exv10w1






Exhibit 10.1




 

 






FLAGSTAR BANCORP, INC.




2006 EQUITY INCENTIVE PLAN




 

 







 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I

ESTABLISHMENT AND PURPOSE
	Section 1.1.
	 	Establishment	 	 	1	 
	Section 1.2.
	 	Purpose	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE II

DEFINITIONS
	Section 2.1.
	 	Definitions	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE III

ADMINISTRATION
	Section 3.1.
	 	General	 	 	5	 
	Section 3.2.
	 	Committee Meetings	 	 	5	 
	Section 3.3.
	 	Powers of the Committee	 	 	6	 
	Section 3.4.
	 	Grants to Committee Members	 	 	6	 
	Section 3.5.
	 	Committee Decisions and Determinations	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE IV

ELIGIBILITY AND PARTICIPATION
	Section 4.1.
	 	Eligibility	 	 	7	 
	Section 4.2.
	 	Participation	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE V

SHARES SUBJECT TO PLAN
	Section 5.1.
	 	Available Shares	 	 	7	 
	Section 5.2.
	 	Previously Granted Shares	 	 	8	 
	Section 5.3.
	 	Incentive Stock Option Restriction	 	 	8	 
	Section 5.4.
	 	Adjustments	 	 	8	 
	Section 5.5.
	 	Code Section 409A Limitation	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE VI

GRANTS IN GENERAL
	Section 6.1.
	 	Agreement	 	 	9	 
	Section 6.2.
	 	Time of Granting of an Award	 	 	9	 
	Section 6.3.
	 	Term and Nontransferability of Grants	 	 	9	 
	Section 6.4.
	 	Termination of Service as Applied to Options and SARs	 	 	9	 
	Section 6.5.
	 	Termination of Service as Applied to Grants Other Than Options and SARs	 	 	10	 
	Section 6.6.
	 	Dividends and Distributions	 	 	10	 
	Section 6.7.
	 	Participation	 	 	11	 
	Section 6.8.
	 	Section 83(b) Election	 	 	11	 






 









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE VII

STOCK OPTIONS
	Section 7.1.
	 	Grants	 	 	11	 
	Section 7.2.
	 	Exercise of Options	 	 	11	 
	Section 7.3.
	 	Term of Options	 	 	12	 
	Section 7.4.
	 	Special Rules For Incentive Stock Options	 	 	12	 
	Section 7.5.
	 	Grants to Non-Employee Directors	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

STOCK APPRECIATION RIGHTS
	Section 8.1.
	 	Grant	 	 	13	 
	Section 8.2.
	 	Required Terms and Conditions	 	 	14	 
	Section 8.3.
	 	Standard Terms and Conditions	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE IX

RESTRICTED STOCK
	Section 9.1.
	 	General	 	 	15	 
	Section 9.2.
	 	Required Terms and Conditions	 	 	15	 
	Section 9.3.
	 	Standard Terms and Conditions	 	 	15	 
	Section 9.4.
	 	Price	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE X

RESTRICTED STOCK UNITS
	Section 10.1.
	 	General	 	 	16	 
	Section 10.2.
	 	Required Terms and Conditions	 	 	16	 
	Section 10.3.
	 	Standard Terms and Conditions	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE XI

OTHER AWARDS AND PERFORMANCE-BASED GRANTS
	Section 11.1.
	 	Performance Units	 	 	17	 
	Section 11.2.
	 	Performance Shares	 	 	17	 
	Section 11.3.
	 	Other Awards	 	 	17	 
	Section 11.4.
	 	Incentive Awards	 	 	18	 
	Section 11.5.
	 	Provisions Relating to Code Section 162(m)	 	 	18	 
	 
	 	 	 	 	 	 
	ARTICLE XII

MISCELLANEOUS
	Section 12.1.
	 	Effect of a Change in Control	 	 	20	 
	Section 12.2.
	 	Rights as a Shareholder	 	 	20	 
	Section 12.3.
	 	Modification, Extension and Renewal of Grants	 	 	21	 
	Section 12.4.
	 	Term of Plan	 	 	21	 
	Section 12.5.
	 	Securities Law Requirements	 	 	21	 
	Section 12.6.
	 	Amendment of the Plan	 	 	22	 
	Section 12.7.
	 	Application of Funds	 	 	23	 
	Section 12.8.
	 	Tax Withholding	 	 	23	 
	Section 12.9.
	 	No Reload Rights and No Repricings	 	 	23	 
	Section 12.10.
	 	Notices	 	 	23	 






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	 	 	 	 	Page	 
	Section 12.11.
	 	Rights to Employment or Other Service	 	 	23	 
	Section 12.12.
	 	Exculpation and Indemnification	 	 	24	 
	Section 12.13.
	 	No Fund Created	 	 	24	 
	Section 12.14.
	 	Additional Arrangements	 	 	24	 
	Section 12.15.
	 	Code Section 409A Savings Clause	 	 	24	 
	Section 12.16.
	 	Captions	 	 	24	 
	Section 12.17.
	 	Governing Law	 	 	24	 
	Section 12.18.
	 	Execution	 	 	25	 







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FLAGSTAR BANCORP, INC.




2006 EQUITY INCENTIVE PLAN




ARTICLE I




ESTABLISHMENT AND PURPOSE




     Section 1.1. Establishment. Prior to the adoption of this Flagstar Bancorp, Inc. 2006 Equity
Incentive Plan (the “Plan”), the Company maintained the 1997 Incentive Plan, the 1997 Employees and
Directors Stock Option Plan and the 2000 Stock Incentive Plan, all as amended from time to time
(collectively, the “Prior Plans”). This Plan consolidates, amends and restates the Prior Plans
into this single plan document so that as of the Effective Date: (i) the Prior Plans will be
merged into this Plan; and (ii) no additional grants will be made under any Prior Plan.
Outstanding awards under any Prior Plan will continue to be governed by such Prior Plan according
to the terms of that Prior Plan as of the Effective Date.



     Section 1.2. Purpose. The Plan is intended to provide incentive to key employees, officers,
directors and others expected to provide significant services to the Company and its Affiliates to
foster and promote the long-term financial success of the Company and Affiliates and materially
increase shareholder value. The Plan is also intended to encourage proprietary interest in the
Company, to encourage such key employees to remain in the employ of the Company and its Affiliates,
to attract new employees with outstanding qualifications, and to afford additional incentives to
others to increase their efforts in providing significant services to the Company and its
Affiliates. In furtherance thereof, the Plan permits awards of equity-based and cash incentives to
key employees, officers and directors of, and certain other providers of services to, the Company
and its Affiliates.



ARTICLE II




DEFINITIONS




     Section 2.1. Definitions. The following terms shall have the following meanings when used
herein, unless the context clearly indicates otherwise.




     (a) “Act” means the Securities Act of 1933, as amended.




     (b) “Affiliate” means any “parent corporation” or “subsidiary corporation” of the
Company as those terms are defined in Code Sections 424(e) and (f), respectively.




     (c) “Agreement” means a written agreement entered into between the Company and the
recipient of a Grant which sets forth the terms and conditions of the Grant.




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



 









 






     (e) “Cause” means, unless otherwise provided in a Participant’s Agreement, (i) engaging
in (A) willful or gross misconduct or (B) willful or gross neglect, (ii) repeatedly failing
to adhere to the directions of superiors or the Board or the written policies and practices
of the Company, (iii) the commission of a felony, a crime of moral turpitude or any crime
involving the Company, (iv) fraud, misappropriation, dishonesty or embezzlement, (v)
incompetence or a material breach of the Participant’s employment agreement (if any) with
the Company (other than a termination of employment by the Participant), or (vi) any
unlawful act detrimental to the Company, all as determined in the sole discretion of the
Committee.




