Document:

exhibit_10-1.htm

[HealthSouth letterhead]

 

 

 

	
                         November 30, 2010

	
Mr. Jay Grinney

	
c/o HealthSouth Corporation

	
3660 Grandview Parkway, Suite 200 

	
Birmingham, Alabama 35243

 

Dear Jay:

 

The Board of Directors (the “Board”) of HealthSouth Corporation (the “Company”) is delighted to have you continue your employment as President and Chief Executive Officer (“CEO”) of the Company. This letter (“Letter”) outlines certain of the terms and conditions of your continued employment with the Company.

1.           Position, Duties, and Term of Letter. Subject to the terms and conditions of this Letter, you have been and will be employed as the President and CEO of the Company, reporting directly to the Board. In your capacity as President and CEO, you have the overall charge and responsibility for the business and affairs of the Company, subject to the Board’s direction and the policies of the Company, and such other duties and responsibilities as are commensurate with such positions. During your employment, and excluding any periods of Paid Time Off (“PTO”) to which you are entitled, you agree to devote your full business attention and time to the business and affairs of the Company and to use your best efforts to perform faithfully and efficiently such responsibilities. Your services primarily will be performed at the Company’s headquarters in Birmingham, Alabama and from time to time, you may be required to travel to other locations in carrying out your responsibilities. This Letter will be in effect for three (3) years following the date of execution by you and will automatically be extended by consecutive periods of twelve (12) additional months each (the three year period plus any extension thereof being referred to herein as the “Term”), unless either party provides written notice to the other party no less than ninety (90) days prior to the date of any such scheduled extension of the party’s intention not to renew the terms of this Letter.

2.           Board Membership. You will also continue to be nominated to be a member of the Board, so long as you continue to be employed as the President and CEO of the Company. However, as a member of the Board, you will not participate in any deliberations or determinations regarding your own compensation.

 

  

  

  

3.           Compensation, Generally. Your base salary, annual incentive compensation and long-term incentive compensation (“Total Compensation”) will be determined by the Compensation Committee of the Board (the “Committee”) on an annual basis. The Committee intends, subject to its discretion, its review of your individual and Company performance and other market trends, to provide you during your employment  with the opportunity to receive  Total Compensation an amount generally comparable to the 65th percentile of amounts paid to CEOs of other publicly traded companies in the healthcare industry (“Peer Group Data”), which companies will be determined by the Committee in its sole discretion, for target performance. The Committee will establish, in its sole discretion, the performance and payment conditions applicable to your Total Compensation, and such performance and payment conditions for annual and/or long-term incentive compensation awards will be established no later than 90 days into the applicable performance period.

4.           Base Salary and Annual Bonus. Your base salary as President and CEO of the Company for the period beginning on January 1, 2011 and ending on December 31, 2011 will be at an annualized rate of $1,000,000.00. For future calendar years during your employment, your base salary may be increased, but not decreased. During your employment, you will continue to be a participant in the Company’s Senior Management Bonus Plan. Your target annual bonus for 2011 as President and CEO will be 100% (and your maximum bonus will be 200%) of your annualized rate of base salary as referenced above. For future calendar years during your employment, the Committee retains discretion to modify the applicable target bonus percentage in response to changes in Peer Group Data, no later than 90 days into the applicable performance period.

5.           Benefits, Etc. You will also be eligible to participate in all of the Company’s plans, programs and policies, and to receive all benefits generally available to senior executives of the Company. In addition, during your employment, you will be entitled, at the Company’s expense, to disability insurance coverage that provides for an annual long-term disability benefit equal to 60% of your base salary, subject to your eligibility for such coverage from a third-party at commercially reasonable rates.

6.           Long-Term Incentives.  Your  annual equity and other long-term incentive grants during your employment ( the “Awards”) will be determined by the Committee in its discretion and as described in Section 3 hereof, and will have such terms and conditions as are applicable to similarly situated executives in accordance with the terms and conditions the applicable plans and programs.

