Document:

exv10w5

 

Exhibit 10.5

AGREEMENT TO MANAGEMENT AGREEMENT

     This Amendment to Management Agreement (the “Amendment”) is made as of May
1, 2002, by and between FBR Asset Investment Corporation (the “Company”) and
Friedman, Billings, Ramsey Investment Management, Inc. (the “Manager”).

     WHEREAS, the Company and the Manager are parties to that certain
Management Agreement, dated as of December 17, 1997, and extended and amended
by the Agreement to Extend and Amend Management Agreement, dated as of December
17, 1999, the Agreement to Extend Management Agreement, dated as of December
17, 2000, and the Agreement to Extend Management Agreement, dated as of
December 17, 2001 (the “Management Agreement”); and

     WHEREAS, the parties have determined to amend the Management Agreement to
revise the compensation payable by the Company to the Manager.

     NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties agree as follows:

     SECTION 1.Compensation. Effective as of the date hereof, the parties
hereby agree to amend Section 8(a) of the Management Agreement by deleting
“1/4” in the third line of such section and substituting therefor “1/5”.

     SECTION 2. Other terms. Other than as expressly extended hereby, all
other terms, conditions and provisions of the Management Agreement shall remain
in effect, unless the Management Agreement is amended in writing by the parties
or is sooner terminated in accordance with the provisions thereof.

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

	 	 	 
	FBR ASSET INVESTMENT

CORPORATION	 	
FRIEDMAN, BILLINGS, RAMSEY

INVESTMENT MANAGEMENT, INC.

	 	 	 
	By: /s/ Eric F. Billings            
	 	
By: /s/ Emanuel J. Friedman            

	
Name:   Eric F. Billings

Tittle: Chairman and Chief

	 	
Name:  Emanuel J. Friedman

Title:  Chairman and Co-Chief

	            Executive Officer	 	           Executive Officerexv10w9

 

EXHIBIT 10.9

FBR ASSET INVESTMENT CORPORATION

STOCK INCENTIVE PLAN

(as amended through May 23, 2002)

SECTION 1. Purpose; Definitions

     The purpose of the Plan is to give the Company a competitive advantage in
attracting, retaining and motivating officers, employees, non-employee
directors and other service providers and to provide the Company and its
Subsidiaries and Affiliated Companies with an incentive compensation plan
providing incentives directly linked to the profitability of the Company’s
businesses and/or increases in shareholder value.

     For purposes of the Plan, the following terms are defined as set forth
below:

     a.     “Affiliated Company” means any corporation (or partnership, joint
venture, or other enterprise), of which the Company owns or controls, directly
or indirectly, 10% or more, but less than 50% of the outstanding shares of
stock normally entitled to vote for the election of directors (or comparable
equity participation and voting power).

     b.     “Award” means a Stock Appreciation Right, Stock Option, Restricted
Stock, unrestricted share of Common Stock, dividend equivalent, interest
equivalent, Performance Unit or other award granted under this Plan.

     c.     “Board” means the Board of Directors of the Company.

     d.     [Intentionally left blank]

     e.     “Cause” means (except as otherwise provided by the Committee in the
agreement relating to any Award) (1) conviction of a participant for committing
a felony under federal law or the law of the state in which such action
occurred, (2) dishonesty in the course of fulfilling a participant’s employment
duties or (3) willful and deliberate failure on the part of a participant to
perform his employment duties in any material respect. Notwithstanding the
foregoing, if a participant is a party to an employment agreement with the
Corporation or any Subsidiary or Affiliated Company that contains a definition
of “Cause,” such definition shall apply to such participant for purposes of the
Plan except to the extent otherwise provided by the Committee in the agreement
relating to any Award.

     f.     “Change in Control” and “Change in Control Price” have the meanings set
forth in Sections 10(b) and (c), respectively.

     g.     “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.

     h.     “Committee” means the Board or, if the Board appoints it, a committee
of two or more non-employee directors selected by the Board.

