Document:

exv10w4

 

Exhibit
10.4

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT is made and entered into as of October 1, 2007 between ASSET
ACCEPTANCE, LLC, a Delaware limited liability company (the “Company”), a wholly owned subsidiary of
Asset Acceptance Capital Corp., a Delaware corporation (“AACC”), and DEBORAH L. EVERLY (the
“Executive”).

     The Executive has served the Company and AACC or their predecessors continuously during the
past twelve years. The Executive’s services have constituted a material factor in the successful
growth and development of the Company and AACC. The Company desires to retain the unique
experience, ability and services of the Executive and to prevent any other competitive business
from securing her services and utilizing her experience, background and know-how.

     In consideration of the mutual covenants and agreements contained herein, the parties hereto
agree as follows:

     1. EMPLOYMENT. The Company hereby agrees to continue the employment of the Executive and the
Executive hereby accepts continued employment with the Company, on the terms and subject to the
conditions hereinafter set forth in this Agreement. Subject to the provisions set forth below
regarding Severance Benefits (as defined below), Executive serves at the pleasure of the Board of
Directors of AACC and may be terminated at any time, at will, with or without Cause (as defined
below).

     2. POSITION AND DUTIES. Subject to the terms and conditions contained herein, the Executive
shall serve as Senior Vice President and Chief Acquisitions Officer of the Company and AACC and, in
such capacity, shall provide such services and perform such functions, consistent with the nature
of such position, as shall be determined from time to time by, or pursuant to authority of, the
Board of Directors of AACC (the “Board of Directors”) and such other reasonable duties as are from
time to time agreed to between the Chief Executive Officer of the Company and AACC and the
Executive. The Executive shall report directly to the Chief Executive Officer of the Company and
AACC, and shall observe all directives, rules, policies, regulations, customs and practices now or
hereafter established by AACC and the Company for the conduct of their business to the extent the
foregoing are not materially inconsistent with the terms of this Agreement. The Executive
understands and agrees that she may be required to undertake normal business travel from time to
time.

     3. COMPENSATION; BENEFITS.

          (a) As compensation for the performance of the Executive’s services hereunder, the Company
shall pay to the Executive an annual salary (the “Regular Base Salary”) of $300,000 (less
deductions required by law) effective beginning October 1, 2007, payable in arrears in accordance
with the Company’s payroll policy as the same may be modified by the Company from time to time. So
long as this Agreement is in effect, the Regular Base Salary shall be subject to annual review, but
shall not be reduced below $300,000.

          (b) The Executive shall be entitled to participate in AACC’s 2007 Annual Incentive
Compensation Plan for Management (the “Incentive Compensation Plan”), the terms and conditions of
which will be determined by the Board of Directors from time to time for

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future years, but shall be substantially in accordance with Schedule 1 hereto. If the
Executive is entitled to a bonus pursuant to the Incentive Compensation Plan with respect to a
fiscal year commencing with the fiscal year ending December 31, 2007, the Executive shall be paid
in respect to such fiscal year an annual cash bonus (the “Bonus”), payable within two and one-half
months following the end of such fiscal year (or such later time as is allowed in accordance with
Treasury Regulation 1.409A-3(d)). The terms and conditions of the Incentive Compensation Plan for
the fiscal year ending December 31, 2007 are set forth in Schedule1 hereto. Upon termination of
employment, all rights to receive any Bonus for any period shall also terminate; provided that, if
the Executive’s employment is terminated during a fiscal year under the circumstances contemplated
by Section 6(c) or 6(d) and the Executive would have otherwise been entitled to a Bonus with
respect to the “Financial Objectives” referenced in the Incentive Compensation Plan or “Personal
Objectives” referenced in the Incentive Compensation Plan that were met by Executive, the Executive
shall be entitled to receive the pro rata portion (based upon the number of days in such fiscal
year that the Executive was employed by the Company) of the Bonus, if any, that would have been
paid to the Executive pursuant to this Section 3(b) at the time such Bonus would have been paid had
the Executive’s employment not been terminated under the circumstances contemplated by Section 6(c)
or 6(d).

          (c) The Executive shall also be entitled to receive a bonus (the “Purchased Receivables
Bonus”) in the amount of five (5) basis points of the charged-off consumer accounts receivable
purchased by the Company, AACC or its subsidiaries (each a “Subsidiary” and collectively the
“Subsidiaries”) beginning January 1, 2007, net of (i) any amount repaid to the Company, AACC or a
Subsidiary by the seller of the accounts which is attributable to repurchases of accounts by the
seller, (ii) any amount received by the Company, AACC or a Subsidiary attributable to purchased
accounts immediately resold by the Company, AACC or a Subsidiary following the purchase of the
accounts and (iii) any other amount for which the Company does not take title with the intention of
collecting the accounts receivable for the long-term benefit of the Company. The Purchased
Receivables bonus shall be payable beginning January 31, 2008, for purchases made in 2007, and
thereafter on a quarterly basis for purchases made each quarter, as of the last pay date for the
Executive in the month following each quarter, subject to the adjustments set forth in items (i)
through (iii) of the immediately preceding sentence. Upon termination of employment, all rights to
receive any Purchased Receivables Bonus for any period shall also terminate; provided that if the
Executive’s employment is terminated during a fiscal year under the circumstances contemplated by
Section 6(c) or 6(d) and the Executive would have otherwise been entitled to a Purchased
Receivables Bonus for a period in which the Executive’s employment is terminated, the Executive
shall be entitled to receive the Purchased Receivables Bonus, if any and to the extent not yet
paid, that would have been paid on completed purchases through the date of termination of
Executive’s employment.

          (d) During the period of Executive’s employment by the Company (the “Employment Period”), the
Executive shall be entitled to receive such other benefits and conditions of employment, including,
without limitation, participation in such group health, life, and disability plans provided by the
Company as are afforded from time to time hereafter to the other senior executives of the Company
with similar position, tenure, salary and other qualifications as the Executive’s. The Executive
acknowledges and agrees that the Company does not guarantee the adoption or continuation of any
particular employee benefit plan or program or other fringe benefit during her employment, and
participation by the Executive in any such plan or program shall be subject to the rules and
regulations applicable thereto.

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          (e) The Company shall, in connection with a meeting of the Compensation Committee of the Board
of Directors in the fourth quarter of the Company’s fiscal year 2007, after release of AACC’s third
quarter financial results, take such actions as are necessary for AACC to grant, as of the date of
that meeting of the Compensation Committee of the Board of Directors, stock options and restricted
stock units pursuant to the terms of AACC’s 2004 Stock Incentive Plan, as amended (the “Stock
Incentive Plan”), subject to the terms and conditions set forth in Schedule 2 attached hereto and
subject to AACC and the Executive entering into appropriate stock option and restricted stock unit
award agreements in accordance with the Stock Incentive Plan.

