Document:

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EXHIBIT 4.1

Asset
Acceptance Capital Corp.

2004 STOCK INCENTIVE PLAN

I. GENERAL PROVISIONS

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

     1.2 Purpose. The purpose of the Plan is (i) to promote the best interests of the
Corporation and its shareholders by encouraging Employees, consultants and non-employee directors
of the Corporation and its Subsidiaries to acquire an ownership interest in the Corporation through
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Share
Awards and Annual Incentive Awards, thus identifying their interests with those of shareholders,
and (ii) to enhance the ability of the Corporation to attract and retain qualified Employees,
consultants and non-employee directors. It is the further purpose of the Plan to permit the
granting of Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, Performance Share Awards and Annual Incentive Awards that will constitute performance
based compensation, as described in Section 162(m) of the Code, and regulations promulgated
thereunder.

     1.3 Definitions. As used in this Plan, the following terms have the meaning described
below:

          (a) “Agreement” means the written agreement that sets forth the terms of a
Participant’s Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units,
Performance Share Award or Annual Incentive Award.

          (b) “Annual Incentive Award” means an award that is granted in accordance with
Article VI of the Plan.

          (c) “Board” means the Board of Directors of the Corporation.

          (d) “Change in Control” means the occurrence at any time after the Initial Public
Offering of any of the following events: (i) the acquisition of ownership by a person, corporation
or other entity, or a group acting in concert, of fifty-one percent, or more, of the outstanding
Common Stock of the Corporation in a single transaction or a series of related transactions within
a one-year period; (ii) a sale of all or substantially all of the assets of the

 

 

Corporation to any
person, corporation or other entity; or (iii) a merger or similar transaction between the
Corporation and another entity if shareholders of the Corporation do not own a majority of the
voting stock of the surviving entity or any parent thereof and a majority in value of the total
outstanding stock of such surviving entity or any parent thereof. Provided, however,
that there shall not be included within the meaning of “Change in Control,” any such event
involving: (iv) any employee benefit plan (or related trust) sponsored or maintained by the
Corporation; or (v) any of the current shareholders of the Corporation as of the date of adoption
of this Plan by the Board (or any entity at any time controlled by any such shareholder or
shareholders)

          (e) “Change in Position” means, as determined by the Committee in its discretion with
respect to any Participant, a significant change in such Participant’s employment relationship with
the Company, including but not limited to any or all of the following: (i) such Participant’s
involuntary termination of employment or services; (ii) a significant reduction in such
Participant’s duties, responsibilities, compensation and/or fringe benefits, or the assignment to
such Participant of duties inconsistent with his or her position (all as in effect immediately
prior to a Change in Control), whether or not such Participant voluntarily terminates employment or
services as a result thereof; or (iii) a significant change in the geographic location of the
Participant’s primary workplace.

          (f) “Code” means the Internal Revenue Code of 1986, as amended.

          (g) “Committee” means the Compensation Committee of the Corporation, which shall be
comprised of two or more members of the Board.

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

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

          (j) “Disability” means total and permanent disability, as defined in Code Section
22(e).

          (k) “Employee” means an individual who has an “employment relationship” with the
Corporation or a Subsidiary, as defined in Treasury Regulation 1.421-7(h), and the term
“employment” means employment with the Corporation, or a Subsidiary of the Corporation.

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

          (m) “Fair Market Value” means for purposes of determining the value of Common Stock on
the Grant Date:

 

 

               (i) If the Grant Date is the same as the date upon which an Initial Public Offering of
the Corporation’s Common Stock becomes effective, the initial public offering price; or

               (ii) If the Grant Date occurs after an Initial Public Offering of the Corporation’s
Common Stock becomes effective, the Stock Exchange closing price of the Corporation’s Common
Stock as reported in The Wall Street Journal (or as otherwise reported by such Stock
Exchange) for the Grant Date. In the event that there were no Common Stock transactions on
such date, the Fair Market Value shall be determined as of the immediately preceding date on
which there were Common Stock transactions.

Unless otherwise specified in the Plan, “Fair Market Value” for purposes of determining the value
of Common Stock on the date of exercise means, as applicable under (i) or (ii) above (substituting
the date of exercise for the Grant Date): the initial public offering price; or the Stock Exchange
closing price of the Corporation’s Common Stock on the last date preceding the exercise on which
there were Common Stock transactions.

          (n) “Grant Date” means the date on which the Committee authorizes an individual
Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance Share
Award or Annual Incentive Award, or such later date as shall be designated by the Committee.

          (o) “Incentive Stock Option” means an Option that is intended to meet the requirements
of Section 422 of the Code.

          (p) “Initial Public Offering” means a firm commitment underwritten initial public
offering of the Corporation’s Common Stock registered under the Securities Act of 1933, as amended.

          (q) “Nonqualified Stock Option” means an Option that is not intended to constitute an
Incentive Stock Option.

          (r) “Option” means either an Incentive Stock Option or a Nonqualified Stock Option.

          (s) “Participant” means an Employee or non-employee director or consultant designated
by the Committee to participate in the Plan.

          (t) “Performance Share Award” means a performance share award that is granted in
accordance with Article V of the plan.

          (u) “Plan” means the Asset Acceptance Capital Corp. 2004 Stock Incentive Plan, the
terms of which are set forth herein, and amendments thereto.

 

 

          (v) “Restriction Period” means the period of time during which a Participant’s
Restricted Stock or Restricted Stock Unit grant is subject to restrictions and is nontransferable.

          (w) “Restricted Stock” means Common Stock that is subject to restrictions.

          (x) “Restricted Stock Unit” means a right granted pursuant to Article IV to receive
Restricted Stock or an equivalent value in cash pursuant to the terms of the Plan and the related
Agreement.

          (y) “Retirement” means termination of employment on or after the attainment of age 65
and completion of three (3) years of service with the Corporation.

          (z) “Stock Appreciation Right” means the right to receive a cash or Common Stock
payment from the Corporation, in accordance with Article III of the Plan.

          (aa) “Stock Exchange” means the principal national securities exchange on which the
Common Stock is listed for trading or, if the Common Stock is not listed for trading on a national
securities exchange, such other recognized trading market or quotation system upon which the
largest number of shares of Common Stock has been traded in the aggregate during the last 20 days
before a Grant Date or date on which an Option is exercised, whichever is applicable.

          (bb) “Subsidiary” means a corporation or other entity defined in Code Section 424(f).

          (cc) “Vested” means the extent to which an Option or Stock Appreciation Right granted
hereunder has become exercisable in accordance with this Plan and the terms of the respective
Agreement pursuant to which such Option or Stock Appreciation Right was granted.

     1.4 Administration.

          (a) The Plan shall be administered by the Committee. At all times it is intended that the
directors appointed to serve on the Committee shall be “disinterested persons” (within the meaning
of Rule 16b-3 promulgated under the Exchange Act) and “outside directors” (within the meaning of
Code Section 162(m)); however, the mere fact that a Committee member shall fail to qualify under
either of these requirements shall not invalidate any award made by the Committee if the award is
otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may
be changed at any time and from time to time, at the discretion of the Board.

          (b) The Committee shall interpret the Plan, prescribe, amend, and rescind rules and
regulations relating to the Plan, and make all other determinations necessary or advisable for its
administration. The decision of the Committee on any question concerning the

 

 

interpretation of the
Plan or its administration with respect to any Option, Stock Appreciation Right, Restricted Stock
grant, Restricted Stock Units, Performance Share Award or Annual Incentive Award granted under the
Plan shall be final and binding upon all Participants. No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or any grant or award
hereunder.

     1.5 Participants. Participants in the Plan shall be such Employees (including
Employees who are directors), non-employee directors of, or consultants to, the Corporation and its
Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee
may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Share Awards and Annual Incentive Awards to an individual upon the condition that the individual
become an Employee of the Corporation or of a Subsidiary, provided that the Option, Stock
Appreciation Right, Restricted Stock, Restricted Stock Units, Performance Share Award or Annual
Incentive Award shall be deemed to be granted only on the date that the individual becomes an
Employee.

     1.6 Stock. The Corporation has reserved 3,700,000 shares of the Corporation’s Common
Stock for issuance in conjunction with all Options and other stock-based awards to be granted under
the Plan. Shares subject to any unexercised portion of a terminated, cancelled or expired Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, or Performance Share
Award granted hereunder, and pursuant to which a Participant never acquired benefits of ownership,
including payment of a stock dividend (but excluding voting rights), may again be subjected to
grants and awards under the Plan, but shares surrendered pursuant to the exercise of a Stock
Appreciation Right shall not be available for future grants and awards. All provisions in this
Section 1.6 shall be adjusted, as applicable, in accordance with Article VIII.

