Document:

fac-ex1011_6.htm

Exhibit 10.11

 

RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the ___ day of __________________, between First Acceptance Corporation, a Delaware corporation (the “Company”), and _________________ (the “Participant”).

W I T N E S S E T H

In consideration of the mutual promises and covenants made herein and the mutual benefits to be derived herefrom, the parties hereto agree as follows:

1.Grant and Vesting of Restricted Stock Units.

(a)Subject to the provisions of this Agreement and to the provisions of the Amended and Restated First Acceptance Corporation 2002 Long Term Incentive Plan (the “Plan”), the Company hereby grants to the Participant as of ______________ (the “Grant Date”), an Award under the Plan of ________________ Restricted Stock Units (the “Awarded Units”).  Each Awarded Unit shall be a notional share of Common Stock, with the value of each Awarded Unit being equal to the Fair Market Value of a share of Common Stock at any time.  All capitalized terms used herein, to the extent not defined, shall have the meaning set forth in the Plan.  

(b)Subject to the terms and conditions of this Agreement, one hundred percent (100%) of the Awarded Units shall vest and no longer be subject to any restriction (other than the restrictions set forth in Section 5 below) on the third anniversary of the Date of Grant (the “Restriction Period”), provided that the Participant is employed by (or, if the Participant is an Outside Director or Consultant, is providing services to) the Company or any of its Subsidiaries on such date.  

(c)Notwithstanding the foregoing, in the event of the Participant’s Termination of Service during the Restriction Period due to death or Total and Permanent Disability, Retirement or by the Company without Cause, a prorated portion of the Awarded Units granted hereunder shall immediately vest and no longer be subject to restriction, with such proration determined by multiplying the total number of the Awarded Units granted hereunder by a fraction, the numerator of which is the number of months during the Restriction Period that the Participant was employed, including the full vesting month in which the Participant’s death or Total and Permanent Disability, Retirement or Termination of Service without Cause occurs, and the denominator of which is thirty-six (36).  Except as provided in the preceding sentence, in the event of the Participant’s Termination of Service during the Restriction Period, all unvested Awarded Units shall be forfeited by the Participant for no consideration effective immediately upon such termination.  Upon forfeiture, all of the Participant’s rights with respect to the 

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forfeited Awarded Units shall cease and terminate, without any further obligation on the part of the Company.   Nothing in this Agreement or the Plan shall confer upon the Participant any right to continue in the employ of the Company or any of its Subsidiaries or interfere in any way with the right of the Company or any such Subsidiaries to terminate the Participant’s employment at any time.

(d)In the event of a Change in Control, to the extent not previously forfeited, the Awarded Units shall immediately vest in full and no longer be subject to restriction.

(e)Awarded Units which have become vested pursuant to the terms of this Section 1 are collectively referred to herein as “Vested RSUs.”  All other Awarded Units are collectively referred to herein as “Unvested RSUs.”

2.Issuance of Shares.  

The Company shall convert the Vested RSUs into the number of whole shares of Common Stock equal to the number of Vested RSUs, subject to the provisions of the Plan and this Agreement, including, without limitation, the forfeiture provisions of Section 1(c) and Section 5, and the clawback provisions of Section 16, and shall either electronically register such shares of Common Stock in the Participant’s name or issue certificates for the number of shares of Common Stock equal to the Vested RSUs in the Participant’s name, on the first of the following events:

(i)on the third anniversary of the Date of Grant;

(ii) within thirty (30) days following the Participant’s Termination of Service due to death, Total and Permanent Disability, Retirement or by the Company without Cause, provided, that if such thirty (30) day period begins in one taxable year and ends in a second taxable year, the Vested RSUs shall be converted into shares of Common Stock in the second taxable year; or 

 

(iii)on the effective date of a Change in Control (so long as such Change in Control qualifies as a permissible payment event pursuant to Section 409A(a)(2)(A)(v) of the Code and the regulations issued thereunder). 

 

The Company shall electronically register such shares, or issue certificates for the number of shares of Common Stock, equal to the Vested RSUs in the Participant’s name or in the name of such person or persons to whom the Participant’s rights under the Award passed by will or the applicable laws of descent and distribution.  From and after the date of registration or receipt of such shares of Common Stock, the Participant, or such person or persons to whom the Participant’s rights under the Award passed by will or the applicable laws of descent and distribution, as the case may be, shall have full rights of transfer or resale with respect to such shares of Common Stock, subject to Section 5 hereof and applicable state and federal regulations.