     4. EXCLUSIVITY. During her employment, and excluding any periods of vacation and sick leave
to which the Executive is entitled, the Executive shall devote her full attention and time during
normal business hours to the business and affairs of AACC and the Company, shall perform her
services primarily at AACC’s headquarters, wherever the Board of Directors may from time to time
designate them to be, but in any case, within a 50 mile radius of Detroit, Michigan, and at all
times use her best efforts to carry out such responsibilities faithfully and efficiently and to
advance the business of AACC and the Company. During the Employment Period, the Executive will not
be engaged in any other business activity which, in the reasonable judgment of the Board of
Directors or its designee, conflicts with the duties of the Executive hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary advantage. It shall not be considered
a violation of the foregoing for the Executive to (i) serve on civic or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage personal investments, so long as such activities do not compete with
and are not provided to or for any entity that competes with or intends to compete with AACC or the
Company or any of their subsidiaries and affiliates and do not interfere significantly with the
performance of the Executive’s responsibilities as an employee of the Company in accordance with
this Agreement.

     5. REIMBURSEMENT FOR EXPENSES. Upon the presentation of itemized vouchers and receipts to the
reasonable satisfaction of the Company, the Company shall reimburse the Executive for travel,
meals, entertainment and other expenses reasonably incurred by the Executive in the performance of
her duties under this Agreement in accordance with the Company’s expense reimbursement policy as
the same may be modified by the Company from time to time (provided that expense reimbursement will
under no circumstances occur later than sixty (60) days after the date on which the expense is
incurred).

     6. TERMINATION.

          (a) The Company shall be entitled to terminate this Agreement and the employment relationship
established hereby with or without Cause immediately by giving written notice of termination to the
Executive. As used herein, “Cause” means any of the following circumstances:

          (i) continual or deliberate neglect by the Executive in the performance of her
material duties under this Agreement;

          (ii) failure by the Executive to devote substantially all of her working time to the
business of AACC and the Company and the Subsidiaries of AACC in accordance with Section 4
hereof;

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          (iii) the Executive’s willful failure to follow the directives of the Board of
Directors in any material respect; provided that such directives are not materially
inconsistent with the terms of this Agreement;

          (iv) the Executive’s engaging willfully in misconduct in connection with the
performance of any of her duties hereunder which is reasonably likely to result, in the
Board of Director’s good faith judgment, in material injury to the reputation of AACC, the
Company or any of the Subsidiaries, including, without limitation, the misappropriation of
funds;

          (v) the Executive’s breach of the provisions of Section 7 of this Agreement or any
other noncompetition, noninterference, nondisclosure, confidentiality or other similar
agreement executed by the Executive with the Company, AACC or any of its Subsidiaries; or

          (vi) the Executive’s engaging in conduct which is reasonably likely to result, in the
Board of Director’s good faith judgment, in material injury to the reputation of the
Company, AACC or any of its Subsidiaries, including, without limitation, commission of a
felony, fraud, embezzlement or other crime involving moral turpitude;

provided that, with respect to the events set forth in clauses (i) through (iii), the Executive
shall have been given written notice of the act, omission or event constituting Cause and shall not
have cured such act, omission or event within 30 days after the giving of such notice.

     After the effective date of termination for Cause under this Section 6(a), the Company shall
not be obligated to make any further payments to the Executive under this Agreement, except for
amounts due the Executive hereunder as of such effective date or amounts or benefits to which the
Executive may be entitled under the terms of any employee benefit plan of the Company.

          (b) In the event that the Executive resigns, other than upon Retirement or for Substantial
Breach (as those terms are hereinafter defined), this Agreement and the employment relationship
established hereby shall terminate immediately upon the receipt by the Company of notice of the
Executive’s resignation. After the effective date of termination under this Section 6(b), the
Company shall not be obligated to make any further payments under this Agreement, except for
amounts due the Executive hereunder as of such effective date or for amounts or benefits to which
the Executive may be entitled under the terms of any employee benefit plan of the Company.

          (c) In the event that the Executive dies, Retires (as hereinafter defined) or becomes Disabled
(as hereinafter defined) during the term of this Agreement, this Agreement and the employment
relationship established hereby shall terminate immediately upon the date on which the Executive
dies, Retires or becomes Disabled, as the case may be. After the effective date of termination
under this Section 6(c), the Company shall not be obligated to make any further payments under this
Agreement, other than payment to the Executive or the Executive’s heirs, devisees, executors,
administrators, legal representatives or the trustee of a revocable trust of which the Executive is
the grantor, as the case may be, of (i) all amounts due the Executive hereunder as of such
effective date, including any amounts or benefits to which the Executive may be entitled under the
terms of any employee benefit plan of the Company, as in

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effect on the effective date of such termination and (ii) the pro rata portion of the Bonus
and the Purchased Receivables Bonus, if any, due to the Executive in accordance with Section 3(b)
or 3(c). For purposes of this Section 6(c), “Retires” or “Retirement” shall mean the voluntary
termination of employment by the Executive after the Executive attains age 65 and “Disabled” shall
mean, as of any date, the inability of the Executive to perform her essential duties hereunder
without reasonable accommodation for a period of six months as determined in the good faith
judgment of the Board of Directors.

          (d) In the event that (i) the Company elects to terminate the employment of the Executive
without Cause, or (ii) the Executive resigns from her employment hereunder following a Substantial
Breach (as defined in this Section 6(d) (such Substantial Breach having not been corrected by the
Company within 30 days of receipt of written notice from the Executive of the occurrence of such
Substantial Breach, which notice shall specifically set forth the nature of the Substantial Breach
which is the reason for such resignation), then, in either such event, the Company shall pay the
Executive the Severance Benefits as defined and provided in Section 9 hereof.

          “Substantial Breach” shall mean any material breach by the Company of its obligations under
this Agreement including without limitation, (i) the assignment of the Executive to a position or
duties materially diminished from those normally assigned to a Chief Acquisitions Officer of a
business enterprise comparable to AACC; (ii) a material reduction in the Executive’s Regular Base
Salary below $300,000; (iii) a change in the location at which the Executive is required to perform
her duties for the Company, AACC and its Subsidiaries which is outside a 50 mile radius of Detroit,
Michigan; or (iv) the material failure by the Company to allow the Executive to participate in the
Company’s employee benefit plans or incentive compensation plans generally available from time to
time to senior executives of the Company in comparable positions; provided, that the term
“Substantial Breach” shall not include (x) an immaterial breach by the Company of any provisions of
this Agreement or (y) a termination for Cause under Section 6(a).

          The date of termination of employment by the Company under this Section 6(d) shall, as the
case may be, be the later of the date, if any, specified in a written notice of termination to the
Executive or the date on which such notice is given to the Executive. The date of resignation
under this Section 6(d) shall be 31 days after receipt by the Company of written notice of
resignation; provided that the Substantial Breach specified in such notice shall not have been
corrected by the Company during the preceding 30-day period. The effective date of termination of
employment by the Company under this Section 6(d) and the effective date of resignation by the
Executive under this Section 6(d) shall each be referred to as a “Section 6(d) Termination Date”.

