Document:

EX-10(A)

 

EXHIBIT 10(a)

THE SHERWIN-WILLIAMS COMPANY 2007

EXECUTIVE PERFORMANCE BONUS PLAN

	1.	 	Purpose of the Plan. The purpose of The
Sherwin-Williams Company 2007 Executive
Performance Bonus Plan (the “Plan”) is to attract and retain key executives for The
Sherwin-Williams Company, an Ohio corporation (the “Company”) and its Subsidiaries (as
hereinafter defined) and to incent such persons for superior performance in producing
results that increase shareholder value, as well as to encourage individual and team
behavior that helps the Company achieve both short- and long-term corporate objectives.
The Plan is intended to provide performance-based compensation to certain individuals as
further described herein that is fully deductible by the Company under federal tax law and
is to be interpreted and operated accordingly.
	 
	2.	 	Definitions.

	 	a.	 	“162(m) Participant” means those eligible individuals who are
“Covered Employees” within the meaning of Section 162(m)(3) of the Code.
	 
	 	b.	 	“Award” means, with respect to each Participant, the award determined
pursuant to Section 8 below for a Plan Year. Each Award is determined by a Payout
Formula for the applicable Plan Year, subject to the Committee’s authority under
Section 8 to eliminate, reduce or adjust the Award otherwise payable.
	 
	 	c.	 	“Base Salary” means as to any Plan Year, the Participant’s actual
salary paid during the Plan Year. Such Base Salary shall be determined before both
(a) deductions for taxes or benefits, and (b) deferrals of compensation pursuant
to Company-sponsored plans.
	 
	 	d.	 	“Board” means the Board of Directors of the Company.
	 
	 	e.	 	“Code” means the Internal Revenue Code of 1986, as amended from time
to time.
	 
	 	f.	 	“Committee” means the Compensation and Management Development
Committee of the Board, or a sub-committee of that Committee, which shall, with
respect to payments hereunder intended to qualify as performance-based
compensation under Section 162(m) for 162(m) Participants, consist solely of two
or more members of the Board who are not employees of the Company and who
otherwise qualify as “outside directors” within the meaning of Section 162(m) and
Section 1.162-27(e)(3) of the Regulations.
	 
	 	g.	 	“Determination Date” means the latest possible date, but in no event
more than 90 days from the commencement of the Plan Year, that will not jeopardize
a Target Award or Award’s qualification as Performance-Based Compensation.
	 
	 	h.	 	“Individual Performance Objectives” mean the goal(s) applicable to a
Participant which are subjective and/or qualitative in nature and do not otherwise
constitute Performance Goals.
	 
	 	i.	 	“Maximum Award” means, as to any Participant for any particular Plan
Year, $4 Million and 00/100 Dollars ($4,000,000.00).

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	 	j.	 	“Participant” means an eligible executive or key employee of the
Company participating in the Plan for a particular Plan Year as determined
pursuant to Section 4.
	 
	 	k.	 	“Payout Formula” means as to any Plan Year, the objective formula or
payout matrix established by the Committee pursuant to Section 7 in order to
determine the Awards (if any) to be paid to Participants. The formula or matrix
may differ from Participant to Participant.
	 
	 	l.	 	“Performance-Based Compensation” means compensation that is intended
to qualify as “performance-based compensation” within the meaning of Section
162(m).
	 
	 	m.	 	“Performance Goals” means the goal(s) (or combined goal(s))
determined by the Committee (in its discretion) to be applicable to a Participant
with respect to an Award. As determined by the Committee, the Performance Goals
applicable to an Award shall be based upon the Performance Measurements and may be
described in terms of Company-wide objectives or objectives that are related to
the performance of the individual Participant or of a Subsidiary, division,
department or function within the Company or Subsidiary in which the Participant
is employed. Performance Goals may be stated as a combination of the Performance
Measurements and may differ from Participant to Participant and from Award to
Award. The outcome of any Performance Goal must be substantially uncertain at the
time such Performance Goal is established by the Committee. The Committee shall
appropriately adjust any evaluation of performance under a Performance Goal to
exclude: (i) any extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management’s discussion and analysis of
financial conditions and results of operations appearing in the Company’s annual
report to shareholders for the applicable Plan Year in order to comply with
Opinion No. 30; (ii) the effect of any changes in accounting standards and
principles pursuant to GAAP; or (iii) the effect of any statements issued by the
Financial Accounting Standards Board or its constituent committees.
	 
	 	n.	 	“Performance Measurements” mean the specified levels of, growth in or
relative peer company performance in, cash flow, cost of capital, debt reduction,
earnings, earnings before interest and taxes, earnings before interest, taxes,
depreciation and amortization, earnings per share, economic value added, expenses,
facilities open, free cash flow, gallon growth, interest coverage, inventory
management, net profit margin, operating cash flow, operating income, operating
profit margin, pretax earnings, proforma net income, working capital, inventory
management, net income, productivity improvement, profit after tax, reduction of
fixed costs, return on assets, return on equity, return on invested capital,
return on sales, revenues, sales, sales per employee, sales per dollar of assets,
total debt to capitalization, customer services and/or shareholder return.
	 
	 	o.	 	“Plan Year” means the Company’s fiscal year.

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	 	p.	 	“Regulations” mean the Treasury Regulations promulgated under the
Code, as amended from time to time.
	 
	 	q.	 	“Section 162(m)” means Section 162(m) of the Code, or any successor
to Section 162(m), as that Section may be interpreted from time to time by the
Internal Revenue Service, whether by regulation, notice or otherwise.
	 
	 	r.	 	“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.
	 
	 	s.	 	“Target Award” means the target award payable under the Plan to a
Participant for a Plan Year, expressed as a percentage of his or her Base Salary
or a specific dollar amount, as determined by the Committee in accordance with
Section 6.

	3.	 	Plan Administration.

	 	a.	 	The Committee shall be responsible for the general administration and
interpretation of the Plan and for carrying out its provisions.
	 
	 	b.	 	Subject to the requirements for qualifying compensation as
Performance-Based Compensation:

	 	i.	 	the Committee may delegate specific
administrative tasks to Company employees or others as appropriate for
proper administration of the Plan; and
	 
	 	ii.	 	except as the Committee may otherwise delegate
such tasks to Company employees, the Committee shall, based on
recommendations by the Chief Executive Officer:

	 	1.	 	select from the employees of the
Company, those employees who shall be Participants;
	 
	 	2.	 	make Awards in the forms and
amounts as the Committee shall determine;
	 
	 	3.	 	impose such limitations,
restrictions and conditions upon such Awards as the Committee
shall deem appropriate;
	 
	 	4.	 	interpret the Plan and adopt, amend
and rescind administrative guidelines and other rules and
regulations relating to the Plan;
	 
	 	5.	 	correct any defect or omission or
reconcile any inconsistency in the Plan or in any Award granted
hereunder; and
	 
	 	6.	 	make all other necessary
determinations and take all other actions necessary or advisable
for the implementation and administration of the Plan.

	 	c.	 	Any rule or decision by the Committee that is not inconsistent with
the provisions of the Plan shall be conclusive and binding on all persons, and
shall be given the maximum deference permitted by law.

	4.	 	Eligibility. The employees eligible to participate in the Plan for a given
Plan Year shall be executive officers and such other key employees of the Company as are
designated by the Committee; provided, however that such Committee designation shall take
into consideration recommendations made by the Chief Executive Officer. No person shall
be automatically entitled to participate in the

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	 	 	Plan. Subject to Section 9, an employee who becomes eligible after the beginning of a Plan
Year may participate in the Plan for that Plan Year.

	5.	 	Performance Goal Determination.

	 	a.	 	Subject to Section 9, the Chief Executive Officer shall recommend,
subject to the approval of the Committee, the process for measuring corporate
performance and results. Such recommendation may include, but shall not be
limited to: (i) the organizational level of performance measurement, e.g.
corporate, business unit, division, product line or another level, either singly
or in combination; (ii) specific measures of performance for each organizational
level; and (iii) specific Performance Goals for each organizational level. In
addition, except as provided in Section 9, Individual Performance Objectives may
be included as components of an Award.
	 
	 	b.	 	Such Performance Goals and, except as provided in Section 9,
Individual Performance Objectives, shall be set forth in writing prior to the
Determination Date.
	 
	 	c.	 	Once established, Performance Goals and Individual Performance
Objectives shall not be changed during the Plan Year; provided, however, except as
set forth in Section 9, if the Chief Executive Officer determines that external
changes or other unanticipated business conditions have materially affected the
fairness of the Performance Goals or Individual Performance Objectives, then
appropriate adjustments may be made to the Performance Goals and/or Individual
Performance Goals (either up or down) during the Plan Year.

	6.	 	Target Award Determination. Subject to Section 9, the Chief Executive
Officer shall recommend, subject to the approval of the Committee in its sole discretion,
each Participant’s Target Award. Once a Participant’s Target Award is established by the
Committee in this manner, the Target Award shall be set forth in writing prior to the
Determination Date.

	7.	 	Determination of Payout Formula or Formulae. On or prior to the Determination
Date, the Committee, in its sole discretion, shall establish a Payout Formula or Formulae
for purposes of determining the Award (if any) payable to each Participant. Each Payout
Formula with respect to 162(m) Participants shall (a) be set forth in writing prior to the
Determination Date, (b) be based on a comparison of actual performance to the Performance
Goals, (c) provide for the payment of a Participant’s Target Award if the Performance
Goals for the Plan Year are achieved, and (d) provide for an Award greater than or less
than the Participant’s Target Award, depending upon the extent to which actual performance
exceeds or falls below the Performance Goals. Each Payout Formula with respect to
Participants other than 162(m) Participants shall also take into consideration performance
of Individual Performance Objectives. Notwithstanding the preceding, in no event shall a
Participant’s Award for any Plan Year exceed the Maximum Award.

	8.	 	Determination of Awards; Award Payment.

	 	a.	 	Determination and Certification. At the end of each Plan
Year, Awards shall be computed for each Participant. After the end of each Plan
Year,

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	 	 	 	the Committee shall certify in writing (which may be by approval of the minutes in
which the certification was made) the extent to which the Performance Goals
applicable to each 162(m) Participant for the Plan Year were achieved or exceeded.
The Award for each 162(m) Participant shall be determined by applying the Payout
Formula to the level of actual performance that has been certified by the
Committee. Notwithstanding any contrary provision of the Plan, the Committee, in
its sole discretion, may eliminate or reduce the Award payable to any 162(m)
Participant below that which otherwise would be payable under the Payout Formula.
	 
	 	b.	 	Adjustment of Determination. Notwithstanding Section 8(a),
except as provided in Section 9, if Performance Goals are not achieved, the Chief
Executive Officer may recommend, subject to approval of the Committee, payment of
awards on a discretionary basis.
	 
	 	c.	 	Right to Receive Payment. Participants must be actively
employed by the Company on the last day of the Plan Year to receive an award for
that Plan Year; provided however, that a Participant who is not employed on the
last day of the Plan Year as a result of the Participant’s death, disability,
retirement, a reduction in force directly affecting the Participant or the
Participant’s transfer to non-included affiliate during the Plan Year, shall
nonetheless be eligible to receive an Award, which Award shall be determined
solely with respect to amounts of Base Salary earned by the Participant during the
period of the Plan Year in which he/she was a Participant. Each Award under the
Plan shall be paid solely from the general assets of the Company. Nothing in this
Plan shall be construed to create a trust or to establish or evidence any
Participant’s claim of any right to payment of an Award other than as an unsecured
general creditor with respect to any payment to which he or she may be entitled.
	 
	 	d.	 	Form of Distributions. The Company shall distribute all
Awards to the Participants in cash.
	 
	 	e.	 	Timing of Distributions. Subject to Section 8(f) below, the
Company shall distribute amounts payable to Participants as soon as is practicable
following the determination and written certification of the Award for a Plan
Year, but in no event later than two and one-half months after the end of the
applicable Plan Year.

