Document:

Exhibit 10.12

 

CHECKSMART FINANCIAL HOLDINGS CORP.

2006 MANAGEMENT EQUITY INCENTIVE PLAN

STOCK APPRECIATION RIGHT AWARD AGREEMENT

 

GRANTS TO:  Chad M. Streff

 

THIS AGREEMENT (this “Agreement”) is made effective as of December 31, 2008  (the “Grant Date”), between CheckSmart Financial Holdings Corp., a Delaware corporation (together with its successors, the “Company”), and Chad M. Streff, who is an employee of the Company or one of its Subsidiaries (the “Grantee”). Capitalized terms, unless defined in Section 9 or a prior section of this Agreement, shall have the same meanings as in the Plan (as defined below).

 

WHEREAS, in connection with the Grantee’s employment with the Company or one of its Subsidiaries, the Company desires to grant to the Grantee a certain number of stock appreciation rights with respect to the Class A Common Stock, par value $0.01, of the Company (“SARs”) on the date hereof pursuant to the terms and conditions of this Agreement and the Company’s 2006 Management Equity Incentive Plan, as amended (the “Plan”).

 

WHEREAS, the Board has determined that it would be to the advantage, and in the best interest, of the Company and its shareholders to grant the SARs provided for herein to the Grantee as an incentive for increased efforts during his employment with the Company or one of its Subsidiaries.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

SECTION 1.                         GRANT OF SAR AWARDS

 

(a)                                 Grant. Subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants to the Grantee the following:

 

(i)                                     10,750 SARs, which will be earned based on time (the “Time SARs”); and

 

(ii)                                  10,750 SARs which will be earned based on achievement of certain targets upon the consummation of a Liquidity Event (the “Performance SARs”).

 

(b)                                 Plan. The foregoing awards are granted under the Plan, which is incorporated herein by this reference and made a part of this Agreement.

 

(c)                                  No Rights as Stockholder. It shall be understood that none of the terms contained  herein grant to the Grantee any rights as a stockholder, and such Grantee shall not have any such rights unless and until such Grantee receives Shares in settlement of an Award.

 

 

SECTION 2.                         VESTING OF SARS

 

(a)                                 Vesting. Subject to the provisions of this Agreement, the following SARs shall vest as follows:

 

(i)                                     the Time SARs shall vest in accordance with the provisions and terms of Schedule A; and

 

(ii)                                  the Performance SARs shall vest in accordance with the provisions and terms of Schedule B.

 

(b)                                 Effect of Vesting. For each vested SAR the Grantee is entitled to receive from the Company an amount equal to the excess of (x) the Fair Market Value (as defined below) of one Share on the date of the Notice of Exercise (as defined below) over (y) the Initial Base Value per Share.  In the event that vested SARs are exercised by the Grantee subsequent to a Termination Event, the Grantee shall be entitled to receive from the Company an amount equal to the excess of (x) the Fair Market Value of one Share on the Termination Date over (y) the Initial Base Value per Share.

 

SECTION 3.                         EXERCISE PROCEDURES

 

(a)                                 Notice of Exercise. The Grantee may request that any of his vested SARs be exercised prior to their termination as set forth in Section 5 by giving written notice to the Company in the form attached hereto as Exhibit A (such form, a “Notice of Exercise”), specifying the number of vested SARs which the Grantee requests to be exercised.

 

(b)                                 Settlement of SARs.  The Company at its election and in its sole discretion, may settle any SARs requested to be exercised pursuant to Section 3(a) in Shares (based on their value as of the Settlement Date (as defined below)) or cash, all in accordance with the terms and conditions of the Plan.

 

(c)                                  Issuance of Shares. After receiving a properly completed and executed Notice of Exercise, if the Company elects to settle the SARs subject to such notice in Shares, the Company shall cause to be issued a certificate or certificates for the number of Shares the Grantee is entitled to receive pursuant to Section 2(b), registered in the name of the Grantee (or in the names of such person and his spouse as community property or as joint tenants with right of survivorship), with any legend required pursuant to the Stockholders Agreement or otherwise required under the securities laws, such Shares the “Settlement Shares”.  In connection with any such settlement of vested SARs, the Person settling such SARs shall deliver to the Company a duly executed blank share power in the form attached hereto as Exhibit B and a fully executed Joinder Agreement. The date of the issuance of the Settlement Shares shall be the “Settlement Date.”

 

(d)                                 Withholding Requirements. The Company may withhold any tax (or other governmental obligation) required to be withheld in connection with the settlement of any exercised vested SARs, and as a condition to the settlement of any such SARs.  Such

 

 

withholding may be made from any source (including any consideration issued in settlement of the SARs and any salary or other compensation payable to the Grantee), and the Grantee shall make arrangements satisfactory to the Company to enable it to satisfy all such withholding requirements as a condition to the settlement of any SARs (including by remitting to the Company an amount in cash sufficient to satisfy the withholding obligation). For the avoidance of doubt, the Company will not withhold any amounts greater than the statutory minimum.

 

SECTION 4.                         SECURITIES LAW ISSUES, TRANSFER RESTRICTIONS

 

(a)                                 Grantee Acknowledgements and Representations. The Grantee understands and agrees that: (x) the SARs have not been and any Settlement Shares will not be registered under the Securities Act, (y) the SARs are and any Settlement Shares will be restricted securities under the Securities Act and (z) neither the SARs nor any Settlement Shares may be resold or transferred unless they are first registered under the Securities Act or unless an exemption from such registration is available. The Grantee hereby makes to the Company the representations  and warranties set forth in Exhibit C hereto with respect to the SARs and any Settlement Shares.

 

(b)                                 No Registration Rights. Except as otherwise set forth in the Stockholders Agreement with respect to any Settlement Shares, the Company may, but shall not be obligated to, register or qualify the issuance of Settlement Shares to, or the resale of any such Settlement Shares by,  the Grantee under the Securities Act or any other applicable law.

