Exhibit
10.7


 


DJO INCORPORATED

2007 INCENTIVE STOCK PLAN


 


1.             Purpose.  The purpose of the DJO Incorporated 2007
Incentive Stock Plan is to promote the interests of the Company and its
shareholders by enabling (i) designated key employees (including employees who
are also officers or directors) the Company and its Affiliates, (ii)
contractors, consultants and advisors who perform valuable services for the
Company or its Affiliates and (iii) non-employee members of the Board of
Directors of the Company (the “Board”) and its Affiliates to participate in the
long-term growth of the Company by receiving the opportunity to acquire shares
of the Company’s Stock and to provide for additional compensation based on
appreciation in the Company’s Stock.


 


2.             Defined Terms. The following defined
terms have the meanings set forth below:


 


(a)           “Act”
means the Securities Exchange Act of 1934, as amended from time to time.


 


(b)           “Affiliate”
means (i) any corporation, partnership or other entity which owns, directly or
indirectly, a majority of the voting equity securities of the Company, (ii) any
corporation, partnership or other entity of which a majority of the voting
equity securities or equity interest is owned, directly or indirectly, by the
Company, and (iii) with respect to an Option that is intended to be an
Incentive Stock Option, (A) any “parent corporation” of the Company, as defined
in Section 424(e) of the Code, or (B) any “subsidiary corporation” of the
Company, as defined in Section 424(f) of the Code, any other entity that is
taxed as a corporation under Section 7701(a)(3) of the Code and is a member of
the “affiliated group” as defined in Section 1504(a) of the Code of which the
Company is the common parent, and any other entity as may be permitted from
time to time by the Code or by the Internal Revenue Service to be an employer
of Employees to whom Incentive Stock Options may be granted.


 


(c)           “Award”
or “Awards,” except where referring to a particular category of grant under the
Plan, includes Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Unrestricted Stock Awards,
Deferred Stock Awards, Performance Unit Awards and Other Stock-Based Awards.


 


(d)           “Code”
means the Internal Revenue Code of 1986, as amended, and any successor code and
related rules, regulations and interpretations.


 


(e)           “Committee”
means the Compensation Committee of the Board (or any successor committee as
described in Section 5 below); such Committee shall consist of at least two (2)
members of the Board, each of whom shall be a Non-Employee Director. To the
extent required for compensation realized from Awards under the Plan to be
deductible by the Company pursuant to Section 162(m) of the Code, the Committee
shall be composed of two (2) or more members, each of whom is an “outside
director” within the meaning of Section 162(m) of the Code.


 


(f)            “Company”
means ReAble Therapeutics, Inc., a Delaware corporation which, following the
consummation of certain transactions set forth in the Agreement and Plan of
Merger, dated July 15, 2007, by and between ReAble Therapeutics, Inc. and
certain other parties, intends to change its name to “DJO Incorporated” or its
successors; provided, that to the extent that any class of equity securities of
a member of the Company’s controlled group becomes publicly traded on an
established securities market, the term “Company” shall be deemed to refer to
such publicly traded entity.


 





















 


(g)           “Disability”
means the “disability” of a person as defined in a then effective long-term
disability plan maintained by the Company that covers such person, or if such a
plan does not exist at any relevant time, “Disability” means the permanent and
total disability of a person within the meaning of Section 22(e)(3) of the
Code. For purposes of determining the time during which an Incentive Stock
Option may be exercised under the terms of an Award Agreement, “Disability”
means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code. Section 22(e)(3) of the Code provides
that an individual is totally and permanently disabled if he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months.


 


(h)           “Fair
Market Value” shall mean with respect to the Shares, as of any date,
(i) if the Stock is listed or admitted to trade on a national securities
exchange, the closing price of the Stock on the composite tape, as published in
The Wall Street Journal or such
other source as the Committee deems reliable, of the principal national
securities exchange on which the Stock is so listed or admitted to trade, on
such date or, if there is no trading in Shares on such date, then the closing
price of the Stock as quoted on such composite tape on the next preceding date
on which there was trading in such Shares; (ii) if the Stock is not listed
or admitted to trade on a national securities exchange, then the closing price
of the Stock as quoted on the National Market System of the NASD; (iii) if
the Stock is not listed or admitted to trade on a national securities exchange
or the National Market System of the NASD, the mean between the bid and asked
price for the Stock on such date, as furnished by the NASD through NASDAQ or a
similar organization if NASDAQ is no longer reporting such information; or
(iv) if the Stock is not listed or admitted to trade on a national
securities exchange or the National Market System of the NASD and if bid and
asked prices for the Stock are not so furnished by the NASD or a similar
organization, the value established by the Board. Fair market value shall be
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse.


 


(i)            “Incentive
Stock Option” means any Stock Option intended to be and designated as an “incentive
stock option” within the meaning of Section 422 of the Code.


 


(j)            “Non-Employee
Director” means a Director of the Company who either (i) is not an
Employee or Officer, does not receive compensation (directly or indirectly)
from the Company or an Affiliate in any capacity other than as a Director
(except for an amount as to which disclosure would not be required under Item
404(a) of Regulation S-K), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K or
(ii) is otherwise considered a “non-employee director” for purposes of
Rule 16b-3 under the Act.


 


(k)           “Non-Qualified
Stock Option” means any Stock Option that is not an Incentive Stock Option.


 


(l)            “Other
Stock-Based Award” shall have the meaning set forth in Section 13(a).


 


(m)          “Performance
Unit Award” shall have the meaning set forth in Section 12(a).


 


(n)           “Plan”
means the DJO Incorporated 2007 Incentive Stock Plan, as amended from time to
time.


 


(o)           “Restricted
Stock Award” shall have the meaning set forth in Section 9(a).


 


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(p)           “Retirement”
means a severance from the active employment of the Company or its Affiliates
by reason of retirement pursuant to the provisions of any profit sharing,
pension or other retirement plan of the Company or its Affiliates, or any
contract between the Company or any of its Affiliates and the Grantee.


 


(q)           “Rule 16b-3”
means Rule 16b-3, as promulgated by the Securities and Exchange Commission
under Section 16(b) of the Act, as amended from time to time.


 


(r)            “Stock”
means the common stock, $.001 par value, of the Company.


 


(s)           “Stock
Appreciation Right” shall have the meaning set forth in Section 8(a).


 


(t)            “Stock
Option” means any option to purchase shares of Stock granted pursuant to
Section 7.


 


(u)           “Unrestricted
Stock Award” shall have the meaning set forth in Section 10.