	9.	 	Additional Restrictions with respect to Performance-Based Compensation.

	 	a.	 	The provisions of this Section 9 shall only apply to 162(m)
Participants. In the event of any inconsistencies between this Section 9 and any
other provisions of the Plan, the provisions of this Section 9 shall control.
	 
	 	b.	 	A 162(m) Participant who becomes eligible after the beginning of a
Plan Year may participate in the Plan beginning with the succeeding Plan Year,
unless such Participant becomes eligible during the first 90 days of the Plan Year
and is approved by the Committee for participation during the current Plan Year.
	 
	 	c.	 	Each individual Award shall be based on (i) the 162(m) Participant’s
Target Award and (ii) Performance Goals approved by the Committee. In

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	 	 	 	no event shall a 162(m) Participant receive an Award based upon Individual
Performance Objectives.
	 
	 	d.	 	The Committee shall determine the Payout Formula and Performance
Goals for the Plan Year in writing no later than 90 days after the beginning of
the Plan Year.
	 
	 	e.	 	Each 162(m) Participant’s Award shall be based on the Target Award as
of the first day of the Plan Year.
	 
	 	f.	 	Once established, Performance Goals shall not be changed during the
Plan Year. 162(m) Participants shall not receive any payout pursuant to this
Section 9 if Performance Goals established by the Committee are not met.
	 
	 	g.	 	Individual performance shall not be reflected in the Award. However,
the Committee retains the discretion to decrease or eliminate the amount of the
Award otherwise payable to a 162(m) Participant.
	 
	 	h.	 	Notwithstanding anything to the contrary in this Section 9, in no
event shall a Participant’s Award for any Plan Year exceed the Maximum Award.

	10.	 	Amendment and Termination of the Plan. The Committee may amend, modify,
suspend or terminate the Plan, in whole or in part, at any time, including the adoption of
amendments deemed necessary or desirable to correct any defect or to supply omitted data
or to reconcile any inconsistency in the Plan or in any Award granted hereunder; provided,
however, that no amendment, modification, suspension or termination shall be made which
would (i) impair any payments to Participants made prior to such amendment, modification,
suspension or termination, unless the Committee has made a determination that such
amendment or modification is in the best interests of all persons to whom Awards have
theretofore been granted; provided further, however, that in no event may such an
amendment or modification result in an increase in the amount of compensation payable
pursuant to such Award or (ii) with respect to 162(m) Participants, cause compensation
that is, or may become, payable hereunder to fail to qualify as Performance-Based
Compensation. To the extent necessary or advisable under applicable law, including Section
162(m), Plan amendments shall be subject to shareholder approval. At no time before the
actual distribution of funds to Participants under the Plan shall any Participant accrue
any vested interest or right whatsoever under the Plan except as otherwise stated in this
Plan.
	 
	11.	 	Withholding. Distributions pursuant to this Plan shall be subject to all
applicable federal and state tax and withholding requirements.
	 
	12.	 	At-Will Employment. No statement in this Plan should be construed to grant
any employee an employment contract of fixed duration or any other contractual rights, nor
should this Plan be interpreted as creating an implied or an expressed contract of
employment or any other contractual rights between the Company and its employees. The
employment relationship between the Company and its employees is terminable at-will. This
means that an employee or the Company may terminate the employment relationship at any
time and for any reason or no reason.
	 
	13.	 	Successors. All obligations of the Company under the Plan, with respect to
awards granted hereunder, shall be binding on any successor to the Company,

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	 	 	whether the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business or assets
of the Company.
	 
	14.	 	Nonassignment. The rights of a Participant under this Plan shall not be
assignable or transferable by the Participant except by will or the laws of intestacy.
	 
	15.	 	Governing Law. The Plan shall be governed by the laws of the State of Ohio.
	 
	16.	 	Section 162(m) of the Code. It is intended that the Plan comply with the
provisions of Section 162(m). The Plan shall be administered in a manner consistent with
this intent with respect to the 162(m) Participants. To the extent the Plan should fail
for any reason to satisfy Section 162(m), the Company reserves the right to pay any
amounts which would otherwise be payable to 162(m) Participants notwithstanding the lack
of deductibility with respect to such payments.
	 
	17.	 	Section 409A of the Code. To the extent applicable, it is intended that the
Plan comply with the provisions of Section 409A of the Code. The Plan shall be
administered in a manner consistent with this intent, and any provision that would cause
the Plan to fail to satisfy Section 409A of the Code shall have no force and effect until
amended to comply with Section 409A of the Code (which amendment may be retroactive to the
extent permitted by Section 409A of the Code and may be made by the Company without the
consent of the Participant).
	 
	18.	 	Effective Date. The Plan shall become generally effective January 1, 2007
and shall remain in effect until such time as time as the Company may decide to terminate
the Plan. Provided, however, that the provisions of the Plan intended to comply with
Section 162(m) shall only become effective upon approval by the shareholders and shall
remain effective until the first shareholders’ meeting in 2012, subject to any further
shareholder approvals (or re-approvals) mandated for Performance- Based Compensation under
Section 162(m), and further subject to the right of the Board to terminate the Plan, on a
prospective basis only, at any time.

7EX-10(B)

 

EXHIBIT
10(b)

FORM
A OF SEVERANCE AGREEMENT

THE SHERWIN-WILLIAMS COMPANY

SEVERANCE AGREEMENT

     THIS SEVERANCE AGREEMENT (this “Agreement”), dated as of                     , 20___, is made and
entered into by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio corporation (“Company”) and
                                                             (“Executive”).

RECITALS:

	 	A.	 	Executive is a senior executive of Company or one or more of its Subsidiaries
(as defined below) and has made and is expected to continue to make major contributions
to the short- and long-term profitability, growth and financial strength of Company.
	 
	 	B.	 	Company recognizes that the possibility of a Change in Control (as defined
below) exists and that such possibility, and the uncertainty it may create among
management, may result in the distraction or departure of management personnel, to the
detriment of Company and its stockholders.
	 
	 	C.	 	Company desires to assure itself of both present and future continuity of
management and desires to establish certain minimum severance benefits for certain of
its senior executives, including Executive, applicable in the event of a Change in
Control.
	 
	 	D.	 	Company wishes to ensure that its senior executives are not unduly distracted
by the circumstances attendant to the possibility of a Change in Control and to
encourage the continued attention and dedication of such executives, including
Executive, to their assigned duties with Company.
	 
	 	E.	 	Company desires to provide additional inducement for Executive to continue to
remain in the employ of Company.

     NOW, THEREFORE, Company and Executive agree as follows:

	 	1.	 	Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this Agreement
with initial capital letters:

          (a) “Base Pay” means Executive’s annual base salary rate as in effect from time to time.

          (b) “Board” means the Board of Directors of Company.

          (c) “Cause” means that, prior to any termination pursuant to Section 3(a)(iii), Executive
shall have:

          (d) been convicted of a criminal violation involving, in each case, fraud,
embezzlement or theft in connection with Executive’s duties or in the course of Executive’s
employment with Company or any Subsidiary;

          (i) committed intentional wrongful damage to property of Company or any
Subsidiary; or

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          (ii) committed intentional wrongful disclosure of secret processes or
confidential information of Company or any Subsidiary;

and any such act shall have been demonstrably and materially harmful to Company. For
purposes of this Agreement, no act or failure to act on the part of Executive will be deemed
“intentional” if it was due primarily to an error in judgment or negligence, but will be
deemed “intentional” only if done or omitted to be done by Executive not in good faith and
without reasonable belief that Executive’s action or omission was in the best interest of
Company. Notwithstanding the foregoing, Executive will not be deemed to have been
terminated for “Cause” hereunder unless and until there shall have been delivered to
Executive a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the Board then in office (excluding Executive if Executive is then a member of
the Board) at a meeting of the Board called and held for such purpose, after reasonable
notice to Executive and an opportunity for Executive, together with Executive’s counsel (if
Executive chooses to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, Executive had committed an act
constituting “Cause” as herein defined and specifying the particulars thereof in reasonable
detail. Nothing herein will limit the right of Executive or Executive’s beneficiaries to
contest the validity or propriety of any such determination.

          (e) “Change in Control” means the occurrence during the Term of any of the following events:

          (i) any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a “Person”) is or becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined
voting power of the then-outstanding Voting Stock of Company; provided,
however, that:

          (1) for purposes of this Section 1(d)(i), the following acquisitions will
not constitute a Change in Control: (A) any acquisition of Voting Stock directly from
Company that is approved by a majority of the Incumbent Directors, (B) any
acquisition of Voting Stock by Company or any Subsidiary, (C) any acquisition of
Voting Stock by the trustee or other fiduciary holding securities under any employee
benefit plan (or related trust) sponsored or maintained by Company or any Subsidiary,
and (D) any acquisition of Voting Stock by any Person pursuant to a Business
Transaction that complies with clauses (A), (B) and (C) of Section 1(d)(iii) below;

          (2) if any Person is or becomes the beneficial owner of 20% or more of
combined voting power of the then-outstanding Voting Stock as a result of a
transaction described in clause (A) of Section 1(d)(i)(1) above and such Person
thereafter becomes the beneficial owner of any additional shares of Voting Stock
representing 1% or more of the then-outstanding Voting Stock, other than in an
acquisition directly from Company that is approved by a majority of the Incumbent
Directors or other than as a result of a stock dividend, stock split or similar
transaction effected by Company in which all holders of Voting Stock are treated
equally, such subsequent acquisition shall be treated as a Change in Control;

          (3) a Change in Control will not be deemed to have occurred if a Person is or
becomes the beneficial owner of 20% or more of the Voting Stock as a result of a
reduction in the number of shares of Voting Stock outstanding pursuant to a
transaction or series of transactions that is approved by a majority of the Incumbent
Directors unless and until such Person thereafter becomes the beneficial owner of any
additional shares of Voting

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Stock representing 1% or more of the then-outstanding Voting Stock, other than
as a result of a stock dividend, stock split or similar transaction effected by
Company in which all holders of Voting Stock are treated equally; and

          (4) if at least a majority of the Incumbent Directors determine in good faith
that a Person has acquired beneficial ownership of 20% or more of the Voting Stock
inadvertently, and such Person divests as promptly as practicable but no later than
the date, if any, set by the Incumbent Board a sufficient number of shares so that
such Person beneficially owns less than 20% of the Voting Stock, then no Change in
Control shall have occurred as a result of such Person’s acquisition; or

          (ii) a majority of the Board ceases to be comprised of Incumbent Directors;
or

          (iii) the consummation of a reorganization, merger or consolidation, or sale
or other disposition of all or substantially all of the assets of Company or the acquisition
of the stock or assets of another corporation, or other transaction (each, a “Business
Transaction”), unless, in each case, immediately following such Business Transaction (A) the
Voting Stock outstanding immediately prior to such Business Transaction continues to
represent (either by remaining outstanding or by being converted into voting stock of the
surviving entity or any parent thereof), more than 50% of the combined voting power of the
then outstanding shares of voting stock of the entity resulting from such Business
Transaction (including, without limitation, an entity which as a result of such transaction
owns Company or all or substantially all of Company’s assets either directly or through one
or more subsidiaries), (B) no Person (other than Company, such entity resulting from such
Business Transaction, or any employee benefit plan (or related trust) sponsored or
maintained by Company, any Subsidiary or such entity resulting from such Business
Transaction) beneficially owns, directly or indirectly, 20% or more of the combined voting
power of the then outstanding shares of voting stock of the entity resulting from such
Business Transaction, and (C) at least a majority of the members of the board of directors
of the entity resulting from such Business Transaction were Incumbent Directors at the time
of the execution of the initial agreement or of the action of the Board providing for such
Business Transaction; or

          (iv) approval by the shareholders of Company of a complete liquidation or
dissolution of Company, except pursuant to a Business Transaction that complies with clauses
(A), (B) and (C) of Section 1(d)(iii).

