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                                                                    EXHIBIT 10.2

                              EMPLOYMENT AGREEMENT

      This Employment Agreement is dated June 10, 2005. Its parties are NORTH
POINTE HOLDINGS CORPORATION, a Michigan corporation ("Company"), and JAMES G.
PETCOFF ("Executive").

                                   BACKGROUND

      The Executive currently serves in various executive capacities for the
Company and its affiliates, including that of President, Chief Executive Officer
and Chairman of the Board. His services in those capacities are highly important
to the Company's continued successful conduct of its business.

      The Company recognizes that circumstances in which a change of control of
the Company occurs, through acquisition or otherwise, are highly disruptive and
will cause uncertainty about the Executive's future employment with the Company
without regard to the Executive's competence or past contributions. This
uncertainty may materially adversely affect the Company.

      The Company and the Executive want any proposal for a change of control or
acquisition of the Company to be considered by the Executive objectively, with
reference only to the best interests of the Company and its shareholders and
without undue regard for his own personal interests.

      The Executive will be in a better position to consider the Company's and
its shareholders' best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change of control or acquisition.

      The Company believes it to be in the best interests of its shareholders to
enter into this Agreement with the Executive.

      The parties intend that this Agreement supersede and replace in its
entirety the Executive's Employment Agreement, dated October 1, 1993, as amended
to date.

                                      TERMS

      NOW, THEREFORE, the parties agree as follows:

      1. EMPLOYMENT. The Company employs the Executive and the Executive accepts
employment as the Company's President, Chief Executive Officer, and Chairman of
the Board on the terms set forth herein. This employment includes serving as an
officer or director of the Company's subsidiaries or affiliates.

      2. TERM OF EMPLOYMENT. The Executive's term of employment under this
Agreement shall commence effective as of this Agreement's date, and will
continue for a term of

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5 years. The term shall be automatically extended for successive additional
one-year periods, unless 90 days prior to the expiration of a term, either the
Executive or the Company gives written notice to the other that the term is not
to be renewed. The term during which this Agreement is in effect is the
"Contract Term". Notwithstanding the foregoing, this Agreement may terminate
prior to expiration of its term as provided in Section 9 hereof.

      3. DUTIES OF EXECUTIVE. During the Contract Term, the Executive will
perform those tasks and discharge those duties of his positions as set forth in
Section 1 above and similar duties for the Company's subsidiaries. The Company's
Board of Directors ("Board") may set forth his positions' particular duties from
time to time. The Executive will devote his best efforts and all of his business
time, attention and skill to the Company's then-current business and affairs.
The Executive's services are to be rendered in the Detroit metropolitan area.
Without the Executive's consent, which may be withheld in his discretion, he
will not be required to be absent from this metropolitan area more than 45 days
in any 12-month period or for more than 14 consecutive days. The Executive shall
report to the Board.

      4. COMPENSATION. The Executive initially shall receive an annual base
salary of $750,000 for his services hereunder, payable in accordance with the
Company's normal payroll practices. The Compensation Committee (the
"Compensation Committee") of the Board (or full Board, if there is no
Compensation Committee) will review the Executive's base salary not less than
once each year. It may be increased or decreased based upon performance,
generally prevailing property and casualty insurance industry compensation
practices and other factors that the Compensation Committee deems relevant and
reasonable. The Compensation Committee may also award bonus compensation to the
Executive from time to time, based upon the Company's performance and
profitability, in its sole discretion.

      5. BENEFITS. During the Contract Term, the Executive shall be entitled to
participate at the highest level in all of the Company's employee benefit plans
or arrangements (including all life insurance plans, surgical, medical, dental
and hospital expense benefit plans, long-term disability plans,
retirement-income plans and profit sharing plans) that are in effect during the
Contract term and to receive benefits under those plans on a basis consistent
with their overall administration. The Executive also shall be included in all
plans providing additional benefits to Company executives of comparable status
and position to the Executive, including deferred compensation, life insurance,
supplemental retirement, stock option, equity incentive, stock appreciation,
stock bonus, cash bonus and similar or comparable plans. One or more of these
benefits may be offered by benefit plans maintained by one of the Company's
subsidiaries, and in those cases references in this section to the Company
include the subsidiary.

      6. VACATION AND SICK LEAVE. The Executive shall be entitled to 8 weeks of
vacation per year. The sick leave policies stated in the North Pointe Financial
Services Employee Handbook (or any successor handbook applicable to employees of
the Company and its subsidiaries generally) shall apply to the Executive.

      7. REIMBURSEMENT OF BUSINESS EXPENSES. Entertainment of business
associates benefits the Company and is an essential part of the Executive's
duties and responsibilities. The

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Company shall reimburse the Executive for all reasonable business expenses that
he incurs in conducting the business of the Company, including reasonable
expenditures for dining, entertainment, gifts and travel. In addition, the
Executive shall be entitled to reimbursement of up to $30,000 annually for
country club and athletic club dues. These amounts are to be considered
expenditures by the Company for its benefit. The Executive must furnish to the
Company adequate records and other documentary evidence required by federal and
state tax statutes and regulations relating to the substantiation of these
expenditures as an income tax deduction. Notwithstanding any other provisions in
this Agreement, if any of these expenditures are not a proper income tax
deduction to the Company as a business expense, the cost of the items shall be
deemed additional compensation under this Agreement and shall not reduce any
other salary or bonus payment to the Executive.

      8.    OTHER BENEFITS. The Company will reimburse the Executive for the
following business expenses, which will not be considered taxable compensation
to the Executive, but rather expenditures by the Company for its benefit: (a)
the Executive will be reimbursed for reasonable expenditures for travel to
seminars, board meetings, conventions and other similar events, civic clubs and
related expenditures, including dues and meals; (b) the Company shall provide
the Executive an automobile allowance of $1,500 per month, subject to
agreed-upon increases; and (c) the Company will reimburse the Executive for all
fees and dues related to membership in professional organizations and all
reasonable expenses related to these memberships. Notwithstanding any other
provisions in this Agreement, if any of these expenditures are not a proper
income tax deduction to the Company as a business expense, the cost of the items
shall be deemed additional compensation under this Agreement and shall not
reduce any other salary or bonus payment to the Executive.

      9.    TERMINATION OF AGREEMENT.

      (a)   AUTOMATIC TERMINATION. This Agreement shall terminate immediately if
the Executive dies or becomes disabled. The Executive is "disabled" (and suffers
from a "disability") if any of the following occurs:

            (i)   A court with jurisdiction over the matter appoints a guardian
                  or conservator over the Executive or his property.

