Document:

EX-10.1

 

Exhibit 10.1

[DATE]

Attn: [                    ]

PolyOne Corporation

POLYONE CORPORATION INCENTIVE AWARD

Grant of Restricted Stock Units

THIS AGREEMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THE COMMON SHARES OF THE COMPANY ARE LISTED ON THE NEW YORK STOCK
EXCHANGE.

Dear [                    ]:

          Subject to the terms and conditions of the [INSERT PLAN] (the “Plan”) and this letter
agreement (this “Agreement”), the Compensation and Governance Committee of the Board of Directors
(the “Committee”) of PolyOne Corporation (“PolyOne”) (or a subcommittee thereof) has granted to you
as of [DATE], the following award:

[                    ] restricted stock units (the “Restricted Stock Units”), which shall become
non-forfeitable in accordance with Article 1 hereof. Each Restricted Stock Unit shall
represent one hypothetical share of PolyOne’s common stock, par value $0.01, per share (a
“Common Share”) and shall at all times be equal in value to one Common Share.

          A copy of the Plan is available for your review through the Corporate Secretary’s office.
Unless otherwise indicated, the capitalized terms used in this Agreement shall have the same
meanings as set forth in the Plan.

	1.	 	Vesting of Restricted Stock Units.

	 	(a)	 	Provided that you have been in the continuous employ of PolyOne from the date
hereof until [DATE] (the “Restriction Period”), the Restricted Stock Units shall become
non-forfeitable on [DATE] (the “Vesting Date”).
	 
	 	(b)	 	Notwithstanding the provisions of Section 1(a), (i) all of the Restricted Stock
Units shall immediately become non-forfeitable if a Change of Control (as defined on
Exhibit A to this Agreement) occurs, and (ii) a pro-rata portion of the
Restricted Stock Units shall immediately become non-forfeitable if your

 

 

	 	 	 	employment terminates prior to [DATE] due to (A) your retirement at age 55 or older
with at least 10 years of service or retirement under other circumstances entitling
you to receive benefits under one of PolyOne’s (including its predecessors) defined
benefit pension plans, (B) your permanent and total disability (as defined under the
relevant disability plan or program of PolyOne or a Subsidiary in which you then
participate), or (C) your death, such proration to be based on the portion of the
Restriction Period during which you were employed by PolyOne.

	2.	 	Other Termination. If your employment with PolyOne or a Subsidiary terminates before
the Vesting Date for any reason other than as set forth in Section 1(b)(ii) and before a
Change of Control, the Restricted Stock Units will be forfeited.
	 
	3.	 	Payment of Restricted Stock Units. The Restricted Stock Units that have become
non-forfeitable pursuant to Section 1 will be paid in Common Shares transferred to you on the
10th business day following the Vesting Date, provided, however, in the event
a Change of Control occurs prior to the Vesting Date and such Change of Control constitutes a
change of ownership or effective control of PolyOne, or a change in the ownership of a
substantial portion of the assets of PolyOne, within the meaning of Section 409A of the Code,
the Restricted Stock Units will be so paid on the 10th business day following such Change of
Control. If PolyOne determines that it is required to withhold any federal, state, local or
foreign taxes from any payment, PolyOne may withhold Common Shares with a Market Value per
Share equal to the amount of these taxes from the payment.
	 
	4.	 	Dividend, Voting and Other Rights. You shall have no rights of ownership in the
Restricted Stock Units and shall have no right to vote them until the date on which the
Restricted Stock Units are transferred to you pursuant to Section 3. While the Restricted
Stock Units are still outstanding, on the date that PolyOne pays a cash dividend to holders of
Common Shares generally, you shall be entitled to a number of additional whole Restricted
Stock Units determined by dividing (i) the product of (A) the dollar amount of the cash
dividend paid per Common Share on such date and (B) the total number of Restricted Stock Units
(including dividend equivalents paid thereon) previously credited to you as of such date, by
(ii) the Market Value per Share on such date. Such dividend equivalents shall be subject to
the same terms and conditions and shall be settled or forfeited in the same manner and at the
same time as the Restricted Stock Units to which the dividend equivalents were credited.
	 
