Exhibit 10.13
[PolyOne Letterhead]
[Date]
[Name]
[Title]
[Address]
Dear ________________:
PolyOne Corporation (the “Company”) considers the establishment and maintenance
of a sound and vital senior management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. In this
connection, the Company recognizes that, as is the case with many publicly-held
corporations, the possibility of a change of control may exist and that such
possibility, and the uncertainty and questions that it may raise among
management, may result in the distraction and even the departure of senior
management personnel to the detriment of the Company and its shareholders.
Accordingly, the Company’s Board of Directors has determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of members of the Company’s senior management, including yourself, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change of control of the
Company.
In order to induce you to remain in the employ of the Company, and to continue
your employment notwithstanding the occurrence or threat of occurrence of a
transaction that results in a change of control of the Company, this letter
agreement (“Agreement”) sets forth the benefits that the Company agrees shall be
provided to you in the event a Change of Control (as hereinafter defined in
Paragraph 3) should occur during the term of this Agreement and in the event
that your employment is thereafter terminated under such circumstances as are
expressly provided in Paragraph 4.
In making provision for the payment of these benefits, it is not the Company’s
intention to alter in any way the compensation and benefits that would be paid
to you in the absence of a Change of Control.
1. TERM. This Agreement shall commence on [DATE] and shall continue through
December 31, 20___, provided, however, that commencing on January 1, 20___ and
each January 1st thereafter, the term of this Agreement shall automatically be
extended for one additional year, unless at least 90 days prior to such January
1st date, the Company shall have given notice that it does not wish to extend
this Agreement; provided, however, that prior to the occurrence of a Change of
Control, notwithstanding such extension, the term of this Agreement shall
automatically end when you cease to serve as an elected officer of the Company.
Upon the occurrence of a Change of Control during the term of this Agreement,
including any extensions thereof, this Agreement shall automatically be extended
until the end of your Period of Employment (as hereinafter defined in
Paragraph 2), and may not be terminated by the Company during such time.

 

--------------------------------------------------------------------------------

 

2. PERIOD OF EMPLOYMENT. Your “Period of Employment” shall commence on the date
on which a Change of Control occurs and shall end on the date that is ___ months
after the date on which such Change of Control occurs. Notwithstanding the
foregoing, however, your Period of Employment shall not extend beyond the
Mandatory Retirement Date (as hereinafter defined in Paragraph 3) applicable to
you.
3. CERTAIN DEFINITIONS. For purposes of this Agreement:
     (a) A “Change of Control” shall mean
          (i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of voting
securities of the Company where such acquisition causes such Person to own 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 subparagraph (i), the following acquisitions shall not be deemed to
result in a Change of Control: (A) any acquisition directly from the Company
that is approved by the Incumbent Board (as defined in subparagraph (ii),
below), (B) any acquisition by the Company, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any Person
pursuant to a transaction that complies with clauses (A), (B) and (C) of
subparagraph (iii) 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 (A) or (B) 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% of 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 meanings 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
          (ii) individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board” (as modified by this clause (ii)) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof 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 a 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

2

--------------------------------------------------------------------------------

 

actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
          (iii) 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 (A) the individuals and entities who were the
beneficial owners of the Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the 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) (B) 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 (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
          (iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company except pursuant to a Business
Combination that complies with clauses (A), (B) and (C) of subparagraph (iii),
above.
     (b) The term “Mandatory Retirement Date” shall mean the compulsory
retirement date, if any, established by the Company for those executives of the
Company who, by reason of their positions and the size of their nonforfeitable
annual retirement benefits under the Company’s pension, profit-sharing, and
deferred compensation plans, are exempt from the provisions of the Age
Discrimination in Employment Act, 29 U.S.C. Sections 621, et seq., which date
shall not in any event be earlier for any executive than the last day of the
month in which such executive reaches age 65.
     (c) The term “Section 409A Guidance” shall mean collectively Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), any proposed,
temporary or final regulations or other formal guidance issued by the Secretary
of the Treasury or the Internal Revenue Service with respect thereto.
4. COMPENSATION UPON TERMINATION OF EMPLOYMENT. If, during the Period of
Employment, the Company shall terminate your employment for any reason (other
than for a reason and as expressly provided in Paragraph 5 hereof), or if you
shall terminate your employment for “Good Reason” (as hereinafter defined in
subparagraph 4(g)), then the Company shall be obligated to compensate you as
follows:

3

--------------------------------------------------------------------------------

 

