Document:

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                                                                   Exhibit 10(h)

                              Amended and Restated
                       Severance and Employment Agreement

 1.  Recitals

         (a) This Amended and Restated Severance and Employment Agreement
("Agreement") is between Royal Appliance Mfg. Co. (the "Company")and       (the
"Executive") and is effective as of        . This Agreement supersedes all prior
Severance and Employment Agreements between the Company and Executive.

         (b) The address of the Company is 7005 Cochran Road, Glenwillow, Ohio
44139. The address of the Executive is         .

         (c) The Executive is currently employed by the Company in the capacity
of           , and the Executive is one of the key executives of the Company.

         (d) In consideration of the mutual promises contained herein and other
good and valuable consideration, the Executive and the Company have entered into
this Agreement.

 2.  Term of Agreement

         The Term of this Agreement shall commence on the date hereof and
continue until            provided, however, that commencing on January 1,
and each January 1st thereafter, the above-referenced date and the term of this
Agreement shall automatically be extended for one additional year unless at
least thirty days prior to such January 1st date, the Company or the Executive
shall have given notice that it or he or she does not wish to extend this
Agreement. The phrase "Term of Agreement" shall refer to the period commencing
on the date hereof and ending on       (or any extension thereof pursuant to the
preceding sentence).

 3.  Change in Control

         No benefit shall be payable hereunder (and Sections 4 through 11, 18,
and 20 shall not be applicable) unless a change in control of the Company shall
have occurred within the Term of Agreement and the Executive's employment by the
Company shall have been terminated within three years thereafter, whether or not
within the Term of Agreement. For purposes of this Agreement, a "change in
control of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or any similar item or successor schedule, form, or report) promulgated
under the Securities Exchange Act of 1934 as amended ("Exchange Act"); provided
that, without limitation, such a change in control shall be deemed to have
occurred if and at such times as (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes the beneficial
owner, directly or indirectly, of securities of the Company presenting 30% or
more of the

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combined voting power of the Company's then outstanding securities, or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least a
majority (i.e., more than one-half) thereof unless the election, or the
nomination for election by the Company's shareholders, of each new director
during such two-year period was approved by an affirmative vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of said two-year period.

 4.  Notice of Termination; Date of Termination

         (a) Any termination of the Executive's employment by the Company or the
Executive shall be communicated by written Notice of Termination to the other
party thereto. 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 employment under the
provision so indicated.

         (b)  "Date of Termination" shall mean:

                  (i)      If the Agreement is terminated for Disability, thirty
                           days after Notice of Termination is given (provided
                           that the Executive shall not have returned to the
                           performance of his or her duties on a full-time basis
                           during such thirty-day period),

                  (ii)     If the Executive's employment is terminated pursuant
                           to Section 10, the date specified in the Notice of
                           Termination, and

                  (iii)    If the Executive's employment is terminated for any
                           other reason, the date on which a Notice of
                           Termination is given; provided that if within thirty
                           days after any Notice of Termination is given the
                           party receiving such Notice of Termination notifies
                           the other party that a dispute exists concerning the
                           termination, the Date of Termination shall be the
                           date on which the dispute is finally determined,
                           either by mutual written agreement of the parties, by
                           a binding and final arbitration award or by a final
                           judgment, order or decree of a court of competent
                           jurisdiction (the time for appeal therefrom having
                           expired and no appeal having been perfected).

 5.  Compensation After Change in Control

         Immediately after any change in control of the Company, the Executive
shall be entitled to receive for the remainder of the Term of Agreement (as
extended) an annual base salary (the "Base Salary"), payable in equal
semi-monthly, bi-weekly, or weekly installments, at an annual rate at least
equal to the aggregate annual base salary payable to the Executive as of the
date hereof. The Base Salary may be increased (but may not be decreased) at any
time and from time to time by action of the Board of Directors of the Company,
any committee thereof, or any

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individual having authority to take such action, in accordance with the
Company's regular practices. Any increase in the Base Salary shall not serve to
limit or reduce any other obligation of the Company hereunder.

 6.  Benefit Plans

         Immediately after a change in control of the Company,

         (a) The Company agrees to continue in effect any perquisite, benefit or
compensation plan (including its annual bonus plan, long-term incentive plan,
section 401(k) plan, dental plan, life insurance plan, health and accident plan,
disability plan, 401(k) Plus Plan, or deferred compensation plan) in which the
Executive is currently participating (collectively referred to as the "Benefit
Plans"); or to maintain plans providing substantially similar benefits, unless
the continuation of any such plan (or similar plan) would not, in the good faith
discretion of the Company, be an economically reasonable decision, taking into
account all facts and circumstances;

         (b) Other than as provided in paragraph (a), the Company agrees not to
take any action that would adversely affect the Executive's participation in, or
materially reduce the benefits under, any of the Benefit Plans or deprive the
Executive of any material fringe benefit currently enjoyed; and

         (c) The Company agrees to provide the Executive with the number of paid
vacation days to which he or she is entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation policy in
effect on the date hereof.

 7.  Termination for Cause

         (a) Following a change in control, the Company may terminate the
Executive's employment for Cause. For the purposes of this Agreement, the
Company shall have "Cause" to terminate employment hereunder only (i) if
termination shall have been the result of an act or acts of dishonesty by the
Executive constituting a felony and resulting or intended to result directly or
indirectly in substantial gain or personal enrichment at the expense of the
Company; or (ii) upon the willful and continued failure by the Executive
substantially to perform his or her duties with the Company (other than any such
failure resulting from incapacity due to mental or physical illness) after a
demand in writing for substantial performance is delivered by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed his or her duties, and such failure
results in demonstrably material injury to the Company. The Executive's
employment shall in no event be considered to have been terminated by the
Company for Cause if such termination took place as the result of (i) bad
judgment or negligence, or (ii) any act or omission without intent of gaining
therefrom directly or indirectly a profit to which the Executive was not legally
entitled, or (iii) any act or omission believed in good faith to have been in or
not opposed to the interest of the Company, or (iv) any act or omission in
respect of which a determination be made that the Executive met the applicable
standard of conduct prescribed for indemnification or reimbursement or payment
of

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expenses under the Regulations of the Company or the laws of the State of
Ohio, in each case as in effect at the time of such act or omission. The
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to him or her a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for the
purpose (after reasonable notice to the Executive and an opportunity for him or
her, together with his or her counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the Executive was guilty of conduct
set forth above in clauses (i) or (ii) of the second sentence of this paragraph
and specifying the particulars thereof in detail.

