Document:

NOVC 2015Q2 EX-10.2

NOVATION COMPANIES, INC.
RESTRICTED STOCK AWARD AGREEMENT
TO NON-EMPLOYEE DIRECTOR

This Restricted Stock Award Agreement (the “Agreement”) is by and between Novation Companies, Inc., a Maryland corporation (the “Corporation”), and [________] (“Director”), and is effective as of [________], 20[__].

WHEREAS, pursuant to Section 7.A. of the Novation Companies, Inc. 2015 Incentive Stock Plan (the “Plan”), the Compensation Committee of the Corporation’s Board of Directors (the “Committee”) has determined that the Director is to be granted a restricted stock award of shares of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), on the terms and conditions set forth herein, and the Committee hereby grants such award. Any capitalized terms not defined herein shall have the meaning set forth in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants and representations set forth herein, the Corporation and Director agree as follows:

1.Grant of Stock.  Subject to the terms and conditions of this Agreement and pursuant to the Plan, the Committee hereby grants to Director [________]shares of the Corporation’s Common Stock (the “Stock”) subject to vesting pursuant to Section 2 below.

2.    Vesting Restrictions; Acceleration.  The Stock shall be subject to vesting as set forth in this Section 2:

(a)    The Stock shall vest in its entirety on [________], 20[__].  Notwithstanding the preceding sentence, any non-vested Stock shall be immediately vested upon the death or Disability (interpreted as though the Director were covered under the Corporation’s disability program or policy) of Director while serving as a director of the Corporation.

(b)    The rights of Director upon a Change of Control of the Corporation shall be determined in accordance with Section 15 of the Plan.  Director expressly consents to such Section 15, to the definition of “Change of Control” in Section 2.G. of the Plan and the other terms and conditions of the Plan. 

3.    Responsibility for Tax Payments.  The Director shall be responsible for all income and other taxes incurred by the Director in connection with this award under this Agreement, including, without limitation, in connection with the issuance or vesting of Stock.

4.    Corporate Transactions.  In the event of changes in the outstanding Stock by reason of stock dividends, recapitalization, mergers, consolidations, split-ups, combinations or exchanges of shares and the like, the number of shares of non-vested Stock shall be adjusted accordingly to preserve the benefits or potential benefits of the awards in a manner consistent with the Plan.  In such event, any and all new, substituted or additional securities or other property to which Director is entitled by reason of his ownership of non-vested Stock shall be immediately subject to this Agreement and be subject to all restrictions as the Stock with the same force and effect under this Agreement.  Any and all such new, substituted, or additional securities or other property to which Director is entitled by reason of his ownership of the shares of Stock subject to this 

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Agreement shall become vested, released from all restrictions and otherwise released and paid to the Director on the date that the restrictions lapse with respect to the underlying Stock to which it relates.

5.    Restriction on Transfer.  Director shall not sell, transfer, pledge, hypothecate or otherwise dispose of any shares of the non-vested Stock.  Notwithstanding the foregoing, the Director may transfer all or any portion of the Stock to a trust or trusts for the exclusive benefit of the Director and his spouse, qualified domestic partner, children or grandchildren or any other persons related to the Director as may be approved by the Administrator.
    
The Corporation shall not be required (i) to transfer on its books any shares of Stock which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of such shares of Stock or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

6.    Legend.  All certificates representing any of the shares of Stock subject to the provisions of this Agreement shall have endorsed thereon the following legend:

“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions of the Novation Companies, Inc. 2015 Incentive Stock Plan and a Restricted Stock Award Agreement entered into and between the registered owner and Novation Companies, Inc. Copies of the plan and agreement are on file in the offices of Novation Companies, Inc.”

7.    Limitations on Disposition.  The Director shall in no event make any disposition of all or any portion of the Stock unless and until:

(a)    The shares of Stock proposed to be transferred are vested; and

(b)    If Director is, or is likely deemed to be, an affiliate of the Corporation, the disposition is made (i) pursuant to an effective registration statement filed and effective with the Securities and Exchange Commission (or successor agency), (ii)  pursuant to the applicable provisions of Rule 144 of the Securities Act of 1933, as amended (or successor statute or regulation) or (iii) in a manner that is otherwise exempt from such registration requirements in the opinion of counsel acceptable to the Corporation.

8.    Escrow.  As security for the faithful performance of the terms of this Agreement and to ensure the availability for delivery of the Director’s Stock free of legends upon lapse of the restrictions herein provided for, the Director agrees to deposit with the Secretary of the Corporation, or such other person designated by the Corporation, as escrow agent in this transaction (the “Escrow Agent”), the Stock, to be held by the Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the Corporation and the Director set forth in Exhibit A attached hereto and incorporated by this reference, which instructions shall also be delivered to the Escrow Agent at the closing hereunder.

