Document:

EX-10.1

Exhibit 10.1

JOHN B. SANFILIPPO & SON, INC.

2008 EQUITY INCENTIVE PLAN

PREAMBLE

John B. Sanfilippo & Son, Inc., a Delaware corporation (together with its successors and assigns,
the “Company”), hereby establishes the John B. Sanfilippo & Son, Inc. 2008 Equity Incentive Plan
(the “Plan”) to provide the Company with an effective means of attracting, retaining, and
motivating directors, officers, key employees and other service providers, and to provide them with
incentives to enhance the growth and profitability of the Company.

ARTICLE 1 DEFINITIONS

In this Plan, except where the context otherwise indicates, the following definitions and rules
apply:

	1.1	 	Agreement means either (i) a written agreement entered into by the Company and a
Participant setting forth the terms and provisions applicable to an Award granted under this
Plan, or (ii) a written or electronic statement issued by the Company to a Participant
describing the terms and provisions of such Award, in each case, including any amendment or
modification thereof. The Committee may provide for the use of electronic, internet or other
non-paper Award Agreements, and the use of electronic, internet or other non-paper means for
the acceptance thereof and actions thereunder by a Participant.
	 
	1.2	 	Approval Date shall mean the date the Plan is approved by the holders of a majority
of the combined voting power of the Common Stock and Class A Stock of the Company present, or
represented, and entitled to vote at a meeting duly called and held.
	 
	1.3	 	Award means any award or benefit granted under the Plan, including, without
limitation, a grant of Common Stock, Options, Restricted Stock, Stock Appreciation Rights or
Restricted Stock Units.
	 
	1.4	 	Board means the Board of Directors of the Company.
	 
	1.5	 	Change in Control shall have the meaning set forth in Section 10.1.
	 
	1.6	 	Class A Stock means the Class A Common Stock, $.01 par value per share, of the
Company.

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	1.7	 	Code means the Internal Revenue Code of 1986, as amended, including any regulations
promulgated thereunder. A reference to any provision of the Code shall include reference to
any successor provision of the Code.
	 
	1.8	 	Committee means the Compensation Committee of the Board, or any successor thereto
(references herein to the Committee shall be deemed to include the Subcommittee, as
applicable). In the event there is no valid Committee, the entire Board shall be the
Committee.
	 
	1.9	 	Common Stock means the Common Stock, par value $.01 per share, of the Company, and
any other shares into which such Common Stock shall thereafter be exchanged by reason of a
recapitalization, merger, consolidation, split-up, combination, exchange of shares or the
like.
	 
	1.10	 	Company shall have the meaning set forth in the Preamble.
	 
	1.11	 	Covered Employee means a Participant who, as of the date of vesting and/or payout
of an Award, as applicable, is a “covered employee” as defined by Code Section 162(m).
	 
	1.12	 	Date of Exercise means the date on which the Company receives notice of the
exercise of an Option or a Stock Appreciation Right in accordance with the terms hereof.
	 
	1.13	 	Date of Grant means the date on which an Award is granted by the Committee (or such
later date as specified in advance by the Committee) or, in the case of an Award granted to
an Non-Employee Director, the date on which such Award is approved by the Board (or such
later date as specified in advance by the Board).
	 
	1.14	 	Effective Date shall have the meaning set forth in Section 2.1.
	 
	1.15	 	Employee means any individual classified or treated as an employee of the Company
and/or its Subsidiaries on the payroll records thereof. An Employee shall not include any
individual during any period he or she is classified or treated by the Company and/or its
Subsidiaries as an independent contractor, a consultant, or any employee of an employment,
consulting, or temporary agency or any other entity other than the Company and/or its
Subsidiaries, without regard to whether such individual is subsequently determined to have
been, or is subsequently retroactively reclassified as a common-law employee of the Company
and/or its Subsidiary during such period.
	 
	1.16	 	Exchange Act means the Securities Exchange Act of 1934, as amended.
	 
	1.17	 	Exercise Price shall have the meaning set forth in Section 6.2.
	 
	1.18	 	Fair Market Value of a Share means:

	 	(a)	 	If on the applicable date the Common Stock is listed for trading on a
national securities exchange, including the NASDAQ Global Market, the closing price

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	 	 	 	of the Common Stock on such exchange on the applicable date, or if no sales of
Common Stock shall have occurred on such exchange on the applicable date, the
closing price of the Common Stock on such exchange on the next preceding date on
which there were such sales;

	 	(b)	 	If on the applicable date the Common Stock is not listed for trading on
a national securities exchange, including the NASDAQ Global Market, the mean
between the closing bid price and the closing ask price of the Common Stock as
otherwise reported by the NASDAQ Stock Market LLC or its successors or assigns with
respect to the applicable date or, if the closing bid and ask prices for the Common
Stock shall not have been so reported with respect to the applicable date, on the
next preceding date with respect to which such bid and ask prices were so reported;
or
	 
	 	(c)	 	If on the applicable date the Common Stock is not listed for trading on
a national securities exchange, including the NASDAQ Global Market, or otherwise
reported by the NASDAQ Stock Market LLC or its successors or assigns, the fair
market value of a Share as determined by the Committee.

	1.19	 	Family Members shall have the meaning set forth in Section 1.32(a).
	 
	1.20	 	For Cause shall have the meaning set forth in Section 9.3.
	 
	1.21	 	Insider means a director, officer or beneficial owner of more than 10% of the
Common Stock for purposes of Section 16 of the Exchange Act.
	 
	1.22	 	Non-Employee Director means any individual who is a director of the Company and who
is not also an employee of either the Company, any Subsidiary or any of their respective
affiliates.
	 
	1.23	 	Nonstatutory Stock Option means an Option granted under the Plan that does not
qualify as an incentive stock option under Section 422 of the Code.
	 
	1.24	 	Option means a right to purchase Common Stock granted under the Plan.
	 
	1.25	 	Option Period means the period during which an Option may be exercised.
	 
	1.26	 	Option Price means the price per Share at which an Option may be exercised.
	 
	1.27	 	Original Directors shall have the meaning set forth in Section 10.1(c).
	 
	1.28	 	Participant means an individual with an outstanding Award.
	 
	1.29	 	Performance-Based Compensation means “performance-based compensation” as that term
is used in Code Section 162(m).
	 
	1.30	 	Performance Measures shall have the meaning set forth in Section 6.6(b).

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	1.31	 	Permanent Disability means a mental or physical condition which, in the opinion of
the Committee, renders a Participant unable or incompetent to carry out the job
responsibilities which such Participant held or tasks to which such Participant was assigned
at the time the disability was incurred and which is expected to be permanent or for an
indefinite period. With respect to any Award subject to Code Section 409A, the Committee may
not find that a Permanent Disability exists with respect to the applicable Participant
unless, in the Committee’s opinion, such Participant is also “disabled” within the meaning of
Code Section 409A.
	 
	1.32	 	Permitted Holder means:

	 	(a)	 	Jasper B. Sanfilippo (“Jasper”), Mathias A. Valentine, (“Mathias”), a
spouse of Jasper, a spouse of Mathias, any lineal descendant of Jasper or any
lineal descendant of Mathias (collectively referred to as the “Family Members”);
	 
	 	(b)	 	a legal representative of a deceased or disabled Family Member’s
estate, provided that such legal representative is a Family Member;
	 
	 	(c)	 	a trustee of any trust of which all the beneficiaries (and any donees
and appointees of any powers of appointment held thereunder) are Family Members and
the trustee of which is a Family Member;
	 
	 	(d)	 	a custodian under the Uniform Gifts to Minors Act or Uniform Transfers
to Minors Act for the exclusive benefit of a Family Member, provided that such
custodian is a Family Member;
	 
	 	(e)	 	any corporation, partnership or other entity, provided that at least
75% of the equity interests in such entity (by vote and by value) are owned, either
directly or indirectly, in the aggregate by Family Members;
	 
	 	(f)	 	any bank or other financial institution, solely as a bona fide pledgee
of shares of Class A Stock by the owner thereof as collateral security for
indebtedness due to the pledgee; or
	 
	 	(g)	 	any employee benefit plan, or trust or account held thereunder, or any
savings or retirement account (including an individual retirement account), held
for the exclusive benefit of a Family Member.

	1.33	 	Plan shall have the meaning set forth in the Preamble.
	 
	1.34	 	Prior Plan means the John B. Sanfilippo & Son, Inc. 1998 Equity Incentive Plan.
	 
	1.35	 	Restricted Stock means any grant of Shares, with such Shares subject to a risk of
forfeiture or other restrictions as determined pursuant to the Plan.
	 
	1.36	 	Restricted Stock Unit means the grant of a right to receive Shares (or a derivative
thereof) in the future, with such right to future delivery of Shares (or other rights)
subject to a risk of forfeiture or other restrictions as determined pursuant to the Plan.

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	1.37	 	Retirement for an Employee means a Termination of Service, other than For Cause, to
the extent the Employee has attained, as of the effective date of such Termination of
Service, either (i) age 65 or, (ii) age 55 and 10 completed years of service with the Company
or any Subsidiary. Retirement for a Non-Employee Director means a Termination of Service on
or after the attainment of age 60.
	 
	1.38	 	Share means a share of Common Stock.
	 
	1.39	 	Share Withholding shall have the meaning set forth in Section 8.4.
	 
	1.40	 	Stock Appreciation Right means any such right granted under Section 6.2.
	 
	1.41	 	Subcommittee shall have the meaning set forth in Section 3.3.
	 
	1.42	 	Subsidiary means a corporation of which at least 50% of the total combined voting
power of all classes of stock is owned by the Company either directly or through one or more
Subsidiaries.
	 
	1.43	 	Termination of Service shall have the following meanings:

	 	(a)	 	for an Employee, the date on which the Employee is no longer an
Employee;
	 
	 	(b)	 	for a Non-Employee Director, the date on which the Non-Employee
Director is no longer a member of the Committee;
	 
	 	(c)	 	for any other eligible individual, the date on which such individual no
longer provides substantial services on a regular basis.

	 	 	With respect to any Award subject to Code Section 409A, a Termination of Service shall
mean a “separation from service” within the meaning of Code Section 409A.

