Document:

Exhibit 10.1

ADVISOR AGREEMENT

 

THIS ADVISOR AGREEMENT (this “Agreement”) is made by Motorsport.com, Inc., a Florida corporation (“Motorsport”), and Emerson Fittipaldi (the “Advisor”), and is effective as of July 19, 2011 (the “Effective Date”).

RECITALS

WHEREAS, Motorsport has developed and continues to operate a video serving website (www.motorsport.com, the “Website”) for motorsport enthusiasts; and

 

WHEREAS, Advisor’s name and likeness, by virtue of his ability and motorsport related experience, has acquired a stature important to establishing the credibility in the motorsport sector and media; and

 

WHEREAS, Advisor was represented by Mr. Daniel Goodstadt (“Goodstadt”) in the negotiation of this Agreement and acknowledging that Motorsport is entering into a similar agreement with Goodstadt; and

 

WHEREAS, Motorsport is desirous to enter into an agreement with Advisor to leverage his expertise and relationships, as well as to acquire a non-exclusive license for the Term to utilize Advisor’s name in connection with the marketing and promotion of the Website and Advisor is willing to grant a non-exclusive license.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, it is agreed as follows:

 

Section 1.    Engagement of Services

 

Motorsport has requested Advisor and Advisor has agreed to consult with Motorsport on a non-exclusive basis.  Advisor shall use reasonable efforts to attend meetings as requested from time-to-time by Motorsport’s CEO and to render advice on issues discussed at such meetings.

 

The manager of Motorsport, who is signing this Agreement on behalf of Motorsport, shall appoint Advisor as Chairman of Motorsport’s Advisory Board.

 

  

  

 

 

Subject to Advisor’s ability to attend without conflicting with his professional obligations, Advisor will participate with Motorsport in the following ways (collectively, the “Services”):

 

	
  

	
·

	
Director of Motorsport’s parent company Net Element, Inc.  Advisor will be elected to the Board of Directors within 60 days of the Effective Date of Net Element and will be elected each year while this Agreement is in effect.  Advisor will be expected to attend regularly scheduled and special board meetings (either in person or, when necessary, by telephone) and participate to lend his business expertise to the promotion of the business of Net Element (Motorsport’s parent company).

 

	
  

	
·

	
Motorsport relaunch. Advisor will strategize on the relaunch of a new Website, including media tour, appearances/presentations, etc. at times and on dates approved by Advisor.*

 

	
  

	
·

	
Advisor will serve as the “face of Motorsport,” granting use of his name and likeness to Motorsport for use on the Website to promote Motorsport in the media through media interviews and special appearances, including motorsport events, subject to Advisor’s prior written approval in each instance (any such approval not to be unreasonably withheld or delayed). Motorsport will provide Advisor 30 days advance notice of appearances when possible.

 

	
  

	
·

	
Advisor will brainstorm creative ideas, including contests, promotions and tie-ins to industry events and major motorsport events that advance the awareness of Motorsport. Advisor shall appear in one or more videos or video blogs on Motorsport. Advisor will endeavor in good faith to make media appearances related to Motorsport activities.*

 

	
  

	
·

	
Advisor may participate as his professional schedule permits, in the Website, including without limitation contests, blogs, video blogs, commentary, etc.*

 

	
  

	
·

	
Advisor will be the Chairman of the Board and the Chairman of the Board of Advisors of Motorsport while this Agreement is in effect and assist in the planning or and will attend Board of Advisors’ Meeting, and oversee and conduct the affairs of Motorsport.

 

	
  

	
·

	
While this Agreement is in effect, Motorsport shall provide experienced marketing and technical support to maintain a high quality website.

 

  

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·

	
Logo.  Advisor will wear the Motorsport logo whenever reasonable on sports apparel (provided by Motorsport.com), driving suits, etc.

 

	
  

	
·

	
Social Media.  Advisor will appoint Motorsport as to manage all of his social media accountings, including without limitation, Facebook and Twitter accounts, in conjunction with and working closely with Advisor’s managers/advisors Fernando Paiva and Daniel Goodstadt.

 

	
  

	
·

	
Motorsport Team.  Advisor will meet at least once per week for a reasonable amount of time with one or more of the members of the Motorsport team, taking into account Advisors other obligation and schedule.*

 

*      Indicates responsibilities that Advisor may assign to one or more of his personal support team.

