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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:
[ ] 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
POLYONE CORPORATION
(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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[POLYONE LOGO]
POLYONE CORPORATION
NOTICE OF 2001
ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
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POLYONE CORPORATION
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
The Annual Meeting of Shareholders of PolyOne Corporation will be held at
The Forum Conference and Education Center, 1375 E. Ninth Street, Cleveland, Ohio
at 9:00 a.m. on Wednesday, May 2, 2001. The purposes of the meeting are:
1. To elect Directors; and
2. To consider and transact any other business that may properly come
before the meeting.
Shareholders of record at the close of business on March 15, 2001, are
entitled to notice of and to vote at the meeting.
For the Board of Directors
/s/ Gregory L. Rutman
GREGORY L. RUTMAN
Chief Legal Officer
March 28, 2001
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POLYONE CORPORATION
PROXY STATEMENT
The Board of Directors of PolyOne Corporation (the "Company") respectfully
requests your proxy for use at the Annual Meeting of Shareholders to be held on
May 2, 2001, 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. Common Shares 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. You may revoke your proxy before it is voted by giving notice
to the Company in writing or orally at the meeting. Persons entitled to direct
the vote of shares held by the following Company plans will receive a separate
voting instruction card: The Geon Retirement Savings Plan, The Geon Company
Share Ownership Trust, M.A. Hanna Company 401(k) and Retirement Plan, M.A. Hanna
Company Capital Accumulation Plan, DH Compounding 401(k) Plan and M.A. Hanna
Company Associates Ownership Trust. If you receive a separate voting instruction
card for one of these plans, you must sign and return the card as indicated on
the card in order to instruct the trustee on how to vote the shares held under
the plan. You may revoke your voting instruction card before the trustee votes
the shares held by it by giving notice in writing to the trustee.
Shareholders may also submit their proxies by telephone or over the
Internet. The telephone and Internet voting procedures are designed to
authenticate votes cast by use of a personal identification number. These
procedures allow shareholders to appoint a proxy to vote their shares and to
confirm that their instructions have been properly recorded. Instructions for
voting by telephone and over the Internet are printed on the proxy cards.
This Proxy Statement and the enclosed proxy card and, if applicable, the
voting instruction card, are being mailed to shareholders on or about March 28,
2001. The Company's headquarters are located at 200 Public Square, Suite
36-5000, Cleveland, Ohio 44114. The Company's telephone number is (216)
589-4000.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of twelve directors.
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. Following the consolidation of The Geon Company ("Geon"), M.A.
Hanna Company ("M.A. Hanna") and Consolidation Corp., which resulted in the
formation of the Company on August 31, 2000 (the "Consolidation"), the Board met
2 times during the remainder of fiscal year 2000.
A shareholder 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
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the procedures specified in Regulation 12 of the Company's Regulations.
Generally the Secretary of the Company must receive the notice not less than 60
nor more than 90 days prior to the first anniversary of the date on which the
Company first mailed its proxy materials for 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 include the nominee's signed consent
to serve as a director if elected. The notice must set forth, as to the
shareholder giving the notice and any beneficial owner on whose behalf the
nomination is being made, the name and address of, and the class and number of
shares of the Company owned by, such shareholder, beneficial owner, and any
other shareholders believed to be supporting such nominee.
The eleven nominees for election as directors for terms expiring in 2002
and a description of the business experience of each nominee appear below. Each
of the nominees is a current member of the Board. The reference below each
director's name to the term of service as a director includes the period during
which such director served as a director of Geon or M.A. Hanna, each a
predecessor to the Company. Marvin L. Mann, a current member of the Board, is
not seeking re-election. The Company has not yet identified a successor for Mr.
Mann. Therefore, a vacancy will exist on the Board after the 2001 Annual Meeting
of Shareholders.
JAMES K. BAKER Served as Chairman and Chief Executive Officer of Arvin
Director since 1993 Industries, Inc., an auto parts supplier to the original
Age - 69 equipment and replacement markets, from 1986 to February
1996, and as Vice Chairman until his retirement in April
1998. Mr. Baker serves on the Boards of Directors of Cinergy
Corp., Amcast Industrial Corp. and Veridian Corp.
J. DOUGLAS CAMPBELL Served as President and Chief Executive Officer and was a
Director since 1993 Director of Arcadian Corporation, a nitrogen chemicals and
Age - 59 fertilizer manufacturer, from December 1992 until his
retirement in 1997. From 1966 to 1992, Mr. Campbell held
various positions with Standard Oil (Ohio) and British
Petroleum.
CAROL A. CARTWRIGHT President of Kent State University, a public higher
Director since 1994 education institution, since 1991. Ms. Cartwright serves on
Age - 59 the Boards of Directors of KeyCorp and FirstEnergy.
GALE DUFF-BLOOM Served as President of Company Communications and Corporate
Director since 1994 Image of J.C. Penney Company, Inc., a major retailer, from
Age - 61 June 1999 until her retirement in April 2000. From February
1996 to June 1999, Ms. Duff-Bloom served as President of
Marketing and Company Communications and from 1995 to
February 1996 as Senior Executive Vice President and
Director of Personnel and Company Communications of J.C.
Penney. Ms. Duff-Bloom serves on the Board of Directors of
Chase Bank of Texas.
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WAYNE R. EMBRY Served as President and Chief Operating Officer, Team
Director since 1990 Division, of the Cleveland Cavaliers, a professional
Age - 63 basketball team, from 1986 until his retirement in June
2000. Mr. Embry serves on the Boards of Directors of Ohio
Casualty Insurance Company, Kohl's Corporation and the
Federal Reserve Bank of Cleveland.
ROBERT A. GARDA Executive-in-Residence of The Fuqua School of Business, Duke
Director since 1998 University, since 1997. Mr. Garda served as an independent
Age - 61 consultant from 1995 to 1997. Mr. Garda served as President
and Chief Executive Officer of Aladdin Industries, a leading
supplier of thermal insulated food and beverage ware
products, from 1994 to 1995. Mr. Garda serves on the Boards
of Directors of Insect Biotechnology, Inc. and Warrick
Industries.
GORDON D. HARNETT Chairman, President and Chief Executive Officer of Brush
Director since 1997 Engineered Materials Inc., an international supplier and
Age - 58 producer of high performance engineered materials, since
January 1991. Mr. Harnett serves on the Boards of Directors
of The Lubrizol Corp. and National City Bank.
DAVID H. HOAG Served as Chairman of LTV Corporation, a steel manufacturer,
Director since 1999 from 1991 until his retirement in February 1999. Mr. Hoag
Age - 61 serves on the Boards of Directors of Brush Engineered
Materials Inc., The Chubb Corporation, Federal Reserve Bank
of Cleveland, The Lubrizol Corporation and NACCO Industries,
Inc.
D. LARRY MOORE Served as President and Chief Operating Officer of
Director since 1994 Honeywell, Inc., a multinational manufacturer of controls
Age - 64 for use in homes, buildings, industry, and space and
aviation, from 1993 until his retirement in 1997.