          (e) Notwithstanding anything in this Section 6 to the contrary, but subject to the
consequences set forth in this Section 6, (i) the Company may terminate the Executive’s employment
at any time with or without Cause, (ii) the Executive may terminate her employment at any time
whether or not there has been a Substantial Breach and (iii) the Executive’s rights in any employee
benefit plans offered by the Company shall be governed by the rules of such plans as well as by
applicable law.

          (f) Notwithstanding anything in this Section 6 to the contrary, the provisions of Sections 7
and 8 shall survive termination of this Agreement.

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     7. CONFIDENTIALITY AND NON COMPETITION. The Executive acknowledges that (i) the agreements
and covenants contained herein are essential to protect AACC and the Company’s business and assets
and (ii) by virtue of her association with AACC and the Company, the Executive has access to and
has obtained and will continue to have access to and obtain such knowledge, know-how, proprietary
information, training and experience, which is known only to the members, officers or managers of
AACC and the Company, or other employees, former employees, consultants, or others in a
confidential relationship with the Company, AACC and its Subsidiaries, and there is a substantial
probability that such knowledge, know-how, proprietary information, training and experience could
be used to the substantial advantage of a competitor of AACC or the Company and to AACC or the
Company’s substantial detriment.

          (a) COVENANT NOT TO COMPETE.

     (i) The Executive agrees that, for the period commencing on the date of this
Agreement and ending on the date which is the later of (A) one year after the
termination of the Executive’s employment and (B) the date the Company ceases making
to the Executive the payments with respect to the Severance Benefits, if any,
required to be made pursuant to Sections 6 and 9 (the “Restricted Period ”), the
Executive shall not, in the Territory (hereinafter defined), directly or indirectly,
either for herself or for, with or through any other person, own, manage, operate,
control, be employed by, participate in, loan money to or be connected in any manner
with, or permit her name to be used by, any business which is engaged (1) in the
business of purchasing and collecting consumer accounts receivable that have been
charged off by the original creditor (“Charged Off Accounts”), (2) in financing
sales of consumer product retailers or (3) any other business activity in which the
Company, AACC or any of its Subsidiaries may engage during the Employment Period (a
“Competitive Activity ”); provided that the Company may, at its option, extend the
Restricted Period for up to one additional year by continuing to pay to the
Executive on the regular payment dates the Executive’s regular installments of
Regular Base Salary as in effect on the day immediately preceding the date of
termination.

     (ii) For purposes of this Agreement, the term “participate ” includes any
direct or indirect interest, whether as an officer, director, employee, partner,
sole proprietor, trustee, beneficiary, agent, representative, independent
contractor, consultant, advisor, provider of personal services, creditor, owner
(other than by ownership of less than one (1) percent of the stock of a corporation
that has a class of equity securities registered under the Securities Exchange Act
of 1934). “Territory” means North America, South America, Europe and Asia.

          (b) NONDISCLOSURE OF CONFIDENTIAL INFORMATION.

     (i) The Executive shall not, whether during or after employment, disclose to
any person or entity or use, any information not in the public domain, in any form,
acquired by the Executive while she was employed or associated with AACC and the
Company or, if acquired following the termination of such association, such
information which, to the Executive’s knowledge, has been acquired, directly or
indirectly, from any person or entity owing a duty of

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confidentiality to the Company or AACC (the “Confidential Information ”). By
way of illustration but not limitation, Confidential Information may include trade
secrets, supplier lists regarding Charged Off Accounts , collection methods,
information regarding bulk purchases of Charged Off Accounts, employee compensation
arrangements, business practices, plans, policies, secret inventions, processes and
compilations of information, records and specifications, as well as information
related to the management policies and plans for AACC, the Company or their
affiliates.

     (ii) Notwithstanding the foregoing, the restrictions in subsection (b)(i) of
this Section 7 are not applicable to the disclosure or use of Confidential
Information in connection with the following: (A) in the course of faithfully
performing the Executive’s duties as an employee of the Company; (B) with the
Company’s express written consent; (C) to the extent that any such Confidential
Information is in the public domain other than as a result of the Executive’s breach
of any of her obligations hereunder; or (D) where required to be disclosed by court
order, subpoena or other governmental process. In the event that the Executive
shall be required to make disclosure pursuant to the provisions of clause (D) of the
preceding sentence, the Executive promptly (but in no event more than forty-eight
(48) hours after learning of such subpoena, court order, or other governmental
process) shall notify the Company in writing, by personal delivery or by facsimile,
confirmed by mail or by certified mail, return receipt requested.

     (iii) The Executive agrees and acknowledges that all of such Confidential
Information, in any form, and copies and extracts thereof are and shall remain the
sole and exclusive property of AACC and the Company, and the Executive shall on
request return to the Company the originals and all copies of any such information
provided to or acquired by the Executive in connection with her association with
AACC or the Company, and shall return to the Company all files, correspondence
and/or other communications received, maintained and/or originated by the Executive
during the course of such association.

          (c) NO INTERFERENCE. During the Restricted Period, the Executive shall not, without the prior
written approval of the Board of Directors, directly or indirectly through any other person (i)
induce or attempt to induce any employee of the Company, AACC or any of its Subsidiaries to leave
the employ of the Company, AACC or any of its Subsidiaries or in any way interfere with the
relationship between the Company, AACC or any of its Subsidiaries and any employee thereof, (ii)
hire any person who was an employee of the Company, AACC or any of its Subsidiaries within twelve
months after such person’s employment with the Company, AACC or any of its Subsidiaries was
terminated for any reason, (iii) induce or attempt to induce any supplier of Charged Off Accounts
or other business relation of the Company, AACC or any of its Subsidiaries to cease doing business
with the Company, AACC or its Subsidiaries, or in any way interfere with the relationship between
any such supplier or business relation and the Company, AACC and its Subsidiaries or (iv) acquire
Charged Off Accounts from any person that was a seller of Charged Off Accounts to the Company, AACC
or any of its Subsidiaries during the Restricted Period; provided that the Company may, at its
option, extend the Restricted Period for up to one additional year by continuing to pay to the
Executive on the regular payment

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dates the Executive’s regular installments of Regular Base Salary as in effect on the day
immediately preceding the date of termination.

