-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QDnKyvxwhjE835CHu9148tFcfdggxdvXfyyorTEpGuermdbb51awLLwL1z2TWs6g xtAjUMNeVYPDxZecIJjm4A== 0000950152-98-006738.txt : 19980817 0000950152-98-006738.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950152-98-006738 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEON CO CENTRAL INDEX KEY: 0000897547 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 341730488 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11804 FILM NUMBER: 98687046 BUSINESS ADDRESS: STREET 1: ONE GEON CTR CITY: AVON LAKE STATE: OH ZIP: 44012 BUSINESS PHONE: 4409301001 MAIL ADDRESS: STREET 1: ONE GEON CENTER CITY: AVON LAKE STATE: OH ZIP: 44012 10-Q 1 THE GEON COMPANY QUARTERLY REPORT FORM 10-Q 1 ================================================================================ - -------------------------------------------------------------------------------- FORM 10-Q ---------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED JUNE 30, 1998. COMMISSION FILE NUMBER 1-11804 THE GEON COMPANY (Exact name of Registrant as specified in its charter) DELAWARE 34-1730488 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) One Geon Center, Avon Lake, Ohio 44012 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (440) 930-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- As of July 31, 1998 there were 23,300,748 shares of common stock outstanding. There is only one class of common stock. - -------------------------------------------------------------------------------- ================================================================================ 2 Part I. Financial Information Item 1. Financial Statements THE GEON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 -------- -------- ------- ------- Sales $ 330.7 $ 333.0 $ 655.2 $ 634.0 Operating costs and expenses: Cost of sales 285.3 278.4 568.7 546.8 Selling and administrative 17.6 12.4 34.6 23.7 Depreciation and amortization 15.4 12.7 29.9 26.2 Employee separation -- 15.0 -- 15.0 -------- -------- ------- ------- Operating income 12.4 14.5 22.0 22.3 Interest expense (3.8) (2.4) (7.6) (5.6) Interest income .3 .2 .9 .2 Other income (expense), net (.7) (1.9) 2.7 (2.9) -------- -------- ------- ------- Income before income taxes 8.2 10.4 18.0 14.0 Income tax expense (3.4) (4.3) (7.4) (5.6) -------- -------- ------- ------- Net income $ 4.8 $ 6.1 $ 10.6 $ 8.4 ======== ======== ======= ======= Earnings per share of common stock: Basic $ .21 $ .27 $ .46 $ .37 Diluted $ .20 $ .26 $ .45 $ .36 Number of shares used to compute earnings per share: Basic 22.9 23.0 22.9 23.0 Diluted 23.6 23.7 23.6 23.6 Dividends paid per share of common stock $ .125 $ .125 $ .25 $ .25
3 THE GEON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT PER SHARE DATA)
June 30, 1998 December 31, ASSETS (Unaudited) 1997 ------------ ------------ Current assets: Cash and cash equivalents $ 21.1 $ 49.1 Accounts receivable, net 98.5 110.8 Inventories 123.3 122.4 Deferred income taxes 17.4 20.7 Prepaid expenses 6.9 10.5 ------------ ------------ Total current assets 267.2 313.5 Property, net 456.1 456.6 Deferred charges and other assets 125.6 102.8 ------------ ------------ Total assets $ 848.9 $ 872.9 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term bank debt $ 77.5 $ 90.4 Accounts payable 147.3 159.1 Accrued expenses 60.2 63.3 Current portion of long-term debt .8 .8 ------------ ------------ Total current liabilities 285.8 313.6 Long-term debt 136.1 136.4 Deferred income taxes 32.9 35.8 Postretirement benefits other than pensions 85.6 86.2 Other non-current liabilities 80.3 77.1 ------------ ------------ Total liabilities 620.7 649.1 Stockholders' equity: Preferred stock, 10.0 shares authorized, no shares issued -- -- Common stock, $.10 par, authorized 100.0 shares; issued 28.0 shares in 1998 and 27.9 in 1997 2.8 2.8 Other stockholders' equity 225.4 221.0 ------------ ------------ Total stockholders' equity 228.2 223.8 ------------ ------------ Total liabilities and stockholders' equity $ 848.9 $ 872.9 ============ ============
4 THE GEON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN MILLIONS)
Six Months Ended, June 30, -------------------------- 1998 1997 --------- ---------- OPERATING ACTIVITIES Net income $ 10.6 $ 8.4 Adjustments to reconcile net income to net cash provided by operating activities: Employee separation -- 15.0 Depreciation and amortization 29.9 26.2 Provision for deferred income taxes .7 1.0 Change in assets and liabilities: Accounts receivable 27.3 (17.7) Inventories 9.4 (3.6) Accounts payable (19.8) 19.0 Accrued expenses and other (5.0) 9.0 ------------ ------------ Net cash provided by operating activities 53.1 57.3 INVESTING ACTIVITIES Business acquisitions, net of cash acquired (39.6) -- Purchases of property (16.0) (16.2) Investment in and advances to equity affiliates (6.7) (34.9) ------------ ------------ NET CASH (USED) PROVIDED BY OPERATING AND INVESTING ACTIVITIES (9.2) 6.2 FINANCING ACTIVITIES (Decrease) increase in short-term debt (12.9) 30.9 Repayment of long-term debt (.3) (.3) Dividends (5.8) (5.8) Repurchase of common stock -- (4.1) Proceeds from issuance of common stock .1 -- ------------ ------------ Net cash (used) provided by financing activities (18.9) 20.7 EFFECT OF EXCHANGE RATE CHANGES ON CASH .1 .2 ------------ ------------ (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (28.0) 27.1 CASH AND CASH EQUIVALENTS AT JANUARY 1 49.1 17.9 ------------ ------------ CASH AND CASH EQUIVALENTS AT JUNE 30 $ 21.1 $ 45.0 ============ ============
5 THE GEON COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (DOLLARS IN MILLIONS, SHARES IN THOUSANDS)
COMMON SHARE ADDITIONAL COMMON HELD IN COMMON PAID-IN RETAINED SHARES TREASURE TOTAL STOCK CAPITAL EARNINGS ---------------------------------------------------------------------------- BALANCE JANUARY 1, 1997 27,877 4,559 $222.4 $2.8 $296.1 $62.4 Non-owner equity changes: Net income 2.3 2.3 Other non-owner equity changes: Translation adjustment (1.2) Total non-owner equity changes 1.1 Stock based compensation and exercise of options 0.2 (2.0) Cash dividends (2.9) (2.9) ---------------------------------------------------------------------------- BALANCE MARCH 31, 1997 27,877 4,559 $220.8 $2.8 $294.1 $61.8 Non-owner equity changes: Net income 6.1 6.1 Other non-owner equity changes: Translation adjustment (0.8) Total non-owner equity changes 5.3 Repurchase of common stock 200 (4.1) Stock based compensation and exercise of options 0.6 0.5 Cash dividends (2.9) (2.9) ---------------------------------------------------------------------------- BALANCE JUNE 30, 1997 27,877 4,759 $219.7 $2.8 $294.6 $65.0 ============================================================================ BALANCE JANUARY 1, 1998 27,877 4,700 $223.8 $2.8 $295.8 $73.3 Non-owner equity changes: Net income 5.8 5.8 Other non-owner equity changes: Translation adjustment 2.2 Total non-owner equity changes 8.0 Stock based compensation and exercise of options 97.0 (29.0) (1.1) (2.6) Cash dividends (2.9) (2.9) ---------------------------------------------------------------------------- BALANCE MARCH 31, 1998 27,974 4,671 $227.8 $2.8 $293.2 $76.2 Non-owner equity changes: Net income 4.8 4.8 Other non-owner equity changes: - Translation adjustment (2.4) Total non-owner equity changes (2.4) Stock based compensation and exercise of options 2 .9 0.9 Cash dividends (2.9) (2.9) ---------------------------------------------------------------------------- BALANCE JUNE 30, 1998 27,974 4,673 $228.2 $2.8 $294.1 $78.1 ============================================================================
COMMON ACCUMULATED STOCK OTHER NON- HELD IN OWNER EQUITY TREASURY CHARGES OTHER ------------------------------------- BALANCE JANUARY 1, 1997 $(115.7) $(21.9) $(1.3) Non-owner equity changes: Net income Other non-owner equity changes: Translation adjustment (1.2) Total non-owner equity changes Stock based compensation and exercise of options 2.0 0.2 Cash dividends ------------------------------------- BALANCE MARCH 31, 1997 $(113.7) $(23.1) $(1.1) Non-owner equity changes: Net income Other non-owner equity changes: Translation adjustment (.8) Total non-owner equity changes Repurchase of common stock (4.1) Stock based compensation and exercise of options 0.1 Cash dividends ------------------------------------ BALANCE JUNE 30, 1997 $(117.8) $(23.9) $(1.0) ==================================== BALANCE JANUARY 1, 1998 $(118.0) $(29.3) $(0.8) Non-owner equity changes: Net income Other non-owner equity changes: Translation adjustment 2.2 Total non-owner equity changes Stock based compensation and exercise of options 1.4 0.1 Cash dividends ------------------------------------ BALANCE MARCH 31, 1998 $(116.6) $(27.1) $(0.7) Non-owner equity changes: Net income Other non-owner equity changes: Translation adjustment (2.4) Total non-owner equity changes Stock based compensation and exercise of options (0.1) 0.1 Cash dividends ------------------------------------ BALANCE JUNE 30, 1998 $(116.7) $(29.5) $(0.6) ====================================
6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A The accompanying unaudited condensed consolidated financial statements of The Geon Company (Company or Geon) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all of the information, footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair financial presentation have been included. Operating results for the three and six month periods ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1997. Certain amounts for 1997 have been reclassified to conform to the 1998 interim period presentation. NOTE B There are pending or threatened against the Company or its subsidiaries various claims, lawsuits and administrative proceedings, all arising from the ordinary course of business with respect to employment, commercial, product liability and environmental matters, which seek remedies or damages. The Company believes that any liability that may finally be determined should not have a material adverse effect on the Company's consolidated financial position. NOTE C Components of inventories at June 30, 1998 and December 31, 1997 are as follows:
June 30, December 31, (Dollars in millions) 1998 1997 ---------------- ----------------- Finished products and in-process inventories $99.3 $107.8 Raw materials and supplies 44.7 48.7 ---- ---- 144.0 156.5 LIFO Reserve (20.7) (34.1) ------ ------ $123.3 $122.4 ===== =====
NOTE D In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income," (SFAS 130). The pronouncement requires that an enterprise classify items of other comprehensive income or "non-owner equity changes" as referred to by the Company, by their nature in a financial statement and display the accumulated non-owner equity changes separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The Company adopted SFAS 130 on January 1, 1998. Certain reclassifications have been made to the June 30, 1997 and December 31, 1997 financial statements to conform to the requirements of this pronouncement. NOTE E In June 1998, the Company announced that it had signed a non-binding letter of intent to enter into transactions with Occidental Chemical Corporation (Oxychem), a subsidiary of Occidental Petroleum Corporation, which, if completed, will create a joint venture of their polyvinyl chloride (PVC) suspension resin businesses and related supporting operations to be owned 76 percent by Oxychem and 24 percent by Geon. The agreement provides for a long-term supply arrangement of resin for Geon's vinyl compounding operations. In addition, Geon will acquire Oxychem's vinyl compound and film business at Burlington, NJ, and Pasadena, Texas, and the companies will form a second joint venture devoted to powder compounding. The proposed transactions with Oxychem is subject to a number of conditions, including the execution of definitive documents, approval of the respective boards of directors and Geon shareholders, and other necessary approvals. 7 In June 1998, the Company completed the acquisition of Plast-O-Meric, Inc., (Plast-O-Meric) a privately held custom formulator of vinyl plastisols and polyurethane systems. Also in June 1998, the Company acquired the Wilflex Ink Division (Wilflex) of Flexible Products Company. Wilflex is a manufacturer and marketer of vinyl plastisol ink products. The combined revenues of the acquired companies was approximately $100 million for their most recently completed fiscal years, and the companies employ approximately 300 people. Geon's operating results for the second quarter of 1998 include one month of Plast-O-Meric and Wilflex operations. In June 1998, Geon and Orica Limited (formerly ICI Australia Limited) announced approval of their intention to float their entire interests in the joint venture company, Australian Vinyls Corporation Limited pending favorable market conditions. Geon and Orica Limited have agreed that current market conditions for a public offering are unfavorable. Geon holds a 37.4 percent share of the joint venture. NOTE F In March 1998, the Company announced an agreement with Bayer Corporation under which Bayer will utilize a pipeline to transport anhydrous chlorine (HCl) from its plant in Baytown, Texas to Geon's VCM plant in LaPorte, Texas. Geon has constructed an oxychlorination facility at LaPorte which will convert the anhydrous chlorine for use in making VCM at its LaPorte Facility. Operation of the pipeline and related facilities is anticipated to commence in the third quarter of 1998. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations INDUSTRY CONDITIONS: Based on industry data, North American (U.S. and Canada) producer shipments of polyvinyl chloride (PVC), including exports, are estimated to have increased 5% in the second quarter of 1998 as compared to the first quarter of 1998 and were about 9% higher than the second quarter of 1997. For the first six months of 1998, North American producer shipments are estimated to have increased 6% as compared to the same period in 1997. Exports for the second quarter increased 9% over the same period a year ago, and were 8% below the first quarter of 1998. A softening in export activity to East Asia in the first half of 1998 was largely offset by increased shipments to other world markets, in particular, South America, Africa and the Middle East. Capacity utilization (shipments/capacity) for North America was estimated at 94% of effective capacity (87% of nameplate) during the second quarter of 1998, an increase of 1% from the first quarter. Demand for the second quarter 1998 was the highest seen by North American producers on record; nevertheless, the capacity utilization rate was unchanged from second quarter 1997, due to 750 million pounds of capacity increase early in 1998 by two PVC resin suppliers. Industry operating margins (the spread between PVC resin selling prices and large buyer ethylene and chlorine costs as reported in industry trade journals and newsletters) for the largest PVC resin market applications decreased approximately 0.5 cent per pound in the second quarter of 1998 as compared to the previous quarter and decreased 4.0 cents per pound as compared to the same quarter of 1997. Price increases announced in the first and second quarter did not occur due largely to declining raw material costs, capacity additions, and weakness in export prices caused primarily by the economic dislocations in East Asia. The third quarter of 1998 began with PVC resin operating margins at historic lows despite relatively strong demand. No price increases have been announced for the third quarter, and it is anticipated that lower raw material costs, and continued instability in East Asia will continue to put downward pressure on global PVC pricing. RESULTS OF OPERATIONS: The Company had sales of $330.7 million in the second quarter of 1998, a 1% decrease from the second quarter of 1997. The decline in sales primarily reflects lower PVC resin selling prices which offset the majority of the volume increases in PVC compounds and the inclusion of two plastisol formulators acquired in June of 1998. The remainder of the decline is attributable to the formation of the Australian Vinyls Corporation joint venture from a previously consolidated subsidiary in the third quarter of 1997. Year-to-date sales were $655.2 million, as compared with $634.0 million in 1997. After consideration of the employee separation charge in 1997, year-to-date net income in 1998 declined $7.0 million as compared to 1997. Operating income for the first six months, excluding the impact of the $15.0 million employee separation charge in 1997, declined by $15.3 million to $22.0. For the second quarter of 1998, operating income declined by $17.1 million from the same period a year ago (excluding the 1997 employee separation charge). This decrease in earnings is due primarily to the decline in resin operating margins as discussed under "Industry Conditions" above. In addition, costs associated with a scheduled maintenance shutdown in the second quarter of 1998 at the Company's vinyl chloride monomer plant in LaPorte, Texas unfavorably affected pretax earnings by approximately $3.5 million in the quarter. This was partially offset by the earnings of businesses acquired in the last year, including Synergistics Industries Limited (Synergistics), Plast-O-Meric, and Wilflex. . Net income for the quarter was $4.8 million or $1.3 million below the same period last year, which included a one-time pretax employee separation charge of $15.0 million ($9.2 million after tax). Year-to-date net income was $10.6 million or an increase of $2.2 million over the same period last year. The Performance Polymer and Services business units, which includes PVC compounds, specialty dispersion resins, plastisol formulators and Polymer Diagnostics, Inc., had aggregate sales revenues 41% higher in the second quarter of 1998 as compared to the same quarter last year, and 8% higher than the previous quarter, due largely to the acquisitions of Synergistics in fourth quarter of 1997 and Plast-O-Meric and Wilflex in June 1998. Second quarter 1998 suspension/mass resin volume shipments were approximately 6% higher than in the first quarter and 2% higher than in the same quarter in 1997. Suspension/mass resin selling prices decreased approximately 25% in the second quarter of 1998 from the same quarter last year. 9 Selling, general and administrative expenses increased by $10.9 million from 1997 to $34.6 million in the first six months of 1998. The increase primarily reflects additional expenses associated with the acquired businesses. Similarly, depreciation and amortization has increased over the same periods last year as a result of the additional depreciation on assets acquired as well as the amortization expense related to acquisition goodwill. INTEREST & OTHER EXPENSE: Interest expense for the second quarter of 1998 increased $1.4 million from 1997 to $3.8 million. Year-to-date interest expense increased $2.0 million from 1997 to $7.6 million in 1998. This increase is a result of the higher average short-term borrowings utilized to fund the aforementioned acquisitions. Other income (expense), net was expense of $0.7 million for second quarter 1998 and expense of $1.9 million in the same quarter last year. The decline in net expense is primarily the result of earnings of equity affiliates in 1998, including the Sunbelt chlor-alkali joint venture, which began operations in December 1997. Similarly, year-to-date other income (expense), net was income of $2.7 million for the first half of 1998 as compared to expense of $2.9 million in 1997, largely due to the equity earnings from Sunbelt and Australian Vinyls Corporation. Foreign currency losses for the second quarter of 1998 were $1.8 million, as compared with 0.8 million in the same quarter last year. Year-to-date foreign currency losses were $0.5 million and $0.7 million in 1998 and 1997, respectively. Currency losses result primarily from fluctuations in Australian currency. TAXES: Income tax expense for the first half of 1998 was approximately 41% of pre-tax income, as compared with 40% for the first half of 1997. The increase in the effective tax rate is due in part to non-deductible goodwill associated with the Synergistics acquisition as well as the effect of a state income tax refund in 1997. The second quarter effective tax rate approximates the year-to-date rate. CAPITAL