Document:

exv10w2

 

Exhibit 10.2

AFFIRMATIVE INSURANCE HOLDINGS, INC.

2004 STOCK INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

      This Restricted Stock Award Agreement (this
“Agreement”), made as of the       day of                     , 2004 (the “Grant Date”) by and between
Affirmative Insurance Holdings, Inc. (the “Company”), and                      (the “Grantee”),
evidences the grant by the Company of a Stock Award (the “Award”) of restricted Common Stock, par
value $0.01 per share (the “Common Stock”) to the Grantee on such date and the Grantee’s acceptance
of the Award in accordance with the provisions of the Company’s 2004 Stock Incentive Plan (the
“Plan”), a copy of which is attached hereto as Exhibit A.

      NOW, THEREFORE, in consideration of the premises and the benefits to be derived from the
mutual observance of the covenants and promises contained herein and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

      1. Basis for Award. This Award is made pursuant to the Plan for services rendered to the
Company by the Grantee.

      2. Restricted Stock Award. The Company hereby awards and grants to Grantee, in consideration
for past services rendered to the Company or an Affiliate which services have a value in excess of
the aggregate par value of the Common Stock awarded to Grantee,
                     shares of Common Stock
of the Company (the “Restricted Stock Award”) which shall be subject to the restrictions and
conditions set forth in the Plan and in this Agreement. In addition, if a cash purchase price per
share is required by the Company to be paid by the Grantee, such purchase price is $      per
share.

      3. Vesting. The Restricted Stock Award (the “Restricted Stock”) shall vest and be held
subject to:

     (a)
                     shares of Common Stock shall vest on the date hereof.

     (b)
an additional                      shares of Common Stock shall become vested on each of
                    , 2005,                     , 2006,                     , 2007 and
                    , 2008, provided that Executive has remained continuously employed by the
Company through each such vesting date.

     (c) any unvested shares of Common Stock shall become vested if, during the term of
Executive’s employment by the Company, a Change in Control occurs.

      4. Compliance with Laws and Regulations. The issuance and transfer of Common Stock shall be
subject to compliance by the Company and Grantee with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange on which the
Company’s Common Stock may be listed at the time of such issuance or transfer. Grantee understands
that the Company is under no obligation to register or qualify the Common Stock with the SEC, any
state securities commission or any stock exchange to effect such compliance.

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      5. Tax Withholding.

     (a) Grantee agrees that, subject to Section 5(b) below, no later than the first
to occur of (i) the date as of which the restrictions on the Restricted Stock shall lapse
with respect to all or any of the Restricted Stock covered by this Agreement or (ii) the
date required by Section 5(b) below, Grantee shall pay to the Company (in cash or to
the extent permitted by the Board, Company Stock held by the Grantee for at least six (6)
months whose Fair Market Value on the date the Restricted Stock vests is equal to the amount
of Grantee’s tax withholding liability) any federal, state or local taxes of any kind
required by law to be withheld, if any, with respect to the Restricted Stock for which the
restrictions shall lapse. The Company shall, to the extent permitted by law, have the right
to deduct from any payment of any kind otherwise due to Grantee any federal, state or local
taxes of any kind required by law to be withheld with respect to the shares of such Company
Stock.

     (b) Grantee agrees to properly elect, within thirty (30) days of the Grant Date, to
include in gross income for federal income tax purposes an amount equal to the Fair Market
Value of the Restricted Stock less the amount, if any, paid by the Grantee for the
Restricted Stock granted hereunder pursuant to Section 83(b) of the Internal Revenue Code of
1986, as amended, Grantee shall pay to the Company, or make other arrangements satisfactory
to the Board to pay to the Company on the date of such grant, any federal, state or local
taxes required to be withheld with respect to such Company Stock. If Grantee fails to make
such payments, the Company shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to Grantee any federal, state or local taxes of
any kind required by law to be withheld with respect to such Restricted Stock.

      6. No Right to Continued Service. Nothing in this Agreement shall be deemed by implication or
otherwise to impose any limitation on any right of the Company to terminate the Grantee’s service
at any time. In the event Grantee’s employment with the Company is terminated by the Company, by
Grantee or as a result of Grantee’s death or disability, no unvested shares of Common Stock shall
become vested after such termination of employment.

      7. Representations and Warranties of Grantee. Grantee represents and warrants to the Company
that:

     (a) Agrees to Terms of the Plan. Grantee has received a copy of the Plan and
has read and understands the terms of the Plan and this Agreement, and agrees to be bound by
their terms and conditions. Grantee acknowledges that there may be adverse tax consequences
upon the vesting of Restricted Stock or disposition of the shares of Common Stock once
vested, and that Grantee should consult a tax advisor prior to such time.

     (b) Stock Ownership. Grantee is the record and beneficial owner of the shares
of Restricted Stock with full right and power to transfer the Unvested Shares to the Company
free and clear of any liens, claims or encumbrances and Grantee understands that the stock
certificates evidencing the Restricted Stock will bear a legend referencing this Agreement.

