Document:

EX-10.3

 

 Exhibit 10.3

Attn: [                    ]

PolyOne Corporation

POLYONE CORPORATION INCENTIVE AWARD

Grant of Performance 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:

     [                    ] performance units (the “Performance Units”), with each such Performance Unit being
equal in value to $1.00, payment of which depends on PolyOne’s performance as set forth in
this Agreement and in your Statement of Performance Goals.

          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. Performance Units.

	 	(a)	 	Your right to receive all or any portion of the Performance Units will be
contingent upon the achievement of certain management objectives (the “Management
Objectives”), as set forth in your Statement of Performance Goals. The achievement of
the Management Objectives will be measured during the period from January 1, 20___
through December 31, 20___(the “Performance Period”).
	 
	 	(b)	 	The Management Objectives for the Performance Period will be based solely on
achievement of performance goals relating to PolyOne’s earnings per share (“Earnings
Per Share”), as defined in your Statement of Performance Goals.

 

 

2. Earning of Performance Units.

	 	(a)	 	The Performance Units shall be earned as follows:

	 	(i)	 	If, upon the conclusion of the Performance Period, Earnings Per
Share equal or exceed the threshold level, but is less than the 100% target
level, as set forth in the Performance Matrix contained in your Statement of
Performance Goals, a proportionate number of the Performance Units shall become
earned, as determined by mathematical interpolation and rounded up to the
nearest whole unit.
	 
	 	(ii)	 	If, upon the conclusion of the Performance Period, Earnings Per
Share equal or exceed the 100% target level, but is less than the maximum
level, as set forth in the Performance Matrix contained in your Statement of
Performance Goals, a proportionate number of the Performance Units shall become
earned, as determined by mathematical interpolation and rounded up to the
nearest whole unit.
	 
	 	(iii)	 	If, upon the conclusion of the Performance Period, Earnings
Per Share equal or exceed the maximum level, as set forth in the Performance
Matrix contained in your Statement of Performance Goals, 200% of the
Performance Units shall become earned.

	 	(b)	 	In no event shall any Performance Units become earned if actual performance
falls below the threshold level for Earnings Per Share.
	 
	 	(c)	 	If the Committee determines that a change in the business, operations,
corporate structure or capital structure of PolyOne, the manner in which it conducts
business or other events or circumstances render the Management Objectives to be
unsuitable, the Committee may modify such Management Objectives or the related levels
of achievement, in whole or in part, as the Committee deems appropriate;
provided, however, that no such action will be made in the case of a
Covered Employee where such action may result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”).
	 
	 	(d)	 	Your right to receive any Performance Units is contingent upon your remaining
in the continuous employ of PolyOne or a Subsidiary through the end of the Performance
Period. Following the Performance Period, the Committee shall determine the number of
Performance Units that shall have become earned hereunder. For awards to Covered
Employees, the Committee shall only have the ability and authority to reduce, but not
increase, the amount of Performance Units that become earned hereunder.

	3.	 	Change of Control. If a Change of Control (as defined on Exhibit A to this
Agreement) occurs during the Performance Period, PolyOne shall pay to you 100% of the
Performance Units as soon as administratively practicable after, but in all events no later
than 60 days following, the Change of Control.

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	4.	 	Retirement, Disability or Death. If your employment with PolyOne or a Subsidiary
terminates before the end of the Performance Period 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, PolyOne shall
pay to you or your executor or administrator, as the case may be, after the end of the
Performance Period, the portion of the Performance Units to which you would have been entitled
under Section 2 above, had you remained employed by PolyOne through the end of the Performance
Period, prorated based on the portion of the Performance Period during which you were employed
by PolyOne. The pro-rata portion of the Performance Units required to be paid under this
Section 4 shall be paid to you or your executor or administrator, as the case may be, as
provided in Section 6 of this Agreement.
	 
	5.	 	Other Termination. If your employment with PolyOne or a Subsidiary terminates before
the end of the Performance Period for any reason other than as set forth in Section 4 above
and before a Change of Control, the Performance Units will be forfeited.
	 
