Document:

exv10w20

 

Exhibit 10.20

FIRST MERCURY FINANCIAL CORPORATION

PERFORMANCE-BASED ANNUAL INCENTIVE PLAN

 

 

FIRST MERCURY FINANCIAL CORPORATION

PERFORMANCE-BASED ANNUAL INCENTIVE PLAN

     1. Purpose. The purpose of the First Mercury Financial Corporation Performance-Based Annual
Incentive Plan (the “Plan”) is to advance the interests of First Mercury Financial Corporation and
its stockholders by providing certain of its key executives with annual incentive compensation
which is tied to the achievement of pre-established and objective performance goals. The Plan is
intended to provide Participants with annual incentive compensation which is not subject to the
deduction limitation rules prescribed under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”), and should be construed to the extent possible as providing for remuneration
which is “performance-based compensation” within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.

     2. Definitions. Where the context of the Plan permits, words in the masculine gender
shall include the feminine gender, the plural form of a word shall include the singular
form, and the singular form of a word shall include the plural form. Unless the context
clearly indicates otherwise, the following terms shall have the following meanings:

	 	(a)	 	“Board” means the Board of Directors of the Corporation.
	 
	 	(b)	 	“Committee” means the Compensation and Employee Benefits Committee of the
Board, a subcommittee thereof, or such other committee as may be appointed by the
Board. The Committee shall be comprised of two or more non-employee members of the
Board who shall qualify to administer the Plan as “outside directors” under Section
162(m) of the Code and who shall qualify as “independent” under the New York Stock
Exchange listing requirements.
	 
	 	(c)	 	“Corporation” means First Mercury Financial Corporation, a Delaware
corporation, and any successor thereto.
	 
	 	(d)	 	“Incentive Pool” Fund means an amount equal
to a percentage of Operating Income to be set by the Committee.

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	 	(e)	 	“Operating Income” means the Corporation’s operating income for the applicable
Performance Period as reported in the Corporation’s income statement and as adjusted to
eliminate the effects of charges for restructurings, discontinued operations,
extraordinary items, other unusual or non-recurring items, and the cumulative effect of
tax or accounting changes, each as determined in accordance with Generally Accepted
Accounting Principles and identified in the financial statements, in the notes to the
financial statements or in the Management’s Discussion and Analysis section of the
financial statements.
	 
	 	(f)	 	“Participant” means (i) a “covered employee,” as defined in Section 162(m) of
the Code and the regulations promulgated thereunder, of the Corporation or its
Subsidiaries who has been selected by the Committee to participate in the Plan during a
Performance Period and (ii) each other employee of the Corporation or its Subsidiaries
who has been selected by the Committee to participate in the Plan during a Performance
Period.
	 
	 	(g)	 	“Performance Award” means an award granted pursuant to the terms of Section 4
of this Plan. A Participant shall have no right to any Performance Award until that
award is paid.
	 
	 	(h)	 	“Performance Period” means the Corporation’s fiscal year, or such other period
as designated by the Committee.
	 
	 	(i)	 	“Plan” means the First Mercury Financial Corporation Performance-Based Annual
Incentive Plan, as amended from time to time.
	 
	 	(j)	 	“Pool Fund Allocation” means the percentage of the Incentive Pool Fund that is
allocated to each Participant with respect to any Performance Period. A maximum of
[___] % may be allocated to any single Participant. The total allocation may not
exceed 100%.
	 
	 	(k)	 	“Subsidiary” or “Subsidiaries” means any corporation or entity of which the
Corporation owns directly or indirectly, at least 50% of the total voting power or in
which it has at least a 50% economic interest, and which is authorized to participate
in the Plan.

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     3. Plan Administration. The Committee shall have full discretion, power and authority to
administer and interpret the Plan and to establish rules and procedures for its administration as
the Committee deems necessary and appropriate. The Committee may delegate to officers and
employees of the Corporation the authority to manage the day-to-day administration of the Plan
including without limitation the discretionary authority to (i) administer and interpret the terms
of the Plan, and (ii) amend the Plan only as necessary to reflect any ministerial, administrative
or managerial functions; provided that any such amendment does not increase the Incentive Pool Fund
or the Pool Fund Allocation. Pool Fund Allocations shall be established by the Committee for a
Participant (or group of Participants) no later than ninety (90) days after the commencement of
each Performance Period (or the date on which 25% of the Performance Period has elapsed, if
earlier).

