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AMENDED AND RESTATED
AWARD AGREEMENT
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THIS AMENDED AND RESTATED AWARD AGREEMENT (the "Agreement") is entered
into as of the 16th day of September 1997 (hereinafter referred to as the
"Date of Grant"), as amended as of the 6th day of April 1998, by and between
XXXX XXXXXXXX (the "Optionee") and LINCOLN HERITAGE CORPORATION, a Texas
corporation (f/k/a National Prearranged Services of Texas, Inc., the
"Company").
WHEREAS, the Company is the parent corporation of Memorial Service Life
Insurance Company, Inc., a Texas corporation ("Memorial"), which owns Lincoln
Memorial Life Insurance Company, Inc., a Texas corporation ("Lincoln"); and
WHEREAS, the Optionee's services are important to the future growth of
the Company, Memorial and Lincoln through the acquisition of other insurance
companies and blocks of policies and annuities; and
WHEREAS, pursuant to the terms of that certain Memorandum of
Understanding dated September 16, 1997, by and among the Company, Xxxxxxxx
Xxxxxxx and the Optionee (the "Memorandum of Understanding"), the Company
granted to the Optionee, effective as of January 1, 1997, certain incentives
in the form of stock options to acquire shares of common stock, $0.01 par
value, of the Company (the "Common Stock"); and
WHEREAS, the Company currently is proposing to effect an initial public
offering of the Common Stock and, in connection therewith, has taken certain
corporate actions that affect the terms of the Memorandum of Understanding;
and
WHEREAS, the Company has adopted the Lincoln Heritage Corporation 1998
Long-Term Incentive Plan (the "Plan"), which Plan is incorporated by
reference and made a part of this Agreement; and
WHEREAS, based upon the foregoing, the Company believes that it is in
the best interests of each of the Company and the Optionee to amend and
restate the Memorandum of Understanding.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. The Company hereby reconfirms the grant to the
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Optionee the right and option (the "Option") to purchase, on the terms and
conditions hereinafter set forth, up to 400,000 shares (the "Option Shares")
of Common Stock. The purchase price of the Option Shares shall be $3.75 per
share (the "Exercise Price"), subject to adjustments as herein provided.
This Option is intended to be treated as a Non-Qualified Stock Option.
Unless otherwise provided herein, capitalized terms shall have the meanings
ascribed to such terms in the Plan.
2. Vesting. Subject to the provisions of Paragraph 4 hereof, the
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Option will vest and become exercisable during the period Optionee is
continuously employed by the Company or any of its subsidiaries, on a
cumulative basis with respect to the Option Shares, as follows: (i) the
Option shall become exercisable with respect to ten percent (10%) of the
Option Shares on April 6,
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1998; (ii) the Option shall become exercisable with respect to an additional
ten percent (10%) of the Option Shares on April 6, 1999; (iii) the Option
shall become exercisable with respect to an additional ten percent (10%) of
the Option Shares on April 6, 2000; (iv) the Option shall become exercisable
with respect to an additional ten percent (10%) of the Option Shares on April
6, 2001; and (v) the Option shall become exercisable with respect to the
remaining sixty percent (60%) of the Option Shares on April 7, 2002.
Notwithstanding the foregoing, all Options granted hereunder shall vest
immediately upon a "Change in Control" of the Company.
3. Exercise of Option.
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(a) Subject to the provisions of Paragraph 4 hereof, the Option
will remain exercisable until the earlier of (i) 30 days following
the termination of the Optionee's employment with the Company or its
subsidiaries by the Company for "cause" (as defined in subparagraph
3(e) hereof and other than by reason of a termination in Paragraph
4) or a Deemed Exercise (as defined in Paragraph 4 hereof) or (ii)
the tenth (10th) anniversary of the Date of Grant (the "Expiration
Date"); provided, however, in no event shall this Option be
exercisable after the tenth (10th) anniversary of the Date of Grant.
This Option may be exercised with respect to whole Option Shares
only.
(b) To the extent then vested as set forth in Paragraph 2
above, this Option may be exercised by delivering to the Company at
its principal executive office written notice of intent to so
exercise. Such notice shall specify the number of Option Shares for
which the Option is being exercised and shall be accompanied by
payment in full of the Exercise Price and any applicable taxes or
like requirements pursuant to Paragraph 10 hereof. Such payment
shall be made in cash or by certified check, bank draft or postal or
express money order payable to the order of the Company, or in whole
or in part in Common Stock, valued at Fair Market Value (which Common
Stock must have been owned by the Optionee for at least 180 days).
(c) Notwithstanding any other provision of the Plan or this
Agreement to the contrary, this Option may not be exercised prior to
the completion of any registration or qualification of the shares of
Common Stock to be received upon exercise of the Option under
applicable state and Federal securities or other laws, or under any
ruling or regulation of any governmental body or national securities
exchange that the Committee shall with reasonable discretion
determine to be necessary or advisable.
