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Exhibit 10.7
[GEON LOGO]
One Geon Center
Avon Lake, Ohio 44012
216-930-1000
The Geon Company
One Geon Center
Avon Lake, Ohio 44012
Dear
The Geon Company (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 stockholders. 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 which 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 stockholders.
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 employment arrangement and benefits which
the Company agrees will 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 5 hereof
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 November 6, 1996 and shall
continue through December 31, 1996, provided, however, that commencing on
January 1, 1997 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
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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 shall automatically be extended until the end
of your Period of Employment (as hereinafter defined 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 later to occur
of (i) the date which is 24 months after the date on which such Change of
control occurs, or (ii) the date which is 24 months after the first date on
which a majority of the Board of Directors (the "Board") of the Company consists
of persons who were not members of the Board on the date immediately preceding
the date on which a Change of control occurs. Notwithstanding the foregoing,
however, your Period of Employment shall not extend beyond either any Mandatory
Retirement Date (as hereinafter defined in Paragraph 3) applicable to you or the
date which is 48 months after the date on which a Change of control occurs.
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 20%
or more of the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (i), 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 subsection (iii)
below; provided, further, that if 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 Company Voting Securities inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares so that such
Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) less than 20% of the Outstanding Company Voting Securities, then
no Change of Control shall have occurred as a result of such Person's
acquisition; or
(ii) individuals who, as of 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
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nomination for election by the Company's shareholders, was approved by A vote
of at least A majority of the directors then comprising the Incumbent Board
shall be considered AS though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(iii) The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another corporation
("Business Combination") excluding, however, such a Business Combination
pursuant to which (A) all or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, (B) no Person
(excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(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 DURING PERIOD OF EMPLOYMENT. For so long during
your Period of Employment as you are an employee of the Company, the Company
shall be obligated to compensate you as follows:
(a) You shall continue to receive your full base salary at the rate
in effect immediately prior to the Change of control. Your base salary shall
be increased annually, with each such
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increase due on the anniversary date of your most recent previous increase. Each
such increase shall be no less than an amount which at least equals on a
percentage basis the mean of the annualized percentage increases in base salary
for all elected officers of the Company during the two full calendar years
immediately preceding the Change of control.
(b) You shall continue to participate in all benefit and compensation
plans (including but not limited to stock options under the Incentive Stock
Plan, awards under Long-Term Incentive Plan (based upon the Incentive Stock
Plan), Management Incentive Program, pension plan, savings plan, flexible
benefits plan, life insurance plan, health and accident plan or disability plan,
executive insurance programs, and Disability Benefit Arrangement) in which you
were participating immediately prior to the Change of control, or in plans
providing substantially similar benefits, in either case upon terms and
conditions and at levels at least as favorable as those provided to you under
the plans in which you were participating immediately prior to the Change of
control;
(c) You shall continue to receive all fringe benefits, perquisites, and
similar arrangements which you were entitled to receive immediately prior to the
Change of control; and
(d) You shall continue to receive annually the number of paid vacation
days and holidays which you were entitled to receive immediately prior to the
Change of control.
5. 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 6 hereof), or if you
shall terminate your employment for "Good Reason" (as hereinafter defined in
subparagraph 5(f)), then the Company shall be obligated to compensate you as
follows:
(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 I
which occurs prior to a Change of control by giving prior written notice of such
change to the Company), either (i) continue your base salary as provided for
under subparagraph 4(a) immediately prior to the Date of Termination (as
hereinafter defined in Paragraph 8) for a period equal to the shorter of (A)
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, as
provided for under subparagraph 4(a), immediately prior to the Date of
Termination, 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)
the sum of
(i) under the Company's Management Incentive Program the
greatest of one-twelfth of: (A) the amount most recently paid to you
for a full calendar year; (B) your "target incentive amount" for the
calendar year in which your Date of Termination occurs;
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or (C) your "target incentive amount" in effect prior to the Change of
control for the calendar year in which the Change of control occurs;
plus, if applicable,
(ii) under the Company's Long-Term Incentive Plan the greatest
of one-thirty-sixth of the "calculated market value" of (A) with
respect to the most recently completed Plan Cycle, if any, the sum of
(1) the Restricted Stock awarded to you, (2) the Performance Stock as
to which restrictions were removed, if any, and (3) the awarding of
Additional Stock, if any, if the applicable financial objectives were
exceeded; (B) with respect to the most recently commenced Plan Cycle
prior to your Date of Termination, the sum of (1) the Restricted Stock,
if any, awarded to you, and (2) the Performance Stock, if any, awarded
to you; or (C) with respect to the most recently commenced Plan Cycle
prior to the date of the occurrence of the Change of control, the sum
of (1) the Restricted Stock, if any, awarded to you, and (2) the
Performance Stock, if any, awarded to you.
