Allison Transmission, Inc. Deferred

Compensation Plan

June 22, 2012

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TABLE OF CONTENTS

PREAMBLE

 

ARTICLE 1 – GENERAL      1   

1.1

 

Effective Dates.

     1   

1.2

 

Rules of Interpretation.

     1    ARTICLE 2 – DEFINITIONS      2   

2.1

 

“Account”

     2   

2.2

 

“Administrator”

     2   

2.3

 

“Affiliate”

     2   

2.4

 

“Beneficiary”

     2   

2.5

 

“Board” or “Board of Directors”

     2   

2.6

 

“Bonus”

     2   

2.7

 

“Carlyle Stockholders”

     2   

2.8

 

“Change in Control”

     2   

2.9

 

“Code”

     2   

2.10

 

“Compensation”

     2   

2.11

 

“Compensation Committee”

     3   

2.12

 

“Current Onex Stockholders”

     3   

2.13

 

“Disability”

     3   

2.14

 

“Eligible Employee”

     3   

2.15

 

“Employer”

     3   

2.16

 

“ERISA”

     3   

2.17

 

“Identification Date”

     3   

2.18

 

“Key Employee”

     3   

2.19

 

“Onex Stockholders”

     4   

2.20

 

“Participant”

     4   

2.21

 

“Performance Bonus”

     4   

2.22

 

“Permitted Transferee”

     4   

2.23

 

“Person”

     4   

2.24

 

“Plan”

     4   

2.25

 

“Plan Sponsor”

     4   

2.26

 

“Plan Year”

     4   

2.27

 

“Related Employer”

     4   

2.28

 

“Retirement”

     4   

2.29

 

“Separation from Service”

     4   

2.30

 

“Specified Date”

     5   

2.31

 

“Valuation Date”

     5   

2.32

 

“Years of Service”

     6    ARTICLE 3 – PARTICIPATION      7   

3.1

 

Participation

     7   

 

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3.2

 

Termination of Participation

     7   

ARTICLE 4 – PARTICIPANT ELECTIONS

     8   

4.1

 

Deferral Agreement

     8   

4.2

 

Amount of Deferral

     8   

4.3

 

Timing of Election to Defer.

     8   

4.4

 

Election of Payment Schedule and Form of Payment.

     9   

4.5

 

Election Change

     10    ARTICLE 5 – EMPLOYER CONTRIBUTIONS      11   

5.1

 

Matching Contributions

     11   

5.2

 

Other Employer Contributions

     11   

ARTICLE 6 – ACCOUNTS AND CREDITS

     12   

6.1

 

Establishment of Account

     12   

6.2

 

Credits to Account

     12    ARTICLE 7 – INVESTMENT OF CONTRIBUTIONS      13   

7.1

 

Investment Options

     13   

7.2

 

Adjustment of Accounts

     13    ARTICLE 8 – RIGHT TO BENEFITS      14   

8.1

 

Vesting.

     14   

8.2

 

Death or Disability

     14    ARTICLE 9 – DISTRIBUTION OF BENEFITS      16   

9.1

 

Amount of Benefits

     16   

9.2

 

Method and Timing of Distributions

     16   

9.3

 

Cashouts Of Amounts Not Exceeding Stated Limit

     16   

9.4

 

Required Delay in Payment to Key Employees

     16   

9.5

 

Change in Control

     17   

9.6

 

Permissible Delays in Payment

     20   

9.7

 

Permitted Acceleration of Payment

     21    ARTICLE 10 – AMENDMENT AND TERMINATION      23   

10.1

 

Amendment

     23   

10.2

 

Plan Termination Following Change in Control or Corporate Dissolution

     23   

10.3

 

Other Plan Terminations

     23   

 

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ARTICLE 11 – THE TRUST      25   

11.1

 

Establishment of Trust

     25   

11.2

 

Rabbi Trust

     25   

11.3

 

Investment of Trust Funds

     25   

ARTICLE 12 – PLAN ADMINISTRATION

     26   

12.1

 

Powers and Responsibilities of the Administrator

     26   

12.2

 

Claims and Review Procedures.

     26   

12.3

 

Plan Administrative Costs

     28   

12.4

 

Indemnification

     28    ARTICLE 13 – MISCELLANEOUS      29   

13.1

 

Unsecured General Creditor of the Employer

     29   

13.2

 

Employer’s Liability

     29   

13.3

 

Limitation of Rights

     29   

13.4

 

Anti-Assignment

     29   

13.5

 

Facility of Payment

     29   

13.6

 

Notices

     30   

13.7

 

Tax Withholding

     30   

13.8

 

Recoupment

     30   

13.9

 

Successors

     30   

13.10

 

Disclaimer

     30   

13.11

 

Governing Law

     30   

13.12

 

Other Plans

     31   

SCHEDULE 1

 

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PREAMBLE

The Plan is intended to be a “plan which is unfunded and is maintained by an
employer 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. The Plan is further intended to conform with
the requirements of Internal Revenue Code Section 409A and the final regulations
issued thereunder and shall be interpreted, implemented and administered in a
manner consistent therewith. The Plan Sponsor may establish a grantor trust to
hold assets for the provision of certain benefits under the Plan as provided
under Section 11. Assets of the trust, if any, shall be subject to the claims of
the Plan Sponsor’s general creditors, and no Participant shall have any interest
in any assets of the trust or the Plan Sponsor, other than as a general creditor
of the Plan Sponsor.

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ARTICLE 1 – GENERAL

 

1.1 Effective Dates.

 

  (a) Original Effective Date. The Original Effective Date is June 22, 2012, the
date as of which the Plan is initially adopted.

 

1.2 Rules of Interpretation.

 

  (a) The Plan is intended to comply with (i) Code Section 409A and (ii) the
applicable provisions of ERISA, and it shall be interpreted and administered in
accordance with such intent. Except as provided in the preceding sentence or as
otherwise expressly provided herein, the Plan shall be construed, enforced, and
administered, and the validity thereof determined, in accordance with the
internal laws of the State of Indiana without regard to conflict of law
principles and the following provisions of this Section.

 

  (b) Words used herein in the masculine shall be construed to include the
feminine, where appropriate, and vice versa, and words used herein in the
singular or plural shall be construed to include the plural or singular, where
appropriate.

 

  (c) Headings and subheadings are used for convenience of reference only and
shall not affect the interpretation of any provision hereof.

 

  (d) If any provision of the Plan shall be held to violate the Code or ERISA or
be illegal or invalid for any other reason, that provision shall be deemed null
and void, but the invalidation of that provision shall not otherwise affect the
Plan.

 

  (e) Reference to any provision of the Code, ERISA, or other law shall be
deemed to include a reference to the successor of such provision.

 

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ARTICLE 2 – DEFINITIONS

Wherever used herein, the following terms have the meanings set forth below,
unless a different meaning is clearly required by the context:

2.1 “Account” means an account established for the purpose of recording amounts
credited on behalf of a Participant and any income, expenses, gains, losses or
distributions included thereon. The Account shall be a bookkeeping entry only
and shall be utilized solely as a device for the measurement and determination
of the amounts to be paid to a Participant or to the Participant’s Beneficiary
pursuant to the Plan.

2.2 “Administrator” means the Benefits Committee and/or its designee who is
responsible for the administration of the Plan.

2.3 “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person. For these purposes, “control” shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

2.4 “Beneficiary” means the persons, trusts, estates or other entities entitled
under Section 8.2 to receive benefits under the Plan upon the death of a
Participant.

