Document:

EX-10.1 2008 Employee Equity and Incentive Plan

 

 

    Exhibit 10.1

 

    AUTONATION,
    INC.

    2008 EMPLOYEE EQUITY AND INCENTIVE PLAN

 

    AutoNation, Inc. (the “Company”) hereby adopts this
    AutoNation, Inc. 2008 Employee Equity and Incentive Plan (the
    “Plan”), the terms of which shall be as follows:

 

			
	 	    1.  
	
    PURPOSE

 

    The Plan is intended to advance the interests of the Company by
    providing eligible individuals (as designated pursuant to
    Section 4 below) with an opportunity to acquire or increase
    a proprietary interest in the Company, and to receive
    performance-based cash incentive compensation, which thereby
    will create a stronger incentive to expend maximum effort for
    the growth and success of the Company and its subsidiaries, and
    will encourage such eligible individuals to remain in the employ
    of the Company or one or more of its subsidiaries. Pursuant to
    the provisions hereof, there may be granted Options (as such
    term is defined below), Stock Appreciation Rights (as such term
    is defined in Section 9(e)), Restricted Stock (as such term
    is defined in Section 10(a)), Restricted Stock Units (as
    such term is defined in Section 10(b)), other stock-based
    awards (including but not limited to dividend equivalents,
    performance units and other long-term stock-based awards) and
    cash-based awards (collectively, “Awards”); excluding,
    however, reload or other automatic Awards made upon exercise of
    Options, which Awards shall not be granted under the Plan. Each
    stock option granted under the Plan (an “Option”)
    shall be an option that is not intended to constitute an
    “incentive stock option” (“Incentive Stock
    Option”) within the meaning of Section 422 of the
    Internal Revenue Code of 1986, or the corresponding provision of
    any subsequently-enacted tax statute, as amended from time to
    time (the “Code”), unless such Option is granted to an
    employee of the Company or a “subsidiary corporation”
    (a “Subsidiary”) thereof within the meaning of
    Section 424(f) of the Code and is specifically designated
    at the time of grant as being an Incentive Stock Option. Any
    Option so designated shall constitute an Incentive Stock Option
    only to the extent that it does not exceed the limitations set
    forth in Section 7 below.

 

    2.  ADMINISTRATION

 

    (a) BOARD.  The Plan shall be administered by the
    Board of Directors of the Company (the “Board”), which
    in its sole discretion shall have the full power and authority
    to take all actions, and to make all determinations required or
    provided for under the Plan or any Award granted or Award
    Agreement (as defined in Section 8 below) entered into
    under the Plan and all such other actions and determinations not
    inconsistent with the specific terms and provisions of the Plan
    deemed by the Board to be necessary or appropriate to the
    administration of the Plan or any Award granted or Award
    Agreement entered into hereunder. All such actions and
    determinations shall be by the affirmative vote of a majority of
    the members of the Board present at a meeting at which any issue
    relating to the Plan is properly raised for consideration, or
    without a meeting by written consent of the Board executed in
    accordance with the Company’s Certificate of Incorporation
    and By-Laws, and with applicable law. The interpretation and
    construction by the Board of any provision of the Plan or of any
    Award granted or Award Agreement entered into hereunder shall be
    final and conclusive.

 

    (b) COMMITTEE.  The Board may from time to time
    appoint a committee or subcommittee (the “Committee”)
    consisting of not less than two members of the Board, none of
    whom shall be an officer or other salaried employee of the
    Company or any Subsidiary, and, unless otherwise determined by
    the Board, each of whom shall qualify in all respects as an
    “outside director” for purposes of Section 162(m)
    of the Code. The Board, in its sole discretion, may provide that
    the role of the Committee shall be limited to making
    recommendations to the Board concerning any determinations to be
    made and actions to be taken by the Board pursuant to or with
    respect to the Plan, or the Board may delegate to the Committee
    such powers and authorities related to the administration of the
    Plan, as set forth in Section 2(a) above, as the Board
    shall determine, consistent with the Certificate of
    Incorporation and By-Laws of the Company and applicable law. The
    Board may remove members, add members, and fill vacancies on the
    Committee from time to time, all in accordance with the
    Company’s Certificate of Incorporation and By-Laws, and
    with applicable law. All actions and determinations of the
    Committee shall be by the affirmative vote of a majority of the
    members of the Committee present at a meeting at which any issue
    relating to the Plan is

    

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    properly raised for consideration or without a meeting by
    written consent of the Committee executed in accordance with
    applicable law.

 

    (c) NO LIABILITY.  No member of the Board or of
    the Committee shall be liable for any action or determination
    made in good faith with respect to the Plan or any Award granted
    or Award Agreement entered into hereunder.

 

    (d) DELEGATION TO THE COMMITTEE.  In the event
    that the Plan, any Award granted, or Award Agreement entered
    into hereunder provides for any action to be taken by or
    determination to be made by the Board, such action may be taken
    by or such determination may be made by the Committee if the
    power and authority to do so has been delegated to the Committee
    by the Board as provided for in Section 2(b) above. Unless
    otherwise expressly determined by the Board, any such action or
    determination by the Committee shall be final and conclusive.

 

    3.  STOCK

 

    The stock that may be issued pursuant to Awards granted under
    the Plan shall be shares of common stock, $0.01 par value,
    of the Company (the “Stock”), which shares may be
    treasury shares or authorized but unissued shares. The number of
    shares of Stock that may be issued pursuant to Awards granted
    under the Plan shall not exceed in the aggregate
    12,000,000 shares (the “Share Reserve”), subject
    to adjustment as provided in Section 17 below; provided
    that no more than 2,000,000 shares shall be issued pursuant
    to the grant of Awards, other than Options or Stock Appreciation
    Rights, that are settled in Stock (such Awards, “Share
    Equivalent Awards”). Each share of Stock issued pursuant to
    an Award shall reduce the Share Reserve by one share. To the
    extent that an Award is settled in cash rather than in shares of
    Stock, the Share Reserve shall remain unchanged; provided,
    however, that the Share Reserve shall be reduced on a
    one-for-one basis by the number of shares of Stock with respect
    to which a Stock Appreciation Right (or other Stock-Based Award)
    is exercised if such exercise is settled in shares of Stock. If
    any shares of Stock subject to an Award are forfeited,
    cancelled, exchanged or surrendered or if an Award otherwise
    terminates or expires without a distribution of shares to the
    Participant (as such term is defined in Section 6), the
    shares of Stock with respect to such Award shall, to the extent
    of any such forfeiture, cancellation, exchange, surrender,
    termination or expiration, again be available for Awards under
    the Plan. Further, Stock issued under the Plan through the
    settlement, assumption or substitution of outstanding Awards as
    a condition of the Company acquiring another entity shall not
    reduce the maximum number of shares of Stock available for
    delivery. The maximum number of shares of Stock subject to
    Awards that may be granted during any calendar year under the
    Plan to any executive officer or other employee of the Company
    or any Subsidiary or Affiliate whose compensation is or may be
    subject to Code Section 162(m) (a “Covered
    Employee”) is 2,000,000 shares (subject to adjustment
    as provided in Section 17 hereof).

 

    4.  ELIGIBILITY

 

    (a) EMPLOYEES.  Awards may be granted under the
    Plan to any employee of the Company, a Subsidiary or any other
    entity of which on the relevant date at least a majority of the
    securities or other ownership interest having ordinary voting
    power (absolutely or contingently) for the election of directors
    or other persons performing similar functions (“Voting
    Securities”) are at the time owned directly or indirectly
    by the Company or any Subsidiary (such entity,
    “Affiliate”), including any such employee who is an
    officer or director of the Company, a Subsidiary or an
    Affiliate, as the Board shall determine and designate from time
    to time prior to expiration or termination of the Plan.

 

    (b) INDEPENDENT CONTRACTORS.  Awards may be
    granted to independent contractors performing services for the
    Company or any Subsidiary or Affiliate as determined by the
    Board from time to time on the basis of their importance to the
    business of the Company or such Subsidiary or Affiliate.
    Independent contractors shall not be eligible to receive Options
    intended to constitute Incentive Stock Options. Non-employee
    directors of the Company shall not be eligible to receive Awards
    under the Plan.

 

    (c) MULTIPLE GRANTS.  An individual may hold more
    than one Award, subject to such restrictions as are provided
    herein.

