,259/1,156,136
D. P. Knechtges...... 10,000 172,500 81,901/98,801 968,469/1,175,061
V. L. Mitchell....... 0 0 13,300/97,902 113,225/1,163,711
G. L. Rutman......... 21,772 282,814 79,001/98,501 965,919/1,171,224
</TABLE>
- ---------------
(1) Represents the difference between the option exercise price and the last
sale price of a share of Common Stock as reported on the New York Stock
Exchange on the date prior to exercise.
(2) Based on the last sale price of a share of Common Stock of $32 1/2 as
reported on the New York Stock Exchange on December 31, 1999. The ultimate
realization of profit, if any, on the sale of Common Stock underlying the
option is dependent upon the market price of the shares on the date of sale.
RETIREMENT PENSIONS
The Company has in effect a pension plan for salaried employees which
provides pensions payable at retirement to each eligible employee. The plan
makes available a pension which is paid from funds provided through
contributions by the Company and contributions by the employee, if any, made
prior to 1972. The amount of an employee's pension depends on a number of
factors including Final Average Earnings ("FAE") and years of credited service
to the Company. The following chart shows the annual pension amounts currently
available to employees who retire with the combinations of FAE and years of
credited service shown in the chart, which should be read in conjunction with
the notes following the chart. As of January 1, 1989, the plan generally
provides a benefit of 1.15% of FAE times all years of pension credit plus 0.45%
of FAE in excess of covered compensation times years of pension credit up to 35
years. In addition, employees who were actively at work on December 31, 1989,
may receive an additional pension credit of 4 years (up to a maximum of 24
years) of pension credit. Benefits become vested after 5 years of service.
15
<PAGE> 18
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------------------
FINAL 15 20 25 30 35
AVERAGE ----------------- ------------------ ------- ------- -------
EARNINGS (1) (2) (1) (2)
- ---------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $21,768 $27,573 $ 29,025 $34,830 $36,281 $43,537 $50,793
$ 200,000 45,768 57,973 61,025 73,230 76,281 91,537 106,793
$ 300,000 69,768 88,373 93,025 111,630 116,281 139,537 162,793
$ 400,000 93,768 118,773 125,025 150,030 156,281 187,537 218,793
$ 500,000 117,768 149,173 157,025 188,430 196,281 235,537 274,793
$ 600,000 141,768 179,573 189,025 226,830 236,281 283,537 330,793
$ 700,000 165,768 209,973 221,025 265,230 276,281 331,537 386,793
$ 800,000 189,768 240,373 253,025 303,630 316,281 379,537 442,793
$ 900,000 213,768 270,773 285,025 342,030 356,281 427,537 498,793
$1,000,000 237,768 301,173 317,025 380,430 396,281 475,537 554,793
$1,100,000 261,768 331,573 349,025 418,830 436,281 523,537 610,793
$1,200,000 285,768 361,973 381,025 457,230 476,281 571,537 666,793
$1,300,000 309,768 392,373 413,025 495,630 516,281 619,537 722,793
$1,400,000 333,768 422,773 445,025 534,030 556,281 667,537 778,793
</TABLE>
- ---------------
(1) Assumes actively employed January 1, 1990 and after.
(2) Includes an additional 4 years of service applicable to pre-January 1, 1990
employees.
(3) The pension plan uses either a "final average earnings" formula or a
"service credit" formula to compute the amount of an employee's pension,
applying the formula which produces the higher amount. The above chart was
prepared using the FAE formula, since the service credit formula would
produce lower amounts than those shown. Under the FAE formula, a pension is
based on the highest four consecutive calendar years of an employee's
earnings. Earnings include salary, overtime pay, holiday pay, vacation pay,
and certain incentive payments including annual cash bonuses, but exclude
awards under long-term incentive programs and the Company match in the
Company savings plans. As of December 31, 1999, final average earnings for
the individuals named in the Summary Compensation Table were as follows:
W.F. Patient -- $842,548.20; T.A. Waltermire -- $495,533.80; D.P.
Knechtges -- $319,096.22; W.D. Wilson -- $258,219.14; G.L. Rutman --
$279,807.73; and V.L. Mitchell -- $247,005.80.
(4) In computing the pension amounts shown, it was assumed that an employee
would retire at age 65 and elect to receive a five year certain and
continuous annuity under the pension plan and that the employee would not
elect any of the available "survivor options," which would result in a lower
annual pension. Pensions are not subject to any reduction for Social
Security or any other offset amounts.
(5) As of December 31, 1999, the six executive officers named in the cash
compensation table had the following years of credited service under the
pension plan or subsidiary plans or supplemental agreements: W.F. Patient,
10 years, 2 months; T.A. Waltermire, 25 years, 6 months; W.D. Wilson,
16
<PAGE> 19
21 years, 11 months; D.P. Knechtges, 34 years, 6 months; V.L. Mitchell, 10
years, 7 months; and G.L. Rutman, 25 years, 2 months.
