Document:

EX-4.5

 

EXHIBIT 4.5

DR. REDDY’S LABORATORIES LTD.

DR. REDDY’S EMPLOYEES ADR STOCK OPTION SCHEME, 2007.

	1.	 	Short title, extent and commencement:
	 
	a)	 	This Plan may be called the “Dr. Reddy’s Employees ADR Stock Option Scheme, 2007”.
	 
	b)	 	It applies only to the bonafide Employees of the Company and employees of all Subsidiaries,
whether now or hereafter existing.
	 
	c)	 	It shall be deemed to have come into force on the date of approval of the Plan by the board.
	 
	2.	 	Object:

The object of the plan is to:

	•	 	Incentivize performance towards creating better values for shareholders.
	 
	•	 	Attract and retain desired talent in the Company, by offering substantial wealth creation opportunity for employees.
	 
	•	 	Create a culture of enterprise and build very strong commitment amongst employees towards critical goals/ milestones of the
Company.
	 
	3.	 	Definitions:

In this Plan, unless the context otherwise requires,

	a)	 	“Administrator” means the Compensation Committee of the Company, which shall administer the
Plan in accordance with Section 6 hereof.
	 
	b)	 	“ADR” means American Depository Receipts of the Company listed on the New York Stock
Exchange and each evidencing one Share deposited with the Depositary.
	 
	c)	 	“Applicable Laws” means the legal requirements relating to stock Option plans, including,
without limitation, the tax, securities or corporate laws of India, any conditions stipulated
by stock exchanges on which the ADRs are listed or quoted.
	 
	d)	 	“Board” means the Board of Directors of the Company.
	 
	e)	 	“Company” means Dr. Reddy’s Laboratories Ltd.
	 
	f)	 	“Compensation Committee” means the Compensation Committee constituted by the Board.
	 
	g)	 	“Director” means a member of the Board.

 

 

	h)	 	“Disability” shall mean “Permanent total Disability” as may be defined by the Compensation
Committee.

	i)	 	“Eligible Employee” means an Employee who qualifies for issue of Options under this Plan and
who fulfills the minimum condition of one year of service and other conditions as decided in
the appraisal process or such other employees as may be decided by the compensation committee
from time to time within in the frame work of Securities Exchange Board of India (SEBI)
guidelines.

Provided that, employees and directors who are either promoters or belong to the promoter
group as defined in SEBI Guidelines shall not be eligible under this Plan. At present the
following shall not be eligible.

Dr K Anji Reddy

Mr G V Prasad

Mr K Satish Reddy

Further provided that any person holding 2% of the outstanding share capital of the
Company’s equity Shares/ADRs at any time after the commencement of this Plan shall not be
eligible under this Plan.

	j)	 	“Employee” means any person, including officers who are in the permanent employment of the
company; Directors, appointed by the Company; or any Parent or Subsidiary of the Company. An
Employee shall not cease to be an Employee in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or between the Company, its
Parent, any Subsidiary, or any successor.
	 
	k)	 	“Employee Compensation” means the total cost incurred by the Company towards Employee
Compensation including basic salary, dearness allowance, other allowances, bonuses and
commissions, and the value of all perquisites provided, but does not include the fair value
of the Options granted under any Option Plan.
	 
	l)	 	“Exercise” is the act of a written application being made by the Eligible Employee to the
Company to have the Options vested in him issued as ADRs upon payment of the Exercise Price.
Exercise can take place as specified after Vesting.
	 
	m)	 	“Exercise Period” means, the period after 12 months of the date of issue of Options to the
Eligible Employee but within 60 months from the date of Vesting of the Options by the
Company. On the expiry of the Exercise Period, any Options that have not been exercised will
lapse and cease to be valid for any purpose.
	 
	n)	 	“Exercise Price” means, such amount as may be decided by the Compensation Committee at the
time of grant of options that shall be paid by an Optionee at the time of Exercise.
	 
	o)	 	“Fair Market Value” of a share on a given date means the previous day closing price on the
date of grant in the stock exchange where there is highest trading volume during that period.
	 
