Document:

Exhibit 10.24

 

ev3 INC.

EMPLOYEE STOCK PURCHASE PLAN

 

Section 1.              Purpose.  This Employee Stock Purchase Plan (the “Plan”)
is intended to advance the interests of ev3 Inc., a Delaware corporation (“the
Company”) and its stockholders by providing Employees of the Company and its
Designated Subsidiaries with opportunities to acquire shares of the Company’s
Common Stock on favorable terms through payroll deductions.  The Plan is intended to qualify as an “employee
stock purchase plan” under Section 423 of the Internal Revenue Code of
1986, as amended (the “Code”), and will be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 423
of the Code.

 

Section 2.              Definitions.

 

(a)           “Board” means the Board of Directors
of the Company.

 

(b)           “Common
Stock” means the common stock, par value $0.01 per share, of the Company, or
the number and kind of shares of stock or other securities into which such
common stock may be changed in accordance with Section 13 of the Plan.

 

(c)           “Committee”
means the entity administering the Plan, as provided in Section 3 below.

 

(d)           “Compensation”
means regular straight-time earnings and commissions that are included in
regular compensation, including amounts that would have constituted compensation
but for a Participant’s election to defer or reduce compensation pursuant to
any deferred compensation, cafeteria, capital accumulation or any other similar
plan of the Company and excluding all other amounts such as amounts
attributable to overtime, shift premium, incentive compensation and bonuses
(except to the extent that the inclusion of any such item is specifically
directed by the Committee), determined in a manner consistent with the
requirements of Section 423 of the Code.

 

(e)           “Designated
Subsidiary” means a Subsidiary that has been designated by the Board from time
to time, in its sole discretion, as eligible to participate in the Plan.

 

(f)            “Employee”
means any person, including an officer, who is employed by the Company or one
of its Designated Subsidiaries, excluding any such person whose customary
employment with the Company or a Designated Subsidiary is for 20 hours or less
per week.

 

(g)           “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

(h)           “Fair
Market Value” means, with respect to the Common Stock, as of any date: (i) the
closing sale price of the Common Stock as of such date at the end of the
regular trading session, as reported on the Nasdaq National Market System or on
any national exchange (or, if no shares were traded on such date, as of the
next preceding date on which there was such a trade); or (ii) if the
Common Stock is not so listed, admitted to unlisted trading privileges, or
reported on any national exchange or on the Nasdaq National Market System, the closing
sale price as of such date at the end of the regular trading session, as
reported by the Nasdaq SmallCap Market, Over-the-Counter Bulletin Board, the
Bulletin Board Exchange (BBX) or the Pink Sheets, LLC, or other comparable
service (or, if no shares were traded or quoted on such date, as of the next
preceding date on which there was such a trade or quote); or (iii) if the
Common Stock is not so 

 

 

listed or reported, such price as the Committee determines in its sole
discretion in a manner acceptable under Section 423 of the Code.

 

(i)            “Offering”
means any of the offerings to Participants of options to purchase Common Stock
under the Plan, as described in Section 5 below.

 

(j)            “Offering
Date” means the first day of the period of an Offering under the Plan, as
described in Section 5 below.

 

(k)           “Option Price” is defined in Section 8
below.

 

(l)            “Participant”
means an eligible Employee who elects to participate in the Plan pursuant to Section 6
below.

 

(m)          “Securities Act” means the Securities
Act of 1933, as amended.

 

(n)           “Subsidiary”
means any subsidiary corporation of the Company within the meaning of Section 424(f) of
the Code.

 

(o)           “Purchase
Date” means the last day of the period of an Offering under the Plan, as
described in Section 5 below.