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     (c) SEC Rule 144. Grantee understands that Rule 144 promulgated under the
Securities Act may indefinitely restrict transfer of the Common Stock so long as Grantee
remains an “affiliate” of the Company or if “current public information” about the Company
(as defined in Rule 144) is not publicly available.

      8. Compliance with U.S. Federal Securities Laws. Grantee understands and acknowledges that
notwithstanding any other provision of the Agreement to the contrary, the vesting and holding of
the Common Stock is expressly conditioned upon compliance with the Securities Act and all
applicable state securities laws. Grantee agrees to cooperate with the Company to ensure
compliance with such laws.

      9. Forfeiture of Unvested Stock. In the event that the Restricted Stock was issued to Grantee
solely in consideration for services rendered and shares of unvested Common Stock (“Unvested
Shares”) standing the in name of Grantee on the books of the Company do not become vested on or
before the expiration of the period during which the applicable vesting conditions must occur, such
Unvested Shares shall be automatically forfeited and cancelled as outstanding shares of Common
Stock immediately upon the occurrence of the event or time period after which such Unvested Shares
may no longer become vested.

      10. Option to Repurchase Unvested Stock. In the event that the Grantee purchased the
Restricted Stock for a cash price per share as set forth in Section 2 hereof, Grantee grants to the
Company an irrevocable right and option (the “Option”) to purchase from Grantee Unvested Shares
standing in the name of Grantee on the books of the Company in accordance with this Agreement.
Unvested Shares may be repurchased by the Company at a price (the “Option Exercise Price”) equal to
the lesser of Fair Market Value or the cash price per share paid by Grantee pursuant to Section
2 and shall be transferred to the Company automatically without further action by Grantee if
repurchased by the Company. The Company may exercise the right to repurchase the Unvested Shares
at any time within ninety (90) days after the expiration of the period during which the applicable
vesting conditions must occur. The repurchase price may be paid to Grantee by personal delivery or
by Company check mailed to Grantee’s last known address on the Company’s records. Grantee
acknowledges that the Unvested Shares shall be held by Grantee subject to the applicable vesting
requirements set forth in this Agreement and Grantee shall have no right to retain any Unvested
Shares that are forfeited or that the Company repurchases in accordance with the terms of this
Agreement. The Company may elect to assign its right to repurchase the Unvested Shares to any
designee of the Company.

      11. Restrictions on Unvested Shares.

     (a) Deposit of the Unvested Shares. Grantee shall deposit all of the Unvested
Shares with the Company to hold until the Unvested Shares become vested, at which time such
vested shares shall no longer constitute Unvested Shares. The Company will deliver to
Grantee the shares of Common Stock that become vested upon vesting of such shares. Grantee
shall execute and deliver to the Company, concurrently with the execution of this Agreement
blank stock powers for use in connection with the transfer to the Company or its designee of
Unvested Shares that do not become vested.

     (b) Restriction on Transfer of Unvested Shares. Grantee shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber or otherwise
dispose of any of the Unvested Shares, except as permitted by this Agreement.

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      12. Adjustments. The number of Unvested Shares and the Option Exercise Price per Unvested
Share shall be automatically adjusted to reflect any stock split, stock dividend, recapitalization,
merger, consolidation, reorganization, combination or exchanges of shares or other similar event
affecting the Company’s outstanding Common Stock subsequent to the date of this Agreement. If
Grantee becomes entitled to receive any additional shares of Common Stock or other securities
(“Additional Securities”) in respect of the Unvested Shares prior to the exercise of the Option,
the total number of Unvested Shares shall be equal to the sum of (i) the initial Unvested Shares;
and, (ii) the number of Additional Securities issued or issuable in respect of the initial Unvested
Shares and any Additional Securities previously issued to Grantee. The Option Exercise Price per
Unvested Share shall be equal to the applicable Option Exercise Price per Unvested Share set forth
in Section 10(a) (as adjusted pursuant to the first sentence of this Section 12) divided by the sum
of (a) the number of Additional Securities issued or issuable in respect of each Unvested Share and
any Additional Securities previously issued to Grantee plus (b) the initial Unvested Share.

      13. Restrictive Legends and Stop-Transfer Orders.

     (a) Legends. Grantee understands and agrees that the Company will place the
legends set forth below or similar legends on any stock certificate(s) evidencing the Common
Stock, together with any other legends that may be required by state or U.S. Federal
securities laws, the Company’s Certificate of Incorporation or Bylaws, any other agreement
between Grantee and the Company or any agreement between Grantee and any third party:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON PUBLIC RESALE AND TRANSFER, INCLUDING AN OPTION HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE ISSUER
AND THE ORIGINAL HOLDER OF THESE SHARES. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS
INCLUDING THE OPTION, ARE BINDING ON TRANSFEREES OF THESE SHARES.