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     i.     “Common Stock” means the common stock, par value $0.01 per share, of
the Company.

     j.     “Company” means FBR Asset Investment Corporation, a Virginia
corporation.

     k.     “Disability” means permanent and total disability as determined by the
Committee for purposes of the Plan.

     l.     “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.

     m.     “Fair Market Value” means, as of any given date, the closing price of
the Common Stock reported in the Wall Street Journal for the day prior to such
date, or if the Common Stock was not traded on either the American Stock
Exchange or the New York Stock Exchange on such day, then for the last
preceding day on which the Common Stock was traded. If there is no regular
public trading market for the Common Stock, Fair Market Value shall be
determined by such other source as the Committee may select.

     n.     “Incentive Stock Option” means any Stock Option designated as, and
qualified as, an “incentive stock option” within the meaning of Section 422 of
the Code.

     o.     “NonQualified Stock Option” means any Stock Option that is not an
Incentive Stock Option.

     p.     “Performance Goals” means the performance goals established by the
Committee in connection with the grant of Restricted Stock or Performance
Units. Performance Goals may be established based on any of the following
areas of performance of the Company, or any Affiliated Company: asset growth;
combined net worth; debt to equity ratio; earnings per share; revenues;
operating income; operating cash flow; net income, before or after taxes;
return on total capital, equity, revenue or assets; total shareholder return;
or changes in the market price of the Common Stock.

     q.     “Performance Units” means an Award granted under Section 8.

     r.     “Plan” means the FBR Asset Investment Corporation Stock Incentive Plan,
as set forth herein and as hereinafter amended from time to time.

     s.     “Restricted Stock” means an Award granted under Section 7.

     t.     “Retirement” means retirement from employment with the Company, a
Subsidiary or an Affiliated Company as determined by the Committee for purposes
of an Award under the Plan.

     u.     “Stock Appreciation Right” means an Award granted under Section 6.

     v.     “Stock Option” means an Award granted under Section 5.

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     w.     “Subsidiary” means: (i) for the purpose of an Incentive Stock Option,
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the Incentive
Stock Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain;
and (ii) for the purposes of any other Award, any corporation (or partnership,
joint venture, or other enterprise) of which the Company owns or controls,
directly or indirectly, 50% or more of the outstanding shares of stock normally
entitled to vote for the election of directors (or comparable equity
participation and voting power).

     x.     “Termination of Employment” means the termination of the participant’s
employment with, or service as an officer, non-employee director or other
service provider of, the Company and any Subsidiary or Affiliated Company
notwithstanding that service as a non-employee director or other service
provider may not constitute “employment” for other purposes. A participant
employed by or serving as a non-employee director or other service provider of
a Subsidiary or an Affiliated Company shall also be deemed to incur a
Termination of Employment if the Subsidiary or Affiliated Company ceases to be
such a Subsidiary or Affiliated Company, as the case may be, and the
participant does not immediately thereafter become an employee, director or
service provider of the Company or another Subsidiary or Affiliated Company.
Temporary absences from employment or other service because of illness,
vacation or leave of absence and transfers among the Company and its
Subsidiaries, or, if the Committee so determines, among the group consisting of
the Company, its Subsidiaries and Affiliated Companies, shall not be considered
Terminations of Employment.

     In addition, certain other terms used in the Plan have definitions
provided to them in the first place in which they are used herein.

SECTION 2. Administration

     The Plan shall be administered by the Committee; provided, that any
authority granted to the Committee under the Plan may also be exercised by the
full Board; and provided, further, that the full Board shall have the sole
authority to grant Awards to non-employee directors, and any reference to the
Committee shall be a reference to the Board with respect to all such Awards.

     The Committee shall have plenary authority to grant Awards pursuant to the
terms of the Plan or, in the Committee’s discretion, in connection with awards
under other bonus plans or programs of the Company, to officers, employees,
non-employee directors or other service providers of the Company and its
Subsidiaries and Affiliated Companies.

     Among other things, the Committee shall have the authority, subject to the
terms of the Plan:

     (a)  To select the officers, employees, non-employee directors and service
providers to whom Awards may from time to time be granted;

     (b)  To determine whether and to what extent Awards are to be granted
hereunder;

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     (c)  To determine the number of shares of Common Stock to be covered by
each Stock Option granted hereunder;

     (d)  To determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)), any
vesting condition, restriction or limitation (which may be related to the
performance of the participant, the Company or any Subsidiary or Affiliated
Company) and any vesting acceleration or forfeiture or waiver regarding any
Award and the shares of Common Stock relating thereto, based on such factors as
the Committee shall determine; and

     (e)  To determine under what circumstances an Award may be settled in cash
or Common Stock under Section 5(g) or Section 6(d)(ii).

     The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any award certificate relating
thereto) and to otherwise supervise the administration of the Plan.

     The Committee may act only by a majority of its members then in office,
except that the members thereof may delegate all or a portion of the
administration of the Plan to one or more senior managers of the Company.

     Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriate
delegate pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Plan participants.