THOMAS A. WALTERMIRE Chairman of the Board, Chief Executive Officer and President
Director since 1998 of the Company since August 31, 2000. Prior to the formation
Age - 51 of the Company at the end of August 2000, Mr. Waltermire
served as Chairman of the Board of Geon since August 1999
and Chief Executive Officer of Geon since May 1999. From
February 1998 to May 1999, Mr. Waltermire served as
President and Chief Operating Officer of Geon and from May
1997 to February 1998, as Executive Vice President and Chief
Operating Officer. Mr. Waltermire was the Chief Financial
Officer of Geon from October 1993 until May 1997.
FARAH M. WALTERS President and Chief Executive Officer of University
Director since 1998 Hospitals Health System and University Hospitals of
Age - 56 Cleveland since 1992. Ms. Walters serves on the Boards of
Directors of LTV Corporation, Kerr-McGee Corporation and
University HealthSystem Consortium in Chicago, Illinois.
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COMMITTEES OF THE BOARD OF DIRECTORS; ATTENDANCE
Each committee below was formed after the formation of the Company upon the
Consolidation. The references below to the number of times that each committee
met refers to the number of times each committee met during the remainder of
fiscal year 2000, following the formation of the Company.
The present members of the Audit Committee are Messrs. Campbell, Moore,
Garda and Harnett. Mr. Harnett serves as Chairperson of the Committee. The Audit
Committee has adopted a charter and it is attached to this Proxy Statement as
Appendix A. The Company's Common Shares are listed on the New York Stock
Exchange and are governed by its listing standards. All members of the Audit
Committee meet the independence requirements as set forth in the NYSE listing
standards. The Audit Committee meets with appropriate Company financial and
legal personnel and independent auditors to review the corporate accounting and
internal controls of the Company and its financial reporting. The Committee
exercises oversight of the independent auditors, the internal auditors and the
financial management of the Company. The Audit Committee recommends to the Board
of Directors the appointment of the independent auditors to serve as auditors in
examining the corporate accounts of the Company. Following the formation of the
Company, the Audit Committee met two times during the remainder of fiscal year
2000.
The present members of the Compensation Committee are Mss. Duff-Bloom and
Walters and Messrs. Embry and Mann. Ms. Duff-Bloom serves as Chairperson of the
Committee. The Compensation Committee reviews and approves compensation,
benefits and perquisites afforded the executive officers and highly-compensated
personnel of the Company. The Committee has similar responsibilities with
respect to non-employee directors, except that the Committee's actions and
determinations are subject to the approval of the Board of Directors. The
Committee also has oversight responsibilities for all broad-based compensation
and benefit programs of the Company and provides policy guidance and oversight
on selected human resource policies and practices. Following the formation of
the Company, the Compensation Committee met three times during the remainder of
fiscal year 2000.
The present members of the Nominating and Governance Committee are Ms.
Duff-Bloom and Messrs. Baker, Hoag and Mann. Mr. Mann 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 the establishment of a search committee to identify 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. Following the
formation of the Company, the Nominating and Governance Committee met one time
during the remainder of fiscal year 2000.
The present members of the Environmental, Health and Safety Committee are
Mss. Cartwright and Walters and Messrs. Embry, Harnett and Moore. 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
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regulations. Following the formation of the Company, the Environmental, Health
and Safety Committee met two times during the remainder of fiscal year 2000.
The present members of the Financial Policy Committee are Ms. Cartwright
and Messrs. Baker, Campbell, Garda and Hoag. 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. Following the formation of the Company, the Financial Policy
Committee met one time during the remainder of fiscal year 2000.
For the remainder of fiscal year 2000 following the formation of the
Company, 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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REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board and considered the compatibility of nonaudit
services with the auditors' independence. Based upon the Committee's
considerations, the Committee has concluded that Ernst & Young LLP is
independent. The Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, their evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting. Since the formation of the Company on August 31, 2000, the Committee
has held two meetings. Prior to such date, the audit committees of Geon and M.A.
Hanna held two and three meetings, respectively, during fiscal year 2000.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2000, for filing with the Securities and Exchange
Commission.
THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
Gordon D. Harnett, Chairperson
J. Douglas Campbell
Robert A. Garda
D. Larry Moore
February 28, 2001
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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 an award
of $17,000 in value of fully vested Common Shares. 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 $1,250 for each
Board and Committee meeting attended, except that the Chairperson of the Audit
Committee and the Compensation Committee receives $2,500 for each meeting
attended. In addition, the Chairperson of each Committee receives a fixed annual
retainer of $3,000, payable quarterly. 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 15,000 Common Shares. Commencing in 2001, each Director will
receive an annual option to acquire 6,000 Common Shares, upon re-election to the
Board, effective as of the date of the Annual Meeting. The options and share
awards made to such Directors are awarded under the PolyOne Corporation 2000
Stock Incentive Plan or any other present or future stock plan of the Company
having shares available for such awards.
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 Shares of the Company (at a rate equal to 125% of
the cash compensation amount). Deferred compensation, whether in the form of
cash or Common Shares, is held in trust for the participating Directors.
Interest earned on the cash amounts and dividends on the Common Shares accrue
for the benefit of the participating Directors.
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OWNERSHIP OF COMMON SHARES
The following table shows the number of Common Shares beneficially owned on
March 15, 2001 (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 15, and by all Directors and executive
officers as a group.
NUMBER OF
NAME SHARES(1)
---- ---------------
James K. Baker.............................................. 102,779(2)(3)
Gale Duff-Bloom............................................. 76,546(2)(3)
J. Douglas Campbell......................................... 96,931(2)(3)
Carol A. Cartwright......................................... 56,136(2)(3)
Wayne R. Embry.............................................. 32,449(2)(3)
Robert A. Garda............................................. 56,326(2)(3)
Gordon D. Harnett........................................... 64,377(2)(3)
David H. Hoag............................................... 50,405(2)(3)
Marvin L. Mann.............................................. 38,505(2)(3)
D. Larry Moore.............................................. 83,544(2)(3)
Thomas A. Waltermire........................................ 758,229(2)(3)
Farah M. Walters............................................ 54,730(2)(3)
Garth W. Henry.............................................. 179,197(2)(3)
W. David Wilson............................................. 361,294(2)(3)
V. Lance Mitchell........................................... 242,870(2)(3)
Donald P. Knechtges......................................... 328,542(2)(3)
16 Directors and executive officers as a group.............. 2,582,860(2)(3)
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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, respectively, in The Geon
Retirement Savings Plan and the M.A. Hanna Company 401(k) and Retirement
Plan, tax-qualified defined contribution plans. No Director, nominee or
executive officer beneficially owned on March 15, 2001, more than 1% of the
outstanding Common Shares of the Company. As of that date, the Directors and
executive officers as a group beneficially owned approximately 2.75% of the
outstanding Common Shares.
