Document:

Exhibit 10.7

 

December 8, 2008

 

Mr. Richard F. Wallman

124 Deer Estates Lane

Ponte Verde Beach, FL 32082

 

Dear Richard:

 

I am please to invite you to join the
Supervisory Board of Tornier B.V. (“Tornier”), as well as join Tornier’s Audit
Committee as Chairman, effective as of December 17, 2008.  We believe that Tornier is positioned to
become the leading company worldwide focused on orthopaedic extremities, and
are excited to benefit from your strategic vision and financial expertise to
help Tornier achieve its objectives.

 

If you accept this invitation, upon being
appointed to the Supervisory Board, you will receive, in lieu of any annual or
per-meeting fees, a one-time grant of options to purchase 150,000 shares of
Tornier BV common stock, which represents 0.164% of the fully-diluted shares
outstanding.  The options will be granted
to your with an exercise price equal to the fair value of a share of Tornier BV
common stock, which is currently $5.66 per share.  The options are subject to a four-year
vesting schedule, with 25% vesting after one year, and the remaining 75%
vesting pro rata each quarter over the subsequent three years, subject to your
continued service on the Supervisory Board. 
Naturally, Tornier will also reimburse your for all expenses you incur
in connection with your service as a Board member.

 

In order to provide you with an additional
opportunity to participate in the company’s future, you will be granted a
one-time co-investment right in Tornier, with such investment to close in
conjunction with Tornier’s next round of financing, which is expected to occur
in the first quarter of 2009.

 

We are very excited about the future of Tornier
and would be honored to have you as a member of our team.  Please do not hesitate to call me with any
concerns or questions.

 

 

If you are in agreement with the foregoing,
please sign below and fax to me at 952-426-7601.

 

 

Sincerely,

 

	
  /s/ Douglas
  W. Kohrs

  	
   

  
	
  Douglas W. Kohrs

  	
   

  
	
  Chief Executive Officer

  	
   

  
	
  Tornier

  	
   

  

 

Accepted and agreed

 

December 11, 2008

 

 

	
  /s/ Richard F. Wallman

  	
   

  
	
  Richard F. WallmanExhibit
10.8

 

TORNIER B.V.

STOCK OPTION PLAN

 

1.                                       PURPOSE.

 

The purpose of the Plan is to assist the Company in
attracting, retaining, motivating and rewarding Eligible Persons, and promoting
the creation of long-term value for stockholders of the Company by closely
aligning the interests of Participants with those of such stockholders.  The Plan authorizes the award of stock-based
incentives to Participants to encourage such persons to expend their maximum
efforts in the creation of stockholder value.

 

2.                                       DEFINITIONS.

 

For purposes of the Plan, the following terms shall
be defined as set forth below:

 

(a)                                  “Acquisition” means,
collectively, the transactions contemplated under the Share Purchase Agreements
dated May 30, 2006, pursuant to which Felding Finance B.V. whose rights
and obligations have been assigned to TMG France SNC, a wholly owned subsidiary
of the Company, shall purchase the totality of the share capital and voting
rights of (i) Tornier Holding SAS, a French société par actions simplifiée, and (ii) Donovan
Medical Equipment Ltd., a company incorporated in the Republic of Ireland.

 

(b)                                 “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 all within the meaning of section 2:24b of the
Dutch Civil Code.

 

(c)                                  “Board” means the
Management Board of the Company.

 

(d)                                 “Cause” means, in the
absence of any employment agreement between a Participant and the Employer
otherwise defining Cause, (i) incompetence, incompetence, fraud, personal
dishonesty, or acts of gross negligence or willful misconduct on the part of a
Participant in the course of his or her employment or services; (ii) a
Participant’s engagement in conduct that is, or could reasonably be expected to
be, materially injurious to the Company or its Affiliates; (iii) misappropriation
by a Participant of the assets or business opportunities of the Company or its
Affiliates; (iv) embezzlement or other financial fraud committed by a
Participant, at his or her direction, or with his or her personal knowledge; (v) 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 Company’s or an Affiliate’s reputation or
business; or (vi) failure by a Participant to follow the lawful directions
of a superior officer or the Board.  In
the event there is an employment agreement between a Participant and the
Employer defining Cause, “Cause” shall have the meaning provided in such
agreement.