  

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7.           Restrictive Covenants. During your employment as President and CEO  (and for such extended periods after your employment ends, as applicable, under the Restrictive Covenant Agreement attached hereto as Annex B (the “Restrictive Covenant Agreement”)), you agree to be bound by the terms of the Restrictive Covenant Agreement, which is incorporated herein in its entirety.

8.           Termination, Severance, and Change in Control.

(a)                                                      If your employment relationship with HealthSouth ends during the Term, by either party and for any or no reason, all rights to compensation and benefits cease as of the last date of employment, except as expressly set forth in the HealthSouth Corporation Second Amended and Restated Executive Severance Plan (the “Executive Severance Plan”) and the HealthSouth Corporation Amended and Restated Change in Control Benefits Plan (the “Change in Control Benefits Plan”), each as in effect on the date hereof.

(b)           The parties agree that nothing in this Agreement (including the non-renewal thereof) shall limit the parties’ rights under the Executive Severance Plan (notwithstanding Section 3.01(d) of the Executive Severance Plan) or the Change in Control Benefits Plan. The parties agree that notwithstanding any amendments after the date of this Letter to either the Executive Severance Plan or the Change in Control Benefits Plan,  the rights, payments, and benefits provided under such plans,  each as in effect on the date hereof shall control.

(c)           Your entitlement to payments and benefits under the Executive Severance Plan, the Change in Control Benefits Plan and Section 8(d) below, shall be contingent upon your compliance with the provisions of the Restrictive Covenant Agreement.

(d)    If your employment terminates as a result of a termination by the Company without Cause, by your resigning with Good Reason, as such terms are defined in the Executive Severance Plan, or due to your death, you shall have continued exercisability of any outstanding portion of the stock option granted to you in 2004 to purchase 1,000,000 shares of the Company’s common stock, par value $0.01, (the “2004 Option”), for twelve (12) months following the date of termination (provided that such termination is prior to the expiration of the 2004 Option). Otherwise, the exercisability of all other outstanding Restricted Stock Awards and Options shall be governed by the terms of the Executive Severance Plan, and/or the applicable equity incentive plan(s), and/or the applicable agreements pursuant to which the Restricted Stock Award and Options are granted. 

 

9.           Resignation. Upon termination of your employment for any reason, you agree to resign, effective as of the date of your termination of employment, from any positions that you hold with the Company and its affiliates, the Board (and any committees thereof) and the board of directors (and any committees thereof) of any of the Company’s affiliates.

  

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10.           Indemnification. You will be entitled to indemnification in connection with a litigation or proceeding arising out of you acting as President and CEO or an employee, officer or director of the Company, to the fullest extent permitted under the Company’s charter and by-laws and by applicable law. In addition, you will be entitled to liability insurance coverage pursuant to a Company-purchased directors’ and officers’ liability insurance policy on the same basis as other directors and officers of the Company.

11.           Tax. The Company may withhold from any amounts payable under this Letter such Federal, state, local or foreign taxes as will be required to be withheld pursuant to any applicable law or regulation. This Letter is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). Unless otherwise provided herein or in any applicable plan, program or policy of the Company, payments to you under this Letter are intended to comply with the short-term deferral exemption from Section 409A and as such, will be made no later than March 15th of the calendar year following the calendar year in which you have a legally binding right to the payment. Further, reimbursements provided herein will be made no later than December 31st of the calendar year following the year in which the expense incurred, and in no event will the amount of in-kind benefits available in one taxable year affect the amount of in-kind benefits available in a different taxable year. In the event that any payments to you under this Letter (including pursuant to the Executive Severance Plan and the Change in Control Benefits Plan) are considered “non-qualified deferred compensation” under Section 409A, and of a type requiring payments six months after the date of your separation from service, to the extent required by Section 409A such payment will be delayed until six months and one day after the date of your separation from service (within the meaning of Section 409A); provided, however, that a payment delayed pursuant to this clause will commence earlier in the event of your death prior to the end of the six-month period.