(d) Upon the valid exercise of the Option as to any of the
shares of Common Stock subject thereto, the Secretary of the Company
or the Company's transfer agent shall issue a certificate in the
Optionee's name for such shares of Common Stock. However, the
Company shall not be liable to the Optionee for damages relating to
any reasonable delays in issuing such certificate to the Optionee,
any loss of the certificate or any mistakes or errors in the
issuance of the certificate itself.
(e) "Cause" shall mean termination based upon: (i) the
Optionee's failure to perform substantially his duties with the
Company (other than as a result of incapacity due to physical or
mental condition) after a demand for substantial performance is
delivered to him by the Chairman of the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"),
which specifically identifies the manner in which Optionee has not
substantially performed his duties; (ii) the Optionee's willful
commission of misconduct which is injurious to the Company,
monetarily or otherwise; or (iii) the Optionee's material breach of
any provisions of this Agreement. Notwithstanding the foregoing,
the Optionee shall not be deemed to have been terminated for cause
unless and until: (i) he receives written notice of termination from
the Chairman of the Compensation Committee of the Board; (ii) he is
given the opportunity, with
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counsel, to be heard before the Board; and (iii) the Board finds, in
its good faith opinion, that the Optionee was guilty of the conduct
set forth in said notice of termination.
4. Exercisability Upon Change in Control of the Company or Death,
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Retirement or Termination of Employment. Notwithstanding any other provision
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of this Agreement to the contrary, prior to full vesting, if the Optionee
dies, is permanently disabled or if the Optionee's employment with the
Company and its subsidiaries is terminated by the Company without cause (as
cause is defined in subparagraph 3(e)), the Option shall be deemed to have
become vested on January 1 of each year from January 1, 1998 through January
1, 2002 at the rate shown on the following schedule:
Vesting Date Percentage of Option Shares Vested
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January 1, 1998 20%
January 1, 1999 20%
January 1, 2000 20%
January 1, 2001 20%
January 1, 2002 20%
To the extent so vested prior to the date of termination, this Option shall
continue to be exercisable according to the provisions of Paragraphs 2 and 3
hereof; provided, however, that in the event of a Change in Control during
the term hereof, any outstanding Option held by the Optionee shall become
immediately and fully exercisable or payable according to the following
terms:
(a) The Option shall become immediately and fully exercisable,
and shall remain exercisable until it would otherwise terminate in
accordance with its terms.
(b) During the six-month and seven-day period from and after a
Change in Control (the "Exercise Period"), the Optionee shall have
the right, in lieu of the payment of the Exercise Price per share of
Common Stock being purchased under the Option and by giving notice to
the Committee, to elect to receive cash, within the Exercise Period,
in lieu of exercise thereof (a "Deemed Exercise"), provided that if
the Optionee is a Reporting Person, either (i) the Option grant was
approved by the Board or the Committee or (ii) more than six (6)
months have elapsed from the grant thereof, to surrender all or part
of the Option to the Company and to receive in cash, within 30 days
of such notice, an amount equal to the amount by which the Change in
Control Price (as hereinafter defined) per share of Common Stock on
the date of such election shall exceed the Exercise Price per share
of Common Stock under the Option multiplied by the number of shares
of Common Stock granted under the Option as to which the right
granted under this subparagraph 4(b) shall have been exercised.
Change in Control Price shall mean the higher of (i) (A) for any
period during which Common Stock shall be listed for trading on a
national securities exchange, the highest closing price per share of
Common Stock on such exchange as of the close of such trading day,
(B) for any period during which Common Stock shall not be listed for
trading on a national securities exchange, but when Common Stock
shall be authorized as a Nasdaq National Market security, the highest
price per share as quoted by the Nasdaq, (C) for any period during
which Common Stock shall not be listed for trading on a national
securities exchange or authorized as a Nasdaq National Market
security, but when Common Stock shall be authorized as a Nasdaq
SmallCap Market security, the highest average of the high bid and low
asked prices as reported by the Nasdaq or (D) the highest market
price per share of Common Stock as determined by a nationally
recognized investment banking firm selected by the Committee in the
event neither (A), (B) nor (C) above shall be applicable, in each
case during the 60-day period prior to and ending on
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the date of the Change in Control, and (ii) if the Change in Control
is the result of a transaction or series of transactions described in
clauses (i), (iii), (iv) or (v) of the definition of "Change in
Control" in the Plan, the highest price per share of Common Stock
paid in such transaction or series of transactions (which in the case
of paragraph (i) shall be the highest price per share of Common Stock
as reflected in a Schedule 13D by the person having made the
acquisition).
