Document:

EX-10.1

 

Exhibit
10.1

[DATE]

Attn: [                    ]

PolyOne Corporation

POLYONE CORPORATION INCENTIVE AWARD

Grant of Stock-Settled SARs

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

Dear [                                        ]:

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

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

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

	1.	 	Exercise of SARs.

	 	(a)	 	Subject to the provisions of the Plan and this Agreement, the SARs will expire
on [DATE] and shall be exercisable on or before [DATE]. Provided that you have been in
the continuous employ of PolyOne on such date, vesting will occur when the market price
of the Common Shares as reported on the New York Stock Exchange — Composite
Transactions Listing or similar report reaches pre-determined levels for a minimum of
three consecutive trading days as follows:

 

 

	 	•	 	One-third vests at a market price of $___;
	 
	 	•	 	One-third vests at a market price of $___; and
	 
	 	•	 	The remaining one-third vests at a market price of $___;

	 	 	 	provided, however, if the SARs become vested pursuant to the above
vesting schedule at any time prior to [DATE], such SARs may not be exercised until
on or after [DATE].
	 
	 	(b)	 	The SARs may be exercised as provided in this Section 1(b) as to all or any of
the SARs that are exercisable in accordance with Section 1(a), as long as each exercise
covers at least 1,000 SARs. To exercise the SARs, you must submit a SAR Exercise Form
to PolyOne signed by you stating the number of SARs you are exercising at that time and
certifying that you are in compliance with the terms and conditions of the Plan.
PolyOne will then issue you the number of Common Shares determined under Section 1(c).
	 
	 	(c)	 	The number of Common Shares to be issued will be determined by calculating (1)
the difference between the fair market value of a Common Share on the date of exercise
and the Base Price (the “Spread”); (2) multiplied by the number of SARs exercised; (3)
less any withholding taxes (federal, state, local or foreign taxes) PolyOne determines
are to be withheld in accordance with the Plan and with applicable law. The result of
this calculation will then be divided by the fair market value of a Common Share on the
date of exercise to determine the number of Common Shares to be issued, rounded down to
the nearest whole share. For purposes of this Section 1(c), the term “fair market
value” will mean the average of the high and low prices of the Common Shares for the
relevant date as reported on the New York Stock Exchange — Composite Transactions
Listing or similar report. In no event will you be entitled to acquire a fraction of
one Common Share pursuant to this Agreement.

	2.	 	Vesting Upon a Change of Control. If a Change of Control (as defined on Exhibit
A to this Agreement) occurs during the term of the SARs, the SARs, to the extent not
previously fully exercisable, will become immediately exercisable in full.

	3.	 	Retirement, Disability or Death. If your employment with PolyOne or a Subsidiary
terminates before the expiration of the SARs due to (1) retirement at age 55 or older with at
least 10 years of service or retirement under other circumstances entitling you to receive
benefits under one of PolyOne’s (including its predecessors) defined benefit pension plans,
(2) permanent and total disability (as defined under the relevant disability plan or program
of PolyOne or a Subsidiary in which you then participate) or (3) death, then:

	 	(a)	 	any SARs that are vested at the time of termination of employment as provided
in Section 1(a) above may be exercised in whole or in part (subject to the proviso in
Section 1(a) above) for the shorter of (i) a period of three years after your

2

 

	 	 	 	termination of employment or (ii) the remainder of their term, but in no event beyond
[DATE], after which such SARs will terminate; and
	 
	 	(b)	 	If any SARs become vested as provided in Section 1(a) above within the three
year period following your termination of employment, you will be entitled to exercise,
in whole or in part (subject to the proviso in Section 1(a) above), a number of SARs
equal to the number of SARs that vest in such three-year period, provided that such
number shall be pro-rated based on the portion of time you were employed by PolyOne
during the period of [DATE] through [DATE] and provided that you shall be entitled to
exercise such SARs for the shorter of (i) a period of three years after your
termination of employment and (ii) the remainder of their term, but in no event beyond
[DATE], after which such SARs will terminate.

