Exhibit 10.4


 


Draft of
Febuary 16, 2006


 


DPL INC.

SEVERANCE PAY AND CHANGE OF CONTROL PLAN

EFFECTIVE JANUARY 1, 2006


 


ARTICLE I  - INTRODUCTION


 


The
Board of Directors of DPL Inc. (“DPL”) and the Board of Directors of The Dayton
Power and Light Company (“DP&L”) (collectively, the “Company”) hereby adopt
the DPL Inc. Severance Pay and Change of Control Plan (the “Plan”).  The Plan shall be effective as of the
Effective Date.  The Plan is designed to
(a) provide severance protection to certain Employees of the Company who are
expected to make substantial contributions to the success of the Company and
thereby provide for stability and continuity of operations and (b) enable
certain Employees to make career decisions without regard to the time pressure
and financial uncertainty which may result from a proposed or threatened Change
of Control (as defined herein) transaction, encourage such Employees to remain
employees of the Company and its Subsidiaries notwithstanding the outcome of
any such proposed transaction, and to assure fair treatment of such Employees
in the event of a Change of Control of the Company.


 


ARTICLE II  - ESTABLISHMENT OF THE
PLAN


 


Section 2.1.                                Applicability
of Plan.  The benefits provided by
this Plan shall be available to all Employees who, at or after the Effective
Date, meet the eligibility requirements of Article IV hereof.


 


Section 2.2.                                Contractual
Right to Benefits.  Subject to the
provisions of Article IX hereof, this Plan establishes and vests in each
Participant a contractual right to the benefits to which he or she is entitled
hereunder, enforceable by the Participant against the Company on the terms and
subject to the conditions hereof.


 


ARTICLE III  - DEFINITIONS AND
CONSTRUCTION


 


Section 3.1.                                “Affiliate”
means, with respect to any person, any entity, directly or indirectly,
controlled by, controlling or under common control with such person.


 


Section 3.2.                                “Base
Pay” of a Participant means the Participant’s annual base salary rate as in
effect on the Termination Date from the Participant’s Employer; provided, however, that any reductions in Base Pay following
the date of a Change of Control will not be taken into account when determining
Base Pay hereunder; and further  provided, any reduction in Base Pay that occurs prior to a
Change of Control but which the Participant reasonably demonstrates
(i) was at the request of a third party who effectuates a Change of
Control or (ii) otherwise occurred in connection with or in anticipation
of a Change of Control which has been threatened or proposed and which


 


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actually occurs, shall not be taken into account when determining Base
Pay hereunder, it being agreed that any such reduction taken following
shareholder approval of a transaction which if consummated would constitute a
Change of Control, shall be deemed to be in anticipation of a Change of Control
provided such transaction is actually consummated.


 


Section 3.3.                                “Board”
means the Board of Directors of DPL Inc.


 


Section 3.4.                                “Cause”
means:


 


(a)                                  any
willful or negligent material violation of any applicable securities laws
(including the Sarbanes-Oxley Act of 2002);


 


(b)                                 any
act of fraud, intentional misrepresentation, embezzlement, misappropriation or
conversion of any asset or business opportunity of the Company;


 


(c)                                  a
conviction of, or entering into a plea of nolo contendere to, a felony;


 


(d)                                 an
intentional, repeated or continuing violation of any of the Company’s policies
or procedures that occurs or continues after the Company has given notice to
the Participant that he or she has materially violated a Company policy or
procedure; or


 


(e)                                  any
breach of a written covenant or agreement with the Company, including the terms
of this Plan (other than a failure to perform Participant’s duties with the
Company resulting from the Participant’s incapacity due to physical or mental
illness or from the assignment to the Participant of duties that would
constitute Good Reason), which is material and which is not cured within 30
days after written notice thereof from the Company to the Participant


 


For purposes of this Plan, the Participant shall not
be deemed to have been terminated for Cause under clauses (a), (b), (c), (d) or
(e) hereunder unless the Participant receives a Notice of Termination setting
forth the grounds for the termination at least 15 calendar days prior to the
specified Termination Date.


 


Section 3.5.                                “Change
of Control” means the consummation of any Change of Control of DPL, or its
principal subsidiary, DP&L, of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as
determined by the Board of Directors of DPL in its sole discretion; provided that,
without limitation, such a Change of Control shall be deemed to have occurred
if:


 


(a)                                  any
“Person” (as such term is defined in Sections 13(d) or 14(d)(2) of
the Exchange Act; hereafter, a “Person”) is on the date hereof or becomes the
beneficial owner, directly or indirectly, of securities of DPL or DP&L
representing (i) 25% or more of the combined voting power of the then
outstanding Voting Stock of DPL or DP&L if the acquisition of such
beneficial ownership is not


 


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approved by the Board of Directors of DPL prior to the acquisition or
(ii) 50% or more of such combined voting power in all other cases; provided,
however, that:


 


(i)                                     for
purposes of this Section 3.5(a), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition of Voting Stock of DPL
or DP&L directly from DPL or DP&L that is approved by a majority of
those persons serving as directors of the Company or DP&L on the date of
this Plan (the “Original Directors”) or their Successors (as defined below),
(B) any acquisition of Voting Stock of DPL or DP&L by DPL or any
Subsidiary, and (C) any acquisition of Voting Stock of DPL or DP&L by
the trustee or other fiduciary holding securities under any employee benefit
plan (or related trust) sponsored or maintained by DPL or any Subsidiary (the
term “Successors” shall mean those directors whose election or nomination for
election by shareholders has been approved by the vote of at least two-thirds
of the Original Directors and previously qualified Successors serving as
directors of DPL or DP&L, as the case may be, at the time of such election
or nomination for election);


