**SANDERSMORRIS HARRIS GROUP INC.**

 

**CAPITALINCENTIVE PROGRAM**

 

**(AsAmended and Restated Effective November 1, 2001)**

 

**TABLE OF CONTENTS**

 
|       |                                                        |   |
|------------|-------------------------------------------------------------|--------|
|       |                                                        |   |
| Section 1. | Background and Purpose of the Program                       |   |
|       |                                                        |   |
| Section 2. | Definitions                                                 |   |
| (a)        | Adopting Employer                                           |   |
| (b)        | Award Date                                                  |   |
| (c)        | Bonus                                                       |   |
| (d)        | Company                                                     |   |
| (e)        | Consultant                                                  |   |
| (f)        | Elective Deferral Agreement                                 |   |
| (g)        | Elective Deferral Contribution                              |   |
| (h)        | Employment                                                  |   |
| (i)        | Fair Market Value                                           |   |
| (j)        | Participant                                                 |   |
| (k)        | Payout                                                      |   |
| (l)        | Plan                                                        |   |
| (m)        | Program                                                     |   |
| (n)        | Program Year                                                |   |
| (o)        | RSA Agreement                                               |   |
| (p)        | Restricted Period                                           |   |
| (q)        | Restricted Stock                                            |   |
| (r)        | Restricted Stock Award                                      |   |
| (s)        | Salary                                                      |   |
| (t)        | Vesting Date                                                |   |
|       |                                                        |   |
| Section 3. | Eligibility                                                 |   |
|       |                                                        |   |
| Section 4. | Elective Deferral Agreement                                 |   |
|       |                                                        |   |
| Section 5. | Revocation of Participant’s Salary or Bonus  Deferrals |   |
|       |                                                        |   |
| Section 6. | Restricted Stock Awards                                     |   |
| (a)        | Authority of Committee                                      |   |
| (b)        | Number of Restricted Shares Awarded to  Employees           |   |
| (c)        | Number of Restricted Shares Awarded to  Consultants         |   |
| (d)        | Stock Certificate and Legend                                |   |
| (e)        | Restrictions on Stock                                       |   |
| (f)        | Voting of Restricted Stock                                  |   |
| (g)        | Post-Termination Forfeiture for Cause                       |   |
|       |                                                        |   |
| Section 7. | Amendment and Termination                                   |   |
|       |                                                        |   |
| Section 8. | General Provisions                                          |   |
| (a)        | No Limitation on other Compensation Plans  or Employment    |   |
| (b)        | Indemnification                                             |   |
| (c)        | Assignment                                                  |   |
| (d)        | Tax Withholding                                             |   |
| (e)        | Severability                                                |   |
| (f)        | Applicability of Plan                                       |   |
|       |                                                        |   |
| SCHEDULE A |                                                        |   |
|       |                                                        |   |

 

**SANDERSMORRIS HARRIS GROUP INC.**

**CAPITALINCENTIVE PROGRAM**

 

(**As Amended and Restated Effective November 1,2001**)

 

 

**Section 1.****                Background and Purpose of the Program****.**

 

The name of this program is the SANDERSMORRIS HARRIS GROUP INC. CAPITAL INCENTIVE PROGRAM (the “**Program**”). The Program is an amendment and restatement, effective as ofNovember 1, 2001, of the “Pinnacle Global Group, Inc. Capital IncentiveProgram” which was originally effective January 1, 2001.  The Program was amended and restated to (i)reflect the change in the name of the sponsoring employer from Pinnacle GlobalGroup, Inc. to Sanders Morris Harris Group Inc. and (ii) allow participation inthe Program by Consultants.

 

The Program permits the grants of RestrictedStock Awards to key Employees and Consultants. The Program was adopted by the Committee and being made availablepursuant to the authority granted to the Committee under the Pinnacle Global Group, Inc.1998 Incentive Plan, as it may be amended from time to time (the “**Plan**”), particularly Section 3 of thePlan, “Restricted Stock,” which Plan is incorporated by reference herein in itsentirety.

