Document:

Exhibit 10.8

PP
HOLDING CORPORATION II

REGISTRATION
RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of May 13, 2004, among the institutional investors whose names and
addresses are listed from time to time on Schedule I hereto (collectively,
the “Institutional Investors”), those employees of Polypore Inc., a
Delaware corporation (“Polypore”), and certain employees of Polypore’s
subsidiaries whose names and addresses are listed on Schedule II hereto
(the “Management Investors” and together with the Institutional
Investors, the “Investors”), and PP Holding Corporation II, a Delaware
corporation (the “Company”).

R E C I T A L S

WHEREAS, on January 30, 2004, PP Acquisition
Corporation (“PP Acquisition”), a Delaware corporation and a wholly
owned subsidiary of PP Holding Corporation, a Delaware corporation (“PP
Holding”), entered into a Stock Purchase Agreement (the “Purchase
Agreement”) with Polypore and the stockholders of Polypore party thereto,
pursuant to which PP Acquisition agreed to purchase 100% of the capital stock
(the “Stock Purchase”) of Polypore;

WHEREAS, PP Holding is a wholly owned subsidiary of
the Company;

WHEREAS, upon or shortly following the closing of the
Stock Purchase, PP Acquisition will be merged with and into Polypore, resulting
in Polypore being a direct wholly owned subsidiary of PP Holding and an
indirect wholly owned subsidiary of the Company;

WHEREAS, in connection with the transactions
contemplated by the Purchase Agreement, the Institutional Investors have
entered into a Securities Purchase Agreement (the “Subscription Agreement”)
with the Company pursuant to which the Company has agreed to sell and each
Institutional Investor has agreed to purchase from the Company, among other
things, shares of common stock, par value $0.01 per share (the “Common Stock”);
and

WHEREAS, the Company and the Investors desire to
define the registration rights of the Investors on the terms and subject to the
conditions herein set forth.

NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the parties hereby
agree as follows:

SECTION
1.         DEFINITIONS.

As used in this Agreement, the following terms have
the respective meanings set forth below:

Commission:  shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act;

 

 

Exchange Act:  shall mean the Securities Exchange Act of
1934, as amended (or any successor act), and the rules and regulations
promulgated thereunder;

Holder:  shall mean any holder of Registrable
Securities;

Initial Public Offering:  shall mean the initial public offering of
shares of Common Stock pursuant to a registration under the Securities Act;

Person:  shall mean an individual, partnership,
joint-stock company, corporation, limited liability company, trust or
unincorporated organization, and a government or agency or political
subdivision thereof;

register, registered and registration: 
shall mean a registration effected by preparing and filing a registration
statement in compliance with the Securities Act (and any post-effective
amendments filed or required to be filed) and the declaration or ordering of
effectiveness of such registration statement;

Registrable Securities:  shall mean (A) the shares of Common Stock
acquired by the Institutional Investors pursuant to the terms of the
Subscription Agreement, (B) any additional shares of Common Stock acquired by
the Institutional Investors after the date hereof,  including any shares
of Common Stock issuable upon conversion or exchange of convertible or
exchangeable securities acquired by the Institutional Investors after the date
hereof, (C) the shares of Common Stock issuable to the Management Investors
upon exercise of any option to acquire shares of Common Stock granted to them
by the Company pursuant to the Company’s 2004 Stock Option Plan; (D) the shares
of Common Stock, if any, distributed to the Management Investors pursuant to
the terms of that certain Amended and Restated Limited Liability Company
Agreement of PP Holding, LLC, a Delaware limited liability company, as the same
may be amended from time to time and (E) any stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (A), (B), (C)
or (D) above;

Registration Expenses:  shall mean all expenses incurred by the
Company in compliance with Section 2(a), (b) and (c) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, all of the reasonable fees and
expenses of one counsel for all of the Holders, blue sky fees and expenses and
any expenses associated with any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company);

Securities Act:  shall mean the Securities Act of 1933, as
amended (or any successor act), and the rules and regulations promulgated
thereunder;

Selling Expenses:  shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for each of the Holders other than the reasonable
fees and expenses of one counsel for all of the Holders; and

 

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Warburg Pincus:  shall mean Warburg Pincus Private Equity VIII,
L.P., a Delaware limited partnership, or Warburg Pincus International Partners,
L.P., a Delaware limited partnership.

SECTION
2.         REGISTRATION RIGHTS.

(a)          
Requested Registration.

(i)           
Request for Registration.  If the Company shall receive from
Warburg Pincus, at any time, a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:

(1)          
promptly give written notice of the proposed registration, qualification or
compliance to all other Holders; and

(2)          
as soon as practicable, use its reasonable best efforts to effect such
registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder
or Holders joining in such request as are specified in a written request
received by the Company within ten (10) business days after written notice from
the Company is given under Section 2(a)(i)(1) above; provided that the
Company shall not be obligated to effect, or take any action to effect, any
such registration pursuant to this Section 2(a):

(A)         
In any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to service
in such jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder;

(B)          
After the Company has effected three (3) such registrations pursuant to this
Section 2(a) and such registrations have been declared or ordered effective and
the sales of such Registrable Securities shall have closed;

(C)          
If the Registrable Securities requested by all Holders to be registered
pursuant to such request do not have an anticipated aggregate public offering
price (before deduction of Selling Expenses) of at least $15,000,000 (or $25,000,000
if such requested registration is the Initial Public Offering); or

(D)         
During the period starting with the date sixty (60) days prior to the Company’s
good faith estimate of the date of filing of, and ending on the date six (6)
months immediately following the effective date of, any 

 

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registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction, with respect to an employee benefit plan
or with respect to the Company’s first registered public offering of its
stock), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; provided,
however, that the Company may only delay an offering pursuant to this
Section 2(a)(i)(2)(D) for a period of not more than sixty (60) days, if a
filing of any other registration statement is not made within that period and
the Company may only exercise this right once in any twelve (12) month period.

The
registration statement filed pursuant to the request of Warburg Pincus may,
subject to the provisions of Section 2(a)(ii) below, include other securities
of the Company which are held by Persons who, by virtue of agreements with the
Company, are entitled to include their securities in any such registration (“Other
Stockholders”).  In the event any Holder requests a registration
pursuant to this Section 2(a) in connection with a distribution of Registrable
Securities to its partners or members, the registration shall provide for the
resale by such partners or members, if requested by such Holder.

The
registration rights set forth in this Section 2 may be assigned, in whole or in
part, to any transferee of Registrable Securities (who shall be bound by all
obligations of this Agreement).

(ii)          
Underwriting.  If Warburg Pincus intends to distribute the
Registrable Securities covered by its request by means of an underwriting, it
shall so advise the Company as a part of its request made pursuant to Section
2(a).  If Other Stockholders request inclusion in any such registration,
the Holders shall offer to include the securities of such Other Stockholders in
the underwriting and may condition such offer on their acceptance of the
further applicable provisions of this Section 2.  The Holders whose shares
of Common Stock are to be included in such registration and the Company shall
(together with all Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by Warburg Pincus and reasonably acceptable to the
Company.  Notwithstanding any other provision of this Section 2(a), if the
representative advises the Holders in writing that marketing factors require a
limitation on the number of shares of Common Stock to be underwritten, the
securities of the Company held by Other Stockholders, including, without
limitation, the Management Investors, shall be excluded from such
registration to the extent so required by such limitation.  If, after the
exclusion of such shares, further reductions are still required, the number of
shares included in the registration by each Holder shall be reduced on a pro
rata basis (based on the number of shares requested to be registered by such
Holder), by such minimum number of shares as is necessary to comply with such
request.  No Registrable Securities or any other securities excluded from
the underwriting by reason of the underwriter’s marketing limitation shall be
included in such registration.  If any Holder who has requested inclusion
in such registration as provided above disapproves of the terms of the
underwriting, such Person may elect to withdraw therefrom by providing written
notice to the Company, the underwriter and Warburg Pincus.  The securities
so withdrawn shall also be withdrawn 

 

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from
registration.  If the underwriter has not limited the number of
Registrable Securities or other securities to be underwritten, the Company and
officers and directors of the Company (to the extent such persons are not
otherwise Holders) may include its or their securities for its or their own
account in such registration if the representative so agrees and if the number
of Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.

(b)          
Company Registration.

(i)           
If the Company shall determine to register any of its equity securities either
for its own account or for the account of Warburg Pincus, any Holder or any
Other Stockholder, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Rule 145 transaction, or
a registration on any registration form which does not permit secondary sales
or does not include substantially the same information as would be required to
be included in a registration statement covering the sale of Registrable
Securities, the Company will:

(1)          
promptly give to each of the Holders a written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and

(2)          
include in such registration (and any related qualification under blue sky laws
or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made by the
Holders within fifteen (15) days after receipt of the written notice from the
Company described in clause (1) above, except as set forth in Section 2(b)(ii)
below.  Such written request may specify all or a part of the Holders’
Registrable Securities.  In the event any Holder requests inclusion in a
registration pursuant to this Section 2(b) in connection with a distribution of
Registrable Securities to its partners or members, the registration shall
provide for the resale by such partners or members, if requested by such
Holder.