12.           Other Matters.

(a)           In no event will you be entitled to duplicate payments or benefits under different provisions of this Letter or pursuant to the terms of any other plan, program or arrangement of the Company or its affiliates. In the event of any termination of your employment, you will be under no obligation to seek other employment, and, there will be no offset against amounts due to you under this Letter on account of any remuneration attributable to any subsequent employment, unless provided otherwise under the Company’s applicable plans.

  

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(b)           Except to the extent necessary to enforce the provisions of the Restrictive Covenant Agreement, any disputes under this Letter will be settled by arbitration in Birmingham, Alabama in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Subject to review of time entries and other documentation, the Company will pay reasonable legal fees incurred by you in connection with the negotiation and documentation of this Letter  up to a maximum of $15,000.

(c)           This Letter is personal to you and without the prior written consent of the Company will not be assignable by you. This Letter will inure to the benefit of and be enforceable by your legal representatives, heirs or legatees. This Letter will inure to the benefit of and be binding upon the Company and its successors and assigns.

 (d)           This Letter will be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. This Letter may not be amended or modified otherwise than by a written agreement executed by the Chairman of the Board of the Company and you or the respective successors and legal representatives of the Company and you.

(e)           The invalidity or unenforceability of any provision of this Letter will not affect the validity or enforceability of any other provision of this Letter. No waiver will be valid unless in writing signed by the party providing the waiver (that is, by you or an authorized officer of the Company, as the case may be). The Company’s or your failure to insist upon strict compliance with any provisions of, or to assert any right under, this Letter will not be deemed to be a waiver of such provision or right or of any other provision or right under this Letter.

(f)           This Letter and the applicable Company incentive, equity, welfare and benefit plans, programs and policies, including the Executive Severance Plan and the Change in Control Benefit Plan, contain the entire agreement between the parties concerning the subject matter hereof and supersede all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto (including, without limitation, the 2004 Employment Agreement and the Letter of Understanding between you and the Company dated October 31, 2007. In the event of any inconsistency between the provisions of this Letter and the provisions of any other agreement or plan, the provisions of this Letter will control. 

 

  

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Please confirm your acceptance of the foregoing by signing and returning a copy of this Letter to the undersigned no later than Friday, December 3, 2010. This Letter may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. This Letter will not be effective until you execute and deliver a copy of it to the Company.

 

	 	Yours sincerely,	 
	 	 	 
	 	HEALTHSOUTH Corporation	 
	 	 	 
	
 

	 /s/  JON F. HANSON	 
	 	 Jon F. Hanson	 
	 	 Chairman of the Board of Directors	 
	 	 	 	 
	 	 	 	 
	 Agreed and accepted:	 	 	 
	 	 	 	 
	 /s/ JAY GRINNEY	 	 	 	 
	 Jay Grinney	 	 	 
	 	 	 	 
	 	 	 	 
	 Date:  December 2, 2010	 	 	 

 

 

  

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ANNEX A

RESTRICTIVE COVENANT AGREEMENT

This Restrictive Covenant Agreement (“Agreement”) formalizes in writing certain understandings between HealthSouth Corporation and its current and future subsidiaries and affiliates (collectively, the “Company”) and you, Jay Grinney:

1.           Confidentiality. During your employment  and thereafter, other than in the ordinary course of performing your duties for the Company, you agree that you will not disclose to anyone or make use of any trade secret or proprietary or confidential information of the Company or any affiliate of the Company, including such trade secret or proprietary or confidential information of any customer or other entity to which the Company owes an obligation not to disclose such information, which you acquire during the course of your employment, including, but not limited to, records kept in the ordinary course of business, except when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent or actual jurisdiction to order you to divulge, disclose or make accessible such information. In the event you are requested to disclose information as contemplated in the preceding sentence, you agree, unless otherwise prohibited by law, to use your best efforts to give the Company’s General Counsel prompt written notice of any request for disclosure in advance of you making such disclosure in order to permit the Company a reasonable opportunity to challenge such disclosure. The foregoing will not apply to information that (i) was known to the public prior to its disclosure by you; or (ii) becomes known to the public through no wrongful disclosure or act of you or any of your representatives.

