Document:

exv4w2

Exhibit 4.2

UNIVERSAL INSURANCE HOLDINGS, INC.

2009 OMNIBUS INCENTIVE PLAN

(as amended through April 8, 2011)

ARTICLE I

PURPOSE AND ADOPTION OF THE PLAN

     1.01. Purpose. The purpose of the Universal Insurance Holdings, Inc. 2009 Omnibus
Incentive Plan (as amended from time to time, the “Plan”) is to assist in attracting and retaining
highly competent employees, directors and consultants to act as an incentive in motivating selected
employees, directors and consultants of the Company and its Subsidiaries to achieve long-term
corporate objectives, to reward superior service to the Company and to enable stock-based and
cash-based incentive awards to qualify as performance-based compensation for purposes of the tax
deduction limitations under Section 162(m) of the Code.

     1.02. Adoption and Term. The Plan has been approved by the Board and the stockholders
of the Company and shall be effective as of November 16, 2009 (the “Effective Date”). The Plan
shall remain in effect until the tenth anniversary of the Effective Date, or until terminated by
action of the Board, whichever occurs sooner.

ARTICLE II

DEFINITIONS

     For the purpose of this Plan, capitalized terms shall have the following meanings:

     2.01. Affiliate means an entity in which, directly or indirectly through one or more
intermediaries, the Company has at least a fifty percent (50%) ownership interest or, where
permissible under Section 409A of the Code, at least a twenty percent (20%) ownership interest;
provided, however, for purposes of any grant of an Incentive Stock Option, “Affiliate” means a
corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the
Company, directly or indirectly.

     2.02. Award means any one or a combination of Non-Qualified Stock Options or Incentive
Stock Options described in Article VI, Stock Appreciation Rights described in Article VI,
Restricted Shares and Restricted Stock Units described in Article VII, Performance Awards described
in Article VIII, other stock-based Awards described in Article IX, short-term cash incentive Awards
described in Article X or any other Award made under the terms of the Plan.

     2.03. Award Agreement means a written agreement between the Company and a Participant
or a written acknowledgment from the Company to a Participant specifically setting forth the terms
and conditions of an Award granted under the Plan.

 

 

     2.04. Award Period means, with respect to an Award, the period of time, if any, set
forth in the Award Agreement during which specified target performance goals must be achieved or
other conditions set forth in the Award Agreement must be satisfied.

     2.05. Beneficiary means an individual, trust or estate who or which, by a written
designation of the Participant filed with the Company, or if no such written designation is filed,
by operation of law, succeeds to the rights and obligations of the Participant under the Plan and
the Award Agreement upon the Participant’s death.

     2.06. Board means the Board of Directors of the Company.

     2.07. Change in Control means, and shall be deemed to have occurred upon the
occurrence of, any one of the following events:

          (a) The acquisition in one or more transactions, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act), other than the Company, an Affiliate or any employee benefit plan (or related trust)
sponsored or maintained by the Company or an Affiliate, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of a number of Company Voting Securities in
excess of 15% of the Company Voting Securities unless such acquisition has been approved by the
Board;

          (b) Any election has occurred of persons to the Board that causes two-thirds of the Board to
consist of persons other than (i) persons who were members of the Board on the Effective Date and
(ii) persons who were nominated for elections as members of the Board at a time when two-thirds of
the Board consisted of persons who were members of the Board on the Effective Date, provided,
however, that any person nominated for election by a Board at least two-thirds of whom constituted
persons described in clauses (i) and/or (ii) or by persons who were themselves nominated by such
Board shall, for this purpose, be deemed to have been nominated by a Board composed of persons
described in clause (i);

          (c) The consummation (i.e. closing) of a reorganization, merger or consolidation involving the
Company, unless, following such reorganization, merger or consolidation, all or substantially all
of the individuals and entities who were the respective beneficial owners of the Outstanding Common
Stock and Company Voting Securities immediately prior to such reorganization, merger or
consolidation, following such reorganization, merger or consolidation beneficially own, directly or
indirectly, more than 75% 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 or trustees, as the case may be, of the entity resulting from such
reorganization, merger or consolidation in substantially the same proportion as their ownership of
the Outstanding Common Stock and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, as the case may be;

          (d) The consummation (i.e. closing) of a sale or other disposition of all or substantially all
the assets of the Company, unless, following such sale or disposition, all or substantially all of
the individuals and entities who were the respective beneficial owners of the

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Outstanding Common
Stock and Company Voting Securities immediately prior to such sale or disposition, following such
sale or disposition beneficially own, directly or indirectly, more than 75% 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 or trustees, as the case may be, of the entity purchasing such assets in
substantially the same proportion as their ownership of the Outstanding Common Stock and Company
Voting Securities immediately prior to such sale or disposition, as the case may be; or

          (e) a complete liquidation or dissolution of the Company.

Solely to the extent required by Section 409A of the Code, an event described above shall not
constitute a Change in Control for purposes of the payment (but not vesting) provisions of any
Award subject to Section 409A unless such event also constitutes a change in ownership or effective
control of the Company or a change in the ownership of a substantial portion of the Company’s
assets within the meaning of Section 409A of the Code and the final regulations issued thereunder.

     2.08. Code means the Internal Revenue Code of 1986, as amended. References to a
section of the Code shall include that section and any comparable section or sections of any future
legislation that amends, supplements or supersedes said section.

     2.09. Committee means the Compensation Committee of the Board.

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

     2.11. Company means Universal Insurance Holdings, Inc., a Delaware corporation, and
its successors.

     2.12. Company Voting Securities means the combined voting power of all outstanding
voting securities of the Company entitled to vote generally in the election of directors to the
Board.

     2.13. Date of Grant means the date designated by the Committee as the date as of which
it grants an Award, which shall not be earlier than the date on which the Committee approves the
granting of such Award.

     2.14. Dividend Equivalent Account means a bookkeeping account in accordance with under
Section 11.17 and related to an Award that is credited with the amount of any cash dividends or
stock distributions that would be payable with respect to the shares of Common Stock subject to
such Awards had such shares been outstanding shares of Common Stock.

     2.15. Exchange Act means the Securities Exchange Act of 1934, as amended. References
to a section of the Exchange Act shall include that section and any comparable section or sections
of any future legislation that amends, supplements or supersedes said section.

     2.16. Exercise Price means, with respect to a Stock Appreciation Right, the amount
established by the Committee in the Award Agreement which is to be subtracted from the Fair

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Market
Value on the date of exercise in order to determine the amount of the payment to be made to the
Participant, as further described in Section 6.02(b).

     2.17. Fair Market Value means, as of any applicable date: (i) if the Common Stock is
listed on one or more international or national securities exchanges, the closing sales price of
the Common Stock on the exchange having the greatest number of shares listed or eligible for
trading on that date, or, if no sale of the Common Stock occurred on that date, on the next
preceding date on which there was a reported sale; or (ii) if none of the above apply, the closing
bid price as reported by the Nasdaq SmallCap Market on that date, or if no price was reported for
that date, on the next preceding date for which a price was reported; or (iii) if none of the above
apply, the last reported bid price published in the “pink sheets” or displayed on the National
Association of Securities Dealers, Inc. (“NASD”), Electronic Bulletin Board, as the case may be; or
(iv) if none of the above apply or the Committee elects to use a different standard for determining
Fair Market Value for one or more Awards, the fair market value of the Common Stock as determined
under written procedures established by the Committee.

     2.18. Incentive Stock Option means a stock option within the meaning of Section 422 of
the Code.

     2.19. Merger means any merger, reorganization, consolidation, exchange, transfer of
assets or other transaction having similar effect involving the Company.