 

Section 3.              Administration.  The Plan will be administered by the Board or
by a committee of the Board.  So long as
the Company has a class of its equity securities registered under Section 12
of the Exchange Act, the Plan will be administered by a committee (the “Committee”)
consisting solely of not less than two members of the Board who are “non-employee
directors” within the meaning of Rule 16b-3 under the Exchange Act.  Such a committee, if established, will act by
majority approval of the members (but may also take action with the written
consent of all the members of such committee), and a majority of the members of
such a committee will constitute a quorum. 
As used in the Plan, “Committee” will refer to the Board or to such a
committee, if established.  To the extent
consistent with corporate law, the Committee may delegate to any officers of
the Company the duties, power and authority of the Committee under the Plan
pursuant to such conditions or limitations as the Committee may establish;
provided, however, that only the Committee may exercise such duties, power and
authority with respect to Participants who are subject to Section 16 of
the Exchange Act.  The Committee may
exercise its duties, power and authority under the Plan in its sole discretion
without the consent of any Participant or other party, unless the Plan
specifically provides otherwise.  Each
determination, interpretation or other action made or taken by the Committee
pursuant to the provisions of the Plan will be final, conclusive and binding
for all purposes and on all persons, including, without limitation, the
Company, the stockholders of the Company, the Participants and their respective
successors-in-interest.  No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under the Plan.

 

Section 4.              Eligibility.

 

(a)           With
respect to an Offering, any Employee employed by the Company or a Designated
Subsidiary on the Offering Date shall be eligible to participate in the Plan,
subject to the limitations imposed by Section 423(b) of the Code.

 

(b)           Any
provisions of the Plan to the contrary notwithstanding, no Employee shall be
granted an option under the Plan if:

 

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(i)            immediately
after the grant, such Employee (or any other person whose stock ownership would
be attributed to such Employee pursuant to Section 424(d) of the
Code) would own shares of Common Stock and/or hold outstanding options to
purchase shares of Common Stock possessing 5% or more of the total combined
voting power or value of all classes of shares of the Company or of any
Subsidiary; or

 

(ii)           the
amount of payroll deductions that the Employee has elected to have withheld
under such option (pursuant to Section 7 below) would permit the Employee
to purchase shares of Common Stock under all “employee stock purchase plans”
(within the meaning of Section 423 of the Code) of the Company and its
Subsidiaries to accrue (i.e., become exercisable) at a rate that exceeds
$25,000 of the Fair Market Value of such shares of Common Stock (determined at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.

 

Section 5.              Offerings.  Options to purchase shares of Common Stock
shall be offered to Participants under the Plan through a continuous series of
Offerings, each continuing for six months and each of which shall commence on January 1
and July 1 of each year, as the case may be, and shall terminate on June 30
and December 31 of such year, as the case may be; provided, however, that
the first Offering under the Plan shall have an Offering Date and Purchase Date
as determined by the Committee in its sole discretion.  Offerings under the Plan shall continue until
either (a) the Committee decides, in its sole discretion, that no further
Offerings shall be made because the Common Stock remaining available under the
Plan is insufficient to make an Offering to all eligible Employees, or (b) the
Plan is terminated under Section 17 below. 
Notwithstanding the foregoing, and without limiting the authority of the
Committee under Section 3, 13(b) and 17 of the Plan, the Committee,
in its sole discretion, may (a) accelerate the Purchase Date of the then
current Offering and provide for the exercise of options thereunder by
Participants in accordance with Section 9 of the Plan, or (b) accelerate
the Purchase Date of the then current Offering and provide that all payroll
deductions credited to the accounts of Participants will be paid to
Participants as soon as practicable after such Purchase Date and that all
options for such Offering will automatically be canceled and will no longer be
exercisable, if such change is announced at least five (5) days prior to
the newly scheduled Purchase Date.

 

Section 6.              Participation.

 

(a)           An
eligible Employee may become a Participant in the Plan by completing a
subscription agreement authorizing payroll deductions on the form provided by
the Company (the “Participation Form”) and filing the Participation Form with
the Company’s Human Resources Department or the stock brokerage or other
financial services firm designated by the Company (“Designated Broker”) not
less than 15 days before the Offering Date of the first Offering in which the
Participant wishes to participate.