 


3.             Stock Subject to
the Plan.


 


(a)           Shares Issuable. The maximum number of
shares of Stock reserved and available for distribution pursuant to Awards
under the Plan shall be 5,000,000 shares. Such shares of Stock may consist, in
whole or in part, of authorized and unissued shares or treasury shares. If
(i) an Award expires or terminates for any reason without being exercised
in full or is satisfied without the distribution of Stock, or (ii) Stock
distributed pursuant to an Award is forfeited or reacquired by the Company, or
is surrendered upon exercise of an Award, the Stock subject to such Award or so
forfeited, reacquired or surrendered shall again be available for distribution
for purposes of the Plan.


 


(b)           Changes in Capitalization. In the event
of a stock dividend, spin-off, stock split, any increase or decrease in the
number of issued shares of Stock resulting from a subdivision or combination of
shares effected without receipt of consideration by the Company or any other
change in corporate structure or other distribution of stock or property
(except ordinary cash dividends) affecting the Stock, the Committee shall make
appropriate adjustments in (i) the number of and kind of shares of stock
or securities underlying Awards that may thereafter be granted, (ii) the
number and kind of shares remaining subject to outstanding Awards and
(iii) the option or purchase price in respect of such shares. In the event
of any such change in capitalization of the Company, the Committee may make
such additional adjustments in the number and class of shares of Stock or other
securities with respect to which outstanding Awards are exercisable and with
respect to which future Awards may be granted as the Committee in its sole
discretion shall deem equitable or appropriate, subject to the provisions of
Section 18 below. In the event the Stock is changed into the same number
of shares with a different par value or without par value, the shares resulting
from any such change shall be deemed to be the Stock within the meaning of the
Plan. Except (i) as expressly provided in the preceding sentences or (ii) for
any distribution or adjustment made with respect to outstanding shares of
Restricted Stock in connection with a distribution or adjustment made with
respect to all other outstanding shares of Stock, any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Stock subject to any Award.
The existence of the Plan and the Awards granted pursuant to the Plan shall not
affect in any way the right or power of the Company to make or authorize any
adjustment, reclassification, reorganization or other change in its capital or
business structure, any merger or consolidation of the Company, any issue of
debt or equity securities having preferences or priorities as to the Stock or
the rights thereof, the dissolution or liquidation of the Company, any sale or
transfer of all or any part of its business or assets, or any other corporate
act or proceeding.


 


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(c)           Substitute Awards. The Company may
grant Awards under the Plan in substitution for stock and stock-based awards
held by employees of another corporation who concurrently become employees of
the Company or a Affiliate, as the result of a merger or consolidation of the
employing corporation with the Company or a Affiliate or the acquisition by the
Company or a Affiliate of property or stock of the employing corporation. The
Committee will establish policies to ensure that the substitution of Awards
under the Plan for stock and stock-based awards held by employees of another
corporation who become employees of the Company or an Affiliate, as the result
of a merger or consolidation of the employing corporation with the Company are
on such terms and conditions as the Committee considers appropriate in the
circumstances and which, to the extent necessary, comply with applicable laws
governing such substitutions, including, but not limited to, Section 424
and 409A of the Code and the Treasury regulations promulgated thereunder.


 


4.             Eligibility.
All employees of the Company and its Affiliates (“Employees”), including
Employees who are officers or members of the Board, and Non-Employee Directors
shall be eligible to participate in the Plan. Consultants, contractors and
advisors who perform services for the Company or any of its Affiliates (“Consultants”)
shall be eligible to participate in the Plan, if the Consultants render bona
fide services to the Company, the services are not in connection with the offer
and sale of securities in a capital-raising transaction, and the Consultants do
not directly or indirectly promote or maintain a market for the Company’s
securities. Employees, Consultants and Non-Employee Directors who receive
Awards under this Plan shall hereinafter be referred to as “Grantees”. In the
case of Awards payable in Stock, no Grantee shall be granted during any fiscal
year the right to acquire pursuant to Awards granted under the Plan more than
1,000,000 shares of Stock. In the case of Awards payable in cash, no Grantee
shall be granted Awards entitling the Grantee to receive more than $10,000,000
in compensation during the life of the Plan or during the period within which
Awards may be payable under the Plan.


 


5.             Administration of
the Plan. The Plan shall be administered by the Board, the Committee or
such other committee of the Board, composed of not less than two
(2) Directors who are both Non-Employee Directors and, to the extent necessary
to comply with Section 162(m) of the Code, outside directors, as defined
therein, who shall be appointed by the Board and who shall serve at the
pleasure of the Board. (All references to the Committee hereinafter shall also
be deemed to refer to the Board.) The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:


 


(a)           to
select the individuals to whom Awards may from time to time be granted;


 


(b)           to
determine the time or times of grant, and the extent, if any, of Incentive
Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Unrestricted Stock Awards, Deferred Stock Awards,
Performance Units Awards, and any Other Stock-Based Awards, or any combination
of the foregoing, granted to any one or more Grantees;


 


(c)           to
determine the number of shares to be covered by any Award; and


 


(d)           to
establish the terms and conditions of any Award, including, but not limited to:


 


(i)            the
share price;


 


(ii)           any
restriction or limitation on the grant, vesting or exercise of any Award
including, but not limited to, the attainment (and certification of the
attainment) of one or more performance goals based on one or more (or any
combination) of the following business criteria that may apply to the
individual Grantee, a Company business unit, or the Company as a whole:
revenues, net income (before or after tax), earnings, earnings per share,
shareholders’ equity,


 


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return on equity, assets, return on assets, capital,
return on capital, book value, economic value added, operating margins, profit
margins, cash flow, shareholder return, expenses, sales or market share,
expense management, return on investment, improvements in capital structure,
net revenue per employee, profitability of an identifiable business unit or
product, or stock price, or shall be based on any one or more (or any
combination) of the foregoing business criteria before the effect of acquisitions,
divestitures, accounting changes, restructuring or other special charges or
extraordinary items, to the extent the Committee specifies, when granting the
Award, that the effect of any such extraordinary items shall be disregarded;
and


 


(iii)          any waiver of vesting, acceleration or
forfeiture provisions regarding any Stock Option or other Award and the Stock
relating thereto, based on such factors as the Committee shall determine.


 


Subject to the
provisions of the Plan, the Committee shall have full and conclusive authority
to interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the respective
Award agreements and to make all other determinations necessary or advisable
for the proper administration of the Plan. The Committee’s determinations under
the Plan need not be uniform and may be made by it selectively among persons
who receive, or are eligible to receive, Awards under the Plan (whether or not
such persons are similarly situated). Any determination made by the Committee
pursuant to the provisions of the Plan with respect to any Award shall be made
in its sole discretion at the time of the grant of the Award or, unless in
contravention of any express term of the Plan, at any time thereafter. All
decisions by the Committee made pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Company and the Grantees.


 


6.             Limitations on
Term and Date of Awards.


 


(a)           Duration of Awards. Subject to Section
19(c) below, no restrictions or limitations on any Award shall extend beyond
ten (10) years from the grant date.