ARTICLE 2 EFFECTIVE DATE AND AVAILABLE SHARES

	2.1	 	Effective Date, Approval Date and effect on Prior Plan. The Board and the
Committee adopted the Plan on September 4, 2008 (the “Effective Date”); provided, however,
that Awards granted under the Plan prior to the Approval Date are contingent on approval of
the Plan by the Company’s stockholders. The Plan shall be unlimited in duration and, in the
event of Plan termination, shall remain in effect as long as any Awards under it are
outstanding; provided, however, that no Awards may be granted under the Plan after the
ten-year anniversary of the Effective Date (except for Awards granted pursuant to commitments
entered into prior to such ten-year anniversary). Upon the Effective Date, no further awards
will be made under the Prior Plan. If there is no Approval Date within 12 months of the
Effective Date, Awards granted pursuant to the Plan shall be deemed cancelled.
	 
	2.2	 	Share authorization.

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	 	(a)	 	The maximum number of Shares available for grants of Awards (including
the Shares underlying such Awards) pursuant to the Plan is 1,000,000.
	 
	 	(b)	 	The maximum number of Shares available for Awards of Common Stock,
Restricted Stock and Restricted Stock Units is 500,000.
	 
	 	(c)	 	Shares issued pursuant to the Plan may come from authorized and
unissued Shares, treasury Shares or Shares purchased by the Company in the open
market.

	2.3	 	Share usage. The limits of Sections 2.2(a) and (b) are governed by the rules
contained in this Section 2.3. Any Shares related to Awards which (i) terminate by
expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, (ii)
are settled in cash in lieu of Shares, or (iii) are exchanged with the Committee’s
permission, prior to the issuance of Shares, shall be available again for grant under this
Plan. Moreover, if the Option Price of any Option or the tax withholding requirements with
respect to any Award are satisfied by tendering Shares to the Company (by either actual
delivery or by attestation) or through the surrender of all or a portion of an Option, or if
a Stock Appreciation Right is exercised, only the number of Shares issued, net of the Shares
tendered, if any, will be deemed delivered for purposes of determining the maximum number of
Shares available for delivery under this Plan.

ARTICLE 3 ADMINISTRATION

	3.1	 	The Committee. The Plan shall be administered by the Committee in accordance with
the following:

	 	(a)	 	The Committee shall have the authority in its sole discretion, at any
time, and from time to time, subject to and not inconsistent with the express
provisions of the Plan, to administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan or as it deems
necessary or advisable in administration of the Plan, including without limitation,
(i) the authority to grant Awards; (ii) to determine the individuals to whom and
the time or times at which Awards shall be granted; (iii) to determine the type and
number of Awards to be granted, as applicable, the number of Shares to which an
Award may relate and the terms, conditions, restrictions and performance criteria
relating to any Award; (iv) to determine whether, to what extent, and under what
circumstances and the manner in which an Award may be settled, cancelled,
forfeited, exchanged or surrendered; (v) to construe and interpret the Plan and any
Award; (vi) to prescribe, amend, and rescind rules and regulations relating to the
Plan, including but not limited to, rules and regulations relating to leaves of
absence and changes from an employee to a service provider or consultant; and (vii)
to make all other determinations deemed necessary or advisable for the
administration and implementation of the Plan. The determination of the Committee
on all matters relating to the Plan or any Agreement shall be final

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	 	 	 	and conclusive and binding on the Company and all Participants and
beneficiaries.

	 	(b)	 	Except to the extent prohibited by applicable law or the applicable
rules of a securities exchange, or inconsistent with the Company’s Bylaws or
Committee charters, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate all
or any part of its responsibilities and powers to any person or persons selected by
it. Such delegation shall include, unless limited by its terms, all of the
responsibility and authority held by the Committee hereunder, and any such
allocation or delegation may be revoked by the Committee at any time.

	3.2	 	Prohibition on Option Repricing. Notwithstanding any other provision of the Plan,
the Committee may not reprice, replace or regrant any Option granted under the Plan or any
other plan of the Company, (i) through cancellation and replacement or regrant with lower
priced options or (ii) by lowering the Option Price of a previously granted Award, without
the prior approval of Company stockholders.
	 
	3.3	 	Code Section 162(m) Subcommittee. Notwithstanding anything to the contrary
contained herein, the Committee has the authority to designate, if desirable, a subcommittee
(the “Subcommittee”) to administer the Plan with respect to Covered Employees. If a
Subcommittee is designated, the Subcommittee shall be composed of two or more members of the
Committee appointed by the Committee, all of whom shall be “outside directors” as that term
is used in Code Section 162(m). With respect to such Covered Employees, the Subcommittee
shall have all of the powers, rights, and duties granted to the Committee under this Plan.
	 
	3.4	 	Periodic Committee review and meetings with management. The Committee may from
time to time review the implementation and results of the Plan to determine the extent to
which the Plan’s purpose is being accomplished. In addition, the Committee may periodically
meet with senior management of the Company to review their suggestions regarding grants under
the Plan, including the individuals who are proposed to receive grants and the amount and
terms of such grants; provided, however, that unless otherwise delegated, all such grants
shall be determined solely by the Committee in its discretion.

ARTICLE 4 AWARDS

	4.1	 	Eligibility. Awards may be granted to any Employee, any consultant or other person
providing services to the Company or a Subsidiary and any member of the Board.
	 
	4.2	 	Award Agreements. Awards under the Plan shall be evidenced by Agreements which
shall not be inconsistent with the terms and provisions of the Plan, and which shall contain
such provisions as the Committee may in its sole discretion determine. A copy of such
Agreement shall be provided to the Participant, and the Committee may, but need not, require
that the Participant sign a copy of such Agreement. Without limiting the generality of the
foregoing, the Committee may in any Agreement impose

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	 	 	such restrictions or conditions upon the exercise or settlement of any Award or upon the
sale or other disposition of any Shares issuable pursuant to the Plan as the Committee
may in its sole discretion determine. Awards and related Agreements may, but need not,
be uniform among Participants. By accepting an Award pursuant to the Plan each
Participant shall thereby agree that each such Award shall be subject to all of the
terms and provisions of the Plan. In the event of any inconsistency between an
Agreement and the Plan, the terms of the Plan shall prevail.

ARTICLE 5 OPTIONS

	5.1	 	General. The Committee is authorized to grant Options with the terms and
conditions set forth in this Article and with such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall determine in its sole
discretion.
	 
	5.2	 	Type of Options. All Options granted pursuant to the Plan shall be Nonstatutory
Stock Options.
	 
	5.3	 	General terms and conditions. The Committee shall determine all terms and
conditions of the Options not inconsistent with the Plan, provided that, the following terms
and conditions shall apply to all Options:

	 	(a)	 	Options may not be exercised after ten years have elapsed from the Date
of Grant;
	 
	 	(b)	 	The Option Price shall be determined by the Committee in accordance
with the terms and conditions of the Plan, except that, in no event shall the
Option Price be less than 100% of the Fair Market Value per Share determined as of
the Date of Grant;
	 
	 	(c)	 	Except as otherwise provided by the Committee and set forth in the
Award Agreement, each Option shall become exercisable in equal installments of 25%
of the total number of Shares subject to being purchased thereunder on each of the
first, second, third and fourth anniversaries of the Option’s Date of Grant;
provided, however, that the Participant remains an Employee (or a Non-Employee
Director or continues to provide services as a consultant, as applicable) on a
regular and continuous basis through each such anniversary of the Date of Grant;
and
	 
	 	(d)	 	Options shall not contain any provision entitling a Participant to the
automatic grant of additional Options in connection with any exercise of the
original Option.

	5.4	 	Annual individual limit. The maximum number of Shares subject to Options which may
be awarded to any individual in any one calendar year shall not exceed 100,000 Shares.

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	5.5	 	 Exercise of Options. Subject to the provisions hereof and the provisions of the
Agreement under which it was granted, each Option shall be exercised by delivery to the
Company’s treasurer of written notice (or by such other method determined by the Committee
and communicated in writing to a Participant) of intent to purchase a specific whole number
of Shares subject to the Option or by such other method as may be provided by the Committee.
Except as otherwise provided in an Agreement or determined by the Committee, a payment to
exercise an Option may, at the election of the Participant, be made in (i) cash, (ii) Shares
valued at their Fair Market Value on the Date of Exercise, (iii) surrender of an exercisable
Option covering Shares with an aggregate Fair Market Value as of the date of exercise in
excess of the aggregate dollar amount of the Option Prices of such Shares under such Option
equal to the Option Price of the Options sought to be exercised, (iv) through the delivery of
irrevocable instructions to a broker to deliver promptly to the Company an amount in cash
equal to the Option Price, (v) any combination of the foregoing, or (vi) in accordance with
the terms of the Agreement under which the Options sought to be exercised were granted, or
(vii) in accordance with other methods as the Committee may from time to time permit. A
Participant may surrender to the Company an Option (or a portion thereof) that has become
exercisable and receive upon such surrender, without any payment to the Company or a
Subsidiary (other than required tax withholding amounts), that number of Shares (equal to the
highest whole number of Shares) having an aggregate Fair Market Value as of the date of
surrender equal to that number of Shares subject to the Option (or portion thereof) being
surrendered multiplied by an amount equal to the excess of (i) the Fair Market Value of a
Share on the date of surrender, over (ii) the Option Price, plus an amount of cash equal to
the Fair Market Value of any fractional Share to which the Participant might be entitled.
Any such surrender shall be treated as the exercise of the Option (or portion thereof).

ARTICLE 6 OTHER AWARDS

	6.1	 	Restricted Stock and Restricted Stock Units. The Committee is authorized to grant
Awards of Common Stock, Restricted Stock and Restricted Stock Units. Any such Award shall be
subject to such conditions, restrictions and contingencies as the Committee may impose
(including, without limitation, any limitation on the right to vote Restricted Stock or the
right to receive any dividend or other right or property), which may lapse separately or in
combination and at such time or times as the Committee may deem appropriate. Awards of
Restricted Stock Units may be subject to such terms and conditions deemed necessary and
desirable by the Committee to permit such Awards to comply with the provisions of Code
Section 409A.
	 