	6.	 	Payment of Performance Units. Payment of any Performance Units that become earned as
set forth herein will be made in cash. Payment will be made in the year following the end of
the Performance Period as soon as practicable after the receipt of audited financial
statements of PolyOne relating to the last fiscal year of the Performance Period, the
determination by the Committee of the level of attainment of the Management Objectives and
certification by the Board that such Management Objectives were satisfied, but payment shall
in all cases be made within two and one-half months of the expiration of the Performance
Period. If PolyOne determines that it is required to withhold any federal, state, local or
foreign taxes from any payment, PolyOne will withhold the amount of these taxes from the
payment.
	 
	7.	 	Non-Assignability. The Performance Units subject to this grant of Performance 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 Performance 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 7 shall be void, and
the other party to any such purported transaction shall not obtain any rights to or interest
in such Performance Units.

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8. 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 Performance 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
Performance 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. 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 Performance 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 Performance Units, this Grant of Performance Units and any rights to
the Performance 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

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	 	 	 	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 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.

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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-10.4

 

Exhibit 10.4 

POLYONE CORPORATION

DEFERRED COMPENSATION
PLAN

FOR NON-EMPLOYEE DIRECTORS

(As Amended and Restated Effective April 1, 2008)

ARTICLE I

PURPOSE OF THE PLAN

     The purpose
of the PolyOne Corporation (the “Company”) Deferred Compensation Plan for
Non-Employee Directors is to provide any Non-Employee Director of the Company the option to defer
receipt of the compensation payable for services as a Director and to build loyalty to the Company
through increased ownership in the Company’s Common Stock.

ARTICLE II

DEFINITIONS

     As used
herein, the following words shall have the meaning stated after them unless otherwise
specifically provided:

     2.1
“Calendar Year” shall mean the twelve month period January 1 through December 31.

     2.2
“Change in Control” shall mean
any of the following events:

(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 20% 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
subsection (a), the following acquisitions shall not be deemed to result in a Change of
Control: (i) any acquisition directly from the Company, (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 subsection (c) below; provided, further, that if any Person’s
beneficial
ownership of the Outstanding Company Voting Securities reaches or exceeds 20% 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 20% 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 20% 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 20% 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
November 6, 1996, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to November 6, 1996 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 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 (“Business Combination”); excluding, however, such a Business
Combination pursuant to which (i) all or substantially all of the individuals and entities
who were the beneficial owners of the Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation 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) in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Voting Securities, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the 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.

     2.3
“Committee” shall mean the Compensation and Governance Committee described in
Section 8.1
hereof.

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     2.4
“Common Stock” or “stock” means common shares, par value $.01 per share, of
the Company,
including authorized and unissued shares and treasury shares.

     2.5
“Company” means PolyOne Corporation, an Ohio corporation.

     2.6
“Director” shall mean any non-employee director of the Company.

ARTICLE III

ELECTIONS BY DIRECTORS

     3.1
Election to Defer. At any time designated by the Company before the beginning of
a taxable year (the “Election Period”), a Director may elect to defer receipt of the
compensation
payable to him or her for services as a Director during the taxable year. Such election shall be
made on an election form specified by the Company (the “Election Form”). A Director’s
initial
Election Form will, subject to the following sentence, include an election as to the time of
payment or the commencement of payment and the manner of payment of all amounts in his or her
Account. In addition, if a Director has elected to receive or commence payment in a specified
year, the Election Form for the Election Period immediately prior to such specified year shall
contain the Director’s election regarding the time and manner of payment of amounts in his or her
Account for that and all future Election Periods. Notwithstanding the foregoing, with respect to
the first taxable year in which a person becomes a Director, such Director may, within 30 days of
becoming a Director, make an election to defer compensation payable to him or her in such taxable
year for services as a Director subsequent to the election. Each Director’s Election Form shall
indicate the portion of the Director’s compensation to be invested in an interest-bearing account
and the portion of such compensation to be invested in Common Stock.