2.5 “Board” or “Board of Directors” means the Board of Directors of the Plan
Sponsor.

2.6 “Bonus” means any cash bonus payable by an Employer to an Eligible Employee
(i) that does not constitute a Performance Bonus, and (ii) has been determined
by the Administrator to be subject to a separate annual deferral election
(including an initial deferral election) on the applicable deferral agreement.

2.7 “Carlyle Stockholders” means (i) Carlyle Partners IV AT Holdings, L.P. and
(ii) any Permitted Transferee of Carlyle Partners IV AT Holdings, L.P. that
hereafter acquires any shares of stock of the Plan Sponsor.

2.8 “Change in Control” means the occurrence of an event involving the Plan
Sponsor that is described in Section 9.5.

2.9 “Code” means the Internal Revenue Code of 1986, as amended.

2.10 “Compensation” means (a) a Participant’s base salary, (b) amounts paid to a
Participant within 1 month after the Participant’s severance from employment, to
the extent these amounts absent a severance from employment, would have been
paid to the Participant prior to the severance from employment if employment
with the Employer had continued, (c) eligible salary continuation payments for
Participants on an approved short term disability leave of absence, (d) pre-tax
contributions and catch up

 

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contributions under the Allison Transmission Salaried Employee Retirement
Savings Plan as well as amounts contributed to the flexible benefits plan, but
not flexible compensation contributions, (e) any Bonus that the Administrator
has made subject to a separate annual deferral election (including an initial
deferral election) on the applicable deferral agreement for such year and,
(f) Performance Bonuses. Exclusions from Compensation include: (a) flexible
compensation payments, (b) overtime and shift payments, (c) accrued vacation pay
paid after severance from employment, (d) amounts paid for not working (i.e.,
sickness, accident and leave payments), (e) seven day operation premiums,
(f) lump sum merit increases, (g) merit bonuses, (h) other bonuses, (i) other
special payments, fees, awards or incentive compensation allowances, and/or
(j) equity compensation.

2.11 “Compensation Committee” means the Compensation Committee of the Board of
Directors of Allison Transmission Holdings, Inc.

2.12 “Current Onex Stockholders” means those entities set forth on Schedule 1.

2.13 “Disability” means a determination by the Administrator that the
Participant is either (a) unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, or (b) is, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or last for a continuous period of not less than twelve months, receiving
income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Employer. A Participant will
be considered to have incurred a Disability if he is determined to be totally
disabled by the Social Security Administration or the Railroad Retirement Board.

2.14 “Eligible Employee” means a select group of management or highly
compensated employees of the Employer who are classified as executives in the
payroll system, as defined under Sections 201(2), 301(a)(3), and 401(a)(1) of
ERISA. Eligible Employees will not include non-resident aliens who receive no
earned income (within the meaning of Code Section 911(d)(2)) from the Employer
which constitutes income from sources within the United States within the
meaning of Code Section 861(a)(3).

2.15 “Employer” means the Plan Sponsor which is authorized to participate in the
Plan.

2.16 “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

2.17 “Identification Date” means each December 31, the date as of which Key
Employees are determined.

2.18 “Key Employee” means an employee who satisfies the conditions set forth in
Section 9.4.

 

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2.19 “Onex Stockholders” means (i) the Current Onex Stockholders and (ii) any
Permitted Transferee of the Current Onex Stockholders that hereafter acquires
any shares of stock of the Plan Sponsor.

2.20 “Participant” means an Eligible Employee who has elected to make deferrals
under the Plan, and/or has received Employer Contributions, and whose Account
has not been fully distributed.

2.21 “Performance Bonus” means the cash portion of the gross annual bonus
payable under the Plan Sponsor’s Allison Transmission, Inc. Career Incentive
Compensation Program with respect to any performance period of at least twelve
months; provided that such gross bonus constitutes “performance-based
compensation” within the meaning of Code Section 409A(a)(2)(A)(v) and the
regulations thereunder.

2.22 “Permitted Transferee” means (i) any Affiliate of the Carlyle Stockholders
or the Onex Stockholders (other than the Plan Sponsor and its subsidiaries), and
(ii) any director, officer or employee of any Affiliate of the Carlyle
Stockholders or the Onex Stockholders (other than the Plan Sponsor and its
subsidiaries).

2.23 “Person” means an individual, corporation, company, limited liability
company, association, partnership, joint venture, organization, business, trust
or any other entity or organization, including a government or any subdivision
or agency thereof.

2.24 “Plan” means the Allison Transmission, Inc. Deferred Compensation Plan,
including any trust agreement, as adopted by the Compensation Committee of the
Board of Directors of Allison Transmission Holdings, Inc. and as amended from
time to time.

2.25 “Plan Sponsor” means Allison Transmission, Inc.

2.26 “Plan Year” means June 22, 2012 through December 31, 2012, and January 1
through December 31, thereafter.

2.27 “Related Employer” means the Employer and (a) any corporation that is a
member of a controlled group of corporations as defined in Code Section 414(b)
that includes the Employer or (b) an unincorporated trade or business that is
under common control as defined in Code Section 414(c) that includes the
Employer.

2.28 “Retirement” means (a) age 55 and (b) 10 Years of Service.

2.29 “Separation from Service” means the date that the Participant dies, retires
or otherwise has a termination of employment with respect to all entities
comprising the Related Employer. A Separation from Service does not occur if the
Participant is on military leave, sick leave or other bona fide leave of absence
if the period of leave does not exceed six months or such longer period during
which the Participant’s right to re-employment is provided by statute or
contract. If the period of leave exceeds six

 

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months and the Participant’s right to re-employment is not provided either by
statute or contract, a Separation from Service will be deemed to have occurred
on the first day following the six-month period. If the period of leave is due
to any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not
less than six months, where the impairment causes the Participant to be unable
to perform the duties of his or her position of employment or any substantially
similar position of employment, a 29 month period of absence may be substituted
for the six month period.

Whether a termination of employment has occurred is based on whether the facts
and circumstances indicate that the Related Employer and the Participant
reasonably anticipated that no further services would be performed after a
certain date or that the level of bona fide services the Participant would
perform after such date (whether as an employee or as an independent contractor)
would permanently decrease to no more than 20 percent of the average level of
bona fide services performed (whether as an employee or an independent
contractor) over the immediately preceding 36 month period (or the full period
of services to the Related Employer if the employee has been providing services
to the Related Employer for less than 36 months).

An independent contractor is considered to have experienced a Separation from
Service with the Related Employer upon the expiration of the contract (or, in
the case of more than one contract, all contracts) under which services are
performed for the Related Employer if the expiration constitutes a good-faith
and complete termination of the contractual relationship.

If a Participant provides services as both an employee and an independent
contractor of the Related Employer, the Participant must separate from service
both as an employee and as an independent contractor to be treated as having
incurred a Separation from Service. If a Participant ceases providing services
as an independent contractor and begins providing services as an employee, or
ceases providing services as an employee and begins providing services as an
independent contractor, the Participant will not be considered to have
experienced a Separation from Service until the Participant has ceased providing
services in both capacities.

All determinations of whether a Separation from Service has occurred will be
made in a manner consistent with Code Section 409A and the final regulations
thereunder.

2.30 “Specified Date” means a “specified time (or pursuant to a fixed schedule)”
within the meaning of Code Section 409A(a)(2)(A)(iv) and the regulations
thereunder.

2.31 “Valuation Date” means each business day of the Plan Year that the New York
Stock Exchange is open.