9.    Miscellaneous.

(a)    Subject to the provisions and limitations hereof, Director may, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Corporation with respect to the Stock, including, but not limited to, voting and dividend rights.  In the event of a stock dividend, any and all new securities 

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to which Director is entitled by reason of his ownership of non-vested Stock shall be immediately subject to this Agreement and be subject to all restrictions as the Stock with the same force and effect under this Agreement.  Any and all such new securities to which Director is entitled by reason of his ownership of the shares of Stock subject to this Agreement shall become vested, released from all restrictions and otherwise released and paid to the Director on the date that the restrictions lapse with respect to the underlying Stock to which it relates.

(b)    The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

(c)    Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given and received (i) if delivered personally or actually received, as of the date received, (ii) if delivered by by registered or certified mail with postage and fees prepaid, two (2) business days after being mailed, or (iii) if delivered by a nationally recognized overnight delivery service, one (1) business day after being sent to such service, or (iv) if sent via facsimile, electronic mail or similar electronic transmission, as of the date received.  Any such notice shall be addressed to Director or Corporation and shall use the address, facsimile or electronic mail address set forth on the signature page of this Agreement or such other address as such party may designate by ten days’ advance written notice to the other party hereto.

(d)    The Corporation may assign its rights and delegate its duties under this Agreement. If any such assignment or delegation requires consent of any state securities authorities, the parties agree to cooperate in requesting such consent.  This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Corporation and, subject to the restrictions on transfer herein set forth, the Director’s heirs, legatees, executors and administrators.

(e)    Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Corporation and shareholders to terminate Director’s service, for any reason, with or without cause.

(f)    The failure of the Corporation to enforce at any time any provision on this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

(g)    This Agreement shall be governed by and construed according to the laws of the State of Maryland without regard to its principles of conflict of laws.

(h)    The Plan is hereby incorporated by reference and made a part hereof, and this Agreement is subject to all terms and conditions of the Plan.

(i)    This Agreement may be amended or modified at any time by an instrument in writing signed by the parties hereto.  
 
(j)    This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

[Remainder of page intentionally left blank; signature page follows.]

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

NOVATION COMPANIES, INC.

    
Rodney E. Schwatken, Chief Financial Officer

Notice Address:        

Novation Companies, Inc.
2114 Central Street, Suite 600
Kansas City, MO 64108
Attention: Secretary
Fax: [________________]
Email: [________________]
 

    
By: [________________]

Notice Address:     
[________________]
[________________]
[________________]
Fax: [________________]
Email: [________________]

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EXHIBIT A
JOINT ESCROW INSTRUCTIONS
[Date]
Rodney E. Schwatken
c/o Novation Companies, Inc.
2114 Central Street, Suite 600
Kansas City, MO 64108
Dear Sir:
As Escrow Agent for the undersigned parties, Novation Companies, Inc., a Maryland corporation (the “Corporation”), and [________________] (“Director”), you are hereby authorized and directed to hold the Stock deposited with you pursuant to the terms of that certain Restricted Stock Award Agreement (the “Agreement”) between the Corporation and the Director, to which a copy of these Joint Escrow Instructions is attached as Exhibit A, in accordance with the following instructions (capitalized terms used herein shall have the meanings set forth in the Agreement):
1.The Director irrevocably authorizes the Corporation to deposit with you the shares of Stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement.  The Director does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated.  Subject to the provisions of the Agreement, the Director shall have all rights and privileges of a shareholder of the Corporation while the Stock is held by you.
2.    Upon written request of the Director or the Director’s personal representative, the Corporation will confirm to you in writing the number of shares of Stock that are no longer subject to the vesting restrictions.  Promptly after your receipt of such confirmation, you will deliver to the Director or the Director’s personal representative such number of shares of Stock as are not then subject to the vesting restrictions and have not been previously delivered to the Director or the Director’s personal representative.  Such shares will be free of legends.
3.    If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to the Director, you shall deliver all of same to the Director and shall be discharged of all further obligations hereunder.
4.    Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
5.    You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties.  You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for the Director while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.  The Corporation shall indemnify and hold the Escrow Agent harmless against any and all liabilities, obligations, losses, damages, penalties, actions, 

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judgments, suits, costs, expenses, attorney fees or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against it or them hereunder and under the Agreement, except for any of the foregoing incurred in connection with, or arising out of, the Escrow Agent’s willful misfeasance, bad faith or negligence in the performance of its duties hereunder or by reason of its reckless disregard for its obligations and duties hereunder.
6.    You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and you are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court.  In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
7.    You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
8.    You shall not be liable for relinquishing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
9.    You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, and you may rely upon the advice of such counsel.  Such counsel’s reasonable compensation shall be paid by the Corporation.
10.    Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be Secretary of the Corporation or if you shall resign by written notice to each party.  In the event of any such termination, the Corporation shall appoint a successor Escrow Agent.
11.    You are authorized to employ as agents banks, brokerage firms or other financial institutions to hold in safekeeping any certificates, instruments or other documents delivered to you hereunder and to perform other services such as sale of securities, recordkeeping and other administrative services as you may deem appropriate.  Any or all of the shares of Stock being deposited with you may be held in book entry form at the Corporation’s custodian, properly marked to indicate your interest therein.  All fees and expenses of such agents shall be paid by the Corporation.  If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
12.    It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
13.    Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following 

