exv10w1



 






Exhibit 10.1




ASSET ACCEPTANCE CAPITAL CORP.




2004 STOCK INCENTIVE PLAN




(as amended and restated effective January 1, 2008)




I. GENERAL PROVISIONS




     1.1 Establishment. On February 2, 2004, the Board of Directors (“Board”) of
Asset Acceptance Capital Corp., a Delaware corporation (“Company”), adopted the 2004
Stock Incentive Plan (“Plan”). On February 2, 2004, the Company’s shareholders
approved the Plan. On April 2, 2007, the Board amended and restated the Plan, and separately on
April 2, 2007 the Board amended and restated the Plan to provide as set forth herein, with the
changes made through this restatement being (i) effective only on their receipt of shareholder
approval at the Company’s annual meeting in 2007, and (ii) applicable to all outstanding and
future awards of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Deferred Stock Units, Performance Share Awards, or Annual Incentive Awards. On May 22, 2007 this
amended and restated Plan was approved by shareholders at the Company’s 2007 annual meeting of
shareholders. As of January 1, 2008, the Plan was further amended and restated to comply with
Internal Revenue Code Section 409A.



     1.2 Purpose. The purpose of the Plan is (i) to promote the best interests of the
Company and its shareholders by encouraging Employees, consultants and non-employee directors
of the Company and its Subsidiaries to acquire an ownership interest in the Company through
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units,
Performance Share Awards and Annual Incentive Awards, thus identifying their interests with those
of shareholders, and (ii) to enhance the ability of the Company to attract and retain qualified
Employees, consultants and non-employee directors. It is the further purpose of the Plan to permit
the granting of Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, Deferred Stock Units, Performance Share Awards and Annual Incentive Awards that will
constitute performance based compensation, as described in Section 162(m) of the Code, and
regulations promulgated thereunder.



     1.3 Definitions. As used in this Plan, the following terms have the meaning described
below:



          (a) “Agreement” means the written agreement that sets forth the terms of a
Participant’s Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units,
Deferred Stock Units, Performance Share Award, Annual Incentive Award, or Deferred Stock Unit award
within the meaning of Section 4.10 of the Plan.














 








          (b) “Annual Incentive Award” means an award that is granted in accordance with
Article VI of the Plan.




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




          (d) “Change in Control” means the occurrence of any of the following events: (i) the
acquisition of ownership by a person, corporation or other entity, or a group acting in concert, of
fifty-one percent, or more, of the outstanding Common Stock of the Company in a single
transaction or a series of related transactions within a one-year period; (ii) a sale of all or
substantially all of the assets of the Company to any person, corporation or other entity;
(iii) a merger or similar transaction between the Company and another entity if shareholders of
the Company do not own a majority of the voting stock of the surviving entity or any parent
thereof and a majority in value of the total outstanding stock of such surviving entity or any
parent thereof; or (iv) during any consecutive two-year period commencing after the date of
adoption of this Plan, individuals who constituted the Board at the beginning of the period (or
their approved replacements, as defined herein) cease for any reason to constitute a majority of
the Board, with a new Director being considered an “approved replacement” Director if his or her
election (or nomination for election) was approved by a vote of at least a majority of the
Directors then still in office who either were Directors at the beginning of the period or were
themselves approved replacement Directors, but in either case excluding any Director whose initial
assumption of office occurred as a result of an actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board. Provided, however, that there shall
not be included within the meaning of “Change in Control,” any such event involving: (a) any
employee benefit plan (or related trust) sponsored or maintained by the Company; or (b) any of
the current shareholders of the Company as of the date of adoption of this Plan by the Board
(or any entity at any time controlled by any such shareholder or shareholders).




          (e) “Change in Position” means, as determined by the Committee in its discretion with
respect to any Participant, a significant change in such Participant’s employment relationship with
the Company, including but not limited to any or all of the following: (i) such Participant’s
involuntary termination of employment or services; (ii) a significant reduction in such
Participant’s duties, responsibilities, compensation and/or fringe benefits, or the assignment to
such Participant of duties inconsistent with his or her position (all as in effect immediately
prior to a Change in Control), whether or not such Participant voluntarily terminates employment or
services as a result thereof; or (iii) a significant change in the geographic location of the
Participant’s primary workplace.




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




          (g) “Committee” means the Compensation Committee of the Company, which shall be
comprised of two or more members of the Board.




          (h) “Common Stock” means shares of the Company’s authorized common stock.




          (i) “Company” means Asset Acceptance Capital Corp. a Delaware corporation.






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          (j) “Continuous Service” means the absence of any interruption or termination of
service as an Employee, non-employee director, or consultant.
Continuous Service shall not be considered interrupted in the case of: (i) sick leave; (ii) military
leave; (iii) any other leave of absence approved by the Committee, provided that such leave is for
a period of not more than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; (iv) changes in status from director to advisory director or emeritus
status; or (v) in the case of transfers between locations of the Company or between the
Company or its respective successors. Changes in status between service as an Employee,
director, and a consultant shall not constitute an interruption of
Continuous Service.





          (k) “Deferred Stock Unit” means Common Stock that is subject to future delivery in
accordance with Section 4.10 of the Plan.




          (l) “Disability” means total and permanent disability, as defined in Code Section
22(e).




          (m) “Employee” means an individual who has an “employment relationship” with the
Company or a Subsidiary, as defined in Treasury Regulation 1.421-7(h), and the term
“employment” means employment with the Company, or a Subsidiary of the Company.




          (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time and any successor thereto.




          (o) “Fair Market Value” means for purposes of determining the value of Common Stock on
the Grant Date the Stock Exchange closing price of the Company’s Common Stock as reported in
The Wall Street Journal (or as otherwise reported by such Stock Exchange) for the Grant
Date. In the event that there were no Common Stock transactions on such date, the Fair Market
Value shall be determined as of the immediately preceding date on which there were Common Stock
transactions. Unless otherwise specified in the Plan, “Fair Market Value” for purposes of
determining the value of Common Stock on the date of exercise means the Stock Exchange closing
price of the Company’s Common Stock on the last date preceding the exercise on which there were
Common Stock transactions.




          (p) “Grant Date” means the date on which the Committee authorizes an individual
Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock
Units, Performance Share Award or Annual Incentive Award, or such later date as shall be designated
by the Committee.




          (q) “Incentive Stock Option” means an Option that is intended to meet the requirements
of Section 422 of the Code.




          (r) “Nonqualified Stock Option” means an Option that is not intended to constitute an
Incentive Stock Option.




          (s) “Option” means either an Incentive Stock Option or a Nonqualified Stock Option.




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          (t) “Participant” means an Employee or non-employee director or consultant designated
by the Committee to participate in the Plan.




          (u) “Performance Share Award” means a performance share award that is granted in
accordance with Article V of the plan.




          (v) “Plan” means the Asset Acceptance Capital Corp. 2004 Stock Incentive Plan, the
terms of which are set forth herein, and amendments thereto.




          (w) “Restriction Period” means the period of time during which a Participant’s
Restricted Stock or Restricted Stock Unit grant is subject to restrictions and is nontransferable.




          (x) “Restricted Stock” means Common Stock that is subject to restrictions.




          (y) “Restricted Stock Unit” means a right granted pursuant to Article IV to receive
Restricted Stock or an equivalent value in cash pursuant to the terms of the Plan and the related
Agreement.




          (z) “Retirement” means termination of employment on or after the attainment of age 65
and completion of three (3) years of service with the Company.




          (aa) “Stock Appreciation Right” means the right to receive a cash or Common Stock
payment from the Company, in accordance with Article III of the Plan.




          (bb) “Stock Exchange” means the principal national securities exchange on which the
Common Stock is listed for trading or, if the Common Stock is not listed for trading on a national
securities exchange, such other recognized trading market or quotation system upon which the
largest number of shares of Common Stock has been traded in the aggregate during the last 20 days
before a Grant Date or date on which an Option is exercised, whichever is applicable.