     Any interpretation of the Plan or other act of the Committee (or its delegate) in
administering the Plan shall be final and binding upon all Participants.

     4. Performance Awards. For each Performance Period, the Committee shall determine the amount
of a Participant’s Performance Award as follows:

	 	(a)	 	General. The maximum amount of a Participant’s Performance Award shall be equal
to the Participant’s Pool Fund Allocation of the Incentive Pool Fund for the
Performance Period. The actual amount of a Participant’s Performance Award may be
reduced or eliminated by the Committee as set forth in subsection (c) below.
	 
	 	(b)	 	Allocation of Incentive Pool Fund. The Incentive Pool Fund for each Performance
Period shall be allocated among Participants. The maximum award for a Participant is
equal to the Participant’s Pool Fund Allocation.
	 
	 	(c)	 	Reduction or Elimination of Pool Fund. The Pool Fund Allocation for each
Participant may be reduced or eliminated by the Committee in its sole discretion;
provided, however, that under no circumstances may the amount of the Incentive Pool
Fund, or the Pool Fund Allocation to any Participant, be increased. Once 

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	 	 	 	the Committee
has determined the amount of a Participant’s Performance Award
pursuant to subsections (a), (b), and (c) in this Section 4, and upon the
certification required under Section 5 hereto, the Committee shall pay the
Participant’s Performance Award pursuant to such terms and procedures as the
Committee shall adopt under Section 3 hereto.

     5. Payment of Performance Awards. Subject to any stockholder approval required by law,
payment of any Performance Award to a Participant for any Performance Period shall be made in cash
(or in stock or stock-based awards under the First Mercury Financial Corporation Omnibus Incentive
Plan of 2006 as restated and/or amended from time to time) after written certification by the
Committee that the performance goal for the Performance Period was achieved, and any other material
terms of the Performance Award were satisfied. Any Performance Award may be deferred pursuant to
the terms and conditions of the Corporation’s deferred compensation plan or plans then in effect.

     A Participant is not entitled to any award hereunder for the Performance Period during which
Participant breaches any confidentiality, proprietary information, or non-compete provisions of any
agreement or plan then in effect between Corporation and Participant, and shall immediately forfeit
his right to any accrued but unpaid amounts attributable to any Performance Period. Further, if a
Participant breaches any confidentiality, proprietary information, or non-compete provisions of any
agreement or plan between Corporation and the Participant in effect after the Participant’s
termination of employment, the Participant shall repay to Corporation any award paid to the
Participant under the Plan within one year of such breach (plus the cost of collection and a
reasonable rate of interest) and shall immediately forfeit his right to any accrued unpaid amounts
attributable to any Performance Period.

     The Committee may make retroactive adjustments to and the Participant shall reimburse to the
Corporation any cash or equity based incentive compensation paid to the Participant where such
compensation was predicated upon achieving certain financial results that were

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substantially the subject of a restatement, and as a result of the restatement it is determined that the Participant
otherwise would not have been paid such compensation, regardless of whether or
not the restatement resulted from the Participant’s misconduct. In each such instance, the
Corporation will, to the extent practicable, seek to recover the amount by which the Participant’s
cash or equity based incentive compensation for the relevant period exceeded the lower payment that
would have been made based on the restated financial results. The Corporation will, to the extent
permitted by governing law, require reimbursement of any cash or equity based incentive
compensation paid to any named executive officer (for purposes of this policy “named executive
officers” has the meaning given that term in Item 402(a)(3) of Regulation S-K under the Securities
Exchange Act of 1934) where: (i) the payment was predicated upon the achievement of certain
financial results that were subsequently the subject of a substantial restatement, and (ii) in the
Committee’s view the officer engaged in fraud or misconduct that caused or partially caused the
need for the substantial restatement. In each instance described above, the Corporation will, to
the extent practicable, seek to recover the described cash or equity based incentive compensation
for the relevant period, plus a reasonable rate of interest.