2.           Property Rights. Whether during your employment or thereafter, you agree to hereby assign and transfer to the Company all of your right, title and interest in and to all inventions, discoveries, improvements and copyrightable subject matter (the “Rights”) which during the period of your employment are made or conceived by you, alone or with others, and which are within or arise out of any general field of the Company’s business or arise out of any work you perform, or information you receive regarding the business of the Company, while employed by the Company. You will fully disclose to the Company as promptly as available all information known or possessed by you concerning any Rights, and upon request by the Company and without any further remuneration in any form to you by the Company, but at the expense of the Company, execute all applications for patents and for copyright registration, assignments thereof and other instruments and do all things which the Company may deem necessary to vest and maintain in it the entire right, title and interest in and to all such Rights. You agree that at the time of the termination of employment, whether at the instance of you 

 

  

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or the Company, and regardless of the reasons therefor, you will promptly deliver to the Company’s General Counsel, and not keep or deliver to anyone else, any and all of the following which is in your possession or control: (i) Company property (including, without limitation, credit cards, computers, communication devices, home office equipment and other Company tangible property) and (ii) notes, files, memoranda, papers and, in general, any and all physical matter and computer files containing confidential or proprietary information of the Company or any of its affiliates, including any and all documents relating to the conduct of the business of the Company or any of its affiliates and any and all documents containing confidential or proprietary information of the customers of the Company or any of its affiliates, except for (x) any documents for which the Company’s General Counsel has given written consent to removal at the time of termination of your employment and (y) any information necessary for you to retain for your tax purposes.

3.           Non-Competition. You acknowledge that in your capacity in management you have had or will have a great deal of exposure and access of the Company’s trade secrets and confidential and proprietary information. Therefore, during your employment and for 24 months following termination of such employment if you are terminated for Cause or resign without Good Reason (each, as defined in the HealthSouth Corporation Executive Severance Plan) or, for 12 months following termination of such employment as a result of a non-renewal of the Term by the Company or if you are terminated by the Company without Cause or due to Disability, or if you resign for Good Reason or due to a Change in Control (each, as defined in the HealthSouth Corporation Executive Severance Plan or HealthSouth Corporation Change in Control Benefits Plan, as applicable), to protect the Company’s trade secrets and other confidential and proprietary information, you agree that you will not, other than in the ordinary course of performing your duties hereunder or as agreed by the Company in writing, engage in a “Competitive Business,” directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any relationship or capacity, in any geographic location in which the Company or any of its affiliates is engaged in business. You will not be deemed to be in violation of this Section 3 by reason of the fact that you own or acquire, solely as an investment, 2% or less of the outstanding equity securities (measured by value) of any publicly traded company. “Competitive Business” will mean (x) your participation in any unsolicited offer to purchase the stock or assets of the Company or (y) any business that competes anywhere in the world where the Company conducts any business or activity with (I) any business or activity, conducted by the Company prior to or as of the date of termination of your employment or (II) any business or activity in which the Company is actively considering to engage prior to or as of the date of termination of your employment.

4.           Non-Interference. You acknowledge that information regarding the Company’s business and financial relations with its vendors and customers is confidential information and proprietary to the 

 

  

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Company and that any interference with such relations based directly or indirectly on the use of such information would cause irreparable damage to the Company. You acknowledge that by virtue of your employment with the Company, you have gained or may gain knowledge of such information concerning the Company’s vendors and customers (respectively “Vendor Information” or “Customer Information”), and that you would inevitably have to draw on this Vendor Information and Customer Information and on other confidential information if you were to solicit or service the Company’s vendors or customers on behalf of a competing business enterprise. Accordingly, and subject to the immediately following sentence, you agree that, other than in the ordinary course of performing your duties for the Company, during your employment and for the 36-month period following the termination of such employment (whether during the Term or thereafter)(the “Restricted Period”), you will not, on behalf of yourself or any other person or entity, directly or indirectly seek to encourage or induce any vendor or customer of the Company to cease doing business with, or lessen its business with, the Company, or otherwise interfere with or damage (or attempt to interfere with or damage) any of the Company’s relationships with its vendors and customers. No action by another person or entity in engaging in such encouragement or inducement as described in the preceding sentence will be deemed to be a breach of this provision by you unless you assisted, encouraged or otherwise counseled such person or entity to engage in such activity.