     (a) (i) If the Change of Control constitutes a change in the ownership or
effective control of the Company, or a change in the ownership of a substantial
portion of the assets of the Company, within the meaning of the Section 409A
Guidance (a “Section 409A Change of Control”), the Company shall pay to you in a
lump sum an amount equal to the product of one-twelfth of your annualized Base
Salary, multiplied by the number of months, including fractional months, in the
Payment Period. For purposes of this Paragraph 4, (A) the “Payment Period” shall
be equal to the shorter of (I) [12 or 24 or 36] months, commencing on the Date
of Termination, or (II) the period from the Date of Termination to your
Mandatory Retirement Date, if any, and (B) “Base Salary” shall be equal to your
base salary at the rate in effect immediately prior to the Change of Control or,
if greater, immediately prior to the Date of Termination. If the Change of
Control does not constitute a Section 409A Change of Control, the Company shall
continue your Base Salary for the Payment Period.
          (ii) Subject to Paragraph 4(f), payment made pursuant to this
Paragraph 4(a): (A) shall be made, in the case of payment following a
Section 409A Change of Control, on the date 60 calendar days after the Date of
Termination (the “Initial Payment Date”), and (B) shall commence, in the case of
payments following a Change of Control that does not constitute a Section 409A
Change of Control, with the first payroll period that commences on or after the
Initial Payment Date. Each payment under this Paragraph 4 shall be considered a
separate payment and not one of a series of payments.
     (b) The Company shall pay you in a lump sum an amount equal to the product
of (x) the number of months, including fractional months, in the Payment Period
and (y) under the Company’s annual bonus or similar incentive plan (the “Annual
Incentive Plan”), one-twelfth of your “target annual incentive amount” in effect
prior to the Change of Control for the calendar year in which the Change of
Control occurs. Your “target annual incentive amount” under the Annual Incentive
Plan is determined by multiplying your salary range midpoint by the incentive
target percentage that is applicable to your incentive category under such Plan.
Subject to Paragraph 4(f), payment made pursuant to this Paragraph 4(b) shall be
made on the Initial Payment Date.
     (c) (i) The Company shall maintain in full force and effect, for your
continued benefit, for the Payment Period, all health and welfare benefit plans
and programs or arrangements, other than the Company’s long-term disability
plan, in which you were entitled to participate immediately prior to the Date of
Termination (collectively, the “Health Plans”), as long as your continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that your participation in any such plan or program
is barred, the Company shall provide you with benefits substantially similar to
those to which you would have been entitled to receive under such plans and
programs (“Comparable Benefits”), had you continued to participate in them as an
employee of the Company. Notwithstanding the preceding two sentences, this
subparagraph 4(c)(i) shall not restrict the Company’s right to modify or
discontinue any benefit; provided, however, that you shall not be treated less
favorably than similarly situated active employees (including non-highly
compensated, salaried employees as similarly situated for such purpose) who were
employed by the Company immediately prior to the Change of Control.

4

--------------------------------------------------------------------------------

 

          (ii) You will be required to pay the full cost during the Payment
Period of continuation coverage in the Health Plans and of any Comparable
Benefits that are subject to Code section 105 on an after-tax basis. On the
Initial Payment Date and on January 2 of each of the years during the Payment
Period following the year in which the Initial Payment Date occurs, the Company
will make a payment to you (the “Health Plans Premium Reimbursement”) equal to
the difference between (A) the amount you are required to pay during the
calendar year of payment for such continuation coverage and, with respect to the
payment on the Initial Payment Date, the amount, if any, you are required to pay
for such continuation coverage in the prior year, and (B) the amount you would
have been required to pay during such years for such continuation coverage if
you had paid the same percentage of the cost that a similarly situated active
employee would pay, as of the Date of Termination. The Company will reimburse
the amount of the federal, state and local taxes imposed on you as a result of
your receipt of the Health Plans Premium Reimbursement, such reimbursement to be
made subject to Paragraph 4(f) and no later than December 31 of the year
following the year in which you remitted the applicable taxes. Your right to
continuation coverage under the Health Plans and any Comparable Benefits
pursuant to Paragraph 4(c)(i) shall satisfy the Health Plans’ obligation to
provide you continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended.
          (iii) If you have met the requirements for retirement eligibility
under the Company’s general retirement policies on the Date of Termination, the
Company shall provide you after the end of the Payment Period with those health
and welfare benefits, if any, as in effect from time to time, to which you would
have been entitled under the Company’s general retirement policies if you had
been eligible to retire and you had retired immediately prior to the Change of
Control, with the Company paying that percentage of the premium cost of the
plans that it would have paid under the terms of the plans in effect immediately
prior to the Change of Control with respect to individuals who retire at age 65,
regardless of your actual age on the Date of Termination. If the percentage of
premium cost that the Company pays for you is greater than the percentage of
premium cost that the Company pays for other similarly situated retirees, the
Company may treat the differential amount as taxable to you and pay you an
additional amount in cash equal to the amount necessary to cause the after-tax
value of the benefit that you receive to be equal to the after-tax value of the
benefit you would have received had the Company not treated the differential
amount as taxable to you. Such payment shall be made subject to Paragraph 4(f)
and no later than December 31 of the year following the year in which you
remitted the applicable taxes. Notwithstanding the preceding two sentences, this
subparagraph 4(c)(iii) shall not restrict the Company’s right to modify or
discontinue any benefit, or the portion of the premium cost thereof paid by the
Company; provided, however, that you shall not be treated less favorably with
respect to any such modification or discontinuance than similarly situated
individuals (including non-highly compensated, salaried employee retirees as
similarly situated for such purpose) who retired at or after age 65 under the
terms and conditions in effect immediately prior to the Change of Control (or
under the terms and conditions that would have applied to persons who were
eligible to retire, if they had retired, immediately prior to the Change of
Control);
     (d) The Company shall pay you a financial planning/tax preparation
allowance equal to the full amount of the annual financial planning/tax
preparation allowance you were entitled to receive immediately prior to the
Change of Control (without the requirement to submit itemized