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3.Who May Receive Converted Vested RSUs.  

During the lifetime of the Participant, the shares of Common Stock received upon conversion of Vested RSUs may only be received by the Participant or the Participant’s legal representative.  If the Participant dies prior to the date his or her Vested RSUs are converted into shares of Common Stock as described in Section 2 above, the shares of Common Stock relating to such converted Vested RSUs may be received by any individual who is entitled to receive the property of the Participant pursuant to the applicable laws of descent and distribution.

4. Nontransferability of the Restricted Stock Units.

(a)     Subject to the provisions of the Plan and this Agreement, the Unvested RSUs shall not be transferable by the Participant by means of sale, assignment, exchange, encumbrance, pledge, or otherwise.

(b)     Intentionally Omitted.

 

5.Non-Solicitation. The Participant covenants and agrees that during his or her employment with the Company or its Subsidiaries and for a period of twelve (12) months subsequent to the Participant’s Termination of Service for any reason, whether involuntary or voluntary, the Participant shall not directly or indirectly, as an owner, stockholder, director, employee, partner, agent, broker, or consultant recruit, hire or attempt to recruit or hire other employees of the Company or its Subsidiaries, directly or by assisting other employees of the Company and its Subsidiaries, nor shall the Participant contact or communicate with any other employees of the Company or its Subsidiaries for the purpose of inducing other employees to terminate their employment with the Company or its Subsidiaries.  For purposes of this Section 5, “other employees” shall refer to employees who are still actively employed by or doing business with the Company or its Subsidiaries at the time of the attempted recruiting or hiring. Notwithstanding anything to the contrary contained herein, in the event the Participant fails to comply with the non-solicitation provisions set forth in this Section 5, or the non-solicitation provisions contained in any written agreement by and between the Participant and the Company or its Subsidiaries, then (i) the Awarded Units shall immediately cease to vest as of the date of such violation, and (ii) any Vested RSUs that had not been converted into shares of Common Stock prior to the date of such violation and any Unvested RSUs shall be immediately forfeited and this Agreement (other than the provisions of this Section 5) will be terminated on the date of such violation.

6.        Rights as a Stockholder.

The Participant will have no rights as a stockholder with respect to any shares of Common Stock covered by this Agreement until the electronic registration of, or the issuance of certificates for, such shares of Common Stock in the Participant’s name with respect to the Awarded Units.  The Awarded Units shall be subject to the terms and conditions of this Agreement regarding such shares of Common Stock.  No adjustment shall be made for dividends or other rights for which the record date is prior to the 

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registration of, or the issues of certificates for, such shares of Common Stock in the Participant’s name.

 

7. Adjustments.

 

Adjustments to the Awarded Units (or any of the shares of Common Stock covered by the Awarded Units), if any, shall be made in accordance with Article XI of the Plan.

8.Conditions for Issuance.  

The Committee may, in its discretion, require the Participant to represent to, and agree with, the Company in writing that such person is acquiring the shares of Common Stock without a view to the distribution thereof.  The certificates for such shares of Common Stock may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.  Notwithstanding any other provision of the Plan or this Agreement, the Company shall not be required to issue or deliver any certificate or certificates for shares of Common Stock under the Plan prior to fulfillment of all of the following conditions: (i) listing, or approval for listing upon notice of issuance, of such shares of Common Stock on the applicable exchange; (ii) any registration or other qualification of such shares  of Common Stock under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (iii) obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable. Notwithstanding any of the provisions hereof, the Participant hereby agrees that he or she will not acquire any shares of Common Stock, and that the Company will not be obligated to issue any shares of Common Stock to the Participant hereunder, if the issuance of such shares of Common Stock shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority.  Any determination in this connection by the Company shall be final, binding, and conclusive.  The obligations of the Company and the rights of the Participant are subject to all applicable laws, rules, and regulations.  

9. Taxes and Withholding.

No later than the date as of which an amount with respect to this Agreement first becomes includible in the gross income of the Participant or subject to withholding for federal, state, local, or foreign income or employment or other tax purposes, the Participant shall pay to the Company or the applicable Subsidiary, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local, or foreign taxes of any kind required by applicable law and regulations to be withheld with respect to such amount.  Unless the Participant has made separate 

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arrangements satisfactory to the Company, the Company may elect, but shall not be obligated, to withhold shares of Common Stock deliverable upon vesting of the Awarded Units having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes.  The obligations of the Company under this Agreement and the Plan shall be conditional on compliance by the Participant with this Section 9, and the Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise payable to the Participant.  The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with shares of Common Stock.  

