EXHIBIT 10.2
HALLMARK FINANCIAL SERVICES, INC.
INCENTIVE STOCK OPTION
GRANT AGREEMENT
To: _________________
You ("Optionee") have been granted an incentive stock option to
purchase shares of the Common Stock of Hallmark Financial Services, Inc.
(the "Company") as follows:
Date of Grant: _______________________
Total Number of Shares Optioned: _______________________
Exercise Price per Share: $_____
Exercisability Schedule:
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Number of Shares Not Earlier Than Not Later Than
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Up to ______ shares
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An additional ______ shares
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An additional ______ shares
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An additional ______ shares
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The attached Terms and Conditions comprise an integral part of this
Incentive Stock Option Grant Agreement, and the option hereby granted is
subject to the Terms and Conditions and the 2005 Long Term Incentive Plan of
the Company (the "Incentive Plan"). By your signature below, you agree to
be bound by the provisions of the Incentive Stock Option Grant Agreement
(including the Terms and Conditions) and the Incentive Plan.
HALLMARK FINANCIAL SERVICES, INC.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer
OPTIONEE
TERMS AND CONDITIONS
The following Terms and Conditions comprise an integral part of the
"Incentive Stock Option Grant Agreement" to which these Terms and Conditions
are attached.
R E C I T A L S
- - - - - - - -
A. Optionee is regularly employed by Hallmark Financial Services,
Inc. (the "Company") or one of its subsidiaries in a capacity that has been
determined by the Compensation Committee of the Board of Directors of the
Company (the "Committee") to comply with the requirements for eligibility to
participate in the Company's 2005 Long Term Incentive Plan (hereinafter
called the "Incentive Plan"), and the Company desires that Optionee remain
in the employment of the Company or one of its subsidiaries and contribute
to the growth and success of the Company.
B. The Committee has determined to grant to Optionee an option in
order to encourage Optionee to remain in the employment of the Company or
one of its subsidiaries and contribute to the growth and success of the
Company by affording Optionee an opportunity to obtain an increased
proprietary interest in the Company so as to assure a closer identification
between Optionee's interest and the interest of the Company.
1. Grant of Option.
Subject to the terms and conditions of the Incentive Plan, as such
plan is now and may be hereafter amended, the Company has granted to
Optionee the option to purchase from the Company the number of shares (the
"Optioned Shares") of the Common Stock, $.03 par value per share, of the
Company (unless otherwise indicated, hereinafter "Common Stock") indicated
in the Incentive Stock Option Grant Agreement, at the exercise price and in
accordance with the exercisability schedule therein reflected.
2. Manner of Exercising Option.
This option shall be exercised by Optionee only in the State of
Texas at the principal office of the Company by:
(a) Delivering to the Secretary or Assistant Secretary of the Company
a written notice specifying the number of Optioned Shares that Optionee then
desires to purchase, which written notice shall be in substantially the form
attached hereto as Exhibit "A" and shall be signed by Optionee; and
(b) Tendering the full exercise price of such Optioned Shares (i) in
cash (including check, bank draft or money order), (ii) by the delivery of
shares of Common Stock of the Company already owned by Optionee, (iii) by a
combination of cash and shares of such stock or (iv) otherwise in accordance
with the Incentive Plan.
As soon as practicable after such exercise of this option in whole
or in part by Optionee, the Company will deliver to Optionee at the
Company's principal office in the State of Texas a certificate or
certificates for the number of shares with respect to which this option
shall be so exercised, issued in Optionee's name. Each purchase of stock
hereunder shall be a separate and divisible transaction and a complete
contract in and of itself.
This option shall not be exercised at any one time as to less than
100 shares of Common Stock (or less than the number of shares of Common
Stock as to which this option is then exercisable, if that number is less
than 100 shares).
Notwithstanding any provision to the contrary herein contained, if
the Fair Market Value per Share (as defined in the Incentive Plan) exceeds
the exercise price of this option per Optioned Share, the Committee, in its
sole discretion, may elect, in lieu of delivering all or a portion of the
Optioned Shares as to which this option has been exercised, to reimburse
Optionee the exercise price tendered and to pay Optionee in cash or in
shares of Common Stock, or a combination of cash and Common Stock, an amount
having an aggregate value equal to the product of (i) the number of Optioned
Shares as to which this option has been exercised times (ii) the excess of
(A) the Fair Market Value per Share over (B) the exercise price of this
option per Optioned Share. Such election by the Committee shall be made by
giving written notice to Optionee.
3. Compliance with Securities and Other Laws. The Company shall not
be required to sell or issue Optioned Shares if the issuance thereof would
constitute a violation by either Optionee or the Company of any provision of
any law or regulation of any governmental authority or any national
securities exchange or market system. As a condition of any sale or
issuance of Optioned Shares, the Company may place legends on shares, issue
stop transfer orders and require such agreements or undertakings from
Optionee as the Company may deem necessary or advisable to assure compliance
with any such law or regulation, including, if the Company or its counsel
deems it appropriate, representations from Optionee that (s)he is acquiring
the Optioned Shares solely for investment and not with a view to
distribution and that no distribution of such shares acquired by Optionee
will be made unless registered pursuant to applicable federal and state
securities laws or, in the opinion of counsel of the Company, such
registration is unnecessary.