(ii)          
Underwriting.  If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 2(b)(i)(1).  In such event, the right of each of
the Holders to include its Registrable Securities in such registration pursuant
to this Section 2(b) shall be conditioned upon such Holders’ participation in
such underwriting and the inclusion of such Holders’ Registrable Securities in
the underwriting to the extent provided herein.  The Holders whose
Registrable Securities are to be included in such registration shall (together
with the Company and the Other Stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for underwriting
by the Company.  Notwithstanding any other provision of this Section 2(b),
if the representative determines that marketing factors require a limitation on
the number of shares to be underwritten, and (x) if such registration is the
Initial Public Offering, the representative may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be 

 

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underwritten
pursuant hereto, and (y) if such registration is other than the Initial Public
Offering, the representative may (subject to the allocation priority set forth
below) limit the number of Registrable Securities to be included in the
registration and underwriting to not less than twenty five percent (25%) of the
shares included therein (based on the number of shares); provided, however,
without limiting the foregoing, the Company shall have no obligation to include
any such registration any Registrable Securities held by the Management
Investors if the underwriters determine, in their sole discretion, that
marketing factors require the Registrable Securities held by such Management
Investors to be excluded from the registration.  The Company shall immediately
so advise all holders of securities requesting registration of such limitation,
and the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following manner: 
The securities of the Company held by officers, directors and Other
Stockholders of the Company (other than Registrable Securities and other than
securities held by holders who by contractual right demanded such registration
(“Demanding Holders”)) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a limitation on
the number of shares is still required, the number of shares that may be
included in the registration and underwriting by each of the Holders and Demanding
Holders shall be reduced, on a pro rata basis (based on the number of shares
held by such Holder or Demanding Holder), by such minimum number of shares as
is necessary to comply with such limitation.  If any of the Holders or any
officer, director or Other Stockholder disapproves of the terms of any such
underwriting, he, she or it may elect to withdraw therefrom by providing
written notice to the Company and the underwriter.  Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.

(c)          
Form S-3.  Following the Initial Public Offering, the Company shall
use its best efforts to qualify for registration on Form S-3 for secondary
sales.  After the Company has qualified for the use of Form S-3, Warburg
Pincus shall have the right to request an unlimited number of registrations on
Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of shares by Warburg Pincus), provided, that the Company
shall not be obligated to effect, or take any action to effect, any such
registration pursuant to this Section 2(c):

(i)           
Unless the Holders who join in such registration pursuant to the terms hereof
propose to dispose of shares of Registrable Securities having an aggregate
price to the public (before deduction of Selling Expenses) of more than
$5,000,000;

(ii)          
Within 180 days of the effective date of the most recent registration pursuant
to this Section 2(c) in which securities held by such Holders could have been
included for sale or distribution;

(iii)         
In any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to service
in such jurisdiction and 

 

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except
as may be required by the Securities Act or applicable rules or regulations
thereunder; or

(iv)         
During the period starting with the date sixty (60) days prior to the Company’s
good faith estimate of the date of filing of, and ending on the date six (6)
months immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; provided,
however, that the Company may only delay an offering pursuant to this
Section 2(c)(iv) for a period of not more than sixty (60) days, if a filing of
any other registration statement is not made within that period and the Company
may only exercise this right once in any twelve (12) month period.

The
Company shall give written notice to all Holders of the receipt of a request
for registration pursuant to this Section 2(c) and shall provide a reasonable
opportunity for other Holders to participate in the registration, provided that
if the registration is for an underwritten offering, the terms of Section
2(a)(ii) shall apply to all participants in such offering.  Subject to the
foregoing, the Company will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form S-3 to the extent
requested by Warburg Pincus for purposes of disposition.  In the event
Warburg Pincus requests a registration pursuant to this Section 2(c) in
connection with a distribution of Registrable Securities to its partners or
members, the registration shall provide for the resale by such partners or
members, if requested by Warburg Pincus.

(d)          
Expenses of Registration.  All registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 2 shall be borne by the Company, and all Selling Expenses shall be
borne by the Holders of the securities so registered pro rata on the basis of
the number of their shares so registered.

(e)          
Registration Procedures.  In the case of each registration effected
by the Company pursuant to this Section 2, the Company will keep the Holders,
as applicable, advised in writing as to the initiation of each registration and
as to the completion thereof.  At its expense, the Company will:

(i)           
keep such registration effective for a period of one hundred twenty (120) days
or until the Holders (or in the case of a distribution to the partners or
members of such Holder, such partners or members), as applicable, have
completed the distribution described in the registration statement relating
thereto, whichever first occurs; provided, however, that (A) such
120-day period shall be extended for a period of time equal to the period
during which the Holders, partners or members, as applicable, refrain from
selling any securities included in such registration in accordance with
provisions in Section 2(i) hereof; and (B) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or delayed
basis, and provided  further, that applicable rules under the
Securities Act 

 

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governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (y) includes any prospectus required by Section
10(a) of the Securities Act or (z) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (y) and (z) above to be contained in periodic reports filed
pursuant to Section 12 or 15(d) of the Exchange Act in the registration statement;

(ii)          
furnish such number of prospectuses and other documents incident thereto as
each of the Holders, as applicable, from time to time may reasonably request;

(iii)         
notify each Holder of Registrable Securities covered by such registration at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and

(iv)         
furnish, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters
or, if such securities are not being sold through underwriters, on the date
that the registration statement with respect to such securities becomes
effective, (1) an opinion, dated as of such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders participating
in such registration, addressed to the underwriters, if any, and to the Holders
participating in such registration and (2) a letter, dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering and reasonably satisfactory
to a majority in interest of the Holders participating in such registration,
addressed to the underwriters, if any, and if permitted by applicable
accounting standards, to the Holders participating in such registration.

(f)           
Indemnification.

(i)           
The Company will indemnify each of the Holders, as applicable, each of its
officers, directors, partners and members, and each Person controlling each of
the Holders, with respect to each registration which has been effected pursuant
to this Section 2 in which such Holder includes Registrable Securities, and
each underwriter, if any, and each Person who controls any underwriter, against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or any violation by the 

 

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Company
of the Securities Act or the Exchange Act or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each of the Holders, each of its officers, directors,
partners and members, and each Person controlling each of the Holders, each
such underwriter and each Person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by the Holders or underwriter and stated to be
specifically for use therein.

(ii)          
Each of the Holders will, if Registrable Securities held by it are included in
the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
each underwriter, if any, of the Company’s securities covered by such a
registration statement, each Person who controls the Company or such
underwriter, each other Holder and each Other Stockholder and each of their
respective officers, directors, partners and members, and each Person
controlling such other Holder or Other Stockholder against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document made by such Holder in writing, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements by such Holder therein not misleading, and
will reimburse the Company, the underwriters and such other Holders and Other
Stockholders and their respective directors, officers, members, partners,
Persons or control Persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by such Holder and stated to be
specifically for use therein; provided, however, that the
obligations of each of the Holders hereunder shall be limited to an amount
equal to the net proceeds to such Holder of securities sold in such
registration as contemplated herein.

(iii)         
Each party entitled to indemnification under this Section 2(f) (the “Indemnified
Party”) shall give notice to the party required to provide indemnification
(the “Indemnifying Party”) promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld) and the Indemnified Party
may participate in such defense at such party’s expense (unless the Indemnified
Party shall have reasonably concluded that there may be a conflict of interest
between the Indemnifying Party and the Indemnified Party in such action, in
which case the fees and 

 

9

 

expenses
of counsel shall be at the expense of the Indemnifying Party), and provided
further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 2 unless the Indemnifying Party is materially and adversely
prejudiced thereby.  No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the prior written consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.  Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.

(iv)         
If the indemnification provided for in this Section 2(f) is held by a court of
competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions (or alleged statements or omissions) which resulted in
such loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations.  The relative fault of the Indemnifying Party
and of the Indemnified Party shall be determined by reference to, among other
things, whether the untrue (or alleged untrue) statement of a material fact or
the omission (or alleged omission) to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

(v)          
Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten public offering contemplated
by this Agreement are in conflict with the foregoing provisions, the provisions
in such underwriting agreement shall be controlling.

(vi)         
The foregoing indemnity agreement of the Company and Holders is subject to the
condition that, insofar as they relate to any loss, claim, liability or damage
arising out of a statement made in or omitted from a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the Commission at
the time the registration statement in question becomes effective or the
amended prospectus filed with the Commission pursuant to Commission Rule 424(b)
(the “Final Prospectus”), such indemnity or contribution agreement shall
not inure to the benefit of any underwriter or Holder if a copy of the Final
Prospectus was furnished to the underwriter and was not furnished to the Person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act.

(g)          
Information by the Holders.

 

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(i)           
Each of the Holders holding securities included in any registration shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Section 2.

(ii)          
In the event that, either immediately prior to or subsequent to the
effectiveness of any registration statement, any Holder shall distribute
Registrable Securities to its partners or members, such Holder shall so advise
the Company and provide such information as shall be necessary to permit an
amendment to such registration statement to provide information with respect to
such partners or members, as selling securityholders.  Promptly following
receipt of such information, the Company shall file an appropriate amendment to
such registration statement reflecting the information so provided.  Any
incremental expense to the Company resulting from such amendment shall be borne
by such Holder.

(h)          
Rule 144 Reporting.

With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities to the public without registration, the Company agrees
to:

(i)           
make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act (“Rule 144”), at all times
from and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;

(ii)          
use its best efforts to file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and

(iii)         
so long as the Holder owns any Registrable Securities, furnish to the Holder
upon request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after ninety (90) days
following the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as the
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing the Holder to sell any such securities without
registration.