5

--------------------------------------------------------------------------------

 

invoices). Such amount will be paid (i) in a lump sum on the Initial Payment
Date if the Change of Control constitutes a Section 409A Change of Control, or
(ii) in twelve equal monthly installments commencing on the Initial Payment Date
if the Change of Control does not constitute a Section 409A Change of Control;
and
     (e) (i) The Company shall, in addition to the benefits to which you are
entitled under the retirement plans or programs in which, as of immediately
prior to the Change of Control, you both participate and are actually accruing
benefits, pay you in a lump sum in cash an amount equal to the excess, if any,
of (A) the actuarial equivalent of the retirement pension to which you would
have been entitled under the terms of such retirement plans or programs had you
accumulated additional years of continuous service under such plans equal in
length to your Payment Period, over (B) the actuarial equivalent of the
retirement pension to which you are entitled under the terms of such retirement
plans or programs, determined without regard to this subparagraph (i). For
purposes of subparagraph (i), (w) the terms of a retirement plan or program
shall be those in effect immediately prior to the Change of Control or the Date
of Termination, whichever is more favorable to you; (x) the length of the
Payment Period shall be added to total years of continuous service for
determining vesting and the amount of benefit accrual and to the age that you
will be considered to be for the purposes of determining eligibility for normal
or early retirement calculations; (y) your actual age shall be used for
determining the amount of any actuarial reduction; and (z) for the purposes of
calculating benefit accrual, the amount of compensation you shall be deemed to
have received during each month of your Payment Period shall be equal to the sum
of your Base Salary prorated on a monthly basis, plus under the Annual Incentive
Plan, one-twelfth of your “target annual incentive amount” in effect prior to
the Change of Control for the calendar year in which the Change of Control
occurs. For purposes of this subparagraph (i), “retirement plan or program”
shall mean any plan or program to the extent such plan or program is a “defined
benefit plan,” within the meaning of Section 3(35) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”); and “actuarial equivalent”
shall be determined using the same methods and assumptions as those utilized
immediately prior to the Change of Control under the applicable retirement plan
or program in which you participate for purposes of this subparagraph (i).
Subject to Paragraph 4(f), payment made pursuant to this Paragraph 4(e)(i) shall
be made on the Initial Payment Date.
          (ii) The Company shall, in addition to the benefits to which you are
entitled under any defined contribution plans and programs in which, as of
immediately prior to the Change of Control, you are eligible to participate and
receive employer contributions, pay you in a lump sum in cash an amount equal to
the product of (A) the sum of all amounts payable to you under subparagraphs
4(a) and 4(b), multiplied by (B) the sum of (x) the aggregate maximum
percentage(s) of eligible compensation you were eligible to receive as employer
matching contributions under all such defined contribution plans for the plan
year(s) in which occurs the Change of Control or the Date of Termination,
whichever is more favorable to you, determined without regard to any change in
any such plan adverse to you adopted after the Change of Control, plus (y) the
aggregate maximum percentage(s) of eligible compensation you were eligible to
receive as employer non-elective contributions under all such defined
contribution plans for the plan year(s) in which occurs the Change of Control or
the Date of Termination, whichever is more favorable to you, determined without
regard to any change in any such plan adverse to you adopted after the Change of
Control. For purposes of this subparagraph (ii), defined contribution plan or
program shall mean any plan or program to the extent such plan or

6

--------------------------------------------------------------------------------

 

program is a “defined contribution plan,” within the meaning of Section 3(34) of
ERISA; “employer matching contributions” shall mean those employer contributions
that are conditioned upon your making employee after-tax contributions and/or
employee pre-tax contributions and that are not “discretionary contributions”
(as hereinafter defined), but in no event shall employer matching contributions
be deemed to include employee pre-tax contributions regardless of whether
employee pre-tax contributions are considered employer contributions for any
purpose; “employer non-elective contributions” shall mean employer contributions
that are not employer matching contributions and that are not “discretionary
contributions” (as hereinafter defined); “discretionary contributions” shall
mean employer contributions that under the terms of the applicable defined
contribution plan as in effect immediately prior to the Change of Control or the
Date of Termination, whichever is more favorable to you, were not required to be
made, determined without regard to any requirement that the participant be
employed during the plan year or at another relevant time in order to be
eligible to receive such contributions, except that an employer contribution
that would otherwise be considered a discretionary contribution under this
definition shall not be considered a discretionary contribution if prior to the
Date of Termination, the Company (or other employer related to the Company
maintaining the plan) has communicated to participants in such plan that such
contribution will, or is likely to, be made. For purposes of determining the
maximum percentage of eligible compensation you were eligible to receive as
employer matching contributions and/or for purposes of determining the maximum
percentage of eligible compensation you were eligible to receive as employer
non-elective contributions, if under the terms of the applicable defined
contribution plan the contribution structure is a per capita structure or a
step-rate or similar structure, or if the contribution structure has changed
during the plan year, then the maximum percentage shall be determined or
adjusted as necessary or appropriate to carry out the intent of this
subparagraph (ii); provided that if you are also covered with respect to any
such defined contribution plan (the “first plan”) by another defined
contribution plan that provides for contributions in respect of any limitations
under the terms of the first plan, there shall be no duplication of payment with
respect to those arrangements. Subject to Paragraph 4(f), payment made pursuant
to this Paragraph 4(e)(ii) shall be made on the Initial Payment Date.
     (f) Notwithstanding anything to the contrary in this Paragraph 4, if you
are a “specified employee,” as determined by the Company in its Specified
Employee Designation Procedure, on the Date of Termination and any payment under
this Agreement would be considered to be deferred compensation under
Section 409A of the Code, then any such payment that is considered to be
deferred compensation that would otherwise be payable during the six-month
period following the Date of Termination will instead be paid on the earlier of
(i) the first business day of the seventh month following the Date of
Termination, or (ii) your death. Any amount that would have been paid during the
six-month period following the Date of Termination if payment would have been
made or commenced on the Initial Payment Date shall not be paid during such
period, but instead shall be paid on the first business day of the seventh month
following the Date of Termination.