            (ii)  The Executive has been determined to be unable to provide for
                  his own basic physical needs such as food, shelter and
                  clothing due to a mental or physical condition for at least
                  six consecutive months, as determined by his regularly
                  attending physician. If the Board does not agree with this
                  physician's determination, it will engage at its expense a
                  physician to examine the Executive. If those two physicians
                  cannot agree on a final opinion, they will choose a third
                  physician, and that physician's opinion will control. The
                  Executive and the Company will evenly divide the expense of
                  the third physician. The Executive consents to these
                  examinations and waives any related patient-physician
                  privileges.

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            (iii) Proceeds are paid under a long-term disability insurance
                  policy on the Executive.

            (iv)  The Executive receives Social Security disability benefits.

      (b)   DISCRETIONARY TERMINATION. If any of the following occurs, the
Company shall have the right to terminate this Agreement immediately upon giving
the Executive advance written notice of the termination:

            (i)   The Executive breaches any material term of this Agreement.

            (ii)  The Executive continuously neglects his employment duties.

            (iii) The Executive commits any acts of gross negligence,
                  dishonesty, embezzlement, fraud, misrepresentation, or
                  intentional disclosure of confidential information related to
                  the Company's business that would be detrimental to the
                  Company if disclosed.

            (iv)  The Executive commits acts of habitual illegal substance abuse
                  or drunkenness.

            (v)   The Executive is convicted of or pleads guilty or no contest
                  to, a felony or a crime involving moral turpitude.

            (vi)  The Executive commits intentional acts that the Board
                  reasonably determines to be substantially detrimental to the
                  Company's best interests, including (without limitation)
                  material violations of the Company's codes of conduct.

      A termination under this subsection will be considered a termination "for
cause."

      (c)   TERMINATION BY EXECUTIVE FOR CAUSE. If the Company fails to make any
payment of base salary or bonus or other amounts provided for in this Agreement
to the Executive within 30 days after such payment is due, or otherwise
materially breaches this Agreement, the Executive may terminate this Agreement
upon giving to the Company 30 days advance written notice of the termination.
The Executive shall not be entitled to terminate this Agreement pursuant to this
subsection, however, if the Company makes an overdue payment to the Executive or
otherwise cures in all material respects the default prior to expiration of the
30-day notice period. Any notice given to the Company pursuant to this
subsection shall indicate the reason for termination and the type and amount of
any overdue payment.

      (d)   TERMINATION BY COMPANY WITHOUT CAUSE. Notwithstanding any other
provisions in this Agreement to the contrary, the Company may terminate this
Agreement upon giving to the Executive 30 days advance written notice of the
termination.

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      10. POST-TERMINATION PAYMENTS.

      (a) COMPENSATION UPON DISCRETIONARY TERMINATION. If this Agreement is
terminated for any of the reasons set forth above in Subsection 9(b), the
Executive will be entitled to the base salary earned by him prior to the date of
the termination as provided for in this Agreement computed pro rata up to and
including the date of termination.

      (b) PAYMENT UPON AUTOMATIC TERMINATION. If the Company terminates this
Agreement upon the Executive's death or disability pursuant to Section 9(a), the
Company shall pay to the Executive (or if the Executive is deceased or disabled
to the Executive's estate or personal representative), a monthly sum equal to
the highest monthly rate of base salary paid to the Executive during the last
full prior calendar year pursuant to Section 4 above, less any disability
payments from insurance for which the Company has paid the premiums. If this
termination occurs prior to the last day of the Contract Term, these payments
shall continue until the last day of the last full calendar month of the full
Contract Term, or until Executive reaches 70 years of age, whichever occurs
first. In addition, Executive shall also be entitled to payment in an amount
equal to 3 times his cash bonus(es) for the last previous full calendar year.
Notwithstanding the foregoing, if the Executive is a "specified employee" within
the meaning of Internal Revenue Code Section 409A, then to the extent payments
described in this Section 10(b) are not considered payments made under a bona
fide disability or death benefit plan within the meaning of Code Section 409A,
such payments shall be delayed for six (6) months from the date of termination
of this Agreement. In such event, all past due payments shall be paid in a lump
sum (without interest thereon) as soon as practicable after the six (6)-month
waiting period has expired.

      (c) PAYMENT UPON TERMINATION BY EXECUTIVE FOR CAUSE. If this Agreement is
terminated by the Executive for cause pursuant to Subsection 9(c), the Executive
shall be entitled to his base salary as provided for in this Agreement for the
remaining Contract Term plus an amount equal to three (3) times his cash
bonus(es) for the last previous full calendar year. Notwithstanding the
foregoing, if the Executive is a "specified employee" within the meaning of
Internal Revenue Code Section 409A, then such payments shall be delayed for six
(6) months from the date of termination of this Agreement. In such event, all
past due payments shall be paid in a lump sum (without interest thereon) as soon
as practicable after the six (6)-month waiting period has expired.

      (d) PAYMENT UPON TERMINATION BY COMPANY WITHOUT CAUSE. If this Agreement
is terminated by the Company without cause pursuant to Subsection 9(d), the
Executive shall be entitled to the greater of (i) his base salary as provided
for in this Agreement for the remaining Contract Term or (ii) a termination
payment equal to 3 times the sum of (A) the Executive's annual base salary in
effect on the Termination Date plus (B) 50% of the cash bonus paid or due to the
Executive under the Company's bonus plan applicable to the Executive for the
last fiscal year ending prior to the Termination Date. This termination payment
shall be paid to the Executive in cash no later than 10 business days after the
termination. The Executive shall not be required to mitigate the amount of the
termination payment by securing other employment or otherwise, nor will this
termination payment be reduced by reason of the Executive securing other
employment or for any other reason. Notwithstanding the foregoing, if the
Executive is a "specified employee" within the meaning of Internal Revenue Code
Section 409A, then such

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payments shall be delayed for six (6) months from the date of termination of
this Agreement. In such event, all past due payments shall be paid in a lump sum
(without interest thereon) as soon as practicable after the six (6)-month
waiting period has expired.

      11.   CHANGE OF CONTROL.

      (a)   DEFINITIONS. The following definitions are used in this section.