 

Section 2.    Grant of Right to Use Likeness

 

While this Agreement is in effect, Advisor grants to Motorsport the right to use his name, nickname, initials, autograph, facsimile signature, photograph, likeness, and/or endorsement (each a “Likeness”) in promotion of Motorsport, the Website, and Motorsport’s events (the “License”) specifically as Advisor approves, which approval shall not be unreasonably withheld.  Advisor shall approve all images of Advisor for Motorsport’s use and shall have the right to approve all press releases, biographies or other personal information used by Motorsport which approval shall not be unreasonably withheld. This conditional license shall terminate concurrently with Advisor’s services for Motorsport.  Motorsport shall submit all requests for approval of use of a Likeness to the Advisor with sufficient specificity for the Advisor to understand the requested use.  If the Advisor does not object to any proposed use of a Likeness within 24 hours of a particular request, such request shall be deemed to have been approved; provided, however, that any requests to withdraw approval of a particular use or Likeness shall be discussed between the parties and deference to Advisor’s reasonable desires shall be extended whenever possible.

 

  

3

 

Section 3.    Term and Termination

 

This Agreement shall be effective until terminated pursuant to the terms herein.  Either Party may terminate this Agreement with or without cause by providing the other Party thirty (30) days prior, written notice. If either party terminates this Agreement, the Retainer (as defined in Section 4 herein) will be treated as follows: (i) if termination occurs by Motorsport without Cause, Advisor shall be entitled to retain the Retainer; (ii) if termination occurs by Advisor, Advisor shall forfeit a portion of the Retainer, proportionate with the number of months of the Term remaining subtracted by thirty-six (36) months.  For example, if Advisor terminates the consultancy after 24 months, he will forfeit (36-24=12) divided by (36) = one-third of the Retainer. For purposes of this Section 3, “Cause” shall mean Advisor’s material failure to provide the Services set forth in Section 1 above or Advisor’s involvement in activities that could reasonably be deemed to cause material damage to Motorsport’s business reputation or Advisor’s involvement in the business and/or operations of a direct, online competitor of Motorsport.

 

Section 4.    Compensation

 

In consideration of the Services and the grant of the License, Motorsport shall pay (or cause its parent company Net Element, Inc. to pay in the case of stock) Advisor as follows: (i) five million (5,000,000) shares of Net Element, Inc. common stock (the “Retainer”); (ii) a commission in an amount up to 20% (as a finder’s fee) on all advertising or sponsorship opportunities brought to Motorsport.com; and (iii) a revenue share of up to 50% of the revenue generated directly from Advisor’s social media activities, including Twitter and Facebook. In addition, the Motorsport may pay the Advisor a bonus of two tranches of 500,000 shares of Net Element based on the Advisor’s success in promoting Motorsport.com through his social networking activities in the sole discretion of the Board of Directors of Net Element. In addition, Motorsport will pay for Advisor’s reasonable travel expenses incurred while traveling exclusively for Motorsport business, including first class travel arrangements for Advisor and his spouse. Motorsport will reimburse Advisor, in addition, for all reasonable and documented expenses he incurs in rendering the Services. The Retainer shall be delivered to Advisor promptly following the execution and delivery of this Agreement.

 

Section 5.    Confidentiality

 

5.1  Confidential Information.  As used in this Agreement, “Confidential Information” means all nonpublic information disclosed by or relating to Motorsport or Advisor that is designated as confidential or that, given the nature of the information or the circumstances surrounding its disclosure, reasonably should be considered as confidential. Confidential Information includes, without limitation, (i) all nonpublic information relating to Motorsport’s technology, customers, business plans, finances and other business affairs, (ii) all third-party information that Motorsport specifically identifies to Advisor as being confidential, and (iii) with respect to Advisor, all information about his private life, family, financial and professional details not publicly available.  Confidential Information may be contained in tangible materials, such as drawings, data, specifications, reports and computer programs.

 

  

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5.2  Exclusions.  “Confidential Information” does not include any information that (i) is or becomes publicly available without breach of this Agreement, (ii) can be shown by documentation to have been known to Advisor at the time of its receipt from Motorsport or Advisor, respectively, (iii) is received from a third party who did not acquire or disclose such information by a wrongful or tortious act, or (iv) can be shown by documentation to have been independently developed by Advisor without reference to any Confidential Information.

