Exhibit 99.1
AMENDED AND RESTATED
FIRST ACCEPTANCE CORPORATION
2002 LONG TERM INCENTIVE PLAN
The Amended and Restated First Acceptance Corporation 2002 Long Term Incentive Plan (the
Plan) was adopted by the Board of Directors of First Acceptance Corporation, a Delaware
corporation (the Company). This Plan amends and restates the First Acceptance Corporation 2002
Long Term Incentive Plan, as amended, that was originally approved by the Companys shareholders on
April 30, 2004. The amendments contained in this Plan shall become effective upon approval by the
holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present
or by written consent in accordance with applicable law. Subject to such approval, Awards may be
granted hereunder on and after the adoption of this Plan by the Board.
ARTICLE I.
PURPOSE
The purpose of the Plan is to foster and promote the long-term financial success of the
Company and its Subsidiaries and materially increase the value of the Company and its Subsidiaries
by (a) encouraging the long-term commitment of the Employees, Consultants, and Outside Directors of
the Company and its Subsidiaries, (b) motivating performance of the Employees, Consultants, and
Outside Directors of the Company and its Subsidiaries by means of long-term performance related
incentives, (c) encouraging and providing Employees, Consultants, and Outside Directors of the
Company and its Subsidiaries with an opportunity to obtain an ownership interest in the Company,
(d) attracting and retaining outstanding Employees, Consultants, and Outside Directors by providing
incentive compensation opportunities, and (e) enabling participation by Employees, Consultants, and
Outside Directors in the long-term growth and financial success of the Company and its
Subsidiaries.
ARTICLE II.
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the following
terms shall have the meanings indicated:
2.1 Award means the grant of any Option, SAR, Restricted Stock, Restricted Stock Unit,
Performance Award or Other Stock-Based Award, whether granted singly or in combination or in
tandem.
2.2 Award Agreement means a written agreement between a Participant and the Company which
sets out the terms of the grant of an Award.
2.3 Board means the board of directors of the Company.
2.4 Cause shall mean, unless otherwise defined in the applicable Award Agreement, the
Company or a Subsidiary having cause to terminate a Participants employment or service, as
defined in any written employment agreement then in effect between the Participant and the Company,
or, in the absence of such an agreement with respect to any Participant, such Participants (i)
failure to comply with the employment policies of the Company or any Subsidiary or a material
breach of an employment, consulting or other agreement, including any written confidentiality,
non-compete, non-solicitation or business opportunity covenant contained in any agreement entered
into by such Participant and the Company or any Subsidiary; (ii) commission of any material act of
dishonesty, breach of trust or misconduct in connection with performance of employment-related
duties; or (iii) conviction of, or pleading guilty or
nolo contendere
to, any felony or to any
crime involving dishonesty, theft or unethical business conduct, or conduct which could impair or
injure the Company or its reputation.
2.5 Change in Control shall mean any of the following: (i) any consolidation, merger or
share exchange of the Company in which the holders of a majority of the Companys outstanding
voting power prior to such transaction do not own at least a majority of the outstanding voting
power of the Company or any successor
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thereto following such transaction; (ii) any sale, lease, exchange or other transfer
(excluding transfer by way of pledge or hypothecation) in one transaction or a series of related
transactions, of all or substantially all of the assets of the Company; (iii) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of the Company;
(iv) the cessation of control (by virtue of their not constituting a majority of directors) of the
Board by the individuals who (x) at the date of this Plan were directors or (y) become directors
after the date of this Plan and whose election or nomination for election by the Companys
stockholders was approved by a vote of at least two-thirds of the directors then in office who were
directors at the date of this Plan or whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the
1934 Act) of an aggregate of 50% or more of the voting power of the Companys outstanding voting
securities by any person or group (as such term is used in Rule 13d-5 under the 1934 Act) who
beneficially owned less than 50% of the voting power of the Companys outstanding voting securities
on the date of this Plan; provided , however , that notwithstanding the foregoing, an acquisition
shall not constitute a Change in Control hereunder if the acquiror is (x) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company and acting in such
capacity, or (y) a Subsidiary of the Company or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their ownership of voting
securities of the Company; or (vi) in a Title 11 bankruptcy proceeding, the appointment of a
trustee or the conversion of a case involving the Company to a case under Chapter 7.
2.6 Code means the Internal Revenue Code of 1986, as amended.
2.7 Committee means the committee appointed or designated by the Board to administer the
Plan in accordance with
Article 3
of this Plan.
2.8 Common Stock means the common stock, par value $0.01 per share, which the Company is
currently authorized to issue or may in the future be authorized to issue, or any securities into
which or for which the common stock of the Company may be converted or exchanged, as the case may
be, pursuant to the terms of this Plan.
2.9 Company means First Acceptance Corporation, a Delaware corporation, and any successor
entity.
2.10 Consultant means any person performing advisory or consulting services for the Company
or a Subsidiary, with or without compensation, to whom the Company chooses to grant an Award in
accordance with the Plan, provided that bona fide services must be rendered by such person and
such services shall not be rendered in connection with the offer or sale of securities in a capital
raising transaction.
2.11 Covered Officer shall mean at any date (i) any individual who, with respect to the
previous taxable year of the Company, was a covered employee of the Company within the meaning of
Section 162(m); provided, however, that the term Covered Officer shall not include any such
individual who is designated by the Committee, in its discretion, at the time of any Award or at
any subsequent time, as reasonably expected not to be such a covered employee with respect to the
current taxable year of the Company or with respect to the taxable year of the Company in which any
applicable Award will be paid or vested and (ii) any individual who is designated by the Committee,
in its discretion, at the time of any Award or at any subsequent time, as reasonably expected to be
such a covered employee with respect to the current taxable year of the Company or with respect
to the taxable year of the Company in which any applicable Award will be paid or vested.
2.12 Date of Grant means the effective date on which an Award is made to a Participant as
set forth in the applicable Award Agreement.
2.13 Employee means common law employee (as defined in accordance with the Regulations and
Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary
of the Company.
2.14 Fair Market Value means, as of a particular date, (a) if the shares of Common Stock are
listed on a national securities exchange, the closing sales price per share of Common Stock on the
consolidated transaction
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reporting system for the principal securities exchange for the Common Stock on that date, or,
if there shall have been no such sale so reported on that date, on the last preceding date on which
such a sale was so reported, (b) if the Common Stock is not so listed or quoted, the mean between
the closing bid and asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available, or (d) if none of the
above is applicable, such amount as may be determined by the Committee (acting on the advice of an
Independent Third Party, should the Committee elect in its sole discretion to utilize an
Independent Third Party for this purpose), in good faith, to be the fair market value per share of
Common Stock.
2.15 Grant Price means the price established at the time of grant of an SAR pursuant to
Article VI
used to determine whether there is any payment due upon exercise of the SAR.
2.16 Independent Third Party means an individual or entity independent of the Company having
experience in providing investment banking or similar appraisal or valuation services and with
expertise generally in the valuation of securities or other property for purposes of this Plan. The
Board Committee may utilize one or more Independent Third Parties.
2.17 Incentive Stock Option means an incentive stock option within the meaning of
Section 422 of the Code, granted pursuant to this Plan.
2.18 Nonpublicly Traded means not listed on a national securities exchange registered with
the Securities and Exchange Commission.
2.19 Nonqualified Stock Option means a nonqualified stock option, granted pursuant to this
Plan, to which Section 421 of the Code does not apply.
2.20 Option means a Nonqualified Stock Option or an Incentive Stock Option granted pursuant
to
Article VI
hereof.
2.21 Option Price means the price that must be paid by a Participant upon exercise of an
Option to purchase a share of Common Stock.
2.22 Outside Director means a director of the Company who is not an Employee.
2.23 Other Stock-Based Award shall mean any Award granted under
Article IX
of the
Plan.
2.24 Participant means an Employee, Consultant, or Outside Director of the Company or a
Subsidiary to whom an Award is granted under this Plan.
2.25 Performance Award shall mean any Award granted under
Article VIII
of the Plan.
2.26 Plan means this Amended and Restated First Acceptance Corporation 2002 Long Term
Incentive Plan, as amended from time to time.
2.27 Restricted Stock means shares of Common Stock issued or transferred to a Participant
pursuant to
Article VII
of this Plan which are subject to restrictions or limitations set
forth in this Plan and in the related Award Agreement.
2.28 Restricted Stock Unit shall mean any unit granted under
Article VII
of the
Plan.
2.29 Retirement means any Termination of Service solely due to retirement upon or after
attainment of age sixty-five (65), or permitted early retirement as determined by the Committee.
2.30 SAR or stock appreciation right means the right to receive a payment, in cash and/or
Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of
Common Stock on the date the SAR is exercised over the Grant Price for such shares.
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2.31 Section 162(m) shall mean Section 162(m) of the Code and the regulations promulgated
thereunder and any successor provision thereto as in effect from time to time.
2.32 Subsidiary means (i) any corporation in an unbroken chain of corporations beginning
with the Company, if each of the corporations other than the last corporation in the unbroken chain
owns stock possessing a majority of the total combined voting power of all classes of stock in one
of the other corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general partnership interest and a
majority of the limited partnership interests entitled to vote on the removal and replacement of
the general partner, and (iii) any partnership or limited liability company, if the partners or
members thereof are composed only of the Company, any corporation listed in item (i) above or any
limited partnership listed in item (ii) above. Subsidiaries means more than one of any such
corporations, limited partnerships, partnerships or limited liability companies.
2.33 Substitute Award shall mean an Award granted pursuant to
Article XIV
solely in
assumption of, or in substitution for, an outstanding award previously granted by a company
acquired by the Company or with which the Company combines.
2.34 Termination of Service occurs when a Participant who is an Employee or a Consultant of
the Company or any Subsidiary shall cease to serve as an Employee or Consultant of the Company and
its Subsidiaries, for any reason; or, when a Participant who is an Outside Director of the Company
or a Subsidiary shall cease to serve as a director of the Company and its Subsidiaries for any
reason. Except as may be necessary or desirable to comply with applicable federal or state law, a
Termination of Service shall not be deemed to have occurred when a Participant who is an Employee
becomes a Consultant or an Outside Director or vice versa. If, however, a Participant who is an
Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a
Termination of Service, and if that Participant does not exercise the Incentive Stock Option within
the time required under Code section 422 upon ceasing to be an Employee, the Incentive Stock Option
shall thereafter become a Nonqualified Stock Option.
2.35 Total and Permanent Disability means a Participant is qualified for long-term
disability benefits under the Companys or Subsidiarys disability plan or insurance policy; or, if
no such plan or policy is then in existence or if the Participant is not eligible to participate in
such plan or policy, that the Participant is incapacitated and absent from his or her duties with
the Company or any Subsidiary on a full time basis for a period of six (6) continuous months or for
at least one hundred eighty (180) days during any twelve (12) -month period as a result of mental
or physical illness or physical injury, as determined in good faith by the Committee; provided that, with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning
given it under the rules governing Incentive Stock Options under the Code.
ARTICLE III.
ADMINISTRATION
3.1
General Administration; Establishment of Committee
. Subject to the terms of this
Article 3
, the Plan shall be administered by the Board or such committee of the Board as is
designated by the Board to administer the Plan (the Committee). The Committee shall consist of
not fewer than two persons. Any member of the Committee may be removed at any time, with or without
cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board. At any time there is no Committee to administer the Plan, any
references in this Plan to the Committee shall be deemed to refer to the Board.
Membership on the Committee shall be limited to those members of the Board who are outside
directors under Section 162(m) of the Code and non-employee directors as defined in Rule 16b-3
promulgated under the 1934 Act. The Committee shall select one of its members to act as its
chairman. A majority of the Committee shall constitute a quorum, and the act of a majority of the
members of the Committee present at a meeting at which a quorum is present shall be the act of the
Committee.
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3.2
Designation of Participants and Awards
.
