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Exhibit 10.11
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[Date]
[Name]
[Title]
[Address]
Dear _____________:
PolyOne Corporation (the "Company") considers the establishment and
maintenance of a sound and vital senior management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly-held
corporations, the possibility of a change of control may exist and that such
possibility, and the uncertainty and questions that it may raise among
management, may result in the distraction and even the departure of senior
management personnel to the detriment of the Company and its shareholders.
Accordingly, the Company's Board of Directors has determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's senior management, including yourself, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of the
Company.
In order to induce you to remain in the employ of the Company, and to
continue your employment notwithstanding the occurrence or threat of occurrence
of a transaction that results in a change of control of the Company, this letter
agreement ("Agreement") sets forth the benefits that the Company agrees shall be
provided to you in the event a Change of Control (as hereinafter defined in
Paragraph 3) should occur during the term of this Agreement and in the event
that your employment is thereafter terminated under such circumstances as are
expressly provided in Paragraph 4.
In making provision for the payment of these benefits, it is not the
Company's intention to alter in any way the compensation and benefits that would
be paid to you in the absence of a Change of Control.
1. TERM. This Agreement shall commence on [Date] and shall continue
through December 31, 2003, provided, however, that commencing on January 1, 2002
and each January 1st thereafter, the term of this Agreement shall automatically
be extended for one additional year, unless at least 90 days prior to such
January 1st date, the Company shall have given notice that it does not wish to
extend this Agreement. Upon the occurrence of a Change of Control during the
term of this Agreement, including any extensions thereof, this Agreement
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shall automatically be extended until the end of your Period of Employment (as
hereinafter defined in Paragraph 2), and may not be terminated by the Company
during such time.
2. PERIOD OF EMPLOYMENT. Your "Period of Employment" shall commence on
the date on which a Change of Control occurs and shall end on the date that is
___ months after the date on which such Change of Control occurs.
Notwithstanding the foregoing, however, your Period of Employment shall not
extend beyond the Mandatory Retirement Date (as hereinafter defined in Paragraph
3) applicable to you.
3. CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) A "Change of Control" shall mean
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company where such
acquisition causes such Person to own 25% or more of the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not
be deemed to result in a Change of Control: (A) any acquisition
directly from the Company that is approved by the Incumbent Board (as
defined in subsection (ii), below, (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 Person pursuant to a
transaction that complies with clauses (A), (B) and (C) of subsection
(iii) below; provided, further, that if any Person's beneficial
ownership of the Outstanding Company Voting Securities reaches or
exceeds 25% 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 25% 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 25% of more of the Outstanding Company
Voting Securities inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares so that such Person
beneficially owns (within the meanings of Rule 13d-3 promulgated under
the Exchange Act) less than 25% of the Outstanding Company Voting
Securities, then no Change of Control shall have occurred as a result
of such Person's acquisition; or
(ii) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board" (as modified by this clause (ii)) 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 (either by a
specific vote or by approval of the
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proxy statement of the Company in which such person is named as a
nominee for director, without objection to such nomination) shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) The 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, or other transaction ("Business Combination") excluding,
however, such a Business Combination pursuant to which (A) the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from such Business Combination
(including, without limitation, an entity 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)
(B) no Person (excluding any employee benefit plan (or related trust)
of the Company, the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of
the combined voting power of the then outstanding securities entitled
to vote generally in the election of directors of the entity resulting
from such 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
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company except pursuant to a Business
Combination that complies with clauses (A), (B) and (C) of subsection
(iii), above.
(b) The term "Mandatory Retirement Date" shall mean the compulsory
retirement date, if any, established by the Company for those executives of the
Company who, by reason of their positions and the size of their nonforfeitable
annual retirement benefits under the Company's pension, profit-sharing, and
deferred compensation plans, are exempt from the provisions of the Age
Discrimination in Employment Act, 29 U.S.C. Sections 621, et seq., which date
shall not in any event be earlier for any executive than the last day of the
month in which such executive reaches age 65.
