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POLYONE CORPORATION
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[POLYONE LOGO]
POLYONE CORPORATION
NOTICE OF 2003
ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
POLYONE CORPORATION
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
The Annual Meeting of Shareholders of PolyOne Corporation will be held at
The Forum Conference and Education Center, 1375 E. Ninth Street, Cleveland, Ohio
at 9:00 a.m. on Thursday, May 15, 2003. The purposes of the meeting are:
1. To elect Directors; and
2. To consider and transact any other business that may properly come
before the meeting.
Shareholders of record at the close of business on March 17, 2003, are
entitled to notice of and to vote at the meeting.
For the Board of Directors
/s/ Wendy C. Shiba
WENDY C. SHIBA
Vice President, Chief Legal Officer
and Secretary
March 25, 2003
1
POLYONE CORPORATION
200 PUBLIC SQUARE
SUITE 36-5000
CLEVELAND, OHIO 44114
PROXY STATEMENT
DATED MARCH 25, 2003
The Board of Directors of PolyOne Corporation respectfully requests your
proxy for use at the Annual Meeting of Shareholders to be held at The Forum
Conference and Education Center, 1375 E. Ninth Street, Cleveland, Ohio at 9:00
a.m. on Thursday, May 15, 2003, and at any adjournments of that meeting. This
proxy statement is to inform you about the matters to be acted upon at the
meeting.
If you attend the meeting, you may vote your shares by ballot. If you do
not attend, your shares may still be voted at the meeting if you sign and return
the enclosed proxy card. Common shares of PolyOne represented by a properly
signed card will be voted in accordance with the choices marked on the card. If
no choices are marked, the shares will be voted to elect the nominees listed on
pages 3 and 4 below. You may revoke your proxy before it is voted by giving
notice to us in writing or orally at the meeting. Persons entitled to direct the
vote of shares held by the following PolyOne plans will receive a separate
voting instruction card: The Geon Retirement Savings Plan, M.A. Hanna Company
401(k) and Retirement Plan, M.A. Hanna Company Capital Accumulation Plan, DH
Compounding 401(k) Plan and PolyOne Canada Inc. Retirement Plan. If you receive
a separate voting instruction card for one of these plans, you must sign and
return the card as indicated on the card in order to instruct the trustee on how
to vote the shares held under the plan. You may revoke your voting instruction
card before the trustee votes the shares held by it by giving notice in writing
to the trustee.
Shareholders may also submit their proxies by telephone or over the
Internet. The telephone and Internet voting procedures are designed to
authenticate votes cast by use of a personal identification number. These
procedures allow shareholders to appoint a proxy to vote their shares and to
confirm that their instructions have been properly recorded. Instructions for
voting by telephone and over the Internet are printed on the proxy cards.
We are mailing this proxy statement and the enclosed proxy card and, if
applicable, the voting instruction card, to shareholders on or about April 3,
2003. PolyOne's headquarters are located at 200 Public Square, Suite 36-5000,
Cleveland, Ohio 44114 and our telephone number is (216) 589-4000.
2
ELECTION OF DIRECTORS
PolyOne's Board of Directors currently consists of ten Directors. Each
Director serves for a one year term and until a successor is duly elected and
qualified, subject to the Director's earlier death, retirement or resignation.
The Board met eight times during 2002, the calendar year being PolyOne's fiscal
year. PolyOne's independent Directors meet regularly in executive sessions
chaired by the chairperson of the Compensation and Governance Committee. The
Board conducts an annual self-evaluation.
A shareholder who wishes to suggest a Director candidate for consideration
by the Compensation and Governance Committee must provide written notice to the
Secretary of PolyOne in accordance with the procedures specified in Regulation
12 of PolyOne's Regulations. Generally, the Secretary must receive the notice
not less than 60 nor more than 90 days prior to the first anniversary of the
date on which we first mailed our proxy materials for the preceding year's
annual meeting. The notice must set forth, as to each nominee, the name, age,
principal occupations and employment during the past five years, name and
principal business of any corporation or other organization in which such
occupations and employment were carried on, and a brief description of any
arrangement or understanding between such person and any others pursuant to
which such person was selected as a nominee. The notice must include the
nominee's signed consent to serve as a Director if elected. The notice must set
forth the name and address of, and the number of PolyOne common shares owned by,
the shareholder giving the notice and the beneficial owner on whose behalf the
nomination is made and any other shareholders believed to be supporting such
nominee.
The nominees for election as Directors for terms expiring in 2004 and a
description of the business experience of each nominee appear below. Each of the
nominees is a current member of the Board. The reference below each Director's
name to the term of service as a Director includes the period during which the
Director served as a Director of The Geon Company ("Geon") or M.A. Hanna Company
("M.A. Hanna"), each a predecessor to PolyOne.
J. DOUGLAS CAMPBELL
Director since 1993
Age -- 61 Served as President and Chief Executive Officer and was
a Director of Arcadian Corporation, a nitrogen chemicals
and fertilizer manufacturer, from December 1992 until
his retirement in 1997. From 1966 to 1992, Mr. Campbell
held various positions with Standard Oil (Ohio) and
British Petroleum.
CAROL A. CARTWRIGHT
Director since 1994
Age -- 61 President of Kent State University, a public higher
education institution, since 1991. Ms. Cartwright serves
on the Boards of Directors of KeyCorp, FirstEnergy and
The Davey Tree Expert Company.
GALE DUFF-BLOOM
Director since 1994
Age -- 63 Served as President of Company Communications and
Corporate Image of J.C. Penney Company, Inc., a major
retailer, from June 1999 until her retirement in April
2000. From 1996 to June 1999, Ms. Duff-Bloom served as
President of Marketing and Company Communications and
from 1995 to 1996 as Senior Executive Vice President and
Director of Personnel and Company Communications of J.C.
Penney.
WAYNE R. EMBRY
Director since 1990
Age -- 65 Served as President and Chief Operating Officer, Team
Division, of the Cleveland Cavaliers, a professional
basketball team, from 1986 until his retirement in 2000.
Mr. Embry serves on the Boards of Directors of Kohl's
Corporation and the Federal Reserve Bank of Cleveland.
3
ROBERT A. GARDA
Director since 1998
Age -- 64 Executive-in-Residence of The Fuqua School of Business,
Duke University, since 1997. Mr. Garda served as an
independent consultant from 1995 to 1997. Mr. Garda
served as President and Chief Executive Officer of
Aladdin Industries, a leading supplier of thermal
insulated food and beverage ware products, from 1994 to
1995. From 1967 to 1994, Mr. Garda was with McKinsey &
Company and served as a director from 1978 to 1994. Mr.
Garda serves on the Boards of Directors of Insect
Biotechnology, Inc., VSV, Inc. and GED, Inc.
GORDON D. HARNETT
Director since 1997
Age -- 60 Chairman, President and Chief Executive Officer of Brush
Engineered Materials Inc., an international supplier and
producer of high performance engineered materials, since
1991. Mr. Harnett serves on the Boards of Directors of
The Lubrizol Corporation, EnPro Industries, Inc. and
National City Bank.