          (v) For purposes of this Section 1(d), the term “Incumbent Directors” shall
mean, during any period of two consecutive years, individuals who at the beginning of such
period constituted the Board and any new director (other than a director initially elected
or nominated as a director as a result of an actual or threatened election contest with
respect to directors or any other actual or threatened solicitation of proxies by or on
behalf of such director) whose election by the Board or nomination for election by the
Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved.

          (f) “Code” means the Internal Revenue Code of 1986, as amended.

          (g) “Common Shares” means shares of common stock, no par value, of Company.

          (h) “Employee Benefits” means the perquisites, benefits and service credit for benefits as
provided under any and all employee retirement income and welfare benefit policies, plans, programs
or arrangements in which Executive is entitled to participate, including without limitation any
stock option, performance share, performance unit, stock purchase, stock appreciation, savings,
pension, supplemental

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executive retirement, or other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by Company or a Subsidiary), disability, salary
continuation, expense reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans, programs or
arrangements that may be adopted hereafter by Company or a Subsidiary, providing benefits and
service credit for benefits at least as great in the aggregate as are payable thereunder
immediately prior to a Change in Control.

          (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (j) “Good Reason” means the occurrence of one or more of the following events:

          (i) Failure to elect or reelect or otherwise to maintain Executive in the office
or the position, or a substantially equivalent or better office or position, of or with
Company and/or a Subsidiary (or any successor thereto by operation of law or otherwise), as
the case may be, which Executive held immediately prior to a Change in Control, or the
removal of Executive as a Director of Company and/or a Subsidiary (or any successor thereto)
if Executive shall have been a Director of Company and/or a Subsidiary immediately prior to
the Change in Control;

          (ii) Failure of Company to remedy any of the following within 10 calendar
days after receipt by Company of written notice thereof from Executive: (A) a significant
adverse change in the nature or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with Company and any Subsidiary which
Executive held immediately prior to the Change in Control, (B) a reduction in Executive’s
Base Pay received from Company and any Subsidiary, (C) a reduction in Executive’s Incentive
Pay opportunity as compared with the Incentive Pay opportunity most recently paid prior to
the Change in Control, or (D) the termination or denial of Executive’s rights to Employee
Benefits or a reduction in the scope or value thereof;

          (iii) The liquidation, dissolution, merger, consolidation or reorganization
of Company or the transfer of all or substantially all of its business and/or assets, unless
the successor or successors (by liquidation, merger, consolidation, reorganization, transfer
or otherwise) to which all or substantially all of its business and/or assets have been
transferred (by operation of law or otherwise) assumed all duties and obligations of Company
under this Agreement pursuant to Section 11(a);

          (iv) Company requires Executive to have Executive’s principal location of
work changed to any location that is in excess of 30 miles from the location thereof
immediately prior to the Change in Control, or requires Executive to travel away from
Executive’s office in the course of discharging Executive’s responsibilities or duties
hereunder at least 20% more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to any prior year) than was
required of Executive in any of the three full years immediately prior to the Change in
Control without, in either case, Executive’s prior written consent; or

          (v) Without limiting the generality or effect of the foregoing, any material
breach of this Agreement by Company or any successor thereto.

          (k) “Incentive Pay” means an annual bonus, incentive or other payment of compensation, in
addition to Base Pay, made or to be made in regard to services rendered in any year pursuant to any
bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy,
plan, program or arrangement (whether or not funded) of Company or a Subsidiary, or any successor
thereto. “Incentive Pay” does not include any stock option, stock appreciation, stock purchase,
restricted stock, private equity, long-

4

 

term incentive or similar plan, program, arrangement or grant, whether or not provided under a
plan, program or arrangement described in the preceding sentence.

          (l) “Severance Period” means the period of time commencing on the date of the first occurrence
of a Change in Control and continuing until the earlier of (i) the second anniversary of the
occurrence of the Change in Control, or (ii) Executive’s death;

          (m) “Subsidiary” means an entity in which Company directly or indirectly beneficially owns 50%
or more of the outstanding voting stock of such entity.

          (n) “Term” means the period commencing as of the date hereof and expiring on the close of
business on December 31, 2008; provided, however, that (i) commencing on January 1,
2008 and each January 1 thereafter, the term of this Agreement will automatically be extended for
an additional year unless, not later than September 30 of the immediately preceding year, Company
or Executive shall have given notice that Company or Executive, as the case may be, does not wish
to have the Term extended; (ii) if a Change in Control occurs during the Term, the Term will expire
on the last day of the Severance Period; and (iii) subject to Section 3(c), if, prior to a Change
in Control, the Executive ceases for any reason to be a corporate officer or operating president of
Company and any Subsidiary, thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no further effect; provided
however, that this Section 1(m)(iii) shall not apply to terminate the Agreement with respect to any
Executive who had a Severance Pay Agreement or Amended and Restated Severance Pay Agreement between
Company and Executive in effect on February 20, 2007 and who entered into this Agreement effective
February 21, 2007. For purposes of this Section 1(m), the Executive shall not be deemed to have
ceased to be an employee of Company and any Subsidiary by reason of the transfer of the Executive’s
employment between Company and any Subsidiary, or among any Subsidiaries.

          (o) “Termination Date” means the date on which Executive’s employment is terminated (the
effective date of which will be the date of termination, or such other date that may be specified
by Executive if the termination is pursuant to Section 3(b)).

          (p) “Voting Stock” means at any time, the then-outstanding securities entitled to vote
generally in the election of directors of Company.

     2. Operation of Agreement. This Agreement will be effective and binding immediately
upon its execution, but, anything in this Agreement to the contrary notwithstanding, except as
provided in Section 3(c), this Agreement will not be operative unless and until a Change in Control
occurs. Upon the occurrence of a Change in Control at any time during the Term, without further
action, this Agreement will become immediately operative.

     3. Termination Following a Change in Control.

          (a) In the event of the occurrence of a Change in Control, Executive’s employment may be
terminated by Company or a Subsidiary during the Severance Period (or pursuant to Section 3(c)) and
Executive will be entitled to the benefits provided by Section 4 unless such termination is the
result of the occurrence of one or more of the following events:

          (i) Executive’s death;

          (ii) If Executive becomes permanently disabled within the meaning of, and
begins actually to receive disability benefits pursuant to, the long-term disability plan in
effect for, or applicable to, Executive immediately prior to the Change in Control; or

5

 

          (iii) Cause.

If, during the Severance Period, Executive’s employment is terminated by Company or any
Subsidiary other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), Executive will be
entitled to the benefits provided by Section 4.

          (b) In the event of the occurrence of a Change in Control, Executive may terminate employment
with Company and any Subsidiary during the Severance Period for Good Reason with the right to
severance compensation as provided in Section 4 regardless of whether any other reason, other than
Cause, for such termination exists or has occurred, including without limitation other employment.

          (c) Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs
and not more than 90 days prior to the date on which the Change in Control occurs, Executive’s
employment with Company is terminated by Company, such termination of employment will be deemed to
be a termination of employment after a Change in Control for purposes of this Agreement if
Executive has reasonably demonstrated that such termination of employment (i) was at the request of
a third party who has taken steps reasonably calculated to effect a Change in Control, or (ii)
otherwise arose in connection with or in anticipation of a Change in Control.

          (d) A termination of employment pursuant to Section 3(a), 3(b) or 3(c) will not affect any
rights that Executive may have pursuant to any agreement, policy, plan, program or arrangement of
Company or Subsidiary providing Employee Benefits, which rights will be governed by the terms
thereof, except for any rights to severance compensation to which Executive may be entitled upon
termination of employment pursuant to any employment or severance agreement or employee plan
(“Other Arrangements”), which rights will be deemed to have been satisfied to the extent and only
to the extent comparable benefits are provided under this Agreement. This Section 3(d) is intended
to avoid duplication of payments and benefits under this Agreement and under the Other Arrangements
and this Section should be interpreted as being intended to insure that, in circumstances in which
Executive is entitled to severance and other benefits under Section 4 of this Agreement and under
the Other Arrangements, the total severance amounts and value of benefits received by Executive
will be equal to the amounts and benefits provided under the agreement or arrangement that provides
for the greatest amounts and benefits, but Executive shall not be entitled to duplication of such
amounts and benefits.

     4. Severance Compensation.

          (a) If, following the occurrence of a Change in Control, Company or Subsidiary terminates
Executive’s employment during the Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii)
or 3(a)(iii), or if Executive terminates Executive’s employment pursuant to Section 3(b), Company
will be obligated to make the following payments and provide the following benefits to Executive.

          (i) Within ten business days after the occurrence of an event described in
Section 4(a) above, Company shall pay, in a lump sum, an amount equal
to three (3) times the sum of (A) Base Pay (at the highest rate in effect for any period within
three years prior to the Termination Date), plus (B) an amount equal to the greater of: (x)
the average of the Incentive Pay earned or received by Executive during the three year
period immediately preceding the Termination Date, or (y) the Executive’s target Incentive
Pay for the year in which the Termination Date occurs (assuming the Executive achieves 100%
of any stated goals); provided, however, that if payment to Executive would
constitute a “deferral of compensation” under Section 409A of the Code, Executive (or
Executive’s beneficiary) will receive payment of the amounts described in this Section
4(a)(i) upon the earlier of (i) six (6) months following Executive’s “separation from
service” with Company (as such phrase is defined in Section 409A of the Code) or (ii)
Executive’s death.

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          (ii) For a period of eighteen (18) months following the Termination Date (the
“Continuation Period”), Company shall arrange to provide Executive, at no cost to Executive,
with medical and dental benefits substantially similar to those that Executive was receiving
or entitled to receive immediately prior to the Termination Date (or, if greater,
immediately prior to the reduction, termination, or denial described in Section 1(i)(ii)).
The Continuation Period shall be considered to be the period during which Executive shall be
eligible for continuation coverage under Section 4980B of the Code, and Company shall
reimburse Executive for the amount of the premiums for such continuation coverage;
provided, however that without otherwise limiting the purposes or effect of
Section 6, the benefits otherwise receivable by Executive pursuant to this Section 4(a)(ii)
will be reduced to the extent comparable welfare benefits are actually received by Executive
from another employer during the Continuation Period following Executive’s Termination Date,
and any such benefits actually received by Executive shall be reported by Executive to
Company. If any benefit described in this Section 4(a)(ii) is subject to tax, Company will
pay to Executive an additional amount such that after payment by Executive or Executive’s
dependents or beneficiaries, as the case may be, of all taxes so imposed, the recipient
retains an amount equal to such taxes. Notwithstanding the foregoing, if Company determines
that the provision of benefits under this Section 4(a)(ii) is likely to result in negative
tax consequences to Executive, Company will use its reasonable best efforts to make other
arrangements to provide a substantially similar benefit to Executive that does not have such
negative tax consequences, which may include, making a lump sum payment at the earliest time
permitted under Section 409A of the Code, in an amount equal to Company’s reasonable
determination of the present value of any such benefits that, if provided, would result in
negative tax consequences to Executive and/or providing such benefit through insurance
coverage on Executive’s behalf.