	5.	 	Adjustments. In the event of any change in the number of Common Shares by reason of
a merger, consolidation, reorganization, recapitalization, or similar transaction, or in the
event of a stock dividend, stock split, or distribution to shareholders (other than normal
cash dividends), the number of Restricted Stock Units then held by you will be adjusted. Such
adjustment shall be made automatically on the customary arithmetical basis in the case of any
stock split, including a stock split effected by means of a stock dividend, and in the case of
any other dividend paid in PolyOne common shares. If any such transaction or event occurs,
the Committee may provide in substitution for outstanding Restricted Stock Units such
alternative consideration (including, without limitation, in the form of cash, securities or
other property) as it may determine to be equitable in the

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	 	 	circumstances and may require in connection therewith the surrender of the Restricted Stock
Units subject to this Agreement. No adjustment provided for in this Section 5 will require
PolyOne to issue any fractional shares.
	 
	6.	 	Non-Assignability. The Restricted Stock Units subject to this grant of Restricted
Stock Units are personal to you and may not be sold, exchanged, assigned, transferred,
pledged, encumbered or otherwise disposed of by you until they become earned as provided in
this Agreement; provided, however, that your rights with respect to such
Restricted Stock Units may be transferred by will or pursuant to the laws of descent and
distribution. Any purported transfer or encumbrance in violation of the provisions of this
Section 6 shall be void, and the other party to any such purported transaction shall not
obtain any rights to or interest in such Restricted Stock Units.
	 
	7.	 	Miscellaneous.

	 	(a)	 	The contents of this Agreement are subject in all respects to the terms and
conditions of the Plan as approved by the Board and the shareholders of PolyOne, which
are controlling. The interpretation and construction by the Board and/or the Committee
of any provision of the Plan or this Agreement shall be final and conclusive upon you,
your estate, executor, administrator, beneficiaries, personal representative and
guardian and PolyOne and its successors and assigns.
	 
	 	(b)	 	The grant of the Restricted Stock Units is discretionary and will not be
considered to be an employment contract or a part of your terms and conditions of
employment or of your salary or compensation. Information about you and your
participation in the Plan, including, without limitation, your name, home address and
telephone number, date of birth, social insurance number or other identification
number, salary, nationality, job title, any shares of stock or directorships held in
PolyOne, and details of the Restricted Stock Units or other entitlement to shares of
stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor may
be collected, recorded, held, used and disclosed by PolyOne and any of its Subsidiaries
and any non-PolyOne entities engaged by PolyOne to provide services in connection with
this grant (a “Third Party Administrator”), for any purpose related to the
administration of the Plan. You understand that PolyOne and its Subsidiaries may
transfer such information to Third Party Administrators, regardless of whether such
Third Party Administrators are located within your country of residence, the European
Economic Area or in countries outside of the European Economic Area, including the
United States of America. You consent to the processing of information relating to you
and your participation in the Plan in any one or more of the ways referred to above.
This consent may be withdrawn at any time in writing by sending a declaration of
withdrawal to PolyOne’s chief human resources officer.
	 
	 	(c)	 	Any amendment to the Plan shall be deemed to be an amendment to this Agreement
to the extent that the amendment is applicable hereto. The terms and conditions of
this Agreement may not be modified, amended or waived, except by an instrument in
writing signed by a duly authorized executive officer at PolyOne.

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	 	 	 	Notwithstanding the foregoing, no amendment shall adversely affect your rights under
this Agreement without your consent.
	 
	 	(d)	 	[FOR EMPLOYEES SIGNING EMPLOYEE AGREEMENT] It is a condition to your receipt of
the Restricted Stock Units that you execute and agree to the terms of PolyOne’s current
and applicable Employee Agreement (the “Employee Agreement”). If you do not sign and
return the Employee Agreement to PolyOne Human Resources within 30 days of your receipt
of this Grant of Restricted Stock Units, this Grant of Restricted Stock Units and any
rights to the Restricted Stock Units will terminate and become null and void.
	 