	4.	 	Termination Following Change of Control.

	 	(a)	 	If your employment with PolyOne or a Subsidiary terminates following a Change
of Control because (i) your employment is involuntarily terminated without “cause” (as
defined below), or (ii) if you are a party to a Management Continuity Agreement with
PolyOne, you terminate your employment for “Good Reason” (as defined in your Management
Continuity Agreement), or (iii) if you are not a party to a Management Continuity
Agreement with PolyOne, you terminate your employment for “Good Reason” (as defined in
the PolyOne Employee Transition Plan (as amended and restated, effective as of January
1, 2006) or any successor plan (the “PolyOne ETP”)), the SARs become immediately vested
and may be exercised in whole or in part at any time and from time to time for the
remainder of their term, but in no event beyond [DATE], after which the SARs will
terminate.
	 
	 	(b)	 	For purposes of Section 4(a) above:

	 	(i)	 	If you are a party to a Management Continuity Agreement,
“cause” shall mean the definition of “cause” as set forth in your Management
Continuity Agreement; or
	 
	 	(ii)	 	If you are not a party to a Management Continuity Agreement,
“cause” shall mean: (A) the willful and continued failure by you to
substantially perform your duties with PolyOne, which failure causes material
and demonstrable injury to PolyOne (other than any such failure resulting from
your incapacity due to physical or mental illness), after a demand for
substantial performance is delivered to you by PolyOne which specifically
identifies the manner in which you have not substantially performed your
duties, and after you have been given a period (hereinafter known as the “Cure
Period”) of at least thirty (30) days to correct your performance, or (B) the
willful engaging by you in other gross misconduct materially and demonstrably
injurious to PolyOne. For purposes of this Section 4(b)(ii), no act, or
failure to act, on your part shall be considered “willful” unless

3

 

	 	 	 	conclusively
demonstrated to have been done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was in the best
interests of PolyOne.

	5.	 	Other Termination. If your employment with PolyOne or a Subsidiary terminates before
the expiration of the SARs for any reason other than as set forth in Sections 3 or 4 above,
the SARs that are exercisable shall be limited to the number of SARs that could have been
exercised under Section 1 above at the time of your termination of employment and shall
terminate as to the remaining SARs and may be exercised as to such limited number of SARs at
any time within ninety (90) days of your termination of employment, but in no event beyond
[DATE], after which the SARs will terminate.

	6.	 	Non-Assignability. The SARs are personal to you and are not transferable by you
other than by will or the laws of descent and distribution. They are exercisable during your
lifetime only by you or by your guardian or legal representative.

	7.	 	Adjustments. In the event of any change in the number of Common Shares by reason of
a merger, consolidation, reorganization, recapitalization, or similar transaction, or in the
event of a stock dividend, stock split, or distribution to shareholders (other than normal
cash dividends), the number and class of shares subject to outstanding SARs, the Base Price
applicable to outstanding SARs and other value determinations, if any, applicable to
outstanding SARs will be adjusted. Such adjustment shall be made automatically on the
customary arithmetical basis in the case of any stock split, including a stock split effected
by means of a stock dividend, and in the case of any other dividend paid in PolyOne common
shares. If any such transaction or event occurs, the Committee may provide in substitution
for outstanding SARs such alternative consideration (including, without limitation, in the
form of cash, securities or other property) as it may determine to be equitable in the
circumstances and may require in connection therewith the surrender of the SARs subject to
this Agreement. No adjustment provided for in this Section 7 will require PolyOne to issue
any fractional share.

	8.	 	Miscellaneous.

	 	(a)	 	The contents of this letter are subject in all respects to the terms and
conditions of the Plan as approved by the Board and the shareholders of PolyOne, which
are controlling. The interpretation and construction by the Board and/or the Committee
of any provision of the Plan or this Agreement shall be final and conclusive upon you,
your estate, executor, administrator, beneficiaries, personal representative and
guardian and PolyOne and its successors and assigns.
	 
	 	(b)	 	The grant of the SARs is discretionary and will not be considered to be an
employment contract or a part of your terms and conditions of employment or of your
salary or compensation. Your acceptance of this grant constitutes your consent to the
transfer of data and information concerning or arising out of this grant to PolyOne and
to non-PolyOne entities engaged by PolyOne to provide services in connection with this
grant from non-U.S. entities related to PolyOne

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	 	 	 	for purposes of any applicable privacy,
information or data protection laws and regulations.
	 
	 	(c)	 	Any amendment to the Plan shall be deemed to be an amendment to this Agreement
to the extent that the amendment is applicable hereto. The terms and conditions of
this Agreement may not be modified, amended or waived, except by an instrument in
writing signed by a duly authorized executive officer at PolyOne. Notwithstanding the
foregoing, no amendment shall adversely affect your rights under this Agreement without
your consent.
	 