         (b) If the Executive's employment shall be terminated for Cause, the
Company shall pay the Executive his or her full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
the Company shall have no further obligations to the Executive under this
Agreement.

 8.  Termination for Death or Disability

         (a) The Company may terminate this Agreement on account of the
Executive's death, or for "Disability" if the Executive is "Disabled." For
purposes of this Agreement, the Executive shall be considered Disabled only if,
as a result of his or her incapacity due to physical or mental illness, he or
she shall have been absent from his or her duties with the Company on a
full-time basis for a period of one year and a physician selected by him or her
is of the opinion that (i) he is suffering from "Total Disability" as defined in
the Company's Pension Plan, or any successor plan or program and (ii) he or she
will qualify for Social Security Disability Payment and (iii) within thirty days
after written notice of termination is given, he or she shall not have returned
to the full-time performance of his or her duties.

         (b) If the Company terminates this Agreement on account of the
Executive's death or because the Executive is Disabled, the Company shall pay to
the Executive (or his or her successors) the amounts, and provide to the
Executive the benefits, specified in Sections 5 and 6 of this Agreement for the
remainder of the Term of Agreement.

 9.  Termination Following Retirement

         (a) This Agreement will terminate upon the Executive's Retirement. For
purposes of this Agreement, "Retirement" shall mean termination of the
Executive's employment with his or her consent in accordance with the Company's
retirement policy (including early retirement) generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with the Executive's consent with respect to him or her.

         (b) In the event this Agreement terminates upon the Executive's
Retirement, the Company shall have no further obligation to the Executive under
this Agreement.

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10.  Termination of Employment by the Executive for Good Reason

         (a) The Executive may terminate his or her employment for Good Reason.
For purposes of this Agreement, Good Reason will exist if any one or more of the
following occur:

                  (i)      Failure by the Company to honor any of its
                           obligations under Sections 5, 6, or 12; or

                  (ii)     Any purported termination by the Company of the
                           Executive's employment that is not effected pursuant
                           to a Notice of Termination satisfying the
                           requirements of Section 4 above and, for purposes of
                           this Agreement, no such purported termination shall
                           be effective; or

                  (iii)    Failure to elect or reelect or otherwise to maintain
                           the Executive to the office or the position (or a
                           substantially equivalent office or position) in the
                           Company that the Executive held immediately prior to
                           a change in control, or the removal of the Executive
                           as a Director of the Company (or any successor
                           thereto) if the Executive shall have been a Director
                           of the Company immediately prior to the change in
                           control; or

                  (iv)     An adverse change in the nature or scope of the
                           authorities, powers, functions, responsibilities or
                           duties attached to the position with the Company
                           which the Executive held immediately prior to the
                           change in control, (including but not limited to
                           assignment by the Company to the Executive of duties
                           inconsistent with his or her current positions,
                           duties, responsibilities, and status with the Company
                           or a change of his or her reporting responsibilities,
                           titles, or offices currently in effect) without the
                           prior written consent of the Executive, which is not
                           remedied within 10 calendar days after receipt by the
                           Company of written notice from the Executive of such
                           change; or

                  (v)      A determination by the Executive made in good faith
                           that as a result of a change in control and a change
                           in circumstances thereafter significantly affecting
                           his or her position, including without limitation a
                           change in the scope of the business or other
                           activities for which he or she was responsible
                           immediately prior to a change in control, he or she
                           has been rendered substantially unable to carry out,
                           has been substantially hindered in the performance
                           of, or has suffered a substantial reduction in, any
                           of the authorities, powers, functions,
                           responsibilities or duties attached to the position
                           held by the Executive immediately prior to the change
                           in control, which situation is not remedied within 10
                           calendar days after written notice to the Company
                           from the Executive of such determination; or

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                  (vi)     The Company shall relocate its principal executive
                           offices, or require the Executive to have his or her
                           principal location of work changed, to any location
                           which is in excess of 50 miles from the location
                           thereof immediately prior to the change of control or
                           to travel away from his or her office in the course
                           of discharging his or her responsibilities or duties
                           hereunder significantly more (in terms of either
                           consecutive days or aggregate days in any calendar
                           year) than was required of him or her prior to the
                           change of control without, in either case, his or her
                           prior written consent.

11.  Compensation Upon Certain Terminations

         (a) If the Company shall terminate the Executive's employment other
than pursuant to Sections 7, 8, or 9 hereof or if the Executive shall terminate
his or her employment for Good Reason pursuant to Section 10 hereof, then the
Company shall pay to the Executive in a lump sum on the fifth business day
following the Date of Termination, the following amounts:

                  (i)      The Executive's Base Salary through the Date of
                           Termination at the rate in effect at the time Notice
                           of Termination is given;

                  (ii)     In lieu of any further salary payments for periods
                           subsequent to the Date of Termination, an amount
                           equal to three times the Executive's current Base
                           Salary (which for these purposes shall include the
                           average contributions made by the Company to the
                           Executive's 401(k) Plan and 401(k) Plus Plan for the
                           preceding five years); and

                  (iii)    All legal fees and expenses incurred as a result of
                           such termination (including all such fees and
                           expenses, if any, incurred in contesting or disputing
                           any such termination, in seeking to obtain or enforce
                           any right or benefit provided by this Agreement, or
                           in interpreting this Agreement).

         (b) If the Company shall terminate the Executive's employment other
than pursuant to Sections 7, 8, or 9 hereof or if the Executive shall terminate
his or her employment for Good Reason pursuant to Section 10 hereof, all
unvested stock options, stock appreciation rights, and restricted stock awards
shall immediately vest in full and, in the case of options or stock appreciation
rights, be exercisable for a period of three years following such termination,
provided that in no event shall the option or stock appreciation right be
exercisable after the latest date on which such option or right would have
expired pursuant to its original terms.

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         12.  Successors, Binding Agreement

         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, by agreement in form and substance
satisfactory to the Executive, 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 agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from the Company in the same amount and on the same terms as
would apply if the Executive terminated his or her employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid that executes and
delivers the agreement provided for in this section or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable hereunder had the Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to his or her devisee,
legatee, or other designee or, if there be no such designee, to his or her
estate.