            (i)   A "Change of Control" means any of the following events:

                  A.    The acquisition, other than from the Company, by any
                        individual, entity or group (within the meaning of
                        Section 13(d)(3) or 14(d)(2) of the Securities Exchange
                        Act of 1934, as amended (the "Exchange Act")) of
                        beneficial ownership (within the meaning of Rule 13d-3
                        promulgated under the Exchange Act) of 40% or more of
                        either:

                        (1)   The then outstanding shares of common stock of the
                              Company (the "Outstanding Company Common Stock")
                              or

                        (2)   The combined voting power of the then outstanding
                              voting securities of the Company entitled to vote
                              generally in the election of directors (the
                              "Company Voting Securities");

                        provided, however, that any acquisition by an Excluded
                        Person shall not constitute a Change of Control of the
                        Company. For purposes hereof, an "Excluded Person" shall
                        mean any of the following: (x) James G. Petcoff, B.
                        Matthew Petcoff or members of either of their immediate
                        families; (y) the Company or any of its subsidiaries, or
                        any employee benefit plan (or related trust) sponsored
                        or maintained by the Company or any of its subsidiaries
                        or; (z) any corporation with respect to which, following
                        such acquisition, more than 60% of, respectively, the
                        then outstanding shares of common stock of such
                        corporation and the combined voting power of the then
                        outstanding voting securities of such corporation
                        entitled to vote generally in the election of directors
                        is then beneficially owned, directly or indirectly, by
                        all or substantially all of the individuals and entities
                        who were the beneficial owners, respectively, of the
                        Outstanding Company Common Stock and Company Voting
                        Securities immediately prior to such acquisition in
                        substantially the same proportion as their ownership,
                        immediately prior to such acquisition, of the
                        Outstanding Company Common Stock and Company Voting
                        Securities, as the case may be; or

                  B.    Individuals who, as of the day immediately following the
                        closing of the initial public offering of shares of the
                        Company's common

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                        stock (the "Post-Offering Date"), constitute the Board
                        (the "Incumbent Board") cease for any reason to
                        constitute at least a majority of the Board, provided
                        that any individual becoming a director subsequent to
                        the Post-Offering Date, whose election or nomination for
                        election by the Company's shareholders was approved by a
                        vote of at least a majority of the directors then
                        comprising the Incumbent Board, shall be considered as
                        though such individual were a member of the Incumbent
                        Board, but excluding, for this purpose, any such
                        individual whose initial assumption of office is in
                        connection with an actual or threatened election contest
                        relating to the election of the Directors of the Company
                        (as such terms are used in Rule 14a-11 of Regulation 14A
                        promulgated under the Exchange Act); or

                  C.    Consummation of a reorganization, merger or
                        consolidation (a "Business Combination"), in each case,
                        with respect to which all or substantially all of the
                        individuals and entities who were the respective
                        beneficial owners of the Outstanding Company Common
                        Stock and Company Voting Securities immediately prior to
                        such Business Combination do not, following such
                        Business Combination, beneficially own, directly or
                        indirectly, more than 60% of, respectively, the then
                        outstanding shares of common stock and the combined
                        voting power of the then outstanding voting securities
                        entitled to vote generally in the election of directors,
                        as the case may be, of the corporation resulting from
                        such Business Combination in substantially the same
                        proportion as their ownership immediately prior to such
                        Business Combination of the Outstanding Company Common
                        Stock and Company Voting Securities, as the case may be;
                        or

                  D.    A complete liquidation or dissolution of the Company or
                        sale or other disposition of all or substantially all of
                        the assets of the Company other than to a corporation
                        with respect to which, following such sale or
                        disposition, more than 60% of, respectively, the then
                        outstanding shares of common stock and the combined
                        voting power of the then outstanding voting securities
                        entitled to vote generally in the election of directors
                        is then owned beneficially, directly or indirectly, by
                        all or substantially all of the individuals and entities
                        who were the beneficial owners, respectively, of the
                        Outstanding Company Common Stock and Company Voting
                        Securities immediately prior to such sale or disposition
                        in substantially the same proportion as their ownership
                        of the Outstanding Company Common Stock and Company
                        Voting Securities, as the case may be, immediately prior
                        to such sale or disposition.

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            (ii)  A "Beneficial Owner" of Company shares includes any person
                  who, directly or indirectly, through any contract,
                  understanding, or otherwise has, shares, or within 60 days has
                  the right to acquire, voting power (which includes the power
                  to vote, or to direct the voting of, any such security) and/or
                  investment power (which includes the power to dispose, or to
                  direct the disposition of, any such security) relating to the
                  Company's equity securities.

            (iii) The Executive shall be deemed to have "Good Reason" to
                  terminate his employment with the Company if any of the
                  following events occur without the Executive's express written
                  consent:

                  A.    The assignment to the Executive of any duties materially
                        inconsistent with the Executive's positions, duties and
                        responsibilities with the Company or its subsidiaries
                        immediately prior to the Change of Control.

                  B.    A reduction in the Executive's base salary in effect
                        immediately prior to the Change of Control.

                  C.    A failure by the Company to continue any incentive
                        programs for executives applicable to the Executive
                        immediately prior to the Change of Control, the effect
                        of which failure would be to materially reduce the
                        incentive compensation which would be payable to the
                        Executive but for discontinuance of any such programs.

                  D.    The Executive is requested to relocate his office to a
                        location more than 100 miles from its location
                        immediately prior to the Change of Control.

                  E.    If the Executive consents to a relocation of his office
                        that necessitates moving from his then current residence
                        ("Prior Residence"), the failure of the Company to pay
                        or reimburse the Executive's reasonable moving expenses
                        and indemnify the Executive against any loss he incurs
                        in the sale of his Prior Residence (such a loss being
                        the amount by which the Prior Residence's actual sales
                        price is exceeded by the higher of the Executive's
                        aggregate investment in the prior Residence or its fair
                        market value as established by an independent appraiser
                        designated by the Executive and acceptable to the
                        Company).

                  F.    The Company's failure to continue in effect or
                        adequately replace any benefit or compensation plan or
                        arrangement in which the Executive was participating
                        immediately preceding the Change of Control, or the
                        taking of any action by the Company not required
                        by law which would adversely affect the Executive's
                        participation in or materially reduce Executive's
                        benefits from such a plan.

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      (b) THE EXECUTIVE'S RIGHT TO TERMINATE AGREEMENT. If (i) a Change of
Control has occurred within the preceding 24 months and (ii) there is a
significant change in the nature and scope of the Executive's duties as
described in this Agreement or prior Board determination or the Executive has
Good Reason to terminate, then the Executive shall be entitled (upon giving 30
days advance written notice to the Company within 90 days after the Executive
becomes aware of the circumstances constituting Good Reason to terminate) to
terminate this Agreement and shall, within 90 days after the effective date of
that termination, receive a lump sum amount equal to amounts that would be paid
to the Executive if he had been terminated without cause, as described in
Section 10(d). Notwithstanding the foregoing, if the Executive is a "specified
employee" within the meaning of Internal Revenue Code Section 409A, then such
payment shall be delayed for six (6) months from the date of termination of this
Agreement.