     6. Plan Amendment and Termination. Except as explicitly provided by law, this Plan is
provided at the Corporation’s sole discretion and the Board or the Committee may modify or
terminate it at any time, prospectively or retroactively, without notice or obligation for any
reason, subject to obtaining any necessary stockholder approval as required by law, regulation, or
listing exchange requirement. In addition, there is no obligation to extend the Plan or establish
a replacement plan in subsequent years.

     7. Miscellaneous Provisions.

	 	(a)	 	Employment Rights. The Plan does not constitute a contract of employment and
participation in the Plan will not give a Participant the right to continue in the
employ of the Corporation, or any of its subsidiaries or affiliates, on a full-time,
part-time, or any other basis. Participation in the Plan will not give any

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	 	 	 	Participant any right or claim to any benefit under the Plan, unless such right or claim has
specifically been granted by the Committee under the terms of the Plan.
	 
	 	(b)	 	Committee’s Decision Final. Any interpretation of the Plan and any decision on
any matter pertaining to the Plan which is made by the Committee in its discretion in
good faith shall be binding on all persons.
	 
	 	(c)	 	Governing Law. Except to the extent superseded by the laws of the United
States, the laws of the State of Michigan, without regard to any state’s conflict of
laws principles, shall govern in all matters relating to the Plan. Any legal action
related to this Plan shall be brought only in a federal or state court located in
Michigan.
	 
	 	(d)	 	Interests Not Transferable. Any interests of Participants under the Plan may
not be voluntarily sold, transferred, alienated, assigned or encumbered, other than by
will or pursuant to the laws of descent and distribution.
	 
	 	(e)	 	Severability. In the event any provision of the Plan shall be held to be
illegal or invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if such
illegal or invalid provision(s) had never been contained in the Plan.
	 
	 	(f)	 	Withholding. The Corporation will withhold from any amounts payable under this
Plan all federal, state, foreign, city and local taxes as shall be legally required.
	 
	 	(g)	 	Effect on Other Plans or Agreements. Payments or benefits provided to a
Participant under any stock, deferred compensation, savings, retirement or other
employee benefit plan are governed solely by the terms of such plan.

     8. Effective
Date. This Plan shall be effective as of October 4, 2006, subject to stockholder
approval. The Plan shall automatically terminate as of the first meeting of shareholders on and
after the third anniversary of the date on which the Corporation first issues equity securities of
the Corporation that are required to be registered under Article II of the Securities Exchange Act
of 1934 as amended, unless resubmitted to and approved by shareholders prior to that date.

7exv10w21

 

Exhibit 10.21

FIRST MERCURY FINANCIAL CORPORATION

NON-QUALIFIED DEFERRED COMPENSATION PLAN

 

 

FIRST MERCURY FINANCIAL CORPORATION

NON-QUALIFIED DEFERRED COMPENSATION PLAN

SECTION 1

Introduction

1.1. The Plan, Effective Date and Plan Year

     The First Mercury Financial Corporation Nonqualified Retirement Savings Excess Plan (the
“Plan”) is effective as of October 4, 2006 (the “Effective Date”). The “Plan Year” means the
calendar year; provided that the first Plan Year shall mean the period beginning on the Effective
Date and ending December 31, 2006.

1.2. Purpose

     First Mercury Financial Corporation (the “Corporation”) has established the Plan for a select
group of management and highly compensated employees of the Corporation (or any Subsidiary or
Affiliate that adopts the Plan in accordance with subsection 7.1) to retain and attract highly
qualified personnel by offering the benefits of a non-qualified, unfunded Plan of deferred
compensation. The Plan is intended to be a top-hat Plan described in Section 201(2) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Notwithstanding any
provision of the Plan to the contrary, the Plan is subject to the provisions of Section 409A of the
Internal Revenue Code (the “Code”) and at all times shall be interpreted and administered so that
it is consistent with such Code section.

1.3. Administration

     The Plan shall be administered by the Corporation or by one or more individuals appointed by
the Corporation to administer the Plan (the “Plan Administrator”). The Plan Administrator shall
have the powers set forth in the Plan and the power to interpret its provisions. Any decisions of
the Plan Administrator shall be final and binding on all persons with regard to the Plan.