     (f) “Change in Control” means any one of the following events: (i) a complete
dissolution or liquidation of the Company, (ii) a sale of substantially all of the assets of
the Company, (iii) a merger or combination involving the Company after which the owners of
Common Stock of the Company immediately prior to the merger or combination own less than 50%
of the outstanding shares of common stock of the surviving corporation, or (iv) the
acquisition of more than 25% of the outstanding shares of Common Stock of the Company,
whether by tender offer or otherwise, by any “person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934) other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company. The decision of
the Committee as to whether a Change in Control has occurred shall be conclusive and
binding.




     (g) “Code” means the Internal Revenue Code of 1986, as amended, and any related rules,
regulations and interpretations.




     (h) “Committee” means the Compensation Committee of the Board; provided that the
Committee shall at all times consist solely of at least two persons who each qualify as a
“Non-Employee Director” under Rule 16b-3(b)(3)(i) promulgated under the Exchange Act and, to
the extent that relief from the limitation of Section 162(m) of the Code is sought, as an
“Outside Director” under Section 1.162-27(e)(3)(i) of the Treasury Regulations.




     (i) “Common Stock” means the Company’s Common Stock, par value $0.01, either currently
existing or authorized hereafter and any other stock or security resulting from adjustment
thereof as described herein, or the Common Stock of any successor to the Company which is
designated for the purpose of the Plan.




     (j) “Company” means Flagstar Bancorp, Inc., a Michigan corporation, and any successor
or assignee corporation(s) into which the Company may be merged, changed or consolidated;
any corporation for whose Securities the Securities of the Company shall be exchanged; and
any assignee of or successor to substantially all of the assets of the Company.




     (k) “Disability” means a physical or mental condition, which in the sole and absolute
discretion of the Committee is reasonably expected to be of indefinite duration and
substantially prevents a Participant from fulfilling his or her duties or responsibilities
to the Company or an Affiliate.



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     (l) “Effective Date” means the date this Plan is approved by the Company’s
shareholders.




     (m) “Eligible Persons” means officers, directors and Employees of the Company and its
Affiliates and other persons expected to provide significant services (of a type expressly
approved by the Committee as covered services for these purposes) to the Company or its
Affiliates. The Committee will determine the eligibility of Employees, officers, directors
and others expected to provide significant services to the Company and its Affiliates based
on, among other factors, the position and responsibilities of such individuals and the
nature and value to the Company or its Affiliates of such individual’s accomplishments and
potential contribution to the success of the Company or its Affiliates.




     (n) “Employee” means an individual, including an officer or director of the Company or
an Affiliate, who is employed as a common-law employee of the Company or an Affiliate. An
“Employee” shall not include any person classified by the Company as an independent
contractor even if the individual is subsequently reclassified as a common-law employee by a
court, administrative agency or other adjudicatory body. The payment of director’s fees by
the Company is not sufficient to constitute “employment” of the director by the Company.




     (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder.




     (p) “Exercise Price” means the price per share of Common Stock, determined by the Board
or the Committee, at which an Option or SAR may be exercised.




     (q) “Fair Market Value” means the value of one share of Common Stock, determined as
follows:




     (i) If the Common Stock is listed on a national stock exchange, the average of
the highest and lowest selling prices on the exchange for the date of determination,
but if no sales were reported for the date of determination, the average of the
highest and lowest selling prices on the exchange for the last preceding date on
which there was a sale of Common Stock on such exchange, as determined by the
Committee, or such other reasonable basis determined by the Committee using actual
transactions in the Common Stock as reported by such market and consistently applied
by the Committee.




     (ii) If the Common Stock is not then listed on a national stock exchange but is
traded on an over-the-counter market, the average of the closing bid and asked
prices for the Common Stock in such over-the-counter market for the last preceding
date on which there was a sale of Common Stock in such market, as determined by the
Committee.




     (iii) If neither (i) nor (ii) applies, such value as the Committee in its
discretion may in good faith determine. Notwithstanding the foregoing, where the
Common Stock is listed or traded, the Committee may make discretionary



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determinations in good faith where the Common Stock has not been traded for 10
trading days.




     (r) “Grant” means an award of an Incentive Stock Option, Non-qualified Stock Option,
SAR, Restricted Stock, Restricted Stock Unit, Performance Unit, Performance Share, Incentive
Award, Other Award or any combination thereof to an Eligible Person.




     (s) “Incentive Award” means a right granted a Participant under Section 11.4.




     (t) “Incentive Stock Option” means an Option of the type described in Section 422(b) of
the Code awarded to an Employee.




     (u) “Non-qualified Stock Option” means an Option not described in Section 422(b) of the
Code awarded to an Eligible Person, the taxation of which is pursuant to Section 83 of the
Code.




     (v) “Option” means any option, whether an Incentive Stock Option or a Non-qualified
Stock Option, to purchase shares of Common Stock at a price and for the term fixed by the
Committee in accordance with Article VII of the Plan and subject to such other limitations
and restrictions in the Plan and the applicable Agreement.




     (w) “Other Award” means a right granted a Participant under Section 11.3.




     (x) “Participant” means any Eligible Person to whom a Grant is made, or the Successors
of the Participant, as the context so requires.




     (y) “Performance Period” means the period established by the Committee during which any
performance goals specified by the Committee with respect to a Grant are to be measured.




     (z) “Performance Share” means a right granted a Participant under Section 11.2.




     (aa) “Performance Unit” means a right granted a Participant under Section 11.1.




     (bb) “Plan” means the Company’s 2006 Equity Incentive Plan, as set forth herein, and as
the same may from time to time be amended.




     (cc) “Purchase Price” means the Exercise Price times the number of shares of Common
Stock with respect to which an Option is exercised.




     (dd) “Restricted Stock” means Common Stock granted to a Participant subject to the
terms and conditions established by the Committee pursuant to Article IX.




     (ee) “Restricted Stock Unit” means a right granted to a Participant under Article X.



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     (ff) “Restriction Period” means the period of time during which restrictions
established by the Committee shall apply to a Grant.




     (gg) “Retirement” means, unless otherwise provided by the Committee in the
Participant’s Agreement, the Termination of Service (other than for Cause) of a Participant:




     (i) on or after the Participant’s attainment of age 65; or




     (ii) on or after the Participant’s attainment of age 55, provided the
Participant’s age plus years of service with the Company or an Affiliate, including
service in the employer-employee relationship, directorship or both, equals or
exceeds 75 years.




     (hh) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under
Article VIII.




     (ii) “Successor of the Participant” means the legal representative of the estate of a
deceased Participant or the person or persons who acquire the right to exercise an Option or
SAR by bequest or inheritance or by reason of the death of the Participant.




     (jj) “Termination of Service” means the time when the employee-employer relationship or
directorship or other service relationship (sufficient to constitute service as an Eligible
Person) between the Participant and the Company or an Affiliate is terminated for any
reason, with or without Cause, including, but not limited to, any termination by
resignation, discharge, Disability, death or Retirement; provided, however, Termination of
Service shall not include: (i) a termination where there is a simultaneous reemployment of
the Participant by the Company or an Affiliate or other continuation of service (sufficient
to constitute service as an Eligible Person) for the Company or an Affiliate or (ii) an
employee who is on military leave, sick leave or other bona fide leave of absence (to be
determined in the discretion of the Committee). The Committee, in its absolute discretion,
shall determine the effects of all matters and questions relating to Termination of Service,
including but not limited to the question of whether any Termination of Service was for
Cause and all questions of whether particular leaves of absence constitute Terminations of
Employment.



ARTICLE III




ADMINISTRATION




     Section 3.1. General. The Plan shall be administered by the Committee.



     Section 3.2. Committee Meetings. The Committee shall meet from time to time as determined by
its chairman or by the Chairman or Chief Executive Officer of the Company. A majority of the
members of the Committee shall constitute a quorum and the acts of a majority of the members
present at any meeting of the Committee at which a quorum is present, or acts approved in writing
by a majority of the entire Committee, shall be the acts of the Committee for



5









 







purposes of the Plan. To the extent applicable, no member of the Committee may act as to
matters under the Plan specifically relating to such member.



