**Exhibit 10.4**

 

**ev3 Inc.**

 

**AMENDED AND RESTATED**

**2005 INCENTIVE STOCK PLAN**

 

**(as amended through July 25,2005)**

 

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TABLE OF CONTENTS

 
| § 1.  BACKGROUND AND PURPOSE  |                                 |   |
|-----------------------------------------|--------------------------------------|--------|
|                                    |                                 |   |
| § 2. DEFINITIONS              |                                 |   |
|                                    |                                 |   |
| 2.1                                     | Affiliate                            |   |
| 2.2                                     | Board                                |   |
| 2.3                                     | Change  Effective Date               |   |
| 2.4                                     | Change  in Control                   |   |
| 2.5                                     | Code                                 |   |
| 2.6                                     | Committee                            |   |
| 2.7                                     | Company                              |   |
| 2.8                                     | Director                             |   |
| 2.9                                     | Eligible  Employee                   |   |
| 2.10                                    | Fair  Market Value                   |   |
| 2.11                                    | ISO                                  |   |
| 2.12                                    | 1933 Act                             |   |
| 2.13                                    | 1934 Act                             |   |
| 2.14                                    | Non-ISO                              |   |
| 2.15                                    | Option                               |   |
| 2.16                                    | Option  Certificate                  |   |
| 2.17                                    | Option  Price                        |   |
| 2.18                                    | Parent                               |   |
| 2.19                                    | Plan                                 |   |
| 2.20                                    | Rule 16b-3                      |   |
| 2.21                                    | SAR  Value                           |   |
| 2.22                                    | Stock                                |   |
| 2.23                                    | Stock Appreciation Right             |   |
| 2.24                                    | Stock Appreciation Right Certificate |   |
| 2.25                                    | Stock  Grant                         |   |
| 2.26                                    | Stock Grant Certificate              |   |
| 2.27                                    | Stock  Unit Grant                    |   |
| 2.28                                    | Subsidiary                           |   |
| 2.29                                    | Ten Percent Shareholder              |   |
|                                    |                                 |   |
| § 3.  SHARES AND GRANT LIMITS |                                 |   |
|                                    |                                 |   |
| 3.1                                     | Shares Reserved                      |   |
| 3.2                                     | Source of Shares                     |   |
| 3.3                                     | Use of Proceeds                      |   |
| 3.4                                     | Grant Limits                         |   |
|                                    |                                 |   |
| § 4. EFFECTIVE DATE           |                                 |   |
|                                    |                                 |   |
| § 5. COMMITTEE                |                                 |   |
|                                         |                                      |        |  |

 

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| § 6. ELIGIBILITY               |                                                         |   |
|------------------------------------------|--------------------------------------------------------------|--------|
|                                     |                                                         |   |
| § 7. OPTIONS                   |                                                         |   |
|                                     |                                                         |   |
| 7.1                                      | Committee Action                                             |   |
| 7.2                                      | $100,000 Limit                                               |   |
| 7.3                                      | Option Price                                                 |   |
| 7.4                                      | Payment                                                      |   |
| 7.5                                      | Exercise                                                     |   |
|                                     |                                                         |   |
| § 8. STOCK APPRECIATION RIGHTS |                                                         |   |
|                                     |                                                         |   |
| 8.1                                      | Committee Action                                             |   |
| 8.2                                      | Terms  and Conditions                                        |   |
| 8.3                                      | Exercise                                                     |   |
|                                     |                                                         |   |
| § 9. STOCK GRANTS              |                                                         |   |
|                                     |                                                         |   |
| 9.1                                      | Committee Action                                             |   |
| 9.2                                      | Conditions                                                   |   |
| 9.3                                      | Dividends, Voting Rights and Creditor Status                 |   |
| 9.4                                      | Satisfaction of Forfeiture Conditions                        |   |
| 9.5                                      | Income  Tax Deduction                                        |   |
|                                     |                                                         |   |
| § 10.  NON-TRANSFERABILITY     |                                                         |   |
|                                     |                                                         |   |
| 10.1                                     | General Rule                                                 |   |
| 10.2                                     | Transfers to Family Members                                  |   |
|                                     |                                                         |   |
| § 11. SECURITIES REGISTRATION  |                                                         |   |
|                                     |                                                         |   |
| § 12. LIFE OF PLAN             |                                                         |   |
|                                     |                                                         |   |
| § 13. ADJUSTMENT               |                                                         |   |
|                                     |                                                         |   |
| 13.1                                     | Capital Structure                                            |   |
| 13.2                                     | Available Shares                                             |   |
| 13.3                                     | Transactions Described in § 424 of the Code        |   |
| 13.4                                     | Fractional Shares                                            |   |
|                                     |                                                         |   |
| § 14. CHANGE IN CONTROL        |                                                         |   |
|                                     |                                                         |   |
| § 15. AMENDMENT OR TERMINATION |                                                         |   |
|                                     |                                                         |   |
| § 16. MISCELLANEOUS            |                                                         |   |
|                                     |                                                         |   |
| 16.1                                     | Shareholder Rights                                           |   |
| 16.2                                     | No Contract of Employment                                    |   |
| 16.3                                     | Withholding                                                  |   |
| 16.4                                     | Construction                                                 |   |
| 16.5                                     | Other Conditions                                             |   |
| 16.6                                     | Rule 16b-3                                              |   |
| 16.7                                     | Coordination with Employment Agreements and Other Agreements |   |
|                                          |                                                              |        |  |

 

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§ 1.BACKGROUND AND PURPOSE

 

The purpose of this Plan is to promote the interest of the Company byauthorizing the Committee to grant Options and Stock Appreciation Rights and tomake Stock Grants and Stock Unit Grants to Eligible Employees and Directors orconsultants in order (1) to attract and retain Eligible Employees,Directors or consultants, (2) to provide an additional incentive to eachEligible Employee, Director or consultant to work to increase the value ofStock and (3) to provide each Eligible Employee, Director or consultantwith a stake in the future of the Company which corresponds to the stake ofeach of the Company’s shareholders.