	6.2	 	Stock Appreciation Rights. The Committee is authorized to grant Stock Appreciation
Rights, which may, but need not, relate to a specific Option granted under the Plan. Subject
to the terms of the Plan and any applicable Agreement, each Stock Appreciation Right shall
confer on the holder thereof a right to receive, upon exercise thereof, the excess of (a) the
Fair Market Value of one Share on the Date of Exercise over (ii) the exercise price (the
“Exercise Price”) of the right as specified by the Committee, which shall not be less than
the Fair Market Value of one Share on the Date of Grant of the Stock Appreciation Right.
Subject to the terms of the Plan and

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	 	 	any applicable Agreement, the Exercise Price, term, methods of exercise, methods of
payment or settlement, including whether such Stock Appreciation Right shall be settled
in cash or Shares, and any other terms and conditions of any Stock Appreciation Right
shall be as determined by the Committee, but in no event shall the term of a Stock
Appreciation Right exceed a period of ten years from the date of its grant.

	6.3	 	Dividends and Dividend Equivalents. Any Award of Restricted Stock or Restricted
Stock Units may provide the Participant with the right to receive dividend payments or
dividend equivalent payments with respect to Shares underlying the Award (both before and/or
after the Shares subject to the Award are earned, vested, or acquired), which payments may be
either made currently or credited to an account for the Participant (the Agreement shall
specify whether such amounts are paid currently or credited to an account, and any such
account shall be intended to comply with applicable provisions of Code Section 409A), and may
be settled in cash or Shares as determined by the Committee. Any such settlements, and any
such crediting of dividends or dividend equivalents or reinvestments in Shares, may be
subject to such conditions, restrictions and contingencies as the Committee shall establish,
including the reinvestment of such credited amounts in Share equivalents.
	 
	6.4	 	Share certificates and distributions. At the time Restricted Stock is granted to a
Participant, share certificates representing the appropriate number of Shares of Restricted
Stock shall be registered in the name of the Participant but shall be held by the Company in
custody for the account of such person. The Committee (and the Company) may take whatever
actions it determines necessary or desirable to restrict the transferability of the unvested
Restricted Stock including providing that the certificates bear a legend restricting their
transferability. Any Shares or other securities of the Company received by a Participant to
whom Restricted Stock has been granted as a result of a stock distribution to stockholders or
as a stock dividend on Common Stock shall be subject to the same terms, conditions and
restrictions as such Restricted Stock.
	 
	6.5	 	Annual individual limits.

	 	(a)	 	The maximum number of Shares subject to Stock Appreciation Rights which
may be awarded to any individual in any one calendar year shall not exceed 100,000
Shares.
	 
	 	(b)	 	The maximum number of Shares, shares of Restricted Stock or Restricted
Stock Units which may be awarded to any individual in any one calendar year shall
not exceed 50,000 (for the avoidance of doubt, this limit applies separately to
each type of Award).

	6.6	 	Performance-Based Compensation.

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	 	(a)	 	An Award of Restricted Stock or Restricted Stock Units that is intended
to qualify as Performance-Based Compensation shall be governed by this Section 6.6.
	 
	 	(b)	 	The performance goals upon which the payment or vesting of an Award of
Restricted Stock and Restricted Stock Units to a Covered Employee that is intended
to qualify as Performance-Based Compensation shall be limited to one or more of the
performance measures listed in Appendix A hereto (the “Performance Measures”).
	 
	 	(c)	 	Any Performance Measure(s) may be used to measure the performance of
the Company and its Subsidiaries as a whole or any business unit of the Company or
its Subsidiaries or any combination thereof, as the Committee may deem appropriate,
or any of the Performance Measures as compared to the performance of a group of
comparator companies, or published or special index that the Committee, in its sole
discretion, deems appropriate, or the Company may select Performance Measure (j) on
Appendix A as compared to various stock market indices. The Committee also has the
authority to provide for accelerated vesting of any Award based on the achievement
of performance goals pursuant to the Performance Measures set forth at Appendix A.
	 
	 	(d)	 	The Committee may provide in any such Award that any evaluation of
performance may include or exclude any of the following events that occurs during a
Performance Period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax laws, accounting principles, or
other laws or provisions affecting reported results, (iv) any reorganization and
restructuring programs, (v) extraordinary nonrecurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management’s discussion and
analysis of financial condition and results of operations appearing in the
Company’s annual report to stockholders for the applicable year or other applicable
periodic filings with the Securities and Exchange Commission, (vi) acquisitions or
divestitures, and (vii) foreign exchange gains and losses. To the extent such
inclusions or exclusions affect Awards to Covered Employees, they shall be
prescribed in a form that meets the requirements of Code Section 162(m) for
deductibility.
	 
	 	(e)	 	Awards that are intended to qualify as Performance-Based Compensation
may not be adjusted upward. The Committee may retain the discretion to adjust such
Awards downward, either on a formula or discretionary basis or any combination, as
the Committee determines.
	 
	 	(f)	 	In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing Performance Measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Committee determines that it is advisable to

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	 	 	 	grant Awards that shall not qualify as Performance-Based Compensation, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m) and base vesting on Performance Measures other than those set
forth herein.

	 	(g)	 	In all events, determinations under this section shall be made in a
manner which is consistent with Code Section 162(m).

ARTICLE 7 NON-EMPLOYEE DIRECTORS

The Committee, subject to approval by the full Board, shall determine all Awards to Non-Employee
Directors. The terms and conditions of any Award to any such Non-Employee Director shall be set
forth in an Agreement and, except as otherwise provided for in such Agreement, such Award shall
vest or become exercisable, as the case may be, on the first anniversary of the Award’s Date of
Grant.

ARTICLE 8 TAXES

	8.1	 	Notification under Section 83(b). Provided that the Committee has not prohibited
such Participant from making the following election, if a Participant shall, in connection
with the receipt of any Award, make the election permitted under Section 83(b) of the Code
(i.e., an election to include in such Participant’s gross income in the year of transfer the
amounts specified in Section 83(b) of the Code), such Participant shall notify the Committee
or its designee of such election within ten (10) days of filing notice of the election with
the Internal Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Section 83(b) of the Code.
	 
	8.2	 	Remittance of Tax as Condition of Delivery. The Company shall be entitled to
require as a condition of delivery of Shares hereunder that the Participant remit an amount
of cash sufficient to satisfy all federal, state and other governmental withholding tax
requirements related thereto.
	 
	8.3	 	Mandatory Withholding on Insiders. In the case of a Participant who is an Insider,
whenever under the Plan Shares are to be delivered, the Company shall withhold an amount
sufficient to satisfy all minimum federal, state and other governmental withholding tax
requirements related thereto.
	 
	8.4	 	Elective Share Withholding. Provided that the Committee has not prohibited such
Participant from making the following election, a Participant, other than an Insider, may
elect the withholding (“Share Withholding”) by the Company of a portion of the Shares
otherwise deliverable to such Participant upon the settlement of an Award having a Fair
Market Value equal to the amount necessary to satisfy such Participant’s minimum required
federal, state or other governmental withholding tax liability with respect thereto.
	 
	8.5	 	Share withholding is subject to Committee approval. Each Share Withholding
election by a Participant shall also be subject to the following restrictions:

12

 

	 	(a)	 	the election must be made prior to the date on which the amount of tax
to be withheld is determined; and
	 
	 	(b)	 	the election shall be irrevocable.

ARTICLE 9 TERMINATION OF SERVICE

	9.1	 	Unexercisable Options. Except as otherwise determined by the Committee, upon a
Participant’s Termination of Service, all unexercisable and/or unvested Options shall be
forfeited and cancelled without further action by the Committee.
	 
	9.2	 	Exercisable Options. Except as otherwise determined by the Committee, this Section
9.2 shall apply to exercisable Options held by an Employee. An unexercised Option shall
terminate and/or be forfeited upon Termination of Service if the Termination of Service was
the result of the resignation of the Participant or the Participant was terminated For Cause
or otherwise, except that:

	 	(a)	 	Death. If the Participant’s Termination of Service is as a result of
his or her death, unexercised Options to the extent exercisable on the date of the
Participant’s death, may be exercised, in whole or in part, at any time within one
(1) year after the date of death by the Participant’s personal representative or by
the person to whom the Options are transferred by will or the applicable laws of
descent and distribution.
	 
	 	(b)	 	Retirement. If the Termination of Service of an Employee or a
Non-Employee Director is as a result of Retirement, any unexercised Option, to the
extent exercisable at the date of such Termination of Service, may be exercised, in
whole or in part, at any time within one (1) year after the date of such
Termination of Service; provided that, if the Participant dies after such
Termination of Service and before the expiration of such one (1) year period,
unexercised Options held by such deceased Participant may be exercised by his or
her personal representative or by the person to whom the Option is transferred by
will or the applicable laws of descent and distribution within one (1) year after
the Participant’s Termination of Service.
	 
	 	(c)	 	Permanent Disability. If the Participant’s Termination of Service is a
result of his or her Permanent Disability, any unexercised Option, to the extent
exercisable at the date of such Termination of Service, may be exercised, in whole
or in part, at any time within one (1) year after the date of such Termination of
Service; provided that, if a Participant dies after such Termination of Service and
before the expiration of such one (1) year period, the unexercised Options may be
exercised by the deceased Participant’s personal representative or by the person to
whom the unexercised Options are transferred by will or the applicable laws of
descent and distribution within one (1) year after the Participant’s Termination of
Service, or, if later, within 180 days after the Participant’s death.

13

 

	 	(d)	 	Other Reasons for Termination. If the Participant has a Termination of
Service for any reason other than by death, Retirement, Permanent Disability,
resignation or For Cause, any unexercised Option, to the extent exercisable on the
date of such Termination of Service, may be exercised, in whole or in part, at any
time within ninety (90) days from the date of such Termination of Service.

	 	 	When Options are no longer exercisable pursuant to the provisions of Section 9.2(a) through
(d), such Options shall be forfeited and cancelled without further action by the Committee.
	 