 

(b)           Except
as provided in Section 7(a) below, payroll deductions for a
Participant shall begin with the first payroll following the applicable
Offering Date, and shall continue until the termination date of the Plan,
subject to earlier termination by the Participant as provided in Section 11
below or increases or decreases by the Participant in the amount of payroll
deductions as provided in Section 7(c) below.

 

Section 7.              Payroll Deductions.

 

(a)           By
completing and filing a Participation Form, a Participant shall elect to have
payroll deductions made from the Participant’s total Compensation (in whole
percentages from 1% to a maximum of 10% of the Participant’s total
Compensation) on each payday during the 

 

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time he or she is a Participant in the Plan in such amount as he or she
shall designate on the Participation Form; provided, however, that no
Participant’s payroll deductions shall be less than $10.00 per pay period.

 

(b)           All
payroll deductions authorized by a Participant shall be credited to an account
established under the Plan for the Participant. 
The monies represented by such account shall be held as part of the
Company’s general assets, usable for any corporate purpose, and the Company
shall not be obligated to segregate such monies.  A Participant may not make any separate cash
payment or contribution to such account.

 

(c)           No
increases or decreases of the amount of payroll deductions for a Participant
may be made during an Offering.  A
Participant may increase or decrease the amount of the Participant’s payroll
deductions under the Plan for subsequent Offerings by completing an amended
Participation Form and filing it with the Company’s Human Resources
Department or Designated Broker not less than 15 days prior to the Offering
Date as of which such increase or decrease is to be effective.

 

(d)           A
Participant may discontinue the Participant’s participation in the Plan at any
time as provided in Section 11 below.

 

Section 8.              Grant of Option.  On each Offering Date, each eligible Employee
who is then a Participant shall be granted (by operation of the Plan) an option
to purchase as many full shares of Common Stock at the Option Price as he or
she will be able to purchase with (a) the payroll deductions credited to
the Participant’s account during the Participant’s participation in the
Offering beginning on such Offering Date and (b) the balance (if any)
carried forward from the Employee’s payroll deduction account from the preceding
Offering.  Notwithstanding the foregoing,
in no event may the number of shares purchased by any Employee during an
Offering exceed 2,500 shares of Common Stock. 
The option price per share of such shares (the “Option Price”) shall be
equal to the lesser of: (a) 85% of the Fair Market Value of one share of
Common Stock on the Offering Date or (b) 85% of the Fair Market Value of
one share of Common Stock on the Purchase Date.

 

Section 9.              Exercise of Option.

 

(a)           Unless
a Participant gives written notice to the Company as provided in Section 9(d) below
or withdraws from the Plan pursuant to Section 11 below, the Participant’s
option for the purchase of shares of Common Stock granted for an Offering will
be exercised automatically at the Purchase Date of such Offering for the
purchase of the number of full shares of Common Stock that the accumulated
payroll deductions in the Participant’s account on such Purchase Date will
purchase at the applicable Option Price.

 

(b)           A
Participant may only purchase one or more full shares in connection with the
automatic exercise of an option granted for any Offering.  That portion of any balance remaining in a
Participant’s payroll deduction account at the close of business on the
Purchase Date of any Offering that is less than the purchase price of one full
share will be carried forward into the Participant’s payroll deduction account
for the following Offering.  In no event
will the balance carried forward be equal to or greater than the purchase price
of one share on the Purchase Date of an Offering.  Notwithstanding the foregoing, the Committee
may determine, in its sole discretion, that in lieu of carrying such cash
balances forward, such balances will be deemed to have purchased such number of
fractional shares of Common Stock as would then be purchasable at the
applicable Option Price, with such fractional shares calculated to the fourth
(4th) decimal place.

 

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(c)           No
Participant (or any person claiming through such Participant) shall have any
interest in any Common Stock subject to an option under the Plan until such
option has been exercised, at which point such interest shall be limited to the
interest of a purchaser of the Common Stock purchased upon such exercise pending
the delivery or credit of such Common Stock in accordance with Section 10
below.  During the Participant’s
lifetime, a Participant’s option to purchase shares of Common Stock under the
Plan is exercisable only by the Participant.