7

--------------------------------------------------------------------------------

 

     (g) For purposes of this Agreement, “Good Reason” shall mean the failure of
the Company to remedy any of the following within 10 calendar days after receipt
by the Company within the Employment Period of written notice thereof from you:
          (i) except as a result of the termination of your employment pursuant
to Paragraph 5 hereof and without your express written consent, (A) one or more
changes in your duties, responsibilities, reporting relationships and status
that, when considered in the aggregate as compared with your duties,
responsibilities, reporting relationships and status immediately prior to a
Change of Control, constitute a material demotion, (B) the assignment to you of
new duties or responsibilities that, in the aggregate, (1) are materially
inconsistent with, and (2) materially and adversely change, your positions,
duties, responsibilities, reporting relationships and status as in effect
immediately prior to a Change of Control, (C) a reduction in your annual Base
Salary or target annual incentive amount, (D) the failure to continue your
health, welfare and retirement benefits, perquisites, vacation policy, fringe
benefits, long-term incentive compensation programs, and relocation benefits and
policies (including indemnification against loss on the sale of your residence
in connection with your relocation) on either a substantially similar basis or
with substantially similar aggregate economic value, as compared with
immediately prior to a Change of Control, (E) the Company requires that you
change the principal location of your work, which results in an additional
commute of more than 50 miles, or (F) the Company requires you to travel away
from your office in the course of discharging your responsibilities or duties at
least one-third more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison) than was required
of you for the calendar year immediately preceding the Change of Control;
          (ii) the failure of the Company to obtain the assumption of and the
agreement to perform this Agreement by any successor as contemplated in
Paragraph 11 hereof; [or]
          (iii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Paragraph 6 hereof[; or/.]
          (iv) [FOR THE CEO, CFO AND GENERAL COUNSEL AGREEMENTS ONLY: without
regard to any obligation to provide notice and an opportunity to cure, your
election to terminate your employment with the Company for any reason during the
30-day period immediately following the first anniversary of the first
occurrence of a Change of Control].
5. TERMINATION FOR CAUSE OR UPON DISABILITY, RETIREMENT OR DEATH. If your
employment is terminated for any of the following reasons and in accordance with
the provisions of this Paragraph 5, you shall not be entitled by virtue of this
Agreement to any of the benefits provided in the foregoing Paragraph 4:
     (a) If, as a result of your incapacity due to physical or mental illness,
you shall have been absent from your duties with the Company on a full-time
basis for 120 consecutive business days, and within thirty (30) days after a
written Notice of Termination (as hereinafter defined in Paragraph 6) is given,
you shall not have returned to the full-time performance of your duties;

8

--------------------------------------------------------------------------------

 

     (b) If the Company shall have Cause. For the purposes of this Agreement,
the Company shall have “Cause” to terminate your employment hereunder upon
(i) the willful and continued failure by you to substantially perform your
duties with the Company, which failure causes material and demonstrable injury
to the Company (other than any such failure resulting from your incapacity due
to physical or mental illness), after a demand for substantial performance is
delivered to you by the Board which specifically identifies the manner in which
the Board believes that you have not substantially performed your duties, and
after you have been given a period (hereinafter known as the “Cure Period”) of
at least thirty (30) days to correct your performance, or (ii) the willful
engaging by you in other gross misconduct materially and demonstrably injurious
to the Company. For purposes of this paragraph, no act, or failure to act, on
your part shall be considered “willful” unless conclusively demonstrated to have
been done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interests of the
Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a Notice of
Termination which shall include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board (excluding you for this purpose, if you are then a member of the Board) at
a meeting of the Board called and held for the purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the Board you were
guilty of conduct set forth above in clauses (i) or (ii), including the
expiration of the Cure Period without the correction of your performance, or of
the preceding subparagraph and specifying the particulars thereof in detail.
     (c) If you die while employed by the Company or if you retire from such
employment during your Period of Employment, then you shall not be entitled to
any of the benefits provided by this Agreement and the benefits to which you or
your beneficiary shall be entitled shall be determined without regard to the
provisions hereof.
6. NOTICE OF TERMINATION. Any termination of your employment by the Company or
any termination by you for Good Reason shall be communicated by written notice
to the other party hereto. For purposes of this Agreement, such notice shall be
referred to as a “Notice of Termination.” Such notice shall, to the extent
applicable, set forth the specific reason for termination, and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
7. DATE OF TERMINATION. “Date of Termination” shall mean the date on which you
incur a “separation from service” from the Company within the meaning of
Section 409A(c)(2)(A)(i) of the Code.
     (a) If you terminate your employment for Good Reason, the proposed Date of
Termination shall be the date specified in the Notice of Termination, which in
no event will be more than sixty (60) days after Notice of Termination is given;
     (b) If your employment is terminated for Cause under subparagraph 5(b), the
proposed Date of Termination shall be the date on which a Notice of Termination
is given,

