EXHIBIT 10.2
COASTAL BANKING COMPANY, INC.
RESTRICTED STOCK AWARD

This RESTRICTED STOCK AWARD (the “Award”) is made and entered into as of the
26th day of May, 2010, by and between Coastal Banking Company, Inc. (the
“Company”), a South Carolina corporation, and Michael G. Sanchez (the
“Employee”).

Upon and subject to the Additional Terms and Conditions attached hereto and
incorporated herein by reference as part of this Award, the Company hereby
awards as of the Grant Date to the Employee the Restricted Shares described
below in consideration of the services rendered and/or to be rendered to the
Company by virtue of the Employee’s employment relationship with the Company
(including any affiliate thereof).

A.           Grant Date:  May 26, 2010.

B.           Restricted
Shares:  20,000                                            shares of the
Company’s common stock (“Common Stock”).

C.           Vesting:  The Restricted Shares shall become vested, as and to the
extent indicated below, but only if the Employee remains in the continuous
service of the Company and its affiliates (the “Service Condition”) through the
applicable Vesting Date indicated in the Vesting Schedule below:
 

  Years of Vesting Service  
Percentage of Restricted Shares
which are Vested Shares
    Less than 2   0%     2 or more   100%  

 
The Employee shall receive one Year of Vesting Service for each full consecutive
one-year period of continuous service during the period beginning with the Grant
Date and ending on the date the Employee ceases to provide services to the
Company (including any affiliate), regardless of the reason.

Notwithstanding the foregoing, the Service Condition will be deemed satisfied as
to all of the Restricted Shares if the Employee provides continuous service to
the Company and/or any affiliate from the Grant Date through the date of any of
the earlier events listed below:

(a)           in the event of a termination of the Employee’s services as an
employee for the Company (and its affiliates) due to either death or Disability;
or

(b)           the effective date of a Change in Control.

The Restricted Shares which have satisfied (or are deemed to have satisfied) the
Service Condition are herein referred to as the “Vested Shares.”  Any portion of
the Restricted Shares which have not become Vested Shares in accordance with
this Paragraph C. before or at the time the Employee ceases to be an employee of
the Company (including any affiliate), regardless of the reason, shall be
forfeited.

 
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IN WITNESS WHEREOF, the Company and Employee have signed this Award as of the
Grant Date set forth above.

 
 
 

  COASTAL BANKING COMPANY, INC.:        EMPLOYEE:               By:
 /s/ Suellen Rodeffer Garner
   
/s/ Michael G. Sanchez 
   
Suellen Rodeffer Garner
   
Michael G. Sanchez
  Title: 
Chairman of the Board
   
 
 

 
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ADDITIONAL TERMS AND CONDITIONS OF
COASTAL BANKING COMPANY, INC.
RESTRICTED STOCK AWARD

1.           Condition to Delivery of Restricted Shares.

 
 

 
(a)           Employee must deliver to the Company, within two (2) business days
after the earlier of (i) the date (the “Vesting Date”) on which any Restricted
Shares become Vested Shares, or (ii) the date the Employee makes an election
pursuant to Section 83(b) of the Internal Revenue Code as to all or any portion
of the Restricted Shares, either cash or a certified check payable to the
Company in the amount of all tax withholding obligations (whether federal, state
or local) imposed on the Company by reason of the vesting of the Restricted
Shares, or the making of an election pursuant to Section 83(b) of the Internal
Revenue Code, as applicable, except as provided in Section 1(b).
 
(b)           If the Employee does not make an election pursuant to Section
83(b) of the Internal Revenue Code, in lieu of paying the withholding tax
obligations in cash or by certified check as required by Section 1(a), Employee
may elect (the “Withholding Election”) to have the actual number of shares of
Common Stock that become Vested Shares reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the Fair Market Value of the
Common Stock, is sufficient to satisfy the amount of the tax withholding
obligations imposed on the Company by reason of the vesting of the Restricted
Shares on the applicable Vesting Date.  Employee may make a Withholding Election
only if all of the following conditions are met:

(i)           the Withholding Election must be made on or prior to the Vesting
Date by executing and delivering to the Company a properly completed Notice of
Withholding Election, in substantially the form of Exhibit A attached hereto;

(ii)           the Company determines that giving effect to the Withholding
Election is permitted under the standards for compensation and corporate
governance published by the Treasury Department as an interim final rule under
Section 111 of the Emergency Economic Stabilization Act of 2008, or any
successor guidance; and

(iii)            any Withholding Election made will be irrevocable; however, the
Board of Directors may, in its sole discretion, disapprove and give no effect to
any Withholding Election.