13.  Notice

         Notices and all other communications provided for in this 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, addressed to the respective addresses set forth on the first page of
this Agreement, provided that all notices to the Company shall be directed to
the attention of the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.

14.  Miscellaneous

         No provisions of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing signed by
The Executive and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the 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. No agreement or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Ohio.

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15.  Validity

         The invalidity or unenforceability of any one or more provisions 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.

16.  Counterparts

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

17.  Arbitration

         Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Cleveland, Ohio in
accordance with the rules of the American Arbitration Association then in
effect; provided that all arbitration expenses shall be borne by the Company.
Notwithstanding the pendency of any dispute or controversy concerning
termination or the effects thereof, the Company will continue to pay the
Executive his or her full compensation in effect immediately before any Notice
of Termination giving rise to the dispute was given and continue him or her as a
participant in all compensation, benefit and insurance plans in which he or she
was then participating, until the dispute is finally resolved. Amounts paid
under this paragraph are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement. Judgment may be entered on the arbitrators' award in any court
having jurisdiction; provided, however, that the Executive shall be entitled to
seek specific performance of his or her 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.

18.  Additional Payment

         Anything in this Agreement to the contrary notwithstanding, in the
event that any payment or distribution to or for the Executive's benefit,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise pursuant to or by reason of any other agreement,
policy, plan, program, or arrangement (including without limitation any stock
option agreement), or similar right (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code (the "Code"), or
any interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment or payments (a "Gross-Up Payment") in an amount
such that, after payment by the Executive of all federal, state, local, or
foreign taxes (including any interest or penalties imposed with respect to such
taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.

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19.  Withholding of Taxes

         The Company may withhold from any amounts payable under this Agreement
all federal, state, city or other taxes as shall be required pursuant to any law
or government regulation or ruling.

20.  Legal Fees and Expenses

         It is the intent of the Company that the Executive not be required to
incur the legal expenses associated with (i) the interpretation of any provision
in, or obtaining of any right or benefit under, this Agreement or (ii) the
enforcement of his or her rights under this Agreement by litigation or other
legal action, because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Executive hereunder.
Accordingly, the Company irrevocably authorizes the Executive from time to time
to retain counsel of his or her choice, at the expense of the Company as
hereafter provided, to represent the Executive in connection with the
interpretation or enforcement of this Agreement, including the initiation or
defense of any litigation or other legal action, whether by or against the
Company or any Director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The Company shall pay or cause to be paid and shall
be solely responsible for any and all attorneys' and related fees and expenses
incurred by the Executive under this Section 20.

                                            ROYAL APPLIANCE MFG. CO.

                                            BY:
                                               ---------------------------------

                                             -----------------------------------
                                             Executive

                                      -9-<PAGE>   1
                                                                   Exhibit 10(l)

                                 ROYAL APPLIANCE

                               PHANTOM STOCK PLAN

                                               Effective Date: December 15, 2000

<PAGE>   2

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

ARTICLE                                            NUMBER
-------                                            ------
<S>                                                <C>
PURPOSE                                               I

DEFINITIONS                                           II

ELIGIBILITY AND PARTICIPATION                         III

AWARD OF PHANTOM SHARES                               IV

VESTING OF PHANTOM SHARES                             V

EVENTS OF FORFEITURE                                  VI

TERMINATION OF EMPLOYMENT                             VII

DISABILITY OF A PARTICIPANT                           VIII

DEATH OF A PARTICIPANT                                IX

PAYMENT OF PHANTOM SHARE VALUE                        X

NONTRANSFERABILITY OF PHANTOM SHARES                  XI

ADMINISTRATION                                        XII

AMENDMENT AND TERMINATION                             XIII

PARTICIPATING EMPLOYERS                               XIV

MISCELLANEOUS                                         XV
</TABLE>

<PAGE>   3

                                   ARTICLE I

                                     PURPOSE

                  1.1 This Plan is intended to serve as an incentive to key
employees of the Company and Participating Employers, and to attract and retain
in their employ persons of outstanding abilities upon whom the future success of
the Company largely depends. This Plan shall become effective December 15, 2000.

                                   ARTICLE II

                                   DEFINITIONS

                  2.1 The words "Actual Shares" shall mean the common shares,
without par value, of the Company.

                  2.2 The word "Administrator" shall mean the Compensation
Committee or the person, persons, committee, corporation, partnership or other
entity designated as Administrator under Article XII.

                  2.3 The words "Appeals Committee" shall mean the Appeals
Committee established pursuant to Article XII.

                  2.4 The word "beneficiary" shall mean any person who receives
or is designated to receive payment of any amounts under the terms of this Plan
because of the participation of another person in this Plan.

                  2.5 The word "Board" shall mean the Board of Directors of the
Company, as the same may change from time to time.

                  2.6 The word "Cause" shall mean for purposes of this Plan any
of the following occurring while a Participant or former Participant is an
employee of the Company or any Participating Employer:

                  (a)      his engaging in any act of fraud or gross dishonesty
                           or criminal activity with respect to the Company or
                           any Participating Employer; or

                  (b)      his conviction of any felony; or

                  (c)      his engaging in any act of willful misconduct or
                           gross negligence which adversely affects the
                           Companies or any Participating Employer; or

                  (d)      his refusal to submit to a medical examination if
                           directed to do so by the Company or Participating
                           Employer to determine whether the Participant is
                           disabled under this Plan.

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                  2.7      The words "Change in Control" shall mean:

                  (a)      a change in the composition of the Board of Directors
                           of the Company such that a majority of the Board
                           members are not the same persons who were directors
                           twelve (12) months earlier;

                  (b)      approval by the stockholders of the Company of a
                           reorganization, merger or consolidation with respect
                           to which, in any such case, the persons who were the
                           stockholders of the Company immediately prior to such
                           reorganization, merger or consolidation do not,
                           immediately thereafter, own more than 51% of the
                           combined voting power entitled to vote in the
                           election of directors of the reorganized, merged or
                           consolidated company's then outstanding voting
                           securities; or

                  (c)      liquidation or dissolution of the Company or a sale
                           of all or substantially all of the assets of the
                           Company.