SECTION 3. Common Stock Subject to Plan

     Subject to adjustment as described below, the total number of shares of
Common Stock reserved and available for grant pursuant to Awards under the Plan
shall not exceed 605,000 shares. Shares subject to Awards under the Plan may
be authorized and unissued shares or may be treasury shares, or both.

     If any shares of Restricted Stock are forfeited, or if any Stock Option or
Stock Appreciation Right terminates without being exercised, or if any Stock
Appreciation Right (whether granted alone or in conjunction with a Stock
Option) is exercised for cash, shares subject to such Awards shall again be
available for distribution in connection with Awards under the Plan.

     In the event of any change in corporate capitalization, such as a stock
split or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property
(without regard to the payment of any cash dividends by the Company in the
ordinary course) of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code) or any partial or complete liquidation of the Company, the Committee or
Board may make such

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substitution or adjustments in the aggregate number and kind of shares
reserved for issuance under the Plan, in the number, kind and option price, as
applicable, of shares subject to outstanding Stock Options, and in the number
and kind of shares subject to other outstanding Awards granted under the Plan,
and/or such other equitable substitution or adjustments as it may determine to
be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted
option price shall also be used to determine the amount payable by the Company
upon the exercise of any Stock Appreciation Right associated with any Stock
Option.

SECTION 4. Eligibility

     Officers, employees, and non-employee directors of, and other persons who
provide services to, the Company, a Subsidiary or an Affiliated Company who are
responsible for or contribute to the growth and profitability of the business
of the Company, a Subsidiary or an Affiliated Company are eligible to be
granted Awards under the Plan. No more than one million (1,000,000) shares of
Common Stock may be allocated to the Awards, including the maximum amounts
payable under or with respect to any Stock Option, Stock Appreciation Right,
unrestricted Common Stock, Restricted Stock, or Performance Unit, that are
granted to any participant during any single taxable year of the Company.

SECTION 5. Stock Options

     Stock Options may be granted alone or in addition to other Awards granted
under the Plan and may be of two types: Incentive Stock Options and
NonQualified Stock Options. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.

     The Committee shall have the authority to grant any optionee Incentive
Stock Options, NonQualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its Subsidiaries. To the
extent that any Stock Option is not designated as an Incentive Stock Option or,
even if so designated, does not qualify as an Incentive Stock Option, it shall
constitute a NonQualified Stock Option.

     Stock Options shall be evidenced by option award certificates, the terms
and provisions of which may differ. An option award certificate shall indicate
on its face whether it is intended to be an award certificate for an Incentive
Stock Option or a NonQualified Stock Option. The grant of a Stock Option shall
occur on the date the Committee by resolution selects an individual to be a
participant in any grant of a Stock Option, determines the number of shares of
Common Stock to be subject to such Stock Option to be granted to such
individual and specifies the terms and provisions of the Stock Option, or on
such later date as is specified by the Committee.

     Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:

     (a)  Option Price. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee and, unless otherwise
determined by the

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Committee, shall not be less than the Fair Market Value of the Common
Stock subject to the Stock Option on the date of grant. The option price per
share shall not be decreased thereafter except pursuant to Section 3 of this
Plan.

     (b)  Option Term. The term of each Stock Option shall be fixed by the
Committee. Unless otherwise determined by the Committee, the term of each
Stock Option shall be 10 years. No Stock Option shall be exercisable more than
10 years after the date the Stock Option is granted.

     (c)  Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. Unless otherwise
determined by the Committee, Stock Options shall become exercisable ratably on
each of the first five anniversaries of the date of grant. In addition, the
Committee may at any time accelerate the exercisability of any Stock Option.

     (d)  Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise, or notice in accordance with
such other procedures as may be established from time to time, to the Company
or its designated agent specifying the number of shares of Common Stock subject
to the Stock Option to be purchased.

     Such notice shall be accompanied by payment in full of the purchase price
in cash or by certified or cashier’s check or such other instrument as the
Company may accept. If approved by the Committee, payment, in full or in part,
may also be made in the form of unrestricted Common Stock already owned by the
optionee of the same class as the Common Stock subject to the Stock Option
(based on the Fair Market Value of the Common Stock on the date the Stock
Option is exercised); provided, however, that such already owned shares have
been held by the optionee for at least six months at the time of exercise
unless otherwise determined by the Committee; provided, further, that, in the
case of an Incentive Stock Option, the right to make a payment in the form of
already owned shares of Common Stock of the same class as the Common Stock
subject to the Stock Option may be authorized only at the time the Stock Option
is granted.

     In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds necessary
to pay the purchase price, and, if requested, by the amount of any federal,
state, local or foreign withholding taxes. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.