 

(c)                                  Transfers. No SARs shall be transferable to any Person for any reason. Any attempt to Transfer any SARs shall be null and void and have no force or effect, and the Company shall not, and shall cause any transfer agent not to, give any effect in such entity’s share records to such attempted Transfer. Any Settlement Shares shall be subject to the restrictions on Transfer as set forth in Article 3 of the Stockholders Agreement, except with respect to a Transfer by will or by the laws of descent and distribution. Unless otherwise permitted pursuant to the Stockholders Agreement, the Grantee shall not Transfer any Settlement Shares (x) except in compliance with the provisions of Article 3 of the Stockholders Agreement, and (y) unless the transferee shall have agreed in writing to be bound by the terms of this Agreement in a manner acceptable to the Board and otherwise acknowledging that such Settlement Shares are subject to the restrictions set forth in this Agreement. Any attempt to Transfer any Settlement Shares not in compliance with this Agreement shall be null and void and have no force or effect, and the Company shall not, and shall cause any transfer agent not to, give any effect in such entity’s share records to such attempted Transfer. The Grantee acknowledges that the transfer restrictions contained in this Agreement are reasonable and in the best interests of the Company.

 

SECTION 5.                         TERM OF GRANT.

 

(a)                                 The SARs granted in this Agreement shall expire 10 years from the date hereof. In the event that the employment of the Grantee terminates, unless a Notice of Exercise has been given to the Company from the Grantee, all vested SARs shall expire on the first anniversary after termination of employment, except in the case of (i) termination of the Grantee’s employment with the Company or any of its Subsidiaries for Cause, or resignation by the Grantee without Good Reason, in which case the SARs would terminate upon such termination or resignation, or (ii) death or Disability, in which case the SARs would terminate on the first anniversary of the

 

 

date of death or Disability. Any SARs which are unvested at the date of termination of employment will expire on the date of termination, and shall be forfeited. Further, any part of a SAR Award that is vested (but not exercised) as of the Termination Date, if the Termination Event was a termination by the Company or any of its Subsidiaries for Cause at any time or a resignation by the Grantee without Good Reason, will be forfeited and there shall be no settlement with respect thereto.

 

SECTION 6.                         RIGHT OF REPURCHASE UPON TERMINATION OF EMPLOYMENT

 

(a)                                 Repurchase Rights.

 

(i)                                     Upon the termination of employment of the Grantee by the Company or any of its Subsidiaries for any reason (the reason for the termination of such employment, the “Termination Event” and the date of such termination, the “Termination Date”), subject to the provisions of this Section 6 and the prior approval of the Compensation Committee of the Board (or if there is no such Compensation Committee, the Board), the Company shall have the right (but not the obligation) to purchase, and if such right is exercised, the Grantee shall sell, and shall cause any Permitted Transferees of the Grantee to sell (and such Permitted Transferees shall sell), to the Company, all or any portion (as determined by the Company) of the Settlement Shares (if any) owned by the Grantee or his Permitted Transferees at a price per Settlement Share equal to an amount (the “Termination Price”) (as determined pursuant to Section 6(b) below); provided, that the parties acknowledge that any unvested SARs held by the Grantee as of the Termination Date shall be cancelled pursuant to this Agreement.

 

(ii)                                  With respect to the Settlement Shares, the Company shall notify the Grantee in writing, within the Call Period whether the Company will exercise its right to purchase the Settlement Shares (the date on which the Grantee is so notified, the “Call Notice Date”). The Company may assign its right to purchase all or any portion of the Settlement Shares under this Section 6 to the DCP Investor and the DCP Investor may exercise the rights of the Company under this Section 6 in the same manner in which the Company could exercise such rights.

 

(iii)                               The closing of the purchase by the Company or the DCP Investor of Settlement Shares pursuant to this Section 6 shall take place at the principal office of the Company, on the date chosen by either the Company or the DCP Investor, as applicable, which date shall, except as may be reasonably necessary to determine the Termination Price, in no event be more than 45 days after the Call Notice Date. At such closing, (i) the Company or the DCP Investor, as applicable, shall pay the Grantee and/or such Grantee’s Permitted Transferees, as applicable, against delivery of duly endorsed certificates described below representing such Settlement Shares, the aggregate Termination Price by wire transfer of immediately available federal funds and (ii) the Grantee and/or such Grantee’s Permitted Transferees, as applicable, shall deliver to the Company a certificate or certificates representing the Settlement Shares to be purchased by

 

 

the Company or the DCP Investor, as applicable, duly endorsed, or with share (or equivalent) powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary share (or equivalent) transfer tax stamps affixed. The delivery of a certificate or certificates for the Settlement Shares by any Person selling such Settlement Shares pursuant to this Section 6(a)(iii) shall be deemed a representation and warranty by such Person that: (w) such Person has full right, title and interest in and to such Settlement Shares; (x) such Person has all necessary power and authority and has taken all necessary action to sell such Settlement Shares as contemplated; (y) such Settlement Shares are free and clear of any and all liens or encumbrances and (z) there is no adverse claim with respect to such Settlement Shares.

 

(b)                                 Termination Pricing. The Termination Price of any Settlement Share shall be determined as follows:

 

(i)                                     If the Termination Event was a resignation by the Grantee with Good Reason, or termination of the employment of the Grantee by the Company or any of its Subsidiaries without Cause, the Termination Price for such Settlement Share shall be the Fair Market Value on the FMV Calculation Date,

 

(ii)                                  if the Termination Event was as a result of the death or Disability of the Grantee, the Termination Price for such Settlement Share shall be the Fair Market Value on the Termination Date, and

 

(iii)                               if the Termination Event was a termination of the employment of the Grantee by the Company or any of its Subsidiaries with Cause, or was a resignation by the Grantee without Good Reason, the Termination Price for such Settlement Share shall be the lower of (i) the Fair Market Value on the FMV Calculation Date or (ii) the Initial Base Value per Share.

 

(c)                                  Payment Terms. In the event that the Company, or the DCP Investor if applicable, exercises a Right of Repurchase pursuant to Section 6 of this Agreement, the Company, or the DCP Investor if applicable, shall pay the Termination Price in cash; provided, however, that if the Company has not assigned its right to purchase any or all of the Settlement Shares to the DCP Investor pursuant to Section 6(a)(ii), and is at the time of the Purchase Closing prohibited from purchasing all or any portion of such Settlement Shares (i) because restrictive covenants or other provisions contained in the documents evidencing such entity’s or any of its Affiliates’ indebtedness for borrowed money do not permit or allow such entity to make such payments in cash in whole or in part; or (ii) pursuant to applicable law, then, the portion of the Termination Price not permitted to be made in cash may be paid by the execution and delivery by the Company of a promissory note or other deferred cash payment arrangement (if applicable, any promissory note to be subordinated to the indebtedness for borrowed money of such company or any of its Affiliates) bearing interest at the prime rate, as published in the Wall Street Journal, Eastern edition, on the first Business Day immediately prior to the day on which such promissory note or other deferred cash payment is issued, with principal and accrued interest payable at such time as is required in the Board’s determination to ensure that any payment pursuant to such

 

 

promissory note or other deferred cash payment arrangement is not prohibited because of any of the matters described in clauses (i) or (ii) of this Section 6(c) above.