RESOURCES AND LIQUIDITY: During the six months ended June 30, 1998, the Company generated $53.1 million of cash from operating activities as compared to $57.3 million during the same period of 1997. The year-to-date 1998 earnings before non-cash charges were $9.4 million below last year. Operating working capital (accounts receivable plus inventory less accounts payable) decreased by $16.9 million in the first half of 1998, compared with an increase of $2.3 million in 1997, largely as a result of lower material costs and PVC resin pricing in 1998. Accrued expenses were impacted by the timing of payments for income taxes, sales and use taxes, and insurance. Investing activities include the net cash paid of $39.6 million for acquisitions of Plast-O-Meric and Wilflex in 1998. Purchases of property were $16.0 million and $16.2 million for the first half of 1998 and 1997, respectively. Capital expenditures for the full year of 1998 are projected to be approximately $50 million, or flat with 1997. Investing activities for the first half of 1998 also included $6.7 million of investments in and advances to equity affiliates as compared with $34.9 million in 1997. These primarily relate to the Sunbelt chlor-alkali joint venture with Olin. Financing activities in the first six months of 1998 reflect a decrease in short-term debt of $12.9 million. During the same period in 1997, short-term borrowings increased, primarily to fund the construction of the Sunbelt chlor-alkali plant. In addition, in the first half of 1997, the Company repurchased 200,000 shares of common stock for $4.1 million. As of June 30, 1998, 1.7 million shares are authorized for repurchase under an August 1996 Board of Directors resolution. The Company believes it has sufficient funds to support dividends, debt service requirements, normal capital expenditures, future acquisitions and expenditures and advances associated with the Bayer HCL project, based on projected operations, existing working capital facilities and other available permitted borrowings. YEAR 2000: The Company has largely completed the conversion of its primary commercial and financial information systems to an enterprise wide system which is year 2000 compliant. The Company is evaluating its other support systems and equipment and may incur internal staff costs as well as consulting and other expenses to upgrade or replace these systems. In addition, the Company is inquiring of major suppliers and customers regarding their ability to meet Year 2000 requirements. While much of the work and certain initial testing has been completed, the formal review and 10 testing is anticipated to be completed by the end of 1998. Future expenditures, beyond those which the Company would incur in the normal course of maintaining and upgrading its systems are not expected to be material. Certain factors that may affect these forward-looking comments are discussed under "Cautionary Note on Forward-Looking Statements". ENVIRONMENTAL MATTERS: The Company is subject to various federal, state and local environmental laws and regulations concerning emissions to the air, discharges to waterways, the release of materials into the environment, the generation, handling, storage, transportation, treatment and disposal of waste materials or otherwise relating to the protection of the environment. The Company maintains a disciplined environmental and industrial safety and health compliance program and conducts internal and external regulatory audits at its plants in order to identify and categorize potential environmental exposures and to assure compliance with applicable environmental, health and safety laws and regulations. This effort has required and may continue to require process or operational modifications, the installation of pollution control devices and cleanups. The Company estimates capital expenditures related to the limiting and monitoring of hazardous and non-hazardous wastes during 1998 to approximate $3 million to $5 million. Certain factors that may affect these forward-looking comments are discussed under "Cautionary Note on Forward-Looking Statements". The Company believes that compliance with current governmental regulations will not have a material adverse effect on its capital expenditures, earnings, cash flow or liquidity. At June 30, 1998, the Company had accruals totaling approximately $50 million to cover potential future environmental remediation expenditures. Environmental remediation expenditures in 1998 are estimated to approximate the level of 1997. CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS: This Quarterly Report contains statements concerning trends and other forward-looking information affecting or relating to the Company and its industry that are intended to qualify for the protections afforded "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from such statements for a variety of factors, including but not limited to (1) unanticipated changes in world, regional, or U.S. PVC consumption growth rates affecting the Company's markets; (2) unanticipated changes in industry capacity or in the rate at which anticipated changes in industry capacity come online in the PVC , VCM & chlor-alkali industries; (3) fluctuations in raw material prices and supply, in particular fluctuations outside the normal range of industry cycles; (4) unanticipated delays in achieving or inability to achieve cost reduction and employee productivity goals; (5) unanticipated production outages; (6) unanticipated changes in customer sales mix; and (7) the impact on the North American vinyl markets and supply/demand balance resulting from the economic situation in East Asia. Item 3. Quantitative and Qualitative Disclosures About Market Risk None. Part II - Other Information Item 1. Legal Proceedings None. Item 2. Changes in Securities Not Applicable Item 3. Defaults Upon Senior Securities None. 11 Item 4. Submission of Matters to a Vote of Security Holders The company held its Annual Meeting of Stockholders on May 7, 1998. As described in the 1998 Proxy Statement, the following action was taken: a) The nine nominees for directors were elected. The votes for directors were as follows:
Number of Shares Number of Share Voted For Votes Withheld --------- -------------- James K. Baker 20,824,606 195,236 Gale Duff-Bloom 20,814,005 205,837 J.A. Fred Brothers 20,859,963 159,879 J. Douglas Campbell 20,861,860 157,982 D. Larry Moore 20,852,904 166,938 John D. Ong 20,711,585 308,257 William F. Patient 20,859,460 178,382 R. Geoffrey Styles 20,859,579 160,263 Thomas A. Waltermire 20,823,809 196,033
Item 5. Other Information: None. Item 6. Exhibits and Reports on Form 8-K: (a) Exhibit 10.2 - 1995 Stock Option Plan, amended and restated as of August 7, 1998 Exhibit 10.2a - 1998 Interim Stock Award Plan Exhibit 11 - Statement re Computation of Per Share Earnings Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K In April and June 1998, the Company filed 8-K's related to the acquisition of Plast-O-Meric, Inc., a privately held custom formulator of vinyl plastisols and polyurethane systems. The acquisition was completed in June 1998. In May 1998, the Company filed an 8-K announcing the election to its Board of Directors of Thomas A. Waltermire, president and chief operating officer of Geon and Farah M. Walters, president and chief executive officer of University Hospitals Health System and University Hospitals of Cleveland. In May 1998, the Company filed an 8-K announcing the acquisition of the Wilflex Ink Division of Flexible Products Company. In June 1998, the Company filed an 8-K announcing the approval by Geon and Orica Limited (formerly ICI Australia Limited) of their intention to sell their entire interests in the joint venture company, Australian Vinyls Corporation Limited, through a public offering on the Australian Stock Exchange, subject to completion of satisfactory underwriting arrangements, price and market conditions. On June 18, 1998, the Company filed an 8-K announcing that second quarter earnings would be lower than security analysts expectations. 12 On June 26, 1998, the Company filed an 8-K announcing the signing of a non-binding letter of intent to enter into transactions with Occidental Chemical Corporation (OxyChem), a subsidiary of Occidental Petroleum Corporation, which, if completed will create a joint venture of their polyvinyl chloride (PVC) suspension resin businesses and related supporting operations. In addition, it was also announced that Geon will acquire OxyChem's vinyl compound and film businesses at Burlington, NJ, and Pasadena, Texas, and that the companies will form a second joint venture devoted to powder compounding. 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. August 14, 1998 THE GEON COMPANY \S\W. D. WILSON W. D. Wilson Vice President and Chief Financial Officer, (Principal Financial Officer) \S\G. P. SMITH G. P. Smith Corporate Controller and Assistant Treasurer (Principal Accounting Officer) EX-10.2 2 EXHIBIT 10.2 1 EXHIBIT 10.2 THE GEON COMPANY 1995 INCENTIVE STOCK PLAN (AS AMENDED AND RESTATED AS OF AUGUST 7, 1998) 1. PURPOSE. The Geon Company 1995 Incentive Stock Plan (the "Plan") is designed to foster and promote the long-term growth and performance of the Company by enhancing the Company's ability to attract and retain qualified Directors and key employees and motivating Directors and key employees through stock ownership and performance-based incentives. To achieve this purpose, this Plan provides authority for the grant of Stock Options, Director Options, Restricted Stock, Stock Equivalent Units, Stock Appreciation Rights, Performance-Based Stock Awards, and other stock and performance-based incentives. 