(2) Includes shares with respect to which the following Directors and executive
officers have only sole voting power as follows: J.K. Baker, 60,779 shares;
G. Duff-Bloom, 34,546 shares; J.D. Campbell, 54,931 shares; C.A. Cartwright,
12,636 shares; W.R. Embry, 11,449 shares; R.A. Garda, 12,826 shares; G.D.
Harnett, 20,877 shares; D.H. Hoag, 6,905 shares; M.L. Mann, 23,505 shares;
D.L. Moore, 41,544 shares; T.A. Waltermire, 257,217 shares; F.M. Walters,
18,730 shares; G.W. Henry, 1,382 shares; W.D. Wilson, 113,010 shares; V.L.
Mitchell, 84,734 shares; D.P. Knechtges, 31,406 shares; and the Directors
and executive officers as a group, 786,477 shares. With respect to the
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Directors, except Mr. Waltermire who is not eligible to participate in the
Directors' Deferred Compensation Plan, these shares are held under the
Directors' Deferred Compensation Plan.
(3) Includes shares the individuals have a right to acquire on or before May 14,
2001 as follows: J.K. Baker, 42,000 shares; G. Duff-Bloom, 42,000 shares;
J.D. Campbell, 42,000 shares; C.A. Cartwright, 43,500 shares; W.R. Embry,
21,000 shares; R.A. Garda, 43,500 shares; G.D. Harnett, 43,500 shares; D.H.
Hoag, 43,500 shares; M.L. Mann, 15,000 shares; D.L. Moore, 42,000 shares;
T.A. Waltermire, 501,012 shares; F.M. Walters, 36,000 shares; G.W. Henry,
177,815 shares; W.D. Wilson, 248,284 shares; V.L. Mitchell, 158,136 shares;
D.P. Knechtges, 297,136 shares; and the Directors and executive officers as
a group, 1,796,383 shares.
The following table shows certain information with respect to all persons
who, as of March 15, 2001, were known by the Company to beneficially own more
than five percent of the outstanding Common Shares of the Company based on
information provided in Schedule 13G filings with the Securities and Exchange
Commission (the "Commission"):
NUMBER % OF
NAME AND ADDRESS OF SHARES SHARES
---------------- --------- ------
Citigroup Inc............................................... 8,464,348(1) 9.00%
399 Park Avenue
New York, New York 10043
Salomon Smith Barney Holdings Inc...................... (1)
388 Greenwich Street
New York, New York 10013
SSB Citi Fund Management LLC........................... (1)
388 Greenwich Street
New York, New York 10013
FMR Corp.................................................... 9,953,600(2) 10.58%
82 Devonshire Street
Boston, Massachusetts 02109
Mellon Financial Corporation................................ 8,042,242(3) 8.54%
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258-0001
The Boston Company, Inc................................ (3)
c/o Mellon Financial Corporation
One Mellon Center
Pittsburgh, Pennsylvania 15258
The Boston Company, Asset Management, LLC.............. (3)
c/o Mellon Financial Corporation
One Mellon Center
Pittsburgh, Pennsylvania 15258
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NUMBER % OF
NAME AND ADDRESS OF SHARES SHARES
---------------- --------- ------
State Street Bank and Trust Company, as Trustee for The Geon
Retirement Savings Plan................................... 6,854,233(4) 7.30%
225 Franklin Street
Boston, Massachusetts 02110
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(1) As of February 15, 2001, based upon information contained in a Schedule 13G
filed with the Commission. Citigroup Inc., as a holding company reporting on
behalf of its subsidiaries, has shared voting power and shared dispositive
power with respect to all of these shares. Included in the 8,464,348 are
8,404,348 shares (8.9% of the outstanding Common Shares of the Company)
beneficially owned by Citigroup Inc.'s subsidiary, Salomon Smith Barney
Holdings Inc., a holding company reporting on behalf of its subsidiaries.
Salomon Smith Barney Holdings Inc. has shared voting power and shared
dispositive power with respect to all of these shares. Also included in the
8,464,348 are 6,088,707 shares (6.5% of the outstanding Common Shares of the
Company) beneficially owned by Salomon Smith Barney Holdings Inc.'s
subsidiary, SSB Citi Fund Management LLC. SSB Citi Fund Management LLC has
shared voting power and shared dispositive power with respect to all of
these shares.
(2) As of February 9, 2001, 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 442,810 of
these shares and has sole dispositive power with respect to all of these
shares.
(3) As of January 22, 2001, based upon information contained in a Schedule 13G
filed with the Commission. Mellon Financial Corporation, as a holding
company reporting on behalf of its subsidiaries, has sole voting power with
respect to 6,857,386 of these shares, shared voting power with respect to
545,850 of these shares, and sole dispositive power with respect to
8,013,770 of these shares. Included in the 8,042,242 are 6,848,420 shares
(7.27% of the outstanding Common Shares of the Company) beneficially owned
by Mellon Financial Corporation's 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 5,761,320 of these shares, shared
voting power with respect to 517,500 of these shares and sole dispositive
power with respect to 6,848,298 of these shares. Also included in the
8,042,242 are 5,561,620 shares (5.90% of the outstanding Common Shares of
the Company) beneficially owned by The Boston Company, Inc.'s subsidiary,
The Boston Company, Asset Management, LLC. The Boston Company, Asset
Management, LLC has sole voting power with respect to 4,474,520 of these
shares, shared voting power with respect to 517,500 of these shares and sole
dispositive power with respect to all of these shares.
(4) As of February 12, 2001, based upon information contained in a Schedule 13G
filed with the Commission. State Street Bank and Trust Company, as Trustee
for The Geon 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 685,700 of these shares, shared voting
power with respect to 6,105,033 of these shares, sole dispositive power with
respect to 748,880 of these shares, and shared dispositive power with
respect to 6,105,353 of these shares.
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EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report of the Compensation Committee of the Board of Directors (the
"Committee") addresses the activities of the Committee following the formation
of the Company on August 31, 2000. The Committee is currently comprised of Gale
Duff-Bloom, its Chairperson, Wayne R. Embry, Marvin L. Mann and Farah M.
Walters.
The Committee is responsible for establishing the compensation and benefit
policies of the Company and reviewing the Company's philosophy regarding
executive remuneration to assure consistency with the goals and business
strategy of the Company. Each year the Committee reviews market data to assess
the Company's competitive position with respect to all aspects of executive
compensation and considers and approves changes in base salary and annual
incentive levels for executive officers as well as all awards (including stock
options, equity-based awards and long-term incentive plan awards) to executive
officers and key employees. The Committee also reviews and approves annual and
long-term performance criteria and goals at the beginning of each performance
period and certifies the results at the end of each performance period. In
addition, the Committee has oversight responsibilities for all broad-based
compensation and benefit programs of the Company.
The Summary Compensation Table appearing on page 15 includes compensation
earned by the named executive officers in connection with their employment with
the Company's predecessors.