    

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    5.  EFFECTIVE DATE AND TERM OF THE PLAN

 

    (a) EFFECTIVE DATE.  The Plan shall be effective
    as of the date of adoption by the Board, which date is set forth
    below, subject to approval of the Plan, within one year of such
    effective date, by the stockholders of the Company by a majority
    of the votes present and entitled to vote at a duly held meeting
    of the stockholders, at which a quorum representing a majority
    of all outstanding voting stock is present, either in person or
    by proxy or by written consent in accordance with the
    Company’s Certificate of Incorporation and By-Laws;
    provided, however, that upon approval of the Plan by the
    stockholders of the Company as set forth above, all Awards
    granted on or after the effective date shall be fully effective
    as if the stockholders of the Company had approved the Plan on
    the effective date. If the stockholders fail to approve the Plan
    within one year of such effective date, any Awards granted
    hereunder shall be null and void and of no effect.
    Notwithstanding any other provision of the Plan, no Option
    granted to a Participant under the Plan shall be exercisable in
    whole or in part, and no shares of Stock with respect to a Share
    Equivalent Award or Stock Appreciation Right shall be issued,
    prior to the date the Plan is approved by the stockholders of
    the Company as provided in this Section 5(a).

 

    (b) TERM.  The Plan shall terminate on the date
    that is ten (10) years from the effective date.

 

    6.  GRANT OF AWARDS

 

    Subject to the terms and conditions of the Plan, the Board may,
    at any time and from time to time, prior to the date of
    termination of the Plan, grant to such eligible individuals as
    the Board may determine (“Participants”), Awards with
    respect to such number of shares of Stock or amounts of cash on
    such terms and conditions as the Board may determine. The date
    on which the Board approves or ratifies the grant of an Award
    (or such later date as the Board may designate) shall be
    considered the date on which such Award is granted.

 

    7.  LIMITATION ON INCENTIVE STOCK OPTIONS

 

    An Option intended to constitute an Incentive Stock Option (and
    so designated at the time of grant) shall qualify as an
    Incentive Stock Option only to the extent that the aggregate
    fair market value (determined at the time the Option is granted)
    of the stock with respect to which Incentive Stock Options are
    exercisable for the first time by the Participant during any
    calendar year (under the Plan and all other plans of the
    Participant’s employer corporation and its parent and
    subsidiary corporations within the meaning of
    Section 422(d) of the Code) does not exceed $100,000. This
    limitation shall be applied by taking Options into account in
    the order in which they were granted.

 

    8.  AWARD AGREEMENTS

 

    All Awards granted pursuant to the Plan shall be evidenced by
    written agreements (“Award Agreements”), to be
    executed by the Company and by the Participant, in such form or
    forms as the Board shall from time to time determine. Award
    Agreements covering Awards granted from time to time or at the
    same time need not contain similar provisions; provided,
    however, that all such Award Agreements shall comply with all
    terms of the Plan.

 

    9.  OPTIONS AND STOCK APPRECIATION RIGHTS

 

    (a) OPTION PRICE.  The purchase price of each
    share of the Stock subject to an Option shall be not less than
    100 percent of the fair market value of a share of the
    Stock, which shall mean the closing price of a share of the
    Stock on the date the Option is granted as reported on the
    principal nationally recognized stock exchange on which the
    Stock is traded on such date, or if the date of grant is not a
    trading day, the reported closing price of the Stock on the next
    trading day (the “Option Price”); provided however,
    that in the event that the Participant would otherwise be
    ineligible to receive an Incentive Stock Option by reason of the
    provisions of Section 422(b)(6) and 424(d) of the Code
    (relating to stock ownership of more than 10 percent), the
    Option Price of an Option that is intended to be an Incentive
    Stock Option shall be not less than 110 percent of the fair
    market value of a share of Stock.

 

    (b) OPTION PERIOD.  Each Option granted under the
    Plan shall terminate and all rights to purchase shares
    thereunder shall cease upon the expiration of ten years from the
    date such Option is granted, or on such date prior thereto as
    may be fixed by the Board and stated in the Award Agreement
    relating to such Option; provided, however, that in the event
    the Participant would otherwise be ineligible to receive an
    Incentive Stock Option by reason of the provisions of
    Sections 422(b)(6) and 424(d) of the Code (relating to
    stock ownership of more than 10 percent), an

    

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    Option granted to such Participant that is intended to be an
    Incentive Stock Option shall in no event be exercisable after
    the expiration of five years from the date it is granted.

 

    (c) OPTION VESTING AND LIMITATIONS ON
    EXERCISE.  Except as otherwise provided herein, each
    Option shall become exercisable with respect to 25% of the total
    number of shares subject to the Option on the date that is
    12 months after the date of its grant (the “Vesting
    Date”) and with respect to an additional 25% of the number
    of such shares on each of the next three succeeding
    anniversaries of the Vesting Date; provided, however, that the
    Board may provide that an Option may be exercised, in whole or
    in part, at any time and from time to time, over a period
    commencing on or after the date of grant and ending upon the
    expiration or termination of the Option, as the Board shall
    determine and set forth in the Award Agreement relating to such
    Option. Without limiting the foregoing, the Board, subject to
    the terms and conditions of the Plan, may provide that an Option
    may be exercised immediately upon grant or that it may not be
    exercised in whole or in part for any period or periods of time
    during which such Option is outstanding; provided, however, that
    any vesting requirement or other such limitation on the exercise
    of an Option may be rescinded, modified or waived by the Board,
    at any time and from time to time after the date of grant of
    such Option, so as to accelerate the time at which the Option
    may be exercised.

 

    (d) METHOD OF OPTION EXERCISE.  An Option that is
    exercisable hereunder may be exercised pursuant to such
    procedures as may be established by the Company from time to
    time. The Company shall establish procedures governing the
    payment of the Option Price for the shares of Stock purchased
    pursuant to the exercise of an Option, which shall require that
    the Option Price be paid in full at the time of exercise in one
    of the following ways: (i) in cash or cash equivalents,
    (ii) with the consent of the Company, in shares of Stock,
    valued at fair market value on the date of exercise, or
    (iii) the Company may permit such payment of exercise price
    by any other method it deems satisfactory in its discretion
    (including by permitting broker’s cashless exercise
    procedure). An attempt to exercise any Option granted hereunder
    other than as set forth above shall be invalid and of no force
    and effect. An individual holding or exercising an Option shall
    have none of the rights of a stockholder until the shares of
    Stock covered thereby are fully paid and issued to him and,
    except as provided in Section 17 below, no adjustment shall
    be made for dividends or other rights for which the record date
    is prior to the date of such issuance.

 

    (e) STOCK APPRECIATION RIGHTS.  The Board may,
    from time to time, grant Awards of Stock Appreciation Rights,
    subject to such restrictions, terms and conditions as the Board
    shall determine and as shall be evidenced by the applicable
    Award Agreement (provided that any such Award is subject to the
    terms and conditions set forth in this Section 9(e)). A
    “Stock Appreciation Right” is the right, granted to a
    Participant under this Section 9(e), to be paid an amount
    measured by the appreciation in the fair market value of a share
    of Stock from the date of grant to the date of exercise of the
    right, with payment to be made in cash
    and/or
    share(s) of Stock, as specified in the Award Agreement or
    determined by the Board. The number of shares of Stock
    underlying each Stock Appreciation Right and the exercise price
    in effect for those shares shall be determined by the Board. In
    no event, however, shall the exercise price for each share of
    Stock underlying the Stock Appreciation Right (the “Stock
    Appreciation Right Price”) be less than one hundred percent
    (100%) of the fair market value per underlying share of Stock on
    the grant date (which shall mean the closing price of a share of
    the Stock on the date the Stock Appreciation Right is granted as
    reported on the principal nationally recognized stock exchange
    on which the Stock is traded on such date, or if the date of
    grant is not a trading day, the reported closing price of the
    Stock on the next trading day). Upon exercise of a Stock
    Appreciation Right, the holder shall be entitled to receive a
    distribution from the Company in an amount equal to the excess
    of (i) the aggregate fair market value on the exercise date
    of the shares of Stock underlying the portion of the Stock
    Appreciation Right being exercised (which shall be determined by
    reference to the closing price of a share of the Stock on the
    date the Stock Appreciation Right is exercised as reported on
    the principal nationally recognized stock exchange on which the
    Stock is traded on such date, or if the date of exercise is not
    a trading day, the reported closing price of the Stock on the
    next trading day) over (ii) the aggregate exercise price of
    the portion of the Stock Appreciation Right being exercised. The
    distribution with respect to any exercised Stock Appreciation
    Right may be made in shares of Stock valued at the fair market
    value of such shares on the exercise date, in cash, or partly in
    shares of Stock and partly in cash, as the Board shall deem
    appropriate. Each Stock Appreciation Right granted under the
    Plan shall terminate and all rights to receive an amount equal
    to the appreciation in the fair market value of a share of Stock
    shall cease upon the expiration of ten (10) years from the
    date such Stock Appreciation Right is granted or on such date
    prior thereto as may be fixed by the Board and stated in the
    Award Agreement relating to such Stock Appreciation Right. No
    recipient of an award of Stock Appreciation

    

    4

 

    Rights shall be deemed to be the holder of, or to have any of
    the rights of a holder with respect to, any shares of Stock
    issuable upon exercise of such Stock Appreciation Rights, except
    to the extent that the Company has issued the shares of Stock
    relating to such Stock Appreciation Rights.