2. DEFINITIONS. (a) "Affiliate" -- This term has the meaning given to it in Rule 12b-2 under the Exchange Act. (b) "Award" -- The grant of Stock Options, Director Options, Restricted Stock, Stock Equivalent Units, Stock Appreciation Rights, Performance-Based Stock Awards, and other stock and performance-based incentives under this Plan. (c) "Award Agreement" -- Any agreement between the Company and a Participant that sets forth terms, conditions, and restrictions applicable to an Award. (d) "Board of Directors " -- The Board of Directors of the Company, (e) "Change of Control" --A "Change of Control" means: (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 (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 subsection (c) below; provided, further, that if any Person's beneficial ownership of the Outstanding Company Voting Securities reaches or exceeds 20% as a result of a transaction described in clause (i) or (ii) above, and such Person subsequently acquires 2 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 November 6, 1996, 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 November 6, 1996 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 (iii) 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 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, 20% or 3 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 (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (f) "Change of Control Price" -- the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Business Combination, the highest price per share of Common Stock paid in such tender or exchange offer or Business Combination; provided, however, that, in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change of Control Price shall be in all cases the Fair Market Value of the Common Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board. (g) "Code" -- The Internal Revenue Code of 1986, or any law that supersedes or replaces it, as amended from time to time. (h) "Committee" -- The Compensation Committee of the Board of Directors, or any other committee of the Board of Directors that the Board of Directors authorizes to administer this Plan. The Committee will be constituted in a manner that satisfies all applicable legal requirements, including satisfying the disinterested administration standard set forth in Rule 16b-3 and the outside director requirement under Section 162(m). (i) "Common Stock" or "stock"-- Common Stock, $.10 par value, of the Company, including authorized and unissued shares and treasury shares. (j) "Company" -- The Geon Company, a Delaware corporation, and its direct and indirect subsidiaries. (k) "Continuing Director" -- A Director following a Change of Control who was a Director prior to such Change of Control or who was recommended or elected to succeed a Continuing Director by a majority of the Continuing Directors then in office. (l) "Director" -- A director of the Company. 4 (m) "Director Option" -- A right to purchase Common Stock granted to a Director pursuant to Section 7. (n) "Exchange Act"-- The Securities Exchange Act of 1934, as amended, or any law that supersedes or replaces it, as the same may be amended from time to time. (o) "Fair Market Value" of Common Stock -- The Fair Market Value of a share of Common Stock on any particular date means the mean of the high and low prices of the 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 (a) if the Common Stock is listed on the New York Stock Exchange, as reported on the New York Stock Exchange Composite Transactions listing (or similar report), or (b) if the Common Stock is listed on the NASDAQ National Market System, then as reported on such system, or (c) if not listed on either the New York Stock Exchange or the NASDAQ National Market System, as determined by the Board or Committee. (p) "Incentive Stock Option"-- A Stock Option that meets the requirements of Section 422 of the Code. (q) "Non-Employee Director" -- A Director who is not an employee of the Company. (r) "Notice of Award"-- Any notice by the Committee to a Participant that advises the Participant of the grant of an Award or sets forth terms, conditions, and restrictions applicable to an Award. (s) "Participant" -- Any person to whom an Award has been granted under this Plan. (t) "Performance-Based Stock Award" -- A Stock Award granted to a Participant pursuant to Section 8. (u) "Restricted Stock" -- An Award of Common Stock subject to restrictions or risk of forfeiture. (v) "Rule 16b-3" -- Rule 16b-3 under the Exchange Act as the same may be amended, modified, superseded or replaced from time to time. (w) "Section 162(m) " -- Section 162(m) of the Code, together with the regulations promulgated by the Internal Revenue Service thereunder, as the same may be amended, modified, superseded or replaced from time to time. (x) "Stock Appreciation Right" -- This term has the meaning given to it in Section 6(b)(ii). 5 (y) "Stock Award" -- This term has the meaning given to it in Section 6(b)(iii). (z) "Stock Equivalent Unit" -- An Award that is valued by reference to the value of Common Stock. (aa) "Stock Option" -- This term has the meaning given to it in Section 6(b)(iv). 3. ELIGIBILITY. All key employees of the Company and its Affiliates, including officers whether or not Directors, are eligible for the grant of Awards (other than Director Options). The selection of key employees to receive Awards (other than Director Options) will be within the discretion of the Committee. More than one Award may be granted to the same key employee. All Non-Employee Directors are eligible for the grant of Director Options, as provided in Section 7. Non-Employee Directors are not, however, eligible for the grant of any Awards other than Director Options. 4. COMMON STOCK AVAILABLE FOR AWARDS; ADJUSTMENT. (a) NUMBER OF SHARES OF COMMON STOCK. Subject to adjustment as provided for in Section 4(d), the aggregate number of shares of Common Stock that may be subject to Awards granted under this Plan shall be 2,500,000 shares of Common Stock. The assumption of awards granted by an organization acquired by the Company, or the grant of Awards under this Plan in substitution for any such awards, will not reduce the number of shares of Common Stock available for the grant of Awards under this Plan. Common Stock Subject to an Award that expires or is forfeited, terminated, or canceled will again be available for grant under this Plan, without reducing the number of shares of Common Stock available for grant of Awards under this Plan, except to the extent that the availability of those shares of Common Stock would cause this Plan or any Awards granted under this Plan to fail to qualify for the exemption provided by Rule 16b-3. Notwithstanding the foregoing, Common Stock subject to awards of Stock Options and Stock Appreciation Rights to Participants who are employees which expire or are forfeited, terminated, or canceled in the same year such Award is granted will, upon such expiration or forfeiture, termination, or cancellation, continue to be counted against the maximum number of shares with respect to which Options and Stock Appreciation Rights may be granted under this Plan in such year to such Participants holding the expired or forfeited, terminated or canceled Stock Options or Stock Appreciation Rights. (b) LIMITATIONS ON CERTAIN AWARDS. (i) The aggregate number of shares of Common Stock that may be issued upon exercise of Incentive Stock Options is 2,000,000. (ii) The maximum number of shares with respect to which Options (including Incentive Stock Options) and Stock Appreciation Rights may be granted under this Plan in any 6 one fiscal year is (A) 100,000 as to any individual Participant who is an employee (other than the Chief Executive Officer or the Chief Operating Officer of the Company) and (B) 205,000 as to any individual Participant who is the Chief Executive Officer or the Chief Operating Officer of the Company. (iii) The aggregate number of shares of Restricted Stock (other than Restricted Stock which is a Performance-Based Stock Award) that may be awarded under this Plan is 2,000,000. (c) NO FRACTIONAL SHARES. No fractional shares will be issued, and the Committee will determine the manner in which the value of fractional shares will be treated. (d) ADJUSTMENT. In the event of any change in the number of shares of Common Stock by reason of a merger, consolidation, reorganization, recapitalization, or similar transaction, or in the event of a stock dividend, stock split, or distribution to stockholders (other than normal cash dividends), the Committee will adjust the number and class of shares that may be issued under this Plan, the number and class of shares subject to outstanding Awards, the exercise price applicable to outstanding Awards, and the Fair Market Value of the shares of Common Stock and other value determinations applicable to outstanding Awards. 5. ADMINISTRATION. (a) COMMITTEE. This Plan will be administered by the Committee. The Committee will, subject to the terms of this Plan, have the authority to: (i) select the eligible employees who will receive Awards, (ii) grant Awards (other than Director Options), (iii) determine the number and types of Awards to be granted to employees, (iv) determine the terms, conditions, vesting periods, and restrictions applicable to Awards (other than Director Options), (v) adopt, alter, and repeal administrative rules and practices governing this Plan, (vi) interpret the terms and provisions of this Plan and any Awards granted under this Plan, (vii) prescribe the forms of any Notices of Award, Award Agreements, or other instruments relating to Awards, and (viii) otherwise supervise the administration of this Plan. All decisions by the Committee will be made with the approval of not less than a majority of its members. (b) DELEGATION. The Committee may delegate any of its authority to any other person or persons that it deems appropriate, provided the delegation does not cause this Plan or any Awards granted under this Plan to fail to qualify for the exemption provided by Rule 16b-3 under the Exchange Act. (c) DECISIONS FINAL. All decisions by the Committee, and by any other person or persons to whom the Committee has delegated authority, will be final and binding on all persons. 