 

(d)           By
written notice to the Company prior to the Purchase Date of any Offering, a
Participant may elect, effective on such Purchase Date to withdraw all of the
accumulated payroll deductions in the Participant’s account as of the Purchase
Date (which withdrawal may, but need not, also constitute a notice of
termination and withdrawal pursuant to Section 11(a)).

 

Section 10.            Delivery.

 

(a)           Except
as provided in paragraph (b) below, as promptly as practicable after the
Purchase Date of each Offering, the Company will deliver to each Participant,
as appropriate, either:

 

(i)            a
certificate representing the shares of Common Stock purchased upon exercise of
the Participant’s option granted for such Offering, registered in the name of
the Participant or, if the Participant so directs on the Participant’s
Participation Form, in the names of the Participant and the Participant’s
spouse; or

 

(ii)           if
the Participant makes an election pursuant to Section 9(d) for the
Offering, a cash payment equal to the total of the payroll deductions credited
to the Participant’s account.

 

(b)           Notwithstanding
paragraph (a) above, in lieu of delivering certificates to each of the
Participants with respect to shares of Common Stock purchased in connection
with an Offering, the Company may deliver a certificate to a third party
representing an aggregate of all of the shares of Common Stock purchased in
connection with the Offering (including an aggregate of all of the fractional
shares deemed to have been purchased pursuant to Section 9(b), if
applicable) rounded down to the nearest full share, plus cash in an amount
equal to the Option Price multiplied by any remaining fractional share deemed
to have been purchased pursuant to Section 9(b), if applicable, which
shares will be held for the benefit of the Participants in accordance with
their respective interests, and will deliver a statement of account to each
Participant indicating the number of shares of Common Stock purchased by that
Participant in connection with that Offering. 
In the event shares are held for the benefit of Participants, all full
shares purchased and fractional shares deemed to have been purchased by a
Participant in an Offering and in any subsequent Offerings will accumulate for
the benefit of the Participant until the Participant’s withdrawal or
termination pursuant to Section 11.

 

Section 11.            Withdrawal; Termination of Employment.

 

(a)           A
Participant may terminate the Participant’s participation in the Plan and
withdraw all, but not less than all, the payroll deductions credited to the
Participant’s account under the Plan at any time prior to the Purchase Date of
an Offering, for such Offering, by giving written notice to the Company’s Human
Resources Department or Designated Broker. 
Such notice shall state that the Participant wishes to terminate the
Participant’s involvement in the Plan, specify a termination date and request
the withdrawal of all of the Participant’s payroll deductions held under the
Plan.  All of the Participant’s payroll
deductions credited to the 

 

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Participant’s account will be paid to the Participant as soon as
practicable after the termination date specified in the notice of termination
and withdrawal (or, if no such date is specified, as soon as practical after
receipt of the Participant’s notice of termination and withdrawal), and the
Participant’s option for such Offering will be automatically canceled, and no
further payroll deductions for the purchase of shares of Common Stock will be
made for such Offering or for any subsequent Offering, except in accordance
with a new Participation Form filed pursuant to Section 6 above.

 

(b)           Upon
termination of a Participant’s employment for any reason, including retirement
or death, the payroll deductions accumulated in the Participant’s account will
be returned to the Participant as soon as practicable after such termination
or, in the case of the Participant’s death, to the person or persons entitled
thereto under Section 14 below, and the Participant’s option will be
automatically canceled.  In the event
that shares are held for the benefit of Participants pursuant to Section 10(b),
then upon the termination of a Participant’s employment for any reason,
including retirement or death, the Participant, or, in the case of death, the
Participant’s designated beneficiary (if allowed by the Committee) or the
executor or administrator of the Participant’s estate will be entitled to
receive, a certificate representing the number of full shares of Common Stock
held for the benefit of the Participant plus cash in an amount equal to the
Fair Market Value of any remaining fractional share deemed to have been
purchased.  In any event, Fair Market
Value will be determined as of such termination and such certificate will be
delivered and such amounts paid as soon thereafter as practicable.  For purposes of the Plan, the termination
date of employment shall be the Participant’s last date of actual employment
and shall not include any period during which such Participant receives any
severance payments.  A transfer of
employment between the Company and a Designated Subsidiary or between one
Designated Subsidiary and another Designated Subsidiary, or absence or leave
approved by the Company, shall not be deemed a termination of employment under
this Section 11(b).