     2.20. Non-Qualified Stock Option means a stock option which is not an Incentive Stock
Option.

     2.21. Non-Vested Share means shares of the Company Common Stock issued to a
Participant in respect of the non-vested portion of an Option in the event of the early exercise of
such Participant’s Options pursuant to such Participant’s Award Agreement, as permitted in Section
6.06 below.

     2.22. Options means all Non-Qualified Stock Options and Incentive Stock Options
granted at any time under the Plan.

     2.23. Outstanding Common Stock means, at any time, the issued and outstanding shares
of Common Stock.

     2.24. Participant means a person designated to receive an Award under the Plan in
accordance with Section 5.01.

     2.25. Performance Awards means Awards granted in accordance with Article VIII.

     2.26. Performance Goals means operating income, operating profit (earnings from
continuing operations before interest and taxes), earnings per share, share price, net income,
income before taxes, return on investment or working capital, return on stockholders’ equity, total
shareholder return, economic value added (the amount, if any, by which net operating profit after
tax exceeds a reference cost of capital), policy count, number of states in which the Company
operates, any one of which may be measured with respect to the Company or any one or more of its
Subsidiaries and divisions and either in absolute terms, as compared to another

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company or
companies or subject to such objective adjustment factors as shall be set by the Committee in
accordance with Section 162(m) of the Code at the time that the goals and related
performance targets are set for the applicable performance period, and quantifiable, objective
measures of individual performance relevant to the particular individual’s job responsibilities.

     2.27. Plan has the meaning given to such term in Section 1.01.

     2.28. Purchase Price, with respect to Options, shall have the meaning set forth in
Section 6.01(b).

     2.29. Restricted Shares means Common Stock subject to restrictions imposed in
connection with Awards granted under Article VII.

     2.30. Restricted Stock Unit means a unit representing the right to receive Common
Stock or the value thereof in the future subject to restrictions imposed in connection with Awards
granted under Article VII.

     2.31. Rule 16b-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, as the same may be amended from time to time, and
any successor rule.

     2.32. Stock Appreciation Rights means awards granted in accordance with Article VI.

     2.33. Termination of Service means the voluntary or involuntary termination of a
Participant’s service as an employee, director or consultant with the Company or an Affiliate for
any reason, including death, disability, retirement or as the result of the divestiture of the
Participant’s employer or any similar transaction in which the Participant’s employer ceases to be
the Company or one of its Subsidiaries. Whether entering military or other government service
shall constitute Termination of Service, or whether and when a Termination of Service shall occur
as a result of disability, shall be determined in each case by the Committee in its sole
discretion. For purposes of the payment (but not vesting) provisions of any Award subject to
Section 409A of the Code, Termination of Service shall mean a separation from service within the
meaning of Section 409A of the Code and the final regulations issued thereunder.

ARTICLE III

ADMINISTRATION

     3.01. Committee.

          (a) Duties and Authority. The Plan shall be administered by the Committee and the
Committee shall have exclusive and final authority in each determination, interpretation or other
action affecting the Plan and its Participants. The Committee shall have the sole discretionary
authority to interpret the Plan, to establish and modify administrative rules for the Plan, to
impose such conditions and restrictions on Awards as it determines appropriate, and to make all
factual determinations with respect to and take such steps in connection with the Plan and Awards
granted hereunder as it may deem necessary or advisable. The Committee shall not, however, have or
exercise any discretion that would disqualify amounts payable under Article X as performance-based
compensation for purposes of Section 162(m) of the Code. The

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Committee may delegate such of its
powers and authority under the Plan as it deems appropriate to a subcommittee of the Committee or
designated officers or employees of the Company. In
addition, the full Board may exercise any of the powers and authority of the Committee under
the Plan. In the event of such delegation of authority or exercise of authority by the Board,
references in the Plan to the Committee shall be deemed to refer, as appropriate, to the delegate
of the Committee or the Board.

          (b) Indemnification. Each person who is or shall have been a member of the Board or
the Committee, or an officer or employee of the Company to whom authority was delegated in
accordance with the Plan shall be indemnified and held harmless by the Company against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such
individual in connection with or resulting from any claim, action, suit, or proceeding to which he
or she may be a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf; provided, however, that the foregoing
indemnification shall not apply to any loss, cost, liability, or expense that is a result of his or
her own willful misconduct. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the Company’s
Certificate of Incorporation or Bylaws, conferred in a separate agreement with the Company, as a
matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

ARTICLE IV

SHARES

     4.01. Number of Shares Issuable. The total number of shares initially authorized to
be issued under the Plan shall be 1,800,000 shares of Common Stock and shall be increased to
4,200,000 as of the date of the 2011 Annual Meeting of Shareholders; provided that such increase is
approved by the shareholders of the Company at the 2011 Annual Meeting The foregoing share limits
shall be subject to adjustment in accordance with Section 11.07. The shares to be offered under
the Plan shall be authorized and unissued Common Stock, issued Common Stock that shall have been
reacquired by the Company, or shares issued from the Universal Insurance Holdings, Inc. Stock
Grantor Trust, formed April 3, 2000.

     4.02. Shares Subject to Terminated Awards. Common Stock covered by any unexercised
portions of terminated or forfeited Options (including canceled Options) granted under Article VI,
Restricted Stock or Restricted Stock Units forfeited as provided in Article VII, other stock-based
Awards terminated or forfeited as provided under the Plan, and Common Stock subject to any Awards
that are otherwise surrendered by the Participant may again be subject to new Awards under the
Plan. Shares of Common Stock surrendered to or withheld by the Company in payment or satisfaction
of the Purchase Price of an Option or tax withholding obligation with respect to an Award shall be
available for the grant of new Awards under the Plan. In the event of the exercise of Stock
Appreciation Rights, whether or not granted in tandem with Options, only the number of shares of
Common Stock actually issued in payment of

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such Stock Appreciation Rights shall be charged against
the number of shares of Common Stock available for the grant of Awards hereunder.

ARTICLE V

PARTICIPATION

     5.01. Eligible Participants. Participants in the Plan shall be such employees,
directors and consultants of the Company and its Subsidiaries as the Committee, in its sole
discretion, may designate from time to time. The Committee’s designation of a Participant in any
year shall not require the Committee to designate such person to receive Awards or grants in any
other year. The designation of a Participant to receive Awards or grants under one portion of the
Plan does not require the Committee to include such Participant under other portions of the Plan.
The Committee shall consider such factors as it deems pertinent in selecting Participants and in
determining the type and amount of their respective Awards. Subject to any applicable adjustment
in accordance with Section 11.07, in any calendar year, Awards to Participants shall be subject to
the following limits: (i) no Participant shall be granted in any calendar year Options or Stock
Appreciation Rights (whether stock or cash settled) covering more than 650,000 shares of Common
Stock; (ii) no Participant shall be granted in any calendar year an Award of (A) Restricted
Shares, (B) Restricted Stock Units, or (C) Performance Awards or other stock-based awards (within
the meaning of Article IX) denominated in shares of Common Stock that can be settled through the
delivery of more than 650,000 shares of Common Stock (or, if such Award is payable in cash, through
the delivery of cash with a value equal to 650,000 shares of Common Stock at the time of
settlement); and (iii) no Participant shall be granted in any calendar year any other stock-based
award (within the meaning of Article IX) not denominated in shares of Common Stock or cash-based
Awards (including short-term cash incentive awards under Article X) that can be settled through
the payment of more than $10,000,000 or in shares of Common Stock with a value at the time of
payment of more than $10,000,000.

ARTICLE VI

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

     6.01. Option Awards.

          (a) Grant of Options. The Committee may grant, to such Participants as the Committee
may select, Options entitling the Participant to purchase shares of Common Stock from the Company
in such number, at such price, and on such terms and subject to such conditions, not inconsistent
with the terms of this Plan, as may be established by the Committee. The terms of any Option
granted under this Plan shall be set forth in an Award Agreement.