7 6. AWARDS. (a) GRANT OF AWARDS. The Committee will determine the type or types of Awards to be granted to each Participant and will set forth in the related Notice of Award or Award Agreement the terms, conditions, vesting periods, and restrictions applicable to each Award. Awards may be granted singly or in combination or tandem with other Awards, except to the extent that any grants in combination or tandem would impair the exemption for performance based compensation provided for under Section 162(m). Awards may also be granted in replacement of, or in substitution for, other awards granted by the Company, whether or not granted under this Plan, except that, with respect to Performance-Based Stock Awards, the new Award must also be wholly contingent on the attainment of performance goals established by the Committee; without limiting the foregoing, if a Participant pays all or part of the exercise price or taxes associated with an Award by the transfer of Common Stock or the surrender of all or part of an Award (including the Award being exercised), the Committee may, in its discretion, grant a new Award (which, in the case of Awards intended to replace Performance-Based Stock Awards, must also be wholly contingent on the attainment of performance goals established by the Committee) to replace the shares of Common Stock that were transferred or the Award that was surrendered. The Company may assume awards granted by an organization acquired by the Company or may grant Awards in replacement of, or in substitution for, any such awards. (b) TYPES OF AWARDS. Awards may include, but are not limited to, the following: (i) DIRECTOR OPTION -- A right to purchase Common Stock granted to a Director pursuant to Section 7. (ii) STOCK APPRECIATION RIGHT -- A right to receive a payment, in cash or Common Shares, equal to the excess of (A) the Fair Market Value of a specified number of shares of Common Stock on the date the right is exercised over (B) the Fair Market Value on the date the right is granted. The right may be conditioned upon the occurrence of certain events, such as a Change of Control of the Company, or may be unconditional, as determined by the Committee. (iii) STOCK AWARD -- An Award that is made in Common Stock, Restricted Stock, or Stock Equivalent Units or that is otherwise based on, or valued in whole or in part by reference to, the Common Shares, including Performance-Based Stock Awards. All or any part of any Stock Award may be subject to such conditions, restrictions, and risks of forfeiture, as and to the extent established by the Committee and, with respect to Performance-Based Stock Awards, such conditions and restrictions as may be required under Section 162(m), so that the Performance-Based Stock Awards constitute performance-based compensation thereunder. Stock Awards may be based on the Fair Market Value of the Common Stock, or on other specified values or methods of valuation, as determined by the Committee. 8 (iv) STOCK OPTION -- A right to purchase a specified number of shares of Common Stock, during a specified period, and at a specified exercise price, all as determined by the Committee. A Stock Option may be an Incentive Stock Option or a Stock Option that does not qualify as an Incentive Stock Option (a "non-qualified Stock Option"). In addition to the terms, conditions, vesting periods, and restrictions established by the Committee, Incentive Stock Options must comply with the requirements of Section 422 of the Code. The exercise price of a Stock Option, including a non-qualified Stock Option, may be no less than the Fair Market Value of the Common Shares on the date the Stock Option is granted. (v) PERFORMANCE-BASED STOCK AWARDS -- A Stock Award granted to a Participant pursuant to Section 8. 7. DIRECTOR OPTIONS. (a) GRANT OF DIRECTOR OPTIONS; NUMBER OF SHARES OF COMMON STOCK. Upon approval of this Plan at the 1995 Annual Meeting of Stockholders, each Non-Employee Director of the Company will receive a Director Option for 5,000 shares of Common Stock on the date of such meeting. Each Non-Employee Director who first becomes a Director at any time thereafter, will receive a Director Option for 5,000 shares of Common Stock on the date that he or she is first elected or appointed as a Non-Employee Director. Each Director who ceases to be an employee of the Company during his or her term in office will receive a Director Option on the date that he or she is first elected as a Director after ceasing to be an employee. Each Non-Employee Director who receives a Director Option under this Plan and continues in office will receive an additional Director Option for 1,000 shares of Common Stock annually on each anniversary date of the date on which the previous Director Option was received. No action by the Committee will be required to effect the grant of these Director Options. Notwithstanding the provisions of Section 14, the number of shares of Common Stock to which the annual Director Options relates may not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, as amended, or the rules thereunder. (b) EXERCISE PRICE. The purchase price of the Common Stock subject to each Director Option will be the Fair Market Value of the Common Shares at the date of grant. (c) DATE DIRECTOR OPTIONS BECOME EXERCISABLE. Each Director Option will become exercisable one year after the date of grant or upon the earlier occurrence of a Change of Control. (d) EXPIRATION DATE. Unless terminated earlier pursuant to the next sentence, each Director Option will terminate, and the right of the holder to purchase Common Stock upon exercise of the Director Option will expire, at the close of business on the tenth anniversary date of the date of grant. Each Director Option will terminate, and the right of the holder to purchase Common Stock upon exercise of the Director Option will expire, upon the completion of a transaction of the type identified in Sections 2(e) (3) and (4), but only if provision satisfactory to 9 the Committee is made for the payment to the holder of the Director Option of the excess of (i) the Fair Market Value of the Common Stock subject to the Director Option immediately prior to the completion of the transaction over (ii) the exercise price. (e) NOT INCENTIVE STOCK OPTIONS. None of the Director Options will be Incentive Stock Options. (f) CONTINUOUS SERVICE AS A DIRECTOR. No Director Option may be exercised unless the Non-Employee Director to whom the Director Option was granted has continued to be a Non-Employee Director from the time of grant through the time of exercise, except as provided in this Section 7(f ). (i) If the service in office of a Non-Employee Director is terminated due to the death of the Non-Employee Director, the Non-Employee Director's estate, executor, administrator, personal representative, or beneficiary will have the right to exercise the Director Option in whole or in part prior to the earlier of (i) 12 months after the date of the holder's death and (ii) the expiration of the Director Option. (ii) If a Non-Employee Director ceases to be a Non-Employee Director by reason of his employment by the Company, the Director Option granted to that Non-Employee Director will be treated the same as Stock Options held by employees and will continue to be exercisable prior to the expiration of the Director Option, subject to the limitations on exercise following termination of employment established by the Committee pursuant to Section 12. (iii) If the service in office of a Non-Employee Director is terminated for any reason other than those set forth in Sections 7(f)(i) and 7(f)(ii), the holder of the Director Option may exercise the Director Option in whole or in part only with the consent of the Committee. In any such event, the consent of the Committee must be obtained and the Director Option exercised prior to the earlier of (i) three months after the date of the termination of service in office of a Non-Employee Director and (ii) the expiration of the Director Option. 10 8. PERFORMANCE-BASED STOCK AWARDS. (a) PERFORMANCE-BASED STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards valued by reference to shares of Common Stock that are wholly contingent on the attainment of performance goals established by the Committee from time to time. The performance goals will relate to one or more of the following performance measures, as determined by the Committee for each applicable performance period: (i) return to stockholders, (ii) cash flow, (iii) return on equity, (iv) Company created income (for example, income due to Company initiated cost reductions or productivity improvements), (v) sales growth, (vi) earnings and earnings growth, (vii) return on assets, (viii) stock price, (ix) earnings per share, (x) market share, (xi) customer satisfaction, and (xii) safety and/or environmental performance. Any such performance goals and the applicable performance measures will be determined by the Committee at the time of grant and reflected in a written award agreement. The number or value of Performance-Based Stock Awards that will be paid out to any Participant at the end of the applicable performance period, which may be one year or longer as determined by the Committee, will depend on the extent to which the Company attains the established performance goals. (b) MAXIMUM AMOUNT OF PERFORMANCE-BASED STOCK AWARDS. No participant who is an employee may be awarded Performance-Based Stock Awards in any one fiscal year in excess of an aggregate of 50,000 shares of Common Stock. The maximum dollar value, based on the Fair Market Value of the number of shares of Common Stock awarded, of any Performance-Based Stock Award to any Participant who is an employee shall not exceed $1,200,000 in any one fiscal year. 9. DEFERRAL OF PAYMENT. With the approval of the Committee, the delivery of the Common Stock, cash, or any combination thereof subject to an Award (other than Director Options) may be deferred, either in the form of installments or a single future delivery. The Committee may also permit selected Participants to defer the payment of some or all of their Awards, as well as other compensation, in accordance with procedures established by the Committee to assure that the recognition of taxable income is deferred under the Code. Deferred amounts may, to the extent permitted by the Committee, be credited as cash or Stock Equivalent Units. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and dividend equivalents on Stock Equivalent Units. 