 


(ii)                                  if
any Person is or becomes the beneficial owner of 25% or more of the combined
voting power of the then-outstanding Voting Stock of DPL or DP&L as a
result of a transaction described in clause (A) of Section 3.5(a)(i) above and
such Person thereafter becomes the beneficial owner of any additional shares of
Voting Stock of DPL or DP&L representing 1% or more of the then-outstanding
Voting Stock of DPL or DP&L, other than in an acquisition directly from DPL
or DP&L that is approved by a majority of the Original Directors or their
Successors or other than as a result of a stock dividend, stock split or similar
transaction effected by DPL or DP&L in which all holders of Voting Stock of
DPL or DP&L are treated equally, such subsequent acquisition shall be
treated as a Change in Control;


 


(iii)                               a
Change in Control will not be deemed to have occurred if a Person is or becomes
the beneficial owner of 25% or more of the Voting Stock of DPL or DP&L as a
result of a reduction in the number of shares of Voting Stock of DPL or
DP&L outstanding pursuant to a transaction or series of transactions that
is approved by a majority of the Original Directors or their Successors unless
and until such Person thereafter becomes the beneficial owner of any additional
shares of Voting Stock of DPL or DP&L representing 1% or more of the
then-outstanding Voting Stock of DPL or DP&L, other than as a result of a
stock dividend, stock split or similar transaction effected by DPL or DP&L
in which all holders of Voting Stock are treated equally; and


 


(iv)                              if
at least a majority of the Original Directors or their Successors determine in
good faith that a Person has acquired beneficial ownership of 25% or more of
the Voting Stock of DPL or DP&L inadvertently, and such Person divests as
promptly as practicable but no later than the date, if any, set by the Original
Directors or their Successors a sufficient number


 


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of shares so that such Person beneficially owns less than 25% of the
Voting Stock of DPL or DP&L, then no Change of Control shall have occurred
as a result of such Person’s acquisition; or


 


(b)                                 DPL
or DP&L consummates a merger or consolidation, or consummates a “combination”
or “majority share acquisition” in which it is the “acquiring corporation” (as
such terms are defined in Ohio Rev. Code § 1701.01 as in effect on the
Effective Date) and in which shareholders of DPL or DP&L, as the case may
be, immediately prior to entering into such agreement, will beneficially own,
immediately after the effective time of the merger, consolidation, combination
or majority share acquisition, securities of DPL or DP&L or any surviving
or new corporation, as the case may be, having less than 50% of the “voting
power” of DPL or DP&L or any surviving or new corporation, as the case may
be, including “voting power” exercisable on a contingent or deferred basis as
well as immediately exercisable “voting power”, excluding any merger of
DP&L into DPL or of DPL into DP&L; or


 


(c)                                  DPL
or DP&L consummates a sale, lease, exchange or other transfer or
disposition of all or substantially all of its assets to any Person other than
to a wholly owned subsidiary or, in the case of DP&L, to DPL or a wholly
owned subsidiary(ies) of the Company; but not including (i) a mortgage or
pledge of assets granted in connection with a financing or (ii) a spin-off or
sale of assets if DPL continues in existence and its common shares are listed
on a national securities exchange, quoted on the automated quotation system of
a national securities association or traded in the over-the-counter market; or


 


(d)                                 the
Original Directors and/or their Successors do not constitute a majority of the
whole Board of Directors of DPL or DP&L, as the case may be; or


 


(e)                                  approval
by the shareholders of DPL or DP&L of a complete liquidation or dissolution
of DPL or DP&L, as the case may be.


 


Section 3.6.                                “Code”
means the Internal Revenue Code of 1986, as amended.


 


Section 3.7.                                “Company”
means DPL Inc., an Ohio corporation, any successor thereto as provided in
Article VIII hereof, and The Dayton Power and Light Company.


 


Section 3.8.                                “Disability”
means a Participant’s inability to perform the duties required of the
Participant in his or her position with the Company on a full-time basis for a
period of six consecutive months because of physical or mental illness or other
physical or mental disability or incapacity.


 


Section 3.9.                                “Effective
Date” means January 1, 2006.


 


Section 3.10.                         “EICP”
means the DPL Inc. Executive Incentive Compensation Plan, as it may be amended
from time to time.


 


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Section 3.11.                         “Employee”
means a full-time salaried employee of an Employer.


 


Section 3.12.                         “ERISA”
means Employee Retirement Income Security Act of 1974, as amended from time to
time.


 


Section 3.13.                         “Employer”
means the Company, any Subsidiary or any Affiliate which employs a Participant
or any person or entity that has adopted this Plan pursuant to Article VIII
hereof.