          (cc) “Subsidiary” means a corporation or other entity defined in Code Section 424(f).




          (dd) “Vested” means the extent to which an Option or Stock Appreciation Right granted
hereunder has become exercisable in accordance with this Plan and the terms of the respective
Agreement pursuant to which such Option or Stock Appreciation Right was granted.




     1.4 Administration.



          (a) The Plan shall be administered by the Committee. At all times it is intended that the
directors appointed to serve on the Committee shall be “disinterested persons” (within the meaning
of Rule 16b-3 promulgated under the Exchange Act) and “outside directors” (within the meaning of
Code Section 162(m)); however, the mere fact that a Committee member shall fail to qualify under
either of these requirements shall not invalidate any award made by the Committee if the award is
otherwise validly made under the Plan. The members of the




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Committee shall be appointed by, and may be changed at any time and from time to time, at the
discretion of the Board.




          (b) The Committee shall interpret the Plan, prescribe, amend, and rescind rules and
regulations relating to the Plan, and make all other determinations necessary or advisable for its
administration. Subject to applicable law and the restrictions set forth in the Plan, the
Committee may delegate administrative functions to officers and Employees of the Company or its
Subsidiaries, and may delegate in writing to one or more executives the authority, which shall be
revocable in writing at any time by the Committee, to make grants to non-executive Employees.




          (c) The Committee shall have the discretion to interpret or construe ambiguous, unclear, or
implied (but omitted) terms in any fashion it deems to be appropriate in its sole discretion, and
to make any findings of fact needed in the administration of the Plan or Agreements. The
Committee’s prior exercise of its discretionary authority shall not obligate it to exercise its
authority in a like fashion thereafter. The decision of the Committee on any question concerning
the interpretation of the Plan or its administration with respect to any Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units, Performance Share
Award or Annual Incentive Award granted under the Plan shall be final and binding upon all
Participants and their beneficiaries, transferees, successors, and assigns. No member of the
Committee shall be liable for any action or determination made in good faith with respect to the
Plan or any grant or award hereunder.




     1.5 Participants. Participants in the Plan shall be such Employees (including
Employees who are directors), non-employee directors of, or consultants to, the Company and its
Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee
may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred
Stock Units, Performance Share Awards and Annual Incentive Awards to an individual upon the
condition that the individual become an Employee of the Company or of a Subsidiary, provided
that the Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Units, Deferred Stock
Units, Performance Share Award or Annual Incentive Award shall be deemed to be granted only on the
date that the individual becomes an Employee.



     1.6 Stock. The Company has reserved 3,700,000 shares of the Company’s Common
Stock for issuance in conjunction with all Options and other stock-based awards to be granted under
the Plan. Shares subject to any unexercised portion of a terminated, cancelled or expired Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units, or
Performance Share Award granted hereunder, and pursuant to which a Participant never acquired
benefits of ownership, including payment of a stock dividend (but excluding voting rights), may
again be subjected to grants and awards under the Plan, but shares surrendered pursuant to the
exercise of a Stock Appreciation Right shall not be available for future grants and awards.
Notwithstanding the foregoing, the number of Shares that are available for Incentive Stock Option
awards shall be determined, to the extent required under applicable tax laws, by reducing the
number of shares designated in the preceding paragraph by the number of Shares granted pursuant to
all awards (whether or not shares are issued pursuant to such awards), provided that any shares
that are either issued or purchased under the Plan and forfeited back to the Plan, or surrendered
in payment of the exercise price for an Option or Stock



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Appreciation Right shall be available for issuance pursuant to future Incentive Stock Option
awards. All provisions in this Section 1.6 shall be adjusted, as applicable, in accordance
with Article VIII.



II. STOCK OPTIONS




     2.1 Grant of Options. The Committee, at any time and from time to time, subject to
the terms and conditions of the Plan, may grant Options to such Participants and for such number of
shares of Common Stock (whole or fractional) as it shall designate; provided, however, that no
Participant may be granted Options during any one fiscal year (when aggregated with all other
stock-based awards granted under the Plan during such fiscal year), to purchase more than 500,000
shares of Common Stock (subject to adjustment in accordance with Section 8.1(a) below). Any
Participant may hold more than one Option under the Plan and any other Plan of the Company or
Subsidiary. The Committee shall determine the general terms and conditions of exercise, including
any applicable vesting requirements, which shall be set forth in a Participant’s Option Agreement.
No Option granted hereunder may be exercised after the tenth anniversary of the Grant Date. The
Committee may designate any Option granted as either an Incentive Stock Option or a Nonqualified
Stock Option, or the Committee may designate a portion of an Option as an Incentive Stock Option or
a Nonqualified Stock Option. An Incentive Stock Option may only be granted to an Employee. At the
discretion of the Committee, an Option may be granted in tandem with a Stock Appreciation Right.
Nonqualified Stock Options are intended to satisfy the requirements of Code Section 162(m) and the
regulations promulgated thereunder, to the extent applicable.



     2.2 Incentive Stock Options. Any Option intended to constitute an Incentive Stock
Option shall comply with the requirements of this Section 2.2. No Incentive Stock Option
shall be granted with an exercise price below the Fair Market Value of Common Stock on the Grant
Date nor with an exercise term that extends beyond 10 years from the Grant Date. An Incentive
Stock Option shall not be granted to any Participant who owns (within the meaning of Code Section
424(d)) stock of the Company or any Subsidiary possessing more than 10% of the total combined
voting power of all classes of stock of the Company or a Subsidiary unless, at the Grant Date,
the exercise price for the Option is at least 110% of the Fair Market Value of the shares subject
to the Option and the Option, by its terms, is not exercisable more than 5 years after the Grant
Date. The aggregate Fair Market Value of the underlying Common Stock (determined at the Grant
Date) as to which Incentive Stock Options granted under the Plan (including a plan of a Subsidiary)
may first be exercised by a Participant in any one calendar year shall not exceed $100,000. To the
extent that an Option intended to constitute an Incentive Stock Option shall violate the foregoing
$100,000 limitation (or any other limitation set forth in Code Section 422), the portion of the
Option that exceeds the $100,000 limitation (or violates any other Code Section 422 limitation)
shall be deemed to constitute a Nonqualified Stock Option.



     2.3 Option Price. The Committee shall determine the per share exercise price for each
Option granted under the Plan. The Committee, at its discretion, may grant Nonqualified Stock
Options with an exercise price below 100% of the Fair Market Value of Common Stock on the Grant
Date. The foregoing notwithstanding, no Incentive Stock Option shall be granted with an exercise
price below the Fair Market Value of Common Stock on the Grant Date.



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     2.4 Payment for Option Shares.



          (a) The purchase price for shares of Common Stock to be acquired upon exercise of an Option
granted hereunder shall be paid in full in cash or by personal check, bank draft or money order at
the time of exercise; provided, however, that in lieu of such form of payment and to the extent
authorized in an Agreement, a Participant may pay such purchase price in whole or in part by
tendering shares of Common Stock, which are either (i) subject to the Option being exercised or
(ii) have been held by the Participant for at least six (6) months and which are freely owned and
held by the Participant independent of any restrictions, hypothecations or other encumbrances, duly
endorsed for transfer (or with duly executed stock powers attached), or in any combination of the
above. Shares of Common Stock surrendered upon exercise shall be valued at the Stock Exchange
closing price for the Company’s Common Stock on the day prior to exercise, as reported in
The Wall Street Journal (or as otherwise reported by such Stock Exchange), and the
certificate(s) for such shares, duly endorsed for transfer or accompanied by appropriate stock
powers, shall be surrendered to the Company. Participants who are subject to short swing
profit restrictions under the Exchange Act and who exercise an Option by tendering
previously-acquired shares shall do so only in accordance with the provisions of Rule 16b-3 of the
Exchange Act.