GENERAL COMPENSATION PHILOSOPHY
The Committee believes that pay should be administered on a total
remuneration basis, with consideration of the value of all components of
compensation. Total remuneration opportunities should be competitive and serve
to attract, retain, motivate and reward employees based upon their experience,
responsibility, performance and marketability. They should be affordable and
fair to both employees and shareholders, based upon the operating results of the
Company. Incentive programs should create a strong mutuality of interests
between executives and shareholders through the use of equity-based compensation
and the selection of performance criteria that are consistent with the Company's
strategic objectives.
EXECUTIVE COMPENSATION
The Company's executive compensation program has the following principal
components: base salary, annual incentive compensation and long-term incentive
compensation. As an executive's level of responsibility increases, a greater
portion of his or her potential total remuneration is based on performance
incentives (including stock-based awards) rather than on salary. This approach
may result in changes in an executive's total cash compensation from year to
year if there are variations in the Company's performance.
The total remuneration program is designed to be competitive with the total
remuneration programs of companies similar to the Company within the specialty
chemical industry and a broad-base of industrial companies and is based on the
total remuneration programs of companies with which the
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Company competes for executive talent. To assess the competitive total
remuneration programs of these other companies and to establish appropriate
compensation comparisons, the Committee receives advice from an independent
compensation consultant and reviews data which is based on the specialty
chemical peer group as well as various published surveys.
BASE SALARIES
The Committee annually reviews the base salaries of executive officers.
Prior to the meeting at which the annual review occurs, the Committee is
furnished with data on the current total compensation of each executive, current
market place data for comparable positions, individual performance appraisals
and recommended adjustments by the Chief Executive Officer for each executive
officer except himself. At the meeting, the Committee reviews all available data
and considers and approves adjustments. In addition, the Committee reviews
market place data for, and the performance of, the Chief Executive Officer and
determines the appropriate adjustment.
At the time of the formation of the Company, the Committee reviewed the
base salaries for those positions affected by the consolidation of Geon and M.A.
Hanna. Where an executive's scope of responsibility had significantly increased,
adjustments were made to reflect the increased position accountability. The
effective date of all such salary increases was postponed until January 1, 2001,
at the request of management in recognition of the business conditions
experienced by the Company in the latter part of 2000.
INCENTIVE COMPENSATION
Upon the formation of the Company, the Company assumed The Geon Company
Senior Executive Management Incentive Plan, a plan which was approved by Geon
stockholders at the Geon 2000 Annual Meeting. This plan, which continues to be
in effect, has been renamed the Senior Executive PolyOne Annual Incentive Plan
(the "PolyOne AIP"). The PolyOne AIP provides for awards that are wholly
contingent upon 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 PolyOne AIP has, in the past,
satisfied and will continue to satisfy the Internal Revenue Service's
requirements for "performance-based" compensation under Section 162(m). Under
Section 162(m), performance-based compensation is not subject to the
deductibility limitation under current Internal Revenue Service regulations.
The Committee approved a corporate performance target for the period from
the formation of the Company through the end of 2000. However, no awards were
earned due to performance that was below the established minimum hurdle for that
period. Awards made for that portion of 2000 prior to the formation of the
Company under bonus plans of the Company's predecessors are described in the
footnotes to the Summary Compensation Table on page 15.
LONG TERM INCENTIVES
All stock options held by executives and outstanding at the time of the
formation of the Company are currently vested and exercisable with the exception
of Challenge Grant Stock Appreciation Rights
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that will vest only upon the achievement of certain stock prices at certain
times. Each executive officer received an option grant of 200 common shares
under the Founders Grant program, which provided equity-based appreciation
grants generally to all full-time and part-time (over 20 hours per week)
employees.
On February 28, 2001, the Committee approved awards to executive officers
of the Company under the Company's Strategic Improvement Incentive Plan that
will provide rewards to such officers based upon both the Company's stock price
performance and achievement of financial performance goals. The Plan rewards
executive officers with awards in the form of Time-Vested Stock Options and
Performance Awards. Time-Vested Stock Options are stock options with a ten year
term that vest in increments over a three year period following the date of
grant, 35% in each of the first and second years and 30% in the third year. The
amount scheduled to vest in the third year may vest earlier based upon the stock
price performance of the Company. Performance Awards are comprised of
Performance Options and Performance Cash Awards. Performance Options are stock
options that vest on the third anniversary of the date of grant and have a term
of 39 months. Performance Cash Awards are cash payments based upon the Company's
performance for the year ending December 31, 2003, relative to targets
established by the Committee. The purpose of these awards is to encourage
superior strategic business performance over time. These awards will be granted
under the PolyOne Corporation 2000 Stock Incentive Plan, which was approved by
stockholders of the Company's predecessors on August 29, 2000. The Committee
believes that these awards will satisfy the Internal Revenue Service's
requirements for "performance-based" compensation under Section 162(m). As
stated above, under Section 162(m), performance-based compensation is not
subject to the deductibility limitation under current Internal Revenue Service
regulations.
CHIEF EXECUTIVE OFFICER
The Committee approved an increase in the base salary of Mr. Waltermire at
the time of the formation of the Company in recognition of the expanded scope of
the Company and Mr. Waltermire's increased responsibilities. At his request,
based on assessment of business conditions, the Committee deferred the effective
date of the increase until January 1, 2001.
Mr. Waltermire participated in the PolyOne AIP and Strategic Improvement
Incentive Plan under similar terms and conditions as other executive officers
and as described above. Based on Company performance from its formation, no
incentive award was earned for this period.
The Summary Compensation Table appearing on page 15 includes compensation
earned by Mr. Waltermire in connection with his employment with Geon, one of the
Company's predecessors.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Gale Duff-Bloom, Chairperson
Wayne R. Embry
Marvin L. Mann
Farah M. Walters
February 28, 2001
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The following table sets forth the compensation received for the three
years ended December 31, 2000 by the Company's Chief Executive Officer and the
persons who were at December 31, 2000 the four other most highly paid executive
officers. To provide more complete and comparable information, this table
includes compensation paid by Geon and M.A. Hanna prior to the Consolidation.