          (b) Purchase Price of Options. The Purchase Price of each share of Common Stock which
may be purchased upon exercise of any Option granted under the Plan shall be determined by the
Committee; provided, however, that in no event shall the Purchase Price be less than the Fair
Market Value on the Date of Grant.

          (c) Designation of Options. The Committee shall designate, at the time of the grant
of each Option, the Option as an Incentive Stock Option or a Non-Qualified Stock Option;

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provided,
however, that an Option may be designated as an Incentive Stock Option only if the applicable
Participant is an employee of the Company on the Date of Grant.

          (d) Special Incentive Stock Option Rules. No Participant may be granted Incentive
Stock Options under the Incentive Plan (or any other plans of the Company) that would result in
Incentive Stock Options to purchase shares of Common Stock with an aggregate Fair Market Value
(measured on the Date of Grant) of more than $100,000 first becoming exercisable by the Participant
in any one calendar year. Notwithstanding any other provision of the Incentive Plan to the
contrary, the Exercise Price of each Incentive Stock Option shall be equal to or greater than the
Fair Market Value of the Common Stock subject to the Incentive Stock Option as of the Date of Grant
of the Incentive Stock Option; provided, however, that no Incentive Stock Option shall be granted
to any person who, at the time the Option is granted, owns stock (including stock owned by
application of the constructive ownership rules in Section 424(d) of the Code) possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of the Company, unless
at the time the Incentive Stock Option is granted the price of the Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock subject to the Incentive Stock
Option and the Incentive Stock Option by its terms is not exercisable for more than five years from
the Date of Grant.

          (e) Rights As a Stockholder. Except as otherwise provided by the Committee, a
Participant or a transferee of an Option pursuant to Section 11.04 shall have no rights as a
stockholder with respect to Common Stock covered by an Option until the Participant or transferee
shall have become the holder of record of any such shares, and no adjustment shall be made for
dividends in cash or other property or distributions or other rights with respect to any such
Common Stock for which the record date is prior to the date on which the Participant or a
transferee of the Option shall have become the holder of record of any such shares covered by the
Option; provided, however, that Participants are entitled to share adjustments to reflect capital
changes under Section 11.07.

     6.02. Stock Appreciation Rights.

          (a) Stock Appreciation Right Awards. The Committee is authorized to grant to any
Participant one or more Stock Appreciation Rights. Such Stock Appreciation Rights may be granted
either independent of or in tandem with Options granted to the same Participant. Stock
Appreciation Rights granted in tandem with Options may be granted simultaneously with, or, in the
case of Non-Qualified Stock Options, subsequent to, the grant to such Participant of the related
Option; provided however, that: (i) any Option covering any share of Common Stock shall expire and
not be exercisable upon the exercise of any Stock Appreciation Right with respect to the same
share, (ii) any Stock Appreciation Right covering any share of Common Stock shall expire and not be
exercisable upon the exercise of any related Option with respect to the same share, and (iii) an
Option and Stock Appreciation Right covering the same share of Common Stock may not be exercised
simultaneously. Upon exercise of a Stock Appreciation Right with respect to a share of Common
Stock, the Participant shall be entitled to receive an amount equal to the excess, if any, of (A)
the Fair Market Value of a share of Common Stock on the date of exercise over (B) the Exercise
Price of such Stock Appreciation Right established in the Award Agreement, which amount shall be
payable as provided in Section 6.02(c).

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          (b) Exercise Price. The Exercise Price established under any Stock Appreciation Right
granted under this Plan shall be determined by the Committee, but in the case of Stock Appreciation
Rights granted in tandem with Options shall not be less than the Purchase
Price of the related Option; provided, however, that in no event shall the Exercise Price be
less than the Fair Market Value on the Date of Grant. Upon exercise of Stock Appreciation Rights
granted in tandem with options, the number of shares subject to exercise under any related Option
shall automatically be reduced by the number of shares of Common Stock represented by the Option or
portion thereof which are surrendered as a result of the exercise of such Stock Appreciation
Rights.

          (c) Payment of Incremental Value. Any payment which may become due from the Company
by reason of a Participant’s exercise of a Stock Appreciation Right may be paid to the Participant
as determined by the Committee (i) all in cash, (ii) all in Common Stock, or (iii) in any
combination of cash and Common Stock. In the event that all or a portion of the payment is made in
Common Stock, the number of shares of Common Stock delivered in satisfaction of such payment shall
be determined by dividing the amount of such payment or portion thereof by the Fair Market Value on
the Exercise Date. No fractional share of Common Stock shall be issued to make any payment in
respect of Stock Appreciation Rights; if any fractional share would be issuable, the combination of
cash and Common Stock payable to the Participant shall be adjusted as directed by the Committee to
avoid the issuance of any fractional share.

     6.03. Terms of Stock Options and Stock Appreciation Rights.

          (a) Conditions on Exercise. An Award Agreement with respect to Options or Stock
Appreciation Rights may contain such waiting periods, exercise dates and restrictions on exercise
(including, but not limited to, periodic installments) as may be determined by the Committee at the
time of grant.

          (b) Duration of Options and Stock Appreciation Rights. Options and Stock Appreciation
Rights shall terminate upon the first to occur of the following events:

          (i) Expiration of the Option or Stock Appreciation Right as provided in the Award
Agreement; or

          (ii) Termination of the Award in the event of a Participant’s disability, Retirement,
death or other Termination of Service as provided in the Award Agreement; or

          (iii) In the case of an Incentive Stock Option, ten years from the Date of Grant (five
years in certain cases, as described in Section 6.01(d)); or

          (iv) Solely in the case of a Stock Appreciation Right granted in tandem with an Option,
upon the expiration of the related Option.

          (c) Acceleration or Extension of Exercise Time. The Committee, in its sole
discretion, shall have the right (but shall not be obligated), exercisable on or at any time after
the Date of Grant, to permit the exercise of an Option or Stock Appreciation Right (i) prior to the

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time such Option or Stock Appreciation Right would become exercisable under the terms of the Award
Agreement, (ii) after the termination of the Option or Stock Appreciation Right under the
terms of the Award Agreement, or (iii) after the expiration of the Option or Stock
Appreciation Right.

     6.04. Exercise Procedures. Each Option and Stock Appreciation Right granted under the
Plan shall be exercised under such procedures and by such methods as the Board may establish or
approve from time to time. The Purchase Price of shares purchased upon exercise of an Option
granted under the Plan shall be paid in full in cash by the Participant pursuant to the Award
Agreement; provided, however, that the Committee may (but shall not be required to) permit payment
to be made (a) by delivery to the Company of shares of Common Stock held by the Participant, (b) by
a “net exercise” method under which the Company reduces the number of shares of Common Stock issued
upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed
the aggregate Exercise Price, or (c) such other consideration as the Committee deems appropriate
and in compliance with applicable law (including payment under an arrangement constituting a
brokerage transaction as permitted under the provisions of Regulation T applicable to cashless
exercises promulgated by the Federal Reserve Board, unless prohibited by Section 402 of the
Sarbanes-Oxley Act of 2002). In the event that any Common Stock shall be transferred to the
Company to satisfy all or any part of the Purchase Price, the part of the Purchase Price deemed to
have been satisfied by such transfer of Common Stock shall be equal to the product derived by
multiplying the Fair Market Value as of the date of exercise times the number of shares of Common
Stock transferred to the Company. The Participant may not transfer to the Company in satisfaction
of the Purchase Price any fractional share of Common Stock. Any part of the Purchase Price paid in
cash upon the exercise of any Option shall be added to the general funds of the Company and may be
used for any proper corporate purpose. Unless the Committee shall otherwise determine, any Common
Stock transferred to the Company as payment of all or part of the Purchase Price upon the exercise
of any Option shall be held as treasury shares.

