<PAGE>
Exhibit 10.10
AC SAFETY HOLDING CORP.
2004 DEFERRED COMPENSATION PLAN
Dated as of April 7, 2004
The AC Safety Holding Corp. 2004 Deferred Compensation Plan
(the
"Plan") has been adopted by AC Safety
Holding Corp., a corporation organized
under the laws of the state of Delaware,
effective as of the Effective Date (as
hereinafter defined), for the benefit of
its eligible employees. The Plan is a
nonqualified deferred compensation plan
pursuant to which the employees of the
Company (as hereinafter defined) who are
selected for participation in the Plan
may defer compensation. The Plan is
maintained primarily for the purpose of
providing deferred compensation for a
select group of management or highly
compensated employees, within the meaning
of Sections 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended.
ARTICLE I
DEFINITIONS
The following words and phrases used in this Plan shall have
the
respective meanings set forth below unless
the context clearly indicates to the
contrary. Wherever appropriate herein,
words used in the singular shall be
considered to include the plural, words
used in the plural shall be considered
to include the singular, and the masculine
gender shall be deemed to include the
feminine gender.
Section 1.1 "Administrator" shall mean the Company acting through
the
Board or any Person to whom it delegates
its authority pursuant to Article V.
Section 1.2 "Board" shall mean the Board of Directors of the
Company.
Section 1.3 "Bonus" shall mean that portion of the
consideration
received by a Participant on the Closing
Date as a "Transaction Bonus" that is
credited to such Participant's Deferred
Compensation Account in accordance with
Section 2.2 of the Plan, pursuant to and
determined in accordance with the
Participant's Subscription Agreement.
Section 1.4 "Closing Date" shall mean the date on which the
Proposed
Merger is consummated.
Section 1.5 "Come Along Transaction" shall have the meaning given
to
such term in the Stockholders'
Agreement.
Section 1.6 "Common Stock" shall mean shares of Company's common
stock,
par value $0.01 per share.
Section 1.7 "Company" shall mean AC Safety Holding Corp., a
Delaware
corporation.
Section 1.8 "Deferred Common Stock Unit" shall mean the right of
a
Participant to receive one share of Common
Stock as of the Distribution Date in
accordance with Article IV.
<PAGE>
Section 1.9 "Deferred Compensation Account" of a Participant shall
mean
the bookkeeping account established on
behalf of the Participant in accordance
with Section 3.1.
Section 1.10 "Deferred Preferred Stock Unit" shall mean the right
of a
Participant to receive one share of
Preferred Stock as of the Distribution Date
in accordance with Article IV.
Section 1.11 "Distribution Date" shall mean the date on which the
event
described in Section 4.1 shall occur.
Section 1.12 "Effective Date" means the effective date of the
Plan
which shall be the Closing Date.
Section 1.13 "Exit Event" shall be deemed to have occurred (i) upon
the
expiration of the period of time following
the consummation of an Initial
Offering, as determined by the managing
underwriters, during which the Bear
Group Holders (as such term is defined in
the Stockholders' Agreement) or any
other stockholders of the Company are
contractually prohibited from selling,
making any short sale of, granting any
option for the purchase of, or otherwise
disposing of any Common Stock or Preferred
Stock, or securities convertible into
shares of Common Stock or Preferred Stock,
(ii) upon consummation of a
Realization Event (as defined in the
Company's 2004 Stock Incentive Plan) or
(iii) upon any change of control (or
similar event, however denominated) with
respect to the Company under and as defined
in any indenture or agreement to
which the Company or any of its
subsidiaries is a party with respect to
indebtedness for borrowed money in the
excess of the aggregate principal amount
of $100,000,000.
Section 1.14 "Fund" shall have the meaning set forth in Section
3.4.
Section 1.15 "Initial Offering" shall mean the initial offering
of
Common Stock or Preferred Stock or equity
securities of any Person that owns in
excess of 75% of the outstanding voting
securities of the Company pursuant to
(i) an offering registered under the
Securities Act or (ii) an offering
consummated pursuant to Rule 144A under the
Securities Act.
Section 1.16 "Merger Agreement" shall mean the Agreement and Plan
of
Merger dated as of March 10, 2004, by and
among the Company, AC Safety
Acquisition Corp., a Delaware corporation,
and Aearo Corporation, a Delaware
corporation, as it may be amended,
supplemented or restated from time to time.
Section 1.17
"Participant" shall mean any person included in the Plan
as provided in Article II.
Section 1.18 "Person" shall be construed broadly and shall
include,
without limitation, an individual, a
partnership, a corporation, an association,
a joint stock company, a limited liability
company, a trust, a joint venture, an
unincorporated organization and a
governmental entity or any department, agency
or political subdivision thereof.
Section 1.19 "Plan" shall mean the AC Safety Holding Corp. 2004
Deferred Compensation Plan, as set forth in
this document and as it may
hereafter be amended from time to time.
2
<PAGE>
Section 1.20 "Preferred Stock" shall mean shares of the
Company's
Series A Preferred Stock, par value $0.01
per share.