                  2.8 The word "Company" shall mean Royal Appliance Mfg. Co.,
and any successor corporation or business organization which shall assume the
duties an obligations of Royal Appliance Mfg. Co. under this Plan.

                  2.9 The words "Compensation Committee" shall mean a committee
consisting of three (3) or more members who are designated by the Board as the
Compensation Committee.

                  2.10 The word "Disability" shall mean a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing his usual and customary
employment with the Company. The disability of Participant shall be determined
by a licensed physician chosen by the Administrator. The determination shall be
applied uniformly to all Participants.

                  2.11 The words "he," "him," and "his" shall mean, in addition
to their common meaning, "she," "her," "hers," "it" or "its," as the context may
require, and generally, whenever any pronoun is used herein, it shall be
construed to include the masculine pronoun, the feminine pronoun or the neuter
pronoun, as shall be appropriate.

                  2.12 The word "Participant" shall mean any individual who is
designated by the Board and who takes the necessary actions to participate in
the Plan pursuant to Article III hereof.

                  2.13 The words "Participating Employer" shall mean the Company
and such subsidiaries and affiliated companies of the Company which participate
in the Plan with the consent of the Board of Directors.

                  2.14 The words "Phantom Share" shall mean a phantom unit of
ownership awarded to a Participant pursuant to this Plan that represents one (1)
Actual Share.

                  2.15 The words "Phantom Share Value" shall mean the fair
market value of an Actual Share. The fair market value of an Actual Share shall
be the closing price of an Actual

                                       2
<PAGE>   5
Share on the New York Stock Exchange or other applicable national stock exchange
with which the Company is registered for the trading date for which the fair
market value of an Actual Share is reported which is coincident with or
immediately prior to the date the Phantom Share Value is determined under this
Plan

                  2.16 The word "Plan" shall mean the Royal Appliance Phantom
Stock Plan as set forth in this instrument, as amended from time to time.

                  2.17 The words "Plan Year" shall mean the calendar year.

                  2.18 The words "Termination of Employment" shall mean the
Participant's cessation of his service with a Participating Employer for any
reason whatsoever, whether voluntarily or involuntarily, including by reason of
retirement, death, or Disability.

                  2.19 The words "Vested Percentage" shall mean, with respect to
any Phantom Shares in the account of a Participant, the applicable percentage
determined pursuant to Article V hereof.

                  2.20 The words "Vested Phantom Shares" shall mean the number
of Phantom Shares in a Participant's account multiplied by the applicable Vested
Percentage determined pursuant to Article V hereof.

                  2.21 The words "Vesting Service" shall mean a Participant's
period of continuous employment with the Company and a Participating Employer
commencing on the date the Phantom Shares are awarded to him under the Plan and
ending on his Termination of Employment.

                  2.22 The words "Years of Service" shall mean a Participant's
period of continuous employment with the Company and a Participating Employer
commencing on his most recent date of hire and ending on his Termination of
Employment.

                                  ARTICLE III

                          ELIGIBILITY AND PARTICIPATION

                  3.1 Eligibility. The employees who shall be eligible to
participate under this Plan shall be such employees as are designated by the
Compensation Committee (hereinafter the "Committee") to qualify as a member of a
"select group of management or highly compensated employees" as provided in
Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of the Employee Retirement
Income Security Act of 1974, as amended.

                  3.2 Participation. The Committee shall notify an employee upon
his or her selection for participation under the Plan of such selection. If an
employee, upon such notification, desires to become a Participant, the employee
shall, within such time as the Committee specifies:

                                       3
<PAGE>   6

                  (a)      furnish to the Committee all information requested by
                           it;

                  (b)      execute such documents and such instruments as the
                           Committee may require to facilitate the
                           administration of this Plan;

                  (c)      agree in such form and manner as the Committee may
                           require to be bound by the terms of this Plan and by
                           the terms of such amendments as may be made hereto;
                           and

                  (d)      truthfully and fully answer any questions and supply
                           any information which the Committee deems necessary
                           or desirable for the proper administration of this
                           Plan, without any reservations whatsoever.

An employee who is selected by the Committee to participate in the Plan and who
performs timely all acts required to become a Participant, shall become a
Participant on or as of such date as is specified by the Committee.

                  3.3 Termination of Participation. The Committee may terminate
the participation of any Participant at any time. Such termination of
participation shall not affect the rights of the terminated Participant to the
payment, pursuant to Article X, of the Vested Phantom Shares previously awarded
to such Participant (except as provided in Article VI). A Participant shall
automatically cease to be a Participant on the date of his or her Termination of
Employment.

                                   ARTICLE IV

                             AWARD OF PHANTOM SHARES

                  4.1 Authorization of Phantom Shares. The Company has
authorized 100,000 Phantom Shares which may be awarded under the Plan. In the
event there shall be a change in the number of Actual Shares by reason of a
stock split, stock dividend, reorganization, recapitalization, cash dividend, or
other similar event, a similar change shall be made in the number of Phantom
Shares. The determination of the Compensation Committee with respect to any such
adjustment shall be conclusive and binding upon the Participants and their
beneficiaries.

                  4.2 Award. The Committee, in its sole discretion, may from
time to time award Phantom Shares to a Participant. Subject to all the terms and
conditions of this Plan, each awarded Phantom Share which becomes a Vested
Phantom Share (or is deemed to be a Vested Phantom Share hereunder) shall
entitle the Participant to receive Actual Shares of the Company equal to the
number of the Vested Phantom Shares awarded to a Participant hereunder, on the
dates and under the method of payment as set forth in this Plan. Each
Participant shall be notified by the Committee of the number of Phantom Shares
which have been awarded to him or her.

                                       4
<PAGE>   7

                  4.3 Rights under Phantom Shares. Phantom Shares awarded under
this Plan shall have no voting rights and shall not be entitled to receive cash
or other dividends declared and paid, and the Participant shall have no other
rights as a shareholder of the Company under the Ohio General Corporation Law or
common law.

                  4.4 Bookkeeping Entries. All grants of Phantom Shares awarded
under this Plan shall be simple bookkeeping entries for the convenience of the
Company. The Company shall not be require to segregate any funds with respect to
the Phantom Shares granted under this Plan. All rights of Participants, former
Participants and beneficiaries under this Plan shall constitute only contractual
claims against the Company and no such claim against the Company shall be
secured or deemed to be secured in any manner.