II. STOCK OPTIONS

     2.1 Grant of Options. The Committee, at any time and from time to time, subject to
the terms and conditions of the Plan, may grant Options to such Participants and for such number of
shares of Common Stock (whole or fractional) as it shall designate; provided, however, that no
Participant may be granted Options during any one fiscal year (when aggregated with all other
stock-based awards granted under the Plan during such fiscal year), to purchase more than 500,000
shares of Common Stock. Any Participant may hold more than one Option under the Plan and any other
Plan of the Corporation or Subsidiary. The Committee shall determine the general terms and
conditions of exercise, including any applicable vesting requirements, which shall be set forth in
a Participant’s Option Agreement. No Option granted hereunder may be exercised after the tenth
anniversary of the Grant Date. The Committee may designate any Option granted as either an
Incentive Stock Option or a Nonqualified Stock Option, or the Committee may designate a portion of
an Option as an Incentive Stock Option or a Nonqualified Stock Option. An Incentive Stock Option
may only be granted to an Employee. At the discretion of the Committee, an Option may be granted
in tandem with a Stock Appreciation Right. Nonqualified Stock Options are intended to satisfy the
requirements of Code Section 162(m) and the regulations promulgated thereunder, to the extent
applicable.

 

 

     2.2 Incentive Stock Options. Any Option intended to constitute an Incentive Stock
Option shall comply with the requirements of this Section 2.2. No Incentive Stock Option
shall be granted with an exercise price below the Fair Market Value of Common Stock on the Grant
Date nor with an exercise term that extends beyond 10 years from the Grant Date. An Incentive
Stock Option shall not be granted to any Participant who owns (within the meaning of Code
Section 424(d)) stock of the Corporation or any Subsidiary possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation or a Subsidiary unless, at
the Grant Date, the exercise price for the Option is at least 110% of the Fair Market Value of the
shares subject to the Option and the Option, by its terms, is not exercisable more than 5 years
after the Grant Date. The aggregate Fair Market Value of the underlying Common Stock (determined
at the Grant Date) as to which Incentive Stock Options granted under the Plan (including a plan of
a Subsidiary) may first be exercised by a Participant in any one calendar year shall not exceed
$100,000. To the extent that an Option intended to constitute an Incentive Stock Option shall
violate the foregoing $100,000 limitation (or any other limitation set forth in Code Section 422),
the portion of the Option that exceeds the $100,000 limitation (or violates any other Code Section
422 limitation) shall be deemed to constitute a Nonqualified Stock Option.

     2.3 Option Price. The Committee shall determine the per share exercise price for each
Option granted under the Plan. The Committee, at its discretion, may grant Nonqualified Stock
Options with an exercise price below 100% of the Fair Market Value of Common Stock on the Grant
Date. The foregoing notwithstanding, no Incentive Stock Option shall be granted with an exercise
price below the Fair Market Value of Common Stock on the Grant Date.

     2.4 Payment for Option Shares.

          (a) The purchase price for shares of Common Stock to be acquired upon exercise of an Option
granted hereunder shall be paid in full in cash or by personal check, bank draft or money order at
the time of exercise; provided, however, that in lieu of such form of payment a Participant may pay
such purchase price in whole or in part by tendering shares of Common Stock, which have been held
by the Participant for at least six (6) months and which are freely owned and held by the
Participant independent of any restrictions, hypothecations or other encumbrances, duly endorsed
for transfer (or with duly executed stock powers attached), or in any combination of the above.
Shares of Common Stock surrendered upon exercise shall be valued at the Stock Exchange closing
price for the Corporation’s Common Stock on the day prior to exercise, as reported in The Wall
Street Journal (or as otherwise reported by such Stock Exchange), and the certificate(s) for
such shares, duly endorsed for transfer or accompanied by appropriate stock powers, shall be
surrendered to the Corporation. Participants who are subject to short swing profit restrictions
under the Exchange Act and who exercise an Option by

 

 

tendering previously-acquired shares shall do
so only in accordance with the provisions of Rule 16b-3 of the Exchange Act.

          (b) At the discretion of the Committee, as set forth in a Participant’s Option Agreement, any
Option granted hereunder may be deemed exercised by delivery to the Corporation of a properly
executed exercise notice, acceptable to the Corporation, together with irrevocable instructions to
the Participant’s broker to deliver to the Corporation sufficient cash to pay the exercise price
and any applicable income and employment withholding taxes, in accordance with a written agreement
between the Corporation and the brokerage firm (“cashless exercise procedure”).

III. STOCK APPRECIATION RIGHTS

     3.1 Grant of Stock Appreciation Rights. Stock Appreciation Rights may be granted,
held and exercised in such form and upon such general terms and conditions as determined by the
Committee on an individual basis. A Stock Appreciation Right may be granted to a Participant with
respect to such number of shares of Common Stock of the Corporation as the Committee may determine;
provided, however, that no Participant may be granted a Stock Appreciation Right during any one
fiscal year (when aggregated with all other stock-based awards granted under the Plan during such
fiscal year), for more than 500,000 shares of Common Stock. A Stock Appreciation Right may be
granted on a stand-alone basis or in tandem with an Option. If granted in tandem with an Option,
the number of shares covered by the Stock Appreciation Right shall not exceed the number of shares
of stock which the Participant could purchase upon the exercise of the related Option. Stock
Appreciation Rights are intended to satisfy the requirements of Code Section 162(m) and the
regulations promulgated thereunder, to the extent applicable.

     3.2 Exercise of Stock Appreciation Rights. A Stock Appreciation Right shall be deemed
exercised upon receipt by the Corporation of written notice of exercise from the Participant.
Except as permitted under Rule 16b-3, notice of exercise of a Stock Appreciation Right by a
Participant subject to the insider trading restrictions of Section 16(b) of the Securities Exchange
Act of 1934, shall be limited to the period beginning on the third day following the release of the
Corporation’s quarterly or annual summary of earnings and ending on the 12th business day after
such release. The exercise term of each Stock Appreciation Right shall be limited to 10 years from
its Grant Date or such earlier period as set by the Committee or in a related Option. If granted
in tandem with an Option, a Stock Appreciation Right shall be exercisable only at such times and in
such amounts as the related Option may be exercised. A Stock Appreciation Right granted to a
Participant subject to the insider trading restrictions shall not be exercisable in whole or part
during the first six months of its term, unless the Participant dies or becomes disabled during
such six-month period.

 

 

     3.3 Stock Appreciation Right Entitlement.

          (a) Upon exercise of a Stock Appreciation Right, a Participant shall be entitled to payment
from the Corporation, in cash, shares, or partly in each (as determined by the Committee in
accordance with any applicable terms of the Agreement), of an amount equal to the difference
between the aggregate Fair Market Value on the date of exercise for the specified number of shares
being exercised and the aggregate exercise price of the Stock Appreciation Right being exercised.
If the Stock Appreciation Right is granted in tandem with an Option, the payment shall be equal to
the difference between:

               (i) the Fair Market Value of the number of shares subject to the Stock Appreciation
Right on the exercise date; and

               (ii) the Option price of the associated Option multiplied by the number of shares
available under the Option.

          (b) Notwithstanding Section 3.3(a), upon exercise of a Stock Appreciation Right the
Participant shall be required to surrender any associated Option.

     3.4 Maximum Stock Appreciation Right Amount Per Share. The Committee may, at its sole
discretion, establish (at the time of grant) a maximum amount per share which shall be payable upon
the exercise of a Stock Appreciation Right, expressed as a dollar amount or as a percentage or
multiple of the Option price of a related Option.

IV. RESTRICTED STOCK GRANTS AND UNITS

     4.1 Grant of Restricted Stock and Restricted Stock Units. Subject to the terms and
conditions of the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock and Restricted Stock Units under this Plan to such Participants and in such
amounts as it shall determine; provided, however, that no Participant may be granted a Restricted
Stock Award or Restricted Stock Units during any one fiscal year (when aggregated with all other
stock-based awards granted under the Plan during such fiscal year), for more than 500,000 shares of
Common Stock.

     4.2 Restricted Stock Agreement. Each grant of Restricted Stock or Restricted Stock
Units shall be evidenced by an Agreement that shall specify the terms of the restrictions,
including the Restriction Period, or periods, the number of Common Stock shares subject to the
grant or units, and such other general terms and conditions, including performance goals, as the
Committee shall determine.

     4.3 Transferability. Except as provided in this Article IV or Section
9.4 of the Plan, the shares of Common Stock subject to a Restricted Stock grant or Restricted
Stock Unit hereunder may not be transferred, pledged, assigned, or otherwise alienated or
hypothecated until the termination of the applicable Restriction Period or for such period of time
as shall be

 

 

established by the Committee and as shall be specified in the applicable Agreement, or
upon the earlier satisfaction of other conditions as specified by the Committee in its sole
discretion and as set forth in the applicable Agreement.

     4.4 Other Restrictions. The Committee shall impose such other restrictions on any
shares of Common Stock subject to a Restricted Stock grant or Restricted Stock Unit under the Plan
as it may deem advisable including, without limitation, restrictions under applicable Federal or
State securities laws, and may legend the certificates representing such shares to give appropriate
notice of such restrictions.

     4.5 Certificate Legend. In addition to any legends placed on certificates pursuant to
Sections 4.3 and 4.4, each certificate representing shares of Common Stock subject to a
Restricted Stock grant or Restricted Stock Unit shall bear the following legend:

          The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is subject to
certain restrictions on transfer set forth in the Asset Acceptance Capital Corp.
2004 Stock Incentive Plan (“Plan”), rules and administrative guidelines adopted
pursuant to such Plan and an Agreement dated                     .
A copy of the Plan, such rules and such Agreement may be obtained from the Secretary
of Asset Acceptance Capital Corp.