 

(e)                                  “Change in Control”
means (i) the sale or disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company to any
person or group, other than the Institutional Investors; (ii) any person
or group, other than the Institutional Investors, is or becomes the “beneficial
owner,” directly or indirectly, of more than 50% of the total voting power of
the voting stock of the Company, including by way of merger,

 

 

consolidation or otherwise (other than an offering of Stock to the
general public through a registration statement filed with the Securities and
Exchange Commission); or (iii) the sale or disposition, in one or a series
of related transactions, of the voting stock of the Company, as a result of
which the Institutional Investors (either directly or indirectly) are no longer
the single largest holder of voting stock of the Company.

 

(f)                                    “Committee” means the
Board or such other committee appointed in writing by the Board consisting of
two or more individuals, which may include all or part of the Management Board.

 

(g)                                 “Company” means
Tornier B.V. (formerly “TMG B.V.”) a private company with limited liability
(besloten vennootschap met beperkte aansprakelijkheid) organized under the laws
of the Netherlands.

 

(h)                                 “Company Securities”
means equity securities of the Company acquired by the Institutional Investors
from time to time (determined on an as-converted basis).

 

(i)                                     “Competitive Activity”
means, with respect to any Participant, any activity reasonably determined by
the Committee to be competitive with the business of the Employer of the
Participant.  If a Participant is a party
to an employment or other agreement with the Employer that contains restrictive
covenants, “Competitive Activity” with respect to such Participant shall be
limited to the material breach of such restrictive covenants by such
Participant.

 

(j)                                     “Corporate Event”
means (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) a Change in Control; or (iv) the
reorganization or liquidation of the Company.

 

(k)                                  “Depositary Receipts”
means depositary receipts (‘certificaten van
aandelen’) of shares in the capital of the Company, par value €0.01
per Depositary Receipt, issued without cooperation of the company as referred
to in article 2:227 paragraph 2 of the Dutch Civil Code, which shares in the capital
of the Company, par value €0.07 per share are held by the Dutch Foundation
Stichting Administratiekantoor Tronier and such other securities as may be
substituted for such depositary Receipts pursuant to Section 9 hereof.

 

(l)                                     “Disability” means,
in the absence of any employment agreement between a Participant and the
Employer otherwise defining Disability, the permanent and total disability of a
person as determined in good faith by the Committee.  In the event there is an employment agreement
between a Participant and the Employer defining Disability, “Disability” shall
have the meaning provided in such agreement.

 

(m)                               “Effective Date”
means July 18, 2006.

 

(n)                                 “Eligible Person”
means (i) each employee of the Company or of any of its Affiliates, including
each such person who may also be a director of the Company and/or its
Affiliates; (ii) each non-employee director of the Company and/or its
Affiliates; (iii) each other

 

2

 

person who provides substantial services to the Company and/or its
Affiliates and who is designated as eligible by the Committee; and (iv) any
person who has been offered employment by the Company or its Affiliates;
provided that such prospective employee may not receive any payment or exercise
any right relating to an Option until such person has commenced employment with
the Company or its Affiliates.  An
employee on an approved leave of absence may be considered as still in the
employ of the Company or its Affiliates for purposes of eligibility for
participation in the Plan.

 

(o)                                 “Employer” means
either the Company or an Affiliate of the Company that the Participant
(determined without regard to any transfer of an Option) is principally
employed by or provides services to, as applicable.

 

(p)                                 “Expiration Date”
means the date upon which the term of an Option expires, as determined under Section 5(b) hereof.

 

(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 offered to the public in such IPO, and (iii) after an IPO, on
any date (A) if the Stock is listed on a national or international
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 listed on a nationally or internationally recognized automated
quotation system, 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 listed on
a national or international securities exchange or on a nationally or internationally
recognized automated quotation system, 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)                                    “Institutional Investors”
means the “Institutional Investors” listed on Schedule I to the Securityholders’
Agreement as of the Effective Date, together with their respective Affiliates.