                                   ARTICLE V

                            VESTING OF PHANTOM SHARES

                  5.1 Vesting Schedule. Subject to the provisions of Section 6.2
the Vested Percentage applicable to a Participant shall be determined on the
basis of his Vesting Service in accordance with the following table:

<TABLE>
<CAPTION>

                           Vesting                                    Vested
                           Service                                   Percentage
                           -------                                   ----------
<S>                                                                     <C>
                           Less than 3 years                             0%
                           At least 3 but less than 4 years             60%
                           At least 4 but less than 5 years             80%
                           5 or more years                             100%
</TABLE>

                  5.2 Death or Disability. Notwithstanding anything in this
Article V to the contrary but subject to the provisions of this Section 5.2
hereof, upon the death of a Participant or the Termination of Employment of a
Participant due to Disability, the Vested Percentage applicable to a Participant
shall be determined by multiplying the number of his total months of Vesting
Service with the Company commencing the date the Phantom Shares were awarded to
him and ending on his date of death or Termination of Employment due to
Disability by 1/60. A fractional month of Vesting Service shall be counted as
one month. The Vested Percentage determined under this Section 5.2 shall not
exceed 100%.

                  5.3 100% Vesting. Notwithstanding anything in this Article V
to the contrary but subject to the provisions of this Section 5.3 hereof, the
Vested Percentage applicable to a Participant shall become one hundred percent
(100%) with respect to all Phantom Shares previously granted to him pursuant to
this Plan (other than Phantom Shares previously forfeited pursuant to Article VI
hereof) upon the occurrence of a Change in Control.

                                       5
<PAGE>   8

                                   ARTICLE VI

                              EVENTS OF FORFEITURE

                  6.1 Forfeiture. Except as set forth below in Section 6.2, in
the event that a Participant has a Termination of Employment before he is 100%
vested under the provisions of Article V, he shall forfeit all rights whatsoever
he shall have to receive any payments on account of the Phantom Shares that are
not vested on the date of his Termination of Employment.

                  6.2 Termination for Cause. Notwithstanding any other provision
of this Plan, in the event that a Participant's Termination of Employment shall
be for Cause, the Participant shall forfeit all Phantom Shares granted to him
and shall forfeit all rights whatsoever he shall have to receive any payments of
Actual Shares or other amounts under this Plan. If a Participant's employment
could be terminated for Cause hereunder, it shall be considered so terminated
regardless of whether actually so terminated or terminated voluntarily by the
Participant through retirement or otherwise.

                  6.3 Effect of Forfeiture. Upon the occurrence of an event
described in this Article which results in forfeiture of a Participant's Phantom
Shares, such Phantom Shares shall be canceled and neither the Participant nor
his beneficiary shall have any further rights with respect thereto. If a
Participant forfeits all rights to receive payment hereunder as a result of a
Termination of Employment for Cause pursuant to Section 6.2 above, he shall
forfeit all rights to any further payments hereunder but he shall not be
required to repay amounts previously received by him hereunder. Forfeited
Phantom Shares shall not be reinstated by subsequent rehire of the Participant
by the Company or a Participating Employer. Forfeited Phantom Shares shall be
available for reissuance under the Plan.

                                  ARTICLE VII

                            TERMINATION OF EMPLOYMENT

                  7.1 Termination of Employment Other Than For Cause. In the
event of a Participant's Termination of Employment for a reason other than death
or Disability, and there is no Cause for the Company or any Participating
Employer to terminate his employment, such Participant shall be entitled to
receive a distribution of his Phantom Shares multiplied by his Vested
Percentage.

                  7.2 Payment of Vested Phantom Shares. A Participant's Vested
Phantom Shares shall be paid to such Participant as provided in Article X
hereof.

                                       6
<PAGE>   9

                                  ARTICLE VIII

                           DISABILITY OF A PARTICIPANT

                  8.1 Benefits Payable Due to Disability. In the event of a
Participant's Termination of Employment due to his Disability, all Phantom
Shares awarded to such disabled Participant which have not vested previously
pursuant to this Plan shall become vested in accordance with the pro-rata
vesting formula set out in Section 5.2 as of the date the Participant's
Termination of Employment due to his Disability.

                  8.2 Payment of Vested Phantom Shares. A Participant's Vested
Phantom Shares shall be paid to such disabled Participant as provided in Article
X hereof.

                                   ARTICLE IX

                             DEATH OF A PARTICIPANT

                  9.1 Benefits Payable Due to Death. In the event of the
Termination of Employment of a Participant by reason of his death, his
beneficiary shall be entitled to receive a distribution of his Vested Phantom
Shares. All Phantom Shares awarded to such Participant which have not vested
previously pursuant to this Plan shall become vested in accordance with the
pro-rata vesting formula set out in Section 5.2 as of the Participant's date of
Termination of Employment by reason of his death.

                  9.2 Payment of Vested Phantom Shares. A Participant's Vested
Phantom Shares shall be paid as provided in Article X hereof to the beneficiary
of the Participant.

                  9.3 Default Beneficiary. Unless a Participant or former
Participant has designated a beneficiary in accordance with the provisions of
Section 9.4 hereof, his beneficiary shall be deemed to be the person or persons
in the first of the following classes in which there are any survivors of such
Participant or former Participant:

                  (a)      his spouse at the time of his death;

                  (b)      his issue, per stirpes;

                  (c)      his parents; or

                  (d)      the executor or administrator of his estate.

                  9.4 Designated Beneficiary. In lieu of having the Vested
Phantom Shares distributable pursuant to this Article distributed to a
beneficiary determined in accordance with the provisions of Section 9.3 hereof,
a Participant may sign a document designating a beneficiary or beneficiaries to
receive such Vested Phantom Shares.

                                       7
<PAGE>   10

                  9.5 Partial Disposition. In the event that a Participant or
former Participant, dies at a time when he has a designation on file with the
Administrator which does not fully dispose of his Vested Phantom Shares under
this Plan upon his death, then the Vested Phantom Shares distributable on behalf
of said Participant or former Participant, the disposition of which was not
determined by the deceased Participant's or former Participant's designation,
shall be distributed to a beneficiary determined under the provisions of Section
9.3 hereof.