	p)	 	“Option” means a stock Option granted pursuant to the Plan, comprising of a right but not an
obligation granted to an Employee to apply for and be allotted ADRs of the Company at the
Exercise Price determined earlier, during or within the Exercise Period, subject to the
requirements of Vesting.
	 
	q)	 	“Option Agreement” means a written or electronic agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The

 

 

	 	 	Option Agreement is subject to the terms and conditions of the Plan. The Agreement is included as
Annexure I.

	r)	 	“Optionee” means the holder of an outstanding Option granted pursuant to this Plan.
	 
	s)	 	“Plan” mean this Dr. Reddy’s Employees ADR Stock Option Scheme, 2007.
	 
	t)	 	“Qualifying Date” means the 31st day of March of every year or the last day of the financial
year of the Company, or such date as the Compensation Committee may decide. However, the
Compensation Committee may relax the Qualifying Date condition on a case to case basis.
	 
	u)	 	“Shares” mean, the equity Shares of the Company with a nominal par value of Rs.5/- (Rupees
five only) which have no preference in respect of dividends or in respect of amounts payable
in the event of any voluntary liquidation or winding up of the Company.
	 
	v)	 	“Subsidiary” means a Subsidiary of the Company, whether now or hereafter existing as defined
under Section 4 of the Companies Act, 1956.
	 
	w)	 	“Vesting” means the event of the Option granted under this Plan becoming eligible to be
exercised and shall occur on such date/s or after such period, not earlier than the expiry of
12 months from the date of issue of the Options to the Eligible Employee or as may be
determined by the Compensation Committee.
	 
	4.	 	Stock subject to the Plan:
	 
	a)	 	Subject to the provisions of section 17 of the Plan, the maximum aggregate number of ADRs on
which Options may be granted under the Plan, are 1,530,779 ADRs, which represents 2% of the
total issued Shares. The ADRs may be authorized but unissued or unacquired.
	 
	b)	 	If an Option expires or becomes unexercisable without having been exercised in full, the
ADRs which were subject thereto shall become available for future grant under the Plan
(unless the Plan has been terminated). However, ADRs that have actually been issued under the
Plan upon Exercise of an Option shall not be returned to the Plan and shall not become
available for future distribution under the Plan.
	 
	5.	 	Establishment of the Compensation Committee:
	 
	a)	 	The Company has constituted a Committee by the name of the “Compensation Committee” to
administer the stock option plans of the Company.
	 
	b)	 	The Dr. Reddy’s Employees ADR Stock Option Scheme, 2007 shall be administered by the
Compensation Committee.
	 
	6.	 	Administration of the Dr Reddy’ Employee ADR Stock Option Scheme, 2007:
	 
	(a)	 	Subject to the provisions of the Plan, and subject to the approval of any relevant
authorities, the Compensation Committee shall have the authority in its discretion:

	 	i)	 	to determine Exercise Price;
	 
	 	ii)	 	to select the Employees to whom Options may from time to time be granted
hereunder;

 

 

	 	iii)	 	to determine the number of ADRs to be covered by each such Option granted
hereunder;
	 
	 	iv)	 	to determine the Vesting period and the Exercise Period.
	 
	 	v)	 	to approve forms of agreement for use under the Plan;
	 
	 	vi)	 	to determine the terms and conditions, not inconsistent with the terms of the
Plan, of any Option granted hereunder;
	 
	 	vii)	 	to prescribe, amend and rescind rules and regulations relating to the Plan;
and
	 
	 	viii)	 	to construe and interpret the terms of the Plan and Options granted pursuant
to the Plan.

	(b)	 	All decisions, determinations and interpretations of the Compensation Committee shall be
final and binding on all Optionees.
	 
	7.	 	Eligibility:
	 
	a)	 	Employees of all Grades shall be eligible for grants under the Plan. However, the
consideration for purchase of ADRs under this Plan for resident employees shall not exceed
US$50,000 or its equivalent in a block of 5 years, or such other limits as may be prescribed
under Indian laws.
	 
	b)	 	New hires who are considered important to the success of the Company shall be eligible for
grants under the Plan.
	 