(a) The Committee or the Board shall determine and designate from time to time the eligible
persons to whom Awards will be granted and shall set forth in each related Award Agreement such
terms, provisions, limitations, and performance requirements as are approved by the Committee but
not inconsistent with the Plan. The Committee shall determine whether an Award Agreement shall
include one type of Award or two or more Awards granted in combination or two or more Awards
granted in tandem (that is, a joint grant where exercise of one Award results in cancellation of
all or a portion of the other Award). Although the members of the Committee shall be eligible to
receive Awards, no member of the Committee shall participate in any decisions regarding any Award
granted hereunder to such member. All decisions with respect to any Award, and the terms and
conditions thereof, to be granted under the Plan to any member of the Committee shall be made
solely and exclusively by the other members of the Committee, or if such member is the only member
of the Committee, by the Board.
In addition, the chief executive officer of the Company may recommend to the Board or the
Committee (i) that Awards be granted to one or more Employees, Officers, Consultants, or Outside
Directors, (ii) the number of shares of Common Stock to be subject to such Awards, and (iii) the
price to be paid for such Awards and such other terms that the chief executive officer deems
appropriate with respect to such Awards; in such case, the chief executive officers
recommendations shall not be binding on the Board and the Board may, in its sole discretion, accept
or deny the chief executive officers recommendations.
(b) Notwithstanding
Section 3.2(a)
, to the extent consistent with applicable
securities laws, the Board may in its discretion and by a resolution adopted by the Board,
authorize one or more officers of the Company (an Authorized Officer) to (i) designate one or
more Employees as eligible persons to whom Awards will be granted under the Plan and (ii) determine
the number of shares of Common Stock that will be subject to such Awards; provided, however, that
the resolution of the Board granting such authority shall (x) specify the total number of shares of
Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a
formula by which such price or prices may be determined) to be paid for the purchase of the Common
Stock subject to such Awards, and (z) not authorize an officer to designate himself as a recipient
of any Award. The Authorized Officer shall notify the Committee in writing of the persons
designated to receive such Awards, the type of Award, the Date of Grant, the number of shares of
Common Stock that will be subject to such Awards, and the purchase price to be paid for such
shares. If authorized to do so in the Boards written resolution, the Authorized Officer shall
cause the Company to execute an Award Agreement with the Participant, subject to the Committees
ratification of such terms of an Award as required by law.
Within an administratively reasonable time after receipt of the Authorized Officers written
notice of one or more Awards, the Committee shall authorize or ratify the grant of such Awards and
shall prescribe all other terms of such Awards pursuant to its authority set forth in
Section
3(a)
.
3.3
Authority of the Committee
. The Committee, in its discretion, shall have the full power
and authority in its discretion to (i) interpret the Plan, (ii) prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the Plan, (iii) establish
performance goals for an Award and certify the extent of their achievement, (iv) accelerate the
time at which all or any part of an Award may be settled or exercised, (v) make all determinations
under the Plan concerning any Termination of Service and whether such termination has occurred by
reason of Cause, Disability, Retirement or in connection with a Change in Control; and (vi) make
such other determinations or certifications and take such other action as it deems necessary or
advisable in the administration of the Plan. Any interpretation, determination, or other action
made or taken by the Committee shall be final, binding, and conclusive on all interested parties.
The Committees discretion set forth herein shall not be limited by any provision of the Plan,
including any provision which by its terms is applicable notwithstanding any other provision of the
Plan to the contrary.
To the extent consistent with applicable securities laws, the Committee may delegate to
officers of the Company, pursuant to a written delegation, the authority to perform specified
functions under the Plan. Any actions taken by any officers of the Company pursuant to such written
delegation of authority shall be deemed to have been taken by the Committee.
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With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3
promulgated under the 1934 Act, Section 422 of the Code, Section 162(m) of the Code, the rules of
any exchange or inter-dealer quotation system upon which the Companys securities are listed or
quoted, or any other applicable law, rule or restriction (collectively, applicable law), to the
extent that any such restrictions are no longer required by applicable law, the Committee shall
have the sole discretion and authority to grant Awards that are not subject to such mandated
restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.
ARTICLE IV.
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer), Outside Director,
or Consultant of the Company whose judgment, initiative, and efforts contributed or may be expected
to contribute to the successful performance of the Company is eligible to participate in the Plan.
The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any
Employee, Outside Director, or Consultant of the Company or any Subsidiary. Awards may be granted
by the Committee at any time and from time to time to new Participants, or to then Participants, or
to a greater or lesser number of Participants, and may include or exclude previous Participants, as
the Committee shall determine. Except as required by this Plan, Awards granted at different times
need not contain similar provisions. The Committees determinations under the Plan (including
without limitation determinations of which Employees, Outside Directors, or Consultants, if any,
are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such
Awards and the agreements evidencing same) need not be uniform and may be made by it selectively
among Participants who receive, or are eligible to receive, Awards under the Plan.
ARTICLE V.
SHARES SUBJECT TO PLAN
5.1
Number Available for Awards
. Subject to adjustment as provided in
Articles XI
and
XII
, the maximum number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is 8,500,000 shares. Shares to be issued may be made available from
authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common
Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the
Company will at all times reserve and keep available the number of shares of Common Stock that
shall be sufficient to satisfy the requirements of this Plan.
5.2
Reuse of Shares
.
(a) If shares of Common Stock are subject to an Option, SAR or other Award which shall expire
or terminate for any reason without having been exercised or settled in full, or in the event that
an Option, SAR or other Award is settled in cash or is otherwise exercised or settled in a manner
such that some or all of the shares of Common Stock relating to the Option are not issued to the
Participant (or beneficiary) (including as the result of the use of shares for withholding taxes),
the shares of Common Stock subject thereto which have not become outstanding shall (unless the Plan
shall have sooner terminated) become available for issuance under the Plan.
(b) If any shares of Common Stock subject to an Award are not delivered to a Participant
because the Award is exercised through a reduction of shares subject to the Award (i.e., net
exercised) or an appreciation distribution in respect of a SAR is paid in Common Stock, then the
number of shares subject to the Award that are not delivered to the Participant shall remain
available for subsequent issuance under the Plan.
(c) If the exercise price of any Award is satisfied by tendering Common Stock by the
Participant (either by actual delivery or attestation), then the number of shares so tendered shall
remain available for subsequent issuance under the Plan.
(d) In no event shall the number of shares of Common Stock subject to Incentive Stock Options
exceed, in the aggregate, 6,000,000 shares of Common Stock plus shares subject to Incentive Stock
Options which are forfeited or terminated, or expire unexercised.
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ARTICLE VI.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1
Grant.
Subject to the provisions of the Plan and other applicable legal requirements, the
Committee shall have sole and complete authority to determine the Participants to whom Options and
SARs shall be granted, the number of shares of Common Stock subject to each Award, the exercise
price and the conditions and limitations applicable to the exercise of each Option and SAR. An
Option may be granted with or without a related SAR. A SAR may be granted with or without a
related Option. The grant of an Option shall take place when the Committee by resolution, written
consent or other appropriate action determines to grant such Option for a particular number of
shares to a particular Participant at a particular Option Price. The Committee shall have the
authority to grant Incentive Stock Options and to grant Non-Qualified Stock Options. In the case
of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply
with Section 422 of the Code, as from time to time amended, and any regulations implementing such
statute. A person who has been granted an Option or SAR under this Plan may be granted additional
Options or SARs under the Plan if the Committee shall so determine; provided, however, that to the
extent the aggregate Fair Market Value (determined at the time the Incentive Stock Option is
granted) of the Common Stock with respect to which all Incentive Stock Options are exercisable for
the first time by an Employee during any calendar year (under all plans described in of
Section 422(d) of the Code of the Employees employer corporation and its parent and Subsidiaries)
exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.
6.2
Price.
The Committee in its sole discretion shall establish the Option Price at the time
each Option is granted and the Grant Price at the time each SAR is granted. Except in the case of
Substitute Awards, the Option Price of an Option may not be less than one hundred percent (100%) of
the Fair Market Value of the Common Stock with respect to which the Option is granted on the date
of grant of such Option. In the case of Substitute Awards or Awards granted in connection with an
adjustment provided for in
Article XI
of the Plan in the form of Options, such grants shall
have an Option Price per share that is intended to maintain the economic value of the Award that
was replaced or adjusted, as determined by the Committee. Notwithstanding the foregoing and except
as permitted by the provisions of
Article XI
hereof, the Committee shall not have the power
to (i) amend the terms of previously granted Options or SARs to reduce the Option Price of such
Options or the Grant Price of such SARs, or (ii) cancel such Options or SARs and grant substitute
Options or SARs with a lower Option Price or Grant Price than the cancelled Options or SARs, in
each case without the approval of the Companys stockholders. Except with respect to Substitute
Awards, SARs may not have a Grant Price less than the Fair Market Value of a share of Common Stock
on the date of grant.
6.3
Term.
Subject to the Committees authority under
Article III
and the provisions
of
Section 6.6
, each Option and SAR and all rights and obligations thereunder shall expire
on the date determined by the Committee and specified in the Award Agreement. The Committee shall
be under no duty to provide terms of like duration for Options or SARs granted under the Plan.
Notwithstanding the foregoing, but subject to the last sentence of
Section 6.4(a)
, no
Option or SAR shall be exercisable after the expiration of ten (10) years from the date such Option
or SAR was granted.
6.4
Exercise
.
(a) Each Option and SAR shall be exercisable at such times and subject to such terms and
conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement
or thereafter. The Committee shall have full and complete authority to determine whether an Option
or SAR will be exercisable in full at any time or from time to time during the term of the Option
or SAR, or to provide for the exercise thereof in such installments, upon the occurrence of such
events and at such times during the term of the Option or SAR as the Committee may determine. An
Award Agreement may provide that the period of time over which an Option, other than an Incentive
Stock Option, may be exercised shall be automatically extended if on the scheduled expiration of
such Option, the Participants exercise of such Option would violate applicable securities law;
provided, however, that during the extended exercise period the Option may only be exercised to the
extent the Option was exercisable in accordance with its terms immediately prior to such scheduled
expiration date; provided further, however, that
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such extended exercise period shall end not later than thirty (30) days after the exercise of
such Option first would no longer violate such laws.
(b) The Committee may impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of federal, state or foreign
securities laws or the Code, as it may deem necessary or advisable. The exercise of any Option
granted hereunder shall be effective only at such time as the sale of Common Stock pursuant to such
exercise will not violate any state or federal securities or other laws.
(c) An Option or SAR may be exercised in whole or in part at any time, with respect to whole
shares only, within the period permitted thereunder for the exercise thereof, and shall be
exercised by written notice of intent to exercise the Option or SAR, delivered to the Company at
its principal office, and payment in full to the Company at the direction of the Committee of the
amount of the Option Price for the number of shares of Common Stock with respect to which the
Option is then being exercised.
(d) Payment of the Option Price shall be made in (i) cash or cash equivalents, or,
(ii) at the
discretion of the Committee, by transfer, either actually or by attestation, to the Company of
unencumbered shares of Common Stock previously acquired by the Participant, valued at the Fair
Market Value of such shares on the date of exercise (or next succeeding trading date, if the date
of exercise is not a trading date), together with any applicable withholding taxes, such transfer
to be upon such terms and conditions as determined by the Committee, (iii) by a combination of (i)
or (ii), or (iv) by any other method approved or accepted by the Committee in its sole discretion,
including, if the Committee so determines, (x) a cashless (broker-assisted) exercise that complies
with applicable laws or (y) withholding shares of Common Stock (net-exercise) otherwise deliverable
to the Participant pursuant to the Option having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price. Until the optionee has been issued the Common Stock
subject to such exercise, he or she shall possess no rights as a stockholder with respect to such
Common Stock.
(e) At the Committees discretion, the amount payable to the Participant as a result of
the
exercise of a SAR may be settled in cash, Common Stock or a combination thereof. A fractional
share shall not be deliverable upon the exercise of a SAR but a cash payment will be made in lieu
thereof.
6.5
Termination of Employment or Service.