 

SECTION 7.                         ADJUSTMENT OF SHARES

 

In the event of a recapitalization, the terms of this award (including, without limitation, the number and kind of Class A Common Shares subject to this award) shall be adjusted as set forth in Section 13(a) of the Plan.

 

SECTION 8.                         MISCELLANEOUS PROVISIONS

 

(a)                                 No Retention Rights. Nothing in this Agreement or in the Plan shall confer upon the Grantee any right to continue in Service or interfere with or otherwise restrict in any way the rights of the Company or any Subsidiary employing the Grantee, which rights are hereby expressly reserved by the Company and any Subsidiary employing the Grantee, to terminate the Grantee’s Service at any time and for any reason, with or without Cause.

 

(b)                                 Notices. All notices, requests and other communications under this Agreement shall be  in writing and shall be delivered in person (by courier or otherwise), mailed by certified or registered mail, return receipt requested, or sent by facsimile transmission, as follows:

 

If to the Company, to:

 

CheckSmart Financial Holdings Corp.

7001 Post Road, Suite 200

Dublin, OH 43016

 

If to the Grantee, to the address that he most recently provided to the Company,

 

or, in each case, at such other address or fax number as such party may hereafter specify for the purpose of notices hereunder by written notice to the other party hereto. All notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. Any notice, request or other written communication sent by facsimile transmission shall be confirmed by certified or registered mail, return receipt requested, posted within one Business Day, or by personal delivery, whether by courier or otherwise, made within two Business Days after the date of such facsimile transmissions; provided that such confirmation mailing or delivery shall not affect the date of receipt, which will be the date that the facsimile successfully transmitted the notice, request or other communication.

 

(c)                                  Entire Agreement. This Agreement and the Plan, together with the Stockholders Agreement, and the other agreements referred to herein and therein and any schedules, exhibits and other documents referred to herein or therein, constitute the entire agreement and understanding among the parties hereto in respect of the subject matter hereof and thereof and supersede all prior and contemporaneous arrangements, agreements and understandings, both

 

 

oral and written, whether in term sheets, presentations or otherwise, among the parties hereto, or between any of them, with respect to the subject matter hereof and thereof.

 

(d)                                 Amendment; Waiver. No amendment or modification of any provision of this Agreement shall be effective unless signed in writing by or on behalf of the Company and the Grantee, except that the Company may amend or modify the Agreement without the Grantee’s consent in accordance with the provisions of the Plan or as otherwise set forth in this Agreement. The failure of the Company in any instance to exercise the Right of Repurchase shall not constitute a waiver of any other repurchase rights that may subsequently arise under the provisions of this Agreement or any other agreement between the Company and the Grantee. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature. Any amendment or modification of or to any provision of this Agreement, or any waiver of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

 

(e)                                  Assignment. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Grantee except pursuant to a Transfer in accordance with the provisions of this Agreement.

 

(f)                                   Successors and Assigns; No Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the Company and the Grantee and their respective heirs, successors, legal representatives and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the Company and the Grantee, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

(g)                                  Governing Law, Venue. This Agreement and any matters or disputes related to, in connection with, or arising under this Agreement shall be governed by the laws of the State of Delaware, without regard to the conflicts of laws rules of such state. Any legal action or proceeding with respect this Agreement shall be brought in the federal or state court sitting in the State of Delaware, and, by execution and delivery of this Agreement, each party hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of such courts. Each party irrevocably waives any objection which it may now or hereafter have to the laying of venue of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in this paragraph and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

 

(h)                                 Waiver of Jury Trial. The Grantee hereby irrevocably waives all right of trial by jury in any legal action or proceeding (including counterclaims) relating to or arising out of or in connection with this Agreement or any of the transactions or relationships hereby contemplated or otherwise in connection with the enforcement of any rights or obligations hereunder.

 

(i)                                     Interpretation. Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation apply:

 

 

Headings. The division of this Agreement into Sections and other subdivisions and the insertion of headings are for convenience of reference only and do not alter the meaning of, or affect the construction or interpretation of, this Agreement.

 

Section References. All references in this Agreement to any “Section” are to the corresponding Section of this Agreement.

 

Schedules/Exhibits. Any capitalized terms used in any Schedule or Exhibit to this Agreement but are not otherwise defined therein have the meanings set forth in this Agreement.

 

(j)                                    Severability. If any provision of this Agreement is invalid, illegal, or incapable of being enforced by any law, all other provisions of this Agreement remain in full force and effect so long as the economic and legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. If any provision of this Agreement is held to be invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

(k)                                 Counterparts. The parties may execute this Agreement in one or more counterparts, each of which constitutes an original copy of this Agreement and all of which, collectively constitute only one agreement. The signatures of all the parties need not appear on the same counterpart.

 

(l)                                     Grantee Undertaking. The Grantee agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to carry out or effect one or more of the obligations or restrictions imposed on either the Grantee or upon the SARs or any Settlement Shares pursuant to the provisions of this Agreement.

 

(m)                             Plan; Stockholders Agreement; Counsel. The Grantee acknowledges and understands that material definitions and provisions concerning the SARs or any Settlement Shares and the Grantee’s rights and obligations with respect thereto are set forth in the Plan and the Stockholders Agreement. The Grantee has had the opportunity to retain counsel, and has read carefully, and understands, the provisions of such documents.

 

SECTION 9.                         DEFINITIONS

 

(a)                                 “Affiliate” shall mean, with respect to any specified Person, (a) any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise); provided, however, that neither the Company nor any of its Subsidiaries shall be deemed an Affiliate of any of the Stockholders (and vice versa), and (b) if such specified Person is an

 

 

investment fund, any other investment fund the primary investment advisor to which is the primary investment advisor to such specified Person.

 

(b)                                 “Board” means the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

 

(c)                                  “Business Day” has the meaning ascribed to such term in the Stockholders Agreement.