(6) W. F. Patient became vested in benefits immediately and earned an additional
benefit equal to 1.6 percent of his final average annual earnings for each
year with the Company. These additional benefits are payable under an
unfunded, non-qualified supplemental plan.
(7) Benefits shown in the chart that exceed the level of benefits permitted to
be paid from a tax-qualified pension plan under the Code, and certain
additional benefits not payable under the qualified pension plan because of
certain exclusions from compensation taken into account thereunder, are
payable under an unfunded, non-qualified supplemental pension plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, file reports
of ownership and changes in ownership with the Commission. Executive officers,
directors and greater than 10% stockholders are required by Commission rules to
furnish the Company with copies of all forms they file. Based solely on its
review of the copies of such forms received by the Company and written
representations from certain reporting persons, the Company believes that,
during fiscal year 1999, all Section 16(a) filing requirements applicable to its
executive officers, directors and 10% stockholders were satisfied except as
follows: Mr. Waltermire failed to file Form 5 reports for 1995, 1996 and 1999
concerning a total of 28 transactions in which he gifted an aggregate of 670
Company shares to charity.
MANAGEMENT CONTINUITY AGREEMENTS
The Company has entered into management continuity agreements (the
"Continuity Agreements") with certain employees, including all of the executive
officers named in the Summary Compensation Table. The purpose of the Continuity
Agreements is to encourage the individuals to carry out their duties in the
event of the possibility of a "change of control" of the Company. The Continuity
Agreements do not provide any assurance of continued employment unless there is
a change of control. The Continuity Agreements generally provide for a two-year
period of employment commencing upon a change of control, which generally is
deemed to have occurred if: (i) any person becomes the beneficial owner of 20%
or more of the combined voting power of the Company's outstanding securities
(subject to certain exceptions), (ii) there is a change in the majority of the
Board of Directors of the Company, (iii) certain corporate reorganizations occur
where the existing stockholders do not retain more than 60% of the common stock
and combined voting power of the outstanding voting securities of the surviving
entity, or (iv) there is stockholder approval of a complete liquidation or
dissolution of the Company.
The Continuity Agreements generally provide for the continuation of
employment of the individuals in the same positions and with the same
responsibilities and authorities that they possessed immediately prior to the
change of control and with the same benefits and level of compensation,
including average annual increases. If the individual's employment is terminated
by the Company or its successor for reasons other than "cause" or is terminated
voluntarily by the individual for "good reason" (in each case as defined in the
Continuity Agreements), generally the individual would be entitled to receive:
17
<PAGE> 20
(i) compensation for a period of up to three years, commencing at the
individual's base salary rate in effect at the time of the termination and
including average annual increases thereafter, (ii) the continuation of all
employee benefits and perquisites, and (iii) a lump sum equal to the total of
(A) up to three times the individual's annualized incentive compensation, which
shall be equal to the greater of that paid with respect to the calendar year
prior to such termination or the "target incentive amount" (as defined in the
Continuity Agreements) for the year of the change of control or the year of
termination and (B) up to three times the "calculated market value" of the
"restricted stock" and "performance stock" awarded to the individual in the
Company's most recent "plan cycle" (in each case as defined in the Continuity
Agreements). The Continuity Agreements also provide for a tax gross-up for any
excise tax due under the Code for any payments or distributions made under the
agreements.
18
<PAGE> 21
COMPANY STOCK PERFORMANCE
Following is a graph which compares the five-year cumulative return from
investing $100 on December 31, 1994, in each of shares of the Common Stock of
the Company, the S&P 500 index, and the S&P Chemicals index, with dividends
assumed to be reinvested when received. The S&P Chemicals index includes a broad
range of chemical manufacturers. Because of the relationship of the Company's
business within the chemical industry, it is felt that comparison with this
broader index is also appropriate.
COMPARISON OF CUMULATIVE TOTAL RETURN
TO SHAREHOLDERS
DECEMBER 30, 1994 TO DECEMBER 31, 1999 [CHART]
<TABLE>
<CAPTION>
THE GEON COMPANY S&P CHEMICALS S&P 500
---------------- ------------- -------
<S> <C> <C> <C>
12/30/94 $ 100 $ 100 $ 100
12/29/95 $ 90.75 $130.53 $137.54
12/31/96 $ 74.65 $169.52 $169.09
12/31/97 $ 90.99 $209.31 $225.48
12/31/98 $ 91.71 $195.85 $289.93
12/31/99 $131.94 $232.45 $350.93
</TABLE>
19
<PAGE> 22
PROPOSAL TO REAPPROVE THE GEON COMPANY SENIOR EXECUTIVE
MANAGEMENT INCENTIVE PLAN
SUMMARY
The purpose of this proposal is to reapprove The Geon Company Senior
Executive MIP. Awards under the Senior Executive MIP are intended to qualify as
performance-based compensation under Section 162(m) of the Code.