9.6 Ambiguity as to Beneficiary. Any ambiguity in a Participant's beneficiary
designation shall be resolved by the Administrator. Subject to Section 9.4
hereof, the Administrator may direct a Participant to clarify his beneficiary
designation and if necessary execute a new beneficiary designation containing
such clarification.

                                   ARTICLE X

                            PAYMENT OF PHANTOM SHARES

                  10.1 Payments Before Termination of Employment. Subject to
Sections 10.2 and 10.4, a Participant who has not had a Termination of
Employment may request a distribution of all or a portion of his Vested Phantom
Shares. Such request shall be made in writing in a form and manner specified by
the Company and must specify the number of Vested Phantom Shares to be
distributed and the date upon which such Vested Phantom Shares shall be paid
which must be as soon as administratively possible following a date that is at
least one (1) year after the date on which the request is made. A Participant
may request a distribution before the date on which his Phantom Shares actually
become vested subject to the other requirements set forth in this Section 10.1.
Any distribution request shall be irrevocable unless, prior to payment, the
Participant dies, has a Termination of Employment due to Disability or has a
Termination of Employment at which time the request shall become null and void
and the Participant's Vested Phantom Shares shall be paid as provided in Section
10.2.

                  10.2 Payments On or After a Termination of Employment. Upon a
Participant's Termination of Employment for any reason, including death or
Disability, the Participant or the beneficiary of the deceased Participant shall
be entitled to a distribution equal to his Vested Phantom Shares. Such
distribution shall be in a single lump sum payment on the date determined under
Section 10.5 and shall be in lieu of all other benefits under this Plan.

                  10.3 Change in Control. Any Phantom Shares held by a
Participant under this Plan or any Phantom Shares remaining to be paid to a
Participant or beneficiary under a prior distribution election shall be paid
immediately to such Participant or beneficiary in a single lump sum payment upon
the occurrence of a Change in Control.

                  10.4     Form and Amount of Payment.

                           (a)      Subject to such rules, procedures, limits
                                    and restrictions as the Administrator may
                                    establish from time to time, a Participant,
                                    may elect that distributions payable under
                                    Section 10.1 shall be made in a single sum
                                    or in the form of annual installments over a
                                    period of no

                                       8
<PAGE>   11

                                    less than two (2) calendar years and no more
                                    than ten (10) calendar years.

                           (b)      Any installment form of payment shall be
                                    equal to the number of Vested Phantom Shares
                                    to be distributed to a Participant divided
                                    by the number of remaining installments to
                                    be paid.

                           (c)      The Administrator, with the consent of the
                                    Company, may establish procedures to permit
                                    some or all Participants to request to
                                    change their prior elections regarding the
                                    form of their benefit payments under Section
                                    10.1, provided that any such procedures
                                    shall either require such request be made a
                                    reasonable period of time, as determined by
                                    the Company in its sole discretion, before
                                    the Phantom Shares affected by such request
                                    shall be distributable, or require a
                                    forfeiture of a significant portion of such
                                    Phantom Shares. The Administrator may, but
                                    is not required to, grant any such requests.

                           (d)      All payments under the Plan shall be made in
                                    Actual Shares of the Company. Actual Shares
                                    shall be distributed first from treasury
                                    shares and then, to the extent treasury
                                    shares are not available, from any
                                    authorized and unissued Company shares.

                  10.5     Commencement of Payments.

                           (a)      Payments under Section 10.1 of this Plan
                                    shall be made as soon as administratively
                                    possible following the date elected by the
                                    Participant which is at least one (1) year
                                    after the date such election is made by the
                                    Participant.

                           (b)      The Administrator, with the consent of the
                                    Company, may establish procedures to permit
                                    some or all Participants who have made a
                                    distribution election pursuant to Section
                                    10.1 to request to change their prior
                                    elections regarding the time of commencement
                                    of benefits hereunder, provided that any
                                    such procedures shall either require that
                                    the request be made a reasonable period of
                                    time, as determined by the Company in its
                                    sole discretion, before the amounts affected
                                    by such request shall be distributable, or
                                    require a forfeiture of a significant
                                    portion of such amounts. The Administrator
                                    may, but is not required to, grant any such
                                    requests.

                           (c)      Single lump sum payments made under Section
                                    10.2 of this Plan shall be made as soon as
                                    administratively possible following a
                                    Participant's Termination of Employment and,
                                    in any event, no later than ninety (90) days
                                    after a Participant's Termination of
                                    Employment.

                                       9
<PAGE>   12

                           (d)      Single lump sum payments made under Section
                                    10.3 of this Plan shall be made immediately
                                    upon a Change in Control.

                      10.6 Protective Distributions. In the event that the
Administrator determines, in its sole discretion, that a Participant is not, or
may not be, a member of a "select group of management or highly compensated
employees" within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) or
4021(b)(6) of the Employee Retirement Income Security Act of 1974, as amended,
then the Administrator may, in its sole discretion, terminate such Participant's
participation in this Plan, and distribute such Participant's Vested Phantom
Shares in a single lump sum payment. Any such distribution shall be made at such
time as the Administrator determines in its sole discretion.

                      10.7 Tax Withholding. A Participating Employer may
withhold from any payment made by it under the Plan the number of Vested Phantom
Shares equal in value to such amount or amounts as may be required for purposes
of complying with the tax withholding or other provisions of the Internal
Revenue Code or the Social Security Act or any state or local income or
employment tax act or for purposes of paying any estate, inheritance or other
tax attributable to any amounts payable hereunder.

                      10.8 Cancellation of Phantom Shares. As of the date of
payment with respect to a Phantom Share of a Participant, such Phantom Share
shall be deemed canceled.

                                   ARTICLE XI

                      NONTRANSFERABILITY OF PHANTOM SHARES

                      11.1 Nontransferable. Except as provided in Article IX
hereof with respect to the designation of beneficiaries, Phantom Shares awarded
pursuant to this Plan and the right to receive payments of Vested Phantom
Shares, if any, attributable thereto, are nontransferable directly, indirectly,
as security for a loan or otherwise by any means, either voluntarily or by
operation of law.

                                  ARTICLE XII

                                 ADMINISTRATION

                      12.1 Administration. The Compensation Committee shall be
the Administrator unless and until the Board shall appoint some other person,
persons, committee, corporation, partnership or other entity as Administrator.