 

§ 2.DEFINITIONS

 

2.1           Affiliate — means anyorganization (other than a Subsidiary) that would be treated as under commoncontrol with the Company under § 414(c) of the Code if “50 percent”were substituted for “80 percent” in the income tax regulations under § 414(c) ofthe Code.

 

2.2           Board — means the Board ofDirectors of the Company.

 

2.3           Change EffectiveDate — means either the date which includes the “closing” of thetransaction which makes a Change in Control effective if the Change in Controlis made effective through a transaction which has a “closing” or the date aChange in Control is reported in accordance with applicable law as effective tothe Securities and Exchange Commission if the Change in Control is madeeffective other than through a transaction which has a “closing”.

 

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2.4           Change in Control — means achange in control of the Company occurring after the effective date of thisPlan of a nature that would be required to be reported in response to Item 6(e) ofSchedule 14A of Regulation 14A (or in response to any similar item onany similar schedule or form) promulgated under the 1934 Act, whether ornot the Company is then subject to such reporting requirement; provided,however, that, without limitation, a Change in Control shallinclude:  (i) the acquisition (otherthan from the Company) after the date hereof by any person, entity or “group”within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934Act (excluding, for this purpose, the Company or its subsidiaries, any employeebenefit plan of the Company or its subsidiaries which acquires beneficialownership of voting securities of the Company, any qualified institutionalinvestor who meets the requirements of Rule 13d-1(b)(1) promulgatedunder the 1934 Act, Warburg Pincus LLC and its affiliates, and The VerticalGroup, L.P. and its affiliates) of beneficial ownership (within the meaning of Rule 13d-3promulgated under the 1934 Act) of 20% or more of either the then-outstandingshares of common stock or the combined voting power of the Company’sthen-outstanding capital stock entitled to vote generally in the election ofdirectors; (ii) individuals who, as of the date hereof, constitute theBoard (the “Incumbent Board”) ceasing for any reason to constitute at least amajority of the Board, provided that any person becoming a director subsequentto the date hereof whose election, or nomination for election by the Company’sstockholders was approved by a vote of at least a majority of the directorsthen comprising the Incumbent Board (other than an

 

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election ornomination of an individual whose initial assumption of office is in connectionwith an actual or threatened election contest relating to the election of thedirectors of the Company) shall be, for purposes of this Agreement, consideredas though such person were a member of the Incumbent Board; or (iii) approvalby the stockholders of the Company of (A) a reorganization, merger, orconsolidation, in each case, with respect to which persons who were thestockholders of the Company immediately prior to such reorganization, merger,or consolidation do not, immediately thereafter, own more than 50% of thecombined voting power entitled to vote generally in the election of directorsof the reorganized, merged, consolidated or other surviving corporation’sthen-outstanding voting securities, (B) a liquidation or dissolution ofthe Company, or (C) the sale of all or substantially all of the assets ofthe Company.

 

2.5           Code — means the InternalRevenue Code of 1986, as amended.

 

2.6           Committee — means a committeeof the Board which shall have at least 2 members, each of whom shall beappointed by and shall serve at the pleasure of the Board and at least 2 ofwhom shall come within the definition of a “non-employee director” under Rule 16b-3,or if no such committee of the Board has been appointed, the Board as a whole.

 

2.7           Company — means ev3 Inc. andany successor to ev3 Inc.

 

2.8           Director — means any member ofthe Board who is not an employee of the Company or a Parent or Subsidiary oraffiliate (as such term is defined in Rule 405 of the 1933 Act) of theCompany.

 

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2.9           Eligible Employee— means an employee of the Company or any Subsidiary or Parent or Affiliate towhom the Committee decides for reasons sufficient to the Committee to make agrant under this Plan.

 

2.10         Fair Market Value— means either (a) the closing price on any date for a share of Stock asreported by The Wall Street Journal or, if The Wall Street Journalno longer reports such closing price, such closing price as reported by anewspaper or trade journal selected by the Committee or, if no such closingprice is available on such date, (b) such closing price as so reported inaccordance with § 2.10(a) for the immediately preceding business day,or, if no newspaper or trade journal reports such closing price or if no suchprice quotation is available, (c) the price which the Committee acting ingood faith determines through any reasonable valuation method that a share ofStock might change hands between a willing buyer and a willing seller, neitherbeing under any compulsion to buy or to sell and both having reasonableknowledge of the relevant facts.

 

2.11         ISO — means an option grantedunder this Plan to purchase Stock which is intended to satisfy the requirementsof § 422 of the Code.

 

2.12         1933 Act — means the SecuritiesAct of 1933, as amended.

 

2.13         1934 Act — means the SecuritiesExchange Act of 1934, as amended.

 

2.14         Non-ISO — means an optiongranted under this Plan to purchase Stock which is intended to fail to satisfythe requirements of § 422 of the Code.

 

2.15         Option — means an ISO or aNon-ISO which is granted under § 7.

 

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2.16         Option Certificate— means the certificate (whether in electronic or written form) which setsforth the terms and conditions of an Option granted under this Plan.

 

2.17         Option Price — means the pricewhich shall be paid to purchase one share of Stock upon the exercise of anOption granted under this Plan.

 

2.18         Parent — means any corporationwhich is a parent corporation (within the meaning of § 424(e) of theCode) of the Company.