     Section 3.3. Powers of the Committee. Subject to the terms and conditions of the Plan and
consistent with the Company’s intention for the Committee to exercise the greatest permissible
flexibility under Rule 16b-3 of the Exchange Act in awarding Grants, the Committee shall have the
power:




     (a) to determine from time to time the Eligible Persons who are to be awarded Grants
and the nature and amount of Grants, and to generally determine the terms, provisions and
conditions (which need not be identical) of Grants awarded under the Plan, not inconsistent
with the terms of the Plan;




     (b) to construe and interpret the Plan and Grants thereunder and to establish, amend
and revoke rules and regulations for administration of the Plan. In this connection, the
Committee may correct any defect, supply any omission or reconcile any inconsistency in the
Plan, in any Agreement or in any related agreements in the manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective;




     (c) to amend any outstanding Grant, subject to Sections 8.2(f), 12.3, 12.5 and 12.9,
and to accelerate or extend the vesting or exercisability of any Grant, subject to Section
12.3, and to waive conditions or restrictions on any Grants, subject to Section 8.2(f), all
to the extent it shall deem appropriate;




     (d) to cancel, with the consent of a Participant or as otherwise permitted by the Plan,
outstanding Grants;




     (e) to determine whether, and to what extent and under what circumstances, Grants may
be settled in cash, Common Stock, other property or a combination of the foregoing, subject
to Section 8.2(f);




     (f) to appoint agents as the Committee deems necessary or desirable to administer the
Plan;




     (g) to provide for the forms of Agreements to be utilized in connection with the Plan,
which need not be identical for each Participant;




     (h) to establish any “blackout” period the Committee in its sole discretion deems
necessary or advisable; and




     (i) generally to exercise such powers and to perform such acts as are deemed necessary
or expedient to carry out the terms of the Plan and to promote the best interests of the
Company and its Affiliates with respect to the Plan.



     Section 3.4. Grants to Committee Members. Notwithstanding Section 3.3, any Grant awarded
under the Plan to an Eligible Person who is a member of the Committee shall be made by a majority
of the directors of the Company who are not on the Committee; provided that any Grant to such
person must satisfy the requirements for exemption under Rule 16b-3 of the



6









 







Exchange Act and does not cause any member of the Committee to be disqualified as a
Non-Employee Director under such Rule.



     Section 3.5. Committee Decisions and Determinations. Any determination made by the Committee
pursuant to the provisions of the Plan or an Agreement shall be made in its sole discretion in the
best interest of the Company and its Affiliates, not as a fiduciary. All decisions made by the
Committee pursuant to the provisions of the Plan or an Agreement shall be final and binding on all
persons, including the Company, its Affiliates, Participants and Successors of the Participants.
Any determination by the Committee shall not be subject to de novo review if challenged in any
court or legal forum.



ARTICLE IV




ELIGIBILITY AND PARTICIPATION




     Section 4.1. Eligibility. Any Eligible Person may receive Grants under the Plan.



     Section 4.2. Participation. Whether an Eligible Person receives a Grant under the Plan will
be determined by the Committee, in its sole discretion, as provided in Section 3.3. Except for
Incentive Awards, to receive a Grant an Eligible Person must enter into an Agreement evidencing the
Grant.



ARTICLE V




SHARES SUBJECT TO PLAN




     Section 5.1. Available Shares. Shares hereunder may consist, in whole or in part, of
authorized and unissued shares or treasury shares, including shares purchased by the Company on the
open market for purposes of the Plan. The certificates for Common Stock issued hereunder may
include any legend which the Committee deems appropriate to reflect any restrictions on transfer
hereunder or under the Agreement or as the Committee may otherwise deem appropriate.




     (a) Grants. Subject to adjustment pursuant to Section 5.4 and except as provided in
subsection (b), the maximum number of shares of Common Stock that may be issued under the
Plan as a result of any Grants is: (i) 2,268,280 shares, which is the total shares
attributable to any authorized shares not issued or not subject to outstanding awards under
the Company’s 1997 Employees and Directors Stock Option Plan and 2000 Stock Incentive Plan,
both as amended, as of the Effective Date, plus (ii) any shares subject to outstanding
awards under the Company’s 1997 Employees and Directors Stock Option Plan and 2000 Stock
Incentive Plan, both as amended, as of the Effective Date that on or after the Effective
Date cease for any reason to be subject to such awards (other than by reason of exercise or
settlement of the awards to the extent they are exercised for or settled in vested and
nonforfeitable shares), plus (iii) 75,000,000 shares.




     (b) Cash-Settled SARs. Grants of SARs under which the Grant Agreement provides they
will be settled only in cash shall not be considered in the limit under subsection (a);
provided, however, once made, a Grant of a SAR which will be settled in



7









 







only cash may not later be amended, modified or otherwise changed to be settled in
Common Stock or a combination of Common Stock and cash, as provided in Section 8.2(f).



     Section 5.2. Previously Granted Shares. Subject to Sections 5.1 and 5.3, the Committee has
full authority to determine the number of shares of Common Stock available for Grants. In its
discretion, the Committee may include as available for distribution all of the following:




     (a) Common Stock subject to a Grant that has been forfeited;




     (b) Common Stock under a Grant that otherwise terminates, fails to vest, expires or
lapses without issuance of Common Stock being made to a Participant; and




     (c) Common Stock subject to any Grant that settles in cash or a form other than Common
Stock.



     Section 5.3. Incentive Stock Option Restriction. Solely for purposes of determining whether
shares are available for the issuance of Incentive Stock Options, and notwithstanding any provision
of this Article V to the contrary, the maximum aggregate number of shares that may be issued
through Incentive Stock Options under the Plan is 979,509. The terms of Section 5.2 apply in
determining the number of shares available under this Section for issuance through Incentive Stock
Options.



     Section 5.4. Adjustments. In the event that the outstanding shares of Common Stock hereafter
are changed into or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination of shares, stock split-up, or stock dividend, or in
the event that there should be any other stock splits, stock dividends or other relevant changes in
capitalization occurring after the effective date of this Plan:




          (a) The aggregate number and kind of shares that may be issued under this Plan may be
adjusted appropriately; and




          (b) Rights under outstanding Grants made to Eligible Persons hereunder, both as to the
number of subject shares and the Exercise Price, may be adjusted appropriately.



     Notwithstanding anything herein to the contrary, without affecting the number of shares of
Common Stock reserved or available hereunder, the Committee may authorize the issuance or
assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of
property or stock, or reorganization upon such terms and conditions as it may deem appropriate
(including but not limited to a conversion of equity awards in Grants under this Plan in a manner
consistent with paragraph 53 of FASB Interpretation No. 44), subject to compliance with the rules
under Code Sections 422 and 424, as applicable.



     The foregoing adjustments and the manner of application of the foregoing provisions to Grants
shall be determined solely by the Committee on a case-by-case basis, applied to similarly situated
groups or in any other manner as it deems in its sole discretion. Any adjustment hereunder may
provide for the elimination of fractional share interests.



8









 





     Section 5.5. Code Section 409A Limitation. Any adjustment made pursuant to Section 5.4 to
any Grant that is considered “deferred compensation” within the meaning of Section 409A of the Code
shall be made in compliance with the requirements of Code Section 409A. Any adjustments made
pursuant to Section 5.4 to any Grant that is not considered “deferred compensation” shall be made
in a manner to ensure that after such adjustment, the Grant either continues not to be subject to
Code Section 409A or complies with the requirements of Code Section 409A.



ARTICLE VI




GRANTS IN GENERAL




     Section 6.1. Agreement. Except for Incentive Awards, each Grant hereunder shall be evidenced
by a written Agreement as of the date of the Grant and executed by the Company and the Eligible
Person. Each Agreement shall set forth the terms and conditions as may be determined by the
Committee consistent with the Plan. The Agreement shall state the number of shares of Common Stock
to which the Grant pertains and may provide for adjustment in accordance with Section 5.4. As
applicable, each Agreement must state the Exercise Price or other consideration to be paid for any
Grant.