     6.05. Change in Control. With respect to each Award of Options or Stock Appreciation
Rights, the Committee shall determine whether and to what extent such Options or Stock Appreciation
Rights shall become immediately and fully exercisable in the event of a Change in Control or upon
the occurrence of one or more specified conditions following a Change in Control. Such provisions
relating to the effect of a Change in Control on an outstanding Award of Options or Stock
Appreciation Rights shall be set forth in the applicable Award Agreement.

     6.06. Early Exercise. An Option may, but need not, include a provision by which the
Participant may elect to exercise the Option in whole or in part prior to the date the Option is
fully vested. The provision may be included in the Award Agreement at the time of grant of the
Option or may be added to the Award Agreement by amendment at a later time. In the event of an
early exercise of an Option, any shares of Common Stock received shall be subject to a special
repurchase right in favor of the Company with terms established by the Board. If the Company
exercises its repurchase rights, the Company may elect to pay the repurchase price in the form of
(i) cash or cash equivalents, (ii) installment payments over a specified period, (iii) cancellation
of indebtedness, or (iv) any other form of consideration approved by the Company. The Board shall
determine the time and/or the event that causes the repurchase right to terminate and fully vest
the Common Stock in the Participant. Alternatively, in the sole

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discretion of the Board, one or
more Participants may be granted stock purchase rights allowing them to purchase
shares of Common Stock outright, subject to conditions and restrictions as the Board may
determine.

ARTICLE VII

RESTRICTED SHARES AND RESTRICTED STOCK UNITS

     7.01. Award of Restricted Stock and Restricted Stock Units. The Committee may grant
to any Participant an Award of Restricted Shares consisting of a specified number of shares of
Common Stock issued to the Participant subject to such terms, conditions and forfeiture and
transfer restrictions, whether based on performance standards, periods of service, retention by the
Participant of ownership of specified shares of Common Stock or other criteria, as the Committee
shall establish. The Committee may also grant Restricted Stock Units representing the right to
receive shares of Common Stock in the future subject to such terms, conditions and restrictions,
whether based on performance standards, periods of service, retention by the Participant of
ownership of specified shares of Common Stock or other criteria, as the Committee shall establish.
With respect to performance-based Awards of Restricted Shares or Restricted Stock Units intended to
qualify as “performance-based” compensation for purposes of Section 162(m) of the Code, performance
targets will consist of specified levels of one or more of the Performance Goals. The terms of any
Restricted Share and Restricted Stock Unit Awards granted under this Plan shall be set forth in an
Award Agreement which shall contain provisions determined by the Committee and not inconsistent
with this Plan.

     7.02. Restricted Shares.

          (a) Issuance of Restricted Shares. As soon as practicable after the Date of Grant of
a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books
of the Company, or its agent, Common Stock, registered on behalf of the Participant, evidencing the
Restricted Shares covered by the Award, but subject to forfeiture to the Company as of the Date of
Grant if an Award Agreement with respect to the Restricted Shares covered by the Award is not duly
executed by the Participant and timely returned to the Company. All Common Stock covered by Awards
under this Article VII shall be subject to the restrictions, terms and conditions contained in the
Plan and the Award Agreement entered into by the Participant. Until the lapse or release of all
restrictions applicable to an Award of Restricted Shares, the share certificates representing such
Restricted Shares may be held in custody by the Company, its designee, or, if the certificates bear
a restrictive legend, by the Participant. Upon the lapse or release of all restrictions with
respect to an Award as described in Section 7.02(d), one or more share certificates, registered in
the name of the Participant, for an appropriate number of shares as provided in Section 7.02(d),
free of any restrictions set forth in the Plan and the Award Agreement shall be delivered to the
Participant.

          (b) Stockholder Rights. Beginning on the Date of Grant of the Restricted Share Award
and subject to execution of the Award Agreement as provided in Section 7.02(a), the Participant
shall become a stockholder of the Company with respect to all shares subject to the Award Agreement
and shall have all of the rights of a stockholder, including, but not limited to, the right to vote
such shares and the right to receive dividends; provided, however, that any Common Stock
distributed as a dividend or otherwise with respect to any Restricted Shares as to

11

 

which the restrictions have not yet lapsed, shall be subject to the same restrictions as such
Restricted Shares and held or restricted as provided in Section 7.02(a).

          (c) Restriction on Transferability. None of the Restricted Shares may be assigned or
transferred (other than by will or the laws of descent and distribution, or to an inter vivos trust
with respect to which the Participant is treated as the owner under Sections 671 through 677 of the
Code, except to the extent that Section 16 of the Exchange Act limits a Participant’s right to make
such transfers), pledged or sold prior to lapse of the restrictions applicable thereto.

          (d) Delivery of Shares Upon Vesting. Upon expiration or earlier termination of the
forfeiture period without a forfeiture and the satisfaction of or release from any other conditions
prescribed by the Committee, or at such earlier time as provided under the provisions of Section
7.04, the restrictions applicable to the Restricted Shares shall lapse. As promptly as
administratively feasible thereafter, subject to the requirements of Section 11.05, the Company
shall deliver to the Participant or, in case of the Participant’s death, to the Participant’s
Beneficiary, one or more share certificates for the appropriate number of shares of Common Stock,
free of all such restrictions, except for any restrictions that may be imposed by law.

          (e) Forfeiture of Restricted Shares. Subject to Sections 7.02(f) and 7.04, all
Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant
with respect to such Restricted Shares shall terminate unless the Participant continues in the
service of the Company or an Affiliate as an employee until the expiration of the forfeiture period
for such Restricted Shares and satisfies any and all other conditions set forth in the Award
Agreement. The Committee shall determine the forfeiture period (which may, but need not, lapse in
installments) and any other terms and conditions applicable with respect to any Restricted Share
Award.

          (f) Waiver of Forfeiture Period. Notwithstanding anything contained in this Article
VII to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any
other conditions set forth in any Award Agreement under appropriate circumstances (including the
death, disability or Retirement of the Participant or a material change in circumstances arising
after the date of an Award) and subject to such terms and conditions (including forfeiture of a
proportionate number of the Restricted Shares) as the Committee shall deem appropriate.

     7.03. Restricted Stock Units.

          (a) Settlement of Restricted Stock Units. Payments shall be made to Participants with
respect to their Restricted Stock Units as soon as practicable after the Committee has determined
that the terms and conditions applicable to such Award have been satisfied or at a later date if
distribution has been deferred. Payments to Participants with respect to Restricted Stock Units
shall be made in the form of Common Stock, or cash or a combination of both, as the Committee may
determine. The amount of any cash to be paid in lieu of Common Stock shall be determined on the
basis of the Fair Market Value of the Common Stock on the date any such payment is processed. As
to shares of Common Stock which constitute all or any part of such payment, the Committee may
impose such restrictions concerning their

12

 

transferability and/or their forfeiture as may be provided in the applicable Award Agreement
or as the Committee may otherwise determine, provided such determination is made on or before the
date certificates for such shares are first delivered to the applicable Participant.

          (b) Shareholder Rights. Until the lapse or release of all restrictions applicable to
an Award of Restricted Stock Units, no shares of Common Stock shall be issued in respect of such
Awards and no Participant shall have any rights as a shareholder of the Company with respect to the
shares of Common Stock covered by such Award of Restricted Stock Units.