 

2.19         Plan — means this ev3 Inc. 2005Incentive Stock Plan as effective as of the date approved by the shareholdersof the Company and as amended from time to time thereafter.  For each grant of an Option to an EligibleEmployee, Director or consultant who is a resident of France, the Plan shallinclude the terms of the addendum titled, “Terms and Conditions for FrenchOption Grants”, which shall supercede the terms of the Plan to the extent thatthe terms of such addendum conflict with the terms of the Plan.

 

2.20         Rule 16b-3 — means theexemption under Rule 16b-3 to Section 16(b) of the 1934 Act orany successor to such rule.

 

2.21         SAR Value — means the valueassigned by the Committee to a share of Stock in connection with the grant of aStock Appreciation Right under § 8.

 

2.22         Stock — means the common stockof the Company.

 

2.23         Stock AppreciationRight — means a right which is granted under § 8 to receive the appreciationin a share of Stock.

 

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2.24         Stock AppreciationRight Certificate -- means the certificate (whether in electronic orwritten form) which sets forth the terms and conditions of a Stock AppreciationRight which is not granted as part of an Option.

 

2.25         Stock Grant — means a grantunder § 9 which is designed to result in the issuance of the number ofshares of Stock described in such grant rather than a payment in cash based onthe Fair Market Value of such shares of Stock.

 

2.26         Stock GrantCertificate — means the certificate (whether in electronic or written form)which sets forth the terms and conditions of a Stock Grant or a Stock UnitGrant.

 

2.27         Stock Unit Grant— means a grant under § 9 which is designed to result in the payment ofcash based on the Fair Market Value of the number of shares of Stock describedin such grant rather than the issuance of the number of shares of Stockdescribed in such grant.

 

2.28         Subsidiary — meansa corporation which is a subsidiary corporation (within the meaning of § 424(f) ofthe Code) of the Company.

 

2.29         Ten PercentShareholder — means a person who owns (after taking into account theattribution rules of § 424(d) of the Code) more than ten percentof the total combined voting power of all classes of stock of either theCompany, a Subsidiary or Parent.

 

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§ 3. SHARES AND GRANT LIMITS

 

3.1           Shares Reserved.  There shall (subject to § 13) bereserved for issuance under this Plan 2,000,000 shares of Stock; provided,however that no more than 2,000,000 shares of Stock may be issued in connectionwith the exercise of ISOs.

 

3.2           Source of Shares.  The shares of Stock described in § 3.1shall be reserved to the extent that the Company deems appropriate fromauthorized but unissued shares of Stock and from shares of Stock which havebeen reacquired by the Company.  Allshares of Stock described in § 3.1 shall remain available for issuanceunder this Plan until issued pursuant to the exercise of an Option or a StockAppreciation Right or issued pursuant to a Stock Grant, and any such shares ofstock which are issued pursuant to an Option, a Stock Appreciation Right or aStock Grant which are forfeited thereafter shall again become available forissuance under this Plan.  Finally, ifthe Option Price under an Option is paid in whole or in part in shares of Stockor if shares of Stock are tendered to the Company in satisfaction of any conditionto a Stock Grant, such shares thereafter shall become available for issuanceunder this Plan and shall be treated the same as any other shares available forissuance under this Plan.

 

3.3           Use of Proceeds.  The proceeds which the Company receives fromthe sale of any shares of Stock under this Plan shall be used for generalcorporate purposes and shall be added to the general funds of the Company.

 

3.4           Grant Limits.  No Eligible Employee, Director or consultantin any calendar year shall be granted an Option to purchase (subject to § 13)more than 250,000 shares of Stock or a Stock Appreciation Right based on theappreciation with respect to (subject to § 13) more than 250,000 shares ofStock, and no Stock Grant or

 

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Stock Unit Grant shall be made to any Eligible Employee, Director orconsultant in any calendar year where the Fair Market Value of the Stocksubject to such grant on the date of the grant exceeds $10,000,000.  No more than 500,000 non-forfeitable sharesof Stock shall (subject to § 13) be issued pursuant to Stock Grants under § 9.

 

§ 4. EFFECTIVE DATE

 

The effective date of this Plan shall be the date the shareholders ofthe Company (acting at a duly called meeting of such shareholders) approve theadoption of this Plan.

 

§ 5.COMMITTEE

 

This Plan shall be administered by the Committee.  The Committee acting in its absolutediscretion shall exercise such powers and take such action as expressly calledfor under this Plan and, further, the Committee shall have the power tointerpret this Plan and (subject to § 14 and § 15 and Rule 16b-3)to take such other action in the administration and operation of this Plan asthe Committee deems equitable under the circumstances, which action shall bebinding on the Company, on each affected Eligible Employee, Director orconsultant and on each other person directly or indirectly affected by suchaction.  Furthermore, the Committee as acondition to making any grant under this Plan to any Eligible Employee, Directoror consultant shall have the right to require him or her to execute anagreement which makes the Eligible Employee, Director or consultant subject tonon-competition provisions and other restrictive covenants which run in favorof the Company.

 

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§ 6.****ELIGIBILITY

 

Only Eligible Employees who are employed by the Company or a Subsidiaryor Parent shall be eligible for the grant of ISOs under this Plan.  All Eligible Employees, Directors andconsultants shall be eligible for the grant of Non-ISOs and Stock AppreciationRights and for Stock Grants and Stock Unit Grants under this Plan.