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addresses, or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto.
CORPORATION:
Novation Companies, Inc.
2114 Central Street, Suite 600
Kansas City, MO 64108
Attention: Secretary
DIRECTOR:
[________________]
ESCROW AGENT:
Rodney E. Schwatken
c/o Novation Companies, Inc.
2114 Central Street, Suite 600
Kansas City, MO 64108
14.    By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
15.    Your duties under these Joint Escrow Instructions shall terminate upon the expiration of the vesting restrictions as to all shares of Stock covered thereby and the delivery of the certificates evidencing the Stock to the party entitled thereto.
16.    This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
Very truly yours,
NOVATION COMPANIES, INC.
By:        
Title:        
DIRECTOR:
    
[________________]
ESCROW AGENT:
    
Rodney E. Schwatken

A-3NOVC 2015Q2 EX-10.3

EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT
[Key Executive Form]

THIS EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”), dated as of the ____ day of _________, 20[__], is entered into by and between Novation Companies, Inc., a Maryland corporation (the “Company”) and [____________] (the “Optionee”).
    
WHEREAS, pursuant to the terms of the Company’s 2015 Incentive Stock Plan (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that the Optionee is to be granted an option to purchase a specified number of shares of the Company’s common stock on the terms and conditions set forth herein;

WHEREAS, the Optionee is now an employee of the Company or an “Employer”, as defined in the Plan (an “Employer”); and

WHEREAS, the Company and the Optionee desire to enter into this Agreement for the purpose of memorializing the terms and conditions of the option.

NOW, THEREFORE, the Company and the Optionee agree as follows:

1.    Grant Subject to Plan.  The Option (as defined below) is expressly subject to all terms and provisions of the Plan, and the terms and provisions of such Plan are incorporated herein by reference.  Capitalized terms not defined herein shall have the meaning ascribed thereto in the Plan.  

2.    Number of Shares and Option Price.  Pursuant to the action of the Committee, which action was effective on ____________, 20[__] (the “Date of Grant”), the Optionee is hereby granted a non-qualified stock option (the “Option”) to purchase [______ (______)] shares of the Company’s common stock (the “Option Shares”), at the purchase price of [______ ($____)] per share (the “Option Price”). The Option Price is equal to or greater than the price at which the Company’s common stock was last sold as quoted on the OTCQB (or applicable exchange or quotation system) on the Date of Grant.

3.    Period of Option.  The term of the Option and of this Agreement shall commence on the Date of Grant and terminate upon the expiration of ten (10) years from the Date of Grant. Upon termination of the Option, all rights of the Optionee hereunder shall cease.

4.    Conditions of Exercise.  This Option may be exercised, in whole or in part at any time, or from time to time, up to ten (10) years from the Date of Grant, but only (i) with respect to Option Shares which have vested, and (ii) during the period in which such Option remains exercisable as herein provided. One-quarter of the Option Shares shall vest on each anniversary of the Date of Grant.
5.    Nontransferability of Option.  Other than a transfer as described in Section 13 of the Plan or otherwise in the discretion of the Committee pursuant to Section 13 of the Plan, the Option and this Agreement shall not be transferable.

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6.    Exercise of Option.   The Option may be exercised using the methods described in Section 6.C. of the Plan and the Option Shares purchased shall thereupon be promptly delivered. The Optionee will not be deemed to be a holder of any Option Shares pursuant to exercise of the Option until the Option Shares are paid in full and issued to him or her upon the exercise of the Option.

7.    Adjustment for Changes in Capitalization.  As described in Section 15 of the Plan, in the event of changes in the outstanding stock of the Company by reason of stock dividends, recapitalization, mergers, consolidations, split-ups, combinations or exchanges of shares and the like, occurring after the date hereof, the number of shares covered by this Agreement and the price thereof shall be adjusted to the same proportionate number of shares and price as set forth in Section 2 of this Agreement.