      12. TERMINATION PAYMENT MAXIMUM. The parties intend that no portion of any
termination payment, or any other payment or benefit under this Agreement, or
payments or benefits to or for the benefit of the Executive under any other
agreement or plan of the Company, regardless of whether the payment or benefit
was paid or provided for prior to a termination discussed in this Agreement
(collectively, "Total Payments"), be deemed to be an "excess parachute payment"
as defined in Section 280G of the Internal Revenue Code ("Code"). The present
value of the Total Payments and any other payments to or for the benefit of the
Executive in the nature of compensation, receipt of which are contingent on a
Change of Control and to which Code Section 280G applies (in the aggregate
"Total Benefits") shall not exceed an amount equal to one dollar less than the
maximum amount which the Executive may receive without becoming subject to the
tax imposed by Code Section 4999 ("Excise Tax") or which the Company may pay
without loss of deduction under Code Section 280G(a) . Present value for
purposes of this Agreement shall be calculated in accordance with Code Section
280G(d)(4). Within 45 days following a termination or notice by either party to
the other of its belief that there is a payment or benefit due the Executive
which will result in an excess parachute payment, the Executive and the Company,
at the Company's expense, shall obtain the opinion of those legal counsel (the
opinion of which need not to be unqualified), and certified public accountants
as the Executive may choose, which sets forth (a) the amount of the Base Period
Income (as defined below) of the Executive, (b) the present value of Total
Benefits, and (c) the amount and present value of any excess parachute payments.
If these opinions determine that there would be an excess parachute payment, the
termination payment or any other payment determined by the counsel or accountant
to be includible in the Total Benefits, shall be reduced or eliminated as
specified by the Executive in writing delivered to the Company within 30 days of
his receipt of the opinion(s). If the Executive fails to so notify the Company,
then the Company shall reasonably determine which payment to reduce or
eliminate, so that under the bases of calculation set forth in such opinions the
Total Benefits paid to the Executive shall be an amount equal to one dollar less
than the maximum amount which the Executive may receive without becoming subject
to the Excise Tax ("Reduced Amount"). For purposes of this Agreement, the term
"Base Period Income" shall be an amount equal to the Executive's "annualized
includible compensation" from the Company for the "base period" as defined in
Code Sections 280G(d)(1)

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and (2)o. If the Code provisions of Sections 280G and 4999 or any successor
provision are repealed without succession this provision shall be of no further
effect.

      As a result of the uncertainty in the application of Code Section 280G at
the time of the initial determination by legal counsel and accountants as
provided in this provision, it is possible that amounts will have been paid or
distributed by the Company to or for the benefit of the Executive pursuant to
this Agreement which should not have been so paid or distributed ("Overpayment")
or that additional amounts which will have not been paid or distributed by the
Company to or for the benefit of the Executive pursuant to this Agreement could
have been so paid or distributed ("Underpayment"), in each case, consistent with
the calculation of the Reduced Amount. If the legal counsel and certified public
accountants described above, or if Executive's legal counsel, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Executive which such legal counsel believes has a high probability of
success or other controlling precedent or substantial authority, determine that
an Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of the Executive shall be treated for all purposes
as a loan to the Executive which the Executive shall repay to the Company
together with interest at the applicable federal rate provided for in Code
Section 7872(f)(2); provided, however, that no amount shall be payable by the
Executive to the Company if and to the extent such payment would not reduce the
amount which is subject to the excise tax under Code Section 4999. If the
Executive's legal counsel, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, any such Underpayment
shall be promptly paid by the Company to or for the benefit of the Executive
together with interest at the applicable federal rate provided for in Code
Section 7872(f)(2). References to Code sections in this Agreement are deemed to
include any successor or replacement provisions.

      13. CONFIDENTIALITY OBLIGATIONS; NONCOMPETITION; NONSOLICITATION;
NONDISPARAGEMENT.

      (a) Confidentiality. The Executive shall not, at any time during the
Contract Term or thereafter, make use of or disclose, directly or indirectly,
any (i) Works (as defined in Section 13(e) below), (ii) trade secret or other
confidential or secret information of the Company or of any of its affiliates or
subsidiaries or (iii) other technical, business, marketing, proprietary,
financial, policyholder, pricing or personnel information of the Company or of
any of its affiliates or subsidiaries not intended to be available to the public
generally or to the competitors of the Company or to the competitors of any of
its affiliates or subsidiaries ("Confidential Information"), except to the
extent that such Confidential Information (a) becomes a matter of public record
or is published in a newspaper, magazine or other periodical or on electronic or
other media available to the general public, other than as a result of any act
or omission of the Executive, (b) is required to be disclosed by any law,
regulation or order of any court or regulatory commission, department or agency,
provided that the Executive gives prompt notice of such requirement to the
Company to enable the Company to seek an appropriate protective order, or (c) is
required to be used or disclosed by the Executive to perform properly the
Executive's duties under this Agreement. The Confidential Information is solely
the property of the Company. Promptly following the termination of the Contract
Term, the Executive shall surrender and return to the Company all Confidential
Information and other property of the

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Company and its affiliates and subsidiaries and all information relating to the
actual and prospective policyholders of the Company and its affiliates and
subsidiaries that the Executive may then possess or have under the Executive's
control (together with all copies thereof), including but not limited to
records, memoranda, notes, plans, reports, computer tapes and software and other
documents and data which constitute Confidential Information.

      (b) Noncompetition. Executive acknowledges that in the course of the
Executive's employment with the Company, the Executive has and will become
familiar with trade secrets and other confidential information concerning the
Company and its affiliates and subsidiaries and has established and will
establish substantial relationships with certain policyholders, agents,
reinsurers and other key business partners of the Company and its affiliates and
subsidiaries. The Executive further acknowledges that the Executive's services
will be of special, unique and extraordinary value to the Company and its
affiliates and subsidiaries. The Executive agrees that during the period of the
Executive's employment with the Company, and for a period thereafter of 24
months (the "Noncompetition Period"), the Executive shall not in any manner,
directly or indirectly, through any person, firm or corporation, alone or as a
member of a partnership or as an officer, director, stockholder, investor or
employee of or consultant to any other corporation or enterprise or otherwise,
engage or be engaged, or assist any other person, firm, corporation or
enterprise in engaging or being engaged, in an insurance underwriting or agency
business activity that is competitive with the business of the Company or its
affiliates or subsidiaries, or in any other business being conducted by the
Company or any of its subsidiaries as of the termination of the Executive's
employment in which the Executive was involved during the Executive's
employment, in any geographic area in which the Company or any of its affiliates
or subsidiaries is then conducting such business. Nothing in this Section 13
shall prohibit the Executive from being (i) a stockholder in a mutual fund or a
diversified investment company or (ii) an owner of not more than two percent
(2%) of the outstanding stock of any class of a corporation, any securities of
which are publicly traded so long as the Executive has no active participation
in the business of such corporation.