 

    (f) NO REPRICING.  Notwithstanding anything
    herein to the contrary, but subject to Section 17 hereof,
    neither the Board, the Committee nor their respective delegates
    shall have the authority without first obtaining the approval of
    the Company’s stockholders to (i) reprice (or cancel
    and regrant) any Option, Stock Appreciation Right or other
    Stock-Based Award at a lower exercise price, (ii) take any
    other action (whether in the form of an amendment, cancellation
    or replacement grant) that has the effect of repricing an
    Option, Stock Appreciation Right or other Stock-Based Award at a
    lower exercise price, or (iii) grant any Option, Stock
    Appreciation Right or other Stock-Based Award that contains a
    so-called “reload” feature under which additional
    Options, Stock Appreciation Rights or other Stock-Based Awards
    are granted automatically to the Participant upon exercise of
    the original Option, Stock Appreciation Right or other
    Stock-Based Award.

 

    10.  RESTRICTED STOCK, RESTRICTED STOCK UNITS AND
    OTHER STOCK-BASED OR
    CASH-BASED
    AWARDS

 

    (a) RESTRICTED STOCK.  The Board may, from time
    to time, grant Awards of shares of Stock that may be subject to
    certain restrictions and to a risk of forfeiture
    (“Restricted Stock”), subject to such restrictions,
    terms, and conditions as the Board shall determine and as shall
    be evidenced by the applicable Award Agreement. The vesting of a
    Restricted Stock Award granted under the Plan may be conditioned
    upon the completion of a specified period of employment or
    service with the Company or any Subsidiary or Affiliate, upon
    the attainment of specified Performance Goals (as defined in
    Section 10(d)),
    and/or upon
    such other criteria as the Board may determine. The Board may,
    upon such terms and conditions as the Board determines, provide
    that a certificate or certificates representing the shares
    underlying a Restricted Stock Award shall be registered in the
    Participant’s name and bear an appropriate legend
    specifying that such shares are not transferable and are subject
    to the provisions of the Plan and the restrictions, terms and
    conditions set forth in the applicable Award Agreement, or that
    such certificate or certificates shall be held in escrow by the
    Company on behalf of the Participant until such shares become
    vested or are forfeited. If and to the extent that the
    applicable Award Agreement may so provide, a Participant shall
    have the right to vote and receive dividends on Restricted Stock
    granted under the Plan. Unless otherwise provided in the
    applicable Award Agreement, any Stock received as a dividend on
    or in connection with a stock split of the shares of Stock
    underlying a Restricted Stock Award shall be subject to the same
    restrictions as the shares of Stock underlying such Restricted
    Stock Award.

 

    (b) RESTRICTED STOCK UNITS.  The Board may, from
    time to time, grant Awards of rights to receive in cash or
    shares of Stock, as determined by the Board, the fair market
    value of a share of Stock at the end of a specified period
    (“Restricted Stock Units”), which right may be subject
    to the attainment of Performance Goals (as defined below) in a
    period of continued employment or other terms and conditions as
    the Board shall determine and as shall be evidenced by the
    applicable Award Agreement. The vesting of Restricted Stock
    Units granted under the Plan may be conditioned upon the
    completion of a specified period of employment or service with
    the Company or any Subsidiary or Affiliate, upon the attainment
    of specified Performance Goals,
    and/or upon
    such other criteria as the Board may determine. Unless otherwise
    provided in an Award Agreement, and except as otherwise provided
    in the Plan, upon the vesting of a Restricted Stock Unit there
    shall be delivered to the Participant, within 30 days of
    the date on which such Award (or any portion thereof) vests,
    either that number of shares of Stock equal to the number of
    Restricted Stock Units becoming so vested or cash equal to the
    fair market value of the shares of Stock underlying the
    Restricted Stock Units becoming so vested (or a combination
    thereof), as determined by the Board. If and to the extent that
    the applicable Award Agreement may so provide, a Participant
    shall have the right to receive dividend equivalents on
    Restricted Stock Units granted under the Plan. Unless otherwise
    provided in the applicable Award Agreement, any Stock received
    as a dividend equivalent on or in connection with a stock split
    of the shares of Stock underlying a Restricted Stock Unit Award
    shall be subject to the same restrictions as the shares of Stock
    underlying such Restricted Stock Unit Award.

 

    (c) OTHER STOCK-BASED OR CASH-BASED AWARDS.  The
    Board is authorized to grant Awards to Participants in the form
    of Other Stock-Based Awards (as defined below) or Other
    Cash-Based Awards (as defined below), as deemed by the Board to
    be consistent with the purposes of the Plan. The Board shall
    determine the terms

    

    5

 

    and conditions of such Awards, consistent with the terms of the
    Plan, at the date of grant or thereafter, including provisions
    addressing terms and conditions such as vesting, applicable
    Performance Goals and performance periods. Stock or other
    securities or property delivered pursuant to an Award in the
    nature of a purchase right granted under this Section 10(c)
    shall be purchased for such consideration, paid for at such
    times, by such methods, and in such forms, including, without
    limitation, Stock, other Awards, notes or other property, as the
    Board shall determine, subject to any required corporate action.
    With respect to a Covered Employee, the maximum value of the
    aggregate payment that any Participant may receive with respect
    to Other Cash-Based Awards pursuant to this Section 10(c)
    in respect of any annual performance period is $5 million
    and for any other performance period in excess of one year, such
    amount multiplied by a fraction, the numerator of which is the
    number of months in the performance period and the denominator
    of which is twelve. No payment shall be made to a Covered
    Employee prior to the certification by the Board that the
    Performance Goals have been attained. The Board may establish
    such other rules applicable to the Other Stock- or Cash-Based
    Awards to the extent not inconsistent with Section 162(m)
    of the Code. Payments earned in respect of any Cash-Based Award
    may be decreased or, with respect to any Participant who is not
    a Covered Employee, increased based on such factors as the Board
    deems appropriate. Notwithstanding the foregoing, any Awards may
    be adjusted in accordance with Section 17 hereof.
    “Other Cash-Based Award” means an Award granted to a
    Participant under this Section 10(c), including cash
    awarded as a bonus or upon the attainment of Performance Goals
    or otherwise as permitted under the Plan. “Other
    Stock-Based Award” means an Award granted to a Participant
    pursuant to this Section 10(c), that may be denominated or
    payable in, valued in whole or in part by reference to, or
    otherwise based on, or related to, Stock including but not
    limited to performance units or dividend equivalents, each of
    which may be subject to the attainment of Performance Goals or a
    period of continued employment or other terms and conditions as
    permitted under the Plan. Notwithstanding anything herein to the
    contrary, no dividend equivalents shall be granted in tandem
    with an Award of Options or Stock Appreciation Rights.