 

(d)                                 “Call Period” shall mean from the Termination Date until:

 

(i)                                     if the Termination Event is a termination of the employment of the Grantee by the Company or any of its Subsidiaries without Cause, a resignation by the Grantee with Good Reason or a resignation by the Grantee without Good Reason, the later of (A) the date that is 60 days after such Termination Date and (B) the date that is 190 days after the Settlement Date,

 

(ii)                                  if the Termination Event is a termination of the employment of the Grantee by the Company or any of its Subsidiaries as a result of the death or Disability of the Grantee, the date that is the later of (i) 60 days after the Termination Date or the date which is 60 days after the Settlement Date, or

 

(iii)                               if the Termination Event is a termination of the employment of the Grantee by the Company or any of its Subsidiaries for Cause, or a resignation by the Grantee without Good Reason the date which is 60 days after the Settlement Date.

 

(e)                                  “Cause”: The Company shall have the right to terminate Grantee’s employment for Cause.  “Cause” shall mean:

 

(i)                                     Grantee’s failure or refusal to comply, on a timely basis, with any lawful direction or instruction of the Board;

 

(ii)                                  Grantee’s gross negligence or willful misconduct in the performance of his duties as an employee of the Company;

 

(iii)                               Grantee’s commission of fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or act of dishonesty against the Company;

 

(iv)                              conviction of Grantee of a felony or entry by Grantee of a plea of nolo contendre or a plea of guilty under an indictment to a felony; or

 

(v)                                 the habitual drug addiction or intoxication of Grantee.

 

(f)                                   “Change of Control” shall mean (a) any transaction or series of related transactions, whether or not the Company is a party thereto, in which, after giving effect to such transaction or transactions any “person” or “group” (as such terms are used in Section 13(d) of the Exchange Act other than a group of which the DCP Investor is a member, acquires, directly or indirectly, in excess of 50% of the Voting Securities, or (b) a sale, lease or other disposition of all or

 

 

substantially all of the assets of the Company and its Subsidiaries on a consolidated basis (including securities of the Company’s directly or indirectly owned Subsidiaries) to a Person that is not an Affiliate of the Company.

 

(g)                                  “Class A Common Stock” means the voting class A common stock of the Company, and any stock into which such Class A Common Stock may hereafter be converted, changed, reclassified or exchanged.

 

(h)                                 “Closing” or “Closing Date” shall mean May 1, 2006

 

(i)                                     “Committee” means the compensation committee of the Board of Directors of the Company.

 

(j)                                    “DCP Investor” means collectively, Diamond Castle Partners IV, L.P., Diamond Castle Partners IV-A, L.P. and Deal Leaders Fund, L.P or any of their Permitted Transferees.

 

(k)                                 “Disability”: Grantee’s employment may be terminated, if, as a result of Grantee’s incapacity due to physical or mental illness, Grantee is unable to perform his duties for 180 consecutive days and, within 30 days after a notice of termination, which notice of termination may not be given until the expiration of such consecutive 180 day period, is given to Grantee, Grantee has not returned to work.

 

(l)                                     “Fair Market Value” or “FMV’ with respect to a share of stock of the Company, shall mean, in the event that such shares are listed on an established U.S. exchange or through the NASDAQ National Market or any established over-the-counter trading system, the average of the closing prices of such Group Equity Securities on such exchange if listed or, if not so listed, the average bid and asked price of such shares reported on the NASDAQ National Market or any established over-the-counter trading system on which prices for such shares are quoted, in each case, for a period of twenty trading days prior to such date of determination, or (ii) if such shares are not publicly traded, a good faith determination by the Board through a reasonable application of a reasonable valuation method. Such determination shall be conclusive and binding on all persons.

 

(m)                             “FMV Calculation Date” means:

 

(i)                                     if the Termination Event is a termination by the Company or any of its Subsidiaries without Cause or a resignation by the Grantee with Good Reason:

 

(A)                               if the Settlement Date occurred 180 days or more before the Termination Date, the Termination Date, and

 

(B)                               if the Settlement Date occurred 179 days or less before the Termination Date or occurs after the Termination Date, then the Call Notice Date,

 

(ii)                                  if the Termination Event is as a result of the death or Disability of the Grantee, then the Termination Date; and

 

 

(iii)                               if the Termination Event is a termination by the Company or any of its Subsidiaries with Cause, or a resignation by the Grantee without Good Reason, then the Termination Date.

 

(n)                                 “Good Reason”: Grantee may resign for “Good Reason” within 30 days after Grantee has actual knowledge of the occurrence, without the written consent of Grantee, of one of the following events:

 

(i)                                     a reduction in Grantee’s base salary, or non-timely payment of base salary or earned annual bonus not cured by the Company within five business days;

 

(ii)                                  a material diminution in Grantee’s duties or responsibilities not cured by the Company within 20 days after written notice to the Company; or

 

(iii)                               a requirement by the Company that Grantee be based in an office that is located more than 20 miles from Grantee’s principal place of employment.

 

(o)                                 “Initial Base Value” means $36.00.

 

(p)                                 “Initial Public Offering” has the meaning ascribed to such term in the Stockholders Agreement.

 

(q)                                 “Joinder Agreement” means an agreement substantially in the form of Exhibit A of the Stockholders Agreement, pursuant to which the Grantee shall become a party to the Stockholders Agreement and subject to all of the rights, restrictions and obligations contained therein.

 

(r)                                    “Liquidity Event” shall mean (i) any transaction or series of related transactions resulting in or involving a Change of Control, or (ii) an Initial Public Offering.

 

(s)                                   “Permitted Transferee” has the meaning ascribed to such term in the Stockholders Agreement.

 

(t)                                    “Person” means an individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

(u)                                 “Right of Repurchase” means the Company’s right of repurchase described in Section 5 of this Agreement.

 

(v)                                 “Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(w)                               “Service” means service as an employee.

 

(x)                                 “Share(s)” means a share(s) of Class A Common Stock of the Company.

 

(y)                                 “Stockholders Agreement” means that certain Stockholders Agreement dated as of May 1, 2006 by and among the Company, the Grantee and the other parties thereto (as the same shall be amended, modified or supplemented from time to time).

 

 

(z)                                  “Subsidiary” means, with respect to the Company, any other Person in which the Company, directly or indirectly through one or more Affiliates or otherwise, beneficially owns at least 50% of either the ownership interest (determined by equity or economic interests) in, or the voting control of, such other Person.