 

The purpose of the Program is to enableSanders Morris Harris Group Inc.  (the “**Company**”) and its Subsidiaries to attract,retain and motivate key Employees and Consultants to compensate them for theircontributions to the growth and profits of the Company, and to encourage theirownership of Common Stock in the Company. The Program provides incentives to participating Employees andConsultants which are linked directly to increases in stockholder value andshould, therefore, inure to the benefit of the stockholders of the Company.

 

 

**Section 2.****                Definitions****.**

 

All capitalized terms used in the Program,unless otherwise defined herein, shall have the meanings ascribed to such termsin the Plan.  The Program, in itsentirety, is incorporated by reference into the Plan.

 

(a)                **Adopting Employer****.**  “Adopting Employer” means the Company andeach of its Subsidiaries which have been designated by the Committee as anemployer which has adopted the Program.

 

(b)                **Award Date**.  “Award Date” means (i) with respect to aRestricted Stock Award relating to a Bonus deferral under the Program, the dateduring a Program Year on which the Bonus would have been paid absent thedeferral election and (ii) with respect to a Restricted Stock Award relating toa Salary deferral under the Program; the last day of each quarter during aProgram Year, i.e., March 31, June 30, September 30 and December31.

 

(c)                **Bonus****. **“Bonus” means any amount attributable tothe Employee during a Program Year which is designated by the Adopting Employeras bonus compensation.  In the event ofany disagreement, the Committee, in its sole discretion, shall determinewhether any particular type or item of compensation shall be deemed a “Bonus”for purposes of the Program.

 

(d)                **Company.**   “Company” means Sanders Morris Harris GroupInc., a corporation organized under the laws of the State of Texas, andany successor in interest thereto.

 

(e)                **Consultant.**** **“Consultant”means an independent agent, consultant, contractor, an individual who hasagreed to become an Employee within the next six months, or any otherindividual who is not an outside director or Employee of the Company (or anyParent or Subsidiary) and who, in the opinion of the Committee, is in a positionto contribute to the growth or financial success of the Company (or anyParent or Subsidiary), (ii) is a natural person and (iii) provides bona fideservices to the Company (or any Parent or Subsidiary), which services are notin connection with the offer or sale of securities in a capital raisingtransaction, and do not directly or indirectly promote or maintain a market forthe Company’s securities.

 

(f)**                Elective Deferral Agreement****.**  “Elective Deferral Agreement” means awritten agreement entered into by and between the Adopting Employer and aParticipant for a Program Year, which agreement describes the terms andconditions of such Participant’s arrangement to defer (i) up to one hundredpercent (100%) of his Bonus that may be awarded with respect to such ProgramYear and/or (ii) up to fifty percent (50%) of his Salary that would otherwisebe paid to the Participant during the Program Year absent his deferralelection.  The Elective DeferralAgreement shall be executed and dated by the Participant and shall specify theamount of Bonus and/or Salary, by percentage or dollar amount, to be deferredunder the Program for the Program Year.

 

(g)                **ElectiveDeferral Contribution****. **“Elective Deferral Contribution”means any amount of a Participant’s Salary and/or Bonus which he elects todefer hereunder pursuant to an Elective Deferral Agreement and to have suchdeferred amount applied to a Restricted Stock Award pursuant to Section 4.

 

If an Active Participant is authorized by hisAdopting Employer to take a paid leave of absence from Employment, theParticipant shall continue to be considered in Employment and his ElectiveDeferral Contributions shall continue to be withheld during such paid leave ofabsence.

 

If an ActiveParticipant is authorized by his Adopting Employer for any reason to take anunpaid leave of absence from Employment, the Participant shall continue to beconsidered in Employment and the Participant shall be excused from makingElective Deferral Contributions from his Salary until the Participant returnsto a paid Employment status.  Upon hisreturn, Elective Deferral Contributions shall resume for the remaining portionof the Program Year in which the expiration or return occurs, based on theParticipant’s Elective Deferral Agreement as in effect for that Program Year,i.e., the same percentage or dollar amount of Salary that was being withheldprior to the unpaid leave of absence shall resume after return to activeservice, but no make-up elective contributions can be made for the leaveperiod.  A leave of absence shall notaffect any Bonus deferral election made by the Participant under his ElectiveDeferral Agreement.

 

(h)                **Employment****. **“Employment”with respect to an Employee means employment as an Employee.  “Employment” with respect to a Consultantmeans active service as a Consultant for an Adopting Employer.