Except as otherwise provided in the applicable
Award Agreement, an Option may be exercised only to the extent that it is then exercisable, and if
at all times during the period beginning with the date of granting such Option and ending on the
date of exercise of such Option the Participant is an Employee, Outside Director or Consultant, and
shall terminate immediately upon a Termination of Service of the Participant. Notwithstanding the
foregoing provisions of this
Section 6.5
to the contrary, the Committee may determine in
its discretion that an Option may be exercised following any such termination of employment,
whether or not exercisable at the time of such termination of employment; provided, however, that
in no event may an Option be exercised after the expiration date of such Option specified in the
applicable Award Agreement, except as provided in the last sentence of
Section 6.4(a)
.
6.6
Ten Percent Stock Rule.
Notwithstanding any other provisions in the Plan, if at the time
an Option is otherwise to be granted pursuant to the Plan, the optionee or rights holder owns
directly or indirectly (within the meaning of Section 424(d) of the Code) Common Stock of the
Company possessing more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or its parent or Subsidiary corporations (within the meaning of
Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee or
rights holder pursuant to the Plan shall satisfy the requirement of Section 422(c)(5) of the Code,
and the Option Price shall be not less than one hundred ten percent (110%) of the Fair Market Value
of the Common Stock of the Company, and such Option by its terms shall not be exercisable after the
expiration of five (5) years from the date such Option is granted.
6.7
Buyout Provisions.
Notwithstanding any other provision of the Plan, the Committee may at
any time offer to buy out for a payment in cash, Common Stock or Restricted Stock an Option
previously granted, based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
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6.8
Maximum Individual Grant
. No Participant may receive during any fiscal year of the
Company Awards of Options or SARs covering an aggregate of more than 3,000,000 shares of Common
Stock.
ARTICLE VII.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
7.1
Grant
.
(a) Subject to the provisions of the Plan and other applicable legal requirements, the
Committee shall have sole and complete authority to determine the Participants to whom Restricted
Stock and Restricted Stock Units shall be granted, the number of shares of Restricted Stock and the
number of Restricted Stock Units to be granted to each Participant, the duration of the period
during which, and the conditions under which, the Restricted Stock and Restricted Stock Units may
be forfeited to the Company, and the other terms and conditions of such Awards. The Restricted
Stock and Restricted Stock Unit Awards shall be evidenced by Award Agreements in such form as the
Committee shall from time to time approve, which agreements shall comply with and be subject to the
terms and conditions provided hereunder and any additional terms and conditions established by the
Committee that are consistent with the terms of the Plan.
(b) Each Restricted Stock and Restricted Stock Unit Award made under the Plan shall be for
such number of shares of Common Stock as shall be determined by the Committee and set forth in the
Award Agreement containing the terms of such Restricted Stock or Restricted Stock Unit Award. Such
agreement shall set forth a period of time during which the grantee must remain in the continuous
employment of the Company in order for the forfeiture and transfer restrictions to lapse. If the
Committee so determines, the restrictions may lapse during such restricted period in installments
with respect to specified portions of the shares covered by the Restricted Stock or Restricted
Stock Unit Award. The Award Agreement may also, in the discretion of the Committee, set forth
performance or other conditions that will subject the shares to forfeiture and transfer
restrictions. The Committee may, at its discretion, waive all or any part of the restrictions
applicable to any or all outstanding Restricted Stock and Restricted Stock Unit Awards.
7.2
Dividends and Other Distributions
.
(a) Prior to the lapse of any applicable transfer restrictions, Participants holding
Restricted Stock shall be credited with any cash dividends paid with respect to such Restricted
Stock while they are so held, unless determined otherwise by the Committee and set forth in the
Award Agreement. The Committee may apply any restrictions to such dividends that the Committee
deems appropriate. Except as set forth in the Award Agreement or otherwise determined by the
Committee, in the event (a) of any adjustment as provided in
Article XI
, or (b) any shares
or securities are received as a dividend, or an extraordinary dividend is paid in cash, on
Restricted Stock, any new or additional shares or securities or any extraordinary dividends paid in
cash received by a Participant on such Restricted Stock shall be subject to the same terms and
conditions, including any transfer restrictions, as relate to the original Restricted Stock.
(b) The applicable Award Agreement will specify whether a Participant will be entitled to
receive dividend equivalent rights in respect of Restricted Stock Units at the time of any payment
of dividends to stockholders on Common Stock. If the applicable Award Agreement specifies that a
Participant will be entitled to receive dividend equivalent rights, (i) the amount of any such
dividend equivalent right shall equal the amount that would be payable to the Participant as a
stockholder in respect of a number of shares equal to the number of Restricted Stock Units then
credited to the Participant, (ii) any such dividend equivalent right shall be paid in accordance
with the Companys payment practices as may be established from time to time and as of the date on
which such dividend would have been payable in respect of outstanding Common Stock, and (iii) the
applicable Award Agreement will specify whether dividend equivalents shall be paid in respect of
Restricted Stock Units that are not yet vested.
7.3
Transfer Restrictions on Restricted Stock.
At the time of a Restricted Stock Award, a
certificate representing the number of Shares awarded thereunder shall be registered in the name of
the grantee. Such
9
certificate shall be held by the Company or any custodian appointed by the Company for the
account of the grantee subject to the terms and conditions of the Plan, and shall bear such a
legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may
determine. The foregoing to the contrary notwithstanding, the Committee may, in its discretion,
provide that a Participants ownership of Restricted Stock prior to the lapse of any transfer
restrictions or any other applicable restrictions shall, in lieu of such certificates, be evidenced
by a book entry (
i.e
., a computerized or manual entry) in the records of the Company or its
designated agent in the name of the Participant who has received such Award, and confirmation and
account statements sent to the Participant with respect to such book-entry shares may bear the
restrictive legend referenced in the preceding sentence. Such records of the Company or such agent
shall, absent manifest error, be binding on all Participants who receive Restricted Stock Awards
evidenced in such manner. The holding of Restricted Stock by the Company or such an escrow holder,
or the use of book entries to evidence the ownership of Restricted Stock, in accordance with this
Section 7.3
, shall not affect the rights of Participants as owners of the Restricted Stock
awarded to them, nor affect the restrictions applicable to such shares under the Award Agreement or
the Plan, including the transfer restrictions.
7.4
Other Rights of Restricted Stockholders.
Unless otherwise provided in the applicable
Award Agreement, the grantee shall have all other rights of a stockholder with respect to the
Restricted Stock, including the right to vote such shares, subject to the following restrictions:
(i) the grantee shall not be entitled to delivery of the stock certificate until the expiration of
the restricted period and the fulfillment of any other restrictive conditions set forth in the
Award Agreement with respect to such Restricted Stock; (ii) none of the shares of Restricted Stock
may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of
during such restricted period or until after the fulfillment of any such other restrictive
conditions; and (iii) except as otherwise determined by the Committee at or after grant, all of the
shares of Restricted Stock shall be forfeited and all rights of the grantee to such shares shall
terminate, without further obligation on the part of the Company, unless the grantee remains in the
continuous employment of the Company for the entire restricted period in relation to which such
shares were granted and unless any other restrictive conditions relating to the Restricted Stock
Award are met.
7.5
Termination of Restrictions on Restricted Stock.
At the end of the restricted period and
provided that any other restrictive conditions of the Restricted Stock Award are met, or at such
earlier time as otherwise determined by the Committee, all restrictions set forth in the Award
Agreement relating to the Restricted Stock Award or in the Plan shall lapse as to the Restricted
Stock subject thereto, and a stock certificate for the appropriate number of shares of Common
Stock, free of the restrictions and restricted stock legend, shall be delivered to the Participant
or the Participants beneficiary or estate, as the case may be (or, in the case of book-entry
shares, such restrictions and restricted stock legend shall be removed from the confirmation and
account statements delivered to the Participant or the Participants beneficiary or estate, as the
case may be, in book-entry form).
7.6
Payment of Restricted Stock Units.
Each Restricted Stock Unit shall have a value equal to
the Fair Market Value of a share of Common Stock. Restricted Stock Units shall be paid in cash,
Common Stock, other securities or other property, as determined in the sole discretion of the
Committee, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with
the applicable Award Agreement. Except as otherwise determined by the Committee at or after grant,
Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise
encumbered or disposed of, and all Restricted Stock Units and all rights of the grantee to such
Restricted Stock Units shall terminate, without further obligation on the part of the Company,
unless the grantee remains in continuous employment of the Company for the entire restricted period
in relation to which such Restricted Stock Units were granted and unless any other restrictive
conditions relating to the Restricted Stock Unit Award are met. Except as otherwise provided in
the Plan or the applicable Award Agreement, a Participant shall have no rights of a stockholder
with respect to Restricted Stock Units.
ARTICLE VIII.
PERFORMANCE AWARDS
8.1
Grant.
The Committee shall have sole and complete authority to determine the Participants
who shall receive Performance Awards, which shall consist of a right that is (i) denominated in
cash or Common Stock (including but not limited to Restricted Stock and Restricted Stock Units),
(ii) valued, as determined by the Committee, in accordance with the achievement of such performance
goals during such performance periods as the Committee shall establish, and (iii) payable at such
time and in such form as the Committee shall determine.
10
8.2
Terms and Conditions.
Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any Performance Award and
the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and
may amend specific provisions of the Performance Award; provided, however, that such amendment may
not adversely affect existing Performance Awards made within a performance period commencing prior
to implementation of the amendment.
8.3
Payment of Performance Awards.
Performance Awards may be paid in a lump sum or in
installments following the close of the performance period or, in accordance with the procedures
established by the Committee, on a deferred basis. Notwithstanding the foregoing, the Committee
may in its discretion, waive any performance goals and/or other terms and conditions relating to a
Performance Award. A Participants rights to any Performance Award may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of in any manner, except by
will or the laws of descent and distribution, and/or except as the Committee may determine at or
after grant.
8.4
Termination of Service.
Each Award Agreement shall set forth the extent to which the
Participant shall have the right to retain Performance Awards following such Participants
Termination of Employment. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the applicable Award Agreement, need not be uniform among all such
Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for the
termination of employment.
8.5
Provisions Applicable To Covered Officers And Performance Awards
. Notwithstanding
anything in the Plan to the contrary, unless the Committee determines that a Performance Award to
be granted to a Covered Officer should not qualify as performance-based compensation for purposes
of Section 162(m), Performance Awards granted to Covered Officers shall be subject to the terms and
provisions of this
Section 8.5
. Accordingly, unless otherwise determined by the Committee,
if any provision of the Plan or any Award Agreement relating to such an Award does not comply or is
inconsistent with Section 162(m), such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, and no provision shall be deemed to confer upon the
Committee discretion to increase the amount of compensation otherwise payable to a Covered Officer
in connection with any such Award upon the attainment of the performance criteria established by
the Committee.
(a) The Committee may grant Performance Awards to Covered Officers based solely upon the
attainment of performance targets related to one or more performance goals selected by the
Committee from among the goals specified below. For the purposes of this
Section 8.5
,
performance goals shall be limited to one or more of the following Company, Subsidiary, operating
unit, business segment or division financial performance measures:
(i) earnings before interest, taxes, depreciation and/or
amortization;
(ii) operating income or profit;
(iii) operating efficiencies;
(iv) return on equity, assets, capital, capital employed or
investment;
(v) net income;
(vi) earnings (gross, net, pre-tax, after tax or per share);
(vii) utilization;
(viii) gross or net profit margins;
(ix) stock price or total stockholder return;
(x) customer growth or sales;
(xi) debt reduction;
(xii) revenue;
(xiii) market share;
(xiv) strategic business objectives, consisting of
one or more objectives based on meeting specified cost targets,
business expansion goals or goals relating to acquisitions or
divestitures; or
(xv) any combination thereof.
Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise
employ comparisons
11
based on internal targets, the past performance of the Company or any Subsidiary, operating unit,
business segment or division of the Company and/or the past or current performance of other
companies, and in the case of earnings-based measures, may use or employ comparisons relating to
capital, stockholders equity and/or Shares outstanding, or to assets or net assets. The Committee
may appropriately adjust any evaluation of performance under criteria set forth in this
Section
8.5(a)
to exclude any of the following events that occurs during a performance period: (i)
asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes
in tax law, accounting principles or other such laws or provisions affecting reported results, (iv)
accruals for reorganization and restructuring programs and (v) any extraordinary non-recurring
items as described in Accounting Principles Board Opinion No. 30 and/or in managements discussion
and analysis of financial condition and results of operations appearing in the Companys annual
report to stockholders for the applicable year.