      (c) Nonsolicitation. The Executive further agrees that during the
Noncompetition Period, the Executive shall not (i) in any manner, directly or
indirectly, induce or attempt to induce any employee or consultant of the
Company or any of its affiliates or subsidiaries to terminate or abandon his or
her employment or services for any purpose whatsoever or (ii) in connection with
any business to which Section 13(b) applies, call on, service, solicit or
otherwise do business with any policyholder (determined as of the effective date
of the termination of Executive's employment) of the Company or any of its
affiliates or subsidiaries.

      (d) Nondisparagement. Except as otherwise required by applicable law, the
Executive agrees not to make, or cause to be made, any oral or written
statement, or take any other action, which disparages, criticizes, damages the
reputation of, or is hostile to, the Company or its administration, employees,
management, officers, shareholders, agents and/or directors. In the event that
the Executive violates this provision, including making statements to the media,
it will be considered a material breach hereof.

      (e) Definition of Works. As used in this Agreement, "Works" means (i) any
inventions, trade secrets, ideas, know-how, developments, designs or original
works of authorship, whether or not legally protectable, that the Executive at
any time has or will have

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conceived, created, developed, discovered, made or acquired in whole or in part
during or pursuant to the course of the Executive's employment relationship with
the Company or any of its affiliates, whether such employment relationship was
prior to, during or after the Contract Term (such period being the "Relationship
Period"), or that in any way relate to the Company or its businesses or the
Company's actual or demonstrably anticipated research or development, (ii) any
inventions, trade secrets, ideas or original works of authorship that the
Executive at any time has or will have conceived, created, developed, discovered
or made in whole or in part during or after the Executive's employment with the
Company or its affiliates and that are made through the use of any of the
Company's Confidential Information, equipment, facilities, materials, supplies,
trade secrets or time, or that result from any work performed for the Company or
its affiliates and (iii) any part or aspect of any of the foregoing.

      (f) Remedies. The Executive acknowledges that the provisions contained in
Section 13 are reasonable and necessary because of the substantial harm that
could be caused to the Company or its affiliates and subsidiaries by the
Executive engaging in any of the prohibited or restricted activities contained
in such Section. The Executive represents and warrants that the prohibitions and
restrictions contained in Section 13 will not impair the Executive's ability to
earn a livelihood because the Executive has the ability and experience to engage
in employment that will not breach or violate the prohibitions and restrictions
contained in such Sections. The parties hereto agree that the Company and its
affiliates and subsidiaries would be damaged irreparably in the event that any
provision of Section 13 of this Agreement were not performed in accordance with
its terms or were otherwise breached and that money damages would be an
inadequate remedy for any such nonperformance or breach. Accordingly, the
Company and its successors and permitted assigns shall be entitled, in addition
to other rights and remedies existing in their favor, to an injunction or
injunctions to prevent any breach or threatened breach of any of such provisions
and to enforce such provisions specifically (without posting a bond or other
security). The Executive and the Company agree that in the event any of the
prohibitions or restrictions set forth in Section 13 of this Agreement are found
by a court of final and competent jurisdiction to be unreasonable and
accordingly unenforceable, it is the purpose and intent of the parties that any
prohibitions or restrictions be deemed modified or limited so that, as modified
or limited, such prohibitions or restrictions may be enforced to the fullest
extent permitted by law.

      14. SETTLEMENT OF CONTROVERSY AND EXPENSES.

      (a) Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Oakland County,
Michigan, in accordance with the Arbitration Rules of the American Arbitration
Association then in effect. The parties will choose the arbitrator, who will not
have jurisdiction or authority to change, add to or subtract from any of the
provisions of this Agreement. The arbitration decision shall be final and
binding and judgment may be entered on the arbitrator's award in any court
having jurisdiction. If the parties cannot decide on an arbitrator, the American
Arbitration Association shall empanel three arbitrators, as it shall select in
accordance with its then applicable rules, who shall hear the controversy and
decide all issues (including the allocation of fees and costs) by majority vote.

      (b) Notwithstanding subsection (a) above, either party hereto shall have
the right to petition any state or federal court having jurisdiction, to provide
equitable relief to enjoin or

                                       12
<PAGE>

prohibit ongoing and irreparable injury to the petitioning party due to any
violation of this Agreement.

      15. SUCCESSORS; BINDING AGREEMENT

      (a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the Company's business and/or assets, by written agreement in a form
satisfactory to the Executive, to agree to perform this Agreement in the same
manner that the Company would be required to perform this Agreement if no such
succession had taken place. As used in this Agreement, "the Company" shall
include any successor to its business and/or assets as aforesaid, which
successor executes and delivers the agreement provided for in this section or
which otherwise becomes bound by this Agreement's terms by operation of law.

      (b) This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.

      16. NOTICES. Any notices to be given under this Agreement by a party to
the other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the following addresses, but each
party may change his address by written notice in accordance with this section.
Notices delivered personally shall be deemed communicated as of actual receipt;
notices mailed by certified or registered mail shall be deemed communicated as
of actual receipt; notices mailed first class shall be deemed communicated as of
5 days after mailing:

            To the Company:             28819 Franklin Road, Suite 300
                                        Southfield, MI 48034
                                        Attn: John H. Berry
                                              Chief Financial Officer

            To the Executive:           James G. Petcoff
                                        5853 Clearview Court
                                        Troy, MI 48098

      17. ENTIRE AGREEMENT. This Agreement supersedes all other agreements,
either oral or in writing, between the parties with respect to the Company's
employment of the Executive. It contains all of the agreements between the
parties with respect to this employment. No modification of this Agreement shall
be enforceable unless it is in writing signed by both parties. This Agreement is
not assignable by the Executive.

      18. GOVERNING LAW. This Agreement and the rights and obligations hereunder
shall be governed by and construed in accordance with the laws of the State of
Michigan without regard to any of its conflicts of law principles.

                                       13
<PAGE>

      19. OPPORTUNITY FOR REVIEW. The Executive acknowledges that he has had an
opportunity to consult with counsel separate from that of Company's prior to
execution of this Agreement.