DAVID H. HOAG
Director since 1999
Age -- 63 Served as Chairman of LTV Corporation, a steel
manufacturer, from 1991 until his retirement in 1999,
and as Chief Executive Officer from 1991 to September
1998. Mr. Hoag serves on the Boards of Directors of
Brush Engineered Materials Inc., The Chubb Corporation,
The Lubrizol Corporation and NACCO Industries, Inc.
D. LARRY MOORE
Director since 1994
Age -- 66 Served as President and Chief Operating Officer of
Honeywell, Inc., a multinational manufacturer of
controls for use in homes, buildings, industry, and
space and aviation, from 1993 until his retirement in
1997.
THOMAS A. WALTERMIRE
Director since 1998
Age -- 53 Chairman of the Board, Chief Executive Officer and
President of PolyOne since August 31, 2000. Prior to the
formation of PolyOne at the end of August 2000, Mr.
Waltermire served as Chairman of the Board of Geon from
August 1999 and Chief Executive Officer of Geon from May
1999. From February 1998 to May 1999, Mr. Waltermire
served as President and Chief Operating Officer of Geon
and from May 1997 to February 1998, as Executive Vice
President and Chief Operating Officer. Mr. Waltermire
was the Chief Financial Officer of Geon from October
1993 until May 1997. Mr. Waltermire serves on the Board
of Directors of Nucor Corporation.
FARAH M. WALTERS
Director since 1998
Age -- 58 Served as President and Chief Executive Officer of
University Hospitals Health System and University
Hospitals of Cleveland from 1992 until her retirement in
June 2002. Ms. Walters serves on the Boards of Directors
of Kerr-McGee Corporation and Alpharma Inc.
COMMITTEES OF THE BOARD OF DIRECTORS; ATTENDANCE
The Board has an Audit Committee consisting of Messrs. Harnett, the
Chairperson, Campbell and Moore and Ms. Cartwright; a Compensation and
Governance Committee consisting of Mss. Duff-Bloom, the Chairperson, and Walters
and Messrs. Embry, Garda and Hoag; an Environmental, Health and Safety Committee
consisting of Messrs. Moore, the Chairperson, Embry and Harnett and Ms. Walters;
and a Financial Policy Committee consisting of Messrs. Campbell, the
Chairperson, Garda and Hoag and Ms. Cartwright.
4
The Audit Committee, which met five times during 2002, meets with
appropriate financial and legal personnel and independent auditors to review
PolyOne's corporate accounting, internal controls and financial reporting. The
Committee exercises oversight of the independent auditors, the internal auditors
and the financial management of PolyOne. The Audit Committee recommends to the
Board of Directors the appointment of the independent auditors to serve as
auditors in examining PolyOne's corporate accounts. PolyOne's common shares are
listed on the New York Stock Exchange and are governed by its listing standards.
All members of the Audit Committee meet the independence requirements as set
forth in the New York Stock Exchange listing standards. On September 6, 2000,
the Board adopted an Audit Committee charter, which was amended on February 28,
2002.
Effective in May of 2002, the functions of the Compensation Committee and
the Nominating and Governance Committee were combined to form the Compensation
and Governance Committee. The Compensation and Goverance Committee, which met
three times during 2002 after its formation, reviews and approves compensation,
benefits and perquisites afforded PolyOne's executive officers and other
highly-compensated personnel. The Committee has similar responsibilities with
respect to non-employee Directors, except that the Committee's actions and
determinations are subject to the approval of the Board of Directors. The
Committee also has oversight responsibilities for all of PolyOne's broad-based
compensation and benefit programs and provides policy guidance and oversight on
selected human resource policies and practices. The Committee recommends to the
Board of Directors candidates for nomination as Directors of PolyOne, and the
Committee advises the Board with respect to governance issues and directorship
practices, reviews succession planning for the Chief Executive Officer and other
executive officers and oversees the process by which the Board annually
evaluates the performance of the Chief Executive Officer. All members of the
Compensation and Governance Committee are independent. Prior to the formation of
the Compensation and Governance Committee, the Compensation Committee met four
times during 2002 and the Nominating and Governance Committee met one time
during 2002.
The Environmental, Health and Safety Committee, which met three times
during 2002, exercises oversight with respect to PolyOne's environmental,
health, safety and product stewardship policies and practices and its compliance
with related laws and regulations.
The Financial Policy Committee, which met four times during 2002, exercises
oversight with respect to PolyOne's capital structure, borrowing and repayment
of funds, financial policies, management of foreign exchange risk and other
matters of risk management, banking relationships and other financial matters
relating to PolyOne.
During 2002, each incumbent Director attended at least 75% of the meetings
of the Board of Directors and of the Committees on which he or she served.
COMPENSATION OF DIRECTORS
PolyOne pays unaffiliated Directors an annual retainer of $25,000,
quarterly in arrears, and annually grants to Directors an award of $17,000 in
value of fully vested common shares. PolyOne grants the shares quarterly and
determines the number of shares to be granted by dividing the dollar value by
the arithmetic average of the high and low stock price on the last trading day
of each quarter. PolyOne also pays fees of $1,250 for each Board and Committee
meeting attended, except that the Chairpersons of the Audit Committee and the
Compensation and Governance Committee receive $2,500 for each meeting (of their
respective committee) attended. Compensation for participation in board or
committee meetings by telephone is paid at fifty percent of the normal meeting
fee. In addition, the Chairperson of each Committee receives a fixed annual
retainer of
5
$3,000, payable quarterly. PolyOne reimburses Directors for their expenses
associated with each meeting attended.
PolyOne grants each new Director who is not an employee of PolyOne at the
time of his or her initial election or appointment as a Director an option to
acquire 15,000 common shares. Each non-employee Director receives an annual
option to acquire 6,000 common shares, upon re-election to the Board, effective
as of the date of the Annual Meeting. The options and share awards made to
Directors are awarded under the PolyOne Corporation 2000 Stock Incentive Plan or
any other present or future stock plan of PolyOne having shares available for
these awards.
Directors who are not employees of PolyOne may defer payment of all or a
portion of their compensation as a Director under PolyOne's Deferred
Compensation Plan for Non-Employee Directors (the "Directors' Deferred
Compensation Plan"). A Director may defer the compensation as cash or elect to
have it converted into PolyOne common shares at a rate equal to 125% of the cash
compensation amount. Deferred compensation, whether in the form of cash or
common shares, is held in trust for the participating Directors. Interest earned
on the cash amounts and dividends on the common shares accrue for the benefit of
the participating Directors.
BENEFICIAL OWNERSHIP OF COMMON SHARES
The following table shows the number of common shares beneficially owned on
March 17, 2003 (including options exercisable within 60 days of that date) by
each of the Directors and nominees, each of the executive officers named in the
Summary Compensation Table on page 11 and by all Directors and executive
officers as a group.
