Document:

exv10w1

 

    Exhibit 10.1

 

    Asset
    Acceptance Capital Corp.

    

    2004
    STOCK INCENTIVE PLAN

    

    (as
    amended and restated effective May 22, 2007)

    

    I. GENERAL PROVISIONS
    

 

    1.1  Establishment.  On
    February 2, 2004, the Board of Directors
    (“Board”) of Asset Acceptance Capital Corp., a
    Delaware corporation (“Corporation”), adopted
    the 2004 Stock Incentive Plan (“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 Corporation’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.

 

    1.2  Purpose.  The purpose of
    the Plan is (i) to promote the best interests of the
    Corporation and its shareholders by encouraging Employees,
    consultants and non-employee directors of the Corporation and
    its Subsidiaries to acquire an ownership interest in the
    Corporation 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 Corporation 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 Corporation.

 

    (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 Corporation 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 Corporation to any person, corporation or
    other entity; (iii) a merger or similar transaction between
    the Corporation and another entity if shareholders of the
    Corporation 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

    

    1

 

    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 Corporation; or (b) any of the current shareholders
    of the Corporation 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 Corporation, which shall be
    comprised of two or more members of the Board.

 

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

 

    (i)  “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.

 

    (j)  “Corporation” means Asset
    Acceptance Capital Corp. a Delaware corporation.

 

    (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
    Corporation or a Subsidiary, as defined in Treasury
    Regulation 1.421-7(h),
    and the term “employment” means employment with the
    Corporation, or a Subsidiary of the Corporation.

 

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

    

    2

 

    (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 Corporation’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 Corporation’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.

 

    (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
    Corporation.

 

    (aa)  “Stock Appreciation Right”
    means the right to receive a cash or Common Stock payment from
    the Corporation, 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).

    

    3

 

    (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 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
    Corporation 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 Corporation 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 Corporation
    has reserved 3,700,000 shares of the Corporation’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

    

    4

 

    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 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 Corporation 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
    Corporation or any Subsidiary possessing more than 10% of the
    total combined voting power of all classes of stock of the
    Corporation 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.

    

    5

 

    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 Corporation’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 Corporation. 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 Corporation
    of a properly executed exercise notice, acceptable to the
    Corporation, together with irrevocable instructions to the
    Participant’s broker to deliver to the Corporation
    sufficient cash to pay the exercise price and any applicable
    income and employment withholding taxes, in accordance with a
    written agreement between the Corporation 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 Corporation 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.

 

    3.2  Exercise of Stock Appreciation
    Rights.  A Stock Appreciation Right shall be
    deemed exercised upon receipt by the Corporation 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 Corporation’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

    

    6

 

    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 Corporation,
    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).

 

    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

    

    7

 

    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.

 

    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 Corporation 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.

    

    8

 

    (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 Corporation 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 Corporation 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 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) the

    

    9

 

    Committee may unilaterally 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 Continuous Service terminates,
    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
    completed within ten years following termination of the
    Participant’s Continuous 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 relieve the Participant’s unforeseeable
    emergency plus amounts necessary to pay taxes reasonably
    anticipated as a result of the distribution. The Committee 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

    

    10

 

    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.

 

    (b)  Each Code Section 162(m) Performance Share
    Award shall be based upon the attainment of specified levels of
    Corporation 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 Corporation 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.

    

    11

 

    (d)  For each performance period, the Committee shall
    certify, in writing: (i) if the Corporation 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:

 

    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.

    

    12

 

    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 Corporation 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 Corporation, 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 Corporation 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.

 

    6.2  Attainment of Performance Targets.

 

    (a)  For each fiscal year, the Committee shall
    certify, in writing: (i) the degree to which the
    Corporation 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 Corporation’s, a subsidiary’s, or a selected
    Employee’s performance relative to competitors and/or
    performance with respect to the Corporation’s strategic
    business goals.

 

    6.3  Payment of Annual Incentive
    Awards.  An Annual Incentive Award shall be
    paid only if (i) the Corporation 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 Corporation, 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.

    

    13

 

    (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 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.

    

    14

 

    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 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
    Corporation’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 Corporation’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.

    

    15

 

    7.5  Other Provisions.  The
    transfer of an Employee from one corporation to another among
    the Corporation and any of its Subsidiaries, or a leave of
    absence under the leave policy of the Corporation or any of its
    Subsidiaries shall not be a termination of employment for
    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 Corporation, issuance of warrants or
    other rights to purchase Common Stock or other securities of the
    Corporation, 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 Corporation, 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 Corporation 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 Corporation with
    or into another corporation, the sale of substantially all of
    the assets of the Corporation, or the reorganization or
    consolidation of the Corporation, it is intended that each
    outstanding Option, Stock Appreciation 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

    

    16

 

    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.

 

    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

    

    17

 

    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 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 Corporation unless the Corporation
    shall have been furnished with written notice thereof and a copy
    of the will and/or such evidence as the Corporation may deem
    necessary to establish the validity of the transfer and the
    acceptance by the transferee or transferees of the terms and

    

    18

 

    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 Corporation’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 Corporation deems necessary or advisable.
    The Corporation 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 Corporation has
    determined that the Corporation has complied with all
    requirements under appropriate securities laws.

 

    9.6  Withholding Taxes.

 

    (a)  The Corporation 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 Corporation 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.

    

    19

 

    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, 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 Corporation 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.

 

    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 Corporation 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
    Corporation.

 

    9.10  Approval of
    Plan.  Unless this Plan has been approved by
    the shareholders of the Corporation 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.

    

    20exv4w1

 

Exhibit 4.1

FIRST AMENDMENT

     THIS FIRST AMENDMENT (“First Amendment”) dated May ___, 2007, to Amended and Restated Trust
Agreement (“Agreement”) of Compass Diversified Trust, a Delaware statutory trust (the “Trust”), is
made effective as of April 25, 2006, the effective date of the Agreement, by and among COMPASS
GROUP DIVERSIFIED HOLDINGS LLC, a Delaware limited liability company (the “Sponsor”), THE BANK OF
NEW YORK (DELAWARE), a Delaware banking corporation, as Delaware trustee (in such capacity, the
“Delaware Trustee”), and MR. ALAN B. OFFENBERG and MR. JAMES J. BOTTIGLIERI, as the regular
trustees (each a “Regular Trustee”, together “Regular Trustees” and, collectively with the Delaware
Trustee, the “Trustees”).

     The Sponsor and the Trustees hereby agree as follows:

          1. A new Section 9.6 is added to the Agreement to read as follows:

          Section 9.6 Treatment of Trust as Tax Partnership

     Notwithstanding anything to the contrary elsewhere in this Agreement, in the event that
the Sponsor, acting through the Board of Directors, determines that the Trust is, or is
reasonably likely to be, required to issue Schedules K-1 to Shareholders, or if the Board of
Directors determines that it is otherwise reasonable and prudent to do so, the Sponsor may,
in lieu of the procedure provided in Section 9.2 and without the consent or approval of any
other Person pursuant to Section 10.2, amend or amend and restate this Agreement as
necessary so that with respect to any or all periods the Trust will be treated as a
partnership for federal income tax purposes and to provide for those provisions that are
customary, necessary or useful for an entity treated as a partnership for federal income tax
purposes.

          2. The Sponsor and the Trustees otherwise ratify and confirm the Agreement.

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