(b) With respect to any Covered Officer, the maximum annual number of shares of Common Stock
in respect of which all Performance Awards may be granted under
Article VIII
of the Plan is
1,500,000 and the maximum amount of all Performance Awards that are settled in cash and that may be
granted under this
Article VIII
in any year is $5,000,000.
(c) To the extent necessary to comply with Section 162(m), with respect to grants of
Performance Awards, no later than 90 days following the commencement of each performance period (or
such other time as may be required or permitted by Section 162(m) of the Code), the Committee
shall, in writing, (1) select the performance goal or goals applicable to the performance period,
(2) establish the various targets and bonus amounts which may be earned for such performance
period, and (3) specify the relationship between performance goals and targets and the amounts to
be earned by each Covered Officer for such performance period. Following the completion of each
performance period, the Committee shall certify in writing whether the applicable performance
targets have been achieved and the amounts, if any, payable to Covered Officers for such
performance period. In determining the amount earned by a Covered Officer for a given performance
period, subject to any applicable Award Agreement, the Committee shall have the right to reduce
(but not increase) the amount payable at a given level of performance to take into account
additional factors that the Committee may deem relevant in its sole discretion to the assessment of
individual or corporate performance for the performance period.
ARTICLE IX.
OTHER STOCK-BASED AWARDS
The Committee shall have the authority to determine the Participants who shall receive Other
Stock-Based Awards, which shall consist of any right that is (i) not an Award described in
Sections 6
,
7
or
8
above and (ii) an Award of Common Stock or an Award
denominated or payable in, valued in whole or in part by reference to, or otherwise based on or
related to, Common Stock (including, without limitation, securities convertible into Common Stock),
as deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of
the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions
of any such Other Stock-Based Award.
ARTICLE X.
TERM; AMENDMENTS
10.1
Term
. The Plan, as amended and restated, shall be effective from the date that this
amended and restated Plan is approved by the Board. Unless sooner terminated by action of the
Board, the Plan will terminate on the date that is ten years after the date this amended and
restated Plan is approved by the Board, but Awards granted before that date will continue to be
effective in accordance with their terms and conditions.
10.2
Amendment or Discontinuance
. Subject to the limitations set forth in this
Article X
, the Board may at any time and from time to time, without the consent of the
Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment which requires stockholder approval in order for the Plan and Awards
made under the Plan to continue to comply with Sections 162(m), 421, and 422 of the Code, including
any successors to such Sections, shall be effective unless such amendment shall be approved by the
requisite vote of the stockholders of the Company entitled to vote thereon. Except as otherwise
provided in any existing Award Agreement, any such amendment shall, to the extent deemed necessary
or advisable by the
12
Committee, be applicable to any outstanding Awards theretofore granted under the Plan. Except
as otherwise provided in any Award Agreement, in the event of any such amendment to the Plan, the
holder of any Award outstanding under the Plan shall, upon request of the Committee and as a
condition to the exercisability thereof, execute a conforming amendment in the form prescribed by
the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this
Plan to the contrary, unless required by law, no action contemplated or permitted by this
Article X
shall adversely affect any rights of Participants or obligations of the Company
to Participants with respect to any Incentive theretofore granted under the Plan without the
consent of the affected Participant.
ARTICLE XI.
CAPITAL ADJUSTMENTS
In the event that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, stock split, reverse stock split,
rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination,
subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance
of warrants or other rights to purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event affects the Common Stock, then the Committee shall in an
equitable and proportionate manner, as determined by the Committee (and, as applicable, in such
manner as is consistent with Sections 162(m), 422 and 409A of the Code and the regulations
thereunder) in order to prevent the dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, adjust any or all of the (i) the number of shares and
type of Common Stock (or the securities or property) which thereafter may be made the subject of
Awards, (ii) the number of shares and type of Common Stock (or other securities or property)
subject to outstanding Awards, (iii) the number of shares and type of Common Stock (or other
securities or property) specified as the annual per-participant limitations under
Sections
6.8
and
8.5(b)
of the Plan, (iv) the Option Price of each outstanding Award, and
(v) the number of or Grant Price of shares of Common Stock then subject to outstanding SARs
previously granted and unexercised under the Plan to the end that the same proportion of the
Companys issued and outstanding shares of Common Stock in each instance shall remain subject to
exercise at the same aggregate Grant Price; provided however, that the number of shares of Common
Stock (or other securities or property) subject to any Award shall always be a whole number. In
lieu of the foregoing, if deemed appropriate, the Committee may make provision for a cash payment
to the holder of an outstanding Award, except as may otherwise be provided in an applicable Award
Agreement. Such adjustments shall be made in accordance with the rules of any securities exchange,
stock market, or stock quotation system to which the Company is subject. No adjustment or cash
payment will be required under this
Article XI
for the issuance of Common Stock for such
consideration, not less than the par value of the Common Stock, as may be determined from time to
time by the Board to be fair consideration.
Upon the occurrence of any such adjustment or cash payment, the Company shall provide notice
to each affected Participant of its computation of such adjustment or cash payment which shall be
conclusive and shall be binding upon each such Participant.
ARTICLE XII.
RECAPITALIZATION, MERGER AND CONSOLIDATION
12.1
No Effect on Companys Authority
. The existence of this Plan and Awards granted hereunder
shall not affect in any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the
Companys capital structure and its business, or any merger or consolidation of the Company, or any
issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise
affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase
same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding, whether of a similar character
or otherwise.
12.2
Conversion of Awards Where Company Survives
. Subject to any required action by the
stockholders, if the Company shall be the surviving or resulting corporation in any merger,
consolidation or share exchange, any Award granted hereunder shall pertain to and apply to the
securities or rights (including cash, property, or assets) to which a holder of the number of
shares of Common Stock subject to the Award would have been entitled.
13
12.3
Exchange or Cancellation of Incentives Where Company Does Not Survive
. In the event of
any merger, consolidation or share exchange which is a Change of Control in which the Company does
not survive, there may be substituted for each share of Common Stock subject to the unexercised
portions of outstanding Options or SARs, that number of shares of each class of stock or other
securities or that amount of cash, property, or assets of the surviving, resulting or consolidated
company which were distributed or distributable to the stockholders of the Company in respect to
each share of Common Stock held by them, such outstanding Options or SARs to be thereafter
exercisable for such stock, securities, cash, or property in accordance with their terms.
Notwithstanding the foregoing, however, all Stock Options or SARs may be canceled by the
Company, in its sole discretion, as of the effective date of any merger, consolidation or share
exchange which is a Change of Control in which the Company does not survive, by either:
(a) giving notice to each holder thereof or his personal representative of its intention to
cancel such Stock Options or SARs and permitting the purchase during the thirty (30) day period
next preceding such effective date of any or all of the shares subject to such outstanding Stock
Options or SARs, including, in the Boards discretion, some or all of the shares as to which such
Stock Options or SARs would not otherwise be vested and exercisable; or
(b) paying the holder thereof an amount equal to a reasonable estimate of the difference
between the net amount per share payable in such transaction or as a result of such transaction,
and the exercise price per share of such Option (hereinafter the Spread), multiplied by the
number of shares subject to the Option. In cases where the shares constitute, or would after
exercise, constitute Restricted Stock, the Company, in its discretion, may include some or all of
those shares in the calculation of the amount payable hereunder. In estimating the Spread,
appropriate adjustments to give effect to the existence of the Options shall be made, such as
deeming the Options to have been exercised, with the Company receiving the exercise price payable
thereunder, and treating the shares receivable upon exercise of the Options as being outstanding in
determining the net amount per share. In cases where the proposed transaction consists of the
acquisition of assets of the Company, the net amount per share shall be calculated on the basis of
the net amount receivable with respect to shares of Common Stock upon a distribution and
liquidation by the Company after giving effect to expenses and charges, including but not limited
to taxes, payable by the Company before such liquidation could be completed.
(c) An Option or SAR that by its terms would be vested and exercisable upon a Change in
Control will be considered vested and exercisable for purposes of
Section 12.3(a)
hereof.
ARTICLE XIII.
LIQUIDATION OR DISSOLUTION
Subject to
Section 12.3
hereof, in case the Company shall, at any time while any Award
under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its
property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall be
entitled to receive, in lieu of each share of Common Stock of the Company which such Participant
would have been entitled to receive under the Awards, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation,
or winding up with respect to each share of Common Stock of the Company. If the Company shall, at
any time prior to the expiration of any Award, make any partial distribution of its assets, in the
nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution
of a cash dividend payable out of earned surplus and designated as such) then in such event the
purchase price, if any, Option Prices or Grant Prices then in effect with respect to each Option or
SAR shall be reduced, on the payment date of such distribution, in proportion to the percentage
reduction in the tangible book value of the shares of the Companys Common Stock (determined in
accordance with generally accepted accounting principles) resulting by reason of such distribution.
14
ARTICLE XIV.
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Awards may be granted under the Plan from time to time in substitution for similar instruments
held by employees or directors of a corporation, partnership, or limited liability company who
become or are about to become Employees or Outside Directors of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the Company, the acquisition
by the Company of equity of the employing entity, or any other similar transaction pursuant to
which the Company becomes the successor employer. The terms and conditions of the Substitute Awards
so granted may vary from the terms and conditions set forth in this Plan to such extent as the
Committee at the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Awards in substitution for which they are granted.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
15.1
Investment Intent
. The Company may require that there be presented to and filed with it
by any Participant under the Plan, such evidence as it may deem necessary to establish that the
Awards granted or the shares of Common Stock to be purchased or transferred are being acquired for
investment and not with a view to their distribution.
15.2
Nonpublicly Traded Common Stock
. In the event a Participant receives, as Restricted Stock
or pursuant to the exercise of a Stock Option, shares of Common Stock that are Nonpublicly Traded,
the Committee may impose restrictions and conditions on the transfer or other disposition of those
shares. The restrictions and conditions may be reflected in the Award Agreement or in a separate
stockholders agreement.
15.3
No Right to Continued Employment
. Neither the Plan nor any Awards granted under the Plan
shall confer upon any Participant any right with respect to continuance of employment by the
Company or any Subsidiary.
15.4
Indemnification of Board and Committee
. No member of the Board or the Committee, nor any
officer or Employee of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board and the Committee, each officer of the Company,
and each Employee of the Company acting on behalf of the Board or the Committee shall, to the
extent permitted by law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.
15.5
Effect of the Plan
. Neither the adoption of this Plan nor any action of the Board or the
Committee shall be deemed to give any person any right to be granted an Award or any other rights
except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the
Committee and executed on behalf of the Company, and then only to the extent and upon the terms and
conditions expressly set forth therein. The terms and conditions of Awards need not be the same
with respect to each Participant. Nothing contained in the Plan shall prevent the Company or any
Subsidiary from adopting or continuing in effect other compensation arrangements, which may, but
need not, provide for the grant of Options, Restricted Stock, Restricted Stock Units, Other
Stock-Based Awards or other types of Awards provided for hereunder.
15.6
Compliance With Other Laws and Regulations
. Notwithstanding anything contained herein to
the contrary, the Company shall not be required to sell or issue shares of Common Stock under any
Award if the issuance thereof would constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted
or traded; and, as a condition of any sale or issuance of shares of Common Stock under an Award,
the Committee may require such agreements or undertakings, if any, as the Committee may deem
necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant
and exercise of Awards hereunder, and the obligation of the Company to sell and deliver shares of
15
Common Stock, shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
15.7
Tax Requirements
. The Company shall have shall have the right and is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award or under the Plan,
or from any other compensation or other amount owing to a Participant, the amount (in cash, Common
Stock, other securities, other Awards or other property) of any applicable withholding or other
tax-related obligations in respect of an Award, its exercise or any other transaction involving an
Award, or any payment or transfer under an Award or under the Plan and to take such other action as
may be necessary in the opinion of the Company to satisfy all obligations for the payment of such
taxes. The Participant receiving shares of Common Stock issued under the Plan shall be required to
pay the Company the amount of any taxes which the Company is required to withhold with respect to
such shares of Common Stock. Such payments shall be required to be made prior to the delivery of
any certificate representing such shares of Common Stock. Such payment may be made (i) by the
delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of
fractional shares under (iii) below) the required tax withholding obligation of the Company;
(ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the
exercising Participant to the Company of shares of Common Stock previously owned by the
Participant, which shares so delivered have an aggregate Fair Market Value that equals or exceeds
(to avoid the issuance of fractional shares under (iii) below) the required tax withholding
payment; (iii) if the Company, in its sole discretion, so consents in writing, the Companys
withholding of a number of shares to be delivered upon the exercise, vesting or other payment of an
Award, which shares so withheld have an aggregate fair market value that equals (but does not
exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii).