9

--------------------------------------------------------------------------------

 

except that the Date of Termination shall not be any date prior to the date on
which the Cure Period expires without the correction of your performance;
     (c) If your employment pursuant to this Agreement is terminated following
absence due to physical incapacity, under subparagraph 5(a), then the proposed
Date of Termination shall be thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such thirty (30) day period); or
     (d) If your employment is terminated by the Company other than under
subparagraph 7(b) or 7(c), the proposed Date of Termination shall be the date
specified in the Notice of Termination.
Subject to subparagraph 10(b), a termination of employment by either the Company
or by you shall not affect any rights you or your surviving spouse may have
pursuant to any other agreement or plan of the Company providing benefits to
you, except as provided in such agreement or plan.
8. CERTAIN ADDITIONAL PAYMENTS.
     (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined (as hereafter provided) that any payment or
distribution by the Company or any of its affiliates to you or for your benefit
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Paragraph 8) (a “Payment”) would be subject to the
excise tax imposed by Section 4999 (or any successor provisions) of the Code, or
to any similar tax imposed by state or local law, or any interest or penalties
are incurred by you with respect to such excise tax (such tax or taxes, together
with any such interest and penalties, are hereinafter collectively referred to
as the “Excise Tax”), then you shall be entitled to receive an additional
payment or payments (collectively, a “Gross-Up Payment”) in an amount such that
after payment by you of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise Tax
imposed on the Gross-Up Payment, you retain an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. For purposes of determining
the amount of the Gross-Up Payment, you shall be considered to pay (x) federal
income taxes at the highest rate in effect in the year in which the Gross-Up
Payment will be made and (y) state and local income taxes at the highest rate in
effect in the state or locality in which the Gross-Up Payment would be subject
to state or local tax, net of the maximum reduction in federal income tax that
could be obtained from deduction of such state and local taxes.
     (b) Subject to the provisions of subparagraph 8(c), all determinations
required to be made under this Paragraph 8, including whether and when such a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
the accounting firm that was, immediately prior to the Change of Control, the
Company’s independent auditor (the “Accounting Firm”), which shall provide
detailed supporting calculations both to the Company and to you within fifteen
(15) business

10

--------------------------------------------------------------------------------

 

days of the receipt of notice from you that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, you shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Paragraph 8, shall be paid by
the Company to you as provided in subparagraph 8(h). If the Accounting Firm
determines that no Excise Tax is payable by you, it shall furnish you with a
written opinion that you have substantial authority not to report any Excise Tax
on your federal, state or local income or other tax return with respect to such
benefit or amount. Any determination by the Accounting Firm shall be binding
upon the Company and you. As a result of the uncertainty of the application of
Section 4999 of the Code and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of the initial determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments that will
not have been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to
subparagraph 8(c) and you thereafter are required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that-has occurred and any such Underpayment shall be paid by the Company to you
or for your benefit as provided in subparagraph 8(h).
     (c) You shall notify the Company in writing of any claim by the Internal
Revenue Service or any other taxing authority that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten (10) business days after you
are informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
You shall not pay such claim prior to the expiration of the thirty (30) day
period following the date on which you give such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies you in writing prior to the expiration of
such period that it desires to contest such claim, you shall:
          (i) give the Company any information reasonably requested by the
Company relating to such claim,
          (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
          (iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
          (iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold you harmless, on an
after-tax basis, for any Excise Tax or income tax

11

--------------------------------------------------------------------------------

 

(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this subparagraph 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of any such claim and may, at
its sole option, either direct you to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and you agree to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs you to pay such claim
and sue for a refund, the Company shall advance the amount of such payment to
you, on an interest-free basis and shall indemnify and hold you harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for your taxable year with respect to which such contested amount is claimed to
be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and you shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
     (d) If, after the receipt by you of an amount advanced by the Company
pursuant to subparagraph 8(c), you become entitled to receive any refund with
respect to such claim, you shall (subject to the Company’s complying with the
requirements of subparagraph 8(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by you of an amount advanced by the
Company pursuant to subparagraph 8(c), a determination is made that you shall
not be entitled to any refund with respect to such claim and the Company does
not notify you in writing of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
     (e) You and the Company shall each provide the Accounting Firm access to
and copies of any books, records and documents in your possession or the
Company’s possession, as the case may be, as reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by this Paragraph 8.
     (f) The federal, state and local income or other tax returns filed by you
shall be prepared and filed on a consistent basis with the determination of the
Accounting Firm with respect to the Excise Tax payable by you. You shall report
and make proper payment of the amount of any Excise Tax, and at the request of
the Company, provide to the Company true and correct copies (with any
amendments) of your federal income tax return as filed with the Internal Revenue
Service and corresponding state and local tax returns, if relevant, as filed
with the applicable taxing authority, and such other documents reasonably
requested by the Company, evidencing such payment. If prior to the filing of
your federal income tax return, or corresponding state or local tax return, if
relevant, the Accounting Firm determines that the