(c)           Unless and until the Employee provides for the payment of the tax
withholding obligations in accordance with the provisions of this Section 1, the
Company shall have no obligation to deliver any of the Vested Shares and may
take any other actions necessary to satisfy such obligations, including
withholding of appropriate sums from other amounts payable to the Employee.  If
the shares of Common Stock are being traded by brokers and the Employee is not a
“director” or “executive officer”, within the meaning of Section 13(k) of the
Securities Exchange Act of 1934 (Section 402 of the Sarbanes-Oxley Act of 2002),
at the time tax withholding obligations become due, at the request of the
Employee, the Board of Directors may make, or authorize the making of, such
arrangements with the Employee and a broker, dealer or other “creditor” (as
defined by Regulation T issued by the Board of Governors of the Federal Reserve
System) acting on behalf of the Employee for the receipt from such broker,
dealer or other “creditor” of cash by the Company in an amount necessary to
satisfy the Employee’s tax withholding obligations in exchange for delivery of a
number of Vested Shares directly to the broker, dealer or other “creditor”
having a value equal to the cash delivered.

 
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2.           Issuance of Restricted Shares.

(a)           The Company shall issue the Restricted Shares as of the Grant Date
in either manner described below, as determined by the Board of Directors in its
sole discretion:

(i)           by the issuance of share certificate(s) evidencing Restricted
Shares to the Secretary of the Company or such other agent of the Company as may
be designated by the Board of Directors or the Secretary (the “Share
Custodian”); or

(ii)           by documenting the issuance in uncertificated or book entry form
on the Company’s stock records.

Evidence of the Restricted Shares either in the form of share certificate(s) or
book entry, as the case may be, shall be held by the Company or Share Custodian,
as applicable, until the Restricted Shares become Vested Shares in accordance
with the Vesting Schedule.

(b)           If the shares of Common Stock are registered under the Securities
Act of 1933, as amended (the “Securities Act”) and the Employee is determined by
the Board of Directors to be an “affiliate” of the Company, as such term is
defined in Rule 144 (“Rule 144”) under the Securities Act, the Restricted Shares
(and the Vested Shares resulting therefrom) shall be evidenced only by physical
share certificates.

(c)           When the Restricted Shares become Vested Shares, the Company or
the Share Custodian, as the case may be, shall deliver the Vested Shares to the
Employee or, at the Company’s election, to a broker designated by the Company
(the “Designated Broker”) by either physical delivery of the share
certificate(s) or book entry transfer, as applicable, for the benefit of an
account established in the name of the Employee, in either case, after, to the
extent applicable, payment by the Employee of the tax withholding obligations
pursuant to Section 1(a) and/or reduced by any Vested Shares withheld and
returned to the Company pursuant to Section 1(b) above or delivered to a broker,
dealer or other “creditor” as contemplated by Section 1(c) above (such reduced
number of Vested Shares are referred to in this Section 2(b) as the “Net Vested
Shares”).  If the number of Vested Shares includes a fraction of a share,
neither the Company nor the Share Custodian shall be required to deliver the
fractional share to the Employee, and the Company shall pay the Employee the
amount determined by the Company to be the Fair Market Value therefor.  At any
time after receipt by the Designated Broker, the Employee may require that the
Designated Broker deliver the Net Vested Shares to the Employee pursuant to such
arrangements or agreements as may exist between the Designated Broker and the
Employee.

(c)           In the event that the Employee forfeits any of the Restricted
Shares, the Company shall cancel the issuance on its stock records and, if
applicable, the Share Custodian shall promptly deliver the share certificate(s)
representing the forfeited shares to the Company.

(d)           Employee hereby irrevocably appoints the Share Custodian, and any
successor thereto, as the true and lawful attorney-in-fact of Employee with full
power and authority to execute any stock transfer power or other instrument
necessary to transfer any Restricted Shares to the Company in accordance with
this Award, in the name, place, and stead of the Employee.  The term of such
appointment shall commence on the Grant Date of this Award and shall continue
until the last of the Restricted Shares are delivered to the Employee as Net
Vested Shares or are returned to the Company as forfeited Restricted Shares or
as Vested Shares withheld and returned to the Company pursuant to Section 1(b),
as provided by the applicable terms of this Award.