     Section 6.2. Time of Granting of an Award. The award date of a Grant shall, for all
purposes, be the date on which the Committee makes the determination awarding such Grant, or such
other date as is determined by the Board. Notice of the determination of a Grant shall be given to
each Eligible Person to whom a Grant is awarded within a reasonable period of time after the date
of such Grant.



     Section 6.3. Term and Nontransferability of Grants. No Grant is exercisable except by the
Participant or a Successor of the Participant permitted by the Plan. No Grant is assignable or
transferable, except by will or the laws of descent and distribution of the state wherein the
Participant was domiciled at the time of his or her death; provided, however, that the Committee
may permit other transfers where the Committee concludes that such transferability (i) does not
result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock
Option to fail to be described in Code Section 422(b), (iii) is in no event a transfer for value,
and (iv) is otherwise appropriate and desirable.



     Section 6.4. Termination of Service as Applied to Options and SARs. Unless otherwise
provided in the applicable Agreement or as otherwise determined by the Committee, Options and SARs
shall be governed by the following provisions in the event of a Participant’s Termination of
Service:




     (a) Termination of Service, Except by Death, Retirement or Disability. Upon any
Termination of Service for any reason other than a Participant’s death, Retirement or
Disability, the Participant has the right, subject to the restrictions of Section 7.4, to
exercise his or her Options or SARs at any time within three months after Termination of
Service, but only to the extent that, at the date of Termination of Service, the
Participant’s right to exercise such Options or SARs had accrued pursuant to the terms of
the Agreement and had not previously been exercised; provided, however, that,



9









 







unless otherwise provided in the Agreement, if there occurs a Termination of Service
for Cause, any Option or SAR not exercised in full prior to such Termination of Service
shall be canceled.




     (b) Death of Participant. If the Participant dies while an Eligible Person or within
three months after any Termination of Service other than for Cause, his or her Options or
SARs may be exercised in full, subject to the restrictions of Section 7.4, at any time
within 24 months after the Participant’s death, by the Successor of the Participant, but
only to the extent that, at the date of death, the Participant’s right to exercise such
Options or SARs had accrued, had not been forfeited pursuant to the terms of the Agreement
and had not previously been exercised.




     (c) Disability or Retirement of Participant. Upon Termination of Service for reason of
Disability or Retirement, a Participant shall have the right, subject to the restrictions of
Section 7.4, to exercise his or her Options or SARs in full at any time within 12 months
after Termination of Service, but only to the extent that, at the date of Termination of
Service, the Participant’s right to exercise such Options or SARs had accrued pursuant to
the terms of the applicable Agreement and had not previously been exercised.



     Section 6.5. Termination of Service as Applied to Grants Other Than Options and SARs. Unless
otherwise provided in the applicable Agreement or as determined by the Committee, Restricted Stock,
Restricted Stock Units, Performance Units, Performance Shares, Incentive Awards and Other Awards
shall be governed by the following provisions:




     (a) Termination of Service, Except by Death, Retirement or Disability. In the event of
a Participant’s Termination of Service for any reason other than the Participant’s death,
Retirement or Disability, the Participant’s Grants of Restricted Stock, Restricted Stock
Units, Performance Units, Performance Shares, Incentive Awards and Other Awards shall be
forfeited upon the Participant’s Termination of Service.




     (b) Death, Retirement or Disability of Participant. Restricted Stock, Restricted Stock
Units and Other Awards shall fully vest on a Participant’s Termination of Service by reason
of the Participant’s death, Retirement or Disability. Performance Units, Performance Shares
and Incentive Awards or any award tied to performance may be paid out at a target level and
paid or distributed at the same time payments are made to other Participants who did not
incur such a Termination of Service as determined by the Committee.



     Section 6.6. Dividends and Distributions. Participants awarded Grants of Restricted Stock,
Restricted Stock Units, Performance Shares or Performance Units may, if the Committee so
determines, be credited with dividends paid with respect to the underlying shares or dividend
equivalents while the Grants are held in a manner determined by the Committee in its sole
discretion. The Committee may apply any restrictions to the dividends or dividend equivalents that
the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of
payment of dividends or dividend equivalents, including in the form of cash, Common Stock,
Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units.



10









 





     Section 6.7. Participation. There is no guarantee that any Eligible Person will receive a
Grant under the Plan or, having received a Grant, that the Participant will receive a future Grant
on similar terms or at all. There is no obligation for uniformity of treatment of Eligible Persons
with respect to who receives a Grant or the terms and conditions of Participants’ Grants.



     Section 6.8. Section 83(b) Election. The Committee may prohibit a Participant from making an
election under Section 83(b) of the Code. If the Committee has not prohibited such election, and
if the Participant elects to include in such Participant’s gross income in the year of transfer the
amounts specified in Section 83(b) of the Code, the Participant shall notify the Company of such
election within ten (10) days of filing notice of the election with the Internal Revenue Service,
and will provide the required withholding pursuant to Section 12.8, in addition to any filing and
notification required pursuant to regulations issued under the authority of Section 83(b) of the
Code.



ARTICLE VII




STOCK OPTIONS




     Section 7.1. Grants. The Committee may grant Options in accordance with this Article. The
Exercise Price for any Option shall not be less than Fair Market Value on the date of Grant. Each
Agreement for an Option shall state whether such Option is an Incentive Stock Option or a
Non-qualified Stock Option. Incentive Stock Options may not be granted to an Eligible Person who
is not an Employee of the Company or an Affiliate. Options may be awarded alone or in addition to
other Grants made under the Plan.



     Section 7.2. Exercise of Options.




     (a) Options may be exercised in whole or part at any time within the period permitted
for the exercise thereof and shall be exercised by written notice of intent to exercise the
Option delivered to the Secretary of the Company at its principal executive offices.




     (b) Except as may otherwise be provided below, the Purchase Price for each Option
granted to an Eligible Person shall be payable in full in United States dollars upon the
exercise of the Option. In the event the Company determines that it is required to withhold
taxes as a result of the exercise of an Option, as a condition to the exercise thereof, an
Employee may be required to make arrangements satisfactory to the Company to enable it to
satisfy such withholding requirements in accordance with Section 12.8 hereof. If the
applicable Agreement so provides, and the Committee otherwise so permits, the Purchase Price
may be paid in one or a combination of the following:




     (i) by a certified or bank cashier’s check;




     (ii) by the surrender of shares of Common Stock in good form for transfer,
owned by the person exercising the Option and having a Fair Market Value on the date
of exercise equal to the Purchase Price, or in any combination of cash and shares of
Common Stock, as long as the sum of the cash so paid and



11









 







the Fair Market Value of the shares of Common Stock so surrendered equals the
Purchase Price;




     (iii) by cancellation of indebtedness owed by the Company to the Participant;
or




     (iv) by any combination of such methods of payment or any other method
acceptable to the Committee in its discretion.




Except in the case of exercised Options paid for by certified or bank cashier’s
check, the Committee may impose limitations and prohibitions on the exercise of
Options as it deems appropriate, including, without limitation, any limitation or
prohibition designed to avoid accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option. Any fractional shares of
Common Stock resulting from a Participant’s election that are accepted by the
Company will be paid in cash or forfeited in the discretion of the Committee.



     Section 7.3. Term of Options. The period during which any Option may be exercised shall not
exceed ten (10) years from the Grant Date. No Option shall be exercisable until such time as set
forth in the applicable Agreement (but in no event after the expiration of such Option).



     Section 7.4. Special Rules For Incentive Stock Options.