          (d) INVENTIONS. The Executive hereby sells, transfers and assigns to the Company or to any
person or entity designated by the Company all of the entire right, title and interest of the
Executive in and to all inventions, ideas, disclosures and improvements, whether patented or
unpatented, and copyrightable material, made or conceived by the Executive, solely or jointly, or
in whole or in part, during her employment (including employment prior to the date hereof) by the
Company which are not generally known to the public or recognized as standard practice and which
(i) relate to methods, apparatus, designs, products, processes or devices sold, leased, used or
under construction or development by the Company or any Subsidiary and (ii) arise (wholly or
partly) from the efforts of the Executive during her employment with the Company (an “Invention ”).
The Executive shall communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to any such Inventions; and, whether during
the Restricted Period or thereafter, the Executive shall execute and deliver to the Company such
form of transfers and assignments and such other papers and documents as reasonably may be required
of the Executive to permit the Company or any person or entity designated by the Company to file
and prosecute the patent applications and, as to copyrightable material, to obtain a copyright
thereon. The Company shall pay all costs incident to the execution and delivery of such transfers,
assignments and other documents. Any invention by the Executive within six months following the
termination of her employment hereunder shall be deemed to fall within the provisions of this
Section 7(d) unless the Executive bears the burden of proof of showing that the Invention was first
conceived and made following such termination.

     8. DEDUCTIONS FROM COMPENSATION. The Executive agrees that the Company shall be entitled to
deduct and withhold from any compensation payable to the Executive under this Agreement (i) any
taxes in respect of the Executive that the Company is required to deduct and withhold under
federal, state or local law whether arising from compensation hereunder or otherwise and (ii) any
other amounts lawfully due from the Executive as determined in good faith by the Company and/or the
Board of Directors. In the event that the Executive is no longer employed by the Company at a time
when the Company otherwise would be entitled to deduct and withhold any amount pursuant to the
preceding sentence, the Executive shall remit such amount to the Company within five days after the
receipt of notice from the Company specifying such amount or otherwise in accordance with the
Executive’s obligations with respect thereto.

     9. SEVERANCE BENEFITS. If the Executive’s employment with the Company is terminated pursuant
to Section 6(d)hereof, the Executive shall be entitled to receive as her sole and exclusive remedy
the termination benefits provided under this Section 9 (the “Severance Benefits”). As a condition
of receiving Severance Benefits, Executive agrees to sign an effective legal release (in any form
the Board of Directors may require) waiving any and all claims she has or may have against the
Company, AACC and their agents, employees, directors, subsidiaries, attorneys, successors, assigns,
and affiliates, as of the date of her termination.

          (a) The Executive shall be paid periodically, according to the Company’s payroll policy, her
Regular Base Salary at the rate in effect on the Section 6(d) Termination Date for a period of
twelve (12) months, provided that the Company, in its sole discretion, may elect to pay the
Executive’s Regular Base Salary for up to one additional year for the purpose of

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extending the term of the Executive’s covenants set forth in Sections 7(a) and 7(c) during
that additional one year period. The Executive shall also be paid the pro rata portion of each of
the Bonus and the Purchased Receivables Bonus, if any, due to the Executive in accordance with
Sections 3(b) and 3(c) for the fiscal year in which she was terminated. The Company shall make
these pro rata Bonus and Purchased Receivables Bonus payments within two and one-half months after
the end of its fiscal year to which the Bonus and Purchased Receivables Bonus relates (or such
later time as is allowed in accordance with Treasury Regulation 1.409A-3(d)), with payment made
promptly after the Company makes bonus payments to its executive officers. The Executive shall not
be entitled to any further notice, severance pay, pay in lieu of notice or any compensation
whatsoever, except any amounts owing under this Agreement. The Executive agrees that the foregoing
notice is deemed conclusively to be reasonable notice of termination at common law and the
Executive is not entitled to any additional notice or pay in lieu of notice or severance pay. The
Executive acknowledges that the Company has drawn her attention to the provisions contained herein
prior to executing this Agreement.

          (b) The Company shall pay the costs necessary to continue the Executive’s participation
pursuant to COBRA (to the extent applicable) for a period of 18 months following the Section 6(d)
Termination Date (including dependent coverage) in any life, disability, group health and dental
benefit plans provided by the Company, in effect immediately prior to the Section 6(d) Termination
Date. Following the Section 6(d) Termination Date, the Company shall not be obligated to (i)
provide business accident insurance covering the Executive or (ii) to make contributions in respect
of the Executive to any qualified retirement and pension plans or profit sharing plans for
compensation paid after the Section 6(d) Termination Date.

     10. EXECUTIVE TRAINING. The Company shall permit the Executive to participate in executive
training programs relevant to the Company’s business and the professional development of the
Executive, chosen by the Company and the Executive and paid for by the Company.

     11. INJUNCTIVE RELIEF. Without intending to limit the remedies available to the Company, the
Executive acknowledges that a breach of any of the covenants contained in Section 7 hereof may
result in material irreparable injury to the Company or its affiliates for which there is no
adequate remedy at law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain
a temporary restraining order and/or a preliminary or permanent injunction restraining the
Executive from engaging in activities prohibited by Section 7 hereof or such other relief as may be
required to specifically enforce any of the covenants in Section 7 hereof. The Executive hereby
agrees and consents that such injunctive relief may be sought in any state or federal court of
record in Michigan, or in the state in which such violation may occur, or in any other court having
jurisdiction, at the election of the Company.

     12. EXTENSION OF RESTRICTED PERIODS. In addition to the remedies the Company may seek and
obtain pursuant to Section 11 of this Agreement, the Restricted Period shall be extended by any and
all periods during which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 7 hereof.

     13. SUCCESSORS; BINDING AGREEMENT. This Agreement is personal to the Executive and, without
the prior written consent of the Company, shall not be assignable by the Executive otherwise than
by will, the laws of descent and distribution or the terms of a revocable

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trust of which the Executive is the grantor. This Agreement shall inure to the benefit of and
be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns.

     14. WAIVER AND MODIFICATION. Any waiver, alteration or modification of any of the terms of
this Agreement shall be valid only if made in writing and signed by the parties hereto; provided
that any such waiver, alteration or modification is consented to on the Company’s behalf by the
Board of Directors. No waiver by either of the parties hereto of their rights hereunder shall be
deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder
unless such waiver specifically states that it is to be construed as a continuing waiver.

     15. SEVERABILITY. The Executive acknowledges and agrees that the covenants set forth in
Section 7 hereof are reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants or other provisions of this Agreement are found to be invalid
or unenforceable by a final determination of a court of competent jurisdiction (i) the remaining
terms and provisions hereof shall be unimpaired and (ii) the invalid or unenforceable term or
provision shall be deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term or provision.

     16. SUBMISSION TO JURISDICTION; VENUE.

     (a) WITH THE EXCEPTION OF THE RIGHTS OF THE COMPANY UNDER SECTION 11 OF THIS AGREEMENT,
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE COURTS OF THE STATE OF MICHIGAN OR IN THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN SITTING IN DETROIT, MICHIGAN,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HEREBY ACCEPTS FOR
HERSELF OR ITSELF AND IN RESPECT OF HER OR ITS PROPERTY GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
SUCH PARTY AT HER OR ITS ADDRESS AS PROVIDED IN SECTION 18 HEREOF. NOTHING IN THIS
PARAGRAPH (a) SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS IN ANY OTHER JURISDICTION.