 
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(e)           Unless and until the Restricted Shares become Vested Shares, the
Employee shall be entitled to all rights applicable to holders of shares of
Common Stock including, without limitation, the right to vote such shares and to
receive dividends or other distributions thereon as provided by Section 3,
except as otherwise expressly provided in this Award.

(f)           In the event the number of shares of Common Stock is increased or
reduced as a result of a subdivision or combination of shares of Common Stock or
the payment of a stock dividend or any other increase or decrease in the number
of shares of Common Stock or other transaction such as a merger, reorganization
or other change in the capital structure of the Company, the Employee agrees
that any certificate representing shares of Common Stock or other securities of
the Company issued as a result of any of the foregoing shall be delivered to the
Share Custodian or recorded in book entry form, as applicable, and shall be
subject to all of the provisions of this Award as if initially granted
hereunder.

3.             Acknowledgement by Employee of Tax Election
Opportunity.  Employee acknowledges that the award of the Restricted Shares
constitutes a transfer of property for federal income tax purposes under Section
83 of the Internal Revenue Code and that the Employee shall have the sole
responsibility for determining whether to elect early income tax treatment by
making an election permitted under Subsection (b) of Section 83 of the Internal
Revenue Code and the sole responsibility for effecting any such election in an
appropriate and on a timely basis.

4.             Dividends.  The Employee shall be entitled to dividends or other
distributions paid or made on Restricted Shares but only as and when the
Restricted Shares to which the dividends or other distributions are attributable
become Vested Shares.  Dividends paid on Restricted Shares will be held by the
Company and transferred to the Employee, without interest, on such date as the
Restricted Shares become Vested Shares.  Dividends or other distributions paid
on Restricted Shares that are forfeited shall be retained by the Company.

5.             Restrictions on Transfer of Restricted Shares.

 
(a)           General Restrictions.  Except as provided by this Award and
subject to subsection (b) below, the Employee shall not have the right to make
or permit to exist any transfer or hypothecation, whether outright or as
security, with or without consideration, voluntary or involuntary, of all or any
part of any right, title or interest in or to any Restricted Shares.  Any such
disposition not made in accordance with this Award shall be deemed null and
void.  The Company will not recognize, or have the duty to recognize, any
disposition not made in accordance with this Award, and any Restricted Shares so
transferred will continue to be bound by this Award.  The Employee (and any
subsequent holder of Restricted Shares) may not sell, pledge or otherwise
directly or indirectly transfer (whether with or without consideration and
whether voluntarily or involuntarily or by operation of law) any interest in or
any beneficial interest in any Restricted Shares except pursuant to the
provisions of this Award.  Any sale, pledge or other transfer (or any attempt to
effect the same) of any Restricted Shares in violation of any provision of this
Award shall be void, and the Company shall not record such transfer, assignment,
pledge or other disposition on its books or treat any purported transferee or
pledgee of such Restricted Shares as the owner or pledgee of such Restricted
Shares for any purpose.
 

 
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           (b)           TARP Restrictions.  Notwithstanding any other provision
of this Award, until the Company fully repays the obligations arising from the
financial assistance (the “TARP Proceeds”) provided to the Company and its
affiliates under the Troubled Asset Relief Program (“TARP”) administered by the
U.S. Department of Treasury, the Restricted Shares and, after satisfaction of
the Service Condition, the Vested Shares shall be subject to this Section 5(b)
and shall not be transferable (as defined in Treasury Regulations Section
1.83-3(d)) except in accordance with the following schedule:
 

 
Percentage of TARP
Proceeds Repaid
 
Percentage of Restricted & Vested
Shares that are Transferrable
    Less than 25%    0%     At least 25% but less than 50%   25%     At least
50% but less than 75%    50%     At least 75% but less than 100%   75%     100%
  100%  

 
Notwithstanding the foregoing, if the Employee does not make an election
pursuant to Section 83(b) of the Internal Revenue Code, at any time beginning
with the date upon which the Restricted Shares become Vested Shares and ending
on December 31 of the calendar year in which such Vesting Date occurs, a portion
of the Vested Shares may be transferable as may reasonably be required to pay
federal, state, or local taxes that are anticipated to apply to the income
recognized due to such vesting, and the amounts made transferable for this
purpose shall not count toward the percentages in the schedule above.

