[POLYONE LETTERHEAD]
[DATE]
Attn: [____________]
PolyOne Corporation
POLYONE CORPORATION INCENTIVE AWARD
GRANT OF STOCK-SETTLED SAR'S
THIS AGREEMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE COMMON SHARES OF THE COMPANY
ARE LISTED ON THE NEW YORK STOCK EXCHANGE.
Dear [_________________]:
Subject to the terms and conditions of the [INSERT PLAN] (the
"Plan") and this letter agreement (this "Agreement"), the Compensation and
Governance Committee of the Board of Directors of PolyOne Corporation
("PolyOne") has granted to you as of [DATE], the following award:
Target Priced Stock Appreciation Rights ("SARs") in respect of an
aggregate of [_____] common shares of PolyOne, having a par value of
$.01 per share (the "Common Shares"). The price (the "Base Price") to
be used as the basis for determining the Spread (as defined below) upon
exercise of the SAR is $______, the fair market value of one Common
Share as of the date of this grant.
A copy of the Plan is available for your review through the
Corporate Secretary's office. Unless otherwise indicated, the capitalized terms
used in this Agreement shall have the same meanings as set forth in the Plan.
1. EXERCISE OF SARs.
(a) Subject to the provisions of the Plan and this Agreement, the
SARs will expire on [DATE] and shall be exercisable on or
before [DATE]. Provided that you have been in the continuous
employ of PolyOne on such date, vesting will occur when the
market price of the Common Shares as reported on the New York
Stock Exchange - Composite Transactions Listing or similar
report reaches pre-determined levels for a minimum of three
consecutive trading days as follows:
o One-third vests at a market price of
$_______;
o One-third vests at a market price of
$_______; and
o The remaining one-third vests at a market
price of $_______.
(b) The SARs may be exercised as provided in this Section 1(b) as
to all or any of the SARs that are exercisable in accordance
with Section 1(a), as long as each exercise covers at least
1,000 SARs. To exercise the SARs, you must submit a letter to
PolyOne signed by you stating the number of SARs you are
exercising at that time and certifying that you are in
compliance with the terms and conditions of the Plan. PolyOne
will then issue you the number of Common Shares determined
under Section 1(c).
(c) The number of Common Shares to be issued will be determined by
calculating (1) the difference between the fair market value
of a Common Share on the date of exercise and the Base Price
(the "Spread"); (2) multiplied by the number of SARs
exercised; (3) less any withholding taxes (federal, state,
local or foreign taxes) PolyOne determines are to be withheld
in accordance with the Plan and with applicable law. The
result of this calculation will then be divided by the fair
market value of a Common Share on the date of exercise to
determine the number of Common Shares to be issued, rounded
down to the nearest whole share. For purposes of this Section
1(c), the term "fair market value" will mean the mean of the
high and low prices of the Common Shares for the relevant date
as reported on the New York Stock Exchange - Composite
Transactions Listing or similar report. In no event will you
be entitled to acquire a fraction of one Common Share pursuant
to this Agreement.
2. VESTING UPON A CHANGE OF CONTROL. If a Change of Control (as defined on
Exhibit A to this Agreement) occurs during the term of the SARs, the
SARs, to the extent not previously fully exercisable, will become
immediately exercisable in full.
3. RETIREMENT, DISABILITY OR DEATH. If your employment with PolyOne or a
subsidiary company (a "Subsidiary") terminates before the expiration of
the SARs due to (1) retirement at age 55 or older with at least 10
years of service or retirement under other circumstances entitling you
to receive benefits under one of PolyOne's (including its predecessors)
defined benefit pension plans, (2) permanent and total disability (as
defined under the relevant disability plan or program of PolyOne or a
Subsidiary in which you then participate) or (3) death, the SARs, to
the extent not previously fully exercisable, shall become immediately
exercisable in full and may be exercised in whole or in part at any
time and from time to time for the remainder of their term, but in no
event beyond [Date], after which such SARs will terminate.
4. TERMINATION FOLLOWING CHANGE OF CONTROL.
(a) If your employment with PolyOne or a Subsidiary terminates
following a Change of Control because (i) your employment is
involuntarily terminated without "cause" (as defined below),
or (ii) if you are a party to a Management Continuity
Agreement with PolyOne, you terminate your employment for
"Good Reason" (as
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defined in your Management Continuity Agreement), or (iii) if
you are not a party to a Management Continuity Agreement with
PolyOne, you terminate your employment for "Good Reason" (as
defined in the PolyOne Employee Transition Plan (as amended
and restated, effective as of January 1, 2004) or any
successor plan (the "PolyOne ETP")), the SARs may be exercised
in whole or in part at any time and from time to time within
eighteen (18) months of your termination of employment, but in
no event beyond [DATE], after which the SARs will terminate.
(b) For purposes of Section 4(a) above:
(i) If you are a party to a Management Continuity
Agreement, "cause" shall mean the definition of
"cause" as set forth in your Management Continuity
Agreement; or
(ii) If you are not a party to a Management Continuity
Agreement, "cause" shall mean: (A) the willful and
continued failure by you to substantially perform
your duties with PolyOne, which failure causes
material and demonstrable injury to PolyOne (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
PolyOne which specifically identifies the manner in
which 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 (B)
the willful engaging by you in other gross misconduct
materially and demonstrably injurious to PolyOne. For
purposes of this Section 4(b)(ii), 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 PolyOne.