     3.2
Effectiveness of Elections. Elections shall be effective and, except as set forth
in Section 3.3, irrevocable upon the delivery of an Election Form to the Committee. Subject to the
provisions of Article VI, amounts deferred pursuant to such elections shall be distributed at the
time and in the manner set forth in such election.

     3.3
Amendment and Termination of Elections. A Director may terminate or amend his or
her election to defer receipt of compensation by written notice delivered to the Committee during
the Election Period prior to the commencement of the taxable year with respect to which such
compensation will be earned. Amendments which serve only to change the beneficiary designation
shall be permitted at any time and as often as necessary.

ARTICLE IV

COMMON STOCK AVAILABLE UNDER THE PLAN

     4.1
Common Stock. The aggregate number of shares of Common Stock that may be credited
to Accounts pursuant to the third sentence of Section 5.1 shall not be limited. The aggregate
number of shares of Common Stock that may be granted and credited to Accounts pursuant to the last
sentence of Section 5.1 under this Plan in any fiscal year of the Company during the term of this
Plan will be equal to one tenth of one percent (0.1%) of the number of shares of Common Stock
outstanding as of the first day of that fiscal year. Shares of Common Stock awarded to a Director
as compensation pursuant to any other plan or arrangement of the

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Company, the receipt of which the Director defers
pursuant to this Plan, shall not reduce the
number of shares of Common Stock that may be granted under this Plan in accordance with the
immediately preceding sentence.

     4.2
Adjustment. In the event of any change in the Common Stock of the Company by
reason of a merger, consolidation, reorganization, or similar transaction, or in the event of a
stock dividend, stock split, or distribution to shareholders (other than normal cash dividends),
the Committee will adjust the number and class of shares that may be issued under this Plan, the
number and class of shares subject to outstanding deferrals, and the fair market value of the
Common Stock, and other determinations applicable to outstanding awards.

ARTICLE V

ACCOUNTS

     5.1
Accounts. The Company shall establish and maintain two separate Deferred
Compensation Accounts (each an “Account”) for each Director who elects to defer
compensation under
the Plan: (a) the “Grandfathered Account” for amounts that are “deferred”
(as such term is defined
in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) as of
December 31,
2004 (and earnings thereon) and (b) the “Post-2004 Account” for amounts that are
deferred after
December 31, 2004 (and earnings thereon). If the Director elects to have deferred cash
compensation invested in an interest-bearing account, the Company shall credit the Account of the
Director with an amount equal to one hundred percent (100%) of the compensation deferred pursuant
to this Plan. In the event that a Director elects to have some or all of his or her cash
compensation invested in Common Stock, then the Company shall credit the Account of the Director
with an amount equal to one hundred percent (100%) of such compensation, in the form of a number of
shares of Common Stock, valued at its Fair Market Value. As used herein, the Fair Market Value of
Common Stock shall be the average of the high and low prices of the Company’s Common Stock as
reported on the composite tape for securities listed on the New York Stock Exchange for the date
immediately preceding the date of crediting the Account, provided that if no sales of Common Stock
were made on said Exchange on that date, the Fair Market Value shall be the average of the high and
low prices of Common Stock as reported on said composite tape for the preceding day on which sales
of Common Stock were made on said Exchange. The Accounts shall be credited as of the date on which
the compensation would otherwise have been paid to the Director, if not deferred under the Plan.
In the event that a Director elects to defer compensation that, but for the Director’s election to
defer, the Director would have received in the form of Common Stock (rather than cash or some other
non-stock form of compensation), then the Company shall credit the Account of the Director with an
amount equal to one hundred percent (100%) of such compensation, in the form of the number of
shares of Common Stock otherwise payable to the Director under the plan or arrangement of the
Company providing for the payment of such compensation, valued as provided in the plan or
arrangement of the Company providing for the payment of such compensation or, if no such provision
is made, at its Fair Market Value.