5.           Non-Solicitation. You agree that, during the Restricted Period (other than in the ordinary course of performing your duties for the Company), you will not, without the prior written consent of the Company, directly or indirectly, (i) hire any employee of the Company or any of its affiliates, who is then an employee of the Company or such affiliate or was an employee during the prior six-month period, or (ii) solicit or encourage any such employee to leave the employ of the Company or such affiliate, as the case may be. No action by another person or entity in engaging in such hiring, solicitation or encouragement as described in the preceding sentence will be deemed to be a breach of this provision by you unless you assisted, encouraged or otherwise counseled such person or entity to engage in such activity.

6.           Public Comment. You, during your employment and at all times thereafter, will not make any public derogatory comment concerning the Company or its affiliates or anyone whom you know to be a current or former director, officer, stockholder or employee of the Company. Further, you, during your employment and at all times thereafter, will not publish, produce, or write any book, article, screenplay, teleplay or similar type of publication (collectively “Publication”) relating to the Company or its affiliates or anyone whom you know to be a current or former director, stockholder or employee, without providing reasonable advance written notice to the Board, along with an advance copy of such Publication; and in such instance, you agree to cooperate with the Board to ensure that no confidential or 

 

  

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proprietary information is disclosed herein. Notwithstanding the foregoing, nothing in this Section 6 will prohibit you from responding publicly to incorrect, disparaging or derogatory public statements about the Company or you relating to your employment with the Company.

7.           Blue Penciling. If any restrictions on competitive or other activities contained in this Agreement will for any reason be held by a court of competent jurisdiction to be excessively broad as to duration, geographical scope, activity or subject, such restrictions will be construed so as thereafter to be limited or reduced to be enforceable to the extent compatible with the applicable law; it being understood that by the execution of this Agreement, (i) you and the Company regard such restrictions as reasonable and compatible with your and the Company’s respective rights and (ii) you acknowledge and agree that the restrictions will not prevent you from obtaining gainful employment subsequent to the termination of your employment.

8.           Injunctive Relief. You acknowledge and agree that the covenants and obligations of you set forth in this Agreement relate to special, unique and extraordinary services rendered by you to the Company and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, you agree that the Company will be entitled to seek an injunction, restraining order or other temporary or permanent equitable relief (without the requirement to post bond) restraining you from committing any violation of the covenants and obligations contained herein. These injunctive remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity. The existence of any claim or cause of action by you against the Company will not constitute a defense to the enforcement by the Company of the foregoing restrictive covenants, but such claim or cause of action will be determined separately.

9.           Survival. The provisions of this Agreement will remain in full force and effect until the expiration of the periods specified herein notwithstanding the earlier termination of your employment hereunder or the expiration or non-renewal of the Term. Your entitlement to payments and benefits under the Executive Severance Plan and Change in Control Benefits Plan is contingent upon your compliance with the provisions of the Restrictive Covenant Agreement.

 

  

10exhibit10_1.htm

Exhibit 10.1

P.A.M. TRANSPORTATION SERVICES,  INC.

NONSTATUTORY STOCK OPTION AGREEMENT

2006 STOCK OPTION PLAN

THIS NONSTATUTORY STOCK OPTION AGREEMENT (the “Option” or the “Agreement”) is made on _________________ (the “Effective Date”), by and between P.A.M. TRANSPORTATION SERVICES,  INC.,  a Delaware corporation (the “Company”), and _______________________ (the “Optionholder”).

The Company, pursuant to the terms of the P.A.M. Transportation Services, Inc. 2006 Stock Option Plan adopted by the Company’s Board of Directors on March 2, 2006 (the “Plan”), hereby grants an option of ________ shares of common stock of the Company (“Common Stock”) to the Optionholder at the price and in all respects subject to the terms, definitions and provisions of this Agreement.

1.      Option Price. The Option price for each share shall be the Market Price on _____________________, or ____________ per share of the Common Stock as determined by the Company.