          (iii) Executive shall be entitled to outplacement services by a firm selected
by Executive, at the expense of Company in an amount not to exceed ten percent (10%) of Base
Pay; provided, however, that all such outplacement services must be
completed, and all payments by Company must be made, by December 31 of the second calendar
year following the calendar year in which the Termination Date occurs.

          (b) Without limiting the rights of Executive at law or in equity, if Company fails to make any
payment or provide any benefit required to be made or provided hereunder on a timely basis, Company
will pay interest on the amount or value thereof at an annualized rate of interest equal to the
“prime rate” as set forth from time to time during the relevant period in The Wall Street
Journal “Money Rates” column. Such interest will be payable as it accrues on demand. Any
change in such prime rate will be effective on and as of the date of such change.

          (b) Unless otherwise expressly provided by the applicable plan, program or agreement, after
the occurrence of a Change in Control, Company will pay in cash to Executive a lump sum amount
equal to the sum of (i) any unpaid Incentive Pay that would have been earned, accrued, allocated or
awarded to Executive for any performance period ending prior to the Change in Control (regardless
of whether (x) payment of such compensation is contingent on the continuing performance of services
by Executive or (y) the bonus, incentive, profit-sharing, performance, discretionary pay or similar
agreement, policy, plan, program or arrangement pursuant to which such Incentive Pay would
otherwise be payable permits pro-ration), plus (ii) the value of any annual bonus or long-term
Incentive Pay (including, without limitation, incentive-based annual cash bonuses and performance
units, but not including any equity-based compensation or compensation provided under a qualified
plan) payable pursuant to any performance period that is outstanding on the date of the Change in
Control. Such payment will be made at the earlier of (x) the date prescribed for payment pursuant
to the applicable plan, program or agreement, and (y) within five business days after the Change in
Control. In the case of clauses (i) and (ii), any applicable vesting requirements will be
disregarded. In the case of clause (ii), the amount will be calculated at the greater of (1) the
plan target or payout rate and (2) the amount determined based on Company’s actual results relative
to

7

 

the applicable performance criteria as if the performance period had ended on the date of the
Change in Control, which amount will be prorated on the basis of the number of days of Executive’s
participation during the applicable performance period to which the incentive pay related divided
by the aggregate number of days in such performance period, taking into account service rendered
through the payment date.

     5. Certain Additional Payments by the Company.

          (a) Anything in this Agreement to the contrary notwithstanding, but subject to Paragraph 7 of
Annex A, in the event that this Agreement becomes operative and it is determined (as hereafter
provided) that any payment (other than the Gross-Up payments provided for in this Section 5 and
Annex A) or distribution by Company or any of its affiliates to or for the benefit of Executive,
whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option, performance share, performance unit, stock
appreciation right or similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being
considered “contingent on a change in ownership or control” of Company, within the meaning of
Section 280G 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 Executive will be entitled to receive an additional payment or payments
(collectively, a “Gross-Up Payment”); provided, however, that no Gross-up Payment will be made with
respect to the Excise Tax, if any, attributable to (i) any incentive stock option, as defined by
Section 422 of the Code (“ISO”) granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with any ISO described in
clause (i). The Gross-Up Payment will be in an amount such that, after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes), including any
Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment. For purposes of determining the amount of the
Gross-Up Payment, Executive will 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, (y) federal employment taxes; and
and (z) 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) The obligations set forth in Section 5(a) will be subject to the procedural provisions
described in Annex A.

     6. No Mitigation Obligation. Company hereby acknowledges that it will be difficult
and may be impossible for Executive to find reasonably comparable employment following Termination
Date. Accordingly, the payment of the severance compensation by Company to Executive in accordance
with the terms of this Agreement is hereby acknowledged by Company to be reasonable, and Executive
will not be required to mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor will any profits, income, earnings or other benefits
from any source whatsoever create any mitigation, offset, reduction or any other obligation on the
part of Executive hereunder or otherwise.

     7. Legal Fees and Expenses.

          (a) It is the intent of Company that Executive not be required to incur legal fees and the
related expenses associated with the interpretation, enforcement or defense of Executive’s rights
in connection with any dispute arising under this Agreement because the cost and expense thereof
would substantially detract from the benefits intended to be extended to Executive hereunder.
Accordingly, if it should appear to Executive that Company has failed to comply with any of its
obligations under this

8

 

Agreement or in the event that Company or any other person takes or threatens to take any
action to declare this Agreement void or unenforceable, or institutes any proceeding designed to
deny, or to recover from, Executive the benefits provided or intended to be provided to Executive
hereunder, Company irrevocably authorizes Executive from time to time to retain counsel of
Executive’s choice, at the expense of Company as hereafter provided, to advise and represent
Executive in connection with any such dispute or proceeding. Notwithstanding any existing or prior
attorney-client relationship between Company and such counsel, Company irrevocably consents to
Executive’s entering into an attorney-client relationship with such counsel, and in that connection
Company and Executive agree that a confidential relationship will exist between Executive and such
counsel. Without respect to whether Executive prevails, in whole or in part, in connection with
any of the foregoing, Company will pay and be solely financially responsible for any and all
attorneys’ and related fees and expenses incurred by Executive in connection with any of the
foregoing. Such payments will be made within five business days after delivery of Executive’s
written requests for payment, accompanied by such evidence of fees and expenses incurred as Company
may reasonably require.

          (b) In order to secure the benefits to be received by Executive pursuant to this Agreement and
similar arrangements with other executives, Company shall establish one or more trust funds (the
“Trust”). Company will deposit in such Trust, within five (5) business days after the occurrence
of an event that in the reasonable opinion of the Board will likely result in a Change in Control,
an amount equal to approximately the maximum aggregate benefits that could be payable to Executive
under the terms of this Agreement. Any funds which may be placed into the Trust under this
Agreement shall continue for all purposes to be a part of the general funds of Company subject to
the claims of Company’s creditors in the event of Company’s insolvency and no person shall by
virtue of this Agreement have any interest in such funds. To the extent that any person acquires a
right to receive payments from Company under this Agreement, such rights shall be no greater than
the right of any unsecured general creditor of Company. Executive shall be entitled to receive
distributions from the funds held in the Trust pursuant to the terms and conditions of this
Agreement and the agreement establishing the Trust between Company and the trustee. If prior to
the date of a Change in Control, the Board has actual knowledge that all third parties have
abandoned or terminated their efforts to effect a Change in Control and a Change in Control at that
time is unlikely and the Board so advises Executive, the trust funds and interest earned thereon,
if any, shall be returned to Company by the trustee. Notwithstanding the provisions of this
Section 6(b), failure by Company to place such funds in Trust in no way relieves Company from its
financial obligations and responsibilities to Executive under the terms of this Agreement.

          (c) All benefits to be paid pursuant to this Agreement, including any amounts paid pursuant to
Section 6(a) which were not paid through the Trust established pursuant to Section 6(b), shall be
paid from the general assets of the Company.

     8. Employment Rights. Nothing expressed or implied in this Agreement will create any
right or duty on the part of Company or Executive to have Executive remain in the employment of
Company or any Subsidiary prior to or following any Change in Control.

     9. Withholding of Taxes. Company may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as Company is required to withhold pursuant to
any applicable law, regulation or ruling.

     10. Successors and Binding Agreement.

          (a) Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the business or assets
of Company, by agreement in form and substance reasonably satisfactory to Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same extent Company would
be required to perform if no such succession had taken place. This Agreement will be binding upon
and inure to the benefit

9

 

of Company and any successor to Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of Company whether by
purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be
deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable,
transferable or delegable by Company.

          (b) This Agreement will inure to the benefit of and be enforceable by Executive’s personal or
legal representatives, executors, administrators, successors, heirs, distributees and legatees.

          (c) This Agreement is personal in nature and neither of the parties hereto will, without the
consent of the other, assign, transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 10(a) and 10(b). Without limiting the
generality or effect of the foregoing, Executive’s right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security interest, or
otherwise, other than by a transfer by Executive’s will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer contrary to this Section 10(c), Company
will have no liability to pay any amount so attempted to be assigned, transferred or delegated.

     11. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder will be in writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as FedEx or UPS, addressed to Company (to the attention
of the Secretary of Company) at its principal executive office and to Executive at Executive’s
principal residence, or to such other address as any party may have furnished to the other in
writing and in accordance herewith, except that notices of changes of address will be effective
only upon receipt.

     12. Governing Law. The validity, interpretation, construction and performance of this
Agreement will be governed by and construed in accordance with the substantive laws of the State of
Ohio and federal law, without giving effect to the principles of conflict of laws of such State,
except as expressly provided herein.

     13. Validity. If any provision of this Agreement or the application of any provision
hereof to any person or circumstance is held invalid or otherwise unenforceable, the remainder of
this Agreement and the application of such provision to any other person or circumstance will not
be affected, and the provision so held to be invalid or otherwise unenforceable will be reformed to
the extent (and only to the extent) necessary to make it enforceable or valid.

     14. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by
Executive and 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 will 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,
expressed or implied with respect to the subject matter hereof have been made by either party that
are not set forth expressly in this Agreement. The headings used in this Agreement are intended
for convenience or reference only and will not in any manner amplify, limit, modify or otherwise be
used in the construction or interpretation of any provision of this Agreement. References to
Sections are to Sections of this Agreement. Any reference in this Agreement to a provision of a
statute, rule or regulation will also include any successor provision thereto.

10

 

     15. Effect on Prior Agreements. This Agreement shall expressly supersede and render
null, void and invalid any prior severance pay agreement or agreements of a similar nature
previously entered into by and between Company and Executive with respect to the subject matter of
this Agreement, including but not limited to any Amended and Restated Severance Pay Agreement,
effective as of April 23, 1997 or Severance Pay Agreement effective as of a subsequent date but
prior to the effective date of this Agreement, between Company and Executive.

     16. Dispute Resolution. Any dispute between the parties under this Agreement will be
resolved (except as provided below) through informal arbitration by an arbitrator selected under
the rules of the American Arbitration Association for arbitration of employment disputes (located
in the city in which Company’s principal executive offices in the United States are based) and the
arbitration will be conducted in that location under the rules of said Association. Each party
will be entitled to present evidence and argument to the arbitrator. The arbitrator will have the
right only to interpret and apply the provisions of this Agreement and may not change any of its
provisions, except as expressly provided in Section 13. The arbitrator will permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a claim or a defense to a
claim, subject to supervision by the arbitrator. The determination of the arbitrator will be
conclusive and binding upon the parties and judgment upon the same may be entered in any court
having jurisdiction thereof. The arbitrator will give written notice to the parties stating the
arbitrator’s determination, and will furnish to each party a signed copy of such determination.
The expenses of arbitration will be borne equally by Company and Executive or as the arbitrator
equitably determines consistent with the application of state or federal law; provided, however,
that Executive’s share of such expenses will not exceed the maximum permitted by law. Any
arbitration or action pursuant to this Section 16 will be governed by and construed in accordance
with the substantive laws of the State of Ohio and, where applicable, federal law, without giving
effect to the principles of conflict of laws of such State.