 

§ 7.OPTIONS

 

7.1           Committee Action.  The Committee acting in its absolutediscretion shall have the right to grant Options to Eligible Employees,Directors and consultants under this Plan from time to time to purchase sharesof Stock, but the Committee shall not (subject to § 13) take any action,whether through amendment, cancellation, replacement grants, or any othermeans, to reduce the Option Price of any outstanding Options absent theapproval of the Company’s shareholders. Each grant of an Option to an Eligible Employee, Director or consultantshall be evidenced by an Option Certificate, and each Option Certificate shallset forth whether the Option is an ISO or a Non-ISO and shall set forth suchother terms and conditions of such grant as the Committee acting in itsabsolute discretion deems consistent with the terms of this Plan; however, (a) ifthe Committee grants an ISO and a Non-ISO to an Eligible Employee on the samedate, the right of the Eligible Employee to exercise the ISO shall not beconditioned on his or her failure to exercise the Non-ISO and (b) if theonly condition to exercise of the Option is the completion of a period ofservice, such period of service shall be no less than the one (1) yearperiod****which starts on the date asof which the

 

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Option is granted unless the Committee determines that a shorter periodof service (or no period of service) better serves the Company’s interest.

 

7.2           $100,000 Limit.  No Optionshall be treated as an ISO to the extent that the aggregate Fair Market Valueof the Stock subject to the Option which would first become exercisable in anycalendar year exceeds $100,000.  Any suchexcess shall instead automatically be treated as a Non-ISO.  The Committee shall interpret and administerthe ISO limitation set forth in this § 7.2 in accordance with § 422(d) ofthe Code, and the Committee shall treat this § 7.2 as in effect only forthose periods for which § 422(d) of the Code is in effect.

 

7.3           Option Price.  The Option Price for each share of Stocksubject to an Option shall be no less than the Fair Market Value of a share ofStock on the date the Option is granted; provided, however, if the Option is anISO granted to an Eligible Employee who is a Ten Percent Shareholder, theOption Price for each share of Stock subject to such ISO shall be no less than110% of the Fair Market Value of a share of Stock on the date such ISO isgranted.

 

7.4           Payment.  The Option Price shall be payable in fullupon the exercise of any Option and, at the discretion of the Committee, anOption Certificate can provide for the payment of the Option Price either incash, by check or in Stock which has been held for at least 6 months and whichis acceptable to the Committee, or through any cashless exercise procedurewhich is effected by an unrelated broker through a sale of Stock in the openmarket and which is acceptable to the Committee, or in any combination of suchforms of payment.  Any payment made inStock shall be treated as equal to the Fair Market Value of such Stock on thedate the certificate for

 

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such Stock (or proper evidence of suchcertificate) is presented to the Committee or its delegate in such form asacceptable to the Committee.

 

7.5           Exercise.

 

(a)                                  Exercise Period.  Each Option granted under this Plan shall beexercisable in whole or in part at such time or times as set forth in therelated Option Certificate, but no Option Certificate shall make an Optionexercisable on or after the earlier of

 

(1)                                  the date which is thefifth anniversary of the date the Option is granted, if the Option is an ISOand the Eligible Employee is a Ten Percent Shareholder on the date the Optionis granted, or

 

(2)                                  thedate which is the tenth anniversary of the date the Option is granted, if theOption is (a) a Non-ISO or (b) an ISO which is granted to an EligibleEmployee who is not a Ten Percent Shareholder on the date the Option isgranted.

 

(b)                                 Termination ofStatus as Eligible Employee or Director. Subject to § 7.5(a), an Option Certificate may provide for theexercise of an Option after an Eligible Employee’s, Director’s or consultant’sstatus as such has terminated for any reason whatsoever, including death ordisability.

 

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§ 8.STOCK APPRECIATION RIGHTS

 

8.1           Committee Action.  The Committee acting in its absolutediscretion shall have the right to grant Stock Appreciation Rights to EligibleEmployees, Directors and consultants under this Plan from time to time, andeach Stock Appreciation Right grant shall be evidenced by a Stock AppreciationRight Certificate or, if such Stock Appreciation Right is granted as part of anOption, shall be evidenced by the Option Certificate for the related Option.

 

8.2           Terms and Conditions.

 

(a)                                  Stock AppreciationRight Certificate.  If a StockAppreciation Right is granted independent of an Option, such Stock AppreciationRight shall be evidenced by a Stock Appreciation Right Certificate, and suchcertificate shall set forth the number of shares of Stock on which the EligibleEmployee’s, Director’s or consultant’s right to appreciation shall be based andthe SAR Value of each share of Stock. Such SAR Value shall be no less than the Fair Market Value of a share ofStock on the date that the Stock Appreciation Right is granted.  The Stock Appreciation Right Certificateshall set forth such other terms and conditions for the exercise of the StockAppreciation Right as the Committee deems appropriate under the circumstances,but no Stock Appreciation Right Certificate shall make a Stock AppreciationRight exercisable on or after the date

 

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which is thetenth anniversary of the date such Stock Appreciation Right is granted.

 

(b)                                 Option Certificate.  If a Stock Appreciation Right is grantedtogether with an Option, such Stock Appreciation Right shall be evidenced by anOption Certificate, the number of shares of Stock on which the EligibleEmployee’s, Director’s or consultant’s right to appreciation shall be basedshall be the same as the number of shares of Stock subject to the relatedOption, and the SAR Value for each such share of Stock shall be no less thanthe Option Price under the related Option. Each such Option Certificate shall provide that the exercise of theStock Appreciation Right with respect to any share of Stock shall cancel theEligible Employee’s, Director’s or consultant’s right to exercise his or herOption with respect to such share and, conversely, that the exercise of theOption with respect to any share of Stock shall cancel the Eligible Employee’s,Director’s or consultant’s right to exercise his or her Stock AppreciationRight with respect to such share.  AStock Appreciation Right which is granted as part of an Option shall beexercisable only while the related Option is exercisable.  The Option Certificate shall set forth suchother terms and conditions for the exercise of the Stock Appreciation Right asthe Committee deems appropriate under the circumstances.