 


Section 3.14.                         “Good
Reason” means, following a Change of Control:


 


(a)                                  a
demotion or a significant reduction in the Participant’s position, duties,
responsibilities, and status with the Company in effect immediately prior to a
Change of Control;


 


(b)                                 a
reduction by the Company of a Participant’s base salary;


 


(c)                                  the
taking of any action by the Company which would adversely affect a Participant’s
participation in or materially reduce a Participant’s benefits under any
employee benefit plans maintained by the Company for its executives or deprive
a Participant of any material fringe benefit enjoyed by a Participant at the
time of the Change of Control; or


 


(d)                                 the
relocation of the Company’s principal executive offices more than 50 miles from
their current location, if at the time of a Change of Control the Participant
is based at the Company’s principal executive offices, or the requirement of
the Participant to be based at a location more than 50 miles from the
Participant’s location as of the Change of Control;


 


provided,
however, that any event or condition
described in clauses (a) through (d) that occurs prior to a Change of Control
but which the Participant reasonably demonstrates (i) was at the request
of a third party who effectuates a Change of Control or (ii) otherwise
arose in connection with or in anticipation of a Change of Control which has
been threatened or proposed and which actually occurs, shall constitute Good
Reason for purposes of this Plan notwithstanding that it occurred prior to a
Change of Control, it being agreed that any such action taken following
shareholder approval of a transaction which if consummated would constitute a
Change of Control, shall be deemed to be in anticipation of a Change of Control
provided such transaction is actually consummated.


 


Before a termination by a Participant will constitute
termination for Good Reason, the Participant must give the Company a Notice of
Termination within 30 calendar days following the occurrence of the event that
constitutes Good Reason.  Failure to
provide such Notice of Termination within such 30-day period shall be
conclusive proof that the Participant shall not have Good Reason to terminate
employment.


 


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Good Reason shall exist only if the Employer fails to
remedy the event or events constituting Good Reason within 15 calendar days
after receipt of the Notice of Termination from the Participant.  If the Participant determines that Good
Reason for termination exists and timely files a Notice of Termination, such
determination shall be presumed to be true and the Company will have the burden
of proving that Good Reason does not exist.


 


Section 3.15.                         “Key
Employee” means a key employee as defined in Section 416(i) of the Code
(without regard to paragraph (5) thereof) of an Employer.


 


Section 3.16.                         “Notice
of Termination” means (i) a written notice of termination by the Company to
the Participant provided to the Participant no less than 15 calendar days prior
to the specified Termination Date or (ii) a written notice of termination for
Good Reason by the Participant to the Company, in either case, setting forth in
reasonable detail the specific reason for termination and the facts and
circumstances claimed to provide a basis for termination of employment under
the provision indicated and the specified Termination Date.


 


Section 3.17.                         “Participant”
means an Employee who meets the eligibility requirements of Article IV hereof,
other than an Employee who, after becoming a Participant, has entered into an
employment, severance or other similar agreement with the Company (other than a
stock option, restricted stock, supplemental retirement, deferred compensation
or similar plan or agreement or other form of participation document entered
into pursuant to an Employer-sponsored plan which may contain provisions
operative on a termination of the Participant’s employment or may incidentally
refer to accelerated vesting or accelerated payment upon a Change of Control
(as defined in such separate plan or document)).


 


Section 3.18.                         “Participation
Agreement” means an agreement between the Company and each Employee that
must be executed as a condition of the Participant’s eligibility for this Plan.


 


Section 3.19.                         “Plan”
means this Severance Pay and Change of Control Plan.


 


Section 3.20.                         “Plan
Administrator” means the Compensation Committee of the Board.


 


Section 3.21.                         “Protection
Period” means (i) for all Participants, excluding the individual who is the
Chief Executive Officer of the Company (the “CEO”) at the time of a Change of
Control, the period of time commencing on the date of the first occurrence of a
Change of Control and continuing until the first anniversary of the first
occurrence of the Change of Control and (ii) for the CEO of the Company, the
period of time commencing on the date of the first occurrence of a Change of
Control and continuing until the second anniversary of the first occurrence of
the Change of Control.


 


Section 3.22.                         “Separation
from Service” has the meaning ascribed to such phrase in the 409A Guidance.


 


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Section 3.23.                         “Severance
Payment” or “Severance Payments” means the payment or payments of severance
compensation described in Article V hereof.


 


Section 3.24.                         “Severance
Period” means (i) for the CEO, the period of time commencing on the
Termination Date and continuing until the third anniversary of the Termination
Date, (ii) for all officers, other than the CEO, the period of time commencing
on the Termination Date and continuing until the second anniversary of the
Termination Date, and (iii) for all other Participants, the period of time
commencing on the Termination Date and continuing until the first anniversary
of the Termination Date.


 


Section 3.25.                         “Subsidiary”
means a corporation, partnership, joint venture, unincorporated association or
other entity in which the Company has a direct or indirect ownership or other
equity interest.


 


Section 3.26.                         “Termination
Date” means the date on which the Participant’s employment terminates.


 


Section 3.27.                         “Voting
Stock” means securities entitled to vote generally in the election of
directors.


 


Section 3.28.                         “409A
Guidance” means Section 409A of the Code, including proposed, temporary or
final regulations or any other guidance issued by the Secretary of the Treasury
and the Internal Revenue Service with respect thereto.


 


ARTICLE IV  – ELIGIBILITY


 


Section 4.1.                                Participation.  Each person who is an Employee, who is
designated by the Compensation Committee to be a Participant in this Plan, and
who has executed a Participation Agreement shall be a Participant commencing on
the date such Participant executes a Participation Agreement.


 


Section 4.2.                                Duration
of Participation.  A Participant
shall cease to be a Participant and shall have no rights hereunder, without
further action, when (a) he or she ceases to be an Employee, unless such
Participant is then entitled to payment of a Severance Payment as provided in
Article V hereof or (b) prior to a Change of Control, the Compensation
Committee designates a Participant to be ineligible to continue to participate
in this Plan as a result of a change in the Participant’s job title or
duties.  A Participant entitled to a
Severance Payment shall remain a Participant in this Plan until the full amount
of the Severance Payment has been paid to the Participant.