 

(aa)                          “Transfer” has the meaning ascribed in such term in the Stockholders Agreement.

 

 

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

 

	
 
    	
CHECKSMART FINANCIAL HOLDINGS CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   H. Eugene Lockhart
    
	
 
    	
 
    	
Name:
    	
H.   Eugene Lockhart
    
	
 
    	
 
    	
Title:
    	
Chairman
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/ Chad M. Streff
    
	
 
    	
 
    	
Chad M. Streff
    

 

 

EXHIBIT A

 

Notice of Exercise

 

(To be signed only upon an exercise of the vested SAR)

 

To CheckSmart Financial Holdings Corp.:

 

The undersigned, the Holder of the Stock Appreciation Right, dated as of                                         , 200    , of CheckSmart Financial Holdings Corp. (the “SAR”), hereby irrevocably elects to exercise                                              SARs for:

 

                             shares of Class A Common Stock of CheckSmart Financial Holdings Corp., at a value of $                     per share; or

 

$                                in cash.

 

The undersigned represents that (i) it is entitled to exercise the number of SARs indicated, and (ii) if he is exercising the SARs to be settled in shares of Class A Common Stock of CheckSmart Financial Holdings Corp. (“Award Shares”), he is acquiring such Award Shares for his own account for investment and not with a view to or for sale in connection with any distribution thereof (subject, however, to any requirement of law that the disposition thereof shall at all times be within its control).

 

DATED:                                       , 20

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CHAD M. STREFF
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    

 

 

EXHIBIT B

 

Share Power

 

IRREVOCABLE STOCK POWERS

CHECKSMART FINANCIAL HOLDINGS CORP.

 

FOR VALUE RECEIVED, Chad M. Streff does hereby sell, assign and transfer unto                                                                           Shares of Class A Common Stock of CheckSmart Financial Holdings Corp., par value $0.01, represented by Certificate No.        herewith and does hereby irrevocably constitute and appoint                                              attorney to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: Chad M. Streff
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    

 

 

EXHIBIT C

 

Investment Representations and Warranties

 

The Grantee hereby represents and warrants to the Company that:

 

1.              The SARs and Settlement Shares (either or both, the “Securities”) received by him will be held by him for investment only for his own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof in violation of applicable U.S. federal or state or foreign securities laws. The Grantee has no current intention of selling, granting participation in or otherwise distributing the Securities in violation of applicable U.S. federal or state or foreign securities laws. The Grantee does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or entity, or to any third person or entity, with respect to any of the Securities, in each case, in violation of applicable U.S. federal or state or foreign securities laws.

 

2.              The Grantee understands that the issuance of the Securities has not been registered under the Securities Act or any applicable U.S. federal, state or foreign securities laws, and that the Securities are being issued in reliance on an exemption from registration, which exemption depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Grantee’s representations as expressed herein.

 

3.              The Grantee has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of his owning the Securities. The Grantee is a sophisticated investor, has relied upon independent investigations made by the Grantee and, to the extent believed by the Grantee to be appropriate, the Grantee’s representatives, including the Grantee’s own professional, tax and other advisors, and is making an independent decision to invest in the Securities. The Grantee has been furnished with such documents, materials and information that the Grantee deems necessary or appropriate for evaluating an investment in the Company, and the Grantee has read carefully such documents, materials and information and understands and has evaluated the types of risks involved with holding the Securities. The Grantee has not relied upon any representations or other information (whether oral or written) from the Company or its shareholders, directors, officers or affiliates, or from any other person or entity, in connection with his investment in the Securities. The Grantee acknowledges that the Company has not given any assurances with respect to the tax consequences of the ownership and disposition of the Securities.

 

4.              The Grantee has had, prior to his being granted the Securities, the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of the transactions contemplated by the Agreement and the Grantee’s holding of the Securities and to obtain additional information necessary to verify the accuracy of any information furnished to his or to which he had access. The Grantee confirms that he has satisfied himself with respect to any of the foregoing matters.

 

 

5.              The Grantee understands that no U.S. federal or state or foreign agency has passed upon the Securities or upon the Company, or upon the accuracy, validity or completeness of any documentation provided to the Grantee in connection with the transactions contemplated by the Agreement, nor has any such agency made any finding or determination as to holding the Securities.

 

6.              The Grantee understands that there are substantial restrictions on the transferability of the Securities and that on the date of the Agreement and for an indefinite period thereafter there will be no public market for the Securities and, accordingly, it may not be possible for the Grantee to liquidate his investment in case of emergency, if at all. In addition, the Grantee understands that the Agreement and Stockholders Agreement contain substantial restrictions on the transferability of the Securities and provide that, in the event that the conditions relating to the transfer of any Securities in such document has not been satisfied, the holder shall not transfer any such Securities, and unless otherwise specified the Company will not recognize the transfer of any such Securities on its books and records or issue any share certificates representing any such Securities, and any purported transfer not in accordance with the terms of the Agreement or the Stockholders Agreement shall be void. As such, Grantee understands that: a restrictive legend or legends in a form to be set forth in the Agreement and the Stockholders Agreement will be placed on the certificates representing the Securities; a notation will be made in the appropriate records of the Company indicating that each of the Securities are subject to restrictions on transfer and, if the Company should at some time in the future engage the services of a securities transfer agent, appropriate stop-transfer instructions will be issued to such transfer agent with respect to the Securities; and the Grantee will sell, transfer or otherwise dispose of the Securities only in a manner consistent with its representations set forth herein and then only in accordance with the Agreement and the Stockholders Agreement.

 

7.              The Grantee understands that (i) the Securities may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom, (ii) the Securities have not been registered under the Securities Act; (iii) the Securities must be held indefinitely and he must continue to bear the economic risk of holding the Securities unless such Securities are subsequently registered under the Securities Act or an exemption from such registration is available; (iv) the Grantee is prepared to bear the economic risk of holding the Securities for an indefinite period of time; (v) it is not anticipated that there will be any public market for the Securities; (vi) the Securities are characterized as “restricted securities” under the U.S. federal securities laws; and (vii) the Securities may not be sold, transferred or otherwise disposed of except in compliance with federal, state and local law.

