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Exhibit 10.9
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SENIOR EXECUTIVE POLYONE ANNUAL INCENTIVE PLAN
1. PURPOSE. The Senior Executive PolyOne Annual Incentive Plan (the
"PolyOne AIP") 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 PolyOne AIP is designed to provide a competitive level of performance-based
incentive compensation when all relevant performance objectives are achieved.
2. ADMINISTRATION. The PolyOne AIP will be administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee is authorized to interpret the PolyOne AIP and to establish and
maintain guidelines necessary or desirable for the administration of the PolyOne
AIP. Decisions and determinations of the Committee shall be binding on all
persons claiming rights under the PolyOne AIP. 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 PolyOne AIP 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 PolyOne AIP (a "Plan Year"), a key executive must have assumed the
duties of an incentive-eligible position and have been selected for
participation in the PolyOne AIP within 90 days of the commencement of the
applicable Plan Year. The foregoing and other provisions of the PolyOne AIP
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 PolyOne AIP 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 PolyOne AIP, 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.
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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 PolyOne AIP. 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 shareholders, (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) share 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 PolyOne AIP. 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.
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7. DETERMINATION OF AWARDS. The amount of incentive awards available
for payment to a participant under the PolyOne AIP 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 share 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 PolyOne AIP if none of the Performance Targets is achieved.
Notwithstanding the amount of any available incentive award under PolyOne AIP,
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 PolyOne AIP.
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 shares or share 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 shares or share equivalent units.
(b) Any award paid as restricted shares or share equivalent units will
be enhanced with a 25% "premium", i.e. for every $100 deferred, the participant
will receive $125 in restricted shares or share equivalent units. Restrictions
on the restricted shares or share equivalent units will be determined by the
Committee at the time awards are approved in accordance with the provisions of
the stock option plan of the Company under which the shares are awarded. The
number of restricted shares to be delivered or share equivalent units to be
credited to a participant in respect of his or her incentive award under the
PolyOne AIP shall be determined by dividing the dollar amount of the incentive
award (after giving effect to the 25% premium for restricted share deferrals)
under the PolyOne AIP by the fair market value of one common share of the
Company 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 PolyOne AIP, fair market value of one share
shall be the mean of the high and low prices of the Company's common shares 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 shares are 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 shares
or share 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 shares or share equivalent units
in cash (without payment of any "premium") in any circumstance deemed
appropriate by the Committee.
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9. OTHER PROVISIONS.
(a) No awards under the PolyOne AIP 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 PolyOne AIP nor its submission to the
shareholders 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 PolyOne AIP, 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
PolyOne AIP. 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 PolyOne AIP.
(b) The Interim Payment shall not reduce the obligation of the Company
to make a final payment under the terms of the PolyOne AIP, but any Interim
Payment made shall be offset against any later payment required to be made under
the terms of the PolyOne AIP 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 POLYONE AIP.
(a) The PolyOne AIP 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 PolyOne AIP will be effective on August 31, 2001, and will
remain in effect thereafter until terminated by the Committee.
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ATTACHMENT A
SENIOR EXECUTIVE POLYONE ANNUAL INCENTIVE PLAN
DEFINITION OF "CHANGE IN CONTROL"
For purposes of the Senior Executive PolyOne Annual 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 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 of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
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- - 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 common shares and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the 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 common shares of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (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.
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