     4.6 Removal of Restrictions. Except as otherwise provided in this Article IV
of the Plan, and subject to applicable federal and state securities laws, shares of Common Stock
subject to a Restricted Stock grant or Restricted Stock Unit under the Plan shall become freely
transferable by the Participant after the last day of the Restriction Period. Once the shares are
released from the restrictions, the Participant shall be entitled to have the legend required by
Section 4.5 of the Plan removed from the applicable Common Stock certificate. Provided
further, the Committee shall have the discretion to waive the applicable Restriction Period with
respect to all or any part of the Common Stock subject to a Restricted Stock grant or Restricted
Stock Unit.

     4.7 Voting Rights. During the Restriction Period, Participants holding shares of
Common Stock subject to a Restricted Stock grant or Restricted Stock Unit hereunder may exercise
full voting rights with respect to the Restricted Stock or Restricted Stock Unit.

     4.8 Dividends and Other Distributions. During the Restriction Period, a Participant
shall be entitled to receive all dividends and other distributions paid with respect to shares of
Common Stock subject to a Restricted Stock grant or Restricted Stock Unit. If any dividends or
distributions are paid in shares of Common Stock during the Restriction Period, the dividend or
other distribution shares shall be subject to the same restrictions on transferability as the
shares of Common Stock with respect to which they were paid.

 

 

     4.9 Restricted Stock Grants and Units Under Code Section 162(m). The Committee, at
its discretion, may designate certain Restricted Stock grants or Restricted Stock Units as being
granted pursuant to Code Section 162(m). Such Restricted Stock and Restricted Stock Units must
comply with the following additional requirements, which override any other provision set forth in
this Article IV:

          (a) Each Code Section 162(m) Restricted Stock Award or Restricted Stock Unit shall be based
upon pre-established, objective performance goals that are intended to satisfy the
performance-based compensation requirements of Code Section 162(m) and the regulations promulgated
thereunder. Further, at the discretion of the Committee, a Restricted Stock Award or Restricted
Stock Unit also may be subject to goals and restrictions in addition to the performance
requirements.

          (b) Each Code Section 162(m) Restricted Stock Award or Restricted Stock Unit shall be based
upon the attainment of specified levels of Corporation or Subsidiary
performance during a specified performance period, as measured by any or all of the following:
earnings (as measured by net income, net income per share, operating income, operating income per
share, or earnings before interest, taxes, depreciation and amortization [“EBITDA”]), revenue
growth, market capitalization, and price per share.

          (c) For each designated performance period, the Committee shall (i) select those Employees who
shall be eligible to receive a Restricted Stock Award or Restricted Stock Unit, (ii) determine the
performance period, which may be a one to five fiscal year period, (iii) determine the target
levels of Corporation or Subsidiary performance, and (iv) determine the number of shares subject to
a Restricted Stock Award or Restricted Stock Unit to be paid to each selected Employee. The
Committee shall make the foregoing determinations prior to the commencement of services to which a
Restricted Stock Award or Restricted Stock Unit relates (or within the permissible time-period
established under Code Section 162(m)) and while the outcome of the performance goals and targets
is uncertain.

          (d) For each performance period, the Committee shall certify, in writing: (i) if the
Corporation has attained the performance targets, and (ii) the number of shares pursuant to the
Restricted Stock Award or Restricted Stock Unit that are to become freely transferable. The
Committee shall have no discretion to waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Restricted Stock Award or Restricted
Stock Unit.

          (e) Any dividends paid during the Restriction Period automatically shall be reinvested on
behalf of the Employee in additional shares of Common Stock under the Plan, and such additional
shares shall be subject to the same performance goals and restrictions as the other shares under
the Restricted Stock Award or Restricted Stock Unit. No shares under a Code Section 162(m)
Restricted Stock Award or Restricted Stock Unit shall become transferable until the Committee
certifies in writing that the performance goals and restrictions have been satisfied.

 

 

          (f) Except as otherwise provided in this Article IV or Section 9.4 of the
Plan, and subject to applicable federal and state securities laws, shares covered by each
Restricted Stock Award or Restricted Stock Unit made under the Plan may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the applicable performance targets
and other restrictions are satisfied, as shall be certified in writing by the Committee. At such
time, shares covered by the Restricted Stock Award or Restricted Stock Unit shall become freely
transferable by the Employee. Once the shares are released from the restrictions, the Employee
shall be entitled to have the legend required by Section 4.5 of the Plan removed from the
applicable Common Stock certificate.

V. PERFORMANCE SHARE AWARDS

     5.1 Grant of Performance Share Awards. The Committee, at its discretion, may grant
Performance Share Awards to Participants and may determine, on an individual or group basis, the
performance goals to be attained pursuant to each Performance Share Award;
provided, however, that no Participant may be granted a Performance Share Award during any one
fiscal year (when aggregated with all other stock-based awards granted under the Plan during such
fiscal year), for more than 500,000 shares of Common Stock.

     5.2 Terms of Performance Share Awards. In general, Performance Share Awards shall
consist of rights to receive cash, Common Stock or a combination of each, if designated performance
goals are achieved. The terms of a Participant’s Performance Share Award shall be set forth in his
individual Performance Share Agreement. Each Agreement shall specify the performance goals
applicable to a particular Participant or group of Participants, the period over which the
targeted goals are to be attained, the payment schedule if the goals are attained, and any other
general terms and conditions applicable to an individual Performance Share Award as the Committee
shall determine. The Committee, at its discretion, may waive all or part of the conditions, goals
and restrictions applicable to the receipt of full or partial payment of a Performance Share Award.

     5.3 Performance Share Awards Granted Under Code Section 162(m). The Committee, at its
discretion, may designate certain Performance Share Awards as granted pursuant to Code Section
162(m). Such Performance Share Awards must comply with the following additional requirements,
which override any other provision set forth in this Article V:

          (a) The Committee, at its discretion, may grant Code Section 162(m) Performance Share Awards
based upon pre-established, objective performance goals that are intended to satisfy the
performance-based compensation requirements of Code Section 162(m) and the regulations promulgated
thereunder. Further, at the discretion of the Committee, a Performance Share Award also may be
subject to goals and restrictions in addition to the performance requirements.

 

 

          (b) Each Code Section 162(m) Performance Share Award shall be based upon the attainment of
specified levels of Corporation or Subsidiary performance during a specified performance period, as
measured by any or all of the following: earnings (as measured by net income, net income per share,
operating income, operating income per share, or earnings before interest, taxes, depreciation and
amortization [“EBITDA”]), revenue growth, market capitalization, and price per share.

          (c) For each designated performance period, the Committee shall (i) select those Employees who
shall be eligible to receive a Code Section 162(m) Performance Share Award, (ii) determine the
performance period, which may be a one to five fiscal year period, (iii) determine the target
levels of Corporation or Subsidiary performance, and (iv) determine the Performance Share Award to
be paid to each selected Employee. The Committee shall make the foregoing determinations prior to
the commencement of services to which a Performance Share Award relates (or within the permissible
time-period established under Code Section 162(m)) and while the outcome of the performance goals
and targets is uncertain.

          (d) For each performance period, the Committee shall certify, in writing: (i) if the
Corporation has attained the performance targets; and (ii) the cash or number of shares (or
combination thereof) pursuant to the Performance Share Award that shall be paid to each selected
Employee (or the number of shares that are to become freely transferable, if a Performance Share
Award is granted subject to attainment of the designated performance goals). The Committee, may
not waive all or part of the conditions, goals and restrictions applicable to the receipt of full
or partial payment of a Performance Share Award.

          (e) Code Section 162(m) Performance Share Awards may be granted in two different forms, at the
discretion of the Committee. Under one form, the Employee shall receive a Performance Share Award
that consists of a legended certificate of Common Stock, restricted from transfer prior to the
satisfaction of the designated performance goals and restrictions, as determined by the Committee
and specified in the Employee’s Performance Share Agreement. Prior to satisfaction of the
performance goals and restrictions, the Employee shall be entitled to vote the Performance Shares.
Further, any dividends paid on such shares during the performance/restriction period automatically
shall be reinvested on behalf of the Employee in additional Performance Shares under the Plan, and
such additional shares shall be subject to the same performance goals and restrictions as the other
shares under the Performance Share Award. No shares under a Performance Share Award shall become
transferable until the Committee certifies in writing that the performance goals and restrictions
have been satisfied.

          (f) Under the second form, the Employee shall receive a Performance Share Agreement from the
Committee that specifies the performance goals and restrictions that must be satisfied before the
Company shall issue the payment, which may be cash, a designated number of shares of Common Stock
or a combination of the two. Any certificate for shares under such form of Performance Share Award
shall be issued only after the Committee certifies in writing that the performance goals and
restrictions have been satisfied.

 

 

          (g) In addition to any legends placed on certificates pursuant to Section 5.3(e), each
certificate representing shares under a Performance Share Award shall bear the following legend:

     The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is subject to
certain restrictions on transfer set forth in the Asset Acceptance Capital Corp.
2004 Stock Incentive Plan (“Plan”), rules and administrative guidelines adopted
pursuant to such Plan and a Performance Share Agreement dated                      . A copy of the Plan, such rules and such Performance Share Agreement
may be obtained from the Secretary of Asset Acceptance Capital Corp.