12

--------------------------------------------------------------------------------

 

amount of the Gross-Up Payment should be reduced, you shall within five business
days pay to the Company the amount of such reduction.
     (g) Notwithstanding any provision of this Agreement to the contrary, but
giving effect to any redetermination of the amount of Gross-Up Payments
otherwise required by this Paragraph 8, if (i) but for this sentence, the
Company would be obligated to make a Gross-Up Payment to you, and (ii) the
aggregate “present value” of the “parachute payments” to be paid or provided to
you under this Agreement or otherwise does not exceed 1.05 multiplied by three
times your “base amount,” then the payments and benefits to be paid or provided
under this Agreement shall be reduced (or repaid to the Company, if previously
paid or provided) to the minimum extent necessary so that no portion of any
payment or benefit to you, as so reduced or repaid, constitutes an “excess
parachute payment.” For purposes of this subparagraph 8(g), the terms “excess
parachute payment,” “present value,” “parachute payment,” and “base amount”
shall have the meanings assigned to them by Section 280G of the Code. The
determination of whether any reduction in or repayment of such payments or
benefits to be provided under this Agreement is required pursuant to this
subparagraph 8(g) shall be made at the expense of the Company, if requested by
you or the Company, by the Accounting Firm. Appropriate adjustments shall be
made to amounts previously paid to you, or to amounts not paid pursuant to this
subparagraph 8(g), as the case may be, to reflect properly a subsequent
determination that you owe more or less Excise Tax than the amount previously
determined to be due. In the event that any payment or benefit intended to be
provided under this Agreement or otherwise is required to be reduced or repaid
pursuant to this subparagraph 8(g), the amount payable pursuant to subparagraph
4(a) shall be reduced.
     (h) Notwithstanding any other provision of this Paragraph 8 to the
contrary, all taxes and expenses described in this Paragraph 8 shall be paid or
reimbursed within 5 business days after you submit evidence of incurrence of
such taxes and/or expenses, provided that in all events such reimbursement shall
be made on or before the last day of the year following (a) the year in which
the applicable taxes are remitted or expenses are incurred, or (b) in the case
of reimbursement of expenses incurred due to a tax audit or litigation in which
there is no remittance of taxes, the year in which the audit is completed or
there is a final and nonappealable settlement or other resolution of the
litigation, in accordance with Treasury Regulation §1.409A-3(i)(1)(v). You shall
be required to submit all requests for reimbursements no later than 30 days
prior to the last day for reimbursement described in the prior sentence. Each
provision of reimbursements pursuant to this Paragraph 8 shall be considered a
separate payment and not one of a series of payments for purposes of
Section 409A of the Code. Any expense reimbursed by the Company in one taxable
year in no event will affect the amount of expenses eligible for reimbursement,
or in-kind benefits to be provided, by the Company in any other taxable year.
9. COVENANTS.
     (a) [FOR 24 AND 36 MONTH AGREEMENTS ONLY:] During the term of this
Agreement specified in Paragraph 1 (the “Term”) and for a period ending one year
following the Date of Termination, if you have received or are receiving
benefits under this Agreement, you shall not, without the prior written consent
of an officer of the Company, directly or indirectly, engage in any Competitive
Activity. For this purpose, “Competitive Activity” means your participation in
the management of any business enterprise if such enterprise engages in

13

--------------------------------------------------------------------------------

 

substantial and direct competition with the Company and such enterprise’s sales
of any product or service competitive with any product or service of the Company
amounted to 10% of such enterprise’s net sales for its most recently completed
fiscal year and if the Company’s net sales of said product or service amounted
to 10% of the Company’s net sales for its most recently completed fiscal year.
“Competitive Activity” shall not include (i) the mere ownership of securities in
any publicly-traded enterprise, if such ownership is less than 5% of the
outstanding voting securities or units of such enterprise or (ii) participation
in the management of any such enterprise other than in connection with the
competitive operations of such enterprise.
     (b) During the Term, the Company agrees that it will disclose to you its
confidential or proprietary information (as defined in this subparagraph 9(b))
to the extent necessary for you to carry out your obligations to the Company.
You hereby covenant and agree that you will not during the Term or thereafter
disclose to any person not employed by the Company, or use in connection with
engaging in competition with the Company, any confidential or proprietary
information of the Company. For purposes of this Agreement, the term
“confidential or proprietary information” shall include all information of any
nature and in any form that is owned by the Company and that is not publicly
available (other than by your breach of this subparagraph 9(b)) or generally
known to persons engaged in businesses similar or related to those of the
Company. Confidential or proprietary information shall include, without
limitation, the Company’s financial matters, customers, employees, industry
contracts, strategic business plans, product development (or other proprietary
product data), marketing plans, and all other secrets and all other information
of a confidential or proprietary nature. For purposes of the preceding two
sentences, the term “Company” shall also include any subsidiary controlled by
the Company (collectively, the “Restricted Group”). The foregoing obligations
imposed by this subparagraph 9(b) shall not apply (i) during the Term, in the
course of the business of and for the benefit of the Company, (ii) if such
confidential or proprietary information has become, through no fault of yours,
generally known to the public or (iii) if you are required by law to make
disclosure (after giving the Company notice and an opportunity to contest such
requirement). These rights of the Company are in addition to and without
limitation to those rights and remedies otherwise available by law for
protection of the types of such confidential or proprietary information.
     (c) You hereby covenant and agree that during the Term and for a period
ending one year after the Date of Termination you will not, without the prior
written consent of the Company, on your behalf or on behalf of any person, firm
or company, directly or indirectly, attempt to influence, persuade or induce, or
assist any other person in so persuading or inducing, any employee or customer
of the Restricted Group to give up, or to not commence, employment or a business
relationship with the Restricted Group.
     (d) You and the Company agree that the covenants contained in this
Paragraph 9 are reasonable under the circumstances, and further agree that if in
the opinion of any court of competent jurisdiction any such covenant is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify any provision or provisions of such covenants as to the
court will appear not reasonable and to enforce the remainder of the covenants
as so amended. You acknowledge and agree that the remedy at law available to the
Company for breach of any of your obligations under this Paragraph 9 would be
inadequate and that damages flowing from such a breach may not readily be
susceptible to being measured in monetary terms.