     (b) WITH THE EXCEPTION OF THE RIGHTS OF THE COMPANY UNDER SECTION 11 OF THIS AGREEMENT,
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS WHICH SHE OR IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN PARAGRAPH (a) OF THIS
SECTION 16 AND HEREBY FURTHER IRREVOCABLY WAIVES

10

 

AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     (c) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH OF THE PARTIES TO THIS
AGREEMENT AGREES THAT, AT THE TIME OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY, EACH OF THE PARTIES WILL EXECUTE SUCH
INSTRUMENTS AND OTHER DOCUMENTS AS MAY BE NECESSARY TO CONSENT TO AND WAIVE ANY OBJECTION TO
VENUE AND JURISDICTION IN THE COURTS IDENTIFIED IN SUBSECTIONS (a) AND (b) ABOVE.

     17. WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

     18. BLUE PENCILLING. In the event that, notwithstanding the first sentence of Section 15
hereof, any of the provisions of Section 7 relating to the geographic or temporal scope of the
covenants contained therein or the nature of the business restricted thereby shall be declared by a
court of competent jurisdiction to exceed the maximum restrictiveness such court deems enforceable,
such provision shall be deemed to be replaced herein by the maximum restriction deemed enforceable
by such court.

     19. NOTICES. All notices required to be given hereunder shall be in writing and shall be
deemed to have been given if (i) delivered personally or by documented courier or delivery service,
(ii) transmitted by facsimile or (iii) mailed by registered or certified mail (return receipt
requested and postage prepaid) to the following listed persons at the addresses and facsimile
numbers specified below, or to such other persons, addresses or facsimile numbers as a party
entitled to notice shall give, in the manner hereinabove described, to the others entitled to
notice:

In the case of the Company:

Asset Acceptance, LLC

28405 Van Dyke Avenue

Warren, Michigan 48093

Attention: Nathaniel F. Bradley IV

     Chairman, President and CEO

Facsimile No.: 586-446-7832

11

 

     with a copy to:

Asset Acceptance, LLC

28405 Van Dyke Avenue

Warren, Michigan 48093

Attention: Edwin L. Herbert, Esq.

     Vice President and General Counsel

Facsimile No.: 586-446-7832

In the case of the Executive:

Deborah L. Everly

41623 Belvidere

Harrison Township, MI 48045

Notice pursuant hereto shall be deemed given (i) if delivered personally, when so delivered, (ii)
if given by facsimile, when transmitted to the facsimile number set forth above, when so
transmitted if transmitted during normal business hours at the location to which it is transmitted
or upon the opening of business on the next Business Day if transmitted other than during normal
business hours at the location to which it is transmitted and (iii) if given by mail, on the third
business day following the day on which it was posted.

     20. TAXES. Except as otherwise specifically provided elsewhere in this Agreement or herein,
the Executive is solely responsible for the satisfaction of any taxes that may arise pursuant to
this Agreement (including taxes arising under Section 409A regarding deferred compensation, and
Section 4999 regarding golden parachute excise taxes, of the Internal Revenue Code of 1986 (the
“Code”)).  The Company shall not have any obligation whatsoever to pay such taxes or to otherwise
indemnify or hold the Executive harmless from any or all of such taxes. If any amounts that become
due under this Agreement constitute “nonqualified deferred compensation” within the meaning of
Section 409A, payment of such amounts shall not commence until the Executive incurs a “separation
from service” within the meaning of Treasury Regulation Section 1.409A-1(h).  If, at the time
of the Executive’s separation from service, the Executive is a “specified employee” (within the
meaning of Internal Revenue Code Section 409A), any benefit as to which Section 409A additional
taxes could be assessed on account of her separation from service (including any amounts payable
pursuant to the preceding sentence) will not be paid until after the end of the sixth calendar
month beginning after the Executive’s separation from service (the “409A Suspension Period”) to the
extent such delay may reasonably be expected to avoid Section 409A additional taxes. Within 14
calendar days after the end of the 409A Suspension Period, the Executive shall be paid a lump sum
payment in cash equal to any payments delayed because of the preceding sentence. Thereafter, the
Executive shall receive any remaining benefits as if there had not been an earlier delay. The
Company shall have the sole discretion to interpret the requirements of the Code, including Section
409A, for purposes of this Agreement.

12

 

     21. CAPTIONS AND PARAGRAPH HEADINGS. Captions and section headings herein are for convenience
only, are not a part hereof and shall not be used in construing this Agreement.

     22. ENTIRE AGREEMENT. This Agreement, including the Schedules hereto, constitutes the entire
understanding and agreement of the parties hereto regarding the employment of the Executive, and
supersedes all prior agreements and understandings between the parties.

     23. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the same instrument.

     24. ACKNOWLEDGMENT AND INDEPENDENT LEGAL ADVICE. The Executive acknowledges that (i) she has
read and understands this Agreement and that the Company has advised her that the foregoing alters
and supersedes her common law rights, and (ii) neither her execution of this Agreement nor her
performance of services pursuant to this Agreement will violate any prior or existing employment
agreement, non-competition agreement, or similar agreement to which the Executive is or ever has
been a party. The Executive acknowledges that the Company has advised her to seek legal advice
prior to executing this Agreement.

     25. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Michigan, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of Michigan or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of Michigan.

[Signatures on next page]

13

 

     WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first
above written.

	 	 	 	 	 
	 	ASSET ACCEPTANCE, LLC

 	 
	 	By:  	/s/ Nathaniel F. Bradley
 	 
	 	 	Name:  	Nathaniel F. Bradley IV 	 
	 	 	Title:  	Chairman, CEO, President 	 
	 
	 	 	 
	 	By:  	     /s/ Deborah L. Everyly
 	 
	 	 	DEBORAH L. EVERLY
 	 
	 	 	 	 

14

 

	 	 	 	 	 

SCHEDULE 1

2007 Annual Incentive Compensation Plan for Management

Attached is the Asset Acceptance Capital Corp. 2007 Annual Incentive Compensation Plan for
Management, with the terms for participation by Deborah L. Everly for 2007 to include the
following:

	 	 	 	 
	Target Bonus Rate
	 	50.0%	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Bonus as %	 	 
	 	 	Objectives	 	% of Target	 	of Salary	 	$
Bonus (1)
	% Based on Company Objectives
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Minimum
	 	 	50.0	%	 	As determined	 	 	0.0	%	 	$	—	 
	Target
	 	 	50.0	%	 	 	100.0	%	 	 	25.0	%	 	$	75,000	 
	Maximum
	 	 	50.0	%	 	 	110.0	%	 	 	50.0	%	 	$	150,000	 
	 
	% Based on Personal Objectives
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Target
	 	 	50.0	%	 	 	 	 	 	 	25.0	%	 	$	75,000	 
	 
	Total Bonus Opportunity
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Minimum
	 	 	 	 	 	As determined	 	 	25.0	%	 	$	75,000	 
	Target
	 	 	 	 	 	 	100.0	%	 	 	50.0	%	 	$	150,000	 
	Maximum
	 	 	 	 	 	 	110.0	%	 	 	75.0	%	 	$	225,000	 

	 	 	 	 	 
	Personal Objectives	 	% of Personal Bonus	 
	(1)
	 	 	—	%
	(2)
	 	 	—	%
	(3)
	 	 	—	%
	(4)
	 	 	—	%
	(5)
	 	 	—	%

 

			
	(1)	 	Calculated as if Executive’s annual base salary of $300,000 was effective from January 1, 2007
through December 31,2007.