     17. Survival. Notwithstanding any provision of this Agreement to the contrary, the
parties’ respective rights and obligations under Sections 3(d), 4, 5, 7, 9, 10(b), 16 and 18 will
survive any termination or expiration of this Agreement or the termination of Executive’s
employment following a Change in Control for any reason whatsoever.

     18. Beneficiaries. Executive will be entitled to select (and change, to the extent
permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following Executive’s death, and may change such election, in either case
by giving Company written notice thereof in accordance with Section 11. In the event of
Executive’s death or a judicial determination of Executive’s incompetence, reference in this
Agreement to “Executive” will be deemed, where appropriate, to Executive’s beneficiary, estate or
other legal representative.

     19. Counterparts. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original but all of which together will constitute one and the same
agreement.

     20. Section 409A of the Code. To the extent applicable, it is intended that this
Agreement comply with the provisions of Section 409A of the Code. This Agreement shall be
administered in a manner consistent with this intent, and any provision that would cause the
Agreement to fail to satisfy Section 409A of the Code shall have no force and effect until amended
to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted
by Section 409A of the Code and may be made by Company without the consent of Executive).

11

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.

	 	 	 	 	 
	 	THE SHERWIN-WILLIAMS COMPANY 

 	 
	 	By:  	 	 
	 	 	[Name and Title] 	 
	 
	 
	 	 	[Executive]

 	 
	 	 	 
	 	 	 
	 	 	 

12

 

	 	 	 	 	 

Annex A

EXCISE TAX GROSS-UP PROCEDURAL PROVISIONS

     (1) Subject to the provisions of Paragraph 5, all determinations required to be made under
Section 5 and Annex A, including whether an Excise Tax is payable by Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid by Company to Executive and
the amount of such Gross-Up Payment, if any, will be made by a nationally recognized accounting
firm or benefits consulting firm (the “National Firm”) selected by the Executive in Executive’s
sole discretion. Executive will direct the National Firm to submit its determination and detailed
supporting calculations to both Company and Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be requested by Company or Executive.
If the National Firm determines that any Excise Tax is payable by Executive, Company will pay the
required Gross-Up Payment to Executive within 5 business days after receipt of such determination
and calculations with respect to any Payment to Executive. If the National Firm determines that no
Excise Tax is payable by Executive with respect to any material benefit or amount (or portion
thereof), it will, at the same time as it makes such determination, furnish Company and Executive
with an opinion that Executive has substantial authority not to report any Excise Tax on
Executive’s federal, state or local income or other tax return with respect to such benefit or
amount. As a result of the uncertainty in 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 any
determination by the National Firm hereunder, it is possible that Gross-Up Payments that will not
have been made by Company should have been made (an “Underpayment”), consistent with the
calculations required to be made hereunder. In the event that Company exhausts or fails to pursue
its remedies pursuant to Paragraph 5 and Executive thereafter is required to make a payment of any
Excise Tax, Executive will direct the National Firm to determine the amount of the Underpayment
that has occurred and to submit its determination and detailed supporting calculations to both
Company and Executive as promptly as possible. Any such Underpayment will be promptly paid by
Company to, or for the benefit of, Executive within 5 business days after receipt of such
determination and calculations.

     (2) Company and Executive will each provide the National Firm access to and copies of any
books, records and documents in the possession of Company or Executive, as the case may be,
reasonably requested by the National Firm, and otherwise cooperate with the National Firm in
connection with the preparation and issuance of the determinations and calculations contemplated by
Paragraph 1. Any determination by the National Firm as to the amount of the Gross-Up Payment will
be binding upon Company and Executive.

     (3) The federal, state and local income or other tax returns filed by Executive will be
prepared and filed on a consistent basis with the determination of the National Firm with respect
to the Excise Tax payable by Executive. Executive will report and make proper payment of the
amount of any Excise Tax, and at the request of Company, provide to Company true and correct copies
(with any amendments) of Executive’s 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 Company, evidencing such
payment. If prior to the filing of Executive’s federal income tax return, or corresponding state
or local tax return, if relevant, the National Firm determines that the amount of the Gross-Up
Payment should be reduced, Executive will within 5 business days pay to Company the amount of such
reduction.

     (4) The fees and expenses of the National Firm for its services in connection with the
determinations and calculations contemplated by Paragraph 1 will be borne by Company. If such fees
and expenses are initially paid by Executive, Company will reimburse Executive the full amount of
such fees and expenses within 5 business days after receipt from Executive of a statement therefor
and reasonable evidence of Executive’s payment thereof.

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     (5) Executive will notify Company in writing of any claim by the Internal Revenue Service or
any other taxing authority that, if successful, would require the payment by Company of a Gross-Up
Payment. Such notification will be given as promptly as practicable but no later than 10 business
days after Executive actually receives notice of such claim and Executive will further apprise
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 Executive). Executive will not pay such claim prior to the
expiration of the 30-calendar-day period following the date on which Executive gives such notice to
Company or, if earlier, the date that any payment of amount with respect to such claim is due. If
Company notifies Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive will:

     (A) provide Company with any written records or documents in Executive’s possession
relating to such claim reasonably requested by Company;

     (B) take such action in connection with contesting such claim as Company reasonably
requests 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 Company;

     (C) cooperate with Company in good faith in order effectively to contest such claim;
and

     (D) permit Company to participate in any proceedings relating to such claim;

provided, however, that Company will bear and pay directly all costs and expenses
(including interest and penalties) incurred in connection with such contest and will indemnify and
hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income or other
tax, including interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing provisions of
this Paragraph 5, Company will control all proceedings taken in connection with the contest of any
claim contemplated by this Paragraph 5 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 Executive may participate therein at Executive’s own cost
and expense) and may, at its option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive 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 Company determines; provided, however, that
if Company directs Executive to pay the tax claimed and sue for a refund, Company will, as
permitted by applicable law, advance the amount of such payment to Executive on an interest-free
basis and will indemnify and hold Executive 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 Executive with respect
to which the contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, Company’s control of any such contested claim will be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and Executive will 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.

     (6) If, after the receipt by Executive of an amount advanced by Company pursuant to Paragraph
5, Executive receives any refund with respect to such claim, Executive will (subject to Company’s
complying with the requirements of Paragraph 5) promptly pay to Company the amount of such refund
(together with any interest paid or credited thereon after any taxes applicable thereto). If,
after the receipt by Executive of an amount advanced by Company pursuant to Paragraph 5, a
determination is made that Executive is not entitled to any refund with respect to such claim and
Company does not notify Executive in writing of its intent to contest such denial or refund prior
to the expiration of 30 calendar days after such determination, then such advance will be forgiven
and will not be required to be repaid and the amount of

14

 

any such advance will offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid by Company to Executive pursuant to Section 5 and this Annex C.

     (7) 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 Annex A, if (A) but
for this sentence, Company would be obligated to make a Gross-Up Payment to Executive and (B) the
aggregate “present value” of the “parachute payments” to be paid or provided to Executive under
this Agreement or otherwise does not exceed 1.15 multiplied by three times Executive’s “base
amount,” , then the payments and benefits to be paid or provided under this Agreement will be
reduced (or repaid to Company, if previously paid or provided) to the minimum extent necessary so
that no portion of any payment or benefit to Executive, as so reduced or repaid, constitutes an
“excess parachute payment.” For purposes of this Paragraph 7, the terms “excess parachute
payment,” “present value,” “parachute payment,” and “base amount” will 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
Paragraph 7 will be made at the expense of Company, if requested by Executive or Company, by the
National Firm. Appropriate adjustments will be made to amounts previously paid to Executive, or to
amounts not paid pursuant to this Paragraph 7, as the case may be, to reflect properly a subsequent
determination that Executive owes 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 Paragraph 7, Executive will be
entitled to designate the payments and/or benefits to be so reduced or repaid in order to give
effect to this Paragraph 7. Company will provide Executive with all information reasonably
requested by Executive to permit Executive to make such designation. In the event that Executive
fails to make such designation within 10 business days prior to the Termination Date or other due
date, Company may effect such reduction or repayment in any manner it deems appropriate.

15

 

FORM B OF SEVERANCE AGREEMENT

THE SHERWIN-WILLIAMS COMPANY

SEVERANCE AGREEMENT

     THIS SEVERANCE AGREEMENT (this “Agreement”), dated as of                     , 20___, is made and
entered into by and between THE SHERWIN-WILLIAMS COMPANY, an Ohio corporation (“Company”) and
                                                             (“Executive”).

RECITALS:

	 	A.	 	Executive is a senior executive of Company or one or more of its Subsidiaries
(as defined below) and has made and is expected to continue to make major contributions
to the short- and long-term profitability, growth and financial strength of Company.
	 
	 	B.	 	Company recognizes that the possibility of a Change in Control (as defined
below) exists and that such possibility, and the uncertainty it may create among
management, may result in the distraction or departure of management personnel, to the
detriment of Company and its stockholders.
	 
	 	C.	 	Company desires to assure itself of both present and future continuity of
management and desires to establish certain minimum severance benefits for certain of
its senior executives, including Executive, applicable in the event of a Change in
Control.
	 
	 	D.	 	Company wishes to ensure that its senior executives are not unduly distracted
by the circumstances attendant to the possibility of a Change in Control and to
encourage the continued attention and dedication of such executives, including
Executive, to their assigned duties with Company.
	 
	 	E.	 	Company desires to provide additional inducement for Executive to continue to
remain in the employ of Company.

     NOW, THEREFORE, Company and Executive agree as follows:

	 	1.	 	Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this Agreement
with initial capital letters:

          (a) “Base Pay” means Executive’s annual base salary rate as in effect from time to time.

          (b) “Board” means the Board of Directors of Company.

          (c) “Cause” means that, prior to any termination pursuant to Section 3(a)(iii), Executive
shall have:

          (d) been convicted of a criminal violation involving, in each case, fraud,
embezzlement or theft in connection with Executive’s duties or in the course of Executive’s
employment with Company or any Subsidiary;

          (i) committed intentional wrongful damage to property of Company or any
Subsidiary; or

16

 

          (ii) committed intentional wrongful disclosure of secret processes or
confidential information of Company or any Subsidiary;

and any such act shall have been demonstrably and materially harmful to Company. For
purposes of this Agreement, no act or failure to act on the part of Executive will be deemed
“intentional” if it was due primarily to an error in judgment or negligence, but will be
deemed “intentional” only if done or omitted to be done by Executive not in good faith and
without reasonable belief that Executive’s action or omission was in the best interest of
Company. Notwithstanding the foregoing, Executive will not be deemed to have been
terminated for “Cause” hereunder unless and until there shall have been delivered to
Executive a copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the Board then in office (excluding Executive if Executive is then a member of
the Board) at a meeting of the Board called and held for such purpose, after reasonable
notice to Executive and an opportunity for Executive, together with Executive’s counsel (if
Executive chooses to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, Executive had committed an act
constituting “Cause” as herein defined and specifying the particulars thereof in reasonable
detail. Nothing herein will limit the right of Executive or Executive’s beneficiaries to
contest the validity or propriety of any such determination.

