Document:

ex10-14.htm

Exhibit 10.14

 

 

 

 

 

GENTA INCORPORATED

 

2009 STOCK INCENTIVE PLAN

 

(As Amended and Restated September 8, 2011)

 

 

 

 

 

  

  

  

TABLE OF CONTENTS

 

Page

	
ARTICLE I

	
GENERAL

	
1

	
1.1

	
Purpose

	
1

	
1.2

	
Administration

	
1

	
1.3

	
Persons Eligible for Awards

	
2

	
1.4

	
Types of Awards Under Plan

	
2

	
1.5

	
Shares Available for Awards

	
2

	
1.6

	
Definitions of Certain Terms

	
3

	
ARTICLE II

	
AWARDS UNDER THE PLAN

	
5

	
2.1

	
Agreements Evidencing Awards

	
5

	
2.2

	
No Rights as a Shareholder

	
5

	
2.3

	
Grant of Stock Options, Stock Appreciation Rights and Reload Options

	
6

	
2.4

	
Exercise of Options and Stock Appreciation Rights

	
7

	
2.5

	
Termination of Employment; Death

	
8

	
2.6

	
Grant of Restricted Stock

	
9

	
2.7

	
Grant of Restricted Stock Units

	
10

	
2.8

	
Other Stock-Based Awards

	
10

	
2.9

	
Grant of Dividend Equivalent Rights

	
10

	
2.10

	
Right of Recapture

	
10

	
ARTICLE III

	
AUTOMATIC GRANT PROGRAM FOR NON-EMPLOYEE DIRECTORS

	
11

	
3.1

	
Automatic Grants

	
11

	
3.2

	
Annual Grants

	
11

	
3.3

	
Vesting of Awards

	
11

	
ARTICLE IV

	
MISCELLANEOUS

	
12

	
4.1

	
Amendment of the Plan; Modification of Awards

	
12

	
4.2

	
Tax Withholding

	
12

	
4.3

	
Restrictions

	
13

	
4.4

	
Nonassignability

	
13

	
4.5

	
Requirement of Notification of Election Under Section 83(b) of the Code

	
13

	
4.6

	
Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code

	
13

 

  

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TABLE OF CONTENTS

(continued)

Page

	
4.7

	
Change in Control, Dissolution, Liquidation, Merger

	
14

	
4.8

	
Right of Discharge Reserved

	
15

	
4.9

	
Nature of Payments

	
15

	
4.10

	
Non-Uniform Determinations

	
16

	
4.11

	
Other Payments or Awards

	
16

	
4.12

	
Section Headings

	
16

	
4.13

	
Effective Date and Term of Plan

	
16

	
4.14

	
Governing Law

	
16

  

-ii-

  

 

ARTICLE I

 

GENERAL

 

1.1           Purpose

 

The purpose of the Genta Incorporated 2009 Stock Incentive Plan (the “Plan”) is to provide for officers, other employees and directors of, and consultants to, Genta Incorporated (the “Company”) and its subsidiaries an incentive (a) to enter into and remain in the service of the Company, (b) to enhance the long-term performance of the Company, and (c) to acquire a proprietary interest in the success of the Company.

 

1.2           Administration

 

1.2.1           Subject to Section 1.2.6, the Plan shall be administered by the Compensation Committee (the “Committee”) of the board of directors of the Company (the “Board”), which shall consist of not less than two directors.  The members of the Committee shall be appointed by, and serve at the pleasure of, the Board.  To the extent required for transactions under the Plan to qualify for the exemptions available under Rule 16b-3 (“Rule 16b-3”) promulgated under the Securities Exchange Act of 1934 (the “1934 Act”), all actions relating to awards to persons subject to Section 16 of the 1934 Act shall be taken by the Board unless each person who serves on the Committee is a “non-employee director” within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of the Committee (or the Board) comprised solely of “non-employee directors”.  To the extent required for compensation realized from awards under the Plan to be deductible by the Company pursuant to section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations and rulings promulgated thereunder (collectively, the “Code”), the members of the Committee shall be “outside directors” within the meaning of such section 162(m).

 

1.2.2           The Committee shall have the authority (a) to exercise all of the powers granted to it under the Plan; (b) to construe, interpret and implement the Plan and any plan agreements executed pursuant to Section 2.1; (c) to prescribe, or amend and rescind rules and regulations relating to the Plan, including rules governing its own operations; (d) to make all determinations necessary or advisable in administering the Plan; (e) to correct any defect, supply any omission and reconcile any inconsistency in the Plan; (f) to amend the Plan to reflect changes in applicable law; (g) to determine whether, to what extent and under what circumstances awards may be settled or exercised in cash, Shares of Common Stock, other securities, other awards or other property, or canceled, forfeited or suspended and the method or methods by which awards may be settled, canceled, forfeited or suspended; (h) to determine whether, to what extent and under what circumstances cash, shares of Common Stock, other securities, other awards or other property and other amounts payable with respect to an award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (i) to determine whether, to what extent and under what circumstances the management of the day-to-day operations of the Plan and the functions of the Company with respect thereto, including, without limitation, processing of the exercise of options and holding and sales of option shares by grantees, shall be delegated to a registered broker-dealer or other qualified third party; and (j) to direct that a) a stop order may be placed in effect with respect to shares issued pursuant to the Plan and b) any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan.

 

  

  

  

 

1.2.3           Actions of the Committee shall be taken by the vote of a majority of its members.  Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken shall be fully as effective as if it had been taken by a vote at a meeting.

 

1.2.4           The determination of the Committee on all matters relating to the Plan or any plan agreement shall be final, binding and conclusive.

 

1.2.5           No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any award thereunder.

 

1.2.6           Notwithstanding anything to the contrary contained herein:  (a) until the Board shall appoint the members of the Committee, the Plan shall be administered by the Board; and (b) the Board may, in its sole discretion, at any time and from time to time, grant awards or resolve to administer the Plan.  In either of the foregoing events, the Board shall have all of the authority and responsibility granted to the Committee herein.

 

1.3           Persons Eligible for Awards

 

Awards under the Plan may be made to such directors (including directors who are not employees), officers and other employees of the Company and its subsidiaries (including prospective employees conditioned on their becoming employees), and to such consultants, advisers and other independent contractors of the Company and its subsidiaries (collectively, “key persons”), as the Committee shall select in its discretion.

 

1.4           Types of Awards Under Plan

 

Awards may be made under the Plan in the form of (a) incentive stock options (within the meaning of section 422 of the Code); (b) non-qualified stock options; (c) stock appreciation rights; (d) dividend equivalent rights; (e) restricted stock; (f) restricted stock units; and (g) other stock-based awards, all as more fully set forth in Article II.  The term “award” means any of the foregoing.  No incentive stock option (other than an incentive stock option that may be assumed or issued by the Company in connection with a transaction to which section 424(a) of the Code applies) may be granted to a person who is not an employee of the Company on the date of grant.

 

1.5           Shares Available for Awards

 

1.5.1           Total shares available.  The shares issuable under the Plan may be authorized but unissued shares of common stock of the Company, par value $0.001 per share (“Common Stock”),or authorized and issued Common Stock held in the Company’s treasury or acquired by the Company for the purposes of the Plan.  Subject to adjustment from time to time as provided in Section 1.5.3, the total number of shares of Common Stock reserved for issuance pursuant to awards granted under the Plan shall be __________.  Such reserve represents fifteen percent (15%) of the outstanding shares of Common Stock on May 3, 2011.   The share reserve under the Plan shall automatically be adjusted on each of November 1, 2011, April 1, 2012, August 1, 2012, November 1, 2012, April 1, 2013, August 1, 2013, November 1, 2013, April 1, 2014, August 1, 2014 and September 1, 2014 to be equal to fifteen percent (15%) of the outstanding shares of Common Stock as of each such date, respectively.  If, after the Plan Effective Date, any award is forfeited or any award otherwise terminates or is cancelled without the delivery of shares of Common Stock, then the shares covered by such award or to which such award relates shall again become available for transfer pursuant to awards granted or to be granted under this Plan.  Any shares of Common Stock delivered by the Company, any shares of Common Stock with respect to which awards are made by the Company and any shares of Common Stock with respect to which the Company becomes obligated to make awards, through the assumption of, or in substitution for, outstanding awards previously granted by an acquired entity, shall not be counted against the shares available for awards under this Plan.  The maximum number of shares of Common Stock for which incentive stock options may be granted over the term of the Plan shall be 54,738,066 (subject to adjustment from time to time as provided in Section 1.5.3).