 

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2.32 “Years of Service” means “Years of Credited Service” as defined under the
Allison Transmission Salaried Employee Retirement Savings Plan.

 

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ARTICLE 3 – PARTICIPATION

 

3.1 Participation. Only Eligible Employees may become Participants. An Eligible
Employee shall become eligible to have amounts credited to his or her Account as
of the date he or she becomes an “executive” as designated under the Plan
Sponsor’s payroll system, or the Original Effective Date of the Plan, if later.

An Eligible Employee shall become a Participant as of the date such amounts are
credited to his or her Accounts, provided that he has completed such forms and
made such elections as the Administrator may prescribe as a condition of
participation.

 

3.2 Termination of Participation. The Administrator may, in its sole discretion,
terminate a Participant’s participation in the Plan in a manner consistent with
Code Section 409A, and the regulations thereunder. If a Participant’s
participation is terminated before the Participant experiences a Separation from
Service, the Participant’s vested Accounts shall be paid in accordance with the
provisions of Article 9.

 

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ARTICLE 4 – PARTICIPANT ELECTIONS

 

4.1 Deferral Agreement. Each Eligible Employee may elect to defer his
Compensation, Bonus, and/or Performance Bonuses separately by executing in
writing or electronically, a deferral agreement in accordance with rules and
procedures established by the Administrator and the provisions of this Article
4. Any Performance Bonus and/or other Bonus deferred under the Plan can be
deferred from cash compensation only, and not from equity or other types of
compensation.

A new deferral agreement must be timely executed for each Plan Year during which
the Eligible Employee desires to defer Compensation. An Eligible Employee who
does not timely execute a deferral agreement shall be deemed to have elected
zero deferrals of Compensation, Bonus, and/or Performance Bonus (except as
provided below for “Special Election for Performance Bonus Compensation”) for
such Plan Year.

A deferral agreement may be changed or revoked during the period specified by
the Administrator. Except as provided in Section 4.3 and 9.2, a deferral
agreement becomes irrevocable at the close of the specified period.

 

4.2 Amount of Deferral. An Eligible Employee may elect to defer his or her
Compensation (exclusive of any Bonus or any Performance Bonus), in a minimum
amount of 5% of Compensation, up to a maximum amount of 50% of Compensation, in
1% increments. Bonuses and Performance Bonuses may be deferred in a minimum
amount of 5% , up to a maximum amount of 100% of the Performance Bonus and/or
Bonus, in 1% increments.

 

4.3 Timing of Election to Defer.

Initial Election. Except as otherwise provided below, an Eligible Employee who
is making an initial deferral election, and who is classified or designated as
an Eligible Employee during a Plan Year, may elect to defer Compensation, and
Bonus separately otherwise payable during the remainder of such Plan Year in
accordance with the rules of this Section 4.3 by executing a deferral agreement
within the thirty (30) day period beginning on the date the employee is
classified or designated as an Eligible Employee (or, if earlier, within 30 days
after the date on which he or she becomes eligible to participate in any other
plan of a Related Employer that is required to be aggregated with this Plan for
purposes of Code Section 409A).

Notwithstanding the preceding provisions, initial deferral elections made prior
to June 30, 2012 will be implemented as soon as administratively feasible with
respect to Compensation (other than Bonuses) payable on or after September 1,
2012. Initial deferral elections made prior to June 30, 2012, for Bonuses, will
be prorated for the number of days after the election is effective.

 

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If a deferral agreement is not elected within this 30 day time period the
Eligible Employee will not be able to elect to defer Compensation, Bonuses
and/or Performance Bonuses under the Plan until the next annual deferral
election period.

If a Bonus is based on a specified performance period that begins before the
Eligible Employee executes his initial deferral agreement, the election will be
deemed to apply to the portion of such Bonus equal to the total amount of such
Bonus for the performance period multiplied by the ratio of the number of days
remaining in the performance period after the election becomes irrevocable and
effective over the total number of days in the performance period. The rules of
this paragraph shall not apply unless the Eligible Employee can be treated as
initially eligible in accordance with Reg. Sec. 1.409A-2(a)(7).

Annual Deferral Election. Each Eligible Employee who desires to defer
Compensation and/or Bonus otherwise payable during a Plan Year, must execute a
deferral agreement within the period preceding the Plan Year specified by the
Administrator.

Special Election for Performance Bonus Compensation. If the Performance Bonus
can be treated as “performance-based compensation” as described in Code
Section 409A(a)(4)(B)(iii), the deferral agreement may be executed within the
period specified by the Administrator. This election period, in no event, shall
end after the date which is six months prior to the end of the period during
which the Performance Bonus is earned; provided the Participant has performed
services continuously from the later of: (a) the beginning of the performance
period or, (b) the date the performance criteria are established through the
date the Participant executed the deferral agreement. Furthermore, the
Compensation must not yet become ‘readily ascertainable’ within the meaning of
Reg. Sec 1.409A-2(a)(8). In addition, if the Compensation qualifies as ‘fiscal
year compensation’ within the meaning of Reg. Sec. 1.409A-2(a)(6), the deferral
agreement may be entered into not later than the end of the Employer’s taxable
year immediately preceding the first taxable year of the Employer in which any
services are performed for which such Compensation is payable.

 

4.4 Election of Payment Schedule and Form of Payment.

All elections of a payment schedule and a form of payment will be made in
accordance with rules and procedures established by the Administrator and the
provisions of this Section 4.4.

Deferrals. At the time an Eligible Employee completes a deferral agreement, the
Eligible Employee must separately elect a “distribution event” and form of
distribution designated for deferrals for Compensation, Bonuses and/or
Performance Bonuses, as applicable, as of the earliest to occur of the following
distribution events: (i) a Specified Date, in the form of a lump sum, or
(ii) Retirement, in the form of a lump sum or quarterly installment payments not
to

 

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exceed 5 years. Once installment payments begin, except as otherwise required
herein (e.g., Section 9.4) or prohibited by Code Section 409A, the following
intervening payment events will accelerate any remaining installments, to be
paid (in the form of a lump sum distribution) in accordance with Section 9.2:
(1) death, (2) Disability, or (3) Change in Control.

Notwithstanding the above and regardless of whether the Participant made
different elections of time and/or form of payment at the time of Separation
from Service for purposes of Compensation, Bonuses, and/or Performance Bonuses,
but subject to Section 9.5, payment of the remaining vested Account balance of
the Participant will automatically occur in the form of a lump sum payment, in
the event of (a) a Separation from Service prior to Retirement or a Specified
Date, (b) Disability, or (c) death. See Article 9 for timing of such
distributions. Except as otherwise required herein or by Code Section 409A and
the final regulations thereunder, payments will be made as provided under
Section 9.2, but in no event later than the time prescribed by Treas. Reg.
Section 1.409A-3(d).

If an Eligible Employee fails to elect a distribution event for Compensation,
Bonuses, and/or Performance Bonuses, he shall be deemed to have elected
Separation from Service as the distribution event. If he fails to elect a form
of payment, he shall be deemed to have elected a lump sum form of payment.

The minimum deferral period for a Specified Date event shall be 3 years for all
Participant deferrals.

Employer Contributions. Employer Contributions shall be distributed in the form
and under the timing provisions that are applicable to deferrals.