 

(c)           A
Participant’s termination and withdrawal pursuant to Section 11(a) above
will not have any effect upon the Participant’s eligibility to participate in a
subsequent Offering by completing and filing a new Participation Form pursuant
to Section 6 above or in any similar plan that may hereafter be adopted by
the Company.

 

Section 12.            Interest.  No interest shall accrue on a Participant’s
payroll deductions under the Plan.

 

Section 13.            Stock Subject to the Plan.

 

(a)           The
maximum number of shares of Common Stock that shall be reserved for sale under
the Plan shall be 750,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 13(b) below.  The
shares to be sold to Participants under the Plan may be, at the election of the
Company, either treasury shares or shares authorized but unissued.  If the total number of shares of Common Stock
that would otherwise be subject to options granted pursuant to Section 8
above on any Purchase Date exceeds the number of shares then available under
the Plan (after deduction of all shares for which options have been exercised
or are then outstanding), the Company shall make a pro rata allocation of the
shares of Common Stock remaining available for issuance in as uniform and
equitable a manner as is practicable.  In
such event, the Company shall give written notice of such reduction of the
number of shares subject to the option to each Participant affected thereby and
shall return any excess funds accumulated in each Participant’s account as soon
as practicable after the Purchase Date of such Offering.

 

6

 

(b)           In
the event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, divestiture or extraordinary dividend (including a
spin-off) or any other similar change in the corporate structure or shares of
the Company, the Committee (or, if the Company is not the surviving corporation
in any such transaction, the board of directors of the surviving corporation)
will make appropriate adjustment (which determination will be conclusive) as to
the number and kind of securities or other property (including cash) available for
issuance or payment under the Plan and, in order to prevent dilution or
enlargement of the rights of Participants, the number and kind of securities or
other property (including cash) subject to, and the exercise price of,
outstanding options.

 

(c)           In
the event that Participants are deemed to have purchased fractional shares of
Common Stock pursuant to Section 9(b), the aggregate of such fractional
share interests at any given time will be applied to reduce the maximum number
of shares of Common Stock remaining available for issuance under the Plan;
provided, however, that any fractional shares that are paid out to a
Participant in cash pursuant to Section 11 will automatically again become
available for issuance under the Plan.

 

Section 14.            Designation of Beneficiary.

 

(a)           In
the discretion of the Committee, a Participant may file written designation of
a beneficiary who is to receive shares of Common Stock and/or cash, if any,
from the Participant’s account under the Plan in the event of such Participant’s
death at a time when cash or shares of Common Stock are held for the
Participant’s account.

 

(b)           Such
designation of beneficiary may be changed by the Participant at any time by
written notice.  In the event of the
death of a Participant in the absence of a valid designation of a beneficiary
who is living at the time of such Participant’s death, the Company shall
deliver such shares of Common Stock and/or cash to the executor or
administrator of the estate of the Participant; or, if no such executor or administrator
has been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares of Common Stock and/or cash to the spouse
or to any one or more dependents or relatives of the Participant; or, if no
spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

 

Section 15.            Transferability.  Neither payroll deductions credited to a
Participant’s account nor any rights with regard to the exercise of an option
or to receive shares of Common Stock under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution, or as provided in Section 14 above)
by the Participant.  Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 11(a) above.

 

Section 16.            Share Transfer Restrictions.

 

(a)           Shares
of Common Stock shall not be issued under the Plan unless such issuance is
either registered under the Securities Act and applicable state securities laws
or is exempt from such registration.