 

    (d) PERFORMANCE GOALS AND PERFORMANCE
    PERIODS.  “Performance Goals” shall mean the
    criteria and objectives, determined by the Board, which must be
    met during the applicable Performance Period as a condition of
    the Participant’s receipt of payment with respect to an
    Award. Performance Goals may include any or all of the following
    or any combination thereof, or any increase or decrease of one
    or more of the following over a specified period: net income
    (before or after taxes); operating income; gross margin;
    earnings before all or any of interest, taxes, depreciation
    and/or
    amortization (“EBIT”, “EBITA” or
    “EBITDA”); revenue; unit sales; cash flow; return on
    equity; return on assets; return on capital; earnings from
    continuing operations; cost reduction goals or levels of
    expenses, costs or liabilities; market share; asset management
    (e.g., inventory and receivable levels); and customer
    satisfaction. Such Performance Goals may relate to the
    performance of the Company, a Subsidiary, any portion of the
    business (including a store or franchise), product line, or any
    combination thereof and may be expressed on an aggregate, per
    share (outstanding or fully diluted) or per unit basis. Where
    applicable, the Performance Goals may be expressed in terms of
    attaining a specified level of the particular criteria, the
    attainment of a percentage increase or decrease in the
    particular criteria, or may be applied to the performance of the
    Company, a Subsidiary, a business unit, product line, or any
    combination thereof, relative to a market index, a group of
    other companies (or their subsidiaries, business units or
    product lines), or a combination thereof, all as determined by
    the Board. Performance Goals may include a threshold level of
    performance below which no payment shall be made, levels of
    performance below the target level but above the threshold level
    at which specified percentages of the Award shall be paid, a
    target level of performance at which the full Award shall be
    paid, levels of performance above the target level but below the
    maximum level at which specified multiples of the Award shall be
    paid, and a maximum level of performance above which no
    additional payment shall be made. Performance Goals may also
    specify that payments for levels of performances between
    specified levels will be interpolated. The Board shall determine
    whether, or to what extent, Performance Goals are achieved;
    provided, however, that the Board shall have the authority to
    make appropriate adjustments in Performance Goals under an Award
    to reflect the impact of extraordinary items not reflected in
    such goals. For purposes of the Plan, extraordinary items shall
    be defined as (1) any profit or loss attributable to
    acquisitions or dispositions of stock or assets, (2) any
    changes in accounting standards or treatments that may be
    required or permitted by the Financial Accounting Standards
    Board or adopted by the Company or its Subsidiaries after the
    goal is established, (3) all items of gain, loss or expense
    for the year related to restructuring charges for the Company or
    its Subsidiaries, (4) all items of gain, loss or expense
    for the year determined to be extraordinary or unusual in nature
    or infrequent in occurrence or related to the disposal of a

    

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    segment of a business, (5) all items of gain, loss or
    expense for the year related to discontinued operations that do
    not qualify as a segment of a business as defined in APB Opinion
    No. 30 (or successor literature), (6) the impact of
    capital expenditures, (7) the impact of share repurchases
    and other changes in the number of outstanding shares, and
    (8) such other items as may be prescribed by
    Section 162(m) of the Code and the Treasury Regulations
    thereunder as may be in effect from time to time, and any
    amendments, revisions or successor provisions and any changes
    thereto. “Performance Period” shall mean the
    twelve-month periods commencing on January 1, 2008 and each
    January 1 thereafter, or such other periods as the Board shall
    determine; provided that a Performance Period for a Participant
    who becomes employed by the Company or its Subsidiaries
    following the commencement of a Performance Period may be a
    shorter period that commences with the date of the commencement
    of such employment.

 

    (e) CHANGE IN CONTROL.  In the event of a Change
    in Control (as defined below), except as the Board shall
    otherwise provide in an Award Agreement with respect to an Award
    granted under the Plan, all outstanding Options and Stock
    Appreciation Rights shall become immediately exercisable in
    full, without regard to any limitation on exercise imposed
    pursuant to Section 9(c) or Section 9(e) above, the
    restrictions, payment conditions and forfeiture conditions
    applicable to any Award other than an Option or Stock
    Appreciation Right Award shall lapse and such Awards shall be
    deemed fully vested, and any performance conditions imposed with
    respect to Awards shall be deemed to be achieved at the target
    level for the applicable Performance Period. Furthermore, unless
    waived in advance of such Change in Control by the Board, each
    Participant who is an employee or a consultant of the Company or
    a Subsidiary or Affiliate at the time of such Change in Control
    shall have the right to require the Company to pay, in
    cancellation of any or all such Options and Stock Appreciation
    Rights held by such Participant, an amount equal to the product
    of (i) the excess of (x) the fair market value per
    share of the Stock (which shall mean the closing price as of the
    trading day preceding the day of the Change in Control) over
    (y) the Option Price or Stock Appreciation Right Price, as
    the case may be, times (ii) the number of shares of Stock
    specified by the Participant in a written notice to the Company
    prior to or within 30 days after the Change in Control (up
    to the full number of shares of Stock then subject to such
    Option and Stock Appreciation Right). For purposes of the Plan,
    a “Change in Control” shall be deemed to occur if any
    person shall (a) acquire direct or indirect beneficial
    ownership of more than 50% of the total combined voting power
    with respect to the election of directors of the issued and
    outstanding stock of the Company (except that no Change in
    Control shall be deemed to have occurred if the persons who were
    stockholders of the Company immediately before such acquisition
    own all or substantially all of the voting stock or other
    interests of such person immediately after such transaction), or
    (b) have the power (whether as a result of stock ownership,
    revocable or irrevocable proxies, contract or otherwise) or
    ability to elect or cause the election of directors consisting
    at the time of such election of a majority of the Board. A
    “person” for this purpose shall mean any person,
    corporation, partnership, joint venture or other entity or any
    group (as such term is defined for purposes of
    Section 13(d) of the Exchange Act) and a person shall be
    deemed to be a beneficial owner as that term is used in
    Rule 13d-3
    under the Exchange Act. The amount payable under this
    Section 10(e) shall be remitted by the Company in cash or
    by certified or bank check, reduced by applicable tax
    withholding.

 

    11.  TRANSFERABILITY OF AWARDS

 

    No Award shall be assignable or transferable by the Participant
    to whom it is granted, other than by will or the laws of descent
    and distribution, except that, upon approval by the Board, the
    Participant may transfer an Award that is not intended to
    constitute an Incentive Stock Option (a) pursuant to a
    qualified domestic relations order as defined for purposes of
    the Employee Retirement Income Security Act of 1974, as amended,
    or (b) by gift: to a member of the “Family” (as
    defined below) of the Participant, to or for the benefit of one
    or more organizations qualifying under Code
    Sections 50l(c)(3) and 170(c)(2) (a “Charitable
    Organization”) or to a trust for the exclusive benefit of
    the Participant, one or more members of the Participant’s
    Family, one or more Charitable Organizations, or any combination
    of the foregoing; provided that any such transferee shall enter
    into a written agreement to be bound by the terms of this Plan.
    For this purpose, “Family” shall mean the ancestors,
    spouse, siblings, spouses of siblings, lineal descendants and
    spouses of lineal descendants of the Participant. During the
    lifetime of a Participant to whom an Incentive Stock Option is
    granted, only such Participant (or, in the event of legal
    incapacity or incompetence, the Participant’s guardian or
    legal representative) may exercise the Incentive Stock Option.

    

    7

 

    12.  TERMINATION OF EMPLOYMENT OR SERVICE

 

    (a) GENERAL.  Except as otherwise provided in
    Section 12(b) or 13 below or as may otherwise be provided
    by the Board, upon the termination of employment or other
    service of a Participant with the Company, a Subsidiary or an
    Affiliate for any reason, all unvested Awards held by such
    Participant at the time of such termination shall immediately
    terminate and such Participant shall have no further right to
    receive cash or purchase or receive shares of Stock pursuant to
    such Award; provided, however, that, unless such termination is
    by the Company for “Cause,” all Options and Stock
    Appreciation Rights, to the extent exercisable on the date of
    such termination, shall remain exercisable until the earlier of
    (a) the expiration date of such Option or Stock
    Appreciation Right as fixed by the Board pursuant to
    Section 9 hereof and (b) the 60th day following
    the date of such termination. For purposes of the foregoing,
    “Cause” shall mean (1) the Participant’s
    conviction for commission of a felony or other crime;
    (2) the commission by the Participant of any act against
    the Company constituting willful misconduct, dishonesty, fraud,
    theft or embezzlement; (3) the Participant’s failure,
    inability or refusal to perform any of the material services,
    duties or responsibilities required of him by the Company, or to
    materially comply with the policies or procedures established
    from time to time by the Company, for any reason other than his
    illness or physical or mental incapacity; (4) the
    Participant’s dependence, as determined in good faith by
    the Company, on any addictive substance, including, but not
    limited to, alcohol or any illegal or narcotic drugs;
    (5) the destruction of or material damage to Company
    property caused by the Participant’s willful or grossly
    negligent conduct; and (6) the willful engaging by the
    Participant in any other conduct which is demonstrably injurious
    to the Company or its subsidiaries, monetarily or otherwise.
    Determination of Cause shall be made by the Board.
    Notwithstanding the foregoing, if the Participant is a party to
    an employment agreement with the Company, “Cause” with
    respect to such Participant shall have the meaning set forth
    therein.