     In addition, in the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by instructing the Company or its
designated agent to withhold a number of such shares having a Fair Market Value
on the date of exercise equal to the aggregate exercise price of such Stock
Option.

     No shares of Common Stock shall be issued until full payment therefor has
been made. An optionee shall have all of the rights of a shareholder of the
Company holding the class or

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series of Common Stock that is subject to such Stock Option (including, if
applicable, the right to vote the shares and the right to receive dividends),
when the optionee has given written notice of exercise, has paid in full for
such shares and, if requested, has given the representation described in
Section 3(a).

     (e)  Transferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of descent
and distribution, or, in the Committee’s discretion, pursuant to a written
beneficiary designation, (ii) pursuant to a qualified domestic relations order,
as defined in the Code or (iii) in the Committee’s discretion, pursuant to a
gift to such optionee’s “immediate family” members directly, or indirectly or
by means of a trust, partnership or limited liability company. All Stock
Options shall be exercisable, subject to the terms of this Plan, only by the
optionee, guardian, legal representative or beneficiary of the optionee or
permitted transferee, it being understood that the terms “holder” and
“optionee” include any such guardian, legal representative or beneficiary or
transferee. For purposes of this Section 5(e), “immediate family” shall mean,
except as otherwise defined by the Committee, the optionee’s spouse, children,
siblings, stepchildren, grandchildren, parents, stepparents, grandparents,
in-laws and persons related by legal adoption. Such transferees may transfer a
Stock Option only by will or by the laws of descent and distribution.

     (f)  Termination by Death or Disability. Unless otherwise determined by
the Committee, if an optionee’s Termination of Employment is by reason of death
or Disability, any Stock Option held by such optionee may thereafter be
exercised, to the extent exercisable at the time of such termination, for a
period of twelve (12) months (or such other period as the Committee may specify
in the option agreement) from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.

     (g)  Termination by Reason of Retirement. Unless otherwise determined by
the Committee, if an optionee’s Termination of Employment is by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
by the optionee, to the extent it was exercisable at the time of such
Retirement, or on such accelerated basis as the Committee may determine, for a
period of five (5) years (or such other period as the Committee may specify in
the option agreement) from the date of such Termination of Employment or until
the expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the optionee dies within such period any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of twelve (12) months from
the date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.

     (h)  Other Termination. Unless otherwise determined by the Committee, if
an optionee’s Termination of Employment is for any reason other than death,
Disability or Retirement, any Stock Option held by such optionee, to the extent
then exercisable, or on such accelerated basis as the Committee may determine,
may be exercised for the lesser of three (3) months from the date of such
Termination of Employment or the balance of such Stock Option’s term; provided,
however, that if the optionee dies within such three (3) month period, any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such three (3) month period, continue to be exercisable to the
extent to which it was exercisable at the

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time of death for a period of twelve (12) months from the date of such
death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.

     (i)  Cashing Out of Stock Option. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Common Stock for which a Stock Option is being exercised by paying
the optionee an amount, in cash or Common Stock, equal to the excess of the
Fair Market Value of the Common Stock over the option price times the number of
shares of Common Stock for which the Option is being exercised on the effective
date of such cash-out.

     (j)  Change in Control Cash-out. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change in Control (the
“Exercise Period”), unless the Committee shall determine otherwise at the time
of grant, an optionee shall have the right, whether or not the Stock Option is
fully exercisable and in lieu of the payment of the exercise price for the
shares of Common Stock being purchased under the Stock Option and by giving
notice to the Company, to elect (within the Exercise Period) to surrender all
or part of the Stock Option to the Company and to receive cash, within 30 days
of such notice, in an amount equal to the amount by which the Change in Control
Price per share of Common Stock on the date of such election shall exceed the
exercise price per share of Common Stock under the Stock Option (the “Spread”)
multiplied by the number of shares of Common Stock granted under the Stock
Option as to which the right granted under this Section 5(j) shall have been
exercised. Notwithstanding the foregoing, if any right granted pursuant to
this Section 5(j) would make a Change in Control transaction ineligible for
pooling-of-interests accounting under APB No. 16 that but for the nature of
such grant would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute for the cash payable pursuant to
such right Common Stock with a Fair Market Value equal to the cash that would
otherwise be payable hereunder.

     (k)  Deferral of Option Shares. The Committee may from time to time
establish procedures pursuant to which an optionee may elect to defer, until a
time or times later than the exercise of an Option, receipt of all or a portion
of the shares subject to such Option and/or to receive cash at such later time
or times in lieu of such deferred shares, all on such terms and conditions as
the Committee shall determine. If any such deferrals are permitted, then
notwithstanding Section 5(d) above, an optionee who elects such deferral shall
not have any rights as a stockholder with respect to such deferred shares
unless and until certificates representing such shares are actually delivered
to the optionee with respect thereto, except to the extent otherwise determined
by the Committee.