4. COMPENSATION UPON TERMINATION OF EMPLOYMENT. If, during the Period
of Employment, the Company shall terminate your employment for any reason (other
than for a reason and as expressly provided in Paragraph 5 hereof), or if you
shall terminate your employment for "Good Reason" (as hereinafter defined in
subparagraph 4(f)), then the Company shall be obligated to compensate you as
follows:
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(a) The Company shall, at your election (which shall be made on the
signing of this Agreement and which may be changed by you as of any January 1st
that occurs prior to a Change of Control by giving prior written notice of such
change to the Company), either (i) continue your base salary at the rate in
effect immediately prior to the Change of Control or, if greater, immediately
prior to the Date of Termination (as hereinafter defined in Paragraph 7) ("Base
Salary") for a period equal to the shorter of (A) [one (1)/two (2)/three (3)]
years, commencing on the Date of Termination, or (B) the period from the Date of
Termination to your Mandatory Retirement Date, if any (whichever period applies
shall hereinafter be known as the "Payment Period") or (ii) pay to you in a lump
sum, by not later than the fifth day following the Date of Termination, an
amount equal to one-twelfth of your annualized Base Salary, multiplied by the
number of months, including fractional months, in the Payment Period;
(b) By not later than the fifth day following the Date of Termination,
the Company shall pay you in a lump sum an amount equal to the product of (x)
the number of months, including fractional months, in the Payment Period and (y)
under the Company's annual bonus or similar incentive plan (the "Annual
Incentive Plan"), one-twelfth of your "target annual incentive amount" in effect
prior to the Change of Control for the calendar year in which the Change of
Control occurs. Your "target annual incentive amount" under the Annual Incentive
Plan is determined by multiplying your salary range midpoint by the incentive
target percentage that is applicable to your incentive category under such Plan;
(c)
(i) The Company shall maintain in full force and effect, for
your continued benefit, for the Payment Period, all health and welfare
benefit plans and programs or arrangements in which you were entitled
to participate immediately prior to the Date of Termination, as long as
your continued participation is possible under the general terms and
provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall
provide you with benefits substantially similar to those to which you
would have been entitled to receive under such plans and programs, had
you continued to participate in them as an employee of the Company plus
an amount in cash equal to the amount necessary to cause the amount of
the aggregate after-tax compensation and employee benefits you receive
pursuant to this provision to be equal to the aggregate after-tax value
of the benefits that you would have received if you continued to
receive such benefits as an employee. Notwithstanding the preceding two
sentences, this subsection 4(c)(i) shall not restrict the Company's
right to modify or discontinue any benefit; provided, however, that you
shall not be treated less favorably than similarly situated active
employees (including non-highly compensated, salaried employees as
similarly situated for such purpose) who were employed by the Company
immediately prior to the Change of Control.
(ii) If you have met the requirements for retirement
eligibility under the Company's general retirement policies on the Date
of Termination, the Company shall provide you after the end of the
Payment Period with those health and welfare benefits, if any, as in
effect from time to time, to which you would have been entitled under
the Company's general retirement policies if you had been eligible to
retire and you had retired immediately prior to the Change of Control,
with the Company paying that
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percentage of the premium cost of the plans that it would have paid
under the terms of the plans in effect immediately prior to the Change
of Control with respect to individuals who retire at age 65, regardless
of your actual age on the Date of Termination. If the percentage of
premium cost that the Company pays for you is greater than the
percentage of premium cost that the Company pays for other similarly
situated retirees, the Company may treat the differential amount as
taxable to you and pay you an additional amount in cash equal to the
amount necessary to cause the after-tax value of the benefit that you
receive to be equal to the after-tax value of the benefit you would
have received had the Company not treated the differential amount as
taxable to you. Notwithstanding the preceding two sentences, this
subsection 4(c)(ii) shall not restrict the Company's right to modify or
discontinue any benefit, or the portion of the premium cost thereof
paid by the Company; provided, however, that you shall not be treated
less favorably with respect to any such modification or discontinuance
than similarly situated individuals (including non-highly compensated,
salaried employee retirees as similarly situated for such purpose) who
retired at or after age 65 under the terms and conditions in effect
immediately prior to the Change of Control (or under the terms and
conditions that would have applied to persons who were eligible to
retire, if they had retired, immediately prior to the Change of
Control);
(d) The Company shall, for one year after the Date of Termination,
provide financial planning services substantially similar to what you were
entitled to receive immediately prior to the Change of Control; and
(e)
(i) The Company shall, in addition to the benefits to which
you are entitled under the retirement plans or programs in which, as of
immediately prior to the Change of Control, you both participate and
are actually accruing benefits, pay you in a lump sum in cash at your
normal retirement date (or earlier retirement date should you so
elect), as defined in such retirement plans or programs, an amount
equal to the excess, if any, of (A) the actuarial equivalent of the
retirement pension to which you would have been entitled under the
terms of such retirement plans or programs had you accumulated
additional years of continuous service under such plans equal in length
to your Payment Period, over (B) the actuarial equivalent of the
retirement pension to which you are entitled under the terms of such
retirement plans or programs, determined without regard to this
subsection (i). For purposes of subsection (i), (w) the terms of a
retirement plan or program shall be those in effect immediately prior
to the Change of Control or the Date of Termination, whichever is more
favorable to you; (x) the length of the Payment Period shall be added
to total years of continuous service for determining vesting and the
amount of benefit accrual and to the age that you will be considered to
be for the purposes of determining eligibility for normal or early
retirement calculations; (y) your actual age shall be used for
determining the amount of any actuarial reduction; and (z) for the
purposes of calculating benefit accrual, the amount of compensation you
shall be deemed to have received during each month of your Payment
Period shall be equal to the sum of your Base Salary prorated on a
monthly basis, plus under the Annual Incentive Plan, one-twelfth of
your "target annual incentive amount" in effect prior to the Change of
Control for the calendar year in which the Change of Control occurs.