 

  

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1.5.2           Individual Limit.  The total number of shares of Common Stock with respect to which stock options and stock appreciation rights may be granted to any one employee of the Company or a subsidiary during any one calendar year shall not exceed 28 million shares.

 

1.5.3           Adjustments.  Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding award, the number of shares available for awards, the number of shares that may be subject to awards to any one employee, the maximum number of shares for which incentive stock options may be granted,  the maximum number of shares subject to initial grants to non-employee Board members pursuant to Section 3.2.2, and the price per share of Common Stock covered by each such outstanding award shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive.  Except as expressly provided herein or in the applicable plan agreement, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an award.  After any adjustment made pursuant to this Section 1.5.3, the number of shares subject to each outstanding award shall be rounded to the nearest whole number.

 

1.5.4           Except as provided in this Section 1.5 and in Section 2.3.8, there shall be no limit on the number or the value of the shares of Common Stock that may be subject to awards to any individual under the Plan.

 

1.6           Definitions of Certain Terms

 

1.6.1           The “Fair Market Value” of a share of Common Stock on any day shall be determined as follows.

 

  

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(a)           If the principal market for the Common Stock (the “Market”) is a national securities exchange or the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) National Market or Small Cap Market, the last sale price or, if no reported sales take place on the applicable date, the average of the high bid and low asked price of Common Stock as reported for such Market on such date or, if no such quotation is made on such date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date;

 

(b)           If the Common Stock is actively traded but paragraph (a) does not apply, the average of the high bid and low asked price for Common Stock on the applicable date, or, if no such quotations shall have been made on such date, on the next preceding day on which there were quotations, provided that such quotations shall have been made within the ten (10) business days preceding the applicable date; or,

 

(c)           In the event that neither paragraph (a) nor (b) shall apply, the Fair Market Value of a share of Common Stock on any day shall be determined in good faith by the Committee.  Fair Market Value shall be determined in a manner that complies with requirements of Section 409A of the Code.

 

1.6.2           The term “incentive stock option” means an option that is intended to qualify for special federal income tax treatment pursuant to sections 421 and 422 of the Code, as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is so designated in the applicable plan agreement.  Any option that is not specifically designated as an incentive stock option shall under no circumstances be considered an incentive stock option.  Any option that is not an incentive stock option is referred to herein as a “nonqualified stock option.”

 

1.6.3           The term “employment” means, in the case of a grantee of an award under the Plan who is not an employee of the Company, the grantee’s association with the Company or a subsidiary as a director, consultant, adviser, other independent contractor or otherwise.

 

1.6.4           A grantee shall be deemed to have a “termination of employment” upon ceasing to be employed by the Company and all of its subsidiaries or by a corporation assuming awards in a transaction to which section 424(a) of the Code applies.  The Committee may in its discretion determine (a) whether any leave of absence constitutes a termination of employment for purposes of the Plan; (b) the impact, if any, of any such leave of absence on awards theretofore made under the Plan; and (c) when a change in a non-employee’s association with the Company constitutes a termination of employment for purposes of the Plan.  The Committee shall have the right to determine whether a grantee’s termination of employment is a dismissal for cause and the date of termination in such case, which date the Committee may retroactively deem to be the date of the action that is cause for dismissal.  Such determinations of the Committee shall be final, binding and conclusive.

 

  

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1.6.5           The term “cause,” when used in connection with termination of a grantee’s employment, shall have the meaning set forth in any then-effective employment agreement between the grantee and the Company or a subsidiary thereof.  In the absence of such an employment agreement provision, “cause” means:  (a) conviction of any crime (whether or not involving the Company or its subsidiaries) constituting a felony in the jurisdiction involved; (b) engaging in any act which, in each case, subjects, or if generally known would subject, the Company or its subsidiaries to public ridicule or embarrassment; (c) material violation of the Company’s or a subsidiary’s policies, including, without limitation, those relating to sexual harassment or the disclosure or misuse of confidential information; or (d) serious neglect or misconduct in the performance of the grantee’s duties for the Company or a subsidiary or willful or repeated failure or refusal to perform such duties; in each case as determined by the Committee, which determination shall be final, binding and conclusive.

 

1.6.6           The term “date of grant” of an award in this Plan means  the date on which the award is approved by the Committee, or such later date as may be specified by the Committee in authorizing such award.

 

ARTICLE II

 

AWARDS UNDER THE PLAN

 

2.1           Agreements Evidencing Awards

 

Each award granted under the Plan (except an award of unrestricted stock) shall be evidenced by a written agreement (“plan agreement”) which shall contain such provisions as the Committee in its discretion deems necessary or desirable.  Such provisions may include, without limitation, a requirement that the grantee acknowledge that such shares are acquired for investment purposes only.  The Committee may grant awards in tandem with or in substitution for any other award or awards granted under this Plan or any award granted under any other plan of the Company or any subsidiary.  Payments or transfers to be made by the Company or any subsidiary upon the grant, exercise or payment of an award may be made in such form as the Committee shall determine, including cash, shares of Common Stock, other securities, other awards or other property and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules established by the Committee.  By accepting an award pursuant to the Plan, a grantee thereby agrees that the award shall be subject to all of the terms and provisions of the Plan, the applicable plan agreement, and the determinations of the Committee.

 

2.2           No Rights as a Shareholder

 

No grantee of an option or stock appreciation right (or other person having the right to exercise such award) shall have any of the rights of a shareholder of the Company with respect to shares subject to such award until a) the issuance of a stock certificate to such person for such shares or b) the book-entry ownership is reflected for the nominee of such person who holds such shares in “street name.”  Except as otherwise provided in Section 1.5.3, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such shares are issued.

 

  

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2.3           Grant of Stock Options, Stock Appreciation Rights and Reload Options

 

2.3.1           The Committee may grant incentive stock options and nonqualified stock options (collectively, “options”) to purchase shares of Common Stock from the Company, to such key persons, in such amounts and subject to such terms and conditions, as the Committee shall determine in its discretion, subject to the provisions of the Plan.

 

2.3.2           The Committee may grant stock appreciation rights to such key persons, in such amounts and subject to such terms and conditions, as the Committee shall determine in its discretion, subject to the provisions of the Plan.  Stock appreciation rights may be granted in connection with all or any part of, or independently of, any option granted under the Plan.  A stock appreciation right granted in connection with a nonqualified stock option may be granted at or after the date of grant of such option.  A stock appreciation right granted in connection with an incentive stock option may be granted only at the date of grant of such option.

 

2.3.3           The grantee of a stock appreciation right shall have the right, subject to the terms of the Plan and the applicable plan agreement, to receive from the Company an amount equal to (a) the excess of the Fair Market Value of a share of Common Stock on the date of exercise of the stock appreciation right over (b) the exercise price of such right as set forth in the plan agreement (or over the option exercise price if the stock appreciation right is granted in connection with an option), multiplied by (c) the number of shares with respect to which the stock appreciation right is exercised.  Payment upon exercise of a stock appreciation right shall be in cash or in shares of Common Stock (valued at their Fair Market Value on the date of exercise of the stock appreciation right) or both, all as the Committee shall determine in its discretion.  Upon the exercise of a stock appreciation right granted in connection with an option, the number of shares subject to the option shall be correspondingly reduced by the number of shares with respect to which the stock appreciation right is exercised.  Upon the exercise of an option in connection with which a stock appreciation right has been granted, the number of shares subject to the stock appreciation right shall be correspondingly reduced by the number of shares with respect to which the option is exercised.

 

2.3.4           Each plan agreement with respect to an option shall set forth the amount (the “option exercise price”) payable by the grantee to the Company upon exercise of the option evidenced thereby.  The option exercise price per share shall be determined by the Committee in its discretion; provided, however, that the option exercise price of any  stock option shall be at least 100% of the Fair Market Value of a share of Common Stock on the date the option is granted (except as permitted in connection with the assumption or issuance of options in a transaction to which section 424(a) of the Code applies).

 

2.3.5           Each plan agreement with respect to an option or stock appreciation right shall set forth the periods during which the award evidenced thereby shall be exercisable, whether in whole or in part.  Such periods shall be determined by the Committee in its discretion; provided, however, that no stock option (or a stock appreciation right granted in connection with an incentive stock option) shall be exercisable more than 10 years after the date of grant.