 


(b)           Term. No Award shall be granted more
than ten (10) years after the effective date of the Plan as specified in
Section 20 below, but then outstanding Awards may extend beyond such date.


 


7.             Stock Options.
The Committee may grant Options intended to qualify as Incentive Stock Options
or Nonqualified Stock Options, provided that Incentive Stock Options may be
granted only to Employees as set forth in Section 424 of the Code. Each Stock
Option shall be clearly identified as to its status as an Incentive Stock
Option or a Non-Qualified Stock Option at the date of grant. To the extent that
any Stock Option denominated as an Incentive Stock Option does not qualify as
an “incentive stock option” within the meaning of Section 422 of the Code,
it shall constitute a separate Non-Qualified Stock Option. Stock Options
granted under the Plan shall be subject to the following terms and conditions
and shall be evidenced by option agreements, which shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan,
as the Committee shall deem desirable:


 


(a)           Option Price. The option price per
share of Stock purchasable under a Stock Option shall be determined by the
Committee at the time of grant and set forth in the option agreement but shall
be not less than 100% of the Fair Market Value on the date of grant. If an
Employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Affiliate, and an
Incentive Stock Option is granted to such Employee, the option price shall be no
less than 110% of the Fair Market Value on the date of grant. The grant of a
Stock Option shall occur on the date the Committee by resolution designates an
Employee, Non-Employee Director or Consultant to receive a grant of a Stock
Option, determines the


 


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number of shares of Stock covered by the Stock Option
and specifies the terms and provisions of the option agreement.


 


(b)           Option Term. Unless an option agreement
provides for a shorter exercise period, any Stock Option shall be exercisable
not later than ten (10) years after the
Stock Option is granted; provided, however, that if an Incentive Stock Option
is granted to an Employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any of its Affiliate,
the term of such Incentive Stock Option shall be no more than five (5) years
from the date of grant.


 


(c)           Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and conditions, and
in such amounts, as the Committee shall specify in the option agreement.
Notwithstanding the foregoing, subsequent to the grant of a Stock Option, the
Committee, at any time before the complete expiration of such Stock Option, may
accelerate the time or times at which such Stock Option may be exercised in
whole or in part. Except as provided in subsections (f), (g), (h) and (i)
below, a Stock Option may not be exercised by the holder unless the holder is
then, and continually after the grant of the Stock Option has been, employed by
or providing service to the Company or one of its Affiliates.


 


(d)           Method of Exercise. Stock Options may
be exercised at any time during the option period by giving written notice of
exercise to the Company specifying the number of shares to be purchased. Except
as provided in subsection (k) below, such notice shall be accompanied by
payment in full of the purchase price, either by certified or bank check or
other instrument acceptable to the Committee, or by delivery of shares of Stock
as provided in this subsection. As determined by the Committee, in its
discretion, at (or, in the case of Non-Qualified Stock Options, at or after)
the time of grant, payment in full or part may also be made in the form of
shares of Stock not then subject to restrictions (but which may include shares
the disposition of which constitutes a disqualifying disposition for purposes
of obtaining incentive stock option treatment under the Code). Shares of Stock
so surrendered shall be valued at Fair Market Value on the exercise date.
Except as provided in subsection (k) below, no shares of Stock shall be issued
until full payment therefor has been made. A Grantee shall have all of the
rights of a shareholder of the Company, including the right to vote the shares
and the right to receive dividends, with respect to shares subject to a Stock
Option when the Grantee has given written notice of exercise, has paid in full
for such shares and, if requested, has given the representation described in
Section 19(c) below.


 


(e)           Transferability of Options. Options
considered to be Incentive Stock Options under the Plan shall not be
transferable by the Grantee otherwise than by will or under the laws of descent
and distribution and shall be exercisable, during his or her lifetime, only by
him or her or by the guardian or legal representative of the Grantee. Options
which are deemed to be Non-Qualified Stock Options under the Plan and other
Awards under the Plan as the Committee may determine shall only be transferable
by the Grantee either (i) by will or under the laws of descent and
distribution, or (ii) to the Grantee’s (a) spouse, children or
grandchildren (“Immediate Family Members”), (b) a trust or trusts for the
exclusive benefit of such Immediate Family Members, or (c) a partnership
in which such Immediate Family Members are the only partners, (d) an
entity exempt from federal income tax pursuant to Section 501(c)(3) of the
Code or any successor provision, or (e) a split interest trust or pooled
income fund described in Section 2522(c)(2) of the Code or any successor
provision, provided that (w) there shall be no consideration for any such
transfer, (x) the award agreement pursuant to which such Non-Qualified
Stock Option is granted must be approved by the Committee and must expressly
provide for transferability in a manner consistent with the Plan, (y) no
such transfer will be approved by the Committee if common stock issuable under
such transferred stock option would not be eligible to be registered on Form
S-8 promulgated under the Securities Act of 1933


 


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(“Securities Act”), and (z) subsequent transfers
of transferred nonqualified stock options shall be prohibited except those by
will or by the laws of dissent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended.


 


Notwithstanding
the foregoing, Options and such other Awards as the Committee may determine may
be transferred pursuant to a valid qualified domestic relations order as
defined in section 414(p) of the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended pursuant to which a court has
determined that a spouse or former spouse of a Grantee has an interest in the
Grantee’s Award under the Plan. Any Incentive Stock Option transferred pursuant
to this Section 6(e) shall cease to be an Incentive Stock Option on the date of
such transfer and shall be treated for all purposes as a Non-Qualified Stock
Option in the hands of the transferee. Following any such transfer each Award
transferred shall continue to be subject to the same terms and conditions of
the Plan and the Award agreement applicable to the Award immediately prior to
transfer, provided that for all purposes under the Plan the term “Grantee”
shall be deemed to include the transferee. The effect that a termination of
service shall have on the exercisability of an Award with respect to the
original Grantee shall continue to apply to a transferee after a transfer
pursuant to this Section 6(e), so that the Award transferred shall be
exercisable by the transferee only to the extent and for the periods specified
in the Plan, unless different periods are otherwise provided in a Grantee’s
original Award agreement. The Committee and the Company shall have no
obligation to inform any transferee of an Award of any expiration, termination,
lapse or acceleration of such Award. The Company shall have no obligation to
register with any federal or state securities commission or agency any Stock
issuable or issued under an Award that has been transferred pursuant to this
Section 6(e).


 


(f)            Termination or Cessation by Death. If a
Grantee’s employment with or service to the Company or any Affiliate terminates
or ceases by reason of death, any Stock Option held by such Grantee may
thereafter be exercised, to the extent exercisable at the time of death (or on
such accelerated basis as the Committee shall at any time determine), by the
legal representative or legatee of the Grantee, for a period of one
(1) year (or such other period as the Committee shall specify at the time
of grant) from the date of death or until the expiration of the stated term of
the Stock Option, whichever period is shorter.