SECTION 6. Stock Appreciation Rights

     (a)  Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In
the case of a NonQualified Stock Option, such rights may be granted either at
or after the time of grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of grant of such
Stock Option. In addition, Stock Appreciation Rights may be granted without
relationship to a Stock Option to employees residing in foreign jurisdictions,
where the grant of a Stock

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Option is impossible or impracticable because of securities or tax laws or
other governmental regulations.

     (b)  Freestanding Stock Appreciation Rights. A Stock Appreciation Right
granted without relationship to a Stock Option, pursuant to Section 6(a), shall
be exercisable as determined by the Committee, but in no event after ten years
from the date of grant. The base price of a Stock Appreciation Right granted
without relationship to a Stock Option shall be the Fair Market Value of a
share of Common Stock on the date of grant. A Stock Appreciation Right granted
without relationship to a Stock Option shall entitle the holder, upon receipt
of such right, to a cash payment determined by multiplying (i) the difference
between the base price of the Stock Appreciation Right and the Fair Market
Value of a share of Common Stock on the date of exercise of the Stock
Appreciation Right, by (ii) the number of shares of Common Stock as to which
such Stock Appreciation Right shall have been exercised. A freestanding Stock
Appreciation Right may be exercised by giving written notice of exercise to the
Company or its designated agent specifying the number of shares of Common Stock
as to which such Stock Appreciation Right is being exercised.

     (c)  Tandem Stock Appreciation Rights. A Stock Appreciation Right granted
in conjunction with a Stock Option may be exercised by an optionee in
accordance with Section 6(d) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the
Committee. Upon such exercise and surrender, the optionee shall be entitled to
receive an amount determined in the manner prescribed in Section 6(d). Stock
Options which have been so surrendered shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been exercised. A Stock
Appreciation Right shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option.

     (d)  Tandem Stock Appreciation Right Terms and Conditions. Stock
Appreciation Rights granted in conjunction with a Stock Option shall be subject
to such terms and conditions as shall be determined by the Committee, including
the following:

	 	 	 	(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate are
exercisable in accordance with the provisions of Section 5 and this
Section 6.
	 
	 	 	 	(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall
be entitled to receive an amount in cash, equal to the excess of the Fair
Market Value of one share of Common Stock over the option price per share
specified in the related Stock Option multiplied by the number of shares
in respect of which the Stock Appreciation Right shall have been
exercised.
	 
	 	 	 	(iii) Stock Appreciation Rights shall be transferable only to permitted
transferees of the underlying Stock Option in accordance with Section
5(e).
	 
	 	 	 	(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth
in Section 3 on the number of shares of Common Stock to be issued under
the Plan, but only to the extent of the number of shares

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	 	 	 	covered by the Stock Appreciation Right at the time of exercise based on
the value of the Stock Appreciation Right at such time.

SECTION 7. Bonus Shares and Restricted Stock

     (a)  Administration. Awards of shares of Common Stock or Restricted Stock
may be made either alone or in addition to other Awards granted under the Plan.
In addition, a participant may receive unrestricted shares of Common Stock or
Restricted Stock in lieu of certain cash payments awarded under other plans or
programs of the Company. The Committee shall determine the officers,
employees, non-employee directors and other service providers to whom and the
time or times at which grants of unrestricted shares of Common Stock and
Restricted Stock will be awarded, the number of shares to be awarded to any
participant, the conditions for vesting, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards, in addition to those contained in Section 7(c).

     (b)  Awards and Certificates. Awards of unrestricted shares of Common
Stock and Restricted Stock shall be evidenced in such manner as the Committee
may deem appropriate, including book-entry registration or delivery of one or
more stock certificates to the participant, or, in the case of Restricted
Stock, a custodian or escrow agent. Any stock certificate issued in respect of
unrestricted shares or shares of Restricted Stock shall be registered in the
name of such participant. The Committee may require that the stock
certificates evidencing shares of Restricted Stock be held in custody or escrow
by the Company or its designated agent until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.

