Document:

exv10w4

Exhibit 10.4

NONQUALIFIED STOCK OPTION AGREEMENT

FINGERHUT DIRECT MARKETING, INC.

2005 NON-EMPLOYEE DIRECTORS PLAN

     THIS AGREEMENT, made effective as of this ____ day of ___________ 2005 (the “Issue Date”) by
and between Fingerhut Direct Marketing, Inc., a Delaware corporation (the “Company”), and
______________________ (“Optionee”).

W I T N E S S E T H:

     WHEREAS, Optionee on the date hereof is a member of the Board of Directors of the Company; and

     WHEREAS, the Company wishes to grant a nonqualified stock option to Optionee to purchase
shares of the Company’s Common Stock pursuant to the Company’s 2005 Non-Employee Directors Plan
(the “Plan”); and

     WHEREAS, the Board of Directors of the Plan has authorized the grant of a nonqualified stock
option to Optionee and has determined that, as of the effective date of this Agreement, the fair
market value of the Company’s Common Stock is $0.80 per share;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
the parties hereto agree as follows:

     1. Grant of Option. The Company hereby grants to Optionee on the date set forth
above (the “Date of Grant”), the right and option (the “Option”) to purchase all or portions of an
aggregate of _______________________ (_____) shares of Common Stock at an exercise per share price
of $_____ on the terms and conditions set forth herein, and subject to adjustment pursuant to the
Plan. This Option is not intended to be an incentive stock option within the meaning of
Section 422, or any successor provision, of the Internal Revenue Code of 1986, as amended (the
“Code”), and the regulations thereunder.

     2. Duration and Exercisability.

          a. General. The term during which this Option may be exercised shall terminate on
a date which is ten (10) years from the Issue Date (the “Expiration Date”), except as otherwise
provided herein. This Option shall become exercisable according to the following schedule:

	 	 	 	 	 
	Vesting Date	 	Percentage of Shares	 
	______________, 2006
	 	 	25	%
	______________, 2007
	 	 	25	%
	______________, 2008
	 	 	25	%
	______________, 2009
	 	 	25	%

 

 

     Once the Option becomes exercisable to the extent of any of the aggregate number of shares
specified above, Optionee may continue to exercise this Option with respect to such shares under
the terms and conditions of this Agreement until the termination of the Option as provided herein.
If Optionee does not purchase upon an exercise of this Option the full number of shares which
Optionee is then entitled to purchase, Optionee may purchase upon any subsequent exercise prior to
this Option’s termination such previously unpurchased shares in addition to those Optionee is
otherwise entitled to purchase.

          b. Termination of Option. This Option terminates and is no longer exercisable
when the Optionee ceases to be a member of the Board, except that if the Optionee ceases to be a
member of the Board by reason of death or total disability and has served as a director for at
least 12 continuous months since the date of the grant, the Option will become immediately
exercisable in full (i.e. fully vested) and remain exercisable until the earlier of the expiration
of three years or the remaining term of the Option, and if the Optionee ceases to be a member of
the Board for any other reason, the Option will remain exercisable to the extent that it was
exercisable (i.e. only to the extent already vested) on the date the Optionee ceased to be a member
of the Board until the earlier of the expiration of one year or the remaining term of the Option.

     3. Manner of Exercise.

          a. General. The Option may be exercised only by Optionee (or other proper party
in the event of death or incapacity), subject to the conditions of the Plan and subject to such
other administrative rules as the Board of Directors may deem advisable, by delivering within the
Option Period written notice of exercise to the Company at its principal office. The notice shall
state the number of shares as to which the Option is being exercised and shall be accompanied by
payment in full of the Option exercise price for all shares designated in the notice. The exercise
of the Option shall be deemed effective upon receipt of such notice by the Company and upon payment
that complies with the terms of the Plan and this Agreement. The Option may be exercised with
respect to any number or all of the shares as to which it can then be exercised and, if partially
exercised, may be so exercised as to the unexercised shares any number of times during the Option
period as provided herein.

          b. Form of Payment. Subject to approval by the Board of Directors, payment of the
option price by Optionee shall be in the form of cash, personal check, certified check or mature,
previously-acquired shares of Common Stock of the Company, broker-assisted exercise, or any
combination thereof; provided, however, that Optionee shall not be permitted to pay the option
price in the form of a broker-assisted exercise or in the form of mature, previously-acquired
shares of Common Stock until after the effective date of an initial public offering of the
Company’s Common Stock; and provided, further, that Optionee shall not be permitted to pay the
option price in the form of a broker-assisted exercise or in the form of mature,
previously-acquired shares of Common Stock if payment in such form will cause the Company to
recognize a compensation expense under generally accepted accounting principles. Any stock
tendered as part of such payment shall be valued at its Fair Market Value as provided in the Plan.
For purposes of this Agreement, “mature, previously-acquired shares of Common Stock” and
“broker-assisted exercise” shall have the meaning set forth in the Plan. The Board of Directors
may, in its discretion, permit Optionee to tender such mature, previously-acquired shares through
the actual delivery of such shares or through attestation of ownership on such forms as the Board
of Directors may prescribe.

 

 

For purposes of this Agreement, “Fair Market Value” as of any date shall mean (i) if such stock is
listed on the Nasdaq National Market, Nasdaq SmallCap Market, or an established stock exchange, the
price of such stock at the close of the regular trading session of such market or exchange on such
date, as reported by The Wall Street Journal or a comparable reporting service, or, if no
sale of such stock shall have occurred on such date, on the next preceding day on which there was a
sale of stock; (ii) if such stock is not so listed on the Nasdaq National Market, Nasdaq SmallCap
Market, or an established stock exchange, the average of the closing “bid” and “asked” prices
quoted by the OTC Bulletin Board, the National Quotation Bureau, or any comparable reporting
service on such date or, if there are no quoted “bid” and “asked” prices on such date, on the next
preceding date for which there are such quotes; or (iii) if such stock is not publicly traded as of
such date, the per share value as determined by the Board, or the Committee, in its sole discretion
by applying principles of valuation with respect to the Company’s Common Stock.

          c. Stock Transfer Records. As soon as practicable after the effective exercise of
all or any part of the Option, Optionee shall be recorded on the stock transfer books of the
Company as the owner of the shares purchased, and the Company shall deliver to Optionee one or more
duly issued stock certificates evidencing such ownership. All requisite original issue or transfer
documentary stamp taxes shall be paid by the Company.

     4. Miscellaneous.

          a. Limitation of Rights as a Director and Stockholder. This Agreement shall not
confer on Optionee any right with respect to continued service on the Board of Directors of the
Company. Optionee shall have no rights as a stockholder with respect to shares subject to this
Option until such shares have been issued to Optionee upon exercise of this Option. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to the date such shares
are issued, except as provided in the Plan.

          b. Securities Law Compliance. The exercise of all or any parts of this Option
shall only be effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Common Stock pursuant to such exercise will not violate any state or
federal securities or other laws. Optionee may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all Common Stock to be
acquired pursuant to such exercise shall be held, until such time that such Common Stock is
registered and freely tradable under applicable state and federal securities laws, for Optionee’s
own account without a view to any further distribution thereof, that the certificates for such
shares shall bear an appropriate legend to that effect and that such shares will be not transferred
or disposed of except in compliance with applicable state and federal securities laws.

          c. Mergers, Recapitalizations, Stock Splits, Etc. Pursuant and subject to the
Plan, certain changes in the number or character of the Common Stock of the Company (through
merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment,
reduction or enlargement, as appropriate, in Optionee’s rights with respect to any unexercised
portion of the Option (i.e., Optionee shall have such “anti-dilution” rights under the
Option with respect to such events, but shall not have “preemptive” rights).