 

5.3  Use of Confidential Information.

 

(a)             Advisor may use Confidential Information only pursuant to his relationship with Motorsport. Motorsport cannot use confidential information about Advisor at all.  Except as expressly provided in this Agreement, Advisor will not disclose Confidential Information to anyone without Motorsport’s prior written consent. Advisor will take all reasonable measures to avoid disclosure, dissemination or unauthorized use of Confidential Information, including, at a minimum, those measures it takes to protect his own confidential information of a similar nature.

 

(b)             Motorsport may use Confidential Information only in pursuance of its relationship with Advisor. Except as expressly provided in this Agreement, Motorsport will not disclose Confidential Information to anyone without Advisor’s prior written consent. Motorsport will take all reasonable measures to avoid disclosure, dissemination or unauthorized use of Confidential Information, including, at a minimum, those measures it takes to protect its own confidential information of a similar nature. Motorsport will segregate Confidential Information from the confidential materials of third parties to prevent commingling.

 

Section 6.    Non-Competition

 

While Motorsport understands that Advisor is involved in many different aspects of the motorsport industry and that his services for Motorsport are not exclusive, Advisor agrees to advise Motorsport of any role he undertakes while this Agreement is in effect with a private, online motorsport news or community portal that competes with Motorsport in any fashion.  In Motorsport’s discretion, Motorsport may terminate Advisor’s participation in the Advisory Board if it deems that Advisor’s participation creates an unacceptable conflict of interest.

 

  

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Section 7.    Intellectual Property

 

While this Agreement is in effect, all discoveries and works, including without limitation, ideas, recommendations, additions, suggestions, rewrites, or other contributions, made or conceived for Motorsport by Advisor as part of his Services shall be the sole and exclusive property of Motorsport or shall be deemed work made for hire and all right, title and interest in such Work shall inure to the benefit of Motorsport. Advisor shall assist Motorsport in obtaining or maintaining for itself at Motorsport’s expense United States and foreign copyrights protection or other protection of any and all such Works, and promptly execute, whether while this Agreement is in effect or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for Motorsport and to protect its title thereto.

 

Section 8.    Indemnification

 

If Advisor is made a party or threatened to be made a party to any action, suit or proceeding (an “Action”), by reason of the fact that Advisor is involved with Motorsport, Advisor shall be defended, indemnified and held harmless by Motorsport to the fullest extent permitted by law, as the same exists or may hereafter be amended, against all liability, damages, losses, judgments, liabilities, fines, settlements, and costs, attorneys’ fees and any expenses of defending himself with counsel of his choice or establishing a right to indemnification under this Agreement (“Expenses”) incurred by Advisor in connection therewith, and such indemnification shall continue after Advisor has ceased to be Advisor to Motorsport, and shall inure to the benefit of his heirs, executors and administrators; provided, however, that Advisor shall not be so indemnified for any Action which is finally adjudicated to have arisen out of his willful misconduct, bad faith, gross negligence or reckless disregard of duty.

 

Section 9.    Independent Contractor

 

Advisor is an independent contractor in the performance of the Services. This Agreement shall not be interpreted as creating an association, joint venture, or partnership relationship between the parties or as imposing any employment, or partnership obligation, or liability on any party. Advisor shall not be entitled to, and shall not attempt to, create or assume any obligation, express or implied, on behalf of Motorsport. Motorsport shall have no obligation to withhold or pay income tax, workers’ compensation, pension, deferred compensation, welfare, insurance, and other employee taxes on behalf of Advisor.

 

  

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Section 10.    General Provisions

 

10.1.  Governing Law. The laws of the State of Florida, without regards to choice of law provisions, shall govern this Agreement.

 

10.2   Entire Agreement.  This Agreement sets forth the entire understanding and agreement of the parties as to the subject matter of this Agreement. It may be changed only by written amendment signed by the parties.

 

10.3   Prevailing Party.  In the event either of the parties to this Agreement commences any action or proceeding arising out of, or relating in any way to, this Agreement, the prevailing party shall be entitled to recover, in addition to any other relief awarded to such party, his, her or its costs, expenses and reasonable attorneys’ fees.

 

10.4   Assignability. Neither party may assign this Agreement or the rights and obligations thereunder to any third party without the prior express written approval of the other party which shall not be unreasonably withheld.