For purposes of
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this subsection (i), "retirement plan or program" shall mean any plan
or program to the extent such plan or program is a "defined benefit
plan," within the meaning of Section 3(35) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); and "actuarial
equivalent" shall be determined using the same methods and assumptions
as those utilized immediately prior to the Change of Control under the
applicable retirement plan or program in which you participate for
purposes of this subsection (i).
(ii) The Company shall, in addition to the benefits to which
you are entitled under any defined contribution plans and programs in
which, as of immediately prior to the Change of Control, you are
eligible to participate and receive employer contributions, pay you in
a lump sum in cash within 30 calendar days following the Date of
Termination an amount equal to the product of (A) the sum of all
amounts payable to you under subparagraphs 4(a) and 4(b), multiplied by
(B) the sum of (x) the aggregate maximum percentage(s) of eligible
compensation you were eligible to receive as employer matching
contributions under all such defined contribution plans for the plan
year(s) in which occurs the Change of Control or the Date of
Termination, whichever is more favorable to you, determined without
regard to any change in any such plan adverse to you adopted after the
Change of Control, plus (y) the aggregate maximum percentage(s) of
eligible compensation you were eligible to receive as employer
non-elective contributions under all such defined contribution plans
for the plan year(s) in which occurs the Change of Control or the Date
of Termination, whichever is more favorable to you, determined without
regard to any change in any such plan adverse to you adopted after the
Change of Control. For purposes of this subsection (ii), defined
contribution plan or program shall mean any plan or program to the
extent such plan or program is a "defined contribution plan," within
the meaning of Section 3(34) of ERISA; "employer matching
contributions" shall mean those employer contributions that are
conditioned upon your making employee after-tax contributions and/or
employee pre-tax contributions and that are not "discretionary
contributions" (as hereinafter defined), but in no event shall employer
matching contributions be deemed to include employee pre-tax
contributions regardless of whether employee pre-tax contributions are
considered employer contributions for any purpose; "employer
non-elective contributions" shall mean employer contributions that are
not employer matching contributions and that are not "discretionary
contributions" (as hereinafter defined); "discretionary contributions"
shall mean employer contributions that under the terms of the
applicable defined contribution plan as in effect immediately prior to
the Change of Control or the Date of Termination, whichever is more
favorable to you, were not required to be made, determined without
regard to any requirement that the participant be employed during the
plan year or at another relevant time in order to be eligible to
receive such contributions, except that an employer contribution that
would otherwise be considered a discretionary contribution under this
definition shall not be considered a discretionary contribution if
prior to the Date of Termination, the Company (or other employer
related to the Company maintaining the plan) has communicated to
participants in such plan that such contribution will, or is likely to,
be made. For purposes of determining the maximum percentage of eligible
compensation you were eligible to receive as employer matching
contributions and/or for purposes of determining the maximum percentage
of eligible compensation you were eligible to receive as employer
non-elective contributions, if under the terms of the applicable
defined
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contribution plan the contribution structure is a per capita structure
or a step-rate or similar structure, or if the contribution structure
has changed during the plan year, then the maximum percentage shall be
determined or adjusted as necessary or appropriate to carry out the
intent of this subsection (ii); provided that if you are also covered
with respect to any such defined contribution plan (the "first plan")
by another defined contribution plan that provides for contributions in
respect of any limitations under the terms of the first plan, there
shall be no duplication of payment with respect to those arrangements.