      20. PARTIAL INVALIDITY. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.

      IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first written above.

                               "Company"

                               NORTH POINTE HOLDINGS CORPORATION,
                               a Michigan corporation

                               By: /s/ John H. Berry
                                   -----------------------------------
                                   John H. Berry
                               Its: Chief Financial Officer

                               "Executive"

                               /s/ James G. Petcoff
                               ----------------------------------------
                               JAMES G. PETCOFF

                                       14<PAGE>

                                                                    EXHIBIT 10.3

                        NORTH POINTE HOLDINGS CORPORATION
                       ANNUAL INCENTIVE COMPENSATION PLAN

SECTION 1.  PURPOSE AND DURATION

            (a) Purpose. The purpose of the North Pointe Holdings Corporation
Annual Incentive Compensation Plan is to provide an incentive compensation
system for key employees of the Company and its Affiliates that promotes and
rewards the maximization of shareholder value over the long term through the
establishment of Company objectives which are deemed by the Committee to be in
the best interests of the Company. The Plan is intended to provide for the
payment of amounts that qualify as "performance-based compensation" under Code
Section 162(m) in order that such amounts paid to certain executive officers
will not fail to be deductible by the Company for Federal income tax purposes.

            (b) Duration. The Plan is effective on June 1, 2005. The Plan shall
remain in effect until terminated pursuant to the provisions of Section 12.

SECTION 2.  DEFINITIONS

            Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:

            (a) "Affiliate" means any entity that, directly or through one or
more intermediaries, is Controlled by, Controls, or is under common Control
with, the Company. For this purpose, "Control" shall mean: (A) for a
corporation, ownership of more than 50% of the combined voting power of all
classes of stock entitled to vote; and (B) for a partnership or limited
liability company, ownership of more than 50% of the profits or capital interest
of such a business entity.

            (b) "Board" means the Board of Directors of the Company.

            (c) "Code" means the Internal Revenue Code of 1986, as amended. Any
reference to a particular provision of the Code shall be deemed to include any
successor provision thereto.

            (d) "Committee" means the Compensation Committee of the Board,
unless the Board designates another committee of the Board to administer the
Plan which committee is composed of not less than two directors, each of whom is
an "outside director" within the meaning of Code Section 162(m)(4)(C).

            (e) "Company" means North Pointe Holdings Corporation, a Michigan
corporation, and any successor thereto as provided in Section 13(c).

            (f) "Compensation" means with respect to a Participant, unless the
Committee determines otherwise at the time an award is made, the Participant's
annualized base salary at the close of the Performance Period (or date of the
Participant's termination of employment in the event of his death, Retirement or
Total and Permanent Disability), without regard to any deferral election then in
effect.

<PAGE>

            (g) "Excluded Items" means any items that the Committee determines
shall be excluded in fixing Performance Goals, such as any gains or losses from
discontinued operations, any extraordinary gains or losses and the effects of
accounting changes.

            (h) "Participant" means a key employee of the Company or an
Affiliate who has been approved for participation in the Plan.

            (i) "Performance Criteria" means the target(s) established for the
selected Performance Goal(s) that must be met in order for a cash payment to be
made under an award. Performance Criteria may be established as a step function,
a linear function, in the alternative, as a change (increase or decrease) over a
period of time, or in any other manner that the Committee may determine.

            (j) "Performance Goals" means one or any combination of the
following (in all cases after excluding the impact of applicable Excluded Items)
as selected by the Committee:

                  (i) Return on equity for the Performance Period for the
      Company on a consolidated basis. (E.g., bonus to be paid CEO [or any other
      executive as designated by the Compensation Committee], subject to the
      maximum bonus amount contained in Section 8(a) hereof, if Company has an
      ROE of 5 to 10% with the bonus amount on a sliding scale dependent upon
      the level of ROE goal actually attained; or, for instance in the
      alternative, e.g., if the Company has an increase in ROE from the prior
      year of at least 10%).

                  (ii) Return on investment for the Performance Period (A) for
      the Company on a consolidated basis, (B) for any one or more Affiliates or
      divisions of the Company and/or (C) for any other business unit or units
      of the Company as defined by the Committee at the time of selection.

                  (iii) Return on net assets for the Performance Period (A) for
      the Company on a consolidated basis, (B) for any one or more Affiliates or
      divisions of the Company and/or (C) for any other business unit or units
      of the Company as defined by the Committee at the time of selection.

                  (iv) Economic value added (as defined by the Committee at the
      time of selection) for the Performance Period (A) for the Company on a
      consolidated basis, (B) for any one or more Affiliates or divisions of the
      Company and/or (C) for any other business unit or units of the Company as
      defined by the Committee at the time of selection. (E.g., while the
      outcome is uncertain, the Compensation Committee agrees to pay a bonus to
      general counsel of the Company if he settles a matter in controversy for
      at least $10 million).

                  (v) Earnings from operations for the Performance Period (A)
      for the Company on a consolidated basis, (B) for any one or more
      Affiliates or divisions of the Company and/or (C) for any other business
      unit or units of the Company as defined by the Committee at the time of
      selection.

                  (vi) Pre-tax profits for the Performance Period (A) for the
      Company on a consolidated basis, (B) for any one or more Affiliates or
      divisions of the Company

                                       2
<PAGE>

      and/or (C) for any other business unit or units of the Company as defined
      by the Committee at the time of selection.

                  (vii) Net earnings for the Performance Period (A) for the
      Company on a consolidated basis, (B) for any one or more Affiliates or
      divisions of the Company and/or (C) for any other business unit or units
      of the Company as defined by the Committee at the time of selection.

                  (viii) Net earnings per share of the Company's Common Stock
      for the Performance Period for the Company on a consolidated basis. (E.g.,
      CEO and CFO [or whomever the Compensation Committee designates] to receive
      cash bonus as determined by Compensation Committee limited by the maximum
      bonus as provided in Section 8(a), iF EPS increases by 10% over the prior
      year).

                  (ix) Working capital as a percent of net sales for the
      Performance Period (A) for the Company on a consolidated basis, (B) for
      any one or more Affiliates or divisions of the Company and/or (C) for any
      other business unit or units of the Company as defined by the Committee at
      the time of selection.

                  (x) Net cash provided by operating activities for the
      Performance Period (A) for the Company on a consolidated basis, (B) for
      any one or more Affiliates or divisions of the Company and/or (C) for any
      other business unit or units of the Company as defined by the Committee at
      the time of selection.