10.Notices.

All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by facsimile, overnight courier, or registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Participant:  At the most recent address maintained by the 

Company in its personnel records.

If to the Company:First Acceptance Corporation

3813 Green Hills Village Drive 

Nashville, Tennessee 37215

Attention:Chief Financial Officer

 

or to such other address or facsimile number as any party shall have furnished to the other in writing in accordance with this Section 10.  Notice and communications shall be effective when actually received by the addressee.

11.Successors and Assigns.

The terms of this Agreement shall be binding upon the Participant and upon the Participant’s heirs, executors, administrators, personal representatives, transferees, and successors in interest, and upon the Company and its successors and assignees.  Notwithstanding anything to the contrary in this Agreement, neither this Agreement nor any rights granted herein shall be assignable by the Participant.

12.Laws Applicable to Construction.

The interpretation, performance, and enforcement of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws.  In addition to the terms and conditions set forth in this Agreement, this Award is subject to the terms and conditions of the Plan, as it may be amended from time to time, which are hereby incorporated by reference.  

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13.Severability.

The invalidity or enforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

14.Conflicts and Interpretation.

In the event of any conflict between this Agreement and the Plan, the Plan shall control.  In the event of any ambiguity in this Agreement, or any matters as to which this Agreement is silent, the Plan shall govern, including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan; (ii) prescribe, amend, and rescind rules and regulations relating to the Plan; and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan.  The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any question arising under this Agreement.  

15.Amendment.

This Agreement may be unilaterally amended or modified by the Committee at any time; provided that no amendment or modification shall cause a Performance Award to cease to qualify for the exemption under Section 162(m) of the Code or, without the Participant’s written consent, materially impair the rights of the Participant as provided by this Agreement, except such an amendment made to cause the terms of this Agreement or the Awarded Units granted hereunder to comply with applicable law (including tax law), applicable exchange listing standards, or accounting rules.  The waiver by either party of compliance with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

16.Clawback.

All Awarded Units granted pursuant to this Agreement shall be subject to any clawback, recoupment, or forfeiture provisions (i) required by law or regulation and applicable to the Company or its Subsidiaries as in effect from time to time or (ii) set forth in any policies adopted or maintained by the Company or any of its Subsidiaries as in effect from time to time.

 

17.Headings.

The headings of paragraphs herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Agreement.

18.Counterparts.

This Agreement may be executed in counterparts, which together shall constitute one and the same original.

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19.Entire Agreement.

This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter.  All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement.  Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan, and that any agreement, statement, or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.

20. Section 409A; Six Month Delay.  

 

The Awarded Units granted under this Agreement are intended to be exempt from Section 409A of the Code, and the provisions of this Agreement will be administered, interpreted, and construed accordingly.  Notwithstanding anything to the contrary contained herein, in the event any distribution made on account of the Participant’s Termination of Service as provided in Section 1 above is deemed to be subject to (and not otherwise exempt from) the requirements of Section 409A of the Code and the Participant is deemed a “specified employee” (within the meaning of Section 409A of the Code and the regulations issued thereunder), then the Participant shall not be entitled to any such distributions that are subject to Section 409A of the Code until the earliest of: (i) the first day of the seventh month following the Participant’s Termination of Service; (ii) the date of the Participant’s death; or (iii) such earlier date as complies with the requirements of Section 409A of the Code.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, as of the date first above written, the Company has caused this Agreement to be executed on its behalf by a duly authorized officer and the Participant has hereunto set the Participant’s hand.

FIRST ACCEPTANCE CORPORATION

By:

Name:

Title:

 

 

Agreed and acknowledged:

 

PARTICIPANT

 

 

___________________________

Name:

 

 

8fac-ex1012_7.htm

 

Exhibit 10.12

 

SECOND AMENDED AND RESTATED FIRST ACCEPTANCE CORPORATION

EMPLOYEE STOCK PURCHASE PLAN

 

Article I

INTRODUCTION

 

1.1Establishment of Plan.  First Acceptance Corporation, a Delaware corporation (the “Company”) with its principal offices located in Nashville, Tennessee, adopts the following employee stock purchase plan for its eligible employees.  This Plan shall be known as the Amended and Restated First Acceptance Corporation Employee Stock Purchase Plan.