 

(b)           Shares
of Common Stock issued under the Plan may not be sold, assigned, transferred,
pledged encumbered, or otherwise disposed of (whether voluntarily or
involuntarily) 

 

7

 

except pursuant to registration under the Securities Act and applicable
state securities laws, or pursuant to exemptions from such registration.

 

(c)           The
Company may condition the issuance, sale or transfer of shares of Common Stock
upon the receipt of any representations or agreements from the parties
involved, and the placement of any legends on certificates representing shares
of Common Stock, as may be deemed necessary or advisable by the Company in
order to comply with such securities law or other restrictions.

 

Section 17.            Amendment.  The Plan may be amended by the Board from
time to time to the extent that the Board deems necessary or appropriate in
light of, and consistent with, Section 423 of the Code; provided, however,
that no such amendment shall be effective, without approval of the stockholders
of the Company, if stockholder approval of the amendment is then required
pursuant to Rule 16b-3 under the Exchange Act or any successor rule, the rules of
any stock exchange or Nasdaq if the Common Stock is then listed on such
exchange or Nasdaq or similar regulatory body, or Section 423 of the Code.

 

Section 18.            Notices.  All notices or other communications by a
Participant to the Company in connection with the Plan shall be deemed to have
been duly given when received by the Chief Financial Officer of the Company or
by any other person designated by the Company for the receipt of such notices
or other communications, in the form and at the location specified by the
Company.

 

Section 19.            No Right to Employment.  Nothing in the Plan will interfere with or
limit in any way the right of the Company or any Designated Subsidiary to
terminate the employment of any Employee or Participant at any time, nor confer
upon any Employee or Participant any right to continue in the employ of the
Company or any Designated Subsidiary.

 

Section 20.            Effective Date of Plan; Termination.  The Plan shall be effective as of February 
13, 2006, the date it was adopted by the Board. 
The Plan has been adopted by the Board subject to stockholder approval,
and prior to stockholder approval shares of Common Stock may be issued under
the Plan subject to such approval.  The
Board may terminate or suspend the Plan or the granting of options pursuant to
the Plan at any time.  The Plan will
automatically terminate at midnight on February 12, 2016.  No option will be granted after termination
of the Plan.

 

Section 21.            Governing Law. 
Except to the extent expressly provided herein
or in connection with other matters of corporate governance and authority (all
of which shall be governed by the laws of the Company’s jurisdiction of
incorporation), the validity, construction, interpretation, administration and
effect of the Plan and any rules, regulations and actions relating to the Plan
will be governed by and construed exclusively in accordance with the laws of
the State of Minnesota, notwithstanding the conflicts of laws principles of any
jurisdictions.

 

Section 22.            Miscellaneous.  The headings to Sections in the Plan have
been included for convenience of reference only.  Except as otherwise expressly indicated, all
references to Sections in the Plan shall be to Sections of the Plan.

 

8Exhibit 10.25

 

 

Executive Quarterly

Performance
Incentive Plan

 

Effective January 1,
2006

 

Performance
Period: January 1 – December 31, 2006

 

 

	
  

  	
  Executive
  Performance Incentive Plan

  
	
  Effective
  January 1, 2006

  
	
  Performance
  Period

  
	
   January 1
  - December 31, 2006

  

 

I.              Purpose
of the Plan

 

ev3
Inc.’s compensation philosophy is to pay for performance. The purpose of the ev3 Inc. Executive Performance Incentive
Plan (the “Plan”) is to align the interests of ev3 Inc. and its subsidiaries (the “Company”), executive-level
employees, and stockholders by providing annual incentives for the achievement
of key business and individual performance measures that are critical to the
success of the Company and linking a significant portion of each executive
employee’s annual compensation to the achievement of such measures.

 

II.            Eligible
Participants

 

The Company will
determine eligibility criteria for the Plan on an annual basis and in its sole
discretion. For 2006, the Plan covers the following:  (i) all regular, salaried, exempt United
States employees in Levels 7 and above, and (ii) international and
expatriate/inpatriate employees in Levels 7 and above who are determined by the
Company to be eligible for participation (“Executives” or “Participants”). Notwithstanding
the foregoing, Participants in positions covered by sales compensation plans
are not eligible Participants in the Plan.