		[(d)(e)]  	 	By signing this Agreement, you acknowledge that you have entered into an Employee
Agreement [(the “Employee Agreement”)] with PolyOne. You understand that, as set forth
in Paragraph 5 and Attachment A of the Employee Agreement, you have agreed not to
engage in certain prohibited practices in competition with PolyOne following the
termination of your employment (hereinafter referred to as the “Covenant Not to
Compete”). You further acknowledge that as consideration for entering into the
Covenant Not to Compete, PolyOne is providing you the opportunity to participate in
PolyOne’s long-term incentive plan and receive the award set forth in this Agreement.
You understand that eligibility for participation in the long-term incentive plan was
conditioned upon entering into the Covenant Not to Compete. You further understand and
acknowledge that you would have been ineligible to participate in the long-term
incentive plan and receive this award had you decided not to agree to the Covenant Not
to Compete. You understand that the acknowledgment contained in this sub-section is a
part of the Employee Agreement and is to be interpreted in a manner consistent with its
terms.

	8.	 	Notice. All notices under this Agreement to PolyOne must be delivered personally or
mailed to PolyOne Corporation at PolyOne Center, Avon Lake, Ohio 44012, Attention: Corporate
Secretary. PolyOne’s address may be changed at any time by written notice of such change to
you. Also, all notices under this Agreement to you will be delivered personally or mailed to
you at your address as shown from time to time in PolyOne’s records.
	 
	9.	 	Compliance with Section 409A of the Code.

	 	(a)	 	To the extent applicable, it is intended that this Agreement and the Plan
comply with the provisions of Section 409A of the Code, so that the income inclusion
provisions of Section 409A(a)(1) of the Code do not apply to you. This Agreement and
the Plan shall be administered in a manner consistent with this intent.
	 
	 	(b)	 	Reference to Section 409A of the Code will also include any proposed, temporary
or final regulations, or any other guidance, promulgated with respect to such Section
by the U.S. Department of the Treasury or the Internal Revenue Service.

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          This Agreement, and the terms and conditions of the Plan, shall bind, and inure to the benefit
of you, your estate, executor, administrator, beneficiaries, personal representative and guardian
and PolyOne and its successors and assigns.

	 	 	 	 	 
	 	Very Truly Yours,

POLYONE CORPORATION

 	 
	 	By:  	 	 
	 	 	Kenneth M. Smith, Senior Vice President and 	 
	 	 	Chief Human Resources Officer 	 
	 

	 	 	 
	Accepted:

	 	 
	 
	 
	 	 
	 

	 	 
	 
	                                         (Date)
	 	 

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Exhibit A

A “Change of Control” means:

(a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the Company where such acquisition causes such Person to own 25% or more of
the combined voting power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this paragraph (a), the following acquisitions shall not be deemed to
result in a Change of Control: (i) any acquisition directly from the Company that is approved by
the Incumbent Board (as defined in paragraph (b) below), (ii) any acquisition by the Company, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c) below;
provided, further, that if any Person’s beneficial ownership of the Outstanding Company Voting
Securities reaches or exceeds 25% as a result of a transaction described in clause (i) or (ii)
above, and such Person subsequently acquires beneficial ownership of additional voting securities
of the Company, such subsequent acquisition shall be treated as an acquisition that causes such
Person to own 25% or more of the Outstanding Company Voting Securities; and provided, further, that
if at least a majority of the members of the Incumbent Board determines in good faith that a Person
has acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of the Outstanding Company Voting Securities inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares so that such Person beneficially
owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) less than 25% of the
Outstanding Company Voting Securities, then no Change of Control shall have occurred as a result of
such Person’s acquisition; or

(b) individuals who, as of August 31, 2000, constitute the Board (the “Incumbent Board” as modified
by this paragraph (b)) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to August 31, 2000 whose
election, or nomination for election by the Company’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (either by specific vote or
by approval of the proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