	9.3	 	For Cause. A Termination of Service “For Cause” shall mean a Termination of
Service that, in the judgment of the Committee, is the result of (a) the breach by the
Employee of any employment agreement, employment arrangement or any other agreement with the
Company or a Subsidiary, (b) the Employee engaging in a business that competes with the
Company or a Subsidiary, (c) the Employee disclosing business secrets, trade secrets or
confidential information of the Company or a Subsidiary to any party, (d) dishonesty,
misconduct, fraud or disloyalty by the Employee, (e) misappropriation of corporate funds, or
(f) such other conduct by the Employee of an incompetent, insubordinate, immoral or criminal
nature as to have rendered the continued employment of the Employee incompatible with the
best interests of the Company and its Subsidiaries.
	 
	9.4	 	Other Awards. Except as otherwise determined by the Committee:

	 	(a)	 	Stock Appreciation Rights shall be treated similar to Options as set
forth in Sections 9.1 and 9.2;
	 
	 	(b)	 	Upon Termination of Service except as a result of death or Permanent
Disability, all Restricted Stock Units and shares of Restricted Stock still subject
to restriction and/or unvested shall be forfeited without further action by the
Committee and cancelled or reacquired without payment of consideration by the
Company; and
	 
	 	(c)	 	Upon Termination of Service as a result of death or Permanent
Disability, any Award of Restricted Stock Units or shares of Restricted Stock shall
be immediately vested to the extent the Participant would have become vested in
such Award had he or she not experienced a Termination of Service until immediately
after the next following anniversary of such Award’s Date of Grant, and the
remainder of the Award still subject to restriction and/or unvested shall be
forfeited without further action by the Committee and cancelled or reacquired
without payment of consideration by the Company.

	9.5	 	Term. Any of the provisions herein to the contrary notwithstanding, no Option or
Stock Appreciation Right shall be exercisable beyond the term specified in the related
Agreement thereof.

14

 

	9.6	 	Non-Employee Directors and Other Service Providers. Awards granted to Non-Employee
Directors and other service providers shall be treated in accordance with the principles set
forth in this Article 9, as applicable, provided that service providers who are not
Non-Employee Directors or Employees shall not be eligible for Retirement treatment.

ARTICLE 10 CHANGE IN CONTROL

	10.1	 	Definition. For the purposes of this Plan, a “Change in Control” means,
except as may otherwise be provided in an Agreement, the first date on which one of the
following events occurs:

	 	(a)	 	the consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more than 50% of the
combined voting power of the continuing or surviving entity’s securities
outstanding immediately after such merger, consolidation or other reorganization is
owned by persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization;
	 
	 	(b)	 	the sale, transfer or other disposition of all or substantially all of
the Company’s assets;
	 
	 	(c)	 	a change in the composition of the Board, as a result of which fewer
than one-half of the directors following such change in composition of the Board
are directors who either (i) had been directors of the Company on the date 24
months prior to the date of the event that may constitute a Change in Control (the
“Original Directors”) or (ii) were elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the aggregate of (A) the
Original Directors who were still in office at the time of the election or
nomination and (B) the directors whose election or nomination was previously
approved pursuant to this Clause (ii); or
	 
	 	(d)	 	any transaction as a result of which any “person” or “group” (as such
terms are used in Section 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, or any group that is controlled by Permitted Holders, is or
becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of the voting securities of the Company
representing at least 30% of the total voting power of the Company (with respect to
all matters other than the election of directors) represented by the Company’s then
outstanding voting securities. For purposes of this Clause (d), the term
“transaction” shall include any conversion of the Class A Stock, whether or not
such conversion occurs in connection with a sale, transfer or other disposition of
such Class A Stock.

	 	 	For purposes of this definition, (i) the term “person” shall exclude: (A) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company or

15

 

	 	 	a Subsidiary; and (B) a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of the Common Stock
(it being understood that for purposes of subsequently determining whether a Change in
Control has occurred, all references to the “Company” in the definition of Change in
Control shall be deemed to be references to the Company and/or such corporation, as
applicable); (ii) the term “group” shall exclude any group controlled by any person
identified in Clause (i)(A) above and (iii) the term “control” shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of voting securities,
by contract, or otherwise, and the terms “controlling” and “controlled” have meanings
correlative thereto.

	10.2	 	Certain Rules. The following rules shall apply to the determination of a Change in
Control.

	 	(a)	 	Except as otherwise determined by the Committee, any spin-off of a
division or subsidiary of the Company to its stockholders will not constitute a
Change in Control of the Company.
	 
	 	(b)	 	Any event listed in Section 10.1 that the Committee elects to not treat
as a Change in Control of the Company prior to the occurrence of a Change in
Control, shall not constitute a Change in Control.
	 
	 	(c)	 	Upon a determination by the Committee in its discretion, any other
event substantially similar to an event described in Section 10.1 shall be a Change
in Control .

	10.3	 	Discretionary Treatment; Default Provisions. The Committee shall determine the
treatment of outstanding Awards prior to a Change in Control, except that to the extent the
Committee takes no action (and except as otherwise expressly provided for in an Agreement):

	 	(a)	 	all Options and Stock Appreciation Rights then outstanding shall become
immediately and fully exercisable, notwithstanding any provision therein for the
exercise in installments;
	 
	 	(b)	 	all restrictions and conditions of all Restricted Stock then
outstanding shall be deemed satisfied as of the date of the Change in Control; and
	 
	 	(c)	 	all Restricted Stock Units, Dividend Equivalents and any Award subject
to performance goals shall become vested and deemed earned or satisfied in full,
notwithstanding that the applicable performance cycle, retention cycle or
restriction conditions shall not have been completed or met, and shall be paid or
otherwise settled within 30 days of the Change in Control (except to the extent
that payment must be made pursuant to its original schedule in order to comply with
Code Section 409A).

16

 

	10.4	 	Potential Treatment. Without limitation, except as expressly provided for in an
Agreement, the Committee may elect prior to a Change in Control, that in the event of a
Change in Control, that all or any portion of an Award, with no requirement of uniform
treatment:

	 	(a)	 	Shall be assumed or an equivalent award be substituted by the successor
corporation in any Change in Control transaction, or a parent or subsidiary of such
successor corporation;
	 
	 	(b)	 	Shall be cancelled or forfeited and settled in cash;
	 
	 	(c)	 	To the extent unvested or unexercisable, shall be cancelled or
forfeited without settlement, payment or other consideration; or
	 
	 	(d)	 	With respect to any unexercised portion of an Option or Stock
Appreciation Right, shall be cancelled following the time permitted to exercise
said Award.

	10.5	 	Following a Change in Control, no action shall be taken under the Plan that will cause any
Award that has previously been determined to be (or is determined to be) subject to Code
Section 409A to fail to comply in any respect with Code Section 409A without the written
consent of the Participant.

ARTICLE 11 SECURITIES LAW MATTERS

	11.1	 	Investment Intent Representation: Restrictive Legend. Where an investment intent
representation or restrictive legend is deemed necessary to comply with the Securities Act of
1933, as amended, the Committee may require a written representation to that effect by the
Participant, or may require that such legend be affixed to certificates for Shares at the
time the Option is exercised or an Award is granted.
	 
	11.2	 	Company’s right to postpone exercise or settlement. If based upon the opinion of
counsel to the Company, the Committee determines that the exercise or settlement of any
Awards would violate any applicable provision of (i) state or federal securities law, (ii)
the listing requirements of any securities exchange registered under the Exchange Act on
which are listed any of the Company’s equity securities, (iii) the listing requirements of
the NASDAQ Global Market if any of the Company’s equity securities are listed thereon, or
(iv) the listing requirements of The NASDAQ Capital Market if any of the Company’s equity
securities are listed thereon, then the Committee may postpone any such exercise or
settlement; provided, however, that the Company shall use its best efforts to cause such
exercise to comply with all such provisions at the earliest practicable date; and provided
further, that the Committee’s authority under this Section 11.2 shall expire from and after
the date of any Change in Control.
	 
	11.3	 	Rule 16b-3 Compliance. With respect to Insiders, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the

17

 

	 	 	Board or the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board or the Committee.

ARTICLE 12 MISCELLANEOUS

	12.1	 	Funding. Benefits payable under the Plan to any person shall be paid directly by
the Company. The Company shall not be required to fund, or otherwise segregate assets to be
used for payment of, benefits under the Plan.
	 
	12.2	 	No Employment Rights. Neither the establishment of the Plan, nor the granting of
any rights under the Plan, shall be construed to (a) give any Participant the right to remain
employed by the Company, any Subsidiary or any of their affiliates or to any benefits not
specifically provided by the Plan, or (b) in any manner modify the right of the Company, any
Subsidiary or any of their affiliates to modify, amend or terminate any of its employee
benefit plans.
	 
	12.3	 	Stockholder Rights. A Participant shall not, by reason of any right granted
hereunder, have any right as a stockholder of the Company with respect to the Shares which
may be deliverable upon exercise of such Option until such Shares have been delivered to him
or her.
	 
	12.4	 	Nature of Payments. Any and all grants or deliveries of Shares hereunder shall
constitute special incentive payments to the Participant and shall not be taken into account
in computing the amount of salary or compensation of the Participant for the purposes of
determining any pension, retirement, death or other benefits under (a) any pension,
retirement, profit-sharing, bonus, life insurance or other employee benefit plan of the
Company, any Subsidiary or any of their affiliates, or (b) any agreement between the Company,
any Subsidiary or any of their affiliates, on the one hand, and the Participant, on the other
hand, except as such plan or agreement shall otherwise expressly provide.
	 
	12.5	 	Non-Uniform Determinations. The Committee’s determinations under the Plan need not
be uniform and may be made by the Committee selectively among persons who receive, or are
eligible to receive, grants under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective determinations, and to enter
into non-uniform and selective Agreements as to (a) the persons to receive grants under the
Plan, (b) the terms and provisions of Awards under the Plan, and (c) the treatment, under
Section 3.1, of leaves of absence.
	 