 


(g)           Termination or Cessation by Disability.
If a Grantee’s employment with or service to the Company or any Affiliate
terminates or ceases by reason of Disability, any Stock Option held by such
Grantee may thereafter be exercised by the optionee, to the extent it was
exercisable at the time of such termination of employment or cessation of
services (or on such accelerated basis as the Committee may at any time
determine) for a period of one (1) year (or such other period as the Committee
shall specify at the time of grant) from the date of such termination of
employment or cessation of services or until the expiration of the stated term
of the Stock Option, whichever period is shorter.


 


(h)           Termination or Cessation by Retirement.
If a Grantee’s employment with or service to the Company or any Affiliate
terminates or ceases by reason of Retirement, any Stock Option held by such
Grantee may thereafter be exercised by the Grantee, to the extent it was
exercisable at the time of Retirement (or on such accelerated basis as the
Committee may at any time determine) for a period of (i) in the case of
Incentive Stock Options, three (3) months, and (ii) in the case of Non-Qualified
Stock Options, one (1) year (or such other period as the Committee shall
specify at the time of grant of the Stock Option) from the date of Retirement
or until the expiration of the stated term of the Stock Option, whichever
period shorter. Except as otherwise provided by the Committee at the time of
grant, the death of an Grantee during such exercise period shall extend such
period for one (1) year following death, or until the expiration of the stated
term of the Stock Option, whichever period shorter.


 


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(i)            Termination or Cessation for Cause. In
the event the Grantee ceases to be employed by, or provide services to the
Company or any of its Affiliates on account of a termination for Cause by the
Company or any of its Affiliates, all Stock Options granted under the Plan,
vested or otherwise, shall be canceled and forfeited and the Grantee shall has
no rights under the Plan with respect to those grants. For purposes of this
Section 6(i) “Cause” means (i) “Cause” as that term may be defined in any
written employment or service agreement between an optionee and the Company or
any Affiliate which may at any time be in effect, or (ii) in the absence
of such a definition in a then-effective written employment or service
agreement (in the determination of the Committee) (A) any act or omission
of the Grantee that (1) results in the assessment of a civil or criminal
penalty against the Company or any Affiliate, (2) is otherwise in violation
of any federal, state, local or foreign law or regulation (other than traffic
violations and other similar misdemeanors), (3) adversely affects or could
reasonably be expected to adversely affect the Company’s or any Affiliate’s
business reputation, or (4) otherwise constitutes willful misconduct,
gross negligence, or any act of dishonesty or disloyalty, (B) the
violation by optionee of lawful policies established by the Company or any
Affiliate, or (C) the Grantee’s breach of a fiduciary duty or gross and willful
inattention to duty other than due to a cause reasonably beyond the control of
the Grantee.


 


(j)            Other Termination or Cessation. Unless
otherwise determined by the Committee, if a Grantee’s employment with or
services to the Company or any Affiliate terminate or cease for any reason
other than death, Disability or Retirement, the Stock Option held by such
Grantee may thereafter be exercised by the Grantee, to the extent it was
exercisable at the time of such termination of employment or cessation of
services, for a period of thirty (30) days (or such other period as the
Committee shall specify at the time of grant of the Stock Option) from the date
of such termination of employment or cessation of services or until the
expiration of the stated term of the Stock Option, whichever period is shorter.


 


(k)           Extension of Post-Termination or Post-Service Exercise
Period. At any time after the date of grant, the Committee may
elect to extend the period of time during which an Grantee may exercise the
Option after the Grantee terminates employment with or cease to provide
services to the Company or any Affiliate for any reason other than for Cause;
however, such additional post-termination or post-service exercise period shall
be limited to the earlier of (i) later of (A) the 15th day of the 3rd
month following the date the option would otherwise expire, or
(B) December 31 of the calendar year in which the right would
otherwise have expired, based on the terms of the Stock Option as of the
original grant date, had the stock option not been extended exercise period, or
(ii) the expiration of the stated term of the Stock Option.


 


(l)            Form of Settlement. The Committee may
provide in the option agreement that upon receipt of written notice of
exercise, the Committee may elect to settle all or a part of the portion of any
Stock Option so exercised by paying the Grantee an amount, in cash or Stock,
equal to the excess of the Fair Market Value of the Stock over the exercise
price (the “Spread Value”) (determined on the date the Stock Option is
exercised).


 


(m)          Procedure for Certain Credit Assisted Transactions.
To the extent not inconsistent with the provisions of Section 422 of the
Code or Rule 16b-3, any Grantee desiring to obtain credit from a broker,
dealer or other “creditor” as defined in Regulation T issued by the Board
of Governors of the Federal Reserve System (provided that such broker, dealer
or creditor has been approved by the Committee) to assist in exercising a Stock
Option may deliver to such creditor an exercise notice properly executed by
such Grantee with respect to such Stock Option, together with instructions to
the Company to deliver the resulting Stock to the creditor for deposit into a
designated account. Upon receipt of such exercise notice and related instructions
in a form acceptable to the Company, the Company shall confirm to the creditor
that it will deliver to the creditor the Stock covered by such exercise notice
and instructions promptly following receipt of the exercise price from the
creditor. To the extent not inconsistent with the provisions


 


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of Section 422 of the Code or Rule 16b-3,
upon request the Company may in its discretion, but shall not be obligated to,
deliver to the creditor shares of Stock resulting from an assisted exercise
prior to receipt of the option price for such shares if the creditor has
delivered to the Company, in addition to the other documents contemplated
hereby, the creditor’s agreement to pay the Company such exercise price in cash
within five (5) days after delivery of such shares. The credit assistance
contemplated hereby may include a margin loan by the creditor secured by the
Stock purchased upon exercise of a Stock Option or an immediate sale of some or
all of such Stock by the creditor to obtain or recover the option price that
the creditor has committed to pay to the Company. Notwithstanding the forgoing,
the payment option described in this Section 7(k) shall not be available to any
recipient of an Option who is a Director or executive officer of the Company or
any Affiliate if such payment option would be treated as a personal loan
prohibited under Section 13(k) of the Act.


 


(n)           Special Provisions Relating to Incentive Stock Options.
At the time any Incentive Stock Option granted under the Plan is exercised, the
Company shall be entitled to legend the certificates representing the shares of
Stock purchased pursuant to such Incentive Stock Option to clearly identify
them as representing shares purchased upon exercise of an Incentive Stock
Option that may be subject to income tax withholding requirements as set forth
in Section 15 below. Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted under the
Plan be exercised, so as to disqualify the Plan under Section 422 of the Code
or, without the consent of the affected Grantee, to disqualify any Incentive
Stock Option under Section 422 of the Code.