1.4. Employers

     Any Subsidiary or Affiliate of the Corporation may adopt the Plan with the Corporation’s
consent as described in subsection 7.1. A “Subsidiary” of the Corporation is any corporation more
than 50% of the voting stock of which is owned, directly or indirectly, by the Corporation. An
“Affiliate” of the Corporation is any corporation more than 50% of the voting stock of which is
owned, directly or indirectly, by the owner or owners of more than 50% of the voting stock of the
Corporation. The Corporation and any Subsidiaries or Affiliates of the Corporation which adopt the
Plan are referred to below collectively as the “Employers” and sometimes individually as an
“Employer”.

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SECTION 2

Participation and Deferral Elections

2.1. Eligibility and Participation

     Subject to the conditions and limitations of the Plan, each employee of the Employer who is
employed by the Employer who is scheduled to have base salary for a Plan Year in excess of the
compensation limit set forth in Section 401(a)(17) of the Code, and each director of the
Corporation who is not an employee of the Corporation or any subsidiary of the Corporation
(“Non-Employee Director”) shall be eligible to participate in this Plan. In addition, the Board of
Directors may designate such other select highly compensated or management employees to participate
in the Plan. Eligibility to participate in the Plan in one Plan Year does not guarantee the right
to participate in the Plan in any subsequent Plan Year. The Plan Administrator shall notify the
employees of an Employer if they are eligible to participate in the Plan in each Plan Year.

     An individual participating in the Plan in a given Plan Year may, as authorized by the Plan
Administrator, make Deferral Elections as provided in subsection 2.2 below, and shall be eligible
for the Employer Credits described in Section 3.

     If the Plan Administrator informs a Participant that he is unable to participate in the Plan
for a given Plan Year, the Participant shall retain Participant status until the entire balance of
the Participant’s Deferral Account (as defined in subsection 4.1 below) has been distributed.

2.2. Rules for Deferral Elections

     Any eligible Participant (as provided in subsection 2.1 above) may make an irrevocable
election (“Deferral Election”) to defer receipt of compensation he otherwise would be entitled to
receive for a Plan Year in accordance with the rules set forth below:

	 	(a)	 	A Participant shall be eligible to make a Deferral Election only
if on the date such election is made the Participant satisfies such
requirements as are specified by the Plan Administrator.
	 
	 	(b)	 	All deferral and other elections must be made in such
form as the Plan Administrator may prescribe and must be received by
the Plan Administrator no later than the date specified by the Plan
Administrator. The date specified by the Plan Administrator to receive
a Participant’s Deferral Election shall not be later than the November
30 prior to the January 1 of the Plan Year in which the Participant
performs the services producing the compensation to be deferred;
provided, that in the case of a Participant’s initial year of
participation, the date specified shall not be later than 30 days after
the date the Participant first becomes eligible to participate in the
Plan.

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	 	(c)	 	At the time of an eligible Participant’s annual
Deferral Election, the Participant must specify the date on which
amounts deferred under that Deferral Election, any associated Employer
Credits under Section 3, as well as any Fund Adjustments under Section
4.2 associated with such deferral amounts and Employer Credits shall be
paid or commence (i.e., the Distribution Date as defined below) and the
form in which payment will be made (as provided in subsection 5.1).
	 
	 	(d)	 	The “Distribution Date” specified by the Participant
shall be either (i) a specified date not earlier than January 1
immediately following the fifth anniversary of the date on which the
Participant makes his initial election (the “Designated Distribution
Date”), (ii) the Participant’s Separation from Service (as defined in
subparagraph (f), below) or a specified date coinciding with or next
following the Participant’s Termination of Employment (e.g., January 1
coinciding with or next following the Participant’s Termination of
Employment), or (iii) the earlier of (i) or (ii) above. If any
Participant dies or becomes disabled (as defined in Code Section 409A),
such Participant’s Designated Distribution Date shall be the
Participant’s date of death or disability, as applicable.
	 
	 	(e)	 	The form of payment specified by the Participant shall
be either a single lump sum or a series of annual installments over a
period not exceeding ten years. In the event the Participant fails to
specify a form of payment, the form shall be a single lump sum.
	 