 

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(c)                                  Minimum Period ofService.  If the only condition toexercise of a Stock Appreciation Right is the completion of a period ofservice, such period of service shall be no less than the one (1) yearperiod which starts on the date as of which the Stock Appreciation Right isgranted unless the Committee determines that a shorter period of service (or noperiod of service) better serves the Company’s interest.

 

8.3           Exercise.  A Stock Appreciation Right shall beexercisable only when the Fair Market Value of a share of Stock on which theright to appreciation is based exceeds the SAR Value for such share, and thepayment due on exercise shall be based on such excess with respect to thenumber of shares of Stock to which the exercise relates.  An Eligible Employee, Director or consultantupon the exercise of his or her Stock Appreciation Right shall receive apayment from the Company in cash or in Stock issued under this Plan, or in acombination of cash and Stock, and the number of shares of Stock issued shallbe based on the Fair Market Value of a share of Stock on the date the StockAppreciation Right is exercised.  TheCommittee acting in its absolute discretion shall have the right to determinethe form and time of any payment under this § 8.3.

 

§ 9.STOCK GRANTS

 

9.1           Committee Action.  The Committee acting in its absolutediscretion shall have the right to make Stock Grants and Stock Unit Grants toEligible Employees, Directors or consultants. Each Stock Grant and each Stock Unit Grant shall be

 

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evidenced by a Stock Grant Certificate, and each Stock GrantCertificate shall set forth the conditions, if any, under which Stock will beissued under the Stock Grant or cash will be paid under the Stock Unit Grantand the conditions under which the Eligible Employee’s, Director’s orconsultant’s interest in any Stock which has been issued will becomenon-forfeitable.

 

9.2           Conditions.

 

(a)                                        Conditionsto Issuance of Stock.  The Committeeacting in its absolute discretion may make the issuance of Stock under a StockGrant subject to the satisfaction of one, or more than one, condition which theCommittee deems appropriate under the circumstances for Eligible Employees,Directors or consultants generally or for an Eligible Employee, a Director or aconsultant in particular, and the related Stock Grant Certificate shall setforth each such condition and the deadline for satisfying each suchcondition.  Stock subject to a StockGrant shall be issued in the name of an Eligible Employee, Director orconsultant only after each such condition, if any, has been timely satisfied,and any Stock which is so issued shall be held by the Company pending thesatisfaction of the forfeiture conditions, if any, under § 9.2(b) forthe related Stock Grant.

 

(b)                                       Conditions onForfeiture of Stock or Cash Payment. The Committee acting in its absolute discretion may make any cashpayment due under a Stock Unit Grant or Stock issued in the

 

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name of an Eligible Employee, Director or consultant under a StockGrant non-forfeitable subject to the satisfaction of one, or more than one,objective employment, performance or other condition that the Committee actingin its absolute discretion deems appropriate under the circumstances forEligible Employees, Directors or consultants generally or for an EligibleEmployee, a Director or a consultant in particular, and the related Stock GrantCertificate shall set forth each such condition, if any, and the deadline, if any, for satisfying each suchcondition.  An Eligible Employee’s, Director’sor consultant’s non-forfeitable interest in the shares of Stock underlying aStock Grant or the cash payable under a Stock Unit Grant shall depend on theextent to which he or she timely satisfies each such condition.  If a share of Stock is issued under this § 9.2(b) beforean Eligible Employee’s, Director’s or consultant’s interest in such share ofStock is non-forfeitable, (1) such share of Stock shall not be availablefor re-issuance under § 3 until such time, if any, as such share of Stockthereafter is forfeited as a result of a failure to timely satisfy a forfeiturecondition and (2) the Company shall have the right to condition any suchissuance on the Eligible Employee, Director or consultant first signing anirrevocable stock power in favor of the Company with respect to the forfeitableshares of Stock issued to such Eligible Employee, Director or consultant in

 

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order for theCompany to effect any forfeiture called for under the related Stock GrantCertificate.

 

(c)                                        MinimumPeriod of Service.  If the onlycondition to the forfeiture of a Stock Grant or a Stock Unit Grant is thecompletion of a period of service, such period of service shall be no less thanthe three (3) year period which starts on the date as of which the StockGrant or Stock Unit Grant is made unless the Committee determines that ashorter period of service (or no period of service) better serves the Company’sinterest.

 

9.3           Dividends, VotingRights and Creditor Status.

 

(a)                                  Cash Dividends.  Except as otherwise set forth in a StockGrant Certificate, if a dividend is paid in cash on a share of Stock after suchStock has been issued under a Stock Grant but before the first date that anEligible Employee’s, Director’s or consultant’s interest in such Stock (1) isforfeited completely or (2) becomes completely non-forfeitable, theCompany shall pay such cash dividend directly to such Eligible Employee,Director or consultant.

 

(b)                                 Stock Dividends.  If a dividend is paid on a share of Stock inStock after such Stock has been issued under a Stock Grant but before the firstdate that an Eligible Employee’s, Director’s or consultant’s interest in suchStock (1) is forfeited completely or (2) becomes completelynon-forfeitable, the Company shall hold such dividend

 

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Stock subject to the same conditions under § 9.2(b) asthe related Stock Grant.

 

(c)                                  Other.  If a dividend (other than a dividenddescribed in § 9.3(a) or § 9.3(b)) is paid with respect to ashare of Stock after such Stock has been issued under a Stock Grant but beforethe first date that an Eligible Employee’s, Director’s or consultant’s interestin such Stock (1) is forfeited completely or (2) becomes completelynon-forfeitable, the Company shall distribute or hold such dividend inaccordance with such rules as the Committee shall adopt with respect toeach such dividend.