 

(i)                **Fair Market Value**.  “Fair Market Value” means, as determined bythe Committee, the 20-day average of the closing sales prices for a Share ofthe Company’s Common Stock, as reported on the National Association ofSecurities Dealers Automated Quotation System (“NASDAQ”), ending as of thebusiness day immediately preceding the date on which the Share is being valued.

 

(j)                **Participant****.** “Participant” means an Employee or Consultant who has (i) been selectedto participate in the Program pursuant to Section 3 and (ii) received aRestricted Stock Award.

 

(k)                **Payout.** “Payout” means a fee or other form ofcompensation that is payable by the Company to a Consultant.

 

(l)                **Plan****.**  “Plan” means the Pinnacle Global Group, Inc.1998 Incentive Plan, as it may be amended from time to time.

 

(m)                **Program**.  “Program” means this Sanders Morris HarrisGroup Inc. Capital Incentive Program (fka the Pinnacle Global Group Inc.Capital Incentive Program) as set forth herein, and as it may be amended fromtime to time.  The Program isincorporated into the Plan.

 

(n)                **Program Year**.  “Program Year” means the calendar yearcommencing on January 1 and ending on December 31, with the first Program Yearcommencing on January 1, 2001.

 

(o)                **RSA Agreement****. **“RSA Agreement” means a writtenagreement entered into between the Company and the Participant setting forththe terms and conditions pursuant to which a Restricted Stock Award is grantedunder the Plan.

 

(p)                **Restricted Period****.**  “Restricted Period” means the period of timedetermined by the Committee and set forth in the RSA Agreement during which thetransfer of Restricted Stock by the Participant is restricted.

 

(q)                **Restricted Stock****.** “Restricted Stock” means Shares ofthe Company’s Common Stock that are granted to a Participant pursuant to a RSAAgreement and have not yet vested thereunder.

 

(r)                **Restricted Stock Award****.**  “Restricted Stock Award” means agrant of Restricted Stock as evidenced by a RSA Agreement.

 

(s)                **Salary**.  “Salary” means the gross remuneration thatis earned by the Employee or Consultant from an Adopting Employer forcompensatory services as reportable on the Employee’s IRS form W-2 or theConsultant’s Form 1099, as the case may be, for a calendar year, including,without limitation, commissions, and before such gross remuneration is reducedfor (if any) (i) deductions of payroll taxes and other standard deductions and(ii) Elective Deferral Contributions hereunder, elective deferrals to a 401(k)plan or a cafeteria plan, and other employee benefits deductions; provided,however, the term “Salary” shall exclude any Bonuses (or other extraordinarycompensation), reimbursements of business, moving and other expenses, anyincome resulting from stock option exercises, and any distributions from theProgram and any other qualified or non-qualified deferred compensation program.  The Committee, in its discretion, shalldetermine whether any particular type or item of compensation shall be deemed“Salary” for purposes of the Program.

 

(t)                **Vesting Date****.**  “Vesting Date” means, with respect to aParticipant, the date on which the Restricted Stock Award, or a portionthereof, becomes vested upon lapse of the Restricted Period.

 

 

**Section 3.****                Eligibility****.**

 

The Employees and Consultants who receivegrants of Restricted Stock Awards under the Program shall be selected from timeto time by the Committee, in its sole discretion, from among such persons.

 

This paragraph is only applicable toEmployees, and not Consultants, who have been selected as Participants.  Prior to the beginning of each Program Year(or when an Employee is first designated as a Participant during a ProgramYear), the Committee shall notify each designated Employee of his right toauthorize Elective Deferral Contributions for that Program Year (or remainingportion thereof).  Each Employee who hasbeen designated as a Participant for any Program Year shall automaticallyremain eligible to authorize Elective Deferral Contributions in that ProgramYear and for succeeding Program Years if he remains an Employee, unless anduntil it is determined by the Committee, in its sole discretion, that theEmployee is no longer a Participant.  AnEmployee or former Employee (or in the event of his death, his beneficiary)shall be considered a Participant hereunder so long as he has a Restricted StockAward that has not fully vested.

 

**Section 4.****                Elective Deferral Agreement****.**

 

This Section 4 is only applicable toEmployees (and not Consultants) who have been selected as Participants.