Notwithstanding the foregoing, in the event of an assignment of a Nonqualified Stock Option or SAR
pursuant to
Section 15.8
, the Participant who assigns the Nonqualified Stock Option or SAR
shall remain subject to withholding taxes upon exercise of the Nonqualified Stock Option or SAR by
the transferee to the extent required by the Code or the rules and regulations promulgated
thereunder.
15.8
Assignability
. Incentive Stock Options may not be transferred, assigned, pledged,
hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and
distribution and may be exercised during the lifetime of the Participant only by the Participant or
the Participants legally authorized representative, and each Award Agreement in respect of an
Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not
constitute a transfer of the Option. The Committee may waive or modify any limitation contained in
this
Section 15.8
that is not required for compliance with Section 422 of the Code.
Except as otherwise provided herein, Nonqualified Stock Options and SARs may not be
transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will
or the laws of descent and distribution. The Committee may, in its discretion, authorize all or a
portion of a Nonqualified Stock Option or an SAR granted to a Participant to be on terms which
permit transfer by such Participant to (i) the spouse (or former spouse), children or grandchildren
of the Participant (Immediate Family Members), (ii) a trust or trusts for the exclusive benefit
of such Immediate Family Members or entities described in (iv) below, (iii) a partnership in which
the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by
Immediate Family Members, (3), (iv) an entity exempt from federal income tax pursuant to
Section 501(c)(3) of the Code or any successor provision, or (v) a split interest trust or pooled
income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that
(x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to
which such Nonqualified Stock Option or SAR is granted must be approved by the Committee and must
expressly provide for transferability in a manner consistent with this
Section 15.8
, and
(z) subsequent transfers of transferred Nonqualified Stock Options or SARs shall be prohibited
except those by will or the laws of descent and distribution.
Following any transfer, any such Nonqualified Stock Option or SAR shall continue to be subject
to the same terms and conditions as were applicable immediately prior to transfer, provided that
for purposes of
Articles VIII
,
X
,
XI
,
XIII
and
XV
hereof
the term Participant shall be deemed to include the transferee. The events of Termination of
Service shall continue to be applied with respect to the original Participant, following which the
Nonqualified Stock Options and SARs shall be exercisable, if at all, by the transferee only to the
extent and for the periods specified in the Award Agreement. The Committee and the Company shall
have no obligation to inform any transferee of a Nonqualified Stock Option or an SAR of any
expiration, termination, lapse or acceleration of such Stock Option or SAR. The Company shall have
no obligation to register with any federal or state securities
16
commission or agency any Common Stock issuable or issued under a Nonqualified Stock Option or SAR
that has been transferred by a Participant under this
Section 15.8
.
15.9
Dividend Equivalents.
In the sole and complete discretion of the Committee, an Award may
provide the Participant with dividends or dividend equivalents, payable in cash, Common Stock,
other securities or other property on a current or deferred basis. All dividend or dividend
equivalents which are not paid currently may, at the Committees discretion, accrue interest, be
reinvested into additional Common Stock, or, in the case of dividends or dividend equivalents
credited in connection with Performance Awards, be credited as additional Performance Awards and
paid to the Participant if and when, and to the extent that, payment is made pursuant to such
Award. The total number of Shares available for grant under
Article V
shall not be reduced
to reflect any dividends or dividend equivalents that are reinvested into additional Common Stock
or credited as Performance Awards.
15.10
No Guarantee of Favorable Tax Treatment
. Although the Company intends to administer the
Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A of
the Code, the Company does not warrant that any Award under the Plan will qualify for favorable tax
treatment under Section 409A of the Code or any other provision of federal, state, local or foreign
law. The Company shall not be liable to any Participant for any tax, interest, or penalties that
Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award
under the Plan.
15.11
No Trust or Fund Created.
Neither the Plan nor any Award shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship between the Company or
any Subsidiary and a Participant or any other person. To the extent that any person acquires a
right to receive payments from the Company or any Subsidiary pursuant to an Award, such right shall
be no greater than the right of any unsecured general creditor of the Company or any Subsidiary.
15.12
Severability.
If any provision of the Plan or any Award is, or becomes, or is deemed to
be invalid, illegal or unenforceable in any jurisdiction or as to any Participant or Award, or
would disqualify the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
Participant or Award and the remainder of the Plan and any such Award shall remain in full force
and effect.
15.13
Use of Proceeds
. Proceeds from the sale of shares of Common Stock pursuant to Incentives
granted under this Plan shall constitute general funds of the Company.
15.14
Legend
. Each certificate representing shares of Restricted Stock issued to a Participant
shall bear the following legend, or a similar legend deemed by the Company to constitute an
appropriate notice of the provisions hereof (any such certificate not having such legend shall be
surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
Transfer of this stock is restricted in accordance with conditions printed on the reverse of this
certificate.
On the reverse:
The shares of stock evidenced by this certificate are subject to and transferable only in
accordance with that certain First Acceptance Corporation Long Term Incentive Plan (the Plan), a
copy of which is on file at the principal office of the Company in Nashville, Tennessee. No
transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject
to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or
pledgee hereof agrees to be bound by all of the provisions of said Plan.
The following legend shall be inserted on a certificate evidencing Common Stock issued
under the Plan if the shares were not issued in a transaction registered under the applicable
federal and state securities laws:
17
Shares of stock represented by this certificate have been acquired by the holder for investment
and not for resale, transfer or distribution, have been issued pursuant to exemptions from the
registration requirements of applicable state and federal securities laws, and may not be offered
for sale, sold or transferred other than pursuant to effective registration under such laws, or in
transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company
of compliance with such laws, as to which the Company may rely upon an opinion of counsel
satisfactory to the Company.
A copy of this Plan shall be kept on file in the principal office of the Company
in
Nashville, Tennessee.
18
Exhibit 99.2
OPTION CANCELLATION AND
RESTRICTED STOCK AWARD AGREEMENT
THIS OPTION CANCELLATION AND RESTRICTED STOCK AWARD AGREEMENT (this Agreement) is made and
entered into as of November 18, 2009 (the Date of Grant), between First Acceptance Corporation, a
Delaware corporation (the Company), and Keith E. Bornemann (the Participant). Capitalized
terms not otherwise defined herein shall have the meaning ascribed to such terms in the Amended and
Restated First Acceptance Corporation 2002 Long Term Incentive Plan (the Plan).
WHEREAS, the Company has adopted the Plan, which permits the issuance of restricted shares of
the Companys common stock, par value $0.01 per share (the Common Stock);
WHEREAS, Participant holds an outstanding option to purchase 10,000 shares of Common Stock of
the Company previously granted by the Company to Participant (the Outstanding Option);
WHEREAS, the Companys stockholders approved a one-time value-for-value option exchange on
November 17, 2009, whereby the Participant may surrender for cancellation the Outstanding Option in
exchange for a lesser number of shares of restricted stock with an aggregate value not to exceed
$150,000;
WHEREAS, the Participant desires to surrender, and the Company cancel, the Outstanding Option,
and in exchange for such surrendered and cancelled Outstanding Option, and pursuant to the Plan,
the Committee desires to grant an award of restricted stock to the Participant as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1.
Cancellation of Outstanding Option, Grant of Restricted Stock
.
(a) The Participant hereby surrenders the Outstanding Option to the Company, agrees that the
Outstanding Option shall be cancelled, and agrees that the Nonqualified Stock Option Agreement,
dated February 7, 2007, between Participant and the Company shall be cancelled and of no further
force or effect.
(b) The Company hereby grants to the Participant, in exchange for the cancellation of the
Outstanding Option, an award (the Award) of 3,140 shares of Common
Stock of the Company (the
Stock or the Restricted Stock) on the terms and conditions set forth in this Agreement and as
otherwise provided in the Plan.
(c) The Participants rights with respect to the Stock subject to the Award shall remain
forfeitable at all times prior to the date on which the restrictions as to such Stock shall lapse
in accordance with Section 3 hereof.
2.
Terms and Rights as a Stockholder
.
(a) Except as provided herein and subject to such other exceptions as may be determined by the
Committee in its discretion, the Restriction Period for the Restricted Stock granted herein shall
expire in five equal, annual installments beginning on the first anniversary of Date of Grant (as
may be adjusted in accordance with Section 7 hereof).
(b) The Participant shall have all rights of a stockholder with respect to the Restricted
Stock, including the right to receive dividends and the right to vote such Stock, subject to the
following restrictions:
(i) the Participant shall not be entitled to delivery of the stock certificate for any
Stock until the expiration of the Restriction Period as to such Stock;
(ii) none of the Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of during the Restriction Period as to
such Stock; and
(iii) except as otherwise determined by the Committee at or after the grant of the
Award hereunder, all shares of Restricted Stock as to which the Restriction Period has not
expired or been terminated shall be forfeited, and all rights of the Participant to such
Stock shall terminate, without further obligation on the part of the Company, unless the
Participant remains in the continuous employment of the Company or a Subsidiary until the
expiration or termination of the Restriction Period as to such Stock.
Any Stock, any other securities of the Company and any other property (except for cash
dividends) distributed with respect to the Restricted Stock shall be subject to the same
restrictions, terms and conditions as such Restricted Stock.
(c) Notwithstanding the foregoing, the Restriction Period shall automatically terminate as to
all Restricted Stock awarded hereunder (as to which such Restriction Period has not previously
terminated) upon the occurrence of the following events:
-2-
(i) termination of the Participants employment with the Company or a Subsidiary that
results from the Participants death, Retirement (as defined in the Plan) or Total and
Permanent Disability (as defined in the Plan);
(ii) the termination of the Participants employment with the Company or a Subsidiary
by the Participant for Good Reason (as defined in the Employment Agreement in effect as of
the date hereof between Participant and the Company (the Employment Agreement)) or by the
Company without Cause (as defined in the Employment Agreement); or
(iii) the occurrence of a Change in Control (as defined in the Plan).
3.
Termination of Restrictions
. At the end of the Restriction Period as to any
portion of the Restricted Stock, or at such earlier time as may be determined by the Committee, all
restrictions set forth in this Agreement or in the Plan relating to such portion of the Restricted
Stock shall lapse as to such portion of the Restricted Stock, and a stock certificate for the
appropriate number of shares of such Stock, free of the restrictions and restrictive stock legend,
shall be delivered to the Participant or the Participants beneficiary or estate, as the case may
be, pursuant to the terms of this Agreement.
4.
Delivery of Stock
.
(a) As of the date hereof, certificates representing the Restricted Stock shall be registered
in the name of the Participant and held by the Company or transferred to a custodian appointed by
the Company for the account of the Participant subject to the terms and conditions of the Plan and
shall remain in the custody of the Company or such custodian until their delivery to the
Participant or Participants beneficiary or estate as set forth in Sections 4(b) and (c) hereof or
their reversion to the Company as set forth in Sections 2(b) and 4(d) hereof.
(b) Certificates representing Restricted Stock in respect of which the Restriction Period has
lapsed pursuant to this Agreement shall be delivered to the Participant as soon as practicable
following the date on which the restrictions on such Restricted Stock lapse.
(c) Certificates representing Restricted Stock in respect of which the Restriction Period
lapsed upon the Participants death shall be delivered to the executors or administrators of the
Participants estate as soon as practicable following the receipt of proof of the Participants
death satisfactory to the Company.