 

4.5 Election Change. To the extent permitted under Code Section 409A, a
Participant may make an election change pursuant to this Section with respect to
each scheduled distribution date and/or payment option previously elected by the
Participant with respect to distribution of Compensation, and/or Bonuses, and/or
Performance Bonuses. A Participant’s election change pursuant to this Section
shall be not be valid until 12 months after it is filed with the Administrator,
and it shall be valid only (a) if it defers the original payment date for at
least five years and, (b) if it changes an election for payment at a specified
time or pursuant to a specified schedule, it is made at least 12 months before
the original payment date. The distribution election change must be made in
accordance with procedures and rules established by the Administrator. The
Participant may, at the same time the date of payment is deferred, change the
form of payment but such change in the form of payment may not effect an
acceleration of payment in violation of Code Section 409A or the provisions of
Reg. Sec. 1.409A-2(b). For purposes of this Section 4.5, a series of installment
payments is always treated as a single payment and not as a series of separate
payments.

 

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ARTICLE 5 – EMPLOYER CONTRIBUTIONS

 

5.1 Matching Contributions. The Employer will credit the Participant’s Account
with a Matching Contribution in an amount determined by the Compensation
Committee, and at such times determined by the Compensation Committee, in its
sole discretion. The Matching Contribution will be treated as allocated to the
Participant’s Account at the time specified by the Administrator, in its sole
discretion.

 

5.2 Other Employer Contributions. The Employer will credit the Participant’s
Account with an additional Employer Contribution in an amount determined by the
Compensation Committee at such times determined by the Compensation Committee,
in its sole discretion. The Employer Contribution will be treated as allocated
to the Participant’s Account at the time specified by the Administrator, in its
sole discretion.

 

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ARTICLE 6 – ACCOUNTS AND CREDITS

 

6.1 Establishment of Account. For accounting and computational purposes only,
the Administrator will establish and maintain an Account on behalf of each
Participant which will reflect the credits made pursuant to Section 6.2,
distributions or withdrawals, along with the earnings, expenses, gains and
losses allocated thereto, attributable to actual investments as selected by
Participants made with the amounts in the Account as provided in Article 7. The
Administrator will establish and maintain such other records and accounts, as it
decides in its discretion to be reasonably required or appropriate to discharge
its duties under the Plan.

 

6.2 Credits to Account. A Participant’s Account will be credited for each Plan
Year with: (a) the amount of his elective deferrals under Section 4.1 at the
time the amount subject to the deferral election would otherwise have been
payable to the Participant; and, (b) the amount of Employer Contributions
treated as allocated on his behalf under Article 5.

 

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ARTICLE 7 – INVESTMENT OF CONTRIBUTIONS

 

7.1 Investment Options. The amount credited to each Account shall be invested in
the investment options designated for this purpose by the Allison Transmission,
Inc. Investment Committee.

 

7.2 Adjustment of Accounts. The amount credited to each Account shall be
adjusted for hypothetical investment earnings, expenses, gains or losses in an
amount equal to the earnings, expenses, gains or losses attributable to the
investment options selected by the Participant or Beneficiary from among the
investment options provided in Section 7.1. A Participant (or the Participant’s
Beneficiary after the death of the Participant) may, in accordance with rules
and procedures established by the Administrator, select the investments from
among the options provided in Section 7.1 to be used for the purpose of
calculating future hypothetical investment adjustments to the Account or to
future credits to the Account under Section 6.2, effective as of the Valuation
Date coincident with or next following notice to the Administrator. Each Account
shall be adjusted as of each Valuation Date to reflect: (a) the hypothetical
earnings, expenses, gains and losses described above; (b) amounts credited
pursuant to Section 6.2; and (c) distributions or withdrawals. In addition, each
Account may be adjusted for its allocable share of the hypothetical costs and
expenses associated with the maintenance of the hypothetical investments
provided in Section 7.1.

 

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ARTICLE 8 – RIGHT TO BENEFITS

 

8.1 Vesting.

Deferrals. A Participant, at all times, has a 100% nonforfeitable interest in
the amounts credited to his Account attributable to his elective deferrals made
in accordance with Section 4.1.

Employer Contributions. A Participant’s right to the amounts credited to his
Account attributable to Matching Contributions and Other Employer Contributions
made in accordance with Article 5, shall be vested at 100% after three Years of
Service.

Retention or Other Special Bonuses or Other Employer Contributions
Notwithstanding the preceding provisions, the Administrator may allocate Other
Employer Contributions (such as a retention bonus) to the Plan on the condition
that the Participant satisfy a separate vesting or service schedule (e.g.,
determined without regard to prior Years of Service) in addition to or in lieu
of the vesting requirement referenced in the preceding sentence. In such
instance, such additional vesting or service shall govern the Participant’s
right to such allocations. The form and timing of the distribution will be as
set forth in the award agreement announcing such Other Employer Contribution;
provided, however, that if the form and timing of the payment is not provided in
the award agreement or such timing does not comply with Code Section 409A, then
such Other Employer Contribution shall be distributed in the form of a lump sum
payment upon the earlier of (a) death, (b) Disability or (c) Separation from
Service, subject to Section 9.5. See Article 9 for timing of such distributions

Notwithstanding the provisions above in Section 8.1 under Employer
Contributions, and regardless of the designation of timing and/or the form of
payment set forth in the award agreement, a Participant’s interest in his
Account (including deferrals and Employer Contributions), will automatically
become 100% vested, and will be paid out in the form of a lump sum payment upon
the earlier of: (a) the Participant’s death (see Section 8.2), (b) in the event
of a Change in Control (see Section 9.5), or Disability (see Section 8.2).

Upon a Separation from Service, the Participant shall forfeit the nonvested
portion of his Account, unless otherwise provided by the Compensation Committee.

 

8.2

Death or Disability. A Participant’s nonvested interest in his Account will be
automatically 100% vested upon the death or Disability of the Participant, and
payment of the vested Account balance will occur upon the Participant’s death or
Disability in a lump sum payment, subject to the timing under Section 9.2,
regardless of whether the Participant had made different elections of time
and/or form of payment (even to the extent installment payments were previously
elected or were previously in pay status). The determination of whether a

 

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  Participant has incurred a Disability shall be made by the Administrator, in
its sole discretion, in a manner consistent with the requirements of Code
Section 409A.

In the event of a death, Participant may designate a Beneficiary or
Beneficiaries, or change any prior designation of Beneficiary or Beneficiaries
in accordance with rules and procedures established by the Administrator. A copy
of the death notice or other sufficient documentation must be filed with and
approved by the Administrator. If upon the death of the Participant there is, in
the opinion of the Administrator, no designated Beneficiary for part or all of
the Participant’s vested Account, such amount will be paid to the deceased
Participant’s spouse, but if none, to the deceased Participant’s estate (such
estate shall be deemed to be the Beneficiary for purposes of the Plan) in
accordance with the provisions of Article 9.

 

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ARTICLE 9 – DISTRIBUTION OF BENEFITS

 

9.1 Amount of Benefits. The vested amount credited to a Participant’s Account as
determined under Articles 6, 7 and 8 shall determine and constitute the basis
for the value of benefits payable to the Participant under the Plan.

 

9.2

Method and Timing of Distributions. Except as otherwise provided in this Article
9, distributions under the Plan shall be made in accordance with the elections
made or deemed made by the Participant under Article 4. There shall be a 6 month
delay from the date of Separation from Service or Retirement, in the event of
Separation from Service or Retirement (regardless of whether it is required
under Section 9.4), with payments to commence as soon as administratively
feasible within the month following the 6th month following the distribution
event, but in no event later than the time prescribed by Treasury Regulation
Section 1.409A-3(d). All other distributions under the Plan shall commence as
soon as administratively feasible following the distribution event, but in no
event later than the time prescribed by Treasury Regulation Section 1.409A-3(d).