5. OTHER TERMINATION.
(a) If your employment with PolyOne or a Subsidiary terminates
before the expiration of the SARs for any reason other than as
set forth in Sections 3 or 4 above, the SARs that are
exercisable shall be limited to the number of SARs that could
have been exercised under Section 1 above at the time of your
termination of employment and shall terminate as to the
remaining SARs and may be exercised as to such limited number
of SARs at any time within ninety (90) days of your
termination of employment, but in no event beyond [DATE],
after which the SARs will terminate.
(b) Notwithstanding Section 5(a) above, if your employment is
terminated due to a Reduction in Force Termination (as such
phrase is defined in the PolyOne ETP), then the exercisable
SARs may be exercised at any time within eighteen (18) months
of your termination of employment, but in no event beyond
[DATE], after which the SARs will terminate; provided,
however, that, notwithstanding anything in the PolyOne ETP to
the contrary, the Reduction in Force Termination
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must be effected by PolyOne or a corporation incorporated
within the United States of America that is directly or
indirectly owned by PolyOne. This Section 5(b) will apply to
you regardless of whether you are eligible to receive benefits
under the PolyOne ETP.
6. NON-ASSIGNABILITY. The SARs are personal to you and are not
transferable by you other than by will or the laws of descent and
distribution. They are exercisable during your lifetime only by you or
by your guardian or legal representative.
7. ADJUSTMENTS. In the event of any change in the number of Common Shares
by reason of a merger, consolidation, reorganization, recapitalization,
or similar transaction, or in the event of a stock dividend, stock
split, or distribution to shareholders (other than normal cash
dividends), the Committee will adjust the number and class of shares
subject to outstanding SARs, the Base Price applicable to outstanding
SARs and other value determinations, if any, applicable to outstanding
SARs. If any such transaction or event occurs, the Committee may
provide in substitution for outstanding SARs such alternative
consideration (including, without limitation, in the form of cash,
securities or other property) as it may determine to be equitable in
the circumstances and may require in connection therewith the surrender
of the SARs subject to this Agreement. No adjustment provided for in
this Section 7 will require PolyOne to issue any fractional share.
8. MISCELLANEOUS.
(a) The contents of this letter are subject in all respects to the
terms and conditions of the Plan as approved by the Board of
Directors and the shareholders of PolyOne, which are
controlling. The interpretation and construction by the Board
of Directors and/or the Committee of any provision of the Plan
or this Agreement shall be final and conclusive upon you, your
estate, executor, administrator, beneficiaries, personal
representative and guardian and PolyOne and its successors and
assigns.
(b) The grant of the SARs is discretionary and will not be
considered to be an employment contract or a part of your
terms and conditions of employment or of your salary or
compensation. Your acceptance of this grant constitutes your
consent to the transfer of data and information concerning or
arising out of this grant to PolyOne and to non-PolyOne
entities engaged by PolyOne to provide services in connection
with this grant from non-U.S. entities related to PolyOne for
purposes of any applicable privacy, information or data
protection laws and regulations.
(c) Any amendment to the Plan shall be deemed to be an amendment
to this Agreement to the extent that the amendment is
applicable hereto. The terms and conditions of this Agreement
may not be modified, amended or waived, except by an
instrument in writing signed by a duly authorized executive
officer at PolyOne. Notwithstanding the foregoing, no
amendment shall adversely affect your rights under this
Agreement without your consent.
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9. NOTICE. All notices under this Agreement to PolyOne must be delivered
personally or mailed to PolyOne Corporation at PolyOne Center, Avon
Lake, Ohio 44012, Attention: Corporate Secretary. PolyOne's address may
be changed at any time by written notice of such change to you. Also,
all notices under this Agreement to you will be delivered personally or
mailed to you at your address as shown from time to time in PolyOne's
records.
This Agreement, and the terms and conditions of the Plan,
shall bind, and inure to the benefit of you, your estate, executor,
administrator, beneficiaries, personal representative and guardian and PolyOne
and its successors and assigns.
Very Truly Yours,
POLYONE CORPORATION
By:_______________________________________
Xxxxxxx X. Xxxxx, Vice President and
Chief Human Resources Officer
Accepted:
______________________________
______________________________ (Date)
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EXHIBIT A
A "Change of Control" means:
(a) the acquisition by an 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
paragraph (a), the following acquisitions shall not be deemed to result in a
Change of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any corporation pursuant to
a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c)
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 (i) or (ii) 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% 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 25% of the Outstanding Company Voting Securities, then
no Change of Control shall have occurred as a result of such Person's
acquisition; or
(b) individuals who, as of August 31, 2000, 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 August
31, 2000 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) the approval by the shareholders of the Company 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") or, if consummation of such Business Combination is
subject, at the time of such approval by shareholders, to the consent of any
government or governmental agency, the obtaining of such consent (either
explicitly or implicitly by consummation); excluding, however, such a Business
Combination pursuant to which (i) all or substantially all of the individuals
and entities who were the
A-1
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, (ii) 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, 25% 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 (iii) 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
(d) approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
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