     5.2
Adjustment of Accounts. As of December 31 of each Calendar Year and on such other
dates as the Committee directs, the fair market value of the Account of each Director shall be
determined by crediting to the Account an amount equal to the income earned during the Calendar
Year, or other appropriate period, and the number of shares of Common Stock credited

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to the Account, and then determining the fair
market value of the shares and other amounts
credited to the Account.

ARTICLE VI

PAYMENT OF ACCOUNTS

     6.1 Time
of Payment. Payment of the amount credited to a Director’s Grandfathered
Account shall commence upon a date which is not more than thirty days after the earlier of (i) the
attainment of the date specified (not younger than age 55) in his Election Form or (ii) upon a
Change in Control. Payment of the amount credited to a Director’s Post-2004 Account shall
commence
upon a date which is not more than thirty days after the earliest of (i) as elected by the Director
in his Election Form, upon a specified date or the date of the Director’s separation from service
with the Company, as determined in accordance with Section 409A of the Code (the
“Separation from
Service Date”); provided, however, that the Director shall not have the right to
designate the taxable year of payment and further provided that if the payment is
to commence upon the Director’s Separation from Service Date and the Director is a “specified
employee,” as determined by the Company in its Specified Employee Designation Procedure (a
“Specified Employee”), at the Separation from Service Date, the payment shall commence on
the first
day of the seventh month following the Director’s Separation from Service Date, (ii) the death
of
the Director or (iii) upon a Change in Control. To the extent a Director would be entitled to
payment upon the occurrence of a Change in Control pursuant to the preceding sentence and such
Change in Control does not constitute a permitted distribution event under Section 409A(a)(2) of
the Code, then payment will be made, to the extent necessary to comply with the provisions of
Section 409A of the Code, to the Director on the earliest of (A) the Director’s Separation
from
Service Date, provided, further, that if the Director is a Specified Employee at
the time of the Separation from Service Date, the payment to the Director shall be made on the
first day of the seventh month following such Separation from Service Date or (B) the Director’s
death.

     6.2
Method of Payment.

          (a) Grandfathered
Account.

(1) Amounts Deferred Prior
to January 1, 1996. The amount credited to a
Director’s Grandfathered Account prior to January 1, 1996 shall be paid, in
whole or in part, to the Director in a lump sum and/or in annual
installments over a period of not more than ten years as specified in each
Director’s Election Form. Grandfathered Accounts shall be paid in kind, in
cash, or shares of Common Stock, as credited to the Grandfathered Account.

(2) Amounts Deferred From
and After January 1, 1996. The amount credited to
a Director’s Grandfathered Account on and after January 1, 1996 shall be
paid, in whole or in part, to the Director in a lump sum and/or in annual
installments over a period of not more than ten years as specified in each
Director’s Election Form. A Director may elect to change his or her
original payment period election, as specified in such Director’s Election
Form; provided, that (i) such change is approved by

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the Committee, and (ii) the
election to change is made at least 18 months
prior to the date specified in the electing Director’s Election Form on
which payment of the amount credited to the Director’s Grandfathered Account
is to commence, and such election to change shall apply to all of the
Director’s entire Grandfathered Account. In the event that a Director who
makes an election to change is a member of the Committee, such Director
shall abstain from the Committee’s determination of whether or not to
approve the change. Grandfathered Accounts shall be paid in kind, in cash,
or shares of Common Stock, as credited to the Grandfathered Account.

     (b) Post-2004 Account. The amount credited to a Director’s
Post-2004 Account shall be
paid, in whole or in part, to the Director in a lump sum and/or in annual installments over
a period of not more than ten years as specified in each Director’s Election Form. Payments
to be paid in annual installments shall be paid in a series of substantially equal annual
installments commencing on the initial date of payment set forth in Section 6.1 and on each
anniversary of such date thereafter. Each installment payment shall be treated as a
separate payment and not as part of a series of payments for purposes of Section 409A of the
Code. Post-2004 Accounts shall be paid in kind, in cash, or shares of Common Stock, as
credited to the Post-2004 Account.