	8.	 	Appraisal of Eligible Employees:
	 
	 	 	As soon as may be possible after the Qualifying Date, the Compensation Committee shall,
based on the various criteria for selection of the Eligible Employees during the year
(which criteria shall be decided from time to time by the Compensation Committee for
assessing the contribution of the Employees) decide on the Eligible Employees who qualify
under the Plan and the number of Options of the Company that may be issued to them.
	 
	9.	 	Grant of Options and Grant Frequency:
	 
	a)	 	The Compensation Committee may at its absolute discretion select and grant options to
Eligible Employees on the terms and conditions and for the consideration as it may decide.
The grant size shall be based on the ranges indicated in the following table.

	 	 	 	 	 
	 	 	Designations	 	Number
	6B

	 	President
	 	To be decided by the

compensation committee on

a case-to-case basis
	 
	 	 	 	 
	5A to 6A

	 	Executive Vice President

Senior Vice President

Vice President
	 	Up to 10,000 options
	 
	 	 	 	 
	4A to 4B

	 	Senior Directors and Directors
	 	Up to 5,000 options
	 
	 	 	 	 
	3B

	 	Associate Directors
	 	Up to 3,000 options
	 
	 	 	 	 
	3A and below

	 	Other employees
	 	Up to 2,000 options
	 
	 	 	 	 
	 

	 	As applicable
	 	Gap between desired
positioning on Total Cost
to the Company (excluding
stock options) and
Joining compensation.

 

 

The date of grant of an Option shall, for all purposes, be the date on which the
Compensation Committee makes the determination granting such Option, or such later date as
is determined by the Compensation Committee. Notice of the determination shall be given to
each Employee to whom an Option is so granted within a reasonable time after the date of
such grant.

	b)	 	The Compensation Committee shall grant options under the Plan on an annual basis. However
the compensation committee may grant the options on such other dates as it deems fit.
	 
	10.	 	Vesting Period:
	 
	 	 	The administrator shall decide the vesting period of the options granted under the plan.
	 
	11.	 	Term of Plan and Option:
	 
	a)	 	The Plan shall become effective upon its adoption by the Board. It shall continue in effect
for a term of twenty (20) years unless all the Options granted under the Plan are exercised
or have been extinguished or unless the Plan is terminated under Section 19 of the Plan.
	 
	b)	 	The term of each Option shall be stated in the Option Agreement; provided, however, that the
term shall be no more than five (5) years from the date of Vesting thereof.
	 
	12.	 	Option Exercise Price and Consideration:
	 
	a)	 	The Exercise Price for each option shall be determined by the Administrator at the time of
grant of options.

The stock options can be grants in two categories:

Category A: 382,695 shall be available for grant of Stock Options at the fair market value;
and

Category B: 1,148,084 Options shall be available for grant of Stock Options at par value of
the shares i.e. Rs. 5 per option.”

       The fair market value of a share on each grant date falling under Category A above is defined
as the closing price of the Company’s equity shares on the trading day immediately preceding the
date of grant, in the stock exchange where there is highest trading volume during that period.

Notwithstanding the foregoing, the Compensation Committee may, after getting the approval of
the shareholders in the annual general meeting, grant options with a per share exercise
price other than fair market value and par value of the equity shares.

	b)	 	The consideration to be paid for the ADRs to be issued upon Exercise of an Option, including
the method of payment, shall be determined by the Compensation Committee
at the time of grant. Such consideration may consist of (1) cash, (2) check, (3)
promissory note, (4) consideration received by the Company under a cashless 

 

 

	 	 	Exercise
program implemented by the Company in connection with the Plan, or (5) any combination of
the foregoing methods of payment.

	13.	 	Individual Limits for Grant of Options:

No Employee shall be granted, in any fiscal year of the Company, Options to purchase more
than or equaling 0.5% of the outstanding issued Share capital as on the date of grant,
(excluding outstanding Options and conversions).

Notwithstanding the foregoing, pursuant to a specific special resolution passed by the
members in General Meeting, the Compensation Committee may grant to the Employees mentioned
in such special resolution, Options to purchase ADRs exceeding or equal to 1% of the of the
outstanding issued share capital as on the date of the grant, (excluding outstanding
Options and conversions).