 

    (b) Whether a leave of absence or leave on military or
    government service shall constitute a termination of employment
    or service (in the case of an independent contractor) for
    purposes of the Plan shall be determined by the Board, which
    determination shall be final and conclusive. For purposes of the
    Plan, a termination of employment or service (in the case of an
    independent contractor) with the Company, a Subsidiary or
    Affiliate shall not be deemed to occur if the Participant is
    immediately thereafter employed by or otherwise providing
    services (in the case of an independent contractor) to the
    Company, any Subsidiary or Affiliate.

 

    13.  RIGHTS IN THE EVENT OF DEATH, DISABILITY OR
    RETIREMENT

 

    Except as otherwise provided by the Board and notwithstanding
    anything in Section 12 to the contrary, if a
    Participant’s termination of employment or service is by
    reason of the death, “permanent and total disability”
    (within the meaning of Section 22(e)(3) of the Code) or
    “Retirement” of such Participant, all Awards held by
    such Participant at the time of such termination shall become
    immediately vested, and all Option and Stock Appreciation Right
    Awards shall become exercisable in full and shall remain
    exercisable until the earlier of (a) the expiration date of
    such Option or Stock Appreciation Right, as the case may be, as
    fixed by the Board pursuant to Section 9 hereof and
    (b) the third anniversary of the date of such termination.
    Whether a termination of employment or service is to be
    considered by reason of “permanent and total
    disability” for purposes of this Plan shall be determined
    by the Board, which determination shall be final and conclusive.
    For purposes of the foregoing, “Retirement” shall mean
    the Participant’s termination of employment or other
    service from the Company or a Subsidiary after attainment of
    age 55 and completion of at least 6 years of service
    with the Company or a Subsidiary or an Affiliate. For purposes
    of the preceding sentence employment or other service with an
    entity prior to its becoming a Subsidiary or an Affiliate or
    after its ceasing to be a Subsidiary or an Affiliate shall be
    disregarded.

 

    14.  USE OF PROCEEDS

 

    The proceeds received by the Company from the sale of Stock
    pursuant to Awards granted under the Plan shall constitute
    general funds of the Company.

 

    15.  REQUIREMENTS OF LAW

 

    (a) VIOLATIONS OF LAW.  The Company shall not be
    required to sell or issue any shares of Stock under any Award if
    the sale or issuance of such shares would constitute a violation
    by the individual granted such Award or the Company of any
    provisions of any law or regulation of any governmental
    authority, including without limitation any federal or state
    securities laws or regulations. Any determination in this
    connection by the Board shall be final, binding, and conclusive.
    The Company shall not be obligated to take any affirmative
    action in order to cause the

    

    8

 

    grant of an Award or the issuance of shares pursuant thereto to
    comply with any law or regulation of any governmental authority.
    As to any jurisdiction that expressly imposes the requirement
    that an Option shall not be exercisable unless and until the
    shares of Stock covered by such Option are registered or are
    subject to an available exemption from registration, the
    exercise of such Option (under circumstances in which the laws
    of such jurisdiction apply) shall be deemed conditioned upon the
    effectiveness of such registration or the availability of such
    an exemption.

 

    (b) COMPLIANCE WITH
    RULE 16b-3.  The
    intent of this Plan is to qualify for the exemption provided by
    Rule 16b-3
    under the Exchange Act. To the extent any provision of the Plan
    does not comply with the requirements of
    Rule 16b-3,
    it shall be deemed inoperative to the extent permitted by law
    and deemed advisable by the Board and shall not affect the
    validity of the Plan. In the event Rule
    l6b-3 is
    revised or replaced, the Board, or the Committee acting on
    behalf of the Board, may exercise discretion to modify this Plan
    in any respect necessary to satisfy the requirements of the
    revised exemption or its replacement.

 

    16.  AMENDMENT AND TERMINATION OF THE PLAN

 

    The Board may, at any time and from time to time, amend, suspend
    or terminate the Plan; provided, however, that no amendment by
    the Board shall, without approval by a majority of the votes
    present and entitled to vote at a duly held meeting of the
    stockholders of the Company at which a quorum representing a
    majority of all outstanding voting stock is present, either in
    person or by proxy, or by written consent in accordance with the
    Company’s Certificate of Incorporation and By-Laws,
    increase the total number of shares of Stock reserved for the
    purpose of the Plan or the number of shares of Stock that may be
    issued with respect to Share Equivalent Awards (except as
    permitted under Section 17 hereof), change the requirements
    as to eligibility to receive Options that are intended to
    qualify as Incentive Stock Options, increase the maximum number
    of shares of Stock in the aggregate that may be sold pursuant to
    Options that are intended to qualify as Incentive Stock Options
    granted under the Plan or modify the Plan so that the terms of
    the Plan would not satisfy the requirements of Code
    Section 162(m), any rules of the stock exchange on which
    shares of Stock are traded or any other applicable law. Except
    as permitted under Section 17 hereof, no amendment,
    suspension or termination of the Plan shall, without the consent
    of the holder of the Award, impair rights or obligations under
    any Award theretofore granted under the Plan.

 

    17.  EFFECT OF CHANGES IN CAPITALIZATION

 

    (a) ADJUSTMENT FOR CORPORATE TRANSACTIONS.  The
    Board may determine that a corporate transaction has affected
    the price of the Stock such that an adjustment or adjustments to
    outstanding Awards are required to preserve (or prevent
    enlargement of) the benefits or potential benefits intended at
    time of grant. For this purpose a corporate transaction may
    include, but is not limited to, any stock dividend, stock split,
    extraordinary cash dividend, recapitalization, reorganization,
    merger, consolidation,
    split-up,
    spin-off, combination or exchange of shares of Stock, or other
    similar occurrence. In the event of such a corporate
    transaction, the Board shall make such equitable changes or
    adjustments as it deems necessary or appropriate in order to
    prevent the dilution or enlargement of benefits under the Plan
    and the outstanding awards thereunder, to any or all of
    (i) the number and kind of shares of Stock or other
    property which may be delivered under the Plan; (ii) the
    number and kind of shares of Stock or other property subject to
    outstanding Awards; and (iii) the exercise price of
    outstanding Options and Stock Appreciation Rights. All such
    adjustments shall be final, binding and conclusive on all
    persons.

 

    (b) DISSOLUTION OR LIQUIDATION; REORGANIZATION IN WHICH THE
    COMPANY IS NOT THE SURVIVING CORPORATION OR SALE OF ASSETS OR
    STOCK.  Upon the dissolution or liquidation of the
    Company, the Plan and all Awards outstanding hereunder shall
    terminate. In the event of any termination of the Plan under
    this Section 17(b), all outstanding Share Equivalent Awards
    shall become vested immediately prior to the occurrence of such
    termination, and each individual holding an Option or Stock
    Appreciation Right shall have the right, immediately prior to
    the occurrence of such termination and during such reasonable
    period as the Board shall determine and designate, to exercise
    such Option or Stock Appreciation Right in whole or in part,
    whether or not such Option or Stock Appreciation Right was
    otherwise exercisable at the time such termination occurs and
    without regard to any vesting or other limitation on exercise
    imposed pursuant to Section 9 above. In connection with a
    merger, consolidation, reorganization or other business
    combination of the Company with one or more other entities in
    which the Company is not the surviving entity, or upon a sale of
    all or substantially all of the assets of the Company to another
    entity, or upon any transaction (including, without limitation,
    a merger or reorganization in

    

    9

 

    which the Company is the surviving corporation) that results in
    any person or entity (or persons or entities acting as a group
    or otherwise in concert) owning more than 50 percent of the
    combined voting power of all classes of stock of the Company,
    the Company and the acquiring or surviving entity shall provide
    for (x) the continuation of the Plan and the assumption of
    the Awards theretofore granted, (y) the substitution for
    such Awards of new awards with substantially the same terms as
    such outstanding Awards or (z) the cancellation of any
    outstanding Awards and pay or deliver, or cause to be paid or
    delivered, fair value of such Awards to the holder thereof. With
    respect to Awards that are to be settled in shares of Stock,
    such fair value shall be an amount in cash or securities having
    a value (as determined by the Board acting in good faith) equal
    to the product of (A) the number of shares of Stock subject
    to the Awards so cancelled multiplied by (B) the amount, if
    any, by which (1) the formula or fixed price per share paid
    to holders of shares of Stock pursuant to such acquisition
    exceeds (2) the option or purchase price (as the case may
    be), if any, applicable to such shares of Stock subject to such
    Awards. With respect to Awards that are to be settled in cash,
    fair value shall be determined by the Board acting in good
    faith. The Board shall send prior written notice of the
    occurrence of an event described in this Section 17(b) to
    all individuals who hold Awards not later than the time at which
    the Company gives notice to its stockholders that such event is
    proposed.