 

9.3 Cashouts Of Amounts Not Exceeding Stated Limit. If the vested amount
credited to the Participant’s Account does not exceed $5,000.00 at the time he
incurs a Separation from Service for any reason, the Employer shall distribute
such amount to the Participant in a single lump sum cash payment following such
Separation from Service, as soon as administratively feasible following the
distribution event, but in no event later than the time prescribed by Treasury
Regulation Section 1.409A-3(d).

 

9.4 Required Delay in Payment to Key Employees. Except as otherwise provided in
this Section, a distribution made on account of Separation from Service (or
Retirement, if applicable) to a Participant who is a Key Employee as of the date
of his Separation from Service (or Retirement, if applicable) shall not be made
before the date which is 6 months after the Separation from Service (or
Retirement, if applicable). If payments to a Key Employee are delayed in
accordance with this Section, the payments to which the Key Employee would
otherwise have been entitled during the 6 month period shall be accumulated and
paid in a single lump sum at the time specified in Section 9.2 after the 6 month
period elapses.

 

  (a) A Participant is treated as a Key Employee if (i) he is employed by a
Related Employer any of whose stock is publicly traded on an established
securities market, and (ii) he satisfies the requirements of Code
Section 416(i)(1)(A)(i), (ii) or (iii), determined without regard to Code
Section 416(i)(5), at any time during the 12 month period ending on the
Identification Date.

 

  (b) A Participant who is a Key Employee on an Identification Date shall be
treated as a Key Employee for purposes of the 6 month delay in distributions for
the 12 month period beginning on the first day of the fourth month following the
Identification Date.

 

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  (c) The Plan Administrator may elect to apply an alternative method to
identify Participants who will be treated as Key Employees for purposes of the 6
month delay in distributions if the method satisfies each of the following
requirements. The alternative method is reasonably designed to include all Key
Employees, is an objectively determinable standard providing no direct or
indirect election to any Participant regarding its application, and results in
either all Key Employees or no more than 200 Key Employees being identified in
the class as of any date. Use of an alternative method that satisfies the
requirements of this Section 9.4(c ) will not be treated as a change in the time
and form of payment for purposes of Reg. Sec. 1.409A-2(b).

 

  (d) The 6 month delay does not apply to any other distribution events set
forth in this Plan, including payments described in Section 9.7(a),(b) or (d).

 

9.5 Change in Control. In the event of a Change in Control, a Participant’s
vested interest in his Account, including deferrals and Employer Contributions,
will automatically become 100% vested, and payment of the vested Account balance
will occur upon the Change in Control in a lump sum payment (even to the extent
installment payments were previously elected or were previously in pay status),
subject to the timing of Section 9.2 and any required delay under Section 9.4.
In addition, the Plan Sponsor reserves the right to terminate the Plan and
distribute all vested amounts credited to Participant Accounts upon a Change in
Control.

A Change in Control, for purposes of the Plan, will occur upon a change in the
ownership of the Plan Sponsor, a change in the effective control of the Plan
Sponsor, or a change in the ownership of a substantial portion of the assets of
the Plan Sponsor; provided, that a transaction shall not be a Change in Control
for purposes of the Plan if a change in the ownership of the Plan Sponsor, a
change in the effective control of the Plan Sponsor, or a change in the
ownership of a substantial portion of the assets of the Plan Sponsor results
from the acquisition of Stock or assets by one or more Carlyle Stockholders or
Onex Stockholders. The Plan Sponsor, for this purpose, includes any corporation
identified in this Section.

Whether a Change in Control has occurred will be determined by the Administrator
in accordance with the rules and definitions set forth in this Section and in a
manner consistent with the provisions of Code Section 409A and the final
regulations issued thereunder. A distribution to the Participant will be treated
as occurring upon a Change in Control if the Plan Sponsor terminates the Plan in
accordance with Section 10.2 and distributes the Participant’s benefits within
12 months of a Change in Control as provided in Section 10.2.

 

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  (a) Relevant Corporations. To constitute a Change in Control for purposes of
the Plan, the event must relate to (i) the corporation for whom the Participant
is performing services at the time of the Change in Control, (ii) the
corporation that is liable for the payment of the Participant’s benefits under
the Plan (or all corporations liable if more than one corporation is liable) but
only if either the deferred compensation is attributable to the performance of
services by the Participant for such corporation (or corporations) or there is a
bona fide business purpose for such corporation (or corporations) to be liable
for such payment and, in either case, no significant purpose of making such
corporation (or corporations) liable for such payment is the avoidance of
federal income tax, or (iii) a corporation that is a majority shareholder of a
corporation identified in (i) or (ii), or any corporation in a chain of
corporations in which each corporation is a majority shareholder of another
corporation in the chain, ending in a corporation identified in (i) or (ii). A
majority shareholder is defined as a shareholder owning more than fifty percent
(50%) of the total fair market value and voting power of such corporation.

 

  (b) Stock Ownership. Code Section 318(a) applies for purposes of determining
stock ownership. Stock underlying a vested option is considered owned by the
individual who owns the vested option (and the stock underlying an unvested
option is not considered owned by the individual who holds the unvested option).
If, however, a vested option is exercisable for stock that is not substantially
vested (as defined by Treasury Regulation Section 1.83-3(b) and (j)) the stock
underlying the option is not treated as owned by the individual who holds the
option.

 

  (c)

Change in the Ownership of a Corporation. A change in the ownership of a
corporation occurs on the date that any one person or more than one person
acting as a group, acquires ownership of stock of the corporation that, together
with stock held by such person or group, constitutes more than fifty percent
(50%) of the total fair market value or total voting power of the stock of such
corporation. If any one person or more than one person acting as a group is
considered to own more than fifty percent (50%) of the total fair market value
or total voting power of the stock of a corporation, the acquisition of
additional stock by the same person or persons is not considered to cause a
change in the ownership of the corporation (or to cause a change in the
effective control of the corporation as discussed below in Section 9.5(d)). An
increase in the percentage of stock owned by any one person, or persons acting
as a group, as a result of a transaction in which the corporation acquires its
stock in exchange for property will be treated as an acquisition of stock.
Section 9.5(c) applies only when there is a transfer of stock of a corporation
(or issuance of stock of a corporation) and stock in such corporation remains
outstanding after the transaction. For purposes of this Section 9.5(c), persons
will not be considered to be acting as a group solely because they purchase or
own stock of the same corporation at the

 

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  same time or as a result of a public offering. Persons will, however, be
considered to be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction with the corporation. If a person, including an
entity, owns stock in both corporations that enter into a merger, consolidation,
purchase or acquisition of stock, or similar transaction, such shareholder is
considered to be acting as a group with other shareholders in a corporation only
with respect to ownership in that corporation prior to the transaction giving
rise to the change and not with respect to the ownership interest in the other
corporation.