          (b) At the discretion of the Committee, as set forth in a Participant’s Option Agreement, any
Option granted hereunder may be deemed exercised by delivery to the Company of a properly
executed exercise notice, acceptable to the Company, together with irrevocable instructions to
the Participant’s broker to deliver to the Company sufficient cash to pay the exercise price
and any applicable income and employment withholding taxes, in accordance with a written agreement
between the Company and the brokerage firm (“cashless exercise procedure”).



III. STOCK APPRECIATION RIGHTS




     3.1 Grant of Stock Appreciation Rights. Stock Appreciation Rights may be granted,
held and exercised in such form and upon such general terms and conditions as determined by the
Committee on an individual basis. A Stock Appreciation Right may be granted to a Participant with
respect to such number of shares of Common Stock of the Company as the Committee may determine;
provided, however, that no Participant may be granted a Stock Appreciation Right during any one
fiscal year (when aggregated with all other stock-based awards granted under the Plan during such
fiscal year), for more than 500,000 shares of Common Stock (subject to adjustment in accordance
with Section 8.1(a) below). A Stock Appreciation Right may be granted on a stand-alone basis or in
tandem with an Option. If granted in tandem with an Option, the number of shares covered by the
Stock Appreciation Right shall not exceed the number of shares of stock which the Participant could
purchase upon the exercise of the related Option. Stock Appreciation Rights are intended to
satisfy the requirements of Code Section 162(m) and the regulations promulgated thereunder, to the
extent applicable.



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     3.2 Exercise of Stock Appreciation Rights. A Stock Appreciation Right shall be deemed
exercised upon receipt by the Company of written notice of exercise from the Participant.
Except as permitted under Rule 16b-3, notice of exercise of a Stock Appreciation Right by a
Participant subject to the insider trading restrictions of Section 16(b) of the Securities Exchange
Act of 1934, shall be limited to the period beginning on the third day following the release of the
Company’s quarterly or annual summary of earnings and ending on the 12th business day after
such release. The exercise term of each Stock Appreciation Right shall be limited to 10 years from
its Grant Date or such earlier period as set by the Committee or in a related Option. If granted
in tandem with an Option, a Stock Appreciation Right shall be exercisable only at such times and in
such amounts as the related Option may be exercised. A Stock Appreciation Right granted to a
Participant subject to the insider trading restrictions shall not be exercisable in whole or part
during the first six months of its term, unless the Participant dies or becomes disabled during
such six-month period.



     3.3 Stock Appreciation Right Entitlement.



          (a) Upon exercise of a Stock Appreciation Right, a Participant shall be entitled to payment
from the Company, in cash, shares, or partly in each (as determined by the Committee in
accordance with any applicable terms of the Agreement), of an amount equal to the difference
between the aggregate Fair Market Value on the date of exercise for the specified number of shares
being exercised and the aggregate exercise price of the Stock Appreciation Right being exercised.
If the Stock Appreciation Right is granted in tandem with an Option, the payment shall be equal to
the difference between:




          (i) the Fair Market Value of the number of shares subject to the Stock Appreciation
Right on the exercise date; and




          (ii) the Option price of the associated Option multiplied by the number of shares
available under the Option.



          (b) Notwithstanding Section 3.3(a), upon exercise of a Stock Appreciation Right the
Participant shall be required to surrender any associated Option.



     3.4 Maximum Stock Appreciation Right Amount Per Share. The Committee may, at its sole
discretion, establish (at the time of grant) a maximum amount per share which shall be payable upon
the exercise of a Stock Appreciation Right, expressed as a dollar amount or as a percentage or
multiple of the Option price of a related Option.



IV. RESTRICTED STOCK GRANTS AND UNITS




     4.1 Grant of Restricted Stock and Restricted Stock Units. Subject to the terms and
conditions of the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock and Restricted Stock Units under this Plan to such Participants and in such
amounts as it shall determine; provided, however, that no Participant may be granted a Restricted
Stock Award or Restricted Stock Units during any one fiscal year (when aggregated with all other
stock-based awards granted under the Plan during such fiscal year), for more than 500,000 shares of
Common Stock (subject to adjustment in accordance with Section 8.1(a) below).



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     4.2 Restricted Stock Agreement. Each grant of Restricted Stock or Restricted Stock
Units shall be evidenced by an Agreement that shall specify the terms of the restrictions,
including the Restriction Period, or periods, the number of Common Stock shares subject to the
grant or units, and such other general terms and conditions, including performance goals, as the
Committee shall determine in its discretion; subject to the Committee’s discretion to make awards
having no restrictions or Restricted Period.



     4.3 Transferability. Except as provided in this Article IV or Section
9.4 of the Plan, the shares of Common Stock subject to a Restricted Stock grant or Restricted
Stock Unit hereunder may not be transferred, pledged, assigned, or otherwise alienated or
hypothecated until the termination of the applicable Restriction Period or for such period of time
as shall be established by the Committee and as shall be specified in the applicable Agreement, or
upon the earlier satisfaction of other conditions as specified by the Committee in its sole
discretion and as set forth in the applicable Agreement.



     4.4 Other Restrictions. The Committee shall impose such other restrictions on any
shares of Common Stock subject to a Restricted Stock grant or Restricted Stock Unit under the Plan
as it may deem advisable including, without limitation, restrictions under applicable Federal or
State securities laws, and may legend the certificates representing such shares to give appropriate
notice of such restrictions.



     4.5 Certificate Legend. In addition to any legends placed on certificates pursuant to
Sections 4.3 and 4.4, each certificate representing shares of Common Stock subject to
restrictions under a Restricted Stock grant or Restricted Stock Unit shall bear the following
legend:




     The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is subject to
certain restrictions on transfer set forth in the Asset Acceptance Capital Corp.
2004 Stock Incentive Plan (“Plan”), rules and administrative guidelines adopted
pursuant to such Plan and an Agreement dated                     . A
copy of the Plan, such rules and such Agreement may be obtained from the Secretary
of Asset Acceptance Capital Corp.



     4.6 Removal of Restrictions. Except as otherwise provided in this Article IV
of the Plan, and subject to applicable federal and state securities laws, shares of Common Stock
subject to a Restricted Stock grant or Restricted Stock Unit under the Plan shall become freely
transferable by the Participant after the last day of the Restriction Period. Once the shares are
released from the restrictions, the Participant shall be entitled to have the legend required by
Section 4.5 of the Plan removed from the applicable Common Stock certificate. Provided
further, the Committee shall have the discretion to waive the applicable Restriction Period with
respect to all or any part of the Common Stock subject to a Restricted Stock grant or Restricted
Stock Unit.



     4.7 Voting Rights. During the Restriction Period, Participants holding shares of
Common Stock subject to a Restricted Stock grant hereunder may exercise full voting rights with
respect to the Restricted Stock.



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     4.8 Dividends and Other Distributions. Unless otherwise provided in an Agreement,
during the Restriction Period, a Participant shall be entitled to receive all dividends and other
distributions paid with respect to shares of Common Stock subject to a Restricted Stock grant or
Restricted Stock Unit. If any dividends or distributions are paid in shares of Common Stock during
the Restriction Period, the dividend or other distribution shares shall be subject to the same
restrictions on transferability as the shares of Common Stock with respect to which they were paid
(unless an Agreement provides otherwise).