 

  

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2.3.6           The Committee may in its discretion include in any plan agreement with respect to an option (the “original option”) a provision that an additional option (the “additional option”) shall be granted to any grantee who, pursuant to Section 2.4.3(b), delivers shares of Common Stock in partial or full payment of the exercise price of the original option.  The additional option shall be for a number of shares of Common Stock equal to the number thus delivered, shall have an exercise price equal to the Fair Market Value of a share of Common Stock on the date of exercise of the original option, and shall have an expiration date no later than the expiration date of the original option.  In the event that a plan agreement provides for the grant of an additional option, such agreement shall also provide that the exercise price of the original option be no less than the Fair Market Value of a share of Common Stock on its date of grant, and that any shares that are delivered pursuant to Section 2.4.3(b) in payment of such exercise price shall have been held for at least six months.

 

2.3.7           To the extent that the aggregate Fair Market Value (determined as of the date of grant of the option) of the stock with respect to which incentive stock options granted under this Plan and all other plans of the Company and any subsidiary are first exercisable by any employee during any calendar year shall exceed the maximum limit (currently, $100,000), if any, imposed from time to time under section 422 of the Code, such options shall be treated as nonqualified stock options.

 

2.3.8           Notwithstanding the provisions of Sections 2.3.4 and 2.3.5, to the extent required under section 422 of the Code, an incentive stock option may not be granted under the Plan to an individual who, at the date of grant of  the option, owns stock possessing more than 10% of the total combined voting power of all classes of stock of his employer corporation or of its parent or subsidiary corporations (as such ownership may be determined for purposes of section 422(b)(6) of the Code) unless (a) at the date of grant of  such incentive stock option, the option exercise price is at least 110% of the Fair Market Value of the shares subject thereto and (b) the incentive stock option by its terms is not exercisable after the expiration of five (5) years from the date of grant.

 

2.4           Exercise of Options and Stock Appreciation Rights

 

Subject to the provisions of this Article II, each option or stock appreciation right granted under the Plan shall be exercisable as follows:

 

2.4.1           Unless the applicable plan agreement otherwise provides, an option or stock appreciation right shall become exercisable in four substantially equal installments, on each of the first, second, third and fourth anniversaries of the date of grant, and each installment, once it becomes exercisable, shall remain exercisable until expiration, cancellation or termination of the award.

 

2.4.2           Unless the applicable plan agreement otherwise provides, an option or stock appreciation right may be exercised from time to time as to all or part of the shares as to which such award is then exercisable (but, in any event, only for whole shares).  A stock appreciation right granted in connection with an option may be exercised at any time when, and to the same extent that, the related option may be exercised.  An option or stock appreciation right shall be exercised by the filing of a written notice with the Company, on such form and in such manner as the Committee shall prescribe.

 

  

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2.4.3           Any written notice of exercise of an option shall be accompanied by payment for the shares being purchased or such other document that the Committee may prescribe.  Such payment shall be made:  (a) by certified or official bank check (or the equivalent thereof acceptable to the Company) for the full option exercise price; or (b) unless the applicable plan agreement provides otherwise, by delivery of shares of Common Stock held for the requisite period necessary to avoid a charge to the Company’s earnings for financial accounting purposes  and having a Fair Market Value (determined as of the exercise date) equal to all or part of the option exercise price and a certified or official bank check (or the equivalent thereof acceptable to the Company) for any remaining portion of the full option exercise price; or (c) at the discretion of the Committee and to the extent permitted by law, by such other method as the Committee may from time to time prescribe.

 

2.4.4           Promptly after receiving payment of the full option exercise price, or after receiving notice of the exercise of a stock appreciation right for which payment will be made partly or entirely in shares, the Company shall, subject to the provisions of Section 3.3 (relating to certain restrictions), provide for the issuance of the shares of Common Stock for which the award has been exercised.  If the method of payment employed upon option exercise so requires, and if applicable law permits, an optionee may direct the Company to deliver the certificate(s) to the optionee’s stockbroker.

 

2.5           Termination of Employment; Death

 

2.5.1           Except to the extent otherwise provided in Section 2.5.2 or 2.5.3 or in the applicable plan agreement, all options and stock appreciation rights not theretofore exercised shall terminate upon termination of the grantee’s employment for any reason (including death).

 

2.5.2           Except to the extent otherwise provided in the applicable plan agreement, if a grantee’s employment terminates for any reason other than death or dismissal for cause, the grantee may exercise any outstanding option or stock appreciation right on the following terms and conditions:  (a) exercise may be made only to the extent that the grantee was entitled to exercise the award on the date of employment termination; and (b) exercise must occur within three (3) months  after employment terminates, except that this three month period shall be increased to one year if the termination is by reason of disability, but in no event after the expiration date of the award as set forth in the plan agreement.  The term “disability” for purposes of the preceding sentence shall have the meaning given to it by section 422(c)(6) of the Code.

 

2.5.3           Except to the extent otherwise provided in the applicable plan agreement, if a grantee dies while employed by the Company or any subsidiary, or after employment termination but during the period in which the grantee’s awards are exercisable pursuant to Section 2.5.2, any outstanding option or stock appreciation right shall be exercisable on the following terms and conditions:  (a) exercise may be made only to the extent that the grantee was entitled to exercise the award on the date of death; and (b) exercise must occur by the earlier of the first anniversary of the grantee’s death or the expiration date of the award.  Any such exercise of an award following a grantee’s death shall be made only by the grantee’s executor or administrator, unless the grantee’s will specifically disposes of such award, in which case such exercise shall be made only by the recipient of such specific disposition.  If a grantee’s personal representative or the recipient of a specific disposition under the grantee’s will shall be entitled to exercise any award pursuant to the preceding sentence, such representative or recipient shall be bound by all the terms and conditions of the Plan and the applicable plan agreement which would have applied to the grantee.

 

  

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2.6           Grant of Restricted Stock

 

2.6.1           The Committee may grant restricted shares of Common Stock to such key persons, in such amounts, and subject to such terms and conditions as the Committee shall determine in its discretion, subject to the provisions of the Plan.  Restricted stock awards may be made independently of or in connection with any other award under the Plan.  A grantee of a restricted stock award shall have no rights with respect to such award unless such grantee accepts the award within such period as the Committee shall specify by executing a plan agreement in such form as the Committee shall determine and, if the Committee shall so require, makes payment to the Company by certified or official bank check (or the equivalent thereof acceptable to the Company) in such amount as the Committee may determine.

 

2.6.2           Promptly after a grantee accepts a restricted stock award, the Company shall issue in the grantee’s name a certificate or certificates for the shares of Common Stock covered by the award.  Upon the issuance of such certificate(s), the grantee shall have the rights of a shareholder with respect to the restricted stock, subject to the non-transferability restrictions and Company repurchase rights described in Sections 2.6.4 and 2.6.5 and to such other restrictions and conditions as the Committee in its discretion may include in the applicable plan agreement.

 

2.6.3           Unless the Committee shall otherwise determine, any certificate issued evidencing shares of restricted stock shall remain in the possession of the Company until such shares are free of any restrictions specified in the applicable plan agreement.

 

2.6.4           Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided in this Plan or the applicable plan agreement.  The Committee at the time of grant shall specify the date or dates (which may depend upon or be related to the attainment of performance goals and other conditions) on which the non-transferability of the restricted stock shall lapse.  Unless the applicable plan agreement provides otherwise, additional shares of Common Stock or other property distributed to the grantee in respect of shares of restricted stock, as dividends or otherwise, shall be subject to the same restrictions applicable to such restricted stock.

 

2.6.5           Upon the termination of the grantee’s employment for any reason while holding one or more shares to which restrictions on transferability apply, then those shares shall be immediately surrendered to the Company for cancellation and the grantee shall have no further rights with respect to those shares.  To the extent the surrendered shares were issued for consideration paid in cash or cash equivalent, the Company shall repay to the grantee (or the grantee’s estate) the lesser of (a) the Fair Market Value of the shares on the date of such termination of employment, or (b) any amount paid by the grantee for such shares.

 

  

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2.7           Grant of Restricted Stock Units

 

2.7.1           The Committee may grant awards of restricted stock units to such key persons, in such amounts, and subject to such terms and conditions as the Committee shall determine in its discretion, subject to the provisions of the Plan.  Restricted stock units may be awarded independently of or in connection with any other award under the Plan.