	12.6	 	Adjustments. In the event of any corporate event or transaction (including, but
not limited to, a change in the Shares of the Company or the capitalization of the Company)
such as a merger, consolidation, reorganization, recapitalization, separation, partial or
complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off,
or other distribution of stock or property of the Company, combination of Shares, exchange of
Shares, dividend in kind, or other like change in capital structure, number of outstanding
Shares or distribution (other than normal

18

 

	 	 	cash dividends) to stockholders of the Company, or any similar corporate event or
transaction, the Committee, in order to prevent dilution or enlargement of Participants’
rights under this Plan, shall substitute or adjust, as applicable, the number and kind
of Shares that may be issued under this Plan (Section 2.2(a)) or under particular forms
of Awards (Section 2.2(b)), the number and kind of Shares subject to outstanding Awards,
the Option Price or Exercise Price applicable to outstanding Awards, the annual Award
limits (Sections 5.4 and 6.5), and other value determinations applicable to outstanding
Awards. The Committee, in its sole discretion, may also make appropriate adjustments in
the terms of any Awards under this Plan to reflect such changes or distributions,
including modifications of performance goals and changes in the length of performance
periods, if any. The determination of the Committee as to the foregoing adjustments, if
any, shall be at the discretion of the Committee and shall be conclusive and binding on
Participants under this Plan.

	12.7	 	Conversion. Notwithstanding anything else herein to the contrary, without
affecting the number of Shares reserved or available hereunder, the Committee may authorize
the issuance or assumption of benefits under this Plan in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such terms and
conditions as it may deem appropriate (including, but not limited to, a conversion of equity
awards into Awards under this Plan), subject to compliance with the rules under Code Sections
409A, 422 and 424, as and where applicable.
	 
	12.8	 	Amendment of the Plan. The Committee may amend the Plan and any Agreement in its
sole discretion; provided, however, no modifications shall be made which would materially
impair the rights of any Award theretofore granted without the Participant’s consent; and
provided further, the Committee may not, without further approval of the stockholders of the
Company, either:

	 	(a)	 	materially increase the number of Shares reserved for issuance under
the Plan (except as provided for in Section 12.6);
	 
	 	(b)	 	materially modify the requirements as to eligibility for participation
in the Plan; or
	 
	 	(c)	 	extend the date of termination of the Plan.

	12.9	 	Termination of the Plan. The Plan shall terminate on the tenth (10th) anniversary
of the Effective Date or at such earlier time as the Committee may determine. Any
termination, whether in whole or in part, shall not affect any rights then outstanding under
the Plan.
	 
	12.10	 	Controlling Law. The Plan shall be governed, construed and administered in
accordance with the laws of the State of Delaware, except its laws with respect to choice of
law.
	 
	12.11	 	Action by the Company. Any action required by the Company under the Plan shall be
by resolution of the Committee.

19

 

	12.12	 	Non-transferability. Each Award granted hereunder shall by its terms not be
assignable or transferable other than by will or the laws of descent and distribution.
During the life of the Participant, all rights granted to the Participant under the Plan or
under any Agreement shall be exercisable only by the Participant or, if permissible under
applicable law, by the Participant’s guardian or legal representative.
	 
	12.13	 	No Lien or Security Interest. No Award, and no right under any such Award, may be
pledged, attached or otherwise encumbered other than in favor of the Company, and any
purported pledge, attachment, or encumbrance thereof other than in favor of the Company shall
be void and unenforceable against the Company or any Subsidiary.
	 
	12.14	 	No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between
the Company or any Subsidiary and a Participant or any other person. To the extent that any
person acquires a right to receive payments from the Company or any Subsidiary pursuant to an
Award, such right shall be no greater than the right of any unsecured general creditor of the
Company or any Subsidiary.
	 
	12.15	 	No Fractional Shares. No fractional Shares shall be issued or delivered pursuant
to the Plan or any Award, and the Committee shall determine whether cash, other securities or
other property shall be paid or transferred in lieu of any fractional Shares, or whether such
fractional Shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.
	 
	12.16	 	Settlement of Awards. The obligation to make payments and distributions with
respect to Awards of Restricted Stock Units and Stock Appreciation Rights may be satisfied
through cash payments, the delivery of Shares, or any combination thereof as the Committee
shall determine in its sole discretion. Satisfaction of any obligations to make payments or
distributions under an Award, which is sometimes referred to as “settlement” of the Award,
may be subject to such conditions, restrictions and contingencies as the Committee shall
determine. Each Subsidiary shall be liable for payment of cash due under the Plan with
respect to any Participant to the extent that such benefits are attributable to the services
rendered for that Subsidiary by the Participant. Any disputes relating to liability of a
Subsidiary for cash payments shall be resolved by the Committee.

20

 

APPENDIX A

Performance Measures

	(a)	 	Net earnings or net income (before or after taxes);
	 
	(b)	 	Earnings per share;
	 
	(c)	 	Net sales or revenue growth;
	 
	(d)	 	Net operating profit;
	 
	(e)	 	Return measures (including, but not limited to, return
on assets, capital, invested capital, equity, sales, or revenue);
	 
	(f)	 	Cash flow (including, but not limited to, operating
cash flow, free cash flow, cash flow return on equity, and cash flow return
on investment);
	 
	(g)	 	Earnings before or after taxes, interest, depreciation,
and/or amortization;
	 
	(h)	 	Gross or operating margins;
	 
	(i)	 	Productivity ratios;
	 
	(j)	 	Share price (including, but not limited to, growth
measures and total stockholder return);
	 
	(k)	 	Expense targets;
	 
	(l)	 	Margins;
	 
	(m)	 	Operating efficiency;
	 
	(n)	 	Market share;
	 
	(o)	 	Customer satisfaction;
	 
	(p)	 	Working capital targets and change in working capital;
and
	 
	(q)	 	Stockholder value added which is equal to (i) the net operating profit after
tax minus (ii) the sum of capital multiplied by the cost of capital.

21EX-10(EE)

Exhibit 10(ee)

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the 28th day of
May, 2003, by and between A. SCHULMAN, INC., a Delaware corporation (the “Company”), A. Schulman
Inc. Limited, a corporation organized under the laws of the United Kingdom and a wholly-owned
subsidiary of the Company (the “Employer”), and JACK B. TAYLOR (the “Employee”).

          WHEREAS, the Employer and the Board of Directors of the Company desire to provide for the
continued employment of the Employee as a member of the Employer’s management, and believe that
such continued employment is in the best interest of the Employer, the Company and the Company’s
stockholders. The Employee is willing to commit himself continue to serve the Employer, on the
terms and conditions herein provided;

          NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
the parties hereto agree as follows:

          1. DEFINED TERMS

          The definitions of capitalized terms used in this Agreement (unless stated where first
used) are provided in the last Section hereof.

          2. EMPLOYMENT; EMPLOYER’S OBLIGATIONS

          2.1 Employment. The Employer hereby continues to employ the Employee as General
Manager-Europe for the Employer, and the Employee hereby accepts such continued employment upon the
terms and conditions herein contained.

          2.2 Employer’s Obligations. If the Employer ceases to be an Employer hereunder on a
certain date, the Employer’s obligations under this Agreement shall cease to accrue on such
date.

          3. DUTIES AND CONDITIONS OF EMPLOYMENT

          3.1 Duties. The Employee shall devote his entire business time, attention and
energies to the Employer and shall not engage in any conduct which shall reflect adversely upon the
Employer. The Employee shall perform such duties for the Employer as may be assigned to one in his
employment status and capacity by the Chief Executive Officer of the Company or the Board. The
Employee shall serve diligently and to the best of his ability.

          During his employment by the Employer, the Employee shall not, without the Company’s prior
written consent, be engaged in any other business activity, whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, except that notwithstanding the
foregoing, he may invest his personal funds for his own account; provided that such investment
shall be passive and not controlling in any such investment and subject to the provisions of
Section 13.2 hereof and provided further that he will not be required to provide any substantial
services on behalf of such enterprise. Notwithstanding the foregoing, the

 

 

Employee may serve on the Boards of Directors of other corporations during the Term as long as such
service does not interfere with the performance of his duties hereunder.

          3.2 Conditions. The Employee shall be provided with suitable office space,
furnishings, secretarial and administrative assistance. Without the Employee’s consent, the
Employee shall not be required to report principally to an office located more than five hundred
(500) miles from his principal office at the date of this Agreement, except to the extent the
Employee may be required to report to the Company’s principal office.

          4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW DURING DISPUTE

          4.1 Term of Agreement. The Employer hereby employs the Employee for a Term commencing
as of the date hereof and ending May 28, 2006. At the end of June 2003 and at the end of each
calendar month thereafter up to and including the end of the calendar month in which Employee’s
62nd birthday occurs, this Agreement shall automatically be extended for one (1) month unless
either party shall give notice to the other of non-extension prior to the end of such calendar
month; provided, however, if a Change in Control shall have occurred during the Term of this
Agreement, Sections 7 and 8 and 10 through 21 of this Agreement shall continue in effect until at
least the end of the Change-in-Control Protective Period (whether or not the Term of the Agreement
shall have expired for other purposes).

          4.2 Termination of Employment Prior to a Change in Control. Prior to any Change in
Control, the Company may terminate the employment of the Employee for Cause pursuant to this
Agreement. Prior to any Change in Control, the Employee may terminate his employment pursuant to
this Agreement if the Employer fails to make full and timely payments of all sums provided for in
Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall breach its covenants
hereunder in any material respect.

          4.3 Escrow during a Termination Dispute. Prior to any Change in Control, if the
Employee shall be terminated for Cause, and, within 30 days of such termination, shall notify the
Employer and the Company of his intention to adjudicate such termination as improper, the Company
agrees that it will deposit (or will cause the Employer to deposit) with KeyBank National
Association, Cleveland, Ohio, as Escrow Agent the installments of the Employee’s Base Salary (as
provided in Section 5 below) as the same would have become payable but for such termination. In the
event of a final adjudication by a tribunal of competent jurisdiction that such termination was not
for Cause, then the amounts so deposited in escrow, plus any interest earned by the Escrow Agent
thereon, shall be delivered promptly to the Employee. If such adjudication shall be in favor of the
Employer, the Escrow Agent shall return the sums so deposited, plus such interest, to the Company
or the Employer, as the case may be.