	 	(f)	 	For purposes of the Plan, a “Separation from Service”
occurs when a person leaves the employ of the Corporation (and all
Subsidiaries and Affiliates of the Corporation), or in the case of a
Non-Employee Director when the Non-Employee Director separates from
service, by reason of a resignation, discharge, retirement, or death
that is consistent with Code Section 409A(a)(2)(A)(i) and any IRS
regulations issued thereunder.
	 
	 	(g)	 	Except as provided in subsection (h) below, a Deferral
Election shall be irrevocable; provided, however, if an eligible
Participant receives a distribution on account of financial hardship
under the First Mercury Financial Corporation & Affiliates 401K Plan &
Trust (the “401(k) Plan”), then no amounts may be deferred under the
Plan for a period of six months following the date the eligible
Participant receives the distribution on account of hardship from the
401(k) Plan.

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	 	(h)	 	A Participant may make an irrevocable election to extend a
Distribution Date (a “Re-Deferral Election”) (or to switch the form of
distribution from a lump sum to installments, but not the reverse);
provided, that no Re-Deferral Election shall be effective unless (i)
the Plan Administrator receives the election more than 12-months prior
to the Distribution Date to be changed occurs, and (ii) the new
Distribution Date is not earlier than the January 1 immediately
following the fifth anniversary of the date the Re-Deferral Election is
made. All Re-Deferral Elections must be made in writing on such forms
and pursuant to such rules as the Plan Administrator may prescribe.
	 
	 	(i)	 	Participants also may receive a distribution on account
of an unforeseeable emergency to the extent permitted by Code Section
409A(a)(2)(B)(ii).

2.3. Amounts Deferred

     On or before [                    ], 2006, each employee eligible to participate in the Plan should be
entitled to make an irrevocable election to defer receipt of: (i) any whole percentage (up to 75%)
of (monthly) base salary paid to the employee for his services as an employee for the Employer for
the period from [                    ], 2006 through December 31, 2006 and any portion (expressed as a dollar
amount or a whole percentage up to 100%) of any 2006 bonus paid by the Corporation that is
attributable to the period after such election. On or before [                    ], 2006, each Non-Employee
Director eligible to participate in the Plan shall be entitled to make an irrevocable election to
defer receipt of all or any portion not less than 25 percent of all annual cash retainer
fees payable by the Corporation to a Non-Employee Director for services as a director of the
Corporation, as such amount may be changed from time to time (“Annual Retainers”) and/or the annual
fees payable by the Corporation to a Non-Employee Director for services as a member or chair of a
Board committee, as such amounts may be changed from time to time (“Meeting Fees”) payable for the
period from [                    ], 2006 through December 31, 2006 and any portion (expressed as a dollar
amount or a whole percentage up to 100%) of any 2006 bonus paid by the Corporation.

     For each subsequent Plan Year, each employee eligible to participate in the Plan shall be
entitled to make an irrevocable election to defer receipt of: (i) any whole percentage (up to 75%)
of (monthly) base salary paid to the employee for his services as an employee from the Employer for
the following calendar year; and (ii) any portion (expressed as a dollar amount or a whole
percentage up to 100%) of any bonus to be earned for services performed in the following calendar
year. Each Non-Employee Director eligible to participate in the Plan shall be entitled to make an
irrevocable election to defer receipt of all or any portion not less than 25 percent of all
Annual Retainers and/or Meeting Fees.

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SECTION 3

Employer Credits

3.1. Discretionary Contributions

     Each Plan Year, each Employer may credit to the Deferral Account of any Participant a
contribution determined by the Employer in its discretion.

SECTION 4

Deferral Accounts

4.1. Deferral Accounts

     All amounts deferred pursuant to one or more Deferral Elections under the Plan (“Deferral
Credits”) and any Employer Credits under Section 3 shall be allocated to a bookkeeping account in
the name of the Participant (“Deferral Account”). A Participant’s Deferral Credits and Employer
Credits shall be credited to his Deferral Account as of the Valuation Date (as defined below)
coinciding with or next following the date on which, in the absence of a Deferral Election, the
Participant would otherwise have received the deferred amounts. In the case of any Participant who
has more than one Distribution Date under the Plan, a separate Deferral Account shall be kept with
respect to each such Distribution Date.