 

2.7.2           At the time of grant, the Committee shall specify the date or dates on which the restricted stock units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate.  In the event of the termination of the grantee’s employment by the Company and its subsidiaries for any reason, restricted stock units that have not become nonforfeitable shall be forfeited and cancelled.

 

2.7.3           At the time of grant, the Committee shall specify the date of issuance of the shares subject to each grant of restricted stock units.  Such date may be the vesting date or dates of the award or any date following such vesting date(s) consistent with the applicable requirements of Section 409A of the Code.  On the specified issuance date, the Company shall transfer to the grantee one unrestricted, fully transferable share of Common Stock for each vested restricted stock unit.  The Committee shall specify the purchase price, if any, to be paid by the grantee to the Company for such shares of Common Stock.

 

2.8           Other Stock-Based Awards

 

The Committee may grant other types of stock-based awards (including the grant of unrestricted shares) to such key persons, in such amounts and subject to such terms and conditions, as the Committee shall in its discretion determine, subject to the provisions of the Plan.  Such awards may entail the transfer of actual shares of Common Stock to Plan participants, or payment in cash or otherwise of amounts based on the value of shares of Common Stock.

 

2.9           Grant of Dividend Equivalent Rights

 

The Committee may in its discretion include in the plan agreement with respect to any award a dividend equivalent right entitling the grantee to receive amounts equal to the ordinary dividends that would be paid, during the time such award is outstanding and unexercised, on the shares of Common Stock covered by such award if such shares were then outstanding.  In the event such a provision is included in a plan agreement, the Committee shall determine whether such payments shall be made in cash, in shares of Common Stock or in another form, whether they shall be conditioned upon the exercise of the award to which they relate, the time or times at which they shall be made, and such other terms and conditions as the Committee shall deem appropriate consistent with the applicable requirements of Section 409A of the Code.

 

  

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2.10           Right of Recapture

 

2.10.1           If at any time within one year after the date on which a participant exercises an option or stock appreciation right, or on which restricted stock vests, or which is the maturity date of restricted stock units, or on which income is realized by a participant in connection with any other stock-based award (each of which events is a “realization event”), the participant (a) is terminated for cause or (b) engages in any activity determined in the discretion of the Committee to be in competition with any activity of the Company, or otherwise inimical, contrary or harmful to the interests of the Company (including, but not limited to, accepting employment with or serving as a consultant, adviser or in any other capacity to an entity that is in competition with or acting against the interests of the Company), then any gain realized by the participant from the realization event shall be paid by the participant to the Company upon notice from the Company.  Such gain shall be determined as of the date of the realization event, without regard to any subsequent change in the Fair Market Value of a share of Common Stock.  The Company shall have the right to offset such gain against any amounts otherwise owed to the participant by the Company (whether as wages, vacation pay, or pursuant to any benefit plan or other compensatory arrangement).

 

ARTICLE III

 

AUTOMATIC GRANT PROGRAM FOR NON-EMPLOYEE DIRECTORS

 

3.1           Automatic Grants

 

Awards shall be made automatically to non-employee Board members in accordance with the provisions of this Article III.

 

3.2           Annual Grants

 

On the date of each annual stockholders meeting, beginning with the 2011 Annual Meeting, each individual who is at that time serving as, and is to continue to serve as, a non-employee Board member shall automatically be granted an award (the “Annual Award”) in the form of shares of Common Stock and/or options with a value equal to the Applicable Annual Amount.  The Committee shall also have the discretion to pay the Applicable Annual Amount in cash in lieu of shares or options.  The Committee shall have the sole discretion to determine the amount and type of award for each year within the foregoing limitations.  For such purposes, the value of the Annual Award shall be calculated as follows:  (A) the value of an option share shall be equal to the fair value of an option share as estimated on the date of grant under a valuation model approved by the Financial Accounting Standards Board (“FASB”) for purposes of the Company’s financial statements under FAS 123 (or any successor provision); and (B) the value of a share subject to the stock award shall be equal to the Fair Market Value per share of Common Stock on the award date.  The Applicable Annual Amount shall be determined by the Committee on or before the date of the grant, but in no event shall exceed Twenty-Five Thousand Dollars ($25,000).

 

3.3           Vesting of Awards

 

Each award granted under Section 3.2 shall be fully vested on the date of grant.

 

  

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ARTICLE IV

 

MISCELLANEOUS

 

4.1           Amendment of the Plan; Modification of Awards

 

4.1.1           The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations under any award theretofore made under the Plan without the consent of the grantee (or, after the grantee’s death, the person having the right to exercise the award).  For purposes of this Section 4.1, any action of the Board or the Committee that alters or affects the tax treatment of any award shall not be considered to materially impair any rights of any grantee.

 

4.1.2           Shareholder approval of any amendment shall be obtained to the extent necessary to comply with section 422 of the Code (relating to incentive stock options) or other applicable law or regulation.

 

4.1.3           Except as otherwise provided in Section 4.1.4 hereof, the Committee may amend any outstanding plan agreement, including, without limitation, by amendment which would accelerate the time or times at which the award becomes unrestricted or may be exercised, or waive or amend any goals, restrictions or conditions set forth in the agreement.  However, any such amendment (other than an amendment pursuant to Section 4.7.2, relating to change in control) that materially impairs the rights or materially increases the obligations of a grantee under an outstanding award shall be made only with the consent of the grantee (or, upon the grantee’s death, the person having the right to exercise the award).

 

4.1.4           The Committee shall not (i) implement any cancellation/regrant program pursuant to which outstanding options or stock appreciation rights under the Plan are cancelled and new options or stock appreciation rights are granted in replacement with a lower exercise price per share, (ii) cancel outstanding options or stock appreciation rights under the Plan with exercise prices per share in excess of the then current Fair Market Value per share of Common Stock of the Corporation or (iii) otherwise directly reduce the exercise price in effect for outstanding options or stock appreciation rights under the Plan, without in each such instance obtaining shareholder approval.

 

4.2           Tax Withholding

 

4.2.1           As a condition to the receipt of any shares of Common Stock pursuant to any award or the lifting of restrictions on any award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Company relating to an award (including, without limitation, FICA tax), the Company shall be entitled to require that the grantee remit to the Company an amount sufficient in the opinion of the Company to satisfy such withholding obligation.

 

  

12

  

 

4.2.2           The Committee may, in its discretion, provide the grantee with the right to satisfy the withholding obligation imposed under Section 4.2.1 by electing to have the Company withhold shares with a Fair Market Value of an amount that does not exceed the amount of the Company’s withholding obligations using the grantee’s minimum applicable withholding tax rate for federal (including, without limitation, FICA tax) or other governmental tax liabilities.

 

4.3           Restrictions

 

4.3.1           If the Committee shall at any time determine that any consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any award under the Plan, the issuance or purchase of shares or other rights thereunder, or the taking of any other action thereunder (each such action a “plan action”), then such plan action shall not be taken, in whole or in part, unless and until such consent shall have been effected or obtained to the full satisfaction of the Committee.

 

4.3.2           The term “consent” as used herein with respect to any plan action means (a) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (b) any and all written agreements and representations by the grantee with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made and (c) any and all consents, clearances and approvals in respect of a plan action by any governmental or other regulatory bodies.

 

4.4           Nonassignability

 

Except to the extent otherwise provided in the applicable plan agreement, no award or right granted to any person under the Plan shall be assignable or transferable other than by will or by the laws of descent and distribution, and all such awards and rights shall be exercisable during the life of the grantee only by the grantee or the grantee’s legal representative.

 

4.5           Requirement of Notification of Election Under Section 83(b) of the Code

 

If any grantee shall, in connection with the acquisition of shares of Common Stock under the Plan, make the election permitted under section 83(b) of the Code (that is, an election to include in gross income in the year of transfer the amounts specified in such section 83(b)), such grantee shall notify the Company of such election as required pursuant to regulations issued under Code section 83(b), in addition to any filing and notification required pursuant to such regulations.

 

4.6           Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code

 

If any grantee shall make any disposition of shares of Common Stock issued pursuant to the exercise of an incentive stock option under the circumstances described in section 421(b) of the Code (relating to certain disqualifying dispositions), such grantee shall notify the Company of such disposition within 10 days thereof.