10. PAYMENT OF EXERCISE PRICE. The exercise price of a Stock Option, Director Option, and any Stock Award for which the Committee has established an exercise price may be paid in cash, by the transfer of Common Stock, by the surrender of all or part of an Award (including the Award being exercised), or by a combination of these methods, as and to the extent permitted by the Committee. The Committee may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of this Plan. 11 In the event shares of Restricted Stock are used to pay the exercise price of a Stock Award, a number of the shares of Common Stock issued upon the exercise of the Award equal to the number of shares of Restricted Stock used to pay the exercise price will be subject to the same restrictions as the Restricted Stock, 11. TAXES ASSOCIATED WITH AWARD. Prior to the payment of an Award, the Company may withhold, or require a Participant to remit to the Company, an amount sufficient to pay any Federal, state, and local taxes associated with the Award. The Committee may, in its discretion and subject to such rules as the Committee may adopt, permit a Participant to pay any or all taxes associated with the Award in cash, by the transfer of Common Stock, by the surrender of all or part of an Award (including the Award being exercised), including Performance-Based Stock Awards, or by a combination of these methods. The Committee may permit a Participant to pay any or all taxes associated with an Incentive Stock Option in cash, by the transfer of Common Stock, or by a combination of these methods. 12. TERMINATION OF EMPLOYMENT. Subject to Section 13, if the employment of a Participant terminates for any reason, all unexercised, deferred, and unpaid Awards may be exercisable or paid only in accordance with rules established by the Committee. Subject to the foregoing exception, these rules may provide, as the Committee deems appropriate, for the expiration, continuation, or acceleration of the vesting of all or part of the Awards. 13. CHANGE OF CONTROL. In the event of a Change of Control of the Company, unless and to the extent otherwise determined by the Board of Directors, (i) all Stock Appreciation Rights and Stock Options then outstanding will become fully exercisable as of the date of the Change of Control and (ii) all restrictions and conditions applicable to Restricted Stock and other Stock Awards, including Performance-Based Stock Awards, will be deemed to have been satisfied as of the date of the Change of Control. Any such determination by the Board of Directors that is made after the occurrence of a Change of Control will not be effective unless a majority of the Directors then in office are Continuing Directors and the determination is approved by a majority of the Continuing Directors. Notwithstanding any other provision of this Plan, during the 60-day period from and after a Change of Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of grant, an optionee shall have the right, whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the shares of Common Stock being purchased under the Stock Option and by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the exercise price per share of Common Stock under the Stock Option (the "Spread") multiplied by the number of shares of Common Stock granted under the Stock Option as to which the right granted under this Section shall have been exercised. 12 14. AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN; AMENDMENT OF OUTSTANDING AWARDS. (a) AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN. The Board of Directors may amend, suspend, or terminate this Plan at any time. Stockholder approval for any such amendment will be required only to the extent necessary to preserve the exemption provided by Rule 16b-3 for this Plan and Awards granted under this Plan. (b) AMENDMENT OF OUTSTANDING AWARDS. The Committee may, in its discretion, amend the terms of any Award (other than a Director Option), including, waiving, in whole or in part, any restrictions or conditions applicable to, or accelerating the vesting of, any Award, prospectively or retroactively, but no such amendment may impair the rights of any Participant without his or her consent or cause Awards intended to qualify as performance based compensation under Section 162(m) to fail to so qualify. 15. AWARDS TO FOREIGN NATIONALS AND EMPLOYEES OUTSIDE THE UNITED STATES. To the extent that the Committee deems appropriate to comply with foreign law or practice and to further the purpose of this Plan, the Committee may, without amending this Plan, (i) establish special rules applicable to Awards granted to Participants who are foreign nationals, are employed outside the United States, or both, including rules that diff er from those set forth in this Plan, and (ii) grant Awards to such Participants in accordance with those rules. 16. NONASSIGNABILITY. Unless otherwise determined by the Committee, (i) no Award granted under this Plan may be transferred or assigned by the Participant to whom it is granted other than by will, pursuant to the laws of descent and distribution, or pursuant to a qualified domestic relations order and (ii) an Award granted under this Plan may be exercised, during the Participant's lifetime, only by the Participant or by the Participant's guardian or legal representative; except that, no Incentive Stock Option may be transferred or assigned pursuant to a qualified domestic relations order or exercised, during the Participant's lifetime, by the Participant's guardian or legal representative. 17. GOVERNING LAW. The interpretation, validity, and enforcement of this Plan will, to the extent not governed by the Code or the securities laws of the United States, be governed by the laws of the State of Ohio. 18. RIGHTS OF EMPLOYEES. Nothing in this Plan will confer upon any Participant the right to continued employment by the Company or limit in any way the Company's right to terminate any Participant's employment at will. 19. EFFECTIVE AND TERMINATION DATES. (a) EFFECTIVE DATE. This Plan will become effective on the date it is approved by the stockholders. (b) TERMINATION DATE. This Plan will continue in effect until terminated by the Board of Directors EX-10.2.A 3 EXHIBIT 10.2(A) 1 EXHIBIT 10.2a THE GEON COMPANY 1998 INTERIM STOCK AWARD PLAN 1. PURPOSE. The Geon Company 1998 Interim Stock Award Plan (the "Plan") is designed to foster and promote the long-term growth and performance of the Company by enhancing the Company's ability to attract and retain qualified key employees and motivating key employees through stock ownership and performance-based incentives. To achieve this purpose, this Plan provides authority for the grant of Stock Options, Restricted Stock, Stock Equivalent Units, Stock Appreciation Rights, Performance-Based Stock Awards, and other stock and performance-based incentives. 2. DEFINITIONS. (a) "Affiliate" -- This term has the meaning given to it in Rule 12b-2 under the Exchange Act. (b) "Award" -- The grant of Stock Options, Restricted Stock, Stock Equivalent Units, Stock Appreciation Rights, Performance-Based Stock Awards, and other stock and performance-based incentives under this Plan. (c) "Award Agreement" -- Any agreement between the Company and a Participant that sets forth terms, conditions, and restrictions applicable to an Award. (d) "Board of Directors " -- The Board of Directors of the Company, (e) "Change of Control" --A "Change of Control" means: (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 (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 subsection (c) below; provided, further, that if any Person's beneficial ownership of the Outstanding Company Voting Securities reaches or exceeds 20% as a result of a transaction described in clause (i) or (ii) above, and such Person subsequently acquires 2 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 November 6, 1996, 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 November 6, 1996 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 (iii) 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 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, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from 3 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 (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (f) "Change of Control Price" -- the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Business Combination, the highest price per share of Common Stock paid in such tender or exchange offer or Business Combination; provided, however, that, in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change of Control Price shall be in all cases the Fair Market Value of the Common Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board. (g) "Code" -- The Internal Revenue Code of 1986, or any law that supersedes or replaces it, as amended from time to time. (h) "Committee" -- The Compensation Committee of the Board of Directors, or any other committee of the Board of Directors that the Board of Directors authorizes to administer this Plan. The Committee will be constituted in a manner that satisfies all applicable legal requirements, including satisfying the disinterested administration standard set forth in Rule 16b-3 and the outside director requirement under Section 162(m). (i) "Common Stock" or "stock"-- Common Stock, $.10 par value, of the Company, including authorized and unissued shares and treasury shares. (j) "Company" -- The Geon Company, a Delaware corporation, and its direct and indirect subsidiaries. (k) "Continuing Director" -- A Director following a Change of Control who was a Director prior to such Change of Control or who was recommended or elected to succeed a Continuing Director by a majority of the Continuing Directors then in office. 