NUMBER OF
NAME SHARES(1)
---- ---------
J. Douglas Campbell......................................... 131,508(2)(3)
Carol A. Cartwright......................................... 87,144(2)(3)
Gale Duff-Bloom............................................. 102,834(2)(3)
Wayne R. Embry.............................................. 48,659(2)(3)
Robert A. Garda............................................. 83,611(2)(3)
Gordon D. Harnett........................................... 98,111(2)(3)
David H. Hoag............................................... 81,715(2)(3)
D. Larry Moore.............................................. 126,604(2)(3)
Thomas A. Waltermire........................................ 877,744(3)
Farah M. Walters............................................ 86,940(2)(3)
V. Lance Mitchell........................................... 330,897(3)
W. David Wilson............................................. 358,170(3)
Wendy C. Shiba.............................................. 72,263(3)
Michael L. Rademacher....................................... 110,826(3)
16 Directors and executive officers as a group.............. 2,919,391(2)(3)
6
(1) Except as otherwise stated in the notes below, beneficial ownership of the
shares held by each individual consists of sole voting power and sole
investment power, or of voting power and investment power that is shared
with the spouse of the individual. It includes the approximate number of
shares credited to the named executives' accounts in The Geon Retirement
Savings Plan, a tax-qualified defined contribution plan. No Director,
nominee or executive officer beneficially owned, on March 17, 2003, more
than 1% of PolyOne's outstanding common shares. As of that date, the
Directors and executive officers as a group beneficially owned approximately
3.12% of the outstanding common shares.
(2) With respect to the Directors, except Mr. Waltermire, who is not eligible to
participate in the Directors' Deferred Compensation Plan, includes shares
held under the Directors' Deferred Compensation Plan as follows: J.D.
Campbell, 75,452 shares; C.A. Cartwright, 22,754 shares; G. Duff-Bloom,
48,336 shares; W.R. Embry, 5,112 shares; R.A. Garda, 12,559 shares; G.D.
Harnett, 25,800 shares; D.H. Hoag, 22,832 shares; D.L. Moore, 40,548 shares;
and F.M. Walters, 37,884.
(3) Includes shares the individuals have a right to acquire on or before May 16,
2003 as follows: J.D. Campbell, 54,000 shares; C.A. Cartwright, 55,500
shares; G. Duff-Bloom, 54,000 shares; W.R. Embry, 33,000 shares; R.A. Garda,
55,500 shares; G.D. Harnett, 55,500 shares; D.H. Hoag, 55,500 shares; D.L.
Moore 54,000 shares; T.A. Waltermire, 601,848 shares; F.M. Walters, 48,000
shares; V.L. Mitchell, 239,361 shares; W.D. Wilson, 236,346 shares; W.C.
Shiba, 27,993 shares; M.L. Rademacher, 66,939 shares; and the Directors and
executive officers as a group, 1,818,914 shares.
The following table shows information relating to all persons who, as of
March 17, 2003, were known by us to beneficially own more than five percent of
PolyOne's outstanding common shares based on information provided in Schedule
13Gs filed with the Securities and Exchange Commission (the "Commission"):
NUMBER % OF
NAME AND ADDRESS OF SHARES SHARES
---------------- ---------- ------
FMR Corp. .................................................. 13,755,340(1) 15.0%
82 Devonshire Street
Boston, Massachusetts 02109
State Street Bank and Trust Company,
as Trustee for The Geon Retirement Savings Plan............. 7,926,748(2) 8.7%
225 Franklin Street
Boston, Massachusetts 02110
(1) As of February 14, 2003, based upon information contained in a Schedule 13G
filed with the Commission. FMR Corp., as a holding company reporting on
behalf of its subsidiaries, has sole voting power with respect to 2,423,803
of these shares and has sole dispositive power with respect to all of these
shares.
(2) As of February 10, 2003, based upon information contained in a Schedule 13G
filed with the Commission. State Street Bank and Trust Company, as Trustee
for The Geon Retirement Savings Plan and for various collective investment
funds for employee benefit plans and other index accounts, as a bank, has
sole voting power with respect to 1,064,004 of these shares, shared voting
power with respect to 6,694,344 of these shares, sole dispositive power with
respect to 1,232,404 of these shares, and shared dispositive power with
respect to 6,694,344 of these shares.
7
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND GOVERNANCE COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation and Governance Committee of the Board of Directors (the
"Committee") is currently comprised of Gale Duff-Bloom, its Chairperson, Wayne
R. Embry, Robert A. Garda, David H. Hoag and Farah M. Walters.
The Committee is responsible for establishing PolyOne's compensation and
benefit policies and reviewing PolyOne's philosophy regarding executive
remuneration to assure consistency with its goals and business strategy. Each
year the Committee reviews market data to assess PolyOne's competitive position
with respect to all aspects of executive compensation and considers and approves
changes in base salary and annual incentive levels for executive officers as
well as all awards (including stock options, equity-based awards and long-term
incentive plan awards) to executive officers and key employees. The Committee
also reviews and approves annual and long-term performance criteria and goals at
the beginning of each performance period and certifies the results at the end of
each performance period. In addition, the Committee has oversight
responsibilities for all of PolyOne's broad-based compensation and benefit
programs.
The Summary Compensation Table appearing on page 11 includes compensation
earned by the named executive officers in connection with their employment with
PolyOne's predecessors.
GENERAL COMPENSATION PHILOSOPHY
The Committee believes that pay should be administered on a total
remuneration basis, with consideration of the value of all components of
compensation. Total remuneration opportunities should be competitive and serve
to attract, retain, motivate and reward employees based upon their experience,
responsibility, performance and marketability. They should be affordable and
fair to both employees and shareholders. Incentive programs should create a
strong mutuality of interests between executives and shareholders through the
use of equity-based compensation and the selection of performance criteria that
are consistent with PolyOne's strategic objectives.
EXECUTIVE COMPENSATION
PolyOne's executive compensation program has the following principal
components: base salary, annual incentive compensation and long-term incentive
compensation. As an executive's level of responsibility increases, a greater
portion of his or her potential total remuneration is based on performance
incentives (including stock-based awards) rather than on salary. This approach
may result in changes in an executive's total cash compensation from year to
year if there are variations in PolyOne's performance and/or the performance of
PolyOne's individual business units versus established goals.
The total remuneration program is designed to be competitive with the total
remuneration programs of companies similar to PolyOne within both the specialty
chemical industry and a broad-base of industrial companies and is based on the
total remuneration programs of companies with which PolyOne competes for
executive talent. To assess the competitive total remuneration programs of these
other companies and to establish appropriate compensation comparisons, the
Committee receives advice from an independent compensation consultant and
reviews data that is based on the specialty chemical peer group as well as
various published surveys.
8
BASE SALARIES
The Committee annually reviews the base salaries of executive officers.
Prior to the meeting at which the annual review occurs, the Committee is
furnished with data on the current total compensation of each executive, current
marketplace data for comparable positions, individual performance appraisals and
recommended adjustments by the Chief Executive Officer for each executive
officer except himself. At the meeting, the Committee reviews all available data
and considers and approves adjustments. In addition, the Committee reviews
marketplace data for, and the performance of, the Chief Executive Officer and
determines the appropriate adjustment.