     (a) Aggregate Fair Market Value. In the case of Incentive Stock Options granted
hereunder, the aggregate Fair Market Value (determined as of the date of the Grant thereof)
of the Common Stock with respect to which Incentive Stock Options become exercisable by any
Participant for the first time during any calendar year (under the Plan and all other plans
maintained by the Company or its Affiliates) shall not exceed $100,000.




     (b) Rules Applicable to Certain Owners. In the case of an individual described in
Section 422(b)(6) of the Code (relating to certain 10% owners), the Exercise Price with
respect to an Incentive Stock Option shall not be less than 110% of the Fair Market Value of
a share of Common Stock on the day the Option is granted and the term of an Incentive Stock
Option shall be no more than five years from the date of grant.




     (c) Disqualifying Disposition. If shares of Common Stock acquired upon exercise of an
Incentive Stock Option are disposed of in a disqualifying disposition within the meaning of
Section 422 of the Code by a Participant prior to the expiration of either two years from
the date of grant of such Option or one year from the transfer of such shares to the
Participant pursuant to the exercise of such Option, or in any other disqualifying
disposition within the meaning of Section 422 of the Code, such Participant shall notify the
Company in writing as soon as practicable thereafter of the date and terms of such
disposition and, if the Company thereupon has a tax-withholding obligation, shall pay to the
Company an amount equal to any withholding tax the Company is required to pay as a result of
the disqualifying disposition.



12









 






     (d) Disability. Solely for purposes of the provisions of the Plan as applied to
Incentive Stock Options and notwithstanding any other provision of the Plan, “Disability”
means a Participant’s inability to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of not less
than 12 months.



     Section 7.5. Grants to Non-Employee Directors. Notwithstanding any other provision of the
Plan to the contrary, this Section shall govern Grants to directors who are not Employees.




     (a) Grants. Each director who is not an Employee on the date he or she takes office as
a director on or after the Effective Date shall receive a Grant of 1,000 Non-qualified Stock
Options as of such date. Each director is entitled to such other Grants (excluding
Incentive Stock Options) as the Board may award at any time and from time to time.




     (b) Exercise Price. The Exercise Price of Non-qualified Stock Options granted to a
director equals the Fair Market Value of the Common Stock on such date.




     (c) Term. Non-qualified Stock Options granted to directors hereunder shall have a term
of five years; provided that Grants of Non-qualified Stock Options expire one year after the
date of which a director terminates his or her service as a director, but in no event later
than the date on which such Non-qualified Stock Options would otherwise expire. Grants
other than Non-qualified Stock Options shall have such terms as set by the Board in the
applicable Agreement.




     (d) Exercise and Expiration. Unless provided otherwise by the Board in an Agreement,
Options and SARs granted to a director hereunder are fully (100%) exercisable on the
one-year anniversary of the date of grant. Directors may exercise Non-qualified Stock
Options in the manner set forth in Section 7.2. Grants to directors pursuant to this
Section 7.5 shall be governed by the same provisions for termination in the event of the
director’s death as contained in Sections 6.4(b) and 6.5(b) and in the event of the
director’s Disability as contained in Sections 6.4(c) and 6.5(b).



ARTICLE VIII




STOCK APPRECIATION RIGHTS




     Section 8.1. Grant. The Committee has authority to grant Stock Appreciation Rights (“SARs”)
under the Plan at any time or from time to time. A SAR shall entitle the Participant to receive
Common Stock or cash upon exercise of such SAR equal in value to the excess of the Fair Market
Value per share of Common Stock over the exercise price per share of Common Stock specified in the
related Agreement, multiplied by the number of shares in respect of which the SAR is exercised,
less any amount retained to cover tax withholdings, if necessary. The aggregate Fair Market Value
per share of Common Stock shall be determined as of the date of exercise of such SAR. Settlement
of a SAR shall be subject to the Participant’s satisfaction in



13









 







full of any conditions, restrictions or limitations imposed in accordance with the Plan or any
Agreement. SARs may be awarded alone or in addition to other Grants made under the Plan.



     Section 8.2. Required Terms and Conditions. SARs shall be subject to the following terms and
conditions and to such additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee deems desirable.




     (a) Price. The grant price of a SAR may not be less than 100% of the Fair Market Value
per share of Common Stock on the date of grant, and the exercise price of a SAR may not be
less than 100% of the Fair Market Value per share of Common Stock on the date of exercise.




     (b) Term and Exercisability. The term and exercisability of a SAR shall be no longer
than ten (10) years after the Grant Date. The Committee may provide in a SAR Agreement or
thereafter for an accelerated exercise of all or part of a SAR upon such events or standards
that it may determine, including one or more performance measures.




     (c) Method of Exercise. A Participant shall exercise a SAR by giving written notice of
exercise to the Company specifying in whole shares the portion of the SAR to be exercised
and if the Participant has more than one Grant of SARs which could be exercised, designating
the particular Grant to be exercised.




     (d) No Deferral Features. To the extent necessary to comply with Code Section 409A,
the SAR Agreement shall not include any features allowing the Participant to defer
recognition of income past the date of exercise.




     (f) Modification. Notwithstanding any provision of the Plan to the contrary, the
Committee shall not amend or otherwise modify a Grant of a SAR, which explicitly requires
settlement only in cash, after the date of grant to permit settlement in Common Stock or a
combination of Common Stock and cash.



     Section 8.3. Standard Terms and Conditions. Unless the Committee specifies otherwise in the
SAR Agreement, the terms set forth in this Section 8.4 shall apply to all SARs granted under the
Plan. An SAR Agreement that incorporates the terms of the Plan by reference shall be deemed to
have incorporated the terms set forth in this Section.




     (a) Term. The standard term of a SAR shall be seven (7) years beginning on the Grant
Date.




     (b) Exercisability. The standard rate at which a SAR shall be exercisable shall be 25
percent of the Grant on each of the first four annual anniversaries of the Grant Date.




     (c) Nontransferability of Stock Appreciation Rights. The standard SAR Agreement shall
provide that no SAR shall be sold, assigned, margined, transferred, encumbered, conveyed,
gifted, alienated, hypothecated, pledged or otherwise disposed of, other than by will or the
laws of descent and distribution, and all SARs shall be exercisable during the Participant’s
lifetime only by the Participant.



14









 





ARTICLE IX




RESTRICTED STOCK




     Section 9.1. General. The Committee has authority to grant Restricted Stock under the Plan
at any time or from time to time. The Committee shall determine the number of shares of Restricted
Stock to be awarded to any Eligible Person, the Restriction Period within which such Grants may be
subject to forfeiture and any other terms and conditions of the Grants, including without
limitation providing for either grant or vesting upon the achievement of performance goals. To the
extent the Company desires to avoid the deduction limit of Code Section 162(m) as applied to
Restricted Stock, Grants of Restricted Stock must comply with Section 11.5.



     Section 9.2. Required Terms and Conditions. Restricted Stock shall be subject to the
following terms and conditions and to such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee deems desirable:




     (a) Restrictions. The Committee may condition the grant or vesting of the Restricted
Stock on the performance of services for the Company or the attainment of performance goals,
or both.




     (b) Delivery. The Company shall issue the shares of Restricted Stock to each recipient
who is awarded a Grant of Restricted Stock either in certificate form or in book entry form,
registered in the name of the recipient, with legends or notations, as applicable, referring
to the terms, conditions and restrictions applicable to any such Grant and record the
transfer on the Company’s official shareholder records; provided that the Company may
require that any stock certificates evidencing Restricted Stock granted hereunder be held in
the custody of the Company until the restrictions thereon shall have lapsed, and that as a
condition of any Grant of Restricted Stock, the Participant shall have delivered a stock
power, endorsed in blank, relating to the Common Stock covered by such Grant.



     Section 9.3. Standard Terms and Conditions. Unless the Committee specifies otherwise in the
Restricted Stock Agreement, the terms set forth in this Section 9.3 shall apply to all Restricted
Stock granted under the Plan. A Restricted Stock Agreement that incorporates the terms of the Plan
by reference shall be deemed to have incorporated the terms set forth in this Section.