DISCUSSION
The Senior Executive MIP was originally approved by stockholders at the
1995 Annual Meeting. Under Section 162(m), plans such as the Senior Executive
MIP must be reapproved by stockholders every five years. On February 3, 2000,
the Compensation Committee adopted the Senior Executive MIP as amended and the
Board of Directors recommended that the Senior Executive MIP be reapproved by
the stockholders at the 2000 Annual Meeting. A copy of the Senior Executive MIP
as amended is attached as Exhibit A to this Proxy Statement and the following
summary of the material terms of the Senior Executive MIP is qualified in its
entirety by reference to that Exhibit.
Section 162(m) of the Code provide that certain employee compensation for
years beginning after December 31, 1993 in excess of $1,000,000 will not be
deductible for federal income tax purposes. Section 162(m), however, enumerates
certain types of compensation which will not be subject to the $1,000,000
limitation, including "performance-based" compensation. Among other
requirements, 162(m) requires that in order for compensation to qualify as
performance-based, the material terms of the compensation and the performance
goals on which payment of such compensation is conditioned must be disclosed to
and approved by the stockholders before payment is made.
The Company's Senior Executive MIP and the performance goals thereunder
must be reapproved by stockholders in order for the awards under the existing
Senior Executive MIP to qualify as "performance-based" compensation under
Section 162(m). In the event that stockholders do not reapprove the Senior
Executive MIP, no awards will be made under the Senior Executive MIP, although
other incentive awards may be paid in the future at the discretion of the
Compensation Committee.
The objective of the Senior Executive MIP is to make incentive awards to
key executives under guidelines set by the Compensation Committee without
limiting the Company's ability to deduct that expenditure for federal income tax
purposes. If reapproved by the stockholders, the Senior Executive MIP will be
effective for the fiscal year that began on January 1, 2000 and for each fiscal
year thereafter until terminated.
The Compensation Committee will administer the Senior Executive MIP. The
Compensation Committee is authorized to interpret the Senior Executive MIP and
to establish and maintain guidelines necessary or desirable for its
administration. The Compensation Committee may delegate to the Chief Executive
Officer or other officers authority to perform such functions, including
administrative functions. The Compensation Committee will retain exclusive
authority to determine matters relating to awards to the Chief Executive Officer
and other key executive personnel that are intended to qualify as perform-
20
<PAGE> 23
ance-based compensation under Section 162(m) of the Code. The Senior Executive
MIP will remain in effect until terminated by the Compensation Committee.
Participation in the Senior Executive MIP will be available to key
executive personnel selected by the Compensation Committee who have the
potential to influence significantly and positively the performance of the
Company.
To be eligible for participation in any particular year during the term of
the Senior Executive MIP (a "Plan Year"), a key executive must have assumed the
duties of an incentive-eligible position and have been selected for
participation in the Senior Executive MIP within 90 days of the commencement of
the applicable Plan Year. Notwithstanding these requirements, the Compensation
Committee may make awards to the following employees without complying with the
timing and other related limitations set forth in the Senior Executive MIP:
- any eligible employee whom the Compensation Committee determines is
not a covered employee (a "covered employee" is an officer whom the
Compensation Committee deems likely to have compensation in a given
Plan Year which would be non-deductible by the Company under Section
162(m) if the Company did not comply with the provisions of such
section), and
- newly hired or promoted executives
During each Plan Year, participants will be assigned to an incentive
category based on organizational level, business unit or function, and potential
impact on Company results. Each incentive category will be assigned a
corresponding level of incentive opportunity, stated as a percentage of base
salary (up to a maximum of 200%), that will be available to the participant (an
"Incentive Percentage"). With respect to covered employees, unless the
Compensation Committee specifies otherwise, the base salary upon which the
Incentive Percentage is based will be the base salary in effect at the time the
Compensation Committee establishes the Incentive Percentage. The Compensation
Committee will approve category assignments for each plan participant within 90
days of the commencement of the applicable Plan Year. In determining category
assignments other than that of the Chief Executive Officer, the Compensation
Committee will consider the recommendations of the Chief Executive Officer.