          (h) Except as otherwise provided in this Article V or Section 9.4 of the Plan,
and subject to applicable federal and state securities laws, shares covered by each Performance
Share Award made under the Plan may not be transferred, pledged, assigned, or otherwise
alienated or hypothecated until the applicable performance targets and other restrictions are
satisfied, as shall be certified in writing by the Committee. At such time, shares covered by the
Performance Share Award shall become freely transferable by the Employee. Once the shares are
released from the restrictions, the Employee shall be entitled to have the legend required by
Section 5.3(g) removed from the applicable Common Stock certificate.

VI. ANNUAL INCENTIVE AWARDS

     6.1 Grant of Annual Incentive Awards.

          (a) The Committee, at its discretion, may grant Annual Incentive Awards to such Participants
as it may designate from time to time. The terms of a Participant’s Annual Incentive Award shall
be set forth in his individual Annual Incentive Award Agreement. Each Agreement shall specify such
general terms and conditions as the Committee shall determine, as well as the Participant’s
pre-established, objective performance goals, including those that are intended to satisfy the
performance-based compensation requirements of Code Section 162(m) and the regulations promulgated
thereunder, to the extent applicable.

          (b) The determination of Annual Incentive Awards for a given year shall be based upon the
attainment of specified levels of Corporation or Subsidiary performance as measured by such
performance criteria as are determined at the discretion of the Committee, including any or all of
the following: earnings (as measured by net income, net income per share, operating income,
operating income per share, or earnings before interest, taxes, depreciation and amortization
[“EBITDA”]), revenue growth, market capitalization, and price per share.

          (c) For each fiscal year of the Corporation, the Committee shall (i) select those Participants
who shall be eligible to receive an Annual Incentive Award, (ii) determine the

 

 

performance period,
which may be a one to five fiscal year period, (iii) determine target levels of Corporation
performance, and (iv) determine the level of Annual Incentive Award to be paid to each selected
Participant upon the achievement of each performance level as provided below. The Committee shall
generally make the foregoing determinations prior to the commencement of services to which an
Annual Incentive Award relates (or within the permissible time-period established under Code
Section 162(m), to the extent applicable) and while the outcome of the performance goals and
targets is uncertain.

     6.2 Attainment of Performance Targets.

          (a) For each fiscal year, the Committee shall certify, in writing: (i) the degree to which the
Corporation has attained the performance targets, and (ii) the amount of the Annual Incentive Award
to be paid to each selected Participant.

          (b) Notwithstanding anything to the contrary herein, the Committee may, in its discretion,
reduce any Annual Incentive Award based on such factors as may be determined by the Committee,
including, without limitation, a determination by the Committee that such a
reduction is appropriate: (i) in light of pay practices of competitors; or (ii) in light of
the Corporation’s, a subsidiary’s, or a selected Employee’s performance relative to competitors
and/or performance with respect to the Corporation’s strategic business goals.

     6.3 Payment of Annual Incentive Awards. An Annual Incentive Award shall be paid only
if (i) the Corporation achieves at least the threshold performance level; and (ii) the Committee
makes the certification described in Section 6.2.

     6.4 Annual Incentive Award Payment Forms.

          (a) Annual Incentive Awards shall be paid in cash and/or shares of Common Stock of the
Corporation, at the discretion of the Committee. Payments shall be made within 30 days following
(i) a certification by the Committee that the performance targets were attained, and (ii) a
determination by the Committee that the amount of an Annual Incentive Award shall not be decreased
in accordance with Section 6.2. The aggregate maximum Annual Incentive Award that may be
earned by any Participant on behalf of any one fiscal year (calculated as of the last day of the
fiscal year for which the Annual Incentive Award is earned) may not exceed $1,000,000.

          (b) The amount of an Annual Incentive Award to be paid upon the attainment of each targeted
level of performance shall equal a percentage of each Participant’s base salary for the fiscal year
or a fixed dollar amount, as determined by the Committee.

VII. TERMINATION OF EMPLOYMENT OR SERVICES

     7.1. Options and Stock Appreciation Rights.

 

 

          (a) If, prior to the date that an Option or Stock Appreciation Right first becomes Vested, a
Participant terminates employment or services for any reason (other than as provided in Section
8.2, after a Change in Control), the Participant’s right to exercise the Option or Stock
Appreciation Right shall terminate and all rights thereunder shall cease.

          (b) If, on or after the date that an Option or Stock Appreciation Right first becomes Vested,
a Participant terminates employment or services for any reason other than death or Disability, the
Participant shall have the right, within the earlier of (i) the expiration of the Option or Stock
Appreciation Right, and (ii) three months after termination of employment/services, to exercise the
Option or Stock Appreciation Right to the extent that it was exercisable and unexercised on the
date of the Participant’s termination of employment or services, subject to any other limitation on
the exercise of the Option or Stock Appreciation Right in effect on the date of exercise. The
Committee may designate in a Participant’s Agreement that an Option or Stock Appreciation Right
shall terminate at an earlier or later time than set forth above.

          (c) If, on or after the date that an Option or Stock Appreciation Right first becomes Vested,
a Participant terminates employment or services due to death while an Option or Stock Appreciation
Right is still exercisable, the person or persons to whom the Option or Stock Appreciation Right
shall have been transferred by will or by the laws of descent and distribution, shall have the
right within the exercise period specified in the Participant’s Agreement to exercise the Option or
Stock Appreciation Right to the extent that it was exercisable and unexercised on the Participant’s
date of death, subject to any other limitation on exercise in effect on the date of exercise;
provided, however, that the beneficial tax treatment of an Incentive Stock Option may be forfeited
if the Option is exercised more than one year after a Participant’s date of death.

          (d) If, on or after the date that an Option or Stock Appreciation Right first becomes Vested,
a Participant terminates employment or services due to Disability, the Participant shall have the
right, within the exercise period specified in the Participant’s Agreement to exercise the Option
or Stock Appreciation Right to the extent that it was exercisable and unexercised on the date of
the Participant’s termination of employment or services, subject to any other limitation on the
exercise of the Option or Stock Appreciation Right in effect on the date of exercise. If the
Participant dies after termination of employment/services while the Option or Stock Appreciation
Right is still exercisable, the Option or Stock Appreciation Right shall be exercisable in
accordance with the terms of paragraph (c) above.

          (e) The Committee, at the time of a Participant’s termination of employment or services, may
accelerate a Participant’s right to exercise an Option or extend the exercise period of an Option
or Stock Appreciation Right (but in no event past the tenth anniversary of the Grant Date of such
Option); provided, however that the extension of the exercise period for an Incentive Stock Option
may cause such Option to forfeit its preferential tax treatment.

 

 

          (f) Shares subject to Options and Stock Appreciation Rights that are not exercised in
accordance with the provisions of (a) through (e) above shall expire and be forfeited by the
Participant as of their expiration date and shall become available for new grants and awards under
the Plan as of such date.

     7.2 Restricted Stock Grants and Units. If a Participant terminates employment or
services for any reason (other than as provided in Section 8.2, after a Change in Control),
the Participant’s rights to shares of Common Stock subject to a Restricted Stock grant or
Restricted Stock Unit that are still subject to the Restriction Period automatically shall
terminate and be forfeited by the Participant and, subject to Section 1.6, shall be
available for new grants and awards under the Plan as of such termination date; provided, however,
that the Committee, in its sole discretion, may waive or change the remaining restrictions or add
additional restrictions with respect to any Restricted Stock grant or Restricted Stock Unit that
would otherwise be forfeited, as it deems appropriate. Notwithstanding the foregoing, the
Committee shall not waive any restrictions on a Code Section 162(m) Restricted Stock Award or
Restricted Stock Unit, but the Committee may include a provision in an Employee’s Code Section
162(m) Restricted Stock
or Restricted Stock Unit Agreement stating that upon the Employee’s termination of employment
due to (i) death, (ii) Disability, or (iii) involuntary termination by the Company without cause
(as defined in such agreement) prior to the attainment of the associated performance goals and the
termination of the Restriction Period, that the performance goals and restrictions shall be deemed
to have been satisfied on a pro rata basis, so that the number of shares that become freely
transferable shall be based on the Employee’s full number of months of employment during the
Restriction Period, and the Employee shall forfeit the remaining shares and his rights to such
forfeited shares shall terminate in full.

     7.3 Performance Shares. Performance Share Awards shall expire and be forfeited by a
Participant upon the Participant’s termination of employment or services for any reason (other
than as provided in Section 8.2, after a Change in Control), and such shares shall be
available for new grants and awards under the Plan as of such termination date; provided, however,
that the Committee, in its discretion, may waive all or part of the conditions, goals and
restrictions applicable to the receipt of full or partial payment of a Performance Share Award.
Notwithstanding the foregoing, the Committee shall not waive any restrictions on a Code Section
162(m) Performance Share Award, but the Committee may include a provision in an Employee’s Code
Section 162(m) Performance Share Agreement stating that upon the Employee’s termination of
employment due to (i) death, (ii) Disability, or (iii) involuntary termination by the Company
without cause (as defined in such agreement) prior to the attainment of the associated performance
goals and restrictions, that the performance goals and restrictions shall be deemed to have been
satisfied on a pro rata basis, so that the number of shares that become freely transferable shall
be based on the Employee’s full number of months of employment during the employment period, and
the Employee shall forfeit the remaining shares and his rights to such forfeited shares shall
terminate in full.