 

 

Asset Acceptance Capital Corp.

2007 Annual Incentive Compensation Plan for Management

     General

     Each year, in connection with the approval of the annual budget and forecast, the Compensation
Committee (the “Committee”) of the Board of Directors (the “Board”) of Asset Acceptance Capital
Corp. (the “Company”) establishes an annual incentive compensation plan for key executives and
certain other management level employees (the “Plan Participant(s)”) of the Company.

     The Annual Incentive Compensation Plan will establish for each Plan Participant a bonus target
(the “Bonus Target”) equal to a specified percentage of Base Salary (as defined below). The Bonus
Target will be set by the Committee at a level consistent with each executive’s responsibilities.
As used in this Plan, “Base Salary” shall be the Plan Participant’s base compensation (excluding
incentive and any other compensation) paid during 2007. For individuals who become Plan
Participants during 2007, Base Salary shall be the base compensation (excluding incentive and any
other compensation) paid in 2007 beginning on the date the individual first becomes eligible to
participate in the Annual Incentive Compensation Plan.

     The Annual Incentive Compensation Plan will be comprised of two parts: (a) Financial
Objectives; and (b) Personal Objectives. Bonus amounts will be computed separately for achievement
of Financial Objectives and Personal Objectives, as set forth below under the captions “Financial
Objectives” and “Personal Objectives”, respectively. Final payments under the Annual Incentive
Compensation Plan will be made after receipt and approval by the Board of the annual audited
financial statements of the Company for the year ending December 31, 2007. A Plan Participant will
not be paid a bonus unless the Plan Participant is employed by the Company on the date the Board
approves the annual audited financial statements for 2007.

     Payments shall be made under the Plan in a manner necessary to preserve the exemption from
Section 409A of the Internal Revenue Code.

     The Compensation Committee recognizes the need of the Plan Participants to conduct themselves
in compliance with the Code of Business Conduct. In addition to the non-financial consequences
contained in the Code of Business Conduct, any violation of the Code of Business Conduct shall
result in complete forfeiture of any bonus which would otherwise be paid under this Plan.

     Financial Objectives

     The financial performance of the Company will be measured against Earnings Before Interest,
Taxes, Depreciation and Amortization (“EBITDA”), after accrual of all incentive compensation plan
payments. EBITDA will be determined in a manner consistent with the definition of EBITDA contained
in Exhibit 1.

     For the fiscal year ended December 31, 2007, the Financial Objective goal will be set at the
2007 budgeted EBITDA of $XXXXXX (the “2007 Financial Objective Goal”). The

 

 

minimum goal will be set at a percentage of the 2007 Financial Objective Goal equal to the greater
of (i) 2006 EBITDA achieved by the Company (expressed as a percentage of the 2007 EBITDA Financial
Objective Goal), or (ii) 90% of the 2007 Financial Objective Goal (the “Minimum Goal”). The
maximum goal will be set at 110% of the 2007 Financial Objective Goal (the “Maximum Goal”).

     The bonus payout under the Financial Objective portion of the Plan shall be 50% of the Target
Bonus at achievement of the 2007 Financial Objective Goal. If the 2007 actual EBITDA achieved is
at least equal to the Minimum Goal, the bonus payout under the Financial Objective portion of the
Plan shall be expressed as 50% of the Target Bonus multiplied by the following percentage (provided
that the bonus payout shall not exceed the Maximum Goal):

          The sum of:

          (1) 100%, plus

          (2) the product of (a) 10, multiplied by (b) the difference of actual EBITDA as
a percentage of the 2007 Financial Objective Goal, less 100%

     The following examples illustrate the application of the Financial Objectives:

     (1) If a Plan Participant had a Target Bonus of $100, the 2007 Financial Objective Goal was
$5,000 and the actual 2007 achieved EBITDA was equal to the 2007 Financial Objective Goal, then the
bonus payout under the Financial Objective portion of the Plan would be $50.

     (2) However, if the actual 2007 achieved EBITDA exceeded the Minimum Goal and was equal to 98%
of the 2007 Financial Objective Goal, then the bonus payout under the Financial Objective portion
of the Plan would be $50 multiplied by 80%, or $40, calculated as follows:

     The sum of:

          (1) 100%, plus

          (2) the product of (a) 10, multiplied by (b) the difference of 98%, less 100%

     (3) Moreover, if the actual 2007 achieved EBITDA exceeded the Minimum Goal and was equal to
105% of the 2007 Financial Objective Goal, then the bonus payout under the Financial Objective
portion of the Plan would be $50 multiplied by 150%, or $75, calculated as follows:

     The sum of:

          (1) 100%, plus

          (2) the product of (a) 10, multiplied by (b) the difference of 105%, less 100%

 

 

     Personal Performance Objectives

     Personal Objectives should be measurable goals jointly developed by the Plan
Participant and his/her immediate supervisor (subject to approval by the Chairman, President and
Chief Executive Officer or her designee(s), and for certain participants, the Compensation
Committee of the Board of Directors). The points earned under Personal Performance will be
calculated based on the percentage of completion of each assigned objective, recognizing the
determination of such percentage completion is in part subjective. If there is any disagreement as
to the scoring of each assigned objective, the determination of the Chairman, President and Chief
Executive Officer or her designee(s) shall be final and binding.

     Each Plan Participant may earn up to a maximum of 50% of her Target Bonus based on the
achievement of Personal Objectives. No Plan Participant will be eligible to earn any part of her
bonus based on the achievement of Personal Objectives unless 2007 EBITDA achieved by the Company
equals or exceeds the 2006 EBITDA achieved by the Company.