The Compensation Committee will use measures of Company performance for
each Plan Year ("Performance Measures") to determine the performance goal
targets ("Performance Targets"). If the Compensation Committee so determines, a
Performance Target may include a minimum threshold performance level, a maximum
performance level, and one or more intermediate performance levels or ranges,
with target award levels or ranges that correspond to the respective performance
levels or ranges included in the Performance Target. The Performance Measures
will include one or more of the following, as determined by the Compensation
Committee for each Plan Year: (i) total return to stockholders, (ii) cash flow,
(iii) return on equity, (iv) Company created income (for example, 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, (xii) safety
and/or environmental performance, (xiii) electronic commerce performance, and
(xiv) specific measures related to other forms of marketing or sales (the last
two Performance Measures are in addition to those previously included in the
Senior Executive MIP). The Compensation Committee
21
<PAGE> 24
will determine the actual Performance Measures and the Performance Targets
within 90 days of the commencement of each applicable Plan Year.
The Compensation Committee will weight the Performance Measures each year
to reflect their relative importance to the Company in the applicable Plan Year.
The weightings may vary from year to year and will determine the portion of the
target incentive amount allocated to each Performance Measure.
The amount of the incentive award available to a participant under the
Senior Executive MIP will be the product of the participant's salary and the
Incentive Percentage, as adjusted. The amount will be adjusted to reflect the
weightings assigned to the Performance Measures with respect to which the
Performance Targets were met. If the Compensation Committee established more
than one level or range of performance for any Performance Target, the amount
will also be adjusted to reflect the level or range of performance achieved. The
maximum annual dollar award paid to any participant for any one Plan Year will
be $2,000,000 (the Senior Executive MIP previously had a $1,000,000 maximum). No
awards will be paid under the Senior Executive MIP if none of the Performance
Targets is achieved.
Notwithstanding the amount of any available incentive award under the
Senior Executive MIP, the Compensation Committee may, in its discretion, reduce
or eliminate the amount of any incentive award actually paid to any participant
based on individual performance or otherwise. In no event may the Compensation
Committee increase the amount of any available incentive award to a covered
employee provided for under the Senior Executive MIP.
Promptly following the end of each Plan Year, the Compensation Committee
will meet to certify achievement by the Company of the Performance Targets for
the applicable Plan Year and, if such goals have been achieved, to review
management recommendations and approve actual awards under the Senior Executive
MIP. In a manner conforming to applicable regulations under Section 162(m) and
prior to payout of each award granted to a covered employee, the Compensation
Committee shall certify in writing that the Performance Targets relating to the
award and other material terms of the award upon which payout was conditioned
have been satisfied.
Awards will be paid as soon as practicable after the Performance Targets
for the applicable Plan Year have been certified by the Compensation Committee.
The Compensation Committee may determine, within 90 days of the commencement of
the applicable Plan Year, that a portion of the participant's award will be paid
in the form of the Company's restricted stock or stock equivalent units.
Participants will also have the opportunity, within 120 days of the commencement
of the applicable Plan Year, to elect additional optional deferrals so that they
may receive up to 100% of their award, if any, as restricted stock or stock
equivalent units. Any award paid as restricted stock or stock equivalent units
will be enhanced with a 25% "premium", i.e. for every $100 deferred, the
participant will receive $125 in restricted stock or stock equivalent units. The
Company will determine the restrictions on the restricted stock or stock
equivalent units at the time awards are approved in accordance with the
provisions of the Company's 1999 Incentive Stock Plan or any successor plans
thereto. Any portion of a participant's award not paid as restricted stock or
stock equivalent units will be paid in cash. Notwithstanding other provisions in
the Senior Executive MIP, the Compensation Committee may determine to pay out
portions of the award that otherwise would be payable as restricted stock or
stock equivalent units in
22
<PAGE> 25
cash (without payment of any "premium") in any circumstance deemed appropriate
by the Compensation Committee.
The Senior Executive MIP contains a provision providing that upon a "change
in control" (as defined in the Senior Executive MIP) of the Company each
participant in the Senior Executive MIP shall be entitled to an interim payment.
The interim payment (determined with reference to the number of months elapsed
during the Plan Year until the change in control) shall be based upon the
greater of the payments, if any, under the Senior Executive MIP for the year
prior to the year in which the change in control occurs or the incentive
opportunity in effect for the year in which the change in control occurs
(assuming all Performance Targets were achieved at the maximum performance
level). Any such interim payment shall be offset against any later payment to
which a participant is entitled under the Senior Executive MIP in the Plan Year
in which the change in control occurred. Under the current regulations, any such
payment would, however, be subject to Section 162(m).
The Senior Executive MIP may be amended by the Compensation Committee to
the extent required in order to comply with the provisions of Section 162(m).
The Board believes that reapproval of the Senior Executive MIP will benefit
the Company and its stockholders by enabling the Company to continue to attract
and retain outstanding key executive employees who can contribute to the strong
performance of the Company without limiting the Company's ability to deduct
compensation awarded under the Senior Executive MIP for federal income tax
purposes.
The Board recommends a vote "FOR" reapproval of the Senior Executive MIP.