 

    (c) NO LIMITATIONS ON CORPORATION.  The grant of
    an Award pursuant to the Plan shall not affect or limit in any
    way the right or power of the Company to make adjustments,
    reclassifications, reorganizations or changes of its capital or
    business structure or to merge, consolidate, dissolve or
    liquidate, or to sell or transfer all or any part of its
    business or assets.

 

    18.  DISCLAIMER OF RIGHTS

 

    No provision in the Plan or in any Award granted or Award
    Agreement entered into pursuant to the Plan shall be construed
    to confer upon any individual the right to remain in the employ
    of the Company, any Subsidiary or Affiliate, or to interfere in
    any way with the right and authority of the Company, any
    Subsidiary or Affiliate either to increase or decrease the
    compensation of any individual at any time, or to terminate any
    employment or other relationship between any individual and the
    Company, any Subsidiary or Affiliate.

 

    19.  NON-EXCLUSIVITY OF THE PLAN

 

    Neither the adoption of the Plan nor the submission of the Plan
    to the stockholders of the Company for approval shall be
    construed as creating any limitations upon the right and
    authority of the Board to adopt such other incentive
    compensation arrangements (which arrangements may be applicable
    either generally to a class or classes of individuals or
    specifically to a particular individual or individuals) as the
    Board determines desirable, including, without limitation, the
    granting of stock options or stock appreciation rights otherwise
    than under the Plan.

 

    20.  WITHHOLDING

 

    The Company or any Subsidiary or Affiliate is authorized to
    withhold from any Award granted, any payment relating to an
    Award under the Plan, including from a distribution of Stock, or
    any other payment to a Participant, amounts of withholding and
    other taxes due in connection with any transaction involving an
    Award, and to take such other action as the Company may deem
    advisable to enable the Company and Participants to satisfy
    obligations for the payment of withholding taxes and other tax
    obligations relating to any Award. This authority shall include
    authority to withhold or receive Stock or other property with a
    fair market value not in excess of the minimum amount required
    to be withheld and to make cash payments in respect thereof in
    satisfaction of a Participant’s tax obligations.

 

    This Plan was duly adopted and approved by the Board of the
    Company effective as of the 14th day of March, 2008,
    subject to approval and adoption by the stockholders of the
    Company.

    

    10Ex-10.12 Employment Agreement

 

Exhibit
10.12

			

Amsterdam, March 1st 2007

Employment Agreement

Between:

     WRIGHT MEDICAL NETHERLANDS B.V.

	 	•	 	a private company with limited liability,
	 
	 	•	 	incorporated under the laws of the Netherlands,
	 
	 	•	 	and having its registered office at Commerce Parc — Gebouw B,
6th floor — Krijgsman 11 — 1186 DM Amstelveen — The Netherlands
	 
	 	•	 	hereafter referred to as “The Employer”,
	 
	 	•	 	represented by Mr Gary HENLEY, in the capacity of Chief
Executive Officer for Wright Medical Technology Inc.

And :

     Mr Paul KOSTERS

	 	•	 	domiciled at 
	 
	 	•	 	born 
	 
	 	•	 	hereafter referred to as “The Employee”

Whereas :

As a Dutch citizen the Employee has entered into the employment by Wright Cresmacoli Ortho
N.V. in Belgium as of 19 May 2005, because by then no group company had been incorporated
in the Netherlands, yet. The parties explicitly agreed that once the Dutch group company
would have been incorporated he would enter into an employment agreement with that Dutch
subsidiary. The parties agreed that the

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

1 / 14

 

 

			

Employee would sign an employment agreement at the Dutch subsidiary by the time it was
incorporated.

The parties hereto wish that the terms and conditions of employment be recorded in writing.

It has been agreed as follows :

Article 1 : Job position, location and professional mobility

	1.	 	The Employee will be employed by the Employer as President for Europe, Middle-East and
Africa.
	 
	 	 	Without prejudice to the applicable legal and regulatory provisions, the Employee accepts that
his tasks and responsibilities should be adapted from time to time according to the Employer’s
needs and/or other associated companies, taking into account the experience and qualifications
of the Employee.

	2.	 	Within the framework of the Agreement, and without any further specific proxy the Employee
will not be authorized to legally represent and/or bind the Employer.

	3.	 	The Employee will be based in the Netherlands.
	 
	 	 	The Employee acknowledges and accepts that the place of work is not in his view an essential
element of this agreement (hereafter referred to as “the Agreement”), given that the execution
of his tasks and responsibilities require considerable travel in particular within Europe and
to the United States of America and the rest of the world. Moreover, the Employee agrees to
carry out both short and long-term tasks abroad on a regular basis.
	 
	 	 	The Employee expressly acknowledges that the required mobility constitutes an essential element
of the Agreement.
	 
	 	 	The Employer will be entitled to change the place of work after consultation with the Employee
according to business and financial requirements.

	4.	 	The Employee acknowledges and accepts that the right of the Employer to put his experience
and qualifications at the disposal of other associated companies in Europe
constitutes an essential condition of the Agreement. Such tasks shall be governed by the

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

2 / 14

 

 

			

terms and conditions contained in the Agreement and shall not entitle the Employee to any further
remuneration.

	5.	 	If the Employee is working in a non-office environment he has to meet ARBO regulations. The
Employer will facilitate, inform and instruct the Employee about these regulations. The
Employee is obliged to inform the Employer when those requirements are not met and to take
necessary action for improvement.

Article 2: Commencement, seniority, term and termination:

	1.	 	The Employee has begun his employment as from November 15th 2005 and has been
entered into for an indefinite period of time.

	2.	 	The Agreement shall terminate without notice being required, at the pensionable age of the
Employee.

	3.	 	The Agreement may be terminated by either party as per the last day of any calendar month by
written notice to the other party, observing a (3) months notice period for the Employee and a
(6) months notice period for the Employer.

	4.	 	For the execution of this Agreement, the seniority acquired by the Employee with his former
employer (since May 19th 2005) will be taken into consideration insofar as the
former Employer was an entity of the Wright Medical group (Wright Cremascoli Ortho N.V., now
become Wright Medical Belgium N.V.).

Article 3: Working time

	1.	 	The Employee acknowledges and accepts that he holds a managerial position and that, given the
nature of his position, he is expected to work the time necessary to best achieve his work,
which implies that he will work, at the very least, a minimum of 38 hours a week.

	2.	 	Given his managerial function, it is normally expected that in carrying out his tasks and
responsibilities the Employee will work additional hours to those minimum working hours
mentioned above, including Saturday and/or Sunday.

	3.	 	The Employee acknowledges and accepts that his monthly remuneration, as defined in the
Agreement, constitutes adequate compensation for such additional services and/or
overtime hours. For this reason, no additional proportional remuneration, nor any

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

3 / 14

 

 

			

overtime payment or compensatory leave, will be due for these additional services and/or overtime.

Article 4: Remuneration

	1.	 	The Employee shall receive a salary of € 190.000,00 (in words: one hundred ninety thousand
euros) gross per year, to be paid in twelve equal monthly instalments payable in arrears on
the last day of every calendar month.
	 
	 	 	In addition, the Employee shall be entitled to holiday allowance of 8% of the gross salary
received in twelve months preceding the month of payment, such allowance to be paid on the
last day of the month of May in any calendar year. In the event of termination of the
Agreement, the Employee shall receive a pro rata part of the holiday allowance that has
accrued up to the date of termination.
	 
	 	 	The total annual gross remuneration including the holiday allowance will therefore amount to
€ 205.200,00 (in words: two hundred five thousand and two hundred euros).

	2.	 	In addition, at the sole discretion of the Employer the Employee is eligible for an annual
bonus for a gross amount of 45% of annual remuneration at target (i.e. the annual remuneration
including the holiday allowance) determined exclusively on the basis of the services rendered
and objectives achieved. The decision concerning the objectives to be achieved, the payment
and size of the bonus is taken annually at the discretion of the Employer.

	3.	 	Under no circumstances shall the Employee consider the payment of such amounts an acquired
right.
	 
	 	 	Any decision made by the Employer concerning such a bonus shall only be valid for the period
determined by the Employer and shall be paid for this period only, in accordance with the
conditions stipulated by the Employer.

	4.	 	The Employee expressly accepts that the payment of his remuneration and any potential bonus,
less all legal and contractual withholdings, shall be paid into his bank account.