     (a) Restriction Period. Standard Grants of Restricted Stock will vest in 50%
increments on each annual anniversary of the date of grant beginning with the first
anniversary.




     (b) Restrictions. The standard restrictions applicable to Restricted Stock are
continued service of the Participant for the Company during the Restriction Period.




     (c) Rights. The standard terms of a Restricted Stock Agreement shall provide that the
Participant shall have, with respect to the Restricted Stock, all of the rights of a
shareholder of the Company holding the class of Common Stock that is the subject of the



15









 







Restricted Stock, including, if applicable, the right to vote the shares and the right
to receive any cash dividends, subject to Section 6.3.



     Section 9.4. Price. The Committee may require a Participant to pay a stipulated purchase
price for each share of Restricted Stock.



ARTICLE X




RESTRICTED STOCK UNITS




     Section 10.1. General. The Committee has authority to grant Restricted Stock Units under the
Plan at any time or from time to time. A Restricted Stock Unit is a bookkeeping entry of a grant
of Common Stock that will be settled either by delivery of Common Stock or the payment of cash
based upon the Fair Market Value of a specified number of Common Stock. The Committee shall
determine the number of Restricted Stock Units to be awarded to any Participant, the Restriction
Period within which such Grants may be subject to forfeiture and any other terms and conditions of
the Grants, including, without limitation, providing for either grant or vesting upon the
achievement of performance goals. To the extent the Company desires to avoid the deduction limit
of Code Section 162(m) as applied to Restricted Stock Units, Grants of Restricted Stock Units must
comply with Section 11.5. The Grant of a Restricted Stock Unit shall occur as of the grant date
determined by the Committee. Restricted Stock Units may be awarded alone or in addition to other
Grants made under the Plan.



     Section 10.2. Required Terms and Conditions. Restricted Stock Units shall be subject to the
following terms and conditions and to such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee deems desirable:




     (a) Restrictions. The Committee may condition the grant or vesting of the Restricted
Stock Units on the performance of services for the Company, the attainment of performance
goals, or both. To the extent tied to performance, the Company will comply with Section
11.5 if it desires to obtain a deduction.




     (b) Rights. The Committee shall be entitled to specify in a Restricted Stock Unit
Agreement the extent to which and on what terms and conditions the applicable Participant
shall be entitled to receive payments corresponding to the dividends payable on the Common
Stock.



     Section 10.3. Standard Terms and Conditions. Unless the Committee specifies otherwise in the
Restricted Stock Unit Agreement, the terms set forth in this Section 10.3 shall apply to all
Restricted Stock Units granted under the Plan. A Restricted Stock Unit Agreement that incorporates
the terms of the Plan by reference shall be deemed to have incorporated the terms set forth in this
Section:




     (a) Restriction Period. The standard Restriction Period shall be one year from the
Grant Date.



16









 






     (b) Restrictions. The standard restrictions applicable to a Restricted Stock Unit are
continued service of the Participant for the Company during the Restriction Period.




     (c) Rights. The standard terms of the Restricted Stock Units shall provide that the
Participant is entitled to receive current payments corresponding to the dividends payable
on the Common Stock.



ARTICLE XI




OTHER AWARDS AND PERFORMANCE-BASED GRANTS




     Section 11.1. Performance Units. The Committee has authority to grant Performance Units
under the Plan at any time or from time to time. A Performance Unit consists of the right to
receive cash upon achievement of a performance goal or goals (as the case may be) and satisfaction
of such other terms and conditions as the Committee determines. The Committee shall have complete
discretion to determine the number of Performance Units granted to each Participant and any
applicable conditions. An award of Performance Units shall be earned in accordance with the
Agreement over a specified period of performance, as determined by the Committee. Unless expressly
waived in the Agreement, an award of Performance Units must vest solely on the attainment of one or
more performance goals. Performance Units may be granted alone or in addition to other Awards made
under the Plan. The Committee, in its discretion, may substitute actual shares of Common Stock for
the cash payment otherwise required to be made to a Participant pursuant to a Performance Unit. To
the extent the Company desires to avoid the application of the deduction limit of Code Section
162(m) as applied to Performance Units, Grants of Performance Units will comply with the provisions
of Section 11.5.



     Section 11.2. Performance Shares. The Committee has authority to grant Performance Shares
under the Plan at any time or from time to time. A Performance Share consists of the right to
receive shares of Common Stock upon achievement of a performance goal or goals (as the case may be)
and satisfaction of such other terms and conditions as the Committee determines. The Committee
shall have complete discretion to determine the number of Performance Shares granted to each
Participant and any applicable conditions. An award of Performance Shares shall be earned in
accordance with the Agreement over a specified period of performance, as determined by the
Committee. Unless expressly waived in the Agreement, an award of Performance Shares must vest
solely on the attainment of one or more performance goals. Performance Shares may be granted alone
or in addition to other Awards made under the Plan. The Committee, in its discretion, may make a
cash payment equal to the Fair Market Value of the Common Stock otherwise required to be issued to
a Participant pursuant to a Performance Share. To the extent the Company desires to avoid the
application of the deduction limit of Code Section 162(m) as applied to Performance Shares, Grants
of Performance Shares will comply with the provisions of Section 11.5.



     Section 11.3. Other Awards. The Committee has authority to grant Other Awards under the Plan
at any time and from time to time. An Other Award is a Grant not otherwise specifically provided
for under the terms of the Plan that is valued in whole or in part by



17









 







reference to, or is otherwise based upon or settled in, Common Stock. The Grant of an Other
Award shall be evidenced by an Agreement, setting forth the terms and conditions of the Grant as
the Committee, in its sole discretion within the terms of the Plan, deems desirable. Other Awards
may be awarded alone or in addition to other Grants made under the Plan.



     Section 11.4. Incentive Awards. The Committee has authority to grant Incentive Awards, which
are annual cash payments to select officers and Employees based on the attainment of one or more
performance goals as the Committee may determine. Incentive Awards must comply with the
requirements of Section 11.5.



     Section 11.5. Provisions Relating to Code Section 162(m). Unless expressly waived (either
with respect to an individual Participant or a class of individual Participants) in writing by the
Committee, it is the intent of the Company that Grants made to persons who are (or may become)
“Covered Employees” (within the meaning of Section 162(m) of the Code) shall constitute “qualified
performance-based compensation” satisfying the relevant requirements of Code Section 162(m) and the
guidance thereunder. Accordingly, the Plan shall be administered and the provisions of the Plan
shall be interpreted in a manner consistent with Code Section 162(m). If any provision of the Plan
or any Agreement relating to such a Grant does not comply or is inconsistent with the requirements
of Code Section 162(m), unless expressly waived as described above, such provision shall be
construed or deemed amended to the extent necessary to conform to such requirements. In addition,
the following provisions shall apply to the Plan or a Grant to the extent necessary to obtain a tax
deduction for the Company or an Affiliate:




     (a) Awards subject to this Section must vest (or may be granted or vest) solely on the
attainment of one or more objective performance goals unrelated to term of employment.
Grants will also be subject to the general vesting provisions provided in the Agreement and
this Plan.




     (b) Within the first 90 days of the year, but in no event later than completion of 25%
of the Performance Period or such earlier date as required under Section 162(m), the
Committee must establish performance goals (in accordance with subsection (e) below) in
writing (including but not limited to Committee minutes) for Covered Employees who will
receive Grants that are intended as qualified performance-based compensation. The outcome
of the goal must be substantially uncertain at the time the Committee actually establishes
the goal.




     (c) The performance goal must state, in terms of an objective formula or standard, the
method for computing the Grant payable to the Participant if the goal is attained.




     (d) The terms of the objective formula or standard must prevent any discretion being
exercised by the Committee to later increase the amount payable that otherwise would be due
upon attainment of the goal, but may allow discretion to decrease the amount payable.