 

The Plan year runs
from January 1 - December 31 of each year (the “Plan Year”). Payouts
will be made on a quarterly basis (the “Plan Quarter”). Participants with less
than a full Plan Quarter of service or whose incentive target percent has
changed during a Plan Quarter may be eligible to participate in the plan
on a prorated basis, determined by the percentage of time they were eligible to
participate during that Plan Quarter under applicable criteria. Participants
with less than one full month of eligible service in a Plan Quarter will not be
eligible to receive an award under the Plan for that Plan Quarter.

 

III.           Administration
of the Plan

 

The Compensation
Committee of the Board of Directors of the Company will administer the Plan. The
Compensation Committee, in its sole discretion, may delegate to the
Company’s Chief Executive Officer activities relating to Plan administration
that are not required to be exercised by the Compensation Committee under
applicable laws, rules, regulations and the Compensation Committee Charter. Non-delegable
activities include, but are not limited to, any determination of the final
payouts under the Plan. All decisions of the Compensation Committee will be
final and binding upon all parties, including the Company and Plan
Participants.

 

IV.           Incentive
Targets

 

Incentive targets
have been established for all eligible Plan Participants based upon their level
of responsibility within the Company and impact on the business. These
incentive targets represent the incentive (as a percent of a Plan Participant’s
base salary) that a Participant is eligible to receive under the Plan. It is
the Company’s intention to provide significant incentive and reward
opportunities to its Executives for world-class performance achievement.

 

V.            Individual
Performance Measures

 

Individual
performance measures for a Plan Year are established during the annual goal
setting process. Additionally, performance measures are established for each of
the four quarters of the Plan Year. For each Plan Quarter, all Participants
will be assigned the Company’s quarterly goals as their individual objectives
for the Plan Quarter. Individual objectives other than the Company’s quarterly
goals must be must be agreed to and approved by the Compensation Committee.

 

2

 

VI.           Company
Performance Measures

 

For each Plan
Quarter, the Compensation Committee, together with input from the Company’s Chief
Executive Officer, will identify critical Company performance measures and
determine the incentive pool funding for the Plan based on achievement of such
Company performance measures. The 2006 Company performance measures are:

 

•      Worldwide
Revenue

•      Worldwide
Operating Expense

•      Worldwide
Gross Margin

•      EBITDA
Profitable

 

The
Compensation Committee also will take into consideration the relative
performance by each division of the Company with regard to Divisional Revenue,
Operating Expenses, and Gross Margin.

 

VII.         Incentive
Pool Funding

 

The
incentive pool funding is the amount of money that is available for
distribution to Plan Participants under the Plan based on achievement of the
Company performance measures. Appendix A describes in more detail how
the four Company performance measures will impact the incentive pool funding. The
incentive pool is funded quarterly on the following basis:  20% of the annual pool in Q1, 20% of the
annual pool in Q2, 20% of the annual pool in Q3 and 40% of the annual pool in
Q4.

 

VIII.        Individual
Incentive Payment Criteria, Calculation, and Payout

 

A Plan Participant
must be actively employed by the Company on the last day of the month of the
Plan Quarter to be eligible for an incentive payment under the Plan for that
Plan Quarter.

 

The incentive
payment under the Plan for any eligible Plan Participant for a particular Plan
Quarter will vary depending upon the approved incentive pool funding level for
that Plan Quarter, the Participant’s base salary as of the last month of the
Plan Quarter, the Participant’s incentive target for that Plan Quarter, and the
Participant’s overall individual performance during that Plan Quarter, relative
performance to other Executives and achievement of objectives relative to other
eligible Executives. The total of incentive payments to all eligible Plan
Participants may not exceed the funding pool(s) established by the
Compensation Committee for each Plan Quarter.