(f) For purposes of this Agreement, "Good Reason" shall mean:
(i) except as a result of the termination of your employment
pursuant to Paragraph 5 hereof and without your express written
consent, (A) one or more changes in your duties, responsibilities,
reporting relationships and status that, when considered in the
aggregate as compared with your duties, responsibilities, reporting
relationships and status immediately prior to a Change of Control,
constitute a material demotion, except that a diminution in your duties
or responsibilities that occurs solely because the Company is no longer
an independent publicly-held entity shall not be deemed to be a
reduction in your duties or responsibilities, (B) the assignment to you
of new duties or responsibilities that, in the aggregate, (1) are
materially inconsistent with, and (2) materially and adversely change,
your positions, duties, responsibilities, reporting relationships and
status as in effect immediately prior to a Change of Control, (C) a
reduction in your annual Base Salary or target annual incentive amount,
(D) the failure to continue your health, welfare and retirement
benefits, perquisites, vacation policy, fringe benefits, long-term
incentive compensation programs, and relocation benefits and policies
(including indemnification against loss on the sale of your residence
in connection with your relocation) on either a substantially similar
basis or with substantially similar aggregate economic value, as
compared with immediately prior to a Change of Control, (E) the Company
requires that you change the principal location of your work, which
results in an additional commute of more than 50 miles, or (F) the
Company requires you to travel away from your office in the course of
discharging your responsibilities or duties at least one-third more (in
terms of aggregate days in any calendar year or in any calendar quarter
when annualized for purposes of comparison) than was required of you
for the calendar year immediately preceding the Change of Control;
(ii) the failure of the Company to obtain the assumption of
and the agreement to perform this Agreement by any successor as
contemplated in Paragraph 11 hereof; or
(iii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Paragraph 6 hereof.
In order to have Good Reason, you must give the Company a Notice of
Termination satisfying the requirements of Paragraph 6 within 60 calendar days
of the occurrence of the event that constitutes Good Reason. For purposes of
subsections (i)(A), (i)(B) and (i)(D) of subparagraph 4(f), Good Reason shall
exist only if the Company fails to remedy the event or events constituting Good
Reason within (x) 90 calendar days after receipt of the Notice of
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Termination from you, if the Notice was received by the Company within 90
calendar days after a Change of Control, or (y) 30 calendar days, for all other
Notices. For purposes of subsection (i)(C) of subparagraph 4(f), Good Reason
shall exist only if the Company fails to remedy the event or events constituting
Good Reason within five business days after receipt of the Notice of Termination
from you.
5. TERMINATION FOR CAUSE. If your employment is terminated for any of
the following reasons and in accordance with the provisions of this Paragraph 5,
you shall not be entitled by virtue of this Agreement to any of the benefits
provided in the foregoing Paragraph 4:
(a) If, as a result of your incapacity due to physical or mental
illness, you shall have been absent from your duties with the Company on a
full-time basis for 120 consecutive business days, and within thirty (30) days
after a written Notice of Termination (as hereinafter defined in Paragraph 6) is
given, you shall not have returned to the full-time performance of your duties;
(b) If the Company shall have Cause. For the purposes of this
Agreement, the Company shall have "Cause" to terminate your employment hereunder
upon (i) the willful and continued failure by you to substantially perform your
duties with the Company, which failure causes material and demonstrable injury
to the Company (other than any such failure resulting from your incapacity due
to physical or mental illness), after a demand for substantial performance is
delivered to you by the Board which specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, and
after you have been given a period (hereinafter known as the "Cure Period") of
at least thirty (30) days to correct your performance, or (ii) the willful
engaging by you in other gross misconduct materially and demonstrably injurious
to the Company. For purposes of this paragraph, no act, or failure to act, on
your part shall be considered "willful" unless conclusively demonstrated to have
been done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interests of the
Company.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership of
the Board (excluding you for this purpose, if you are then a member of the
Board) at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clauses (i), including the
expiration of the Cure Period without the correction of your performance, or
(ii) of the preceding subparagraph and specifying the particulars thereof in
detail.
(c) If you die while employed by the Company or if you retire from such
employment during your Period of Employment, then you shall not be entitled to
any of the benefits provided by this Agreement and the benefits to which you or
your beneficiary shall be entitled shall be determined without regard to the
provisions hereof.