(d) By accepting the grant of Restricted Stock under this Agreement, Participant shall
irrevocably grant to the Company a power of attorney to transfer any shares
forfeited to the Company and agrees to execute any documents requested by the Company in
-3-
connection with such forfeiture and transfer. Participant hereby acknowledges that any breach by
him of his obligations under this Section 4(d) would cause substantial and irreparable damage to
the Company, and that money damages would be an inadequate remedy therefore, and, accordingly,
acknowledges and agrees that the Company shall be entitled to specific performance to remedy the
breach of such obligations (in addition to the other rights and remedies provided for herein).
(e) The face of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS
PRINTED ON THE REVERSE OF THIS CERTIFICATE.
(f) The reverse of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN AMENDED AND
RESTATED FIRST ACCEPTANCE CORPORATION 2002 LONG TERM INCENTIVE
PLAN (THE PLAN), A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY IN NASHVILLE, TENNESSEE. NO TRANSFER OR
PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID PLAN. BY
ACCEPTANCE OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGEE
HEREOF AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SAID PLAN.
5.
Effect of Lapse of Restrictions
. To the extent that the Restriction Period
applicable to any Restricted Stock shall have lapsed, the Participant may receive, hold, sell or
otherwise dispose of such Stock free and clear of the restrictions imposed under the Plan and this
Agreement.
6.
No Right to Continued Service
. This Agreement shall not be construed as giving the
Participant the right to be retained as an employee of the Company or any Subsidiary.
-4-
7.
Adjustments
. The Committee shall make equitable and proportionate adjustments in
the terms and conditions of, and the criteria included in, this Award in recognition of unusual or
nonrecurring events (including, without limitation, the events described in Article XI of the Plan)
affecting the Company or any Subsidiary, or the financial statements of the Company or any
Subsidiary, or of changes in applicable laws, regulations, or accounting principals in accordance
with the Plan.
8.
Amendment to Award
. Subject to the restrictions contained in Article X of the
Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate, the Award, prospectively or retroactively; provided that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination
that would adversely affect the rights of the Participant or any holder or beneficiary of the Award
shall not to that extent be effective without the consent of the Participant, holder or beneficiary
affected.
9.
Withholding of Taxes
. If the Participant makes an election under section 83(b) of
the Code with respect to the Award, the Award made pursuant to this Agreement shall be conditioned
upon the prompt payment to the Company of any applicable withholding obligations or withholding
taxes by the Participant (Withholding Taxes). Failure by the Participant to pay such Withholding
Taxes will render this Agreement and the Award granted hereunder null and void ab initio and the
Restricted Stock granted hereunder will be immediately cancelled. If the Participant does not make
an election under section 83(b) of the Code with respect to the Award, upon the lapse of the
Restriction Period with respect to any portion of Restricted Stock (or property distributed with
respect thereto), the Company shall satisfy the required Withholding Taxes as set forth by Internal
Revenue Service guidelines for the employers minimum statutory withholding with respect to the
Participant and issue vested shares to the Participant without restriction.
10.
Plan Governs
. The Participant hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are
governed by the terms of the Plan, and in the case of any inconsistency between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall govern.
11.
Severability
. If any provision of this Agreement is, or becomes, or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as to any person or the Award, or
would disqualify the Plan or Award under any laws deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
-5-
12.
Notices
. All notices required to be given under this Agreement shall be deemed to
be received if delivered or mailed as provided for herein, to the parties at the following
addresses, or to such other address as either party may provide in writing from time to time.
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To the Company:
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First Acceptance Corporation
3322 West End Ave., Suite 1000
Nashville, Tennessee 37203
Attn: Secretary
Facsimile: (615) 844-2800
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To the Participant:
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The address then maintained with respect to the Participant
in the Companys records.
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13.
Governing Law
. The validity, construction and effect of this Agreement shall be
determined in accordance with the laws of the State of Delaware without giving effect to conflicts
of laws principles.
14.
Successors in Interest
. This Agreement shall inure to the benefit of and be
binding upon any successor to the Company. This Agreement shall inure to the benefit of the
Participants legal representatives. All obligations imposed upon the Participant and all rights
granted to the Company under this Agreement shall be binding upon the Participants heirs,
executors, administrators and successors.
15.
Resolution of Disputes
. Any dispute or disagreement which may arise under, or as
a result of, or in any way related to, the interpretation, construction or application of this
Agreement shall be determined by the Committee. Any determination made hereunder shall be final,
binding and conclusive on the Participant and the Company for all purposes.
-6-
IN WITNESS WHEREOF, the parties have caused this Option Cancellation and Restricted Stock
Award Agreement to be duly executed effective as of the day and year first above written.
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FIRST ACCEPTANCE CORPORATION:
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By:
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/s/ Stephen J. Harrison
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Name:
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Stephen J. Harrison
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Its:
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Chief Executive Officer
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PARTICIPANT:
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/s/ Keith E. Bornemann
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Name: Keith E. Bornemann
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Address:
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Exhibit 99.3
OPTION CANCELLATION AND
RESTRICTED STOCK AWARD AGREEMENT
THIS OPTION CANCELLATION AND RESTRICTED STOCK AWARD AGREEMENT (this Agreement) is made and
entered into as of November 18, 2009 (the Date of Grant), between First Acceptance Corporation, a
Delaware corporation (the Company), and Kevin P. Cohn (the Participant). Capitalized terms not
otherwise defined herein shall have the meaning ascribed to such terms in the Amended and Restated
First Acceptance Corporation 2002 Long Term Incentive Plan (the Plan).
WHEREAS, the Company has adopted the Plan, which permits the issuance of restricted shares of
the Companys common stock, par value $0.01 per share (the Common Stock);
WHEREAS, Participant holds an outstanding option to purchase 100,000 shares of Common Stock of
the Company previously granted by the Company to Participant (the Outstanding Option);
WHEREAS, the Companys stockholders approved a one-time value-for-value option exchange on
November 17, 2009, whereby the Participant may surrender for cancellation the Outstanding Option in
exchange for a lesser number of shares of restricted stock with an aggregate value not to exceed
$150,000;
WHEREAS, the Participant desires to surrender, and the Company cancel, the Outstanding Option,
and in exchange for such surrendered and cancelled Outstanding Option, and pursuant to the Plan,
the Committee desires to grant an award of restricted stock to the Participant as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1.
Cancellation of Outstanding Option, Grant of Restricted Stock
.
(a) The Participant hereby surrenders the Outstanding Option to the Company, agrees that the
Outstanding Option shall be cancelled, and agrees that the Nonqualified Stock Option Agreement,
dated October 9, 2006, between Participant and the Company shall be cancelled and of no further
force or effect.
(b) The Company hereby grants to the Participant, in exchange for the cancellation of the
Outstanding Option, an award (the Award) of 27,847 shares of
Common Stock of the Company (the
Stock or the Restricted Stock) on the terms and conditions set forth in this Agreement and as
otherwise provided in the Plan.
(c) The Participants rights with respect to the Stock subject to the Award shall remain
forfeitable at all times prior to the date on which the restrictions as to such Stock shall lapse
in accordance with Section 3 hereof.
2.
Terms and Rights as a Stockholder
.
(a) Except as provided herein and subject to such other exceptions as may be determined by the
Committee in its discretion, the Restriction Period for the Restricted Stock granted herein shall
expire in four equal, annual installments beginning on the first anniversary of Date of Grant (as
may be adjusted in accordance with Section 7 hereof).
(b) The Participant shall have all rights of a stockholder with respect to the Restricted
Stock, including the right to receive dividends and the right to vote such Stock, subject to the
following restrictions:
(i) the Participant shall not be entitled to delivery of the stock certificate for any
Stock until the expiration of the Restriction Period as to such Stock;
(ii) none of the Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of during the Restriction Period as to
such Stock; and
(iii) except as otherwise determined by the Committee at or after the grant of the
Award hereunder, all shares of Restricted Stock as to which the Restriction Period has not
expired or been terminated shall be forfeited, and all rights of the Participant to such
Stock shall terminate, without further obligation on the part of the Company, unless the
Participant remains in the continuous employment of the Company or a Subsidiary until the
expiration or termination of the Restriction Period as to such Stock.
Any Stock, any other securities of the Company and any other property (except for cash
dividends) distributed with respect to the Restricted Stock shall be subject to the same
restrictions, terms and conditions as such Restricted Stock.
(c) Notwithstanding the foregoing, the Restriction Period shall automatically terminate as to
all Restricted Stock awarded hereunder (as to which such Restriction Period has not previously
terminated) upon the occurrence of the following events:
-2-
(i) termination of the Participants employment with the Company or a Subsidiary that
results from the Participants death, Retirement (as defined in the Plan) or Total and
Permanent Disability (as defined in the Plan);
(ii) the termination of the Participants employment with the Company or a Subsidiary
by the Participant for Good Reason (as defined in the Employment Agreement in effect as of
the date hereof between Participant and the Company (the Employment Agreement)) or by the
Company without Cause (as defined in the Employment Agreement); or
(iii) the occurrence of a Change in Control (as defined in the Plan).
3.
Termination of Restrictions
. At the end of the Restriction Period as to any
portion of the Restricted Stock, or at such earlier time as may be determined by the Committee, all
restrictions set forth in this Agreement or in the Plan relating to such portion of the Restricted
Stock shall lapse as to such portion of the Restricted Stock, and a stock certificate for the
appropriate number of shares of such Stock, free of the restrictions and restrictive stock legend,
shall be delivered to the Participant or the Participants beneficiary or estate, as the case may
be, pursuant to the terms of this Agreement.
4.
Delivery of Stock
.
(a) As of the date hereof, certificates representing the Restricted Stock shall be registered
in the name of the Participant and held by the Company or transferred to a custodian appointed by
the Company for the account of the Participant subject to the terms and conditions of the Plan and
shall remain in the custody of the Company or such custodian until their delivery to the
Participant or Participants beneficiary or estate as set forth in Sections 4(b) and (c) hereof or
their reversion to the Company as set forth in Sections 2(b) and 4(d) hereof.
(b) Certificates representing Restricted Stock in respect of which the Restriction Period has
lapsed pursuant to this Agreement shall be delivered to the Participant as soon as practicable
following the date on which the restrictions on such Restricted Stock lapse.
(c) Certificates representing Restricted Stock in respect of which the Restriction Period
lapsed upon the Participants death shall be delivered to the executors or administrators of the
Participants estate as soon as practicable following the receipt of proof of the Participants
death satisfactory to the Company.
(d) By accepting the grant of Restricted Stock under this Agreement, Participant shall
irrevocably grant to the Company a power of attorney to transfer any shares
forfeited to the Company and agrees to execute any documents requested by the Company in
-3-
connection with such forfeiture and transfer. Participant hereby acknowledges that any breach by
him of his obligations under this Section 4(d) would cause substantial and irreparable damage to
the Company, and that money damages would be an inadequate remedy therefore, and, accordingly,
acknowledges and agrees that the Company shall be entitled to specific performance to remedy the
breach of such obligations (in addition to the other rights and remedies provided for herein).
(e) The face of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS
PRINTED ON THE REVERSE OF THIS CERTIFICATE.
(f) The reverse of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN AMENDED AND
RESTATED FIRST ACCEPTANCE CORPORATION 2002 LONG TERM INCENTIVE
PLAN (THE PLAN), A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY IN NASHVILLE, TENNESSEE. NO TRANSFER OR
PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID PLAN. BY
ACCEPTANCE OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGEE
HEREOF AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SAID PLAN.
5.
Effect of Lapse of Restrictions
. To the extent that the Restriction Period
applicable to any Restricted Stock shall have lapsed, the Participant may receive, hold, sell or
otherwise dispose of such Stock free and clear of the restrictions imposed under the Plan and this
Agreement.
6.
No Right to Continued Service
. This Agreement shall not be construed as giving the
Participant the right to be retained as an employee of the Company or any Subsidiary.
-4-
7.
Adjustments
. The Committee shall make equitable and proportionate adjustments in
the terms and conditions of, and the criteria included in, this Award in recognition of unusual or
nonrecurring events (including, without limitation, the events described in Article XI of the Plan)
affecting the Company or any Subsidiary, or the financial statements of the Company or any
Subsidiary, or of changes in applicable laws, regulations, or accounting principals in accordance
with the Plan.