 

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

 

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

 

(u)                                 “Lock-Up Period”
shall have the meaning set forth in Section 6(a) below.

 

(v)                                 “Majority Institutional
Investors” shall have the meaning set forth in the Securityholders’
Agreement.

 

(w)                               “Management Board”
shall mean the Management Board of the Company.

 

3

 

(x)                                   “Option” means a
conditional right, granted to a Participant under Section 5 hereof, to
purchase Depositary Receipts at a specified price during specified time
periods.

 

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

 

(z)                                   “Participant” means
an Eligible Person who has been granted an Option under the Plan, or if
applicable, such other person or entity who holds an Option.

 

(aa)                            “Permitted Transfer”
shall mean any transfer by a Participant of all or any portion of his or her
Depositary Receipts (i) to or for the benefit of any spouse, child or
grandchild of the Participant, or (ii) to a trust or partnership for the
benefit of any of the foregoing, including transfers by will or the laws of
descent and distribution.

 

(bb)                          “Plan” means this
Tornier B.V. Stock Option Plan.

 

(cc)                            “Prime Rate” shall
mean the rate from time to time published in the “Money Rates” section of The Wall Street Journal as being the “Prime
Rate” (or, if more than one rate is published as the Prime Rate, then the
highest of such rates).

 

(dd)                          “Repurchase Price”
means:

 

(i)                           on or following
a Participant’s termination of employment or service, as applicable, other than
by the Employer for Cause, an amount equal to the Fair Market Value of the
Stock on the date of repurchase; or

 

(ii)                        on or following
a Participant’s termination of employment or service, as applicable, by the
Employer for Cause, the lesser of (A) the original purchase price paid for
such Depositary Receipts, and (B) the Fair Market Value of the Stock on
the date of repurchase.

 

(ee)                            “Repurchase Right
Exercise Period” means, with respect to Depositary Receipts received upon
the exercise of any Option, the period commencing on the date of a Participant’s
termination of employment with the Employer for any reason and ending on the
earlier to occur of (i) the Repurchase Right Lapse Date, and (ii) in
the case of Depositary Receipts acquired upon exercise of any Option prior to
the date of a Participant’s termination, the twelve (12) month anniversary of
such termination, and in the case of Depositary Receipts acquired upon exercise
of any Option on or following the date of a Participant’s termination, the
twelve (12) month anniversary of the date of that such Option exercise.

 

(ff)                                “Repurchase Right Lapse
Date” shall mean the earliest to occur of (i) the IPO Date, (ii) a
Change in Control, or (iii) the seven (7) year anniversary of the
Effective Date.

 

(gg)                          “Stock” means the
Company’s common stock, par value €0.01 per share, and such other securities as
may be substituted for such stock pursuant to Section 9 hereof.

 

4

 

(hh)                          “Securityholders’
Agreement” means that certain Securityholders’ Agreement by and among the
Company and certain stockholders of the Company dated even with the Effective
Date.

 

(ii)                                  “Time Vested Option”
means an Option subject to the vesting schedule provided in Section 5(e)(ii) below.

 

(jj)                                  “Trust Conditions” (‘administratie voorwaarden’) means the
agreement entered into by operation of law between Stichting
Administratiekantoor Tornier and the Participants upon receiving Depositary
Receipts.

 

(kk)                            “Vesting Commencement
Date” means a date designated in the Option Agreement that vesting of the
Time Vested Options is based upon.