     7.4 Annual Incentive Awards.

 

 

          (a) A Participant who has been granted an Annual Incentive Award and terminates employment or
services due to Retirement, Disability or death prior to the end of the Corporation’s fiscal year
shall be entitled to a prorated payment of the Annual Incentive Award, based on the number of full
months during the fiscal year in which the Participant was employed or provided services. Any such
prorated Annual Incentive Award shall be paid at the same time as regular Annual Incentive Awards
or, in the event of the Participant’s death, to the beneficiary designated by the Participant.

          (b) Except as otherwise determined by the Committee in its discretion, a Participant who has
been granted an Annual Incentive Award and resigns or is terminated for any reason (other than
Retirement, Disability or death), before the end of the Corporation’s fiscal year for which the
Annual Incentive Award is to be paid, shall forfeit the right to an Annual Incentive Award payment
for that fiscal year.

     7.5 Other Provisions. The transfer of an Employee from one corporation to another
among the Corporation and any of its Subsidiaries, or a leave of absence under the leave policy
of the Corporation or any of its Subsidiaries shall not be a termination of employment for
purposes of the Plan, unless a provision to the contrary is expressly stated by the Committee in a
Participant’s Agreement issued under the Plan.

VIII. ADJUSTMENTS AND CHANGE IN CONTROL

     8.1 Adjustments.

          (a) The total amount of Common Stock for which Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Share Awards and Annual Incentive Awards may be issued
under the Plan, and the number of shares subject to any such grants or awards (both as to the
number of shares of Common Stock and the Option price), shall be adjusted pro rata for any increase
or decrease in the number of outstanding shares of Common Stock resulting from payment of a stock
dividend on Common Stock, a subdivision or combination of shares of Common Stock, or a
reclassification of Common Stock. Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive.

          (b) In the event of a proposed dissolution or liquidation of the Corporation, the Committee
shall notify each Participant as soon as practicable prior to the effective date of such proposed
transaction. The Committee in its discretion may provide for a Participant to have the right to
exercise his or her Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock
Units, Performance Share Award or Annual Incentive Award in full until ten (10) days prior to such
transaction as to all of the shares of Common Stock covered thereby, including shares as to which
the Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance
Share Award or Annual Incentive Award would not

 

 

otherwise be exercisable. In addition, the
Committee may provide that any re-purchase option of the Corporation applicable to the shares
purchased upon exercise of an Option, Stock Appreciation Right, Restricted Stock grant, Restricted
Stock Units, Performance Share Award or Annual Incentive Award shall lapse as to all such shares,
provided that the proposed dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Units, Performance Share Award or Annual Incentive
Award shall terminate immediately prior to the consummation of the proposed dissolution or
liquidation.

          (c) In the event of a merger of the Corporation with or into another corporation, the sale of
substantially all of the assets of the Corporation, or the reorganization or consolidation of the
Corporation, it is intended that each outstanding Option, Stock Appreciation Right, Restricted
Stock grant, Restricted Stock Units, Performance Share Award or Annual Incentive Award shall be
assumed or an equivalent option or right substituted by the successor corporation or the parent or
a subsidiary of the successor corporation. In the event that such successor corporation (or the
parent or a subsidiary thereof) refuses to assume or substitute for the Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Units,
Performance Share Award or Annual Incentive Award, the Participant shall fully vest in and
have the right to exercise the Option, Stock Appreciation Right, Restricted Stock grant, Restricted
Stock Units, Performance Share Award or Annual Incentive Award in full, including shares which
would not otherwise be vested or exercisable. If an Option, Stock Appreciation Right, Restricted
Stock grant, Restricted Stock Units, Performance Share Award or Annual Incentive Award becomes
fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale
of assets, the Committee shall notify the Participant in writing or electronically that the Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance Share Award
or Annual Incentive Award shall be fully vested and exercisable for a period of fifteen (15) days
from the date of such notice, and the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Units, Performance Share Award or Annual Incentive Award shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Units, Performance Share Award or Annual Incentive
Award shall be considered assumed if, following the merger, sale of assets, reorganization or
consolidation, the option or right confers the right to purchase or receive, for each share covered
by the Participant’s Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock
Units, Performance Share Award or Annual Incentive Award, immediately prior to such transaction,
the consideration (whether stock, cash, or other securities or property) received in the merger,
sale of assets, reorganization or consolidation by holders of Common Stock for each share held on
the effective date of the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the merger, sale of assets, reorganization or
consolidation is not solely common stock of the successor corporation (or the parent or a
subsidiary thereof), the Committee may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Units, Performance Share Award or Annual Incentive Award,
for each share of Stock subject to the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted

 

 

Stock Units, Performance Share Award or Annual Incentive Award to be solely Common Stock
of the successor corporation (or the parent or a subsidiary thereof) equal in Fair Market Value to
the per share consideration received by holders of Common Stock in the merger or sale of assets.

          (d) The foregoing adjustments shall be made by the Committee. Any such adjustment may provide
for the elimination of any fractional share which might otherwise become subject to an Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance Share Award
or Annual Incentive Award.

     8.2 Change in Control. The Committee in its discretion may provide in a Participant’s
Agreement, notwithstanding anything contained herein to the contrary, that in the event of a
Participant’s Change in Position subsequent to a Change in Control, any or all of the following
will occur: (i) any outstanding Option or Stock Appreciation Right granted to such Participant
hereunder immediately shall become fully Vested and exercisable in full, regardless of any
installment provision applicable to such Option or Stock Appreciation Right; (ii) the remaining
Restriction Period on any shares of Common Stock subject to a Restricted Stock grant
or Restricted Stock Unit hereunder immediately shall lapse and the shares shall become fully
transferable, subject to any applicable federal or state securities laws; (iii) all performance
goals and conditions shall be deemed to have been satisfied and all restrictions shall lapse on any
outstanding Performance Share Awards granted to such Participant hereunder, and such Awards shall
become payable in full; and (iv) for purposes of any Annual Incentive Awards granted to such
Participant hereunder, the determination of whether the performance targets have been achieved
shall be made as of the date of the Change in Control and payments due should become immediately
payable.

IX. MISCELLANEOUS

     9.1 Partial Exercise/Fractional Shares. The Committee may permit, and shall establish
procedures for, the partial exercise of Options and Stock Appreciation Rights granted under the
Plan. No fractional shares shall be issued in connection with the exercise of a Stock Appreciation
Right or payment of a Performance Share Award or Annual Incentive Award; instead, the Fair Market
Value of the fractional shares shall be paid in cash, or at the discretion of the Committee, the
number of shares shall be rounded down to the nearest whole number of shares and any fractional
shares shall be disregarded.

     9.2 Rule 16b-3 Requirements. Notwithstanding any other provision of the Plan, the
Committee may impose such conditions on the exercise of an Option or Stock Appreciation Right
(including, without limitation, the right of the Committee to limit the time of exercise to
specified periods), or the grant of Restricted Stock or Restricted Stock Unit or the payment of a

 

 

Performance Share Award or Annual Incentive Award, as may be required to satisfy the requirements
of Rule 16b-3 of the Exchange Act.

     9.3 Rights Prior to Issuance of Shares. No Participant shall have any rights as a
shareholder with respect to shares covered by an Option, Stock Appreciation Right, Restricted Stock
grant, Restricted Stock Units, Performance Share Award or Annual Incentive Award until the issuance
of a stock certificate for such shares. No adjustment shall be made for dividends or other rights
with respect to such shares for which the record date is prior to the date the certificate is
issued.

     9.4 Non-Assignability. Except as otherwise determined by the Committee in its
discretion, the following restrictions on assignability of any award under the Plan shall apply to
all Participants: (i) no Option, Stock Appreciation Right, Restricted Stock grant, Restricted
Stock Units, Performance Share Award or Annual Incentive Award shall be transferable by a
Participant except by will or the laws of descent and distribution; (ii) during the lifetime of a
Participant, an Option, Stock Appreciation Right, Restricted Stock grant, or Restricted Stock Unit
shall be exercised only by the Participant, except in the event of the Participant’s Disability, in
which case the Participant’s legal guardian or the individual designated in the Participant’s
durable power of attorney may exercise the Option, Stock Appreciation Right, Restricted Stock
grant, Restricted Stock Unit; and (iii) any transferee of the Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Unit, Performance Share Award or Annual Incentive
Award shall take the same subject to the terms and conditions of this Plan. No transfer of an
Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance Share
Award or Annual Incentive Award by will or the laws of descent and distribution, or as otherwise
permitted by the Committee, shall be effective to bind the Corporation unless the Corporation shall
have been furnished with written notice thereof and a copy of the will and/or such evidence as the
Corporation may deem necessary to establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of the Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Units, Performance Share Award or Annual Incentive Award.