(c) the consummation of a reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company or the acquisition of assets of another
corporation or other transaction (“Business Combination”) excluding, however, such a Business
Combination pursuant to which (i) the individuals and entities who were the beneficial

A-1

 

owners of the Outstanding Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an entity that as a result
of such transaction owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries), (ii) no Person (excluding any employee benefit plan
(or related trust) of the Company, the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting power of
the then outstanding securities entitled to vote generally in the election of directors of the
entity resulting from such Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

(d) approval by the shareholders of the Company of a complete liquidation or dissolution of the
Company except pursuant to a Business Combination that complies with clauses (i), (ii) and (iii) of
paragraph (c) above.

A-2EX-10.2

 

Exhibit 10.2

[DATE]

Attn: [                    ]

PolyOne Corporation

POLYONE CORPORATION INCENTIVE AWARD

Grant of Stock-Settled SARs

THIS AGREEMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THE COMMON SHARES OF THE COMPANY ARE LISTED ON THE NEW YORK STOCK
EXCHANGE.

Dear [                    ]:

          Subject to the terms and conditions of the [INSERT PLAN] (the “Plan”) and this letter
agreement (this “Agreement”), the Compensation and Governance Committee of the Board of Directors
(the “Committee”) of PolyOne Corporation (“PolyOne”) has granted to you as of [DATE], the following
award:

Stock-Settled Stock Appreciation Rights (“SARs”) in respect of an aggregate of [                    ]
common shares of PolyOne, having a par value of $.01 per share (the “Common Shares”). The
price (the “Base Price”) to be used as the basis for determining the Spread (as defined
below) upon exercise of the SAR is $                    , the fair market value of one Common Share on
[DATE].

          A copy of the Plan is available for your review through the Corporate Secretary’s office.
Unless otherwise indicated, the capitalized terms used in this Agreement shall have the same
meanings as set forth in the Plan.

	1.	 	Exercise of SARs.

	 	(a)	 	Subject to the provisions of the Plan and this Agreement, the SARs will expire
on [DATE] and shall be exercisable on or before [DATE]. Provided that you have been in
the continuous employ of PolyOne on such date, vesting will occur as follows:

	 	•	 	[INSERT VESTING SCHEDULE]

 

 

	 	(b)	 	The SARs may be exercised as provided in this Section 1(b) as to all or any of
the SARs that are exercisable in accordance with Section 1(a), as long as each exercise
covers at least 1,000 SARs. To exercise the SARs, you must submit a SAR Exercise Form
to PolyOne signed by you stating the number of SARs you are exercising at that time and
certifying that you are in compliance with the terms and conditions of the Plan.
PolyOne will then issue you the number of Common Shares determined under Section 1(c).
	 
	 	(c)	 	The number of Common Shares to be issued will be determined by calculating (1)
the difference between the fair market value of a Common Share on the date of exercise
and the Base Price (the “Spread”); (2) multiplied by the number of SARs exercised; (3)
less any withholding taxes (federal, state, local or foreign taxes) PolyOne determines
are to be withheld in accordance with the Plan and with applicable law. The result of
this calculation will then be divided by the fair market value of a Common Share on the
date of exercise to determine the number of Common Shares to be issued, rounded down to
the nearest whole share. For purposes of this Section 1(c), the term “fair market
value” will mean the average of the high and low prices of the Common Shares for the
relevant date as reported on the New York Stock Exchange — Composite Transactions
Listing or similar report. In no event will you be entitled to acquire a fraction of
one Common Share pursuant to this Agreement.

	2.	 	Vesting Upon a Change of Control. If a Change of Control (as defined on Exhibit
A to this Agreement) occurs during the term of the SARs, the SARs, to the extent not
previously fully exercisable, will become immediately exercisable in full.
	 