 

8.              The Grantee understands that an investment in the Securities is not recommended for investors who have any need for a current return on this investment or who cannot bear the risk of losing their entire investment. In that regard, the Grantee understands that his holding the Securities involves a high degree of risk of loss. The Grantee acknowledges that: (i) he has adequate means of providing for his current needs and possible personal contingencies and has no need for liquidity in this investment; (ii) his commitment to investments which are not readily marketable is not disproportionate to his net worth; and 

 

 

(iii) his holding the Securities will not cause his overall financial commitments to become excessive.

 

9.              The Grantee is an “accredited investor,” as such term is defined in Rule 501 of the Securities Act.

 

 

SCHEDULE A

 

VESTING OF TIME SARS

 

Subject to the terms set forth in the Agreement and the Plan, the Time SARs vest as follows:

 

(a)                                 Vesting.  100% of the Time SARs shall vest upon the earlier of (i) December 31, 2009 or (ii) the consummation of a Liquidity Event.

 

(b)                                 No Appraisal Rights. To the extent the Time SARs vest on the consummation of a Liquidity Event, the Grantee shall not be entitled to any appraisal rights in connection with any such Liquidity Event.

 

Schedule A-1

 

SCHEDULE B

 

VESTING OF PERFORMANCE SARS

 

Subject to the terms set forth in the Agreement and in the Plan, the Performance SARs shall vest as follows:

 

(a)                                 Vesting.  The Performance SARs shall vest only upon the consummation of a Liquidity Event which results the DCP Investors receiving Aggregate Net Proceeds equal or greater to the DCP Investment (each as defined below).

 

(b)                                 No Appraisal Rights. The Grantee shall not be entitled to appraisal rights in connection with any such Liquidity Event.

 

For purposes of this Schedule B:

 

“Aggregate Net Proceeds” means

 

(i)                                     all cash proceeds actually received by the DCP Investors with respect to the sale or other disposition of shares of its Common Stock to third parties, net of any unreimbursed Sales Costs (as defined below), plus

 

(ii)                                  the Fair Market Value of any Marketable Securities actually received by the DCP Investors with respect to the sale or other disposition of shares of its Common Stock to third parties, as determined on the date of the consummation of such sale or other disposition, net of any unreimbursed Sales Costs, plus

 

(iii)                               all cash dividends or the fair market value of any property dividends (other than stock dividends) as determined by the Board in good faith actually received by the DCP Investors in respect of its Common Stock;

 

provided, however, that (a) Aggregate Net Proceeds shall not include any advisory, management, monitoring, transaction or other fees or any expense reimbursement received by the DCP Investors or any of their affiliates, and (b) any cash dividends received by the DCP Investors shall not be counted more than once in any calculation of Aggregate Net Proceeds.

 

“DCH Investment” means initially $82,906,798 (namely, the equity investment made by the DCP Investors to purchase Class A Common Stock of the Company at the Closing Date, in connection with the consummation of the transactions contemplated by the Merger Agreement), and shall be adjusted for any cash or other consideration contributed from the DCP Investor to the Company from and after the date hereof and prior to the Liquidity Event.

 

“Marketable Securities” means freely tradable equity securities of a company that are listed on an established U.S. securities exchange or through the NASDAQ National Market or any established over-the-counter trading system

 

Schedule B-1

 

“Sales Costs” means any costs or expenses (including legal or other advisor costs and expenses), fees (including investment banking fees), commissions or discounts payable directly by the DCP Investors or any of its affiliates in connection with, arising out of or relating to any sale or other disposition of its Common Stock (including in connection with the negotiation, preparation and execution of any transaction documentation with respect to such sale or other disposition).

 

Schedule B-2Exhibit 10.13

 

Acknowledgement of Receipt of

2012 Executive Compensation, Benefit and

Severance Program

and Release of Claims for Severance

under 2011 Employment Agreement

 

This general release is required as a condition for receiving the compensation, benefits and severance described in the 2012 Executive Compensation, Benefit and Severance Program attached hereto. By executing this general release (“General Release”), you have advised us that you hold no claims for severance arising under any Employment Agreement (“Severance Provision”) between you and Community Choice Financial Inc. (the “Company”), any of its subsidiaries, direct or indirect, or any of their predecessors, successors or assigns, affiliates, shareholders or members and each of their respective officers, directors, agents and employees (collectively, the “Releasees”), and by execution of this General Release you agree to waive and release any such claims.

 

You understand and agree that this General Release will extend to all claims, demands, liabilities and causes of action of every kind, nature and description whatsoever, whether known, unknown or suspected to exist, which you ever had or may now have against the Releasees arising from the Severance Provision.

 

Based on executing this General Release, it is further understood and agreed that you covenant not to sue to challenge the enforceability of this General Release or the Severance Provision.

 

We also hereby advise you of your right to consult with legal counsel prior to executing a copy of this General Release.

 

Finally, this is to expressly acknowledge: You understand that you are not waiving any claims or rights that may arise after the date on which you execute this General Release.

 

I hereby state that I have carefully read this General Release and that I am signing this General Release knowingly and voluntarily with the full intent of releasing the Releasees from those claims set forth herein.

 

	
 
    	
 
    	
 
    
	
Date
    	
 
    	
 
    

 

 

2012 Executive Compensation, Benefit and Severance Program

 

1.                                      Eligible Executives:  This Program covers the Chief Executive Officer, President, Chief Compliance/Technical Officer, General Counsel and Chief Financial Officer (each an “Executive”) of Community Choice Financial Inc. (“Company”) provided that each has signed a waiver of and a release of all claims arising from or related to the severance provisions of any employment agreements entered into by any of them prior to December 31, 2011.

 

2.                                      Duties:  Each Executive’s duties shall be determined by the Chief Executive Officer and shall be in accordance with those duties that are normal, customary and consistent with the Executive’s title. Each Executive shall be permitted, to the extent such activities do not interfere with the performance by Executive of his/her duties and responsibilities hereunder, to (a) manage Executive’s personal, financial and legal affairs, (b) serve on charitable boards or committees, and (c) engage in community service, charitable activities and professional educational programs.

 

3.                                      Base Salary:  Each Executive’s annual base salary (“Base Salary”) shall be determined by the Compensation Committee of Community Choice Financial Inc.’s Board of Directors (“Committee”) and reflected in the Committee’s minutes.