     9.5. Securities Laws.

          (a) Anything to the contrary herein notwithstanding, the Corporation’s obligation to sell and
deliver Common Stock pursuant to the exercise of an Option or Stock Appreciation Right or deliver
Common Stock pursuant to a Restricted Stock grant, Restricted Stock Units, Performance Share Award
or Annual Incentive Award is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities as the Corporation deems
necessary or advisable. The Corporation shall not be required to sell and deliver or issue Common
Stock unless and until it receives satisfactory assurance that the issuance or transfer of such
shares shall not violate any of the provisions of the Securities Act of 1933 or the Securities
Exchange Act of 1934, or the rules and regulations of the Securities Exchange Commission
promulgated thereunder or those of the Stock Exchange or any

 

 

stock exchange on which the Common
Stock may be listed, the provisions of any state laws governing the sale of securities, or that
there has been compliance with the provisions of such acts, rules, regulations and laws.

          (b) The Committee may impose such restrictions on any shares of Common Stock acquired pursuant
to the exercise of an Option or Stock Appreciation Right or the grant of Restricted Stock or
Restricted Stock Units or the payment of a Performance Share Award or Annual Incentive Award under
the Plan as it may deem advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) under the requirements of the Stock Exchange or any other securities
exchange, recognized trading market or quotation system upon which such shares of Common Stock are
then listed or traded, and (iii) under any blue sky or state securities laws applicable to such
shares. No shares shall be issued until counsel for the Corporation has determined that the
Corporation has complied with all requirements under appropriate securities laws.

     9.6 Withholding Taxes.

          (a) The Corporation shall have the right to withhold from a Participant’s compensation or
require a Participant to remit sufficient funds to satisfy applicable withholding for income and
employment taxes upon the exercise of an Option or Stock Appreciation Right or the lapse of the
Restriction Period on shares of Common Stock subject to a Restricted Stock
grant or Restricted Stock Unit or the payment of a Performance Share Award or Annual Incentive
Award. A Participant may make a written election to tender previously-acquired shares of Common
Stock or have shares of stock withheld from the exercise, provided that the shares have an
aggregate Fair Market Value sufficient to satisfy in whole or in part the applicable withholding
taxes. The cashless exercise procedure of Section 2.4 may be utilized to satisfy the
withholding requirements related to the exercise of an Option. At no point shall the Corporation
withhold from the exercise of an Option more shares than are necessary to meet the established tax
withholding requirements of federal, state and local obligations.

          (b) A Participant subject to the insider trading restrictions of Section 16(b) of the Exchange
Act may use Common Stock to satisfy the applicable withholding requirements only if such
disposition is approved in accordance with Rule 16b-3 of the Exchange Act. Any election by a
Participant to utilize Common Stock for withholding purposes is further subject to the discretion
of the Committee.

     9.7 Termination and Amendment.

          (a) The Board may terminate the Plan, or the granting of Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Share Awards or Annual Incentive Awards under
the Plan, at any time. No new grants or awards shall be made under the Plan after the tenth
anniversary of the adoption of this Plan by the Board, or approval by the shareholders, whichever
is earlier, as noted in Section 1.1.

 

 

          (b) The Board may amend or modify the Plan at any time and from time to time, but no amendment
or modification, without the approval of the shareholders of the Corporation, shall (i) materially
increase the benefits accruing to Participants under the Plan; (ii) increase the amount of Common
Stock for which grants and awards may be made under the Plan, except as permitted under
Sections 1.6 and 8.1; or (iii) change the provisions relating to the eligibility of
individuals to whom grants and awards may be made under the Plan.

          (c) No amendment, modification, or termination of the Plan shall in any manner affect any
Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance Share
Award or Annual Incentive Award granted under the Plan without the consent of the Participant
holding the Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units,
Performance Share Award or Annual Incentive Award, except as set forth in any Agreement relating to
such Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance
Share Award or Annual Incentive Award granted under the Plan.

     9.8 Effect on Employment. Neither the adoption of the Plan nor the granting of any
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Units, Performance Share Award
or Annual Incentive Award pursuant to the Plan shall be deemed to create any right in any
individual to be retained or continued in the employment, or as a non-employee director or
consultant, of the Corporation or a Subsidiary.

     9.9 Use of Proceeds. The proceeds received from the sale of Common Stock pursuant to
the Plan will be used for general corporate purposes of the Corporation.

     9.10 Approval of Plan. Unless this Plan has been approved by the shareholders of the
Corporation within 12 months after adoption of the Plan by the Board, as required by Section 422 of
the Code, this Plan, and any grants or awards made hereunder, shall be of no further force or
effect.

     IN WITNESS WHEREOF, this 2004 Stock Incentive Plan has been executed on behalf of the
Corporation on the 2nd day of February, 2004.

	 	 	 	 	 
	 	 	ASSET ACCEPTANCE CAPITAL CORP.
	 
	 	 	 	 
	

	 	By:	 	 /s/ NATHANIEL F. BRADLEY IV                    
	

	 	 	 	Nathaniel F. Bradley IV,
	

	 	 	 	President and Chief Executive Officer<PAGE>

                                                                   EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective as of
May 25, 2005 (the "Effective Date"), by and between FLAGSTAR BANCORP, INC.
("BANCORP") AND FLAGSTAR BANK, FSB (the "Bank" and, together, with Bancorp, the
"Company") and Paul D. Borja (the "Employee").

         WHEREAS, the Company wishes to assure retention of the services of the
Employee for the period provided in this Agreement; and

         WHEREAS, the Employee is willing to serve in the employ of the Company
for said period.

         NOW, THEREFORE, it is agreed as follows:

         SECTION 1. EMPLOYMENT. The Employee is employed as the Executive Vice
President of Bancorp and of Flagstar Bank, fsb ("Bank") from the Effective Date
through June 20, 2005 and thereafter also as Chief Financial Officer of Bancorp
and the Bank. The Employee shall render such administrative and management
services for the Company as are currently rendered and as are customarily
performed by persons situated in such similar executive capacities. The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Company. The Employee's other duties shall
be such as the Board of Directors of Bancorp or of the Bank, as the case may be
(collectively, the "Board") may from time to time reasonably direct, including
normal duties as an officer of the Company.

         SECTION 2. BASE COMPENSATION. Bancorp and Bank, jointly and severally,
agree to pay the Employee during the term of this Agreement a salary at the rate
of $383,000 per annum, payable in a manner consistent with the Company's payroll
practices. The Board shall review, not less often than annually, the rate of the
Employee's salary and, in its sole discretion, may decide to increase the
Employee's salary. If the Employee's salary is reduced to less than $383,000 per
annum, subsequent to a change in control of the Bank as defined in Section
11(a)(ii) hereof, the Employee may, within 90 days of such reduction, terminate
this Agreement and shall thereby be entitled to the payments and thereby be
entitled to the payments and terms as under Section 11(a) of this Agreement.

         SECTION 3. DISCRETIONARY BONUSES. From time to time, the Employee may
be entitled to discretionary bonuses at the sole discretion of the Board. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Employee's right to participate in such discretionary bonuses.

         SECTION 4. (a) PARTICIPATION IN RETIREMENT, MEDICAL AND OTHER PLANS.
The Employee shall participate in any plan that the Company maintains for the
benefit of its employees if the plan relates to (i) pension, profit-sharing or
other retirement benefits, (ii) medical insurance or the reimbursement of
medical or dependent care expenses or (iii) other group benefits, including
disability and life insurance plans.

                  (a)      EMPLOYEE BENEFITS; EXPENSES. The Employee shall
         participate in any fringe benefits which are or may become available to
         the Company's senior management employees and which are commensurate
         with the responsibilities and functions to be performed by the Employee
         under this Agreement. The Employee shall be reimbursed for all
         reasonable out-of-pocket business expenses that the Employee shall
         incur in connection with services under this Agreement upon
         substantiation of such expenses in accordance with the policies of the
         Company. In addition, the Employee shall receive an annual car
         allowance of $7,200 payable in accordance with the Company's payroll
         practices.

                  (b)      LIABILITY INSURANCE; INDEMNIFICATION. The Company
         shall provide the Employee (including heirs, executors and
         administrators) with coverage under a standard directors' and officers'
         liability insurance policy at the Company's expense, or in lieu
         thereof, shall indemnify the Employee (and heirs, executors and
         administrators) to the fullest extent permitted under Michigan law
         against all expenses and liabilities reasonably incurred in connection
         with or arising out of any action, suit or proceeding in

<PAGE>

         which the Employee may be involved by reason of having been a director
         or officer of the Company (whether or not the Employee continues to be
         a director or officer at the time of incurring such expenses or
         liabilities); such expenses and liabilities to include, but not be
         limited to, judgments, court costs and attorneys' fees and the cost of
         reasonable settlements, and such settlements to be approved by the
         Board of Directors of the Company; provided, however, that such
         indemnification shall not extend to matters as to which the Employee is
         finally adjudged to be liable for willful misconduct or gross
         negligence in the performance of duties as a director or officer of the
         Company.

