Document:

EX-10.3

 

Exhibit 10.3

Schedule of 2005 Salary and Target Bonus for Named

Executive Officers (as defined in Item 402(a)(3) of Regulation S-K)

Effective May 1, 2005, the annual salary compensation for each of the Named Executive Officers is:

Robert J. Keegan, Chairman of the Board, Chief Executive Officer and President,
$1,100,000.

Richard J. Kramer, Executive Vice President and Chief Financial Officer, $461,100;

C. Thomas Harvie, Senior Vice President, General Counsel and Secretary, $446,100;

Jonathan
D. Rich, President, North American Tire, $445,200; and

Joseph M. Gingo, Executive Vice President, Quality Systems and Chief Technical Officer,
$376,000.

     Target bonuses for 2005 under the Company’s Performance Recognition Plan for each of the Named
Executive Officers are:

Mr. Keegan, $1,500,000;

Mr. Kramer, $330,000;

Mr. Rich, $385,000;

Mr. Harvie,
$290,000; and

Mr. Gingo $260,000.

     Payment of 2005 bonuses will be made from a payment pool, the size of which will depend on the
extent to which the specific financial performance targets established by the Compensation
Committee are met. The target aggregate payment pool for 2005 is $28.0 million. Earnings before
interest and taxes less finance charges (“EBIT”) and operating cash flow are the financial
performance measures under the Performance Recognition Plan for fiscal year 2005. Funding of the
2005 payment pool will be based 50% on each performance measure and could range from zero to 200%
of the target amount depending on the level of operating cash flow and EBIT achieved. In addition,
payouts for each of the Named Executive Officers may be adjusted based on individual performance.Exhibit 10.1

 

Exhibit 10.1

January 30, 2006

Delivered via E-Mail and Overnight Courier

Mr. Stephen D. Newlin

355 Calomus Circle

Medina, MN 55340

Dear Steve:

          PolyOne Corporation (“PolyOne”) is pleased to confirm its verbal offer of employment to you,
with a start date (the “Effective Date”) on or before February 21, 2006. This letter agreement
sets forth the terms of your employment and the rights and obligations of the parties relating to
such employment.

	1.	 	Position and Duties.

          You will have the title of Chairman, President and Chief Executive Officer, reporting to
PolyOne’s Board of Directors (the “Board”) and will have the normal duties, responsibilities and
authority of an executive serving in such position. During the term of employment, you will devote
your best efforts and your full business time and attention (except for permitted vacation periods
and reasonable periods of illness or other incapacity) to the business and affairs of PolyOne. You
will perform your duties and responsibilities to the best of your abilities in a diligent,
trustworthy, businesslike and efficient manner. You will perform your duties and responsibilities
principally in the metropolitan area of PolyOne’s headquarters.

          You will be appointed by the Board, upon the Effective Date, as a member of the Board, and so
long as you serve as Chairman, President and Chief Executive Officer, the Board will nominate you
to stand for election as a member of the Board at PolyOne’s annual meeting of shareholders.

	2.	 	Compensation.

	 	(a)	 	Salary. Your initial base salary during the Employment Period (as defined
below) will be equal to $700,000 per year and will be subject to annual review by the
Board or the Compensation and Governance Committee of the Board (the
“Committee”).

 

 

Mr. Stephen D. Newlin
Page 2

	 	(b)	 	Bonus/Annual Incentive.

	 	(i)	 	You will to entitled to a signing bonus of $600,000, payable
within 30 calendar days of the Effective Date.
	 
	 	(ii)	 	In addition, during the Employment Period, you will be eligible
for an annual incentive award based on achievement of specified performance
goals (as determined by the Committee). For 2006, you will be eligible to
participate in the 2006 Senior Executive Annual Incentive Plan, with a target
attainment equal to 100% of your base salary.

	 	(c)	 	Equity/Long-Term Incentive Awards.

	 	(i)	 	You will be entitled to receive a grant, effective upon the
Effective Date, of 200,000 shares of restricted stock (the “Restricted Shares”)
under the PolyOne Corporation 2005 Equity and Performance Incentive Plan (the
“Plan”) and upon the following terms:

	 	(A)	 	The Restricted Shares will be subject to a risk
of forfeiture until the third anniversary of the date of grant.
	 
	 	(B)	 	The Restricted Shares will be forfeited if your
employment is terminated for any reason prior to their becoming
nonforfeitable, except that if your employment terminates by reason of
death or your permanent and total disability (as defined under the
relevant disability plan or program of PolyOne in which you then
participate) (“Disability”) or if a change in control (as defined in
PolyOne’s standard award agreements) (a “Change in Control”) of PolyOne
shall occur, all restrictions with respect to the Restricted Shares
will lapse.
	 
