Exhibit 10.4 to RC2 Aug 2005 Form 10-Q


     

    Exhibit
      10.4


    RC2
      CORPORATION

    


    OUTSIDE
      DIRECTOR COMPENSATION PLAN

    


    


    I.      
      Overview.
      

    


    This
      plan
      is established to provide for compensation to the members of the Board of
      Directors (the "Board") of RC2 Corporation (the "Company") who are not officers
      or employees of the Company or any of its subsidiaries (the "Outside
      Directors"). This plan shall be effective commencing with the quarter ending
      March 31, 2005.

    


    II.  
      Annual
      and Chair Fees.

    


    A. 
      Each
      Outside Director shall be entitled to an annual fee (the "Annual Fee") of
      $25,000, payable quarterly in cash or stock options as elected by the Outside
      Director as provided in Section II.C. below. If a new Outside Director
      joins the Board during any quarter, the quarterly installment of the Annual
      Fee
      for such quarter shall be payable pro rata based on the number full months
      during which such new Outside Director serves on the Board.

    


    B.  In
      addition to the Annual Fee, each Outside Director who chairs a committee of
      the
      Board shall receive an additional annual fee (the "Chair Fee") of $5,000. The
      Chair Fee shall be payable quarterly on the same terms as the Annual Fee in
      Section II.A. above.

    


    C. 
      On
      an
      annual basis, each Outside Director may elect to receive such director's Annual
      Fee and Chair Fee in the form of stock options by executing and returning an
      election form to the Company's Chief Financial Officer by February 15 of that
      year. If a stock option election is made, then following the end of each quarter
      during the year the Outside Director will receive options to purchase a number
      of shares of the Company's common stock determined based on the Black Scholes
      valuation method or another appropriate valuation method selected by the
      Company's Chief Financial Officer. Any Outside Director who fails to return
      an
      executed election form to the Company's Chief Financial Officer by February
      15
      will be deemed to have elected to receive cash payment of the Annual Fee and
      Chair Fee for that year. Any such election is irrevocable. All stock options
      will be issued under the Company's stock incentive plan then in effect, will
      have an exercise price equal to the fair market value of the common stock on
      the
      date of grant (determined in accordance with the applicable stock incentive
      plan) and will be fully vested on the date of grant.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    III.   
      Long-Term
      Incentive Compensation.

    


    A.  
      In
      addition to the fees set forth in Section II above, each Outside Director
      will receive an annual fee of $20,000 payable in the form of stock options
      granted on a quarterly basis. Following the end of each calendar quarter, $5,000
      of such stock options shall be granted, with the number of such stock options
      determined consistent with Section II.C. above. All stock options will
      be
      issued under the Company's stock incentive plan then in effect, will have an
      exercise price equal to the fair market value of the common stock on the date
      of
      grant (determined in accordance with the applicable stock incentive plan) and
      will be fully vested on the date of grant. Such options will only be issuable
      if
      the Outside Director is a member of the Board on the date of grant. If a new
      Outside Director joins the Board during any quarter, the quarterly issuance
      of
      stock options for such quarter shall be payable pro rata based on the number
      full months during which such new Outside Director serves on the
      Board.

    


    B.  
      If
      an
      Outside Director is a member of the Board on February 1 of any year (beginning
      with February 1, 2005), the Outside Director shall receive an additional
      grant of options to acquire 100 shares for every full percentage point that
      the
      three-year compounded annual EPS growth rate as of December 31 of the prior
      year
      exceeds 25%. All stock options will be issued under the Company's stock
      incentive plan then in effect, will have an exercise price equal to the fair
      market value of the common stock on the date of grant (determined in accordance
      with the applicable stock incentive plan) and will be fully vested on the date
      of grant.

    


    C.  
      The
      total
      number of options granted to an Outside Director in any fiscal year under this
      Section III shall not exceed 20,000.

    


    IV. Amendment
      and Termination.

    


    The
      Board
      may amend or terminate this bonus plan at any time without the consent or
      approval of any individual Outside Director.

     

     

     

    
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