8.    Termination by Death.  In accordance with Sections 6.G. and 11.B. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates by reason of the Optionee’s death, then the vesting of the Option shall be accelerated and the full number of then-unexercised Option Shares shall become exercisable in full by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of twelve (12) months following the date of death or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

9.    Termination by Reason of Disability.  In accordance with Sections 6.F. and 11.B. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates by reason of the Optionee’s Disability, as defined in Section [__] of the Employment Agreement entered into between the Company and the Optionee on [________], 20[__] (the “Employment Agreement”), then the vesting of the Option shall be accelerated and the full number of then-unexercised Option Shares shall become exercisable in full by the Optionee for a period of twelve (12) months following the date of termination or until the expiration of the stated term of such Option, whichever period is shorter; provided, however, that if the Optionee dies within such twelve (12) month period and prior to the expiration of the stated term of such Option, such Option may thereafter be exercised for a period of twelve (12) months from the date of death or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time periods, the Option shall terminate.

10.    Termination for Cause.  In accordance with Section 6.E. of the Plan, if the Optionee’s employment with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) is terminated by the Company for “Cause” as defined in Section [__] of the Employment Agreement, then the Option shall immediately terminate and cease to be exercisable by the Optionee.

11.    Termination for Good Reason.  In accordance with Section 6.E. of the Plan, if the Optionee’s employment with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) is terminated by him for 

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“Good Reason” as defined in Section [__] of the Employment Agreement, the Option may be exercised to the extent it has become exercisable by the Optionee at the time of such termination, for a period of three (3) years from the effective date of such termination of employment or until the expiration of the stated term of such Option, whichever period is shorter.  If the Option is not exercised within the foregoing time period, the Option shall terminate. Notwithstanding the foregoing, a termination of employment by Optionee for Good Reason shall not be considered as having occurred for purposes of this Agreement unless the Optionee provides written notice to the Company of the events or conditions constituting Good Reason, specifying that the Optionee believes such events or conditions constitute Good Reason, and (if such events or conditions can be remedied) the Company has been afforded a period of at least fifteen (15) days following delivery of such notice to remedy the events or conditions constituting Good Reason and has not done so to the reasonable satisfaction of the Optionee.

12.    Termination Without Cause.  In accordance with Section 6.E. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that the Optionee is no longer employed by either the Company or any Employer) is terminated by the Company without Cause, the Option may be exercised to the extent it has become exercisable at the time of such termination, for a period of three (3) years from the effective date of such termination of employment or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

13.    Retirement.  In accordance with Section 6.E. of the Plan, if the Optionee resigns from the Company (and/or any Employer, as the case may be, such that the Optionee is no longer employed by either the Company or any Employer) after reaching (i) the age of 65 following a term of employment with the Company or any Employer for a continuous period of 10 years or more or (ii) the age of 55 following a term of employment with the Company or any Employer for a continuous period of 20 years or more (“Retirement”), the then-unvested portion of the Option, if any, shall continue to vest in accordance with its terms without giving any effect to such Retirement.  Notwithstanding the foregoing, vesting of the Option after Retirement shall immediately cease (and the unvested portion of the Option shall be forfeited) if, after such Retirement, the Committee determines in good faith that the Optionee has breached any of his or her obligations to the Company or any Employer or otherwise taken any willful action that has had a significant adverse effect upon the Company or any Employer.  Upon Retirement, the Option may be exercised for a period of three (3) years (x) after the date of such Retirement, with respect to the amount of the Option vested upon such date or (y) after the date of vesting, with respect to the amount of the Option which is unvested at the time of Retirement but which becomes vested after Retirement, subject in both cases to the expiration of the stated term of such Option. If the Option is not exercised within the foregoing time period, the Option shall terminate.

14.    Change of Control.  The rights of the Optionee in the event of a Change of Control of the Company (as defined in Section 1.G. of the Plan) shall be determined in accordance with Section 15 of the Plan.  

15.    Other Termination.  In accordance with Section 6.E. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates for any reason other than those described in Sections 8 through 14 above, the Option may be exercised to the extent it has become 

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exercisable at the time of such termination, for a period of three (3) months from the date of such termination or until the expiration of the stated term of the Option, whichever period is shorter; provided, however, that if the Optionee dies within such three (3) month period and prior to the expiration of the stated term of such Option, such Option may thereafter be exercised to the extent it has become exercisable for a period of three (3) months from the date of death or until the expiration of the stated term of the Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

16.    Option Not an Incentive Stock Option.  It is intended that the Option shall not be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. 

17.    No Contract of Employment.  Nothing contained in this Agreement shall be considered or construed as creating a contract of employment for any specified period of time.  

18.    Failure to Enforce Not a Waiver.  The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

19.    Entire Agreement; Amendments.  No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referred hereto, and signed by the parties hereto.  This Agreement supersedes all prior agreements and understandings between the Optionee and the Company to the extent that any such agreements or understandings conflict with the terms hereof.

20.    Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri without regard to the principles of conflicts of law, which might otherwise apply.  

[signature page follows]

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

NOVATION COMPANIES, INC.

                                
Name:  W. Lance Anderson
Title:    Chief Executive Officer

    
OPTIONEE

                                
[________]

[SIGNATURE PAGE TO [____] STOCK OPTION AGREEMENT]

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