          The escrowed salary shall not be deemed to be liquidated damages but the Employer
shall be entitled to a credit against any such award to the extent of the sums so
delivered to the Employee.

2

 

          5. COMPENSATION

          The Employer agrees to pay to the Employee as compensation for his services hereunder a Base
Salary initially equal to the fixed annual salary currently being paid to the Employee by the
Employer as shown on the Employer’s employment records, payable in substantially equal weekly,
biweekly, bimonthly or monthly installments, as the case may be, in the manner currently being
paid to the Employee. The Base Salary may be discretionarily increased by the Chief Executive
Officer of the Company from time to time as the Chief Executive Officer deems appropriate in its
reasonable business judgment. The Base Salary in effect from time to time shall not be decreased
during the Term (except as provided in Section 7.2).

          It is understood and agreed that the Employee’s compensation may not be limited to his Base
Salary and that the Employee may receive an annual bonus in the amount, if any, determined
annually by the Chief Executive Officer of the Company.

          The Employee shall also participate in employee compensation and benefit plans available
generally to employees of the Employer on a level appropriate to his position and shall receive the
employee fringe benefits available generally to employees of the Employer having comparable levels
of responsibility and status (including, without limitation, the use of a company car).

          6. EXPENSES

          The Employee is authorized to incur reasonable expenses for promoting the business of the
Employer, including expenses for entertainment, travel and similar items. The Employer shall
reimburse the Employee for all such expenses upon the presentation by the Employee, from time to
time, of an itemized account of such expenditures.

          7. PRE-TERMINATION COMPENSATION; DISABILITY

          7.l Normal Pre-Termination Compensation. If the Employee’s employment shall be
terminated for any reason during the Term (or, if later, prior to the end of the Change-in-Control
Protective Period), the Employer shall pay the Employee’s Base Salary to the Employee through the
Date of Termination at the rate in effect at the time the Notice of Termination is given (subject
to Section 7.2 hereof), together with all compensation and benefits payable to the Employee through
the Date of Termination under the terms of any compensation or benefit plan, program or arrangement
maintained by the Employer during such period. Subject to Sections 8, 9, 10 and 11 hereof, after
completing the expense reimbursements required by Section 6 hereof and making the payments and
providing the benefits required by this Section 7, the Employer shall have no further obligations
to the Employee under this Agreement.

          7.2 Disability Adjustment to Base Salary Payments. During the Term (or, if
later, at any time prior to the end of the Change-in-Control Protective Period), during any period
that the Employee fails to perform the Employee’s full-time duties with the Employer as a result of
incapacity due to physical or mental illness (but in no event for more than twenty-four (24)
months), the Employer shall pay only sixty percent (60%) of the Employee’s Base Salary to the
Employee at the rate in effect at the commencement of any such period (less amounts, if any,

3

 

payable to the Employee at or prior to the time of any such Base Salary payment under disability
benefit plans of the Employer or under any governmental disability insurance program). After six
(6) months of Disability, the Employer shall have the right to terminate the Employee’s employment
pursuant to this Agreement and all Base Salary payments (except the sixty percent (60%) payments
pursuant to the foregoing sentence) shall cease. Except to the extent provided in this Section 7.2,
all Base Salary payments to the Employee shall be abated during the period of Disability. Subject
to Sections 8, 9, 10 and 11 hereof, after completing the expense reimbursements required by Section
6 hereof and making the payments and providing the benefits required by this Section 7, the
Employer shall have no further obligations to the Employee under this Agreement.

          8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY; TERMINATION PAY; PROMPT PAYMENT

          8.1 Normal Post-Termination Payments. If the Employee’s employment shall be terminated
for any reason during the Term of this Agreement (or, if later, prior to the end of the
Change-in-Control Protective Period), the Employer shall pay the Employee’s normal post-termination
compensation and benefits to the Employee as such payments become due. Subject to Section 10
hereof, such post-termination compensation and benefits shall be determined under, and paid in
accordance with, the Employer’s retirement, insurance and other compensation or benefit plans,
programs and arrangements (other than this Agreement).

          8.2 Continuation Pay; Termination Pay. Notwithstanding anything to the contrary in
Section 7.2, 9.1 or 10.1(A) hereof, if the laws governing this Agreement (or the laws governing the
effects of any termination of the employment of the Employee) shall require that the Employer
continue to pay or otherwise compensate the Employee for any period of time following termination
of the Employee’s employment (“Continuation Pay”) or if such laws require certain amounts of
severance pay, termination compensation or the like (collectively, “Termination Pay”), then to the
fullest extent permitted by law any payments to the Employee pursuant to Section 7.2, 9.1 or
10.1(A) hereof shall be included in the calculation of Continuation Pay and Termination Pay and
such payments shall be deducted from the amount of Continuation Pay or Termination Pay due the
Employee.

          8.3 Prompt Payment. Any payments due under Section 5, 6, 7 or 9 hereof or this Section
8 shall be made promptly after the event giving rise to the obligation and shall be made to the
Employee or in accordance with Section 14.2 hereof, as the case may be.

          9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A CHANGE IN CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE

          9.1 Death Benefit. If the Employee’s employment shall be terminated by death
during the Term (or, if later, prior to the end of the Change-in-Control Protective Period), then,
in addition to the compensation and benefits provided by Sections 7.1 and 8 hereof, the Employer
shall pay a lump sum amount equal to sixty percent (60%) of the Base Salary for twenty-four (24)
months in accordance with Section 14.2.

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          9.2 Termination by the Employer without Cause. If the Employer shall terminate
the Employee’s employment during the Term and prior to a Change in Control, without Cause (and not
for Disability or in connection with the Employee’s death), the Employer shall pay the Employee his
Base Salary throughout the remaining Term and annual bonuses during the remaining Term, each of
which bonuses shall be equal to one-half (1/2) times the average annual bonus paid to the Employee
during the most recent five (5) calendar years of the Employee’s employment by any of the Companies
(prorated for any partial years in the remaining Term).

          10. SEVERANCE PAYMENTS; TOTAL PAYMENTS.

          10.1 Severance Payments.

          The Employer shall pay the Employee the payments described in this Section 10.1 (the
“Severance Payments”) upon the termination of the Employee’s employment following a Change in
Control and prior to the end of the Change-in-Control Protective Period, in addition to any
payments and benefits to which the Employee is entitled under Sections 5, 6, 7 and 8.1 hereof,
unless such termination is (i) by the Company for Cause, (ii) by reason of death or Disability, or
(iii) by the Employee without Good Reason. For purposes of this Agreement, the Employee’s
employment shall be deemed to have been terminated by the Company without Cause following a Change
in Control or by the Employee with Good Reason following a Change in Control, as the case may be,
if (i) the Employee’s employment is terminated without Cause prior to a Change in Control and such
termination was at the request or direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in Control, (ii) the Employee
terminates his employment with Good Reason prior to a Change in Control and the circumstance or
event which constitutes Good Reason occurs at the request or direction of such Person, or (iii) the
Employee’s employment is terminated by the Company without Cause prior to a Change in Control (but
following a Potential Change in Control) and such termination is otherwise in connection with or in
anticipation of a Change in Control which actually occurs. For purposes of any determination
regarding the applicability of the immediately preceding sentence, any position taken by the
Employee shall be presumed to be correct unless the Company establishes to the Committee by clear
and convincing evidence that such position is not correct.

               (A) In lieu of any further salary payments to the Employee for periods subsequent
to the Date of Termination and in lieu of any severance benefit otherwise payable to the
Employee, the Employer shall pay to the Employee a lump sum severance payment, in cash,
equal to three (3) times the sum of (i) the higher of the Employee’s Base Salary in effect
immediately prior to the occurrence of the event or circumstance upon which the Notice of
Termination is based or the Employee’s Base Salary in effect immediately prior to the Change
in Control, and (ii) the higher of the annual bonus earned by the Employee from the Employer
in respect of the Employer’s fiscal year immediately preceding that in which the Date of
Termination occurs or the average annual bonus so earned in respect of the three fiscal
years immediately preceding that in which the Change in Control occurs.

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               (B) Notwithstanding any provision of any annual incentive plan to the contrary, the
Employer shall pay to the Employee a lump sum amount, in cash, equal to the sum of (i) any
annual incentive compensation which has been allocated or awarded to the Employee by the
Employer for a completed fiscal year preceding the Date of Termination and which, as of the
Date of Termination, is contingent only upon the continued employment of the Employee to a
subsequent date, and (ii) a pro rata portion to the Date of Termination of a deemed annual
bonus for the Employer’s fiscal year in which the Date of Termination occurs, calculated by
multiplying (i) the higher of the annual bonus earned by the Employee from the Employer with
respect to the immediately preceding fiscal year or the average annual bonus earned by the
Employee with respect to the immediately preceding three fiscal years of the Employer by
(ii) the fraction obtained by dividing the number of days in the fiscal year of the Employer
in which termination occurs up to and including the Date of Termination by 365.

               (C) For the thirty-six (36) month period immediately following the Date of Termination,
the Employer shall arrange to provide the Employee with life, disability, accident and
health insurance benefits substantially similar to those which the Employee is receiving
immediately prior to the Notice of Termination (without giving effect to any amendment to
such benefits made subsequent to a Change in Control, which amendment adversely affects in
any manner the Employee’s entitlement to or the amount of such benefits). Benefits otherwise
receivable by the Employee pursuant to this Section 10.1(C) shall be reduced to the extent
comparable benefits are actually received by or made available to the Employee without cost
during the thirty-six (36) month period following the Employee’s termination of employment
(and any such benefits actually received by or made available to the Employee shall be
reported to the Employer by the Employee).