 

1.2Purpose.  The purpose of this Plan is to provide an opportunity for eligible employees of the Employer to become shareholders in the Company.  It is believed that broad-based employee participation in the ownership of the business will help to achieve the unity of purpose conducive to the continued growth of the Employer and to the mutual benefit of its employees and shareholders.

 

1.3Qualification.  This Plan is intended to be an employee stock purchase plan which qualifies for favorable Federal income tax treatment under Section 423 of the Code and is intended to comply with the provisions thereof, including the requirement of Section 423(b)(5) of the Code that all Employees granted options to purchase Stock under the Plan have the same rights and privileges with respect to such options.

 

1.4Rule 16b-3 Compliance.  This Plan is intended to comply with Rule 16b-3 under the Securities Exchange Act of 1934, and should be interpreted in accordance therewith.

 

Article II

DEFINITIONS

 

As used herein, the following words and phrases shall have the meanings specified below:  

 

2.1Board of Directors.  The Board of Directors of the Company.

 

2.2Closing Market Price.  The closing price of the Stock as reported in the consolidated trading of the New York Stock Exchange or such market or exchange on which the Stock is then traded on the date specified; provided that if there should be any material alteration in the present system of reporting sales prices of such Stock, or if such Stock should no longer be listed on the New York Stock Exchange or any other market or exchange, the market value of the Stock as of a particular date shall be determined in such a method as shall be specified by the Plan Administrator.

 

2.3Code.  The Internal Revenue Code of 1986, as amended from time to time.

 

2.4Commencement Date.  The first day of each Option Period.  The first Commencement Date shall be February 1, 2005.  Thereafter, Option Periods shall begin on each July 1 and January 1.

 

2.5Contribution Account.  The account established on behalf of a Participant to which shall be credited the amount of the Participant’s contribution, pursuant to Article V.

 

2.6Effective Date.  February 1, 2005.

 

2.7Employee.  Any person employed by the Employer for a period of six (6) months.

 

2.8Employer.  The Company and any corporation (i) which is a Subsidiary of the Company, (ii) which is authorized by the Board of Directors to adopt this Plan with respect to its Employees, and (iii) which adopts this Plan.  The term “Employer” shall include any corporation into which an Employer may be merged or 

 

 

consolidated or to which all or substantially all of its assets may be transferred, provided that the surviving or transferee corporation would qualify as a subsidiary under Section 2.18 hereof and that such corporation does not affirmatively disavow this Plan.

 

2.9Exercise Date.  The last trading date of each Option Period on the New York Stock Exchange or such market or exchange on which the Stock is then traded.

 

2.10Exercise Price.  The price per share of the Stock to be charged to Participants at the Exercise Date, as determined in Section 6.3.

 

2.11Five-Percent Shareholder.  An Employee who owns five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary thereof.  In determining this five percent test, shares of stock which the Employee may purchase under outstanding options, as well as stock attributed to the Employee under Section 424(d) of the Code, shall be treated as stock owned by the Employee in the numerator, but shares of stock which may be issued under options shall not be counted in the total of outstanding shares in the denominator.

 

2.12Grant Date.  The first trading date of each Option Period on the New York Stock Exchange or such market or exchange on which the Stock is then traded.

 

2.13Option Period.  The first Option Period shall begin on February 1, 2005 and end on June 30, 2005.  Thereafter, Option Periods shall be successive six (6) month periods commencing on July 1 and ending on December 31 and commencing on January 1 and ending on June 30.

 

2.14Participant.  Any Employee of an Employer who has met the conditions for eligibility as provided in Article IV and who has elected to participate in the Plan.

 

2.15Plan.  Amended and Restated First Acceptance Corporation Employee Stock Purchase Plan.

 

2.16Plan Administrator.  The committee composed of one or more individuals to whom authority is delegated by the Board of Directors to administer the Plan.  The initial committee shall be the Compensation Committee of the Board of Directors.

 

2.17Stock.  Those shares of common stock of the Company which are reserved pursuant to Section 6.1 for issuance upon the exercise of options granted under this Plan.

 

2.18Subsidiary.  Any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the option, each of the corporations other than the last corporation in the chain owns stock possessing fifty percent (50%) or more of the combined voting power of all classes of stock in one of the other corporations in such chain.

 

Article III

SHAREHOLDER APPROVAL

 

3.1Shareholder Approval Required.  This Plan must be approved by the shareholders of the Company within the period beginning twelve (12) months before and ending twelve (12) months after its adoption by the Board of Directors.