Base salaries for executives officers traditionally are adjusted at the
beginning of each year. In recognition of business conditions and at
management's request, no adjustment was made for 2002. In view of continuing
difficult market conditions and performance that is below expected levels, no
adjustments to base salaries were recommended or approved for 2003. At
management's request, however, Messrs. Waltermire, Wilson and Mitchell's base
salaries were reduced, effective February 1, 2003.
INCENTIVE COMPENSATION
The Senior Executive PolyOne Annual Incentive Plan (the "PolyOne AIP")
provides for awards that are wholly contingent upon the attainment of
performance goals established by the Committee. The PolyOne AIP provides for
administration by a committee of outside directors but eliminates the
Committee's discretion to increase the amount of incentive awards. The Committee
believes that the PolyOne AIP has, in the past, satisfied and will continue to
satisfy the Internal Revenue Service's requirements for "performance-based"
compensation under Section 162(m). Under Section 162(m), performance-based
compensation is considered a fully deductible expense and not subject to the
deductibility limitation under current Internal Revenue Service regulations.
In the beginning of 2002, the Committee approved performance targets
related to corporate net income and working capital management, business unit
operating income, as well as key business initiatives that will improve the
ongoing operating efficiency of PolyOne. PolyOne's performance was sufficient to
provide awards for working capital management and business initiatives, and
three of PolyOne's six business units achieved operating income levels
sufficient to provide for awards. For 2002, the Committee exercised its
discretion to reduce awards payable under the PolyOne AIP. Based on Mr.
Waltermire's recommendation and in light of the performance of certain business
units, payouts for 2002 for certain executive officers, including Mr.
Waltermire, were reduced to amounts less than would have been earned under the
performance targets. No award was earned for the component based on consolidated
company net income due to performance that was below the established minimum
hurdle approved by the Committee. Awards paid for 2002 ranged from 9% to 83% of
target.
LONG TERM INCENTIVES
On March 26, 2002, the Committee approved awards to PolyOne's executive
officers under PolyOne's 2002 - 2004 Strategic Improvement Incentive Plan. The
awards were in the form of time-vested stock options and performance units based
upon PolyOne's three-year cumulative operating income for the period of 2002 to
2004. Time-vested stock options are stock options with an exercise price equal
to fair market value on the date of grant and with a ten-year term. The options
vest in increments over a three-year period following the date of grant, 35% in
each of the first and second years and 30% in the third year. The amount
scheduled to vest in the third year
9
may vest earlier based upon PolyOne's stock price performance. PolyOne limits
the number of options awarded based on the typical practice of its peer group.
Performance awards are comprised of performance options and performance
cash awards. Performance options are stock options that vest on the third
anniversary of the date of grant and have a term of 39 months. Performance cash
awards are cash payments based upon PolyOne's operating income for the
three-year period ending December 31, 2004, relative to targets established by
the Committee. The purpose of these awards is to encourage superior strategic
business performance over time. These awards were granted under the PolyOne
Corporation Long-Term Incentive Plan, which was approved by the stockholders of
PolyOne's predecessors on August 29, 2000. As stated above, under Section
162(m), performance-based compensation is not subject to the deductibility
limitation under current Internal Revenue Service regulations.
CHIEF EXECUTIVE OFFICER
At Mr. Waltermire's request, in recognition of business conditions, no
salary adjustment was made for 2002. For 2003, at Mr. Waltermire's request, his
base salary was reduced by 10% to $621,600 effective February 1, 2003.
Mr. Waltermire participated in the PolyOne AIP and Strategic Improvement
Incentive Plan under similar terms and conditions as other executive officers
and as described above. The Committee approved an award for Mr. Waltermire under
the 2002 PolyOne AIP that was 29% of target.
The Summary Compensation Table appearing on page 11 includes compensation
earned by Mr. Waltermire in connection with his employment with Geon, one of
PolyOne's predecessors.
All members of the Compensation and Governance Committee concur in this
report.
THE COMPENSATION AND
GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
Gale Duff-Bloom, Chairperson
Wayne R. Embry
Robert A. Garda
David H. Hoag
Farah M. Walters
February 26, 2003
10
The following table sets forth the compensation received for the three
years ended December 31, 2002 by PolyOne's Chief Executive Officer and the
persons who were at December 31, 2002 the four other most highly paid executive
officers. To provide more complete and comparable information, this table
includes compensation paid by Geon and M.A. Hanna prior to the formation of
PolyOne.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- ------------------------------------
AWARDS PAYOUTS
----------------------- ----------
OTHER OPTIONS/ LTIP
ANNUAL RESTRICTED SARS PAYOUTS
NAME AND COMPEN- STOCK (# OF (# OF
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($)(1) AWARDS($)(2) SHARES) SHARES)(3)
------------------ ---- --------- ----------- ------------ ------------ -------- ----------
Thomas A. Waltermire 2002 690,000 168,900 (1) -0- 299,200 -0-
Chairman of the Board, 2001 690,000 276,800 (1) 705,528 271,000 -0-
President and 2000 575,000 -0- (1) -0- 200 15,686
Chief Executive Officer
V. Lance Mitchell 2002 335,000 27,700 (1) -0- 96,800 -0-
Group Vice President, 2001 335,000 118,000 (1) 342,432 87,700 -0-
Global Plastics 2000 263,077 -0- 26,836(6) -0- 200 7,470
W. David Wilson 2002 325,000 46,900 (1) -0- 94,000 -0-
Vice President and 2001 325,000 76,700 (1) 332,100 85,800 -0-
Chief Financial Officer 2000 267,961 -0- 37,409(7) -0- 200 7,470
Wendy C. Shiba(8) 2002 300,000 63,200 (1) -0- 67,700 -0-
Vice President, Chief 2001 38,654 75,000 (1) 358,000 12,318 -0-
Legal Officer and Secretary
Michael L. Rademacher 2002 250,000 93,000 36,462(9) -0- 56,400 -0-
Vice President, 2001 250,000 37,500 (1) 255,348 51,100 -0-
Distribution 2000 216,756 11,000 (1) 45,500 19,724 -0-
ALL
OTHER
NAME AND COMPEN-
PRINCIPAL POSITION SATION($)(4)
------------------ ------------
Thomas A. Waltermire 58,008(5)
Chairman of the Board, 41,135(5)
President and 549,700(5)
Chief Executive Officer
V. Lance Mitchell 27,269(6)
Group Vice President, 19,936(6)
Global Plastics 178,331(6)
W. David Wilson 24,102(7)
Vice President and 19,371(7)
Chief Financial Officer 183,314(7)
Wendy C. Shiba(8) 12,000(8)
Vice President, Chief -0-(8)
Legal Officer and Secretary
Michael L. Rademacher 9,506(9)
Vice President, 2,188(9)
Distribution 79,355(9)
(1) Indicates perquisites and other personal benefits did not exceed the lesser
of $50,000 or 10% of the total salary and bonus for the year shown.
(2) The total number of restricted shares held and the value of those shares as
of December 31, 2002, based on the year-end closing price of $3.92 per share
of PolyOne, was 578,317 shares and $2,267,003, respectively.
Amounts for 2001, except for Ms. Shiba, represent the number of shares
awarded multiplied by $7.38, the closing share price on the date of grant.
