Exhibit 10.2
(POLYONE LOGO) [l25923al2592300.gif]
[DATE]
Attn: [                    ]
PolyOne Corporation
POLYONE CORPORATION INCENTIVE AWARD
Grant of Performance Units
THIS AGREEMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE COMMON SHARES OF THE COMPANY
ARE LISTED ON THE NEW YORK STOCK EXCHANGE.
Dear [                                        ]:
Subject to the terms and conditions of the [INSERT PLAN] (the “Plan”) and this
letter agreement (this “Agreement”), the Compensation and Governance Committee
of the Board of Directors (the “Committee”) of PolyOne Corporation (“PolyOne”)
(or a subcommittee thereof) has granted to you as of [DATE], the following
award:
[___] performance units (the “Performance Units”), with each such Performance
Unit being equal in value to $1.00, payment of which depends on PolyOne’s
performance as set forth in this Agreement and in your Statement of Performance
Goals.
     A copy of the Plan is available for your review through the Corporate
Secretary’s office. Unless otherwise indicated, the capitalized terms used in
this Agreement shall have the same meanings as set forth in the Plan.

1.   Performance Units.

  (a)   Your right to receive all or any portion of the Performance Units will
be contingent upon the achievement of certain management objectives (the
“Management Objectives”), as set forth in your Statement of Performance Goals.
The achievement of the Management Objectives will be measured during the period
from January 1, 20___ through December 31, 20___(the “Performance Period”).

 

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  (b)   The Management Objectives for the Performance Period will be based
solely on achievement of performance goals relating to PolyOne’s operating
income (“Operating Income”), as defined in your Statement of Performance Goals.

2.   Earning of Performance Units.

  (a)   The Performance Units shall be earned as follows:

  (i)   If, upon the conclusion of the Performance Period, Operating Income
equals or exceeds the threshold level, but is less than the 100% target level,
as set forth in the Performance Matrix contained in your Statement of
Performance Goals, a proportionate number of the Performance Units shall become
earned, as determined by mathematical interpolation and rounded up to the
nearest whole unit.     (ii)   If, upon the conclusion of the Performance
Period, Operating Income equals or exceeds the 100% target level, but is less
than the maximum level, as set forth in the Performance Matrix contained in your
Statement of Performance Goals, a proportionate number of the Performance Units
shall become earned, as determined by mathematical interpolation and rounded up
to the nearest whole unit.     (iii)   If, upon the conclusion of the
Performance Period, Operating Income equals or exceeds the maximum level, as set
forth in the Performance Matrix contained in your Statement of Performance
Goals, 200% of the Performance Units shall become earned.

  (b)   In no event shall any Performance Units become earned if actual
performance falls below the threshold level for Operating Income.     (c)   If
the Committee determines that a change in the business, operations, corporate
structure or capital structure of PolyOne, the manner in which it conducts
business or other events or circumstances render the Management Objectives to be
unsuitable, the Committee may modify such Management Objectives or the related
levels of achievement, in whole or in part, as the Committee deems appropriate;
provided, however, that no such action may result in the loss of the otherwise
available exemption of the award under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Code”).     (d)   Your right to receive any
Performance Units is contingent upon your remaining in the continuous employ of
PolyOne or a Subsidiary through the end of the Performance Period. Following the
Performance Period, the Committee shall determine the number of Performance
Units that shall have become earned hereunder. In all circumstances, the
Committee shall have the ability and authority to reduce, but not increase, the
amount of Performance Units that become earned hereunder.

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3.   Change of Control. If a Change of Control (as defined on Exhibit A to this
Agreement) occurs during the Performance Period, PolyOne shall pay to you 100%
of the Performance Units as soon as administratively practicable after the
Change of Control.