 

3.2Shareholder Approval for Certain Amendments.  Without the approval of the shareholders of the Company, no amendment to this Plan shall increase the number of shares reserved under the Plan, other than as provided in Section 10.3.  Approval by shareholders must occur within one (1) year of such amendment or such amendment shall be void ab initio, comply with applicable provisions of the corporate charter and bylaws of the Company, and comply with Delaware law prescribing the method and degree of shareholder approval required for issuance of corporate stock or options.

 

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Article IV

ELIGIBILITY AND PARTICIPATION

 

4.1Conditions.  Each Employee shall become eligible to become a Participant on the Commencement Date next following the date on which he is employed by the Employer for a period of six (6) months.  No Employee who is a Five-Percent Shareholder shall be eligible to participate in the Plan.  Notwithstanding anything to the contrary contained herein, no individual who is not an Employee shall be granted an option to purchase Stock under the Plan.

 

4.2Application for Participation.  Each Employee who becomes eligible to participate shall be furnished a summary of the Plan and an enrollment form.  If such Employee elects to participate hereunder, he shall complete such form and file it with his Employer no later than fifteen (15) days prior to the next Commencement Date.  The completed enrollment form shall indicate the amount of Employee contributions authorized by the Employee. If no new enrollment form is filed by a Participant in advance of any Option Period after the initial Option Period, that Participant shall be deemed to have elected to continue to participate with the same contribution previously elected (subject to the limit of 15% of base pay).  If any Employee does not elect to participate in any given Option Period, he may elect to participate on any future Commencement Date so long as he continues to meet the eligibility requirements.

 

4.3Date of Participation.  All Employees who elect to participate shall be enrolled in the Plan commencing with the first pay date after the Commencement Date following their submission of the enrollment form.  Upon becoming a Participant, the Participant shall be bound by the terms of this Plan, including any amendments whenever made.  

 

4.4Acquisition or Creation of Subsidiary.  If the stock of a corporation is acquired by the Company or another Employer so that the acquired corporation becomes a Subsidiary, or if a Subsidiary is created, the Subsidiary in either case shall automatically become an Employer and its Employees shall become eligible to participate in the Plan on the first Commencement Date after the acquisition or creation of the Subsidiary, as the case may be.  Notwithstanding the foregoing, the Board of Directors may by appropriate resolutions (i) provide that the acquired or newly created Subsidiary shall not be a participating Employer, (ii) specify that the acquired or newly created Subsidiary will become a participating Employer on a Commencement Date other than the first Commencement Date after the acquisition or creation, or (iii) attach any condition whatsoever to eligibility of the employees of the acquired or newly created Subsidiary, except to the extent such condition would not comply with Section 423 of the Code.

 

Article V

CONTRIBUTION ACCOUNT

 

5.1Employee Contributions.  The enrollment form signed by each Participant shall authorize the Employer to deduct from the Participant’s compensation an after-tax amount during each payroll period not less than one percent (1%) nor more than an amount which is fifteen percent (15%) of the Participant’s base pay on the Commencement Date.  A Participant’s base pay shall be determined before subtracting any elective deferrals to a qualified plan under Section 401(k) of the Code, salary reduction contributions to a cafeteria plan under Section 125 of the Code or elective deferrals to a nonqualified deferred compensation plan.  The dollar amount deducted each payday shall be credited to the Participant’s Contribution Account.  Participant contributions will not be permitted to commence at any time during the Option Period other than on the Commencement Date.  Unless otherwise determined by the Plan Administrator with respect to an Option Period, no interest will accrue on any contributions or on the balance in a Participant’s Contribution Account.

 

5.2Modification of Contribution Rate.  No change shall be permitted in a Participant’s amount of withholding except upon a Commencement Date, and then only if the Participant files a new enrollment form with the Employer at least fifteen (15) days in advance of the Commencement Date designating the desired withholding rate.  Notwithstanding the foregoing, a Participant may notify the Employer at any time (except during the periods from June 21 through June 30 and December 22 through December 31) that he wishes to discontinue his contributions.  This notice shall be in writing and on such forms as provided by the Employer and shall become 

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effective as of a date provided on the form not more than fifteen (15) days following its receipt by the Employer.  The Participant shall become eligible to recommence contributions on the next Commencement Date.

 

5.3Withdrawal of Contributions.  A Participant may elect to withdraw the balance of his Contribution Account at any time during the Option Period prior to the Exercise Date (except during the periods from June 21 through June 30 and December 22 through December 31).  The option granted to a Participant shall be canceled upon his withdrawal of the balance in his Contribution Account.  This election to withdraw must be in writing on such forms as may be provided by the Employer.  If contributions are withdrawn in this manner, further contributions during that Option Period will be discontinued in the same manner as provided in Section 5.2, and the Participant shall become eligible to recommence contributions on the next Commencement Date.