 

After an Employee has been notified that heis eligible to authorize Elective Deferral Contributions for a Program Year,such Employee must notify the Committee (or its delegate) of his deferralelection, if any, by completing and executing an Elective Deferral Agreement.  Any Elective Deferral Agreement that is notcompleted and signed by the Employee, and received and accepted by theCommittee (or its delegate), on or prior to (a) the last day of the ProgramYear immediately preceding the Program Year for which the Elective DeferralAgreement will be effective, or (b) the first day of the first payroll periodfor which the Elective Deferral Agreement will be effective if the Employeefirst became a Participant during that Program Year, shall be treated as theEmployee’s election not to defer any Salary or Bonus hereunder for that ProgramYear.

 

Notwithstanding the immediately precedingparagraph, if after the commencement of a Program Year an Employee isdesignated as a Participant for the first time then, in order to make adeferral election hereunder, the Participant must complete and execute anElective Deferral Agreement and return it to the Committee (or its delegate)within thirty (30) days from the effective date on which he first becameeligible to participate.  Such ElectiveDeferral Agreement shall only apply to defer not-yet-earned Salary and Bonusfor services to be performed by the Participant (a) for the remainder of theProgram Year and (b) subsequent to receipt and acceptance of his ElectiveDeferral Agreement by the Committee (or its delegate).

 

The amount of Salary deferred hereunder,pursuant to the Participant’s authorization in his Elective Deferral Agreement,shall be withheld on a pro rata basis from the Participant’s regular paymentsof Salary for each pay period during the Program Year (or portion thereofduring which such Elective Deferral Agreement is in effect).  The dollar amount of a Bonus that theParticipant elects to defer pursuant to his Elective Deferral Agreement shallbe deferred in a lump sum on the date that the deferred portion of the Bonuswould have been paid to the Participant in the absence of his deferralelection.

 

In accordance with this Section 4 andSection 7.6 of the Plan, the Committee shall permit a Participant to elect,under the procedures described in this paragraph, to further defer (the“Additional Deferral Election”) the vesting and receipt of shares of RestrictedStock that would otherwise vest and be issuable to such Participant.  The Additional Deferral Election shall (i)be in writing and in the form adopted by the Company, (ii) be made by theParticipant and received by the Company, at least one full year and a day,prior to the date that the vesting restrictions on the shares of RestrictedStock are scheduled to lapse or any additional one-year extension thereof asdescribed below (the “Twelve Month Vesting Date”), (iii) apply to all (and notless than all) of the shares of Restricted Stock scheduled to vest on theTwelve Month Vesting Date (the “Extended Restricted Shares”), and (iv) have theeffect of deferring the Vesting Date of the Extended Restricted Shares for 12months after the Twelve Month Vesting Date (the “Extended Vesting Date”).  The Participant shall be permitted to makesuccessive annual one-year deferral elections with respect to all (but not lessthan all) the Extended Restricted Shares provided that each such electionsatisfies the requirements described above. Until the Extended Vesting Date, the Extended Restricted Shares shall besubject to all restrictions described in the RSA Agreement for unvested sharesof Restricted Stock including, without limitation, all forfeiture provisions.

 

**Section 5.****                Revocation of Participant’s Salary orBonus Deferrals****.**

 

This Section5 is only applicable to Employees (and not Consultants) who have beenselected as Participants.

 

The Participant’s Elective DeferralAgreement, if any, shall continue in effect during the Program Year while heremains a Participant unless and until he files with the Committee a writtennotice of discontinuance of his Elective Deferral Agreement and such notice isreceived and accepted by the Committee in its discretion.  The notice of discontinuance must be filedand accepted at least thirty (30) days prior to the first day of asubsequent  month.  The revocation of deferrals shall beeffective on the first day of the payroll period beginning in the designatedsubsequent month.  A notice ofdiscontinuance shall be effective only with respect to Salary and Bonus amounts(a) attributable to services not yet performed by the Participant and (b) notearned by the Participant before the notice of discontinuance becomeseffective.  This determination shall bemade by the Committee.