     (c)  Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:

	 	 	 	(i) The Committee may, prior to or at the time of grant, condition the
grant or vesting, as applicable, of an award of Restricted Stock upon the
attainment of Performance Goals. The Committee may also condition the
grant or vesting of Restricted Stock upon the continued service of the
participant. The conditions for grant or vesting and the other
provisions of Restricted Stock Awards (including without limitation any
applicable Performance Goals) need not be the same with respect to each
recipient. The Committee may at any time, in its sole discretion,
accelerate or waive, in whole or in part, any of the foregoing
restrictions.
	 
	 	 	 	(ii) Subject to the provisions of the Plan and the terms of the
Restricted Stock Award, during the period, if any, set by the Committee,
commencing with the date of such Award for which such participant’s
continued service is required (the “Restriction Period”), and until the
later of (A) the expiration of the Restriction Period and (B) the date
the applicable Performance Goals (if any) are satisfied, the participant
shall not be permitted to sell, assign, transfer, pledge or otherwise
encumber shares of Restricted Stock; provided that the foregoing shall
not prevent a participant from pledging Restricted Stock as security for
a loan, the sole purpose of which is to provide funds to pay the option
price for Stock Options.

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	 	 	 	(iii) Except as provided in this paragraph (iii) and Sections 7(c)(i) and
7(c)(ii) or the terms of the Restricted Stock Award, the participant
shall have, with respect to the shares of Restricted Stock, all of the
rights of a shareholder of the Company holding the class or series of
Common Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends. If so determined by the Committee under the applicable
terms of the Restricted Stock Award and subject to Section 15(e) of the
Plan, (A) cash dividends on the class or series of Common Stock that is
the subject of the Restricted Stock Award shall be automatically deferred
and reinvested in additional Restricted Stock, held subject to the
vesting of the underlying Restricted Stock, or held subject to meeting
Performance Goals applicable only to dividends, (B) dividends payable in
Common Stock shall be paid in the form of Restricted Stock of the same
class as the Common Stock with which such dividend was paid, held subject
to the vesting of the underlying Restricted Stock, or held subject to
meeting Performance Goals applicable only to dividends and (C) dividends
paid in other property shall be held subject to the vesting of the
underlying Restricted Stock.
	 
	 	 	 	(iv) Except to the extent otherwise provided under the applicable terms
of the Restricted Stock Award and Sections 7(c)(i), 7(c)(ii), 7(c)(v) and
11(a)(ii), upon a participant’s Termination of Employment for any reason
during the Restriction Period or before the applicable Performance Goals
are satisfied, all shares still subject to restriction shall be forfeited
by the participant.
	 
	 	 	 	(v) Except to the extent otherwise provided in Section 11(a)(ii), in the
event of a participant’s Termination of Employment by reason of
Retirement, the Committee shall have the discretion to waive, in whole or
in part, any or all remaining restrictions (other than, in the case of
Restricted Stock with respect to which a participant is a Covered
Employee, satisfaction of the applicable Performance Goals unless the
participant’s employment is terminated by reason of death or Disability)
with respect to any or all of such participant’s shares of Restricted
Stock.
	 
	 	 	 	(vi) If and when any applicable Performance Goals are satisfied and the
Restriction Period expires without a prior forfeiture of the Restricted
Stock, unlegended certificates for such shares shall be delivered to the
participant upon surrender of the legended certificates, or the
restrictions on such shares shall be removed from the book-entry
registration.

SECTION 8. Performance Units

     (a)  Administration. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the officers, employees, non-employee directors and other service providers to
whom, and the time or times at which, Performance Units shall be awarded, the
number of Performance Units to be awarded to any participant, the duration of
the Award cycle and any other terms and conditions of the Award, in addition to
those contained in Section 8(b).

     (b)  Terms and Conditions. Performance Units Awards shall be subject to
the following terms and conditions.

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	 	 	 	(i) The Committee may, prior to or at the time of the grant, designate
Performance Units, in which event it shall condition the settlement
thereof upon the attainment of Performance Goals. The Committee may also
condition the settlement thereof upon the continued service of the
participant. The provisions of such Awards (including without limitation
any applicable Performance Goals) need not be the same with respect to
each recipient. Subject to the provisions of the Plan and the
Performance Units Agreement referred to in Section 8(b)(vi), Performance
Units may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Award cycle.
	 
	 	 	 	(ii) Except to the extent otherwise provided in the applicable
Performance Unit Agreement and Sections 8(b)(ii) and 11(a)(iii), upon a
participant’s Termination of Employment for any reason during the Award
cycle or before any applicable Performance Goals are satisfied, all
rights to receive cash or stock in settlement of the Performance Units
shall be forfeited by the participant.
	 