                      12.2 Powers of the Administrator. The Administrator shall
administer and interpret this Plan. In so doing, it shall have full power and
discretion:

                                       10
<PAGE>   13

                    (a)  to interpret this Plan and any related documents, to
                         resolve ambiguities, inconsistencies and omissions, to
                         determine any questions of fact, to determine the right
                         to benefits of, and the amount of benefits, if any,
                         payable to any person in accordance with the provisions
                         of this Plan;

                     (b)    to enact such rules, regulations, and procedures and
                            to prescribe the use of such administrative forms as
                            it shall deem advisable; and

                     (c)    to appoint or employ such agents, attorneys,
                            appraisers, accountants and assistants at the
                            expense of the Company, as it may deem necessary to
                            keep its records or to assist it in taking any other
                            action authorized or required hereunder.

                      12.3 Denial of Benefits. If any Participant or beneficiary
shall file an application for benefits hereunder and such application is denied
in whole or in part by the Administrator, the applicant shall be notified in
writing of the specific reason or reasons for such denial. The notice shall also
set forth the specific Plan provisions upon which the denial is based, an
explanation of the provisions of 12.4 hereof, and any other information deemed
necessary or advisable by the Administrator.

                      12.4 Appeals Procedure. Any Participant, any beneficiary,
or any authorized representative of a Participant or beneficiary whose
application for benefits hereunder has been denied, in whole or in part, by the
Administrator may upon written notice to the Appeals Committee request a review
by the Appeals Committee of such denial of his application. Such review may be
made by written briefs submitted by the applicant and the Administrator or at a
hearing, or by both, as shall be deemed necessary by the Appeals Committee. Any
such hearing shall be held in the main office of the Company on such date and at
such time as the Appeals Committee shall designate upon not less than seven (7)
days' notice to the applicant and the Administrator unless both of them accept
shorter notice. The Appeals Committee shall make every effort to schedule the
hearing on a day and at a time which is convenient to both the applicant and the
Administrator. After the review has been completed, the Appeals Committee shall
render a decision in writing, a copy of which shall be sent to both the
applicant and the Administrator. Such decision shall be made no later than sixty
(60) days following the applicant's request for review; provided, however, that
in the event that a hearing is held with respect to the review of the claim,
such decision shall be rendered no later than one hundred twenty (120) days
following the applicant's request for review. In rendering its decision, the
Appeals Committee shall have full power and discretion to interpret this Plan
and related documents, to resolve ambiguities, inconsistencies and omissions, to
determine any question of fact, to determine the right to benefits of, and the
amount of benefits, if any, payable to, the applicant in accordance with the
provisions of this Plan. Such decision shall set forth the specific reason or
reasons for the decision and the specific Plan provisions upon which the
decision is based. Such decision shall be final and binding on the applicant and
the Administrator.

                      12.5 Establishment of Appeals Committee. The Company shall
appoint the members of an Appeals Committee which shall consist of three (3) or
more members. The Company may appoint one Appeals Committee to hear all appeals
of denied benefits that may

                                       11
<PAGE>   14
arise under the Plan or a number of Appeals Committees with different members to
hear the appeals of denied benefits that arise from Participants employed by a
Participating Employer or group of Participating Employers. The members of the
Appeals Committee shall remain in office at the will of the Company and the
Company, from time to time, may remove any of said members with or without
cause. A member of the Appeals Committee may resign upon written notice to the
remaining member or members of the Appeals Committee and to the Company,
respectively. The fact that a person is a Participant or a former Participant or
a prospective Participant shall not disqualify him from acting as a member of
the Appeals Committee, nor shall any member of the Appeals Committee be
disqualified from acting on any question because of his interest therein, except
that no member of the Appeals Committee may act on any claim which such member
has brought as a Participant, former Participant, or Beneficiary under this
Plan. In case of the death, resignation or removal of any member of the Appeals
Committee, the remaining members shall act until a successor-member shall be
appointed by the Company. At the Administrator's request, the Secretary of the
Company shall notify the Administrator in writing of the names of the original
members of the Appeals Committee, of any and all changes in the membership of
the Appeals Committee, of the member designated as Chairman, and the member
designated as Secretary, and of any changes in either office. Until notified of
a change, the Administrator shall be protected in assuming that there has been
no change in the membership of the Appeals Committee or the designation of
Chairman or of Secretary since the last notification was filed with it. The
Administrator shall be under no obligation at any time to inquire into the
membership of the Appeals Committee or its officers. All communications to the
Appeals Committee shall be addressed to its Secretary at the address of the
Company.

                      12.6 Operations of Appeals Committee. On all matters and
questions, the decision of a majority of the members of the Appeals Committee
shall govern and control; but a meeting need not be called or held to make any
decision. The Appeals Committee shall appoint one of its members to act as its
Chairman and another member to act as Secretary. The terms of office of these
members shall be determined by the Appeals Committee, and the Secretary and/or
Chairman may be removed by the other members of the Appeals Committee for any
reason which such other members may deem just and proper. The Secretary shall do
all things directed by the Appeals Committee. Although the Appeals Committee
shall act by decision of a majority of its members as above provided,
nevertheless in the absence of written notice to the contrary, every person may
deal with the Secretary and consider his acts as having been authorized by the
Appeals Committee. Any notice served or demand made on the Secretary shall be
deemed to have been served or made upon the Appeals Committee.

                      12.7 Delegation of Powers. The Administrator may by
appropriate resolution delegate to one or more of its members the authority to
exercise any of its powers in administering and interpreting this Plan.

                      12.8 Limitation of Liability. The Administrator and the
Appeals Committee shall not be liable for any action or determination made with
respect to this Plan and awards under it and the Company shall indemnify all
such persons, individually and collectively, against any and all losses, costs
or expenses which may be incurred by them, individually or collectively, in
connection with their administering this Plan.

                                       12
<PAGE>   15

                                  ARTICLE XIII

                            AMENDMENT AND TERMINATION

                      13.1 Power to Amend and Terminate Plan. This Plan may be
amended by the Company at any time, or from time to time, and may be terminated
by the Company with respect to any or all Participants at any time, but no such
amendment or termination will deprive any Participant of the right to receive
any payment in accordance with the terms of the Plan as of the date of such
amendment or termination.