Amount for 2001 for Ms. Shiba represents the number of shares awarded
multiplied by $8.95, the closing share price on the date of grant.
Amount for 2000 for Mr. Rademacher represents the number of shares awarded
multiplied by $11.375, the closing price on the date of grant. The 4,000
restricted shares granted to Mr. Rademacher on January 6, 2000 vested over a
three-year period, with one-third of the shares vesting on each anniversary
of the grant date.
Dividends are paid on restricted shares to the same extent that dividends
are paid on PolyOne's common shares.
(3) Amounts for 2000 represent performance shares under long-term incentive
awards of Geon and M.A. Hanna issued as a result of the change in control
provisions being triggered by approval of the consolidation of Geon and M.A.
Hanna by their respective stockholders on August 29, 2000, net of
withholding.
(4) Amounts for 2000 for the following named executives include cash payments
made under Geon's Senior Executive Management Incentive Program as a result
of the change in control provisions being triggered at the effective time of
the consolidation between Geon and M.A. Hanna in the following amounts: T.A.
Waltermire -- $460,000; V.L. Mitchell -- $141,000; and W.D.
Wilson -- $143,000. Amount for 2000 for M.L. Rademacher includes cash
payment made under M.A. Hanna's Long Term Incentive Plan and
11
Annual Incentive Plan as a result of the change in control provisions being
triggered at the effective time of the consolidation between Geon and M.A.
Hanna.
(5) Amount under "All Other Compensation" for Mr. Waltermire for 2002 includes
PolyOne's cash contributions to PolyOne's Retirement Savings Plan (the
"Savings Plan") in the amount of $11,000 and amounts accrued under a benefit
restoration plan providing for benefits in excess of the amounts permitted
to be contributed under the Retirement Savings Plan (and amounts accrued
with respect to the PolyOne AIP or Geon's Management Incentive Plan (the
"Benefit Restoration Plan") in the amount of $47,008.
(6) Amount under "Other Annual Compensation" for Mr. Mitchell for 2000 includes
tax gross-ups on personal benefits in the amount of $11,016 and car
allowance in the amount of $12,600. Amount under "All Other Compensation"
for Mr. Mitchell for 2002 includes PolyOne's cash contributions to the
Savings Plan in the amount of $11,000 and amounts accrued under the Benefit
Restoration Plan in the amount of $16,269.
(7) Amount under "Other Annual Compensation" for Mr. Wilson for 2000 includes
tax gross-ups on personal benefits in the amount of $12,845 and car
allowance in the amount of $12,600. Amount under "All Other Compensation"
for Mr. Wilson for 2002 includes PolyOne's cash contributions to the Savings
Plan in the amount of $11,000 and amounts accrued under the Benefit
Restoration Plan in the amount of $13,102.
(8) Ms. Shiba began serving as Chief Legal Officer for PolyOne in November 2001
and was appointed Vice President and Secretary in December 2001. Amount
under "All Other Compensation" for Ms. Shiba for 2002 includes PolyOne's
cash contributions to the Savings Plan in the amount of $4,250 and amounts
accrued under the M.A. Hanna's Supplemental Retirement Benefit Plan (the
"Supplemental Retirement Benefit Plan") in the amount of $7,750.
(9) Amount under "Other Annual Compensation" for Mr. Rademacher for 2002
includes tax gross-ups on personal benefits in the amount of $11,572, car
allowance in the amount of $12,000 and financial planning expenses in the
amount of $10,755. Amount under "All Other Compensation" for Mr. Rademacher
for 2002 includes PolyOne's cash contributions to the Savings Plan in the
amount of $5,131 and amounts accrued under the Supplemental Retirement
Benefit Plan in the amount of $4,375.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS (1) PRESENT VALUE ($)(2)
----------------------------------------------------------- --------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE
GRANTED EMPLOYEES IN OR BASE EXPIRATION
NAME (# OF SHARES) FISCAL YEAR PRICE ($/SH) DATE
---- ------------- ------------ ------------ ----------
T. A. Waltermire 36,800 2.54 12.22 6/26/05 110,400
262,400 18.09 12.22 3/26/12 1,167,680
V. L. Mitchell 11,900 .82 12.22 6/26/05 35,700
84,900 5.85 12.22 3/26/12 377,805
W. D. Wilson 11,600 .80 12.22 6/26/05 34,800
82,400 5.68 12.22 3/26/12 366,680
W. C. Shiba 8,300 .57 12.22 6/26/05 24,900
59,400 4.09 12.22 3/26/12 264,330
M. L. Rademacher 6,900 .48 12.22 6/26/05 20,700
49,500 3.41 12.22 3/26/12 220,275
(1) Time-vested options and performance options were granted under PolyOne's
2000 Stock Incentive Plan. The time-vested options will vest over a
three-year period from the date of grant, with 35% of the shares vesting on
the first anniversary, an additional 35% vesting on the second anniversary
and an additional 30% vesting on the third anniversary of the grant date.
All of the performance options will vest on March 26, 2005 and must be
exercised within ninety days of that date.
12
(2) The grant date present value of the time-vested options was estimated using
the Black-Scholes option pricing model, with an assumed risk-free interest
rate of 5.0%, an assumed dividend yield of 2.05%, stock price volatility of
40.0% and a vesting discount of 5% per annum. The grant date present value
of the performance options was estimated using the Black-Scholes option
pricing model, with an assumed risk-free interest rate of 4.01%, an assumed
dividend yield of 2.05%, stock price volatility of 40.0% and a vesting
discount of 5% per annum.
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, option pricing models require the use of
highly subjective assumptions, including the expected stock price
volatility. Because PolyOne's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective assumptions can materially affect the fair value estimates,
the Black-Scholes model does not necessarily provide a reliable single
measure of the fair value of PolyOne's employee stock options. The amount
realized from the exercise of an employee stock option ultimately depends on
the market value of the common shares on the date of exercise.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
(# OF SHARES) ($)(1)
SHARES ACQUIRED --------------- --------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (# OF SHARES) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------- --------------
T. A. Waltermire -0- -0- 566,122/490,960 -0-/-0-
V. L. Mitchell -0- -0- 183,991/158,845 -0-/-0-
W. D. Wilson -0- -0- 268,251/154,915 -0-/-0-
W. C. Shiba -0- -0- 3,602/76,416 -0-/-0-
M. L. Rademacher -0- -0- 34,669/92,555 -0-/-0-
(1) Based on the closing price of a common share of PolyOne of $3.92 as reported
on the New York Stock Exchange on December 31, 2002. The ultimate
realization of profit, if any, on the sale of common shares underlying the
option is dependent upon the market price of the shares on the date of sale.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
PERFORMANCE PRICE-BASED PLANS
OR OTHER PERIOD -----------------------------------------
VALUE OF AWARD UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME ($)(1) OR PAYOUT(2) ($)(3) ($)(4) ($)(5)
---- -------------- ---------------- ------------- ----------- -----------
T. A Waltermire 450,000 3/31/05 225,000 450,000 900,000
V. L. Mitchell 145,500 3/31/05 72,750 145,500 291,000
W. D. Wilson 141,300 3/31/05 70,650 141,300 282,600
W. C. Shiba 102,000 3/31/05 51,000 102,000 204,000
M. L. Rademacher 84,900 3/31/05 42,450 84,900 169,800
(1) Performance cash awards were granted under PolyOne's Strategic Improvement
Incentive Plan ("SIIP"), entitling each named executive to a cash payment if
PolyOne achieves a targeted level of cumulative operating income for the
performance period of 2002-2004. Prior to any payout, however, a targeted
cumulative 2002-2004 earnings per share must be met. If PolyOne's cumulative
operating income for 2002-2004 is greater or less than the targeted level,
but above the threshold level, cash payments will be made in accordance with
a sliding scale. The value of the cash award payable to each named executive
for achievement of the targeted level is based on the exercise price payable
by each named executive to
13
exercise performance options granted in 2002. For a complete description of
the SIIP, which also includes time-vested and performance stock option
awards, see "EXECUTIVE COMPENSATION -- Long Term Incentives" on page 9.