 

  

13

  

 

4.7           Change in Control, Dissolution, Liquidation, Merger

 

4.7.1           For purposes of this Section 4.7, a “change in control” shall have occurred if:

 

(a)           any “person”, as such term is used in Sections 13(d) and 14(d) of the 1934 Act other than (i) the Company or any subsidiary of the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, or (iii) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities without the prior written consent of the Committee or the Board; or

 

(b)           during any period of twenty-four (24) consecutive months, individuals who at the effective date of the Plan constitute the Board and any new director whose election by the Board or nomination for election by the Company shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

 

(c)           the shareholders of the Company approve a merger or consolidation of the Company with any other company (other than a wholly-owned subsidiary of the Company), other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) 50% or more of the combined voting power of voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as defined in Section 4.7.1(a) above with the exceptions noted in section 4.7.1(a)) acquires more than 50% of the combined voting power of the Company’s then outstanding securities; or

 

(d)           the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect).

 

4.7.2           Upon the happening of a change in control:

 

(a)           subject to the provisions of Section 2.5 above, in the event of a change in control, any option or stock appreciation right or other award then outstanding shall become fully vested and immediately exercisable upon such change in control unless the applicable plan agreement expressly provides otherwise; and

 

(b)           to the fullest extent permitted by law, the Committee may, in its sole discretion, amend any plan agreement in such manner as it deems appropriate, including, without limitation, by amendments that advance the dates upon which any or all outstanding awards of any type shall terminate.

 

  

14

  

 

4.7.3           In the event of the proposed dissolution or liquidation of the Company, all outstanding awards will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Committee.  The Committee may, in the exercise of its sole discretion in such instances, accelerate the date on which any award becomes exercisable or fully vested and/or declare that any award shall terminate as of a specified date.

 

4.8           Right of Discharge Reserved

 

Nothing in the Plan or in any plan agreement shall confer upon any grantee the right to continue in the employ of the Company or any subsidiary or affect any right which the Company or any subsidiary may have to terminate such employment.

 

4.9           Nature of Payments

 

4.9.1           Any and all grants of awards and issuances of shares of Common Stock under the Plan shall be in consideration of services performed for the Company by the grantee.

 

4.9.2           All such grants and issuances shall constitute a special incentive payment to the grantee and shall not be taken into account in computing the amount of salary or compensation of the grantee for the purpose of determining any benefits under any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or of any subsidiary or under any agreement with the grantee, unless such plan or agreement specifically provides otherwise.

 

  

15

  

 

4.10          Non-Uniform Determinations

 

The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or not such persons are similarly situated).  Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Plan agreements, as to (a) the persons to receive awards under the Plan, (b) the terms and provisions of awards under the Plan and (c) the treatment of leaves of absence pursuant to Section 1.6.4.

 

4.11           Other Payments or Awards

 

Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

 

4.12           Section Headings

 

The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of the sections.

 

4.13           Effective Date and Term of Plan

 

4.13.1           The Plan was adopted by the Board on July 9, 2009 (the “Plan Effective Date”), and approved by the Company’s shareholders at the regular 2009 Annual Stockholders Meeting.

 

4.13.2           Unless sooner terminated by the Board, the Plan shall terminate on the day before the tenth anniversary of the Plan Effective Date, and no awards shall thereafter be made under the Plan.  All awards made under the Plan prior to its termination shall remain in effect until such awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable plan agreements.

 

4.14           Governing Law

 

All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflict of laws.

 

16ManagementServicesAgreementFINAL

Management Services Agreement

This Management Services Agreement (this “Agreement”) is entered between 1347 Advisors LLC, a Delaware limited liability company (“1347 Advisors”), and United Insurance Management, L.C., a Florida limited liability company (“UIM”), and is effective August 29, 2011 (the “Effective Date”).  
Recitals