 

 

          d. Shares Reserved. The Company shall at all times during the option period
reserve and keep available such number of shares as will be sufficient to satisfy the requirements
of this Agreement.

          e. Nontransferability. During the lifetime of Optionee, the accrued Option shall
be exercisable only by Optionee or by the Optionee’s guardian or other legal representative, and
shall not be assignable or transferable by Optionee, in whole or in part, other than by will or by
the laws of descent and distribution.

          f. 2005 Non-Employee Directors Plan. The Option evidenced by this Agreement is
granted pursuant to the Plan, a copy of which Plan has been made available to Optionee and is
hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited
and conditioned as provided in the Plan and any corresponding action by the Board of Directors.
The Plan and the actions of the Board of Directors govern this Option and, in the event of any
questions as to the construction of this Agreement or in the event of a conflict between the Plan
(as administered by the Board) and this Agreement, the Plan (including any Board action) shall
govern, except as the Plan otherwise provides.

          g. Lockup Period Limitation. Optionee agrees that in the event the Company
advises Optionee that it plans an underwritten public offering of its Common Stock in compliance
with the Securities Act of 1933, as amended, and that the underwriter(s) seek to impose
restrictions under which certain stockholders may not sell or contract to sell or grant any option
to buy or otherwise dispose of part or all of their stock purchase rights of the underlying Common
Stock, Optionee hereby agrees that for a period not to exceed 180 days from the prospectus,
Optionee will not sell or contract to sell or grant an option to buy or otherwise dispose of this
option or any of the underlying shares of Common Stock without the prior written consent of the
underwriter(s) or its representative(s).

          h. Blue Sky Limitation. Notwithstanding anything in this Agreement to the
contrary, in the event the Company makes any public offering of its securities and it is determined
that it is necessary to reduce the number of issued but unexercised stock purchase rights so as to
comply with any state securities or Blue Sky law limitations with respect thereto, and such
determination is affirmed by the Board of Directors, unless the Board of Directors determines
otherwise, (i) the exercisability of this Option and the date on which this Option must be
exercised shall be accelerated, provided that the Company agrees to give Optionee 15 days’ prior
written notice of such acceleration, and (ii) any portion of this Option or any other option
granted to Optionee pursuant to the Plan which is not exercised prior to or contemporaneously with
such public offering shall be canceled. Notice shall be deemed given when delivered personally or
when deposited in the United States mail, first class postage prepaid and addressed to Optionee at
the address of Optionee on file with the Company.

          i. Accounting Compliance. Optionee agrees that, if a merger, reorganization,
liquidation or other “transaction” as defined in the Plan occurs, and Optionee is an “affiliate” of
the Company (as defined in applicable legal and accounting principles) at the time of such
transaction, Optionee will comply with all requirements of Rule 145 of the Securities Act of 1933,
as amended, and the requirements of such other legal or accounting principles, and will execute any
documents necessary to ensure such compliance.

 

 

          j. Right of First Refusal.

               (i) Notice to Company. Optionee shall not sell, assign, give, bequest or
otherwise transfer or dispose of any shares of Common Stock acquired through the exercise of this
Option without first giving written notice to the Company of Optionee’s intent to sell, transfer or
otherwise dispose of such Stock. Such notice shall specify the number of shares of Common Stock
Optionee intends to sell or transfer. The Company shall have the right to repurchase all or any
portion of such Stock at any time within thirty (30) days after the date it receives such notice of
sale at a price determined pursuant to Paragraph 4(k)(iii) below.

               (ii) Exercise of Right.

                    A. The Company shall notify Optionee, in writing, of its exercise of its right to
repurchase all or a portion of the Stock specified in Optionee’s notice of sale or other transfer.
Such notice shall be signed by a member of the Board.

                    B. The Company’s election to exercise its right to repurchase all or a portion of the
Stock specified in Optionee’s notice shall be approved by a majority vote of the Board, or by
written resolution of all members of the Board entitled to participate in such action, provided
that the Board may authorize a standing order electing to repurchase all shares tendered during a
stipulated time period. In no event shall Optionee participate in the Company’s election to
exercise its right to repurchase Optionee’s Stock in an individually authorized transaction if he
is a member of the Board.

                    C. As promptly as practicable after the Company’s exercise of its right to repurchase all
or a portion of the Stock specified in the Optionee’s notice, the Company shall deliver to Optionee
a lump-sum cash payment equal to the purchase price determined under Paragraph 4(k)(iii) below, and
Optionee shall deliver the stock certificates representing such Stock, properly endorsed for
transfer in blank, to the Company for cancellation.

                    D. If the Board notifies Optionee, in writing, that the Company will not exercise its
right to repurchase all or any portion of the Stock specified in Optionee’s notice, or if the Board
fails to exercise the Company’s right to repurchase such Stock during the thirty-day period
described above, the Company’s right to repurchase such Stock will lapse and Optionee shall have
the right to sell or transfer the Stock specified in Optionee’s notice for a period of sixty (60)
days thereafter, subject to any restrictions imposed by applicable securities laws. If Optionee
does not sell or transfer such stock within this sixty-day period, all of the provisions of this
Paragraph 4(k) shall again apply.

                    E. If the Board notifies Optionee, in writing, that the Company will not exercise its
right to repurchase all or any portion of the stock specified in Optionee’s notice, or if the Board
fails to exercise the Company’s right to repurchase such stock during the thirty-day period
described above, and all or any portion of such stock is subsequently sold or otherwise
transferred, the restrictions contained in this Paragraph 4(k) shall not apply to the stock so
transferred.

 

 

               (iii) Purchase Price for Stock. If the Company exercises its right to repurchase
all or any portion of the Stock specified in Optionee’s notice, the Company shall pay Optionee an
amount equal to the greater of: (A) the price offered in the proposed transaction giving rise to
such right of repurchase, and (B) the Fair Market Value (as defined in Paragraph 3(b) hereof) of
the Company’s Common Stock, as defined in the Plan, as of the date the Company received Optionee’s
notice of sale or other transfer.

               (iv) Investor Required Agreements. If in connection with the consummation of an
equity financing by the Company other than a public offering by the Company, the equity investor or
investors require as a condition to their making an investment in the Company that one or more
groups of optionees, with respect to shares of stock that may be owned by Optionee, enter into
buy-sell, voting, co-sale, right of first refusal or other agreements with the Company and/or such
investor or investors, and if the Optionee is a member of such group or groups of optionees, upon
written request of the Company, the Optionee agrees to enter into such agreement or agreements,
provided, however, that, without Optionee’s consent, which consent shall not be unreasonably
withheld, any rights of first refusal or other call options on Optionee’s shares shall not be a
price materially lower than the price that would apply under Paragraph 4(k)(iii) above.

               (iv) Initial Public Offering. The provisions of this Paragraph 4(k) shall no
longer apply on the effective date of an initial public offering of the Company’s Common Stock.

          k. Stock Legend. The Board of Directors may require that the certificates for any
shares of Common Stock purchased by Optionee (or, in the case of death, Optionee’s successors)
shall bear an appropriate legend to reflect the transfer restrictions contained in this Agreement;
provided, however, that failure to so endorse any of such certificates shall not render invalid or
inapplicable any of such restrictions.

          l. Scope of Agreement. This Agreement shall bind and inure to the benefit of the
Company, its affiliates and its successors and assigns and Optionee and any successor or successors
of Optionee permitted by Paragraph 2 or Paragraph 4(f) above.

     5. Change of Control.

          a. No Acceleration. The exercisability of this Option shall not accelerate upon a
Change of Control of the Company if (i) Optionee’s service on the Board of Directors continues with
the surviving entity immediately following such Change of Control and (ii) the surviving entity
assumes this Option or replaces this Option with an option for an equivalent number of such
entity’s voting securities and substantially similar terms, including but not limited to the
vesting period set forth in Paragraph 2 and a ratio of exercise price to fair market value that is
equivalent to such ratio under this Option immediately prior to such Change of Control.

          b. Acceleration. Notwithstanding anything in the Plan or this Agreement to the
contrary, if in connection with a Change of Control, the terms of Paragraph 5(a)(i) and (ii) are
not met, then this Option shall become immediately exercisable upon such Change of Control to the
extent of 100% of the aggregate number of shares specified in Paragraph 1, minus any shares or
securities previously purchased by Optionee, and shall remain exercisable until the earliest of (i)
the

 

 

expiration date stated in Paragraph 2(a) above, or (ii) the date determined by the Board in
connection with the terms of the Plan (including, without limitation, upon consummation of the
Change of Control, if so determined by the Board). If Optionee does not exercise this Option or
the replacement option, as the case may be, within the time specified in this Paragraph 5(b), all
rights of Optionee under this Option or the replacement option shall be forfeited.

          c. Defined. For purposes of this Paragraph 5, a “Change of Control” means:

               i. The consummation of any merger, consolidation, exchange, or reorganization to which the
Company is a party if the individuals and entities who were stockholders of the Company immediately
prior to the effective date of such transaction have, immediately following the effective date of
such transaction, beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of less than twenty percent (20%) of the total combined voting power of all classes of
securities issued by the surviving corporation for the election of directors of the surviving
corporation;

               ii. A liquidation of the Company.

               iii. A sale, lease or other transfer of all or substantially all of the assets of the
Company to any person or entity which is not an affiliate of the Company; or

               iv. The acquisition, without prior approval by resolution adopted by the Board, of direct
or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of
1934) of securities of the Corporation representing, in the aggregate, eighty percent (80%) or more
of the total combined voting power of all classes of the Company’s then-issued and outstanding
securities by any person or entity or by a group of associated persons or entities acting in
concert; provided, however, that a change of control will not be deemed to occur if such
acquisition is initiated by Optionee or an entity in which Optionee owns eighty percent (80%) or
more of the total combined voting power of all classes of such entity’s securities, or if Optionee
or such entity is a member of the group of associated persons or entities acting in concert.