14

--------------------------------------------------------------------------------

 

Accordingly, you acknowledge, consent and agree that, in addition to any other
rights or remedies that the Company may have at law, in equity or under this
Agreement, upon adequate proof of your violation of any such provision of this
Agreement, the Company shall be entitled to immediate injunctive relief and may
obtain a temporary order restraining any threatened or further breach, without
the necessity of proof of actual damage.
10. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL RIGHTS.
     (a) You shall not be required to refund the amount of any payment or
employee benefit provided for or otherwise mitigate damages under this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for under this Agreement be reduced by any compensation or the
value of any benefits earned by you as the result of any employment by another
employer after the date of termination of your employment with the Company, or
otherwise. Subject to subparagraph 10(b), the provisions of this Agreement, and
any payment or benefit provided for hereunder, shall not reduce any amount
otherwise payable, or in any way diminish your existing rights, or rights which
would occur solely as a result of the passage of time, under any other
agreement, contract, plan or arrangement with the Company.
     (b) To the extent, and only to the extent, a payment or benefit that is
paid or provided under this Agreement would also be paid or provided under the
terms of another plan, program, agreement or arrangement of, or assumed by, the
Company or any of its affiliates, or required to be provided by local law,
including, without limitation, any employment agreement or Management Continuity
Agreement, you will be entitled to payment or benefit under this Agreement or
such other plan, program, agreement, arrangement or legal requirement, whichever
provides for greater benefits, but will not be entitled to benefits under both
this Agreement and such other plan, program, agreement, arrangement or legal
requirement.
11. SUCCESSORS AND BINDING AGREEMENT.
     (a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company, by agreement in form and substance
satisfactory to you, to assume and agree to perform this Agreement.
     (b) This Agreement shall be binding upon the Company and any successor of
or to the Company, including, without limitation, any person acquiring directly
or indirectly all or substantially all of the assets of the Company whether by
merger, consolidation, sale or otherwise (and such successor shall thereafter be
deemed “the Company” for the purposes of this Agreement), but shall not
otherwise be assignable by the Company.
     (c) This Agreement shall inure to the benefit of and be enforceable by you
and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amounts would still be payable to you pursuant to Paragraph 4 hereunder if
you had continued to live, all such amounts, unless

15

--------------------------------------------------------------------------------

 

otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee, or other designee or, if there be no such
designee, to your estate.
12. NOTICES. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Ohio, without
giving effect to the principles of conflict of laws of such State.
14. MISCELLANEOUS. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in a
writing signed by you and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof, have
been made by either party which are not set forth expressly in this Agreement.
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. References to Paragraphs and subparagraphs are
to paragraphs and subparagraphs of this Agreement. Any reference in this
Agreement to a provision of a statute, rule or regulation shall also include any
successor provision thereto.
15. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement which shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same agreement.
17. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
18. NONASSIGNABILITY. This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in
Paragraph 11 above. Without limiting the foregoing, your right to receive
payments hereunder shall not be assignable or transferable,

16

--------------------------------------------------------------------------------

 

whether by pledge, creation of a security interest or otherwise, other than by a
transfer by your will or by the laws of descent and distribution and in the
event of any attempted assignment or transfer contrary to this Paragraph 18, the
Company shall have no liability to pay any amounts so attempted to be assigned
or transferred.
19. DISPUTE RESOLUTION.
     (a) All disputes arising out of, relating to or concerning this Agreement,
the breach of this Agreement, your termination, or the termination of your
employment shall be resolved pursuant to this Paragraph 19. This includes all
claims or disputes whether arising in tort or contract and whether arising under
statute or common law, including, without limitation, Ohio Revised Code
Chapter 4112.01 et seq., Ohio Revised Code Section 4117.01, Title VII of the
Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the
Age Discrimination in Employment Act of 1967, as amended, and all other federal
and state employment statutes. Any such dispute shall be resolved by arbitration
held in Cleveland, Ohio, under the then-current Employment Dispute rules of the
American Arbitration Association (“AAA”). The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Sections l-16, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. This agreement to arbitrate shall be specifically enforceable.
Notwithstanding the foregoing, the Company shall not be required to seek or
participate in arbitration regarding any breach of your covenants contained in
Paragraph 9, but may pursue its remedies for such breach in a court of competent
jurisdiction in the city in which the Company’s principal executive offices are
based.
     (b) You and the Company agree that you or it must file any request for
arbitration with the AAA and serve on the other party within six (6) months
after the date on which the dispute arose and hereby waive any statute of
limitations to the contrary.
     (c) The arbitrator shall have no authority to extend, modify, or suspend
any of the terms of this Agreement. The arbitrator is not empowered to award
damages in excess of compensatory damages and you and the Company hereby waive
any right to recover such damages with respect to any dispute resolved by
arbitration. The Company shall pay the fees and costs of the arbitrator. The
arbitrator shall make his award in writing and shall accompany it with an
opinion discussing the evidence and setting forth the reasons for his award. The
decision of the arbitrator within the scope of the submission shall be final and
binding on you and the Company, and any right to judicial action on any matter
subject to arbitration hereunder is waived (unless otherwise required by
applicable law), except suit to enforce this arbitration award. If the rules of
the AAA differ from those of this Paragraph 19, the provisions of this
Paragraph 19 shall control.
20. LEGAL FEES AND EXPENSES. If a Change of Control shall have occurred,
thereafter the Company shall pay and be solely responsible for:
          (i) 00% of the first $100,000 and
          (ii) 70% of any excess above $100,000, of