6. NOTICE OF TERMINATION. Any termination of your employment by the
Company or any termination by you for Good Reason shall be communicated by
written notice
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to the other party hereto. For purposes of this Agreement, such notice shall be
referred to as a "Notice of Termination." Such notice shall, to the extent
applicable, set forth the specific reason for termination, and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
7. DATE OF TERMINATION. "Date of Termination" shall mean:
(a) If you terminate your employment for Good Reason, the date
specified in the Notice of Termination, but in no event more than sixty (60)
days after Notice of Termination is given, subject, however, to the expiration
of the 90-day or five-day period specified in subparagraph 4(f), if applicable,
in which the Company may remedy the event or events constituting Good Reason,
except to the extent such remedy period is waived by the Company;
(b) If your employment is terminated for Cause under subparagraph 5(b),
the date on which a Notice of Termination is given, except that the Date of
Termination shall not be any date prior to the date on which the Cure Period
expires without the correction of your performance;
(c) If your employment pursuant to this Agreement is terminated
following absence due to physical incapacity, under subparagraph 5(a), then the
Date of Termination shall be thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such thirty (30) day period); or
(d) If your employment is terminated by the Company other than under
subparagraph 7(b) or 7(c), the date specified in the Notice of Termination.
Subject to subparagraph 10(b), a termination of employment by either
the Company or by you shall not affect any rights you or your surviving spouse
may have pursuant to any other agreement or plan of the Company providing
benefits to you, except as provided in such agreement or plan.
8. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined (as hereafter provided) that any payment or
distribution by the Company or any of its affiliates to you or for your benefit
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Paragraph 8) (a "Payment") would be subject to the
excise tax imposed by Section 4999 (or any successor provisions) of the Internal
Revenue Code of 1986, as amended (the "Code"), or to any similar tax imposed by
state or local law, or any interest or penalties are incurred by you with
respect to such excise tax (such tax or taxes, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then you shall be entitled to receive an additional payment or payments
(collectively, a "Gross-Up Payment") in an amount such that after payment by you
of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed on the Gross-Up
Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. For purposes of determining the amount of the
Gross-Up Payment, you shall be considered to pay (x) federal income taxes at the
highest
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rate in effect in the year in which the Gross-Up Payment will be made and (y)
state and local income taxes at the highest rate in effect in the state or
locality in which the Gross-Up Payment would be subject to state or local tax,
net of the maximum reduction in federal income tax that could be obtained from
deduction of such state and local taxes.
(b) Subject to the provisions of subparagraph 8(c), all determinations
required to be made under this Paragraph 8, including whether and when such a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
the accounting firm that was, immediately prior to the Change of Control, the
Company's independent auditor (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and to you within fifteen
(15) business days of the receipt of notice from you that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, you shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Paragraph 8, shall be paid by the Company to you within five (5) days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by you, it shall furnish you with a
written opinion that you have substantial authority not to report any Excise Tax
on your federal, state or local income or other tax return with respect to such
benefit or amount. Any determination by the Accounting Firm shall be binding
upon the Company and you. As a result of the uncertainty of the application of
Section 4999 of the Code and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of the initial determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to
subparagraph 8(c) and you thereafter are required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to you or for your benefit.
(c) You shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of the Gross-Up payment. Such
notification shall be given as soon as practicable but no later than ten (10)
business days after you are informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such claim is
requested to be paid. You shall not pay such claim prior to the expiration of
the thirty (30) day period following the date on which it gives such notice to
the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies you in writing prior
to the expiration of such period that it desires to contest such claim, you
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
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(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall bear
and pay directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold you harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions of
this subparagraph 8(c), the Company shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of any such claim and
may, at its sole option, either direct you to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and
you agree to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs you to pay such claim and sue for
a refund, the Company shall advance the amount of such payment to you,
on an interest-free basis and shall indemnify and hold you harmless, on
an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for your taxable year with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and you shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by you of an amount advanced by the Company
pursuant to subparagraph 8(c), you become entitled to receive any refund with
respect to such claim, you shall (subject to the Company's complying with the
requirements of subparagraph 8(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by you of an amount advanced by the
Company pursuant to subparagraph 8(c), a determination is made that you shall
not be entitled to any refund with respect to such claim and the Company does
not notify you in writing of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
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(e) You and the Company shall each provide the Accounting Firm access
to and copies of any books, records and documents in your possession or the
Company's possession, as the case may be, as reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by this Paragraph 8.