	 	 	 	(iii) Except to the extent otherwise provided in Section 11(a)(iii), in
the event that a participant’s employment is terminated (other than for
Cause), or in the event of a participant’s Retirement, the Committee
shall have the discretion to waive, in whole or in part, any or all
remaining payment limitations with respect to any or all of such
participant’s Performance Units.
	 
	 	 	 	(iv) A participant may elect to further defer receipt of cash or shares
in settlement of Performance Units for a specified period or until a
specified event, subject in each case to the Committee’s approval and to
such terms as are determined by the Committee (the “Elective Deferral
Period”). Subject to any exceptions adopted by the Committee, such
election must generally be made prior to commencement of the Award cycle
for the Performance Units in question.
	 
	 	 	 	(v) At the expiration of the Award cycle, the Committee shall evaluate
the Company’s performance in light of any Performance Goals for such
Award, and shall determine the number of Performance Units granted to the
participant which have been earned, and the Committee shall then cause to
be delivered (A) a number of shares of Common Stock equal to the number
of Performance Units determined by the Committee to have been earned, or
(B) cash equal to the Fair Market Value of such number of shares of
Common Stock to the participant as determined by the Committee in its
discretion (subject to any deferral pursuant to Section 8(b)(iv)).
	 
	 	 	 	(vi) Each Award shall be confirmed by, and be subject to, the terms of a
Performance Unit Agreement.

SECTION 9. Dividend Equivalents and Interest Equivalents

     (a)  The Committee may provide that a participant to whom a Stock Option
has been awarded, which is exercisable in whole or in part at a future time for
shares of Common Stock (such shares, the “Option Shares”) shall be entitled to
receive an amount per Option Share, equal in value to the cash dividends, if
any, paid per share of Common Stock on issued and outstanding shares, as of the
dividend record dates occurring during the period between the date of the Award

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and the time each such Option Share is delivered pursuant to the exercise
of such Stock Option. Such amounts (herein called “dividend equivalents”) may,
in the discretion of the Committee, be:

	 	 	 	(i) paid in cash or shares of Common Stock from time to time prior to or
at the time of the delivery of such shares of Common Stock or upon
expiration of the Stock Option if it shall not have been fully exercised
(except that payment of the dividend equivalents on an Incentive Stock
Option may not be made prior to exercise); or
	 
	 	 	 	(ii) converted into contingently credited shares of Common Stock (with
respect to which dividend equivalents shall accrue) in such manner, at
such value, and deliverable at such time or times, as may be determined
by the Committee.

                 Such shares of Common Stock (whether delivered or contingently credited)
shall be charged against the limitations set forth in Section 3.

                 (b)  The Committee, in its discretion, may authorize payment of interest
equivalents on any portion of any Award payable at a future time in cash, and
interest equivalents on dividend equivalents which are payable in cash at a
future time.

SECTION 10. Change in Control Provisions

                 (a)  Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:

	 	 	 	(i) Any Stock Options outstanding as of the date such Change in Control
is determined to have occurred, and which are not then exercisable and
vested, shall become fully exercisable and vested to the full extent of
the original grant.
	 
	 	 	 	(ii) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free
of all restrictions and become fully vested and transferable to the full
extent of the original grant.
	 
	 	 	 	(iii) All Performance Units shall be considered to be earned and payable
in full, and any other deferred or other restrictions shall lapse and
such Performance Units shall be settled in cash or Common Stock (as
determined by the Committee) as promptly as is practicable.

                 (b)  For purposes of the Plan, a “Change in Control” shall mean the
happening of any of the following events:

	 	 	 	(i) acquisition by any individual, entity or group (with the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
50% or more of either (A) the then outstanding shares of common stock of
the Company (the “Outstanding Company Common Stock”) or (B) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding

-13-

 

	 	 	 	Company Voting Securities”); provided, however, that, for purposes of
this subsection (i), the following acquisitions shall not constitute a
Change of Control: (1) any acquisition directly from the Company, (2)
any acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company, (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (iii) of this Section 11(b) or (5) any
acquisition of beneficial ownership by Emanual Friedman, Eric Billings,
W. Russell Ramsey, or William Swanson (the “FBR Parties”), or any entity
that is controlled by one or more of the FBR Parties (the “FBR
Affiliates”); or
	 
	 	 	 	(ii) Individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
	 
	 	 	 	(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of
assets or stock of another corporation (a “Business Combination”), in
each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding
any corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination or the FBR Parties or FBR
Affiliates) beneficially owns, directly or indirectly, 50% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the

-14-

 

	 	 	 	initial agreement, or of the action of the Board, providing for such
Business Combination; or
	 
	 	 	 	(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

     (c)  Change in Control Price. For purposes of the Plan, “Change in Control
Price” means the higher of (i) the highest reported sales price, regular way,
of a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (ii) if the Change in Control is the result of a tender
or exchange offer or a Corporate Transaction, the highest price per share of
Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common Stock on the
date such right under Section 5(j) is exercised. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Board.