4. Early Termination of Option. In the event that Optionee ceases to
be an employee of the Company or a subsidiary of the Company, for any
reason, this option shall terminate completely as to all Optioned Shares
which Optionee was not entitled to purchase at the date of such termination
of employment. However, to the extent that this option could have been
exercised at the date of termination of employment and Optionee could have
purchased Optioned Shares at the date of such termination of employment,
giving effect to the exercisability acceleration provisions of Section 6,
then this option shall continue with respect to those Optioned Shares that
Optionee could have purchased and had not purchased at the date of such
termination of employment, to the extent set forth below:
(a) Discharge for Cause. If Optionee ceases to be an employee of the
Company or a subsidiary by reason of the fact that (s)he is discharged for
cause (as determined solely and exclusively by the Board of Directors of the
Company in its sole discretion), all rights of Optionee to exercise this
option shall terminate, lapse and be forfeited at the time of Optionee's
termination of employment.
(b) Total and Permanent Disability. If Optionee ceases to be an
employee of the Company or a subsidiary by reason of Optionee's total and
permanent disability, Optionee or Optionee's legal guardian, as appropriate,
shall have the right up to one (1) year from the date of Optionee's
cessation of employment to exercise this option.
(c) Death. If Optionee dies while an employee of the Company or a
subsidiary, the personal representatives, heirs, legatees or distributees of
Optionee, as appropriate, shall have the right up to one (1) year from the
date of Optionee's death to exercise this option.
(d) Other Termination of Employment. If Optionee ceases to be an
employee of the Company or a subsidiary for any reason other than discharge
for cause, total and permanent disability or death, Optionee shall have the
right up to three (3) months from the date of Optionee's cessation of
employment to exercise this option.
(e) Notwithstanding the provisions of paragraphs (b), (c) and (d) of
this Section 4, this option shall not be exercisable under any condition
after the date or dates specified in the Incentive Stock Option Grant
Agreement as the latest date or dates on which this option may be exercised.
(f) For purposes hereof, "total and permanent disability" shall have
the meaning set forth in the Company's long-term disability policy.
5. Nontransferability of Option. This option shall be transferable
only to the extent permitted under the Incentive Plan. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of this
option contrary to the provisions of the Incentive Plan, or the levy of any
execution, attachment or similar process upon this option, shall be null and
void and without effect.
6. Exercisability of Option.
(a) This option shall become and be exercisable in accordance with the
schedule indicated in the Incentive Stock Option Grant Agreement. The
option exercisability schedule will be accelerated in the event the
provisions of paragraphs (b), (c) or (d) of this Section 6 apply.
(b) If Optionee ceases to be an employee of the Company or a
subsidiary by reason of death, total and permanent disability (as defined in
Section 4(f) hereof) or retirement at or after the Company's standard
retirement age (as recognized by the Committee from time to time), Optionee
or the personal representatives, heirs, legatees or distributees of
Optionee, as appropriate, shall have the immediate right to exercise this
option as to all the Optioned Shares to the extent not previously exercised.
(c) If the Company experiences a Change in Control (as defined in the
Incentive Plan), Optionee shall have the immediate right to exercise this
option as to all the Optioned Shares to the extent not previously exercised.
(d) The option exercisability schedule may be accelerated by the
Committee at any time in its sole discretion.
7. No Rights of a Stockholder or of Continued Employment. Optionee
shall not have any of the rights of a stockholder of the Company with
respect to the Optioned Shares except to the extent that one or more
certificates for Optioned Shares shall have been delivered to Optionee, or
(s)he has been determined to be a stockholder of record by the Company's
transfer agent, upon due exercise of this option. Further, nothing herein
shall confer upon Optionee any right to remain in the employ of the Company
or any of its subsidiaries, and nothing herein shall be construed in any
manner to terminate Optionee's employment at any time.
8. Interpretation of this Agreement. The administration of the
Incentive Plan has been vested in the Committee, and all questions of
interpretation of this option shall be subject to determination by the
Committee, which determination shall be final and binding on Optionee.
9. Option Subject to Incentive Plan. This option is granted subject
to the terms and provisions of the Incentive Plan, as such plan is now and
may be hereafter subsequently amended, which Incentive Plan is incorporated
herein by reference. In case of any conflict between the provisions hereof
and the Incentive Plan, the terms and provisions of the Incentive Plan shall
be controlling.
EXHIBIT "A"
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Notice of Exercise of Option
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I hereby exercise my option to purchase from Hallmark Financial Services,
Inc. (the "Company") at Dallas, Texas ____________ shares of its Common
Stock in accordance with the Company's 2005 Long Term Incentive Plan,
and in accordance with my Incentive Stock Option Grant Agreement dated
_______________, 20___, and hereby tender in payment therefor cash and/or
Common Stock in the amount of, and/or with an aggregate Fair Market Value
per Share (as defined in the 2005 Long Term Incentive Plan) equal to,
$_______________, being $_____ per share.
(Signature of Optionee)
(Printed Name)
(Date)