Reapproval of the Senior Executive MIP requires the affirmative vote of the
holders of at least a majority of the votes cast (including abstentions) on this
proposal.
INDEPENDENT AUDITORS
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting of Stockholders. The representative will be given an opportunity
to make a statement if desired and to respond to questions regarding Ernst &
Young LLP's examination of the Company's consolidated financial statements and
records for the year ended December 31, 1999.
GENERAL
VOTING AT THE MEETING
Stockholders of record at the close of business on February 23, 2000, are
entitled to vote at the meeting. On that date, a total of 23,864,222 shares of
Common Stock were outstanding. Each share is entitled to one vote.
Holders of shares of Common Stock have no cumulative voting rights.
Directors are elected by a plurality of the votes of shares present, in person
or by proxy, and entitled to vote on the election of directors at a meeting at
which a quorum is present. The affirmative vote of a majority of the shares of
Common Stock represented and voting, in person or by proxy, at any meeting of
stockholders at which a
23
<PAGE> 26
quorum is present is required for action by stockholders on any matter,
including the ratification of the appointment of independent auditors, unless
the vote of a greater number of shares or voting by classes or series is
required under Delaware law.
Votes may be cast in favor of or withheld from each nominee in the election
of directors. Votes that are withheld will be excluded entirely from the vote
and will have no effect. Brokers holding shares in street name that do not
receive instructions are entitled to vote on the election of directors. Under
Delaware law, a broker nonvote will have no effect on the outcome of the
election of directors.
If any of the nominees listed on pages 3 through 4 becomes unable or
declines to serve as a director, each properly signed proxy card will be voted
for another person recommended by the Board of Directors. However, the Board has
no reason to believe that this will occur.
The Board of Directors knows of no other matters that will be presented at
the meeting. However, if other matters do properly come before the meeting, the
persons named in the proxy card will vote on these matters in accordance with
their best judgment.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal to be considered for
inclusion in next year's Proxy Statement should send the proposal to the Company
addressed to the Secretary of the Company so that it is received on or before
November 15, 2000. The Company suggests that all proposals be sent by certified
mail, return receipt requested.
The Company's proxies for the 2001 Annual Meeting of Stockholders will
confer discretionary authority to vote on any matter if the Company does not
receive timely written notice of such matter in accordance with Section 9 of
Article I of the Company's By-Laws. In general, Section 9 provides that, to be
timely, a stockholder's notice must be delivered to the principal executive
offices of the Company not less than 60 nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting.
The Company's 2000 Annual Meeting of Stockholders will be held on April 19,
2000. Sixty days prior to the first anniversary of the 2000 Annual Meeting will
be February 18, 2001, and 90 days prior to the first anniversary of such meeting
will be January 19, 2001. For business to be properly requested by a stockholder
to be brought before the 2001 Annual Meeting of Stockholders, the stockholder
must comply with all of the requirements of Section 9, not just the timeliness
requirements set forth above.
PROXY SOLICITATION
The Company is making this proxy solicitation and will bear the expense of
preparing, printing, and mailing this Notice and Proxy Statement. In addition to
requesting proxies by mail, officers and regular employees of the Company may
request proxies by telephone or in person. The Company has retained Morrow &
Co., Inc., 445 Park Avenue, New York, NY 10022, to assist in the solicitation
for an estimated fee of $5,000 plus reasonable expenses. The Company will ask
custodians, nominees, and fiduciaries to send proxy material to beneficial
owners in order to obtain voting instructions. The Company will, upon request,
reimburse them for their reasonable expenses for mailing the proxy material.
24
<PAGE> 27
The Company's Annual Report to Stockholders, including consolidated
financial statements for the year ended December 31, 1999, is being mailed to
stockholders of record with this Proxy Statement.
For the Board of Directors
The Geon Company
/s/ Gregory L. Rutman
Gregory L. Rutman, Secretary
March 15, 2000
25
<PAGE> 28
March 15, 2000
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at The Forum Conference and Education Center, 1375 E. Ninth Street,
Cleveland, Ohio, at 9:00 a.m. on Wednesday, April 19, 2000.
The Notice of Annual Meeting of Stockholders and the Proxy Statement describe
the matters to be acted upon at the meeting.
Regardless of the number of shares you own, your vote on these matters is
important. Whether or not you plan to attend the meeting, we urge you to mark
your choices on the attached proxy card and to sign, date, and return it in the
envelope provided. If you decide to vote in person at the meeting, you will have
an opportunity to revoke your and vote personally by ballot.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE BOX PROVIDED ON THE PROXY
CARD.
We look forward to seeing you at the meeting.
THOMAS A.WALTERMIRE
Chairman of the Board,
Chief Executive Officer
and President
Detach Proxy Card Here
- -
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the Director nominees listed in
Item 1 and FOR the reapproval of the Senior Executive Management Incentive Plan
in Item 2
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
term to expire at next listed below for all nominees listed below.