 

(d)                                 Voting.  Except as otherwise set forth in a StockGrant Certificate, an Eligible Employee, Director or consultant shall have theright to vote the Stock issued under his or her Stock Grant during the periodwhich comes after such Stock has been issued under a Stock Grant but before thefirst date that an Eligible Employee’s, Director’s or consultant’s interest insuch Stock (1) is forfeited completely or (2) becomes completelynon-forfeitable.

 

(e)                                  General CreditorStatus.  Each Eligible Employee andeach Director and each consultant to whom a Stock Unit grant is made shall beno more than a general and unsecured creditor of the Company with respect toany cash payable under such Stock Unit Grant.

 

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9.4           Satisfaction ofForfeiture Conditions.  A share ofStock shall cease to be subject to a Stock Grant at such time as an EligibleEmployee’s, Director’s or consultant’s interest in such Stock becomesnon-forfeitable under this Plan, and the certificate or other evidence ofownership representing such share shall be transferred to the EligibleEmployee, Director or consultant as soon as practicable thereafter.

 

9.5           Income Tax Deduction.

 

(a)                                  General.  The Committee shall (where the Committeeunder the circumstances deems in the Company’s best interest) either (1) makeStock Grants and Stock Unit Grants to Eligible Employees subject to at leastone condition related to one, or more than one, performance goal based on theperformance goals described in § 9.5(b) which seems likely to resultin the Stock Grant or Stock Unit Grant qualifying as “performance-based compensation”under § 162(m) of the Code or (2) make Stock Grants and Stock UnitGrants to Eligible Employees under such other circumstances as the Committeedeems likely to result in an income tax deduction for the Company with respectsuch Stock Grant or Stock Unit Grant.  Aperformance goal may be set in any manner determined by the Committee,including looking to achievement on an absolute or relative basis in relationto peer groups or indexes.

 

(b)                                 Performance Goals.  A performance goal is described in this § 9.5(b) ifsuch goal relates to (1) the Company’s return over capital costs orincreases in return over capital costs, (2) the Company’s

 

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total earnings or the growth in such earnings, (3) the Company’sconsolidated earnings or the growth in such earnings, (4) the Company’searnings per share or the growth in such earnings, (5) the Company’s netearnings or the growth in such earnings, (6) the Company’s earnings beforeinterest expense, taxes, depreciation, amortization and other non-cash items orthe growth in such earnings, (7) the Company’s earnings before interestand taxes or the growth in such earnings, (8) the Company’s consolidatednet income or the growth in such income, (9) the value of the Company’scommon stock or the growth in such value, (10) the Company’s stock priceor the growth in such price, (11) the Company’s return on assets or the growthon such return, (12) the Company’s cash flow or the growth in such cash flow,(13) the Company’s total shareholder return or the growth in such return, (14)the Company’s expenses or the reduction of such expenses, (15) the Company’ssales growth, (16) the Company’s overhead ratios or changes in such ratios,(17) the Company’s expense-to-sales ratios or the changes in such ratios, or(18) the Company’s economic value added or changes in such value added.

 

(c)                                  Adjustments.  When the Committee determines whether aperformance goal has been satisfied for any period, the Committee may excludeany or all “extraordinary items” as determined under U.S. generally acceptedaccounting principles and any other

 

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unusual ornon-recurring items, including, without limitation, the charges or costsassociated with restructurings of the Company, discontinued operations, and thecumulative effects of accounting changes. The Committee may also adjust any performance goal for a period as itdeems equitable in recognition of unusual or non-recurring events affecting theCompany, changes in applicable tax laws or accounting principles, or such otherfactors as the Committee may determine (including, without limitation, anyadjustments that would result in the Company’s paying non-deductiblecompensation to an Eligible Employee).

 

§ 10.NON-TRANSFERABILITY

 

10.1         General Rule. Except as provided in § 10.2, no Option, Stock Grant, StockUnit Grant or Stock Appreciation Right shall be transferable by an EligibleEmployee, Director or consultant other than by will or by the laws of descentand distribution, and any Option or Stock Appreciation Right shall beexercisable during an Eligible Employee’s, Director’s or consultant’s lifetimeonly by the Eligible Employee, Director or consultant.  The person or persons to whom an Option orStock Grant or Stock Unit Grant or Stock Appreciation Right is transferred bywill or by the laws of descent and distribution or pursuant to § 10.2,thereafter shall be treated as the Eligible Employee, Director or consultant.

 

10.2         Transfers to FamilyMembers.  An Option or StockGrant, Stock Unit Grant or Stock Appreciation Right may be transferred by anEligible Employee,

 

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Director or consultant to a “family member” (as defined for purposes ofForm S-8 under the 1933 Act) of such Eligible Employee, Director orconsultant or to a trust exclusively for the benefit of one or more of suchfamily members of such Eligible Employee, Director or consultant; provided suchtransfer is made as a gift without consideration, and such transfer complieswith applicable securities laws.

 

§ 11.SECURITIES REGISTRATION

 

As a condition to the receipt of shares of Stock under this Plan, theEligible Employee, Director or consultant shall, if so requested by theCompany, agree to hold such shares of Stock for investment and not with a viewof resale or distribution to the public and, if so requested by the Company,shall deliver to the Company a written statement satisfactory to the Company tothat effect.  Furthermore, if sorequested by the Company, the Eligible Employee, Director or consultant shallmake a written representation to the Company that he or she will not sell oroffer for sale any of such Stock unless a registration statement shall be ineffect with respect to such Stock under the 1933 Act and any applicable statesecurities law or he or she shall have furnished to the Company an opinion inform and substance satisfactory to the Company of legal counsel satisfactory tothe Company that such registration is not required.  Certificates or other evidence of ownershiprepresenting the Stock transferred upon the exercise of an Option or StockAppreciation Right or upon the lapse of the forfeiture conditions, if any, onany Stock Grant may at the discretion of the Company bear a legend to the effect  that suchStock has not been registered under the 1933 Act or any applicable statesecurities law and that such Stock cannot be sold or offered for

 

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sale in the absence of an effectiveregistration statement as to such Stock under the 1933 Act and any applicablestate securities law or an opinion in form and substance satisfactory to theCompany of legal counsel satisfactory to the Company that such registration isnot required.