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day
and year first above written.

	 	 	 	 	 
	 	FINGERHUT DIRECT MARKETING, INC.

 	 
	 	By:  	 	 
	 	 	Its: 	 
	 	 	 	 
	 	 	 	 
	 	 	Optionee 	 
	 	 	 	 

 

 

	 	 	 	 	 

RESTRICTED STOCK AWARD AGREEMENT

FINGERHUT DIRECT MARKETING, INC.

2005 NON-EMPLOYEE DIRECTORS PLAN

     THIS AGREEMENT, made effective as of this _______ day of ________, 20__ (the “Grant Date”) by
and between Fingerhut Direct Marketing, Inc., a Delaware Company (the “Company”), and
______________________ (“Participant”).

WITNESSETH:

     WHEREAS, Participant on the date hereof is a member of the Board of Directors of the Company;
and

     WHEREAS, the Company wishes to grant a restricted stock award to Participant for shares of the
Company’s common stock pursuant to the Company’s Amended and Restated 2005 Non-Employee Directors
Equity Compensation Plan (the “Plan”); and

     WHEREAS, the Board of Directors has authorized the grant of a restricted stock award to
Participant;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
the parties hereto agree as follows:

     1. Grant of Restricted Stock Award. The Company hereby grants to Participant on the
Grant Date a restricted stock award (the “Award”) for ______________ shares of the Company’s common
stock (the “Shares”) on the terms and conditions set forth herein, and subject to adjustment
pursuant to Section 4(b) of the Plan. The Company shall cause to be issued a stock certificate
representing such Shares in Participant’s name, and shall deliver such certificate to Participant;
provided, however, that the Company shall place a legend on such certificate describing the risks
of forfeiture and other transfer restrictions set forth in this Agreement and providing for the
cancellation and return of such certificate if such Shares are forfeited as provided in Section 2
below. Until such risks of forfeiture have lapsed or the Shares subject to this Award have been
forfeited pursuant to Section 2 below, Participant shall be entitled to vote the Shares and shall
receive all dividends attributable to such Shares, but Participant shall not have any other rights
as a shareholder with respect to such Shares.

     2. Vesting of Restricted Stock.

a. The Shares subject to this Award shall remain forfeitable as provided in
Section 2(b) and subject to the restrictions on transfer specified in Section 2(c)
until the vesting dates set forth below:

	 	 	 
	Vesting Date	 	Number of Shares
	 
	 	25%
	 	 	 

	 
	 	25%
	 	 	 

	 
	 	25%
	 	 	 

	 
	 	25%
	 	 	 

 

 

          b. This Award terminates and all unvested Shares will be forfeited to the Company when the
Participant ceases to be a member of the Board, except that the Award will immediately vest in full
and the risk of forfeiture and the transfer restrictions of section 2(c) of this Agreement shall
lapse: (i) if the Participant ceases to be a member of the Board by reason of death or total
disability and has served as a director for at least 12 continuous months since the Grant Date, or
(ii) under the circumstances specified in Section 4(a) of this Agreement.

          c. Unless and until the Shares vest as provided in this Agreement, such Shares may not be
transferred, sold, assigned, pledged, alienated, attached or otherwise encumbered (collectively, a
“Transfer”), and any purported Transfer will be void and unenforceable against the Company. No
attempt to transfer any unvested Shares, whether voluntary or involuntary, shall vest the purported
transferee with any interest or right in or with respect to such Shares.

3. Miscellaneous.

          a. Limitation of Rights as a Director. This Agreement shall not confer on Participant
any right with respect to continued service on the Board of Directors of the Company, nor will it
interfere in any way with any right of the Company or its stockholders to terminate such service.

          b. Securities Law Compliance. Participant shall not transfer or otherwise dispose of
the shares of Stock received pursuant to this Agreement until such time as counsel to the Company
shall have determined that such transfer or other disposition will not violate any state or federal
securities laws. Participant may be required by the Company, as a condition of the effectiveness of
this Award, to agree in writing that all shares of Stock subject to this Agreement shall be held
until such time that such shares are registered and freely tradable under applicable state and
federal securities laws for Participant’s own account without a view to any further distribution
thereof, that the certificates for such shares shall bear an appropriate legend to that effect, and
that such shares will be not transferred or disposed of except in compliance with applicable state
and federal securities laws.

          c. Mergers, Recapitalizations, Stock Splits, Etc. Pursuant and subject to Section 4(b)
of the Plan, certain changes in the number or character of the shares of the Company’s common stock
shall result in an adjustment, reduction or enlargement, as appropriate, in Participant’s rights
with respect to shares of Stock subject to this Agreement.

          e. Shares Reserved. The Company shall at all times during the term of this Agreement
reserve and keep available such number of shares as will be sufficient to satisfy the requirements
of this Agreement.

          f. Amended and Restated 2005 Non-Employee Directors Equity Compensation Plan. The
Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been
made available to Participant and is hereby incorporated into this Agreement. This Agreement is
subject to and in all respects limited and conditioned as provided in the Plan. The Plan and the
actions of the Board of Directors pursuant to the Plan govern this
Award and, in the event of any questions as to the construction of this Agreement or in the
event

 

 

of a conflict between the Plan (as administered by the Board) and this Agreement, the Plan
(including any Board action) shall govern.

          g. Lockup Period Limitation. Notwithstanding anything in the Plan to the contrary, the
Participant agrees that, subject to any early release provisions that apply generally to
stockholders of the Company, the Participant will not, if reasonably requested by the managing
underwriter, for a period of up to 180 days following the effective date of a registration
statement for an initial public offering of the Company’s common stock, sell, offer to sell, grant
any option for the sale of or otherwise dispose of any shares of the Company’s common stock,
including the Shares subject to this Award, without the prior written consent of the managing
underwriter or its representative(s).

          h. Accounting Compliance. Participant agrees that if a merger, reorganization,
liquidation or other “transaction” as defined in the Plan occurs, and Participant is an “affiliate”
of the Company (as defined in applicable legal and accounting principles) at the time of such
transaction, Participant will comply with all requirements of Rule 145 of the Securities Act of
1933, as amended, and the requirements of such other legal or accounting principles, and will
execute any documents necessary to ensure such compliance.

          i. Right of First Refusal.

               (i) Notice to Company. Participant shall not sell, assign, give, bequest or otherwise
transfer or dispose of any Shares acquired through this Award without first giving written notice
to the Company of Participant’s intent to sell, transfer or otherwise dispose of such Shares. Such
notice shall specify the number of Shares Participant intends to sell or transfer. The Company
shall have the right to repurchase all or any portion of such Shares at any time within thirty (30)
days after the date it receives such notice of sale at a price determined pursuant to Section
4(h)(iii) below.

               (ii) Exercise of Right.

                    A. The Company shall notify Participant, in writing, of its exercise of its right to
repurchase all or a portion of the Shares specified in Participant’s notice of sale or other
transfer. Such notice shall be signed by a member of the Board.

                    B. The Company’s election to exercise its right to repurchase all or a portion of the Shares
specified in Participant’s notice shall be approved by a majority vote of the Board, or by written
resolution of all members of the Board entitled to participate in such action, provided that the
Board may authorize a standing order electing to repurchase all shares of Company common stock
tendered during a stipulated time period. In no event shall Participant participate in the
Company’s election to exercise its right to repurchase Participant’s Stock in an individually
authorized transaction if he is a member of the Board.