	14.	 	Exercise of Option and Rights as a Shareholder:

	a)	 	Any Option granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Compensation Committee and set forth in
the Option Agreement. Unless the Compensation Committee provides otherwise, the Vesting of
Options granted hereunder shall be tolled during any unauthorized unpaid leave of absence.
An Option may not be exercised for a fraction of a share.

	b)	 	An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of Exercise (in accordance with the Option Agreement) from the person entitled to
Exercise the Option, and (ii) full payment for the ADRs with respect to which the Option is
exercised. Full payment may consist of any consideration and method of payment authorized by
the Compensation Committee and permitted by the Option Agreement and the Plan. ADRs issued
upon Exercise of an Option shall be issued in the name of the Optionee. Until the ADRs are
allotted, no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the ADRs, notwithstanding the Exercise of the Option. The Company
shall allot ADRs promptly after the Option is exercised to the custodians of the ADR
depositories who in turn will issue the ADRs to the employee who have exercised their
options. No adjustment will be made for a dividend or other right for which the record date
is prior to the date the ADRs are issued.

	c)	 	The ADRs shall be allotted in dematerialized form only. The responsibility of opening an
account to receive the dematerialized ADRS lies with the Optionee.

	15.	 	Termination of Relationship as an Employee:

	a)	 	If an Optionee ceases to be an Employee, by reason of resignation subject to the specific
approval of the Compensation Committee in each case, such Optionee may Exercise his or her
Option within such period of time as is specified in the Option Agreement to the extent that
the Option is vested on the date of termination (but in no event later than the expiration of
the term of the Option as set forth in the Option Agreement). In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee’s termination. If, after termination, the Optionee does not Exercise
his or her Option within the time specified by the Administrator, the Option shall terminate,
and the Shares covered by such Option shall again become available for issuance under the
Plan. If, on the date of termination, the Optionee is not vested as to his or her entire
Option, the ADRs covered
by the unvested portion of the Option shall again become available for issuance under the
Plan.

 

 

	b)	 	In the event that an Optionee retires from service while being an employee, on attaining the
age of retirement or superannuation, if applicable, all Options granted to him and Vested in
him, may be exercised in the normal course as if the Optionee were continuing in employment.
If, on the date of superannuation, the Optionee is not vested as to his or her entire Option,
the unvested Options shall vest immediately. However this vesting will be subject to the
minimum vesting period as prescribed under SEBI guidelines.

	c)	 	In the case of termination of employment by the Company for misconduct on the part of
Optionee, all options of the Optionee whether vested or unvested shall be forfeited.

	16.	 	Death or Disability of Optionee:

If an Optionee dies while an Employee, or ceases to be an Employee as a result of the
Optionee’s Disability, all Vested Options shall be exercised within such period of time as
is specified in the Option Agreement. (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee or Optionee’s
estate or by a person who acquires the right to Exercise the Option by bequest or
inheritance. In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for twelve (12) months following the Optionee’s death or Disability. If
the Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall again become available for issuance
under the Plan. If, on the date of death or disability, the Optionee is not vested as to
his or her entire Option, the unvested Options shall vest immediately.

	17.	 	Adjustments Upon Changes in Capitalization, Merger, Asset Sale, Share Split, Bonus Issue
or Rights Issue:

	a)	 	Changes in Capitalization: Subject to any required action by the shareholders of the
Company, the number of Shares covered by each outstanding Option, and the number of Shares,
which have been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued Shares
resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Shares, or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company. The conversion of any
convertible securities of the Company shall not be deemed to have been “effected without
receipt of consideration.” Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of Shares of stock of any class, or securities convertible into
Shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of the Shares subject to an Option.

	b)	 	Dissolution or Liquidation: In the event of the proposed dissolution or liquidation
of the Company, the Administrator shall notify each Optionee as soon as practicable prior to
the effective date of such proposed transaction. The Administrator in its discretion may
provide for an Optionee to have the right to Exercise his or her Option until 15 days prior
to such transaction as to all of the Optioned Stock covered thereby, including Shares as to
which the Option would not otherwise be exercisable. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of such proposed
action.