 

3.                                       ADMINISTRATION.

 

(a)                                  Authority of the Committee.  Except as otherwise provided below, the Plan
shall be administered by the Committee. 
The Committee shall have full and final authority, in each case subject
to and consistent with the provisions of the Plan, to (i) select Eligible
Persons to become Participants; (ii) grant Options; (iii) determine
the type, number, and other terms and conditions of, and all other matters
relating to, Options; (iv) prescribe Option Agreements (which need not be
identical for each Participant) and rules and regulations for the
administration of the Plan; (v) construe and interpret the Plan and Option
agreements and correct defects, supply omissions, or reconcile inconsistencies
therein; and (vi) make all other decisions and determinations as the
Committee may deem necessary or advisable for the administration of the
Plan.  The foregoing notwithstanding, the
Board shall perform the functions of the Committee for purposes of granting
Options under the Plan to non-employee directors.  In any case in which the Board is performing
a function of the Committee under the Plan, each reference to the Committee
herein shall be deemed to refer to the Board, except where the context
otherwise requires.  Any action of the
Committee shall be final, conclusive and binding on all persons, including,
without limitation, the Company, its Affiliates, Eligible Persons, Participants
and beneficiaries of Participants.

 

(b)                                 Delegation.  The Committee may delegate to officers or
employees of the Company or any of its Affiliates, or committees thereof, the
authority, subject to such terms as the Committee shall determine, to perform
such functions, including but not limited to administrative functions, as the
Committee may determine appropriate.  The
Committee may appoint agents to assist it in administering the Plan.  Notwithstanding the foregoing or any other
provision of the Plan to the contrary, any Option granted under the Plan to any
person or entity who is not an employee of the Company or any of its Affiliates
shall be expressly approved by the Committee.

 

4.                                       SHARES AVAILABLE UNDER THE PLAN.

 

(a)                                  Number of Shares Available
for Delivery.  Subject to
adjustment as provided in Section 9 hereof, the total number of shares of
Stock reserved and available for delivery in connection with Options under the
Plan shall be 9,000,000.  Depositary Receipts
delivered under the Plan shall consist of Depositary Receipts of authorized and
unissued shares 

 

5

 

or previously issued shares of Stock reacquired by the Company on the
open market or by private purchase.

 

(b)                                 Share Counting Rules.  The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards) and make adjustments if
the number of Depositary Receipts of shares of Stock actually delivered differs
from the number of Depositary Receipts of shares previously counted in
connection with an Option.  To the extent
that an Option expires or is canceled, forfeited, settled in cash or otherwise
terminated or concluded without a delivery to the Participant of the full
number of Depositary Receipts of which the Option related, the undelivered
Depositary Receipts and underlying shares of Stock will again be available for
Options.  Depositary Receipts withheld in
payment of the exercise price or taxes relating to an Option and shares equal
to the number surrendered in payment of any exercise price or taxes relating to
an Option shall be deemed to constitute Depositary Receipts not delivered to
the Participant and shall be deemed to again be available for Options under the
Plan; provided, however, that, where Depositary Receipts are withheld or
surrendered more than ten years after the date of the most recent stockholder
approval of the Plan or any other transaction occurs that would result in
Depositary Receipts becoming available under this Section 4(b), such
Depositary Receipts shall not become available if and to the extent that it
would constitute a material revision of the Plan subject to stockholder
approval under then applicable rules of the national or international
securities exchange on which the Stock is listed.

 

5.                                       OPTIONS.

 

(a)                                  General.  Options may be granted to Eligible Persons in
such form and having 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.  The Option Agreement shall
designate whether an Option is a Time Vested Option or is subject to other
applicable vesting conditions.

 

(b)                                 Term.  The term of each Option shall be set by the
Committee at the time of grant; provided, however, that no Option granted
hereunder shall be exercisable after the expiration of ten (10) years from
the date it was granted.

 

(c)                                  Exercise Price.  The exercise price per Depositary Receipt for
each Option shall be set by the Committee at the time of grant but shall not be
less than the Fair Market Value of a share of Stock on the date of grant.  The exercise price may be designated in Euros
or United States Dollars.

 

(d)                                 Payment for Stock.  Payment for Depositary Receipts acquired
pursuant to Options granted hereunder shall be made in full, upon exercise of
the Options: (i) in immediately available funds in Euros or United States
dollars, as applicable, or by certified or bank cashier’s check; (ii) by
delivery of a notice of “net exercise” to the Company, pursuant to which the
Participant shall receive the number of Depositary Receipts underlying the
Options so exercised reduced by the number of Depositary Receipts equal to the
aggregate exercise price of the Options divided by the Fair Market Value on the
date of exercise; or (iii) by any other means approved by the Committee.