(c)           Certain Permitted Transfers.  The restrictions contained in this
Section 5 will not apply with respect to transfers of the Restricted Shares
pursuant to applicable laws of descent and distribution; provided that the
restrictions contained in this Section 5 will continue to be applicable to the
Restricted Shares after any such transfer; and provided further that the
transferee(s) of such Restricted Shares must agree in writing to be bound by the
provisions of this Award.

6.             Additional Restrictions on Transfer.

(a)           Certificates evidencing the Restricted Shares shall have noted
conspicuously on the certificate a legend required under applicable securities
laws and reflecting the transfer restrictions set forth herein in addition to
any legends other legend(s) as the Company deems appropriate and the Employee
shall not make any transfer of the Restricted Shares without first complying
with the restrictions on transfer described in such legends.  Such legends may
include the following:

TRANSFER IS RESTRICTED

 
The shares evidenced by this certificate have been issued pursuant to an
exemption from registration under the Securities Act of 1933, as amended (the
“Securities Act”) and applicable state securities laws and as such may only be
sold or otherwise transferred:  (1) pursuant to registration or an exemption
from registration under the Securities Act, including but not limited to Rule
144 thereunder, and the securities laws of any applicable state or other
jurisdiction;  or (2) if, in the opinion of counsel, in form and substance
satisfactory to the issuer, such transfer is exempt from registration or is
otherwise in compliance with applicable federal and state securities laws.

The securities evidenced by this certificate are subject to restrictions on
transfer and forfeiture provisions which also apply to the transferee as set
forth in a restricted stock Award, dated May 26, 2010, a copy of which is
available from the Company.

 
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(b)           Opinion of Counsel.  No holder of Restricted Shares may sell,
transfer, assign, pledge or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any interest in or any beneficial interest in any Restricted Shares, except (i)
pursuant to an effective registration statement under the Securities Act or (ii)
in a transaction that fully complies with Rule 144, without first delivering to
the Company an opinion of counsel (reasonably acceptable in form and substance
to the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.

7.             Change in Capitalization.

(a)           The number and kind of Restricted Shares shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or combination of shares or the payment of a
stock dividend in shares of Common Stock to holders of outstanding shares of
Common Stock or any other increase or decrease in the number of shares of Common
Stock outstanding effected without receipt of consideration by the Company.  No
fractional shares shall be issued in making such adjustment.  All adjustments
made by the Board of Directors under this Section shall be final, binding, and
conclusive.
 
(b)          In the event of a merger, consolidation, extraordinary dividend
(including a spin-off), reorganization, recapitalization, sale of substantially
all of the Company’s assets, other change in the capital structure of the
Company, tender offer for shares of Common Stock or a Change in Control, an
appropriate adjustment may be made with respect to the Restricted Shares such
that other securities, cash or other property may be substituted for the Common
Stock held by the Share Custodian or recorded in book entry form pursuant to
this Award.
 
The existence of the Award shall not affect the right or power of the Company to
make or authorize any adjustment, reclassification, reorganization or other
change in its capital or business structure, any merger or consolidation of the
Company, any issue of debt or equity securities having preferences or priorities
as to the Common Stock or the rights thereof, the dissolution or liquidation of
the Company, any sale or transfer of all or part of its business or assets, or
any other corporate act or proceeding.
 
8.             Governing Laws.  This Award shall be construed, administered and
enforced according to the laws of the State of South Carolina; provided,
however, no Restricted Shares shall be issued except, in the reasonable judgment
of the Board of Directors, in compliance with exemptions under applicable state
securities laws of the state in which the Employee resides, and/or any other
applicable securities laws.

9.             Successors.  This Award shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.

 
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10.           Notice.  Except as otherwise specified herein, all notices and
other communications under this Award shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient.  Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.  Notices
sent to the Company shall be addressed to the attention of the Secretary of the
Company.

11.           Severability.  In the event that any one or more of the provisions
or portion thereof contained in this Award shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Award, and this Award shall be
construed as if the invalid, illegal or unenforceable provision or portion
thereof had never been contained herein.

12.           Entire Agreement.  This Award expresses the entire understanding
and agreement of the parties with respect to the subject matter.  This Award may
be executed in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same instrument.

13.           Headings and Capitalized Terms.  Paragraph headings used herein
are for convenience of reference only and shall not be considered in construing
this Award.  Capitalized terms used, but not defined, in this Award shall have
the meaning ascribed to them in Section 16.