 

  (d) Change in the effective control of a corporation. A change in the
effective control of a corporation occurs on the date that either (i) any one
person, or more than one person acting as a group, acquires (or has acquired
during the twelve month period ending on the date of the most recent acquisition
by such person or persons) ownership of stock of the corporation possessing
thirty percent (30%) or more of the total voting power of the stock of such
corporation, or (ii) a majority of members of the corporation’s board of
directors is replaced during any twelve month period by directors whose
appointment or election is not endorsed by a majority of the members of the
corporation’s board of directors prior to the date of the appointment or
election, provided that for purposes of this paragraph (ii), the term
corporation refers solely to the relevant corporation identified in
Section 9.5(a) for which no other corporation is a majority shareholder for
purposes of Section 9.5(a). In the absence of an event described in
Section 9.5(d)(i) or (ii), a change in the effective control of a corporation
will not have occurred. A change in effective control may also occur in any
transaction in which either of the two corporations involved in the transaction
has a change in the ownership of such corporation as described in Section 9.5(c)
or a change in the ownership of a substantial portion of the assets of such
corporation as described in Section 9.5(e). If any one person, or more than one
person acting as a group, is considered to effectively control a corporation
within the meaning of this Section 9.5(d), the acquisition of additional control
of the corporation by the same person or persons is not considered to cause a
change in the effective control of the corporation or to cause a change in the
ownership of the corporation within the meaning of Section 9.7(c). For purposes
of this Section 9.5(d), persons will or will not be considered to be acting as a
group in accordance with rules similar to those set forth in Section 9.7(c) with
the following exception. If a person, including an entity, owns stock in both
corporations that enter into a merger, consolidation, purchase or acquisition of
stock, or similar transaction, such shareholder is considered to be acting as a
group with other shareholders in a corporation only with respect to the
ownership in that corporation prior to the transaction giving rise to the change
and not with respect to the ownership interest in the other corporation.

 

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  (e) Change in the ownership of a substantial portion of a corporation’s
assets. A change in the ownership of a substantial portion of a corporation’s
assets occurs on the date that any one person, or more than one person acting as
a group (as determined in accordance with rules similar to those set forth in
Section 9.5(d)), acquires (or has acquired during the twelve month period ending
on the date of the most recent acquisition by such person or persons) assets
from the corporation that have a total gross fair market value equal to or more
than forty percent (40%) of the total gross fair market value of all of the
assets of the corporation immediately prior to such acquisition or acquisitions.
For this purpose, gross fair market value means the value of the assets of the
corporation or the value of the assets being disposed of determined without
regard to any liabilities associated with such assets. There is no Change in
Control event under this Section 9.5(e) when there is a transfer to an entity
that is controlled by the shareholders of the transferring corporation
immediately after the transfer. A transfer of assets by a corporation is not
treated as a change in ownership of such assets if the assets are transferred to
(i) a shareholder of the corporation (immediately before the asset transfer) in
exchange for or with respect to its stock, (ii) an entity, fifty percent
(50%) or more of the total value or voting power of which is owned, directly or
indirectly, by the corporation, (iii) a person, or more than one person acting
as a group, that owns, directly or indirectly, fifty percent (50%) or more of
the total value or voting power of all the outstanding stock of the corporation,
or (iv) an entity, at least fifty (50%) of the total value or voting power of
which is owned, directly or indirectly, by a person described in
Section 9.5(e)(iii). For purposes of the foregoing, and except as otherwise
provided, a person’s status is determined immediately after the transfer of
assets.

 

9.6 Permissible Delays in Payment. Distributions may be delayed beyond the date
payment would otherwise occur in accordance with the provisions of Articles 8
and 9 in any of the following circumstances as long as the Employer treats all
payments to similarly situated Participants on a reasonably consistent basis.

 

  (a) The Employer may delay payment if it reasonably anticipates that its
deduction with respect to such payment would be limited or eliminated by the
application of Code Section 162(m). Payment must be made during the
Participant’s first taxable year in which the Employer reasonably anticipates,
or should reasonably anticipate, that if the payment is made during such year
the deduction of such payment will not be barred by the application of Code
Section 162(m) or during the period beginning with the Participant’s Separation
from Service and ending on the later of the last day of the Employer’s taxable
year in which the Participant Separates from Service or, the 15th day of the
third month following the Participant’s Separation from Service. If a scheduled
payment to a Participant is delayed in accordance with this Section 9.6(a), all
scheduled payments to the Participant that could be delayed in accordance with
this Section 9.6(a) will also be delayed.

 

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  (b) The Employer may also delay payment if it reasonably anticipates that the
making of the payment will violate federal securities laws or other applicable
laws provided payment is made at the earliest date on which the Employer
reasonably anticipates that the making of the payment will not cause such
violation.

 

  (c) The Employer reserves the right to amend the Plan to provide for a delay
in payment upon such other events and conditions as the Secretary of the
Treasury may prescribe in generally applicable guidance published in the
Internal Revenue Bulletin.

 

9.7 Permitted Acceleration of Payment. The Employer may permit acceleration of
the time or schedule of any payment or amount scheduled to be paid pursuant to a
payment under the Plan provided such acceleration would be permitted by the
provisions of Reg. Sec. 1.409A-3(j)(4), including the following events:

 

  (a) Domestic Relations Order. A payment may be accelerated if such payment is
made to an alternate payee pursuant to and following the receipt and
qualification of a domestic relations order as defined in Code Section 414(p).

 

  (b) Compliance with Ethics Agreements and Legal Requirements. A payment may be
accelerated as may be necessary to comply with ethics agreements with the
Federal government or as may be reasonably necessary to avoid the violation of
Federal, state, local or foreign ethics law or conflicts of laws, in accordance
with the requirements of Code Section 409A.

 

  (c) De Minimis Amounts. A payment will be accelerated if (i) the amount of the
payment is not greater than the applicable dollar amount under Code
Section 402(g)(1)(B), (ii) at the time the payment is made the amount
constitutes the Participant’s entire interest under the Plan and all other plans
that are aggregated with the Plan under Reg. Sec. 1.409A-1(c)(2).

 

  (d) FICA Tax. A payment may be accelerated to the extent required to pay the
Federal Insurance Contributions Act tax imposed under Code Sections 3101,
3121(a) and 3121(v)(2) of the Code with respect to compensation deferred under
the Plan (the “FICA Amount”). Additionally, a payment may be accelerated to pay
the income tax on wages imposed under Code Section 3401 of the Code on the FICA
Amount and to pay the additional income tax at source on wages attributable to
the pyramiding Code Section 3401 wages and taxes. The total payment under this
subsection (d) may not exceed the aggregate of the FICA Amount and the income
tax withholding related to the FICA Amount.

 

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  (e) Section 409A Additional Tax. A payment may be accelerated if the Plan
fails to meet the requirements of Code Section 409A; provided that such payment
may not exceed the amount required to be included in income as a result of the
failure to comply with the requirements of Code Section 409A.

 

  (f) Offset. A payment may be accelerated in the Employer’s discretion as
satisfaction of a debt of the Participant to the Employer, where such debt is
incurred in the ordinary course of the service relationship between the
Participant and the Employer, the entire amount of the reduction in any of the
Employer’s taxable years does not exceed $5,000, and the reduction is made at
the same time and in the same amount as the debt otherwise would have been due
and collected from the Participant.

 

  (g) Other Events. A payment may be accelerated in the Administrator’s
discretion in connection with such other events and conditions as permitted by
Code Section 409A.