18









 






     (e) The material terms of the performance goal must be disclosed to and subsequently
approved in a separate vote by the stockholders before the payout is
executed, unless they conform to one or any combination of the following goals/targets,
each determined in accordance with generally accepted accounting principles or similar
objective standards (and/or each as may appear in the annual report to stockholders, Form
10K or Form 10Q) as applied to the Company’s activities or performance or relative to
comparison companies and as applied to the Company as a whole or business units or
divisions: revenue; revenue growth; earnings (including earnings per share, earnings before
interest, taxes, depreciation and amortization, earnings before interest and taxes, and
earnings before or after taxes); operating income; gross profit; net income; profit margins;
earnings per share; return on assets; return on equity; return on invested capital; economic
value-added; efficiency ratio (other expenses as a percentage of other income plus net
interest income); stock price; gross dollar volume; cost containment or reduction; total
shareholder return; market share; asset growth; deposit growth; book value; expense deposit
ratios; management; cash flow; customer satisfaction; regulatory compliance metrics; CAMELS
rating; and loan originations.




     The foregoing criteria may relate to the Company or its Affiliates, one or more of
their divisions or units, or any combination of the foregoing, and may be applied on an
absolute basis and/or be relative to one or more peer group companies or indices, or any
combination thereof, all as the Committee shall determine.




     (f) A combination of the above performance goals may be used with a particular
Agreement evidencing a Grant.




     (g) The Committee in its sole discretion in setting the goals/targets in the time
prescribed above may provide for the making of equitable adjustments (singularly or in
combination) to the goals/targets in recognition of unusual or nonrecurring events for the
following qualifying objective items: asset impairments under Statement of Financial
Accounting Standards No. 121, as amended or superseded; acquisition-related charges;
accruals for restructuring and/or reorganization program charges; merger integration costs;
merger transaction costs; any profit or loss attributable to the business operations of any
entity or entities acquired during the period of service to which the performance goal
relates; tax settlements; any extraordinary, unusual-in-nature, infrequent-in-occurrence or
other nonrecurring items (not otherwise listed) as described in Accounting Principles Board
Opinion No. 30; any extraordinary, unusual-in-nature, infrequent-in-occurrence or other
nonrecurring items (not otherwise listed) in management’s discussion and analysis of
financial condition results of operations, selected financial data, financial statements
and/or in the footnotes, each as appearing in the annual report to stockholders; unrealized
gains or losses on investments; charges related to derivative transactions contemplated by
Statement of Financial Accounting Standards No. 133, as amended or superseded; and
compensation charges related to FAS 123 (Revised) or its successor provision.




     (h) The Committee must certify in writing prior to payout that the performance goals
and any other material terms were in fact satisfied. In the manner required by Section
162(m) of the Code, the Committee shall, promptly after the date on



19









 







which the necessary
financial and other information for a particular Performance Period becomes available,
certify the extent to which performance goals have been achieved
with respect to any Grant intended to qualify as “performance-based compensation” under
Section 162(m) of the Code. In addition, the Committee may, in its discretion, reduce or
eliminate the amount of any Grant payable to any Participant, based on such factors as the
Committee may deem relevant.




     (i) Limitation on Grants.




     (i) If a Grant is canceled, the canceled Grant continues to be counted against
the maximum number of shares for which Grants may be awarded to the Participant
under the Plan, but not towards the total number of shares reserved and available
under the Plan pursuant to Section 5.1.




     (ii) During any fiscal year, the maximum aggregate number of shares of Common
Stock for which Options and Stock Appreciation Rights may be granted to any Covered
Employee shall not exceed 5,000,000 shares.




     (iii) During any fiscal year, the maximum aggregate numbers of shares of Common
Stock for which Restricted Stock, Restricted Stock Units, Performance Units,
Performance Shares and Other Awards may be granted to any Covered Employee shall not
exceed 10,000,000 shares.




     (iv) During any fiscal year, the maximum cash payment hereunder for
performance-based compensation purposes under Code Section 162(m) to any Covered
Employee shall not exceed $6,000,000.




     (v) In the case of an outstanding Grant intended to qualify for the
performance-based compensation exception under Section 162(m), the Committee shall
not, without approval of a majority of the shareholders of the Company, amend the
Plan or the Grant in a manner that would adversely affect the Grant’s continued
qualification for the performance-based exception.




     (vi) Effective for any Performance Period beginning after January 1, 2009,
notwithstanding any provision of the Plan to contrary, a Covered Employee whose
employment with the Company terminates mid-Performance Period, other than a
termination because of death or Disability, shall not be entitled to a payout of a
performance-based Grant in any amount greater than the amount payable based on
actual performance during the Performance Period, prorated based on the number of
days during the Performance Period the Covered Employee was in employment with the
Company.



20









 





ARTICLE XII




MISCELLANEOUS




     Section 12.1. Effect of a Change in Control. Notwithstanding any other provision of this
Plan to the contrary, all unvested, unexercisable or restricted Grants shall automatically vest,
become exercisable and become unrestricted without further action by the Board or Committee
upon a Change in Control, unless provisions are made in connection with the transaction resulting
in the Change in Control for the assumption of Grants theretofore awarded, or the substitution for
such Grants of new grants, by the successor entity or parent thereof, with appropriate adjustment
as to the number and kind of shares and the per share exercise prices, as provided in Section 5.4.



     Section 12.2. Rights as a Shareholder. Other than certain voting rights permitted by the
Plan or an Agreement, no person shall have any rights of a shareholder as to Common Stock subject
to a Grant until, after proper transfer of the Common Stock subject to a Grant or other required
action, such shares have been recorded on the Company’s official shareholder records as having been
issued and transferred. No adjustment shall be made for cash dividends or other rights for which
the record date is prior to the date such shares are recorded as issued and transferred in the
Company’s official shareholder records.



     Section 12.3. Modification, Extension and Renewal of Grants.




     (a) Ability. Within the limitations of the Plan, including the limits of Sections
8.2(f) and 12.9, the Committee may modify, extend or renew outstanding Grants, accept the
cancellation of outstanding Grants (to the extent not previously exercised) to make new
Grants in substitution therefor, accelerate vesting and waive any restrictions, forfeiture
provisions or other terms and conditions on Grants, unless such action would not satisfy any
applicable requirements of Rule 16b-3 of the Exchange Act; provided, however, no such action
shall result in an adjustment to the performance goals of any Grant intended to be exempt
under Code Section 162(m) if the action results in such Grant not being deductible or
increases the amount of compensation otherwise payable to a Participant. The foregoing
notwithstanding, no such action shall apply to a Grant without the consent of the
Participant if it would alter or impair any rights or obligations under any Grant previously
made.




     (b) Code Section 409A Limitation. Any action taken under subsection (a) hereunder to
any Grant that is considered “deferred compensation” within the meaning of Section 409A of
the Code shall be made in compliance with the requirements of Code Section 409A. Any action
taken under subsection (a) hereunder to any Grant that is not considered “deferred
compensation” within the meaning of Code Section 409A shall be made in a manner to ensure
that after such action, the Grant either continues not to be subject to Code Section 409A or
complies with the requirements of Code Section 409A.



     Section 12.4. Term of Plan. Grants may be made pursuant to the Plan until the expiration of
ten (10) years from the Effective Date of the Plan, unless the Company sooner terminates the Plan
under Section 12.6.



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     Section 12.5. Securities Law Requirements.




     (a) Legality of Issuance. The issuance of any Common Stock in connection with a Grant
shall be contingent upon the following:




     (i) the obligation of the Company to sell Common Stock with respect to Grants
shall be subject to all applicable laws, rules and regulations, including all
applicable federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or appropriate by the
Committee;




     (ii) the Committee may make such changes to the Plan as may be necessary or
appropriate to comply with the rules and regulations of any government authority or
to obtain tax benefits; and




     (iii) each Grant is subject to the requirement that if at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of Common Stock issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or approval of
any governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the Grant or the issuance of Common Stock, no Grants shall be
granted or payment made or Common Stock issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained free
of any conditions in a manner acceptable to the Committee.