(i)           
“Market Stand-off” Agreement.  Each of the Holders agrees, if
requested by the Company or an underwriter of equity securities of the Company,
not to sell or otherwise transfer or dispose of any Registrable Securities held
by such Holder, unless such shares are sold, transferred or otherwise disposed
of pursuant to a registered offering, during the twelve (12) month period
immediately following the effective date of a registration statement of the
Company filed under the Securities Act, provided that:

 

11

 

(i)           
such agreement only applies to the Initial Public Offering;

(ii)          
all executive officers and directors of the Company and all stockholders who
own in excess of one percent (1%) of the Common Stock on a fully diluted basis
enter into similar agreements; and

(iii)         
the Company shall not be permitted to waive or release the terms of this
Section 2(i) with respect to any Holder unless the Company shall have waived or
released the terms of this Section 2(i) with respect to each other Holder.

If requested by the underwriters, the Holders shall
execute a separate agreement to the foregoing effect.  The Company may
impose stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of said twelve (12) month
period.  The provisions of this Section 2(i) shall be binding upon any
transferee who acquires Registrable Securities.

(j)           
Termination.  The registration rights set forth in this Section 2
shall not be available to any Holder if, (i) in the written opinion of counsel
to the Company, all of the Registrable Securities then owned by such Holder
could be sold in any 90-day period pursuant to Rule 144 (without giving effect
to the provisions of Rule 144(k)) or (ii) all of the Registrable Securities
held by such Holder have been sold in a registration pursuant to the Securities
Act or pursuant to Rule 144.

SECTION
3.         MISCELLANEOUS.

(a)          
Directly or Indirectly.  Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.

(b)          
Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed entirely within such State, without regard to conflict
of law principles.

(c)          
Section Headings.  The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.

(d)          
Notices.

(i)           
All notices, requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if (1) delivered personally, (2) mailed,
certified or registered mail with postage prepaid, (3) sent by next-day or overnight
mail or delivery or (4) sent by telecopy (including facsimile) or telegram, as
follows:

(1)          
if to the Company, to c/o Warburg Pincus LLC, 466 Lexington Avenue, New York,
NY 10017, Attention: Kewsong Lee and David Barr (facsimile: (212) 878-9100), or
at such other address or facsimile number as it may have furnished in writing
to the Holders in accordance with the terms hereof, with a copy (which shall
not constitute

 

12

 

notice)
to Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019,
Attention: Steven J. Gartner, Esq. (facsimile: (212) 728-9222); and

(2)          
if to the Holders, at the address or facsimile number listed on Schedule I
hereto, or at such other address or facsimile number as may have been furnished
the Company in writing in accordance with the terms hereof.

(ii)          
Any notice so addressed shall be deemed to be given: if delivered personally or
by telecopy (including facsimile) or telegram, on the date of such delivery, if
a business day, otherwise on the first business day thereafter; if mailed by
certified or registered mail with postage prepaid, on the third business day
after the date of such mailing, and if sent by next-day or overnight mail or delivery,
on the first business day following the date of such mailing or delivery.

(e)          
Reproduction of Documents.  This Agreement and all documents
relating thereto, including, without limitation, any consents,
waivers and modifications which may hereafter be executed may be reproduced by
the Company and the Holders by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and the Holders and
the Company may destroy any original document so reproduced.  The parties
hereto agree and stipulate that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by the Company or the Holders in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.

(f)           
Successors and Assigns.  This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties. 
No transferee of Registrable Securities shall have any rights under this
Agreement unless (i) the transferee is expressly granted rights under this
Agreement and such rights are set forth in a writing executed by the transferor
and the Company and (ii) such transferee’s Registrable Securities represent at
least five percent (5%) of the outstanding Common Stock on a fully-diluted
basis.

(g)          
Entire Agreement; Amendment and Waiver.  This Agreement constitutes
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior understanding among such parties with
respect to such subject matter.  Subject to the terms of Section 2(i)
hereof, this Agreement may be amended, and the observance of any term of this
Agreement may be waived, with (and only with) the written consent of the
Company and the Holders holding a majority of the then outstanding Registrable
Securities.

(h)          
Severability.  In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not affect the
remaining provisions of this Agreement which shall remain in full force and
effect.

(i)           
Counterparts.  This Agreement may be executed in two or more
counterparts (including by facsimile), each of which shall be deemed an
original and all of which together shall be considered one and the same
agreement.

 

13

 

 

14

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first set forth above.

 

	
   

  	
  PP
  HOLDING CORPORATION II

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
   

  	
   

  	
  Name: Lynn Amos

  
	
   

  	
   

  	
  Title: Chief Financial Officer, Treasurer &
  Secretary

  

 

	
  WARBURG
  PINCUS PRIVATE EQUITY

  
	
  VIII,
  L.P.

  
	
   

  
	
  By:

  	
  Warburg Pincus &
  Co., its

  
	
   

  	
  General Partner

  
	
   

  	
   

  
	
  By:

  	
  /s/ David Barr

  	
   

  
	
   

  	
  Name: David Barr

  
	
   

  	
  Title: Partner

  

 

	
  WARBURG
  PINCUS PRIVATE EQUITY

  
	
  PARTNERS,
  L.P.

  
	
   

  
	
  By:

  	
  Warburg Pincus &
  Co., its

  
	
   

  	
  General Partner

  
	
   

  	
   

  
	
  By:

  	
  /s/ David Barr

  	
   

  
	
   

  	
  Name: David Barr

  
	
   

  	
  Title: Partner

  

 

[Signature Page to Registration Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first set forth above.

 

	
   

  	
  PP
  HOLDING CORPORATION II

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
   

  	
   

  	
  Name: Lynn Amos

  
	
   

  	
   

  	
  Title: Chief Financial Officer, Treasurer &
  Secretary

  

 

 

	
  PP
  HOLDING, LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Warburg Pincus Private
  Equity VIII, L.P., and

  
	
   

  	
  Warburg Pincus
  International Partners, L.P.,

  
	
   

  	
  its Managing Members

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Warburg Pincus &
  Co., the General Partner

  
	
   

  	
  for each of Warburg
  Pincus Private Equity VIII, L.P., and

  
	
   

  	
  Warburg Pincus
  International Partners, L.P.

  

 

	
  By:

  	
  /s/ David Barr

  	
   

  
	
   

  	
  Name: David Barr

  
	
   

  	
  Title: Partner

  

 

[Signature Page to Registration Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first set forth above.

 

	
   

  	
  PP
  HOLDING CORPORATION II

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
   

  	
   

  	
  Name: Lynn Amos

  
	
   

  	
   

  	
  Title: Chief Financial Officer, Treasurer &
  Secretary

  

 

	
  /s/ Frank Nasisi

  	
   

  
	
  Frank Nasisi

  

 

[Signature Page to Registration Rights Agreement]

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first set forth above.

 

	
   

  	
  PP
  HOLDING CORPORATION II

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank Nasisi

  
	
   

  	
   

  	
  Name: Frank Nasisi

  
	
   

  	
   

  	
  Title: President and
  Chief Executive Officer

  

 

	
  /s/ Lynn Amos

  	
   

  
	
  Lynn Amos

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

[Signature Page to Registration Rights Agreement]

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first set forth above.

 

	
   

  	
  PP
  HOLDING CORPORATION II

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lynn Amos

  
	
   

  	
   

  	
  Name: Lynn Amos

  
	
   

  	
   

  	
  Title: Chief Financial Officer, Treasurer &
  Secretary

  

 

	
  /s/ Stefan Geylar

  	
   

  
	
  Stefan Geylar

  

 

[Signature Page to Registration Rights Agreement]

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first set forth above.

 

	
   

  	
  PP
  HOLDING CORPORATION II

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lynn Amos 

  
	
   

  	
   

  	
  Name: Lynn Amos

  
	
   

  	
   

  	
  Title: Chief Financial Officer, Treasurer &
  Secretary

  

 

	
  /s/ Brad Reed

  	
   

  
	
  Brad Reed

  

 

 

[Signature Page to Registration Rights Agreement]Exhibit
10.9

 

PP
HOLDING CORPORATION II

 

2004
STOCK OPTION PLAN

 

Section 1.                                           
PURPOSE.

 

The Plan is intended as
an incentive to improve the performance, encourage the continued employment and
increase the proprietary interest of certain employees of the Company and its
Subsidiaries selected for participation in the Plan.  The Plan is designed
to grant such employees the opportunity to share in the Company’s long-term
success through Stock ownership and to afford them the opportunity for
additional compensation related to the value of Stock of the Company. 
Options granted under this Plan are not intended to qualify as “incentive stock
options” under Section 422 of the Code.

 

Section 2.                                           
DEFINITIONS.

 

(a)                                 
“Affiliate”
means, with respect to any entity, any other entity that, directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such entity.

 

(b)                                
“Annual
EBITDA” means, for any fiscal year, an amount equal to means, for any
fiscal year, an amount equal to the Consolidated EBITDA (as such term is
defined in that certain Credit Agreement, dated as of May 13, 2004, but
determined after adding back all management, sponsor, arranger and other fees,
if any, paid by the Company to the Fund or its Affiliates) for such fiscal
year.

 

(c)                                 
“Annual
EBITDA Target” means:

 

(i)                                    
for
fiscal year 2004, $147.4 million;

 

(ii)                                 
for
fiscal year 2005, $162.1 million;

 

(iii)                              
for
fiscal year 2006, $177.5 million;

 

(iv)                             
for
fiscal year 2007, $194.4 million; and

 

(v)                                
for
fiscal year 2008, $210.1 million.