4 (l) "Director" -- A director of the Company. (m) "Exchange Act"-- The Securities Exchange Act of 1934, as amended, or any law that supersedes or replaces it, as the same may be amended from time to time. (n) "Fair Market Value" of Common Stock -- The Fair Market Value of a share of Common Stock on any particular date means the mean of the high and low prices of the 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 (a) if the Common Stock is listed on the New York Stock Exchange, as reported on the New York Stock Exchange Composite Transactions listing (or similar report), or (b) if the Common Stock is listed on the NASDAQ National Market System, then as reported on such system, or (c) if not listed on either the New York Stock Exchange or the NASDAQ National Market System, as determined by the Board or Committee. (o) "Incentive Stock Option"-- A Stock Option that meets the requirements of Section 422 of the Code. (p) "Non-Employee Director" -- A Director who is not an employee of the Company. (q) "Notice of Award"-- Any notice by the Committee to a Participant that advises the Participant of the grant of an Award or sets forth terms, conditions, and restrictions applicable to an Award. (r) "Participant" -- Any person to whom an Award has been granted under this Plan. (s) "Performance-Based Stock Award" -- A Stock Award granted to a Participant pursuant to Section 7. (t) "Restricted Stock" -- An Award of Common Stock subject to restrictions or risk of forfeiture. (u) "Rule 16b-3" -- Rule 16b-3 under the Exchange Act as the same may be amended, modified, superseded or replaced from time to time. (v) "Section 162(m) " -- Section 162(m) of the Code, together with the regulations promulgated by the Internal Revenue Service thereunder, as the same may be amended, modified, superseded or replaced from time to time. (w) "Stock Appreciation Right" -- This term has the meaning given to it in Section 6(b)(ii). (x) "Stock Award" -- This term has the meaning given to it in Section 6(b)(iii). 5 (y) "Stock Equivalent Unit" -- An Award that is valued by reference to the value of Common Stock. (z) "Stock Option" -- This term has the meaning given to it in Section 6(b)(iv). 3. ELIGIBILITY. All key employees of the Company and its Affiliates, including officers whether or not Directors, are eligible for the grant of Awards. The selection of key employees to receive Awards will be within the discretion of the Committee. More than one Award may be granted to the same key employee. Non-Employee Directors are not, however, eligible for the grant of any Awards. 4. COMMON STOCK AVAILABLE FOR AWARDS; ADJUSTMENT. (a) NUMBER OF SHARES OF COMMON STOCK. Subject to adjustment as provided for in Section 4(d), the aggregate number of shares of Common Stock that may be subject to Awards granted under this Plan shall be 250,000 shares of Common Stock. The assumption of awards granted by an organization acquired by the Company, or the grant of Awards under this Plan in substitution for any such awards, will not reduce the number of shares of Common Stock available for the grant of Awards under this Plan. Common Stock Subject to an Award that expires or is forfeited, terminated, or canceled will again be available for grant under this Plan, without reducing the number of shares of Common Stock available for grant of Awards under this Plan, except to the extent that the availability of those shares of Common Stock would cause this Plan or any Awards granted under this Plan to fail to qualify for the exemption provided by Rule 16b-3. Notwithstanding the foregoing, Common Stock subject to awards of Stock Options and Stock Appreciation Rights to Participants who are employees which expire or are forfeited, terminated, or canceled in the same year such Award is granted will, upon such expiration or forfeiture, termination, or cancellation, continue to be counted against the maximum number of shares with respect to which Options and Stock Appreciation Rights may be granted under this Plan in such year to such Participants holding the expired or forfeited, terminated or canceled Stock Options or Stock Appreciation Rights. (b) LIMITATIONS ON CERTAIN AWARDS. (i) The aggregate number of shares of Common Stock that may be issued upon exercise of Incentive Stock Options is 200,000. (ii) The maximum number of shares with respect to which Options (including Incentive Stock Options) and Stock Appreciation Rights may be granted under this Plan in any one fiscal year is (A) 50,000 as to any individual Participant who is an employee (other than the Chief Executive Officer or the Chief Operating Officer of the Company) and (B) 100,000 as to any individual Participant who is the Chief Executive Officer or the Chief Operating Officer of the Company. 6 (iii) The aggregate number of shares of Restricted Stock (other than Restricted Stock which is a Performance-Based Stock Award) that may be awarded under this Plan is 200,000. (c) NO FRACTIONAL SHARES. No fractional shares will be issued, and the Committee will determine the manner in which the value of fractional shares will be treated. (d) ADJUSTMENT. In the event of any change in the number of shares of Common Stock by reason of a merger, consolidation, reorganization, recapitalization, or similar transaction, or in the event of a stock dividend, stock split, or distribution to stockholders (other than normal cash dividends), the Committee will adjust the number and class of shares that may be issued under this Plan, the number and class of shares subject to outstanding Awards, the exercise price applicable to outstanding Awards, and the Fair Market Value of the shares of Common Stock and other value determinations applicable to outstanding Awards. 5. ADMINISTRATION. (a) COMMITTEE. This Plan will be administered by the Committee. The Committee will, subject to the terms of this Plan, have the authority to: (i) select the eligible employees who will receive Awards, (ii) grant Awards, (iii) determine the number and types of Awards to be granted to employees, (iv) determine the terms, conditions, vesting periods, and restrictions applicable to Awards, (v) adopt, alter, and repeal administrative rules and practices governing this Plan, (vi) interpret the terms and provisions of this Plan and any Awards granted under this Plan, (vii) prescribe the forms of any Notices of Award, Award Agreements, or other instruments relating to Awards, and (viii) otherwise supervise the administration of this Plan. All decisions by the Committee will be made with the approval of not less than a majority of its members. (b) DELEGATION. The Committee may delegate any of its authority to any other person or persons that it deems appropriate, provided the delegation does not cause this Plan or any Awards granted under this Plan to fail to qualify for the exemption provided by Rule 16b-3 under the Exchange Act. (c) DECISIONS FINAL. All decisions by the Committee, and by any other person or persons to whom the Committee has delegated authority, will be final and binding on all persons. 6. AWARDS. 7 (a) GRANT OF AWARDS. The Committee will determine the type or types of Awards to be granted to each Participant and will set forth in the related Notice of Award or Award Agreement the terms, conditions, vesting periods, and restrictions applicable to each Award. Awards may be granted singly or in combination or tandem with other Awards. Awards may also be granted in replacement of, or in substitution for, other awards granted by the Company, whether or not granted under this Plan, except that, with respect to Performance-Based Stock Awards, the new Award must also be wholly contingent on the attainment of performance goals established by the Committee; without limiting the foregoing, if a Participant pays all or part of the exercise price or taxes associated with an Award by the transfer of Common Stock or the surrender of all or part of an Award (including the Award being exercised), the Committee may, in its discretion, grant a new Award (which, in the case of Awards intended to replace Performance-Based Stock Awards, must also be wholly contingent on the attainment of performance goals established by the Committee) to replace the shares of Common Stock that were transferred or the Award that was surrendered. The Company may assume awards granted by an organization acquired by the Company or may grant Awards in replacement of, or in substitution for, any such awards. (b) TYPES OF AWARDS. Awards may include, but are not limited to, the following: (i) STOCK APPRECIATION RIGHT -- A right to receive a payment, in cash or Common Shares, equal to the excess of (A) the Fair Market Value of a specified number of shares of Common Stock on the date the right is exercised over (B) the Fair Market Value on the date the right is granted. The right may be conditioned upon the occurrence of certain events, such as a Change of Control of the Company, or may be unconditional, as determined by the Committee. (ii) STOCK AWARD -- An Award that is made in Common Stock, Restricted Stock, or Stock Equivalent Units or that is otherwise based on, or valued in whole or in part by reference to, the Common Shares, including Performance-Based Stock Awards. All or any part of any Stock Award may be subject to such conditions, restrictions, and risks of forfeiture, as and to the extent established by the Committee. Stock Awards may be based on the Fair Market Value of the Common Stock, or on other specified values or methods of valuation, as determined by the Committee. (iii) STOCK OPTION -- A right to purchase a specified number of shares of Common Stock, during a specified period, and at a specified exercise price, all as determined by the Committee. A Stock Option may be an Incentive Stock Option or a Stock Option that does not qualify as an Incentive Stock Option (a "non-qualified Stock Option"). In addition to the terms, conditions, vesting periods, and restrictions established by the Committee, Incentive Stock Options must comply with the requirements of Section 422 of the Code. The exercise price of an Incentive Stock Option may be no less than the Fair Market Value of the Common Shares on the date the Stock Option is granted. 8 (iii) PERFORMANCE-BASED STOCK AWARDS -- A Stock Award granted to a Participant pursuant to Section 7. 