     (b) Restrictions on Transfer. Regardless of whether the offering and sale of Common
Stock under the Plan has been registered under the Act or has been registered or qualified
under the securities laws of any state, the Company may impose restrictions on the sale,
pledge or other transfer of shares of Common Stock (including the placement of appropriate
legends on stock certificates) if, in the judgment of the Company and its counsel, such
restrictions are necessary or desirable in order to achieve compliance with the provisions
of the Act, the securities laws of any state or any other law. In the event that the sale
of Common Stock under the Plan is not registered under the Act but an exemption is available
which requires an investment representation or other representation, each Participant shall
be required to represent that such shares of Common Stock are being acquired for investment,
and not with a view to the sale or distribution thereof, and to make such other
representations as are deemed necessary or appropriate by the Company and its counsel. Any
determination by the Company and its counsel in connection with any of the matters set forth
in this Section shall be conclusive and binding on all persons.




     (c) Registration or Qualification of Securities. The Company may, but shall not be
obligated to, register or qualify the issuance of Grants and/or the sale of Common Stock
under the Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the issuance of Grants or the sale of Common Stock
under the Plan to comply with any law.



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     (d) Exchange of Certificates. If, in the opinion of the Company and its counsel, any
legend placed on a stock certificate representing Common Stock sold under the Plan is no
longer required, the holder of such certificate shall be entitled to exchange such
certificate for a certificate representing the same number of shares of Common Stock but
lacking such legend.



     Section 12.6. Amendment of the Plan. The Board may from time to time, with respect to any
Common Stock at the time not subject to Grants, suspend or discontinue the Plan or revise or amend
it in any respect whatsoever. The Board may amend the Plan as it shall deem advisable, except that
no amendment may adversely affect a Participant with respect to Grants previously made without the
written consent of the Participant holding such Grant and unless such amendments are in connection
with compliance with applicable laws (including Code Section 409A), stock exchange rules or
accounting rules; provided that the Board may not make any amendment in the Plan, including the
repricing, replacement or regranting through cancellation of Options or SARs, that would, if such
amendment were not approved by the holders of the Common Stock, cause the Plan to fail to comply
with any requirement or applicable law or regulation, unless and until the approval of the holders
of such Common Stock is obtained.



     Section 12.7. Application of Funds. The proceeds received by the Company from the sale of
Common Stock pursuant to the exercise of an Option will be used for general corporate purposes.



     Section 12.8. Tax Withholding. Each recipient of a Grant shall, no later than the date as of
which the value of any Grant first becomes includable in the gross income of the recipient for
federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Company
regarding payment of any federal, state or local taxes of any kind that are required by law to be
withheld with respect to such income. A Participant may elect to have such tax withholding
satisfied, in whole or in part, by (i) authorizing the Company to withhold a number of shares of
Common Stock to be issued pursuant to a Grant equal to the Fair Market Value as of the date
withholding is effected that would satisfy the withholding amount due, (ii) transferring to the
Company shares of Common Stock owned by the Participant with a Fair Market Value equal to the
amount of the required withholding tax, or (iii) in the case of a Participant who is an Employee of
the Company at the time such withholding is effected, by withholding from the Participant’s cash
compensation. Notwithstanding anything contained in the Plan to the contrary, the Participant’s
satisfaction of any tax-withholding requirements imposed by the Committee shall be a condition
precedent to the Company’s obligation as may otherwise be provided hereunder to provide shares of
Common Stock to the Participant, and the failure of the Participant to satisfy such requirements
with respect to the exercise of an Option shall cause such Option to be forfeited. Any Participant
who surrenders previously owned shares of Common Stock to satisfy withholding obligations incurred
in connection with a Grant must comply with the applicable provisions of Rule 16b-3 of the Exchange
Act, if applicable.



     Section 12.9. No Reload Rights and No Repricings. Options and SARs shall not contain any
provisions entitling a Participant to an automatic grant of additional Options or SARs in
connection with any exercise of the original Option or SAR. In no event will the



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Committee be
permitted to reprice any Grant unless approved pursuant to a vote of the shareholders.



     Section 12.10. Notices. All notices under the Plan shall be in writing and if to the
Company, shall be delivered personally to the Secretary of the Company or mailed to its principal
office, addressed to the attention of the Secretary, and if to a Participant or recipient of a
Grant, shall be delivered personally or mailed to the Participant or recipient of a Grant at the
address appearing in the records of the Company. Such addresses may be changed at any time by
written notice to the other party given in accordance with this Section.



     Section 12.11. Rights to Employment or Other Service. Nothing in the Plan or in any Option
or Grant granted pursuant to the Plan shall confer on any individual any right to continue in the
employ or other service of the Company (if applicable) or interfere in any way with the right of
the Company and its shareholders to terminate the individual’s employment or other service at any
time.



     Section 12.12. Exculpation and Indemnification. To the maximum extent permitted by law, the
Company shall indemnify and hold harmless the members of the Board and the members of the Committee
from and against any and all liabilities, costs and expenses incurred by such persons as a result
of any act or omission to act in connection with the performance of such person’s duties,
responsibilities and obligations under the Plan, other than such liabilities, costs and expenses as
may result from the gross negligence, bad faith, willful misconduct or criminal acts of such
persons.



     Section 12.13. No Fund Created. Any and all payments hereunder to recipients of Grants
hereunder shall be made from the general funds of the Company (or, if applicable, a Participating
Company), and no special or separate fund shall be established or other segregation of assets made
to assure such payments; provided that bookkeeping reserves may be established in connection with
the satisfaction of payment obligations hereunder. The obligations of the Company under the Plan
are unsecured and constitute a mere promise by the Company to make benefit payments in the future,
and to the extent that any person acquires a right to receive payments under the Plan from the
Company (or, if applicable, a Participating Company), such right shall be no greater than the right
of a general unsecured creditor of the Company (or, if applicable, a Participating Company).



     Section 12.14. Additional Arrangements. Nothing contained herein precludes any Participating
Company from adopting other or additional compensation or benefit arrangements.



     Section 12.15. Code Section 409A Savings Clause.




     (a) It is the intention of the Company that no Grant shall be “deferred compensation”
subject to Section 409A of the Code, unless and to the extent that the Committee
specifically determines otherwise as provided below, and the Plan and the terms and
conditions of all Grants shall be interpreted accordingly.




     (b) The terms and conditions governing any Grants that the Committee determines will be
subject to Section 409A of the Code, including any rules for elective or mandatory deferral
of the delivery of cash or Common Stock pursuant thereto and any



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rules regarding treatment
of such Grants in the event of a Change in Control, shall be set forth in the applicable
Agreement and shall comply in all respects with Section 409A of the Code.




     (c) Following a Change in Control, no action shall be taken under the Plan that will
cause any Grant that the Committee has previously determined is subject to
Section 409A of the Code to fail to comply in any respect with Section 409A of the Code
without the written consent of the Participant.



     Section 12.16. Captions. The use of captions in the Plan is for convenience. The captions
are not intended to provide substantive rights and shall not be used in construing the terms of the
Plan.



     Section 12.17. Governing Law. The laws of Michigan shall govern the plan, without reference
to principles of conflict of laws.



     Section 12.18. Execution. The Company has caused the Plan to be executed in the name and on
behalf of the Company by an officer of the Company thereunto duly authorized as of this 26th day of
May, 2006.



	 	 	 	 	 
	 	FLAGSTAR BANCORP, INC., a Michigan corporation

 	 
	 	By:  	/s/ Mark T. Hammond
 	 
	 	 	Name & Title:  Mark T. Hammond,  	 
	 	 	Vice Chairman, President and
Chief Executive Officer 	 
	 




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