                    C. As promptly as practicable after the Company’s exercise of its right to repurchase all or a
portion of the Shares specified in the Participant’s notice, the Company shall deliver to
Participant a lump-sum cash payment equal to the purchase price determined under Section 4(h)(iii)
below, and Participant shall deliver the stock certificates
representing such Shares, properly endorsed for transfer in blank, to the Company for
cancellation.

 

 

                    D. If the Board notifies Participant, in writing, that the Company will not exercise its right
to repurchase all or any portion of the Shares specified in Participant’s notice, or if the Board
fails to exercise the Company’s right to repurchase such Stock during the thirty-day period
described above, the Company’s right to repurchase such Shares will lapse and Participant shall
have the right to sell or transfer the Shares specified in Participant’s notice for a period of
sixty (60) days thereafter, subject to any restrictions imposed by applicable securities laws. If
Participant does not sell or transfer such Shares within this sixty-day period, all of the
provisions of this Section 4(h) shall again apply.

                    E. If the Board notifies Participant, in writing, that the Company will not exercise its right
to repurchase all or any portion of the Shares specified in Participant’s notice, or if the Board
fails to exercise the Company’s right to repurchase such Shares during the thirty-day period
described above, and all or any portion of such Shares is subsequently sold or otherwise
transferred, the restrictions contained in this Paragraph 4(h) shall not apply to the Shares so
transferred.

               (iii) Purchase Price for Shares. If the Company exercises its right to repurchase all
or any portion of the Shares specified in Participant’s notice, the Company shall pay Participant
an amount equal to the greater of: (A) the price offered in the proposed transaction giving rise to
such right of repurchase, and (B) the Fair Market Value (as defined in Section 5(g) of the Plan) of
the Company’s common stock as of the date the Company received Participant’s notice of sale or
other transfer.

               (iv) Investor Required Agreements. If in connection with the consummation of an equity
financing by the Company other than a public offering by the Company, the equity investor or
investors require as a condition to their making an investment in the Company that one or more
groups of stockholders, with respect to shares of Company stock that may be owned by such
stockholders, enter into buy-sell, voting, co-sale, right of first refusal or other agreements with
the Company and/or such investor or investors, and if the Participant is a member of such group or
groups of stockholders, upon written request of the Company, the Participant agrees to enter into
such agreement or agreements, provided, however, that, without Participant’s consent, which consent
shall not be unreasonably withheld, any rights of first refusal or other call options on
Participant’s shares shall not be a price materially lower than the price that would apply under
Section 4(h)(iii) above.

               v) Initial Public Offering. The provisions of this Paragraph 4(h) shall no longer
apply on the effective date of an initial public offering of the Company’s common stock.

          i. Stock Legend. Each certificate representing Shares issued to Participant (or, in
the case of death, Participant’s successors) hereunder shall bear the following legend or
legend(s) containing n substantially similar information; provided, however, that failure to so
endorse any of such certificates shall not render invalid or inapplicable any of such
restrictions:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN

 

 

OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A OF SUCH ACT. THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A RESTRICTED STOCK AWARD
AGREEMENT TO WHICH THE HOLDER HEREOF AND THE COMPANY ARE PARTIES. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

          j. Scope of Agreement. This Agreement shall bind and inure to the benefit of the
Company, its affiliates and its successors and assigns and Participant and any successor or
successors of Participant permitted by this Agreement.

4. Change of Control.

          a. When Acceleration Occurs. Notwithstanding anything in the Plan or this Agreement
to the contrary, in the event of a “change in control” as defined in section 4(b), the shares of
Stock subject to this Award will immediately vest and the risk of forfeiture as set forth in
section 2(b) and the transfer restrictions set forth in section 2(c) shall immediately lapse
unless (i) Participant’s service on the Board of Directors continues with the surviving entity
immediately following such change in control and (ii) the surviving entity assumes this Award or
replaces this Award with a restricted stock award for an equivalent number of such entity’s voting
securities and on substantially similar terms, including but not limited to the vesting period set
forth in Section 2.

          b. Change in Control Defined. For purposes of this Agreement, a “change in control”
shall mean any of the following:

               (i) a majority of the directors of the Company shall be persons other than persons:

                    A. for whose election proxies shall have been solicited by the Board of Directors of the
Company or

                    B. who are then serving as directors appointed by the Board of Directors to fill vacancies
on the Board of Directors caused by death or resignation (but not by removal) or to fill
newly-created directorships;

               (ii) 50% or more of the voting power of the outstanding shares of all classes and series of
capital stock of the Company entitled to vote in the general election of directors of the Company,
voting together as a single class (the “Voting Stock”) is acquired or beneficially owned (as
defined in Rule 13d 3 promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) by any person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) other than (A) an entity in connection with a Business Combination in which
clauses (x) and (y) of subparagraph (iii) apply, except such an
acquisition by the Participant, any group of which the Participant is a member, or any entity
of which the Participant is an affiliate (as defined in Rule 12(b)(2) promulgated under the
Exchange Act), or (B) a licensed broker/dealer or licensed underwriter who purchases shares of
Voting Stock pursuant to an underwritten public offering solely for the purpose of resale to the
public;

 

 

               (iii) the consummation of a merger or consolidation of the Company with or into another
entity, a sale or other disposition (in one transaction or a series of transactions) of all or
substantially all of the Company’s assets or a similar business combination (each, a “Business
Combination”), in each case unless, immediately following such Business Combination, (x) all or
substantially all of the beneficial owners of the Company’s Voting Stock immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of the voting power of
the then outstanding shares of voting stock (or comparable voting equity interests) of the
surviving or acquiring entity resulting from such Business Combination (including such beneficial
ownership of an entity that, as a result of such transaction, beneficially owns the Company or all
or substantially all of the Company’s assets either directly or through one of more subsidiaries),
in substantially the same proportions (as compared to the other beneficial owners of the Company’s
Voting Stock immediately prior to such Business Combination) as their beneficial ownership of the
Company’s Voting Stock immediately prior to such Business Combination, and (y) no person, entity or
group beneficially owns, directly or indirectly, 50% or more of the voting power of the outstanding
voting stock (or comparable equity interests) of the surviving or acquiring entity (other than (1)
a direct or indirect parent entity of the surviving or acquiring entity, that, after giving effect
to the Business Combination, beneficially owns, directly or indirectly, 100% of the outstanding
voting stock (or comparable equity interests) of the surviving or acquiring entity, or (2) the
Participant or any group of which the Participant is a member or any entity of which the
Participant is an affiliate); or

               (iv) approval by the shareholders of a definitive agreement or plan to liquidate or dissolve
the Company.

               (v) IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the
day and year first above written.

	 	 	 	 	 
	 	FINGERHUT DIRECT MARKETING, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 	 	 
	 	 	 
	 	(Participantexv10w5

Exhibit 10.5

FINGERHUT DIRECT MARKETING, INC.

2008 EQUITY AND INCENTIVE PLAN

1. DEFINED TERMS

     Exhibit A, which is incorporated by reference, defines the terms used in the Plan and in the
Award Agreements.

2. PURPOSE

     The Plan has been established to advance the interests of the Company and its Affiliates by
providing for the grant of Awards to Participants.

3. ADMINISTRATION

     The Committee has discretionary authority, subject only to the express provisions of the Plan
and the Award Agreements, to interpret the Plan; determine eligibility for and grant Awards;
determine, modify or waive the terms and conditions of any Award; prescribe forms, rules and
procedures; and otherwise do all things necessary to carry out the purposes of the Plan. Except as
otherwise provided by the express terms of an Award Agreement, all determinations of the Committee
made under the Plan will be conclusive and will bind all parties.