 

6

 

(e)                                  Vesting.

 

(i)                           General.  Options shall vest and become exercisable in
such manner, on such date or dates, or upon the achievement of performance or
other conditions, in each case, as set forth in subsection (ii), or as may
otherwise be determined by the Committee and set forth in the Option Agreement;
provided, however, that notwithstanding any 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
Employer, and all vesting shall cease upon a Participant’s termination of
employment or services with the Employer for any reason.

 

(ii)                        Time
Vested Options.  Subject to
a Participant’s continued employment or service, as applicable, with the
Employer, a Participant’s Time Vested Options shall vest as to 25% of the
Depositary Receipts underlying such Time Vested Options on the one (1) year
anniversary of the Vesting Commencement Date, and the remaining 75% of the
Depositary Receipts underlying such Time Vested Options shall vest pro rata on
each quarterly anniversary of the Vesting Commencement Date over the subsequent
three (3) year period following such one (1) year anniversary of the
Vesting Commencement Date.

 

(f)                                    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.  Notwithstanding the foregoing, Options shall
be transferable to the extent provided in the Option Agreement or otherwise
determined by the Committee.

 

(g)                                 Termination of Employment or
Service.  Except as may otherwise be
provided by the Committee in the Option Agreement:

 

(i)                           If prior to the
Expiration Date, a Participant’s employment or service, as applicable, with the
Employer terminates for any reason other than (A) by the Employer for
Cause, or (B) by reason of the Participant’s 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 remain exercisable until the earlier of the Expiration Date or
the date that is ninety (90) days after the date of such termination.

 

(ii)                        If prior to the
Expiration Date, a Participant’s employment or service, as applicable, with the
Employer terminates by reason of such Participant’s death or Disability, (A) all
vesting with respect to the Options shall cease, (B) any unvested Options
shall expire as of the date of such termination, and (C) 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 a Participant’s rights under the Options pass by will
or the applicable laws of 

 

7

 

descent and distribution
until its expiration, but only to the extent the Options were vested by such
Participant at the time of such termination due to death.

 

(iii)                               If prior to the
Expiration Date, a Participant’s employment or service, as applicable, with the
Employer is terminated by the Employer for Cause, all Options (whether or not
vested) shall immediately expire as of the date of such termination.

 

6.                                       RESTRICTIONS ON STOCK.

 

(a)                                  Prohibition on Transfers.  Except as otherwise approved by the
Committee, pursuant to Section 7 below, pursuant to subsections (b) or
(c) below or in the event of a transfer of undertaking pursuant to section
7:663 et seq.  Dutch Civil Code,
Depositary Receipts acquired by a Participant pursuant to exercise of any
Option granted hereunder may not be sold, transferred or otherwise disposed of
prior to the one hundred eightieth (180th) day following the IPO Date (the “Lock-Up Period”).  If requested by the underwriters managing any
IPO, each 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.  In the event of a transfer of undertaking as
mentioned in section 7:663 et seq. Dutch Civil Code, the rights to Depositary
Receipts and/or Options as granted to Participants under the Plan shall not be
transferred to the acquiror.

 

(b)                                 Drag-Along Rights.

 