2.      Exercise and Option.  This Option shall be exercisable at any time and from time to time pursuant to the performance and vesting schedules and in accordance with the terms of this Agreement as follows:

(a)        Performance Schedule.  Common Stock granted by this Option shall be earned in four quarterly installments and one annual installment based upon the Company’s operating ratio (“OR”) for each quarter in _______ and its annual OR for year-ended _______.  The OR shall be determined by generally accepted accounting principles and as disclosed to the public in its quarterly and annual earnings releases.  The dates that the shares shall become earned shall be the dates of the earnings releases (“Release Date”).  The Common Stock shall be earned each quarter and annually as shown in the following schedule:

	

OR

	

Quarterly Earned Common Stock

	

Annual Earned Common Stock

	  	  	  
	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

Any shares of Common Stock that are not earned in any given quarter or at year end shall be forfeited.  Earned shares of Common Stock shall be exercisable as described below.

(b)   Vesting Schedule. Shares of Common Stock shall vest and become exercisable in installments as indicated below:

	

Percentage of

shares vesting

	

Cumulative

percentage of shares vesting

	

Vesting Date

	  	  	  
	
[ ]%

	
[ ]%

	
1st anniversary of Release Date

	
[ ]%

	
[ ]%

	
2nd anniversary of Release Date

	
[ ]%

	
[ ]%

	
3rd anniversary of Release Date

	
[ ]%

[ ]%

	
[ ]%

[ ]%

	
4th anniversary of Release Date

5th anniversary of Release Date

(c)           Method of Exercise.  This Option shall be exercisable by a written notice, which shall:

(i)           state the election to exercise the Option, the number of shares in respect of which it is being exercised, the person in whose name the stock certificate or certificates for such shares of Common Stock is to be registered, his or her address and Social Security Number (or if more than one, the names, addresses and Social Security Numbers of such persons);

(ii)           contain such representations and agreements as to the holder’s investment intent with respect to such shares of Common Stock as may be satisfactory to the Company’s counsel;

(iii)           be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by any person or persons other than the Optionholder, be accompanied by proof, satisfactory to the Company’s counsel, of the right of such person or persons to exercise the Option.

(iv)           be accompanied by payment to the Company of the full Option price for the shares with respect to which the Option is exercised.  The option price shall be paid in the following manner:

(A)           full payment in cash or equivalent;

(B)           full payment in shares of Common Stock, which shall have been held for more than six (6) months, having a fair market value on the exercise date equal to the option price; or

 

(C)           any combination of subclauses “(A)” and “(B)”, equal to the aggregate of the option price.

 

(d)           Securities Exemption.  The Company shall not be required to issue or deliver any certificates for shares of Common Stock purchased upon the exercise of an option (i) prior to the completion of any registration or other qualification of such shares under any state or federal laws or rulings or regulations of any government regulatory body, which the Company shall determine to be necessary or advisable, or (ii) prior to receiving an opinion of counsel satisfactory to the Company that the sale or issuance of such shares is exempt from these registration or qualification requirements.

(e)           Restrictions on Exercise.  As a condition to the exercise of this Option, the Company may require the person exercising the Option to make any representation and warranty to the Company as may be required by any applicable law or regulation.

(f)           Termination, Death or Disability.

	
  

	
(i)

	
In the event the Continuous Service of the Optionholder shall be terminated by the Company without cause, shares of Common Stock that have been earned will immediately vest and may be exercised at any time within ninety (90) days after such termination of Continuous Service.

	
  

	
(ii)

	
In the event the Continuous Service of the Optionholder shall be terminated by the Company for cause, the vested and unexercised portion, the earned but unvested portion, and the unearned portion of this Option shall be forfeited immediately.

 

	
  

	
(iii)

	
In the event the Continuous Service of the Optionholder shall be terminated by the Employee for any reason other than death or Disability, the unvested and unearned portion of the Option shall be forfeited immediately.  The vested portion may be exercised on the ninetieth day after such termination of Continuous Service, if the Optionholder has not become employed by another company in the motor freight business in the United States, Canada, or Mexico, in which case all vested shares shall be forfeited.