5. No Right to Continued Employment. This Option shall not confer
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on the Optionee any right to continue serving as an employee of the Company
or any subsidiary thereof nor shall this Agreement limit in any way the
Company's or any subsidiary's right to terminate or change the terms of the
Optionee's employment.
6. Transferability. Except as required by law or for transfers to a
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Permitted Transferee, this Option is not transferable or assignable by an
Optionee other than by will or the laws of descent and distribution. Unless
otherwise provided by the Board or the Committee, during the Optionee's
lifetime, the Option shall be exercisable only by the Optionee or a Permitted
Transferee, as the case may be.
7. Death of Optionee. Following the death of the Optionee, this
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Option shall be exercisable to the extent provided in Paragraph 4 by the
Optionee's executor or administrator, or a Permitted Transferee, as the case
may be, or the person or persons to whom the Optionee's rights under this
Agreement shall pass by will or by the laws of descent and distribution, as
the case may be. Any heir or legatee of the Optionee shall take rights
herein granted subject to the terms and conditions hereof. No such transfer
of this Option to heirs or legatees of the Optionee shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Committee may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions hereof.
8. Adjustments Upon Changes in Capitalization, Etc. In the event of
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the payment of a stock dividend, a split-up or consolidation of shares, or
any like capital adjustment of the Company occurring after April 6, 1998,
then to the extent the Option hereunder remains outstanding and unexercised,
there shall be a corresponding adjustment as to the number of shares covered
under this Option, and in the Exercise Price per share, to the end that the
Optionee shall retain a proportionate interest without change in the total
Exercise Price under this Option.
9. Forfeiture of Option. The Optionee shall forfeit all unexercised
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Options if he competes with the business of the Company or any subsidiary of
the Company, engages in any activity adverse to the best interests of the
Company or any subsidiary of the Company or uses any of the trade secrets or
confidential information of the Company or any subsidiary of the Company. The
non-competition restriction contained in this Paragraph 9 may be waived by the
Company in writing as to delineated services rendered by the Optionee to
certain specified individuals and/or entities.
10. Withholding. The Optionee agrees to make appropriate
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arrangements with the Company for satisfaction of any applicable Federal,
state or local income tax, withholding requirements or like requirements,
including the payment to the Company at the time of exercise of the Option of
all such taxes and requirements.
11. Securities Laws; Legend on Certificates. Upon the acquisition of
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any shares of Common Stock pursuant to the exercise of this Option, the
Optionee will enter into such written representations, warranties and
agreements as the Company may reasonably request in order to comply with
applicable securities laws or with this Agreement. The certificates
representing the shares of Common
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Stock purchased by exercise of this Option may be stamped or otherwise
imprinted with a legend in such form as the Company or its counsel may
require with respect to any applicable restrictions on sale or transfer and
the stock transfer records of the Company may reflect stop-transfer
instructions with respect to such shares of Common Stock.
12. Notices. Any notice necessary under this Agreement shall be
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addressed (a) to the Company in care of its Secretary at the principal
executive office of the Company in Austin, Texas, (b) to the Optionee at the
address appearing in the personnel records of the Company for such Optionee
or (c) to either party at such other address as either party hereto may
hereafter designate in writing to the other. A notice shall be deemed to
have been given (i) as of the day when the notice is personally delivered,
(ii) three days after being deposited with the United States mail properly
addressed, (iii) the next day after being delivered during business hours to
said overnight delivery service for next day delivery, properly addressed and
prior to such delivery service's cutoff time for next day delivery, or (iv)
the day when receipt of the telecopy is confirmed, as the case may be.
13. Choice of Law. The interpretation, performance and the
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enforcement of this Agreement shall be governed by the laws of the State of
Texas.
14. Amendment of Agreement. No waiver, modification or amendment of
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any provision of this Agreement shall be effective unless specifically made
in writing and duly signed by the parties hereto.
15. Severability. If any provision of this Agreement is hold by a
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court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect to
the greatest extent possible and without being impaired or invalidated in any
way.
16. Amended and Restated Award Agreement. This Agreement shall
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supersede and replace the Memorandum of Understanding, which shall be of no
further force and effect, including, by way of example only and not by way of
limitation, Paragraph 2 of the Memorandum of Understanding, which paragraph
granted to the Optionee the right to "put" the Shares to the Company in
certain circumstances.
17. Counterparts. This Agreement may be executed in one or more
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counterparts, and each of such counterparts shall, for all purposes, be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of the
date and year first above written.
LINCOLN HERITAGE CORPORATION
By:/s/ Xxxxxxxx Xxxxxxx
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Name: Xxxxxxxx Xxxxxxx
Title: President and Chief Executive Officer
OPTIONEE:
/s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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