SUMMARY COMPENSATION TABLE
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)(6)
------------------ ---- -------- -------- --------- ---------- -------- ---------- ------------
Thomas A. Waltermire, 2000 $575,000 $ -0-(5) $55,664 $ -0- 200 15,686 $ 549,700
Chairman of the Board, 1999 522,576 550,000 40,553 -0- -0- -0- 57,693
President and Chief (7) 1998 390,192 270,000 46,360 -0- 202,446 4,100 36,372
Executive Officer
Garth W. Henry, 2000 306,000 144,000(5) 1,504 -0- 200 3,066 1,756,797
Vice President, 1999 301,000 180,000 88,309 6,278 58,520 50,251 47,204
International 1998 258,333 40,000 74,551 3,846 42,667 61,520 60,412
W. David Wilson 2000 267,961 -0-(5) 47,409 -0- 200 7,470 183,314
Chief Financial Officer 1999 241,154 214,500 25,068 -0- -0- -0- 23,432
1998 219,231 130,900 26,475 -0- 96,402 1,628 18,998
V. Lance Mitchell, 2000 263,077 -0-(5) 43,136 -0- 200 7,470 178,331
Group Vice President, 1999 239,038 174,375 64,335 -0- -0- -0- 22,742
Plastic Compounds and 1998 213,654 140,625 20,030 -0- 96,402 1,470 19,510
Colors
Donald P. Knechtges, 2000 249,615 -0-(5) 50,424 -0- 200 7,470 2,588,211
Chief Development 1999 239,711 187,000 35,462 -0- -0- -0- 22,964
Officer 1998 232,115 137,500 59,243 -0- 96,402 3,546 41,647
- ---------------
(1) All amounts in this column represent aggregate bonus payments under annual
incentive compensation plans of Geon (applicable to all named executive
officers except G.W. Henry) or M.A. Hanna (applicable to G.W. Henry). These
amounts do not include payments made under the "change in control"
provisions of these plans. Geon's Senior Executive Management Incentive Plan
("Geon Senior Executive MIP") and Geon's Management Incentive Plan ("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. The
participant could 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. Under
the terms of the change in control provisions of the restricted stock
awards, these awards became unrestricted at the effective time of the
Consolidation. Restricted stock awards that became unrestricted as a result
of the change in control were as follows: T.A. Waltermire, 36,345 shares;
W.D. Wilson, 7,331 shares; V.L. Mitchell, 7,456 shares; and D.P. Knechtges,
7,522 shares. With respect to G.W. Henry, all amounts in this column
represent cash bonus payments under annual incentive plans of M.A. Hanna.
For 2000, the named executive officers (excluding G.W. Henry) received a
payment under the Geon Senior Executive MIP as described in footnote 5
below. There were no additional awards of cash or restricted stock
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under these plans for 2000. The amount of cash (including payments in
respect of fractional shares) and the market value and number of the shares
of restricted stock received by the named executive officers, respectively
(excluding G.W. Henry), 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);
V.L. Mitchell, $77,509 and $96,866 (2,992 shares); and D.P. Knechtges,
$102,013 and $84,984 (2,125 shares). For 1998, such amounts were as follows:
T.A. Waltermire, $19 and $269,981 (11,550 shares); W.D. Wilson, $71,411 and
$59,489 (2,545 shares); V.L. Mitchell, $62,505 and $78,119 (3,342 shares);
and D.P. Knechtges, $74,995 and $62,505 (2,674 shares).
(2) For 2000, amounts include tax gross-ups on personal benefits as follows:
T.A. Waltermire, $15,234; G.W. Henry, $31,745; W.D. Wilson, $12,845; V.L.
Mitchell, $15,300; and D.P. Knechtges, $13,065. For 1999, amounts include
tax gross-ups on personal benefits as follows: T.A. Waltermire, $15,602;
G.W. Henry, $6,610; W.D. Wilson, $9,548; V.L. Mitchell, $15,310; and D.P.
Knechtges, $13,065. For 1998, amounts include tax gross-ups on personal
benefits as follows: T.A. Waltermire, $12,591; G.W. Henry, $4,608; W.D.
Wilson, $8,205; V.L. Mitchell, $6,900; and D.P. Knechtges, $15,811.
(3) The total number of restricted shares held by G.W. Henry and the value of
those shares at the end of the last fiscal year, based on the year-end
closing price for the Company's shares, was 1,114 shares and $6,545,
respectively. Dividends are paid on these restricted shares with the same
frequency as all shareholders.
(4) Amounts for 2000 represent performance shares under long-term incentive
awards of Geon and M.A. Hanna issued as a result of the change in control
provisions being triggered by approval of the Consolidation by Geon and M.A.
Hanna stockholders on August 29, 2000, net of withholding. Amounts for 1998
(excluding G.W. Henry) represent the number of shares paid out to the named
executive on January 1, 1998 in respect of performance shares awarded to the
named executive in 1995 under Geon's 1995-1997 Long-Term Incentive Plan. The
number of shares awarded was based on Geon's achievement of performance
objectives specified under such plan for the three-year period ended
December 31, 1997, and are net of withholding taxes.
(5) Amounts for 2000 represent (for all named executives except G.W. Henry),
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 PolyOne AIP and MIP), and premium payments by
the Company under a split dollar life insurance program as follows: T.A.
Waltermire, $10,200, $79,500, and $0; W.D. Wilson, $10,200, $30,114, and $0;
V.L. Mitchell, $10,200, $27,131, and $0; and D.P. Knechtges, $10,200,
$26,897, and $0. For 1999, such amounts are as follows: T.A. Waltermire,
$9,600, $13,364, and $0; W.D. Wilson, $9,600, $13,832, and $0; V.L.
Mitchell, $9,600, $13,142, and $0; and D.P. Knechtges, $9,600, $13,364, and
$0. For 1998, such amounts are as follows: T.A. Waltermire, $9,600, $26,772,
and $0; W.D. Wilson, $9,600, $9,398, and $0; V.L. Mitchell, $9,600, $9,910,
and $0; and D.P. Knechtges, $9,600, $11,071, and $20,976. Also included in
the amounts for 2000 are payments made under the Geon Senior Executive MIP
as a result of the change in control provisions being triggered at the
effective time of the Consolidation. All amounts were paid in cash as
follows: T.A. Waltermire, $460,000; W.D. Wilson, $143,000; V.L. Mitchell,
$141,000; and D.P. Knechtges,
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$133,000. With respect to G.W. Henry, the amount for 2000 represents $10,200
of cash contributions to the Company's Retirement Savings Plan and $20,697
of premium payments by the Company under a split dollar life insurance
program, in addition to a payment of $122,400 paid in cash under M.A.
Hanna's incentive plan as a result of the change in control provisions being
triggered at the effective time of the Consolidation.
(6) In addition to the payments made in 2000 to D.P. Knechtges and G.W. Henry as
set forth in footnote 5 above, the amounts for 2000 also include payments to
D.P. Knechtges and G.W. Henry, triggered by the Consolidation under
management continuity agreements between D.P. Knechtges and Geon and between
G.W. Henry and M.A. Hanna, in the amount of $2,418,114 for D.P. Knechtges
and $1,603,500 for G.W. Henry. D.P. Knechtges will be retiring from the
Company at the end of May 2001 and G.W. Henry retired from the Company on
January 31, 2001.
(7) Mr. Waltermire began serving as President, Chief Executive Officer and
Chairman of the Board for the Company on August 31, 2000. From January 1,
2000 to August 31, 2000, Mr. Waltermire served as Chief Executive Officer
and Chairman of the Board of Geon.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTION/SARS OPTIONS/SARS
AT FY-END AT FY-END
(# OF SHARES) ($) (2)
SHARES ACQUIRED --------------- -------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (# OF SHARES) ($) (1) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------- -------------
T. A. Waltermire.......... -0- $ -0- 513,808/135,164 $ -0-/-0-
G. W. Henry............... -0- -0- 184,565/200 -0-/-0-
W. D. Wilson.............. -0- -0- 253,402/64,468 -0-/-0-
V. L. Mitchell............ -0- -0- 158,136/64,468 -0-/-0-
D. P. Knechtges........... -0- -0- 297,136/64,468 -0-/-0-
- ---------------
(1) Represents the difference between the option exercise price and the last
sale price of a Common Share as reported on the New York Stock Exchange on
the date prior to exercise.