 


ARTICLE V  - SEVERANCE PAYMENTS


 


Section 5.1.                                Right
to Severance Payment - Termination Prior to a Change of Control.


 


(a)                                  Subject
to Section 5.3, a Participant shall be entitled to receive from the Company
Severance Payments in the amount provided in Section 5.1(b), payable as
described in Section 5.1(c), upon the termination by an Employer of


 


7

















 


the Participant’s employment without Cause and for reasons other than
death or Disability, if the Participant is not entitled to Severance Payments
under Section 5.2 as a result of such termination.


 


(b)                                 The
amount of Severance Payments under this Section 5.1(b) shall equal the sum of
(i) the Participant’s Base Pay and (ii) the amount of the Participant’s target
award under the EICP for the year in which the Termination Date occurs; provided, however, that the amount of such cash payment
determined pursuant to this Section 5.2(b) shall be reduced by an amount equal
to the aggregate amount of any other cash payments in the nature of severance
payments paid or payable by an Employer pursuant to any agreement, Plan, program,
arrangement or requirement of statutory or common law (other than this Plan or
cash payments received in lieu of stock incentives).


 


(c)                                  The
Severance Payments paid pursuant to this Section 5.1 shall be paid in equal
installments over the twelve month period described in this Section 5.1(c)
according to the Company’s then current payroll policies.  The amount of each installment shall be equal
to the total amount of the Severance Payments divided by the number of payroll
dates in the twelve-month period described in this Section 5.1(c).  The period during which Severance Payments
pursuant to this Section 5.1 will be paid is the twelve-month period beginning
on the date 60 calendar days after the Participant’s Separation from Service
and ending twelve months later.  The
first installment of the Severance Payments to which a Participant is entitled
under this Section 5.1 shall be paid with the first normal pay period that
occurs on or after 60 calendar days after the Participant’s Separation from
Service.  Notwithstanding the foregoing,
if the Participant is a Key Employee, then, unless permitted pursuant to the “short-term
deferral” exception under Section 409A of the Code, no Severance Payments shall
be made during the six month period following the Participant’s Separation from
Service, and the first six months of Severance Payments to which a Participant
is entitled under this Section 5.1 shall be paid to the Participant by the
Company in cash and in full, as soon as practicable following six months after
the Participant’s Separation from Service. 
If a Participant entitled to Severance Payments under this Section 5.1
should die before all amounts payable to him or her have been paid, such unpaid
amounts shall be paid as soon as practicable following the Participant’s death
to the Participant’s spouse, if living, otherwise to the personal
representative of the Participant’s estate.


 


Section 5.2.                                Right
to Severance Payment - Termination After a Change of Control.


 


(a)                                  Subject
to Section 5.3, a Participant shall be entitled to receive from the Company
Severance Payments in the amount provided in Section 5.2(b), payable as
described in Section 5.2(c), if, after a Change of Control and within the
Protection Period, (i) the Employer shall terminate Participant’s employment
with the Employers without Cause and for reasons other than death or Disability


 


8

















 


or (ii) the Participant shall terminate employment with the Employers
for Good Reason.


 


(b)                                 The
amount of Severance Payments under this Section 5.2(b) shall equal the sum of
(i) the Participant’s Base Pay multiplied by the factor set forth on Schedule
A for the Participant and (ii) the amount of the Participant’s target award
under the EICP for the year in which the Termination Date occurs multiplied by
the factor set forth on Schedule A for the Participant;  provided, however,
that the amount of such cash payment determined pursuant to this Section 5.2(c)
shall be reduced by an amount equal to the aggregate amount of any other cash
payments in the nature of severance payments paid or payable by an Employer
pursuant to any agreement, plan, program, arrangement or requirement of
statutory or common law (other than this Plan or cash payments received in lieu
of stock incentives).  In addition, such Participant will
be entitled to receive as Severance Payments (i) a pro rata portion of the
Participant’s target award under the EICP and the DPL Inc. 2006 Executive
Performance and Incentive Plan, as of the Termination Date, (ii)
an amount equal to the amount that would be credited to the Participant under
the Company’s Supplemental Executive Defined Contribution Retirement Plan for
the applicable Severance Period, determined as if the Participant had remained
employed during that period and had received remuneration each year during that
period equal to the sum of the Participant’s Base Pay plus the Participant’s
target award under the EICP for the year in which the Termination Date occurs,
and the Code Limit, as defined in the EICP, remained unchanged during the
Severance Period, (iii) continued participation in the Company’s medical plan
for the Severance Period; provided, however, that such coverage shall be provided only to the
extent that such coverage would not be considered “deferred compensation”
subject to the requirements of Section 409A of the Code, and (iv) an amount
equal to $20,000 multiplied by the factor set forth on Schedule
A for the Participant.


 


(c)                                  Subject
to the following sentence, the cash Severance Payments to which a Participant
is entitled under this Section 5.2 shall be paid to the Participant by the
Company in cash and in full as soon as practicable after the Participant’s
Termination Date (or, if later the date the applicable revocation period for
the release required in Section 5.3 has expired).  Notwithstanding the foregoing, if the
Participant is a Key Employee and to the extent the “short-term deferral”
exception under Section 409A of the Code does not apply, then the Severance
Payment to which a Participant is entitled under this Section 5.2 shall be paid
to the Participant by the Company in cash and in full, as soon as practicable
following six months after the Participant’s Separation from Service.  If a Participant entitled to Severance
Payments under this Section 5.2 should die before all amounts payable to him or
her have been paid, such unpaid amounts shall be paid as soon as practicable
following the Participant’s death to the Participant’s spouse, if living,
otherwise to the personal representative of the Participant’s estate.