WHEREAS, UIM has determined that it would be in its best interests to engage a manager to perform the Services (as defined below); and 
WHEREAS, 1347 Advisors has agreed to perform the Services on the terms and conditions set forth herein; 
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, hereby agree as follows:
1.Executive Services.  Subject always to the oversight and supervision of the Board of Directors of UIHC (the “Board”), and the terms and conditions of this Agreement, during the Term (as defined below), and at the election of the Board, 1347 Advisors shall cause Hassan Raza Baqar or his successor, as applicable (the “Executive”) to serve as interim Chief Financial Officer of UIHC (“Interim CFO”), who shall report to the Chief Executive Officer of UIHC (the “CEO”), and to the Board and its committees.  1347 Advisors shall cause Executive to perform such duties as are typically performed by the Chief Financial Officer of a public company (the “Executive Services”), including, without limitation, those duties described in Addendum A, consistent with applicable corporate governance, legal and regulatory requirements.  No Executive Services to be provided by Executive may be subcontracted by 1347 Advisors to another Person without the prior written consent of UIM.  In the event that the Executive is unable or unwilling to serve as Interim CFO, 1347 Advisors shall promptly recommend to the Board one or more other employees or contractors of 1347 Advisors, each of whom is competent and knowledgeable regarding the Executive Services, for appointment by the Board as successor Interim CFO hereunder.  
2.    Corporate Management Services.  Subject always to the oversight and supervision of the Board and the terms and conditions of this Agreement, during the Term, 1347 Advisors shall provide the following services (the “Corporate Management Services” and together with the Executive Services, the “Services”) to and for the benefit of United: 
a.    analysis and forecasting activity;
b.    analysis of capital structure and stockholder liquidity; and
c.    the actuarial services described in Addendum B.
3.    Insurance Regulatory Requirements.  1347 Advisors shall cause any individual who will serve as an officer or director of UIHC or United Property and Casualty Insurance Company (“UPC”) under the terms of this Agreement to timely submit to the Florida Office of Insurance Regulation a biographical affidavit, fingerprints and background investigation report for approval by such office as required by applicable regulatory requirements (“OIR Approval”).  1347 Advisors acknowledges and agrees that as a condition to serving as an officer or director of UIHC or UPC, any such individual must not have been found guilty of, or have pleaded guilty or nolo contendere to, a felony or a misdemeanor other than a minor traffic violation, without regard to whether judgment of conviction was entered by the court, unless such individual is cleared by the Florida Office of Insurance Regulation to serve as an officer or director of an insurer or controlling person of an insurer. 
4.    Compensation and Reimbursement of Expenses.  
a.    Monthly Consulting Fee.  Commencing on the Effective Date, as compensation for the Services, UIM shall pay 1347 Advisors a monthly consulting fee of $60,000 (the “Consulting Fee”), payable in advance on the 29th day of each month.  To the extent required for United to comply with the requirements of applicable law, including federal securities laws, 1347 Advisors shall disclose to the Board the amount of remuneration paid to (i) the Executive for serving as Interim CFO and (ii) any other person providing services to United pursuant to this Agreement.  
b.    Expenses.  In addition to the Consulting Fee, UIM shall reimburse 1347 Advisors for all reasonable out-of-pocket expenses directly incurred by 1347 Advisors in connection with its engagement hereunder, provided that such expenses will not exceed a cumulative total of $25,000.00 during any three-month period, unless authorized in writing by UIM.  1347 Advisors shall bill UIM monthly for reimbursement of expenses, which bills shall be due and payable within thirty (30) days of receipt by UIM and shall include copies of reasonable documentation of all expenses included thereon.  Notwithstanding anything to the contrary herein (i) each party shall pay its own expenses in connection with the negotiation and execution of this Agreement, (ii) expenses of the Interim CFO and his or her staff, shall be in accordance with the expense reimbursement policies of United for its executive officers and employees, as applicable, or as otherwise approved by the compensation committee of UIHC’s Board and (iii) United shall not be obligated or responsible for reimbursing or otherwise paying for any costs or expenses relating to 1347 Advisors’ overhead or any other costs and expenses relating to the conduct or maintenance of its business and operations as a provider of services. 
c.    Currency and Late Fees.  All amounts in this Agreement are stated, and shall be payable, in United States dollars.  Any amounts payable by UIM under this Agreement which are not paid when due shall bear interest from the due date until paid at a monthly rate of 1.5%.
5.    Term.  
a.    General.  The term of this Agreement shall be for an initial period of six months commencing as of August 29, 2011 (the “Effective Date”) and ending February 28, 2012, unless terminated prior to such date pursuant to any other provisions of this Agreement (the “Term”).  The Term shall be automatically extended for successive three-month periods. 
b.    Termination.  Notwithstanding the provisions of Section 3(a) above, this Agreement shall terminate:
i.    upon any date mutually agreed to by 1347 Advisors and UIM in writing;
ii.    if either party notifies the other party in writing of its desire to terminate this Agreement for any or no reason (a “Valid Termination Notice”), in which case (A) if the Valid Termination Notice is received by the non-terminating party during the first 29 days of any calendar quarter, this Agreement shall terminate on the last day of such calendar quarter and (B) if the Valid Termination Notice is received by the non-terminating party after the 29th day of any calendar quarter, this Agreement shall terminate 60 days following the non-terminating party’s receipt of the Valid Termination Notice; 
iii.    10 days after UIM receives written notice from 1347 Advisors that UIM has failed to make any payment to 1347 Advisors due hereunder, unless UIM has fully paid such overdue payment within such 10 days; 
iv.    if either party fails to observe or perform any material provision of this Agreement required to be observed or performed by such party, and such failure shall continue for 30 days after the non-defaulting party provides written notice thereof to the defaulting party (unless such failure is not capable of being cured, in which case, this Agreement shall terminate on the date that the defaulting party receives such notice);
v.    automatically, without any action or notice to either party upon the consummation of a Change of Control; 
vi.    if either party or the ultimate parent company of such party dissolves or voluntarily files a petition in bankruptcy or makes an assignment for the benefit of creditors or otherwise seeks relief from creditors under any federal or state bankruptcy, insolvency, reorganization or moratorium statute, or either party or the ultimate parent company of such party is the subject of an involuntary petition in bankruptcy that is not set aside within 60 days of its filing; or
vii.    if the Board votes to terminate this Agreement for any of the following reasons, this Agreement shall terminate on the date UIM provides written notice thereof to 1347 Advisors: (A) 1347 Advisors or any of its Representatives providing Services (x) acted with negligence, willful misconduct, bad faith or reckless disregard in performing its duties and obligations under this Agreement, (y) engaged in fraudulent or dishonest acts in connection with the business and operations of United, or (z) has been convicted of a felony under federal or state law; (B) the Interim CFO (x) at any time, does not have OIR Approval if required by applicable law or (y) is unable or unwilling to provide the Executive Services and 1347 Advisors has not recommended a replacement candidate that has been approved by the Board or (C) a Change of Control of 1347 Advisors.
6.    Actions Upon Termination.  Upon termination of this Agreement:
a.    1347 Advisors shall use commercially reasonable efforts to assist and cooperate with United to effect the transition to another administrative company if one is appointed by United to succeed 1347 Advisors, or to United, if no administrative company is appointed; and
b.    1347 Advisors shall cause all of its Representatives, including the Interim CFO, who provides Services hereunder to resign their respective positions with United and to cease working on behalf of United as of the date this Agreement terminates or such other date as mutually agreed upon between 1347 Advisors and UIM. 
7.    Indemnification.  UIM (the “Indemnifying Person”) shall indemnify and hold harmless 1347 Advisors and its Affiliates, their respective members, managers, directors, officers, agents, employees and controlling persons, and each of their respective successors and assigns (collectively, the “Indemnified Persons”) to the full extent permitted by applicable law from and against all out-of-pocket losses, claims, costs, expenses, damages or liabilities, including attorney fees and costs, incurred by the Indemnified Persons arising out of any action or inaction by 1347 Advisors or its Representatives taken in good faith pursuant to the terms of this Agreement; provided, however, that the Indemnifying Person shall have no obligation to indemnify the Indemnified Persons for any such losses, claims, costs, expenses, damages or liabilities determined by a court of competent final jurisdiction to have been caused by or to have resulted from the gross negligence, willful misconduct, or fraud of 1347 Advisors or its Representatives.  