     6.3
Subsequent Payment Elections. A Director may elect to change his or her election
with respect to time of commencement or method of payment, or both, with respect to an amount
credited to the Director’s Post-2004 Account, provided that the following requirements are met: (i)
the election to change does not take effect until at least 12 months after the date on which the
election is made, (ii) with respect to an election related to a payment that is to be made at a
specified time or pursuant to a fixed schedule, the election to change is made at least 12 months
prior to the date on which that payment is scheduled to be made and (iii) in the case of an
election related to a distribution not described in Section 6.4(b) or 6.5, the payment under such
election will be made no less than 5 years from the original date on which such payment would be
made. If an election to change an original payment election is not timely made, or for any reason
is not effective, amounts credited to the Director’s Post-2004 Account will automatically be paid
to the Director in the form(s) elected on the Director’s Election Form(s).

     6.4 Other
Payments.

     (a) Hardship Distribution. Prior to the time a Director’s
Grandfathered Account
becomes payable, the Committee, in its sole discretion, may elect to distribute all or a
portion of the Director’s Grandfathered Account in the event that such Director requests a
distribution on account of severe financial hardship. For purposes of this Plan, severe
financial hardship shall be deemed to exist in the event the Committee determines that a
Director needs a distribution to meet immediate and heavy financial needs resulting from a
sudden or unexpected illness or accident of the Director or a member of his or her family,
loss of the Director’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of the
Director. A distribution based on financial hardship shall not exceed the amount required

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to meet the immediate financial
need created by the hardship. The amount of a Director’s
Grandfathered Account shall be reduced by the amount of any hardship distribution to the
Director.

     (b) Unforeseeable Emergency Distribution. The Committee may at
any time, upon written
request of a Director, cause to be paid to such Director, an amount equal to all or any part
of the Director’s Post-2004 Account if the Committee determines, based on such reasonable
evidence that it shall require, that such a payment is necessary for the purpose of
alleviating the consequences of an Unforeseeable Emergency. Payments of amounts because of
an Unforeseeable Emergency may not exceed the amount necessary to satisfy the Unforeseeable
Emergency plus amounts necessary to pay taxes or penalties reasonably anticipated as a
result of the distribution after taking into account the extent to which the Unforeseeable
Emergency is or may be relieved through reimbursement or compensation from insurance or
otherwise, by liquidation of the Director’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship), or by cessation of deferrals under
the Plan. For purposes of this Plan, Unforeseeable Emergency shall mean an event which
results in a severe financial hardship to the Director resulting from (a) an illness or
accident of the Director, the Director’s spouse, the Director’s beneficiary or a dependent
of the Director, (b) loss of the Director’s property due to casualty or (c) other similar
extraordinary and unforeseeable circumstances as a result of events beyond the control of
the Director. The amount of a Director’s Post-2004 Account shall be reduced by the amount
of any Unforeseeable Emergency distribution to the Director.

     6.5
Designation of Beneficiary/Payment upon Death. Notwithstanding the time and
manner of payment elected by a Director on his or her Election Form, upon the death of a Director,
the amount credited to his or her Account (including any amount remaining in such Director’s
Account after commencement of installment payments to the Director) shall be paid in a single lump
sum to the beneficiary or beneficiaries designated by him or her within thirty days after the date
of the death of the Director, provided that no beneficiary will have the right to designate the
taxable year of payment. If there is no designated beneficiary, or no designated beneficiary
surviving at a Director’s death, payment of a Director’s Account shall be made to his or her
estate. Beneficiary designations shall be made in writing. A Director may designate a new
beneficiary or beneficiaries at any time by notifying the Company.

     6.6
Taxes. In the event any taxes are required by law to be withheld or paid from any
payments made pursuant to the Plan, the appropriate amounts shall be deducted from such payments
and transmitted to the appropriate taxing authority.