(2) The performance period during which the performance business operating
income will be measured for purposes of determining cash payouts is the
three-year period commencing on January 1, 2002 and ending on December 31,
2004. Cash payouts, if any, will be paid by March 31, 2005.
(3) Refers to the amount payable if PolyOne's cumulative operating income for
2002-2004 is less than the targeted level but above the threshold level. If
the performance business operating income for 2002-2004 is less than the
threshold level, no amount is payable under the plan.
(4) Refers to the amount payable if PolyOne's cumulative operating income for
2002-2004 is equal to the targeted level.
(5) Refers to the amount payable if PolyOne's cumulative operating income for
2002-2004 is equal to or greater than the maximum level.
RETIREMENT PENSIONS
The following table shows the total estimated annual pension benefits
payable to certain of the executives named in the Summary Compensation Table.
These executives are eligible to receive pension payments under a plan that
existed prior to the consolidation of Geon and M.A. Hanna (the "Plan"). The Plan
makes available a pension that is paid from funds provided through contributions
by PolyOne and contributions by the executive, if any, made prior to 1972. The
amount of the executive's pension depends on a number of factors including Final
Average Earnings ("FAE") and years of credited company service to PolyOne.
Effective January 1, 2003, no additional service will be credited under the
Plan, although future earnings will continue to be factored into the computation
of FAE.
The table shows the annual pension amounts currently available based on the
combinations of FAE and years of credited service shown and should be read in
conjunction with the accompanying notes. As of January 1, 1989, the Plan
generally provides a benefit of 1.15% of FAE times all years of pension credit
plus 0.45% of FAE in excess of "covered compensation" (as defined by the Social
Security Administration) times years of pension credit up to 35 years. In
addition, those executives who were actively at work on December 31, 1989, may
receive an additional pension credit of 4 years (up to a maximum of 24 years) of
pension credit. Benefits become vested after 5 years of service. As of January
1, 2000, the Plan was closed to new participants. The table and discussion of
retirement benefits apply as of December 31, 2002.
14
PENSION PLAN TABLE
FINAL YEARS OF CREDITED SERVICE(1)
AVERAGE -----------------------------------------------
EARNINGS($) 10 (2) 15 (2) 20 (2) 25 30
----------- ------- ------- ------- ------- -------
87,115 118,228 149,340 155,563 186,675
400,000
109,515 148,628 187,740 195,563 234,675
500,000
131,915 179,028 226,140 235,563 282,675
600,000
154,315 209,428 264,540 275,563 330,675
700,000
176,715 239,828 302,940 315,563 378,675
800,000
199,115 270,228 341,340 355,563 426,675
900,000
221,515 300,628 379,740 395,563 474,675
1,000,000
243,915 331,028 418,140 435,563 522,675
1,100,000
266,315 361,428 456,540 475,563 570,675
1,200,000
(1) As of December 31, 2002, the following executives had the following years of
credited service under the Plan or subsidiary plans or supplemental
agreements: T.A. Waltermire, 28 years, 6 months; V.L. Mitchell, 13 years, 7
months; and W.D. Wilson, 24 years, 11 months. Ms. Shiba and Mr. Rademacher
do not participate in a pension plan.
(2) Includes an additional 4 years of service applicable to pre-January 1, 1990
employees.
The Plan uses either a "final average earnings" formula or a "service
credit" formula to compute the amount of an employee's pension, applying the
formula which produces the higher amount. The table was prepared using the FAE
formula, since the service credit formula would produce lower amounts than those
shown. Under the FAE formula, a pension is based on the highest four consecutive
calendar years of an employee's earnings. Earnings include salary, overtime pay,
holiday pay, vacation pay, and certain incentive payments including annual cash
bonuses, but exclude awards under long-term incentive programs and the match by
PolyOne in the savings plans. As of December 31, 2002, final average earnings
for the following individuals were as follows: T.A. Waltermire -- $966,800; V.L.
Mitchell -- $427,046; and W.D. Wilson -- $422,782.
In computing the pension amounts shown, it was assumed that an employee
would retire at age 65 and elect to receive a five-year certain and continuous
annuity under the Plan and that the employee would not elect any of the
available "survivor options," which would result in a lower annual pension.
Pensions are not subject to any reduction for Social Security or any other
offset amount. Benefits shown in the table that exceed the level of benefits
permitted to be paid from a tax-qualified pension plan under the Internal
Revenue Code, and certain additional benefits not payable under the qualified
pension plan because of certain exclusions from compensation taken into account
thereunder, are payable under an unfunded, non-qualified benefits restoration
pension plan.
SHARE OWNERSHIP GUIDELINES
PolyOne has established share ownership guidelines for non-employee
Directors, executive officers and other senior executives to better align their
financial interests with those of shareholders by requiring them to own a
minimum level of PolyOne shares. These individuals are expected to make
continuing progress towards compliance with the guidelines and to comply fully
within five years of becoming subject to the guidelines.
The share ownership requirements depend on a person's level of employment.
The Chief Executive Officer is required to own 300,000 shares. Executive
officers are required to own that number of shares equal to three times their
individual salary divided by a benchmark price for
15
PolyOne shares, which results in a range of required ownership of 45,000 to
85,000 shares. Other executives are required to own either 25,000 or 10,000
shares, depending on their job levels. For individuals nearing retirement, the
applicable guidelines are reduced after age 55 by 10% each year for five years.
The required share ownership level for non-employee Directors is 10,000 shares.
In general, shares counted towards required ownership include shares
directly held and shares vested in PolyOne's benefit or deferral plans. Share
ownership guidelines will be reviewed if significant movements in PolyOne's
share price occur, or at least every three years to evaluate the adequacy of the
required holdings based on the value of required holdings.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that PolyOne's executive officers and Directors, and persons who own more than
10% of a registered class of PolyOne's equity securities, file reports of
ownership and changes in ownership with the Commission. Executive officers,
Directors and greater than 10% shareholders are required by Commission rules to
furnish PolyOne with copies of all forms they file. Based solely on its review
of the copies of such forms received by us and written representations from
certain reporting persons, we believe that, during 2002, all Section 16(a)
filing requirements applicable to its executive officers, Directors and 10%
shareholders were satisfied, with the following exception. On January 23, 2002,
758 shares of PolyOne stock were sold on behalf of Ms. Duff-Bloom. The
disposition was reported on March 8, 2002, as soon as Ms. Duff-Bloom learned of
the disposition.