 

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

 

(e)                                 
“Cause”
means, in the absence of any employment agreement between a Participant and the
Company or any of its Affiliates otherwise defining Cause, (i) fraud or
embezzlement on the part of Participant in the course of his or her employment
or services, (ii) personal dishonesty or acts of gross negligence or gross
misconduct, which, in each case, is demonstrably and materially injurious to
the Company or any of its Affiliates (iii) a Participant’s intentional
engagement in conduct that is materially injurious to the Company or any of its
Affiliates, (iv) a Participant’s conviction by a court of competent
jurisdiction of, or pleading “guilty” or “no contest” to, (x) a felony or (y)
any other criminal charge (other than minor traffic

 

 

violations) which could reasonably be expected to have
a material adverse impact on the reputation or business of the Company or any
of its Affiliates; (v) public or consistent drunkenness by a Participant or his
or her illegal use of narcotics which is, or could reasonably be expected to
become, materially injurious to the reputation or business of the Company or
any of its Affiliates or which impairs, or could reasonably be expected to
impair, the performance of a Participant’s duties to the Company or any of its
Affiliates; or (vi) willful failure by a Participant to follow the lawful
directions of a superior officer or the Board, unless such failure did not
occur in bad faith and is cured promptly after written notice of such failure
is given to the Participant by such superior officer or the Board.  In the
event there is an employment agreement between a Participant and the Company or
any of its Affiliates defining Cause, “Cause” shall have the meaning provided
in such agreement.

 

(f)                                   
“Change
in Control” means (i) a change in ownership or control of the Company
effected through a transaction or series of transactions (other than an
offering of Stock to the general public through a registration statement filed
with the Securities and Exchange Commission) whereby any “person” or related
“group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of
the Exchange Act) (other than the Company, any of its Subsidiaries, an employee
benefit plan maintained by the Company or any of its Subsidiaries, a Principal
Stockholder or an Affiliate of the Company or a Principal Stockholder) directly
or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of securities of the Company possessing more than fifty
percent (50%) of the total combined voting power of the Company’s securities
outstanding immediately after such acquisition; or (ii) the sale or conveyance
of all or substantially all of the assets of the Company.

 

(g)                                
“Closing”
shall have the meaning ascribed to such term in the Stock Purchase Agreement.

 

(h)                                
“Code”
means the Internal Revenue Code of 1986, as amended.

 

(i)                                    
“Committee”
means the Compensation Committee of the Board.

 

(j)                                    
“Company”
means PP Holding Corporation II, a Delaware corporation.

 

(k)                                 
“Cumulative
EBITDA” means, for any fiscal year, the sum of the Annual EBITDA for each
fiscal year prior to and including such fiscal year, commencing with fiscal
year 2004.

 

(l)                                    
“Cumulative
EBITDA Target” means:

 

(i)                                    
for
fiscal year 2004, $147.4 million;

 

(ii)                                 
for
fiscal year 2005, $309.5 million;

 

(iii)                              
for
fiscal year 2006, $487.0 million;

 

(iv)                             
for
fiscal year 2007, $681.4 million; and

 

(v)                                
for
fiscal year 2008, $891.5 million.

 

2

  

(m)                              
“Disability”
means, in the absence of any employment agreement between a Participant and the
Company or an Affiliate otherwise defining Disability, the permanent and total
disability of a person within the meaning of Section 22(e)(3) of the
Code.  In the event there is an employment agreement between a Participant
and the Company or an Affiliate defining Disability, “Disability” shall have
the meaning provided in such agreement.

 

(n)                                
“Employee”
means any person employed by the Company or any subsidiary of the Company.

 

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

 

(p)                                
“Expiration
Date” means the date that an Option expires, after which the Option may no
longer be exercised.

 

(q)                                
“Fair
Market Value” means (i) prior to an IPO, the fair market value per share of
Stock, as determined by the Board in good faith, (ii) at the time of an IPO,
the per share price to the public in such IPO, and (iii) after an IPO, on any
date (A) if the Stock is listed on a national securities exchange, the mean
between the highest and lowest sale prices reported as having occurred on the
primary exchange with which the Stock is listed and traded on the date prior to
such date, or, if there is no such sale on that date, then on the last preceding
date on which such a sale was reported, or (B) if the Stock is not listed on
any national securities exchange but is quoted in the National Market System of
the National Association of Securities Dealers Automated Quotation System (“NASDAQ-NMS”)
on a last sale basis, the average between the high bid price and low ask price
reported on the date prior to such date, or, if there is no such sale on that
date then on the last preceding date on which such a sale was reported. 
If, after an IPO, the Stock is not quoted on NASDAQ-NMS or listed on an
exchange, or representative quotes are not otherwise available, the Fair Market
Value shall mean the amount determined by the Board in good faith to be the
fair market value per share of Stock, on a fully diluted basis.

 

(r)                                   
“Fund”
means Warburg Pincus Private Equity VIII, L.P. or Warburg Pincus International
Partners, L.P.

 

(s)                                 
“Good
Reason” means, in the absence of any employment agreement between a
Participant and the Company or any of its Affiliates otherwise defining Good
Reason, (i) the reduction of a Participant’s base salary or bonus opportunity,
other than an across the board reduction in base salary or bonus opportunity
applicable to all middle and senior management of the Company, (ii) the
material breach by the Company of the provisions of this Plan or of any
employment or similar agreement with the Participant, (iii) a relocation of
Participant’s principal place of employment to a location which is more than 50
miles from the Participant’s principal place of employment as of the Closing,
but only if such new principal place of employment is further from his
permanent residence than the prior place of employment, or (iv) the material diminution
of a Participant’s title, duties or responsibilities, without the Participant’s
consent.  For purposes of this Plan, no termination of a Participant’s
employment shall be considered for Good Reason unless the Participant has
provided the Company thirty (30) days’ written notice setting forth in
reasonable specificity the event that constitutes Good Reason, within sixty
(60) days of the occurrence of such event, and during such

 

3

 

thirty (30) day notice period, the Company shall have
failed to cure the event or events in question.  In the event there is an
employment agreement between a Participant and the Company or an Affiliate
defining Good Reason, “Good Reason” shall have the meaning provided in such
agreement.

 

(t)                                   
“IPO”
means an initial public offering of the Stock registered under the Securities
Act pursuant to an effective registration statement.

 

(u)                                
“IPO
Date” means the effective date of the registration statement for the IPO.

 

(v)                                
“Option”
means any stock option granted pursuant to the Plan

 

(w)                              
“Option
Agreement” means a written agreement between the Company and a Participant
evidencing the terms and conditions of an individual Option grant.

 

(x)                                  
“Participant”
means a person or entity to whom an Option is granted pursuant to the Plan or,
if applicable, such other person or entity who holds an outstanding Option.

 

(y)                                
“Permitted
Transfer” means any transfer by a Participant of all or any portion of his
or her shares of Stock or Options (i) to the Company, (ii) to or for the
benefit of any spouse, child or grandchild of a Participant, or (iii) to a
trust or partnership for the benefit of any of the foregoing, including
transfers by will or the laws of descent and distribution; provided, however,
that, in the case of clauses (ii) and (iii) above, it shall be a condition of
each such transfer that (x) the transferee agrees to be bound by the terms of
the Plan and the applicable Option Agreement as though no such transfer had
taken place, and that (y) the Participant has complied with all applicable law
in connection with such transfer.

 

(z)                                  
“Plan”
means the PP Holding Corporation II 2004 Stock Option Plan, as the same may be
amended from time to time.

 

(aa)                           
“Polypore”
means Polypore, Inc., a Delaware corporation and Affiliate the Company.

 

(bb)                         
“Principal
Stockholder” means either Fund or any of their respective Affiliates.

 

(cc)                           
“Qualifying
Termination” means a termination of a Participant’s employment with the
Company or its Affiliates (i) by the Company without Cause, (ii) by the
Participant with Good Reason or as a result of the Participant’s Retirement,
(iii) by reason of the Participant’s death or Disability.

 

(dd)                         
“Repurchase
Options” means Options the underlying shares of Stock of which are
allocated out of the Repurchase Pool, and except to the extent specifically
provided otherwise herein, a Repurchase Option shall be treated in all respects
as an Option in accordance with the Plan..

 

4

 

(ee)                           
“Repurchase
Pool” means a pool of shares of Stock allocated under the Plan pursuant to
Section 4(d) hereof.

 

(ff)                               
“Repurchase
Price” means:

 

(i)                                    
For
Options:

 

(A)                             
In
the case of a Participant’s termination of employment which is not by reason of
a Qualifying Termination, $0; and

 

(B)                               
In
the case of a Participant’s termination of employment by reason of a Qualifying
Termination, the fair value of the Option on the date of repurchase by the
Company.

 

(ii)                                 
For
Stock underlying an Option:

 

(A)                             
In
the case of a Participant’s termination of employment which is not by reason of
a Qualifying Termination, the lower of (x) price paid by the Participant for
the Stock upon the exercise of the Option, and (y) the Fair Market Value of the
Stock on the date of repurchase by the Company; and

 

(B)                               
In
the case of a Participant’s termination of employment by reason of a Qualifying
Termination, the Fair Market Value of the Stock on the date of repurchase by
the Company.