         SECTION 5. TERM. The Company hereby employs the Employee, and the
Employee hereby accepts such employment under this Agreement, for the term
commencing on the Effective Date and ending 36 months thereafter (or such
earlier date as is determined in accordance with Section 9). Additionally, on or
before the thirty-first of December of each year starting on or before December
31, 2006, the Employee's term of employment may be extended for an additional
one-year term, provided the Board determines in a duly adopted resolution that
this Agreement shall be extended.

         SECTION 6. LOYALTY; NONCOMPETITION.

                  (a)      During the term of employment hereunder and except
         for illnesses, reasonable vacation periods and reasonable leaves of
         absence, the Employee shall devote all business time, attention, skill
         and efforts to the faithful performance of duties hereunder to the
         Company and its subsidiaries; provided, however, that from time to time
         the Employee may serve on the boards of directors of, and hold any
         other offices or positions in, companies or organizations which will
         not present any conflict of interest with the Company or any of its
         subsidiaries or affiliates, or unfavorably affect the performance of
         the Employee's duties pursuant to this Agreement or will not violate
         any applicable statute or regulation. During the term of employment
         under this Agreement, the Employee shall not engage in any business or
         activity contrary to the business affairs or interests of the Company,
         or be gainfully employed in any other position or job other than as
         provided above; and

                  (b)      Nothing contained in this Section 6 shall be deemed
         to prevent or limit the Employee's right to invest in the capital stock
         or other securities of any business dissimilar from that of the
         Company, or, solely as a passive or minority investor, in any business.

         SECTION 7. STANDARDS. The Employee shall perform duties under this
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Company will provide the Employee with the
working facilities and staff customary for similar executives and necessary to
perform duties.

         SECTION 8. VACATION AND SICK LEAVE. At such reasonable times as the
Board shall in its discretion permit, the Employee shall be entitled, without
loss of pay, to be absent voluntarily from the performance of employment under
this Agreement. All such voluntary absences will count as vacation time,
provided that:

                  (a)      The Employee shall be entitled to paid time off in
         accordance with the policies that the Board periodically establishes
         for senior management employees of the Company.

                  (b)      The Employee shall not receive any additional
         compensation from the Company on account of the Employee's failure to
         take a vacation except to the extent authorized by the Board;

                  (c)      In addition to the aforesaid paid vacations, the
         Employee shall be entitled, without loss of pay, to be absent
         voluntarily from the performance of employment with the Company for
         such additional periods of time and for such valid and legitimate
         reasons as the Board may, in its discretion, determine. Further, the
         Board may grant to the Employee a leave or leaves of absence, with or
         without pay, at such time or times and upon such terms and conditions
         as such Board, in its discretion, may determine; and

<PAGE>

         SECTION 9. TERMINATION AND TERMINATION PAY. Subject to Section 11
hereof, the Employee's employment hereunder may be terminated under the
following circumstances:

                  (a)      DEATH. The Employee's employment under this Agreement
         shall terminate upon the Employee's death during the term of this
         Agreement, in which event the Employee's estate shall be entitled to
         receive six months' compensation, payable in a lump sum if election is
         made by the estate within 30 days of the Employee's death or otherwise
         on a monthly basis, plus any accrued and unpaid discretionary bonus due
         the Employee at the time of the Employee's death, payable in a lump sum
         amount within 30 days of the Employee's death. In addition, the Company
         shall maintain the existing medical insurance for the Employee's
         immediate family for six months after the Employee's death.

                  (b)      DISABILITY. The Company may terminate the Employee's
         employment after having established the Employee's Disability. For
         purposes of this Agreement, "Disability" means a physical or mental
         infirmity which impairs the Employee's ability to substantially perform
         duties under this Agreement, or which can be expected to impair the
         Employee's ability to substantially perform duties under this Agreement
         for a period of 180 consecutive days. The Employee shall be entitled to
         the compensation and benefits provided for under this Agreement for (i)
         any period during the term of this Agreement and prior to the
         establishment of the Employee's Disability during which the Employee is
         unable to work due to the physical or mental infirmity or (ii) any
         period of Disability which is prior to the Employee's termination of
         employment pursuant to this Section 9(b).

                  (c)      JUST CAUSE. The Board may, by written notice to the
         Employee, immediately terminate the Employee's employment at any time
         for Just Cause. The Employee shall have no right to receive
         compensation or other benefits for any period after termination for
         Just Cause. Termination for "Just Cause" shall mean termination because
         of, in the good faith determination of the Board, the Employee's
         personal dishonesty, willful misconduct, breach of fiduciary duty
         involving personal profit, intentional failure to perform stated
         duties, willful violation of any law, rule or regulation (other than
         traffic violations or similar offenses) or final cease-and-desist
         order, or material breach of any provision of this Agreement. No act,
         or failure to act, on the Employee's part shall be considered "willful"
         unless the Employee has acted, or failed to act, with an absence of
         good faith and without a reasonable belief that the action, or failure
         to act, was in the best interest of the Company. Notwithstanding the
         foregoing, the Employee shall not be deemed to have been terminated for
         Just Cause unless there shall have been delivered to the Employee a
         copy of a resolution duly adopted by the affirmative vote of not less
         than a majority of the membership of the Board at a meeting of the
         Board called and held for that purpose (after reasonable notice to the
         Employee and an opportunity for the Employee to be heard before the
         Board), finding that in the good faith opinion of the Board the
         Employee was guilty of conduct set forth above in this subsection (c)
         and specifying the particulars thereof in detail.

                  (d)      WITHOUT JUST CAUSE; CONSTRUCTIVE DISCHARGE.

                           (i)      The Board may, by written notice to the
                  Employee, immediately terminate employment at any time for a
                  reason other than Just Cause, in which event the Employee
                  shall be entitled to receive the following compensation and
                  benefits (unless such termination occurs within the time
                  period set forth in Section 11(b) hereof, in which event the
                  benefits and compensation provided for in Section 11 shall
                  apply): (A) the consideration provided pursuant to Section 2
                  hereof, for one year following the date of termination (the
                  "Severance Period"); and (B) cash in an amount equal to the
                  cost to the Employee of obtaining all health, life, disability
                  and other benefits in which the Employee would have been
                  eligible to participate based upon the benefit levels
                  substantially equal to those that the Company provided for the
                  Employee at the date of termination of employment for a period
                  of 12 months. All amounts payable to the Employee shall be
                  paid, at the option of the Employee, either (I) in quarterly
                  payments or (II) in one lump sum within 10 days of such
                  termination, provided, however, that in either instance, such
                  payment shall be delayed until the minimum time required if
                  deemed necessary by the Company to comply subject to and
                  conditioned upon compliance with Internal Revenue Code Section
                  409A and regulations promulgated thereunder regarding any
                  delay in such payment by the Company.

<PAGE>

                           (ii)     The Employee may voluntarily terminate
                  employment under this Agreement, and the Employee shall
                  thereupon be entitled to receive the compensation and benefits
                  payable under Section 9(d)(i) hereof, within 90 days following
                  the occurrence of any of the following events, which has not
                  been consented to in advance by the Employee in writing
                  (unless such voluntary termination occurs within the time
                  period set forth in Section 11(b) hereof in which event the
                  benefits and compensation provided for in Section 11 shall
                  apply): (A) the requirement that the personal residence of the
                  Employee be moved, or perform principal executive functions,
                  more than 50 miles from the Employee's primary office; (B) a
                  material reduction without reasonable cause in the Employee's
                  base compensation; (C) the failure by the Company to continue
                  to provide the Employee with compensation and benefits
                  provided for under this Agreement, or with benefits
                  substantially similar to those provided under any of the
                  employee benefit plans in which the Employee now or hereafter
                  becomes a participant, or the taking of any action by the
                  Company which would directly or indirectly reduce any of such
                  benefits or deprive the Employee of any material fringe
                  benefit enjoyed; (D) the assignment to the Employee of duties
                  and responsibilities materially different from those normally
                  associated with the Employee's position as referenced at
                  Section 1; or (E) a material diminution or reduction in the
                  Employee's responsibilities or authority (excluding reporting
                  responsibilities) in connection with his employment with the
                  Company.

                           (iii)    Notwithstanding the foregoing, but only to
                  the extent required under federal banking law, the amount
                  payable under Section 9(d)(i) hereof shall be reduced to the
                  extent that on the date of the Employee's termination of
                  employment, the present value of the benefits payable under
                  Section 9(d)(i) hereof exceeds the limitation on severance
                  benefits that is set forth in applicable regulations of the
                  Office of Thrift Supervision ("OTS"), as in effect on the
                  Effective Date. In the event that Section 280G of the Internal
                  Revenue Code of 1986, as amended (the "Code"), becomes
                  applicable to payments made under this Section 9(d), and the
                  payments exceed the "Maximum Amount" as defined in Section
                  11(a) hereof, the payments shall be reduced so not to exceed
                  maximum requirements.