	3.	 	Retirement, Disability or Death. If your employment with PolyOne or a Subsidiary
terminates before the expiration of the SARs due to (1) retirement at age 55 or older with at
least 10 years of service or retirement under other circumstances entitling you to receive
benefits under one of PolyOne’s (including its predecessors) defined benefit pension plans,
(2) permanent and total disability (as defined under the relevant disability plan or program
of PolyOne or a Subsidiary in which you then participate) or (3) death, then:

	 	(a)	 	Any SARs that are vested at the time of termination of employment as provided
in Section 1(a) above may be exercised in whole or in part for the shorter of (i) a
period of three years after your termination of employment or (ii) the remainder of
their term, but in no event beyond [DATE], after which such SARs will terminate; and
	 
	 	(b)	 	You will be entitled to exercise, in whole or in part, the SARs that become
vested on the vesting date set forth in Section 1(a) above that immediately follows
your termination of employment (if any) if your employment terminates no more than six
(6) months prior to such vesting date and you will be entitled to exercise such SARs
for the shorter of (i) a period of three years after your termination of employment and
(ii) the remainder of their term, but in no event beyond [DATE], after which such SARs
will terminate.

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	4.	 	Termination Following Change of Control.

	 	(a)	 	If your employment with PolyOne or a Subsidiary terminates following a Change
of Control because (i) your employment is involuntarily terminated without “Cause” (as
defined below), or (ii) you terminate your employment for “Good Reason” (as defined
below), the SARs become immediately vested and may be exercised in whole or in part at
any time and from time to time for the remainder of their term, but in no event beyond
[DATE], after which the SARs will terminate.
	 
	 	(b)	 	For purposes of Section 4(a) above:

	 	(i)	 	If you are a party to a Management Continuity Agreement,
“Cause” shall mean “Cause” and “Good Reason” shall mean “Good Reason,” each as
defined in your Management Continuity Agreement;
	 
	 	(ii)	 	If you are not a party to a Management Continuity Agreement,
“Cause” shall mean: (A) the willful and continued failure by you to
substantially perform your duties with PolyOne, which failure causes material
and demonstrable injury to PolyOne (other than any such failure resulting from
your incapacity due to physical or mental illness), after a demand for
substantial performance is delivered to you by PolyOne which specifically
identifies the manner in which you have not substantially performed your
duties, and after you have been given a period (hereinafter known as the “Cure
Period”) of at least thirty (30) days to correct your performance, or (B) the
willful engaging by you in other gross misconduct materially and demonstrably
injurious to PolyOne. For purposes of this Section 4(b)(ii), no act, or
failure to act, on your part shall be considered “willful” unless conclusively
demonstrated to have been done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was in the best
interests of PolyOne; and
	 
	 	(iii)	 	If you are not a party to a Management Continuity Agreement,
“Good Reason” shall mean, without your express written consent: (A) your
permanent assignment to a new work location that would either increase your
routine one-way commute by fifty (50) or more miles, measured by the shortest
commonly traveled routes between your then-current residence and new reporting
or work location, or make your routine one-way commute sixty (60) or more
miles, or (B) a reduction in your base salary, target annual incentive amount
or employer-provided benefits, if immediately after the reduction the aggregate
total of your base salary, target annual incentive amount and value of
employer-provided benefits is less than eighty percent (80%) of the aggregate
total of your salary, target annual incentive amount and the value of
employer-provided benefits immediately prior to the Change of Control.

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	5.	 	Other Termination. If your employment with PolyOne or a Subsidiary terminates before
the expiration of the SARs for any reason other than as set forth in Sections 3 or 4 above,
the SARs that are exercisable shall be limited to the number of SARs that could have been
exercised under Section 1 above at the time of your termination of employment and shall
terminate as to the remaining SARs and may be exercised as to such limited number of SARs at
any time within ninety (90) days of your termination of employment, but in no event beyond
[DATE], after which the SARs will terminate.
	 
	6.	 	Non-Assignability. The SARs are personal to you and are not transferable by you
other than by will or the laws of descent and distribution. They are exercisable during your
lifetime only by you or by your guardian or legal representative.
	 