 

4.                                      Bonus:  Each Executive shall be eligible for bonus payments equal to the following percentage of his/her respective Base Salary, payable annually (“Bonus”), upon meeting the bonus requirements set forth below:

 

	
Chief Executive Officer:
    	
 
    	
100
    	
%
    
	
President:
    	
 
    	
61
    	
%
    
	
Chief Compliance/Technology Officer:
    	
 
    	
60
    	
%
    
	
Chief Financial Officer:
    	
 
    	
60
    	
%
    
	
General Counsel:
    	
 
    	
55
    	
%
    

 

Bonus Requirements:  Each Executive shall have established goals and objectives applicable to his/her areas of responsibility, which, in the case of the CEO, shall be documented by the Chairman of the Compensation Committee and in the case of all other Executives shall be documented by the CEO. Payment of the Executive’s Bonus shall be contingent on the Executive meeting these goals and objectives.

 

5.                                      Business & Professional Expenses.  Each Executive shall be reimbursed for all normal and customary business, professional, licensing and continuing education expenses upon the presentation of appropriate documentation of same.

 

6.                                      Benefit Plans and Perquisites.  Each Executive shall be entitled to participate in and be covered under all employee benefit plans or programs for which he/she is eligible and which he/she elects including, without limitation, 401(k), vacation and medical, dental and life insurance. In addition, Executive may receive such other and further perquisites as the Committee might approve in its discretion. Such approved perquisites include: participation under the Company’s Aircraft Use Policy; payment of certain personal training expenses; allowance of an election to be paid out for, to defer payment into a health savings account and/or to roll over to subsequent years accrued and unused vacation time beyond what is permitted in the Company’s employee handbook; an automobile allowance, and, in the case of the President, payment of certain life insurance premiums.

 

7.                                      Termination.  An Executive’s employment may be terminated upon the following events:

 

a.                                      Death.  Executive’s employment shall terminate upon his/her death.

 

b.                                      Disability.  If, as a result of Executive’s incapacity due to physical or mental illness, Executive is unable to perform his/her duties for 180 consecutive days and, within 30 days after a Notice of Termination (as defined below), which Notice of Termination may not be given until the 

 

 

expiration of such consecutive 180 day period, is given to Executive, Executive has not returned to work (“Disability”).

 

c.                                       Cause.  The Company shall have the right to terminate Executive’s employment for Cause. “Cause” shall mean:

 

i.                                          Executive’s material failure to meet the duties and responsibilities reasonably assigned to the Executive and Executive’s failure to cure such breach within 20 days following written notice from the Board or the CEO to Executive of such failure;

 

ii.                                       Executive’s failure or refusal to comply, on a timely basis, with any lawful direction or instruction of the Board or the CEO;

 

iii.                                    Executive’s gross negligence or willful misconduct in the performance of his/her duties as an employee of the Company;

 

iv.                                   Executive’s commission of fraud, embezzlement, misappropriation of funds, breach of fiduciary duty or act of dishonesty against the Company;

 

v.                                      Executive’s conviction of a felony or entry by Executive of a plea of nolo contendre or a plea of guilty under an indictment to a felony; or

 

vi.                                   Executive’s habitual drug addiction or intoxication.

 

d.                                      Without Cause.  The Company shall have the right to terminate Executive’s employment without Cause by providing Executive with a Notice of Termination.

 

e.                                       Good Reason.  Any Executive may resign for “Good Reason” within 30 days after Executive has actual knowledge of the occurrence, without the written consent of Executive, of one of the following events:

 

i.                                          a reduction in Executive’s Base Salary, or non-timely payment of Base Salary or Bonus or benefits or other breach by the Company of the provisions of this Program that is not cured by the Company within 20 days of Executive’s written notice to the Company of such breach; or

 

ii.                                       a material diminution in Executive’s duties or responsibilities not cured by the Company within 20 days after written notice to the Company. For the purposes of this section, a “material diminution in Executive’s duties or responsibilities” shall not include a realignment or reorganization of executive responsibilities as the result of Company growth or contraction or the growth or contraction of the Company’s management team, but shall include the removal or withdrawal of substantially all of the Executive’s duties or responsibilities.

 

8.                                      Termination Procedure.

 

a.                                      Notice of Termination.  Any termination of Executive’s employment by the Company or resignation by Executive (other than termination by reason of death) shall be communicated by written Notice of Termination by one party to the other in writing at Executive’s home address on file with the Company or at Company’s principal office, and addressed to the Committee or the CEO. “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Policy relied upon.

 

b.                                      Termination Date.  “Termination Date” shall mean (i) if Executive’s employment is terminated by his/her death, the date of her death, (ii) if Executive’s employment is terminated for Disability, 30 days after Notice of Termination, and (iii) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given (subject to any cure periods) or any later date (within 30 days after the giving of such notice) set forth in such Notice of Termination.

 

 

9.                                      Compensation on Termination.  Upon the termination of Executive’s employment and subject to Executive executing a full release and a covenant not to sue for the benefit of the Company and all of its subsidiaries, officers, and directors, the Company shall provide Executive with the payments and benefits set forth below. Executive acknowledges and agrees that the payments set forth in this Policy constitute liquidated damages for termination of his/her employment.

 

a.                                      Termination upon Executive’s Disability.  If Executive’s employment is terminated by reason of Disability, then:

 

i.                                          Company shall pay to Executive (A) any accrued, but unpaid, Base Salary and vacation pay through the Termination Date, payable in accordance with the usual payroll practices of the Company, (B) any portion of the Executive’s Bonus that is determined to have otherwise been earned with respect to the fiscal year in which the Termination Date occurs (the “Termination Year”), payable in accordance with the Company’s usual bonus payment schedule, and (C) continued Base Salary and Continued Benefits (as defined below) until the earlier of (i) six months following the Termination Date or (ii) the date on which Executive becomes entitled to long-term disability benefits under the applicable plan or program of the Company, payable, in the case of Base Salary, in accordance with the usual payroll policies of the Company.

 

ii.                                       “Continued Benefits” means reimbursement of any premiums for continued group medical, dental and vision coverage for the Executive and/or the Executive’s eligible dependents under Section 4980B of the Internal Revenue Code of 1986, as amended (“COBRA”), to the extent such amount exceeds the premium which Executive would have had to pay for coverage under such plan if he/she had remained an active employee. For the avoidance of doubt, any amounts reimbursed pursuant to this provision shall be treated as compensation.

 

b.                                      Termination upon Executive’s Death.  If Executive’s employment terminates due to Executive’s death, then:

 

i.                                          The Company shall pay to Executive’s beneficiary, (A) any accrued, but unpaid Base Salary and Bonus through the Termination Date, payable within 10 days of the Termination Date, and (B) any accrued but unpaid vacation pay through the Termination Date, payable within 30 days of the Termination Date.