 

5.4Limitations on Contributions.  During each Option Period, the total contributions by a Participant to his Contribution Account shall not exceed fifteen percent (15%) of the Participant’s base pay for the Option Period.  If a Participant’s total contributions should exceed this limit, the excess shall be returned to the Participant after the end of the Option Period, without interest.

 

Article VI

ISSUANCE AND EXERCISE OF OPTIONS

 

6.1Reserved Shares of Stock.  The Company shall reserve six hundred thousand (600,000) shares of Stock for issuance upon exercise of the options granted under this Plan.

 

6.2Issuance of Options.  On the Grant Date each Participant shall be deemed to receive an option to purchase Stock with the number of shares and Exercise Price determined as provided in this Article VI, subject to the maximum limits specified in Section 6.6(a).  All such options shall be automatically exercised on the following Exercise Date, except for options which are canceled when a Participant withdraws the balance of his Contribution Account or which are otherwise terminated under the provisions of this Plan.

 

6.3Determination of Exercise Price.  The Exercise Price of the options granted under this Plan for any Option Period shall be the lesser of:

 

(i)one hundred percent (100%) of the Closing Market Price of the Stock on the Exercise Date; or

 

(ii)one hundred percent (100%) of the Closing Market Price of the Stock on the Grant Date.

 

6.4Purchase of Stock.  On an Exercise Date, all options shall be automatically exercised, except that the options of a Participant who has terminated employment pursuant to Section 7.1 or who has withdrawn all his contributions shall expire.  The Contribution Account of each Participant shall be used to purchase the maximum number of shares of Stock, determined up to three decimal places, determined by dividing the Exercise Price into the balance of the Participant’s Contribution Account.

 

6.5Terms of Options.  Options granted under this Plan shall be subject to such amendment or modification as the Employer shall deem necessary to comply with any applicable law or regulation, including but not limited to Section 423 of the Code, and shall contain such other provisions as the Employer shall from time to time approve and deem necessary; provided, however, that any such provisions shall comply with Section 423 of the Code.

 

6.6Limitations on Options.  The options granted hereunder are subject to the following limitations:

 

(a)The maximum number of shares of Stock which may be purchased by any Participant on an Exercise Date shall be three thousand (3,000) shares.  This maximum number of shares shall be adjusted upon the occurrence of an event described in Section 10.3. 

 

(b)No Participant shall be permitted to accrue the right to purchase during any calendar year Stock under this Plan (or any other Plan of the Employer or a Subsidiary which is qualified under Section 423 of the Code) having a market value of greater than twenty-five thousand dollars ($25,000.00) (as 

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determined on the Grant Date for the Option Period during which each such share of Stock is purchased) as provided in Section 423(b)(8) of the Code.

 

(c)No option may be granted to a Participant if the Participant immediately after the option is granted would be a Five-Percent Shareholder.

 

(d)No Participant may assign, transfer or otherwise alienate any options granted to him under this Plan, otherwise than by will or the laws of descent and distribution, and such options must be exercised during the Participant’s lifetime only by him.

 

6.7Pro-Rata Reduction of Optioned Stock.  If the total number of shares of Stock to be purchased under option by all Participants on an Exercise Date exceeds the number of shares of Stock remaining authorized for issuance under Section 6.1, a pro-rata allocation of the shares of Stock available for issuance will be made among Participants in proportion to their respective Contribution Account balances on the Exercise Date, and any money remaining in the Contribution Accounts shall be returned to the Participants.

 

6.8State Securities Laws.  Notwithstanding anything to the contrary contained herein, the Company shall not be obligated to issue shares of Stock to any Participant if to do so would violate any State securities law applicable to the sale of Stock to such Participant.  In the event that the Company refrains from issuing shares of Stock to any Participant in reliance on this Section, the Company shall return to such Participant the amount in such Participant’s Contribution Account that would otherwise have been applied to the purchase of Stock.

 

Article VII

TERMINATION OF PARTICIPATION

 

7.1Termination of Employment.  Any Employee whose employment with the Employer is terminated during the Option Period prior to the Exercise Date for any reason except death, disability or retirement at or after age 65 shall cease being a Participant immediately.  The balance of that Participant’s Contribution Account shall be paid to such Participant as soon as practical after his termination.  The option granted to such Participant shall be null and void.