 


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Section 5.3.                                Release.  Notwithstanding anything to the contrary
contained in this Plan, a Participant shall not be entitled to receive any
Severance Payment hereunder unless and until he or she has signed and returned
to the Company a release (the “Release”) by the deadline established by the
Plan Administrator (which shall be no later than 50 calendar days after the
Participant’s Termination Date) and the period during which the Participant may
revoke the Release, if any, has elapsed. 
The Release, which shall be signed by the Participant no earlier than
the Participant’s Termination Date, shall be a written document, in a form
prescribed by the Company, intended to create a binding agreement by a
Participant to release any claim that the Participant has or may have against
the Company and certain related entities and individuals, that arise on or
before the date on which Participant signs the Release, including, without limitation,
any claims under the federal Age Discrimination in Employment Act.  The Release shall also include
confidentiality and non-disparagement covenants.


 


Section 5.4.                                Third
Party Removal.  Notwithstanding
anything to the contrary contained in this Plan, any termination of employment
of the Participant that occurs prior to a Change of Control but which the
Participant reasonably demonstrates occurred at the request of a third party
who had taken steps reasonably calculated to effect the Change of Control shall
be deemed to be a termination or removal of the Participant after a Change of
Control for purposes of this Plan.


 


Section 5.5.                                Breach.  The Company’s payment obligations and the
Participant’s participation rights under Sections 5.1 and 5.2 shall cease in
the event the Participant breaches any of the covenants contained in the
Participant’s Participation Agreement or the Release.


 


Section 5.6.                                No
Mitigation Obligation.  The
Participant shall not be required to mitigate damages or the amount of his or her
Severance Payment by seeking other employment or otherwise, nor shall the
amount of such payment be reduced by any compensation earned by the Participant
as a result of employment after the termination of his or her employment by an
Employer.


 


Section 5.7.                                Excess
Parachute Payments.


 


(a)                                  Notwithstanding any provision of this Plan to the
contrary, if the aggregate “present value” (as determined under Section 280G of
the Code) of the “parachute payments” (as defined under Section 280G(b)(2) of
the Code) to be paid or provided under this Plan or any other plan or agreement
between the Participant and an Employer exceeds 300% of the Participant’s “base
amount” (as defined in Section 280G(b)(3)) (“Excess Parachute Payment”) by more
than 10% and is determined to be subject to the excise tax imposed by Section
4999 of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the “Excise Tax”), then the
Participant shall be entitled to receive an additional payment or payments
(collectively, a “Gross-Up


 


10

















 


Payment”). The Gross-Up Payment shall be in an
amount such that, after payment by the Participant of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment.  The Company shall pay the required Gross-Up
Payment to the Participant within thirty (30) business days after the
Participant’s termination.


 


(b)                                 Notwithstanding any provision of this Plan to the
contrary, if the aggregate “present value” (as determined under Section 280G of
the Code) of the “parachute payments” (as defined under Section 280G(b)(2) of
the Code) to be paid or provided under this Plan or any other plan or agreement
between the Participant and an Employer exceeds 300% of the Participant’s “base
amount” (as defined in Section 280G(b)(3)) by 10% or less and is determined to
be subject to the Excise Tax, then the payments and benefits to be paid or
provided under this Plan shall be reduced to the minimum extent necessary (but
in no event to less than zero) so that no portion of any such payment or
benefit, as so reduced, constitutes an Excess Parachute Payment.


 


(c)                                  Procedures
for all determinations to be made under this Section 5.7 are set forth on Schedule
B.


 


ARTICLE VI  - NON-SOLICITATION


 


Section 6.1.                                Non-Solicitation.  In the event that a Participant receives a
Severance Payment pursuant to this Plan, during the Participant’s employment
and for a period of two years after the Termination Date, Participant will not
(i) solicit for employment with himself or herself or any firm or entity with
which he or she is associated, any employee of the Company, its Subsidiaries or
Affiliates, or otherwise disrupt, impair, damage or interfere with the Company’s,
its Subsidiaries’ or Affiliates’ relationships with their employees or (ii)
solicit for Participant’s own behalf or on behalf of any other person(s), any
retail customer of the Company, its Subsidiaries or Affiliates, that has
purchased products or services from the Company, its Subsidiaries or
Affiliates, at any time (a) with respect to solicitation during employment,
during the Participant’s employment, or (b) with respect to solicitation after
employment, in the twelve months preceding the Participant’s Termination Date
or that the Company, its Subsidiaries or Affiliates are actively soliciting or
have known plans to solicit, for the purpose of marketing or distributing any
product, pricing or service competitive with any product, pricing or service
then offered by the Company or its Subsidiaries or Affiliates or which the
Company or its Subsidiaries or Affiliates have known plans to offer.


 


ARTICLE VII  - OTHER RIGHTS AND
BENEFITS NOT AFFECTED


 


Section 7.1.                                Other
Benefits.  Except as provided in
Section 5.7, neither the provisions of this Plan nor the Severance Payments
provided for hereunder shall reduce or increase any amounts otherwise payable,
or in any other way affect a Participant’s rights as an employee of an
Employer, whether existing now or hereafter, under any


 


11

















 


benefit, incentive, retirement, stock option, stock bonus, stock
purchase or employment agreement, plan (other than this Plan), program or arrangement
(collectively, the “Other Plans”), except to the extent specifically provided
under such Other Plans.