 

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ARTICLE 10 – AMENDMENT AND TERMINATION

 

10.1 Amendment. The Plan shall continue in force with respect to any Participant
until the completion of any payments due hereunder and shall be binding upon any
successor to the Employer. The Plan Sponsor reserves the right, in its sole
discretion, to amend or modify the Plan in whole or in part, at any time, by
action of the Vice President, Human Resources, and the Director of Employee
Benefits and Pension Administration. Such amendment or modification shall be in
writing and may be retroactive if and to the extent such action is appropriate
in light of government regulations or other legal requirements. Notwithstanding
the above, any amendment or modification that materially changes the benefits
provided under the Plan or increases the costs of the Plan beyond that amount
budgeted by the Plan Sponsor for the Plan Year, shall be made by the
Compensation Committee. The Compensation Committee will also determine the
amount of Matching Contributions and other Employer Contributions in its sole
discretion. If an amendment is to provide that no additional benefits shall
accrue with respect to any Participant under the Plan, no such amendment shall
(a) deprive any Participant or Beneficiary of any benefit that accrued under the
Plan before the adoption of such amendment; (b) result in an acceleration of
benefit payments in violation of Code Section 409A and the guidance thereunder,
or (c) result in any other violation of Section 409A or the guidance thereunder.

 

10.2 Plan Termination Following Change in Control or Corporate Dissolution. As
set forth in Section 9.5, the Compensation Committee reserves the right to
terminate the Plan and distribute all amounts credited to all Participant
Accounts within the 30 days preceding or the 12 months following a Change in
Control as determined in accordance with the rules set forth in Section 9.5. For
this purpose, the Plan will be treated as terminated only if all agreements,
methods, programs and other arrangements sponsored by the Related Employer
immediately after the Change in Control which are treated as a single plan under
Reg. Sec. 1.409A-1(c)(2) are also terminated so that all participants under the
Plan and all similar arrangements are required to receive all amounts deferred
under the terminated arrangements within 12 months of the date the Compensation
Committee irrevocably takes all necessary action to terminate the arrangements.
In addition, the Compensation Committee reserves the right to terminate the Plan
within twelve months of a corporate dissolution taxed under Code Section 331 or
with the approval of a bankruptcy court pursuant to 11 U. S. C.
Section 503(b)(1)(A) provided that amounts deferred under the Plan are included
in the gross incomes of Participants in the latest of (a) the calendar year in
which the termination and liquidation occurs, (b) the first calendar year in
which the amount is no longer subject to a substantial risk of forfeiture, or
(c) the first calendar year in which payment is administratively practicable.

 

10.3

Other Plan Terminations. The Compensation Committee retains the discretion to
terminate the Plan if (a) all arrangements sponsored by the Plan Sponsor that

 

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  would be aggregated with any terminated arrangement under Code Section 409A
and Reg. Sec. 1.409A-1(c)(2) are terminated, (b) no payments other than payments
that would be payable under the terms of the arrangements if the termination had
not occurred are made within 12 months of the termination of the arrangements,
(c) all payments are made within 24 months of the date the Compensation
Committee takes all necessary action to irrevocably terminate and liquidate the
arrangements, (d) the Plan Sponsor does not adopt a new arrangement that would
be aggregated with any terminated arrangement under Code Section 409A and the
regulations thereunder at any time within the 3 year period following the date
of termination of the arrangement, and (e) the termination does not occur
proximate to a downturn in the financial health of the Plan sponsor. The
Compensation Committee also reserves the right to amend the Plan to provide that
termination of the Plan will occur under such conditions and events as may be
prescribed by the Secretary of the Treasury in generally applicable guidance
published in the Internal Revenue Bulletin.

 

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ARTICLE 11 – THE TRUST

 

11.1 Establishment of Trust. The Plan Sponsor may but is not required to
establish a trust to hold amounts which the Plan Sponsor may contribute from
time to time to correspond to some or all amounts credited to Participants under
Section 6.2. In the event that the Plan Sponsor wishes to establish a trust to
provide a source of funds for the payment of Plan benefits, any such trust shall
be constructed to constitute an unfunded arrangement that does not affect the
status of the Plan as an unfunded plan for purposes of Title I of ERISA and the
Code.

 

11.2 Rabbi Trust. Any trust established by the Plan Sponsor shall be between the
Plan Sponsor and a trustee pursuant to a separate written agreement under which
assets are held, administered and managed, subject to the claims of the Plan
Sponsor’s creditors in the event of the Plan Sponsor’s insolvency. The trust is
intended to be treated as a rabbi trust in accordance with existing guidance of
the Internal Revenue Service, and the establishment of the trust shall not cause
the Participant to realize current income on amounts contributed thereto. The
Plan Sponsor must notify the trustee in the event of a bankruptcy or insolvency.

 

11.3 Investment of Trust Funds. Any amounts contributed to the trust by the Plan
Sponsor shall be invested by the trustee in accordance with the provisions of
the trust and the instructions of the Administrator. Trust investments need not
reflect the hypothetical investments selected by Participants under Section 7.1
for the purpose of adjusting Accounts, and the earnings or investment results of
the trust need not affect the hypothetical investment adjustments to Participant
Accounts under the Plan.

 

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ARTICLE 12 – PLAN ADMINISTRATION

 

12.1 Powers and Responsibilities of the Administrator. The Administrator has the
full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the applicable requirements of ERISA. The
Administrator’s powers and responsibilities include, but are not limited to, the
following:

 

  (a) To make and enforce such rules and procedures as it deems necessary or
proper for the efficient administration of the Plan;

 

  (b) To interpret the Plan, its interpretation thereof to be final, except as
provided in Section 12.2, on all persons claiming benefits under the Plan;

 

  (c) To decide all questions concerning the Plan and the eligibility of any
person to participate in the Plan;

 

  (d) To administer the claims and review procedures specified in Section 12.2;

 

  (e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the provisions
of the Plan;

 

  (f) To determine the person or persons to whom such benefits will be paid;

 

  (g) To authorize the payment of benefits;

 

  (h) To comply with the reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA, as applicable;

 

  (i) To appoint such agents, counsel, accountants, and consultants as may be
required to assist in administering the Plan;

 

  (j) By written instrument, to allocate and delegate its responsibilities,
including the delegation to a committee to administer the Plan.

 

12.2 Claims and Review Procedures.

 

  (a) Claims Procedure.

If any person believes he is being denied any rights or benefits under the Plan,
such person may file a claim in writing with the Administrator. If any such
claim is wholly or partially denied, the Administrator will notify such person
of its decision in writing. Such notification will contain (i) specific reasons
for the denial, (ii) specific reference to pertinent Plan provisions, (iii) a
description of any additional material or information necessary for such person
to perfect such claim and an explanation of why such material or information is
necessary, and (iv) a description of the Plan’s review procedures and the time
limits applicable to such procedures,

 

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including a statement of the person’s right to bring a civil action following an
adverse decision on review. Such notification will be given within 90 days (45
days in the case of a claim regarding Disability) after the claim is received by
the Administrator. The Administrator may extend the period for providing the
notification by 90 days (30 days in the case of a claim regarding Disability) if
special circumstances require an extension of time for processing the claim and
if written notice of such extension and circumstance is given to such person
within the initial 90 day period (45 day period in the case of a claim regarding
Disability). If such notification is not given within such period, the claim
will be considered denied as of the last day of such period and such person may
request a review of his claim.

 

  (b) Review Procedure.