17

--------------------------------------------------------------------------------

 

any and all attorneys’ and related fees and expenses incurred by you to
successfully (in whole or in part, and whether by modification of the Company’s
position, agreement, compromise, settlement, or administrative or judicial
determination) enforce this Agreement or any provision hereof or as a result of
the Company or any shareholder of the Company contesting the validity or
enforceability of this Agreement or any provision hereof. To secure the
foregoing obligation, the Company shall, within 90 days after being requested by
you to do so, enter into a contract with an insurance company, open a letter of
credit or establish an escrow in a form satisfactory to you. All reimbursements
under this Paragraph 20 shall be for expenses incurred by you during your
lifetime. Reimbursement shall be made no sooner than the first business day of
the seventh month following the Date of Termination and in all events shall be
made prior to the last day of the calendar year following the calendar year in
which you incurred the expense. In no event will the amount of expenses so
reimbursed by the Company in one year affect the amount of expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other taxable year.
Each provision of reimbursement pursuant to this Paragraph 20 shall be
considered a separate payment and not one of a series of payments for purposes
of Section 409A of the Code.
21. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement shall
create any right or duty on your part or on the part of the Company to have you
remain in the employment of the Company prior to the commencement of the Period
of Employment; provided, however, that any termination of your employment, for
any reason other than those set forth in Paragraph 5, following the commencement
of any discussion with a third party, or the announcement by a third party of
the commencement of, or the intention to commence, a tender offer, or other
intention to acquire all or a portion of the equity securities of the Company
that ultimately results in a Change of Control shall (unless such termination is
conclusively demonstrated to have been wholly unrelated to any such activity
relating to a Change of Control) be deemed to be a termination of your
employment after a Change of Control for purposes of this Agreement and both the
Period of Employment and the Payment Period shall be deemed to have begun on the
date of such termination.
22. RIGHT OF SETOFF. There shall be no right of setoff or counterclaim against,
or delay in, any payment by the Company to you or your designated beneficiary or
beneficiaries provided for in this Agreement in respect of any claim against you
or any debt or obligation owed by you, whether arising hereunder or otherwise.
23. RIGHTS TO OTHER BENEFITS. Except as provided in subparagraph 10(b), the
existence of this Agreement and your rights hereunder shall be in addition to,
and not in lieu of, your rights under any other of the Company’s compensation
and benefit plans and programs, and under any other contract or agreement
between you and the Company.
24. RELEASE. Notwithstanding any provision of this Agreement to the contrary,
the Company shall not pay or provide any compensation or benefits hereunder in
connection with the termination of your employment unless, prior to the sixtieth
(60th) day following the Date of Termination, you first sign a general release
substantially in the form attached hereto as Exhibit A and you do not revoke
such release during the time period set forth therein for revocation.
25. SURVIVAL. Notwithstanding any provision of this Agreement to the contrary,
the parties’ respective rights and obligations under Paragraphs 4, 8, 9, 19, 20,
21 and 26 shall survive

18

--------------------------------------------------------------------------------

 

any termination or expiration of this Agreement or the termination of your
employment following a Change of Control for any reason whatsoever.
26. SOURCE OF PAYMENT. All payments under this Agreement shall be made solely
from the general assets of the Company or one of its subsidiaries (or from a
grantor trust, if any, established by the Company for purposes of making
payments under this Agreement and other similar agreements), and you shall have
the rights of an unsecured general creditor of the Company with respect thereto.
The Company may, but need not, establish a trust to fund its obligations under
the Agreement; provided, however, that if the Company establishes such a trust,
any funds contained therein shall remain liable for the claims of the Company’s
general creditors. Notwithstanding the above, upon the earlier to occur of (a) a
Change of Control or (b) a declaration by the Company’s Board of Directors that
a Change of Control is imminent, to the extent permitted by applicable law, the
Company shall promptly, to the extent it has not previously done so, establish a
trust to fund its obligations under this Agreement and transfer to the trustee
of such trust, to be added to the principal thereof, an amount sufficient to
fund all payments which would be made to you hereunder if your employment was
terminated on the date of the Change of Control under circumstances in which
payments under Paragraph 4 hereof would become due and payable to you,
including, without limitation, cash in an amount sufficient to fund payments of
all future welfare plan benefits as provided in subparagraph 4(c) hereof, and
the Gross-Up Payment as defined in Paragraph 8 hereof, in each case based on
reasonable estimates. In no event shall any amount be transferred to a trust
described in this Paragraph 26 if, pursuant to Section 409A(b)(3)(A) of the
Code, such amount would, for purposes of Section 83 of the Code, be treated as
property transferred in connection with the performance of services.
27. SECTION 409A COMPLIANCE. It is intended that this Agreement comply with the
provisions of Section 409A of the Code, so as to prevent the inclusion in gross
income of any amounts deferred hereunder in a taxable year that is prior to the
taxable year or years in which such amounts would otherwise actually be
distributed or made available to you or your beneficiaries. This Agreement shall
be administered in a manner consistent with such intent.
If this letter correctly sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.

           

Accepted And Agreed To
As Of The Date Hereof
    Sincerely,

POLYONE CORPORATION

By direction of the Compensation and
Governance Committee of the Board of
Directors
        By       [Name]      [Name]             

19