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

4 / 14

 

 

			

Article 5: Tax consulting allowance

The Employer will reimburse the personal tax consulting costs incurred by the Employee resulting
from this employment contract, up to a maximum amount of € 7.000,00 per year including VAT.

Article 6: Company car

The Employer shall put a car at the disposal of the Employee. But the Employee may also choose to
be granted a monthly car allowance of an equivalent value.

All conditions related to this benefit (type of car, budget, costs borne by the Employer, etc ...)
are in compliance with the Company Car policy applicable in the Netherlands.

Article 7: Expense allowance and reimbursement

Taking into account his job role and responsibilities, the Employer will receive a monthly lump sum
indemnity amounting to € 200, to cover any professional expenses he incurs.

This lump sum indemnity will cover the expenses incurred by the Employee in the execution of his
work, including (but not limited to) :

	 	•	 	Representation costs in case of events with clients;
	 
	 	•	 	Certain travel costs (i.e. underground, toll, taxi, etc.);
	 
	 	•	 	Costs related to undertaking work tasks (costs of parking, telephone costs, etc.);
	 
	 	•	 	Costs incurred for affiliation cards, tips, little gifts, etc.;
	 
	 	•	 	Costs related to the Employee’s information/documentation (newspapers, etc.);
	 
	 	•	 	Costs of attending to technical events and general training, taking into account the
Employee’s socio-professional position.

This lump sum indemnity, granted to the Employee as reimbursement of professional expenses, does
not however cover costs that are otherwise reimbursed to the Employee.

The Employee undertakes to provide the Employer with receipts for these professional expenses as
evidence of their existence and details of the costs incurred.

Neither the lump sum indemnity nor any other compensation for expenses will be paid during any
period in which the Employee has been ordered to refrain from active duty for whatever
reason and/or for a period longer than one month consecutive due to illness, disablement or any
other reason for inactive status.

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

5 / 14

 

 

			

Unusual professional expenses incurred by the Employee, that are not covered by the lump sum
indemnity mentioned above shall be reimbursed by the Employer to the Employee provided that they
have been approved by the Employer.

These professional expenses, if accepted by the Employer, shall be reimbursed on the basis of
receipts produced by the Employee at the end of each month.

Article 8: Pension

The Employer contributes 12% of the Employee’s gross annual remuneration (gross annual
remuneration as mentioned in article 4.1, including holiday allowance) into the employees pension
fund. This pension fund will be in accordance with article 2 paragraph 4 under C of the Pensions
and Savings Funds Act (Pensioen- en Spaarfondsenwet).

Article 9: Holidays

For each full calendar year during which employment continues, the Employee shall be entitled to 25
working days holiday with full pay. If the Employee performed work during only a part of the year,
the number of days of holiday will be calculated proportionately.

The Employee must timely inform the Employer, in writing, of his wishes with respect to the
beginning and end of his holiday period.

Contrary to article 7:638 Civil Code (Burgerlijk Wetboek), the Employer will decide, in
consultation with the Employee, upon the commencement and termination of the holiday periods.

Article 10: Sick leave

	1.	 	If the Employee is prevented by sickness from performing the contracted work, the Employee
shall be entitled, during a period not exceeding 104 weeks calculated from the third day of
the incapacity for work until no later than the termination of employment, to 70% of the gross
salary which applied in the period immediately
preceding the incapacity for work, insofar as the salary does not exceed the maximum daily
pay referred to in Section 9 (1) of the Social Insurance Coordination Act.

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

6 / 14

 

 

			

	2.	 	The periods during which the Employee is prevented by sickness from performing his duties
shall be aggregated if the interval between these periods is less than four weeks.

	3.	 	The Employee must strictly comply with the guidelines and instructions given by or on behalf
of the Employer regarding sick leave, like, but not restricted to:

	 	•	 	The Employee shall be obliged to report his illness immediately and before 09:00
hours on the day on which he becomes ill. This obligation applies also in case of
illness during a holiday. If requested, the Employee is obliged to submit a declaration
of an authorized medical note which indicates the beginning and the expected duration
of the illness;
	 
	 	•	 	The recovery report should be undertaken forthwith;
	 
	 	•	 	In the event that an Employee reports himself sick, he is obliged to report his
treatment address and he is obliged to be contactable to the Employer;
	 
	 	•	 	The Employee is obliged to obey a call from the qualified medical practitioner and
to provide a medical and all the other relevant documents which are important to
determine his illness and the duration of the illness;
	 
	 	•	 	The Employee is obliged to give assistance to every request from the doctor to
cooperate on all the necessarily medical researches;
	 
	 	•	 	The Employee is obliged to comply with a reasonable request from the Employer for
reintegration.

	4.	 	On pain of forfeiture of his entitlement to continue the payment of salary pursuant to the
Agreement, the Employee must strictly comply with the guidelines and instructions given by or
on behalf of the Employer regarding sick leave.

Article 11: Exclusivity

	1.	 	The Employee agrees to devote all of his working time and all of his efforts exclusively to
the interests of the Employer and, during the present employment contract, to accept no other
employment or exercise any other external professional activity to that of the Employer, which
is paid or unpaid, directly or indirectly, without the prior written consent of the Employer,
whether or not similar to the services of those rendered to the Employer and whether or not
exercised at the same time as the services rendered to the Employer.

	2.	 	During his employment, the Employee shall not be permitted to have or carry out whatsoever,
whether directly or indirectly, any interests in companies pursuing activities in competition
with or similar or related to the activities of the Employer and/or affiliated companies of
the Employer, or any interest in companies who are

Employment contract between Mr Paul KOSTERS

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business associates of the Employer and/or
affiliated companies of the Employer, unless the shares are traded on a recognised stock
exchange.

	3.	 	The Employee undertakes to display professional and loyal behaviour under all circumstances.
In particular, he is formally prohibited, directly or indirectly, from soliciting, accepting
or receiving any offer, promise, gift, present, commission, reduction, premium or remuneration
of any type from any third party with a business relationship or any other relationship with
the Employer or companies affiliated with the Employer, without of the prior agreement of the
Employer. Any failure by the Employee to respect the present provision may be considered as a
serious fault justifying immediate termination of the Agreement without notice, without
prejudice to the right of the Employer to prosecute the Employee and/or any third person
concerned, notably for any (criminal) violation.

Article 12: Confidentiality

	1.	 	The Employee acknowledges that he has no knowledge prior to commencing work in the service of
the Employer of information of a confidential or secret nature concerning the commercial
activities of the Employer and/or any other company with which the Employer maintains
commercial relations.

	2.	 	The Employee acknowledges that information of a confidential or secret nature concerning the
commercial activities of the Employer and/or any other company with which the Employer has
commercial relations, is to remain strictly confidential and secret and that it is precious,
special and unique to the Employer, and of great value to him.

	3.	 	The Employee recognizes that the Employer has provided him with a copy of the confidentiality
and inventions agreement, which is applicable at this particular moment in time, albeit
subject to occasional modifications. A copy of this confidentiality and inventions agreement
is included in the present agreement documentation. The Employee explicitly expresses his
consent to the totality of the provisions of this agreement.

	4.	 	Without prejudice to legal prohibitions on revealing the above mentioned information, the
Employee undertakes to keep secret and neither use nor allow the use of, nor render public,
communicate or divulge, directly or indirectly, totally or partially, at any
time, either during his employment or subsequently, whatever the reason for the termination,
whatever the circumstances, aim or reason, any manufacturing or trading secrets or any other
secret information, or information of which he could reasonably understand that it was
secret, whatever its importance, which comes to his knowledge during his employment by the
Employer, such as information concerning the

Employment contract between Mr Paul KOSTERS

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activities, suppliers, customers, organisation
and personnel of the Employer, and in particular lists of customers, price lists and other
conditions of sale and working methods.

	5.	 	On suspension or termination of the Agreement with the Employer, for whatever reason, as well
as at any time and at the first request of the Employer during the period of employment, the
Employee shall immediately return all originals, copies and/or summaries of documents,
reports, files, computer programmes, diskettes, notes, lists, notepaper, correspondence,
samples and any other similar information and/or any equivalent information carriers directly
or indirectly dealing with the Employer or his business, irrespective of whether they were
received from the Employer or constituted by the Employee, as well as any other items that
have been received for the execution of his work.

	6.	 	The above-mentioned documents and objects shall always remain the exclusive property of the
Employer. Moreover, the Employee agrees not to make or keep copies of any of the above and
will confirm to the Employer, at the end of the Agreement, that no copy has been made or kept.

