**Exhibit 10.6**

**HOMEOWNERS CHOICE, INC.**

**2007 Stock Option and Incentive Plan**

 

The purpose of this 2007 StockOption and Incentive Plan (the “Plan”) of Homeowners Choice, Inc. (the “Company”) is to provide stock options and other equity interests in the Company (each an “Award”) to employees, officers,directors, consultants and advisors of the Company and its Subsidiaries, all of whom are eligible to receive Awards under the Plan. Any person to whom an Award has been granted under the Plan is called a “Participant”. Additionaldefinitions are contained in Section 8. 

 

a. Administration byBoard of Directors. The Plan will be administered by the Board of Directors of the Company (the “Board”). The Board, in its sole discretion, shall have the authority to grant and amend Awards, to adopt, amend and repealrules relating to the Plan and to interpret and correct the provisions of the Plan and any Award. All decisions by the Board shall be final and binding on all interested persons. Neither the Company nor any member of the Board shall be liable forany action or determination relating to the Plan. 

b. Appointment of Committees. To the extent permitted byapplicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean suchCommittee or the Board. 

c. Delegation to Executive Officers. To the extent permitted by applicable law, theBoard may delegate to one or more executive officers of the Company the power to grant Awards and exercise such other powers under the Plan as the Board may determine*, provided that*the Board shall fix the maximum number of Awards to begranted and the maximum number of shares issuable to any one Participant pursuant to Awards granted by such executive officers. 

 

a. Numberof Shares. Subject to adjustment under Section 3(b), the aggregate number of shares of Common Stock of the Company (the “Common Stock”) that may be issued pursuant to the Plan is six million (6,000,000) shares. Ifany Award expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. If shares of Common Stock issued pursuant to thePlan are repurchased by, or are surrendered or forfeited to, the Company at no more than cost, such shares of Common Stock shall again be available for the grant of Awards under the Plan; *provided, however*, that the cumulative number of suchshares that may be so reissued under the Plan will not exceed six million (6,000,000) shares. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. 

b. Adjustment to Common Stock. In the event of any stock split, stockdividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or event, (i) the number and class ofsecurities available for Awards under the Plan and the per-Participant share limit, (ii) the number and class of securities, vesting schedule and exercise price per share subject to each outstanding Option, (iii) the repurchase price persecurity subject to repurchase, and (iv) the terms of each other outstanding stock-based Award shall be adjusted by the Company (or substituted Awards may be made) to the extent the Board shall determine, in good faith, that such an adjustment(or substitution) is appropriate. 

 
 4.Stock Options 
a. General. TheBoard may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable tothe exercise of each Option and the Common Stock issued upon the exercise of each Option, including vesting provisions, repurchase provisions and restrictions relating to applicable federal or state securities laws, as it considers advisable.

b. Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” asdefined in Section 422 of the Code (an “Incentive Stock Option”) shall be granted only to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of theCode. The maximum aggregate number of shares of Common Stock which may be issued under this Plan as Incentive Stock Options is six million (6,000,000), subject to adjustment under Section 3(c). The Board and the Company shall have no liabilityif an Option or any part thereof that is intended to be an Incentive Stock Option does not qualify as such. An Option or any part thereof that does not qualify as an Incentive Stock Option is referred to herein as a “Nonstatutory StockOption.” 

c. Exercise Price. The Board shall establish the exercise price (or determine the method bywhich the exercise price shall be determined) at the time each Option is granted and specify it in the applicable option agreement. 

d. Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement. 

e. Exercise of Option. Options may be exercised only by delivery to the Company of a written notice of exercise signed by theproper person together with payment in full as specified in Section 4(f) for the number of shares for which the Option is exercised. 

f. Payment Upon Exercise. Common Stock purchased upon the exercise of an Option shall be paid for by one or any combination of the following forms of payment: 

i. by check payable to the order of the Company; 

 

2 

ii. except as otherwise explicitly provided in the applicable option agreement, and onlyif the Common Stock is then publicly traded, delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, or delivery by the Participant to theCompany of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or 

iii. to the extent explicitly provided in the applicable option agreement, by (a) delivery of shares of Common Stock owned by theParticipant valued at fair market value (as determined by the Board or as determined pursuant to the applicable option agreement), (b) delivery of a promissory note of the Participant to the Company (and delivery to the Company by theParticipant of a check in an amount equal to the par value of the shares purchased), or (c) payment of such other lawful consideration as the Board may determine. 