 

 

AACC 2007 BONUS PLAN

	 	 	 
	 

Name:

	 	 

Insert Name
	 
	 	 
	Title:

	 	Insert Title
	 
	 	 
	Estimated Salary:

	 	2007 Base Comp.
	 
	 	 
	Target Bonus Rate

	 	Insert Target Bonus %

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Bonus as %	 	 	 	 
	 	 	Objectives	 	 	% of Target	 	 	of Salary	 	 	$ Bonus	 
	% Based on Company Objectives
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Minimum
	 	 	50.0	%	 	As determined	 	 	 	0.0	%	 	$	—	 
	Target
	 	 	50.0	%	 	 	100.0	%	 	50% of Target Bonus Rate	 	 	Computed	 
	Maximum
	 	 	50.0	%	 	 	110.0	%	 	100% of Target Bonus Rate	 	 	Computed	 
	 
	% Based on Personal Objectives
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Target
	 	 	50.0	%	 	 	 	 	 	50% of Target Bonus Rate	 	 	Computed	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Bonus Opportunity
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Minimum
	 	 	 	 	 	As determined	 	 	Computed	 	 	Computed	 
	Target
	 	 	 	 	 	 	100.0	%	 	Computed	 	 	Computed	 
	Maximum
	 	 	 	 	 	 	110.0	%	 	Computed	 	 	Computed	 

	 	 	 	 	 
	Personal Objectives	 	% of Personal Bonus	 
	(1) Insert Goal 1
	 	Goal 1 Weight
	(2) Insert Goal 2
	 	Goal 2 Weight
	(3) Insert Goal 3
	 	Goal 3 Weight
	(4) Insert Goal 4
	 	Goal 4 Weight
	(5) Insert Goal 5
	 	Goal 5 Weight
	     Total
	 	 	100.0	%

 

 

Exhibit 1

     EBITDA: The earnings of the Company before interest, income taxes, depreciation and
amortization (including amortization of purchased receivables). The determination of EBITDA, for
purposes of this Plan, shall be made by the Board in accordance with generally accepted accounting
principles in effect in the United States, applied on a consistent basis (“GAAP”); provided,
however, that EBITDA shall be adjusted for this purpose to (A) exclude net gains and losses on the
disposal of assets and other non-operating income or expense items and (B) exclude EBITDA generated
from acquisitions of new businesses or companies during the year (an acquisition of a new office
would not be deemed to be a material acquisition). EBITDA will be determined after accrual for all
bonuses, including bonuses to be paid under this and all other Company annual incentive
compensation plans.

 

 

SCHEDULE 2

Equity Grants – Stock Options; Restricted Stock

The equity awards that the Executive shall receive pursuant to Section 3(e) of the Employment
Agreement to which this Schedule 2 relates shall be subject to the terms and conditions of the
Stock Incentive Plan, shall be set forth in award agreements comparable to those that AACC enters
into with other similarly-situated executives, and shall reflect the following terms and
conditions:

Time-Vested Restricted Stock Units:

	 	1.	 	Number of units of AACC common stock subject to award: ___that number of units
equal to $500,000 divided by the fair market value per share of AACC common stock on the
date of the award.
	 
	 	2.	 	Vesting Schedule: 50% on each of the first and second anniversary dates of the award
date (in the fourth quarter 2007), but only if the Executive is employed by the Company on
the particular vesting date.

Stock Options:

	 	1.	 	Number of shares of AACC common stock subject to award:

	 	a.	 	2007 fourth quarter grant: 21,250 shares.

	 	2.	 	Exercise Price: fair market value on date of award, determined pursuant to the Stock
Incentive Plan and general practices applicable to executive officers.
	 
	 	3.	 	Vesting Schedule for each individual grant: 25% each August 7, for the next 4 years.

Performance-Based Restricted Stock Units:

	 	1.	 	Number of units of AACC common stock subject to award: 10,625

	 
	 	2.	 	Vesting Schedule:

	 	a.	 	0% until the earlier of (i) the filing date of the Company’s Form 10-Q
for the quarterly period ending June 30, 2011 or (ii) August 15, 2011 (the “Vesting
Date”).

	 	b.	 	If and only if the Executive is employed by the Company on the Vesting
Date, the percentage determined according to the following table based on AACC’s
cumulative earnings per share (“EPS”) over AACC’s most recent four-year period
ending at the end of the calendar quarter immediately preceding the Vesting Date:

 

 

	 	 	 	 	 	 	 	 	 
	4-year Cumulative EPS	 	 	 	 	 	 
	(measured from a base of	 	 	 	 	 	 
	$XXXX per share for the	 	 	 	 	 	 
	2007 grant) (1)	 	 	 	 	 	Vested Percentage (1)
	Less than XX% per annum
	 	 	 	 	 	 	0	%
	At XX% per annum
	 	 	 	 	 	 	60	%
	At XX% per annum
	 	 	 	 	 	 	80	%
	At XX% per annum
	 	 	 	 	 	 	100	%

 

			
	(1)	 	The Executive’s vested percentage from the foregoing table will be pro
rated for EPS results between XX% and XX% per annum, as well as between
XX% and XX% per annum. Cumulative EPS will be rounded to the nearest
one-tenth of one cent. The Executive’s vested percentage will be rounded
to the nearest one hundredth of one percent. Full shares only will be
awarded.

The Board of Directors or Compensation Committee will determine four-year EPS in
accordance with Generally Accepted Accounting Principles (subject (1) to their
discretion to take into account or to disregard extraordinary financial events on a
uniform basis for all executives, and net gains and losses on the disposal of assets
and other non-operating income or expense items, and (2) to excluding non-cash
equity compensation expense).

Superseding of the Foregoing through Award Agreements:

The terms and conditions of any executed award agreement for stock options or restricted stock or
restricted stock units will be deemed to supersede and to automatically satisfy all terms of this
Schedule 2 for the granting of equity awards pursuant to Section 3(d) of the Employment Agreement.exv10w49

 

Exhibit 10.49

AMENDMENT NO. 2 TO

AMERICAN
PHYSICIANS CAPITAL, INC.

STOCK COMPENSATION PLAN

     THIS AMENDMENT to the American Physicians Capital, Inc. Stock Compensation Plan (the “Plan”)
is made this 24th day of October, 2007 pursuant to Section 7.07(b) of the Plan following
approval by the Board of Directors of American Physicians Capital, Inc. This Amendment No. 2 shall
be effective as of January 1, 2007. The Amendment is intended to clarify the application of
Section 409A of the Internal Revenue Code (the “Code”) to Restricted Stock Units, Performance
Awards and any other grants or awards under the Plan that are subject to Code Section 409A.
Options and Restricted Stock Awards are not intended to be subject to Code Section 409A. Between
January 1, 2005 and December 31, 2006, the Plan was administered in good faith compliance with IRS
guidance then in effect relating to Code Section 409A. Grants and awards that were vested as of
December 31, 2004 are intended to be grandfathered from Code Section 409A and to be administered in
accordance with the terms of the Plan in effect on December 31, 2004, with no permitted material
modifications thereafter.