(2) Based on the closing price of a Common Share of $5.875 as reported on the
New York Stock Exchange on December 29, 2000. The ultimate realization of
profit, if any, on the sale of Common Shares underlying the option is
dependent upon the market price of the shares on the date of sale.
RETIREMENT PENSIONS
The Company has in effect pension plans for salaried employees which
provide pensions payable at retirement to each eligible employee. The Geon
Pension Plan (applicable to all named executive officers in the Summary
Compensation Table except Mr. Henry) makes available a pension which is
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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 first chart below shows the annual
pension amounts, under The Geon Pension Plan, 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 Geon Pension 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. As of January 1, 2000,
The Geon Pension Plan was closed to new participants.
THE GEON COMPANY PENSION PLAN TABLE(1)
YEARS OF CREDITED SERVICE
-----------------------------------------------------------------------------
FINAL 15 20 25 30 35
AVERAGE ------------------- ------------------- -------- -------- ----------
EARNINGS (2) (3) (2) (3)
-------- -------- -------- -------- --------
$ 100,000 $ 21,631 $ 27,399 $ 28,841 $ 34,609 $ 36,051 $ 43,262 $ 50,472
$ 200,000 45,631 57,799 60,841 73,009 76,051 91,262 106,472
$ 300,000 69,631 88,199 92,841 111,409 116,051 139,262 162,472
$ 400,000 93,631 118,599 124,841 149,809 156,051 187,262 218,472
$ 500,000 117,631 148,999 156,841 188,209 196,051 235,262 274,472
$ 600,000 141,631 179,399 188,841 226,609 236,051 283,262 330,472
$ 700,000 165,631 209,799 220,841 265,009 276,051 331,262 386,472
$ 800,000 189,631 240,199 252,841 303,409 316,051 379,262 442,472
$ 900,000 213,631 270,599 284,841 341,809 356,051 427,262 498,472
$1,000,000 237,631 300,999 316,841 380,209 396,051 475,262 554,472
$1,100,000 261,631 331,399 348,841 418,609 436,051 523,262 610,472
$1,200,000 285,631 361,799 380,841 457,009 476,051 571,262 666,472
$1,300,000 309,631 392,199 412,841 495,409 516,051 619,262 722,472
$1,400,000 333,631 422,599 444,841 533,809 556,051 667,262 778,472
$1,500,000 357,631 452,999 476,841 572,209 596,051 715,262 834,472
$1,600,000 381,631 483,399 508,841 610,609 636,051 763,262 890,472
$1,700,000 405,631 513,799 540,841 649,009 676,051 811,262 946,472
$1,800,000 429,631 544,199 572,841 687,409 716,051 859,262 1,002,472
$1,900,000 453,631 574,599 604,841 725,809 756,051 907,262 1,058,472
$2,000,000 477,631 604,999 636,841 764,209 796,051 955,262 1,114,472
- ---------------
(1) Applicable to T.A. Waltermire, W.D. Wilson, V.L. Mitchell and D.P.
Knechtges.
(2) Assumes actively employed January 1, 1990 and after.
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(3) Includes an additional 4 years of service applicable to pre-January 1, 1990
employees.
(4) The Geon 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, 2000, final average earnings for
the individuals named in the Summary Compensation Table were as follows:
T.A. Waltermire -- $776,985.58; W.D. Wilson -- $365,891.24; V.L.
Mitchell -- $348,745.23; and D.P. Knechtges -- $380,319.05.
(5) 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.
(6) As of December 31, 2000, the executives named in the Summary Compensation
Table (excluding G.W. Henry) had the following years of credited service
under The Geon Pension Plan or subsidiary plans or supplemental agreements:
T.A. Waltermire, 26 years, 6 months; W.D. Wilson, 22 years, 11 months; V.L.
Mitchell, 11 years, 7 months; and D.P. Knechtges, 35 years, 6 months.
(7) Benefits shown in the chart that exceed the level of benefits permitted to
be paid from a tax-qualified pension plan under the Internal Revenue Code,
and certain additional benefits not payable under the qualified pension plan
because of certain exclusions from compensation taken into account
thereunder, are payable under an unfunded, non-qualified supplemental
pension plan.
The chart below represents the pension benefits applicable to Mr. Henry
under the Salaried Employees Retirement Income Plan (the "SERIP"), a
non-contributory pension plan covering all M.A. Hanna officers employed prior to
January 1, 1999, and certain other salaried employees of the Company. Effective
December 31, 1998, the SERIP was closed to new participants, benefit accruals
ceased and the benefits of the participants were frozen. Upon reaching the
normal retirement age (age 65), each participant in the SERIP generally is
entitled to receive monthly for life a basic benefit equal to the greater of (a)
the participant's highest average monthly compensation (including bonuses and
overtime) for 60 consecutive months out of the final 120 months of his or her
employment or (b) 1/12th of the average of his or her annual compensation
(including bonuses and overtime) during any 5 annual periods in which he or she
received the highest compensation included within the final 10 annual periods of
his or her employment prior to January 1, 1999, which is then multiplied by 2%
for the first 20 years of credited service and 1% for the next 20 years of
credited service. In addition, benefits are provided for early retirement and to
surviving spouses.
The Company also has in effect an excess benefits plan to pay retirement
benefits which but for limitation under the Employee Retirement Income Security
Act of 1974 and the Internal Revenue Code would have been paid under the SERIP
and will continue to accrue non-qualified benefits for up to a five
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year period in connection with the freezing of the SERIP. These benefits will be
paid out of the general funds of the Company or trust funds established for this
purpose.
SALARIED EMPLOYEES RETIREMENT INCOME PLAN TABLE(1)
AVERAGE ANNUAL
COMPENSATION YEARS OF SERVICE AT AGE 65
FOR LAST 5 YEARS ----------------------------------------------------
OF EMPLOYMENT 15 20 25 30 35
- ---------------- -------- -------- -------- -------- --------
$ 300,000 $ 90,000 $120,000 $135,000 $150,000 $165,000
$ 500,000 150,000 200,000 225,000 250,000 275,000
$ 700,000 210,000 280,000 315,000 350,000 385,000
$ 900,000 270,000 360,000 405,000 450,000 495,000
$1,100,000 330,000 440,000 495,000 550,000 605,000
- ---------------
(1) Applicable to G.W. Henry. The credited years of service for retirement
benefits for Mr. Henry is 25 years.
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 2000, all Section 16(a) filing requirements applicable to its
executive officers, directors and 10% stockholders were satisfied except for two
filings. The Company undertook to have prepared and filed on behalf of the
executive officers and directors of the Company, Geon and M.A. Hanna the Form
3's and Form 4's required under Section 16(a) in connection with the
Consolidation. Due to a clerical error, the Company filed a Form 3 and Form 4
for Christopher Sachs 10 days after the due date for the forms.