 

§ 12.LIFE OF PLAN

 

No Option or Stock Appreciation Right shall be granted or Stock Grantor Stock Unit Grant made under this Plan on or after the earlier of:

 

(1)                                  the tenth anniversaryof the effective date of this Plan (as determined under § 4), in whichevent this Plan otherwise thereafter shall continue in effect until alloutstanding Options and Stock Appreciation Rights have been exercised in fullor no longer are exercisable and all Stock issued under any Stock Grants underthis Plan have been forfeited or have become non-forfeitable, or

 

(2)                                  the date on which allof the Stock reserved under § 3 has (as a result of the exercise ofOptions or Stock Appreciation Rights granted under this Plan or thesatisfaction of the forfeiture conditions, if any, on Stock Grants) been issuedor no longer is available for use under this Plan, in which event this Planalso shall terminate on such date.

 

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§ 13.ADJUSTMENT

 

13.1         Capital Structure.  The grant caps described in § 3.4, thenumber, kind or class (or any combination thereof) of shares of Stock subjectto outstanding Options and Stock Appreciation Rights granted under this Planand the Option Price of such Options and the SAR Value of such Stock AppreciationRights as well as the number, kind or class (or any combination thereof) ofshares of Stock subject to outstanding Stock Grants and Stock Unit Grants madeunder this Plan shall be adjusted by the Committee in a reasonable andequitable manner to preserve immediately after

 

(a)                                  anyequity restructuring or change in the capitalization of the Company, including,but not limited to, spin offs, stock dividends, large non-reoccurringdividends, rights offerings or stock splits, or

 

(b)                                 anyother transaction described in § 424(a) of the Code which does notconstitute a Change in Control of the Company

 

the aggregate intrinsic value of each suchoutstanding Option, Stock Appreciation Right, Stock Grant and Stock Unit Grantimmediately before such restructuring or recapitalization or other transaction.

 

13.2         Available Shares. If any adjustment is made with respect to any outstanding Option, StockAppreciation Right, Stock Grant or Stock Unit Grant under § 13.1, then theCommittee shall adjust the number, kind or class (or any combination thereof)of shares of Stock reserved under § 3.1 so that there is a sufficientnumber, kind and class of shares of Stock available for issuance pursuant toeach such Option, Stock Appreciation Right, Stock Grant and Stock Unit Grant asadjusted under § 13.1 without seeking the approval of the Company’sshareholders for such adjustment unless such approval is required underapplicable law or the rules of the stock exchange on

 

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which shares of Stock aretraded.  Furthermore, the Committee shallhave the absolute discretion to further adjust such number, kind or class (orany combination thereof) of shares of Stock reserved under § 3.1 in lightof any of the events described in § 13.1(a) and § 13.1(b) tothe extent the Committee acting in good faith determines that a furtheradjustment would be appropriate and proper under the circumstances and inkeeping with the purposes of this Plan without seeking the approval of theCompany’s shareholders for such adjustment unless such approval is requiredunder applicable law or the rules of the stock exchange on which shares ofStock are traded.

 

13.3         Transactions Described in § 424 of theCode.   If there is a  corporate transaction described in § 424(a) ofthe Code which does not constitute a Change in Control of the Company, theCommittee as part of any such transaction shall have the right to make StockGrants, Stock Unit Grants and Option and Stock Appreciation Right grants(without regard to any limitations set forth under 3.4 of this Plan) to effectthe assumption of, or the substitution for, outstanding stock grants, stockunit grants and option and stock appreciation right grants previously made byany other corporation to the extent that such corporate transaction calls forsuch substitution or assumption of such outstanding stock grants, stock unitgrants and stock option and stock appreciation right grants.  Furthermore, if the Committee makes any suchgrants as part of any such transaction, the Committee shall have the right toincrease the number of shares of Stock available for issuance under § 3.1by the number of shares of Stock subject to such grants without seeking theapproval of the Company’s shareholders for such adjustment unless such approvalis required under applicable law or the rules of the stock exchange onwhich shares of Stock are traded.

 

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13.4         Fractional Shares.  If any adjustment under this § 13 wouldcreate a fractional share of Stock or a right to acquire a fractional share ofStock under any Option, Stock Appreciation Right or Stock Grant, suchfractional share shall be disregarded and the number of shares of Stockreserved under this Plan and the number subject to any Options or StockAppreciation Right grants and Stock Grants shall be the next lower number ofshares of Stock, rounding all fractions downward.  An adjustment made under this § 13 bythe Committee shall be conclusive and binding on all affected persons.