4. LIMITS ON AWARDS UNDER THE PLAN

     a. Number of Shares. Subject to adjustment as provided in Section 11, the
number of shares of Common Stock of the Company that may be issued or transferred (i) upon the
exercise of Stock Options, (ii) in payment of Stock Appreciation Rights, (iii) as shares of
Restricted Stock, (iv) in payment of Restricted Stock Units, (v) in payment of Other Stock-Based
Awards, or (vi) as or pursuant to any other Awards contemplated by the Plan shall not exceed in the
aggregate [152,312,347] Shares, which maximum number will be increased by the following: (A) the
number of Shares reserved for issuance and not subject to outstanding awards under each Rolled-Up
Plan as of the Effective Date; (B) the number of Shares relating to awards outstanding under any
Rolled-Up Plan as of the Effective Date that (1) expire, or are forfeited, terminated or cancelled,
without the issuance of Shares, (2) are settled in cash in lieu of Shares, or (3) are exchanged
prior to the issuance of Shares, for awards not involving Shares; and (C) if the exercise price of
any stock option outstanding under any Rolled-Up Plan as of the Effective Date is, or the tax
withholding requirements with respect to any award outstanding under any Rolled-Up Plan as of the
Effective Date are, satisfied by withholding Shares otherwise then deliverable in respect of the
award or the actual or constructive transfer to the Company of Shares already owned, the number of
Shares equal to the withheld or transferred Shares.

     b. Reuse of Shares. Under the Plan, (i) if all or any portion of an Award
expires, or is forfeited, terminated or cancelled, without the issuance of Shares, or is settled in
cash in lieu of Shares, or is exchanged with the Committee’s permission, prior to the issuance of
Shares, for an Award not involving Shares, the number of Shares expired, forfeited, terminated or
cancelled, or settled or exchanged, as the case may be, will again be available for issuance or
transfer under

 

 

the Plan; (ii) if the exercise price of any Stock Option granted under the Plan is, or the tax
withholding requirements with respect to any Award granted under the Plan are, satisfied through
the withholding by the Company of Shares otherwise then deliverable in respect of such Award or
actual or constructive transfer to the Company of Shares already owned, a number of Shares equal to
such withheld or transferred Shares will again be available for issuance or transfer under the
Plan; and (iii) if a Stock Appreciation Right is exercised and settled in Shares, a number of
Shares equal to the difference between the total number of Shares for which the Stock Appreciation
Right was exercised and the number of Shares actually issued or transferred will again be available
for issuance or transfer under the Plan, with the result being that only the number of Shares
actually issued or transferred upon exercise of the Stock Appreciation Right are counted against
the maximum number of Shares available for issuance or transfer under the Plan.

     c. Type of Shares. Common Stock delivered under the Plan may be authorized but
unissued Common Stock or previously issued Common Stock acquired by the Company or any of its
Affiliates and may include fractional shares of Common Stock.

5. ELIGIBILITY AND PARTICIPATION

     The Committee, based upon recommendations of the Company and its Affiliates, will select
Participants from among those Employees, Non-Employee Directors and consultants of the Company or
its Affiliates who, in the opinion of the Committee, are in a position to make a significant
contribution to the success of the Company and its Affiliates.

6. RULES APPLICABLE TO STOCK OPTIONS

     a. General.

          1. Stock Option Provisions. The Committee will determine the terms of all Stock
Options, subject to the limitations provided herein, and shall furnish to each Participant an Award
Agreement setting forth the terms applicable to the Participant’s Stock Option. By entering into an
Award Agreement, the Participant agrees to the terms of the Stock Option and of the Plan, to the
extent not inconsistent with the express terms of the Award Agreement. Notwithstanding any
provision of this Plan to the contrary, awards of an acquired company that are converted, replaced
or adjusted in connection with the acquisition may contain terms and conditions that are
inconsistent with the terms and conditions specified herein, as determined by the Committee.

          2. Transferability. Except as the Committee otherwise expressly provides, Stock
Options may not be transferred other than by will or by the laws of descent and distribution, and
during a Participant’s lifetime, except as the Committee otherwise expressly provides, may be
exercised only by the Participant.

          3. Vesting, Etc. The Committee may determine the time or times at which a Stock
Option will vest or become exercisable and the terms on which a Stock Option requiring exercise
will remain exercisable. Without limiting the foregoing, the Committee may at any time

 

 

accelerate the vesting or exercisability of a Stock Option, regardless of any adverse or
potentially adverse tax consequences resulting from such acceleration. Unless the Committee
expressly provides otherwise in an Award Agreement, immediately upon the cessation of a
Participant’s Employment all Stock Options will cease to be exercisable and will terminate, except
that:

     (A) subject to (B) and (C) below, all Stock Options held by the Participant or
the Participant’s permitted transferees (as determined by reference to the applicable Award
Agreement), if any, immediately prior to the cessation of the Participant’s Employment, to
the extent then exercisable, will remain exercisable for the shorter of (i) a period of 90
days or (ii) the period ending on the latest date on which such Stock Option could have been
exercised without regard to this Section 6(a)(3), and will thereupon terminate;

     (B) all Stock Options held by a Participant or the Participant’s permitted
transferees, if any, immediately prior to the Participant’s death or Disability, to the
extent then exercisable, will remain exercisable for the shorter of (i) the twelve (12)
month period following the Participant’s death or Disability or (ii) the period ending on
the latest date on which such Stock Options could have been exercised without regard to this
Section 6(a)(3), and will thereupon terminate; and

     (C) all Stock Options held by a Participant or the Participant’s permitted
transferees, if any, immediately prior to the cessation of the Participant’s Employment will
immediately terminate upon such cessation if such cessation of Employment was for Cause.

          4. Taxes. The Committee will make such provision for the withholding of taxes as
it deems necessary. The Committee may, but need not, hold back Shares from a Stock Option or permit
a Participant to tender previously owned Shares in satisfaction of tax withholding requirements
(but not in excess of the applicable minimum statutory withholding rate).

          5. Dividend Equivalents, Etc. To the extent consistent with Section 409A of the
Code, the Committee may in its sole discretion provide for the payment of amounts in cash, or for
other adjustments to a Stock Option, upon an Adjustment Event, with respect to Common Stock subject
to a Stock Option.

          6. Term. The term during which any Stock Option granted under the Plan may be
exercised shall be established in each case by the Committee, provided, however, in no event shall
any Stock Option be exercisable during a term of more than 10 years after the date on which it is
granted.

          7. Rights Limited. Nothing in the Plan will be construed as giving any person
the right to continued Employment with the Company or its Affiliates, continued participation in
the Plan, or any rights as a stockholder except as to Shares actually issued under the Plan.

 

 

     b. Exercise.

          1. Time And Manner Of Exercise. Unless the Committee expressly provides
otherwise, a Stock Option permitting exercise by the holder will not be deemed to have been
exercised until the Committee receives a notice of exercise (in form acceptable to the Committee)
signed by the appropriate person and accompanied by any payment required under the Stock Option. If
the Stock Option is exercised by any person other than the Participant, the Committee may require
satisfactory evidence that the person exercising the Stock Option has the right to do so.

          2. Exercise Price. Except as otherwise permitted pursuant to Section 6(a)(5) or
Section 11(b)(1) hereof, the exercise price of a Stock Option will not be less than the Fair Market
Value of the Common Stock subject to the Stock Option, determined as of the date of grant.

          3. Payment Of Exercise Price. Where the exercise of a Stock Option is to be
accompanied by payment, the Committee may determine the required or permitted forms of payment,
subject to the following: (a) all payments will be by cash or check acceptable to the Committee, or
(b) if so permitted by the Committee, (i) through the delivery of Shares that have a Fair Market
Value equal to the exercise price, except where payment by delivery of Shares would adversely
affect the Company’s results of operations under Generally Accepted Accounting Principles or where
payment by delivery of Shares outstanding for less than six months would require application of
securities laws relating to profit realized on such Shares, (ii) where permitted by law, by
delivery to the Company of a promissory note of the person exercising the Stock Option, payable on
such terms as are specified by the Committee, (iii) at such time, if any, as the Common Stock is
publicly traded, through a broker-assisted exercise program acceptable to the Committee, (iv) by
other means acceptable to the Committee, or (v) by means of withholding of Shares with an aggregate
Fair Market Value equal to (A) the aggregate exercise price and (B) unless the Company is precluded
or restricted from doing so under debt covenants, minimum statutory withholding taxes with respect
to such exercise, or (vi) by any combination of the foregoing permissible forms of payment. The
delivery of Shares in payment of the exercise price under clause (b)(i) above may be accomplished
either by actual delivery or by constructive delivery through attestation of ownership, subject to
such rules as the Committee may prescribe.