 

 

	c)	 	Merger or Asset Sale: In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each outstanding
Option shall be assumed or an equivalent Option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall fully vest in
and have the right to Exercise the Option as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option becomes fully
vested and exercisable in lieu of assumption or substitution in the event of a merger or sale
of assets, the Administrator shall notify the Optionee in writing that the Option shall be
fully exercisable for a period of 15 days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this paragraph, the Option
shall be considered assumed if, following the merger or sale of assets, the Option confers
the right to purchase or receive, for each Share subject to the Option immediately prior to
the merger or sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Shares for each Share held
on the effective date of the transaction (and if the 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 or
sale of assets is not solely equity shares (or their equivalent) of the successor corporation
or its Parent, the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the Exercise of the Option, for each ADR subject to
the Option, to be solely equity shares (or their equivalent) of the successor corporation or
its Parent equal in Fair Market Value to the per Share consideration received by holders of
Shares in the merger or sale of assets.

	d)	 	In the event the Company, at any time after the grant of Options but prior to exercise,
makes split or consolidation of the outstanding Shares, the Board of Directors shall, subject
to prior approval of the shareholders in general meeting, make appropriate adjustments in the
number of ADRs covered by each outstanding Options.

	e)	 	In the event of the Company issuing bonus shares, the following changes shall be made:

	 	•	 	The Exercise Price and grant size of both Vested and unvested Options shall be
adjusted.
	 
	 	•	 	The following adjustment shall be made to the grant size:

Adjusted grant size of Options = Unadjusted grant size of Options x (No. of Shares
+ No. of bonus shares)  ̧ No. of Shares

	 	•	 	The following adjustment shall be made to the Exercise Price:

Adjusted Exercise Price of Options = Unadjusted Exercise Price of Options x No. of
Shares  ̧ (No. of Equity Shares + No. of bonus Shares)

	f)	 	In the event of the Company issuing rights shares, the following changes shall be made:

	 	•	 	The Exercise Price and grant size of both vested and unvested options shall be
adjusted.
	 
	 	•	 	The following adjustment shall be made to the grant size:

 

 

Adjusted grant size of Options = Unadjusted grant size of Options x (No. of Shares
+ No. of Rights Shares)  ̧ No. of Shares

	 	•	 	The following adjustment shall be made to the Exercise Price

Adjusted Exercise Price of Options = {(No. of Shares x Unadjusted Exercise Price of
Options) + (No. of Rights Shares x Rights Price)}  ̧ (No. of Shares + No. of
Rights Shares)

In any of the above adjustments, the exercise price shall not fall below Rs.5.

	18.	 	Non-Transferability of Options:

The Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.

	19.	 	Terms and Conditions of the ADRs:

All ADRs allotted on Exercise of Options will rank pari-passu with all other ADRs of the
Company for the time being in issue (save as regards any right attached to such ADRs by
reference to a record date prior to the date of allotment).

	20.	 	Amendment and Termination of the Plan:

	 	a)	 	The Compensation Committee may at any time amend, alter, suspend or terminate
the Plan.

Provided that the Company obtains shareholder approval of any Plan amendment to the
extent necessary and desirable to comply with Applicable Laws.

	 	b)	 	No amendment, alteration, suspension or termination of the Plan shall impair
the existing rights of any Optionee, unless mutually agreed otherwise between the
Optionee and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Administrator’s ability to Exercise the powers granted to it hereunder with respect to
Options granted under the Plan prior to the date of such termination.

	21.	 	Governing Law:

This Plan will be governed by guidelines issued by SEBI and all other laws as applicable
from time to time.

	22.	 	General:

	 	a)	 	This Plan shall not form part of any contract of employment between the
Company and the Employee. The rights and obligations of any individual under the terms
of his office or employment with the Company shall not be affected by his
participation in this Plan or any right which he may have to participate in it and
nothing in this Plan shall be construed as affording such an individual any additional
rights as to compensation or damages in consequence of the termination of such office
or employment for any reason.