     4.9 Restricted Stock Grants and Units Under Code Section 162(m). The Committee, at
its discretion, may designate certain Restricted Stock grants or Restricted Stock Units as being
granted pursuant to Code Section 162(m). Such Restricted Stock and Restricted Stock Units must
comply with the following additional requirements, which override any other provision set forth in
this Article IV:



          (a) Each Code Section 162(m) Restricted Stock Award or Restricted Stock Unit shall be based
upon pre-established, objective performance goals that are intended to satisfy the
performance-based compensation requirements of Code Section 162(m) and the regulations promulgated
thereunder. Further, at the discretion of the Committee, a Restricted Stock Award or Restricted
Stock Unit also may be subject to goals and restrictions in addition to the performance
requirements.



          (b) Each Code Section 162(m) Restricted Stock Award or Restricted Stock Unit shall be based
upon the attainment of specified levels of Company or Subsidiary performance during a specified
performance period, as measured by any or all of the following: earnings (as measured by net
income, net income per share, operating income, operating income per share, or earnings before
interest, taxes, depreciation and amortization [“EBITDA”]), revenue growth, market capitalization,
and price per share.



          (c) For each designated performance period, the Committee shall (i) select those Employees who
shall be eligible to receive a Restricted Stock Award or Restricted Stock Unit, (ii) determine the
performance period, which may be a one to five fiscal year period, (iii) determine the target
levels of Company or Subsidiary performance, and (iv) determine the number of shares subject to
a Restricted Stock Award or Restricted Stock Unit to be paid to each selected Employee. The
Committee shall make the foregoing determinations prior to the commencement of services to which a
Restricted Stock Award or Restricted Stock Unit relates (or within the permissible time-period
established under Code Section 162(m)) and while the outcome of the performance goals and targets
is uncertain.



          (d) For each performance period, the Committee shall certify, in writing: (i) if the
Company has attained the performance targets, and (ii) the number of shares pursuant to the
Restricted Stock Award or Restricted Stock Unit that are to become freely transferable. The
Committee shall have no discretion to waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Restricted Stock Award or Restricted
Stock Unit.



          (e) Any dividends paid during the Restriction Period automatically shall be reinvested on
behalf of the Employee in additional shares of Common Stock under the Plan, and



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such additional shares shall be subject to the same performance goals and restrictions as the
other shares under the Restricted Stock Award or Restricted Stock Unit. No shares under a Code
Section 162(m) Restricted Stock Award or Restricted Stock Unit shall become transferable until the
Committee certifies in writing that the performance goals and restrictions have been satisfied.



          (f) Except as otherwise provided in this Article IV or Section 9.4 of the
Plan, and subject to applicable federal and state securities laws, shares covered by each
Restricted Stock Award or Restricted Stock Unit made under the Plan may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the applicable performance targets
and other restrictions are satisfied, as shall be certified in writing by the Committee. At such
time, shares covered by the Restricted Stock Award or Restricted Stock Unit shall become freely
transferable by the Employee. Once the shares are released from the restrictions, the Employee
shall be entitled to have the legend required by Section 4.5 of the Plan removed from the
applicable Common Stock certificate.



     4.10 Deferred Stock Units.



     (a) Elections to Defer. The Committee may permit any Participant who is a director,
consultant or member of a select group of management or highly compensated Employees (within the
meaning of the Code) to irrevocably elect, on a form provided by and acceptable to the Committee
(the “Election Form”), forego the receipt of cash or other compensation (including the Shares
deliverable pursuant to any Award other than Restricted Shares for which a Section 83(b) Election
has been made), and in lieu thereof to have the Company credit to an internal Plan account (the
“Account”) a number of Deferred Stock units (“Deferred Stock Units”) having a Fair Market Value
equal to the Shares and other compensation deferred. These credits will be made at the end of each
calendar month during which compensation is deferred. Each Election Form shall take effect on the
first day of the next calendar year (or on the first day of the next calendar month in the case of
an initial election by a Participant who first receives an Award, subject to adjustments by the
Committee in accordance with Code Section 409A) after its delivery to the Company, unless the
Company sends the Participant a written notice explaining why the Election Form is invalid
within five business days after the Company receives it. Notwithstanding the foregoing
sentence: (i) Election Forms shall be ineffective with respect to any compensation that a
Participant earns before the date on which the Company receives the Election Form, and (ii)
Election Forms must be submitted to the Committee no later than December 31st of the calendar year
preceding the calendar year in which the Eligible Person first performs the services that are
attributable to the compensation being deferred. Notwithstanding the foregoing, any Eligible
Person who first becomes eligible to defer compensation under the Plan and is not eligible to defer
or otherwise accrue an amount of deferred compensation under any other plan or arrangement that (i)
is maintained by the Company or any other Affiliate that would be considered a single employer
with the Company pursuant to Code Sections 414(b) or 414(c) and (ii) constitutes a single plan
under Treasury Regulation §1.409A-1(c)(2)(A), may submit his or her Election Form to the Committee
no later than 30 days after the date the Eligible Person first becomes eligible to defer
compensation under the Plan; however, the Election Form may relate only to compensation that is to
be paid for services performed after the date the Election Form is submitted to the Committee. The
Committee may reject any Election Form that it determines in its sole discretion does not satisfy
the requirements of this paragraph. The Committee may unilaterally



11









 







make awards in the form of Deferred Stock Units, regardless of whether or not the Participant
foregoes other compensation.



     (b) Vesting. Unless an Agreement expressly provides otherwise, each Participant shall be 100%
vested at all times in any shares subject to Deferred Stock Units.



     (c) Issuances of Shares. The Company shall provide a Participant with one share for each
Deferred Stock Unit in five substantially equal annual installments that are issued before the last
day of each of the five calendar years that end after the date on which the Participant’s incurs a
“separation form service” within the meaning of Treasury Regulations §1.409A-1(h) (“Separation from
Service”), unless —



          (i) the Participant has properly elected a different form of distribution, on a form approved
by the Committee, that permits the Participant to select any combination of a lump sum and annual
installments that are triggered by and completed within ten years following the Participant
Separation from Service, and



          (ii) the Company received the Participant’s distribution election form at the time the
Participant elects to defer the receipt of cash or other compensation pursuant to this Section
4.10(a), provided that such election may be changed through any subsequent election that (i) is
delivered to the Company at least one year before the date on which distributions are otherwise
scheduled to commence pursuant to the Participant’s election, and (ii) defers the commencement of
distributions by at least five years from the originally scheduled commencement date. Fractional
shares shall not be issued, and instead shall be paid out in cash.



     (d) Crediting of Dividends. Whenever shares are issued to a Participant pursuant to Section
4.10(c) above, such Participant shall also be entitled to receive, with respect to each share
issued, cash dividends or a number of shares equal to the sum of (i) any stock dividends, which
were declared and paid to the holders of shares between the Grant Date and the date such share is
issued, and (ii) a number of shares equal to the shares that the Participant could have purchased
at Fair Market Value on the payment date of any cash dividends for shares if the Participant had
received such cash dividends between the Grant Date and the settlement date for the Deferred Stock
Units.



     (e) Emergency Withdrawals. In the event a Participant suffers an unforeseeable emergency
within the contemplation of this Section and Section 409A of the Code, the Participant may apply to
the Company for an immediate distribution of all or a portion of the Participant’s Deferred
Stock Units. The unforeseeable emergency must result from a sudden and unexpected illness or
accident of the Participant, the Participant’s spouse, or a dependent (within the meaning of
Section 152(a) of the Code) of the Participant, casualty loss of the Participant’s property, or
other similar extraordinary and unforeseeable conditions beyond the control of the Participant.
Examples of purposes which are not considered unforeseeable emergencies include post-secondary
school expenses or the desire to purchase a residence. In no event will a distribution be made to
the extent the unforeseeable emergency could be relieved through reimbursement or compensation by
insurance or otherwise, or by liquidation of the Participant’s nonessential assets to the extent
such liquidation would not itself cause a severe financial hardship. The amount of any
distribution hereunder shall be limited to the amount necessary to



12









 







relieve the Participant’s unforeseeable emergency plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution. The Committee, in its sole and absolute
discretion, shall determine whether a Participant has a qualifying unforeseeable emergency and the
amount which qualifies for distribution, if any. The Committee may require evidence of the purpose
and amount of the need, and may establish such application or other procedures as it deems
appropriate.