	7.	 	Adjustments. In the event of any change in the number of Common Shares by reason of
a merger, consolidation, reorganization, recapitalization, or similar transaction, or in the
event of a stock dividend, stock split, or distribution to shareholders (other than normal
cash dividends), the number and class of shares subject to outstanding SARs, the Base Price
applicable to outstanding SARs and other value determinations, if any, applicable to
outstanding SARs will be adjusted. Such adjustment shall be made automatically on the
customary arithmetical basis in the case of any stock split, including a stock split effected
by means of a stock dividend, and in the case of any other dividend paid in PolyOne common
shares. If any such transaction or event occurs, the Committee may provide in substitution
for outstanding SARs such alternative consideration (including, without limitation, in the
form of cash, securities or other property) as it may determine to be equitable in the
circumstances and may require in connection therewith the surrender of the SARs subject to
this Agreement. No adjustment provided for in this Section 7 will require PolyOne to issue
any fractional shares.
	 
	8.	 	Miscellaneous.

	 	(a)	 	The contents of this letter are subject in all respects to the terms and
conditions of the Plan as approved by the Board and the shareholders of PolyOne, which
are controlling. The interpretation and construction by the Board and/or the Committee
of any provision of the Plan or this Agreement shall be final and conclusive upon you,
your estate, executor, administrator, beneficiaries, personal representative and
guardian and PolyOne and its successors and assigns.
	 
	 	(b)	 	The grant of the SARs is discretionary and will not be considered to be an
employment contract or a part of your terms and conditions of employment or of your
salary or compensation. Information about you and your participation in the Plan,
including, without limitation, your name, home address and telephone number, date of
birth, social insurance number or other identification number, salary, nationality, job
title, any shares of stock or directorships held in PolyOne, and details of the SARs or
other entitlement to shares of stock awarded, cancelled, exercised, vested, unvested or
outstanding in your favor may be collected, recorded, held, used and disclosed by
PolyOne and any of its Subsidiaries and any non-PolyOne entities engaged by PolyOne to
provide services in connection with

4

 

	 	 	 	this grant (a “Third Party Administrator”), for any purpose related to the
administration of the Plan. You understand that PolyOne and its Subsidiaries may
transfer such information to Third Party Administrators, regardless of whether such
Third Party Administrators are located within your country of residence, the
European Economic Area or in countries outside of the European Economic Area,
including the United States of America. You consent to the processing of
information relating to you and your participation in the Plan in any one or more of
the ways referred to above. This consent may be withdrawn at any time in writing by
sending a declaration of withdrawal to PolyOne’s chief human resources officer.
	 
	 	(c)	 	Any amendment to the Plan shall be deemed to be an amendment to this Agreement
to the extent that the amendment is applicable hereto. The terms and conditions of
this Agreement may not be modified, amended or waived, except by an instrument in
writing signed by a duly authorized executive officer at PolyOne. Notwithstanding the
foregoing, no amendment shall adversely affect your rights under this Agreement without
your consent.
	 
	 	(d)	 	[FOR EMPLOYEES SIGNING EMPLOYEE AGREEMENT] It is a condition to your receipt of
the SARs that you execute and agree to the terms of PolyOne’s current and applicable
Employee Agreement (the “Employee Agreement”). If you do not sign and return the
Employee Agreement to PolyOne Human Resources within 30 days of your receipt of this
Grant of Stock Settled SARs, this Grant of Stock Settled SARs and any rights to the
SARs will terminate and become null and void.
	 
	 	[(d)/(e)] 	 	By signing this Agreement, you acknowledge that you have entered into an Employee
Agreement [(the “Employee Agreement”)] with PolyOne. You understand that, as set forth
in Paragraph 5 and Attachment A of the Employee Agreement, you have agreed not to engage
in certain prohibited practices in competition with PolyOne following the termination of
your employment (hereinafter referred to as the “Covenant Not to Compete”). You further
acknowledge that as consideration for entering into the Covenant Not to Compete, PolyOne
is providing you the opportunity to participate in PolyOne’s long-term incentive plan and
receive the award set forth in this Agreement. You understand that eligibility for
participation in the long-term incentive plan was conditioned upon entering into the
Covenant Not to Compete. You further understand and acknowledge that you would have been
ineligible to participate in the long-term incentive plan and receive this award had you
decided not to agree to the Covenant Not to Compete. You understand that the
acknowledgment contained in this sub-section is a part of the Employee Agreement and is
to be interpreted in a manner consistent with its terms.