 

(gg)                         
“Retirement”
means a Participant’s voluntary resignation of employment with the Company or
its Affiliates following such Participant’s attainment of age 62; provided,
however, that no voluntary resignation by a Participant shall be
considered a Retirement hereunder if such resignation occurs following such
Participant’s receipt of notice from the Company or an Affiliate of its
intention to terminate the Participant for Cause but prior to the expiration of
any required notice or cure period.

 

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

 

(ii)                                 
“Stock”
means the common stock of the Company, par value $0.01 per share.

 

(jj)                                 
“Stock
Purchase Agreement” means the Stock Purchase Agreement by and among the
Company, PP Acquisition Corporation and certain sellers named therein, dated as
of January 30, 2004.

 

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

 

(ll)                                 
“Transfer” 
shall mean a voluntary or involuntary sale, exchange, transfer, assignment,
pledge, hypothecation, encumbrance or other disposition.

 

5

 

(mm)                     
“Top-Up
Price” means an amount equal to (x + y) / z), where (x) equals the
aggregate consideration received by the Company or its shareholders as a result
of the Change in Control (after payment of all fees and expenses incidental
thereto), (y) equals the aggregate Repurchase Price paid to all Participants
within the one hundred eighty (180) day period immediately prior to the date of
such Change in Control, and (z) equals the sum of (i) all of the shares of
Stock, calculated on a fully diluted basis, outstanding immediately before the
Change in Control plus (ii) the aggregate number of Options and shares of Stock
repurchased pursuant to Section 6(c) hereof within the one hundred eighty
(180) day period immediately prior to the date of such Change in Control.

 

(nn)                         
“Vested
Equity” shall mean any Options which are vested on the date of a
Participant’s termination of employment, together with any Stock acquired by
such Participant upon the exercise of any Options.

 

Section 3.                                           
ADMINISTRATION.

 

(a)                                 
General.  The Plan shall
be administered by the Committee.

 

(b)                                
Powers
of the Committee.  Subject to the provisions of the Plan, the
Committee shall have sole authority, in its absolute discretion:

 

(i)                                    
To
determine from time to time which of the Employees shall be granted Options,
when and how each Option shall be granted, what type or combination of types of
Option shall be granted, the provisions of each Option granted (which need not
be identical), including the time or times when a person shall be permitted to
receive Stock pursuant to an Option, the number of shares of Stock with respect
to which an Option shall be granted to each such person, and, subject to the
provisions of the Plan, the Option exercise price;

 

(ii)                                 
To
construe and interpret the Plan and Options granted under it, and to establish,
amend and revoke rules and regulations for its administration;

 

(iii)                              
To
amend the Plan or an Option as provided in Section 14; and

 

(iv)                             
To
exercise such powers and to perform such acts as the Committee deems necessary
or expedient to promote the best interests of the Company which are not in
conflict with the provisions of the Plan.

 

(c)                                 
Committee
Determinations.  All determinations, interpretations and
constructions made by the Committee in good faith shall not be subject to
review by any person or entity and shall be final, binding and conclusive on
all persons and entities.

 

(d)                                
Delegation
of Authority.  The Committee may delegate to one or more of its
members, or to one or more agents, such administrative duties under this
Section 3 as it may deem advisable.

 

6

 

Section 4.                                           
STOCK SUBJECT TO THE
PLAN.

 

(i)                                    
Share
Reserve.  Subject to Section 7 hereof relating to adjustments, the
total number of shares of Stock which may be issued pursuant to the exercise of
Options shall not exceed, in the aggregate, 8,968 shares of Stock. 
Options for at least 50% of the shares of Stock reserved for issuance under the
Plan shall be granted at or promptly following the Closing, and Options for all
shares available for issuance under the Plan shall be granted prior to any
Change in Control or prior to or in conjunction with an IPO.

 

(b)                                
Source.  The Stock to
be optioned under the Plan shall be shares of authorized but unissued Stock or
previously issued shares of Stock reacquired by the Company on the open market,
by private purchase or otherwise.

 

(c)                                 
Reversion
of Shares.  If any Option shall for any reason expire, be forfeited
or otherwise terminate, in whole or in part, the shares of Stock not acquired
under such Option shall revert to and again become available for issuance under
the Plan.

 

(d)                                
Repurchase
Pool.  Following the Closing, if, pursuant Section 6(c), the
Company repurchases (i) any shares of Stock acquired upon exercise of any
Option, or (ii) any vested Option, such shares of Stock repurchased, or the
shares of Stock underlying the Option repurchased, as applicable, shall be allocated
to the Repurchase Pool, and again become available for issuance under the Plan
as a Repurchase Option.

 

Section 5.                                           
ELIGIBILITY.

 

Participation shall be
limited to Employees who have received written notification from the Committee,
or from a person designated by the Committee, that they have been selected to
participate in the Plan.

 

Section 6.                                           
OPTIONS.

 

(a)                                 
General.  Options granted
hereunder shall be in such form and shall contain such terms and conditions as
the Committee shall deem appropriate.  The provisions of separate Options
shall be set forth in an Option Agreement, which agreements need not be
identical.

 

(b)                                
Option
Terms.  Each Option shall include (through incorporation of provisions
hereof by reference in the Option Agreement or otherwise) the substance of each
of the following provisions:

 

(i)                                    
Expiration Date.  Except as may
otherwise be provided in an Option Agreement, the Expiration Date of an Option
shall be the tenth (10th) anniversary of the date of grant of such
Option; provided, however, that no Option granted hereunder shall
have an Expiration Date beyond the tenth (10th) anniversary of the
date it was granted.

 

(ii)                                 
Exercise Price.  The exercise
price per share of Stock for each Option, which per share exercise price shall
be subject to adjustment as provided in Section 7 hereof, shall be $1,000
per share, representing the Fair Market Value of a share of Stock

 

7

 

immediately following the Closing; provided, however,
in the case of Participants who become Participants who become employed with
the Company following the Closing, the Fair Market Value of a share of Stock as
of the date of grant of an Option; provided, further, that if the
Option is a Repurchase Option, the exercise price of such Repurchase Option
shall in no event (unless determined otherwise by the Compensation Committee)
be less than the Repurchase Price per share paid by the Company in connection
with its repurchase of the shares of Stock or the vested Option in accordance
with the terms of the Section 6(c).

 

(iii)                              
Vesting.

 

(A)                             
General.  Options shall vest and
become exercisable in such manner and on such date or dates set forth in
subsections (B) below (regardless of the date of grant of any such Option or
Repurchase Option); provided, however, that notwithstanding such
vesting dates, the Committee may in its sole discretion accelerate the vesting
of any Option, which acceleration shall not affect the terms and conditions of
any such Option other than with respect to vesting.  Unless otherwise
specifically determined by the Committee, the vesting of an Option shall occur
only while the Participant is employed or rendering services to the Company or
its Affiliates and all vesting shall cease upon a Participant’s termination of
employment or services for any reason.  If an Option is exercisable in
installments, such installments or portions thereof which become exercisable
shall remain exercisable until the Option expires.

 

(B)                               
Performance Vesting.

 

(I)                                    
Vesting Based on Annual
Performance.  For each fiscal
year of the Company beginning with fiscal year 2004 and ending with fiscal year
2008, ten percent (10%) of the Options granted to a Participant shall be
eligible to become vested and exercisable, provided that the Polypore has
achieved an Annual EBITDA equal to, or in excess of, the Annual EBITDA Target
for such fiscal year.  Such Options shall become vested and exercisable as
of the date that the Committee verifies that such Annual EBITDA Target has been
achieved.  For each such fiscal year, the Committee shall verify whether
the Annual EBITDA Target has been achieved, and shall notify Polypore’s Chief
Executive Officer of its determination with respect thereto, within ten (10)
business days after the Committee receives Polypore’s audited financial
statements for that fiscal year.  If Annual EBITDA for a fiscal year is
less than the Annual EBITDA Target for such fiscal year (an “EBITDA
Shortfall”), but Annual EBITDA for the immediately following fiscal year
exceeds the Annual EBITDA Target for such fiscal year by at least the amount of
the prior fiscal year’s EBITDA Shortfall, in addition to any Options that vest
and become exercisable in such immediately following fiscal year in accordance
with the preceding sentence, the Options that were eligible for vesting in the
immediately prior fiscal year shall also vest and become exercisable as of the
date that the Committee verifies (in the manner specified above) that such
Annual EBITDA has been achieved.

 

8

 

(II)                               
Vesting Based on Cumulative
Target.  Provided that the
Cumulative EBITDA for fiscal year 2008 is equal to, or in excess of, the
Cumulative EBITDA Target for fiscal year 2008, fifty percent (50%) of the
Options (the “Cumulative Target Options”) shall become vested and
exercisable as of the date that the Committee verifies that the Cumulative
EBITDA Target for fiscal year 2008 has been achieved.  If the Cumulative
EBITDA for fiscal year 2008 is in excess of ninety (90%) of the Cumulative
EBITDA Target for fiscal year 2008 but less than one hundred percent (100%) of
the Cumulative EBITDA Target for fiscal year 2008, a fraction of the Cumulative
Target Options shall become vested and exercisable, based on a linear
interpolation of the percentage of the Cumulative EBITDA Target for 2008
achieved between 90% and 100%, as of the date that the Committee verifies that
such percentage of the Cumulative EBITDA Target for fiscal year 2008 has been
achieved.  If the Cumulative EBITDA for fiscal year 2008 is less than
ninety (90%) of the Cumulative EBITDA Target for such fiscal year, no Options
shall vest under this Section 6(b)(iii)(B)(II).  The Committee shall
verify whether the Cumulative EBITDA Target for fiscal year 2008 has been
achieved, and shall notify Polypore’s Chief Executive Officer of its
determination with respect thereto, within ten (10) business days after the
Committee receives Polypore’s audited financial statements for fiscal year
2008.