	 	1.	 	Section 1.03(E) “CHANGE IN CONTROL” is amended by the replacement of the
period with a comma at the end of (4) and the addition of (5) to read as follows:

	 	(5)	 	Notwithstanding the foregoing, for purposes of Restricted
Stock Units, Performance Awards and any other grants and awards that are
subject to Code Section 409A, Change in Control shall be defined as the
occurrence of any of the following events:

	 	(a)	 	If any one person, or more than one person
acting as a group (as defined in Code Section 409A and IRS guidance
issued thereunder), acquires ownership of Common Stock of the
Corporation that, together with stock held by such person or group,
constitutes more than fifty (50) percent of the total fair market value
or total voting power of the Common Stock of the Corporation However,
if any one person or more than one person acting as a group, is
considered to own more than fifty (50) percent of the total fair market
value or total voting power of the Common Stock of the Corporation, the
acquisition of additional stock by the same person or persons is not
considered to cause a Change in Control, or to cause a change in the
effective control of the Corporation (within the meaning of Code
Section 409A and IRS guidance issued thereunder). An increase in the
percentage of Common Stock owned by any one person, or persons acting
as a
group, as a result of a transaction in which the Corporation
acquires its stock in exchange for property shall be treated as an

 

 

	 	 	 	acquisition of stock for purposes of this Section. This paragraph
applies only when there is a transfer of stock of the Corporation
(or issuance of stock of the Corporation) and stock in such
Corporation remains outstanding after the transaction. Subsection
(a) shall constitute a “Change in Ownership” of the Corporation.

	 	(b)	 	If any one person, or more than one person
acting as a group (as determined in accordance with Code Section 409A
and IRS guidance thereunder), acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by
such person or persons) ownership of Common Stock of the Corporation
possessing thirty (30) percent or more of the total voting power of the
Common Stock of the Corporation; or
	 
	 	(c)	 	If a majority of members on the Corporation’s
Board is replaced during any 12-month period by Directors whose
appointment or election is not endorsed by a majority of the members of
the Corporation’s Board prior to the date of the appointment or
election (provided that for purposes of this paragraph, the term
Corporation refers solely to the “relevant” Corporation, as defined in
Code Section 409A and IRS guidance issued thereunder), for which no
other Corporation is a majority shareholder. Subsections (b) and (c)
individually shall constitute a “Change in Effective Control” of the
Corporation.
	 
	 	(d)	 	If there is a change in the ownership of a
substantial portion of the Corporation’s assets, which shall occur on
the date that any one person, or more than one person acting as a group
(within the meaning of Code Section 409A and IRS guidance issued
thereunder) acquires (or has acquired during the 12-month period ending
on the date of the most recent acquisition by such person or persons)
assets from the Corporation that have a total gross fair market value
equal to or more than forty (40) percent of the total gross fair market
value of all of the assets of the Corporation immediately prior to such
acquisition or acquisitions. For this purpose, gross fair market value
means the value of the assets of the Corporation, or the value of the
assets being disposed of, determined without regard to any liabilities
associated with such assets. Subsection (iv) shall constitute a
“Change in Ownership of a Substantial Portion of Assets” of the
Corporation.

	 	2.	 	Section 1.03(K) “DISABILITY” is amended and restated in its entirety to read as
follows:

2

 

	 	(K)	 	“DISABILITY” means disability as defined in Section 22(e) of
the Code; provided, however, that for purposes of Restricted Stock Units,
Performance Awards and any other grants or awards that are subject to Code
Section 409A, disability shall be defined as (i) a Participant’s inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months; or (ii) by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months, the participant is
receiving income replacement benefits for a period of not less than three
months under an accident and health plan covering employees of the
Participant’s employer; or (iii) the Participant has been certified as disabled
under Section 223(d) of the Social Security Act.

	 	3.	 	Section 1.03(O) “FAIR MARKET VALUE” is amended and restated in its entirety to
read as follows:

	 	(O)	 	“FAIR MARKET VALUE” means, with respect to a share of Common
Stock on a given date: (a) if the Common Stock is listed for trading on a
national securities exchange (including, for this purpose, the National Market
System (“NMS”) of the National Association of Securities Dealers Automated
System (“NASDAQ”)) on such date, the closing share price on such exchange (or,
if there is more than one, the principal such exchange), or, for the NMS, the
last sale price, on the day immediately preceding the date on which Fair Market
Value is being determined, or on the next preceding day on which shares were
traded if no shares were traded on the immediately preceding day; or (b) if (a)
is not applicable, the Fair Market Value shall be determined in good faith by
the Committee. For purposes of establishing Fair Market Value for any grants
or awards made prior to the Effective Date, the lower of the purchase price for
subscription shares or the underwritten offering price shall be deemed to
constitute Fair Market Value.

	 	4.	 	Section 1.03(BB) “RETIREMENT” is amended and restated in its entirety to read
as follows:

	 	(BB)	 	“RETIREMENT” means a Participant’s voluntary cessation of
employment or services as a Non-Employee Director or Consultant following the
Participant’s 65th birthday. For purposes of Restricted Stock
Units, Performance Awards and any other grants or awards subject to Code
Section 409A, “cessation of employment or services” shall mean “separation from
service” as defined in Treasury Regulation 1.409A-1(h).

3

 

	 	5.	 	Section 1.03(CC) “SPECIFIED EMPLOYEE” shall be added to the Plan to read as
follows:

	 	(CC)	 	“SPECIFIED EMPLOYEE” means an employee as defined in Treasury
Regulation 1.409A-1(i).

	 	6.	 	Section 5.03 “OTHER PROVISIONS” shall be amended by the addition of the
following sentence at the end of the paragraph to read as follows:

	 	For purposes of Restricted Stock Units, Performance Awards or any other grants
subject to 409A, the term “termination of employment” shall mean “separation from
service” as defined in Treasury Regulation 1.409A-1(h).

	 	7.	 	Section 7.12 “APPLICATION OF SPECIFIED EMPLOYEE DELAYED PAYMENT RULES” shall be
added to the Plan to read as follows:

	 	7.12	 	APPLICATION OF SPECIFIED EMPLOYEE DELAYED PAYMENT RULES. If a
Participant is entitled to compensation from a Restricted Stock Unit,
Performance Award or any other grant or award subject to Code Section 409A upon
separation from service and at the time of the separation from service the
Participant is a Specified Employee and by application of Code Section 409A
compensation that otherwise would have been payable during the six month period
immediately following the Participant’s separation from service is required to
be delayed, such compensation shall be aggregated and paid to the Participant
on the first business day after six months have lapsed following the
Participant’s separation from service.

               IN WITNESS WHEREOF, American Physicians Capital, Inc. has caused this Amendment No. 2 to be
executed as of the day and year first above written.

	 	 	 	 	 
	 	AMERICAN PHYSICIANS CAPITAL, INC.

 	 
	 	By:  	 	 
	 	 	     R. Kevin Clinton

     President and Chief Executive Officer 	 
	 

4

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