7. RULES APPLICABLE TO STOCK APPRECIATION RIGHTS

     a. The Committee may grant either unrelated Stock Appreciation Rights or related
(tandem) Stock Appreciation Rights as follows:

          1. The Committee may grant unrelated Stock Appreciation Rights in such amount and
subject to such terms and conditions, as the Committee shall from time to time determine in its
sole discretion, subject to the terms and provisions of the Plan, provided, however, that in no
event shall (i) the exercise price of the Shares subject to the Stock Appreciation Right be less
than the Fair Market Value per Share on the grant date of such Stock Appreciation Right, or (ii)
the period to exercise the Stock Appreciation Right exceed ten (10) years as measured from the date
of grant. The holder of a Stock Appreciation Right shall, subject to the terms and conditions of
the Plan and the applicable Award Agreement, have the right to

 

 

surrender to the Company for cancellation all or a portion of such Stock Appreciation Right,
but only to the extent that such Stock Appreciation Right is then exercisable, and to be paid
therefore, in either Shares or cash, as the Committee shall determine in the Award Agreement or
otherwise, an amount equal to the excess (if any) of (x) the aggregate Fair Market Value of the
Shares subject to the Stock Appreciation Right or portion thereof surrendered, determined as of the
exercise date, over (y) the aggregate exercise price of the Shares subject to the Stock
Appreciation Right or portion thereof surrendered.

          2. The Committee may grant a related Stock Appreciation Right in connection with all or
any part of a Stock Option granted under the Plan, either at the time such Stock Option is granted
or at any time thereafter prior to the exercise, termination or cancellation of such Stock Option,
and subject to such terms and conditions as the Committee shall from time to time determine in its
sole discretion, consistent with the terms and provisions of the Plan, provided, however, that in
no event shall the exercise price of the Shares subject to the Stock Appreciation Right be less
than the Fair Market Value per Share on the grant date of such Stock Appreciation Right. The holder
of a related Stock Appreciation Right shall, subject to the terms and conditions of the Plan and
the applicable Award Agreement, have the right by exercise thereof to surrender to the Company for
cancellation all or a portion of such related Stock Appreciation Right, but only to the extent that
the related Stock Option is then exercisable, and to be paid therefor, in either Shares or cash, as
the Committee shall determine in the Award Agreement or otherwise, an amount equal to the excess
(if any) of (i) the aggregate Fair Market Value of the Shares subject to the related Stock
Appreciation Right or portion thereof surrendered, determined as of the exercise date, over (ii)
the aggregate exercise price of the Shares subject to the Stock Appreciation Right or portion
thereof surrendered. Upon any exercise of a related Stock Appreciation Right or any portion
thereof, the number of Shares subject to the related Stock Option shall be reduced by the number of
Shares in respect of which such Stock Appreciation Right shall have been exercised. Upon any
exercise of a Stock Option or portion thereof, the number of Shares subject to any related Stock
Appreciation Right shall be reduced by the number of Shares in respect of which such Stock Option
shall have been exercised.

     b. The grant or exercisability of any Stock Appreciation Right shall be subject to such
conditions as the Committee, in its sole discretion, shall determine.

8. RULES APPLICABLE TO RESTRICTED STOCK

     a. Grant of Restricted Stock. The Committee may grant Awards of Restricted
Stock, subject to such restrictions, terms and conditions, as the Committee shall determine in its
sole discretion and as shall be evidenced by the applicable Award Agreement (provided that any such
Award is subject to the vesting requirements described herein). The Committee shall determine the
price, which, to the extent required by law, shall not be less than par value of the shares of
Restricted Stock, to be paid by the Participant for each share of Restricted Stock subject to the
Award. Each Award Agreement with respect to such Award shall set forth the amount (if any) to be
paid by the Participant with respect to such Award and when and under what in circumstances such
payment is required to be made.

 

 

     b. Vesting. The vesting of a Restricted Stock Award granted under the Plan may
be conditioned upon the completion of a specified period of employment or service with the Company
or any Affiliate, upon the attainment of specified performance goals, and/or upon such other
criteria as the Committee may determine in its sole discretion.

     c. Stock Certificates. The Committee may, upon such terms and conditions as the
Committee determines, provide that a certificate or certificates representing the Shares underlying
a Restricted Stock Award shall be registered in the Participant’s name and bear an appropriate
legend specifying that such Shares are not transferable and are subject to the provisions of the
Plan and the restrictions, terms and conditions set forth in the applicable Award Agreement, and
that such certificate or certificates shall be held in escrow by the Company on behalf of the
Participant until such Shares become vested or are forfeited.

     d. Voting / Dividends. If and to the extent that the applicable Award Agreement
may so provide, a Participant shall have the right to vote and receive dividends on Restricted
Stock granted under the Plan. Unless otherwise provided in the applicable Award Agreement, any
Common Stock received as a dividend on or in connection with a stock split of the Shares underlying
a Restricted Stock Award shall be subject to the same restrictions as the Shares underlying such
Restricted Stock Award.

     e. Termination of Employment. Upon the termination of a Participant’s Employment
with the Company and its Affiliates, the Restricted Stock granted to such Participant shall be
subject to the terms and conditions specified in the applicable Award Agreement.

9. RULES APPLICABLE TO RESTRICTED STOCK UNITS

     a. General. The Committee may grant Restricted Stock Units, subject to such
restrictions, terms and conditions, as the Committee shall determine in its sole discretion and as
shall be evidenced by the applicable Award Agreement. The vesting of a Restricted Stock Unit
granted under the Plan may be conditioned upon the completion of a specified period of employment
or service with the Company or any Affiliate and/or upon such other criteria as the Committee may
determine in its sole discretion.

     b. Vesting. Unless otherwise provided in an Award Agreement, upon the vesting of
a Restricted Stock Unit there shall be delivered to the Participant, as soon as practicable
following the date on which such Award (or any portion thereof) vests (but in no event later than
two and one-half (2 1/2) months following the end of the calendar year in which such Award vests),
subject to Section 11, that number of Shares equal to the number of Restricted Stock Units that
have vested (or the cash equivalent thereof in the case of a cash-settled award).

     c. Transferability. Except as provided in the applicable Award Agreement, a
Restricted Stock Unit may not be assigned, transferred or otherwise encumbered or disposed of by
the Participant. Subject to the requirements of Code Section 409A, Restricted Stock Units may
provide the Participant with the right to receive dividend equivalent payments with respect to
Shares subject to the Award (both before and after the Award is earned or vested), which

 

 

payments may be either made currently or credited to an account for the Participant, and may
be settled in cash or Shares, as determined by the Committee. Any such settlements and any such
crediting of dividend equivalents may be subject to such conditions, restrictions and contingencies
as the Committee shall establish, including the reinvestment of such credited amounts in Share
equivalents.

     d. Termination of Employment. Upon the termination of a Participant’s Employment
with the Company and its Affiliates, the Restricted Stock Units granted to such Participant shall
be subject to the terms and conditions specified in the applicable Award Agreement.

10. RULES APPLICABLE TO OTHER STOCK- OR CASH-BASED AWARDS

     The Committee is authorized to grant Awards to Participants in the form of Other Stock-Based
Awards or Other Cash-Based Awards under terms and conditions specified by the Committee in the
applicable Award Agreement. Awards granted pursuant to this paragraph may be granted with value and
payment contingent upon the achievement of performance goals, and, if so granted, such goals shall
relate to periods of performance in excess of one calendar year. The Committee shall determine the
terms and conditions of such Awards at the date of grant or thereafter. Payments earned hereunder
may be decreased or increased in the sole discretion of the Committee based on such factors as it
deems appropriate.

11. EFFECT OF CERTAIN TRANSACTIONS

     a. Change Of Control. Except as otherwise provided in an Award Agreement, in the
event of a Change of Control in which there is an acquiring or surviving entity, the Committee may,
unless the Committee determines that doing so is inappropriate or unfeasible, provide for the
continuation or assumption of some or all outstanding Awards, or for the grant of new awards in
substitution therefor, by the acquiror or survivor or an affiliate of the acquiror or survivor, in
each case on such terms and subject to such conditions as preserve the intrinsic value of the Award
in the Committee’s good faith determination. In the event of a Change of Control (whether or not
there is an acquiring or surviving entity) in which there is no assumption or substitution as to
some or all outstanding Awards, the Committee shall preserve the intrinsic value of the Awards,
provide for treating as satisfied any time-based vesting condition on any such Award or for the
accelerated delivery of Shares or cash, as the case may be, issuable under each such Award, or
cancel any Award and, in connection therewith, pay an amount (in cash or, in the discretion of the
Committee, in the form of consideration paid to shareholders of the Company in connection with such
Change of Control) which, in the case of Stock Options, shall equal the excess, if any, of the Fair
Market Value of the Shares subject to such Stock Options over the aggregate exercise price of such
Stock Options, in each case on a basis that gives the holder of the Award a reasonable opportunity,
as determined by the Committee, following exercise or cancellation of the Award or the issuance of
the Shares, as the case may be, to participate as a stockholder in the Change of Control. Except as
otherwise provided in an Award Agreement, each Award (unless assumed pursuant to the first sentence
of this Section 11(a)), will terminate upon consummation of the Change of Control.