7. PERFORMANCE-BASED STOCK AWARDS. (a) PERFORMANCE-BASED STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards valued by reference to shares of Common Stock that are wholly contingent on the attainment of performance goals established by the Committee from time to time. The performance goals will relate to one or more of the following performance measures, as determined by the Committee for each applicable performance period: (i) return to stockholders, (ii) cash flow, (iii) return on equity, (iv) Company created income (for example, income due to Company initiated cost reductions or productivity improvements), (v) sales growth, (vi) earnings and earnings growth, (vii) return on assets, (viii) stock price, (ix) earnings per share, (x) market share, (xi) customer satisfaction, and (xii) safety and/or environmental performance. Any such performance goals and the applicable performance measures will be determined by the Committee at the time of grant and reflected in a written award agreement. The number or value of Performance-Based Stock Awards that will be paid out to any Participant at the end of the applicable performance period, which may be one year or longer as determined by the Committee, will depend on the extent to which the Company attains the established performance goals. (b) MAXIMUM AMOUNT OF PERFORMANCE-BASED STOCK AWARDS. No participant who is an employee may be awarded Performance-Based Stock Awards in any one fiscal year in excess of an aggregate of 50,000 shares of Common Stock. The maximum dollar value, based on the Fair Market Value of the number of shares of Common Stock awarded, of any Performance-Based Stock Award to any Participant who is an employee shall not exceed $1,200,000 in any one fiscal year. 8. DEFERRAL OF PAYMENT. With the approval of the Committee, the delivery of the Common Stock, cash, or any combination thereof subject to an Award may be deferred, either in the form of installments or a single future delivery. The Committee may also permit selected Participants to defer the payment of some or all of their Awards, as well as other compensation, in accordance with procedures established by the Committee to assure that the recognition of taxable income is deferred under the Code. Deferred amounts may, to the extent permitted by the Committee, be credited as cash or Stock Equivalent Units. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and dividend equivalents on Stock Equivalent Units. 9 9. PAYMENT OF EXERCISE PRICE. The exercise price of a Stock Option and any Stock Award for which the Committee has established an exercise price may be paid in cash, by the transfer of Common Stock, by the surrender of all or part of an Award (including the Award being exercised), or by a combination of these methods, as and to the extent permitted by the Committee. The Committee may prescribe any other method of paying the exercise price that it determines to be consistent with applicable law and the purpose of this Plan. In the event shares of Restricted Stock are used to pay the exercise price of a Stock Award, a number of the shares of Common Stock issued upon the exercise of the Award equal to the number of shares of Restricted Stock used to pay the exercise price will be subject to the same restrictions as the Restricted Stock, 10. TAXES ASSOCIATED WITH AWARD. Prior to the payment of an Award, the Company may withhold, or require a Participant to remit to the Company, an amount sufficient to pay any Federal, state, and local taxes associated with the Award. The Committee may, in its discretion and subject to such rules as the Committee may adopt, permit a Participant to pay any or all taxes associated with the Award in cash, by the transfer of Common Stock, by the surrender of all or part of an Award (including the Award being exercised), including Performance-Based Stock Awards, or by a combination of these methods. The Committee may permit a Participant to pay any or all taxes associated with an Incentive Stock Option in cash, by the transfer of Common Stock, or by a combination of these methods. 11. TERMINATION OF EMPLOYMENT. Subject to Section 12, if the employment of a Participant terminates for any reason, all unexercised, deferred, and unpaid Awards may be exercisable or paid only in accordance with rules established by the Committee. Subject to the foregoing exception, these rules may provide, as the Committee deems appropriate, for the expiration, continuation, or acceleration of the vesting of all or part of the Awards. 12. CHANGE OF CONTROL. In the event of a Change of Control of the Company, unless and to the extent otherwise determined by the Board of Directors, (i) all Stock Appreciation Rights and Stock Options then outstanding will become fully exercisable as of the date of the Change of Control and (ii) all restrictions and conditions applicable to Restricted Stock and other Stock Awards, including Performance-Based Stock Awards, will be deemed to have been satisfied as of the date of the Change of Control. Any such determination by the Board of Directors that is made after the occurrence of a Change of Control will not be effective unless a majority of the Directors then in office are Continuing Directors and the determination is approved by a majority of the Continuing Directors. Notwithstanding any other provision of this Plan, during the 60-day period from and after a Change of Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of grant, an optionee shall have the right, whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the shares of Common Stock being purchased under the Stock Option and by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the 10 Change of Control Price per share of Common Stock on the date of such election shall exceed the exercise price per share of Common Stock under the Stock Option (the "Spread") multiplied by the number of shares of Common Stock granted under the Stock Option as to which the right granted under this Section shall have been exercised. 13. AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN; AMENDMENT OF OUTSTANDING AWARDS. (a) AMENDMENT, SUSPENSION, OR TERMINATION OF THIS PLAN. The Board of Directors may amend, suspend, or terminate this Plan at any time. Stockholder approval for any such amendment will be required only to the extent necessary to preserve the exemption provided by Rule 16b-3 for this Plan and Awards granted under this Plan. (b) AMENDMENT OF OUTSTANDING AWARDS. The Committee may, in its discretion, amend the terms of any Award, including, waiving, in whole or in part, any restrictions or conditions applicable to, or accelerating the vesting of, any Award, prospectively or retroactively, but no such amendment may impair the rights of any Participant without his or her consent or cause Awards intended to qualify as performance based compensation under Section 162(m) to fail to so qualify. 14. AWARDS TO FOREIGN NATIONALS AND EMPLOYEES OUTSIDE THE UNITED STATES. To the extent that the Committee deems appropriate to comply with foreign law or practice and to further the purpose of this Plan, the Committee may, without amending this Plan, (i) establish special rules applicable to Awards granted to Participants who are foreign nationals, are employed outside the United States, or both, including rules that diff er from those set forth in this Plan, and (ii) grant Awards to such Participants in accordance with those rules. 15. NONASSIGNABILITY. Unless otherwise determined by the Committee, (i) no Award granted under this Plan may be transferred or assigned by the Participant to whom it is granted other than by will, pursuant to the laws of descent and distribution, or pursuant to a qualified domestic relations order and (ii) an Award granted under this Plan may be exercised, during the Participant's lifetime, only by the Participant or by the Participant's guardian or legal representative; except that, no Incentive Stock Option may be transferred or assigned pursuant to a qualified domestic relations order or exercised, during the Participant's lifetime, by the Participant's guardian or legal representative. 16. GOVERNING LAW. The interpretation, validity, and enforcement of this Plan will, to the extent not governed by the Code or the securities laws of the United States, be governed by the laws of the State of Ohio. 17. RIGHTS OF EMPLOYEES. Nothing in this Plan will confer upon any Participant the right to continued employment by the Company or limit in any way the Company's right to terminate any Participant's employment at will. 11 18. EFFECTIVE AND TERMINATION DATES. (a) EFFECTIVE DATE. This Plan will become effective on the date of its adoption by the Board of Directors. (b) TERMINATION DATE. This Plan will continue in effect until terminated by the Board of Directors. EX-11 4 EXHIBIT 11 1 EXHIBIT 11 The Geon Company Earnings Per Share (EPS) (In millions, except per share data)
Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1998 1997 1998 1997 -------- -------- -------- -------- BASIC EARNINGS PER COMMON SHARE: Number of Shares: ----------------- Average shares of common stock outstanding 23.3 23.4 23.3 23.4 Less: Average shares of contingently issuable restricted stock outstanding (0.4) (0.4) (0.4) (0.4) -------- -------- -------- -------- Total common shares outstanding for basic EPS 22.9 23.0 22.9 23.0 ======== ======== ======== ======== DILUTED EARNINGS PER COMMON SHARE: Number of Shares: ----------------- Average shares of common stock outstanding 23.3 23.4 23.3 23.4 Net effect of dilutive stock options - based on treasury stock method using average market price .3 .3 .3 .2 -------- -------- -------- -------- Total common and common equivalent shares outstanding for diluted EPS 23.6 23.7 23.6 23.6 ======== ======== ======== ======== Net income per share of common stock Basic $ .21 $ .27 .46 $ .37 ======== ======== ======== ======== Diluted $ .20 $ .26 .45 $ .36 ======== ======== ======== ========
EX-27.A 5 EXHIBIT 27(A)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS OF THE GEON COMPANY AND SUBSIDIARIES AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 21 0 99 2 124 267 1,207 751 849 286 136 0 0 3 225 849 655 655 569 633 (4) 0 8 18 7 11 0 0 0 11 .46 .45
EX-27.B 6 EXHIBIT 27(B)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS OF THE GEON COMPANY AND SUBSIDIARIES AS OF JUNE 30, 1997 AND DECEMBER 31, 1996 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 10 35 91 3 110 277 1,192 748 799 249 137 0 0 3 217 799 634 634 573 612 3 0 6 14 6 8 0 0 0 8 .37 .36 RESTATED FOR THE ADOPTION OF SFAS NO. 128
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