                  (xi) Market price per share of the Company's Common Stock for
      the Performance Period. (E.g., certain selected executives will each
      receive a bonus, limited by the maximum allowable under Section 8(a), if
      at the end of one year [or two years, or three years - or such other
      period as the Compensation Committee selects], the price of the Company's
      stock has increased 10% from the base date).

                  (xii) Total shareholder return for the Performance Period for
      the Company on a consolidated basis.

                  (xiii) Market share captured during the Performance Period.

                  (xiv) Increases in (or the combined average of increases in)
      revenues during the Performance Period. (E.g., CEO is to receive cash
      bonus if year-end corporate revenues are increased by at least 10% over
      the prior year.)

                  (xv) Limiting or reducing costs of the Company or any of its
      affiliates during the Performance Period.

            With respect to Participants who the Committee determines are not
potentially subject to Code Section 162(m), the Committee may select as a
Performance Goal any other measurement that it determines, including subjective
goals.

            (k) "Performance Period" means the period of time that the Committee
designates at the time an award is made for which the Performance Criteria will
be determined.

                                       3
<PAGE>

The Performance Period may be a Plan Year or such longer period of time as the
Committee selects.

            (l) "Plan" means the arrangement described herein, as from time to
time amended and in effect.

            (m) "Plan Year" means a fiscal year of the Company, provided that
with respect to an individual who becomes a Participant other than at the
beginning of, or within the first 90 days following the beginning of, a fiscal
year of the Company, the Committee may designate that the Plan Year for the
Participant's first award is all or such portion of the fiscal year of the
Company in which such award is made as the Committee selects.

            (n) "Retirement" means termination of employment from the Company
and its Affiliates (without Cause) on or after attainment of age 55 with at
least ten years of continuous service.

            (o) "Total and Permanent Disability" means the Participant's
inability to perform the material duties of his occupation as a result of a
medically-determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a period of
at least 12 months, as determined by the Committee. The Committee may require
the Participant to submit such medical evidence or to undergo a medical
examination by a doctor selected by the Committee as the Committee determines is
necessary in order to make a determination hereunder.

            (p) "Cause" means: (i) if the Participant is subject to an
employment agreement that contains a definition of "cause", such definition;
(ii) otherwise, any of the following as determined by the Committee: (A)
violation of the provisions of any employment agreement, non-competition
agreement, confidentiality agreement, or similar agreement with the Company or
Affiliate, or the Company's or Affiliate's code of conduct, as then in effect,
(B) conduct rising to the level of gross negligence or willful misconduct in the
course of employment with the Company or an Affiliate, (C) commission of an act
of dishonesty or disloyalty involving the Company or an Affiliate, (D) violation
of any federal, state or local law in connection with the Participant's
employment, or (E) breach of any fiduciary duty to the Company or an Affiliate.

            (q) "Inimical Conduct" means any act or omission that is inimical to
the best of interests of the Company or any Affiliate, as determined by the
Committee in its sole discretion, including but not limited to: (i) violation of
any employment, noncompete, confidentiality or other agreement in effect with
the Company or any Affiliate, (ii) taking any steps or doing anything which
would damage or negatively reflect on the reputation of the Company or an
Affiliate, or (iii) failure to comply with applicable laws relating to trade
secrets, confidential information or unfair competition.

SECTION 3.  GENDER AND NUMBER; SEVERABILITY

            (a) Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein includes the feminine, the plural
includes the singular, and the singular the plural.

                                       4
<PAGE>

            (b) Severability. In the event any provision of the Plan is held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the said illegal or invalid provision had not been include.

SECTION 4.  SELECTION OF PARTICIPANTS

            The Committee shall designate, prior to or within 90 days after the
beginning of the first day of each Plan Year, which employees of the Company or
an Affiliate are to become Participants for such Plan Year. Unless so
designated, no employee shall have any right to be a Participant for a given
Plan Year even if such employee was a Participant for a prior Plan Year. In
addition, the Committee may designate as a Participant for a Plan Year an
employee who is hired by the Company or a subsidiary after the beginning of a
Plan Year, or an employee who receives a promotion after the beginning of a Plan
Year. The Committee may also designate employees to become Participants at any
time during the first fiscal year of the Company in which the Plan becomes
effective.

SECTION 5.  TERMINATION OF PARTICIPATION

            The Committee may withdraw its approval for participation for a
Participant at any time. In the event of such withdrawal, the employee concerned
shall cease to be an active Participant as of the date selected by the
Committee, the employee shall not be entitled to any payment unless the
Committee determines otherwise, and the employee shall be notified of such
withdrawal as soon as practicable following such action.

SECTION 6.  EMPLOYMENT REQUIREMENT; TERMINATION OF EMPLOYMENT

            No Participant shall earn an award for a Performance Period unless
the Participant is employed by the Company or an Affiliate (or is on an approved
leave of absence) on the last day of such Performance Period, unless employment
was terminated during the Performance Period as a result of Retirement, Total
and Permanent Disability or death at a time when the Participant could not have
been terminated for Cause. Accordingly, no incentive award shall be paid for a
Performance Period for a Participant whose employment with the Company or an
Affiliate is terminated during such period for reasons other than Retirement,
Total and Permanent Disability or death, unless approved by the Committee after
considering the cause of the termination.

SECTION 7.  AWARDS

            (a) Grant. At the time of designating an employee to become a
Participant, the Committee shall establish a formula cash award for such
Participant that is earned based on the extent to which one or more Performance
Criteria for the Performance Period is satisfied. The amount to be paid may be
specified as a percentage of Compensation, a fixed dollar amount or in any other
manner that the Committee determines.

            (b) Certification of Goals. As soon as practicable following the
close of each Performance Period, the Committee shall certify in writing the
extent to which the Performance

                                       5
<PAGE>

Criteria have been satisfied. Based on this certification, the amount of the
Participant's formula cash award (if any) shall be determined by the Committee
or its delegate.

            (c) Discretionary Adjustments To Formula Awards.

                  (i) Upon recommendation by the President, the Committee may
      approve adjustments to a Participant's formula cash award based upon the
      individual's performance during the Performance Period. Awards may be
      increased up to a maximum of 125% of the formula cash award in instances
      of outstanding performance and reduced to no less than 75% of the formula
      cash award in instances of marginal performance. Notwithstanding the
      foregoing, with respect to Participants who are subject to Code Section
      162(m), the Committee may only exercise discretion to reduce the formula
      cash award. The amount payable after adjustment (if any), shall be the
      Participant's final cash award.