 

If a Participant files a written notice ofdiscontinuance of his Elective Deferral Agreement, he may not enter into a newElective Deferral Agreement, and he cannot revoke such notice ofdiscontinuance, for the remainder of the Program Year.  Such Participant will be eligible to make anew Elective Deferral Contribution effective as of the first day of the nextProgram Year if, and only if, he is designated as a Participant for thatProgram Year pursuant to Section 3. No such designation of future participation is required to be made bythe Committee pursuant to Section 3. Only a complete and total cessation of Elective Deferral Contributionsshall be permitted hereunder during a Program Year; therefore, requestedchanges by a Participant during a Program Year to either increase or reduce hisElective Deferral Contributions shall not be permitted (unless the reduction isto zero) if such change is to be effective before the first day of the nextProgram Year.

 

**Section 6.****                Restricted Stock Awards****.**

 

(a)                **Authority of Committee****.**  Restricted Stock Awards shall be determinedby the Committee and granted to Participants at such time or times as theCommittee may determine, in its sole discretion, pursuant to the terms andconditions of the Program.  TheCommittee shall have the full and unilateral authority to construe andinterpret the Program and make all determinations hereunder in its discretion.

 

(b)                **Numberof Restricted Shares Awarded to Employees****.**  The number of shares of Restricted Stock tobe awarded to an Employee who is a Participant will be determined by a formulaor formulas approved by the Committee in its discretion.  The Committee, in its discretion, may changethe formula from time to time.  In orderto reflect the impact of the restrictions on the value of the Restricted Stock,as well as the possibility of forfeiture of Restricted Stock, the Fair Market Valueof the Common Stock (determined in the manner described below) shall bediscounted at a rate of thirty-three and one-third percent (33_%) indetermining the number of shares of Restricted Stock to be awarded.  The Committee may, when deemed appropriatein its sole discretion, provide for an alternative discount rate.

 

The dollar value of a Restricted Stock Awardwill be divided by the discounted Fair Market Value to determine the number ofshares of Common Stock in the Restricted Stock Award.  The value of fractional shares will be paid to the Participant incash.  Unless otherwise determined bythe Committee in its discretion, Restricted Stock Awards shall be granted as ofeach Award Date based on the formula prescribed by the Committee pursuant to theforegoing provisions of this Section 6, and the aggregate amount of theParticipant’s Elective Deferral Contributions that were deferred (i) as ofthe Award Date with respect to the Bonus deferral and (ii) as of the quarterending as of the Award Date with respect to the Salary deferral.

 

(c)                **Numberof Restricted Shares Awarded to Consultants****.**   The number of shares of Restricted Stock tobe awarded to a Consultant who is a Participant, and the terms and conditionsof such grant, will be determined by the Committee in its discretion.

 

(d)                **StockCertificate and Legend****.**  Unless the Committee determines otherwise, aParticipant shall not have any rights with respect to his Restricted StockAward, unless and  until he has executeda RSA Agreement and has delivered a fully executed copy thereof to theCompany.  Each Participant who isawarded Restricted Stock shall be issued a stock certificate in respect of suchshares of Restricted Stock.  Eachcertificate registered in the name of a Participant shall bear an appropriatelegend referring to the terms, conditions, and restrictions applicable to suchRestricted Stock Award, substantially in the following form:

 

“The transferability of the certificate andthe shares of stock represented hereby are subject to the terms and conditions(including forfeiture) of the Pinnacle Global Group Inc. 1998 Incentive Planand Capital Incentive Program and a Restricted Stock Award Agreement enteredinto between the registered owner and Pinnacle Global Group Inc.  Copies of such Plan, Program and Agreementare on file in the offices of Pinnacle Global Group Inc.”

 

The Committee shall require that any stockcertificate issued in the name of a Participant evidencing shares of RestrictedStock be held in the custody of the Company until the restrictions thereon havelapsed and as a condition of such issuance of a certificate for RestrictedStock, that the Participant deliver a stock power, endorsed in blank, relatingto the shares covered by such certificate. As soon as practicable after the restrictions have lapsed with respectto shares of Restricted Stock, the Company shall issue, and deliver to theParticipant, a stock certificate registered in the name of the Participant freeof the restrictive legend set forth above.