          10.2 The payments provided in Sections 10.1(A) and (B) hereof shall be made not later than
the fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the Employer shall pay
to the Employee on such day an estimate, as determined in good faith by the Employer of the minimum
amount of such payments to which the Employee is clearly entitled and shall pay the remainder of
such payments (together with interest at one hundred twenty percent (120%) of the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Employer to the Employee, payable on the fifth (5th) business day
after demand by the Employer (together with interest at one hundred twenty percent (120%) of the
rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this
Section, the Employer shall provide the Employee with a written statement setting forth the manner
in which such payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Employer has received from outside counsel, auditors
or consultants (and any such opinions or advice which are in writing shall be attached to the
statement). In the event the Employer should fail to pay when due the amounts described in Sections
10.1(A), (B) and (C) hereof, the Employee shall also be entitled to receive from the Employer an
amount representing interest on any such unpaid amounts from the due date, as determined under this
Section 10.2

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(without regard to any extension of the Date of Termination pursuant to Section 11.3 hereof), to
the date of payment at one hundred twenty percent (120%) of the rate provided in section
1274(b)(2)(B) of the Code.

          10.3 The Employer also shall pay to the Employee all legal fees and expenses incurred by
the Employee (i) in disputing in good faith any issue relating to the termination of the
Employee’s employment following a Change in Control and prior to the end of the Change-in-Control
Protective Period, or (ii) in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement. Such payments shall be made within five (5) business days after
delivery of the Employee’s written requests for payment accompanied with such evidence of fees and
expenses incurred as the Employer reasonably may require.

          11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.

          11.1 Notice of Termination. During the Term (and, if longer, until the end of the
Change-in-Control Protective Period), any purported termination of the Employee’s employment (other
than by reason of death) shall be communicated by written Notice of Termination from the Employee
to the Employer and the Company or from the Employer or the Company to the Employee in accordance
with Section 15 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee’s employment under the provision so indicated. Further, with respect to
any purported termination of the Employee’s employment after a Change in Control and prior to the
end of the Change-in-Control Protective Period, a Notice of Termination for Cause is required to
include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board, which was called and held
for the purpose of considering such termination (after reasonable notice to the Employee and an
opportunity for the Employee, together with the Employee’s counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Employee was guilty of conduct set forth
in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in
detail.

          11.2 Date of Termination. “Date of Termination,” with respect to any purported
termination of the Employee’s employment during the Term (and, if longer, prior to the end of the
Change-in-Control Protective Period), shall mean (i) if the Employee’s employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that the Employee shall
not have returned to the full-time performance of the Employee’s duties during such thirty (30) day
period), and (ii) if the Employee’s employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by the Employer, shall
not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case
of a termination by the Employee, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is given).

          11.3 Dispute Concerning Termination. With respect to any purported termination of the
Employee’s employment after a Change in Control and prior to the end of the

7

 

Change-in-Control Protective Period, if within fifteen (15) days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without regard to this Section
11.3), the party receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended until the date on
which the dispute is finally resolved, either by mutual written agreement of the parties or by a
final judgment, order or decree of a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice of
dispute given by the Employee only if such notice is given in good faith and the Employee pursues
the resolution of such dispute with reasonable diligence.

          11.4 Compensation During Dispute. If a purported termination occurs following a
Change in Control and prior to the end of the Change-in-Control Protective Period and the Date of
Termination is extended in accordance with Section 11.3 hereof, the Employer shall continue to pay
the Employee the full compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Employee as a participant in all
compensation, benefit and insurance plans in which the Employee was participating when the notice
giving rise to the dispute was given, until the Date of Termination, as determined in accordance
with Section 11.3 hereof. Amounts paid under this Section 11.4 are in addition to all other amounts
due under this Agreement (other than those due under Section 7.1 hereof) and shall not be offset
against or reduce any other amounts due under this Agreement.

          12. NO MITIGATION

          The Employer agrees that, if the Employee’s employment with the Employer terminates following
a Change in Control and prior to the end of the Change-in-Control Protective Period, the Employee
is not required to seek other employment or to attempt in any way to reduce any amounts payable to
the Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof. Further, the
amount of any payment or benefit provided for in this Agreement (other than Section 10.1(C) hereof)
shall not be reduced by any compensation earned by the Employee as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.

          13. CONFIDENTIALITY; NON-COMPETITION AND NON SOLICITATION

          13.1 Confidentiality. The Companies’ methods, plans for doing business, processes,
pricing, compounds, customers and supplies are vital to the Companies and, to the extent not made
public by the Companies, constitute confidential information subject to the Companies’ proprietary
rights therein. The Employee covenants and agrees that during the Term and at all times thereafter,
the Employee will not, directly or indirectly, make known, divulge, furnish, make available or use,
otherwise than in the regular course of the Employee’s employment by the Employer, any invention,
product, process, apparatus or design of any of the Companies, or any knowledge or information in
respect thereof (including, but not limited to, business methods and techniques), or any other
confidential or so-called “insider” information of

8

 

any of the Companies. This covenant shall apply without regard to the time or circumstances of any
termination of the Employee’s employment.

          13.2 Non-competition and Non-solicitation. The Employee covenants and agrees that during the period of three (3) years following any termination of the
Employee’s employment which occurs prior to a Change in Control, the Employee will not, directly or indirectly, either as an individual for the Employee’s own account or as an investor, or
other participant in, or as an employee, agent, or representative of, any other business
enterprise:

	 	(i)	 	solicit, employ, entice, take away or interfere with, or attempt to
solicit, employ, entice, take away or interfere with, any employee of the Employer or
the Companies; or
	 
	 	(ii)	 	engage or participate in or finance, aid or be
connected with any enterprise which competes with the business of the
Companies, or any of them.

The geographical limitations of the foregoing shall include any country in which the Companies or
any of them shall be doing business as of such date of such termination. This covenant shall apply
without regard to the circumstances of any termination of the Employee’s employment which occurs
prior to a Change in Control.

          13.3 The Employee acknowledges that the covenants contained in this Section 13 are of the essence of this Agreement and said covenants shall be construed as independent
of any other provisions of this Agreement. Recognizing the irreparable nature of the injury that
could result from the Employee’s violation of any of the covenants and agreement to be
performed and/or observed by the Employee pursuant to the provisions of this Section 13, and
that damages would be inadequate compensation, it is agreed that any violations by the
Employee of the provisions of this Section 13, shall be the proper subject for immediate
injunctive and other equitable relief to the Company or the Employer, as the case may be.

          14. SUCCESSORS; BINDING AGREEMENT

          14.1 In addition to any obligations imposed by law upon any successor to the Company or the
Employer, the Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle the Employee to compensation
from the Employer in the same amount and on the same terms as the Employee would be entitled to
hereunder if the Employee were to terminate the Employee’s employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. Except as provided in
this Section 14.1, this Agreement shall not be assignable by any party without the written consent
of the other parties hereto.

          14.2 This Agreement shall inure to the benefit of and be enforceable by the Employee’s
personal or legal representatives, executors, administrators, successors, heirs,

9

 

distributees, devisees and legatees. If the Employee shall die while any amount would still be
payable to the Employee hereunder (other than amounts which, by their terms, terminate upon the
death of the Employee) if the Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Employee’s estate.

          15. NOTICES

          For purposes of this Agreement, notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid (or the international
equivalent thereof), addressed, if to the Employee, to the address shown for the Employee in the
personnel records of the Employer and, if to the Employer or the Company, to the address set forth
below, or to such other address as such party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective only upon actual
receipt:

To the Employer or the Company:

Robert A. Stefanko

Chief Financial Officer and Executive Vice President-Finance and Administration

A. Schulman, Inc.

P.O. Box 1710

Akron, Ohio 44309-1710

With a copy to:

Laura D. Nemeth, Esq.

Squire, Sanders & Dempsey LLP

4900 Key Tower

127 Public Square

Cleveland, Ohio 44114

          16. MISCELLANEOUS

          No provision of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by the Employee and such officers of
the Company and the Employer as may be specifically designated by their respective Boards. No
waiver by any party hereto at any time of any breach by any other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes any other agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof which have been made by
either party, except as expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of the State of Ohio.
All references to sections of the Exchange Act or the Code shall be

10

 

deemed also to refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under federal, state or local
law and any additional withholding to which the Employee has agreed. The obligations of the
Company, the Employer and the Employee under this Agreement which by their nature may require
(partial or total) performance after the expiration of the Term or the Change-in-Control
Protective Period (including, without limitation, those under Sections 5 through 11 and Section
13 hereof) shall survive such expiration.

          17. VALIDITY

          The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall remain in full
force and effect.

          18. COUNTERPARTS

          This Agreement may be executed in several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same instrument.

          19. SETTLEMENT
OF DISPUTES AFTER CHANGE IN CONTROL; ARBITRATION

          After a Change in Control and prior to the end of the Change-in-Control Protective Period, all
claims by the Employee for benefits under this Agreement shall be directed to and determined by the
Committee and shall be in writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Employee in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The Committee shall
afford a reasonable opportunity to the Employee for a review of the decision denying a claim and
shall further allow the Employee to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Employee’s claim has been denied.
Notwithstanding any provision of this Agreement to the contrary, the Employee shall be entitled to
seek specific performance of the Employee’s right to be paid until the Date of Termination during
the pendency of any dispute or controversy arising under or in connection with this Agreement.

          20. GUARANTEE OF EMPLOYER’S OBLIGATIONS

          The Company hereby guarantees all the obligations of the Employer created by this
Agreement. The guarantee of the Company shall be called upon only to the extent that the
Employer’s obligations are not satisfied by the Employer.

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          21. DEFINITIONS

          For purposes of this Agreement, the following terms shall have the meanings indicated below:

          (A) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.

          (B) “Board” shall mean the Board of Directors of a corporation; unless otherwise
indicated, “Board” shall mean the Board of Directors of the Company.

          (C) “Cause” for termination by the Company of the Employee’s employment (which the Company
has the authority to do so through its control of the Employer as its parent company) shall mean
the following:

          (I) with respect to a termination as to which the Notice of Termination is duly
given prior to a Change in Control, the Employee’s breach of his covenants herein
contained, the Employee’s gross neglect of his duties hereunder, the Employee’s
knowingly committing misfeasance or knowingly permitting nonfeasance of his duties
in any material respect, or the Employee’s committing a felony; and

          (II) with respect to a termination as to which the Notice of Termination is
duly given following a Change in Control, (i) the willful and continued failure by
the Employee to substantially perform the Employee’s duties with the Employer (other
than any such failure resulting from the Employee’s incapacity due to physical or
mental illness or any such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Employee pursuant to Section 11.1
hereof) after a written demand for substantial performance is delivered to the
Employee by the Board, which demand specifically identifies the manner in which the
Board believes that the Employee has not substantially performed the Employee’s
duties, or (ii) the willful engaging by the Employee in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries, monetarily
or otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act,
or failure to act, on the Employee’s part shall be deemed “willful” unless done, or
omitted to be done, by the Employee not in good faith and without reasonable belief
that the Employee’s act, or failure to act, was in the best interest of the Employer
and (y) in the event of a dispute concerning the application of this provision, no
claim by the Company or the Employer that Cause exists shall be given effect unless
the Company or the Employer establishes to the Committee by clear and convincing
evidence that Cause exists.