Annual Meeting.
Nominees: James K. Baker, Gale Duff-Bloom, J. Douglas Campbell, D. Larry Moore, R. Geoffrey P. Styles, Thomas A. Waltermire,
and Farah M. Walters.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name in
the space provided below.)
* Exceptions:
-------------------------------------------------------------------------------------------------------------------
2. Reapproval of The Geon Company Senior Executive Management Incentive Plan In their discretion, the Proxies are authorized
to vote upon such other business as may properly
come before the meeting or any adjournment
thereof and matters incident to the conduct of
the meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Change of Address and [ ] I Will Attend [ ]
or Comments Mark Here the Meeting
Please sign exactly as the name appears
hereon.When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer and affix
corporate seal. If a partnership,
please sign in partnership name by
general partner.
Dated: , 2000
---------------------------
(SEAL)
----------------------------------
Signature
(SEAL)
----------------------------------
Signature if held jointly
Votes MUST be indicated X
Please mark, sign, date and return this proxy promptly using the enclosed envelope. (x) in Black or Blue ink.
</TABLE>
PLEASE DETACH HERE
You Must Detach This Portion of the Proxy Card
- Before Returning it in the Enclosed Envelope -
<PAGE> 29
- --------------------------------------------------------------------------------
THE GEON COMPANY
PROXY
ANNUAL MEETING OF STOCKHOLDERS, APRIL 19, 2000
This Proxy is Solicited on Behalf of the Corporation's Board of Directors
The undersigned hereby appoints Thomas A. Waltermire and Gregory L.
Rutman, and each of them jointly and severally, Proxies, with full power of
substitution, to vote, as designated on the reverse side, all shares of Common
Stock of The Geon Company held of record by the undersigned on February 23,
2000, at the Annual Meeting of Stockholders to be held on April 19, 2000, or
any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
TO SERVE AS DIRECTORS AND "FOR" THE REAPPROVAL OF THE SENIOR EXECUTIVE
MANAGEMENT INCENTIVE PLAN. The shares represented by this Proxy will be voted as
specified on the reverse side. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED ON
THE REVERSE SIDE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF NOMINEES
SPECIFIED IN ITEM 1, and "FOR" THE REAPPROVAL OF THE SENIOR EXECUTIVE MANAGEMENT
INCENTIVE PLAN IN ITEM 2.
(Continued and to be dated and signed on the reverse side.)
THE GEON COMPANY
P.O. BOX 11343
NEW YORK, N.Y. 10203-0343
<PAGE> 30
EXHIBIT A
THE GEON COMPANY
SENIOR EXECUTIVE MANAGEMENT INCENTIVE PLAN
1. PURPOSE. The Geon Company Senior Executive Management Incentive Plan
(the "Senior Executive MIP") has been established to provide opportunities to
certain key executive personnel to receive incentive compensation as a reward
for high levels of performance above the ordinary performance standards
compensated by base salary, and for their contributions to strong performance of
the Company. The Senior Executive MIP is designed to provide a competitive level
of performance-based incentive compensation when all relevant performance
objectives are achieved.
2. ADMINISTRATION. The Senior Executive MIP will be administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee is authorized to interpret the Senior Executive MIP and to establish
and maintain guidelines necessary or desirable for the administration of the
Senior Executive MIP. Decisions and determinations of the Committee shall be
binding on all persons claiming rights under the Senior Executive MIP. The
Committee may delegate to the Chief Executive Officer or other officers, subject
to such terms as the Committee shall determine, authority to perform such
functions, including administrative functions, except that the Committee shall
retain exclusive authority to determine matters relating to awards to the Chief
Executive Officer and other key executive personnel that are intended to qualify
as performance-based compensation under Section 162(m) of the Internal Revenue
Code (the "Code").
3. ELIGIBILITY.
(a) Participation in the Senior Executive MIP will be limited to those key
executive personnel selected by the Committee who have the potential to
influence significantly and positively the performance of the Company.
(b) To be eligible for participation in any particular year during the term
of the Senior Executive MIP (a "Plan Year"), a key executive must have assumed
the duties of an incentive-eligible position and have been selected for
participation in the Senior Executive MIP within 90 days of the commencement of
the applicable Plan Year. The foregoing and other provisions of the Plan
notwithstanding, the Committee may select any eligible employee who the
Committee determines is not a "covered employee" in a given Plan Year to receive
an award under the Plan without complying with the timing and other limitations
set forth in Sections 3(b), 4(b), 5 and 8(a). The Committee may also make awards
to newly hired or newly promoted executives without compliance with such timing
and other limitations, which awards may be based on performance during less than
the full Plan Year. For purposes of the Plan, a "covered employee" means an
officer who the Committee deems likely to have compensation for the Plan Year
which would be non-deductible by the Company under Code Section 162(m) if the
Company did not comply with the provisions of Code Section 162(m) and the
regulations thereunder with respect to such compensation.