 


Section 7.2.                                Certain
Limitations.  This Plan does not
constitute a contract of employment or impose on any Participant, the Company
or any other Employer any obligation to retain any Participant as an employee
or in any other capacity, to change or not change the status, terms or
conditions of any Participant’s employment, or to change or not change the
Employer’s policies regarding termination of employment.


 


ARTICLE VIII  - SUCCESSORS


 


Section 8.1.                                Company’s
Successor.  Without limiting the
obligations of any person or entity under applicable law, the Company shall
require any successor or assignee, whether direct or indirect, by purchase,
merger, consolidation or otherwise, to all or substantially all the business or
assets of the Company, expressly and unconditionally to assume and agree to
perform the Company’s obligations under this Plan, in the same manner and to
the same extent that the Company would be required to perform if no such
succession or assignment had taken place. 
In such event, the term “Company,” as used in this Plan, shall mean the
Company as hereinbefore defined and any successor or assignee to the business
or assets which by reason hereof becomes bound by the terms and provisions of
this Plan.


 


Section 8.2.                                Participant’s
Successor.


 


(a)                                  This
Plan shall inure to the benefit of and be enforceable by the Participant’s
personal or legal representatives, executors, administrators, successors,
heirs, distributees and/or legatees.


 


(b)                                 The
rights under this Plan are personal in nature and neither the Company nor any
Participant shall, without the consent of the other, assign, transfer or
delegate any rights or obligations hereunder except as expressly provided in
this Article VIII.  Without limiting the
generality of the foregoing, the Participant’s right to receive a Severance
Payment hereunder shall not be assignable, transferable or delegable, whether
by pledge, creation of a security interest or otherwise, other than by a
transfer by his or her will or by the laws of descent and distribution and, in
the event of any attempted assignment or transfer contrary to this Section
8.2(b), the Company shall have no liability to pay any amount so attempted to
be assigned, transferred or delegated.


 


12

















 


ARTICLE IX  - AMENDMENT AND TERMINATION


 


Section 9.1.                                Amendment.  This Plan may be amended by the Compensation
Committee or terminated in any respect by resolution adopted by a majority of
the members of the Compensation Committee. 
However, if a Change of Control occurs, notwithstanding the foregoing,
during the Protection Period that follows such Change of Control or following
such Protection Period with respect to all Participants receiving Severance
Payments attributable to terminations of employment that occurred during the
Protection Period, no amendment or termination shall be effective unless, (a)
in the case of amendments or terminations adopted during the Protection Period,
such amendment or termination is consented to by all Participants, and (b) in
the case of amendments or terminations adopted after the Protection Period,
such amendment or termination is consented to by all Participants who are
receiving Severance Payments attributable to terminations of employment that
occurred during the Protection Period.


 


Section 9.2.                                Effect
of Amendment or Termination.  A
proper amendment of this Plan automatically shall effect a corresponding amendment
to all Participants’ rights hereunder.  A
proper termination of this Plan automatically shall effect a termination of all
Participants’ rights and benefits hereunder without further action; provided, however, no
termination shall reduce or terminate any Participant’s right to receive, or
continue to receive, any Severance Payments that became payable prior to the
date of such termination of the Plan.


 


ARTICLE X  ADMINISTRATION OF PLAN


 


Section 10.1.                         Administration.


 


(a)                                  The
Plan shall be administered by the Plan Administrator.  The Plan Administrator shall have discretion
to interpret where necessary all provisions of the Plan (including, without
limitation, by supplying omissions from, correcting deficiencies in, or
resolving inconsistencies or ambiguities in, the language of the Plan), to make
factual findings with respect to any issue arising under the Plan, to determine
the rights and status under the Plan of Participants or other persons, to
resolve questions (including factual questions) or disputes arising under the
Plan and to make any determinations with respect to the benefits payable under
the Plan and the persons entitled thereto as may be necessary for the purposes
of the Plan.  Without limiting the generality
of the foregoing, the Plan Administrator is hereby granted the authority (i) to
determine whether a particular employee is a Participant, and (ii) to determine
if a person is entitled to benefits hereunder and, if so, the amount and
duration of such benefits.  The Plan
Administrator’s determination of the rights of any person hereunder shall be
final and binding on all persons, subject only to the provisions of Section
10.3 hereof.  Notwithstanding the
foregoing, it is intended that in the event of litigation arising from a claim
for benefits under Section 5.2, a reviewing court shall review de novo the Plan
Administrator’s determinations with respect to such claim, and the Plan
Administrator’s determinations shall not be given deference.


 


13

















 


(b)                                 The
Plan Administrator may delegate any of its administrative duties, including,
without limitation, duties with respect to the processing, review,
investigation, approval and payment of benefits, to a named administrator or
administrators.


 


(c)                                  The
Plan Administrator shall not take any action that would violate any provisions
of Section 409A of the Code.  The Plan
Administrator is authorized to adopt rules or regulations deemed necessary or
appropriate in connection therewith to anticipate and/or comply with the
requirements thereof (including any transition rules thereunder).