 

(e)                **Restrictions on Stock****.**  The shares of Restricted Stock awardedpursuant to this Section 6 shall be subject to the followingrestrictions and conditions:

 

(i)                Subjectto the provisions of the Program and the RSA Agreement, during the RestrictedPeriod, the Participant shall not be permitted to sell, transfer, pledge orassign shares of Restricted Stock awarded under the Program.  The Committee may, in its sole discretion,provide for the lapse of any such restrictions in installments and accelerateor waive any such restrictions in whole or in part based on such factors andsuch circumstances as the Committee may determine, in its sole discretion,including, but not limited to, the Participant’s Retirement, termination, deathor Disability.  The terms, conditionsand restrictions applicable to shares of Restricted Stock granted to an Employeein the event of the Employee’s termination of Employment, death, Disability,Retirement, and/or Leave of Absence are set forth on Schedule A attachedhereto and incorporated in its entirety herein by this reference, which terms,conditions and restrictions remain subject to amendment from time to time bythe Committee in its discretion.  Withrespect to Restricted Stock granted to a Consultant, the terms, conditions andrestrictions applicable to the Restricted Stock shall be determined by theCommittee in its discretion and set forth in the RSA Agreement.

 

(ii)                Unlessthe Committee in its sole discretion shall determine otherwise and so prescribein the RSA Agreement as of the grant date of any Restricted Stock Award, theParticipant shall have the right to direct the vote of his shares of RestrictedStock during the Restricted Period, in accordance with Section 6(f)below.  During the Restricted Period,the Participant shall have the right to receive any regular dividends on suchshares of Restricted Stock.  During theRestricted Period, the Committee shall, in its sole discretion, determine theParticipant’s rights with respect to extraordinary dividends or distributionson the shares of Restricted Stock.

 

(iii)                Sharesof Common Stock shall be delivered to the Participant in certificate formpromptly after the Vesting Date.

 

(f)                **Voting of Restricted Stock****.**  Unless the Committee, in its solediscretion, shall determine otherwise at or prior to the grant date of anyRestricted Stock Award, during the Restricted Period the shares of RestrictedStock shall be voted by the Company’s senior administrative officer in chargeof administering the Plan, or such other person as the Committee may designate(the “**Plan Administrator**”),provided that, the Plan Administrator shall vote such shares in accordance withinstructions received from Participants (unless to do so would constitute aviolation of applicable law as determined by the Plan Administrator).  Shares as to which no instructions arereceived shall be voted by the Plan Administrator in his sole discretion(unless to do so would constitute a violation of applicable law as determinedby the Plan Administrator).

 

(g)                **Post-TerminationForfeiture for Cause****.**  In any instance where the vesting of aRestricted Stock Award extends past the termination date of a Participant’sEmployment, either pursuant to the terms of the Program or by action of theCommittee, the non-vested portion of the Restricted Stock Award shall beforfeited if, in the determination of the Committee, at any time within suchremaining Restricted Period,  theParticipant engages in any of the conduct described in the definition of“Cause” under the Plan.

 

 

**Section 7.****                Amendment and Termination****.**

 

The Program may be amended or terminated atany time and from time to time by the Committee; *provided, however*, no amendment shall be permitted to theextent it conflicts with the Plan as may be determined by the Board; *provided, further*, the Program and Planshall be construed as mutually consistent to the maximum possible extent.

 

 

**Section 8****.                General Provisions****.**

 

(a)                **NoLimitation on other Compensation Plans or Employment**.  Nothing contained in the Program shallprevent the Adopting Employer from adopting other or additional compensationarrangements, subject to stockholder approval if such approval is required; andsuch arrangements may be either generally applicable or applicable only inspecific cases.  The adoption of theProgram shall not confer upon any Employee or Consultant any right to continuedEmployment, nor shall it interfere in any way with the right of an AdoptingEmployer to terminate the Employment of such person at any time.

 

(b)                **Indemnification**.  No member of the Board or the Committee, norany officer or employee of an Adopting Employer acting on behalf of the Boardor the Committee, shall be personally liable for any action, determination, orinterpretation taken or made in good faith with respect to the Program, and allmembers of the Board and the Committee and each and any officer or employee ofan Adopting Employer acting on their behalf shall, to the extent permitted bylaw, be fully indemnified and protected by the Company in respect of any suchaction, determination or interpretation.