          (e) “Change in Control” means the occurrence during the Term of any of the following events:

          (i) any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a “Person”) is or becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined
voting power of the then-outstanding Voting Stock of Company; provided,
however, that:

          (1) for purposes of this Section 1(d)(i), the following acquisitions will
not constitute a Change in Control: (A) any acquisition of Voting Stock directly from
Company that is approved by a majority of the Incumbent Directors, (B) any
acquisition of Voting Stock by Company or any Subsidiary, (C) any acquisition of
Voting Stock by the trustee or other fiduciary holding securities under any employee
benefit plan (or related trust) sponsored or maintained by Company or any Subsidiary,
and (D) any acquisition of Voting Stock by any Person pursuant to a Business
Transaction that complies with clauses (A), (B) and (C) of Section 1(d)(iii) below;

          (2) if any Person is or becomes the beneficial owner of 20% or more of
combined voting power of the then-outstanding Voting Stock as a result of a
transaction described in clause (A) of Section 1(d)(i)(1) above and such Person
thereafter becomes the beneficial owner of any additional shares of Voting Stock
representing 1% or more of the then-outstanding Voting Stock, other than in an
acquisition directly from Company that is approved by a majority of the Incumbent
Directors or other than as a result of a stock dividend, stock split or similar
transaction effected by Company in which all holders of Voting Stock are treated
equally, such subsequent acquisition shall be treated as a Change in Control;

          (3) a Change in Control will not be deemed to have occurred if a Person is or
becomes the beneficial owner of 20% or more of the Voting Stock as a result of a
reduction in the number of shares of Voting Stock outstanding pursuant to a
transaction or series of transactions that is approved by a majority of the Incumbent
Directors unless and until such Person thereafter becomes the beneficial owner of any
additional shares of Voting

17

 

Stock representing 1% or more of the then-outstanding Voting Stock, other than
as a result of a stock dividend, stock split or similar transaction effected by
Company in which all holders of Voting Stock are treated equally; and

          (4) if at least a majority of the Incumbent Directors determine in good faith
that a Person has acquired beneficial ownership of 20% or more of the Voting Stock
inadvertently, and such Person divests as promptly as practicable but no later than
the date, if any, set by the Incumbent Board a sufficient number of shares so that
such Person beneficially owns less than 20% of the Voting Stock, then no Change in
Control shall have occurred as a result of such Person’s acquisition; or

          (ii) a majority of the Board ceases to be comprised of Incumbent Directors;
or

          (iii) the consummation of a reorganization, merger or consolidation, or sale
or other disposition of all or substantially all of the assets of Company or the acquisition
of the stock or assets of another corporation, or other transaction (each, a “Business
Transaction”), unless, in each case, immediately following such Business Transaction (A) the
Voting Stock outstanding immediately prior to such Business Transaction continues to
represent (either by remaining outstanding or by being converted into voting stock of the
surviving entity or any parent thereof), more than 50% of the combined voting power of the
then outstanding shares of voting stock of the entity resulting from such Business
Transaction (including, without limitation, an entity which as a result of such transaction
owns Company or all or substantially all of Company’s assets either directly or through one
or more subsidiaries), (B) no Person (other than Company, such entity resulting from such
Business Transaction, or any employee benefit plan (or related trust) sponsored or
maintained by Company, any Subsidiary or such entity resulting from such Business
Transaction) beneficially owns, directly or indirectly, 20% or more of the combined voting
power of the then outstanding shares of voting stock of the entity resulting from such
Business Transaction, and (C) at least a majority of the members of the board of directors
of the entity resulting from such Business Transaction were Incumbent Directors at the time
of the execution of the initial agreement or of the action of the Board providing for such
Business Transaction; or

          (iv) approval by the shareholders of Company of a complete liquidation or
dissolution of Company, except pursuant to a Business Transaction that complies with clauses
(A), (B) and (C) of Section 1(d)(iii).

          (v) For purposes of this Section 1(d), the term “Incumbent Directors” shall
mean, during any period of two consecutive years, individuals who at the beginning of such
period constituted the Board and any new director (other than a director initially elected
or nominated as a director as a result of an actual or threatened election contest with
respect to directors or any other actual or threatened solicitation of proxies by or on
behalf of such director) whose election by the Board or nomination for election by the
Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved.

          (f) “Code” means the Internal Revenue Code of 1986, as amended.

          (g) “Common Shares” means shares of common stock, no par value, of Company.

          (h) “Employee Benefits” means the perquisites, benefits and service credit for benefits as
provided under any and all employee retirement income and welfare benefit policies, plans, programs
or arrangements in which Executive is entitled to participate, including without limitation any
stock option, performance share, performance unit, stock purchase, stock appreciation, savings,
pension, supplemental

18

 

executive retirement, or other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by Company or a Subsidiary), disability, salary
continuation, expense reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies, plans, programs or
arrangements that may be adopted hereafter by Company or a Subsidiary, providing benefits and
service credit for benefits at least as great in the aggregate as are payable thereunder
immediately prior to a Change in Control.

          (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (j) “Good Reason” means the occurrence of one or more of the following events:

          (i) Failure to elect or reelect or otherwise to maintain Executive in the office
or the position, or a substantially equivalent or better office or position, of or with
Company and/or a Subsidiary (or any successor thereto by operation of law or otherwise), as
the case may be, which Executive held immediately prior to a Change in Control, or the
removal of Executive as a Director of Company and/or a Subsidiary (or any successor thereto)
if Executive shall have been a Director of Company and/or a Subsidiary immediately prior to
the Change in Control;

          (ii) Failure of Company to remedy any of the following within 10 calendar
days after receipt by Company of written notice thereof from Executive: (A) a significant
adverse change in the nature or scope of the authorities, powers, functions,
responsibilities or duties attached to the position with Company and any Subsidiary which
Executive held immediately prior to the Change in Control, (B) a reduction in Executive’s
Base Pay received from Company and any Subsidiary, (C) a reduction in Executive’s Incentive
Pay opportunity as compared with the Incentive Pay opportunity most recently paid prior to
the Change in Control, or (D) the termination or denial of Executive’s rights to Employee
Benefits or a reduction in the scope or value thereof;

          (iii) The liquidation, dissolution, merger, consolidation or reorganization
of Company or the transfer of all or substantially all of its business and/or assets, unless
the successor or successors (by liquidation, merger, consolidation, reorganization, transfer
or otherwise) to which all or substantially all of its business and/or assets have been
transferred (by operation of law or otherwise) assumed all duties and obligations of Company
under this Agreement pursuant to Section 11(a);

          (iv) Company requires Executive to have Executive’s principal location of
work changed to any location that is in excess of 30 miles from the location thereof
immediately prior to the Change in Control, or requires Executive to travel away from
Executive’s office in the course of discharging Executive’s responsibilities or duties
hereunder at least 20% more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to any prior year) than was
required of Executive in any of the three full years immediately prior to the Change in
Control without, in either case, Executive’s prior written consent; or

          (v) Without limiting the generality or effect of the foregoing, any material
breach of this Agreement by Company or any successor thereto.

          (k) “Incentive Pay” means an annual bonus, incentive or other payment of compensation, in
addition to Base Pay, made or to be made in regard to services rendered in any year pursuant to any
bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy,
plan, program or arrangement (whether or not funded) of Company or a Subsidiary, or any successor
thereto. “Incentive Pay” does not include any stock option, stock appreciation, stock purchase,
restricted stock, private equity, long-

19

 

term incentive or similar plan, program, arrangement or grant, whether or not provided under a
plan, program or arrangement described in the preceding sentence.

          (l) “Severance Period” means the period of time commencing on the date of the first occurrence
of a Change in Control and continuing until the earlier of (i) the second anniversary of the
occurrence of the Change in Control, or (ii) Executive’s death;

          (m) “Subsidiary” means an entity in which Company directly or indirectly beneficially owns 50%
or more of the outstanding voting stock of such entity.

          (n) “Term” means the period commencing as of the date hereof and expiring on the close of
business on December 31, 2008; provided, however, that (i) commencing on January 1,
2008 and each January 1 thereafter, the term of this Agreement will automatically be extended for
an additional year unless, not later than September 30 of the immediately preceding year, Company
or Executive shall have given notice that Company or Executive, as the case may be, does not wish
to have the Term extended; (ii) if a Change in Control occurs during the Term, the Term will expire
on the last day of the Severance Period; and (iii) subject to Section 3(c), if, prior to a Change
in Control, the Executive ceases for any reason to be a corporate officer or operating president of
Company and any Subsidiary, thereupon without further action the Term shall be deemed to have
expired and this Agreement will immediately terminate and be of no further effect; provided
however, that this Section 1(m)(iii) shall not apply to terminate the Agreement with respect to any
Executive who had a Severance Pay Agreement or Amended and Restated Severance Pay Agreement between
Company and Executive in effect on February 20, 2007 and who entered into this Agreement effective
February 21, 2007. For purposes of this Section 1(m), the Executive shall not be deemed to have
ceased to be an employee of Company and any Subsidiary by reason of the transfer of the Executive’s
employment between Company and any Subsidiary, or among any Subsidiaries.

          (o) “Termination Date” means the date on which Executive’s employment is terminated (the
effective date of which will be the date of termination, or such other date that may be specified
by Executive if the termination is pursuant to Section 3(b)).

          (p) “Voting Stock” means at any time, the then-outstanding securities entitled to vote
generally in the election of directors of Company.

     2. Operation of Agreement. This Agreement will be effective and binding immediately
upon its execution, but, anything in this Agreement to the contrary notwithstanding, except as
provided in Section 3(c), this Agreement will not be operative unless and until a Change in Control
occurs. Upon the occurrence of a Change in Control at any time during the Term, without further
action, this Agreement will become immediately operative.

     3. Termination Following a Change in Control.

          (a) In the event of the occurrence of a Change in Control, Executive’s employment may be
terminated by Company or a Subsidiary during the Severance Period (or pursuant to Section 3(c)) and
Executive will be entitled to the benefits provided by Section 4 unless such termination is the
result of the occurrence of one or more of the following events:

          (i) Executive’s death;

          (ii) If Executive becomes permanently disabled within the meaning of, and
begins actually to receive disability benefits pursuant to, the long-term disability plan in
effect for, or applicable to, Executive immediately prior to the Change in Control; or

20

 

          (iii) Cause.

If, during the Severance Period, Executive’s employment is terminated by Company or any
Subsidiary other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), Executive will be
entitled to the benefits provided by Section 4.

          (b) In the event of the occurrence of a Change in Control, Executive may terminate employment
with Company and any Subsidiary during the Severance Period for Good Reason with the right to
severance compensation as provided in Section 4 regardless of whether any other reason, other than
Cause, for such termination exists or has occurred, including without limitation other employment.

          (c) Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs
and not more than 90 days prior to the date on which the Change in Control occurs, Executive’s
employment with Company is terminated by Company, such termination of employment will be deemed to
be a termination of employment after a Change in Control for purposes of this Agreement if
Executive has reasonably demonstrated that such termination of employment (i) was at the request of
a third party who has taken steps reasonably calculated to effect a Change in Control, or (ii)
otherwise arose in connection with or in anticipation of a Change in Control.