 

10.5   Agreement Binding On Successors. The provisions of the Agreement shall be binding upon and shall inure to the benefit of the Parties hereto, their heirs, administrators, successors and assigns.

 

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

	
MOTORSPORT.COM, INC.

	 	
ADVISOR

	  	  	 	  	  
	
By:

	
/s/ Mike Zoi

	 	
 /s/ Emerson Fittipaldi

	
Name: 

	
Mike Zoi

	 	
Name:

	
Emerson Fittipaldi

	
Title:

	
President

	 	  	  

NET ELEMENT, INC., acknowledging Net Element’s responsibility to issue the shares to Advisor.

	
By:

	
/s/ Dmitry Kozko

	
Name: 

	
Dmitry Kozko

	
Title:

	
VP

 

  

7a6805066ex10-10.htm

Exhibit 10.10

 

FOUR OAKS FINCORP, INC.

FOURTH AMENDED AND RESTATED

DIVIDEND REINVESTMENT AND

STOCK PURCHASE PLAN

1.            Purpose

The purpose of the Plan is to provide the shareholders of record of the Company’s Common Stock with a simple and convenient method of investing cash dividends and optional cash payments in shares of Common Stock. To the extent that new shares of Common Stock will be purchased from the Company, the Company will receive additional funds to finance the continuing operations of the Company.

2.            Features

Participants in the Plan:

	
●

	
Will have cash dividends on their shares of Common Stock automatically reinvested in additional shares of Common Stock;

	  	  
	
●

	
May elect to make optional cash payments from $20.00 to $2,500.00 per quarter for additional Common Stock purchases;

	  	  
	
●

	
Will receive full investment use of funds because the Plan provides for crediting of fractional shares (calculated to four decimal places) and reinvestment in additional shares;

	  	  
	
●

	
Will pay no account fees for the reinvestment of dividends or optional cash payments;

	  	  
	
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Will receive quarterly statements from the Agent (as defined below) reflecting total dividends and optional cash payments, the price paid for shares purchased, and the total shares held in the participant’s account; and

	  	  
	
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Will enjoy safekeeping of shares purchased pursuant to the Plan, including protection against loss, theft, or inadvertent destruction of certificates.

 

  

  

  

 

3.            Administration

Registrar and Transfer Company will administer the Plan and serve as agent (the “Agent”) for Plan participants. The Agent keeps records, sends statements of account to each participant, and performs other duties related to the Plan. Shares purchased under the Plan are registered in the name of the Agent, or in the name of its nominee, and credited to the accounts of the participants in the Plan. Questions and communications regarding the Plan should include your account number and should be directed to:

Registrar and Transfer Company

10 Commerce Drive

Cranford, New Jersey 07016

Telephone: (800) 368-5948; (908) 497-2300

info@rtco.com

www.rtco.com

4.            Participation

a.           Eligibility

Any holder of record of the Company’s Common Stock is eligible to participate in the Plan at any time. Beneficial owners of shares of Common Stock whose shares are registered in names other than their own (for example, in the name of a broker, bank, or other nominee) and who wish to participate in the Plan must become owners of record by having the number of shares they wish to enroll in the Plan transferred into their own names. Alternatively, they must make arrangements for the nominees or other holders of record to participate in the Plan on behalf of such beneficial owners.

b.           Enrollment in the Plan

An eligible shareholder may join the Plan at any time by completing an Authorization Card and returning it to the Agent at the above address. Authorization Cards may be obtained at any time by contacting the Agent.

For new enrollees, participation will commence with the next dividend payable after receipt of authorization, provided it is received by the Agent by the fifth business day prior to the record date for the dividend. If an Authorization Card is received after the fifth business day prior to the record date established for a particular dividend, the reinvestment of dividends under the Plan will begin with the next succeeding dividend. The Company expects to set quarterly dividend and record payment dates for Common Stock on or about the following dates:

	
Approximate Record Date

	
Approximate Payment Date

	  	  
	
February 28

	
March 8

	
May 31

	
June 8

	
August 31

	
September 8

	
November 30

	
December 8

 

  

  

  

 

To participate in the optional cash payment feature, a personal check drawn on a U.S. bank and made payable to Registrar and Transfer Company should be sent together with the payment form that is attached to the quarterly statement participants receive after their initial dividend has been invested. Cash payments can only be made for participants who have had at least one dividend reinvested pursuant to the Plan, provided, however, that if no dividends are paid by the Company in the first quarter of a participant’s enrollment, such participant will be eligible to make a cash payment in any subsequent quarter.