4.2. Deferral Account Adjustments and Investment Funds

     As of the last business day of each calendar month or such other dates as the Plan
Administrator, in its discretion, may designate (a “Valuation Date”), each Participant’s Deferral
Account will be credited with income and gains and charged with losses, expenses and distributions
equal to the amount by which the Deferral Account would have been credited or charged since the
prior Valuation Date (in the manner described below) had the Participant’s Deferral Account been
invested in the Investment Fund (as defined below) selected by the Plan Administrator. For
purposes of adjusting accounts, distributions made since the immediately preceding Valuation Date
shall be deemed to have been made on such Valuation Date. The “Investment Fund” shall consist of a
mutual fund designated by the Plan Administrator, in its sole discretion. A Participant’s account
shall continue to be adjusted under this subsection 4.2 until completely distributed in accordance
with the Participant’s initial election.

4.3. Vesting

     A Participant shall be fully vested at all times in the balance of his Deferral Account
attributable to his own Deferral Credits as well as any Employer Credits.

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SECTION 5

Payment of Benefits

5.1. Time and Method of Payment

     Payment of the vested portion of a Participant’s Deferral Accounts shall be made in the form
of a single lump sum or a series of annual installments over a period not exceeding ten years, as
specified in the Participant’s election applicable to each such Account. Payment shall be made or
commence as soon as possible following the Valuation Date coinciding with or next following the
Participant’s Distribution Date. If payment is to be made in the form of a single lump sum,
payment shall be in an amount equal the value of the Participant’s Deferral Account as of the
Valuation Date coinciding with or immediately preceding the date on which the balance of the
Deferral Account is paid to the Participant. If payment is to be made in the form of installments,
payments shall be made as of the Valuation Date coinciding with or next following the Participant’s
Distribution Date and, during the balance of the installment payment period, as of the Valuation
Date coinciding with or next following each anniversary of the Participant’s Distribution Date.
Each installment amount shall be equal to the Participant’s account balance determined as of the
applicable Valuation Date multiplied by a fraction the numerator of which is one and the
denominator of which is the total number of years remaining in the installment payment period
including the current year. With respect to a Participant who has more than one Distribution Date,
this subsection 5.1 shall be applied separately with respect to each such Distribution Date.

5.2. Payment Upon Disability

     Notwithstanding any election by the Participant regarding the timing of payment of his
Deferral Account, in the event a Participant becomes disabled (as defined in Code Section
409A(a)(1)(C)) before his Distribution Date, payment of the Participant’s Deferral Accounts shall
be made in a single lump sum as soon as practical after the Valuation Date coinciding with or next
following the date on which the Plan Administrator determines that the Participant is disabled.

5.3. Payment Upon Death of a Participant

     Notwithstanding any election by the Participant regarding the timing of payment of his
Deferral Account, a Participant’s Deferral Accounts shall be paid to the Participant’s beneficiary
(designated in accordance with subsection 5.4) in a single lump sum as soon as practical following
the Valuation Date coinciding with or next following the Participant’s death.

5.4. Beneficiary

     If a Participant is married on the date of his death, then his beneficiary shall be the
Participant’s spouse, unless the Participant names a beneficiary or beneficiaries (other than the
Participant’s spouse) to receive the balance of the Participant’s Deferral Accounts in the event of
the Participant’s death prior to the payment of his entire Deferral Accounts. To be effective, any
beneficiary designation shall be filed in writing with the Plan Administrator. A Participant may
revoke an existing beneficiary designation by filing another written beneficiary designation with

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the Plan Administrator. The latest beneficiary designation received by the Plan Administrator
shall be controlling. If no beneficiary is named by a Participant or if he survives all of his
named beneficiaries, the Deferral Accounts shall be paid in the following order of precedence:

	 	(a)	 	the Participant’s spouse;
	 
	 	(b)	 	the Participant’s children (including adopted children)
per stirpes; or
	 
	 	(c)	 	the Participant’s estate.

5.5. Form of Payment

     All payments shall be made in cash.