	7.	 	Any violation, however small, of the above-mentioned obligations during the term of the
Agreement, shall constitute a serious fault justifying immediate termination of the Agreement,
without notice. In the event that the Employee commits any breach of this article, he shall
immediately forfeit to the Employer a payable penalty of EUR 10.000,00 for each such breach,
to be increased by EUR 500,00 for each day that such a breach continues, without prior notice
or judicial intervention being required and entirely without prejudice to the Employer’s right
to demand full compensation for the loss actually suffered by it and/or to demand specific
performance. Article 7:650, sections 3,4 and 5 of the Dutch Civil Code are not applicable to
the Agreement. Payment of the penalty referred to above shall not release the Employee from
his obligations specified in the Agreement.

	8.	 	Any measure taken by the Employer against the Employee in the context of the present
provision shall not prejudice any (criminal) proceedings against the Employee or any third
party.

Article 13: Industrial and intellectual property

	1.	 	Unless parties have otherwise explicitly agreed in writing, all intellectual property rights
which have occurred, developed, been created or otherwise realized under the fulfilment of the
Agreement (regardless of whether with or without the instructions of the Employer), belong
exclusively to the Employer. Intellectual property rights shall

Employment contract between Mr Paul KOSTERS

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mean (but are not limited to)
all copyrights, patent rights, design rights, trademark rights, trade name rights and database
rights worldwide, vested in ideas, designs, creations, methods, researches, communications,
know how and other objects and products protectable by intellectual property.

	2.	 	Insofar as necessary, in signing this Agreement, the Employee hereby fully transfers in
advance to the Employer all copyrights and/or neighbouring rights resulting from the
fulfilment of this Agreement which the Employee could assert against the Employer. Insofar as
required, the Employee shall, upon Employer’s first request, fully cooperate with any overt
act in order to effect such a transfer.
	 
	 	 	With regard to all activities under the Agreement, the Employee irrevocably waives now for
then all his rights as mentioned in article 5, paragraph 1 (under a, b and c) of the Dutch
Neighbouring Rights Act and his rights as mentioned in article 25, paragraph 1 (under a, b
and c) of the Dutch Copyright Act.

	3.	 	The Employee must guarantee that he is free to transfer all rights as mentioned in this
article, as well as to authorise its exploitation without prejudicing the rights of any third
party.

	4.	 	The Employee undertakes to communicate immediately and fully to the competent department
within the company any result, as described in point 1 of this article, accompanied by any
document or information, of whatever nature, certifying the outcome of the said result. The
Employee also undertakes to provide any assistance to the Employer to defend and protect the
said rights and interests before the courts or in any judicial or non-judicial procedure, as
well as to help the Employer to ensure and prove the validity of the transfer of the said
rights and interests. For this purpose, the Employee shall notably lend support to the
Employer by providing him with any document or information, as well as by completing any
required formality. The Employee shall supply the Employer with any useful documentation in
his possession or any useful information for the protection, exploitation and transfer of
these rights and interests.

	5.	 	The transfer, as defined in point 1 of this article, includes, mainly but not exclusively,
all features and rights, in their broadest extent, attached to the copyright (author’s right)
or similar rights (neighbouring right), including the right to reproduce and the right to
communicate to the general public, through any known or as yet unknown form of exploitation
on the date of conclusion of the Agreement, whatever the technical means employed for its
exploitation.

Employment contract between Mr Paul KOSTERS

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	6.	 	The transfer as defined in point 1 of this article is definitive, irrevocable and worldwide.
The Employer, for his part, is free to transfer or licence the said rights and/or interests.

	7.	 	The Employee acknowledges and accepts that any indemnity or compensation for the transfer is
already included in the salary paid by the Employer, and that the said salary constitutes
sufficient and adequate compensation for the transfer considered.

	8.	 	The Employee recognizes that the Employer has provided him with a copy of the confidentiality
and inventions agreement, which is applicable at this particular moment in time, albeit
subject to occasional modifications. A copy of this confidentiality and inventions agreement
is included in the present agreement documentation. The Employee explicitly expresses his
consent to the totality of the provisions of this agreement.

Article 14: Non-competition clause 

	1.	 	At the discretion of the Company, for any period up to one year after termination of the
Agreement for which the Company provides to the employee the remuneration and benefits
provided for in Articles 4.1 and 6, the Employee shall not (without prior written approval of
the Employer) be permitted to undertake any of the following in the Netherlands or in the
geographical area under his responsibility at the termination of the contract :

	 	(i)	 	to work for or be involved with, in any manner, directly or indirectly and
whether paid or unpaid, any person, organization or company pursuing activities in
competition with or similar or related activities to that of the Employer and/or the
companies affiliated with the Employer, or to have or take any interest in such
person, organization or company;
	 
	 	(ii)	 	to maintain in any manner whatsoever, whether directly or indirectly, business
contacts with any person, organization or company with whom during the last two years
preceding the termination of the employment the Employer has had any business contacts.
	 
	 	(iii)	 	to induce present employees of the Employer and/or affiliated companies with
the Employer or persons who, in the period of two years preceding the termination of
the employment, have been or were employed by the Employer and/or companies affiliated
with the Employer to terminate their employment and/or to hire such present of former
employees.

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

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	2.	 	In the event that the Employee commits any breach of this article, the Employee shall repay
the Employer all compensation paid to him under subsection 1 of this article, forfeit any
remaining compensation to be paid in accordance with subsection 1 of this article, and
immediately pay the Employer a penalty of EUR 10.000,00 for each such breach, to be increased
by EUR 500,00 for each day that such breach continues, without prior notice or judicial
intervention being required and entirely without prejudice to the Employer’s right to demand
full compensation for the loss actually suffered by it and/or to demand specific performance.

	3.	 	Article 7:650, sections 3, 4 and 5 of the Dutch Civil Code are not applicable to the
Agreement.

	4.	 	Payment of the penalty referred to above shall not release the Employee from his obligations
specified in the Agreement.

	5.	 	Any violation of this clause during the execution of the Agreement may be considered as a
serious misdemeanour resulting in immediate termination of the Agreement without notice.

Article 15: Legislation applicable and competent jurisdiction

	1.	 	The Agreement is governed by Dutch law and any dispute concerning the interpretation,
execution and/or termination of the present contract must be resolved under Dutch law.

	2.	 	The labour jurisdictions of the Netherlands have exclusive rights covering any dispute
concerning the interpretation, execution and/or termination of the Agreement.

     Article 16: Indivisibility of the provisions and replacement of prior agreements

	1.	 	If any provision of the Agreement or part of a provision is declared null and void or
contrary to a mandatory law in force, the remaining provisions shall not be made automatically
null and void and shall consequently retain their validity.

Employment contract between Mr Paul KOSTERS

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	2.	 	The Agreement replaces all other agreements, settlements and/or undertakings between the
Employee and the Employer wherever the Agreement conflicts with the contents of such
agreements, settlements and/or understandings.

Article 17: Evolution of the agreement and tax and social security issues

	1	 	The Employer reserves the right to alter the provisions of the Agreement, inasmuch as such is
reasonable and follows from pressing reasons (“zwaarwichtige belangen”) for the Employer.

	2	 	All wage tax and social security contributions which an employer must withhold by Dutch tax
law from his employees salary and pay to the relevant authorities shall be so withheld from
and paid in respect of all amounts to be paid to the Employee under the Agreement, unless it
follows from the nature of the payment that it may be made tax-free.

	3	 	If at any time it is determined by the Dutch Inland Revenue and/or Social Security
Authorities that any payment to be made to the Employees pursuant to the Agreement is wholly
or partly subject to the levy of wage/income tax and/or social security contributions, the
compulsory deductions shall be made and charged and debited to the Employee. As from such time
as the amount of the relevant future payment pursuant to the Agreement shall be reduced to the
level at which such payment may be tax-free.

The Employee acknowledges having received an original copy of the Agreement, duly signed by all
parties.

Concluded in two original copies, one to be given to the Employee and the other to be kept by the
Employer.

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

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The Employer :

Mr Gary HENLEY (*)

Chief Executive Officer for Wright Medical Technology Inc.

                 /s/ Gary D. Henley                 

The Employee:

Mr Paul KOSTERS (*)

                 /s/ Paul R. Kosters                

(*) The parties precede their signature with the words “read and approved” and initial each of the
preceding pages

Employment contract between Mr Paul KOSTERS

and the company WRIGHT MEDICAL NETHERLANDS B.V.

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