	9.	 	Notice. All notices under this Agreement to PolyOne must be delivered personally or
mailed to PolyOne Corporation at PolyOne Center, Avon Lake, Ohio 44012, Attention: Corporate
Secretary. PolyOne’s address may be changed at any time by written notice of such change to
you. Also, all notices under this Agreement to you will be delivered

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	 	 	personally or mailed to you at your address as shown from time to time in PolyOne’s
records.
	 
	10.	 	Compliance with Section 409A of the Code.

	 	(a)	 	To the extent applicable, it is intended that this Agreement and the Plan
comply with the provisions of Section 409A of the Code, so that the income inclusion
provisions of Section 409A(a)(1) of the Code do not apply to you. This Agreement and
the Plan shall be administered in a manner consistent with this intent.
	 
	 	(b)	 	Reference to Section 409A of the Code will also include any proposed, temporary
or final regulations, or any other guidance, promulgated with respect to such Section
by the U.S. Department of the Treasury or the Internal Revenue Service.

                    This Agreement, and the terms and conditions of the Plan, shall bind, and inure to the benefit
of you, your estate, executor, administrator, beneficiaries, personal representative and guardian
and PolyOne and its successors and assigns.

	 	 	 	 	 
	 	Very Truly Yours,

POLYONE CORPORATION

 	 
	 	By:  	 	 
	 	 	Kenneth M. Smith, Senior Vice President 	 
	 	 	and Chief Human Resources Officer 	 
	 

	 	 	 
	Accepted:

	 	 
	 
	 
	 	 
	 

	 	 
	 
	                                         (Date)
	 	 

6

 

Exhibit A

A “Change of Control” means:

(a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the Company where such acquisition causes such Person to own 25% or more of
the combined voting power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this paragraph (a), the following acquisitions shall not be deemed to
result in a Change of Control: (i) any acquisition directly from the Company that is approved by
the Incumbent Board (as defined in paragraph (b) below), (ii) any acquisition by the Company, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c) below;
provided, further, that if any Person’s beneficial ownership of the Outstanding Company Voting
Securities reaches or exceeds 25% as a result of a transaction described in clause (i) or (ii)
above, and such Person subsequently acquires beneficial ownership of additional voting securities
of the Company, such subsequent acquisition shall be treated as an acquisition that causes such
Person to own 25% or more of the Outstanding Company Voting Securities; and provided, further, that
if at least a majority of the members of the Incumbent Board determines in good faith that a Person
has acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of the Outstanding Company Voting Securities inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares so that such Person beneficially
owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) less than 25% of the
Outstanding Company Voting Securities, then no Change of Control shall have occurred as a result of
such Person’s acquisition; or

(b) individuals who, as of August 31, 2000, constitute the Board (the “Incumbent Board” as modified
by this paragraph (b)) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to August 31, 2000 whose
election, or nomination for election by the Company’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (either by specific vote or
by approval of the proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

(c) the consummation of a reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company or the acquisition of assets of another
corporation or other transaction (“Business Combination”); excluding, however, such a Business
Combination pursuant to which (i) the individuals and entities who were the beneficial

A-1

 

owners of the Outstanding Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, an entity that as a result
of such transaction owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries), (ii) no Person (excluding any employee benefit plan
(or related trust) of the Company, the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting power of
the then outstanding securities entitled to vote generally in the election of directors of the
entity resulting from such Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

(d) approval by the shareholders of the Company of a complete liquidation or dissolution of the
Company except pursuant to a Business Combination that complies with clauses (i), (ii) and (iii) of
paragraph (c) above.

A-2

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