4.   Retirement, Disability or Death. If your employment with PolyOne or a
Subsidiary terminates before the end of the Performance Period due to
(1) retirement at age 55 or older with at least 10 years of service or
retirement under other circumstances entitling you to receive benefits under one
of PolyOne’s (including its predecessors) defined benefit pension plans,
(2) permanent and total disability (as defined under the relevant disability
plan or program of PolyOne or a Subsidiary in which you then participate) or
(3) death, PolyOne shall pay to you or your executor or administrator, as the
case may be, after the end of the Performance Period, the portion of the
Performance Units to which you would have been entitled under Section 2 above,
had you remained employed by PolyOne through the end of the Performance Period,
prorated based on the portion of the Performance Period during which you were
employed by PolyOne. The pro-rata portion of the Performance Units required to
be paid under this Section 4 shall be paid to you within two and one-half months
of the expiration of the Performance Period.

5.   Other Termination. If your employment with PolyOne or a Subsidiary
terminates before the end of the Performance Period for any reason other than as
set forth in Section 4 above, the Performance Units will be forfeited.

6.   Payment of Performance Units. Payment of any Performance Units that become
earned as set forth herein will be made in cash. Payment will be made as soon as
practicable after the receipt of audited financial statements of PolyOne
relating to the last fiscal year of the Performance Period, the determination by
the Committee of the level of attainment of the Management Objectives and
certification by the Board that such Management Objectives were satisfied, but
payment shall in all cases be made within two and one-half months of the
expiration of the Performance Period. If PolyOne determines that it is required
to withhold any federal, state, local or foreign taxes from any payment, PolyOne
will withhold the amount of these taxes from the payment.

7.   Non-Assignability. The Performance Units subject to this grant of
Performance Units are personal to you and may not be sold, exchanged, assigned,
transferred, pledged, encumbered or otherwise disposed of by you until they
become earned as provided in this Agreement; provided, however, that your rights
with respect to such Performance Units may be transferred by will or pursuant to
the laws of descent and distribution. Any purported transfer or encumbrance in
violation of the provisions of this Section 7 shall be void, and the other party
to any such purported transaction shall not obtain any rights to or interest in
such Performance Units.

8.   Miscellaneous.

  (a)   The contents of this Agreement are subject in all respects to the terms
and conditions of the Plan as approved by the Board and the shareholders of
PolyOne, which are controlling. The interpretation and construction by the Board
and/or the Committee of any provision of the Plan or this Agreement shall be
final and

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      conclusive upon you, your estate, executor, administrator, beneficiaries,
personal representative and guardian and PolyOne and its successors and assigns.
    (b)   The grant of the Performance Units is discretionary and will not be
considered to be an employment contract or a part of your terms and conditions
of employment or of your salary or compensation. Your acceptance of this grant
constitutes your consent to the transfer of data and information concerning or
arising out of this grant to PolyOne and to non-PolyOne entities engaged by
PolyOne to provide services in connection with this grant from non-U.S. entities
related to PolyOne for purposes of any applicable privacy, information or data
protection laws and regulations.     (c)   Any amendment to the Plan shall be
deemed to be an amendment to this Agreement to the extent that the amendment is
applicable hereto. The terms and conditions of this Agreement may not be
modified, amended or waived, except by an instrument in writing signed by a duly
authorized executive officer at PolyOne. Notwithstanding the foregoing, no
amendment shall adversely affect your rights under this Agreement without your
consent.     (d)   [FOR U.S. PARTICIPANTS ONLY:] It is a condition to your
receipt of the Performance Units that you execute and agree to the terms of
PolyOne’s standard Employee Agreement. If you do not sign and return the
Employee Agreement to PolyOne Human Resources within 60 days of your receipt of
this Grant of Performance Units, this Grant of Performance Units and any rights
to the Performance Units will terminate and become null and void.

9.   Notice. All notices under this Agreement to PolyOne must be delivered
personally or mailed to PolyOne Corporation at PolyOne Center, Avon Lake, Ohio
44012, Attention: Corporate Secretary. PolyOne’s address may be changed at any
time by written notice of such change to you. Also, all notices under this
Agreement to you will be delivered personally or mailed to you at your address
as shown from time to time in PolyOne’s records.