 

7.2Death.  If a Participant should die while employed by the Employer, no further contributions on behalf of the deceased Participant shall be made.  The legal representative of the deceased Participant may elect to withdraw the balance in said Participant’s Contribution Account by notifying the Employer in writing prior to the Exercise Date in the Option Period during which the Participant died (except during the periods from June 21 through June 30 and December 22 through December 31).  In the event no election to withdraw is made on or before the June 20 or December 21 preceding the Exercise Date, the balance accumulated in the deceased Participant’s Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.4.

 

7.3Retirement.  If a Participant should retire from the employment of the Employer at or after attaining age 65, no further contributions on behalf of the retired Participant shall be made.  The Participant may elect to withdraw the balance in his Contribution Account by notifying the Employer in writing prior to the Exercise Date in the Option Period during which the Participant retired (except during the periods from June 21 through June 30 and December 22 through December 31).  In the event no election to withdraw is made on or before the June 20 or December 21 preceding the Exercise Date, the balance accumulated in the retired Participant’s Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.4. 

 

7.4Disability.  If a Participant should terminate employment with the Employer on account of disability, as determined by reference to the definition of “disability” in the Employer’s long-term disability plan, no further contributions on behalf of the disabled Participant shall be made.  The Participant may elect to withdraw the balance in his Contribution Account by notifying the Employer in writing prior to the Exercise Date in the Option Period during which the Participant became disabled (except during the periods from June 21 through June 30 and December 22 through December 31).  In the event no election to withdraw is made on or before the June 20 or December 21 preceding the Exercise Date, the balance accumulated in the disabled Participant’s Contribution Account shall be used to purchase shares of Stock in accordance with Section 6.4.

 

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Article VIII

OWNERSHIP OF STOCK

 

8.1Stock Certificates.  As soon as practical after the Exercise Date, the Plan Administrator will, in its sole discretion, either credit a share account maintained for the benefit of each Participant or issue certificates to each Participant for the number of shares of Stock purchased under the Plan by such Participant during an Option Period.  Such determination by the Plan Administrator shall apply equally to all shares of Stock purchased during the Option Period.  Certificates may be issued, at the request of a Participant, in the name of the Participant, jointly in the name of the Participant and a member of the Participant’s family, to the Participant as custodian for the Participant’s child under the Gift to Minors Act, or to the legal representative of a deceased Participant.  No certificate shall be issued for fractional shares of Stock, and any such fractional share shall be converted into cash based upon the Closing Market Price on the date a certificate is issued to the Participant. 

 

8.2Premature Sale of Stock.  If a Participant (or former Participant) sells or otherwise disposes of any shares of Stock obtained under this Plan:

 

(i)prior to two (2) years after the Grant Date of the option under which such shares were obtained, or

 

(ii)prior to one (1) year after the Exercise Date on which such shares were obtained,

 

that Participant (or former Participant) must notify the Employer immediately in writing concerning such disposition.

 

8.3Restrictions on Sale.  The Plan Administrator may, in its sole discretion, place restrictions on the sale or transfer of shares of Stock purchased under the Plan during any Option Period by notice to all Participants of the nature of such restrictions given in advance of the Commencement Date of such Option Period.  The restrictions may prevent the sale, transfer or other disposition of any shares of Stock purchased during the Option Period for a period of up to two years from the Grant Date, subject to such exceptions as the Plan Administrator may determine (e.g., termination of employment with the Employer).  If certificates are issued pursuant to Section 8.1 for shares that are restricted, the certificates shall contain an appropriate legend disclosing the nature and duration of the restriction.  Any such restrictions and exceptions determined by the Plan Administrator shall be applicable equally to all shares of Stock purchased during the Option Period for which the restrictions are first applicable.  In addition, such restrictions and exceptions shall remain applicable during subsequent Option Periods unless otherwise determined by the Plan Administrator.  If the Plan Administrator should change or eliminate the restrictions for a subsequent Option Period, notice of such action shall be given to all Participants.

 

8.4Transfer of Ownership.  A Participant who purchases shares of Stock under this Plan shall be transferred at such time substantially all of the rights of ownership of such shares of Stock in accordance with the Treasury regulations promulgated under Section 423 of the Code as in effect on the Effective Date.  Such rights of ownership shall include the right to vote, the right to receive declared dividends, the right to share in the assets of the Employer in the event of liquidation, the right to inspect the Employer’s books and the right to pledge or sell such Stock subject to the restrictions in the Plan.