 

 

     b. Changes In, Distributions With Respect To And Redemptions Of Common Stock.

          1. Basic Adjustment Provisions. In the event of any stock dividend or other
similar distribution (whether in the form of stock or other securities or other property), stock
split or combination of shares (including a reverse stock split), recapitalization, conversion,
reorganization, consolidation, split-up, spin-off, combination, merger, exchange of stock,
redemption or repurchase of all or part of the shares of any class of stock or any change in the
capital structure of the Company or an Affiliate or other transaction or event (other than those
described in Section 11(a)), the Committee shall, as appropriate in order to prevent enlargement or
dilution of benefits intended to be made available under the Plan, make adjustments to the maximum
number of Shares that may be delivered under the Plan under Section 4(a) and shall also make
appropriate adjustments to the number and kind of shares of stock, securities or other property
(including cash) subject to Awards then outstanding or subsequently granted, any exercise prices
relating to Awards and any other provision of Awards affected by such change.

          2. Certain Other Adjustments. The Committee will also make adjustments of the
type described in paragraph (1) above to take into account distributions to stockholders other than
those provided for in Section 11(a) and 11(b)(1), or any other event, if the Committee determines
that adjustments are appropriate to avoid distortion in the operation of the Plan and to preserve
the value of Awards made hereunder.

          3. Continuing Application of Plan Terms. References in the Plan to Shares will
be construed to include any stock or securities resulting from an adjustment pursuant to this
Section 11.

12. LIMITATION ON BENEFITS

     Notwithstanding anything contained in the Plan or an Award Agreement to the contrary if,
whether as a result of accelerated vesting or otherwise, a Participant would receive any payment,
deemed payment or other benefit under the Plan that, together with any other payment, deemed
payment or other benefit a Participant may receive under any other plan, program, policy or
arrangement, would constitute an “excess parachute payment” under Section 280G of the Code, then,
notwithstanding anything in this Plan to the contrary, the payments, deemed payments or other
benefits such Participant would otherwise receive under the Plan shall be reduced to the extent
necessary to eliminate any such excess parachute payment and such Participant shall have no further
rights or claims with respect thereto. If the preceding sentence would result in a reduction of the
payments, deemed payments or other benefits a Participant would otherwise receive, the Company will
use its good faith efforts to seek the approval of the Company’s shareholders in the manner
provided for in Section 280G(b)(5) of the Code and the regulations thereunder with respect to such
reduced payments or other benefits (if the Company is eligible to do so), so that such payments
would not be treated as “parachute payments” for these purposes (and therefore would cease to be
subject to reduction pursuant to this Section 12).

13. LEGAL CONDITIONS ON DELIVERY OF COMMON STOCK

 

 

     The Company shall, prior to delivering Shares pursuant to the Plan or removing any restriction
from Shares previously delivered under the Plan, ensure that (a) all legal matters in connection
with the issuance and delivery of such Shares have been addressed and resolved, and (b) if the
outstanding Common Stock is at the time of delivery listed on any stock exchange or national market
system, the Shares to be delivered have been listed or authorized to be listed on such exchange or
system upon official notice of issuance. The Company and its Affiliates will be obligated to
deliver any Shares pursuant to the Plan or to remove any restriction from Shares previously
delivered under the Plan upon satisfaction or waiver of the conditions set forth in the preceding
sentence and all other conditions of the Award Agreement. If the sale of Common Stock has not been
registered under the Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as counsel for the Company may in good
faith recommend to avoid violation of such Act. The Company may require that certificates
evidencing Common Stock issued under the Plan bear an appropriate legend reflecting any restriction
on transfer applicable to such Common Stock, and the Company may hold the certificates pending
lapse of the applicable restrictions.

14. AMENDMENT AND TERMINATION

     The Committee, in its sole and absolute discretion, may at any time or times amend or alter
the Plan or any outstanding Award and may at any time terminate or discontinue the Plan as to any
future grants of Awards; provided, that the Committee may not, without the Participant’s consent,
amend or terminate the terms of an Award or the Plan so as to affect adversely the Participants’ or
a Participant’s rights under an Award or the Plan. Any amendments to the Plan shall be conditioned
upon stockholder approval only to the extent, if any, such approval is required by applicable law
(including the Code), as determined by the Committee.

15. WAIVER OF JURY TRIAL

     By accepting an Award under the Plan, each Participant waives any right to a trial by jury in
any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under
any amendment, waiver, consent, instrument, document or other agreement delivered or which in the
future may be delivered in connection. therewith, and agrees that any such action, proceedings or
counterclaim shall be tried before a court and not before a jury. By accepting an Award under the
Plan, each Participant certifies that no officer, representative or attorney of the Company or any
Affiliate has represented, expressly or otherwise, that the Company would not, in the event of any
action, proceeding or counterclaim, seek to enforce the foregoing waivers.

16. ESTABLISHMENT OF SUB-PLANS

     The Board may from time to time establish one or more sub-plans under the Plan for purposes of
satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Board shall
establish such sub-plans by adopting supplements to the Plan setting forth (i) such limitations on
the Committee’s discretion under the Plan as the Board deems necessary or desirable and (ii) such
additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem
necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the
Plan, but each supplement shall apply only to Participants within the

 

 

affected jurisdiction and the Company shall not be required to provide copies of any
supplement to Participants in any jurisdiction that is not affected.

17. SECTION 409A

     Awards under the Plan are intended to either be exempt from, or to comply with Code Section
409A, and all Awards shall be interpreted in accordance with Code Section 409A and Department of
Treasury regulations and other interpretive guidance issued thereunder, including without
limitation any such regulations or other guidance that may be issued after the effective date of
the Plan. Notwithstanding any provision of the Plan or any Award Agreement to the contrary, in the
event that the Committee determines that any Award may or does not comply with Code Section 409A in
a manner that could result in the acceleration of income or the imposition of an additional tax
under Section 409A of the Code, the Company may adopt such amendments to the Plan and the affected
Award (without Participant consent) or adopt other policies and procedures (including amendments,
policies and procedures with retroactive effect), or take any other actions, that the Committee
determines are necessary or appropriate to (i) exempt the Plan and any Award from the application
of Code Section 409A and/or preserve the intended tax treatment of Awards or (ii) comply with the
requirements of Code Section 409A.

18. GOVERNING LAW

     Except as otherwise provided by the express terms of an Award Agreement or under a sub-plan
described in Section 16, the provisions of the Plan and of Awards under the Plan shall be governed
by and interpreted in accordance with the laws of the State of Delaware.

 

 

EXHIBIT A

Definitions of Terms

The following terms, when used in the Plan, will have the meanings and be subject to the provisions
set forth below:

     “Adjustment Event”: Either (i) a cash dividend with respect to Shares paid to all or
substantially all holders of Shares, other than cash dividends in respect of Shares declared by the
Board as part of a regular dividend payment practice or stated cash dividend policy of the Company
following a Public Offering, or (ii) a substantially pro rata redemption or substantially pro rata
repurchase by the Company, of all or part of any class of stock of the Company.

     “Affiliate”: A Parent or Subsidiary of the Company.

     “Award”: Any Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Other Stock-Based or Other Cash-Based Award granted pursuant to the Plan.

     “Award Agreement”: A written agreement between the Company and the Participant evidencing an
Award, which may, but need not, be executed or acknowledged by a Participant.
“Board”: The Board of Directors of the Company.

     “Cause”: “Cause” shall have the meaning set forth in the employment or engagement agreement
between a Participant and the Company, its Affiliates or any of their successors, if such agreement
exists and contains a definition of Cause; otherwise Cause shall mean (i) a Participant being
charged with a felony or convicted of any criminal misdemeanor or more serious act; (ii) any
intentional and/or willful act of fraud or dishonesty by a Participant related to or connected with
Participant’s employment by the Company or any of its Affiliates, (iii) the willful and/or
continued failure, neglect or refusal by Participant to perform his or her employment duties with
the Company or any of its Affiliates, (iv) a material violation of the Company’s or an Affiliate’s
policies or code of conduct, or (v) the willful and/or material breach by Participant of any
agreement between Participant and the Company or any of its Affiliates, including but not limited
to an employment agreement or a noncompetition agreement. The Committee shall, unless otherwise
provided in the Award Agreement or any employment agreement with the Participant, have the sole
discretion to determine whether Cause exists, and its determination shall be final and binding.