 

§ 14.CHANGE IN CONTROL

 

If there is a Change in Control of the Company, then as of the ChangeEffective Date for such Change in Control any and all conditions to theexercise of all outstanding Options and Stock Appreciation Rights on such dateand any and all outstanding issuance and forfeiture conditions on any StockGrants and Stock Unit Grants on such date automatically shall be deemed 100%satisfied as of such Change Effective Date, and the Board shall have the right(to the extent expressly required as part of such transaction) to cancel suchOptions, Stock Appreciation Rights, Stock Grants and Stock Unit Grants afterproviding each Eligible Employee, Director and consultant a reasonable periodto exercise his or her Options and Stock Appreciation Rights and to take suchother action as necessary or appropriate to receive the Stock subject to anyStock Grants and the cash payable under any Stock Unit Grants; provided, if anyissuance or forfeiture condition described in this § 14 relates to satisfyingany performance goal and there is a target for such goal, such issuance or

 

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forfeiture condition shall be deemed satisfied under this § 14only to the extent of such target unless such target has been exceeded beforethe Change Effective Date, in which event such issuance or forfeiture conditionshall be deemed satisfied to the extent such target had been so exceeded.  A Change in Control shall affect a StockAppreciation Right or a Stock Unit Grant which is subject to § 409A of theCode only if the Change in Control meets the requirements for a Change inControl under § 409A of the Code.

 

§ 15.AMENDMENT OR TERMINATION

 

This Plan may be amended by the Board from time to time to the extentthat the Board deems necessary or appropriate; provided, however, (a) noamendment shall be made absent the approval of the shareholders of the Companyto the extent such approval is required under applicable law or the rules ofthe stock exchange on which shares of Stock are listed and (b) noamendment shall be made to § 14 on or after the date of any Change inControl which might adversely affect any rights which otherwise would vest onthe related Change Effective Date.  TheBoard also may suspend granting Options or Stock Appreciation Rights or makingStock Grants or Stock Unit Grants under this Plan at any time and may terminatethis Plan at any time; provided, however, the Board shall not have the rightunilaterally to modify, amend or cancel any Option or Stock Appreciation Rightgranted or Stock Grant made before such suspension or termination unless (1) theEligible Employee, Director or consultant consents in writing to suchmodification, amendment or cancellation or (2) there is a dissolution orliquidation of the Company or a transaction described in § 13.1 or § 14.

 

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§ 16.MISCELLANEOUS

 

16.1         Shareholder Rights.  No Eligible Employee, Director or consultantshall have any rights as a shareholder of the Company as a result of the grantof an Option or a Stock Appreciation Right pending the actual delivery of theStock subject to such Option or Stock Appreciation Right to such EligibleEmployee, Director or consultant.  AnEligible Employee’s, Director’s or consultant’s rights as a shareholder in theshares of Stock which remain subject to forfeiture under § 9.2(b) shallbe set forth in the related Stock Grant Certificate.

 

16.2         No Contract ofEmployment.  The grant of an Optionor a Stock Appreciation Right or a Stock Grant or Stock Unit Grant to anEligible Employee, Director or consultant under this Plan shall not constitutea contract of employment or a right to continue to serve on the Board and shallnot confer on an Eligible Employee, Director or consultant any rights upon hisor her termination of employment or service in addition to those rights, ifany, expressly set forth in this Plan or the related Option Certificate, StockAppreciation Right Certificate, or Stock Grant Certificate.

 

16.3         Withholding.  Each Option, Stock Appreciation Right, StockGrant and Stock Unit Grant shall be made subject to the condition that theEligible Employee, Director or consultant consents to whatever action theCommittee directs to satisfy the minimum statutory federal and state taxwithholding requirements, if any, which the Company determines are applicableto the exercise of such Option or Stock Appreciation Right or to thesatisfaction of any forfeiture conditions with respect to Stock subject to aStock Grant or Stock Unit Grant issued in the name of the Eligible

 

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Employee, Director or consultant.  No withholding shall be effected under thisPlan which exceeds the minimum statutory federal and state withholding requirements.

 

16.4         Construction.  All references to sections (§) are tosections (§) of this Plan unless otherwise indicated.  This Plan shall be construed under the lawsof the State of Delaware.  Each term setforth in § 2 shall, unless otherwise stated, have the meaning set forthopposite such term for purposes of this Plan and, for purposes of suchdefinitions, the singular shall include the plural and the plural shall includethe singular.  Finally, if there is any conflictbetween the terms of this Plan and the terms of any Option Certificate, StockAppreciation Right Certificate or Stock Grant Certificate, the terms of thisPlan shall control.

 

16.5         Other Conditions.  Each Option Certificate, Stock AppreciationRight  Certificate or Stock GrantCertificate may require that an Eligible Employee, Director or consultant (as acondition to the exercise of an Option or a Stock Appreciation Right or theissuance of Stock subject to a Stock Grant) enter into any agreement or makesuch representations prepared by the Company, including (without limitation)any agreement which restricts the transfer of Stock acquired pursuant to theexercise of an Option or a Stock Appreciation Right or a Stock Grant orprovides for the repurchase of such Stock by the Company.

 

16.6         Rule 16b-3.  The Committee shall have the right to amendany Option, Stock Grant or Stock Appreciation Right to withhold or otherwiserestrict the transfer of any Stock or cash under this Plan to an EligibleEmployee, Director or consultant as the Committee deems appropriate in order tosatisfy any condition or

 

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requirement under Rule 16b-3 to theextent Rule 16 of the 1934 Act might be applicable to such grant ortransfer.

 

16.7         Coordination withEmployment Agreements and Other Agreements. If the Company enters into an employment agreement or other agreementwith an Eligible Employee, Director or consultant which expressly provides forthe acceleration in vesting of an outstanding Option, Stock Appreciation Right,Stock Grant or Stock Unit Grant or for the extension of the deadline toexercise any rights under an outstanding Option, Stock Appreciation Right,Stock Grant or Stock Unit Grant, any such acceleration or extension shall bedeemed effected pursuant to, and in accordance with, the terms of suchoutstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grantand this Plan even if such employment agreement or other agreement is firsteffective after the date the outstanding Option or Stock Appreciation Right wasgranted or the Stock Grant or Stock Unit Grant was made.

 

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