          (c) Waiver of Forfeiture Period. Notwithstanding anything contained in this Section
7.03 to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and
any other conditions set forth in any Award Agreement under appropriate circumstances (including
the death, disability or retirement of the Participant or a material change in circumstances
arising after the date of an Award) and subject to such terms and conditions (including forfeiture
of a proportionate number of shares issuable upon settlement of the Restricted Stock Units
constituting an Award) as the Committee shall deem appropriate.

          (d) Deferral of Payment. If approved by the Committee and set forth in the applicable
Award Agreement, a Participant may elect to defer the amount payable with respect to the
Participant’s Restricted Stock Units in accordance with such terms as may be established by the
Committee, subject to the requirements of Section 409A of the Code.

     7.04. Change in Control. With respect to each Award of Restricted Shares and
Restricted Stock Unit Awards, the Committee shall determine whether and to what extent such
Restricted Shares and Restricted Stock Unit Awards shall become immediately and fully vested in the
event of a Change in Control or upon the occurrence of one or more specified conditions following a
Change of Control. Such provisions relating to the effect of a Change of Control on an outstanding
Award of Restricted Shares and Restricted Stock Unit Awards shall be set forth in the applicable
Award Agreement.

ARTICLE VIII

PERFORMANCE AWARDS

     8.01. Performance Awards.

          (a) Award Periods and Calculations of Potential Incentive Amounts. The Committee may
grant Performance Awards to Participants. A Performance Award shall consist of the right to
receive a payment (measured by the Fair Market Value of a specified number of shares of Common
Stock, increases in such Fair Market Value during the Award Period and/or a fixed cash amount)
contingent upon the extent to which certain predetermined performance targets have been met during
an Award Period. The Award Period shall be two or more fiscal or calendar years as determined by
the Committee. The Committee, in its discretion and under such terms as it deems appropriate, may
permit newly eligible Participants, such as those who are promoted or newly hired, to receive
Performance Awards after an Award Period has commenced.

          (b) Performance Targets. Subject to Section 11.18, the performance targets applicable
to a Performance Award may include such goals related to the performance of the

13

 

Company or, where relevant, any one or more of its Subsidiaries or divisions and/or the
performance of a Participant as may be established by the Committee in its discretion. In the case
of Performance Awards to “covered employees” (as defined in Section 162(m) of the Code), the
targets will be limited to specified levels of one or more of the Performance Goals. The
performance targets established by the Committee may vary for different Award Periods and need not
be the same for each Participant receiving a Performance Award in an Award Period.

          (c) Earning Performance Awards. The Committee, at or as soon as practicable after the
Date of Grant, shall prescribe a formula to determine the percentage of the Performance Award to be
earned based upon the degree of attainment of the applicable performance targets.

          (d) Payment of Earned Performance Awards. Subject to the requirements of Section
11.05, payments of earned Performance Awards shall be made in cash or Common Stock, or a
combination of cash and Common Stock, in the discretion of the Committee. The Committee, in its
sole discretion, may define, and set forth in the applicable Award Agreement, such terms and
conditions with respect to the payment of earned Performance Awards as it may deem desirable.

     8.02. Termination of Service. In the event of a Participant’s Termination of Service
during an Award Period, the Participant’s Performance Awards shall be forfeited except as may
otherwise be provided in the applicable Award Agreement.

     8.03. Change in Control. With respect to each Performance Award, the Committee shall
determine whether and to what extent such Performance Awards shall become immediately and fully
vested and payable in the event of a Change in Control or upon the occurrence of one or more
specified conditions following a Change of Control. Such provisions relating to the effect of a
Change of Control on an outstanding Performance Award shall be set forth in the applicable Award
Agreement.

ARTICLE IX

OTHER STOCK-BASED AWARDS

     9.01. Grant of Other Stock-Based Awards. Other stock-based awards, consisting of
stock purchase rights (with or without loans to Participants by the Company containing such terms
as the Committee shall determine), Awards of Common Stock, or Awards valued in whole or in part by
reference to, or otherwise based on, Common Stock, may be granted either alone or in addition to or
in conjunction with other Awards under the Plan. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the persons to whom and the time or
times at which such Awards shall be made, the number of shares of Common Stock to be granted
pursuant to such Awards, and all other conditions of the Awards. Any such Award shall be confirmed
by an Award Agreement executed by the Committee and the Participant, which Award Agreement shall
contain such provisions as the Committee determines to be necessary or appropriate to carry out the
intent of this Plan with respect to such Award.

14

 

     9.02. Terms of Other Stock-Based Awards. In addition to the terms and conditions
specified in the Award Agreement, Awards made pursuant to this Article IX shall be subject to the
following:

          (a) Any Common Stock subject to Awards made under this Article IX may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or,
if later, the date on which any applicable restriction, performance or deferral period lapses; and

          (b) If specified by the Committee in the Award Agreement, the recipient of an Award under this
Article IX shall be entitled to receive, currently or on a deferred basis, interest or dividends or
dividend equivalents with respect to the Common Stock or other securities covered by the Award; and

          (c) The Award Agreement with respect to any Award shall contain provisions dealing with the
disposition of such Award in the event of a Termination of Service prior to the exercise, payment
or other settlement of such Award, whether such termination occurs because of Retirement,
disability, death or other reason, with such provisions to take account of the specific nature and
purpose of the Award.

ARTICLE X

SHORT-TERM CASH INCENTIVE AWARDS

     10.01. Eligibility. Executive officers of the Company who are from time to time
determined by the Committee to be “covered employees” for purposes of Section 162(m) of the Code
will be eligible to receive short-term cash incentive awards under this Article X.

     10.02. Awards.

          (a) Performance Targets. The Committee shall establish objective performance targets
based on specified levels of one or more of the Performance Goals. Such performance targets shall
be established by the Committee on a timely basis to ensure that the targets are considered
“preestablished” for purposes of Section 162(m) of the Code.

          (b) Amounts of Awards. In conjunction with the establishment of performance targets
for a fiscal year or such other short-term performance period established by the Committee, the
Committee shall adopt an objective formula (on the basis of percentages of Participants’ salaries,
shares in a bonus pool or otherwise) for computing the respective amounts payable under the Plan to
Participants if and to the extent that the performance targets are attained. Such formula shall
comply with the requirements applicable to performance-based compensation plans under Section
162(m) of the Code and, to the extent based on percentages of a bonus pool, such percentages shall
not exceed 100% in the aggregate.

          (c) Payment of Awards. Awards will be payable to Participants in cash each year upon
prior written certification by the Committee of attainment of the specified performance targets for
the preceding fiscal year or other applicable performance period.

15

 

          (d) Negative Discretion. Notwithstanding the attainment by the Company of the
specified performance targets, the Committee shall have the discretion, which need not be exercised
uniformly among the Participants, to reduce or eliminate the award that would be otherwise paid.

          (e) Guidelines. The Committee may adopt from time to time written policies for its
implementation of this Article X. Such guidelines shall reflect the intention of the Company that
all payments hereunder qualify as performance-based compensation under Section 162(m) of the Code.

          (f) Non-Exclusive Arrangement. The adoption and operation of this Article X shall not
preclude the Board or the Committee from approving other short-term incentive compensation
arrangements for the benefit of individuals who are Participants hereunder as the Board or
Committee, as the case may be, deems appropriate and in the best interests of the Company.

ARTICLE XI

TERMS APPLICABLE GENERALLY TO AWARDS

GRANTED UNDER THE PLAN

     11.01. Plan Provisions Control Award Terms. Except as provided in Section 11.16, the
terms of the Plan shall govern all Awards granted under the Plan, and in no event shall the
Committee have the power to grant any Award under the Plan which is contrary to any of the
provisions of the Plan. In the event any provision of any Award granted under the Plan shall
conflict with any term in the Plan as constituted on the Date of Grant of such Award, the term in
the Plan as constituted on the Date of Grant of such Award shall control. Except as provided in
Section 11.03 and Section 11.07, the terms of any Award granted under the Plan may not be changed
after the Date of Grant of such Award so as to materially decrease the value of the Award without
the express written approval of the holder.