                  (ii) Notwithstanding the limitation described above, in
      determining the final cash award for a Participant who is not employed on
      the last day of the Performance Period due to death, Total and Permanent
      Disability or Retirement, the Committee may make such adjustments to the
      Participant's formula cash award as it deems equitable, including but not
      limited to, prorating the formula cash award based upon the number of
      months of the Participant's active employment for such Performance Period.

SECTION 8.  PAYMENT

            (a) Payment Following End of Performance Period. Subject to the
provisions of subsection (b), a Participant's final cash award for a Performance
Period shall be paid to the Participant no later than two and a half (2-1/2)
months following the end of the Performance Period. Notwithstanding anything
herein to the contrary, in no event may a Participant receive a payment under
the Plan of more than five million dollars ($5,000,000) for a Plan Year.

            (b) Forfeiture. Notwithstanding the foregoing, no payment shall be
made with respect to a Participant if, after the end of the Performance Period
for which payment has accrued but before payment is made, either (i) the Company
or an Affiliate terminates the Participant's employment for Cause or (ii) the
Participant engages in Inimical Conduct.

SECTION 9.  RIGHTS OF PARTICIPANTS

            (a) No Funding. Unless otherwise determined by the Committee, the
Plan shall be unfunded and shall not create (or be construed to create) a trust
or a separate fund or funds. The Plan shall not establish any fiduciary
relationship between the Company and any Participant or other person. To the
extent any person holds any right by virtue of an award under the Plan, that
right (unless the Committee otherwise determines) shall be no greater than the
right of an unsecured general creditor of the Company.

            (b) No Transfer. No Participant may assign, pledge, or encumber
his/her interest under the Plan, or any part thereof, except pursuant to a will
or the laws of descent and distribution.

                                       6
<PAGE>

            (c) No Implied Rights; Employment. Nothing contained in this Plan
shall be construed to:

                  (i) Give any employee or Participant any right to receive any
      award other than in the sole discretion of the Committee;

                  (ii) Limit in any way the right of the Company an Affiliate to
      terminate a Participant's or other employee's employment at any time; or

                  (iii) Be evidence of any agreement or understanding, express
      or implied, that a Participant or other employee will be retained in any
      particular position or at any particular rate of remuneration.

SECTION 10. ADMINISTRATION

            (a) General. The Plan shall be administered by the Committee. If at
any time the Committee shall not be in existence, the Board shall assume the
Committee's functions and each reference to the Committee herein shall be deemed
to include the Board.

            (b) Authority. The Committee shall have full power and discretionary
authority to: (i) administer the Plan, including but not limited to the power
and authority to construe and interpret the Plan; (ii) correct errors, supply
omissions or reconcile inconsistencies in the Plan; (iii) establish, amend or
waive rules and regulations, and appoint such agents, as it deems appropriate
for the Plan's administration; and (iv) make any other determinations, including
factual determinations, and take any other action as it determines is necessary
or desirable for the Plan's administration.

            (c) Decision Binding. The Committee's determinations and decisions
made pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive and binding on all persons
who have an interest in the Plan or an award, and such determination and
decisions shall not be reviewable.

SECTION 11. ADJUSTMENTS

            In the event of any change in the outstanding shares of the
Company's Common Stock by reason of any stock dividend or split,
recapitalization, reclassification, merger, consolidation or exchange of shares
or other similar corporate change, then if the Committee shall determine, in its
sole discretion, that such change necessarily or equitably requires an
adjustment in the awards then held by Participants or the Performance Goals
established thereunder, such adjustments shall be made by the Committee and
shall be conclusive and binding for all purposes of this Plan. No adjustment
shall be made in connection with the issuance by the Company of any warrants,
rights, or options to acquire additional shares of Common Stock or of securities
convertible into Common Stock. Notwithstanding the foregoing, the Committee's
discretion to make adjustments herein shall not be construed or exercised in a
manner that would violate the provisions of Code Section 162(m) prohibiting
discretion to increase the amount payable under an award.

                                       7
<PAGE>

SECTION 12. AMENDMENT OR TERMINATION

            The Committee may modify or amend, in whole or in part, any or all
of the provisions of the Plan, or suspend or terminate it entirely; provided,
however, that no such modifications, amendment, or suspension or termination
may, without the consent of the Participant, reduce the right of a Participant
to any payment accrued under the Plan except as specifically provided herein.
Notwithstanding the foregoing, in the event of the Plan's termination, the
Committee may provide that all amounts accrued to the date of termination be
distributed to all Participants as soon as practicable after the date of
termination or on such other date as is specified by the Committee. In addition,
and without regard to the foregoing, the Board specifically reserves the right
to amend the provisions of Section 8 prior to the effective date of a Change of
Control without obtaining Participant consent.

            The shareholders of the Company must approve any amendment of the
Plan in order for it to be effective if:

            (a) the amendment (i) increases the maximum amount of compensation
payable with respect to a Participant for a Plan Year, (ii) expands the class of
persons eligible to participate under the Plan, or (iii) expands the Performance
Goals that may be selected for Participants who are subject to the provisions of
Code Section 162(m); or

            (b) approval is otherwise required by the Code or any other
applicable law or regulation.

            In addition, regardless of the foregoing, the shareholders of the
Company must re-approve the Plan no later than the annual meeting of
shareholders that occurs in 2011 if necessary for the Plan to maintain
compliance with Code Section 162(m).

SECTION 13. MISCELLANEOUS

            (a) Tax Withholding. The Company shall have the right to deduct from
all cash payments made hereunder (or from any other payments due a Participant)
any foreign, federal, state, or local taxes required by law to be withheld with
respect to such cash payments.

            (b) Offset. The Company shall have the right to offset from the
incentive award payable hereunder any amount that the Participant owes to the
Company or any Affiliate without the consent of the Participant, unless
prohibited by applicable state law.

            (c) Successors. All obligations of the Company under the Plan with
respect to awards granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or substantially
all of the business and/or assets of the Company.

            (d) Governing Law. Michigan law (without reference to conflict of
law principles) and applicable federal law govern this Plan and all awards
granted hereunder. Any legal action or proceeding relating in any way to this
Plan shall be heard in the Oakland County (Michigan) Circuit Court or the
Federal District Court for the Eastern District of Michigan sitting in Detroit,
Michigan. Any such action may be heard only in a "bench" trial, and any party to

                                       8
<PAGE>

such an action waives its right to assert a jury trial. Any legal action or
proceeding relating in any way to this Plan must be brought within 365 days
after the day the complaining party first knew or should have known of the
events giving rise to the complaint.

                                       9

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