(i)                           If the Majority
Institutional Investors are proposing to sell to one or more third parties
fifty percent (50%) or more of the number of the Company Securities
beneficially owned by them on any date of determination, the Majority
Institutional Investors shall have the right to require each Participant to
sell, in accordance with the immediately following sentence hereof, all or a
portion of such Participant’s Depositary Receipts received in connection with
an Award granted hereunder in such sale. 
In the event that the Majority Institutional Investors require the
Participants to sell all or a portion of their Depositary Receipts pursuant to
this Section 6(b) such Participants shall be required to include in
such sale an amount of Depositary Receipts equal to the aggregate number of
Depositary Receipts owned by such Participant as of the date of the proposed
sale multiplied by a fraction, the numerator of which shall be the number of
Company Securities that the Institutional Investors are proposing to sell in
such sale, and the denominator of which is the aggregate Company Securities
owned by the Majority Institutional Investors, in each case, as of the date of
the proposed sale.  A Participant
required to sell any Depositary Receipts pursuant to this Section 6(b),
shall be entitled to receive in exchange therefor the purchase price per
Depositary Receipt received by the Majority Institutional Investors with
respect to their Depositary Receipts in such transaction (less, in the case of
options, warrants or other convertible securities, the exercise or purchase
price thereof); provided, however, that if the Company Securities include
preferred stock of the Company, such per share price shall be calculated
assuming conversion of all preferred stock and after giving effect to any
applicable liquidation preference to all holders of such preferred stock.  The purchase price paid for any Depositary
Receipts sold pursuant to this Section 6(b) shall be payable

 

8

 

in the same form of
consideration as received by the Majority Institutional Investors, or in the
discretion of the Committee, such other consideration as the Committee deems
equitably appropriate.

 

(ii)           To exercise the rights
granted under this Section 6(b), the Majority Institutional Investors
shall give each other Participant a written notice, not less than fifteen (15)
days prior to the proposed sale, containing (i) the name and address of
the proposed transferee(s) and (ii) the proposed purchase price with
respect to the Depositary Receipts, terms of payment and other material terms
and conditions of the offer of the proposed transferee(s), including the
expected Effective Date of the sale. 
Each Participant shall thereafter be obligated to sell his or her
Depositary Receipts to the proposed transferee(s) as the case may be, in
accordance with Section 6(b)(i) above.  Alternatively, Stichting Administratiekantoor
Tornier, pursuant to this Plan and the Trust Conditions, is authorized and
obliged to sell all shares of Stock it administers to the proposed
transferee(s).  Once all shares of Stock
are sold, the Depositary Receipts give right to a pro rata
portion of the profits.  The profits are
distributed pro rata between the holders of
Depositary Receipts.  After the profits
have been distributed the Depositary Receipts are cancelled by operation of
law.

 

(iii)          To the extent that any
transaction described in this Section 6(b) results in consideration
to the Majority Institutional Investors of securities, at the option of the
Institutional Investors, 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 Board.

 

(iv)          For these purposes of this Section 6(b),
the term “Depositary Receipt” shall be deemed to only include Depositary
Receipts acquired upon exercise of any Option.

 

(v)           The drag-along rights
described in this Section 6(b) shall terminate upon the IPO Date.

 

(c)           Permitted Transfers.  Depositary Receipts acquired upon exercise of
an Option may be transferred in connection with a Permitted Transfer; provided,
however, that it shall be a condition of each such Permitted 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.

 

(d)           Securityholders’ Agreement.  In the event that a Participant is a party to
the Securityholders’ Agreement, the provisions of this Sections 6 shall not
apply, and any restrictions on Depositary Receipts acquired upon the exercise
of Options shall be governed by the Securityholders’ Agreement.

 

7.                                       REPURCHASE RIGHTS UPON TERMINATION OF EMPLOYMENT.

 

(a)           If, prior to the Repurchase Right Lapse Date, a
Participant’s employment or service with the Employer terminates for any reason
then, at any time prior to the expiration of 

 

9

 

the Repurchase Right Exercise Period, the Company shall have the right
to repurchase the Depositary Receipts received pursuant to Options granted
hereunder at a per share price equal to the Repurchase Price (the “Repurchase
Right”).  The Repurchase Right shall
be exercisable upon written notice to a Participant indicating the number of
Depositary Receipts 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.  Notwithstanding anything
contained in this Section 7 to the contrary, except due to unforeseen
circumstances, the Company shall not exercise the Repurchase Right on or prior
to the six-month anniversary of the date of exercise of an Option.

 

(b)           If the Company exercises the Repurchase Right
following a Participant’s termination of employment or service, as applicable,
other than (A) by the Employer for Cause or (B) by a Participant’s
voluntary resignation, the aggregate Repurchase Price shall be paid in a
lump-sum at the time of repurchase.