     11.02. Award Agreement. No person shall have any rights under any Award granted under
the Plan unless and until the Company and the Participant to whom such Award shall have been
granted shall have executed and delivered an Award Agreement or received any other Award
acknowledgment authorized by the Committee expressly granting the Award to such person and
containing provisions setting forth the terms of the Award.

     11.03. Modification of Award After Grant. No Award granted under the Plan to a
Participant may be modified (unless such modification does not materially decrease the value of the
Award or is necessary or advisable in the judgment of the Committee to comply with the requirements
of Section 409A of the Code) after the Date of Grant except by express written agreement between
the Company and the Participant, provided that any such change (a) shall not be inconsistent with
the terms of the Plan, and (b) shall be approved by the Committee. Except as provided in Section
11.07, an outstanding Option or Stock Appreciation Right may not be (i) amended after the Date of
Grant to reduce its exercise price without the prior approval of the amendment by the Company’s
stockholders or (ii) terminated and replaced with a substitute Award if the effect of such
termination and substitution is to reduce the exercise price.

16

 

     11.04. Limitation on Transfer. Except as provided in Section 7.01(c) in the case of
Restricted Shares, a Participant’s rights and interest under the Plan may not be assigned or
transferred other than by will or the laws of descent and distribution, and during the lifetime of
a Participant, only the Participant personally (or the Participant’s personal representative) may
exercise rights under the Plan. The Participant’s Beneficiary may exercise the Participant’s
rights to the extent they are exercisable under the Plan following the death of the Participant.
Notwithstanding the foregoing, to the extent permitted under Section 16(b) of the Exchange Act with
respect to Participants subject to such Section, the Committee may grant Non-Qualified Stock
Options that are transferable, without payment of consideration, to immediate family members of the
Participant or to trusts or partnerships for such family members, and the Committee may also amend
outstanding Non-Qualified Stock Options to provide for such transferability.

     11.05. Taxes. The Company shall be entitled, if the Committee deems it necessary or
desirable, to withhold (or secure payment from the Participant in lieu of withholding) the amount
of any withholding or other tax required by law to be withheld or paid by the Company with respect
to any amount payable and/or shares issuable under such Participant’s Award, or with respect to any
income recognized upon a disqualifying disposition of shares received pursuant to the exercise of
an Incentive Stock Option, and the Company may defer payment or issuance of the cash or shares upon
exercise or vesting of an Award unless indemnified to its satisfaction against any liability for
any such tax. The amount of such withholding or tax payment shall be determined by the Committee
and shall be payable by the Participant at such time as the Committee determines in accordance with
the following rules:

          (a) The Participant shall have the right to elect to meet his or her withholding requirement
(i) by having withheld from such Award at the appropriate time that number of shares of Common
Stock, rounded down to the nearest whole share, whose Fair Market Value is equal to the amount of
withholding taxes due, (ii) by direct payment to the Company in cash of the amount of any taxes
required to be withheld with respect to such Award or (iii) by a combination of shares and cash.

          (b) In the case of Participants who are subject to Section 16 of the Exchange Act, the
Committee may impose such limitations and restrictions as it deems necessary or appropriate with
respect to the delivery or withholding of shares of Common Stock to meet tax withholding
obligations.

     11.06. Surrender of Awards. Subject to compliance with Section 409A of the Code, any
Award granted under the Plan may be surrendered to the Company for cancellation on such terms as
the Committee and the holder approve. Subject to compliance with Section 409A of the Code and
Section 11.03, with the consent of the Participant, the Committee may substitute a new Award under
this Plan in connection with the surrender by the Participant of an equity compensation award
previously granted under this Plan or any other plan sponsored by the Company.

17

 

     11.07. Adjustments to Reflect Capital Changes.

          (a) Recapitalization. In the event of any corporate event or transaction (including,
but not limited to, a change in the Common Stock or the capitalization of the Company) such as a
merger, consolidation, reorganization, recapitalization, separation, partial or complete
liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other
distribution of stock or property of the Company, a combination or exchange of Common Stock,
dividend in kind, or other like change in capital structure, number of outstanding shares of Common
Stock, distribution (other than normal cash dividends) to shareholders of the Company, or any
similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement
of Participants’ rights under this Plan, shall make equitable and appropriate adjustments and
substitutions, as applicable, to or of the number and kind of shares subject to outstanding Awards,
the Purchase Price or Exercise Price for such shares, the number and kind of shares available for
future issuance under the Plan and the maximum number of shares in respect of which Awards can be
made to any Participant in any calendar year, and other determinations applicable to outstanding
Awards. The Committee shall have the power and sole discretion to determine the amount of the
adjustment to be made in each case.

          (b) Merger. In the event that the Company is a party to a Merger, outstanding Awards
shall be subject to the agreement of merger or reorganization. Such agreement may provide, without
limitation, for the continuation of outstanding Awards by the Company (if the Company is a
surviving corporation), for their assumption by the surviving corporation or its parent or
subsidiary, for the substitution by the surviving corporation or its parent or subsidiary of its
own awards for such Awards, for accelerated vesting and accelerated expiration, or for settlement
in cash or cash equivalents.

          (c) Options to Purchase Shares or Stock of Acquired Companies. After any Merger in
which the Company or an Affiliate shall be a surviving corporation, the Committee may grant
substituted options under the provisions of the Plan, pursuant to Section 424 of the Code,
replacing old options granted under a plan of another party to the Merger whose shares or stock
subject to the old options may no longer be issued following the Merger. The foregoing adjustments
and manner of application of the foregoing provisions shall be determined by the Committee in its
sole discretion. Any such adjustments may provide for the elimination of any fractional shares
which might otherwise become subject to any Options.

     11.08. No Right to Continued Service. No person shall have any claim of right to be
granted an Award under this Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the service of the Company or any
of its Subsidiaries.

     11.09. Awards Not Includable for Benefit Purposes. Payments received by a Participant
pursuant to the provisions of the Plan shall not be included in the determination of benefits under
any pension, group insurance or other benefit plan applicable to the Participant which is
maintained by the Company or any of its Subsidiaries, except as may be provided under the terms of
such plans or determined by the Board.

18

 

     11.10. Governing Law. All determinations made and actions taken pursuant to the Plan
shall be governed by the laws of Delaware and construed in accordance therewith.

     11.11. No Strict Construction. No rule of strict construction shall be implied
against the Company, the Committee, or any other person in the interpretation of any of the terms
of the Plan, any Award granted under the Plan or any rule or procedure established by the
Committee.

     11.12. Compliance with Rule 16b-3. It is intended that, unless the Committee
determines otherwise, Awards under the Plan be eligible for exemption under Rule 16b-3. The Board
is authorized to amend the Plan and to make any such modifications to Award Agreements to comply
with Rule 16b-3, as it may be amended from time to time, and to make any other such amendments or
modifications as it deems necessary or appropriate to better accomplish the purposes of the Plan in
light of any amendments made to Rule 16b-3.

     11.13. Captions. The captions (i.e., all Section headings) used in the Plan are for
convenience only, do not constitute a part of the Plan, and shall not be deemed to limit,
characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall
be construed as if no captions have been used in the Plan.

     11.14. Severability. Whenever possible, each provision in the Plan and every Award at
any time granted under the Plan shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Plan or any Award at any time granted under the
Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision
shall be deemed amended to accomplish the objectives of the provision as originally written to the
fullest extent permitted by law and (b) all other provisions of the Plan and every other Award at
any time granted under the Plan shall remain in full force and effect.