Within 60 days (180 days in the case of a claim regarding Disability) after the
date on which a person receives a written notification of denial of claim (or,
if written notification is not provided, within 60 days (180 days in the case of
a claim regarding Disability) of the date denial is considered to have
occurred), such person (or his duly authorized representative) may (i) file a
written request with the Administrator for a review of his denied claim and of
pertinent documents and (ii) submit written issues and comments to the
Administrator. The Administrator will notify such person of its decision in
writing. Such notification will be written in a manner calculated to be
understood by such person and will contain specific reasons for the decision as
well as specific references to pertinent Plan provisions. The notification will
explain that the person is entitled to receive, upon request and free of charge,
reasonable access to and copies of all pertinent documents and has the right to
bring a civil action following an adverse decision on review. The decision on
review will be made within 60 days (45 days in the case of a claim regarding
Disability). The Administrator may extend the period for making the decision on
review by 60 days (45 days in the case of a claim regarding Disability) if
special circumstances require an extension of time for processing the request
such as an election by the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given to such person within the
initial 60-day period (45 days in the case of a claim regarding Disability). If
the decision on review is not made within such period, the claim will be
considered denied.

 

  (c) Exhaustion of Claims Procedures and Right to Bring Legal Claim.

No action at law or equity shall be brought more than one (1) year after the
Administrator’s affirmation of a denial of a claim, or, if earlier, more than
four (4) years after the facts or events giving rising to the claimant’s
allegation(s) or claim(s) first occurred.

 

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12.3 Plan Administrative Costs. All reasonable costs and expenses (including
legal, accounting, and employee communication fees) incurred by the
Administrator in administering the Plan shall be paid by the Plan to the extent
not paid by the Employer.

 

12.4 Indemnification. To the maximum extent permitted by applicable law, the
Employer shall indemnify and hold harmless the Administrator, the Compensation
Committee, any person serving on the Compensation Committee or a committee that
serves as Administrator, and any officer, employee, or director of an Employer
to whom any duty or power relating to the administration of the Plan has been
properly delegated, from and against any cost, expense, or liability arising out
of any act or omission in connection with the Plan, unless arising out of such
person’s own fraud or bad faith.

 

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ARTICLE 13 – MISCELLANEOUS

 

13.1 Unsecured General Creditor of the Employer. Participants and their
Beneficiaries, heirs, successors and assigns shall have no legal or equitable
rights, interests or claims in any property or assets of the Employer. For
purposes of the payment of benefits under the Plan, any and all of the
Employer’s assets shall be, and shall remain, the general, unpledged,
unrestricted assets of the Employer. Each Employer’s obligation under the Plan
shall be merely that of an unfunded and unsecured promise to pay money in the
future.

 

13.2 Employer’s Liability. Each Employer’s liability for the payment of benefits
under the Plan shall be defined only by the Plan and by the deferral agreements
entered into between a Participant and the Employer. An Employer shall have no
obligation or liability to a Participant under the Plan except as provided by
the Plan and a deferral agreement or agreements. An Employer shall have no
liability to Participants employed by other Employers.

 

13.3 Limitation of Rights. Neither the establishment of the Plan, nor any
amendment thereof, nor the creation of any fund or account, nor the payment of
any benefits, will be construed as giving to the Participant or any other person
any legal or equitable right against the Employer, the Plan or the
Administrator, except as provided herein; and in no event will the terms of
employment or service of the Participant be modified or in any way affected
hereby.

 

13.4 Anti-Assignment. Except as may be necessary to fulfill a domestic relations
order within the meaning of Code Section 414(p), none of the benefits or rights
of a Participant or any Beneficiary of a Participant shall be subject to the
claim of any creditor. In particular, to the fullest extent permitted by law,
all such benefits and rights shall be free from attachment, garnishment, or any
other legal or equitable process available to any creditor of the Participant
and his or her Beneficiary. Neither the Participant nor his or her Beneficiary
shall have the right to alienate, anticipate, commute, pledge, encumber, or
assign any of the payments which he or she may expect to receive, contingently
or otherwise, under the Plan, except the right to designate a Beneficiary to
receive death benefits provided hereunder. Notwithstanding the preceding, the
benefit payable from a Participant’s Account may be reduced, at the discretion
of the Administrator, to satisfy any debt or liability to the Employer.

 

13.5

Facility of Payment. If the Administrator determines, on the basis of medical
reports or other evidence satisfactory to the Administrator, that the recipient
of any benefit payments under the Plan is incapable of handling his affairs by
reason of minority, illness, infirmity or other incapacity, the Administrator
may direct the Employer to disburse such payments to a person or institution
designated by a court which has jurisdiction over such recipient or a person or
institution otherwise having the legal authority under State law for the care
and control of such recipient. The receipt by such person or institution of any
such

 

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  payments therefore, and any such payment to the extent thereof, shall
discharge the liability of the Employer, the Plan and the Administrator for the
payment of benefits hereunder to such recipient.

 

13.6 Notices. Any notice or other communication to the Employer or Administrator
in connection with the Plan shall be deemed delivered in writing if addressed to
the Plan Sponsor at the address specified by the Plan Sponsor and if either
actually delivered at said address or, in the case or a letter, 5 business days
shall have elapsed after the same shall have been deposited in the United States
mails, first-class postage prepaid and registered or certified.

 

13.7 Tax Withholding. If the Employer concludes that tax is owing with respect
to any deferral or payment hereunder, the Employer shall withhold such amounts
from any payments due the Participant or from amounts deferred, as permitted by
law, or otherwise make appropriate arrangements with the Participant or his
Beneficiary for satisfaction of such obligation. Tax, for purposes of this
Section 13.7 means any federal, state, local or any other governmental income
tax, employment or payroll tax, excise tax, or any other tax or assessment owing
with respect to amounts deferred, any earnings thereon, and any payments made to
Participants under the Plan.

 

13.8 Recoupment. Notwithstanding any provision herein to the contrary, the
portion of any Accounts maintained under this Plan that are attributable to
Employer Contributions and any and all payments made or required to be made and
pursuant to the Plan that are attributable to Employer Contributions shall be
subject to repayment to the Plan Sponsor by the Participant or former
Participant (and the successors, assigns, heirs, estate and personal
representative of the Participant or former Participant) pursuant to the terms
of any clawback, recoupment or other policy implemented from time to time by the
Board or its designee, as amended (the “Recoupment Policy”). As additional
consideration for any credits of Employer Contributions hereunder and any
payments attributable thereto to any Participant, each Participant agrees that
he/she is bound by and subject to the Recoupment Policy as in effect at any time
and from time to time, as amended (whether before, at or after crediting of such
Employer Contributions to such Participant’s Account).

 

13.9 Successors. The provisions of the Plan shall bind and inure to the benefit
of the Plan Sponsor, the Employer and their successors and assigns and the
Participant and the Participant’s designated Beneficiaries.

 

13.10 Disclaimer. It is the Plan Sponsor’s intention that the Plan comply with
the requirements of Code Section 409A. Neither the Plan Sponsor nor the Employer
shall have any liability to any Participant should any provision of the Plan
fail to satisfy the requirements of Code Section 409A.

 

13.11 Governing Law. The Plan will be construed, administered and enforced
according to the laws of the State of Indiana.

 

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13.12 Other Plans. Amounts and benefits paid under the Plan shall not be
considered compensation to the Participant for purposes of computing any
benefits to which he may be entitled under any other pension or retirement plan
maintained by the Employer.

 

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SCHEDULE 1

CURRENT ONEX STOCKHOLDERS

Onex Partners II LP

Onex Advisor III LLC

Allison Executive Investco LLC

Onex Partners II GP LP

Onex American Holdings II LLC

Onex US Principals LP

Onex Allison Co-Invest LP

Onex Advisor Subco II LLC

OAH Wind LLC

Allison Executive Investco II LLC

Onex Advisor Subco LLC

Onex American Holdings Subco LLC

Onex Allison Holding Limited S.á.R.L.

1597257 Ontario Inc.