MANAGEMENT CONTINUITY AGREEMENTS
Messrs. Waltermire, Wilson, Mitchell and Knechtges were parties to
management continuity agreements with Geon (the "Old Continuity Agreements").
Under the Old Continuity Agreements, each of these executive officers was
entitled to receive certain payments and awards if his employment was terminated
for "cause" or if he voluntarily terminated his employment for "good reason" (in
each case as defined in the Old Continuity Agreements) following a change of
control. The Consolidation constituted a change of control. Messrs. Waltermire,
Wilson, and Mitchell have elected to waive any and all payments and awards to
which they may have been entitled to under the Old Continuity Agreements. By
waiving such payments and awards each became eligible to participate in the
Formation Grant Awards consisting of three-year restricted stock, awarded on a
contingent basis, to all senior executives as
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follows: Waltermire, 95,600 shares; Wilson, 45,000 shares; and Mitchell, 46,400
shares. In addition, these executives have entered into new management
continuity agreements with the Company (the "Continuity Agreements").
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 25% 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 shareholders do
not retain more than 60% of the common shares and combined voting power of the
outstanding voting securities of the surviving entity, or (iv) there is
shareholder 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. If a
change of control occurs and 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:
(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, (ii) a
payment of up to three times the "target annual incentive amount" (as defined in
the Continuity Agreements) in effect prior to the change in control, (iii) the
continuation of all employee health and welfare benefits for up to three years,
(iv) financial planning services for one year, and (v) a payment of up to three
years' additional retirement benefits. The Continuity Agreements also provide
for a tax gross-up for any excise tax due under the Internal Revenue Code for
any payments or distributions made under the agreements. If the individual's
employment is terminated by the Company or its successor for "cause" or is
terminated voluntarily by the individual for reasons other than for "good
reason," the individual is not entitled to the benefits set forth above and is
entitled to compensation earned through the date of termination of his or her
employment.
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COMPANY STOCK PERFORMANCE
Following is a graph which compares the cumulative total shareholder
returns for the Company's Common Shares, the S&P 500 index and the S&P Mid Cap
Chemicals index with dividends assumed to be reinvested when received. The graph
assumes the investing of $100 from September 1, 2000, the first trading date of
the Company's Common Shares, through December 31, 2000. The data regarding the
Company assumes an investment at the initial trading price of $100 per Common
Share of the Company. The S&P Mid Cap 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 appropriate.
COMPARISON OF CUMULATIVE TOTAL RETURN
TO SHAREHOLDERS
AUGUST 31, 2000 TO DECEMBER 31, 2000
S&P 500 S&P MID CAP CHEMICALS POLYONE CORPORATION
------- --------------------- -------------------
8/31/00 $ 100.0 $ 100.0 $ 100.0
9/30/00 94.7 89.4 88.0
10/31/00 94.3 94.9 94.7
11/30/00 86.9 96.1 67.7
12/31/00 87.3 107.5 71.5
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INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as independent
auditors to audit the financial statements of the Company for the current fiscal
year. Fees for fiscal year 2000 were as follows: annual audit fees of $779,000
and all other fees of $1,548,000, including audit related fees of $929,000. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting of Shareholders. 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, 2000.
GENERAL
VOTING AT THE MEETING
Shareholders of record at the close of business on March 15, 2001, are
entitled to vote at the meeting. On that date, a total of 93,900,057 Common
Shares were outstanding. Each share is entitled to one vote.
Holders of Common Shares 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 Common Shares represented
and voting, in person or by proxy, at any meeting of shareholders at which a
quorum is present is required for action by shareholders on any matter, unless
the vote of a greater number of shares or voting by classes or series is
required under Ohio law. Abstentions and broker non-votes are tabulated in
determining the votes present at a meeting. Consequently, an abstention or a
broker non-vote has the same effect as a vote against a proposal or a director
nominee, as each abstention or broker non-vote would be one less vote in favor
of a proposal or for a director nominee.
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.
SHAREHOLDER PROPOSALS
Any shareholder 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 27, 2001. The Company suggests that all proposals be sent by certified
mail, return receipt requested.
The Company's proxies for the 2002 Annual Meeting of Shareholders will
confer discretionary authority to vote on any matter if the Company does not
receive timely written notice of such matter in accordance with Regulation 8(c)
of the Company's Regulations. In general, Regulation 8(c) provides
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that, to be timely, a shareholder'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 date on which the Company first mailed its proxy
materials for the preceding year's annual meeting.
The Company's proxy materials for the 2001 Annual Meeting of Shareholders
will be mailed on or about March 28, 2001. Sixty days prior to the first
anniversary of this date will be January 27, 2002, and 90 days prior to the
first anniversary of this date will be December 28, 2001. For business to be
properly requested by a shareholder to be brought before the 2002 Annual Meeting
of Shareholders, the shareholder must comply with all of the requirements of
Regulation 8(c), 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 $6,000 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.
The Company's Annual Report to Shareholders, including consolidated
financial statements for the year ended December 31, 2000, is being mailed to
shareholders of record with this Proxy Statement.
For the Board of Directors
PolyOne Corporation
/s/ Gregory L. Rutman
Gregory L. Rutman, Chief Legal Officer
March 28, 2001
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APPENDIX A
POLYONE CORPORATION
AUDIT COMMITTEE CHARTER
AUTHORITY
- The Board of Directors, by resolution dated August 31, 2000, established
the Audit Committee.
- The Audit Committee Charter was adopted by the Board on September 6,
2000.
PURPOSE
- Assist the Board of Directors in fulfilling its oversight
responsibilities to the shareholders relating to corporate accounting,
reporting practices of the Company, financial and internal controls and
compliance with the Company's Code of Business Conduct; and
- Maintain effective working relationships with the Board of Directors and
oversight of the independent accountants, the internal auditors and
financial management of the Company.
DUTIES AND RESPONSIBILITIES
It is the overriding responsibility of the Committee to oversee management,
the independent accountants and the internal auditors. It is the responsibility
of those parties to ensure that adequate internal controls are in place and that
financial reports are completed in conformity with generally accepted accounting
principles. The responsibility of the Committee is one of oversight and due
diligence.
REVIEW PROCEDURES
The Committee will:
- Annually review and update, as necessary, the Committee's Charter and
determine if the Committee has satisfied its responsibilities under the
Charter during the year;
- Review the Company's annual audited financial statements with management
and the independent auditors to determine that the independent auditors
are satisfied with the disclosure and content of the financial statements
to be presented to shareholders;
- Review the Company's quarterly financial results with management and the
independent auditors prior to the release of earnings and/or the
Company's quarterly financial statements prior to filing or distribution.
The Chairperson of the Committee may represent the entire Audit Committee
for purposes of this review; and
- In consultation with management, the independent auditors, and the
individual responsible for the internal audit function, consider the
integrity of the Company's financial reporting process and controls.