Shareholders enrolled in the Plan will remain enrolled unless they terminate their participation by giving written notice to the Agent as described below.

5.            Number of Shares Subject to the Plan

Shareholders of record may participate in the Plan with respect to all or any portion of the shares equal to or greater than ten percent of Common Stock registered in their name.  If a shareholder wishes to participate in the Plan with less than all of such shareholder’s shares, the shareholder must notify the Agent in writing to that effect. Otherwise, it will be assumed that the shareholder intends to participate in the Plan with respect to all shares owned. Also, if a participant wishes to change the number of shares of Common Stock subject to the Plan, the participant must notify the Agent in writing to that effect. Any such notification received by the Agent after the fifth business day prior to a dividend payment date will not be effective until the next quarter.

6.            Costs

The Agent will provide the service of reinvesting a participant’s dividends paid on the Company’s Common Stock or optional cash payments at no cost to the shareholder. All administrative costs of the Plan will be paid by the Company. No brokerage commissions or fees will be charged for purchases of shares made under the Plan by the Agent directly from the Company out of authorized but unissued shares of the Company. The Company will bear the costs of brokerage commissions or fees incurred as a result of any purchases made under the Plan on the open market. The Company may change or eliminate this policy entirely upon written notice to participants. The reinvestment of dividends does not relieve the participant of any income tax that may be payable on the dividends or on any brokerage commissions or fees paid by the Company.

7.            Purchases Under the Plan

a.           Method of Purchase

The Agent automatically will receive the full amount of dividends paid on both the shares held by participants and any additional full or fractional shares acquired under the Plan, as well as any optional cash payments made by participants. The Agent will use these funds to purchase shares of the Company’s Common Stock for Plan participants from the Company’s authorized but unissued shares. Purchases also may be made on any securities exchange where such shares are traded, in the over-the-counter market, or in negotiated transactions.

 

  

  

  

 

b.           Number of Shares Purchased

The number of shares purchased under the Plan for each participant will depend on the amount of dividends reinvested and optional cash payments made to the participant’s account and the purchase price of the Common Stock. Therefore, each participant’s account will be credited with the number of shares, including a fractional share computed to four decimal places, equal to the total amount invested under the Plan by the participant (dividends and optional cash payments), divided by the applicable purchase price per share of the Common Stock.

c.           Timing of Purchases

The Agent will purchase shares as soon as practicable after cash dividends are paid in the quarters when such payments are made. In other quarters, the Agent generally will purchase shares on the first business day of the quarter.  Purchases will include dividends to be reinvested and optional cash payments as of the date of purchase, as applicable. The Agent will use every reasonable effort to reinvest all dividends promptly after receipt and in no event later than 30 days after receipt unless such investments are restricted by any applicable state or federal securities laws. No interest will be paid on dividends or optional cash payments pending reinvestment.

If for any reason the Agent is precluded from acquiring shares for 90 consecutive days, the Agent will promptly remit all cash dividends and optional cash payments held in the participant’s Plan account to the participant after such 90th day.

d.           Purchase Price

The purchase price of original issue shares of Common Stock purchased directly from the Company will be determined once each quarter by the Board of Directors of the Company based on an annual appraisal and trading activity. The appraisal will be conducted by an independent appraisal firm selected by the Board of Directors. The purchase price for the first quarter shall be based on the first such appraisal. Each quarter thereafter, the Board of Directors of the Company shall set the purchase price based on a review of the most recent annual appraisal and trading activity during the preceding quarter. No brokerage commissions or fees will be charged for purchases made through the Plan directly from the Company. Shares purchased on the open market under the Plan will be purchased at the price per share payable to the broker-dealer(s) involved. The Company will bear any brokerage commission or fees incurred in connection with open market purchases.