-1-
<PAGE> 31
4. PARTICIPANT CATEGORIES; TARGET AWARD LEVELS.
(a) For each Plan Year, each participant will be assigned to an incentive
category based on organizational level, business unit or function, and potential
impact on Company results. Each incentive category will be assigned a
corresponding target level of incentive opportunity ("Incentive Percentage")
stated as a percentage of base salary (up to a maximum of 200%) that will be
available to the participant upon achievement of the Performance Targets (as
hereinafter defined) for the respective Performance Measures (as hereinafter
defined) for the applicable Plan Year. In the case of a covered employee, unless
the Committee specifies a separate maximum award amount that may be earned, the
base salary upon which the Incentive Percentage is based will be that in effect
at the time the Committee establishes the Incentive Percentage.
(b) Category assignments for each Plan Year will be approved by the
Compensation Committee within 90 days of the commencement of the applicable Plan
Year. In determining category assignments other than that of Chief Executive
Officer, the Committee will consider the recommendations of the Chief Executive
Officer of the Company.
5. PERFORMANCE MEASURES AND TARGETS
(a) Within 90 days of the commencement of each applicable Plan Year, the
Committee shall determine the performance goal targets ("Performance Targets")
applicable to the measures of Company and/or business unit performance
("Performance Measures") which must be achieved in order for awards to be paid
under the Senior Executive MIP. If the Committee so determines, a Performance
Target may include a minimum threshold performance level, a maximum performance
level, and one or more intermediate performance levels or ranges, with target
award levels or ranges that will correspond to the respective performance levels
or ranges included in the Performance Target. The Performance Measures will
include one or more of the following, as determined by the Committee for each
Plan Year: (i) total 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, (xii) safety
and/or environmental performance, (xiii) electronic commerce performance, and
(xiv) specific measures related to other forms of marketing or sales. The
foregoing terms shall have any reasonable definitions that the Committee may
specify.
(b) The Performance Measures selected by the Committee for each Plan Year
will be weighted by the Committee to reflect their relative importance to the
Company in the applicable Plan Year. The weightings of the Performance Measures
shall also be determined by the Committee within 90 days of the commencement of
each applicable Plan Year.
6. CERTIFICATION OF ACHIEVEMENT. Promptly following the end of each Plan
Year the Committee will meet to certify achievement by the Company of the
Performance Targets for the applicable Plan Year and, if such goals have been
achieved, to review management recommendations and approve actual awards under
the Senior Executive MIP. The Committee shall certify in writing, in a manner
conforming to applicable regulations under Section 162(m), prior to payout of
each award granted to a covered employee, that the Performance Targets relating
to the award and other material terms of the award upon which payout was
conditioned have been satisfied.
-2-
<PAGE> 32
7. DETERMINATION OF AWARDS. The amount of incentive awards available for
payment to a participant under the Senior Executive MIP will be the product of
the participant's salary and the Incentive Percentage, adjusted to reflect the
weightings assigned to the Performance Measures with respect to which the
Performance Targets were met and further adjusted, in the case of any
Performance Target for which the Committee determined more than one level or
range of performance, to reflect the level or range of performance achieved;
provided that the maximum annual dollar award (after giving effect to the 25%
premium for restricted stock deferrals provided for in Section 8) paid to any
participant for any one Plan Year will be $2,000,000. No awards will be paid
under the Senior Executive MIP if none of the Performance Targets is achieved.
Notwithstanding the amount of any available incentive award under the Senior
Executive MIP, the Committee may, in its discretion, reduce or eliminate the
amount of any incentive award actually paid to a participant based on individual
performance or otherwise. In no event may the Committee increase the amount of
any available incentive award to a covered employee provided for under the
Senior Executive MIP.
8. PAYMENT OF AWARDS.
(a) Awards will be paid as soon as practicable after approval by the
Committee. The Committee may determine, within 90 days of the commencement of
the applicable Plan Year, that a portion of the participant's award will be paid
in the form of restricted stock or stock equivalent units (the "Basic
Deferral"). Participants will also have the opportunity to elect, within 120
days of the commencement of the applicable Plan Year, additional optional
deferrals so that they may receive up to 100% of their award, if any, as
restricted stock or stock equivalent units.