 
 5.Restricted Stock 
a.Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to (i) delivery to the Company by the Participant of a check in an amount at least equal to the par value of the shares purchased,and (ii) the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant in the event that conditions specified by the Board in the applicable Award are not satisfiedprior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”). 

b. Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award. Any stockcertificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with theCompany (or its designee). After the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or, if the Participant has died, to thebeneficiary designated by a Participant, in a manner determined by the Board, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absenceof an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate. 

 
 6.Other Stock-Based Awards 
The Board shall have the rightto grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including, without limitation, the grant of shares based upon certain conditions, the grant of securities convertible into Common Stockand the grant of stock appreciation rights, phantom stock awards or stock units. 

 

3 

 7.General Provisions Applicable to Awards 
a. Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, eithervoluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context,shall include references to authorized transferees. 

b. Documentation. Each Award under the Plan shall beevidenced by a written instrument in such form as the Board shall determine or as executed by an officer of the Company pursuant to authority delegated by the Board. Each Award may contain terms and conditions in addition to those set forth in thePlan *provided that*such terms and conditions do not contravene the provisions of the Plan. 

c. BoardDiscretion. The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly. 

d. Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent towhich, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award. 

e. Consolidations or Mergers. If the Company is to be consolidated with or acquired by another entity in a merger or otherreorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of such event, shall, immediately following such event, hold, as a group, less than a majority of the voting securities of thesurviving or successor entity, or in the event of a sale of all or substantially all of the Company’s assets or otherwise (each, an “Acquisition”), the Board or the board of directors of any entity assuming the obligations ofthe Company hereunder (as used in this Section 7(e), also the “Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis forthe shares then subject to such Options either (a) the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition, (b) shares of stock of the surviving or successor corporation or(c) such other securities as the Board deems appropriate, the fair market value of which shall not materially exceed the fair market value of the shares of Common Stock subject to such Options immediately preceding the Acquisition; or(ii) upon written notice to the Participants, provide that all Options must be exercised, to the extent then exercisable or to be exercisable as a result of the Acquisition, within a specified number of days of the date of such notice, at theend of which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Options (to the extent then exercisable or to beexercisable as a result of the Acquisition) over the exercise price thereof. 

f. Withholding. Each Participantshall pay to the Company, or make provisions satisfactory to the Company for payment of, any taxes required by law to be 

 

4 

withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. The Board may allow Participants tosatisfy such tax obligations in whole or in part by transferring shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value (as determined by the Board or as determined pursuant tothe applicable option agreement). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant. 

g. Amendment of Awards. The Board may amend, modify or terminate any outstanding Award including, but not limited to,substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, *provided that*, the Participant’s consent to suchaction shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. 

h. Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to thePlan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all otherlegal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant hasexecuted and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations. 

i. Acceleration. The Board may at any time provide that any Options shall become immediately exercisable in full or in part,that any Restricted Stock Awards shall be free of some or all restrictions, or that any other stock-based Awards may become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise realizable in full or in part,as the case may be, despite the fact that the foregoing actions may (i) cause the application of Sections 280G and 4999 of the Code if a change in control of the Company occurs, or (ii) disqualify all or part of the Option as an IncentiveStock Option. 

 
 8.Miscellaneous 
a. Definitions.

i. “Company,” for purposes of eligibility under the Plan, shall include any present or future subsidiarycorporations of Homeowners Choice, Inc., as defined in Section 424(f) of the Code (a “Subsidiary”), and any present or future parent corporation of Homeowners Choice, Inc., as defined in Section 424(e) of the Code. Forpurposes of Awards other than Incentive Stock Options, the term “Company” shall include any other business venture in which the Company has a direct or indirect significant interest, as determined by the Board in its solediscretion. 

 

5 

ii. “Code” means the Internal Revenue Code of 1986, as amended, and anyregulations promulgated thereunder. 

iii. “employee” for purposes of eligibility under the Plan (but notfor purposes of Section 4(b)) shall include a person to whom an offer of employment has been extended by the Company. 

b. No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any otherrelationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan. 

c. No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shallhave any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder thereof. 

d. Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board. No Awardsshall be granted under the Plan after the completion of ten years from the date on which the Plan was adopted by the Board, but Awards previously granted may extend beyond that date. 

e. Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time. 

f. Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordancewith the laws of the State of Florida, without regard to any applicable conflicts of law. 

 
Adopted by the Board of Directors on