     11.15. Amendment and Termination.

          (a) Amendment. The Board shall have complete power and authority to amend the Plan at
any time; provided, however, that the Board shall not, without the requisite affirmative approval
of stockholders of the Company, make any amendment which requires stockholder approval under the
Code or under any other applicable law or rule of any stock exchange which lists Common Stock or
Company Voting Securities. Notwithstanding the foregoing, the Board expressly reserves the right
to approve a cancellation and reissuance of an outstanding Option or Stock Appreciation Right, the
amendment of any Option or Stock Appreciation Right to lower the Purchase Price or Exercise Price,
as the case may be, or any other amendment, adjustment or action taken with respect to an
outstanding Option or Stock Appreciation Right that constitutes a repricing under any applicable
rule of any stock exchange which lists Common Stock or Company Voting Securities. No termination
or amendment of the Plan may, without the consent of the Participant to whom any Award shall
theretofore have been granted under the Plan, adversely affect the right of such individual under
such Award.

          (b) Termination. The Board shall have the right and the power to terminate the Plan
at any time. No Award shall be granted under the Plan after the termination of the Plan, but the
termination of the Plan shall not have any other effect and any Award outstanding at the time of
the termination of the Plan may be exercised after termination of the Plan at any time

19

 

prior to the expiration date of such Award to the same extent such Award would have been
exercisable had the Plan not terminated.

     11.16. Foreign Qualified Awards. Awards under the Plan may be granted to such
employees of the Company and its Subsidiaries who are residing in foreign jurisdictions as the
Committee in its sole discretion may determine from time to time. The Committee may adopt such
supplements to the Plan as may be necessary or appropriate to comply with the applicable laws of
such foreign jurisdictions and to afford Participants favorable treatment under such laws;
provided, however, that no Award shall be granted under any such supplement with terms or
conditions inconsistent with the provision set forth in the Plan.

     11.17. Dividend Equivalents. For any Award granted under the Plan, the Committee
shall have the discretion, upon the Date of Grant or thereafter, to establish a Dividend Equivalent
Account with respect to the Award, and the applicable Award Agreement or an amendment thereto shall
confirm such establishment. If a Dividend Equivalent Account is established, the following terms
shall apply:

          (a) Terms and Conditions. Dividend Equivalent Accounts shall be subject to such terms
and conditions as the Committee shall determine and as shall be set forth in the applicable Award
Agreement. Such terms and conditions may include, without limitation, for the Participant’s
Account to be credited as of the record date of each cash dividend on the Common Stock with an
amount equal to the cash dividends which would be paid with respect to the number of shares of
Common Stock then covered by the related Award if such shares of Common Stock had been owned of
record by the Participant on such record date.

          (b) Unfunded Obligation. Dividend Equivalent Accounts shall be established and
maintained only on the books and records of the Company and no assets or funds of the Company shall
be set aside, placed in trust, removed from the claims of the Company’s general creditors, or
otherwise made available until such amounts are actually payable as provided hereunder.

     11.18. Adjustment of Performance Goals and Targets. Notwithstanding any provision of
the Plan to the contrary, the Committee shall have the authority to adjust any Performance Goal,
performance target or other performance-based criteria established with respect to any Award under
the Plan if circumstances occur (including, but not limited to, unusual or nonrecurring events,
changes in tax laws or accounting principles or practices or changed business or economic
conditions) that cause any such Performance Goal, performance target or performance-based criteria
to be inappropriate in the judgment of the Committee; provided, that with respect to any Award that
is intended to qualify for the “performance-based compensation” exception under Section 162(m) of
the Code and the regulations thereunder, any adjustment by the Committee shall be consistent with
the requirements of Section 162(m) and the regulations thereunder.

     11.19. Legality of Issuance. Notwithstanding any provision of this Plan or any
applicable Award Agreement to the contrary, the Committee shall have the sole discretion to impose
such conditions, restrictions and limitations (including suspending exercises of Options or Stock
Appreciation Rights and the tolling of any applicable exercise period during such

20

 

suspension) on the issuance of Common Stock with respect to any Award unless and until the
Committee determines that such issuance complies with (i) any applicable registration requirements
under the Securities Act of 1933 or the Committee has determined that an exemption therefrom is
available, (ii) any applicable listing requirement of any stock exchange on which the Common Stock
is listed, (iii) any applicable Company policy or administrative rules, and (iv) any other
applicable provision of state, federal or foreign law, including foreign securities laws where
applicable.

     11.20. Restrictions on Transfer. Regardless of whether the offering and sale of
Common Stock under the Plan have been registered under the Securities Act of 1933 or have been
registered or qualified under the securities laws of any state, the Company may impose restrictions
upon the sale, pledge, or other transfer of such Common Stock (including the placement of
appropriate legends on stock certificates) if, in the judgment of the Company and its counsel, such
restrictions are necessary or desirable to achieve compliance with the provisions of the Securities
Act of 1933, the securities laws of any state, the United States or any other applicable foreign
law.

     11.21. Further Assurances. As a condition to receipt of any Award under the Plan, a
Participant shall agree, upon demand of the Company, to do all acts and execute, deliver and
perform all additional documents, instruments and agreements which may be reasonably required by
the Company, to implement the provisions and purposes of the Plan.

21exv10w9

Exhibit 10.9

UNIVERSAL INSURANCE HOLDINGS, INC.

STOCK OPTION AGREEMENT FOR DIRECTORS

     AGREEMENT (“Agreement”) dated this 21st day of December, 2001 by
and between Universal Insurance Holdings, Inc., a Delaware corporation (“Corporation”),
and Bradley I. Meier, a director of the Corporation (“Optionee”).

     WHEREAS, the Corporation desires to have Optionee continue to serve on its Board of
Directors or the Board of Directors of one or more of its wholly-owned subsidiaries and
to provide Optionee with an incentive by sharing in the success of the Corporation;

     WHEREAS, the Corporation desires to grant stock options to Optionee;

     NOW, THEREFORE, in consideration of the mutual covenants and representations herein
contained and intending to be legally bound, the parties hereto agree as follows:

     1. Number of Shares and Price. The Corporation hereby grants to the
Optionee an option (“Option”) to purchase the number of shares of Common Stock set forth
on the last page
of this Agreement. The exercise price per share of Common Stock of the Option shall be as is set
forth on the last page of this Agreement, such price being the Fair Market Value per
share of Common Stock on the date of grant of the Option. The Option is not intended to
be an Incentive Stock Option and shall be deemed a Non-Qualified Stock Option.

     2. Term and Exercise. The Option shall expire on the date set forth on the
last page of this Agreement, subject to earlier termination as set forth in Section 3.
Subject to the provisions of Section 3, the Option shall become exercisable in
installments as set forth on the last page of this Agreement.

     3. Exercise of Option Upon Termination of Service.

          (a) Termination of Vested Option Upon Termination of Service as a
Board Member.

     (i) In General. Upon the Optionee’s termination of service as a
Board member other than by reason of death or permanent disability, the Optionee
may, within 30 days from the date of such termination of service, exercise all or
any part of the Option as was exercisable on the date of termination of service
if such termination of service is not for cause. If such termination of service
is for cause, the right of the Optionee to exercise the Option shall terminate on
the date of termination of service. In no event, however, may the Option be
exercised later than the date determined pursuant to Section 2.

 

 

     (ii) Disability. Upon the Optionee’s permanent disability, the Optionee may,
within 90 days, exercise all or a part of the Option, whether or not the Option
was then exercisable, but only to the extent not previously exercised. In no
event, however, may the Option be exercised later than the date determined
pursuant to Section 2.