 

(c)                **Assignment**.  A Participant’s rights and interest underthe Program may not be assigned or transferred in whole or in part eitherdirectly or by operation of law or otherwise (except in the event of aParticipant’s death or as provided in Section 6(d)) including, withoutlimitation, execution, levy, garnishment, attachment, pledge, bankruptcy or inany other manner, and no such right or interest of any Participant shall besubject to any obligation or liability of such Participant.  Upon the death of a Participant, theParticipant’s estate shall succeed to the rights of the Participant withrespect to any Restricted Stock Awards previously granted to such Participant.

 

(d)                **Tax Withholding**.  The Company and its Subsidiaries shall havethe right to deduct from any payment made under the Program any federal, stateor local income or other taxes which are required by law to be withheld withrespect to such payment.  It shall be acondition to the obligation of the Company to issue Common Stock upon the lapseof the Restricted Period that the Participant (or his beneficiary in the eventof death) pay to the Company, upon its demand, such amount as requested by theCompany for the purpose of satisfying any liability to withhold any taxes.  If the amount requested is not paid, theCompany may refuse to issue Shares. Unless the Committee shall in its sole discretion determine otherwise,payment for taxes required to be withheld may be made in whole or in part, inaccordance with rules adopted by the Committee from time to time, (i) in cash,in United States dollars, (ii) by having the Company sell or withhold Shares ofCommon Stock otherwise issuable pursuant to the Program having a Fair MarketValue equal to such tax liability, or (iii) by tendering to the Company sharesof Common Stock owned by the Participant (or his beneficiary in the event ofhis death), including Common Stock owned jointly with the Participant’s spouse(with spousal consent), and acquired at least six (6) months prior to suchtender (excluding shares of Restricted Stock awarded hereunder or under anyother restricted stock program of the Company) and having a Fair Market Valueequal to such tax liability.

 

(e)                **Severability**.  If any term or provision of this Program orthe application thereof to any person or circumstances shall, to any extent, beinvalid or unenforceable, then the remainder of the Program, or the applicationof such term or provision to persons or circumstances other than those as towhich it is held invalid or unenforceable, shall not be affected thereby, andeach term and provision hereof shall be valid and be enforced to the fullestextent permitted by applicable law.

 

(f)                **Applicability of Plan**.  The terms and provisions of the Plan shallbe applicable to the Program, except to the extent expressly set forth underthis Program and which do not conflict with the Plan; *provided, however*, the definitions inSchedule A shall control in the event of any discrepancy with the terms of thePlan.  The Plan, Program and RSAAgreement shall be construed as mutually consistent to the maximum possibleextent.  In addition, for purposes ofthe Plan, this Program, together with the related RSA Agreement, shallconstitute the “Incentive Agreement.”

 

 

IN WITNESS WHEREOF, this amended and restatedProgram is hereby approved and executed by each member of the CompensationCommittee on this ______ day of November, 2001, to be effective as ofNovember 1, 2001.

 
|   | **SANDERS MORRIS HARRIS GROUP INC.** |
|--------|--------------------------------------|
|   | **COMPENSATION COMMITTEE**           |
|   |                                 |
|   |                                 |
|   |                                 |
|   | **W. Blair Waltrip**                 |
|   |                                 |
|   |                                 |
|   |                                 |
|   | **John H. Styles**                   |
|   |                                 |

 

**SCHEDULE A**

**tothe**

**SANDERSMORRIS HARRIS GROUP INC.**

**CAPITALINCENTIVE PROGRAM**

 

In the event of a Participant’s terminationof Employment, death, Disability, Retirement, Early Retirement, and/or Leave ofAbsence, the following terms, conditions and restrictions shall apply to allRestricted Stock Awards granted to all Employees who are Participants under theProgram, except as may be expressly provided otherwise in the Participant’s RSAAgreement in the sole discretion of the Committee.  Capitalized terms used, but not otherwise defined below or in Section 2of the Program, shall have the meanings set forth in the Plan.

 

1                **Definitions**.  For purposes of the Program and this Schedule A, the followingterms shall have the following meanings:

 

(a)                “*Early Retirement*” shall mean no longerbeing occupied within one’s business or profession, and terminating activeEmployment after attaining at least age fifty-five (55) and having completed atleast five (5) years of service in Employment with the Company and itsSubsidiaries.