 


Section 10.2.                         Regulations.  The Plan Administrator shall promulgate any
rules and regulations it deems necessary in order to carry out the purposes of
the Plan or to interpret the provisions of the Plan; provided, however, that no
rule, regulation or interpretation shall be contrary to the provisions of the
Plan or the 409A Guidance.  The rules,
regulations and interpretations made by the Plan Administrator shall, subject
only to the provisions of Section 10.3 hereof, be final and binding on all
persons.


 


Section 10.3.                         Claims
Procedures.


 


(a)                                  The
Plan Administrator shall determine the rights of any person to any benefit
hereunder.  Any person who believes that
he or she has not received the benefit to which he or she is entitled under the
Plan must file a claim in writing with the Plan Administrator specifying the
basis for his or her claim and the facts upon which he or she relies in making
such a claim.


 


(b)                                 The
Plan Administrator will notify the claimant of its decision regarding his or
her claim within a reasonable period of time, but not later than 90 days
following the date on which the claim is filed, unless special circumstances
require a longer period for adjudication and the claimant is notified in
writing of the reasons for an extension of time prior to the end of the initial
90-day period and the date by which the Plan Administrator expects to make the
final decision.  In no event will the
Plan Administrator be given an extension for processing the claim beyond 180
days after the date on which the claim is first filed with the Plan
Administrator.


 


If
such a claim is denied, the Plan Administrator’s notice will be in writing,
will be written in a manner calculated to be understood by the claimant and
will contain the following information:


 


(i)                                     The
specific reason(s) for the denial;


 


(ii)                                  A
specific reference to the pertinent Plan provision(s) on which the denial is
based;


 


(iii)                               A
description of additional information or material necessary for the claimant to
perfect his or her claim, if any, and an explanation of why such information or
material is necessary; and


 


14

















 


(iv)                              An
explanation of the Plan’s claim review procedure and the applicable time limits
under such procedure and a statement as to the claimant’s right to bring a
civil action under ERISA after all of the Plan’s review procedures have been
satisfied.


 


If
additional information is needed, the claimant shall be provided at least 45
days within which to provide the information and any otherwise applicable time
period for making a determination shall be suspended during the period the
information is being obtained.


 


Within
60 days after receipt of a denial of a claim, the claimant must file with the
Plan Administrator, a written request for review of such claim.  If a request for review is not filed within
such 60-day period, the claimant shall be deemed to have acquiesced in the
original decision of the Plan Administrator on his or her claim.  If a request for review is filed, the Plan
Administrator shall conduct a full and fair review of the claim.  The claimant will be provided, upon request
and free of charge, reasonable access to and copies of all documents and information
relevant to the claim for benefits.  The
claimant may submit issues and comments in writing, and the review must take
into account all information submitted by the claimant regardless of whether it
was reviewed as part of the initial determination.  The decision by the Plan Administrator with
respect to the review must be given within 60 days after receipt of the request
for review, unless circumstances warrant an extension of time not to exceed an
additional 60 days.  If this occurs,
written notice of the extension will be furnished to the claimant before the
end of the initial 60-day period, indicating the special circumstances
requiring the extension and the date by which the Plan Administrator expects to
make the final decision.  The decision shall
be written in a manner calculated to be understood by the claimant, and it
shall include


 


(A)                              The
specific reason(s) for the denial;


 


(B)                                A
reference to the specific Plan provision(s) on which the denial is based;


 


(C)                                A
statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to and copies of all information relevant to the
claimant’s claim for benefits; and


 


(D)                               A
statement describing any voluntary appeal procedures offered by the Plan and a
statement of the claimant’s right to bring a civil action under ERISA.


 


The
Plan Administrator’s decision on review shall be, to the extent permitted by
applicable law, final and binding on all interested persons.


 


ARTICLE XI  - MISCELLANEOUS


 


Section 11.1.                         Legal
Fees and Expenses.  It is the intent
of the Company that Participants not be required to incur any expenses
associated with the enforcement of rights under Section 5.2 of this Plan
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to Participants


 


15

















 


hereunder.  Accordingly, if any
Employer has failed to comply with any of its obligations under Section 5.2 of
this Plan or in the event that any Employer, or any other person takes any
action to declare Section 5.2 of this Plan void or unenforceable, or institutes
any litigation designed to deny, or to recover from, a Participant the benefits
intended to be provided to the Participant under Section 5.2 of this Plan, each
Employer irrevocably authorizes the Participant from time to time to retain
counsel of his or her choice, at the expense of the Company, as hereafter
provided, to represent the Participant in connection with the initiation or
defense of any legal action, whether by or against any Employer, in any
jurisdiction.  The Company shall pay or
cause to be paid and shall be solely responsible for any and all reasonable
attorneys’ fees and expenses incurred by the Participant in enforcing his or
her rights under Section 5.2 of this Plan individually (but not as a
representative of any class) as a result of any Employer’s failure to perform
under Section 5.2 of this Plan or as a result of any Employer or any person
contesting the validity or enforceability of Section 5.2 of this Plan.


 


Section 11.2.                         Withholding
of Taxes.  The Employer may withhold
from any amounts payable under this Plan all foreign, federal, provincial,
state, city or other taxes as shall be required pursuant to any law or
government regulation or ruling.


 


Section 11.3.                         Remedy
at Law.  The Company and each
Participant recognize that each party will have no adequate remedy at law for
breach by the other of any of the agreements contained herein and, in the event
of any such breach, the Company hereby, and each Participant by execution of a
Participation Agreement, agree and consent that the other shall be entitled to
a decree of specific performance, mandamus or other appropriate remedy to
enforce performance of this Plan.