 


8.             Stock Appreciation
Rights.


 


(a)           General. A Stock Appreciation Right is
an Award entitling the recipient to receive an amount in cash or shares of
Stock (or forms of payment permitted under subsection (d) below) or a
combination thereof having a value equal to (or if the Committee shall so
determine at time of grant, less than) the excess of the Fair Market Value of a
share of Stock on the date of exercise over the Fair Market Value of a share of
Stock on the date of grant (or over the option exercise price, if the Stock
Appreciation Right was granted in tandem with a Stock Option) multiplied by the
number of shares with respect to which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment.


 


(b)           Grant and Exercise. Stock Appreciation
Rights may be granted in tandem with, or independently of, any Stock Option
granted under the Plan. In the case of a Stock Appreciation Right granted in
tandem with a Non-Qualified Stock Option, such Stock Appreciation Right may be
granted either at or after the time of grant of such option. In the case of a
Stock Appreciation Right granted in tandem with an Incentive Stock Option, such
Stock Appreciation Right may be granted only at the time of grant of such
option. A Stock Appreciation Right or applicable portion thereof granted in
tandem with a Stock Option shall terminate and no longer be exercisable upon
the termination or exercise of the related Stock Option, except that a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall not be reduced until the exercise or
termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.


 


(c)           Terms and Conditions. Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Committee, including the following:


 


9





















 


(i)            Stock
Appreciation Rights granted in tandem with Stock Options shall be exercisable
only at such time or times and to the extent that the related Stock Option
shall be exercisable. Upon the exercise of a Stock Appreciation Right, the
applicable portion of any related Stock Option shall be surrendered.


 


(ii)           Stock
Appreciation Rights granted in tandem with a Stock Option shall be transferable
only with such Stock Option. Stock Appreciation Rights shall not be
transferable otherwise than by will or the laws of descent and distribution.
All Stock Appreciation Rights shall be exercisable during the Grantee’s
lifetime only by the Grantee or the Grantee’s legal representative or guardian.


 


(iii)          Stock Appreciation Right granted in tandem
with an Incentive Stock Option may be exercised only when the market price of
the Stock subject to the Incentive Stock Option exceeds the exercise price of
such option.


 


(d)           Form of Settlement. Subject to Section
19(c) below, shares of Stock issued upon exercise of a Stock Appreciation Right
shall be free of all restrictions under the Plan, except as otherwise provided
in this subsection (d). The Committee may provide at time of grant of a Stock
Appreciation Right that such shares shall be in the form of Restricted Stock or
rights to acquire Deferred Stock or may reserve the right to provide so at any
time after the date of grant. Any such shares and any shares subject to rights
to acquire Deferred Stock shall be valued at Fair Market Value on the date of
exercise of the Stock Appreciation Right without regard to any restrictions or
deferral limitations.


 


(e)           Rules Relating to Exercise. Where a
Stock Appreciation Right relates to an Incentive Stock Option, the Committee
may prescribe, by rule of general application, such other measure of value as it
may determine but not in excess of an amount consistent with the qualification
of such Stock Option as an “incentive stock option” under Section 422 of the
Code.


 


9.             Restricted Stock.


 


(a)           General. A Restricted Stock Award is an
Award entitling the Grantee to acquire shares of Stock, subject to such
conditions, including the right of the Company during a specified period or
periods to repurchase such shares at their original price or to require
forfeiture of such shares (if no cash consideration was paid) upon the Grantee’s
termination of employment or cessation of services, as the Committee may
determine at the time of grant. Shares of Restricted Stock may be granted or
sold in respect of past services or other valid consideration.


 


(b)           Award Agreement and Certificates. A
Grantee who is granted a Restricted Stock Award shall have no rights with
respect to such Award unless the Grantee shall have accepted the Award within
sixty (60) days (or such shorter period as the Committee may specify)
following the Award date by executing and delivering to the Company a
Restricted Stock Award agreement in such form as the Committee shall determine
and by making payment to the Company by certified or bank check or other
instrument acceptable to the Committee for any cash consideration required to
be paid in connection with such Restricted Stock Award. Each Grantee receiving
a Restricted Stock Award shall be issued a certificate in respect of such
shares of Restricted Stock. Such certificate shall be registered in the name of
the Grantee and deposited with the Company or its designee, and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Award, substantially in the following form:


 


“This
certificate and the shares of stock represented hereby are subject to the terms
and conditions (including forfeiture and restrictions against transfer)
contained in the DJO Incorporated 2007 Incentive Stock Plan and an agreement
entered into between the registered owner and the Company. Release from such
terms and conditions shall be obtained only in


 


10

















 


accordance
with the provisions of the Plan and the Agreement, copies of which are on file
in the office of the Secretary of the Company, located in its corporate
headquarters in Austin, Texas.”


 


The Committee
may require that, as a condition of any Restricted Stock Award, the Grantee
shall have delivered to the Company a stock power, endorsed in blank, relating
to the Stock covered by such Award.


 


(c)           Rights as a Shareholder. Upon complying
with subsection (b) above, a Grantee shall have all the rights of a
shareholder with respect to the Restricted Stock, including voting and dividend
rights, subject to nontransferability restrictions, Company repurchase or
forfeiture rights and any other condition described in this Section 9 or
contained in the Restricted Stock Award agreement. The Restricted Stock Award
agreement may require or permit the immediate payment, waiver, deferral, or
investment of dividends paid on the Restricted Stock.


 


(d)           Restrictions. Shares of Restricted
Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered
or disposed of except as specifically provided herein and in the Restricted
Stock Award agreement. The Committee shall specify the date or dates (which may
depend upon or be related to the attainment of performance goals or such other
factors or criteria as the Committee shall determine) on which the
non-transferability of the Restricted Stock and the obligation to forfeit or
resell such shares to the Company shall lapse. The Committee may provide for
the lapse of such restrictions in installments and at any time may accelerate
such date or dates and otherwise waive or, subject to Section 18 below, amend
any terms and conditions of the Award. Except as otherwise may be provided in
the Award agreement or determined by the Committee at any time after the date
of grant, if a Grantee terminates employment with or ceases to provide services
to the Company and its Affiliates for any reason (including death), the Grantee
or the Grantee’s legal representative shall resell to the Company, at the cash
consideration paid therefor, all Restricted Stock, and the Company shall
purchase such shares at that price, or if no cash consideration was paid, all
shares of Restricted Stock awarded to the Grantee shall automatically be
forfeited to the Company. Any shares of Stock or other securities of the
Company or any other entity that are issued as a distribution on, or in
exchange for, Restricted Stock or into which Restricted Stock is converted as a
result of a recapitalization, stock dividend, distribution of securities, stock
split or combination of shares or a merger, consolidation or sale of
substantially all of the assets of the Company shall be subject to the
restrictions set forth in the Restricted Stock Award agreement, which shall
inure to the benefit of any surviving or successor corporation that is the
issuer of such securities. Upon the lapse of the restrictions applicable to a
Grantee’s Restricted Stock, certificates for shares of Stock free of any
restrictive legend shall be delivered to the Grantee or his legal
representative or guardian.