 

(b)                “*Leave of Absence*” shall mean a temporarycessation from active Employment, as authorized in each individual case by theAdopting Employer, in connection with military leave, personal leave or familyand medical leave, but such term shall not include such a cessation resultingfrom or in connection with a Disability.

 

(c)                “*Retirement*” shall mean no longer beingoccupied in one’s business or profession and terminating Employment afterattaining a number of years of service in Employment with the Company and itsSubsidiaries which number, when added together with the Employee’s age, shallnot be less than seventy–five (75).

 

2                **Termination of Employment**. The followingprovisions supplement and remain subject to the Program:

 

(a)                **Voluntary Termination**.  In the event of a voluntary termination ofEmployment, other than pursuant to Retirement, all Shares of Restricted Stockshall be forfeited to the extent not vested on the termination date.

 

(b)                **Involuntary Termination for Cause**.  In the event of an involuntary terminationof Employment for Cause, all Shares of Restricted Stock shall be forfeited tothe extent not vested on the termination date.

 

(c)                **Involuntary Termination other than for Cause**.  If a Participant is involuntarily terminatedfrom Employment other than for Cause, such Participant shall receive in returnthe number of shares of unvested Restricted Stock such that the total number ofShares of Restricted Stock received by the Participant with respect to thecorresponding Restricted Stock Award (included previously vested shares) shallequal the sum of (i) sixty-six and two-third percent (66_%) of the total numberShares of Restricted Stock represented by the Restricted Stock Award and (ii) apro-rata portion of the remaining thirty-three and one-third percent (33_%) ofthe total number of Shares of Restricted Stock represented by the RestrictedStock Award.  For purposes of thisparagraph, a “pro-rata portion” shall mean a fraction, the numeration of whichis the total number of full calendar months of Participant’s Employment duringthe three-year Restricted Period related to a given Restricted Stock Award andthe denominor of which is 36.  No fractionalshares of Restricted Stock shall be issuable under this paragraph, but ratherthe value of such fractional shares shall be paid to the Participant in cash.

 

(d)                **Death**. Upon the death of a Participant, the Restricted Period shall immediatelylapse and such Shares of Restricted Stock shall become fully vested.

 

(e)                **Disability**.  In the event of a Participant’s Disability prior to thetermination of Employment, the Restricted Period shall continue as scheduled inthe RSA Agreement provided (i) the Participant continues to meet the definitionof Disability and has not voluntarily terminated his Employment or (ii) theDisability is discontinued and the Participant resumes active Employment uponthe earlier to occur of (A) the end of the Disability period or (B) twelve (12)months after the onset of the Disability. If the Disability continues for more than 12 months and the Participantremains in Employment during that 12-month period (except for an involuntarytermination due to such Disability), then the Restricted Period shall lapse onthe  12-month anniversary of the onsetof the Disability on which date the Restricted Stock shall be fullyvested.  In the event that the Participant’sEmployment is involuntarily terminated due to Disability, as determined by theCommittee in its discretion, the Restricted Stock shall be fully vested on histermination date.

 

(f)                **Retirement**.  A Participant who meets the conditions for Retirement shallbecome fully vested in his Shares of Restricted Stock upon lapse of the RestrictedPeriod, i.e., the vesting schedule applicable to such Shares shall continue toapply as if the Participant was still in active Employment.

 

(g)                **Early Retirement**.  A Participant who meets the conditions for Early Retirement shallbecome fully vested, as of his termination date, in two-thirds (2/3) of hisShares of Restricted Stock, if any, that were not vested as of such terminationdate, and the remaining one-third (1/3) of such non-vested Shares shall beforfeited as of such date.

 

(h)                **Leave of Absence**.  In the event a Participant takes an authorized Leave of Absence,the Restricted Period will be extended for a period equal to the length of theLeave of Absence provided the Participant resumes active Employment withintwelve (12) months of the commencement date of the Leave of Absence, andremains in active Employment for a period equal to (i) three (3) months or (ii)the length of the Leave of Absence, whichever is shorter.  If the Participant remains on the Leave ofAbsence for more than 12 months, all non-vested Shares of Restricted Stock asof the date he began the Leave of Absence shall be forfeited.