10.   Compliance with Section 409A of the Code.

  (a)   To the extent applicable, it is intended that this Agreement and the
Plan comply with the provisions of Section 409A of the Code, so that the income
inclusion provisions of Section 409A(a)(1) of the Code do not apply to you. This
Agreement and the Plan shall be administered in a manner consistent with this
intent, and any provision that would cause this Agreement or the Plan to fail to
satisfy Section 409A of the Code shall have no force and effect until amended to
comply with Section 409A of the Code (which amendment may be retroactive to the
extent permitted by Section 409A of the Code and may be made by PolyOne without
your consent).     (b)   To the extent you have a right to receive payment of
the Performance Units, the payment is subject to Section 409A, and the event
triggering the right to payment

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      does not constitute a permitted distribution event under
Section 409A(a)(2) of the Code, then notwithstanding anything to the contrary in
this Agreement, the payment of the Performance Units will be made, to the extent
necessary to comply with Section 409A of the Code, to you on the earliest of
(a) your “separation from service” with PolyOne (determined in accordance with
Section 409A of the Code); provided, however, that if you are a “specified
employee” (within the meaning of Section 409A of the Code), your date of payment
of the Performance Units shall be the date that is six months after the date of
your separation from service with PolyOne; (b) the date of the end of the
Performance Period; (c) your death; or (d) your disability (within the meaning
of Section 409A(a)(2)(C) of the Code).     (c)   Reference to Section 409A of
the Code will also include any proposed, temporary or final regulations, or any
other guidance, promulgated with respect to such Section by the U.S. Department
of the Treasury or the Internal Revenue Service.

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     This Agreement, and the terms and conditions of the Plan, shall bind, and
inure to the benefit of you, your estate, executor, administrator,
beneficiaries, personal representative and guardian and PolyOne and its
successors and assigns.

                  Very Truly Yours,    
 
                POLYONE CORPORATION    
 
           
 
  By:        
 
           
 
      Kenneth M. Smith, Senior Vice President and Chief Human Resources Officer
   

Accepted:
 
                                                            
 
                                        (Date)

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Exhibit A
A “Change of Control” means:
(a) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of voting securities of the
Company where such acquisition causes such Person to own 25% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this
paragraph (a), the following acquisitions shall not be deemed to result in a
Change of Control: (i) any acquisition directly from the Company that is
approved by the Incumbent Board (as defined in paragraph (b) below), (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any corporation pursuant to
a transaction that complies with clauses (i), (ii) and (iii) of paragraph
(c) below; provided, further, that if any Person’s beneficial ownership of the
Outstanding Company Voting Securities reaches or exceeds 25% as a result of a
transaction described in clause (i) or (ii) above, and such Person subsequently
acquires beneficial ownership of additional voting securities of the Company,
such subsequent acquisition shall be treated as an acquisition that causes such
Person to own 25% or more of the Outstanding Company Voting Securities; and
provided, further, that if at least a majority of the members of the Incumbent
Board determines in good faith that a Person has acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the Outstanding Company Voting Securities inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares so that such
Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) less than 25% of the Outstanding Company Voting Securities, then
no Change of Control shall have occurred as a result of such Person’s
acquisition; or
(b) individuals who, as of August 31, 2000, constitute the Board (the “Incumbent
Board” as modified by this paragraph (b)) cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming a
director subsequent to August 31, 2000 whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (either by
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(c) the consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation or other transaction (“Business
Combination”) excluding, however, such a Business Combination pursuant to which
(i) the individuals and entities who were the beneficial

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owners of the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an
entity that as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries), (ii) no Person (excluding any employee benefit plan (or related
trust) of the Company, the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of the
combined voting power of the then outstanding securities entitled to vote
generally in the election of directors of the entity resulting from such
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company except pursuant to a Business Combination that
complies with clauses (i), (ii) and (iii) of paragraph (c) above.

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