5.6. Withholding of Taxes

     The Employers shall withhold any applicable Federal, state or local income tax from payments
due under the Plan. Any Social Security taxes, including the Medicare portion of such taxes, on a
Participant’s elective deferrals shall be withheld when the compensation is deferred and on any
Employer Credits under Section 3 when such amounts are vested under subsection 4.3. Such taxes
shall be withheld from such items of cash compensation (including distributions from this Plan) as
the Employers deem appropriate. The Employers shall also withhold any other employment taxes as
necessary to comply with applicable laws.

5.7. Small Amounts

     Notwithstanding any other provision of the Plan to the contrary, if, on a Participant’s
Termination of Employment, the vested portion of the Participant’s Deferral Accounts is $25,000 or
less, the Plan Administrator, shall pay the vested portion of the Participant’s Deferral Accounts
to the Participant in a single lump sum as soon as administratively practicable, notwithstanding
any distribution election requiring further installment payments. The lump sum payment shall equal
the value of the vested portion of the Participant’s Deferral Accounts as of the Valuation Date
coinciding with or immediately preceding the date on which the balance in the Deferral Accounts is
paid to the Participant.

SECTION 6

Miscellaneous

6.1. Funding

     Benefits payable under the Plan to any Participant shall be paid directly by such
Participant’s Employer(s). The Employers shall not be required to fund, or otherwise segregate
assets to be used for payment of benefits under the Plan. While the Employers may make investments
in the funds designated by the Plan Administrator as Investment Funds, the Employers shall not be
under any obligation to make such investments and any such investment shall remain an asset of the
relevant Employer subject to the claims of its general creditors.

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Notwithstanding the foregoing, the Employers may maintain one or more grantor Trusts (“Trust”)
to hold assets to be used for payment of benefits under the Plan. Upon a Change in control, the
Employers shall maintain such Trusts. The assets of the Trust with respect to benefits payable to
the employees of such Employer(s) shall remain the assets of such Employer(s) subject to the claims
of their general creditors. Any payments by a Trust of benefits provided to a Participant under
the Plan shall be considered payment by the Employers and shall discharge the Employers of any
further liability under the Plan for such payments.

6.2. Employment Rights

     Establishment of the Plan shall not be construed to give any eligible employee the right to be
retained in the service of the Employers or to any benefits not specifically provided by the Plan.

6.3. Interests Not Transferable

     Except as to withholding of any tax under the laws of the United States or any state or
locality and the provisions of subsection 5.4, no benefit payable at any time under the Plan shall
be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or other
legal process, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge
or otherwise encumber any such benefits, whether currently or thereafter payable, shall be void.
No person shall, in any manner, be liable for or subject to the debts or liabilities of any person
entitled to such benefits. If any person shall attempt to, or shall alienate, sell, transfer,
assign, pledge or otherwise encumber his benefits under the Plan, or if by any reason of his
bankruptcy or other event happening at any time, such benefits would devolve upon any other person
or would not be enjoyed by the person entitled thereto under the Plan, then the Plan Administrator,
in its discretion, may terminate the interest in any such benefits of the person titled thereto
under the Plan and hold or apply them for or to the benefit of such person entitled thereto under
the Plan or his spouse, children or other dependents, or any of them, in such manner as the Plan
Administrator may deem proper.

6.4. Forfeitures and Unclaimed Amounts

     Unclaimed amounts shall consist of the amounts of the Deferral Account of a Participant that
cannot be distributed because of the Plan Administrator’s inability, after a reasonable search, to
locate a Participant or his beneficiary, as applicable, within a period of two (2) years after the
Valuation Date upon which the payment of benefits become due. Unclaimed amounts shall be forfeited
at the end of such two-year period. These forfeitures will reduce the obligations of the Employers
under the Plan. After an unclaimed amount has been forfeited, the Participant or beneficiary, as
applicable, shall have no further right to his Deferral Account.

6.5. Controlling Law

     The Plan and any actions taken in connection herewith shall be governed by and construed in
accordance with the laws of the state of Michigan, to the extent not preempted by ERISA, without
regard to any state’s conflict of laws principles. Any legal action related to this Plan shall be
brought only in a federal or state court located in Michigan.

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6.6. Gender and Number

     Words in the masculine gender shall include the feminine, and the plural shall include the
singular and the singular shall include the plural.