	 	(C)	 	The Restricted Shares will not be transferable
by you, except by will or the laws of descent and distribution, until
the shares become nonforfeitable as provided herein.
	 
	 	(D)	 	You will be entitled to all rights as a
shareholder with respect to the Restricted Shares granted (including
the right to vote and receive dividends thereon).
	 
	 	(E)	 	Any additional shares or other securities that
you may be entitled to receive under the terms of the Plan pursuant to
a stock dividend, stock split, combination of shares, recapitalization,
merger, consolidation, separation or reorganization or any other change
in the capital structure of the Company (a “Change in Capitalization”)
will be subject to the same restrictions as the Restricted Shares
granted.

 

 

Mr. Stephen D. Newlin
Page 3

	 	(F)	 	Any tax withholding obligation of the Company
in connection with the Restricted Shares will be satisfied by PolyOne
withholding shares otherwise deliverable pursuant to the award of
Restricted Shares in order to satisfy the minimum withholding amount
permissible under the method that results in the least amount withheld.

	 	(ii)	 	You will also be entitled to participate in PolyOne’s 2006-2008
Long-Term Incentive Plan, consisting of awards of SARs and cash-settled
performance units, granted under the Plan. The total award value for the
2006-2008 award will be equal in value to $1,505,000, provided that in no event
will the number of SARs granted exceed 250,000, and the grant of such 2006-2008
award will be made on the Effective Date.
	 
	 	(iii)	 	You will also be entitled to participate in a two-year cash
incentive plan for the period January 1, 2006 through December 31, 2007 (the
“Performance Period”) upon the following terms:

	 	(A)	 	Such cash incentive plan will be in the form of
a grant to you, effective upon the Effective Date, of 87,000 phantom
units (the “Units”). Each Unit will be equal in value to one share of
PolyOne’s common stock. Any earned Units will entitle you to a cash
payment following the end of the Performance Period equal to the number
of Units earned multiplied by the high-low average of PolyOne’s common
stock on the day immediately preceding the date of the approval of the
payment by the Committee.
	 
	 	(B)	 	Payment of the Units is contingent on the
attainment of certain pre-established metrics (including, threshold,
target and maximum levels of achievement) previously approved by the
Committee relating to the following equally-weighted financial
performance measures: Return on Invested Capital, Ratio of
Debt-to-EBITDA and Operating Cash Flow (as defined and approved by the
Committee).
	 
	 	(C)	 	Payment of the Units is also contingent upon
your remaining in the continuous employ of PolyOne or a subsidiary
through the end of the Performance Period and if your employment
terminates before the end of the Performance Period (except as set
forth below), the Units will be forfeited. Notwithstanding the
preceding sentence, upon a Change in Control, you will be entitled to
payment of 100% of the Units awarded and if your employment with
PolyOne terminates during the Performance Period due to your death or
Disability, PolyOne will pay to you or your executor or administrator,
as the case may be, after the end of the Performance Period, the
portion of the Units to which you would have been entitled had you
remained employed by PolyOne through the end

 

 

Mr. Stephen D. Newlin
Page 4

	 	 	 	of the Performance Period, prorated based on the portion of the
Performance Period during which you were employed by PolyOne.
	 
	 	(D)	 	The Units will not be transferable by you,
except by will or the laws of descent and distribution.
	 
	 	(E)	 	The Units will be adjusted by the Committee in
the event of any Change in Capitalization.

	 	(iv)	 	In future years, you will be eligible to receive long-term
incentive awards, together with PolyOne’s other executive officers, as approved
by the Committee.

	 	(d)	 	Expense Reimbursement. PolyOne will reimburse you for all reasonable business
expenses incurred by you during the Employment Period in the course of performing your
duties under this agreement that are consistent with PolyOne’s policies in effect from
time to time with respect to travel, entertainment and other business expenses, subject
to PolyOne’s requirements applicable generally with respect to reporting and
documentation of such expenses.
	 