 

  

  

  

 

8.            Optional Cash Payments

a.           Method of Payments

Once a participant has received the first Dividend Reinvestment Statement (described below) for dividends reinvested, the participant may elect to make optional cash payments to his account for additional Common Stock purchases, provided, however, that if no dividends are paid by the Company in the first quarter of a participant’s enrollment, such participant will be eligible to make a cash payment in any subsequent quarter. Each optional cash payment must be accompanied by a payment form, which is furnished by the Agent with each Dividend Reinvestment Statement. The Agent will commingle all optional cash payments credited to a participant’s account with cash dividends and optional cash payments credited to all accounts under the Plan, and all such funds will be applied to the purchase of Common Stock as provided above. Optional cash payments received by the fifth business day before a dividend payment date will be combined with cash dividends and invested by the Agent at the time cash dividends are reinvested, and in any event will be invested with funds received by the fifth business day before purchases are made in other quarters, as provided above. Any optional cash payments received by the Agent after the fifth day prior to a dividend payment date or more than 30 days prior to a dividend payment date will be returned to the participant.

The Agent will hold the participants’ optional cash payments in non-interest bearing accounts. No interest will be paid on any optional cash payments for the period following receipt by the Agent but prior to investment. Participants are encouraged to transmit optional cash payments so as to be received by the Agent as close as possible to the fifth day prior to a dividend payment date to avoid unnecessary accumulations of funds.

A participant may obtain a refund of his or her uninvested optional cash payments upon written request to the Agent received not less than two business days prior to the investment of such payments.

A participant is under no obligation to make an optional cash payment in any quarter, and the same amount of money does not need to be sent each quarter.

b.           Limitations

Any optional cash payment must not be less than $20.00, and payments may not exceed $2,500.00 per quarter in the aggregate for any participant or for each beneficial owner on whose behalf a participant may be investing. Only one optional cash payment may be made in each quarter by any participant, or by each beneficial owner on whose behalf a participant may be investing, and optional cash payments are only invested quarterly, as provided above. The Company may change the minimum and maximum allowable optional cash payment amounts or eliminate cash payments entirely upon written notice to participants.

Participants may not draw checks or drafts against their Plan accounts in respect of any shares or cash held therein and may not sell, assign, or transfer their accounts.

 

  

  

  

 

9.            Certificates for Shares

Normally, certificates for shares of Common Stock purchased under the Plan will not be issued directly to participants. Shares will be held by or through the Agent, providing protection against loss, theft, or inadvertent destruction. The number of shares credited to a participant’s account will be shown on the next statement of account sent to the participant. The participant, however, may obtain from the Agent certificates for full shares upon receipt by the Agent of a written request from the participant. Any request for issuance of a certificate received by the Agent less than five days prior to the record date for a dividend payment shall become effective only after dividends paid for such record date have been reinvested. Also, the Agent generally processes requests for certificates only once each month, on or about the l5th day of each month. No certificate will be issued for a fractional share, although dividends on a fractional interest in a share will be credited to the participant’s account.

10.          Reports to Participants

As soon as practicable after the end of each quarterly period, the Agent will send a statement of account (the “Dividend Reinvestment Statement”) to the participant. The Dividend Reinvestment Statement will include information regarding each purchase and other information regarding the status of the participant’s account as of the date of such statement. The Dividend Reinvestment Statement will provide a record of the cost basis of shares purchased under the Plan and should be retained for tax purposes.

11.          Withdrawals of Shares Purchased Under the Plan

A participant may withdraw all or any portion of the full shares of Common Stock held in the participant’s account under the Plan for a fee of $10.00 by notifying the Agent in writing to that effect. Upon notification and payment, a certificate for the full shares withdrawn will be issued in the name of the participant and mailed to him. No certificate will be issued for a fractional share interest.

Withdrawals of some or all of the full shares in a participant’s account will not terminate the participant’s enrollment in the Plan.

12.          Termination of Participation

A participant may terminate his account by notifying the Agent in writing to that effect. Any notice of termination received by the Agent less than five days prior to the record date for a dividend payment shall become effective only after dividends paid for such record date have been reinvested. Upon termination, the Agent will issue to the participant a certificate for the number of full shares of Common Stock and a check for any fractional share in the participant’s account. The Agent generally issues such certificates and checks only once each month, on or about the 15th day of each month.

 

  

  

  

 

13.          Other Features

a.           Stock Splits, Stock Dividends, and Rights Offerings

Stock splits or stock dividends on shares held in a participant’s account will be credited to the account based on the number of shares (including fractional share interests) held in the account on the record date for such dividend or split. The Agent will report the amount of dividends received on shares or fractional shares held in each account.