 


(e)           Section 83(b) Election. Any
Restricted Stock Award agreement may provide that the Grantee may not elect to
be taxed with respect to such Award in accordance with Section 83(b) of the
Code.


 


10.          Unrestricted Stock.
The Committee may, in its sole discretion, grant or sell to any Grantee shares
of Stock free of restrictions under the Plan (“Unrestricted Stock”). Shares of
Unrestricted Stock may be granted or sold in respect of past services or other
valid consideration. Any purchase of Unrestricted Stock by a recipient must
take place within sixty (60) days after the time of grant of the right to
purchase such shares.


 


11.          Deferred Stock Awards.


 


(a)           General. A Deferred Stock Award is an
Award entitling the Grantee to acquire shares of Stock without payment in one
or more installments at a future date or dates, all as determined by the
Committee. The Committee may also condition such acquisition on the


 


11





















 


attainment of specified performance goals or such
other factors or criteria as the Committee shall determine. In establishing
such specified performance goals the Committee with comply with the
requirements of section 162(m) of the Code to the extent necessary.


 


(b)           Award Agreement. A Grantee who is
granted a Deferred Stock Award shall have no rights with respect to such Award unless
within sixty (60) days of the grant of such Award (or such shorter period
as the Committee may specify) the Grantee shall have accepted the Award by
executing and delivering to the Company a Deferred Stock Award agreement.


 


(c)           Restriction on Transfer. Deferred Stock
Awards and rights with respect to such Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered. Rights with respect to such
Awards shall be exercisable during the Grantee’s lifetime only by the Grantee
or the Grantee’s legal representative or guardian.


 


(d)           Rights as a Shareholder. A Grantee
receiving a Deferred Stock Award will have rights of a shareholder only as to
shares actually received by the Grantee t under the Plan and not with respect
to shares subject to the Award but not actually received by the Grantee. A
Grantee shall be entitled to receive a certificate for shares of Stock only
upon satisfaction of all conditions specified in the Deferred Stock Award
agreement.


 


(e)           Elective Deferral. A Grantee may elect
to further defer receipt of the Stock payable under a Deferred Stock Award (or
an installment of the Award) for a specified period or until a specified event,
subject in each case to the Committee’s approval and under such terms as
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must generally be made at least twelve
(12) months prior to completion of the deferral period for the Award (or
for such installment of the Award).


 


(f)            Termination. Except as may otherwise be
provided in the Deferred Stock Award agreement, a Grantee’s rights in all
Deferred Stock Awards shall automatically terminate thirty (30) days after
the Grantee terminates employment with or ceases to provide services to the
Company or any of its Affiliates for any reason excluding death, in which case
the Grantee’s rights shall automatically terminate one (1) year after such
termination. Unless otherwise provided in the terms of an Award, at any time
prior to the Grantee’s termination of employment or cessation of services, the
Committee may in its discretion accelerate, waive, or, subject to
Section 18 below, amend any or all of the restrictions or conditions
imposed under any Deferred Stock Award.


 


(g)           Payments in Respect of Deferred Stock.
Without limiting the right of the Committee to specify different terms, the
Deferred Stock Award agreement may either make no provisions for, or may
require or permit the immediate payment, deferral, or investment of amounts
equal to, or less than, any cash dividends that would have been payable on the
Deferred Stock had such Stock been outstanding, all as determined by the
Committee in its sole discretion.


 


12.          Performance Unit
Awards.


 


(a)           General. A Performance Unit Award is an
Award entitling the Grantee to acquire cash or shares of Stock, or a
combination of cash and shares of Stock, upon the attainment of specified
performance goals. The Committee in its sole discretion shall determine whether
and to whom Performance Unit Awards shall be made, the performance goals
applicable under each such Award, the periods during which performance is to be
measured and all other limitations and conditions applicable to a Performance
Unit Award. Performance goals may vary from Grantee to Grantee and between
groups of Grantee s and shall be based upon such Company, business unit or
individual performance factors or criteria as the Committee may deem
appropriate, including those factors described in Section 5(iv)(B) above.
Performance periods


 


12





















 


may overlap and Grantees may participate
simultaneously with respect to Performance Unit Awards that are subject to
different performance periods and different performance goals. The Committee
may adjust the performance goals and periods applicable to a Performance Unit
Award to take into account changes in law and accounting and tax rules and to
make such adjustments as the Committee deems necessary or appropriate to
reflect the inclusion or exclusion of the impact of extraordinary or unusual
items, events or circumstances in order to avoid windfalls or hardships.
Notwithstanding the discretion the Committee shall have under this Section
12(a) with respect to establishing performance goals, in establishing such
performance goals and administering the Plan in connection with same, the
Committee will comply with the requirements of section 162(m) of the Code to
the extent necessary. Performance Units may be awarded independent of or in
connection with the grant of any other Award under the Plan.


 


(b)           Award Agreement. A Grantee shall have
no rights with respect to a Performance Unit Award unless within sixty
(60) days of the grant of such Award (or such shorter period as the
Committee may specify) the Grantee shall have accepted the Award by executing
and delivering to the Company a Performance Unit Award agreement.


 


(c)           Restrictions on Transfer. Performance
Unit Awards and all rights with respect to such Awards may not be sold,
assigned, transferred, pledged or otherwise encumbered, and if exercisable over
a specified period, shall be exercisable during the Grantee’s lifetime only by
the Grantee or the Grantee’s legal representative or guardian.


 


(d)           Rights as a Shareholder. A Grantee
receiving a Performance Unit Award will have rights of a shareholder only as to
shares of Stock actually received by the Grantee under the Plan and not with
respect to shares subject to the Award but not actually received by the
Grantee. A Grantee shall be entitled to receive a certificate evidencing the
acquisition of shares of Stock under a Performance Unit Award only upon
satisfaction of all conditions specified in the Performance Unit Award
agreement.


 


(e)           Termination. Unless otherwise provided
in the terms of an Award, except as may otherwise be provided by the Committee
at any time prior to the termination of employment or cessation of service, a
Grantee’s rights and all Performance Unit Awards shall automatically terminate
thirty (30) days after the Grantee’s termination of employment or the
Grantee’s services by the Company and its Affiliates for any reason excluding
death, in which case the Grantee’s rights shall automatically terminate one
(1) year after such termination.