8.
Amendment to Award
. Subject to the restrictions contained in Article X of the
Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate, the Award, prospectively or retroactively; provided that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination
that would adversely affect the rights of the Participant or any holder or beneficiary of the Award
shall not to that extent be effective without the consent of the Participant, holder or beneficiary
affected.
9.
Withholding of Taxes
. If the Participant makes an election under section 83(b) of
the Code with respect to the Award, the Award made pursuant to this Agreement shall be conditioned
upon the prompt payment to the Company of any applicable withholding obligations or withholding
taxes by the Participant (Withholding Taxes). Failure by the Participant to pay such Withholding
Taxes will render this Agreement and the Award granted hereunder null and void ab initio and the
Restricted Stock granted hereunder will be immediately cancelled. If the Participant does not make
an election under section 83(b) of the Code with respect to the Award, upon the lapse of the
Restriction Period with respect to any portion of Restricted Stock (or property distributed with
respect thereto), the Company shall satisfy the required Withholding Taxes as set forth by Internal
Revenue Service guidelines for the employers minimum statutory withholding with respect to the
Participant and issue vested shares to the Participant without restriction.
10.
Plan Governs
. The Participant hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are
governed by the terms of the Plan, and in the case of any inconsistency between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall govern.
11.
Severability
. If any provision of this Agreement is, or becomes, or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as to any person or the Award, or
would disqualify the Plan or Award under any laws deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
-5-
12.
Notices
. All notices required to be given under this Agreement shall be deemed to
be received if delivered or mailed as provided for herein, to the parties at the following
addresses, or to such other address as either party may provide in writing from time to time.
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To the Company:
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First Acceptance Corporation
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3322 West End Ave., Suite 1000
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Nashville, Tennessee 37203
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Attn: Secretary
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Facsimile: (615) 844-2800
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To the Participant:
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The address then maintained with respect to the Participant
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in the Companys records.
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13.
Governing Law
. The validity, construction and effect of this Agreement shall be
determined in accordance with the laws of the State of Delaware without giving effect to conflicts
of laws principles.
14.
Successors in Interest
. This Agreement shall inure to the benefit of and be
binding upon any successor to the Company. This Agreement shall inure to the benefit of the
Participants legal representatives. All obligations imposed upon the Participant and all rights
granted to the Company under this Agreement shall be binding upon the Participants heirs,
executors, administrators and successors.
15.
Resolution of Disputes
. Any dispute or disagreement which may arise under, or as
a result of, or in any way related to, the interpretation, construction or application of this
Agreement shall be determined by the Committee. Any determination made hereunder shall be final,
binding and conclusive on the Participant and the Company for all purposes.
-6-
IN WITNESS WHEREOF, the parties have caused this Option Cancellation and Restricted Stock
Award Agreement to be duly executed effective as of the day and year first above written.
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FIRST ACCEPTANCE CORPORATION:
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By:
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/s/ Stephen J. Harrison
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Name: Stephen J. Harrison
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Its: Chief Executive
Officer
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PARTICIPANT:
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/s/ Kevin P. Cohn
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Name: Kevin P. Cohn
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Address:
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Exhibit 99.4
OPTION CANCELLATION AND
RESTRICTED STOCK AWARD AGREEMENT
THIS OPTION CANCELLATION AND RESTRICTED STOCK AWARD AGREEMENT (this Agreement) is made and
entered into as of November 18, 2009 (the Date of Grant), between First Acceptance Corporation, a
Delaware corporation (the Company), and Stephen J. Harrison (the Participant). Capitalized
terms not otherwise defined herein shall have the meaning ascribed to such terms in the Amended and
Restated First Acceptance Corporation 2002 Long Term Incentive Plan (the Plan).
WHEREAS, the Company has adopted the Plan, which permits the issuance of restricted shares of
the Companys common stock, par value $0.01 per share (the Common Stock);
WHEREAS, Participant holds an outstanding option to purchase 100,000 shares of Common Stock of
the Company previously granted by the Company to Participant (the Outstanding Option);
WHEREAS, the Companys stockholders approved a one-time value-for-value option exchange on
November 17, 2009, whereby the Participant may surrender for cancellation the Outstanding Option in
exchange for a lesser number of shares of restricted stock with an aggregate value not to exceed
$150,000;
WHEREAS, the Participant desires to surrender, and the Company cancel, the Outstanding Option,
and in exchange for such surrendered and cancelled Outstanding Option, and pursuant to the Plan,
the Committee desires to grant an award of restricted stock to the Participant as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1.
Cancellation of Outstanding Option, Grant of Restricted Stock
.
(a) The Participant hereby surrenders the Outstanding Option to the Company, agrees that the
Outstanding Option shall be cancelled, and agrees that the Nonqualified Stock Option Agreement,
dated April 30, 2004, between Participant and the Company shall be cancelled and of no further
force or effect.
(b) The Company hereby grants to the Participant, in exchange for the cancellation of the
Outstanding Option, an award (the Award) of 22,827 shares of
Common Stock of the Company (the Stock or the Restricted Stock) on the terms and conditions set
forth in this Agreement and as otherwise provided in the Plan.
(c) The Participants rights with respect to the Stock subject to the Award shall remain
forfeitable at all times prior to the date on which the restrictions as to such Stock shall lapse
in accordance with Section 3 hereof.
2.
Terms and Rights as a Stockholder
.
(a) Except as provided herein and subject to such other exceptions as may be determined by the
Committee in its discretion, the Restriction Period for the Restricted Stock granted herein shall
expire in four equal, annual installments beginning on the first anniversary of Date of Grant (as
may be adjusted in accordance with Section 7 hereof).
(b) The Participant shall have all rights of a stockholder with respect to the Restricted
Stock, including the right to receive dividends and the right to vote such Stock, subject to the
following restrictions:
(i) the Participant shall not be entitled to delivery of the stock certificate for any
Stock until the expiration of the Restriction Period as to such Stock;
(ii) none of the Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of during the Restriction Period as to
such Stock; and
(iii) except as otherwise determined by the Committee at or after the grant of the
Award hereunder, all shares of Restricted Stock as to which the Restriction Period has not
expired or been terminated shall be forfeited, and all rights of the Participant to such
Stock shall terminate, without further obligation on the part of the Company, unless the
Participant remains in the continuous employment of the Company or a Subsidiary until the
expiration or termination of the Restriction Period as to such Stock.
Any Stock, any other securities of the Company and any other property (except for cash
dividends) distributed with respect to the Restricted Stock shall be subject to the same
restrictions, terms and conditions as such Restricted Stock.
(c) Notwithstanding the foregoing, the Restriction Period shall automatically terminate as to
all Restricted Stock awarded hereunder (as to which such Restriction Period has not previously
terminated) upon the occurrence of the following events:
-2-
(i) termination of the Participants employment with the Company or a Subsidiary that
results from the Participants death, Retirement (as defined in the Plan) or Total and
Permanent Disability (as defined in the Plan);
(ii) the termination of the Participants employment with the Company or a Subsidiary
by the Participant for Good Reason (as defined in the Employment Agreement in effect as of
the date hereof between Participant and the Company (the Employment Agreement)) or by the
Company without Cause (as defined in the Employment Agreement); or
(iii) the occurrence of a Change in Control (as defined in the Plan).
3.
Termination of Restrictions
. At the end of the Restriction Period as to any
portion of the Restricted Stock, or at such earlier time as may be determined by the Committee, all
restrictions set forth in this Agreement or in the Plan relating to such portion of the Restricted
Stock shall lapse as to such portion of the Restricted Stock, and a stock certificate for the
appropriate number of shares of such Stock, free of the restrictions and restrictive stock legend,
shall be delivered to the Participant or the Participants beneficiary or estate, as the case may
be, pursuant to the terms of this Agreement.
4.
Delivery of Stock
.
(a) As of the date hereof, certificates representing the Restricted Stock shall be registered
in the name of the Participant and held by the Company or transferred to a custodian appointed by
the Company for the account of the Participant subject to the terms and conditions of the Plan and
shall remain in the custody of the Company or such custodian until their delivery to the
Participant or Participants beneficiary or estate as set forth in Sections 4(b) and (c) hereof or
their reversion to the Company as set forth in Sections 2(b) and 4(d) hereof.
(b) Certificates representing Restricted Stock in respect of which the Restriction Period has
lapsed pursuant to this Agreement shall be delivered to the Participant as soon as practicable
following the date on which the restrictions on such Restricted Stock lapse.
(c) Certificates representing Restricted Stock in respect of which the Restriction Period
lapsed upon the Participants death shall be delivered to the executors or administrators of the
Participants estate as soon as practicable following the receipt of proof of the Participants
death satisfactory to the Company.
(d) By accepting the grant of Restricted Stock under this Agreement, Participant shall
irrevocably grant to the Company a power of attorney to transfer any shares forfeited to the
Company and agrees to execute any documents requested by the Company in
-3-
connection with such forfeiture and transfer. Participant hereby acknowledges that any breach
by him of his obligations under this Section 4(d) would cause substantial and irreparable damage to
the Company, and that money damages would be an inadequate remedy therefore, and, accordingly,
acknowledges and agrees that the Company shall be entitled to specific performance to remedy the
breach of such obligations (in addition to the other rights and remedies provided for herein).
(e) The face of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS
PRINTED ON THE REVERSE OF THIS CERTIFICATE.
(f) The reverse of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN AMENDED AND
RESTATED FIRST ACCEPTANCE CORPORATION 2002 LONG TERM INCENTIVE
PLAN (THE PLAN), A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY IN NASHVILLE, TENNESSEE. NO TRANSFER OR
PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID PLAN. BY
ACCEPTANCE OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGEE
HEREOF AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SAID PLAN.
5.
Effect of Lapse of Restrictions
. To the extent that the Restriction Period
applicable to any Restricted Stock shall have lapsed, the Participant may receive, hold, sell or
otherwise dispose of such Stock free and clear of the restrictions imposed under the Plan and this
Agreement.
6.
No Right to Continued Service
. This Agreement shall not be construed as giving the
Participant the right to be retained as an employee of the Company or any Subsidiary.
-4-
7.
Adjustments
. The Committee shall make equitable and proportionate adjustments in
the terms and conditions of, and the criteria included in, this Award in recognition of unusual or
nonrecurring events (including, without limitation, the events described in Article XI of the Plan)
affecting the Company or any Subsidiary, or the financial statements of the Company or any
Subsidiary, or of changes in applicable laws, regulations, or accounting principals in accordance
with the Plan.
8.
Amendment to Award
. Subject to the restrictions contained in Article X of the
Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate, the Award, prospectively or retroactively; provided that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination
that would adversely affect the rights of the Participant or any holder or beneficiary of the Award
shall not to that extent be effective without the consent of the Participant, holder or beneficiary
affected.
9.
Withholding of Taxes
. If the Participant makes an election under section 83(b) of
the Code with respect to the Award, the Award made pursuant to this Agreement shall be conditioned
upon the prompt payment to the Company of any applicable withholding obligations or withholding
taxes by the Participant (Withholding Taxes). Failure by the Participant to pay such Withholding
Taxes will render this Agreement and the Award granted hereunder null and void ab initio and the
Restricted Stock granted hereunder will be immediately cancelled. If the Participant does not make
an election under section 83(b) of the Code with respect to the Award, upon the lapse of the
Restriction Period with respect to any portion of Restricted Stock (or property distributed with
respect thereto), the Company shall satisfy the required Withholding Taxes as set forth by Internal
Revenue Service guidelines for the employers minimum statutory withholding with respect to the
Participant and issue vested shares to the Participant without restriction.
10.
Plan Governs
. The Participant hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are
governed by the terms of the Plan, and in the case of any inconsistency between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall govern.
11.
Severability
. If any provision of this Agreement is, or becomes, or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as to any person or the Award, or
would disqualify the Plan or Award under any laws deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
-5-
12.
Notices
. All notices required to be given under this Agreement shall be deemed to
be received if delivered or mailed as provided for herein, to the parties at the following
addresses, or to such other address as either party may provide in writing from time to time.