	 	(d)	 	[FOR U.S. PARTICIPANTS ONLY:] It is a condition to your receipt of the SARs
that you execute and agree to the terms of PolyOne’s standard Employee Agreement. If
you do not sign and return the Employee Agreement to PolyOne Human Resources within 60
days of your receipt of this Grant of Stock Settled SARs, this Grant of Stock Settled
SARs and any rights to the SARs will terminate and become null and void.

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

	10.	 	Compliance with Section 409A of the Code.

	 	(a)	 	To the extent applicable, it is intended that this Agreement and the Plan
comply with the provisions of Section 409A of the Code, so that the income inclusion
provisions of Section 409A(a)(1) of the Code do not apply to you. This Agreement and
the Plan shall be administered in a manner consistent with this intent, and any
provision that would cause this Agreement or the Plan to fail to satisfy Section 409A
of the Code shall have no force and effect until amended to comply with Section 409A of
the Code (which amendment may be retroactive to the extent permitted by Section 409A of
the Code and may be made by PolyOne without your consent).
	 
	 	(b)	 	Reference to Section 409A of the Code will also include any proposed, temporary
or final regulations, or any other guidance, promulgated with respect to such Section
by the U.S. Department of the Treasury or the Internal Revenue Service.

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

	 	 	 	 	 	 	 
	 	 	Very Truly Yours,	 	 
	 
	 	 	 	 	 	 
	 	 	POLYONE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

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

Accepted:

                                                            

                                         (Date)

6

 

Exhibit A

A “Change of Control” means:

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

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

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

A-1

 

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

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

A-2EX-10.2

 

Exhibit 10.2

[DATE]

Attn: [                    ]

PolyOne Corporation

POLYONE CORPORATION INCENTIVE AWARD

Grant of Performance Units

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

Dear [                                        ]:

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

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

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

	1.	 	Performance Units.

	 	(a)	 	Your right to receive all or any portion of the Performance Units will be
contingent upon the achievement of certain management objectives (the “Management
Objectives”), as set forth in your Statement of Performance Goals. The achievement of
the Management Objectives will be measured during the period from January 1, 20___
through December 31, 20___(the “Performance Period”).

 

 

	 	(b)	 	The Management Objectives for the Performance Period will be based solely on
achievement of performance goals relating to PolyOne’s operating income (“Operating
Income”), as defined in your Statement of Performance Goals.

	2.	 	Earning of Performance Units.

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

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

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

2

 

	3.	 	Change of Control. If a Change of Control (as defined on Exhibit A to this
Agreement) occurs during the Performance Period, PolyOne shall pay to you 100% of the
Performance Units as soon as administratively practicable after the Change of Control.

	4.	 	Retirement, Disability or Death. If your employment with PolyOne or a Subsidiary
terminates before the end of the Performance Period due to (1) retirement at age 55 or older
with at least 10 years of service or retirement under other circumstances entitling you to
receive benefits under one of PolyOne’s (including its predecessors) defined benefit pension
plans, (2) permanent and total disability (as defined under the relevant disability plan or
program of PolyOne or a Subsidiary in which you then participate) or (3) death, PolyOne shall
pay to you or your executor or administrator, as the case may be, after the end of the
Performance Period, the portion of the Performance Units to which you would have been entitled
under Section 2 above, had you remained employed by PolyOne through the end of the Performance
Period, prorated based on the portion of the Performance Period during which you were employed
by PolyOne. The pro-rata portion of the Performance Units required to be paid under this
Section 4 shall be paid to you within two and one-half months of the expiration of the
Performance Period.

	5.	 	Other Termination. If your employment with PolyOne or a Subsidiary terminates before
the end of the Performance Period for any reason other than as set forth in Section 4 above,
the Performance Units will be forfeited.

	6.	 	Payment of Performance Units. Payment of any Performance Units that become earned as
set forth herein will be made in cash. Payment will be made as soon as practicable after the
receipt of audited financial statements of PolyOne relating to the last fiscal year of the
Performance Period, the determination by the Committee of the level of attainment of the
Management Objectives and certification by the Board that such Management Objectives were
satisfied, but payment shall in all cases be made within two and one-half months of the
expiration of the Performance Period. If PolyOne determines that it is required to withhold
any federal, state, local or foreign taxes from any payment, PolyOne will withhold the amount
of these taxes from the payment.