 


Section 11.4.                         Notices.  For all purposes of this Plan, all
communications, including without limitation notices, consents, requests or
approvals provided for herein, shall be in writing and shall be deemed to have
been duly given when delivered or five business days after having been mailed
by registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company (to the attention of the Secretary of the Company), at
its principal office and to any Participant at his or her principal residence
as shown in the relevant records of the Employer, or to such other address as
any party may have furnished to the other in writing and in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.


 


Section 11.5.                         Governing
Law.  This Plan shall be
administered, construed and enforced according to the laws of the State of Ohio
to the extent they are not preempted by the ERISA.


 


Section 11.6.                         Severability.  If a provision of this Plan shall be held
illegal or invalid, the illegality or invalidity shall not affect the remaining
parts of this Plan and this Plan shall be construed and enforced as if the
illegal or invalid provision had not been included.


 


16

















 


Section 11.7.                         Headings.  The headings are intended only for
convenience in finding the subject matter and do not constitute part of the
text of this Plan and shall not be considered in the interpretation of this
Plan.


 


17

















 


Schedule
A


 


	
  Participant’s Position

  	
   

  	
  Factor

  	
   

  
	
  Chief Executive Officer
  of the Company (“CEO”)

  	
   

  	
  3x

  	
   

  
	
  Officers other than the
  CEO

  	
   

  	
  2x

  	
   

  
	
  All Other Participants

  	
   

  	
  1x

  	
   

  



 


18

















 


Schedule
B


 


Gross-Up
Payment Determination Procedures


 


(a)                                  Subject
to the provisions of Section (e) of this Schedule B, all determinations
required to be made under this Schedule B, including whether (i) pursuant to
Section 5.7(a), a Gross-Up Payment is required to be paid by the Company to the
Participant and the amount of such Gross-Up Payment or (ii) pursuant to Section
5.7(b), a reduction in the payments and benefits to be provided under this Plan
is required, shall be made by the accounting firm or law firm selected by the
Company (the “Tax Professional”). The Company
shall direct the Tax Professional to submit its determination and detailed
supporting calculations to both the Company and the Participant within thirty
calendar days after the Termination Date, if applicable, and any such other
time or times as may be requested by the Company or the Participant.  As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor provision thereto)
and the possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Tax Professional hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an “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 Section (e) of this Section and the
Participant thereafter is required to make a payment of any Excise Tax, the
Participant shall direct the Tax Professional to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Participant as promptly as
possible.  Any such Underpayment shall be
promptly paid by the Company to, or for the benefit of, the Participant within
five business days after receipt of such determination and calculations.


 


(b)                                 The
Company and the Participant shall each provide the Tax Professional access to
and copies of any books, records and documents in the possession of the Company
or the Participant, as the case may be, reasonably requested by the Tax
Professional, and otherwise cooperate with the Tax Professional in connection
with the preparation and issuance of the determinations and calculations contemplated
by Section (a) of this Schedule B.  Any
determination by the Tax Professional shall be binding upon the Company and the
Participant.


 


(c)                                  The
federal, state and local income or other tax returns filed by the Participant
shall be prepared and filed on a consistent basis with the determination of the
Tax Professional.  The Executive shall
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 his or her 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 the Participant’s


 


19

















 


federal income tax return, or corresponding state or local tax return,
if relevant, the Tax Professional determines that the amount of the Gross-Up
Payment should be reduced, the Participant shall within five business days pay
to the Company the amount of such reduction.


 


(d)                                 The
fees and expenses of the Tax Professional for its services in connection with
the determinations and calculations contemplated by Section (a) of this
Schedule B shall be borne by the Company. 
If such fees and expenses are initially paid by the Participant, the
Company shall reimburse the Participant the full amount of such fees and
expenses within ten business days after receipt from the Participant of a
statement therefor and reasonable evidence of his or her payment thereof.


 


(e)                                  The
Participant 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 a Gross-Up Payment.  Such notification shall be given as promptly
as practicable but no later than ten business days after the Participant
actually receives notice of such claim and the Participant shall further
apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid (in each case, to the extent known by the
Participant).  The Participant shall not
pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day
period following the date on which he or she gives such notice to the Company
and (ii) the date that any payment of amount with respect to such claim is
due.  If the Company notifies the
Participant in writing prior to the expiration of such period that it desires
to contest such claim, the Participant shall:


 


(i)                                     provide
the Company with any written records or documents in his or her possession
relating to such claim reasonably requested by the Company;


 


(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
competent in respect of the subject matter and reasonably selected by the
Company;


 


(iii)                               cooperate
with the Company in good faith in order to effectively 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 interest
and penalties) incurred in connection with such contest and shall indemnify and
hold harmless the Participant, on an after-tax basis, for and against any
Excise Tax or income tax, including interest and


 


20

















 


penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses.  Without limiting the foregoing provisions of
this subsection, the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this subsection and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Participant may participate therein at his or her
own cost and expense) and may, at its option, either direct the Participant to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Participant agrees 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 the Participant to pay the tax claimed and
sue for a refund, the Company shall indemnify and hold the Participant
harmless, on an after-tax basis, from any Excise Tax or income or other tax,
including interest or penalties with respect thereto, imposed with respect to
such advance; and provided further, however, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Participant with respect to which the contested amount is claimed to be due is limited
solely to such contested amount. 
Furthermore, the Company’s control of any such contested claim shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Participant 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.


 


21