 


(f)            Acceleration; Waiver. At any time prior
to the Grantee’s termination of employment with or cessation of service to the
Company and its Affiliates, by death or disability or retirement, the Committee
may in its sole discretion accelerate, waive, or, subject to Section 18
below, amend any or all of the goals, restrictions or conditions imposed under
any Performance Unit Award except to the extent such acceleration, waiver, or,
amendment would violate section 162(m) of the Code.


 


(g)           Exercise. The Committee in its sole discretion shall
establish procedures to be followed in exercising any Performance Unit Award,
which procedures shall be set forth in the Performance Unit Award agreement.
The Committee may at any time provide that payment under a Performance Unit
Award shall be made, upon satisfaction of the applicable performance goals, without
any exercise by the Grantee.
Except as otherwise specified by the Committee, (i) a Performance Unit
granted in tandem with a Stock Option may be exercised only while the Stock
Option is exercisable, and (ii) the exercise of a Performance Unit granted
in tandem with any Award shall reduce the number of shares of Stock subject to
the related Award on such basis as is specified in the Performance Unit Award
agreement.


 


13





















 


13.          Other Stock-Based
Awards.


 


(a)           General. The Committee may grant other
Awards under which Stock is or may in the future be acquired (“Other
Stock-Based Awards”). Such Awards may include, without limitation, debt
securities convertible into or exchangeable for shares of Stock upon such
conditions, including attainment of performance goals, as the Committee shall
determine. Subject to the purchase price limitations in subsection
(b) below, such convertible or exchangeable securities may have such terms
and conditions as the Committee may determine at the time of grant. However, no
convertible or exchangeable debt shall be issued unless the Committee shall
have provided (by the Company’s right of repurchase, right to require
conversion or exchange, or other means deemed appropriate by the Committee) a
means of avoiding any right of the holders of such debt to prevent a Company
transaction by reason of covenants in such debt.


 


(b)           Purchase Price; Form of Payment. The
Committee may determine the consideration, if any, payable upon the issuance or
exercise of an Other Stock-Based Award. The Committee may permit payment by
certified check, bank check or other instrument acceptable to the Committee or
by surrender of other shares of Stock (excluding shares then subject to
restrictions under the Plan).


 


(c)           Forfeiture of Awards; Repurchase of Stock;
Acceleration or Waiver of Restrictions. The Committee may
determine the conditions under which an Other Stock-Based Award shall be
forfeited or, in the case of an Award involving a payment by the Grantee, the
conditions under which the Company may or must repurchase such Award or related
Stock. The Committee may in its sole discretion, at any time prior to a Grantee’s
termination of employment with or cessation of services to the Company and its
Subsidiaries, by death or disability or retirement, accelerate, waive, or,
subject to Section 18 below, amend any or all of the limitations or
conditions imposed under any Other Stock-Based Award.


 


(d)           Award Agreements. Unless otherwise
provided in the terms of an Award, a Grantee shall have no rights with respect
to any Other Stock-Based Award unless within sixty (60) days after the
grant of such Award (or such shorter period as the Committee may specify) the
Grantee shall have accepted the Award by executing and delivering to the
Company an Other Stock-Based Award agreement.


 


(e)           Restrictions on Transfer. Other
Stock-Based Awards may not be sold, assigned, transferred, pledged, or
encumbered except as may be provided in the Other Stock-Based Award agreement.
However, in no event shall any Other Stock-Based Award be transferred other
than by will or by the laws of descent and distribution or be exercisable
during the Grantee’s lifetime by other than the Grantee or the Grantee’s legal
representative or guardian.


 


(f)            Rights as a Shareholder. A Grantee of
any Other Stock-Based Award will have rights of a shareholder only at the time
and to the extent, if any, specified by the Committee in the Other Stock-Based
Award agreement.


 


(g)           Deemed Dividend Payments; Deferrals. Without
limiting the right of the Committee to specify different terms, an Other
Stock-Based Award agreement may require or permit the immediate payment,
waiver, deferral, or investment of dividends or deemed dividends payable or
deemed payable on Stock subject to the Award.


 


14.          Supplemental Grants.


 


(a)           Loans. The Company may in its sole
discretion make a loan to the recipient of an Award hereunder, either on or
after the date of grant of such Award. Such loans may be either in


 


14





















 


connection with exercise of a Stock Option, a Stock
Appreciation Right or an Other Stock-Based Award, in connection with the
purchase of shares under any Award, or in connection with the payment of any
federal, state and local income taxes in respect of income recognized under an
Award. The Committee shall have full authority to decide whether to make a loan
hereunder and to determine the amount, term, and provisions of any such loan,
including the interest rate (which may be zero) charged in respect of any such
loan, whether the loan is to be secured or unsecured, the terms on which the
loan is to be repaid and the conditions, if any, under which it may be
forgiven. However, no loan hereunder shall provide or reimburse to the borrower
the amount used by him for the payment of the par value of any shares of Stock
issued, have a term (including extensions) exceeding ten (10) years in
duration or be in amount exceeding the total exercise or purchase price paid by
the borrower under an Award or for related Stock under the Plan plus an amount
equal to the cash payment permitted in subsection (b) below.


 


Notwithstanding
the forgoing, a loan described in this Section 14(a) shall not be available to
any Grantee of an Option who is a Director or executive officer of the Company
or any Affiliate if such loan would be treated as a personal loan prohibited
under Section 13(k) of the Act.


 


(b)           Cash Payments. The Committee may, at
any time and in its discretion, authorize a cash payment, in respect of the
grant or exercise of an Award under the Plan or the lapse or waiver of
restrictions under an Award, which shall not exceed the amount that would be
required in order to pay in full the federal, state and local income taxes due
as a result of income recognized by the Grantee as a consequence of
(i) the receipt of an Award or the exercise of rights thereunder and
(ii) the receipt of such cash payment. The Committee shall have complete
authority to decide whether to make such cash payments in any case, to make
provisions for such payments either simultaneously with or after the grant of
the associated Award, and to determine the amount of any such payment.


 


15





















 


15.          Withholding.
Whenever the Company proposes or is required to issue or transfer shares of
Stock under the Plan, the Company shall have the right to require the Grantee
to remit to the Company an amount sufficient to satisfy any federal, state and
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. If a Grantee surrenders shares of Stock acquired
pursuant to the exercise of an Incentive Stock Option in payment of the option
price of a Stock Option or the purchase price under another Award, and such
surrender constitutes a disqualifying disposition for purposes of obtaining
incentive stock option treatment under the Code, the Company shall have the
right to require the Grantee to remit to the Company an amount sufficient to
satisfy any federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. Whenever under the
Plan payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy any federal, state and local withholding tax
requirements. A Grantee may elect, with respect to any Non-Qualified Stock
Option, Stock Appreciation Right, Restricted Stock Award, Unrestricted Stock
Award, Deferred Stock Award, Performance Unit Award or Other Stock-Based Award
that is paid in whole or in part in Stock, to surrender or authorize the
Company to withhold shares of Stock (valued at Fair Market Value on the date of
surrender or withholding of the shares) in satisfaction of all such withholding
requirements. The Committee shall have the discretion to provide (by general
rule or a provision in the specific Award agreement) that, at the election of
the Grantee, “federal, state and local withholding tax requirements” shall be
deemed to be any amount designated by the recipient that does not exceed the
Grantee’s estimated federal, state and local tax obligations associated with
the transaction, including FICA taxes to the extent applicable.