          (d) A termination of employment pursuant to Section 3(a), 3(b) or 3(c) will not affect any
rights that Executive may have pursuant to any agreement, policy, plan, program or arrangement of
Company or Subsidiary providing Employee Benefits, which rights will be governed by the terms
thereof, except for any rights to severance compensation to which Executive may be entitled upon
termination of employment pursuant to any employment or severance agreement or employee plan
(“Other Arrangements”), which rights will be deemed to have been satisfied to the extent and only
to the extent comparable benefits are provided under this Agreement. This Section 3(d) is intended
to avoid duplication of payments and benefits under this Agreement and under the Other Arrangements
and this Section should be interpreted as being intended to insure that, in circumstances in which
Executive is entitled to severance and other benefits under Section 4 of this Agreement and under
the Other Arrangements, the total severance amounts and value of benefits received by Executive
will be equal to the amounts and benefits provided under the agreement or arrangement that provides
for the greatest amounts and benefits, but Executive shall not be entitled to duplication of such
amounts and benefits.

     4. Severance Compensation.

          (a) If, following the occurrence of a Change in Control, Company or Subsidiary terminates
Executive’s employment during the Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii)
or 3(a)(iii), or if Executive terminates Executive’s employment pursuant to Section 3(b), Company
will be obligated to make the following payments and provide the following benefits to Executive.

          (i) Within ten business days after the occurrence of an event described in
Section 4(a) above, Company shall pay, in a lump sum, an amount equal to two and one-half
(2-1/2) times the sum of (A) Base Pay (at the highest rate in effect for any period within
three years prior to the Termination Date), plus (B) an amount equal to the greater of: (x)
the average of the Incentive Pay earned or received by Executive during the three year
period immediately preceding the Termination Date, or (y) the Executive’s target Incentive
Pay for the year in which the Termination Date occurs (assuming the Executive achieves 100%
of any stated goals); provided, however, that if payment to Executive would
constitute a “deferral of compensation” under Section 409A of the Code, Executive (or
Executive’s beneficiary) will receive payment of the amounts described in this Section
4(a)(i) upon the earlier of (i) six (6) months following Executive’s “separation from
service” with Company (as such phrase is defined in Section 409A of the Code) or (ii)
Executive’s death.

21

 

          (ii) For a period of eighteen (18) months following the Termination Date (the
“Continuation Period”), Company shall arrange to provide Executive, at no cost to Executive,
with medical and dental benefits substantially similar to those that Executive was receiving
or entitled to receive immediately prior to the Termination Date (or, if greater,
immediately prior to the reduction, termination, or denial described in Section 1(i)(ii)).
The Continuation Period shall be considered to be the period during which Executive shall be
eligible for continuation coverage under Section 4980B of the Code, and Company shall
reimburse Executive for the amount of the premiums for such continuation coverage;
provided, however that without otherwise limiting the purposes or effect of
Section 6, the benefits otherwise receivable by Executive pursuant to this Section 4(a)(ii)
will be reduced to the extent comparable welfare benefits are actually received by Executive
from another employer during the Continuation Period following Executive’s Termination Date,
and any such benefits actually received by Executive shall be reported by Executive to
Company. If any benefit described in this Section 4(a)(ii) is subject to tax, Company will
pay to Executive an additional amount such that after payment by Executive or Executive’s
dependents or beneficiaries, as the case may be, of all taxes so imposed, the recipient
retains an amount equal to such taxes. Notwithstanding the foregoing, if Company determines
that the provision of benefits under this Section 4(a)(ii) is likely to result in negative
tax consequences to Executive, Company will use its reasonable best efforts to make other
arrangements to provide a substantially similar benefit to Executive that does not have such
negative tax consequences, which may include, making a lump sum payment at the earliest time
permitted under Section 409A of the Code, in an amount equal to Company’s reasonable
determination of the present value of any such benefits that, if provided, would result in
negative tax consequences to Executive and/or providing such benefit through insurance
coverage on Executive’s behalf.

          (iii) Executive shall be entitled to outplacement services by a firm selected
by Executive, at the expense of Company in an amount not to exceed ten percent (10%) of Base
Pay; provided, however, that all such outplacement services must be
completed, and all payments by Company must be made, by December 31 of the second calendar
year following the calendar year in which the Termination Date occurs.

          (b) Without limiting the rights of Executive at law or in equity, if Company fails to make any
payment or provide any benefit required to be made or provided hereunder on a timely basis, Company
will pay interest on the amount or value thereof at an annualized rate of interest equal to the
“prime rate” as set forth from time to time during the relevant period in The Wall Street
Journal “Money Rates” column. Such interest will be payable as it accrues on demand. Any
change in such prime rate will be effective on and as of the date of such change.

          (b) Unless otherwise expressly provided by the applicable plan, program or agreement, after
the occurrence of a Change in Control, Company will pay in cash to Executive a lump sum amount
equal to the sum of (i) any unpaid Incentive Pay that would have been earned, accrued, allocated or
awarded to Executive for any performance period ending prior to the Change in Control (regardless
of whether (x) payment of such compensation is contingent on the continuing performance of services
by Executive or (y) the bonus, incentive, profit-sharing, performance, discretionary pay or similar
agreement, policy, plan, program or arrangement pursuant to which such Incentive Pay would
otherwise be payable permits pro-ration), plus (ii) the value of any annual bonus or long-term
Incentive Pay (including, without limitation, incentive-based annual cash bonuses and performance
units, but not including any equity-based compensation or compensation provided under a qualified
plan) payable pursuant to any performance period that is outstanding on the date of the Change in
Control. Such payment will be made at the earlier of (x) the date prescribed for payment pursuant
to the applicable plan, program or agreement, and (y) within five business days after the Change in
Control. In the case of clauses (i) and (ii), any applicable vesting requirements will be
disregarded. In the case of clause (ii), the amount will be calculated at the greater of (1) the
plan target or payout rate and (2) the amount determined based on Company’s actual results relative
to

22

 

the applicable performance criteria as if the performance period had ended on the date of the
Change in Control, which amount will be prorated on the basis of the number of days of Executive’s
participation during the applicable performance period to which the incentive pay related divided
by the aggregate number of days in such performance period, taking into account service rendered
through the payment date.

     5. Certain Additional Payments by the Company.

          (a) Anything in this Agreement to the contrary notwithstanding, but subject to Paragraph 7 of
Annex A, in the event that this Agreement becomes operative and it is determined (as hereafter
provided) that any payment (other than the Gross-Up payments provided for in this Section 5 and
Annex A) or distribution by Company or any of its affiliates to or for the benefit of Executive,
whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option, performance share, performance unit, stock
appreciation right or similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto) by reason of being
considered “contingent on a change in ownership or control” of Company, within the meaning of
Section 280G 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 Executive will be entitled to receive an additional payment or payments
(collectively, a “Gross-Up Payment”); provided, however, that no Gross-up Payment will be made with
respect to the Excise Tax, if any, attributable to (i) any incentive stock option, as defined by
Section 422 of the Code (“ISO”) granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with any ISO described in
clause (i). The Gross-Up Payment will be in an amount such that, after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes), including any
Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment. For purposes of determining the amount of the
Gross-Up Payment, Executive will 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, (y) federal employment taxes; and
and (z) 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) The obligations set forth in Section 5(a) will be subject to the procedural provisions
described in Annex A.

     6. No Mitigation Obligation. Company hereby acknowledges that it will be difficult
and may be impossible for Executive to find reasonably comparable employment following Termination
Date. Accordingly, the payment of the severance compensation by Company to Executive in accordance
with the terms of this Agreement is hereby acknowledged by Company to be reasonable, and Executive
will not be required to mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor will any profits, income, earnings or other benefits
from any source whatsoever create any mitigation, offset, reduction or any other obligation on the
part of Executive hereunder or otherwise.

     7. Legal Fees and Expenses.

          (a) It is the intent of Company that Executive not be required to incur legal fees and the
related expenses associated with the interpretation, enforcement or defense of Executive’s rights
in connection with any dispute arising under this Agreement because the cost and expense thereof
would substantially detract from the benefits intended to be extended to Executive hereunder.
Accordingly, if it should appear to Executive that Company has failed to comply with any of its
obligations under this

23

 

Agreement or in the event that Company or any other person takes or threatens to take any
action to declare this Agreement void or unenforceable, or institutes any proceeding designed to
deny, or to recover from, Executive the benefits provided or intended to be provided to Executive
hereunder, Company irrevocably authorizes Executive from time to time to retain counsel of
Executive’s choice, at the expense of Company as hereafter provided, to advise and represent
Executive in connection with any such dispute or proceeding. Notwithstanding any existing or prior
attorney-client relationship between Company and such counsel, Company irrevocably consents to
Executive’s entering into an attorney-client relationship with such counsel, and in that connection
Company and Executive agree that a confidential relationship will exist between Executive and such
counsel. Without respect to whether Executive prevails, in whole or in part, in connection with
any of the foregoing, Company will pay and be solely financially responsible for any and all
attorneys’ and related fees and expenses incurred by Executive in connection with any of the
foregoing. Such payments will be made within five business days after delivery of Executive’s
written requests for payment, accompanied by such evidence of fees and expenses incurred as Company
may reasonably require.

          (b) In order to secure the benefits to be received by Executive pursuant to this Agreement and
similar arrangements with other executives, Company shall establish one or more trust funds (the
“Trust”). Company will deposit in such Trust, within five (5) business days after the occurrence
of an event that in the reasonable opinion of the Board will likely result in a Change in Control,
an amount equal to approximately the maximum aggregate benefits that could be payable to Executive
under the terms of this Agreement. Any funds which may be placed into the Trust under this
Agreement shall continue for all purposes to be a part of the general funds of Company subject to
the claims of Company’s creditors in the event of Company’s insolvency and no person shall by
virtue of this Agreement have any interest in such funds. To the extent that any person acquires a
right to receive payments from Company under this Agreement, such rights shall be no greater than
the right of any unsecured general creditor of Company. Executive shall be entitled to receive
distributions from the funds held in the Trust pursuant to the terms and conditions of this
Agreement and the agreement establishing the Trust between Company and the trustee. If prior to
the date of a Change in Control, the Board has actual knowledge that all third parties have
abandoned or terminated their efforts to effect a Change in Control and a Change in Control at that
time is unlikely and the Board so advises Executive, the trust funds and interest earned thereon,
if any, shall be returned to Company by the trustee. Notwithstanding the provisions of this
Section 6(b), failure by Company to place such funds in Trust in no way relieves Company from its
financial obligations and responsibilities to Executive under the terms of this Agreement.

          (c) All benefits to be paid pursuant to this Agreement, including any amounts paid pursuant to
Section 6(a) which were not paid through the Trust established pursuant to Section 6(b), shall be
paid from the general assets of the Company.

     8. Employment Rights. Nothing expressed or implied in this Agreement will create any
right or duty on the part of Company or Executive to have Executive remain in the employment of
Company or any Subsidiary prior to or following any Change in Control.

     9. Withholding of Taxes. Company may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as Company is required to withhold pursuant to
any applicable law, regulation or ruling.

     10. Successors and Binding Agreement.

          (a) Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the business or assets
of Company, by agreement in form and substance reasonably satisfactory to Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same extent Company would
be required to perform if no such succession had taken place. This Agreement will be binding upon
and inure to the benefit

24

 

of Company and any successor to Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of Company whether by
purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be
deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable,
transferable or delegable by Company.

          (b) This Agreement will inure to the benefit of and be enforceable by Executive’s personal or
legal representatives, executors, administrators, successors, heirs, distributees and legatees.