	7.	 	Non-Assignability. The Performance Units subject to this grant of Performance Units
are personal to you and may not be sold, exchanged, assigned, transferred, pledged, encumbered
or otherwise disposed of by you until they become earned as provided in this Agreement;
provided, however, that your rights with respect to such Performance Units may
be transferred by will or pursuant to the laws of descent and distribution. Any purported
transfer or encumbrance in violation of the provisions of this Section 7 shall be void, and
the other party to any such purported transaction shall not obtain any rights to or interest
in such Performance Units.

	8.	 	Miscellaneous.

	 	(a)	 	The contents of this Agreement are subject in all respects to the terms and
conditions of the Plan as approved by the Board and the shareholders of PolyOne, which
are controlling. The interpretation and construction by the Board and/or the Committee
of any provision of the Plan or this Agreement shall be final and

3

 

	 	 	 	conclusive upon you,
your estate, executor, administrator, beneficiaries, personal representative and
guardian and PolyOne and its successors and assigns.
	 
	 	(b)	 	The grant of the Performance Units is discretionary and will not be considered
to be an employment contract or a part of your terms and conditions of employment or of
your salary or compensation. Your acceptance of this grant constitutes your consent to
the transfer of data and information concerning or arising out of this grant to PolyOne
and to non-PolyOne entities engaged by PolyOne to provide services in connection with
this grant from non-U.S. entities related to PolyOne for purposes of any applicable
privacy, information or data protection laws and regulations.
	 
	 	(c)	 	Any amendment to the Plan shall be deemed to be an amendment to this Agreement
to the extent that the amendment is applicable hereto. The terms and conditions of
this Agreement may not be modified, amended or waived, except by an instrument in
writing signed by a duly authorized executive officer at PolyOne. Notwithstanding the
foregoing, no amendment shall adversely affect your rights under this Agreement without
your consent.
	 
	 	(d)	 	[FOR U.S. PARTICIPANTS ONLY:] It is a condition to your receipt of the
Performance Units that you execute and agree to the terms of PolyOne’s standard
Employee Agreement. If you do not sign and return the Employee Agreement to PolyOne
Human Resources within 60 days of your receipt of this Grant of Performance Units, this
Grant of Performance Units and any rights to the Performance Units will terminate and
become null and void.

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

	10.	 	Compliance with Section 409A of the Code.

	 	(a)	 	To the extent applicable, it is intended that this Agreement and the Plan
comply with the provisions of Section 409A of the Code, so that the income inclusion
provisions of Section 409A(a)(1) of the Code do not apply to you. This Agreement and
the Plan shall be administered in a manner consistent with this intent, and any
provision that would cause this Agreement or the Plan to fail to satisfy Section 409A
of the Code shall have no force and effect until amended to comply with Section 409A of
the Code (which amendment may be retroactive to the extent permitted by Section 409A of
the Code and may be made by PolyOne without your consent).
	 
	 	(b)	 	To the extent you have a right to receive payment of the Performance Units, the
payment is subject to Section 409A, and the event triggering the right to payment

4

 

	 	 	 	does
not constitute a permitted distribution event under Section 409A(a)(2) of the Code,
then notwithstanding anything to the contrary in this Agreement, the payment of the
Performance Units will be made, to the extent necessary to
comply with Section 409A of the Code, to you on the earliest of (a) your “separation
from service” with PolyOne (determined in accordance with Section 409A of the Code);
provided, however, that if you are a “specified employee” (within
the meaning of Section 409A of the Code), your date of payment of the Performance
Units shall be the date that is six months after the date of your separation from
service with PolyOne; (b) the date of the end of the Performance Period; (c) your
death; or (d) your disability (within the meaning of Section 409A(a)(2)(C) of the
Code).
	 
	 	(c)	 	Reference to Section 409A of the Code will also include any proposed, temporary
or final regulations, or any other guidance, promulgated with respect to such Section
by the U.S. Department of the Treasury or the Internal Revenue Service.

5

 

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

	 	 	 	 	 	 	 
	 	 	Very Truly Yours,	 	 
	 
	 	 	 	 	 	 
	 	 	POLYONE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

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

Accepted:

 

                                                            

 

                                        (Date)

6

 

Exhibit A

A “Change of Control” means:

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

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

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

A-1

 

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

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

A-2

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