 

(C)                               
Vesting of Cumulative Target Options on an IPO or Qualifying
Termination of Employment.  Notwithstanding the vesting schedule provided
in sub-clause (B) above, in the event of (x) an IPO, or (y) a Qualifying
Termination, provided that the Cumulative EBITDA for the fiscal year ending
immediately prior to the fiscal year in which such IPO or Qualifying
Termination occurs is equal to, or exceeds, the Cumulative EBITDA Target for
such fiscal year, a percentage of Cumulative Target Options held by each
Participant, in the case of an IPO, or the Participant who undergoes a
Qualifying Termination, in the case of a Qualifying Termination, shall vest
based upon the number of whole fiscal years completed from the Closing through
the date of such IPO or Qualifying Termination over five (5).  For
purposes of clarification, in the event that an IPO or Qualifying Termination
occurs in fiscal year 2004, no vesting of Cumulative Target Options shall occur
by virtue of this sub-clause (C).

 

(D)                              
Change in Control.  In the event of a Change in
Control: (i) if the annualized net rate of return to the Company’s stockholders
(excluding Participants) immediately following the Closing from the Closing
until the date of consummation of such Change in Control (the “NRR”),
equals, or is in excess of, thirty percent (30%), then all Options shall vest
and become exercisable on the Change in Control; and (ii) if the NRR is greater
than twenty percent (20%) but less than thirty percent (30%), a percentage of
the Options which are then unvested, between zero (0) and one-hundred percent
(100%), shall vest and become exercisable on the Change in Control by means of
a linear interpolation of the percentage NRR achieved between 20% and
30%.  For purposes hereof, NRR shall be calculated solely by reference to
payments received or to be

 

9

 

received by stockholders of the Company in respect of any
equity security held by them, taking into account all management, sponsor,
arranger and other fees, if any, paid by the Company to the Fund or its
Affiliates.  Any Options which have not vested prior to, or upon, a Change
in Control, shall terminate upon consummation of a Change in Control.

 

(E)                                
Expiration of Unvested Options.  Unless earlier
terminated pursuant to sub-clause (D) above, Options which have not vested in
accordance with the provisions of sub-clauses (B), (C) or (D) above on or prior
to the date that the Committee verifies whether the Cumulative EBITDA Target
for fiscal year 2008 has been achieved shall terminate as of such date.

 

(F)                                
New Employees.  Notwithstanding the vesting
provisions described above, with respect to any Options granted to any
Participant who becomes an Employee following the Closing, the Committee shall
have the discretion to alter the performance criteria to which the Options so
granted will vest.  If the Committee elects to alter the performance
criteria applicable to any Options granted to any such Participant as
contemplated by this Section 6(b)(iii)(F), the Option Agreement evidencing
the Options so granted shall specifically set forth such altered performance
vesting criteria.

 

(iv)                             
Payment for Stock.  Payment for
shares of Stock acquired pursuant to Options granted hereunder shall be made in
full, upon exercise of the Options (i) in immediately available funds in United
States dollars, by certified or bank cashier’s check, (ii) by surrender to the
Company of shares of Stock which either (A) have been held by the Participant
for at least six-months, or (B) were acquired from a person other than the
Company, (iii) by a combination of (i) and (ii), (iv) prior to an IPO, by
delivery of a notice of “net exercise” to the Company, pursuant to which the
Participant shall receive the number of shares of Stock underlying the Options
so exercised reduced by the number of shares of Stock equal to the aggregate
exercise price of the Options divided by the Fair Market Value on the date of
exercise, or (v) following an IPO, by any other means approved by the
Committee.  Anything herein to the contrary notwithstanding, the Company
shall not directly or indirectly extend or maintain credit, or arrange for the
extension of credit, in the form of a personal loan to or for any director or
executive officer of the Company through the Plan in violation of
Section 402 of the Sarbanes-Oxley Act of 2002 (“Section 402 of SOX”),
and to the extent that any form of payment would, in the opinion of the
Company’s counsel, result in a violation of Section 402 of SOX, such form
of payment shall not be available.

 

(v)                                
Transferability of
Options.  An Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Participant only by the Participant; provided, however,
that subject to the consent of the Committee (such consent not to be
unreasonably withheld), an Option may be transferred for legitimate estate
planning pursuant to a Permitted Transfer.  The Committee may impose
reasonable and customary conditions on any such transfers.

 

10

 

(vi)                             
Termination of
Employment or Service.

 

(A)                             
Other than Death or Disability.  If prior to
the Expiration Date, the Participant’s employment with the Company and its
Affiliates terminates for any reason other than by reason of the Participant’s
death or Disability, then (1) all vesting with respect to the Options shall
cease, (2) any unvested Options shall expire as of the date of such
termination, and (3) any vested Options shall remain exercisable until the
earlier of the Expiration Date or the date that is ninety (90) days after the
date of such termination of employment or service.

 

(B)                               
Death or Disability.  If prior to the Expiration
Date, the Participant’s employment with the Company and its Affiliates
terminates by reason of death or Disability, (1) all vesting with respect to
the Options shall cease, (2) any unvested Options shall expire as of the date
of such termination, and (3) any vested Options shall expire on the earlier of
the Expiration Date or the date that is twelve (12) months after the date of
such termination due to death or Disability of the Participant.  In the
event of a Participant’s death, the Options shall remain exercisable by the
person or persons to whom the Participant’s rights under the Options pass by
will or the applicable laws of descent and distribution until its expiration,
but only to the extent the Options were vested by the Participant at the time
of such termination due to death or Disability.

 

(c)                                 
Repurchase
Rights.  Following a Participant’s termination of employment with the
Company and its Affiliates, and prior to the IPO Date, each Option, and the
Stock underlying such Option, shall be subject to the following repurchase
rights:

 

(i)                                    
Company Call Right.  In the event
that a Participant’s employment is terminated for any reason, for a period of
ninety (90) days following such termination, the Company shall have the right
to repurchase such Participant’s Vested Equity at the Repurchase Price. 
The Company’s repurchase right under this Section 6(c)(i) shall be exercisable
upon written notice to the Participant indicating the number of Options and/or
shares of Stock to be repurchased and the date on which the repurchase is to be
effected, such date to be not more than thirty (30) days after the date of such
notice.

 

(ii)                                 
Participant Put Right.  In the event
that a Participant’s employment is terminated by the Company other than for
Cause or by the Participant with Good Reason, for a period of ninety (90) days
following such termination, the Participant shall have the right to require the
Company to repurchase such Participant’s Vested Equity at the Repurchase
Price.  The Participant’s repurchase right under this
Section 6(c)(ii) shall be exercisable upon written notice to the Company indicating
the number of Options and/or shares of Stock to be repurchased and the date on
which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of such notice.

 

(iii)                              
Limitation to
Repurchase.  Notwithstanding anything contained herein to the contrary, to
the extent (a) the Company is prohibited from purchasing such Vested Equity by
applicable law, (b) any debt instruments or agreements of the Company or its
Affiliates do not allow the Company to purchase such Vested Equity, or in the
reasonable opinion of the Committee, such purchase could result in a default or
an event of default under

 

11

 

any such instrument or agreement, or create a
condition which could, with notice or lapse of time or both, result in such
default or event of default, or (c) the purchase of such Vested Equity would,
in the reasonable opinion of the Committee, be imprudent in view of the
financial condition (present or projected) of the Company and its Affiliates,
the Company shall not be permitted or obligated to make any repurchase of
Options or Stock hereunder until such time that clauses (a), (b) and (c) above,
as applicable, cease to apply.

 

(iv)                             
IPO or Change in
Control.  If, within 180 days following the date of repurchase of a
Participant’s Options or shares of Stock under this Section 6(c), there is
either an IPO or a Change in Control then, with respect to:

 

(A)                             
an
IPO, the Participant shall be entitled to receive an additional payment from
the Company equal to (x – y), where (x) equals the product obtained by
multiplying (A) the IPO price (less the per share underwriting discount and
commission), as set forth on the cover of the final prospectus for such IPO by
(B) the number of Options or shares of Stock, as applicable, repurchased from
such Participant (after giving effect to any adjustment in the number of
Options or shares of Stock pursuant to Section 7 hereof that would have
otherwise applied had the Options or Stock remained outstanding), and (y)
equals the aggregate Repurchase Price; provided, however, that
such Participant shall not be entitled to receive the additional payment
contemplated by this Section 6(c)(iv)(A) if such difference shall be a
negative number; or

 

(B)                               
a
Change in Control, the Participant shall be entitled to receive a payment from
the Company equal to ((x * y) – z), where (x) equals the number of Options or
shares of Stock, as applicable, repurchased from such Participant, (y) equals
the Top-Up Price, and (z) equals the aggregate Repurchase Price received by
such Participant; provided, however, that such Participant shall
not be entitled to receive the additional payment contemplated by this
Section 6(c)(iv)(B) if such difference shall be a negative number.

 

(d)                                
Restrictions
on Transfers.  Prior to the IPO Date, the Stock underlying such
Option, shall be subject to the following restrictions on Transfer:

 

(i)                                    
Prohibition on
Transfer.  Except as otherwise approved by the Committee, shares of Stock
acquired by a Participant upon the exercise of the Options may not be sold, transferred
or otherwise disposed of (other than pursuant to a Permitted Transfer) prior to
the fifth (5th) anniversary of the Closing.