 


16.          Merger; Liquidation.
If the Company shall be the surviving corporation in any merger,
recapitalization or similar reorganization, the holder of each outstanding
Stock Option shall be entitled to purchase, at the same times and upon the same
terms and conditions as are then provided in the Stock Option, the number and
class of shares of Stock or other securities to which a holder of the number of
shares of Stock subject to the Stock Option at the time of such transaction
would have been entitled to receive as a result of such transaction, and a
corresponding adjustment shall be made in connection with determining the value
of any related Stock Appreciation Right. In the event of any such change in
capitalization of the Company, the Committee shall make such additional
adjustments in the number and class of shares of stock or other securities with
respect to which outstanding Awards are exercisable and with respect to which
future Awards may be granted as the Committee in its sole discretion shall deem
equitable or appropriate, subject to the provisions of Section 18 below.
In the event of dissolution or liquidation of the Company or a merger in which
the Company is not the surviving corporation, the Committee shall, as to any
outstanding Awards, make such substitution or adjustment in the aggregate
number of shares reserved for issuance under the Plan and in the number or
purchase price (if any) of shares subject to such Awards as it may determine,
or accelerate, amend, or terminate such Awards upon such terms and conditions
as it shall provide, which, in the case of the termination of the vested
portion of any Award, shall require payment or other consideration that the
Committee deems equitable in the circumstances.


 


17.          Unfunded Status of
Plan. With respect to the portion of any Award that has not been
exercised and any payments in cash, Stock or other consideration not received
by a Grantee, a Grantee shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet
the Company’s obligations to deliver Stock or make payments with respect to
Awards, provided that the existence of such trusts or other arrangements is
consistent with the “unfunded” status of the Plan.


 


16

















 


18.          Amendments and
Termination. The Board may amend, alter or discontinue the Plan, at any
time and from time to time; provided, however, that any alteration or amendment
that would require shareholder approval in order for the Plan to continue to
meet any applicable legal or regulatory requirements shall be effective only if
it is approved by the shareholders of the Company in the manner required
thereby. Unless otherwise provided in the terms of an Award, the Committee may
at any time decrease or cancel any outstanding Award (or provide substitute
Awards at the same or a reduced exercise or purchase price or with no exercise
or purchase price, but such price, if any, must satisfy the requirements that
would apply to the substitute or amended Award if it were then initially
granted under the Plan) for the purpose of satisfying changes in law or for any
other lawful purpose.


 


19.          General Provisions.


 


(a)           Transfers. For purposes of the Plan,
the transfer to the employment by the Company from an Affiliate or from the
Company to an Affiliate, or from one Affiliate to another, shall not be deemed
a termination of employment.


 


(b)           Leaves of Absence. The Committee may in
its discretion determine whether a leave of absence constitutes a termination
of employment for purposes of the Plan and the impact, if any, of such leave of
absence on Awards previously granted to a holder who takes a leave of absence.


 


(c)           Restrictions on Delivery and Sale of Shares.
Each Award granted under the Plan is subject to the condition that if at any
time the Committee, in its discretion, shall determine that the listing,
registration or qualification of the Stock covered by such Award upon any securities
exchange or under any state or federal law is necessary or desirable as a
condition of or in connection with the granting of such Award or the purchase
or delivery of Stock thereunder, the delivery of any or all shares pursuant to
such Award may be withheld unless and until such listing, registration or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933, as amended, or any applicable state
securities laws with respect to the shares of Stock purchasable or otherwise
deliverable under Awards then outstanding, the Committee may require, as a
condition of any delivery of Stock pursuant to an Award, that the Grantee of
Stock represent, in writing, that the shares received pursuant to the Award are
being acquired for investment and not with a view to distribution and agree
that the Stock will not be disposed of except pursuant to an effective
registration statement, unless the Company shall have received an opinion of
counsel that such disposition is exempt from such requirement under the
Securities Act of 1933, as amended, and any applicable state securities laws.
The Company may endorse on certificates representing shares delivered pursuant
to an Award such legends referring to the foregoing representations or
restrictions or any applicable restrictions on resale as the Company, in its
discretion, shall deem appropriate.


 


(d)           Other Compensation Arrangements; No Employment Rights.
Nothing contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to shareholder approval if such
approval is required; such arrangements may be either generally applicable or
applicable only in specific cases. The adoption of the Plan does not confer
upon any Grantee any right to continued employment with the Company or any of
its Affiliates, any right to continue providing services to the Company or any
of its Affiliates, or affect the right of the Company or any Affiliate to
terminate the employment or cease using the services of any Grantee at any
time.


 


(e)           Governing Law. The Plan and all Awards
made and actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of New York.


 


17





















 


(f)            Code Section 83(b) Elections. The
Company and its Affiliates have no responsibility for a Grantee’s election,
attempt to elect or failure to elect to include the value of an Award subject
to Section 83 in the Grantee’s gross income for the year of grant pursuant
to Section 83(b) of the Code. Any Grantee who makes an election pursuant to
Section 83(b) of the Code will promptly provide the Committee with a copy of
the election form.


 


(g)           Code Section 162(m). It is the
intent of the Company that the Plan comply in all respects with Section 162(m)
of the Code and that any ambiguities or inconsistencies in construction of the
Plan be interpreted to give effect to such intention.


 


(h)           Code Section 409A. It is the
intent of the Company that no Award under the Plan be subject to
Section 409A of the Code. The Committee shall design and administer the
Awards under the Plan so that they are not subject to Section 409A of the
Code.


 


(i)            Compliance With Other Laws and Regulations.
Notwithstanding anything contained herein to the contrary, the Company shall
not be required to sell or issue shares of Stock under any Award if the issuance thereof would constitute a violation by the Grantee or the Company of any provisions of any law
or regulation of any governmental authority or any national securities exchange
or inter-dealer quotation system or other forum in which shares of Stock are
quoted or traded (including without limitation Section 16 of the Act and
Section 162(m) of the Code); and, as a condition of any sale or issuance of
shares of Stock under an Award, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to
assure compliance with any such law or regulation. The Plan, the grant and
exercise of an Award hereunder, and the obligation of the Company to sell and
deliver shares of Stock, shall be subject to all applicable federal and state
laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required.


 


20.          Effective Date.
The Plan shall become effective on November 20, 2007.


 


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