     (iii) Death. In the event of the death of the Optionee while serving
as a Board member, the right of the Optionee’s designated beneficiary to exercise
the Option in full (whether or not all or any part of the Option was exercisable
as of the date of death of the Optionee, but only to the extent not previously
exercised) shall expire upon the expiration of 90 days from the date of the
Optionee’s death or on the date of expiration of the Option determined pursuant
to Section 2, whichever is earlier.

          (b) Termination of Unvested Option Upon Termination of Service. Except as
specified in Section 3(a), to the extent all or any part of the Option was not
exercisable as of the date of termination of service, the unexercisable portion of the
Option shall expire at the date of such termination.

     4. Exercise Procedures. The Option shall be exercisable by written notice
to the Corporation, which must be received by the Secretary of the Corporation not later
than 5:00 P.M. local time at the principal executive office of the Corporation on the
expiration date of the Option. Such written notice shall set forth (a) the number of
shares of Common Stock being purchased, (b) the total exercise price for the shares of
Common Stock being purchased, (c) the exact name as it should appear on the stock
certificate(s) to be issued for the shares of Common
Stock being purchased, and (d) the address to which the stock certificate(s) should be
sent. The exercise price of shares of Common Stock purchased upon exercise of the Option
shall be paid in full (a) in cash, (b) by delivery to the Corporation of already owned
shares of Common Stock that have been held by the Optionee for at least six months, (c)
in any combination of cash and already owned shares of Common Stock that have been held
by the Optionee for at least six months, or (d) by delivery of such other consideration
as the Committee deems appropriate and in compliance with applicable law (including
payment in accordance with a cashless exercise program approved by the Committee). If
any shares of Common Stock shall be transferred to the Corporation to satisfy all or any
part of the exercise price, the part of the exercise price deemed to have been satisfied
by such transfer of shares of Common Stock shall be equal to the product derived by
multiplying the Fair Market Value as of the date of exercise times the number of shares
of Common Stock transferred to the Corporation. The Optionee may not transfer to the
Corporation in satisfaction of the exercise price any fraction of a share of Common
Stock, and any portion of the exercise price that would represent less than a full share
of Common Stock must be paid in cash by the Optionee. Subject to Sections 6, 7 and 8
hereof, certificates for the purchased shares of Common Stock will be issued and
delivered to the Optionee as soon as practicable after the receipt of such payment of
the exercise price; provided, however, that delivery of any such shares
of Common Stock shall be deemed effected for all purposes when a stock transfer agent of
the Corporation shall have deposited such certificates in the United States

2

 

mail, addressed to Optionee, at the address set forth on the last page of this Agreement or to
such other address as Optionee may from time to time designate in a written notice to the
Corporation. The Optionee shall not be deemed for any purpose to be a shareholder of the
Corporation in respect of any shares of Common Stock as to which the Option shall not have been
exercised, as herein provided, until such shares of Common Stock have been issued to Optionee by
the Corporation hereunder.

     5. Limitations on Transfer. The Option may not be assigned or transferred other than
by will, by the laws of descent and distribution or pursuant to a domestic relations order. The
Optionee’s beneficiary may exercise the Optionee’s rights hereunder only to the extent they were
exercisable under this Agreement at the date of the death of the Optionee and are otherwise
currently exercisable.

     6. Taxes. The Corporation shall be entitled, if the Corporation deems it necessary or
desirable, to withhold (or secure payment from the Optionee in lieu of withholding) the amount of
any withholding or other tax required by law to be withheld or paid by the Corporation with
respect to the Option. The Corporation may defer issuance of Common Stock under the Option unless
indemnified to its satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Corporation and shall be payable by the
Optionee at such time as the Corporation determines. The Optionee shall be permitted to satisfy
his or her tax or withholding obligation by (a) having cash withheld from the Optionee’s salary or
other compensation payable by the Corporation or a Subsidiary, (b) the payment of cash by the
Optionee to the Corporation, (c) the payment in shares of Common Stock already owned by the
Optionee valued at Fair Market Value, and/or (d) the withholding from the Option, at the
appropriate time, of a number of shares of Common Stock sufficient, based upon the Fair Market
Value of such Common Stock, to satisfy such tax or withholding requirements.

     7. No Exercise in Violation of Law. Notwithstanding any of the provisions of this
Agreement, the Optionee hereby agrees that he or she will not exercise the Option granted hereby,
and that the Corporation will not be obligated to issue any shares of Common Stock to the Optionee
hereunder, if the exercise thereof or the issuance of such shares of Common Stock shall constitute
a violation by the Optionee or the Corporation of any provision of any law or regulation of any
governmental authority. Any determination in this connection by the Committee shall be final,
binding and conclusive.

     8. Securities Law Compliance. The Optionee acknowledges that the shares of Common Stock
issuable on exercise of the Option have not been registered under the Securities Act of 1993, as
amended (“Act”). The Optionee represents and acknowledges that such shares of Common Stock, when
purchased, shall be held for investment and not with a view to the sale or distribution of any
part thereof, and that the Optionee may be required to bear the economic risk of his or her
investment for an indefinite period of time. The Optionee further represents and warrants that the
Optionee and his or her Beneficiaries will not sell or otherwise dispose of these shares of Common
Stock except pursuant to an effective registration statement under the Act or

3

 

in a transaction that, in the opinion of counsel for the Corporation, is exempt from registration
under the Act.

     9. Adjustments. The existence of the Option shall not affect in any way the right or
power of the Corporation or its directors or shareholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other changes in the Corporation’s capital
structure or its business, or any merger or consolidation of the Corporation, or any issuance of
bonds, debentures, preferred stock or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or dissolution or liquidation of the Corporation, or any sale or
transfer of all or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

     10. Dispute Resolution. As a condition of granting the Option, the Optionee agrees,
for the Optionee and his or her beneficiaries, that any dispute or disagreement that may arise
under or as a result of or pursuant to the Option shall be determined by the Board of Directors of
the Corporation in its sole and absolute discretion, and any such interpretation of the terms of
the Option shall be final, binding and conclusive.

4

 

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

	 	 	 	 	 

	ATTEST:	 	UNIVERSAL INSURANCE HOLDINGS, INC.
	 
	 	 	 	 
	/s/
Janet Conde

	 	By:
	 	/s/ Bradley I. Meier
	 

	 	 	 	 

	 

	 	 	 	Bradley I. Meier, President
	 
	 	 	 	 
	WITNESS:	 	OPTIONEE
	 
	 	 	 	 
	/s/ Janet Conde

	 	By:
	 	/s/ Bradley I. Meier
	 

	 	 	 	 
	 

	 	 	 	Bradley I. Meier
	 
	 	 	 	 
	Number of shares of Common Stock

subject to the Option:
	 	
150,000 shares of Common Stock
	 
	 	 	 	 
	Exercise Price per share of Common

Stock:
	 	
$.60	 	 
	 
	 	 	 	 
	Expiration Date of the Option	 	December 21, 2011
	 
	 	 	 	 
	Installment Exercise Schedule, if Any
	 	 	 	 
	 
	 	 	 	 
	Vesting
Schedule
	 	Cumulative Number of
Shares
 of Common Stock in Respect

of which Option is Exercisable
	 
	 	 	 	 
	Immediate-Upon
Grant
	 	150,000
	 
	 	 	 	 
	Notice Addresses:
	 	 	 	 
	 
	 	 	 	 
	If to the Corporation:	 	If to the Optionee:
	 
	 	 	 	 
	Universal Insurance Holdings, Inc.

2875 N.E. 191 Street

Miami, Florida 33180

Attention: Bradley I. Meier	 	 Bradley I. Meier

4000 Island Blvd. #907

Aventura, FL 33160

5

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