 

(ii)                                 
Company Right of
First Refusal.  (A)  If, following the fifth (5th)
anniversary of the Closing, a Participant wishes to sell to a third party
pursuant to a bona fide offer the shares of Stock acquired by a Participant
upon the exercise of the Options, prior to such transfer, such Participant
shall give each of the Company and the Fund advanced written notice of such
proposed sale, setting forth the terms of such bona fide offer in reasonable
detail.  The Company shall have twenty (20) days following its receipt of
such notice from such Participant to elect to repurchase any or all of the
shares of Stock proposed to be transferred from such Participant, and, if the
Company does not elect to repurchase all of such shares of Stock during

 

12

 

such twenty (20) day period, the Fund shall have
twenty (20) days following the expiration of the Company’s twenty (20) day
period to purchase any remaining shares of Stock proposed to be transferred
from such Participant (the entity so electing to purchase shares hereunder
being, the “Purchaser”).  The purchase price for such shares of
Stock shall be equal to the bona fide offer price of the third party transferee
and otherwise on the same terms and conditions of such offer; provided, however,
if the purchase price specified in such Participant’s notice be payable in
property other than cash, the purchase price shall equal the cash value of such
property.  If such Participant and the Purchaser cannot agree on such cash
value of such property within thirty (30) days after the Purchaser’s receipt of
such Participant’s notice, the valuation shall be made by the Company’s
independent accounting firm.  The cost of such valuation shall be shared
equally by the Participant and the Purchaser.

 

(B)                               
If
the Purchaser does not exercise the right of first refusal as provided in
Section 6(d)(ii)(A) above, the Participant shall have sixty (60) days to
consummate the sale of such shares of Stock but only pursuant to the terms of
the bona fide offer.  If such sale is not consummated within sixty (60)
days or is a material term of such bona fide offer is changed, the Participant
shall again be required to present such offer to the Company and the Fund (as
revised, if applicable) and allow the Company and the Fund to exercise its
right of first refusal as provided in Section 6(d)(ii)(A) above.

 

(iii)                              
Drag-Along Rights.

 

(A)                             
If
the Principal Stockholder is proposing to sell to one or more third parties in
excess of fifty percent (50%) of the number of shares of Stock beneficially
owned (within the meaning of Rule 13d-3 under the Exchange Act) by it, the
Principal Stockholder shall have the right to require each Participant to sell,
in accordance with the immediately following sentence hereof, all or a portion
of the shares of Stock acquired by a Participant upon exercise of any Option
granted under the Plan (including, for these purposes, any warrants, Options or
other convertible securities to acquire shares of Stock) in such sale.

 

(B)                               
The
maximum number of shares of Stock a Participant may be required to sell in
accordance with Section 6(d)(iii)(A) above shall be equal to the aggregate
number of shares of Stock received upon exercise of any option granted
hereunder multiplied by a fraction, the numerator of which shall be the number
of shares of Stock that the Principal Stockholder is proposing to sell in such
sale, and the denominator of which is the aggregate number of shares of Stock
beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by
the Principal Stockholder as of the date of the proposed sale.

 

(C)                               
A
Participant required to sell any shares of Stock pursuant to
Section 6(d)(iii)(A) above shall be entitled to receive in exchange
therefor the purchase price per share received by the Principal Stockholder
with respect to its shares in such transaction, and shall otherwise participate
in such transaction on other terms and conditions not less favorable than those
applicable to the Principal Stockholder and, subject to subsection (D)
below, shall receive the same type of

 

13

 

consideration received by the Principal Stockholder in such
transaction.  In the event that any such transaction involves the merger
of the Company with or into a third party or, in the event that in lieu of the
sale of shares of Stock, the transaction involves the sale by Company of all or
substantially all of the Company’s assets to any third party, or if such
transaction otherwise requires the vote of the Company’s stockholders, each
Participant shall be required to vote all shares of Stock then owned by such
Participant in favor of such transaction and to otherwise to take all steps
necessary to enable him or her to comply with the provisions of this
Section 6(d)(iii) to facilitate any such transaction.

 

(D)                              
To
exercise the rights granted under Section 6(d)(iii)(A) above, the
Principal Stockholder shall give each Participant a written notice containing
(i) the name and address of the proposed transferee(s), and (ii) the proposed
purchase price with respect to the shares of Stock, terms of payment and other
material terms and conditions of the offer of the proposed transferee(s). 
Each Stockholder shall thereafter be obligated to sell its shares of Stock to
the proposed transferee(s) or vote its shares of Stock in favor of the proposed
transaction, as the case may be, in accordance with this Section 6(d)(iii).

 

(E)                                
Notwithstanding
anything contained in this Section 6(d)(iii) to the contrary, in the event
that all or a portion of the purchase price for the shares of Stock being
purchased consists of securities and the sale of such securities to a
Participant entitled to participate therein would, by virtue of the fact that
such Participant is not an “accredited investor” (within the meaning of Rule
501(a) under the Securities Act), require either a registration under the Securities
Act or the preparation of a disclosure document pursuant to Regulation D under
the Securities Act (or any successor regulation) or a similar provision of any
state securities law, then, at the option of the Principal Stockholder, any one
or more of such Participants may receive, in lieu of such securities, the fair
market value of such securities in cash, as determined in good faith by the
Committee.

 

(iv)                             
Tag-Along Rights.

 

(A)                             
Subject
to Section 6(d)(iv)(C) below, for so long as the Fund, together with its
Affiliates, directly owns at least twenty percent (20%) of the outstanding
shares of Stock held by the Fund and such Affiliates immediately after the
Closing (as adjusted to reflect any stock dividend, split, reverse split,
combination, recapitalization, reclassification of shares, capital
contributions or like event), and the Fund or any of its Affiliates desire to
sell any of the shares of Stock in a single transaction or a series of
transactions (the “Selling Stockholder”), the Selling Stockholder agrees
that it shall be prohibited from selling any Stock directly owned by it to one
or more third parties, unless the Fund notifies all Participants holding Stock
received upon the exercise of Options (the “Tag-Along Investors”), in
writing, of such proposed sale and its terms and conditions.  Within ten
(10) days of the date of such notice, each Tag-Along Investor shall notify the
Selling Stockholder if it elects to participate in such sale.  Any
Tag-Along Investor that fails to notify the Selling Stockholder within such

 

14

 

ten (10) day period shall be deemed to have waived its
rights under this Section 6(d)(iv)(A) with respect to the proposed
sale.  Each Tag-Along Investor that so notifies the Selling Stockholder
shall have the right to sell, at the same price and on the same terms and
conditions as the Selling Stockholder, an amount of Stock equal to the Stock
the third party actually proposes to purchase multiplied by a fraction, the
numerator of which shall be the number of shares of Stock owned by such
Tag-Along Investor and the denominator of which shall be the sum of aggregate
number of shares of Stock owned (i) by the Selling Stockholder, (ii) each
Tag-Along Investor exercising its rights under this Section 6(d)(iv)(A)
and (iii) any other stockholders of the Company exercising tag-along rights
existing pursuant to other contractual agreements with the Company.

 

(B)                               
Cash
in Lieu of Securities.  In the event that all or a portion of the
purchase price consists of securities and the sale of such securities to the
Tag-Along Investors would require either a registration under the Securities
Act or the preparation of a disclosure document pursuant to Regulation D under
the Securities Act or a similar provision of any state securities law, then, at
the option of the Selling Stockholder, any one or more of the Tag-Along
Investors may receive, in lieu of such securities, the Fair Market Value of
such securities in cash.

 

(C)                               
Transfers
to Affiliates of the Funds; Termination of Tag-Along Rights.  The provisions
of Section 6(d)(iv)(A) above shall not apply to Transfers, whether by sale
or otherwise, by the Fund to any of its Affiliates provided such Affiliate(s)
agree in writing to be bound by the terms of this Section 6(d)(iv). 
The rights provided to the Tag-Along Investors pursuant to this
Section 6(d)(iv) shall terminate automatically upon an IPO.

 

Section 7.                                           
ADJUSTMENT FOR
RECAPITALIZATION, MERGER, ETC.

 

(a)                                 
Capitalization
Adjustments.  The aggregate number of shares of Stock which may
be granted or purchased pursuant to Options granted hereunder, the number of
shares of Stock covered by each outstanding Option, and the price per share
thereof in each such Option shall be equitably and proportionally adjusted or
substituted, as determined by the Committee in good faith and in its sole
discretion, as to the number, price or kind of a share of Stock or other
consideration subject to such Options or as otherwise determined by the
Committee in good faith to be fair and equitable (i) in the event of changes in
the outstanding Stock or in the capital structure of the Company by reason of
stock dividends, stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the date of grant of any
such Option, (ii) in the event of any change in applicable laws or any change
in circumstances which results in or would result in any substantial dilution
or enlargement of the rights granted to, or available for, Participants in the
Plan, or (iii) for any other reason which the Committee determines, in its sole
discretion and acting in good faith, to otherwise warrant equitable
adjustment.  Absent manifest error, any adjustment shall be conclusively
determined by the Committee; provided, in each case, the fair value of the
Option immediately following any

 

15

 

such adjustment shall be equal to the fair value of
the Option immediately prior to such adjustment.