MANAGEMENT CONTINUITY AGREEMENTS
Messrs. Waltermire, Mitchell, Wilson and Rademacher and Ms. Shiba are
parties to management continuity agreements with PolyOne (the "Continuity
Agreements"). The purpose of the Continuity Agreements is to encourage the
individuals to carry out their duties in the event of the possibility of a
"change of control" of PolyOne. The Continuity Agreements do not provide any
assurance of continued employment unless there is a change of control. The
Continuity Agreements generally provide for a two-year period of employment
commencing upon a change of control. Generally, a change of control is deemed to
have occurred if:
- any person becomes the beneficial owner of 25% or more of the combined
voting power of PolyOne's outstanding securities (subject to certain
exceptions);
- there is a change in the majority of the Board of Directors of PolyOne;
- certain corporate reorganizations occur where the existing shareholders
do not retain more than 60% of the common shares and combined voting
power of the outstanding voting securities of the surviving entity; or
- there is shareholder approval of a complete liquidation or dissolution of
PolyOne.
The Continuity Agreements generally provide for the continuation of
employment of the individuals in the same positions and with the same
responsibilities and authorities that they possessed immediately prior to the
change of control and with the same benefits and level of compensation. If a
change of control occurs and the individual's employment is terminated by
PolyOne or a successor for reasons other than "cause" or is terminated
voluntarily by the
16
individual for "good reason" (in each case as defined in the Continuity
Agreements), generally the individual would be entitled to receive:
- compensation for a period of up to three years, commencing at the
individual's base salary rate in effect at the time of the termination;
- a payment of up to three times the "target annual incentive amount" (as
defined in the Continuity Agreements) in effect prior to the change in
control;
- the continuation of all employee health and welfare benefits for up to
three years;
- financial planning services for one year;
- a payment based on the incremental cash value of counting for purposes of
certain retirement plans up to three additional years of covered
compensation; and
- a tax gross-up for any excise tax due under the Internal Revenue Code for
any payments or distributions made under the agreements.
If the individual's employment is terminated by PolyOne or a successor for
"cause" or is terminated voluntarily by the individual for reasons other than
for "good reason," the individual is not entitled to the benefits set forth
above and is entitled to compensation earned through the date of termination of
his or her employment.
COMPENSATION AND GOVERNANCE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2002, none of PolyOne's executive officers or Directors was a member
of the Board of Directors of any other company where the relationship would be
construed to constitute a committee interlock within the meaning of the rules of
the Commission.
17
POLYONE STOCK PERFORMANCE
Following is a graph which compares the cumulative total shareholder
returns for PolyOne's common shares, the S&P 500 index and the S&P Mid Cap
Chemicals index with dividends assumed to be reinvested when received. The graph
assumes the investing of $100 from September 1, 2000, the first trading date of
PolyOne's common shares, through December 31, 2002. The S&P Mid Cap Chemicals
index includes a broad range of chemical manufacturers. Because of the
relationship of PolyOne's business within the chemical industry, it is felt that
comparison with this broader index is appropriate.
COMPARISON OF CUMULATIVE TOTAL RETURN TO SHAREHOLDERS
AUGUST 31, 2000 TO DECEMBER 31, 2002
[PERFORMANCE GRAPH]
S&P 500 S&P MID CAP CHEMICALS POLYONE CORPORATION
------- --------------------- -------------------
8/31/00 100 100 100
12/31/00 87.3 107.5 71.5
12/31/01 77 122.8 122.4
12/31/02 60 112 50.3
8/31/00 12/31/00 12/31/01 12/31/02
PolyOne Corporation $100 $71.5 $122.4 $50.3
S&P 500 $100 $87.3 $77.0 $60.0
S&P Mid Cap Chemicals $100 $107.5 $122.8 $112.0
18
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees PolyOne's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of PolyOne's accounting principles and
such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. The Committee has discussed with the
independent auditors the auditors' independence from management and PolyOne,
including the matters in the written disclosures required by the Independence
Standards Board, and considered the compatibility of nonaudit services with the
auditors' independence. The Committee has also pre-approved all audit and
non-audit services and fees provided to the company by the independent auditors.
Based upon the Committee's considerations, the Committee has concluded that
Ernst & Young LLP is independent. The Committee discussed with PolyOne's
internal and independent auditors the overall scope and plans for their
respective audits. The Committee meets with the internal and independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of PolyOne's internal controls, and the overall
quality of PolyOne's financial reporting. The Audit Committee met five times
during 2002.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2002, for filing with the Securities and Exchange
Commission.
All members of the Audit Committee concur in this report.
THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
Gordon D. Harnett, Chairperson
J. Douglas Campbell
Carol A. Cartwright
D. Larry Moore
February 27, 2003
19
INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as independent
auditors to audit PolyOne's financial statements for the current year. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting of Shareholders. The representative will be given an opportunity to make
a statement if desired and to respond to questions regarding Ernst & Young LLP's
examination of our consolidated financial statements and records for the year
ended December 31, 2002. Fees for 2002 were as follows:
Audit Fees. Fees for audit services totaled $1,318,900 in 2002 and
$1,029,800 in 2001, including fees associated with the annual audit, the reviews
of PolyOne's quarterly reports on Form 10-Q, the issuance of comfort letters,
review of registration statements filed with the Securities and Exchange
Commission and statutory audits required internationally.
Audit-Related Fees. Fees for audit-related services totaled $298,200 in
2002 and $323,600 in 2001. Audit-related services principally include due
diligence in connection with business transactions, accounting consultations and
audits of PolyOne's benefit plans.
Tax Fees. Fees for tax services, including tax compliance, tax advice and
tax planning, totaled $1,161,700 in 2002 and $971,100 in 2001.
All Other Fees. Fees for other services not included in the above
categories totaled $192,000 in 2002 and $337,300 in 2001 and principally include
support and advisory services related to PolyOne's expatriate program.
The Audit Committee has considered whether the provision of the
above-captioned services is compatible with maintaining Ernst & Young's
independence.
GENERAL
VOTING AT THE MEETING
Shareholders of record at the close of business on March 17, 2003, are
entitled to vote at the meeting. On that date, a total of 91,674,548 common
shares were outstanding. Each share is entitled to one vote.
Holders of common shares have no cumulative voting rights. Directors are
elected by a plurality of the votes of shares present, in person or by proxy,
and entitled to vote on the election of Directors at a meeting at which a quorum
is present. The affirmative vote of a majority of the common shares represented
and voting, in person or by proxy, at any meeting of shareholders at which a
quorum is present is required for action by shareholders on any matter, unless
the vote of a greater number of shares or voting by classes or series is
required under Ohio law. Abstentions and broker non-votes are tabulated in
determining the votes present at a meeting. Consequently, an abstention or a
broker non-vote has the same effect as a vote against a proposal or a Director
nominee, as each abstention or broker non-vote would be one less vote in favor
of a proposal or for a Director nominee.