 

(c)           If the Company exercises the Repurchase Right
following a Participant’s termination of employment or service, as applicable, (A) by
the Employer for Cause or (B) by such Participant, the Company shall be
permitted to issue a promissory note equal to the aggregate Repurchase Price in
lieu of a cash payment; provided, however, that such promissory note shall have
a maturity date that does not exceed three years from the date of such
repurchase, shall bear simple interest of not less than the Prime Rate in
effect on the date of such repurchase, and shall be payable as to interest in
equal monthly installments during the term of the note and as to principal on
the maturity date.  The Company shall be
permitted to assign the Repurchase Right to the Institutional Investors or any
of their Affiliates that are stockholders of the Company at the time of such
assignment.

 

8.                                       COMPETITIVE ACTIVITIES

 

Notwithstanding anything contained in the Plan to
the contrary, in the event that a Participant engages in any Competitive
Activity during the term of such Participant’s employment or service with the
Employer or during the six (6) month period following such Participant’s
termination of employment or service with the Employer for any reason, the
Committee may determine, in its sole discretion, to (a) require all
Options held by such Participant to be immediately forfeited and returned to
the Company without additional consideration, (b) require all Depositary
Receipts acquired upon the exercise or vesting of Options within the twelve
(12) month period prior to the date of such Competitive Activity to be
immediately forfeited and returned to the Company without additional
consideration, and (c) to the extent that such Participant received any profit
from the sale of an Option or the Depositary Receipts underlying an Option
within the twelve (12) month period prior to the date of such Competitive
Activity, require that such Participant promptly repay to the Company any
profit received pursuant to such sale.

 

9.                                       ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.

 

(a)           Capitalization Adjustments.  The aggregate number of Depositary Receipts
which may be granted or purchased pursuant to Options granted hereunder, the
number of Depositary Receipts covered by each outstanding Option, and the price
per Depositary Receipt thereof in each such Option shall be equitably and
proportionally adjusted or substituted, as 

 

10

 

determined by the Committee, as to the number, price or kind of a
Depositary Receipt or other consideration subject to such Options (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 (including any Corporate Event (as defined below));
or (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.

 

(b)           Corporate Events.  Notwithstanding the foregoing, except as may
otherwise be provided in an Option agreement, in the event of a Corporate
Event, in lieu of providing the adjustment set forth in subsection (a) above,
the Committee may, in its discretion, cancel any or all vested and/or unvested
Options as of the consummation of such Corporate Event, and provide that
holders of Options so cancelled will receive a payment in respect of
cancellation of their Options based on the amount of the per share
consideration being paid for the Stock in connection with such Corporate Event,
less the applicable exercise price; provided, however, that holders of (1) Options
shall only be entitled to consideration in respect of cancellation of an Option
if the per share consideration less the applicable exercise price is greater
than zero, and (2) “performance vested” Options shall only be entitled to
consideration in respect of cancellation of such Options to the extent that the
applicable performance criteria is achieved prior to or as a result of such
Corporate Event, and shall not otherwise be entitled to payment in
consideration of cancelled unvested Options. 
Payments to holders pursuant to the preceding sentence shall be made in
cash, or, in the sole discretion of the Committee, 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 Depositary Receipts covered by the Option at such time.

 

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

 

10.                                 USE OF PROCEEDS.

 

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

 

11.                                 RIGHTS AND PRIVILEGES AS A HOLDER OF DEPOSITARY RECEIPTS.

 

Except as otherwise specifically provided in the
Plan, Stichting Administratiekantoor Tornier shall be entitled to the rights
and privileges of stock ownership in respect of shares of Stock underlying the
Depositary Receipts which are subject to Options hereunder.  Pursuant to the Trust Conditions, the holders
of Depositary Receipts shall not have these rights and privileges.

 

11

 

Except as other specified
provided in the Plan, no person shall be entitled to the rights and privileges
of Depositary Receipt ownership in respect of Depositary receipts which are
subject to Options hereunder until such Depositary receipts have been issued to
that person.