     (f) Unsecured Rights to Deferred Compensation. A Participant’s right to Deferred Stock Units
shall at all times constitute an unsecured promise of the Company to pay benefits as they come
due. The right of the Participant or the Participant’s duly-authorized transferee to receive
benefits hereunder shall be solely an unsecured claim against the general assets of the
Company. Neither the Participant nor the Participant’s duly-authorized transferee shall have
any claim against or rights in any specific assets, shares, or other funds of the Company.



V. PERFORMANCE SHARE AWARDS




     5.1 Grant of Performance Share Awards. The Committee, at its discretion, may grant
Performance Share Awards to Participants and may determine, on an individual or group basis, the
performance goals to be attained pursuant to each Performance Share Award; provided, however, that
no Participant may be granted a Performance Share Award during any one fiscal year (when aggregated
with all other stock-based awards granted under the Plan during such fiscal year), for more than
500,000 shares of Common Stock (subject to adjustment in accordance with Section 8.1(a) below).



     5.2 Terms of Performance Share Awards. In general, Performance Share Awards shall
consist of rights to receive cash, Common Stock or a combination of each, if designated performance
goals are achieved. The terms of a Participant’s Performance Share Award shall be set forth in his
individual Performance Share Agreement. Each Agreement shall specify the performance goals
applicable to a particular Participant or group of Participants, the period over which the targeted
goals are to be attained, the payment schedule if the goals are attained, and any other general
terms and conditions applicable to an individual Performance Share Award as the Committee shall
determine. The Committee, at its discretion, may waive all or part of the conditions, goals and
restrictions applicable to the receipt of full or partial payment of a Performance Share Award.



     5.3 Performance Share Awards Granted Under Code Section 162(m). The Committee, at its
discretion, may designate certain Performance Share Awards as granted pursuant to Code Section
162(m). Such Performance Share Awards must comply with the following additional requirements,
which override any other provision set forth in this Article V:



          (a) The Committee, at its discretion, may grant Code Section 162(m) Performance Share Awards
based upon pre-established, objective performance goals that are intended to satisfy the
performance-based compensation requirements of Code Section 162(m) and the regulations promulgated
thereunder. Further, at the discretion of the Committee, a Performance Share Award also may be
subject to goals and restrictions in addition to the performance requirements.



13









 





          (b) Each Code Section 162(m) Performance Share Award shall be based upon the attainment of
specified levels of Company or Subsidiary performance during a specified performance period, as
measured by any or all of the following: earnings (as measured by net income, net income per share,
operating income, operating income per share, or earnings before interest, taxes, depreciation and
amortization [“EBITDA”]), revenue growth, market capitalization, and price per share.



          (c) For each designated performance period, the Committee shall (i) select those Employees who
shall be eligible to receive a Code Section 162(m) Performance Share Award, (ii) determine the
performance period, which may be a one to five fiscal year period, (iii) determine the target
levels of Company or Subsidiary performance, and (iv) determine the Performance Share Award to
be paid to each selected Employee. The Committee shall make the foregoing determinations prior to
the commencement of services to which a Performance Share Award relates (or within the permissible
time-period established under Code Section 162(m)) and while the outcome of the performance goals
and targets is uncertain.



          (d) For each performance period, the Committee shall certify, in writing: (i) if the
Company has attained the performance targets; and (ii) the cash or number of shares (or
combination thereof) pursuant to the Performance Share Award that shall be paid to each selected
Employee (or the number of shares that are to become freely transferable, if a Performance Share
Award is granted subject to attainment of the designated performance goals). The Committee, may
not waive all or part of the conditions, goals and restrictions applicable to the receipt of full
or partial payment of a Performance Share Award.



          (e) Code Section 162(m) Performance Share Awards may be granted in two different forms, at the
discretion of the Committee. Under one form, the Employee shall receive a Performance Share Award
that consists of a legended certificate of Common Stock, restricted from transfer prior to the
satisfaction of the designated performance goals and restrictions, as determined by the Committee
and specified in the Employee’s Performance Share Agreement. Prior to satisfaction of the
performance goals and restrictions, the Employee shall be entitled to vote the Performance Shares.
Further, any dividends paid on such shares during the performance/restriction period automatically
shall be reinvested on behalf of the Employee in additional Performance Shares under the Plan, and
such additional shares shall be subject to the same performance goals and restrictions as the other
shares under the Performance Share Award. No shares under a Performance Share Award shall become
transferable until the Committee certifies in writing that the performance goals and restrictions
have been satisfied.



          (f) Under the second form, the Employee shall receive a Performance Share Agreement from the
Committee that specifies the performance goals and restrictions that must be satisfied before the
Company shall issue the payment, which may be cash, a designated number of shares of Common
Stock or a combination of the two. Any certificate for shares under such form of Performance Share
Award shall be issued only after the Committee certifies in writing that the performance goals and
restrictions have been satisfied.



          (g) In addition to any legends placed on certificates pursuant to Section 5.3(e), each
certificate representing shares under a Performance Share Award shall bear the following legend:



14









 






     The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is subject to
certain restrictions on transfer set forth in the Asset Acceptance Capital Corp.
2004 Stock Incentive Plan (“Plan”), rules and administrative guidelines adopted
pursuant to such Plan and a Performance Share Agreement dated                     . A copy of the Plan, such rules and such Performance Share
Agreement
may be obtained from the Secretary of Asset Acceptance Capital Corp.



          (h) Except as otherwise provided in this Article V or Section 9.4 of the Plan,
and subject to applicable federal and state securities laws, shares covered by each Performance
Share Award made under the Plan may not be transferred, pledged, assigned, or otherwise alienated
or hypothecated until the applicable performance targets and other restrictions are satisfied, as
shall be certified in writing by the Committee. At such time, shares covered by the Performance
Share Award shall become freely transferable by the Employee. Once the shares are released from
the restrictions, the Employee shall be entitled to have the legend required by Section
5.3(g) removed from the applicable Common Stock certificate.



VI. ANNUAL INCENTIVE AWARDS




     6.1 Grant of Annual Incentive Awards.



          (a) The Committee, at its discretion, may grant Annual Incentive Awards to such Participants
as it may designate from time to time. The terms of a Participant’s Annual Incentive Award shall
be set forth in his individual Annual Incentive Award Agreement. Each Agreement shall specify such
general terms and conditions as the Committee shall determine, as well as the Participant’s
pre-established, objective performance goals, including those that are intended to satisfy the
performance-based compensation requirements of Code Section 162(m) and the regulations promulgated
thereunder, to the extent applicable.



          (b) The determination of Annual Incentive Awards for a given year shall be based upon the
attainment of specified levels of Company or Subsidiary performance as measured by such
performance criteria as are determined at the discretion of the Committee, including any or all of
the following: earnings (as measured by net income, net income per share, operating income,
operating income per share, or earnings before interest, taxes, depreciation and amortization
[“EBITDA”]), revenue growth, market capitalization, and price per share.



          (c) For each fiscal year of the Company, the Committee shall (i) select those Participants
who shall be eligible to receive an Annual Incentive Award, (ii) determine the performance period,
which may be a one to five fiscal year period, (iii) determine target levels of Company
performance, and (iv) determine the level of Annual Incentive Award to be paid to each selected
Participant upon the achievement of each performance level as provided below. The Committee shall
generally make the foregoing determinations prior to the commencement of services to which an
Annual Incentive Award relates (or within the permissible time-period established under Code
Section 162(m), to the extent applicable) and while the outcome of the performance goals and
targets is uncertain.