          (c) This Agreement is personal in nature and neither of the parties hereto will, without the
consent of the other, assign, transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 10(a) and 10(b). Without limiting the
generality or effect of the foregoing, Executive’s right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security interest, or
otherwise, other than by a transfer by Executive’s will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer contrary to this Section 10(c), Company
will have no liability to pay any amount so attempted to be assigned, transferred or delegated.

     11. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder will be in writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as FedEx or UPS, addressed to Company (to the attention
of the Secretary of Company) at its principal executive office and to Executive at Executive’s
principal residence, or to such other address as any party may have furnished to the other in
writing and in accordance herewith, except that notices of changes of address will be effective
only upon receipt.

     12. Governing Law. The validity, interpretation, construction and performance of this
Agreement will be governed by and construed in accordance with the substantive laws of the State of
Ohio and federal law, without giving effect to the principles of conflict of laws of such State,
except as expressly provided herein.

     13. Validity. If any provision of this Agreement or the application of any provision
hereof to any person or circumstance is held invalid or otherwise unenforceable, the remainder of
this Agreement and the application of such provision to any other person or circumstance will not
be affected, and the provision so held to be invalid or otherwise unenforceable will be reformed to
the extent (and only to the extent) necessary to make it enforceable or valid.

     14. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by
Executive and 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 will 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,
expressed or implied with respect to the subject matter hereof have been made by either party that
are not set forth expressly in this Agreement. The headings used in this Agreement are intended
for convenience or reference only and will not in any manner amplify, limit, modify or otherwise be
used in the construction or interpretation of any provision of this Agreement. References to
Sections are to Sections of this Agreement. Any reference in this Agreement to a provision of a
statute, rule or regulation will also include any successor provision thereto.

25

 

     15. Effect on Prior Agreements. This Agreement shall expressly supersede and render
null, void and invalid any prior severance pay agreement or agreements of a similar nature
previously entered into by and between Company and Executive with respect to the subject matter of
this Agreement, including but not limited to any Amended and Restated Severance Pay Agreement,
effective as of April 23, 1997 or Severance Pay Agreement effective as of a subsequent date but
prior to the effective date of this Agreement, between Company and Executive.

     16. Dispute Resolution. Any dispute between the parties under this Agreement will be
resolved (except as provided below) through informal arbitration by an arbitrator selected under
the rules of the American Arbitration Association for arbitration of employment disputes (located
in the city in which Company’s principal executive offices in the United States are based) and the
arbitration will be conducted in that location under the rules of said Association. Each party
will be entitled to present evidence and argument to the arbitrator. The arbitrator will have the
right only to interpret and apply the provisions of this Agreement and may not change any of its
provisions, except as expressly provided in Section 13. The arbitrator will permit reasonable
pre-hearing discovery of facts, to the extent necessary to establish a claim or a defense to a
claim, subject to supervision by the arbitrator. The determination of the arbitrator will be
conclusive and binding upon the parties and judgment upon the same may be entered in any court
having jurisdiction thereof. The arbitrator will give written notice to the parties stating the
arbitrator’s determination, and will furnish to each party a signed copy of such determination.
The expenses of arbitration will be borne equally by Company and Executive or as the arbitrator
equitably determines consistent with the application of state or federal law; provided, however,
that Executive’s share of such expenses will not exceed the maximum permitted by law. Any
arbitration or action pursuant to this Section 16 will be governed by and construed in accordance
with the substantive laws of the State of Ohio and, where applicable, federal law, without giving
effect to the principles of conflict of laws of such State.

     17. Survival. Notwithstanding any provision of this Agreement to the contrary, the
parties’ respective rights and obligations under Sections 3(d), 4, 5, 7, 9, 10(b), 16 and 18 will
survive any termination or expiration of this Agreement or the termination of Executive’s
employment following a Change in Control for any reason whatsoever.

     18. Beneficiaries. Executive will be entitled to select (and change, to the extent
permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following Executive’s death, and may change such election, in either case
by giving Company written notice thereof in accordance with Section 11. In the event of
Executive’s death or a judicial determination of Executive’s incompetence, reference in this
Agreement to “Executive” will be deemed, where appropriate, to Executive’s beneficiary, estate or
other legal representative.

     19. Counterparts. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original but all of which together will constitute one and the same
agreement.

     20. Section 409A of the Code. To the extent applicable, it is intended that this
Agreement comply with the provisions of Section 409A of the Code. This Agreement shall be
administered in a manner consistent with this intent, and any provision that would cause the
Agreement to fail to satisfy Section 409A of the Code shall have no force and effect until amended
to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted
by Section 409A of the Code and may be made by Company without the consent of Executive).

26

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.

	 	 	 	 	 
	 	THE SHERWIN-WILLIAMS COMPANY 

 	 
	 	By:  	 	 
	 	 	[Name and Title] 	 
	 
	 
	 	 	[Executive]

 	 
	 	 	 
	 	 	 
	 	 	 

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Annex A

EXCISE TAX GROSS-UP PROCEDURAL PROVISIONS

     (1) Subject to the provisions of Paragraph 5, all determinations required to be made under
Section 5 and Annex A, including whether an Excise Tax is payable by Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid by Company to Executive and
the amount of such Gross-Up Payment, if any, will be made by a nationally recognized accounting
firm or benefits consulting firm (the “National Firm”) selected by the Executive in Executive’s
sole discretion. Executive will direct the National Firm to submit its determination and detailed
supporting calculations to both Company and Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be requested by Company or Executive.
If the National Firm determines that any Excise Tax is payable by Executive, Company will pay the
required Gross-Up Payment to Executive within 5 business days after receipt of such determination
and calculations with respect to any Payment to Executive. If the National Firm determines that no
Excise Tax is payable by Executive with respect to any material benefit or amount (or portion
thereof), it will, at the same time as it makes such determination, furnish Company and Executive
with an opinion that Executive has substantial authority not to report any Excise Tax on
Executive’s federal, state or local income or other tax return with respect to such benefit or
amount. As a result of the uncertainty in 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 any
determination by the National Firm hereunder, it is possible that Gross-Up Payments that will not
have been made by Company should have been made (an “Underpayment”), consistent with the
calculations required to be made hereunder. In the event that Company exhausts or fails to pursue
its remedies pursuant to Paragraph 5 and Executive thereafter is required to make a payment of any
Excise Tax, Executive will direct the National Firm to determine the amount of the Underpayment
that has occurred and to submit its determination and detailed supporting calculations to both
Company and Executive as promptly as possible. Any such Underpayment will be promptly paid by
Company to, or for the benefit of, Executive within 5 business days after receipt of such
determination and calculations.

     (2) Company and Executive will each provide the National Firm access to and copies of any
books, records and documents in the possession of Company or Executive, as the case may be,
reasonably requested by the National Firm, and otherwise cooperate with the National Firm in
connection with the preparation and issuance of the determinations and calculations contemplated by
Paragraph 1. Any determination by the National Firm as to the amount of the Gross-Up Payment will
be binding upon Company and Executive.

     (3) The federal, state and local income or other tax returns filed by Executive will be
prepared and filed on a consistent basis with the determination of the National Firm with respect
to the Excise Tax payable by Executive. Executive will report and make proper payment of the
amount of any Excise Tax, and at the request of Company, provide to Company true and correct copies
(with any amendments) of Executive’s 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 Company, evidencing such
payment. If prior to the filing of Executive’s federal income tax return, or corresponding state
or local tax return, if relevant, the National Firm determines that the amount of the Gross-Up
Payment should be reduced, Executive will within 5 business days pay to Company the amount of such
reduction.

     (4) The fees and expenses of the National Firm for its services in connection with the
determinations and calculations contemplated by Paragraph 1 will be borne by Company. If such fees
and expenses are initially paid by Executive, Company will reimburse Executive the full amount of
such fees and expenses within 5 business days after receipt from Executive of a statement therefor
and reasonable evidence of Executive’s payment thereof.

28

 

     (5) Executive will notify Company in writing of any claim by the Internal Revenue Service or
any other taxing authority that, if successful, would require the payment by Company of a Gross-Up
Payment. Such notification will be given as promptly as practicable but no later than 10 business
days after Executive actually receives notice of such claim and Executive will further apprise
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 Executive). Executive will not pay such claim prior to the
expiration of the 30-calendar-day period following the date on which Executive gives such notice to
Company or, if earlier, the date that any payment of amount with respect to such claim is due. If
Company notifies Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive will:

     (A) provide Company with any written records or documents in Executive’s possession
relating to such claim reasonably requested by Company;

     (B) take such action in connection with contesting such claim as Company reasonably
requests 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 Company;

     (C) cooperate with Company in good faith in order effectively to contest such claim;
and

     (D) permit Company to participate in any proceedings relating to such claim;

provided, however, that Company will bear and pay directly all costs and expenses
(including interest and penalties) incurred in connection with such contest and will indemnify and
hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income or other
tax, including interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing provisions of
this Paragraph 5, Company will control all proceedings taken in connection with the contest of any
claim contemplated by this Paragraph 5 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 Executive may participate therein at Executive’s own cost
and expense) and may, at its option, either direct Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Executive 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 Company determines; provided, however, that
if Company directs Executive to pay the tax claimed and sue for a refund, Company will, as
permitted by applicable law, advance the amount of such payment to Executive on an interest-free
basis and will indemnify and hold Executive 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 Executive with respect
to which the contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, Company’s control of any such contested claim will be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and Executive will 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.

     (6) If, after the receipt by Executive of an amount advanced by Company pursuant to Paragraph
5, Executive receives any refund with respect to such claim, Executive will (subject to Company’s
complying with the requirements of Paragraph 5) promptly pay to Company the amount of such refund
(together with any interest paid or credited thereon after any taxes applicable thereto). If,
after the receipt by Executive of an amount advanced by Company pursuant to Paragraph 5, a
determination is made that Executive is not entitled to any refund with respect to such claim and
Company does not notify Executive in writing of its intent to contest such denial or refund prior
to the expiration of 30 calendar days after such determination, then such advance will be forgiven
and will not be required to be repaid and the amount of

29

 

any such advance will offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid by Company to Executive pursuant to Section 5 and this Annex C.

     (7) 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 Annex A, if (A) but
for this sentence, Company would be obligated to make a Gross-Up Payment to Executive and (B) the
aggregate “present value” of the “parachute payments” to be paid or provided to Executive under
this Agreement or otherwise does not exceed 1.15 multiplied by three times Executive’s “base
amount,” , then the payments and benefits to be paid or provided under this Agreement will be
reduced (or repaid to Company, if previously paid or provided) to the minimum extent necessary so
that no portion of any payment or benefit to Executive, as so reduced or repaid, constitutes an
“excess parachute payment.” For purposes of this Paragraph 7, the terms “excess parachute
payment,” “present value,” “parachute payment,” and “base amount” will 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
Paragraph 7 will be made at the expense of Company, if requested by Executive or Company, by the
National Firm. Appropriate adjustments will be made to amounts previously paid to Executive, or to
amounts not paid pursuant to this Paragraph 7, as the case may be, to reflect properly a subsequent
determination that Executive owes 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 Paragraph 7, Executive will be
entitled to designate the payments and/or benefits to be so reduced or repaid in order to give
effect to this Paragraph 7. Company will provide Executive with all information reasonably
requested by Executive to permit Executive to make such designation. In the event that Executive
fails to make such designation within 10 business days prior to the Termination Date or other due
date, Company may effect such reduction or repayment in any manner it deems appropriate.

30

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