a.    Indemnification Procedure.  After receipt by an Indemnified Person of notice of any complaint or the commencement of any action, claim, suit or proceeding, or a written threat stating an intention to commence an action, claim, suit or proceeding, with respect to which indemnification is being sought hereunder, such Indemnified Person will notify the Indemnifying Person in writing of such complaint or of the commencement of such action, claim, suit or proceeding, but failure to notify such Indemnifying Person will relieve the Indemnifying Person from any liability which it may have hereunder only if, and to the extent, that such failure results in the forfeiture by the Indemnifying Person of substantial rights and defenses, and will not in any event relieve the Indemnifying Person from any other obligation or liability that the Indemnifying Person may have to any Indemnified Person otherwise than under these indemnification provisions.  If the Indemnifying Person so elects or is requested by such Indemnified Person, the Indemnifying Person will assume the defense of such action or proceeding, including the employment of counsel reasonably satisfactory to the Indemnified Person and the payment of the reasonable fees and disbursements of such counsel (including the reasonable fees and expenses of expert witnesses and consultants reasonably retained by such counsel for the defense thereof).  In the event, however, such Indemnified Person has been advised by counsel in writing that having common counsel would present such counsel with a conflict of interest or if the defendants in, or targets of, any such action, claim, suit or proceeding include both an Indemnified Person and an Indemnifying Person, and Indemnified Person has been advised by counsel in writing that there are legal defenses available to it or other Indemnified Persons that are different from or in addition to those available to the Indemnifying Person, or if the Indemnifying Person fails to assume the defense of the action, claim, suit or proceeding or to employ counsel reasonably satisfactory to such Indemnified Person, in either case in a timely manner, then such Indemnified Person may employ separate counsel to represent or defend it in any such action, claim suit or proceeding and the Indemnifying Person will pay the reasonable fees and reasonable disbursements for such counsel (including all reasonable fees and expenses of expert witnesses and consultants reasonably retained by such counsel for the defense thereof); provided however, that the Indemnifying Person will not be required to pay the fees and disbursements of more than one separate counsel for all Indemnified Persons in any jurisdiction in any single action, claim, suit or proceeding.  In any action, claim, suit or proceeding the defense of which the Indemnifying Person assumes, the Indemnified Person will have the right to participate in such litigation and to retain its own counsel at such Indemnified Person’s own expense.  The Indemnifying Person further agrees that it will not, without the prior written consent of the Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened action, claim, suit or proceeding in respect of which indemnification or contribution may be sought hereunder unless such settlement, compromise or consent includes an unconditional release of the Indemnified Persons who have not consented thereto from all liability arising out of such action, claim, suit or proceeding, which consent shall not be unreasonably withheld, conditioned or delayed.
b.    Reimbursement.  Without limitation of its other obligations hereunder, the Indemnifying Person further agrees that it will promptly reimburse the Indemnified Persons for all reasonable and customary expenses (including reasonable and customary fees and reasonable and customary disbursements of counsel and any expert witnesses and consultants reasonably retained by counsel in defense of any claim) as they are incurred by such Indemnified Persons in connection with investigating, preparing for or defending, or providing evidence in, any pending or threatened action, claim, suit or proceeding in respect of which indemnification may be sought hereunder and in enforcing these indemnification provisions; provided that the Indemnifying Person receives an undertaking by or on behalf of each applicable Indemnified Person that such Indemnified Person will promptly refund to the Indemnifying Person, as a several but not joint obligation of the Indemnified Persons, with applicable interest from the date of payment to the date of refund, all expenses reimbursed by the Indemnifying Person pursuant to this paragraph in each instance where it is finally judicially determined that such Indemnified Person is not entitled to be indemnified by the Indemnifying Person pursuant to this Section 7.
c.    No Limitation.  The Indemnifying Person’s indemnity, contribution, reimbursement and other obligations under these indemnification provisions shall be in addition to any liability that it may otherwise have, at common law or otherwise, and shall be binding on its successors and assigns.
d.    Survival.  This Section 7 shall survive the termination of this Agreement.
8.     Network Access and Data. 
a.    Network Access.  In the event United grants to 1347 Advisors and its authorized Representatives access to United’s network or a network under the control of United, it merely grants 1347 Advisors a nonexclusive, revocable right, subject to the other terms of this Agreement, to obtain limited access to such network solely for purposes of providing the Services. The uses expressly permitted by United shall be the sole permitted uses of United’ s network and any data device attached thereto.  In the event United provides 1347 Advisors with equipment and/or passwords to enable authorized personnel to access United’s network, 1347 Advisors shall only share such information with its Representatives on a need-to-know basis and will not share such equipment or passwords outside of 1347 Advisors. 1347 Advisors shall take commercially reasonable steps to secure physical access to any such equipment used to access United’s network and shall use passwords in compliance with United’s password policy communicated to 1347 Advisors. 1347 Advisors shall immediately notify United in the event of loss, damage or theft of any equipment used to access United’ s network or of any breach or likely breach of United’s network known to 1347 Advisors.  United reserves the right to require 1347 Advisors to notify United in writing of 1347 Advisors’ Representatives who have access to United’s network.  
b.    Data.  United Data (as defined below) is and will remain the sole and exclusive property of United. "United Data" means any intellectual property provided by United or its agents to 1347 Advisors or its Representatives for use in connection with the Services (including intellectual property created by 1347 Advisors in performing the Services), including, but not limited to, any data, images, photographs, illustrations, logos, graphics, audio clips, video clips, text, programming, computer code, databases, information, data, metadata, and other web content (including without limitation information identifying or otherwise relating to United’s claims, agents, customers, prospective claims, agents or customers, or any employees of United).  1347 Advisors shall only use the United Data in the form provided by United and solely in connection with this Agreement.  United hereby grants to 1347 Advisors, solely for the performance of the Services a non-exclusive, non-transferable, non-sublicensable right to access, operate, and use the United Data. Upon termination of this Agreement for any reason, (i) the rights granted to 1347 Advisors and its Representatives in this Section shall immediately revert to United, and (ii) 1347 Advisors shall (1) deliver to United, at no cost to United, a current copy of all United Data in the form in use as of the date of such termination and (2) completely destroy or erase all other copies of the United Data in 1347 Advisors’ or its Representatives’ possession in any form, including but not limited to electronic, hard copy or other memory device. 
9.    Confidentiality.  1347 Advisors shall treat as confidential and proprietary and not disclose directly or indirectly to anyone, or use for 1347 Advisors’ benefit, except as expressly provided herein, any Proprietary Information of United except as authorized in writing by UIM.  1347 Advisors acknowledges that any damages for breach of this Section 9 may be incalculable and an insufficient remedy.  Accordingly, 1347 Advisors agrees that in the event of any breach of this Section 9, United shall be entitled to equitable relief, including injunctive relief and specific performance and without the necessity of posting any bond.
a.    The term “Proprietary Information” shall refer to any information, not generally known in the relevant trade or industry, which was obtained from United, or which was learned, discovered, developed, conceived, originated or prepared during or as a result of the performance hereunder of Services and which falls within the following general categories:
i.    information relating to trade secrets of United;
ii.    information relating to existing or contemplated products, services, technology, designs, processes, formulae; computer systems, computer software, algorithms,  and research or developments of United;
iii.    information relating to business plans, financial data, actuarial analysis, sales or marketing methods, methods of doing business, customer lists, customer usages and/or requirements, customer claims, names of sales representatives and agents, and vendor and supplier information of United;
iv.    information relating to proprietary or customized computer software (including all computer code and tools and documentation reasonably necessary to build or modify such code) not generally known to the public and related unpublished documentation of proprietary computer programs;
v.    information relating to new developments; and
vi.    any other information that United may wish to protect by copyright or by keeping it secret and confidential.
b.    1347 Advisors will not and will cause its Representatives not to divulge to anyone, at any time during or after the termination of the provision of Services hereunder, any Proprietary Information or any other trade secrets of United.  Upon the termination of this Agreement, 1347 Advisors shall deliver to United all Proprietary Information (excluding standard, off-the-shelf and non-customized computer software and hardware systems owned by 1347 Advisors), including all notebooks, computer files and any other data in any tangible form whatsoever in relation thereto, containing, embodying or evidencing any of the Proprietary Information.  1347 Advisors shall be responsible for any breach of this Section 9 by its Representatives.
10.    Governing Law.  This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware. 
11.    Consent to Jurisdiction.  Both parties submit to the exclusive jurisdiction of the Delaware Court of Chancery with respect to any disputes, claims or controversies arising from, relating to or in connection with this Agreement.  
12.    EACH PARTY, ON BEHALF OF ITSELF AND ITS AFFILIATES AND SUBSIDIARIES, TO THE FULLEST EXTENT PERMITTED BY LAW, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.  THE WAIVER APPLIES TO ANY ACTION OR LEGAL PROCEEDING, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  THE PARTIES ACKNOWLEDGE THIS WAIVER OF TRIAL BY JURY BY PLACING THEIR INITIALS HERE:
____________                    ___________ 
    1347 Advisors                        United
13.    Notices.  All notices and other communications provided for in this Agreement shall be given in writing, addressed to the recipient party as follows:
If to 1347 Advisors:        1347 Advisors LLC 
150 N.W. Point Boulevard
Elk Grove Village, IL  60007
Attention:  President