14.           Specific Performance.  In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Award, the party or parties who are thereby aggrieved shall have the right to
specific performance and injunction in addition to any and all other rights and
remedies at law or in equity, and all such rights and remedies shall be
cumulative.

15.           No Right to Continued Service Relationship.  The grant of the
Restricted Shares made pursuant to this Award shall not be construed as giving
Employee the right to any continued service relationship with the Company or any
affiliate of the Company.
 
 

 
 
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16.           Special Definitions.  For purposes of this Award, the following
terms shall have the meanings ascribed to them herein, as follows:

(a)           The term “Board of Directors” means the Board of Directors of the
Company or any committee thereof.

(b)           The term “Change in Control” means a change in control event
within the meaning of 26 C.F.R. 1.409A-3(i)(5)(i).

(c)           The term “Disability” has the same meaning given to the same term
in the Employment Agreement as in effect from time to time hereafter; provided,
however, if there is no such term contained in the Employment Agreement then in
effect or if no Employment Agreement is then in effect, then the term shall have
the same meaning as provided in the Employment Agreement containing such term
that was most recently in effect.

(d)           The term “Employment Agreement” means the Employment Agreement
entered into December 31, 2008 by and among the Company, CBC National Bank and
the Employee or any successor agreement among the parties.

(e)           The term “Fair Market Value” means the average of the closing high
bid and low asked prices for the Common Stock reported for the applicable date
on the Over-The-Counter Bulletin Board (“OTCBB”) or, in the absence of closing
bids on such day, the closing bids on the next preceding day on which there were
bids or, if the Common Stock is not then traded on the OTCBB, the fair market
value of a share of Common Stock as determined by the Board of Directors taking
into account such facts and circumstances deemed to be material by the Board of
Directors to the value of the Common Stock in the hands of the Employee.
 
 
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EXHIBIT A

NOTICE OF WITHHOLDING ELECTION
COASTAL BANKING COMPANY, INC.
RESTRICTED STOCK AWARD

TO:                      Coastal Banking Company, Inc.

FROM:                _________________________________________                

RE:                      Withholding Election

This election relates to the Restricted Stock Award identified in Paragraph 3
below. I hereby certify that:

              (1)My correct name and social security number and my current
address are set forth at the end of this document.

              (2)I am (check one, whichever is applicable).
 

 
o
the original recipient of the Restricted Stock Award.

 
o
the legal representative of the estate of the original recipient of the
Restricted Stock Award.

 

o     a legatee of the original recipient of the Restricted Stock Award.
 

 
o
the legal guardian of the original recipient of the Restricted Stock Award.

 

              (3)The Restricted Stock Award pursuant to which this election
relates was issued in the name of Michael G. Sanchez for a total of
_____________ shares of Common Stock with an award date of May 26, 2010. This
election relates to ______ shares of Common Stock to be delivered upon the
vesting of a portion of the Restricted Shares, provided that the numbers set
forth above shall be deemed changed as appropriate to reflect stock splits and
other adjustments contemplated by the Restricted Stock Award.

              (4)I hereby elect to have certain of the Vested Shares withheld
and returned to the Company, rather than delivered to me, for the purpose of
having the value of such shares applied to pay minimum required federal, state
or local, if any, tax withholding obligations arising from the vesting
event.  The fair market value of the Vested Shares to be withheld and returned
to the Company shall be equal to the minimum statutory tax withholding
requirements under federal, state and local law in connection with the vesting
event, reduced by the amount of any cash or certified check payment tendered by
me to the Company in partial payment of such tax withholding obligations.

 
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  (5)            I understand that this Withholding Election is made prior to
the Vesting Date and is otherwise timely made pursuant to Section 1 of the
Restricted Stock Award.

              (6)I further understand that, if this Withholding Election is not
disapproved by the Board of Directors, the Company shall withhold from the
Vested Shares a whole number of shares of Common Stock having the value
specified in Paragraph 4 above.

              (7)I have read and understand the provisions of the Restricted
Stock Award and I have no reason to believe that any of the conditions therein
to the making of this Withholding Election have not been met. Capitalized terms
used in this Notice of Withholding Election without definition shall have the
meanings given to them in the Restricted Stock Award.
 

Dated:                     Signature:                   
 
 
 
 
Name (Printed)
 
 
 
 
 
 
  Street Address               City, State, Zip Code               Social
Security Number      

 
 
 
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