ARTICLE VII

CREDITORS

     7.1
Claims of the Company’s Creditors. The rights of a Director or his or her
beneficiaries to any payment under the Plan shall be no greater than the rights of an unsecured
creditor of the Company.

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ARTICLE VIII

ADMINISTRATION

     8.1
Appointment of Committee. The Board of Directors of the Company shall appoint a
Committee consisting of not less than three persons to administer the Plan. Members of the
Committee shall hold office at the pleasure of the Board of Directors and may be dismissed at any
time with or without cause. Such persons serving on the Committee need not be members of the Board
of Directors of the Company.

     8.2
Powers of the Committee. The Committee shall administer the Plan and resolve all
questions of interpretation arising under the Plan with the help of legal counsel, if necessary.

          Whenever directions,
designations, applications, requests or other notices are to be given by
a Director under the Plan, they shall be filed with the Committee. Except as provided in Section
6.2(a)(2) and Section 6.4(a), the Committee shall have no discretion with respect to Plan
contributions or distributions but shall act in an administrative capacity only. Except as
provided in the immediately following sentence, all decisions by the Committee will be made with
the approval of not less than a majority of its members. Any interpretation by a majority of the
Incumbent Directors then serving on the Committee as to whether a sale or other disposition of
assets by the Company or an acquisition of assets of another corporation constitutes a “sale or
other disposition of all or substantially all of the assets of the Company or the acquisition of
assets of another corporation” for purposes of clause (iii) of the definition of “Change of
Control” in Section 2.2 hereof shall be final and binding for all purposes of this Plan and any
Accounts hereunder, notwithstanding that the transaction in question was, or is contemplated to be,
submitted to stockholders of the Company for their approval and notwithstanding such approval.

          It is intended that the Plan
comply with the provisions of Section 409A of the Code, so as to
prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year that is
prior to the taxable year or years in which such amounts would otherwise actually be distributed or
made available to Directors or beneficiaries. This Plan shall be administered in a manner that
effects such intent. Any reference in this Plan 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 409A by the U.S. Department of Treasury or the Internal Revenue Service.

ARTICLE IX

MISCELLANEOUS

     9.1 Term
of Plan. The Plan shall terminate on the tenth anniversary of the approval
of the Plan, as amended, by the shareholders at the 2004 Annual Meeting of Shareholders. Once the
Plan has terminated, no further shares of Common Stock shall be granted; provided, however, that
any Accounts then existing shall continue in accordance with the provisions of the Plan until the
Accounts are paid out in accordance with the provisions of Article VI. The Company reserves the
right to amend or terminate the Plan at any time; provided, however, that no amendment or
termination shall affect the rights of Directors to amounts previously credited to their Accounts
pursuant to Section 5.1 or to future income to be credited to their Accounts

 - 8 - 

 

pursuant to Section 5.2, except to the
extent that such amendment or termination is deemed
necessary by the Company to ensure compliance with Section 409A of the Code.

     9.2
Assignment. No right or interest of any Director (or any person claiming through
or under such Director) in any benefit or payment herefrom other than the surviving spouse of such
Director after he or she is deceased, shall be assignable or transferable in any manner or be
subject to alienation, anticipation, sale, pledge, encumbrance, or other legal process or in any
manner be liable for or subject to the debts or liabilities of such Director. Any attempt to
transfer, assign, alienate, anticipate, sell, pledge, or otherwise encumber benefits hereunder or
any part thereof shall be void.

     9.3
Effective Date of Plan. The Plan’s original effective date was December 9, 1993,
and it is hereby amended and restated effective as of December 31, 2007.

 

IN WITNESS WHEREOF, the Company,
by its duly authorized officer, has caused this Plan to be
executed as of the 23rd day of April, 2008.

	 	 	 	 	 
	 	POLYONE CORPORATION

 	 
	 	By:  	/s/ Kenneth M. Smith
 	 
	 	 	Kenneth M. Smith 	 
	 	 	Senior Vice President and

Chief Information and

Human Resources Officer 	 

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