 

(b)                                
Corporate
Events.  Notwithstanding the foregoing, in the event of (i) a merger or
consolidation involving the Company in which the Company is not the surviving
corporation, (ii) a merger or consolidation involving the Company in which the
Company is the surviving corporation but the holders of shares of Stock receive
securities of another corporation and/or other property, including cash, (iii)
the sale of all or substantially all of the assets of the Company, (iv) the reorganization
or liquidation of the Company, or (v) a Change in Control (each, a “Corporate
Event”), in lieu of providing the adjustment set forth in
subsection (a) above, the Committee may, in its sole discretion and acting
in good faith, provide that all outstanding Options shall terminate as of the
consummation of such Corporate Event, and provide that holders of vested
Options will receive a payment in respect of cancellation of their Options
based on the amount (if any) by which the per share consideration being paid
for the Stock in connection with such Corporate Event exceeds the applicable
exercise price, such payment to be made in cash, or, in the sole discretion of
the Committee acting in good faith, in such other consideration necessary for a
holder of an Option to receive property, cash or securities as such holder
would have been entitled to receive upon the occurrence of the transaction if
the holder had been, immediately prior to such transaction, the holder of the
number of shares of Stock covered by the Option at such time; provided, that if
such consideration received in the transaction is not solely equity securities
of the successor entity, the Committee may, with the consent of the successor
entity and acting in good faith, provide for the consideration to be received
upon exercise of the Option to be solely equity securities of the successor
entity equal to the Fair Market Value of the per share consideration received
by holders of Stock in the Corporate Event.  If a Corporate Event occurs which
does not constitute a Change in Control, the Committee shall, acting in good
faith, take such actions with respect to unvested Options as it considers
reasonable and equitable under the circumstances, and to the extent practicable
will require the successor entity or parent thereof to assume such options and
adjust the vesting schedule thereon in a manner that is designed to ensure
treatment thereof that is consistent with Section 6(b)(iii)(B).

 

(c)                                 
Fractional
Shares.  Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an Option.

 

Section 8.                                           
USE OF PROCEEDS.

 

The proceeds received
from the sale of Stock pursuant to the Plan shall be used for general corporate
purposes.

 

Section 9.                                           
RIGHTS AND PRIVILEGES
AS A STOCKHOLDER.

 

Except as otherwise
specifically provided in the Plan, no person shall be entitled to the rights and
privileges of stock ownership in respect of shares of Stock which are subject
to Options hereunder until the related Options have been exercised.

 

16

 

Section 10.                                     
MARKET STANDOFF
AGREEMENT.

 

In connection with any
registration of the Stock and upon the request of the Committee or the
underwriters managing any public offering of the Stock, Participants shall not
sell or otherwise dispose of any Stock without prior written consent of the
Committee or such underwriters, as the case may be, for a period of time (not
to exceed twelve (12) months) from the effective date of such registration as
the Committee or the underwriters may specify for employee-shareholders
generally; provided, however, that such restrictions shall apply
only to the extent the Fund has agreed to a similar restriction in respect of
Stock it holds, and if the Fund shall be subsequently released from any such
restriction, the Participants shall also be released from any such
restriction.  If requested by the underwriters, the Participant shall
execute a separate agreement to the foregoing effect.  The Company may
impose stop-transfer instructions with respect to the Stock (or securities)
subject to the foregoing restriction until the end of such period.  The
provisions of this Section 10 shall be binding upon any transferee who
acquires the shares of Stock from the Participant

 

Section 11.                                     
EMPLOYMENT.

 

No individual shall have
any claim or right to be granted an Option under the Plan or, having been
selected for the grant of an Option, to be selected for a grant of any other
Option.  Neither the Plan nor any action taken hereunder shall be
construed as giving any individual any right to be retained in the employment
of the Company or an Affiliate.

 

Section 12.                                     
COMPLIANCE WITH LAWS.

 

The obligation of the
Company to make payment of Options in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by governmental
agencies as may be required.  Notwithstanding any terms or conditions of
any Option to the contrary, the Company shall be under no obligation to offer
to sell or to sell and shall be prohibited from offering to sell or selling any
shares of Stock pursuant to an Option unless such shares have been properly
registered for sale pursuant to the Securities Act with the Securities and
Exchange Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms
and conditions of such exemption have been fully complied with.  The Company
shall be under no obligation to register for sale or resale under the
Securities Act any of the shares of Stock to be offered or sold under the Plan
or any shares of Stock issued upon exercise of Options unless the Stock is
registered under Section 12(b) or 12(g) of the Exchange Act and such
registration is necessary in order to permit issuance of the Stock upon
exercise in accordance with the Plan.  If the shares of Stock offered for
sale or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the transfer of
such shares and may legend the Stock certificates representing such shares in
such manner as it deems advisable to ensure the availability of any such
exemption.

 

17

 

Section 13.                                     
WITHHOLDING
OBLIGATIONS.

 

As a condition to the
exercise of any Option, the Committee may require that a Participant satisfy,
through deduction or withholding from any payment of any kind otherwise due to
the Participant, or through such other arrangements as are satisfactory to the
Committee, the minimum amount of all Federal, state and local income and other
taxes of any kind required or permitted to be withheld in connection with such
vesting or exercise.  The Committee, in its sole discretion, may permit
shares of Stock to be used to satisfy tax withholding requirements and such
shares shall be valued at their Fair Market Value as of the date of exercise of
the Option; provided, however, that following the IPO Date, the
aggregate Fair Market Value of the number of shares of Stock that may be used
to satisfy tax withholding requirements may not exceed the minimum statutory
required withholding amount with respect to the exercise of such Option. 
For purposes of this Section 13, the term “Company” shall be deemed to
mean any Subsidiary or Affiliate that may have a tax withholding obligation due
to its relationship with a Participant.

 

Section 14.                                     
AMENDMENT OF THE PLAN
OR OPTIONS.

 

(a)                                 
Amendment
of Plan.  The Board at any time, and from time to time, may amend the
Plan; provided, however, that without further stockholder
approval the Board shall not make any amendment to the Plan which would
increase the maximum number of shares of Stock which may be issued pursuant to
Options under the Plan, except as contemplated by Section 7 hereof, or
which would otherwise violate the shareholder approval requirements of the
national securities exchange on which the Stock is listed or Nasdaq, as
applicable.

 

(b)                                
No
Impairment of Rights.  Rights under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless the
Participant consents in writing.

 

(c)                                 
Amendment
of Stock Options.  The Committee, at any time, and from time to time,
may amend the terms of any one or more Options; provided, however,
that the rights under any Option shall not be impaired by any such amendment
unless the Participant consents in writing.

 

Section 15.                                     
TERMINATION OR
SUSPENSION OF THE PLAN.

 

The Board may suspend or
terminate the Plan at any time.  Unless sooner terminated, the Plan shall
terminate on the day before the tenth (10th) anniversary of the date
the Plan was originally adopted by the Board.  No Options may be granted
under the Plan while the Plan is suspended or after it is terminated. 
Rights under any Option granted before suspension or termination of the Plan
shall not be impaired by such suspension or termination of the Plan unless the
Participant consents in writing.

 

Section 16.                                     
EFFECTIVE DATE OF THE
PLAN.

 

The Plan shall be
effective immediately following the Closing.

 

18

 

Section 17.                                     
MISCELLANEOUS.

 

(a)                                 
No
Liability of Board or Committee Members.  No member of the Board or
the Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on his behalf in his capacity as a member
of the Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Board or the
Committee and each other Employee, officer or director of the Company to whom
any duty or power relating to the administration or interpretation of the Plan
may be allocated or delegated, against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim) arising
out of any act or omission to act in connection with the Plan unless arising
out of such person’s own fraud or willful bad faith; provided, however,
that approval of the Board shall be required for the payment of any amount in
settlement of a claim against any such person.  The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company’s Certificate of
Incorporation or By-Laws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.

 

(b)                                
Payments
Following Accidents or Illness.  If the Committee shall find
that any person to whom any amount is payable under the Plan is unable to care
for his affairs because of illness or accident, or is a minor, or has died, then
any payment due to such person or his estate (unless a prior claim therefor has
been made by a duly appointed legal representative) may, if the Committee so
directs the Company, be paid to his spouse, child, relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person otherwise entitled
to payment.  Any such payment shall be a complete discharge of the
liability of the Committee and the Company therefor.

 

(c)                                 
Governing
Law.  The Plan shall be governed by and construed in accordance with
the internal laws of the State of Delaware without reference to the principles
of conflicts of laws thereof.

 

(d)                                
Funding.  No provision
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, nor shall the Company maintain separate bank accounts, books, records
or other evidence of the existence of a segregated or separately maintained or
administered fund for such purposes.  Participants shall have no rights
under the Plan other than as unsecured general creditors of the Company, except
that insofar as they may have become entitled to payment of additional
compensation by performance of services, they shall have the same rights as
other employees under general law.

 

(e)                                 
Reliance
on Reports.  Each member of the Committee and each member of the
Board shall be fully justified in relying, acting or failing to act, and shall
not be liable for having so relied, acted or failed to act in good faith, upon
any report made by the independent public accountant of the Company and its
Affiliates and upon any other information furnished in connection with the Plan
by any person or persons other than himself.

 

19

 

(f)                                   
Titles
and Headings.  The titles and headings of the sections in the Plan
are for convenience of reference only, and in the event of any conflict, the
text of the Plan, rather than such titles or headings shall control.

 

*    
*     *

 

20

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