          (D) A
“Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

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          (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates other than in connection with the acquisition
by the Company or its affiliates of a business) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined voting power of the Company’s
then outstanding securities; or

          (II) the following individuals cease for any reason to constitute a majority of the number of
directors then serving: individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent solicitation, relating to
the election of directors of the Company) whose appointment or election by the Board or nomination
for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved; or

          (III) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or approve the issuance
of voting securities of the Company in connection with a merger or consolidation
of the Company (or any direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than (i) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of the
Company or any subsidiary of the Company, at least 75% of the combined voting
power of the voting securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities acquired directly
from the Company or its subsidiaries other than in connection with the acquisition
by the Company or its subsidiaries of a business) representing 25% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the Company’s then outstanding securities; or

          (IV) the stockholders of the Company approve a plan of complete liquidation or dissolution
of the Company or an agreement for the sale or disposition by the Company of all or substantially
all of the Company’s assets, other than a sale or disposition by the Company of all or
substantially all of the Company’s assets to an entity, at least 75% of the combined voting power
of the

13

 

voting securities of which are owned by stockholders in substantially the same
proportions as their ownership of the Company immediately prior to such sale.

          Notwithstanding the foregoing, no “Change in Control” shall be deemed to have occurred if
there is consummated any transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company immediately prior to such transaction
or series of transactions continue to have substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets of the Company immediately following such
transaction or series of transactions.

          Further, notwithstanding the foregoing, any event or transaction which would otherwise
constitute a Change in Control (a “Transaction”) shall not constitute a Change in Control for
purposes of this Agreement if, in connection with the Transaction, the Employee participates as an
equity investor in the acquiring entity or any of its affiliates (the “Acquiror”). For purposes of
the preceding sentence, the Employee shall not be deemed to have participated as an equity investor
in the Acquiror by virtue of (i) obtaining beneficial ownership of any equity interest in the
Acquiror as a result of the grant to the Employee of an incentive compensation award under one or
more incentive plans of the Acquiror (including, but not limited to, the conversion in connection
with the Transaction of incentive compensation awards of the Employer into incentive compensation
awards of the Acquiror), on terms and conditions substantially equivalent to those applicable to
other employees of the Employer with comparable levels of responsibility and status immediately
prior to the Transaction, after taking into account normal differences attributable to job
responsibilities, title and similar matters, (ii) obtaining beneficial ownership of any equity
interest in the Acquiror on terms and conditions substantially equivalent to those obtained in the
Transaction by all other stockholders of the Company, or (iii) passive ownership of less than three
percent (3%) of the stock of the Acquiror.

          (E) “Change-in-Control Protective Period” shall mean the period from the occurrence of a Change in Control until the later of the second anniversary of such Change in
Control or, if such Change in Control shall be caused by the stockholder approval of a merger or consolidation described in Section 21(D)(III) hereof, the second anniversary of the
consummation of such merger or consolidation.

          (F) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

          (G) “Committee” shall mean (i) the individuals (not fewer than three in number) who, immediately prior to a Potential Change in Control, constitute the Compensation
Committee of the Board, plus (ii) in the event that fewer than three individuals are available from the group specified in clause (i) above for any reason, such individuals as may be appointed by the individual or individuals so available (including for this purpose any individual or individuals previously so appointed under this clause (ii)); provided, however, that the maximum number of individuals constituting the Committee shall not exceed five.

          (H) “Companies” shall mean, collectively, the Company and each corporation which is now
and hereafter shall become a subsidiary of, or a parent of, the Company, together with their
respective successors and assigns.

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          (I) “Company” shall have the meaning stated in the introductory paragraph to this
Agreement and, except in determining under Section 21(D) hereof whether or not any Change in
Control of the Company has occurred, any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.

          (J) “Continuation Pay” shall mean those payments so described in Section 8.2 hereof.

          (K) “Date of Termination” shall have the meaning stated in Section 11.2 hereof.

          (L) “Disability” shall be deemed the reason for the termination by the Employer of the
Employee’s employment, if, as a result of the Employee’s incapacity due to physical or mental
illness, the Employee shall have been absent from the full-time performance of the Employee’s
duties with the Employer for a period of six (6) consecutive months, the Employer shall have given
the Employee a Notice of Termination for Disability, and, within thirty (30) days after such Notice
of Termination is given, the Employee shall not have returned to the full-time performance of the
Employee’s duties.

          (M) “Employee” shall mean the individual named in the first paragraph of this Agreement.

          (N) “Employer” shall have the meaning stated in the introductory paragraph to this
Agreement. The status of such corporation as an Employer shall continue only so long as the
corporation (or any successor to its business and/or assets) is a direct or indirect subsidiary of
the Company.

          (O) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from
time to time.

          (P) “Good Reason” for termination by the Employee of the Employee’s employment shall
mean the occurrence (without the Employee’s express prior written consent) after any Change in
Control, or after any Potential Change in Control under the circumstances described in the second
sentence of Section 10.1 hereof (treating all references in paragraphs (I) through (VII) below to a
“Change in Control” as references to a “Potential Change in Control”), of any one of the following
acts by the Employer, or failures by the Employer to act, unless, in the case of any act or failure
to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of Termination given in respect
thereof:

          (I) the assignment to the Employee of any duties inconsistent with the
Employee’s employment status with the Employer in effect immediately prior to a
Change in Control or a substantial adverse alteration in the nature or status of the
Employee’s responsibilities from those in effect immediately prior to the Change in
Control (other than any such alteration primarily attributable to the fact that the
Company may no longer be a public company);

15

 

          (II) a reduction by the Employer in the Employee’s annual base salary as in effect on the date
hereof or as the same may be increased from time to time except for across-the-board salary
reductions similarly affecting all employees of the Employer and all employees of any Person in
control of the Employer with comparable levels of responsibility and status to Employee;

          (III) the relocation of the Employer’s principal executive offices to a location more than
fifty (50) miles from the location of such offices immediately prior to the Change in Control or
the Employer’s requiring the Employee to be based anywhere other than the Employer’s principal
executive offices except for required travel on the Employer’s business to an extent substantially
consistent with the Employee’s present business travel obligations;

          (IV) the failure by the Employer, without the Employee’s consent, to pay to the Employee any
portion of the Employee’s current compensation, or to pay to the Employee any portion of an
installment of deferred compensation under any deferred compensation program of the Employer,
within seven (7) days of the date such compensation is due;

          (V) the failure by the Employer to continue in effect any compensation plan in which the
Employee participates immediately prior to the Change in Control which is material to the
Employee’s total compensation, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the failure by the Employer to
continue the Employee’s participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of benefits provided and the level
of the Employee’s participation relative to other participants, as existed at the time of the
Change in Control;

          (VI) the failure by the Employer to continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee under any of the Employer’s pension, life
insurance, medical, health and accident, or disability plans in which the Employee was
participating at the time of the Change in Control, the taking of any action by the Employer which
would directly or indirectly materially reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by the Employee at the time of the Change in Control, or the
failure by the Employer to provide the Employee with the number of paid vacation days to which the
Employee is entitled on the basis of years of service with the Employer in accordance with the
Employer’s normal vacation policy in effect at the time of the Change in Control; or

          (VII) any purported termination of the Employee’s employment which is not effected pursuant to
a Notice of Termination satisfying the requirements of Section 11.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective.

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          The Employee’s right to terminate the Employee’s employment for Good Reason shall not be
affected by the Employee’s incapacity due to physical or mental illness. The Employee’s continued
employment shall not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.

          For purposes of any determination regarding the existence of Good Reason, any claim by the
Employee that Good Reason exists shall be presumed to be correct unless the Employer establishes to
the Committee by clear and convincing evidence that Good Reason does not exist.

          (Q) “Notice of Termination” shall have the meaning stated in Section 11.1 hereof.

          (R) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.

          (S) “Potential Change in Control” shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:

          (1) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;

          (2) the Company or any Person publicly announces an intention to take or
to consider taking actions which, if consummated, would constitute a Change in
Control;

          (3) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s
then outstanding securities; or

          (4) the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control has occurred.

          (T) “Severance Payments” shall mean those payments described in Section 10.1 hereof.

          (U) “Term” shall mean the period of time described in Section 4.1 hereof (including
any extension or continuation described therein).

          (V) “Termination Pay” shall mean those payments so described in Section 8.2 hereof.

17

 

          (W) “Total Payments” shall mean those payments described in Section 10.2 hereof.

          IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed (the
corporate signatory by the respective officer duly authorized) as of the day and year first above
written.

	 	 	 	 	 
	 	 	 
	 	                                       /s/ Jack B. Taylor
 	 
	 	JACK B. TAYLOR (“Employee”) 	 
	 	 	 
	 	 	 	 
	 	A. SCHULMAN INC. LIMITED (“Employer”)

 	 
	 	By  	/s/ Terry L. Haines
 	 
	 	 	Terry L. Haines, Director 	 
	 	 	 	 
	 	By  	/s/ Robert A. Stefanko
 	 
	 	 	Robert A. Stefanko, Director     	 
	 	 	 	 
	 
	 	A. SCHULMAN, INC. (“Company”)

 	 
	 	By  	/s/ Terry L. Haines
 	 
	 	 	Terry L. Haines, President 	 
	 	 	 
	 	By  	/s/ Robert A. Stefanko
 	 
	 	 	Robert A. Stefanko, Executive Vice President 	 
	 

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