In the event the Company offers rights or warrants to purchase additional shares of Common Stock or other securities to the holders of Common Stock, such rights or warrants will be made available to participants based on the number of shares, including fractional share interests to the extent feasible, held in their accounts on the record date established for determining the holders of Common Stock entitled to such rights or warrants.

b.           Voting of Shares Purchased Under the Plan

All full and fractional shares credited to a participant’s account under the Plan will be added to the shares registered in the participant’s name on the shareholder records of the Company. The participant will receive one proxy covering the total of such shares, which proxy shall be voted as the participant directs; or, if the participant so elects, the participant may vote all of such shares in person at the shareholders’ meeting.

14.          Federal Income Tax Consequences

Dividends and other distributions by the Company to shareholders generally will be taxed as ordinary dividend income. Participants who acquire additional shares of Common Stock through the Plan directly from the Company with reinvested cash dividends will be treated for federal income tax purposes as having received a taxable stock distribution. As a result, an amount equal to the fair market value on the dividend payment date of the shares acquired directly from the Company with reinvested cash dividends will be treated as a dividend paid to participants. The tax basis of the shares acquired directly from the Company with such reinvested dividends also will equal the fair market value of the shares on the investment date.

Participants who acquire additional shares of Common Stock through the Plan through open market purchases made with reinvested cash dividends will be deemed to have received a taxable dividend equal to the amount of the cash dividend reinvested plus the amount of any brokerage fees paid by the Company with respect to such additional shares. The participant’s tax basis in these shares acquired on the open market will equal the purchase price of the shares plus any brokerage fees paid with respect to the shares.

Participants in the Plan should not realize any taxable income at the time of investment of optional cash payments in additional shares of Common Stock acquired directly from the Company although it is possible that such participants may be treated as having received a taxable dividend to the extent the fair market value of such Common Stock on the investment date exceeds the amount of the optional cash payment. The tax basis of shares purchased directly from the Company with an optional cash payment will be equal to the optional cash payment plus any amount treated as a taxable dividend pursuant to the preceding sentence.

 

  

  

  

 

Participants who acquire additional shares of Common Stock through open market purchases made with optional cash payments will be treated as receiving a cash dividend equal to the amount of any brokerage fees paid by the Company with respect to such shares. The tax basis of shares purchased on the open market with an optional cash payment will equal the purchase price of the shares, plus any brokerage fees paid by the Company with respect to such shares.

The holding period of shares of Common Stock acquired through the Plan, whether purchased with reinvested dividends or optional cash payments, will begin on the day following the investment date.

Participants in the Plan will not realize any taxable income when they receive certificates for full shares credited to their accounts, whether upon their written requests for such certificates, upon full shares credited to their account, or upon withdrawal from or termination of participation in the Plan. Participants, however, will realize taxable gain or loss (which, for most participants, will be capital gain or loss) when full shares acquired under the Plan are sold or exchanged by participants and when participants receive a cash payment for a fractional share credited to their account. The amount of such gain or loss will be the difference between the amount that a participant receives for his shares or fractional share (net of brokerage commissions and other costs of sale) and the tax basis thereof.

For foreign participants who elect to have their cash dividends reinvested and whose dividends are subject to United States income tax withholding, and any other participants for whom federal income tax withholding on dividends is required, an amount equal to the cash dividends payable to such participants, less the amount of tax required to be withheld, will be applied to the purchase of Common Stock through the Plan.

THE FOREGOING IS INTENDED ONLY AS A GENERAL DISCUSSION OF THE CURRENT FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN.  IT DOES NOT INCLUDE A DISCUSSION OF STATE AND LOCAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN.  FOR SPECIFIC INFORMATION ON THE TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN, INCLUDING ANY FUTURE CHANGES IN APPLICABLE LAW OR INTERPRETATION THEREOF, PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS.

15.          Change and Termination of the Plan; Interpretation of the Plan

The Company reserves the right to change, suspend, or terminate the Plan at any time. Participants shall be notified of any such change, suspension, or termination. Any question of interpretation arising under the Plan will be determined by the Company. The Plan and all transactions in connection with the Plan will be governed by and construed in accordance with the laws of the State of North Carolina.

 

  

  

  

 

This Fourth Amended and Restated Plan was adopted by the Board of Directors of Four Oaks Fincorp, Inc. effective as of July 25, 2011.

	  	
/s/ Wanda J. Blow                               

	  	
Wanda J. Blow

	  	
Secretary

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