Fill and Sign the Proposal to Approve the Geon Company Senior Executive Form

PROPOSAL TO APPROVE THE GEON COMPANY SENIOR EXECUTIVEMANAGEMENT INCENTIVE PLAN Summary The purpose of this proposal is to approve The Geon Company Senior Executive Management Incentive Plan (the "Executive MIP"). Awards under the Executive MIP are intended to qualify as performance-based compensation under Section 162(m) of the Code. The Executive MIP is similar to the Company's existing annual bonus program except for changes necessary to meet the requirements of Section 162(m). It is not expected that benefits awarded under the Executive MIP will be materially different from those that would have been awarded under the existing MIP. Participants in the Executive MIP will no longer be eligible for participation in the existing MIP. Discussion On March 9, 1995, the Committee adopted the Executive MIP and the Board of Directors recommended that the Executive MIP be approved by the stockholders at the Annual Meeting. A copy of the Executive MIP is attached as Exhibit A to this Proxy Statement and the following summary of the material terms of the Executive MIP is qualified in its entirety by reference to that Exhibit. The 1993 amendments to the Code adding Section 162(m) to the Code and the proposed rules and regulations promulgated thereunder provide that certain employee compensation for years beginning after December 31, 1993 in excess of $1,000,000 will not be deductible for federal income tax purposes. Section 162(m), however, enumerates certain types of compensation which will not be subject to the $1,000,000 limitation, including " performance- based" compensation. Among other requirements, Section 162(m) requires that in order for compensation to qualify as performance-based, the material terms of the compensation and the performance goals on which payment of such compensation is conditioned must be disclosed to and approved by the stockholders before payment is made. The Company's existing MIP and the performance goals thereunder have not been approved by stockholders and, consequently, awards under the existing MIP will not qualify as "performance-based" compensation under Section 162(m). The Executive MIP is designed to provide for compensation which will, subject to stockholder approval of the Executive MIP, qualify as "performance-based'' compensation under Section 162(m). In the event that stockholders do not approve the Executive MIP, no awards will be made under the Executive MIP, although other incentive awards may be paid in the future at the discretion of the Committee. The objective of the Executive MIP is to provide opportunities to key executive personnel to receive incentive compensation as a reward for high levels of personal performance above the ordinary performance standards compensated by base salary and for their contributions to strong performance of the Company without limiting the Company's ability to deduct compensation awarded under the Executive MIP for federal income tax purposes. If approved by the stockholders, the Executive M I P will be effective for the fiscal year which began on January 1, 1995 and for each -fiscal year thereafter until terminated. The Executive MIP will be administered by the Committee. The Committee is authorized to inte rpret the Executive MIP and to establish and maintain guidelines necessary or desirable for the administration of the Executive MIP. The Executive MIP will remain in effect until terminated by the Committee. Participation in the Executive MIP will be available to key executive personnel who have the potential to influence significantly and positively the performance of the Company. Participants will be selected by the Committee annually based upon the recommendation of the Chief Executive Officer. To be eligible for participation in any particular year during the term of the Executive MIP (a "Plan Year"), a key executive must have assumed the duties of an incentive-eligible position and have been selected for participation in the Executive MIP within 90 days of the commencement of the applicable Plan Year. Additionally, employees who are hired or promoted into an incentive-eligible position after such 90-day period will participate in the Executive MIP for the Plan Year in which they are hired or promoted based on their base salary (pro-rated) and at the award level associated with the position. To receive any award, the participant must remain employed by the Company through December 15 of the applicable Plan Year. During each Plan Year, participants will be assigned to an incentive category based on organizational level and potential impact on Company results. The participant categories define the level of incentive opportuni ty, stated as a percentage (up to a maximum of 200%) of base salary, that will be available to the participant (a n "Incentive Percentage"). Category assignments (other than that of the Chief Executive Officer) for each Plan Year are initiated on the recommendation of the Chief Executive Officer and will be approved by the Committee within 90 days of the commencement of the applicable Plan Year. The category assignment for t he Chief Executive Officer will be determined by the Committee within such 90-day period. Measures of Company performance for each Plan Year ("Performance Measures"), will be used by the Committee to determine the performance goal target levels ("Performance Targets"). The Performance Measures will include one or more of the following, as determined by the Committee for each Plan Year: (i) return to stockholders, (ii) cash flow, (iii) return on equity, (iv) Company created income (for example, income due to Company initiated cost reductions or productivity improvements), (v) sales growth, (vi) earnings and earnings growth, (vii) return on assets, (viii) stock price, (ix) earnings per share, (x) market share, (xi) customer satisfaction, and (xii) safety and/or environmental performance. The actual Performance Measures and the Performance Targets, will be determined by the Committee within 90 days of the commencement of each applicable Plan Year. The Performance Measures will be weighted by the Committee each year to reflect their relative i mportance to the Company in the applicable Plan Year. The weightings may vary from year to year and will determine the portion of the target incentive amount allocated to each performance measure. If all of the Performance Targets are achieved, the amount of the incentive award available under the Executive MIP will be the product of the participant's salary and the Incentive Percentage; provided, however, that in no event may the annual dollar award paid to any participant for any one Plan Year exceed $1,000,000. If one or more, but less than all, of the Performance Targets are met or exceeded, the award will be reduced proportionately based on the weightings assigned to the Performance Measures with respect to which the Performance Targets were met. For example, if there were three Performance Measures selected for a Plan Year with each measure having an equal weighting, i.e. 331/3%, and the Performance Targets for only two of the Performance Measures were achieved, the amount of the available incentive award would be 6624% of the product of the participant's salary and the Incentive Percentage. No awards will be paid under the Executive MIP if none of the Performance Targets is achieved. Notwithstanding the amount of any available incentive award under the Executive MIP, the Committee may, in its discretion, reduce or eliminate the amount of any incentive award actually paid to any partic ipant based on individual performance or otherwise. In no event may the Committee increase the amount of any available incentive award provided for under the Executive MIP.Promptly following the end of each Plan Year the Committee will meet to certify achievement by the Company of the Performance Targets for the applicable Plan Year and, if such goals have been achieved, to review management recommendations and approve actual awards under the Plan. Awards will be paid as soon as practicable after the Performance Targets for the applicable Plan Year have been certified by the Committee. A portion of each participant's award, as determined by the Committee within 90 days of the commencement of the applicable Plan Year, will be paid in the form of the Company's restricted stock. Participants will also have the opportunity to elect additional optional deferrals so that they may receive up to 100% of their award, if any, as restricted stock. Any award paid as restricted stock will be enhanced with a 25% "premium", i.e. for every $100 deferred, the participant will receive $125 in restricted stock. Restrictions on the stock will be determined by the Committee at the time awards are approved in accordance with the provisions of the Company's Incentive Stock Plan or any successor plans thereto. Any portion of a participant's award not paid as restricted stock will be paid in cash. The Executive MIP contains a provision providing that upon a "change in control" (as defined in the Executive MIP) of the Company each participant in the Executive MIP shall be entitled to an interim pa yment (determined with reference to the number of months elapsed during the Plan Year until the change in control) based upon the greater of the payments, if any, under the Executive MIP for the year prior to the year in which the change in control occurs or the incentive opportunity in effect for the year in which the change in control occurs. Any such interim payment will offset the total amount to which a participant would have been entitled had the change in control not occurred. Under the currently proposed regulations, any such payment would, however, be subject to Section 162 (m). The Board believes that approval of the Executive MIP will benefit the Company and its stockholders by enabling the Company to continue to attract and retain outstanding key executive employees who can contribute to the strong performance of the Company without limiting the Company's ability to deduct compensation awarded under the Executive MIP for federal income tax purposes. While benefits, if any, to be paid under the Executive MIP are not yet determinable, amounts paid for the year ended December 31, 1994 under the existing MIP for each of Messrs. Patient, Martinelli, Waltermire, Knechtges, Rutman, and Maresca are shown under the heading "Bonus" in the Summary Compensation Table set forth on page 14 (which persons constitute all of the Company's executive officers) and amounts paid for all employees other than the executive officers of the Company are $4,310,269. As noted above, employees other than executive personnel will not be eligible to participate in the Executive MIP, although such personnel will continue to be eligible to participate in the existing MIP. The Board recommends a vote "FOR" adoption of the Executive MIR Approval of the Executive MIP requires the affirmative vote of the holders of a least a majority of the votes cast (including abstentions) on this proposal.