                                  ARTICLE XIV

                             PARTICIPATING EMPLOYERS

                      14.1 List of Participating Employers. The initial
Participating Employers as of the Effective Date are as follows:

                             Participating Employers

                            Royal Appliance Mfg. Co.

The Company may designate additional Participating Employers or remove
Participating Employers during the period of the Plan's existence by action of
an appropriate officer of Company authorized or ratified by the Board. Such
addition or deletion shall not require a formal amendment hereto.

                                   ARTICLE XV

                                  MISCELLANEOUS

                      15.1 No Implied Rights. Neither the establishment of the
Plan nor any amendment thereof shall be construed as giving any Participant,
beneficiary or any other person any legal or equitable right unless such right
shall be specifically provided for in the Plan or conferred by specific action
of the Company in accordance with the terms and provisions of the Plan. Except
as expressly provided in this Plan, neither the Company nor any other
Participating Employer shall be required or be liable to make any payment under
the Plan.

                      15.2 No Right to Participating Employer Assets. Neither
the Participant nor any other person shall acquire by reason of the Plan any
right in or title to any assets, funds or property of a Participating Employer
whatsoever including, without limiting the generality of the foregoing, any
specific funds, assets or other property which a Participating Employer, in its
sole discretion, may set aside in anticipation of a liability hereunder. The
Participant shall have only a contractual right to the amounts, if any, payable
hereunder unsecured by any asset of a Participating Employer. Nothing contained
in the Plan constitutes a guarantee by a Participating Employer that the assets
of a Participating Employer shall be sufficient to pay any benefit to any
person.

                                       13
<PAGE>   16
                      15.3 No Employment Rights Created. This Plan shall not be
deemed to constitute a contract of employment between any of the Participating
Employers and any Participant, nor confer upon any Participant or employee the
right to be retained in the service of any Participating Employer for any period
of time, nor shall any provision hereof restrict the right of any Participating
Employer to discharge or otherwise deal with any Participant or other employees,
with or without cause. Nothing herein shall be construed as fixing or regulating
the compensation, salary, bonus or other remuneration payable to any Participant
or other employee of a Participating Employer.

                      15.4 Offset. If, at the time payments or installments of
payments are to be made hereunder, the Participant or the beneficiary or both
are indebted or obligated to a Participating Employer, then the payments
remaining to be made to the Participant or the beneficiary or both may, at the
discretion of the Company, be reduced by the amount of such indebtedness or
obligation, provided, however, that an election by the Company not to reduce any
such payment or payments shall not constitute a waiver of its claim for such
indebtedness or obligation.

                      15.5 Non-assignability. Neither the Participant nor any
other person shall have any voluntary or involuntary right to commute, sell,
assign, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate or convey in advance of actual receipt the amounts, if any, payable
hereunder, or any part thereof, and any attempt to do so shall be void. All
amounts payable under this Plan are expressly declared to be unassignable and
non-transferable. No part of the amounts payable under this Plan shall be, prior
to actual payment, subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by the Participant or any
other person, or be transferable by operation of law in the event of the
Participant's or any other person's bankruptcy or insolvency.

                      15.6 Notice. Any notice required or permitted to be given
under the Plan shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, and if given to the Company, delivered to the
principal office of the Company, directed to the attention of the Secretary of
the Company. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark or the receipt
for registration or certification.

                      15.7 Governing Laws. The Plan shall be construed and
administered according to the laws of the State of Ohio to the extent not
preempted by the laws of the United States of America.

                      15.8 Incapacity. If the Administrator determines that any
Participant or beneficiary entitled to payments under the Plan is incompetent by
reason of physical or mental disability and is consequently unable to give a
valid receipt for payments made hereunder, or is a minor, the Administrator may
order the payments becoming due to such Participant or beneficiary to be made to
another person for the benefit of such Participant or beneficiary, without
responsibility on the part of the Administrator to follow the application of
amounts so paid. Payments made pursuant to this Section shall completely
discharge the Plan, the Administrator, the Participating Employers and the
Appeals Committee with respect to such payments.

                                       14
<PAGE>   17

                      15.9 Administrative Forms. All applications, elections and
designations in connection with the Plan made by a Participant or beneficiary
shall become effective only when duly executed on forms provided by the
Administrator and filed with the Administrator.

                      15.10 Independence of Plan. Except as otherwise expressly
provided herein, this Plan shall be independent of, and in addition to, any
other employee benefit agreement or plan or any rights that may exist from time
to time thereunder.

                      15.11 Responsibility for Legal Effect. Neither the
Company, any other Participating Employer, the Administrator, the Appeals
Committee, nor any officer, member, delegate or agent of any of them, makes any
representations or warranties, express or implied, or assumes any responsibility
concerning the legal, tax, or other implications or effects of this Plan.

                      15.12 Successors. The terms and conditions of this Plan
shall inure to the benefit of and bind the Company, the Participating Employers,
the Administrator, the Appeals Committee and its members, the Participants,
their beneficiaries, and the successors, assigns, and personal representatives
of any of them.

                      15.13 Headings and Titles. The Section headings and titles
of Articles used in this Plan are for convenience of reference only and shall
not be considered in construing this Plan.

                      15.14 General Rules of Construction. The masculine gender
shall include the feminine and neuter, and vice versa, as the context shall
require. The singular number shall include the plural, and vice versa, as the
context shall require. The present tense of a verb shall include the past and
future tenses, and vice versa, as the context may require.

                      15.15 Severability. In the event that any provision or
term of this Plan, or any agreement or instrument required by the Administrator
hereunder, is determined by a judicial, quasi-judicial or administrative body to
be void or not enforceable for any reason, all other provisions or terms of this
Plan or such agreement or instrument shall remain in full force and effect and
shall be enforceable as if such void or nonenforceable provision or term had
never been a part of this Plan, or such agreement or instrument.

                      15.16 Actions by the Company. Except as otherwise provided
herein, all actions of the Company under this Plan shall be taken by the Board,
by any officer of the Company, or by any other person designated by any of the
foregoing.
                                       15
<PAGE>   18

       IN WITNESS WHEREOF, Royal Appliance Mfg. Co., by its duly authorized
officers, has caused this Phantom Stock Plan to be executed as of this 15th day
of December 2000.

                                               ROYAL APPLIANCE MFG. CO.

                                               By___________________________

                                               And__________________________

                                       16

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