If any of the nominees listed on pages 3 and 4 becomes unable or declines
to serve as a Director, each properly signed proxy card will be voted for
another person recommended by the Board of Directors, however, we have no reason
to believe that this will occur.
20
We know of no other matters that will be presented at the meeting, however,
if other matters do properly come before the meeting, the persons named in the
proxy card will vote on these matters in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal to be considered for
inclusion in next year's Proxy Statement should send the proposal to PolyOne,
addressed to the Secretary, so that it is received on or before December 5,
2003. We suggest that all proposals be sent by certified mail, return receipt
requested.
Additionally, a shareholder may submit a proposal for consideration at the
2004 Annual Meeting of Shareholders, but not for inclusion in next year's Proxy
Statement, if the shareholder gives timely written notice of such proposal in
accordance with Regulation 8(c) of PolyOne's Regulations. In general, Regulation
8(c) provides that, to be timely, a shareholder's notice must be delivered to
PolyOne's principal executive offices not less than 60 nor more than 90 days
prior to the first anniversary of the date on which we first mailed our proxy
materials for the preceding year's annual meeting.
Our proxy materials for the 2003 Annual Meeting of Shareholders will be
mailed on or about April 3, 2003. Sixty days prior to the first anniversary of
this date will be February 3, 2004, and 90 days prior to the first anniversary
of this date will be January 4, 2004. Our proxies for the 2004 Annual Meeting of
Shareholders will confer discretionary authority to vote on any matter if we do
not receive timely written notice of such matter in accordance with Regulation
8(c). For business to be properly requested by a shareholder to be brought
before the 2004 Annual Meeting of Shareholders, the shareholder must comply with
all of the requirements of Regulation 8(c), not just the timeliness requirements
set forth above.
PROXY SOLICITATION
PolyOne is making this proxy solicitation and will bear the expense of
preparing, printing and mailing this notice and proxy statement. In addition to
requesting proxies by mail, PolyOne's officers and regular employees may request
proxies by telephone or in person. We have retained Morrow & Co., Inc., 445 Park
Avenue, New York, NY 10022, to assist in the solicitation for an estimated fee
of $6,000 plus reasonable expenses. We will ask custodians, nominees, and
fiduciaries to send proxy material to beneficial owners in order to obtain
voting instructions. We will, upon request, reimburse them for their reasonable
expenses for mailing the proxy material.
We are mailing PolyOne's Annual Report to Shareholders, including
consolidated financial statements for the year ended December 31, 2002, to
shareholders of record with this proxy statement.
For the Board of Directors
PolyOne Corporation
/s/ Wendy C. Shiba
WENDY C. SHIBA
Vice President, Chief Legal Officer
and Secretary
March 25, 2003
21
POLYONE CORPORATION
PROXY
ANNUAL MEETING OF SHAREHOLDERS, MAY 15, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE
CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby appoints Thomas A. Waltermire and Wendy C.
P Shiba, and each of them jointly and severally, Proxies, with full
R power of substitution, to vote, as designated on the reverse side, all
O common shares of PolyOne Corporation held of record by the undersigned
X on March 17, 2003, at the Annual Meeting of Shareholders to be held on
Y May 15, 2003, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES TO SERVE AS DIRECTORS. The shares represented by this
Proxy will be voted as specified on the reverse side. IF NO DIRECTION
IS GIVEN IN THE SPACE PROVIDED ON THE REVERSE SIDE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES SPECIFIED ON THE REVERSE
SIDE.
SEE REVERSE
SIDE
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE.)
FOLD AND DETACH HERE
March 25, 2003
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at The Forum Conference and Education Center, 1375 E. Ninth Street,
Cleveland, Ohio, at 9:00 a.m. on Thursday, May 15, 2003.
The Notice of Annual Meeting of Shareholders and the Proxy Statement describe
the matters to be acted upon at the meeting.
Regardless of the number of shares you own, your vote on these matters is
important. Whether or not you plan to attend the meeting, we urge you to mark
your choices on the attached proxy card and to sign, date and return it in the
envelope provided. If you decide to vote in person at the meeting, you will have
an opportunity to revoke your Proxy and vote personally by ballot.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE BOX PROVIDED ON THE PROXY
CARD.
We look forward to seeing you at the meeting.
THOMAS A. WALTERMIRE
Chairman of the Board, President
and Chief Executive Officer
PLEASE MARK YOUR
[X] VOTE AS IN THIS
EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
OF THE DIRECTOR NOMINEES LISTED BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE DIRECTOR NOMINEES LISTED BELOW.
FOR ALL WITHHELD
NOMINEES (SEE
LISTED AT INSTRUCTIONS
RIGHT BELOW)
ELECTION OF [ ] [ ] Nominees: 01. J. Douglas Campbell 05. Robert A. Garda 09. Thomas A. Waltermire
DIRECTORS 02. Carol A. Cartwright 06. Gordon D. Harnett 10. Farah M. Walters
term to expire 03. Gale Duff-Bloom 07. David H. Hoag
at next Annual 04. Wayne R. Embry 08. D. Larry Moore Change of Address and/ [ ]
Meeting. or Comments Mark Here
I Will Attend the Meeting [ ]
(INSTRUCTIONS: To withhold authority to vote for all nominees, mark the
"WITHHELD" box above. To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided below.)
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In their discretion, the Proxies are
authorized to vote upon such other business
as may properly come before the meeting or
any adjournment thereof and matters incident
to the conduct of the meeting.
The signer hereby revokes all Proxies
previously given by the signer to vote at
the meeting or any adjournments.
Please mark, sign, date and return this
Proxy promptly using the enclosed envelope.
Please sign exactly as the name appears on
this card. When shares are held by joint
tenants, both should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give full title as such.
If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by general partner.
____________________________________________
____________________________________________
SIGNATURE (S) DATE
* FOLD AND DETACH HERE *
POLYONE CORPORATION
PROXY VOTING INSTRUCTION CARD
Your vote is important. Casting your vote in one of the three ways described on
this instruction card votes all common shares of PolyOne Corporation that you
are entitled to vote.
Please consider the issues discussed in the Proxy Statement and cast your vote
by:
[COMPUTER LOGO] - Accessing the World Wide Web site
http://www.eproxyvote.com/pol to vote via the
Internet.
[PHONE LOGO] - Using a touch-tone telephone to vote by phone toll
free from the U.S. or Canada. Simply dial
1-877-779-8683 and follow the instructions. When you
are finished voting, your vote will be confirmed and
the call will end.
[ENVELOPE LOGO] - Completing, dating, signing and mailing the proxy
card in the postage-paid envelope included with the
Proxy Statement or sending it to PolyOne Corporation,
c/o Equiserve Trust Company, N.A., P.O. Box 8640,
Edison, New Jersey 08818-9142.
You can vote by phone or via the Internet anytime prior to May 15, 2003. You
will need the control number printed at the top of this instruction card to vote
by phone or via the Internet. If you do so, you do not need to mail in your
proxy card.