(f) The federal, state and local income or other tax returns filed by
you shall be prepared and filed on a consistent basis with the determination of
the Accounting Firm with respect to the Excise Tax payable by you. You shall
report and make proper payment of the amount of any Excise Tax, and at the
request of the Company, provide to the Company true and correct copies (with any
amendments) of your federal income tax return as filed with the Internal Revenue
Service and corresponding state and local tax returns, if relevant, as filed
with the applicable taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment. If prior to the filing of
your federal income tax return, or corresponding state or local tax return, if
relevant, the Accounting Firm determines that the amount of the Gross-Up Payment
should be reduced, you shall within five business days pay to the Company the
amount of such reduction.
(g) Notwithstanding any provision of this Agreement to the contrary,
but giving effect to any redetermination of the amount of Gross-Up payments
otherwise required by this Paragraph 8, if (i) but for this sentence, the
Company would be obligated to make a Gross-Up Payment to you, and (ii) the
aggregate "present value" of the "parachute payments" to be paid or provided to
you under this Agreement or otherwise does not exceed 1.05 multiplied by three
times your "base amount," then the payments and benefits to be paid or provided
under this Agreement shall be reduced (or repaid to the Company, if previously
paid or provided) to the minimum extent necessary so that no portion of any
payment or benefit to you, as so reduced or repaid, constitutes an "excess
parachute payment." For purposes of this subparagraph 8(g), the terms "excess
parachute payment," "present value," "parachute payment," and "base amount"
shall have the meanings assigned to them by Section 280G of the Code. The
determination of whether any reduction in or repayment of such payments or
benefits to be provided under this Agreement is required pursuant to this
subparagraph 8(g) shall be made at the expense of the Company, if requested by
you or the Company, by the Accounting Firm. Appropriate adjustments shall be
made to amounts previously paid to you, or to amounts not paid pursuant to this
subparagraph 8(g), as the case may be, to reflect properly a subsequent
determination that you owe more or less Excise Tax than the amount previously
determined to be due. In the event that any payment or benefit intended to be
provided under this Agreement or otherwise is required to be reduced or repaid
pursuant to this subparagraph 8(g), you shall be entitled to designate the
payments and/or benefits to be so reduced or repaid in order to give effect to
this subparagraph 8(g). The Company shall provide you with all information
reasonably requested by you to permit you to make such designation. In the event
that you fail to make such designation within 10 business days prior to the Date
of Termination or other due date, the Company may effect such reduction or
repayment in any manner it deems appropriate.
9. COVENANTS.
(a) [For two- and three-year Agreements only.] During the term of this
Agreement specified in Paragraph 1 (the "Term") and for a period ending one year
following the Date of
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Termination, if you have received or are receiving benefits under this
Agreement, you shall not, without the prior written consent of an officer of the
Company, directly or indirectly, engage in any Competitive Activity. For this
purpose, "Competitive Activity" means your participation in the management of
any business enterprise if such enterprise engages in substantial and direct
competition with the Company and such enterprise's sales of any product or
service competitive with any product or service of the Company amounted to 10%
of such enterprise's net sales for its most recently completed fiscal year and
if the Company's net sales of said product or service amounted to 10% of the
Company's net sales for its most recently completed fiscal year. "Competitive
Activity" shall not include (i) the mere ownership of securities in any
publicly-traded enterprise, if such ownership is less than 5% of the outstanding
voting securities or units of such enterprise or (ii) participation in the
management of any such enterprise other than in connection with the competitive
operations of such enterprise.
(b) During the Term, the Company agrees that it will disclose to you
its confidential or proprietary information (as defined in this subparagraph
9(b)) to the extent necessary for you to carry out your obligations to the
Company. You hereby covenant and agree that you will not during the Term or
thereafter disclose to any person not employed by the Company, or use in
connection with engaging in competition with the Company, any confidential or
proprietary information of the Company. For purposes of this Agreement, the term
"confidential or proprietary information" shall include all information of any
nature and in any form that is owned by the Company and that is not publicly
available (other than by your breach of this subparagraph 9(b)) or generally
known to persons engaged in businesses similar or related to those of the
Company. Confidential or proprietary information shall include, without
limitation, the Company's financial matters, customers, employees, industry
contracts, strategic business plans, product development (or other proprietary
product data), marketing plans, and all other secrets and all other information
of a confidential or proprietary nature. For purposes of the preceding two
sentences, the term "Company" shall also include any subsidiary controlled by
the Company (collectively, the "Restricted Group"). The foregoing obligations
imposed by this subparagraph 9(b) shall not apply (i) during the Term, in the
course of the business of and for the benefit of the Company, (ii) if such
confidential or proprietary information has become, through no fault of yours,
generally known to the public or (iii) if you are required by law to make
disclosure (after giving the Company notice and an opportunity to contest such
requirement). These rights of the Company are in addition to and without
limitation to those rights and remedies otherwise available by law for
protection of the types of such confidential or proprietary information.