Your "target incentive amount" under the Management Incentive Program
is determined by multiplying your salary range midpoint by the incentive target
percentage which is applicable to your incentive category under such Program.
The "calculated market value" of Restricted Stock, Performance Stock or
Additional Stock under the Long-Term Incentive Plan shall be the mean of the
high and low prices of the Company's common stock on the relevant date or, if no
sale was made on such date, then on the next preceding day on which such a sale
was made (x) if the Company's stock is listed on the New York Stock Exchange, as
reported on the New York Stock Exchange Composites Transactions listing (or
similar report), or, (y) if the Company's stock is listed on the NASDAQ National
Market System then as reported on such system or (z) if not listed on either the
New York Stock Exchange or the NASDAQ National Market System, as determined by
the Board of Directors, multiplied by the number of shares involved in the
calculation. The relevant date for clauses 5(b)(ii)(A)(1), 5(b)(ii)(B) and
5(b)(ii)(C) is the date upon which the Board of Directors or the Compensation
Committee ("Committee") of the Board of Directors awarded the stock in question;
and for clauses 5(b)(ii)(A)(2) and 5(B)(ii)(A)(3) is the date on which the Board
or Committee made a determination of financial objectives and removed
restrictions on Performance Stock and, if applicable, awarded Additional Stock;
(c) If you are under age 55 at the Date of Termination, 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 executive 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 which you would have
received if you continued to receive such benefits as an employee. If you are
age 55 or over on the Date of Termination, the Company shall provide you with
those health and welfare benefits to which you would be entitled under the
Company's general retirement policies if you retired on the Termination Date
with the Company paying that percentage of the premium cost of the plans which
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
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65, regardless of your actual age on the Termination Date, provided such
benefits would be at least equal to those which would have been payable if you
had been eligible to retire and had retired immediately prior to the Change of
control;
(d) The Company shall, for the Payment Period, continue and you shall
be entitled to receive each and every fringe benefit program, perquisite, and
similar arrangement which you were entitled to receive or in which you were
entitled to participate immediately prior to the Date of Termination; and
(e) The Company shall, in addition to the benefits to which you are
entitled under the retirement plans or programs in which you participate, pay
you in a lump sum in cash at your normal retirement date (or earlier
retirement date should you so elect), as defined in the retirement plans or
programs in which you participate, an amount equal to
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. The length
of the Payment Period will be added to total years of continuous
service for determining vesting, the amount of benefit accrual and to
the age which you will be considered to be for the purposes of
determining eligibility for normal or early retirement calculations.
Your actual age, however, will be used for determining the amount of
any actuarial reduction. For the purposes of calculating benefit
accrual, the amount of compensation you will be deemed to have
received during each month of your Payment Period shall be equal to
the sum of your annual base salary prorated on a monthly basis as
provided for under subparagraph 4(a) immediately prior to the Date of
Termination (including salary increases), plus under the Company's
Management Incentive Program the greatest of one-twelfth of,
(i) the amount most recently paid to you for a full calendar
year,
(ii) your "target incentive amount" for the calendar year
in which your Date of Termination occurs, or
(iii) your "target incentive amount" in effect prior to the
Change of control for the calendar year in which the Change
of control occurs
reduced by the actuarial equivalent of any amounts to which you are
actually entitled pursuant to the provisions of said retirement plans
and programs.
For purposes of illustration, but not intending to be exhaustive, the
following are examples of how inclusion of the Payment Period may affect the
calculation of your retirement benefit.
A. If as of your Date of Termination your actual years of
service under the retirement plans or programs plus the length of your
Payment Period is at least 10, then
1) If as of your Date of Termination your age plus the
length of your Payment Period is at least 65, your retirement
benefit under subparagraph 5(e) will
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be calculated as a "normal retirement" benefit to which you
would have been entitled under the terms of the retirement
plan in which you participate had you accumulated continuous
service equal to such sum; and
2) If as of your Date of Termination your age plus
the length of your Payment Period is at least 55 but less than
65, your retirement benefit under subparagraph 5(e) will be
calculated as an "early retirement" benefit to which you would
have been entitled under the terms of the retirement plan in
which you participate had you accumulated continuous service
equal to such sum. The actuarial reduction used shall be the
actuarial reduction factor for early retirement, calculated to
your actual age at your Date of Termination.
Furthermore, if you were on the active rolls of The B.F.
Goodrich Company or one of its subsidiaries as of December 31, 1989 and
if the sum of your actual years of service under the Company's
retirement plans or programs plus the length of your Payment Period is
at least 10 but less than 24, then for purposes of subparagraph 5(e)
you will also receive an Additional Credit for up to 4 years. The
Additional Credit you will receive will depend upon the sum of the
years of your actual service plus the length of your Payment Period
and will be equal to the lesser of:
(x) 4 years of Additional Credit; or
(y) The amount of Additional Credit needed such that,
when added to the sum of your actual years of service under
the retirement plans or programs plus the length of your
Payment Period, it will create a total of exactly 24.