 

Article IX

ADMINISTRATION AND AMENDMENT

 

9.1Administration.  The Plan Administrator shall (i) administer the Plan, (ii) keep records of the Contribution Account balance of each Participant, (iii) keep records of the share account balance of each Participant, (iv) interpret the Plan, (v) determine all questions arising as to eligibility to participate, amount of contributions permitted, determination of the Exercise Price, and all other matters of administration, and (vi) determine whether to place restrictions on the sale and transfer of Stock and the nature of such restrictions, as provided in Section 8.3.  The Plan Administrator shall have such duties, powers and discretionary authority as may be necessary to discharge the foregoing duties, and may delegate any or all of the foregoing duties to any individual or individuals (including officers or other Employees who are Participants).  The Board of Directors shall have the right at any time and without notice to remove or replace any individual or committee of individuals serving as Plan Administrator.  All 

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determinations by the Plan Administrator shall be conclusive and binding on all persons.  Any rules, regulations, or procedures that may be necessary for the proper administration or functioning of this Plan that are not covered in this Plan document shall be promulgated and adopted by the Plan Administrator.

 

9.2Amendment.  The Board of Directors of the Employer may at any time amend the Plan in any respect, including termination of the Plan, without notice to Participants.  If the Plan is terminated, all options outstanding at the time of termination shall become null and void and the balance in each Participant’s Contribution Account shall be paid to that Participant.  Notwithstanding the foregoing, no amendment of the Plan as described in Section 3.2 shall become effective until and unless such amendment is approved by the shareholders of the Company.

 

Article X

MISCELLANEOUS

 

10.1Expenses.   The expenses of administering the Plan shall be paid by the Participants except as determined by the Plan Administrator in its sole discretion.

 

10.2No Contract of Employment.  Nothing in this Plan shall be construed to constitute a contract of employment between an Employer and any Employee or to be an inducement for the employment of any Employee.  Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of an Employer or to interfere with the right of an Employer to discharge any Employee at any time, with or without cause, regardless of the effect which such discharge may have upon him as a Participant of the Plan.

 

10.3Adjustment Upon Changes in Stock.  The aggregate number of shares of Stock reserved for purchase under the Plan as provided in Section 6.1, and the calculation of the Exercise Price as provided in Section 6.3, shall be adjusted by the Plan Administrator (subject to direction by the Board of Directors) in an equitable manner to reflect changes in the capitalization of the Company, including, but not limited to, such changes as result from merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, combination of shares, exchange of shares and change in corporate structure.  If any adjustment under this Section 10.3 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares available under the Plan and the number of shares covered under any options granted pursuant to the Plan shall be the next lower number of shares, rounding all fractions downward.

 

10.4Employer’s Rights.  The rights and powers of any Employer shall not be affected in any way by its participation in this Plan, including but not limited to the right or power of any Employer to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.

 

10.5Limit on Liability.  No liability whatever shall attach to or be incurred by any past, present or future shareholders, officers or directors, as such, of the Company or any Employer, under or by reason of any of the terms, conditions or agreements contained in this Plan or implied therefrom, and any and all liabilities of any and all rights and claims against the Company, an Employer, or any shareholder, officer or director as such, whether arising at common law or in equity or created by statute or constitution or otherwise, pertaining to this Plan, are hereby expressly waived and released by every Participant as a part of the consideration for any benefits under this Plan; provided, however, no waiver shall occur, solely by reason of this Section 10.5, of any right which is not susceptible to advance waiver under applicable law.

 

10.6Gender and Number.  For the purposes of the Plan, unless the contrary is clearly indicated, the use of the masculine gender shall include the feminine, and the singular number shall include the plural and vice versa.

 

10.7Governing Law.  The validity, construction, interpretation, administration and effect of this Plan, and any rules or regulations promulgated hereunder, including all rights or privileges of any Participants hereunder, shall be governed exclusively by and in accordance with the laws of the State of Delaware, except that the Plan shall 

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be construed to the maximum extent possible to comply with Section 423 of the Code and the Treasury regulations promulgated thereunder.

 

10.8Headings.  Any headings or subheadings in this Plan are inserted for convenience of reference only and are to be ignored in the construction of any provisions hereof.

 

10.9Severability.  If any provision of this Plan is held by a court to be unenforceable or is deemed invalid for any reason, then such provision shall be deemed inapplicable and omitted, but all other provisions of this Plan shall be deemed valid and enforceable to the full extent possible under applicable law.

 

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