(c) You hereby covenant and agree that during the Term and for a period
ending one year after the Date of Termination you will not, without the prior
written consent of the Company, on your behalf or on behalf of any person, firm
or company, directly or indirectly, attempt to influence, persuade or induce, or
assist any other person in so persuading or inducing, any employee or customer
of the Restricted Group to give up, or to not commence, employment or a business
relationship with the Restricted Group.
(d) You and the Company agree that the covenants contained in this
Paragraph 9 are reasonable under the circumstances, and further agree that if in
the opinion of any court of competent jurisdiction any such covenant is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify any provision or provisions of such covenants as to the
court will appear not reasonable and to enforce the remainder of the covenants
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as so amended. You acknowledge and agree that the remedy at law available to the
Company for breach of any of your obligations under this Paragraph 9 would be
inadequate and that damages flowing from such a breach may not readily be
susceptible to being measured in monetary terms. Accordingly, you acknowledge,
consent and agree that, in addition to any other rights or remedies that the
Company may have at law, in equity or under this Agreement, upon adequate proof
of your violation of any such provision of this Agreement, the Company shall be
entitled to immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach, without the necessity of proof of
actual damage.
10. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) You shall not be required to refund the amount of any payment or
employee benefit provided for or otherwise mitigate damages under this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for under this Agreement be reduced by any compensation or the
value of any benefits earned by you as the result of any employment by another
employer after the date of termination of your employment with the Company, or
otherwise. Subject to subparagraph 10(b), the provisions of this Agreement, and
any payment or benefit provided for hereunder, shall not reduce any amount
otherwise payable, or in any way diminish your existing rights, or rights which
would occur solely as a result of the passage of time, under any other
agreement, contract, plan or arrangement with the Company.
(b) To the extent, and only to the extent, a payment or benefit that is
paid or provided under this Agreement would also be paid or provided under the
terms of another plan, program, agreement or arrangement of, or assumed by, the
Company or any of its affiliates, including, without limitation, any Employment
Agreement or Management Continuity Agreement, such applicable plan, program,
agreement or arrangement shall be deemed to have been satisfied by the payment
made or benefit provided under this Agreement.
11. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance satisfactory to you, to assume and agree to perform this
Agreement.
(b) This Agreement shall be binding upon the Company and any successor
of or to the Company, including, without limitation, any person acquiring
directly or indirectly all or substantially all of the assets of the Company
whether by merger, consolidation, sale or otherwise (and such successor shall
thereafter be deemed "the Company" for the purposes of this Agreement), but
shall not otherwise be assignable by the Company.
(c) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amounts would still be payable to you
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pursuant to Paragraph 4 hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
12. NOTICES. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio, without giving effect to the principles of conflict of laws of such State.
14. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in a writing signed by you and the Company. No waiver by either party hereto at
any time of any breach by the other party hereto or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof, have been made by either party which are not set forth expressly in this
Agreement. References to Paragraphs and subparagraphs are to paragraphs and
subparagraphs of this Agreement. Any reference in this Agreement to a provision
of a statute, rule or regulation shall also include any successor provision
thereto.
15. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement which shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same agreement.
17. WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
18. NONASSIGNABILITY. This Agreement is personal in nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except as
provided in Paragraph 11 above. Without limiting the foregoing, your right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than by a transfer
by your will or by the laws of descent and distribution and in the event of any
attempted assignment or
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transfer contrary to this Paragraph 18, the Company shall have no liability to
pay any amounts so attempted to be assigned or transferred.
19. DISPUTE RESOLUTION.
(a) All disputes arising out of, relating to or concerning this
Agreement, the breach of this Agreement, your termination, or the termination of
your employment shall be resolved pursuant to this Paragraph 19. This includes
all claims or disputes whether arising in tort or contract and whether arising
under statute or common law, including, without limitation, Ohio Revised Code
Chapter 4112.01 et seq., Ohio Revised Code Section 4117.01, Title VII of the
Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the
Age Discrimination in Employment Act of 1967, as amended, and all other federal
and state employment statutes. Any such dispute shall be resolved by arbitration
held in Cleveland, Ohio, under the then-current Employment Dispute rules of the
American Arbitration Association ("AAA"). The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. This agreement to arbitrate shall be specifically enforceable.