     (b) Stop-Transfer Instructions. Grantee agrees that, to ensure compliance
with the restrictions imposed by this Agreement, the Company may issue appropriate
“stop-transfer” instructions to its transfer agent, if any, and if the Company transfers its
own securities, it may make appropriate notations to the same effect in its own records.

     (c) Refusal to Transfer. The Company will not be required (i) to transfer on
its books any shares of Common Stock that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner of such
            shares, or to accord the right to vote or pay dividends to any purchaser or other transferee
to whom such shares have been so transferred.

      14. Modification. The Agreement may not be modified except in writing signed by both parties.

      15. Plan. Except as otherwise provided herein, or unless the context clearly indicates
otherwise, capitalized terms herein which are defined in the Plan have the same definitions as
provided in the Plan. The terms and provisions of the Plan are incorporated herein by references,
and the Grantee hereby acknowledges receiving a copy of the Plan. In the event of a conflict or

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inconsistency between the terms and provisions of the Plan and the provisions of this
Agreement, the Plan shall govern and control.

      16. Interpretation. Any dispute regarding the interpretation of this Agreement shall be
submitted by Grantee or the Company to the Plan Administrator for review. The resolution of such a
dispute by the Plan Administrator shall be final and binding on the Company and Grantee.

      17. Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the
Plan constitute the entire agreement of the parties and supercede all prior undertakings and
agreements with respect to the subject matter hereof. If any inconsistency should exist between
the nondiscretionary terms and conditions of this Agreement and the Plan, the Plan shall govern and
control.

      18. Notices. Any notice required to be given or delivered to the Company under the terms of
this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its
principal corporate offices. Any notice required to be given or delivered to Grantee shall be in
writing and addressed to Grantee at the address indicated on the signature page hereof or to such
other address as such party may designate in writing from time to time to the Company. All notices
shall be deemed to have been given or delivered upon: (a) personal delivery; (b) three (3) days
after deposit in the United States mail by certified or registered mail (return receipt requested);
(c) one (1) business day after deposit with any return receipt express courier (prepaid); or (d)
one (1) business day after transmission by facsimile or telecopier.

      19. Successors and Assigns. The Company may assign any of its rights under this Agreement.
This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding
upon Grantee and Grantee’s heirs, executors, administrators, legal representatives, successors and
assigns.

      20. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to its conflict of law principles. If any
provision of this Agreement is determined by a court of law to be illegal or unenforceable, then
such provision will be enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.

      21. Acceptance. Grantee hereby acknowledges receipt of a copy of the Plan and this Agreement.
Grantee has read and understands the terms and provisions thereof, and accepts the Award subject
to all the terms and conditions of the Plan and this Agreement. Grantee acknowledges that there
may be adverse tax consequences upon exercise of the Award or disposition of the Shares and that
Grantee should consult a tax advisor prior to such exercise or disposition.

[SIGNATURE PAGE FOLLOWS]

Affirmative Insurance
Holdings, Inc. Restricted Stock Award Agreement

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

	 	 	 
	AFFIRMATIVE INSURANCE HOLDINGS, INC.

	 
	 	 
	 
	 	 
	By:

	 	 
	

	 	 
	Name:

	 	 
	

	 	 
	Title:

	 	 
	

	 	 
	 
	 	 
	GRANTEE

	 
	 	 
	 
	 	 
	 

	 
	 	 
	Address:
	 	 
	

	 	 
	 
	 	 
	

	 	 
	 
	 	 
	

	 	 

Affirmative Insurance
Holdings, Inc. Restricted Stock Award Agreement

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EXHIBIT A

Affirmative Insurance Holdings, Inc. 2004 Stock Incentive Planexv10w3

 

Exhibit 10.3

Description of Non-Employee Director Compensation

      Pursuant to the Company’s pre-existing policies, non-employee directors receive $25,000 per
year for serving on the Company’s Board (their “Annual Retainer”). Committee Chairmen receive an
additional $5,000 per year. Non-employee directors receive $2,000 for each regular director
meeting attended and $1,000 for each special meeting or committee meeting attended. On May 25,
2004, the Company adopted the Affirmative Insurance Holdings, Inc. 2004 Stock Incentive Plan (the
“Stock Incentive Plan”). Under the Stock Incentive Plan, each non-employee director will receive
annually, on January 31, an option to purchase 5,000 shares of the Company’s common stock at a
price equal to the closing price on the last day of trading in January of that year with a vesting
period of one year from the date of grant.

      On February 22, 2005, the Compensation Committee recommended and on February 23, 2005, the
Board approved, that in addition to the forgoing, the non-employee directors would receive an
annual grant of 1,000 shares of restricted stock and that members of the audit committee would
receive an annual grant of an additional 500 shares of restricted stock. This restricted stock
will vest on the fifth anniversary of the grant date and will expire on the tenth anniversary of
the grant date.

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