Section 1.21 "Proposed Merger" shall mean that certain proposed
merger
of AC Safety Acquisition Corp. into Aearo
Corporation.
Section 1.22 "Public Sale" shall have the meaning given to such
term in
the Stockholders' Agreement.
Section 1.23 "Stockholders' Agreement" shall mean the
Stockholders'
Agreement dated as of the date hereof, by
and among the Company and the holders
party thereto, as it may be amended,
supplemented or restated from time to time.
Section 1.24 "Subsidiary" shall mean with respect to any Person,
any
other Person that, directly or indirectly
through one or more intermediaries
Controls, is Controlled by, or is under
common Control with, such Person. The
term "Control" means the possession,
directly or indirectly, of the power to
cause or director the management and
policies of a Person, whether through the
ownership of voting securities, by contract
or otherwise.
Section 1.25 "Subscription Agreement" with respect to any Person
shall
mean any Subscription Agreement (however
denominated) dated as of the Closing
Date between such Person and the Company
that contains a provision expressly
providing for a bonus credit under this
Plan in an amount equal to the
Transaction Bonus set forth in such
Subscription Agreement.
Section 1.26 "Tag Along Transaction" shall have the meaning given
to
such term in the Stockholders'
Agreement.
Section 1.27 "Termination of Employment" shall mean the time when
the
employee-employer relationship between the
Participant and the Company or any of
its Subsidiaries is terminated for any
reason, with or without cause, including,
but not by way of limitation, a termination
by resignation, discharge,
disability, death or retirement, but
excluding transfers of such Participant's
employment among and between the Company
and any Subsidiary of the Company.
ARTICLE II
PARTICIPATION
Section 2.1 Participation. Unless otherwise determined by the
Administrator in its sole discretion, each
employee of the Company who is a
party to a Subscription Agreement and is
actively employed by the Company or any
of its Subsidiaries as of the Closing Date
shall be eligible to participate in
the Plan.
Section 2.2 Deferred Compensation Account. In accordance with the
terms
set forth in the Subscription Agreement, on
the Closing Date, each Participant's
Deferred Compensation Account shall be
credited with such Participant's Bonus in
such amount as is set forth in such
Participant's Subscription Agreement.
3
<PAGE>
ARTICLE III
ACCOUNTS
Section 3.1 Deferred Compensation Accounts.
(a) The Administrator shall establish and maintain for each
Participant a Deferred Compensation Account
to which shall be (i) credited the
amounts determined under Section 3.1(b) and
(ii) debited the amount of any
distributions under the Plan.
(b) As of the Closing Date, each Participant's Deferred
Compensation Account shall be credited with
the number of Deferred Common Stock
Units and Deferred Preferred Stock Units
set forth in his Subscription
Agreement. Notwithstanding any other
provision of this Plan, no amount shall be
credited to any Participant's Deferred
Compensation Account prior to the Closing
Date.
Section 3.2 Designation of Beneficiary. Each Participant shall have
the
right to designate, revoke and redesignate
beneficiaries hereunder and to direct
payment of the amount or distribution of
the items credited to his Deferred
Compensation Account to such beneficiaries
upon his death. Designation,
revocation and redesignation of
beneficiaries shall be made on such form as
shall be designated by the Administrator
and shall be effective upon delivery to
the Administrator.
Section 3.3 Assignments Prohibited. No part of a Participant's
Deferred
Compensation Account shall be liable for
the debts, contracts or engagements of
any Participant, his beneficiaries or
successors in interest, or be taken in
execution by levy, attachment or
garnishment or by any other legal or equitable
proceeding, nor shall any such person have
any rights to alienate, anticipate,
commute, pledge, encumber or assign any
benefits or payments hereunder in any
manner whatsoever except to designate a
beneficiary as provided herein.
Section 3.4 Fund. The Administrator may, in its discretion,
establish a
fund (the "Fund") to which the Company may
contribute cash or other property,
including securities issued by the Company,
to provide for the benefit payments
under this Plan; provided, however, that
such Fund shall remain a general asset
of the Company subject to the rights of
creditors of the Company in the event of
the Company's bankruptcy or insolvency as
defined in any such Fund. The Company
shall designate a trustee to hold any such
Fund in trust in accordance with the
terms of the applicable trust agreement.
The Company's obligations under this
Plan may be satisfied with Fund assets
distributed pursuant to the terms of the
trust, and any such distribution shall
reduce the Company's obligations under
this Plan.
Section 3.5 Dividend Equivalents.
(a) As of the date the Company pays any dividend (other than
cash
dividends) on shares of Common Stock or
Preferred Stock, each Participant's
Deferred Compensation Account shall be
credited with that number of Deferred
Common Stock Units or Deferred Preferred
Stock Units, as applicable, equal to
the ratio of (i) the aggregate value of the
dividend that would have been
payable on the respective units held by
such Participant immediately prior to
such payment date had the shares of Common
Sto