 

ii.                                       The Company shall provide Executive’s spouse and dependents with Continued Benefits for 12 months.

 

c.                                       Termination by the Company without Cause or Resignation by Executive for Good Reason.  Subject to Executive’s execution, within 60 days of his or her termination of employment, and effectiveness of a general release of all claims (the “Release”) and the expiration of any applicable revocation period during such 60 day period without revocation of the Release and Executive’s execution, within 60 days of his or her termination of employment, of a Non-Competition Agreement effective for the period of time that Executive will receive the Severance Payments set forth herein in the event that Executive is terminated without Cause or resigns for Good Reason, the Company shall pay to Executive (A) any accrued, but unpaid, Base Salary and vacation pay through the Termination Date, payable as soon as practicable in accordance with the usual payroll practices of the Company, (B) any portion of the Executive’s Bonus that is determined to have otherwise been earned with respect to the Termination Year, payable in accordance with the Company’s usual bonus payment schedule, (C) Base Salary and Continued Benefits, in accordance with the Company’s usual payroll practices, as follows:

 

i.                                          For the Chief Executive Officer: two times his annual Base Salary payable over a two year period;

 

 

ii.                                       For the President: one and one-half times his annual Base Salary payable over a one and one-half year period; and

 

iii.                                    For the Chief Compliance/Technology Officer, Chief Financial Officer and General Counsel: one times Base Salary payable over a one year period.

 

d.                                      Termination by the Company without Cause or Resignation by the Executive for Good Reason Coupled with a Change in Control.

 

i.                                          A “Change in Control” for the purposes of this Policy shall mean: (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any person or entity that Person other than its current shareholders, their affiliates and/or the Company’s current management or (ii) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), in a single transaction or in a related series of transactions, by way of merger, amalgamation, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), directly or indirectly, of 50% or more of the total voting stock of the Company or any parent of the Company, unless same is incident to an initial public offering of the Company’s or any affiliate’s stock.

 

ii.                                       Subject to Executive’s execution, within 60 days of his or her termination of employment, and effectiveness of the Release and the expiration of any applicable revocation period during such 60 day period without revocation of the Release and his/her execution, within 60 days of his or her termination of employment, of a Non-Competition Agreement effective for the period of time that Executive will receive the Enhanced Severance Payments set forth herein, in the event that Executive is terminated without Cause within 180-days before or two-years after a Change in Control or if Executive resigns for Good Reason within 180-days before or two-years after a Change in Control, the Company shall pay to Executive (A) any accrued, but unpaid, Base Salary and vacation pay through the Termination Date, payable as soon as practicable in accordance with the usual payroll practices of the Company, (B) a pro rata payment of the Executive’s Bonus for the Termination Year, payable in accordance with the Company’s usual bonus payment schedule, (C) Base Salary and Continued Benefits, in accordance with the Company’s usual payroll practices, as follows:

 

1.                                      For the Chief Executive Officer: three times his annual Base Salary payable over a three year period;

 

2.                                      For the President: three times his annual Base Salary payable over a three year period; and

 

3.                                      For the Chief Compliance/Technology Officer, Chief Financial Officer and General Counsel: two times Base Salary payable over a two year period.

 

e.                                       Release and Non-Competition Agreement and Payment Timing.  The payments owed to an Executive under Section 9.c or 9.d will commence on the first payroll date following the date on which the Executive has executed an effective Release and Non-Compete Agreement and any revocation period has expired without Executive revoking the Release in accordance with Sections 9.c and 9.d; provided that if the 60-day period during which Executive must sign the Release and Non-Competition Agreement commences in one calendar year and ends in another, any payments owed to Executive pursuant to Section 9.c. or 9.d will commence in the second calendar year. If any payments are not made under Section 9.c or 9.d because the Release and Non-Compete Agreement have not been signed and any applicable revocation period has not expired or because of the delay required by the preceding sentence, the first 

 

 

payment of the amounts owed under Section 9.c or 9.d will include all amounts that would have been paid by the payroll date for that first payment if the payments had begun effective immediately following the Termination Date.

 

f.                                        Termination by the Company for Cause or upon Resignation without Good Reason by Executive.  If Executive’s employment is terminated by the Company for Cause or Executive resigns without Good Reason then the Company shall pay Executive his/her accrued, but unpaid Base Salary and any accrued but unpaid vacation pay, through the Termination Date, payable in accordance with the usual payroll policies of the Company as soon as practicable following the Termination Date.

 

10.                               Indemnification.  Executive shall be entitled to such indemnification under the terms of the Company’s Articles and/or Code of Regulations and such other liability insurance as the Company may purchase for its directors and officers from time-to-time.

 

11.                               Compliance with Section 409A.

 

a.                                      Any amounts payable under this Program and the Company’s exercise of authority or discretion hereunder are intended to either comply with or be exempt from the provisions of Section 409A of the Internal Revenue Code (“Section 409A”) so as not to subject Executive to the payment of the additional tax, interest and any tax penalty which may be imposed under Section 409A. Each payment under this Program is intended to be a “separate payment” and not of a series of payments for purposes of Section 409A. Notwithstanding the anything to the contrary, no particular tax result for Executive with respect to any income recognized by Executive in connection with this Program is guaranteed.

 

b.                                      Notwithstanding any provisions of this Program to the contrary, if an Executive is a “specified employee” (within the meaning of Section 409A and determined pursuant to policies adopted by the Company) at the time of Executive’s separation from service (within the meaning of Section 409A) and if any portion of the payments or benefits to be received by the Executive upon his or her separation from service would be considered deferred compensation under Section 409A, then, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A, amounts or benefits that would otherwise be payable or provided pursuant to this Program during the six-month period immediately following the Executive’s separation from service will instead be paid or made available on the earlier of (i) the first day of the seventh month following the date of the Executive’s separation from service and (ii) the Executive’s death.

 

c.                                       To the extent any reimbursement or in-kind benefit provided under the Program is nonqualified deferred compensation within the meaning of Section 409A (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; (ii) the reimbursement of an eligible expense must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

d.                                      A termination of employment (including a resignation) shall not be deemed to have occurred for purposes of any provision of this Program providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless such termination is also a “separation from service” (within the meaning of Section 409A).

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