15









 





     6.2 Attainment of Performance Targets.



          (a) For each fiscal year, the Committee shall certify, in writing: (i) the degree to which the
Company has attained the performance targets, and (ii) the amount of the Annual Incentive Award
to be paid to each selected Participant.



          (b) Notwithstanding anything to the contrary herein, the Committee may, in its discretion,
reduce any Annual Incentive Award based on such factors as may be determined by the Committee,
including, without limitation, a determination by the Committee that such a reduction is
appropriate: (i) in light of pay practices of competitors; or (ii) in light of the Company’s, a
subsidiary’s, or a selected Employee’s performance relative to competitors and/or performance with
respect to the Company’s strategic business goals.



     6.3 Payment of Annual Incentive Awards. An Annual Incentive Award shall be paid only
if (i) the Company achieves at least the threshold performance level; and (ii) the Committee
makes the certification described in Section 6.2.



     6.4 Annual Incentive Award Payment Forms.



          (a) Annual Incentive Awards shall be paid in cash and/or shares of Common Stock of the
Company, at the discretion of the Committee. Payments shall be made within 30 days following
(i) a certification by the Committee that the performance targets were attained, and (ii) a
determination by the Committee that the amount of an Annual Incentive Award shall not be decreased
in accordance with Section 6.2. The aggregate maximum Annual Incentive Award that may be
earned by any Participant on behalf of any one fiscal year (calculated as of the last day of the
fiscal year for which the Annual Incentive Award is earned) may not exceed $1,000,000.



          (b) The amount of an Annual Incentive Award to be paid upon the attainment of each targeted
level of performance shall equal a percentage of each Participant’s base salary for the fiscal year
or a fixed dollar amount, as determined by the Committee.



VII. TERMINATION OF EMPLOYMENT OR SERVICES




     7.1. Options and Stock Appreciation Rights.



          (a) If, prior to the date that an Option or Stock Appreciation Right first becomes Vested, a
Participant terminates employment or services for any reason (other than as provided in Section
8.2, after a Change in Control), the Participant’s right to exercise the Option or Stock
Appreciation Right shall terminate and all rights thereunder shall cease.



          (b) If, on or after the date that an Option or Stock Appreciation Right first becomes Vested,
a Participant terminates employment or services for any reason other than death or Disability, the
Participant shall have the right, within the earlier of (i) the expiration of the Option or Stock
Appreciation Right, and (ii) three months after termination of employment/services, to exercise the
Option or Stock Appreciation Right to the extent that it was exercisable and unexercised on the
date of the Participant’s termination of employment or



16









 







services, subject to any other limitation on
the exercise of the Option or Stock Appreciation Right in effect on the date of exercise. The
Committee may designate in a Participant’s
Agreement that an Option or Stock Appreciation Right shall terminate at an earlier or later
time than set forth above.



          (c) If, on or after the date that an Option or Stock Appreciation Right first becomes Vested,
a Participant terminates employment or services due to death while an Option or Stock Appreciation
Right is still exercisable, the person or persons to whom the Option or Stock Appreciation Right
shall have been transferred by will or by the laws of descent and distribution, shall have the
right within the exercise period specified in the Participant’s Agreement to exercise the Option or
Stock Appreciation Right to the extent that it was exercisable and unexercised on the Participant’s
date of death, subject to any other limitation on exercise in effect on the date of exercise;
provided, however, that the beneficial tax treatment of an Incentive Stock Option may be forfeited
if the Option is exercised more than one year after a Participant’s date of death.



          (d) If, on or after the date that an Option or Stock Appreciation Right first becomes Vested,
a Participant terminates employment or services due to Disability, the Participant shall have the
right, within the exercise period specified in the Participant’s Agreement to exercise the Option
or Stock Appreciation Right to the extent that it was exercisable and unexercised on the date of
the Participant’s termination of employment or services, subject to any other limitation on the
exercise of the Option or Stock Appreciation Right in effect on the date of exercise. If the
Participant dies after termination of employment/services while the Option or Stock Appreciation
Right is still exercisable, the Option or Stock Appreciation Right shall be exercisable in
accordance with the terms of paragraph (c) above.



          (e) The Committee, at the time of a Participant’s termination of employment or services, may
accelerate a Participant’s right to exercise an Option or extend the exercise period of an Option
or Stock Appreciation Right (but in no event past the tenth anniversary of the Grant Date of such
Option); provided, however that the extension of the exercise period for an Incentive Stock Option
may cause such Option to forfeit its preferential tax treatment.



          (f) Shares subject to Options and Stock Appreciation Rights that are not exercised in
accordance with the provisions of (a) through (e) above shall expire and be forfeited by the
Participant as of their expiration date and shall become available for new grants and awards under
the Plan as of such date.



     7.2 Restricted Stock Grants and Units. If a Participant terminates employment or
services for any reason (other than as provided in Section 8.2, after a Change in Control),
the Participant’s rights to shares of Common Stock subject to a Restricted Stock grant or
Restricted Stock Unit that are still subject to the Restriction Period automatically shall
terminate and be forfeited by the Participant and, subject to Section 1.6, shall be
available for new grants and awards under the Plan as of such termination date; provided, however,
that the Committee, in its sole discretion, may waive or change the remaining restrictions or add
additional restrictions with respect to any Restricted Stock grant or Restricted Stock Unit that
would otherwise be forfeited, as it deems appropriate. Notwithstanding the foregoing, the
Committee shall not waive



17









 







any restrictions on a Code Section 162(m) Restricted Stock Award or
Restricted Stock Unit, but the Committee may include a provision in an Employee’s Code Section
162(m) Restricted Stock
or Restricted Stock Unit Agreement stating that upon the Employee’s termination of employment
due to (i) death, (ii) Disability, or (iii) involuntary termination by the Company without
cause (as defined in such agreement) prior to the attainment of the associated performance goals
and the termination of the Restriction Period, that the performance goals and restrictions shall be
deemed to have been satisfied on a pro rata basis, so that the number of shares that become freely
transferable shall be based on the Employee’s full number of months of employment during the
Restriction Period, and the Employee shall forfeit the remaining shares and his rights to such
forfeited shares shall terminate in full.



     7.3 Performance Shares. Performance Share Awards shall expire and be forfeited by a
Participant upon the Participant’s termination of employment or services for any reason (other
than as provided in Section 8.2, after a Change in Control), and such shares shall be
available for new grants and awards under the Plan as of such termination date; provided, however,
that the Committee, in its discretion, may waive all or part of the conditions, goals and
restrictions applicable to the receipt of full or partial payment of a Performance Share Award.
Notwithstanding the foregoing, the Committee shall not waive any restrictions on a Code Section
162(m) Performance Share Award, but the Committee may include a provision in an Employee’s Code
Section 162(m) Performance Share Agreement stating that upon the Employee’s termination of
employment due to (i) death, (ii) Disability, or (iii) involuntary termination by the Company
without cause (as defined in such agreement) prior to the attainment of the associated performance
goals and restrictions, that the performance goals and restrictions shall be deemed to have been
satisfied on a pro rata basis, so that the number of shares that become freely transferable shall
be based on the Employee’s full number of months of employment during the employment period, and
the Employee shall forfeit the remaining shares and his rights to such forfeited shares shall
terminate in full.



     7.4 Annual Incentive Awards.



          (a) A Participant who has been granted an Annual Incentive Award and terminates employment or
services due to Retirement, Disability or death prior to the end of the Company’s fiscal year
shall be entitled to a prorated payment of the Annual Incentive Award, based on the number of full
months during the fiscal year in which the Participant was employed or provided services. Any such
prorated Annual Incentive Award shall be paid at the same time as regular Annual Incentive Awards
or, in the event of the Participant’s death, to the beneficiary designated by the Participant.