                  (e)      VOLUNTARY TERMINATION BY EMPLOYEE. Subject to Section
         11 hereof, the Employee may voluntarily terminate employment with the
         Company during the term of this Agreement, upon at least 60 days' prior
         written notice to the Board of Directors, in which case the Employee
         shall receive only compensation, vested rights and employee benefits up
         to the date of termination (unless such termination occurs pursuant to
         Section 9(d)(ii) hereof or within the time period set forth in Section
         11(a) hereof, in which event the benefits and compensation provided for
         in Section 9(d) or 11, as applicable, shall apply). Should the Employee
         voluntarily terminate employment without providing 60 days' prior
         written notice to the Board of Directors, the Board of Directors may,
         at its election, negate and void any vested rights and/or employee
         benefits accrued.

         SECTION 10. NO MITIGATION. The Employee shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to the Employee in any
subsequent employment.

         SECTION 11. CHANGE IN CONTROL.

                  (a)      CHANGE IN CONTROL; INVOLUNTARY TERMINATION.

                           (i)      Notwithstanding any provision herein to the
                  contrary, if the Employee's employment under this Agreement is
                  terminated by the Company, without the Employee's prior
                  written consent and for a reason other than Just Cause, in
                  connection with or within 12 months after any change in
                  control (as hereinafter defined) of the Company, the Employee
                  shall be paid an amount equal to the difference between (A)
                  the product of 2.99 times "base amount" as defined in Section
                  280G(b)(3) of the Internal Revenue Code of 1986, as amended
                  (the "Code"), and regulations promulgated thereunder and (B)
                  the sum of any other parachute payments (as defined under
                  Section 280G(b)(2) of the Code) that the Employee receives on
                  account of the change in

<PAGE>

                  control. Said sum shall be paid in one lump sum within 10 days
                  of such termination, and shall be paid in lieu of the payment
                  of any benefits under Section 9 hereof. The Company shall also
                  maintain existing health insurance for six months after
                  termination of the Employee's employment, or if the Employee
                  dies within such six months, the Company shall maintain health
                  insurance for the Employee's spouse, if living, for the
                  remainder of the six-month period. At the election of the
                  Employee, which election is to be made within 30 days of the
                  Employee's termination, such payments shall be made in a lump
                  sum or paid monthly during the remaining term of this
                  Agreement following the Employee's termination, and shall be
                  payable, in the event of the Employee's death before full
                  payment is made, to the Employee's surviving spouse, if any,
                  and otherwise to the Employee's estate. In the event that no
                  election is made, payment to the Employee will be made on a
                  monthly basis during the remaining term of this Agreement.

                           (ii)     The term "change in control" shall mean (A)
                  the ownership, holding or power to vote more than 50% of the
                  Company's voting stock, (B) the acquisition of the ability to
                  control the election of a majority of the Company's directors,
                  (C) the acquisition of a controlling influence over the
                  management or policies of the Company by any person or by
                  persons acting as a "group" (within the meaning of Section
                  13(d) of the Securities Exchange Act of 1934 (except in the
                  case of (A), (B) and (C) hereof, ownership or control of the
                  Flagstar Bank by the Company itself shall not constitute a
                  "change in control"). The term "person" means an individual
                  other than the Employee, or a corporation, partnership, trust,
                  association, joint venture, pool, syndicate, sole
                  proprietorship, unincorporated organization or any other form
                  of entity not specifically listed herein. The decision of the
                  Continuing Directors as to whether a change in control has
                  occurred shall be conclusive and binding.

                  (b)      CHANGE IN CONTROL; VOLUNTARY TERMINATION.
         Notwithstanding any other provision of this Agreement to the contrary,
         the Employee may voluntarily terminate employment under this Agreement
         within 12 months following a change in control of the Company, as
         defined in paragraph (a) of this Section 11, should any of the
         following events occur and which have not been consented to in advance
         by the Employee in writing (and the Employee shall thereupon be
         entitled to receive the payment and terms as described in Section 11(a)
         of this Agreement within 90 days): (i) the requirement that the
         Employee move personal residence or perform principal executive
         functions more than 50 miles from the Employee's primary office as of
         the date of the change in control; (ii) a material reduction in the
         Employee's base compensation as in effect on the date of the change in
         control or as the same may be changed by mutual agreement from time to
         time; (iii) the failure by the Company to continue to provide the
         Employee with compensation and benefits provided for under this
         Agreement, as the same may be increased from time to time, or with
         benefits substantially similar to those provided under any employee
         benefit plans in which the Employee now or hereafter becomes a
         participant, or the taking of any action by the Company which would
         directly or indirectly reduce any of such benefits or deprive the
         Employee of any material fringe benefit enjoyed at the time of the
         change in control; (iv) the assignment to the Employee of duties and
         responsibilities materially different from those normally associated
         with the Employee's position as referenced at Section 1; or (v) a
         material diminution or reduction in the Employee's responsibilities or
         authority (excluding reporting responsibilities) in connection with
         employment with the Company. Said sum shall be paid in lieu of the
         payment of any benefits under Section 9 hereof.

                  (c)      COMPLIANCE WITH 12 U.S.C. SECTION 1828(k). Any
         payments made to the Employee pursuant to this Agreement, or otherwise,
         are subject to and conditioned upon their compliance with 12 U.S.C.
         Section 1828(k) and any regulations promulgated thereunder.

                  (d)      COMPLIANCE WITH IRC SECTION 409A. Any payments made
         to the Employee under this Section 11 are subject to and conditioned
         upon their compliance with Section 409A of the Internal Revenue Code of
         1986, as amended, and any regulations promulgated under Section 409A
         regarding any delay in such payments by the Company.

<PAGE>

         SECTION 12. ARBITRATION; REIMBURSEMENT OF EXPENSES.

                  (a)      ARBITRATION. Any dispute or controversy arising under
         or in connection with this Agreement shall be settled exclusively by
         arbitration in accordance with the rules of the American Arbitration
         Association then in effect. Judgment may be entered on the arbitration
         award in any court having jurisdiction; provided, however, that until
         the Expiration Date the employee shall be entitled to seek specific
         performance of the Employee's right to be paid during the pendency of
         any dispute or controversy arising under or in connection with this
         Agreement. Any arbitration proceeding shall be governed by and subject
         to Michigan arbitration law.

                  (b)      REIMBURSEMENT. All reasonable costs and legal fees
         paid or incurred by the Employee pursuant to any dispute or question of
         interpretation relating to this Agreement, or its specific performance,
         shall be paid or reimbursed by the Company, if the Employee is the
         prevailing party. Such payment or reimbursement shall be made within 10
         days of the Employee's furnishing the Company written evidence, which
         may be in the form, among other things, of a canceled check or receipt,
         of any costs or expenses incurred by the Employee.

         SECTION 13. FEDERAL INCOME TAX WITHHOLDING. The Company may withhold
all federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.

         SECTION 14. SUCCESSORS AND ASSIGNS.

                  (a)      COMPANY. This Agreement shall not be assignable by
         the Company; provided, however, that this Agreement shall inure to the
         benefit of and be binding upon any corporate or other successor of the
         Company which shall acquire, directly or indirectly, by merger,
         consolidation, purchase or otherwise, all or substantially all of the
         assets or stock of the Company.

                  (b)      EMPLOYEE. Since the Company is contracting for the
         unique and personal skills of the Employee, the Employee shall be
         precluded from assigning or delegating the Employee's rights or duties
         hereunder without first obtaining the written consent of the Company;
         provided, however, that nothing in this paragraph shall preclude (i)
         the Employee from designating a beneficiary to receive any benefit
         payable hereunder upon death or (ii) the executors, administrators or
         other legal representatives of the Employee or the Employee's estate
         from assigning any rights hereunder to the person or persons entitled
         thereunto.

                  (c)      ATTACHMENT. Except as required by law, nor right to
         receive payments under this Agreement shall be subject to anticipation,
         commutation, alienation, sale, assignment, encumbrance, charge, pledge
         or hypothecation or to exclusion, attachment, levy or similar process
         or assignment by operation of law, and any attempt, voluntary or
         involuntary, to effect any such action shall be null, void and of no
         effect.

         SECTION 15. AMENDMENTS. No amendments, no oral discussions and/or
additions to this Agreement shall be binding unless made in writing and signed
by all of the parties, except as herein otherwise specifically provided.

         SECTION 16. APPLICABLE LAW. Except to the extent preempted by federal
law, the laws of the State of Michigan shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.

         SECTION 17. SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.

         SECTION 18. [Intentionally Omitted]

<PAGE>

         SECTION 19. NON-SOLICITATION. Without the Bank's express written
approval, the Employee shall not, while employed by the Company, and for a
period of one year following termination (whether voluntary or involuntary) of
employment, directly or indirectly solicit any key employee, officer or senior
manager of Bancorp or the Bank for the purpose of hiring any of them or inducing
any of them to leave their position with the Company or the Bank, as the case
may be.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of this
10th day of May , 2005 which shall be effective as of the Effective Date
specified above.

                                         FLAGSTAR BANCORP, INC.

                                         By  /s/ Mark T. Hammond
                                             ----------------------------------
                                             Mark T. Hammond
                                             Chief Executive Officer

                                         FLAGSTAR BANK, fsb

                                         By  /s/ Mark T. Hammond
                                             ----------------------------------
                                             Mark T. Hammond
                                             Chief Executive Officer

                                         EMPLOYEE:

                                         /s/ Paul D. Borja
                                         --------------------------------------
                                         Paul D. Borja

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