 

 

	 	b)	 	This Plan shall not confirm on any person any legal or equitable rights (other
than that to which he would be entitled as an ordinary member of the Company) against
the Company either directly or indirectly or give rise to any cause of action in law
or in equity against the Company.

* *

 

 

Exhibit A

DR. REDDY’S LABORATORIES LTD.

DR. REDDY’S EMPLOYEES ADR STOCK OPTION SCHEME, 2007

NOTICE OF EXERCISE OF OPTIONS

Date:                     

Dr. Reddy’s Laboratories Ltd

7-1-27, Ameerpet

Hyderabad — 500 016

Andhra Pradesh, India

Attention: Compensation Committee

	1.	 	Exercise of Option. Effective as of the date of this notice, the undersigned
(“Purchaser”) hereby elects to purchase ___ ADRs of Dr. Reddy’s Laboratories Ltd.
(the “Company”) under and pursuant to the Dr. Reddy’s Employees ADR Stock Option Scheme, 2007
(the “Plan”) and the Stock Option Agreement dated, ___ (the “Option Agreement”).
The purchase price for the Equity Shares shall be Rs.___, as required by the Option
Agreement.

	2.	 	Delivery of Payment. Purchaser herewith delivers to the Company the full purchase
price for the Equity Shares.

	3.	 	Representations of Purchaser. Purchaser acknowledges that Purchaser has received,
read and understood the Plan and the Option Agreement and agrees to abide by and be bound by
their terms and conditions.

	4.	 	Details of the Purchaser. The details of the purchaser re as under:

	 	 	 
	Name
	 	 
	 
	 	 
	Father’s Name
	 	 
	 
	 	 
	Address
	 	 
	 
	 	 
	Residential Status

	 	Resident Indian / Non Resident

Indian / Foreign National
	 
	 	 
	Electronic account details where
shares have to be credited
	 	 
	 
	 	 
	Submitted by:

	 	Received by:exv10w33

 

Exhibit 10.33

ASSET ACCEPTANCE CAPITAL CORP.

 

2006 Amendment

 

          WHEREAS, Asset Acceptance Capital Corp. (the “Company”) maintains Asset Acceptance Capital
Corp. 2004 Stock Incentive Plan (the “Plan”);

          WHEREAS, the Board of Directors of the Company may amend the Plan pursuant to Section 9.7 of
the Plan;

          WHEREAS, the Board desires to allow select Plan participants to defer the receipt of cash or
other compensation and thereby to receive Deferred Stock units;

          NOW, THEREFORE, the Plan shall be amended, effective immediately, as follows:

          1.      Section 1.3(a) of the Plan shall be amended by deleting “or Annual Incentive Award” and
replacing the deleted text with “Annual Incentive Award, or Deferred Stock Unit award within the
meaning of Section 4.10 of the Plan.”

          2.      Section 4 of the Plan shall be amended by adding the following Section 4.10, entitled
“Deferred Stock Units,” immediately after Section 4.9:

     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
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 Award 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.

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

          3.      Sections 1.2, 1.3, 1.4, 1.5, 1.6, 8.1, 9.2, 9.3, 9.4, 9.5, 9.7, and 9.8 of the Plan shall
be amended by inserting “Deferred Stock Units” immediately after “Restricted Stock Units” wherever
the latter term appears, and by inserting the singular “Deferred Stock Unit” wherever “Restricted
Stock Unit” appears.

          4.      Section 9.6(a) of the Plan shall be amended by adding the following text at the end of its
first sentence: “or the settlement of a Deferred Stock Unit Award.”

          Nothing herein shall be held to alter, vary or otherwise affect the terms or conditions of the
Plan, except as stated above.

          WHEREFORE, on this 29th day of December, Asset Acceptance Capital Corp. adopts this 2006
Amendment to the Plan.

	 	 	 	 	 
	 	ASSET ACCEPTANCE CAPITAL CORP.

 	 
	 	By:  	/s/  Nathaniel F. Bradley IV	 
	 	 	Its:Chairman, President and Chief Executive Officer 	 
	 	 	 	 
	 

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