          (b) Except as otherwise determined by the Committee in its discretion, a Participant who has
been granted an Annual Incentive Award and resigns or is terminated for any reason (other than
Retirement, Disability or death), before the end of the Company’s fiscal year for which the
Annual Incentive Award is to be paid, shall forfeit the right to an Annual Incentive Award payment
for that fiscal year.



     7.5 Other Provisions. The transfer of an Employee from one corporation to another
among the Company and any of its Subsidiaries, or a leave of absence under the leave policy of
the Company or any of its Subsidiaries shall not be a termination of employment for



18









 







purposes of
the Plan, unless a provision to the contrary is expressly stated by the Committee in a
Participant’s Agreement issued under the Plan.



VIII. ADJUSTMENTS AND CHANGE IN CONTROL




     8.1 Adjustments.



          (a) The total amount of Common Stock and kind of security for which Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance
Share Awards and Annual Incentive Awards may be issued under the Plan, and the number and kind of
shares or securities subject to any such grants or awards (both as to the number of shares of
Common Stock and the Option price), shall be adjusted pro rata for any increase or decrease in the
number of outstanding shares of Common Stock or kind of securities resulting from a subdivision or
combination of shares of Common Stock, a reclassification of Common Stock, or stock dividend or
other extraordinary distribution (whether in the form of cash, shares of Common Stock, other
securities, or other property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to purchase Common Stock
or other securities of the Company, or other similar corporate transaction or event that
affects the Common Stock such that an adjustment is determined by the Board to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan and awards under the Plan. Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.



          (b) In the event of a proposed dissolution or liquidation of the Company, the Committee
shall notify each Participant as soon as practicable prior to the effective date of such proposed
transaction. The Committee in its discretion may provide for a Participant to have the right (i)
to exercise his or her Option or Stock Appreciation Right, in full until ten (10) days prior to
such transaction as to all of the shares of Common Stock covered thereby, including shares as to
which the Option or Stock Appreciation Right, would not otherwise be exercisable, and (ii) to
become fully vested in and to settle in full any Restricted Stock grant, Restricted Stock Units,
Deferred Stock Units, Performance Share Award, or Annual Incentive Award. In addition, the
Committee may provide that any re-purchase option of the Company applicable to the shares
purchased upon exercise of an Option or Stock Appreciation Right, or received pursuant to any
Restricted Stock grant, Restricted Stock Units, Deferred Stock Units, Performance Share Award or
Annual Incentive Award, shall lapse as to all such shares, provided that the proposed dissolution
or liquidation takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised or vested, an Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Units, Deferred Stock Units, Performance Share Award or Annual Incentive Award
shall terminate immediately prior to the consummation of the proposed dissolution or liquidation.



          (c) In the event of a merger of the Company with or into another corporation, the sale of
substantially all of the assets of the Company, or the reorganization or consolidation of the
Company, it is intended that each outstanding Option, Stock Appreciation



19









 







Right, Restricted
Stock grant, Restricted Stock Units, Deferred Stock Units, Performance Share Award or Annual
Incentive Award shall be assumed or an equivalent option or right substituted by the successor
corporation or the parent or a subsidiary of the successor corporation. In the event that such
successor corporation (or the parent or a subsidiary thereof) refuses to assume or
substitute for the Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock
Units, Deferred Stock Units, Performance Share Award or Annual Incentive Award, the Participant
shall fully vest in (and in the case of Options and Stock Appreciation Rights have the right to
exercise for at least ten (10) days prior to such transaction) the Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units, Performance Share
Award or Annual Incentive Award in full, including shares which would not otherwise be vested or
exercisable. If an Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock
Units, Deferred Stock Units, Performance Share Award or Annual Incentive Award becomes fully vested
and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets,
the Committee shall notify the Participant in writing or electronically that the Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units,
Performance Share Award or Annual Incentive Award shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Units, Deferred Stock Units, Performance Share Award or
Annual Incentive Award shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock
Units, Deferred Stock Units, Performance Share Award or Annual Incentive Award shall be considered
assumed if, following the merger, sale of assets, reorganization or consolidation, the option or
right confers the right to purchase or receive, for each share covered by the Participant’s Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units,
Performance Share Award or Annual Incentive Award, immediately prior to such transaction, the
consideration (whether stock, cash, or other securities or property) received in the merger, sale
of assets, reorganization or consolidation by holders of Common Stock for each share held on the
effective date of the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding shares); provided, however,
that if such consideration received in the merger, sale of assets, reorganization or consolidation
is not solely common stock of the successor corporation (or the parent or a subsidiary thereof),
the Committee may, with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Units, Deferred Stock Units, Performance Share Award or Annual Incentive Award,
for each share of Stock subject to the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Units, Deferred Stock Units, Performance Share Award or Annual Incentive Award to
be solely Common Stock of the successor corporation (or the parent or a subsidiary thereof) equal
in Fair Market Value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.



          (d) The foregoing adjustments shall be made by the Committee. Any such adjustment may provide
for the elimination of any fractional share which might otherwise become subject to an Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units,
Performance Share Award or Annual Incentive Award.



20









 





     8.2 Change in Control. The Committee in its discretion may provide in a Participant’s
Agreement, notwithstanding anything contained herein to the contrary, that in the event of a
Participant’s Change in Position subsequent to a Change in Control, any or all of the following
will occur: (i) any outstanding Option or Stock Appreciation Right granted to such Participant
hereunder immediately shall become fully Vested and exercisable in full, regardless
of any installment provision applicable to such Option or Stock Appreciation Right; (ii) the
remaining Restriction Period on any shares of Common Stock subject to a Restricted Stock grant or
Restricted Stock Unit hereunder immediately shall lapse and the shares shall become fully
transferable, subject to any applicable federal or state securities laws; (iii) all performance
goals and conditions shall be deemed to have been satisfied and all restrictions shall lapse on any
outstanding Performance Share Awards granted to such Participant hereunder, and such Awards shall
become payable in full; (iv) for purposes of any Annual Incentive Awards granted to such
Participant hereunder, the determination of whether the performance targets have been achieved
shall be made as of the date of the Change in Control and payments due should become immediately
payable; and (v) all Deferred Stock Units shall be settled through their conversion, on a
one-for-one basis of units for shares, into shares that are shall become fully transferable,
subject to any applicable federal or state securities laws.



IX. MISCELLANEOUS




     9.1 Partial Exercise/Fractional Shares. The Committee may permit, and shall establish
procedures for, the partial exercise of Options and Stock Appreciation Rights granted under the
Plan. No fractional shares shall be issued in connection with the exercise of a Stock Appreciation
Right or payment of a Performance Share Award or Annual Incentive Award; instead, the Fair Market
Value of the fractional shares shall be paid in cash, or at the discretion of the Committee, the
number of shares shall be rounded down to the nearest whole number of shares and any fractional
shares shall be disregarded.



     9.2 Rule 16b-3 Requirements. Notwithstanding any other provision of the Plan, the
Committee may impose such conditions on the exercise of an Option or Stock Appreciation Right
(including, without limitation, the right of the Committee to limit the time of exercise to
specified periods), or the grant of Restricted Stock, Restricted Stock Unit, Deferred Stock Unit,
or the payment of a Performance Share Award or Annual Incentive Award, as may be required to
satisfy the requirements of Rule 16b-3 of the Exchange Act.



     9.3 Rights Prior to Issuance of Shares. Unless otherwise provided in the Plan, no
Participant shall have any rights as a shareholder with respect to shares covered by an Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units,
Performance Share Award or Annual Incentive Award until the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends or other rights with respect to such shares
for which the record date is prior to the date the certificate is issued.