If to UIM:            United Insurance Holdings Corp.
360 Central Avenue, Suite 900
St. Petersburg, FL 33701
Attention:  President

All notices and other communications shall be effective (i) if delivered by hand, including any overnight courier service, upon personal delivery, (ii) if delivered by mail, when deposited in the mails (by registered or certified mail, postage prepaid), and (iii) if delivered by telecopy or email, when received.

14.    Obligations Contractual in Nature.  1347 Advisors and UIM agree that each are sophisticated business enterprises that have entered into this Agreement for the specific purposes set forth herein, and the parties acknowledge and agree that their respective rights and obligations are contractual in nature.  UIM further acknowledges and agrees that 1347 Advisors and its Affiliates and associates are or may be engaged in the business of investing in, acquiring and/or managing businesses for their own respective accounts and for the account of other unaffiliated parties and that no aspect or element of these activities will be deemed to be engaged in for the benefit of United nor to constitute a conflict of interest or breach of any duty hereunder unless specifically prohibited by this Agreement.  Notwithstanding anything to the contrary contained herein, 1347 Advisors agrees to submit (and to cause its Representatives performing Services to submit) to United all business, commercial and investment opportunities presented to 1347 Advisors or such Representatives that relate to the business of writing homeowners’ insurance policies (the “Business”) in Florida and South Carolina (collectively, the “Territory”) and, unless approved by UIM in writing, 1347 Advisors shall not (and shall cause such Representatives not to) pursue, directly or indirectly, any such opportunities on its or its Affiliate’s own behalf.  Nothing in this Section 14 shall be deemed to create any affirmative duty to seek out such opportunities nor to obligate any Person to violate any law, breach any contractual commitment or commit any tort. 
15.    Independent Contractor Status.  Except as otherwise expressly set forth herein, for purposes of this Agreement it is acknowledged and agreed that United and 1347 Advisors are at all times acting and performing hereunder as independent contractors, retaining control over and responsibility for their own respective operations and personnel.  1347 Advisors further acknowledges and agrees that it shall have no power to enter into any contract for or on behalf of United or otherwise subject United to any obligation, such power to be the sole right and obligation of United, acting through its Board and/or United’s officers.  Each party shall be solely responsible for compliance, and shall indemnify the other party for its noncompliance, with all state and federal laws pertaining to employment taxes, income withholding, unemployment compensation contributions and other employment related statutes regarding their respective employees, agents and servants.  Nothing in this Agreement shall at any time be construed so as to create the relationship of employer and employee between United and any of 1347 Advisors or its Representatives. 
16.    Information; General Scope of Services.  
a.    Information.  UIM expressly acknowledges and agrees (i) that the performance of 1347 Advisors’ obligations hereunder will require the timely cooperation and support of United, its officers and agents, and agrees that it will use commercially reasonable efforts to ensure that 1347 Advisors is provided in a timely manner the information, including financial data, required by it in performing the Services hereunder (the “Information”) and (ii) 1347 Advisors does not assume responsibility for the accuracy or completeness of the Information and is entitled to rely upon the Information without independent verification.
b.    General Scope of Consulting Services.  The parties acknowledge that 1347 Advisors is not engaged in the provision of auditing, accounting (including forensic accounting), asset valuation or investment management services.  Much of 1347 Advisors’ advice, reports, and recommendations provided under this Agreement are necessarily based upon certain estimates, projections and forward-looking statements with respect to the current and potential future financial position and results of operations of United.  Such estimates, projections and forward-looking statements will reflect various assumptions concerning United’s current and potential future financial position and results of operations, and are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of United or 1347 Advisors. Accordingly, there can be no assurance that such estimates, projections and forward-looking statements will be realized in whole or in part.  The actual consequences of any action discussed, described or recommended by 1347 Advisors in the course of providing the Corporate Management Services may vary from the anticipated consequences and such variations may be material.
17.    Permissible Activities.  1347 Advisors represents and warrants to UIM that as of the date hereof neither 1347 Advisors nor any of its Affiliates, either directly or indirectly, personally or through the use of agents, engage in or invest in any activity or business which is in competition with United’s Business in the Territory, except for purely passive, minority investments in any Person.  During the Term of this Agreement, neither 1347 Advisors nor any of 1347 Advisors’ Affiliates or Representatives providing Services shall, either directly or indirectly, personally or through the use of agents, engage in or invest in any activity or business which is in competition with the Business conducted by United anywhere in the Territory, provided that the foregoing shall not prohibit a purely passive, minority investment in any Person.  Subject to applicable law and except as otherwise prohibited herein, nothing herein will in any way preclude 1347 Advisors or its Affiliates from engaging in any business activities or from (i) performing services for their own account or for the account of others, including for companies that may be in competition with the business conducted by United or (ii) conducting business with any client or customer of United or its Affiliates.  While the provisions contained in this Agreement are considered by the parties to be reasonable in all circumstances, it is recognized that provisions of this Section 17, including without limitation, remedies and geographic scope, may fail for technical reasons and, accordingly, it is hereby agreed and declared that if any one or more of such provisions shall, either by itself or themselves or taken with others, be adjudged to be invalid as exceeding what is reasonable in all circumstances for the protection of the interests of United, but would be valid if any particular restriction or provisions were deleted or restricted or limited in a particular manner or if the period or area thereof were reduced or curtailed, then such provisions shall apply with such deletion, restriction, limitation, reduction, curtailment, or modification as may be necessary to make them valid and effective. 
18.    Successors and Assigns.  This Agreement and the rights and obligations hereunder may not be assigned or delegated by a party, in whole or part, whether voluntarily, by operation of law, change of control or otherwise, without the prior written consent of the other party.  Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.
19.    Entire Agreement; Severability.  This Agreement is the entire agreement of the parties relating to the subject matter hereof, and the parties have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein.  This Agreement replaces and supersedes any and all prior discussions and agreements that the parties have had and have entered into with respect to the subject matter hereof.  No amendment, waiver or modification of this Agreement shall be valid unless made in writing and signed by each of the parties hereto, which with respect to the consent of UIM, such consent shall be authorized by the Board and may be granted or withheld in the sole discretion of such Board.  If any provision of this Agreement shall, to any extent, now or hereafter be or become invalid or unenforceable, the remainder of this Agreement shall not be affected thereby and every other provision of this Agreement shall be valid and enforceable, to the fullest extent permitted by law.  For purposes of this Agreement, a Change of Control of 1347 Advisors shall be deemed to be an assignment and shall require the prior written consent of UIM authorized by the Board, which consent may be granted or withheld in the sole discretion of such Board. 
20.    Legal Fees and Expenses.  The prevailing party in any legal action seeking enforcement of any provisions of this Agreement shall be entitled to recover all of its reasonable costs and expenses in any such action, including but not limited to reasonable attorneys’ fees and disbursements.
21.    Counterparts; Facsimiles.  This Agreement may be executed in counterparts, each of which may be executed and delivered via facsimile or PDF electronic delivery with the same validity as if it were an ink-signed document and each of which shall be effective and binding on the parties as of the Effective Date.  Each such counterpart shall be deemed an original and, when taken together with other signed counterparts, shall constitute one and the same Agreement. 
22.    Definitions.  Except as otherwise noted, for all purposes of this Agreement, the following terms shall have the respective meanings set forth in this Section 22, which meanings shall apply equally to the singular and plural forms of the terms so defined:
a.    “Affiliate” shall mean a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a specified Person. For the purpose of this definition, the term “control” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
b.    “Change of Control of 1347 Advisors” shall mean any transaction pursuant to which the ultimate parent company of 1347 Advisors sells its business other than to any Affiliate of such ultimate parent company by (x) a sale or conveyance of all or substantially all of the assets of such parent company to any Person, or (y) a sale or conveyance of the equity interests in such parent company, or a merger or consolidation of such parent company with any Person, in any such case in which the equity holders of such parent company, immediately prior to such transaction shall own in the aggregate, immediately after giving effect thereto, less than a majority of the voting interests or the economic interests of the surviving entity (or its parent) or the purchasing entity (or its parent), as the case may be.
c.    “Change of Control” shall mean any transaction pursuant to which United sells its business other than to any Affiliate of United by (x) a sale or conveyance of all or substantially all of United’s assets to any Person, or (y) a sale or conveyance of the equity interests in United, or a merger or consolidation of United with any Person, in any such case in which United’s stockholders, immediately prior to such transaction shall own in the aggregate, immediately after giving effect thereto, less than a majority of the voting interests or the economic interests of the surviving entity (or its parent) or the purchasing entity (or its parent), as the case may be; a public offering of UIHC’s equity securities shall not be considered a Change of Control for purposes hereof.
d.    “Person” shall mean any individual, any general partnership, government entity, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association or similar organization, and the heirs, executors, administrators, legal representatives, successors, and assigns of such Person where the context so requires.
e.    “UIHC” shall mean United Insurance Holdings Corp., a Delaware corporation.
f.    “United” shall mean UIHC together with its wholly owned subsidiaries.

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	1347 Advisors LLC
	United Insurance Management, L.C.

	

By: /s/ Larry G. Swets, Jr.
Print Name:  Larry G. Swets, Jr.
Title:                         
	

By:                        
Print Name:                    
Title:                        

[Signature Page to Management Services Agreement]

ADDENDUM A
SERVICES OF INTERIM CFO

The services to be provided by the Interim CFO shall include, without limitation, overseeing and directing the financial affairs of United.  The Interim CFO’s specific areas of responsibility shall include, but are not limited to (i) United’s accounting practices, (ii) the preparation of reports of financial information, (iii) the public disclosure of financial information (including signing reports as UIHC’s interim Chief Financial Officer, “principal financial officer” and “principal accounting officer” required to be filed with the Securities and Exchange Commission (the “SEC”) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the certification thereof, as required by applicable rules and regulations of the SEC), (iv) the preparation and public disclosure of financial information required to be included in any registration statements filed by United with the SEC (including signing any such registration statements as UIHC’s interim Chief Financial Officer, “principal financial officer” and “principal accounting officer”); (v) evaluation of the effectiveness of United’s disclosure controls and procedures and internal control over financial reporting (including any changes therein) as required by applicable rules and regulations of the SEC; (vi) investor relations, (vii) the direction of tax, budget, audit (internal and external) and cash management functions, (viii) the financial planning, analysis and support of corporate strategic initiatives, (ix) counsel and communication to, and cooperation with, other corporate executives, the Board, investors, bankers, customers, employees and contractors as directed from time to time by the CEO (and, from time to time, the Board and its committees); (x) such other services as may be reasonably necessary to (a) accomplish the foregoing, (b) comply with United’s obligations under, and the reporting requirements of, the Securities Act and the Exchange Act, (c) comply with United’s obligations under, and the reporting requirements of, the rules and regulations of any securities exchange or inter-dealer quotation system, (d) comply with United’s obligations under, and the requirements set forth in, the Sarbanes-Oxley Act of 2002, and (e) comply with any other laws, rules, or regulations applicable to United or its officers; provided, however, that the Interim CFO shall only be required to provide services pursuant to clauses (b) through (e) above to the extent that such services are of the kind that are customarily provided or required to be provided by the chief financial officer, principal financial officer or principal accounting officer of a public company; and (xi) such other services as agreed upon between UIM and 1347 Advisors.

ADDENDUM B 
ACTUARIAL SERVICES

The actuarial services to be provided by 1347 Advisors under this Agreement shall consist of all necessary services required to satisfy United’s Statement of Actuarial Opinion filing, as required by the NAIC and Florida’s Office of Insurance Regulation, including, but not limited to (i) production of the Opinion, the Actuarial Opinion Summary, and the supporting report to the Board of Directors; (ii) actuarial analysis and supporting certifications necessary to meet the requirements of the Office of Insurance Regulation for submissions, which shall include, but not be limited to, rate filings; and (iii) other advice and analysis of an actuarial nature, relating to reserves, rates, financial results, and any other advice and analysis necessary and useful for continuing and improving the operations of United.

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