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To the Company:
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First Acceptance Corporation
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3322 West End Ave., Suite 1000
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Nashville, Tennessee 37203
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Attn: Secretary
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Facsimile: (615) 844-2800
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To the Participant:
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The address then maintained with respect to the Participant
in the Companys records.
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13.
Governing Law
. The validity, construction and effect of this Agreement shall be
determined in accordance with the laws of the State of Delaware without giving effect to conflicts
of laws principles.
14.
Successors in Interest
. This Agreement shall inure to the benefit of and be
binding upon any successor to the Company. This Agreement shall inure to the benefit of the
Participants legal representatives. All obligations imposed upon the Participant and all rights
granted to the Company under this Agreement shall be binding upon the Participants heirs,
executors, administrators and successors.
15.
Resolution of Disputes
. Any dispute or disagreement which may arise under, or as
a result of, or in any way related to, the interpretation, construction or application of this
Agreement shall be determined by the Committee. Any determination made hereunder shall be final,
binding and conclusive on the Participant and the Company for all purposes.
-6-
IN WITNESS WHEREOF, the parties have caused this Option Cancellation and Restricted Stock
Award Agreement to be duly executed effective as of the day and year first above written.
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FIRST ACCEPTANCE CORPORATION:
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By:
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/s/ Edward L. Pierce
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Name:
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Edward L. Pierce
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Its:
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President
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PARTICIPANT:
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/s/ Stephen J. Harrison
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Name: Stephen J. Harrison
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Address:
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Exhibit 99.5
OPTION CANCELLATION AND
RESTRICTED STOCK AWARD AGREEMENT
THIS OPTION CANCELLATION AND RESTRICTED STOCK AWARD AGREEMENT (this Agreement) is made and
entered into as of November 18, 2009 (the Date of Grant), between First Acceptance Corporation, a
Delaware corporation (the Company), and Edward L. Pierce (the Participant). Capitalized terms
not otherwise defined herein shall have the meaning ascribed to such terms in the Amended and
Restated First Acceptance Corporation 2002 Long Term Incentive Plan (the Plan).
WHEREAS, the Company has adopted the Plan, which permits the issuance of restricted shares of
the Companys common stock, par value $0.01 per share (the Common Stock);
WHEREAS, Participant holds an outstanding option to purchase 250,000 shares of Common Stock of
the Company previously granted by the Company to Participant (the Outstanding Option);
WHEREAS, the Companys stockholders approved a one-time value-for-value option exchange on
November 17, 2009, whereby the Participant may surrender for cancellation the Outstanding Option in
exchange for a lesser number of shares of restricted stock with an aggregate value not to exceed
$150,000;
WHEREAS, the Participant desires to surrender, and the Company cancel, the Outstanding Option,
and in exchange for such surrendered and cancelled Outstanding Option, and pursuant to the Plan,
the Committee desires to grant an award of restricted stock to the Participant as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1.
Cancellation of Outstanding Option, Grant of Restricted Stock
.
(a) The Participant hereby surrenders the Outstanding Option to the Company, agrees that the
Outstanding Option shall be cancelled, and agrees that the Nonqualified Stock Option Agreement,
dated September 13, 2006, between Participant and the Company shall be cancelled and of no further
force or effect.
(b) The Company hereby grants to the Participant, in exchange for the cancellation of the
Outstanding Option, an award (the Award) of 65,837 shares of
Common Stock of the Company (the
Stock or the Restricted Stock) on the terms and conditions set forth in this Agreement and as
otherwise provided in the Plan.
(c) The Participants rights with respect to the Stock subject to the Award shall remain
forfeitable at all times prior to the date on which the restrictions as to such Stock shall lapse
in accordance with Section 3 hereof.
2.
Terms and Rights as a Stockholder
.
(a) Except as provided herein and subject to such other exceptions as may be determined by the
Committee in its discretion, the Restriction Period for the Restricted Stock granted herein shall
expire in four equal, annual installments beginning on the first anniversary of Date of Grant (as
may be adjusted in accordance with Section 7 hereof).
(b) The Participant shall have all rights of a stockholder with respect to the Restricted
Stock, including the right to receive dividends and the right to vote such Stock, subject to the
following restrictions:
(i) the Participant shall not be entitled to delivery of the stock certificate for any
Stock until the expiration of the Restriction Period as to such Stock;
(ii) none of the Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of during the Restriction Period as to
such Stock; and
(iii) except as otherwise determined by the Committee at or after the grant of the
Award hereunder, all shares of Restricted Stock as to which the Restriction Period has not
expired or been terminated shall be forfeited, and all rights of the Participant to such
Stock shall terminate, without further obligation on the part of the Company, unless the
Participant remains in the continuous employment of the Company or a Subsidiary until the
expiration or termination of the Restriction Period as to such Stock.
Any Stock, any other securities of the Company and any other property (except for cash
dividends) distributed with respect to the Restricted Stock shall be subject to the same
restrictions, terms and conditions as such Restricted Stock.
(c) Notwithstanding the foregoing, the Restriction Period shall automatically terminate as to
all Restricted Stock awarded hereunder (as to which such Restriction Period has not previously
terminated) upon the occurrence of the following events:
-2-
(i) termination of the Participants employment with the Company or a Subsidiary that
results from the Participants death, Retirement (as defined in the Plan) or Total and
Permanent Disability (as defined in the Plan);
(ii) the termination of the Participants employment with the Company or a Subsidiary
by the Participant for Good Reason (as defined in the Employment Agreement in effect as of
the date hereof between Participant and the Company (the Employment Agreement)) or by the
Company without Cause (as defined in the Employment Agreement); or
(iii) the occurrence of a Change in Control (as defined in the Plan).
3.
Termination of Restrictions
. At the end of the Restriction Period as to any
portion of the Restricted Stock, or at such earlier time as may be determined by the Committee, all
restrictions set forth in this Agreement or in the Plan relating to such portion of the Restricted
Stock shall lapse as to such portion of the Restricted Stock, and a stock certificate for the
appropriate number of shares of such Stock, free of the restrictions and restrictive stock legend,
shall be delivered to the Participant or the Participants beneficiary or estate, as the case may
be, pursuant to the terms of this Agreement.
4.
Delivery of Stock
.
(a) As of the date hereof, certificates representing the Restricted Stock shall be registered
in the name of the Participant and held by the Company or transferred to a custodian appointed by
the Company for the account of the Participant subject to the terms and conditions of the Plan and
shall remain in the custody of the Company or such custodian until their delivery to the
Participant or Participants beneficiary or estate as set forth in Sections 4(b) and (c) hereof or
their reversion to the Company as set forth in Sections 2(b) and 4(d) hereof.
(b) Certificates representing Restricted Stock in respect of which the Restriction Period has
lapsed pursuant to this Agreement shall be delivered to the Participant as soon as practicable
following the date on which the restrictions on such Restricted Stock lapse.
(c) Certificates representing Restricted Stock in respect of which the Restriction Period
lapsed upon the Participants death shall be delivered to the executors or administrators of the
Participants estate as soon as practicable following the receipt of proof of the Participants
death satisfactory to the Company.
(d) By accepting the grant of Restricted Stock under this Agreement, Participant shall
irrevocably grant to the Company a power of attorney to transfer any shares
forfeited to the Company and agrees to execute any documents requested by the Company in
-3-
connection with such forfeiture and transfer. Participant hereby acknowledges that any breach by
him of his obligations under this Section 4(d) would cause substantial and irreparable damage to
the Company, and that money damages would be an inadequate remedy therefore, and, accordingly,
acknowledges and agrees that the Company shall be entitled to specific performance to remedy the
breach of such obligations (in addition to the other rights and remedies provided for herein).
(e) The face of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
TRANSFER OF THIS STOCK IS RESTRICTED IN
ACCORDANCE WITH CONDITIONS PRINTED ON THE
REVERSE OF THIS CERTIFICATE.
(f) The reverse of each certificate representing Restricted Stock shall bear a legend in
substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN AMENDED AND
RESTATED FIRST ACCEPTANCE CORPORATION 2002 LONG TERM INCENTIVE
PLAN (THE PLAN), A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY IN NASHVILLE, TENNESSEE. NO TRANSFER OR
PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID PLAN. BY
ACCEPTANCE OF THIS CERTIFICATE, ANY HOLDER, TRANSFEREE OR PLEDGEE
HEREOF AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SAID PLAN.
5.
Effect of Lapse of Restrictions
. To the extent that the Restriction Period
applicable to any Restricted Stock shall have lapsed, the Participant may receive, hold, sell or
otherwise dispose of such Stock free and clear of the restrictions imposed under the Plan and this
Agreement.
6.
No Right to Continued Service
. This Agreement shall not be construed as giving the
Participant the right to be retained as an employee of the Company or any Subsidiary.
-4-
7.
Adjustments
. The Committee shall make equitable and proportionate adjustments in
the terms and conditions of, and the criteria included in, this Award in recognition of unusual or
nonrecurring events (including, without limitation, the events described in Article XI of the Plan)
affecting the Company or any Subsidiary, or the financial statements of the Company or any
Subsidiary, or of changes in applicable laws, regulations, or accounting principals in accordance
with the Plan.
8.
Amendment to Award
. Subject to the restrictions contained in Article X of the
Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate, the Award, prospectively or retroactively; provided that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination
that would adversely affect the rights of the Participant or any holder or beneficiary of the Award
shall not to that extent be effective without the consent of the Participant, holder or beneficiary
affected.
9.
Withholding of Taxes
. If the Participant makes an election under section 83(b) of
the Code with respect to the Award, the Award made pursuant to this Agreement shall be conditioned
upon the prompt payment to the Company of any applicable withholding obligations or withholding
taxes by the Participant (Withholding Taxes). Failure by the Participant to pay such Withholding
Taxes will render this Agreement and the Award granted hereunder null and void ab initio and the
Restricted Stock granted hereunder will be immediately cancelled. If the Participant does not make
an election under section 83(b) of the Code with respect to the Award, upon the lapse of the
Restriction Period with respect to any portion of Restricted Stock (or property distributed with
respect thereto), the Company shall satisfy the required Withholding Taxes as set forth by Internal
Revenue Service guidelines for the employers minimum statutory withholding with respect to the
Participant and issue vested shares to the Participant without restriction.
10.
Plan Governs
. The Participant hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are
governed by the terms of the Plan, and in the case of any inconsistency between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall govern.
11.
Severability
. If any provision of this Agreement is, or becomes, or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as to any person or the Award, or
would disqualify the Plan or Award under any laws deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
-5-
12.
Notices
. All notices required to be given under this Agreement shall be deemed to
be received if delivered or mailed as provided for herein, to the parties at the following
addresses, or to such other address as either party may provide in writing from time to time.
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To the Company:
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First Acceptance Corporation
3322 West End Ave., Suite 1000
Nashville, Tennessee 37203
Attn: Secretary
Facsimile: (615) 844-2800
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To the Participant:
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The address then maintained with respect to the Participant
in the Companys records.
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13.
Governing Law
. The validity, construction and effect of this Agreement shall be
determined in accordance with the laws of the State of Delaware without giving effect to conflicts
of laws principles.
14.
Successors in Interest
. This Agreement shall inure to the benefit of and be
binding upon any successor to the Company. This Agreement shall inure to the benefit of the
Participants legal representatives. All obligations imposed upon the Participant and all rights
granted to the Company under this Agreement shall be binding upon the Participants heirs,
executors, administrators and successors.
15.
Resolution of Disputes
. Any dispute or disagreement which may arise under, or as
a result of, or in any way related to, the interpretation, construction or application of this
Agreement shall be determined by the Committee. Any determination made hereunder shall be final,
binding and conclusive on the Participant and the Company for all purposes.
-6-
IN WITNESS WHEREOF, the parties have caused this Option Cancellation and Restricted Stock
Award Agreement to be duly executed effective as of the day and year first above written.
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FIRST ACCEPTANCE CORPORATION:
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By:
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/s/ Stephen J. Harrison
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Name:
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Stephen J. Harrison
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Chief Executive Officer
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PARTICIPANT:
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/s/ Edward L. Pierce
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Name: Edward L. Pierce
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Address:
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