Discuss significant financial risk exposures and the steps management has
taken
A-1
28
to monitor, control and report such exposures. Review significant
findings prepared by the independent auditors and the internal auditors
together with management's responses.
GENERAL
The Committee will:
- Perform any activities beyond those enumerated below consistent with this
Charter, the Company's Code of Regulations and governing law, as the
Committee or the Board of Directors deems necessary;
- If the Committee determines it to be appropriate, institute special
investigations and/or hire special counsel or experts;
- Review significant accounting and reporting issues and legal and
regulatory pronouncements, and understand their impact on the financial
statements of the Company;
- Periodically review with the Company's Chief Legal Officer any legal or
regulatory matters that may have a material impact on the Company's
financial statements or compliance programs and any material pending
claims and litigation involving the Company as a defendant;
- Periodically report to the Board of Directors as appropriate on the
status and results of major capital projects and other major business
transactions; and
- Periodically review the results of the Company's assessment of its
compliance with its Code of Business Conduct.
INDEPENDENT AUDITORS
The Committee will:
- Review the independence and performance of the independent auditors and
annually recommend to the Board of Directors the appointment of the
independent auditors or approve any discharge of independent auditors
when circumstances warrant;
- Approve fees and other significant compensation to be paid to the
independent auditors;
- Annually review and discuss with the independent auditors all significant
relationships they have with the Company that could impair the
independent auditors' independence;
- Review the independent auditors' audit plan and discuss scope, staffing,
locations, reliance on management and internal audit and their general
audit approach; and
- Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
INTERNAL AUDITORS
- Review the budget, plan, changes in plan, activities, organizational
structure and qualifications of the internal auditors and elicit any
recommendations for improvement;
A-2
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- Review the appointment, performance and replacement of the senior
internal audit executive or other responsible individual; and
- Review significant reports prepared by the internal audit department
together with management's response and follow up on these reports.
COMPOSITION
Committee members shall meet the requirements of the New York Stock
Exchange and applicable rules and regulations.
COMMITTEE MEETINGS AND ACTION
- A majority of the Committee members will be a quorum for the transaction
of business.
- The action of a majority of those present at a meeting at which a quorum
is present will be the act of the Committee.
- Any action which may be taken at a meeting of the Committee will be
deemed the action of the Committee if all of the Committee members
execute a written consent and the consent is filed with the Corporate
Secretary.
- The Company's Vice President and Chief Financial Officer will be the
management liaison to the Committee.
- The Corporate Secretary shall be responsible for keeping minutes of the
Committee meetings.
- The Committee will meet at least 4 times a year and at such other times
as may be requested by its Chairperson and will routinely meet in
executive session to review such matters as the Committee, in its
discretion, determines to be appropriate.
A-3
30
POLYONE CORPORATION
P PROXY
R
O ANNUAL MEETING OF SHAREHOLDERS, MAY 2, 2001
X
Y 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
Common Shares of PolyOne Corporation held of record by the undersigned on
March 15, 2001, at the Annual Meeting of Shareholders to be held on May
2, 2001, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES TO SERVE AS DIRECTORS. 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 THE NOMINEES SPECIFIED IN ITEM 1.
------------
SEE REVERSE
SIDE
------------
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
March 28, 2001
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at The Forum Conference and Education Center, 1375 E. Ninth Street,
Cleveland, Ohio, at 9:00 a.m. on Wednesday, May 2, 2001.
The Notice of Annual Meeting of Shareholders 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 Proxy and vote personally by ballot.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE BOX PROVIDED ON THE PROXY
CARD.
We look forward to seeing you at the meeting.
THOMAS A. WALTERMIRE
Chairman of the Board, President
and Chief Executive Officer
31
PLEASE MARK YOUR 5542
[X] VOTE AS IN THIS
EXAMPLE.
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEES LISTED IN ITEM 1.
- ------------------------------------------------------------------------------------------------------------------------------------
FOR ALL
NOMINEES WITHHELD
LISTED AT (See instructions
RIGHT below) Nominees: 01. James K. Baker 05. Wayne R. Embry 09. D. Larry Moore
1. ELECTION OF [ ] [ ] 02. J. Douglas Campbell 06. Robert A. Garda 10. Thomas A. Waltermire
DIRECTORS term 03. Carol A. Cartwright 07. Gordon D. Harnett 11. Farah M. Walters
to expire at next 04. Gale Duff-Bloom 08. David H. Hoag
Annual Meeting. Change of Address and/ [ ]
or Comments Mark Here
(INSTRUCTIONS: To withhold authority to vote for all nominees, mark the "WITHHELD" box above.
To withhold authority to vote for any individual nominee, mark the "WITHHELD" box above AND
write that nominee's name on the line provided below.)
- ---------------------------------------------------
EXCEPT AS OTHERWISE REQUIRED BY LAW, (a) THE WHOLE
NUMBER OF COMMON SHARES ATTRIBUTABLE TO THE INTERESTS
IN THE PLAN REPRESENTED BY THIS VOTING INSTRUCTION
CARD WILL BE VOTED IN THE MANNER DIRECTED ON THIS
VOTING INSTRUCTION CARD, AND (b) IF NO DIRECTION IS
MADE, OR IF THIS VOTING INSTRUCTION CARD IS NOT
RETURNED, THE WHOLE NUMBER OF COMMON SHARES
ATTRIBUTABLE TO THE INTERESTS IN THE PLAN
REPRESENTED BY THIS VOTING INSTRUCTION CARD WILL BE
VOTED IN THE RATIO FOR EACH DIRECTOR NOMINEE AS THE
DIRECTIONS RECEIVED AND TABULATED BY THE TRUSTEE.
In its discretion, the Trustee is 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.
Please mark, sign, date and return this voting
instruction card promptly using the enclosed
envelope. Your confidential voting instructions will
be seen only by authorized personnel of the Trustee.
Please sign exactly as the name appears on this card.
---------------------------------------------------
---------------------------------------------------
SIGNATURE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
POLYONE CORPORATION
VOTING INSTRUCTION CARD
Your vote is important. Casting your vote in one of the three ways
described on this voting instruction card votes all Common Shares of
PolyOne Corporation that you are entitled to vote.
Please consider the issues discussed in the Proxy Statement and cast your
vote by:
[ICON] - Accessing the World Wide Web site
http://www.eproxyvote.com/pol to vote via the
Internet.
- Using a touch-tone telephone to vote by phone toll
[IC0N] free from the U.S. or Canada. Simply dial
1-877-779-8683 and follow the instructions.
When you are finished voting, your vote will be
confirmed and the call will end.
[ICON] - Completing, dating, signing and mailing the
voting instruction card in the postage-paid
envelope included with the Proxy Statement or
sending it to PolyOne Corporation, c/o First
Chicago Trust Company of New York, P.O. Box 8640,
Edison, New Jersey 08818-9142.
You can vote by phone or via the Internet anytime prior to May 2, 2001. You
will need the control number printed at the top of this instruction card to
vote by phone or via the Internet. If you do so, you do not need to mail in
your voting instruction card.