     “Change of Control”: Any of the following: (a) a majority of the directors of the Company
shall be persons other than persons (i) for whose election proxies shall have been solicited by the
Board or (ii) who are then serving as directors appointed by the Board to fill vacancies on the
Board caused by death or resignation (but not by removal) or to fill newly-created directorships,
(b) 50% or more of the voting power of the outstanding shares of all classes and series of capital
stock of the Company entitled to vote in the general election of directors of the Company, voting
together as a single class (the “Voting Stock”) is acquired or beneficially owned (as defined in
Rule 13d 3 promulgated under the Exchange Act)) by any
person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act)

 

 

other than (i) an entity in connection with a Business Combination in which clauses (x) and
(y) of subparagraph (c) apply, except such an acquisition by the Participant, any group of which
the Participant is a member, or any entity of which the Participant is an affiliate (as defined in
Rule 12(b)(2) promulgated under the Exchange Act), or (ii) a licensed broker/dealer or licensed
underwriter who purchases shares of Voting Stock pursuant to an underwritten public offering solely
for the purpose of resale to the public, (c) the consummation of a merger or consolidation of the
Company with or into another entity, a sale or other disposition (in one transaction or a series of
transactions) of all or substantially all of the Company’s assets or a similar business combination
(each, a “Business Combination”), in each case unless, immediately following such Business
Combination, (x) all or substantially all of the beneficial owners of the Company’s Voting Stock
immediately prior to such Business Combination beneficially own, directly or indirectly, more than
50% of the voting power of the then outstanding shares of voting stock (or comparable voting equity
interests) of the surviving or acquiring entity resulting from such Business Combination (including
such beneficial ownership of an entity that, as a result of such transaction, beneficially owns the
Company or all or substantially all of the Company’s assets either directly or through one of more
subsidiaries), in substantially the same proportions (as compared to the other beneficial owners of
the Company’s Voting Stock immediately prior to such Business Combination) as their beneficial
ownership of the Company’s Voting Stock immediately prior to such Business Combination, and (y) no
person, entity or group beneficially owns, directly or indirectly, 50% or more of the voting power
of the outstanding voting stock (or comparable equity interests) of the surviving or acquiring
entity (other than (1) a direct or indirect parent entity of the surviving or acquiring entity,
that, after giving effect to the Business Combination, beneficially owns, directly or indirectly,
100% of the outstanding voting stock (or comparable equity interests) of the surviving or acquiring
entity, or (2) the Participant or any group of which the Participant is a member or any entity of
which the Participant is an affiliate), or (d) approval by the shareholders of a definitive
agreement or plan to liquidate or dissolve the Company.

     “Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or
any successor statute as from time to time in effect.

     “Committee”: The Board or, if one or more has been appointed, a committee of the Board. The
Committee may delegate ministerial tasks to such persons as it deems appropriate.

     “Common Stock”: Common shares of the Company, par value $.00001 per share. “Company”:
Fingerhut Direct Marketing, Inc.

     “Disability”: With respect to any Participant, that such Participant (i) as determined by the
Committee in its sole discretion, is unable to engage in his or her occupation 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 (ii) is, 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, receiving
income replacement benefits for a period of not less than 3 months under an accident and health
plan covering employees of the Company or an Affiliate thereof.

 

 

     “Effective Date”: The date of approval of the Plan by the Board.

     “Employee”: Any person who is employed by the Company or an Affiliate.

     “Employment”: A Participant’s employment or other service relationship with the Company and
its Affiliates. A Participant who receives an Award in his or her capacity as an Employee will be
deemed to terminate Employment when the employee-employer relationship with the Company and its
Affiliates ceases, provided such termination of Employment constitutes a “separation from service”
within the meaning of Code Section 409A. A Participant who receives an Award in any other capacity
will be deemed to continue Employment so long as the Participant is providing services in such
capacity and does not incur a “separation from service” within the meaning of Code Section 409A.
Except with respect to Awards subject to Code Section 409A, if a Participant’s relationship is with
an Affiliate and that entity ceases to be an Affiliate, the Participant will be deemed to cease
Employment when the entity ceases to be an Affiliate unless the Participant transfers Employment to
the Company or its remaining Affiliates.

     “Exchange Act”: the Securities Exchange Act of 1934, as amended.

     “Fair Market Value”: “Fair Market Value” as of a particular date shall mean the fair market
value of a share of Common Stock as determined by the Committee in its sole discretion; provided,
however, that (i) if the Common Stock is admitted to trading on a national securities exchange, the
fair market value of a share of Common Stock on any date shall be the closing sale price reported
for such share on such exchange on such date or, if no sale was reported on such date, on the last
day preceding such date on which a sale was reported, (ii) if the Common Stock is admitted to
quotation on the National Association of Securities Dealers Automated Quotation (“Nasdaq”) System
or other comparable quotation system and has been designated as a National Market System (“NMS”)
security, the fair market value of a share of Common Stock on any date shall be the closing sale
price reported for such share on such system on such date or, if no sale was reported on such date,
on the last date preceding such date on which a sale was reported, or (iii) if the Common Stock is
admitted to quotation on the Nasdaq System but has not been designated as an NMS security, the fair
market value of a share of Common Stock on any date shall be the average of the highest bid and
lowest asked prices of such share on such system on such date or, if both bid and ask prices were
not reported on such date, on the last date preceding such date on which both bid and ask prices
were reported.

     “Non-Employee Director”: A member of the Board who is not employed by the Company or an
Affiliate.

     “Other Cash-Based Award”: Cash awarded under Section 10, including cash awarded as a bonus or
upon the attainment of performance goals or otherwise as permitted under the Plan.

     “Other Stock-Based Award”: A right or other interest granted to a Participant under Section 10
of the Plan that may be denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Common Stock, including but not limited to (i) unrestricted
Stock awarded as a bonus or upon the attainment of performance goals or otherwise

 

 

as permitted under the Plan, and (ii) a right granted to a Participant to acquire Common Stock
from the Company containing terms and conditions prescribed by the Committee.

     “Parent”: Any entity which owns, directly or indirectly in an unbroken chain, fifty percent
(50%) or more of the total voting power of the Company’s outstanding stock.

     “Participant”: A person who is granted an Award under the Plan.

     “Plan”: Fingerhut Direct Marketing, Inc. 2008 Equity and Incentive Plan, as from time to time
amended and in effect.

     “Public Offering”: a public offering and sale of equity securities for cash pursuant to an
effective registration statement under the Securities Act of 1933 and the rules promulgated
thereunder, as amended from time to time.

     “Restricted Stock” or “Restricted Stock Award”: Shares awarded to a Participant under Section
8, as compensation for services to the Company, that are subject to vesting restrictions.

     “Restricted Stock Unit”: A contractual right awarded to a Participant under Section 9 to
receive a number of Shares or an amount of cash equal to the value of that number of Shares
corresponding to the number of units granted to a Participant, without payment, as compensation for
services to the Company.

     “Rolled-Up Plan”: Each of the following: (i) Fingerhut Direct Marketing, Inc. 2003 Equity
Incentive Plan and (ii) Fingerhut Direct Marketing, Inc. Amended and Restated 2005 Non-Employee
Directors Equity Compensation Plan.

     “Shares”: Shares of Common Stock.

     “Stock Appreciation Right”: The right, granted to a Participant under Section 7, to be paid an
amount measured by the appreciation in the Fair Market Value of a Share from the date of grant to
the date of exercise of the right, with payment to be made in cash and/or Shares, as specified in
the Award Agreement or determined by the Committee.

     “Stock Option”: A right, granted to a Participant under Section 6, to acquire Shares upon
payment of the exercise price. For purposes of the Plan, a Stock Option may only be a
“non-qualified stock option.” No “incentive stock option,” within the meaning of Section 422 of the
Code, may be granted under the Plan.

     “Subsidiary”: A “subsidiary corporation” within the meaning of Section 424(f) of the Code.

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