	 	(e)	 	Standard Benefits. You will be entitled during the Employment Period to
participate, on the same basis as other salaried employees of PolyOne, in PolyOne’s
standard benefit programs (the “Standard Benefits Package”). The Standard Benefits
Package means those benefits (including the PolyOne Retirement Savings Plan, the
PolyOne Supplemental Retirement Savings Plan, the health care programs, short-term and
long-term disability benefits, life insurance, business travel accident coverage,
flexible spending accounts, and an employee assistance program) for which PolyOne
salaried employees are from time to time generally eligible, as determined from time to
time by the Committee or the Board. As part of the Standard Benefits Package, you will
also be entitled to reimbursement of relocation expenses under the PolyOne Plus
Relocation Program (the “Relocation Program”) (except that PolyOne will provide
reimbursement for up to 24 months). Notwithstanding anything to the contrary contained
in this agreement, the Standard Benefits Package will not include the right to
participate in the PolyOne Employee Transition Plan (the “ETP”), which the parties
agree is superseded by this agreement and any obligations of PolyOne under the ETP are
deemed to be fully satisfied by this agreement.
	 
	 	(f)	 	Additional Relocation Benefits. As an additional benefit, PolyOne will
reimburse you for reasonable expenses relating to lodging, meals and travel between
your residence and work (Avon Lake, Ohio) during the 90-day period immediately
following the Effective Date, provided that, following such 90-day period and until
such time as you initiate your relocation under the Relocation Program, you will be
responsible for any and all expenses associated with commuting between your residence
and work (Avon Lake, Ohio) locations, together with your living expenses.

 

 

Mr. Stephen D. Newlin
Page 5

	 	(g)	 	Other. You will also be entitled to the following: (i) five weeks of paid
vacation per year; (ii) a car allowance equal to $1200 per month; (iii) an annual
allowance for financial planning and tax preparation in an amount equal to up to
$13,000 per year, payable upon submission of itemized invoices; and (iv) participation
in the PolyOne Group Excess Liability policy.

	3.	 	Other Agreements. You agree, in connection with your employment with PolyOne, to
execute and be bound by the terms and conditions of PolyOne’s standard: (a) Management
Continuity Agreement for executive officers (providing for 36 months of compensation upon the
terms and conditions in such agreement); (b) Confidential Information, Invention and
Non-Solicitation Agreement; (c) Code of Conduct; and (d) Code of Ethics for Senior Officers
(collectively, the “Other Agreements”).
	 
	4.	 	Employment Period.

	 	(a)	 	The Employment Period. Except as otherwise provided herein, the Employment
Period will commence on the Effective Date and will continue thereafter until
terminated as provided in this Paragraph 4 (the “Employment Period”).
	 
	 	(b)	 	Termination. Notwithstanding anything to the contrary contained in this
agreement, the Employment Period will end on the first to occur of any of the following
events: (i) your death; (ii) PolyOne’s termination of your employment on account of
your Disability; (iii) a voluntary termination of your employment by you (including
your retirement); (iv) an involuntary termination of your employment by PolyOne for
Serious Cause (as defined below); or (v) an involuntary termination of your employment
by PolyOne without Serious Cause (as defined below).
	 
	 	(c)	 	Serious Cause. For purposes of this agreement, “Serious Cause” will have the
meaning ascribed to such term in the ETP, as such ETP may be amended from time to time,
and will also include any breach of a provision of this agreement or of any of the
Other Agreements. A copy of the current definition of “Serious Cause” has been
delivered to you concurrently with this agreement.

	5.	 	Post-Employment Period Payments.

	 	(a)	 	Accrued Compensation/Benefits. Except as provided in Paragraph 5(b) below, at
the end of the Employment Period for any reason, you will cease to have any rights to
compensation or benefits and you shall be entitled only to (i) any base salary that has
accrued but is unpaid, any reimbursable expenses that have been incurred but are
unpaid, and any unexpired vacation days that have accrued under PolyOne’s vacation
policy but are unused, as of the end of the Employment Period; (ii) any plan benefits
that by their terms extend beyond termination of your employment (but only to the
extent provided in any such benefit plan in which you have participated as an employee
of PolyOne and excluding the ETP); and (iii) any benefits to which you are entitled
under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”).

 

 

Mr. Stephen D. Newlin
Page 6

	 	(b)	 	Severance Payments. Notwithstanding the foregoing, if (1) the Employment
Period ends early for any reason other than as set forth in Paragraph 4(b)(i) through
4(b)(iv) above, (2) such termination is not following a change in control of PolyOne
entitling you to benefits under your Management Continuity Agreement and (3) you agree
to standard non-compete and non-solicitation covenants for a period of 36 months
following the date of termination and to other standard terms and conditions, including
a full release of claims, you will also be entitled to the following amounts and
benefits, all payable in accordance with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”):

	 	(i)	 	36 months of salary continuation, car allowance and financial
planning/tax preparation allowance, with monthly payments to commence not
earlier than six months following the date of termination (consistent with the
requirements of Section 409A of the Code);
	 
	 	(ii)	 	An annual incentive amount as earned for the year in which
termination of employment occurs, pro-rated for the amount of time that has
elapsed from the beginning of the applicable performance period until the date
of termination of employment; and
	 
	 	(iii)	 	18 months of continuation in PolyOne’s medical and dental
plans (the “Health Plans”) pursuant to COBRA and an amount equal to the
financial equivalent of six additional months of continuation in the Health
Plans, provided that Health Plans expressly do not include life insurance,
short-term disability or long-term disability.