Notwithstanding the foregoing, the Company shall not be required to seek or
participate in arbitration regarding any breach of your covenants contained in
Paragraph 9, but may pursue its remedies for such breach in a court of competent
jurisdiction in the city in which the Company's principal executive offices are
based.
(b) You and the Company agree that you or it must file any request for
arbitration with the AAA and serve on the other party within six (6) months
after the date on which the dispute arose and hereby waive any statute of
limitations to the contrary.
(c) The arbitrator shall have no authority to extend, modify, or
suspend any of the terms of this Agreement. The arbitrator is not empowered to
award damages in excess of compensatory damages and you and the Company hereby
waive any right to recover such damages with respect to any dispute resolved by
arbitration. The Company shall pay the fees and costs of the arbitrator. The
arbitrator shall make his award in writing and shall accompany it with an
opinion discussing the evidence and setting forth the reasons for his award. The
decision of the arbitrator within the scope of the submission shall be final and
binding on you and the Company, and any right to judicial action on any matter
subject to arbitration hereunder is waived (unless otherwise required by
applicable law), except suit to enforce this arbitration award. If the rules of
the AAA differ from those of this Paragraph 19, the provisions of this Paragraph
19 shall control.
20. LEGAL FEES AND EXPENSES. If a Change of Control shall have
occurred, thereafter the Company shall pay and be solely responsible for:
(i) 100% of the first $100,000 and
(ii) 70% of any excess above $100,000, of
any and all attorneys' and related fees and expenses incurred by you to
successfully (in whole or in part, and whether by modification of the Company's
position, agreement, compromise, settlement, or administrative or judicial
determination) enforce this Agreement or any provision
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hereof or as a result of the Company or any shareholder of the Company
contesting the validity or enforceability of this Agreement or any provision
hereof. To secure the foregoing obligation, the Company shall, within 90 days
after being requested by you to do so, enter into a contract with an insurance
company, open a letter of credit or establish an escrow in a form satisfactory
to you.
21. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement
shall create any right or duty on your part or on the part of the Company to
have you remain in the employment of the Company prior to the commencement of
the Period of Employment; provided, however, that any termination of your
employment, for any reason other than those set forth in Paragraph 5, following
the commencement of any discussion with a third party, or the announcement by a
third party of the commencement of, or the intention to commence, a tender
offer, or other intention to acquire all or a portion of the equity securities
of the Company that ultimately results in a Change of Control shall (unless such
termination is conclusively demonstrated to have been wholly unrelated to any
such activity relating to a Change of Control) be deemed to be a termination of
your employment after a Change of Control for purposes of this Agreement and
both the Period of Employment and the Payment Period shall be deemed to have
begun on the date of such termination.
22. RIGHT OF SETOFF. There shall be no right of setoff or counterclaim
against, or delay in, any payment by the Company to you or your designated
beneficiary or beneficiaries provided for in this Agreement in respect of any
claim against you or any debt or obligation owed by you, whether arising
hereunder or otherwise.
23. RIGHTS TO OTHER BENEFITS. Except as provided in subparagraph 10(b),
the existence of this Agreement and your rights hereunder shall be in addition
to, and not in lieu of, your rights under any other of the Company's
compensation and benefit plans and programs, and under any other contract or
agreement between you and the Company.
24. RELEASE. Notwithstanding any provision of this Agreement to the
contrary, the Company shall not pay or provide any compensation or benefits
hereunder in connection with the termination of your employment unless you first
sign a general release substantially in the form attached hereto as Exhibit A
and you do not revoke such release during the time period set forth therein for
revocation.
25. SURVIVAL. Notwithstanding any provision of this Agreement to the
contrary, the parties' respective rights and obligations under Paragraphs 4, 8,
9, 19, 20 and 21 shall survive any termination or expiration of this Agreement
or the termination of your employment following a Change of Control for any
reason whatsoever.
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If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
POLYONE CORPORATION
ACCEPTED AND AGREED TO By direction of the Compensation Committee
AS OF THE DATE HEREOF. of the Board of Directors
By
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[Name] [Name]
I hereby elect to take any base salary amounts which may be payable
under subparagraph 4(a)
___________ in a lump sum
or (check one)
___________ in installments
----------------------------------------
[Name]
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