 

As
soon as practicable after the Compensation Committee has received the
appropriate financial and other data after the end of each Plan Quarter,
individual incentive payments under the Plan, the Compensation Committee will
certify in writing the amount of each incentive payment to be made to each Plan
Participant under the Plan. Individual incentive payments under the Plan will
be made in a lump sum, less applicable withholding taxes, as soon as reasonably
practicable thereafter.

 

The
Compensation Committee reserves the responsibility to recognize individual
performance and to provide appropriate differential incentive compensation.

 

IX.           Plan
Discretion

 

All benefits payable under the Plan are discretionary and no Plan
Participant shall have any right to payment under the Plan until actually paid.

 

To the extent
necessary with respect to any Plan Quarter, in order to avoid any undue
windfall or hardship due to external causes, the Compensation Committee may,
without the consent of any affected Plan Participants, revise one or more of
the Company performance measures or otherwise make adjustments to payouts under
the Plan to take into account any acquisition or disposition by the

 

3

 

Company not
planned for at the time the Company performance measures were established, any
change in accounting principles or standards, or any extraordinary or
non-recurring event or item, so as equitably to reflect such event or events,
such that the criteria for evaluating whether a Company performance measure has
been achieved will be substantially the same (as determined by the Compensation
Committee) following such event as prior to such event.

 

X.            Termination,
Suspension, or Modification

 

The Company may terminate,
suspend, modify and if suspended, may reinstate or modify, all or part of
the Plan at any time, with or without notice to the Plan Participants. Exceptions
to the eligibility of, or the extent to which the Plan applies to, any
particular Plan Participant must be approved, on a case-by-case basis, by the
Compensation Committee.

 

XI.           Limitation
of Liability

 

No member of the Company’s Board of Directors, the Compensation
Committee, any officer, employee, or agent of the Company, or any other person
participating in any determination of any question under the Plan, or in the
interpretation, administration, or application of the Plan, shall have any
liability to any party for any action taken, or not taken, in good faith under
the Plan.

 

XII.         No
Right to Employment

 

This document sets
forth the terms of the Plan and it is not intended to be a contract or
employment agreement between any Plan Participant and the Company. Nothing contained in the Plan (or in any other
documents related to the Plan) shall confer upon any employee or Plan
Participant any right to continue in the employ or other service of the Company
or constitute any contract or limit in any way the right of the Company to
change such person’s compensation or other benefits or to terminate the
employment or other service of such person with or without cause or notice.

 

XIII.        Non-Assignability

 

Except for the designation of a beneficiary(ies) to receive payments of
benefits for a particular Plan Quarter following a Plan Participant’s death
after the completion of such Plan Quarter, no amount payable at any time under
the Plan shall be subject to sale, transfer, assignment, pledge, attachment, or
other encumbrance of any kind. Any attempt to sell, transfer, assign, pledge,
attach, or otherwise encumber any such benefits, whether currently or
thereafter payable, shall be void.

 

XIV.        Withholding
Taxes

 

The Company is
entitled to withhold and deduct from any payments made pursuant to the Plan or
from future wages of a Plan Participant (or from other amounts that may be
due and owing to the Plan Participant from the Company), or make other
arrangements for the collection of, all legally required amounts necessary to
satisfy any and all federal, state, and local withholding and
employment-related tax requirements attributable to any payment made pursuant
to the Plan.

 

XV.         Unfunded
Status of Plan

 

The Plan shall be unfunded. No provisions of the Plan shall require the
Company, for the purpose of satisfying any obligations under the Plan, to
purchase assets or place any assets in a trust or other entity to which contributions
are made or otherwise to segregate any assets. Plan Participants shall have no
rights under the Plan other than as unsecured general creditors of the Company.

 

4

 

XVI.        Other

 

Except to the
extent in connection with other matters of corporate governance and authority
(all of which shall be governed by the laws of the Company’s jurisdiction of
incorporation), the validity, construction, interpretation, administration and
effect of the Plan and any rules, regulations, and actions relating to the Plan
will be governed by and construed exclusively in accordance with the internal,
substantive laws of the State of Minnesota, without regard to the conflict of
law rules of the State of Minnesota or any other jurisdiction.

 

5

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