	 	(c)	 	Possible Additional Severance Payment. Notwithstanding anything to the
contrary contained herein, in the event that your employment with PolyOne is
involuntarily terminated by PolyOne without Serious Cause (as defined in Paragraph 4(c)
above) prior to the three year anniversary of the Effective Date, you will be entitled
to the following cash payments, payable in accordance with the requirements of Section
409A of the Code:

	 	(i)	 	If your employment is terminated at any time before the one
year anniversary of the Effective Date, you will be entitled to a cash payment
equal to the amount determined by multiplying 66,667 by the fair market value
of one share of PolyOne common stock on the date of termination of your
employment.
	 
	 	(ii)	 	If your employment is terminated on or following the one year
anniversary of the Effective Date but before the 18 month anniversary of the
Effective Date, you will be entitled to a cash payment equal to the amount
determined by multiplying 100,000 by the fair market value of one share of
PolyOne common stock on the date of termination of your employment.

 

 

Mr. Stephen D. Newlin
Page 7

	 	(iii)	 	If your employment is terminated on or following the 18 month
anniversary of the Effective Date but before the two year anniversary of the
Effective Date, you will be entitled to a cash payment equal to the amount
determined by multiplying 133,334 by the fair market value of one share of
PolyOne common stock on the date of termination of your employment.
	 
	 	(iv)	 	If your employment is terminated on or following the two year
anniversary of the Effective Date but before the three year anniversary of the
Effective Date, you will be entitled to a cash payment equal to the amount
determined by multiplying 166,667 by the fair market value of one share of
PolyOne common stock on the date of termination of your employment.
	 
	 	(v)	 	If your employment is terminated on or following the three year
anniversary of the Effective Date, you will not be entitled to any additional
cash payment under this Paragraph 5(c).

	6.	 	Miscellaneous.

          You represent and warrant to PolyOne that: (a) the execution, delivery and performance of this
agreement by you does not and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which you are a party or by which you
are bound, (b) except as disclosed in writing to PolyOne, you are not a party to or bound by any
employment agreement, noncompete/non-solicitation agreement or confidentiality agreement with any
other person or entity and (c) upon the execution and delivery of this agreement by you, this
agreement will be a valid and binding obligation of you, enforceable in accordance with its terms.

          PolyOne may withhold from any amounts payable under this agreement all federal, state, city or
other taxes as PolyOne is required to withhold pursuant to any applicable law, regulation or
ruling.

          Whenever possible, each provision of this agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision
or any other jurisdiction, but this agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never been contained
herein.

          This agreement embodies the complete agreement and understanding between the parties with
respect to the subject matter hereof and effective as of its date supersedes and preempts any prior
understandings, agreements or representations by or between the parties, written or oral, which may
have related to the subject matter hereof in any way.

          This agreement may be executed in separate counterparts, each of which shall be deemed to be
an original and both of which taken together shall constitute one and the same agreement.

 

 

Mr. Stephen D. Newlin
Page 8

          This Agreement shall be governed by the internal law, and not the laws of conflicts, of the
State of Ohio.

          The provisions of this agreement may be amended or waived only with the prior written consent
of PolyOne and you, and no course of conduct or failure or delay in enforcing the provisions of
this agreement shall affect the validity, binding effect or enforceability of this agreement.

          If you find this agreement acceptable, please sign and date the letter below and return it to
me. This agreement will become effective on the latest date set forth below.

	 	 	 	 	 
	 	Sincerely,

POLYONE CORPORATION

 	 
	 	By:  	/s/ Farah M. Walters
 	 
	 	Name: 	Farah M. Walters  	 	 
	 	Title: 	Chairperson of the Compensation and

Governance Committee   	 	 
	 

Date: February 13, 2006

I agree to the terms and conditions

in this letter agreement.

	 	 	 	 	 
	 	 	 
	/s/ Stephen D. Newlin
 	 
	Name: Stephen D. Newlin	 	 	 

Date: February 6, 2006

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]