 

	
  

	
(iv)

	
In the event the Continuous Service of the Optionholder shall be terminated due to Disability, the earned shares of Common Stock shall become immediately vested and may be exercised at any time within twelve (12) months after such Disability, but in no case later than the date on which the Option would otherwise terminate.

	
  

	
(v)

	
If the Optionholder shall die while employed by the Company, the earned shares of Common Stock shall immediately vest and may be exercised by the Optionholder’s estate, by the person who acquires the right to exercise such Option upon his or her death by bequest or inheritance, or by the person designated by the Optionholder to exercise the Option upon the Optionholder’s death.  Such exercise may occur at any time within twelve (12) months after the date of the Optionholder’s death or such other period as the Committee may at any time provide, but in no case later than the date on which the Option would otherwise terminate.

	
  

	
(vi)

	
This Option shall terminate the day before the 10th anniversary of the Effective Date, unless otherwise noted.

3.      Non Transferability of Option. This Option may not be assigned or transferred other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Optionholder only by him or her.

4.      Stock Subject to the Option.  In addition to the restrictions set forth above, the Company and the Optionholder agree that the Common Stock of the Company acquired pursuant to this Agreement shall not be sold or transferred for 180 days after issuance and shall be subject to the other restrictions set forth in the Plan and subject to the restriction as set out in Paragraph 5 of this Agreement.

5.      Right of First Refusal.  The Optionholder shall not sell or transfer the Common Stock of the Company acquired pursuant to this Agreement without first providing to the Company a notice of intent to sell (the “Notice”) at least five (5) days prior to the intended sale date.  After the Notice, the Company shall have until the close of business on the fourth business day after the Notice to agree to purchase the shares intended for sale.  If the Company exercises its right to purchase the shares, the purchase shall be on the fifth day after the Notice and the purchase price shall be the fair market value of the Common Stock on that day.  If the Company does not exercise its right, then the Optionholder shall have ten (10) business days thereafter to sell the shares.

6.      Adjustments Upon Changes in Capitalization.  The number of shares of Common Stock subject to this Agreement shall be proportionately adjusted for any change in the stock structure of the Company because of share dividends, recapitalization, reorganizations, mergers or other restructuring.

7.      Notices.  Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Optionholder at the address appearing in the personnel records of the Company for the Optionholder or to either part at such other address as either party hereto may hereafter designate in writing to the other.  Any such notice shall be deemed effective upon receipt thereof by the addressee.

8.      Sale or Merger.  The Option shall become immediately exercisable upon the sale or merger of the Company whereby the Company is not the surviving entity.  The Option shall be exercisable to the extent Optionholder was entitled to do so at the time of sale or merger.

9.      Benefits of Agreement.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and heirs of the respective parties.  All obligations imposed upon the Optionholder and all rights granted to the Company under this Agreement shall be binding upon Optionholder's heirs, legal representatives, and successors.  This Agreement shall be the sole and exclusive source of any and all rights which the Optionholder, his heirs, legal representatives or successors may have in respect to the Plan or any options or Common Stock granted or issued hereunder, whether to himself or to any other person.

10.    Plan Amendments. This Agreement shall be subject to the terms of the Plan as amended except that this Agreement may not in any way be restricted or limited by any Plan amendment or termination approved after the date of this Agreement without the Optionholder’s written consent.

11.  Terms. Any terms used in this Agreement that are not otherwise defined shall have the meanings ascribed to them in the Plan.

12.  Entire Agreement. This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing and duly signed by the parties.  No waiver by either party of any default under this Agreement shall be deemed a waiver of any later default.

[Signature page follows.]

  

  

  

IN WITNESS WHEREOF, the Company and the Optionholder have caused this Agreement to be executed as of the Effective Date.

COMPANY

PAM TRANSPORTATION SERVICES, INC.

By: __________________________________

 Name:  _______________

       Title:  ________________

OPTIONHOLDER

 

 

By:  __________________________________

                                                 [Name of Optionholder]

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