No Additional Credit will be applied if the sum of your actual years of
service under the retirement plans or programs plus the length of your
Payment Period is 24 or greater. You will not receive any Additional
Credit if you commenced employment with The B.F.Goodrich Company or one
of its subsidiaries on or after January 1, 1990.
B. If as of your Date of Termination the sum of your
actual years of service under the retirement plans or programs plus the
length of your Payment Period is less than 10, or your age plus the
length of your Payment Period is less than 55, your retirement benefit
under subparagraph 5(e) will be calculated as a "deferred vested
pension" to which you would have been entitled under the terms of the
retirement plan in which you participate had you accumulated continuous
service equal to such sum. The actuarial reduction used shall be the
actuarial reduction factor for a deferred vested pension, calculated
to your actual age at your Date of Termination.
For purposes of this subparagraph 5(e), "actuarial equivalent" shall be
determined using the same methods and assumptions as those utilized under the
Company's retirement plans and programs immediately prior to the Change of
control.
(f) For purposes of this Agreement, "Good Reason" shall mean:
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(i) except as a result of the termination of your employment
pursuant to Paragraph 6 hereof and without your express written
consent, (A) the assignment to you of any new duties or
responsibilities inconsistent with your positions, duties,
responsibilities, and reporting relationships and status within the
Company immediately prior to a Change of control, (B) a change in your
duties, responsibilities, reporting relationships, titles or offices as
in effect immediately prior to a Change of control, except that a
reduction in your duties or responsibilities which 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 (C) any
removal of you from or any failure to re-elect you to any of such
positions;
(ii) the failure of the Company to comply with any of its
obligations under Paragraph 4 herein;
(iii) the relocation of the offices of the Company at which
you were employed immediately prior to the Change of control to a
location which is more than twenty (20) miles from such prior location,
any increase in your obligation to travel on the Company's business
over your present business travel obligations, or the failure of the
Company to (A) pay or reimburse you, in accordance with the Company's
presently existing relocation policy for its employees, for all
reasonable costs and expenses, plus "gross-ups" referred to in such
policy incurred by you relating to a change of your principal residence
in connection with any relocation of the Company's offices to which you
consent, and (B) indemnify you against any loss (defined as the
difference between the actual sale price of such residence and the
higher of (1) your aggregate investment in such residence or (2) the
fair market value of such residence as determined by the Prudential
Relocation Management or any successor relocation firm contracted by
the Company (or other real estate appraiser designated by you and
reasonably satisfactory to the Company)) realized in the sale of your
principal residence in connection with any such change of residence;
(iv) 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
(v) any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Paragraph 7 hereof
6. TERMINATION FOR CAUSE. If your employment is terminated for any of
the following reasons and in accordance with the provisions of this Paragraph 6,
you shall not be entitled by virtue of this Agreement to any of the benefits
provided in the foregoing Paragraph 5:
(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 7) 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
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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 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
7. 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 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.
8. 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.
(b) If your employment is terminated for Cause under subparagraph
6(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 6(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).
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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.
9. CERTAIN ADDITIONAL PAYMENTS. (a) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment
or distribution by the Company 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 9) (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 any interest or penalties are incurred by you
with respect to such excise tax (such excise tax, 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 (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.
(b) Subject to the provisions of subparagraph 9(c), all determinations
required to be made under this paragraph 9, 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
Ernst & Young (or their successors) (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 9, 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 failure to report the Excise Tax on your applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty. 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 at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which 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 its remedies pursuant to Section 9(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 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
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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,
(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 9(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 9(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 9(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
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Company pursuant to subparagraph 9(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.
10. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS. 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.
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.
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 pursuant to Paragraph 5 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.
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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.
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 Section 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 transfer contrary to this Section the Company shall have
no liability to pay any amounts so attempted to be assigned or transferred.
19. LEGAL FEES AND EXPENSES. If a Change of control shall have
occurred, thereafter the Company shall pay and be solely responsible for 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 hereof or as a result of the Company
or any stockholder 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.
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20. 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 6, 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.
21. 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.
22. RIGHTS TO OTHER BENEFITS. 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.
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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,
THE GEON COMPANY
ACCEPTED AND AGREED TO By direction of the Compensation
AS OF THE DATE HEREOF. Committee
By /s/ Thomas A. Waltermire
- ------------------------------ --------------------------------------
Employee Signature Thomas A. Waltermire
I hereby elect to take any base salary amounts which may be payable under
subparagraph 5(a)
in a lump sum
- ---------- or (check one)
in installments
- ----------
------------------------------------------------
Employee Signature
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