 

12.                                 EMPLOYMENT OR SERVICE RIGHTS.

 

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 in the future.  The decision to offer the Plan in any given
year, the terms on which the Plan may be offered and the countries in which the
Plan may be offered, is made in the sole discretion of the Board.  The benefits obtained under the Plan are not
contractual benefits and do not form part of the employment contract or the
employment conditions of a Participant. Neither the Plan nor any action taken
hereunder shall be construed as giving any individual any right to be retained
in the employ or service of the Company or an Affiliate of the Company.

 

13.                                 COMPLIANCE WITH LAWS.

 

The obligation of the Company to make payment of
Options in Depositary Receipts 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 Depositary Receipts pursuant to an Option unless such
shares have been properly registered for sale under applicable laws 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 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 applicable law any
of the Depositary Receipts to be offered or sold under the Plan or any
Depositary Receipts issued upon exercise of Options.  If the Depositary Receipts offered for sale
or sold under the Plan are offered or sold pursuant to an exemption from
registration, the Company may restrict the transfer of such Depositary Receipts
as it deems advisable to ensure the availability of any such exemption.

 

14.                                 WITHHOLDING OBLIGATIONS.

 

As a condition to the exercise of any Option, the
Committee may require that a Participant satisfy, through a cash payment by the
Participant, or, in the discretion of the Committee, 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 income, social insurance and other taxes of any kind
required or permitted under applicable law to be withheld in connection with
such exercise.  The Committee, in its
discretion, may permit Depositary Receipts to be used to satisfy tax
withholding requirements and such Depositary Receipts shall be valued at their
Fair Market Value as of the exercise date of the Option; provided, however,
that the aggregate Fair Market Value of the number of Depositary Receipts that
may be used to satisfy tax withholding requirements may not exceed the minimum
statutory required withholding amount with respect to such Option.

 

12

 

15.                                 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, following the IPO Date, without
stockholder approval, the Board shall not make any amendment to the Plan which
would violate the stockholder approval requirements of the national or
international securities exchange on which the Stock is listed.

 

(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 Board has consulted the Participant prior to such amendment.

 

(c)           Amendment of 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 Board has consulted Participant prior to such amendment.

 

16.                                 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 is adopted by the
Board.  No Options may be granted under
the Plan while the Plan is suspended or after it is terminated.

 

17.                                 EFFECTIVE DATE OF THE PLAN.

 

The Plan is effective as of the Effective Date.

 

18.                                 MISCELLANEOUS.

 

(a)           Options to Participants Outside of the Netherlands.  The Committee may modify the terms of any
Option under the Plan made to or held by a Participant who is then a resident
or primarily employed outside of the Netherlands in any manner deemed by the
Committee to be necessary or appropriate in order that such Option shall
conform to laws, regulations and customs of the country in which the
Participant is then a resident or primarily employed, or so that the value and
other benefits of the Option to the Participant, as affected by applicable tax
laws and other restrictions applicable as a result of the Participant’s
residence or employment abroad, shall be comparable to the value of such Option
to a Participant who is a resident or primarily employed in the
Netherlands.  An Option may be modified
under this Section 18(a) in a manner that is inconsistent with the
express terms of the Plan, so long as such modifications will not contravene
any applicable law or regulation.

 

(b)           No Liability of Committee Members.  No member of the Committee shall be
personally liable by reason of any contract or other instrument executed by
such member or on his or her behalf in his or her 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 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 

 

13

 

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 or articles of incorporation or by-laws, each as may be
amended from time to time, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.

 

(c)           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 or her
affairs because of illness or accident, or is a minor, or has died, then any
payment due to such person or his or her 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 or her 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.

 

(d)           Governing Law.  This Agreement and the rights and obligations
of the Parties hereunder and the Persons subject hereto shall be governed by,
and construed and interpreted in accordance with, the laws of the Netherlands,
without giving effect to the choice of law principles thereof.

 

(e)           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.

 

(f)            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 such member.

 

(g)           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.

 

14

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