SECTION 11. Tax Offset Bonuses

     At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the participant receiving such Award the right to
receive a cash payment in an amount specified by the Committee, to be paid at
such time or times (if ever) as the Award results in compensation income to the
participant, for the purpose of assisting the participant to pay the resulting
taxes, all as determined by the Committee and on such other terms and
conditions as the Committee shall determine.

SECTION 12. Amendment and Termination

     The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of
participants under any Award theretofore granted without the participants’
consent. In addition, no such amendment shall be made without the approval of
the Company’s shareholders to the extent such approval is required by law or
agreement.

     The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights of any holder without the holder’s consent.

     Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules as
well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.

SECTION 13. Unfunded Status of Plan

-15-

 

     It is presently intended that the Plan constitute an “unfunded” plan for
incentive and deferred compensation. The Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan
to deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the “unfunded” status of the Plan.

     No Award may be granted under this plan after November 12, 2008. Awards
granted before that date shall remain valid in accordance with their terms.

SECTION 14. General Provisions

     (a)  The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to the distribution thereof.
The certificates for such shares may include any legend, or, in the case of
book-entry registration any notation, which the Committee deems appropriate to
reflect any restrictions on transfer.

     Notwithstanding any other provision of the Plan or certificates made
pursuant thereto, the Company shall not be required to issue or deliver any
stock certificate or certificates for shares of Common Stock, or account for
such shares by book-entry registration, under the Plan prior to fulfillment of
all of the following conditions:

	 	 	 	(1) Listing or approval for listing upon notice of issuance, of such
shares on the American Stock Exchange or the New York Stock Exchange, or
such other securities exchange as may at the time be the principal market
for the Common Stock;
	 
	 	 	 	(2) Any registration or other qualification of such shares of the Company
under any state, federal or foreign law or regulation, or the maintaining
in effect of any such registration or other qualification which the
Committee shall, in its absolute discretion upon the advice of counsel,
deem necessary or advisable; and
	 
	 	 	 	(3) Obtaining any other consent, approval, or permit from any state or
federal governmental agency or foreign governmental body which the
Committee shall, in its absolute discretion after receiving the advice of
counsel, determine to be necessary or advisable.

     (b)  Nothing contained in the Plan shall prevent the Company or any
Subsidiary or Affiliated Company from adopting other or additional compensation
arrangements for its employees.

     (c)  Adoption of the Plan shall not confer upon any employee any right to
continued employment, nor shall it interfere in any way with the right of the
Company or a Subsidiary or an Affiliated Company to terminate the employment of
any employee at any time.

     (d)  No later than the date as of which an amount first becomes includible
in the gross income of the participant for federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required

-16-

 

by law to be withheld with respect to such amount. Unless otherwise
determined by the Company, withholding obligations may be settled with Common
Stock, including Common Stock that is part of the Award that gives rise to the
withholding requirement. The obligations of the Company under the Plan shall
be conditional on such payment or arrangements, and the Company and its
Subsidiaries or Affiliated Companies shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment otherwise due to the
participant. The Committee may establish such procedures as it deems
appropriate, including making irrevocable elections, for the settlement of
withholding obligations with Common Stock.

     (e)  Reinvestment of dividends in additional Restricted Stock at the time
of any dividend payment shall only be permissible if sufficient shares of
Common Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).

     (f)  The Committee, in its sole discretion, may establish such procedures
as it deems appropriate for a participant to designate a beneficiary to whom
any amounts payable in the event of the participant’s death are to be paid or
by whom any rights of the participant, after the participant’s death, may be
exercised.

     (g)  In the case of a grant of an Award to any employee of a Subsidiary or
Affiliated Company, the Company may, if the Committee so directs, issue or
transfer the shares of Common Stock, if any, covered by the Award to the
Subsidiary or Affiliated Company, for such lawful consideration as the
Committee may specify, upon the condition or understanding that the Subsidiary
or Affiliated Company will transfer the shares of Common Stock to the employee
in accordance with the terms of the Award specified by the Committee pursuant
to the provisions of the Plan.

     (h)  The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Virginia,
without reference to principles of conflict of laws.

SECTION 15. Effective Date of Plan

     The Plan shall be effective November 13, 1998.

-17-

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