6.7. Action by the Employers

     Except as otherwise specifically provided herein, any action required of or permitted to be
taken by the Corporation or the Employers under the Plan shall be by resolution of its Board of
Directors or by resolution of a duly authorized committee of its Board of Directors, or by a person
or persons authorized by resolution of its Board of Directors or such committee.

6.8. Other Benefit Plans

     The Participant’s Deferral Credits shall be deemed compensation for the purpose of calculating
the amount of a Participant’s benefits or contributions under all retirement and welfare benefit
plans sponsored by the Corporation and the Subsidiaries, except to the extent not permitted under
such retirement or welfare benefit plan and except to the extent not permitted under the Code.

     No amount distributed to a Participant from a Participant’s Accounts under this Plan shall be
deemed to be compensation with respect to a Participant’s entitlement to benefits under any
retirement or welfare benefit plan established by the Corporation or the Subsidiaries for its
employees unless otherwise specifically provided in such Plan.

6.9. Facility of Payment

     Any amounts payable hereunder to any person under legal disability or who, in the judgment of
the Plan Administrator, is unable to properly manage his financial affairs may be paid to the legal
representative of such person or may be applied for the benefit of such person in any manner that
the Plan Administrator may select.

SECTION 7

Employer Participation

7.1. Adoption of Plan

     Any Subsidiary or Affiliate of the Corporation may, with the approval of the Corporation and
under such terms and conditions as the committee may prescribe, adopt the Plan by filing with the
Corporation a resolution of its Board of Directors to that effect. The Corporation may amend the
Plan as necessary or desirable to reflect the adoption of the Plan by an Employer, provided
however, that an adopting Employer shall not have the authority to amend or terminate the Plan
under Section 8.

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7.2. Withdrawal from the Plan by Employer

     Any such Employer shall have the right, at any time, upon the approval of and under such
conditions as may be provided by the Corporation, to withdraw from the Plan by delivering to the
Corporation written notice of its election so to withdraw. Upon receipt of such notice by the
Corporation, the portion of the Deferral Account of Participants and beneficiaries attributable to
amounts deferred while the Participants were employees of such withdrawing Employer, plus any net
earnings, gains and losses on such amounts, shall be distributed from the Trust at the direction of
the Corporation in cash at such time or times as the Corporation, in its sole discretion, may deem
to be in the best interest of such employees and their beneficiaries. To the extent the amounts
held in the Trust for the benefit of such Participants and beneficiaries are not sufficient to
satisfy the Employers’ obligation to such Participants and their beneficiaries accrued on account
of their employment with those Employers, the remaining amount necessary to satisfy such obligation
shall be an obligation of the relevant Employers, and the other Employers shall have no further
obligation to such Participants and beneficiaries with respect to such amounts.

SECTION 8

Amendment and Termination

     The Corporation intends the Plan to be permanent but, to the extent permitted by applicable
law (including, without limitation, Code Section 409A), reserves the right at any time in its
complete and unilateral discretion to modify, amend or terminate the Plan, provided however, that
except as provided below, any amendment or termination of the Plan shall not reduce or eliminate
(except by reason of investment experience) any Deferral Account accrued through the date of such
amendment or termination. Upon termination of the Plan, the Corporation may provide that
notwithstanding the Distribution Date specified by each Participant, all deferred account balances
will be distributed on a date selected by the Corporation. The Plan Administrator shall have the
authority to adopt amendments to the Plan in the following circumstances:

	 	(a)	 	to adopt amendments to the Plan which the Plan Administrator
determines are necessary or desirable for the Plan to comply with or to
obtain benefits or advantages under the provisions of applicable law,
regulations or rulings or requirements of the Internal Revenue Service
or other governmental or administrative agency or changes in such law,
regulations, rulings or requirements; and
	 
	 	(b)	 	to adopt any other procedural or cosmetic amendment
that the Plan Administrator determines to be necessary or desirable
that does not materially change benefits to Participants or their
beneficiaries or materially increase the Corporation’s or Employer’s
obligations under the Plan.

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The Plan Administrator shall provide notice of amendments adopted by the Plan Administrator to
the Corporation and the Board of Directors of the Corporation on a timely basis.

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