(b) Any award paid as restricted stock or stock equivalent units will be
enhanced with a 25% "premium", i.e. for every $100 deferred, the participant
will receive $125 in restricted stock or stock equivalent units. Restrictions on
the restricted stock or stock equivalent units will be determined by the
Committee at the time awards are approved in accordance with the provisions of
the Company's Incentive Stock Plan. The number of shares of restricted stock to
be delivered or stock equivalent units to be credited to a participant in
respect of his or her incentive award under the Senior Executive MIP shall be
determined by dividing the dollar amount of the incentive award (after giving
effect to the 25% premium for restricted stock deferrals) under the Senior
Executive MIP by the fair market value of one share of the Company's common
stock on the first business day of the year immediately succeeding the Plan Year
in respect of which the incentive award is made.
(c) For purposes of the Senior Executive MIP, fair market value of one
share of stock shall be the mean of the high and low prices of the Company's
common stock on the relevant date (or, if no sale was made on such date, then on
the next preceding date on which such a sale was made) on the composite tape
reporting transactions in securities listed on The New York Stock Exchange. If
the Company's common stock is not listed on The New York Stock Exchange, the
fair market value of one share of stock shall be as determined by the Committee.
(d) Any portion of a participant's award not paid as restricted stock or
stock equivalent units will be paid in cash. Other provisions of this Section 8
notwithstanding, the Committee may determine to pay out portions of the award
that otherwise would be payable as restricted stock or stock equivalent units in
cash (without payment of any "premium") in any circumstance deemed appropriate
by the Committee.
-3-
<PAGE> 33
9. OTHER PROVISIONS.
(a) No awards under the Senior Executive MIP are to be considered earned
until received.
(b) Awards to participants who serve in incentive-eligible positions for
less than a full year, or who within a year serve in two or more positions that
are of significantly different size, may be adjusted on a pro rata basis.
(c) Neither the adoption of the Senior Executive MIP nor its submission to
the stockholders for approval shall be construed as creating any limitations on
the power of the Board of Directors or Committee to adopt such other incentive
arrangements, apart from the Senior Executive MIP, including incentive
arrangements and awards which do not qualify under Code Section 162(m), and such
other arrangements may be either applicable generally or only in specific cases.
10. PAYMENT UPON CHANGE IN CONTROL.
(a) Anything to the contrary notwithstanding, within five days following
the occurrence of a "Change in Control" (as defined in Attachment A hereto), the
Company shall pay to each participant an interim lump-sum cash payment (the
"Interim Payment") with respect to his or her participation in the Senior
Executive MIP. The amount of the Interim Payment shall equal the product of the
number of months, including fractional months, that have elapsed until the
occurrence of the Change in Control in the calendar year in which the Change in
Control occurs and one-twelfth of the greater of (i) the amount most recently
paid to each participant for a full calendar year, or (ii) the level of
incentive opportunity for each participant in effect prior to the Change in
Control for the calendar year in which the Change in Control occurs assuming
that all Performance Targets were achieved at the maximum performance level, in
each case under the terms of the Senior Executive MIP.
(b) The Interim Payment shall not reduce the obligation of the Company to
make a final payment under the terms of the Senior Executive MIP, but any
Interim Payment made shall be offset against any later payment required to be
made under the terms of the Senior Executive MIP for the Plan Year in which a
Change in Control occurs. In no event shall any participant be required to
refund to the Company, or have offset against any other payment due any
participant from or on behalf of the Company, all or any portion of the Interim
Payment.
11. AMENDMENT; TERM OF THE SENIOR EXECUTIVE MIP.
(a) The Senior Executive MIP may be amended by the Committee to the extent
required in order to comply with the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder regarding "performance-based" compensation.
(b) The Senior Executive MIP will, subject to stockholder approval at the
1995 Annual Meeting, be effective for the year beginning January 1, 1995 and
remain in effect thereafter until terminated by the Committee. The material
terms of the Senior Executive MIP will be subject to reapproval at the 2000
Annual Meeting, in accordance with the regulations under Section 162(m). In the
event shareholders do not reapprove such material terms, no awards will
thereafter be paid under the Senior Executive MIP for any Plan Year subsequent
to 1999.
-4-
<PAGE> 34
ATTACHMENT A
THE GEON COMPANY
SENIOR EXECUTIVE MANAGEMENT INCENTIVE PLAN
DEFINITION OF "CHANGE IN CONTROL"
For purposes of the Senior Executive Management Incentive Plan, "Change in
Control" shall mean:
- - 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 paragraph the following acquisitions shall not be
deemed to result in a Change of Control: (A) any acquisition directly from
the Company, (B) any acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (D) any acquisition
by any corporation pursuant to a transaction that complies with clauses (A),
(B) and (C) of the third paragraph 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 (A)
or (B) above, and such Person subsequently acquires 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 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
- - individuals who, as of the date hereof, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof 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
-5-
<PAGE> 35
of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
- - The consummation 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")
excluding, however, such a Business Combination pursuant to which (A) 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, (B) 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 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 (C) 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
- - approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
-6-