     9.4 Non-Assignability. Except as otherwise determined by the Committee in its
discretion, the following restrictions on assignability of any award under the Plan shall apply to
all Participants: (i) no Option, Stock Appreciation Right, Restricted Stock grant, Restricted
Stock Units, Deferred Stock Units, Performance Share Award or Annual Incentive Award shall



21









 







be
transferable by a Participant except by will or the laws of descent and distribution; (ii) during
the lifetime of a Participant, an Option, Stock Appreciation Right, Restricted Stock grant, or
Restricted Stock Unit or Deferred Stock Unit shall be exercised or settled only by the Participant,
except in the event of the Participant’s Disability, in which case the Participant’s legal guardian
or the individual designated in the Participant’s durable power of attorney may exercise or settle
the Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Unit, or
Deferred Stock Unit; and (iii) any transferee of the Option, Stock Appreciation Right, Restricted
Stock grant, Restricted Stock Unit, Deferred Stock Unit, Performance Share Award or Annual
Incentive Award shall take the same subject to the terms and conditions of this Plan. No transfer
of an Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred
Stock Units, Performance Share Award or Annual Incentive Award by will or the laws of descent and
distribution, or as otherwise permitted by the Committee, shall be effective to bind the
Company unless the Company shall have been furnished with written notice thereof and a copy
of the will and/or such evidence as the Company may deem necessary to establish the validity of
the transfer and the acceptance by the transferee or transferees of the terms and conditions of the
Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock
Units, Performance Share Award or Annual Incentive Award.



     9.5. Securities Laws.



          (a) Anything to the contrary herein notwithstanding, the Company’s obligation to sell and
deliver Common Stock pursuant to the exercise of an Option or Stock Appreciation Right or deliver
Common Stock pursuant to a Restricted Stock grant, Restricted Stock Units, Deferred Stock Units,
Performance Share Award or Annual Incentive Award is subject to such compliance with federal and
state laws, rules and regulations applying to the authorization, issuance or sale of securities as
the Company deems necessary or advisable. The Company shall not be required to sell and
deliver or issue Common Stock unless and until it receives satisfactory assurance that the issuance
or transfer of such shares shall not violate any of the provisions of the Securities Act of 1933 or
the Securities Exchange Act of 1934, or the rules and regulations of the Securities Exchange
Commission promulgated thereunder or those of the Stock Exchange or any stock exchange on which the
Common Stock may be listed, the provisions of any state laws governing the sale of securities, or
that there has been compliance with the provisions of such acts, rules, regulations and laws.




          (b) The Committee may impose such restrictions on any shares of Common Stock acquired pursuant
to the exercise of an Option or Stock Appreciation Right or the grant of Restricted Stock,
Restricted Stock Units, or Deferred Stock Units, or the payment of a Performance Share Award or
Annual Incentive Award under the Plan as it may deem advisable, including, without limitation,
restrictions (i) under applicable federal securities laws, (ii) under the requirements of the Stock
Exchange or any other securities exchange, recognized trading market or quotation system upon
which such shares of Common Stock are then listed or traded, and (iii) under any blue sky or state
securities laws applicable to such shares. No shares shall be issued until counsel for the
Company has determined that the Company has complied with all requirements under
appropriate securities laws.




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     9.6 Withholding Taxes.



          (a) The Company shall have the right to withhold from a Participant’s compensation or
require a Participant to remit sufficient funds to satisfy applicable withholding for income and
employment taxes upon the exercise of an Option or Stock Appreciation Right or
the lapse of the Restriction Period on shares of Common Stock subject to a Restricted Stock
grant or Restricted Stock Unit or the payment of a Performance Share Award or Annual Incentive
Award or the settlement of a Deferred Stock Unit Award. A Participant may make a written election
to tender previously-acquired shares of Common Stock or have shares of stock withheld from the
exercise or settlement of a Restricted Stock grant, Restricted Stock Unit, Deferred Stock Unit,
Performance Share Award, or Annual Incentive Award, provided that the shares have an aggregate Fair
Market Value sufficient to satisfy in whole or in part the applicable withholding taxes. The
cashless exercise procedure of Section 2.4 may be utilized to satisfy the withholding
requirements related to the exercise of an Option. At no point shall the Company withhold from
the exercise of an Option or Stock Appreciation Right, or the settlement of a Restricted Stock
grant, Restricted Stock Unit, Deferred Stock Unit, Performance Share Award or Annual Incentive
Award, more shares than are necessary to meet the minimum established tax withholding requirements
of federal, state and local obligations.




          (b) A Participant subject to the insider trading restrictions of Section 16(b) of the Exchange
Act may use Common Stock to satisfy the applicable withholding requirements only if such
disposition is approved in accordance with Rule 16b-3 of the Exchange Act. Any election by a
Participant to utilize Common Stock for withholding purposes is further subject to the discretion
of the Committee.




          (c) Participants are solely responsible and liable for the satisfaction of all taxes and
penalties that may arise in connection with Awards (including any taxes arising under Section 409A
of the Code), and the Company shall not have any obligation to indemnify or otherwise hold any
Participant harmless from any or all of such taxes. The Committee shall have the discretion to
organize any deferral program, to require deferral election forms, and to grant or to unilaterally
modify any Award in a manner that (i) conforms with the requirements of Section 409A of the Code
with respect to compensation that is deferred and/or that vests after December 31, 2004, (ii) that
voids any Participant election to the extent it would violate Section 409A of the Code, and (iii)
for any distribution election that would violate Section 409A of the Code, to make distributions
pursuant to the Award at the earliest to occur of a distribution event that is allowable under
Section 409A of the Code or any distribution event that is both allowable under Section 409A of the
Code and is elected by the Participant, subject to any valid second election to defer, provided
that the Committee permits second elections to defer in accordance with Section 409A(a)(4)(C). The
Committee shall have the sole discretion to interpret the requirements of the Code, including
Section 409A, for purposes of the Plan and all Awards.




     9.7 Termination and Amendment.



          (a) The Board may terminate the Plan, or the granting of Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Deferred Stock Units,



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Performance Share Awards or Annual
Incentive Awards under the Plan, at any time. No new grants or awards shall be made under the Plan
after the tenth anniversary of the initial adoption of this Plan by the Board, or approval by the
shareholders, whichever is earlier, as noted in Section 1.1.



          (b) The Board may amend or modify the Plan at any time and from time to time, but any
amendment or modification shall be subject to the approval of the shareholders of the Company
to the extent required by applicable law, as well as to the extent the Board determines that
shareholder approval is desirable for tax, securities, stock exchange, or other purposes.



          (c) No amendment, modification, or termination of the Plan shall in any manner adversely
affect any Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units,
Deferred Stock Units, Performance Share Award or Annual Incentive Award granted under the Plan
without the consent of the Participant holding the Option, Stock Appreciation Right, Restricted
Stock grant, Restricted Stock Units, Deferred Stock Units, Performance Share Award or Annual
Incentive Award, except as set forth in any Agreement relating to such Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Units, Deferred Stock Units, Performance Share
Award or Annual Incentive Award granted under the Plan (with such effect being presumed to arise
from a modification that would trigger a violation of Section 409A of the Code).



     9.8 Effect on Employment. Neither the adoption of the Plan nor the granting of any
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Units, Deferred Stock Units,
Performance Share Award or Annual Incentive Award pursuant to the Plan shall be deemed to create
any right in any individual to be retained or continued in the employment, or as a non-employee
director or consultant, of the Company or a Subsidiary.



     9.9 Use of Proceeds. The proceeds received from the sale of Common Stock pursuant to
the Plan will be used for general corporate purposes of the Company.



     9.10 Approval of Plan. Unless this Plan has been approved by the shareholders of the
Company within 12 months after adoption of the Plan by the Board, as required by Section 422 of
the Code, this Plan, and any grants or awards made hereunder, shall be of no further force or
effect.




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