ChoiceOne Financial Services, Inc. 10-K [cofs-10k_123119.htm]

 

Exhibit 10.5

 

 

CHOICEONE FINANCIAL SERVICES, INC.

DIRECTOR EQUITY COMPENSATION PLAN OF 2019

 

SECTION 1

 

Establishment Of Plan; Purpose Of Plan

 

1.1       Establishment of Plan. The Company hereby establishes the DIRECTOR
EQUITY COMPENSATION PLAN OF 2019 for its corporate and Subsidiary non-employee
directors. The Plan permits the grant and award of Stock Options, Restricted
Stock, Restricted Stock Units, Stock Awards and other stock-based and
stock-related awards.

 

1.2       Purpose of Plan. The purpose of the Plan is to provide Participants
with an increased incentive to contribute to the long-term growth of the Company
and its Subsidiaries, to join the interests of Participants with the interests
of the Company’s shareholders through the opportunity for increased stock
ownership and to attract and retain Participants. The Plan is further intended
to provide flexibility to the Company in structuring Director compensation to
best promote the foregoing objectives.

 

 

SECTION 2

 

Definitions

 

The following words have the following meanings unless a different meaning
plainly is required by the context:

 

2.1       “Act” means the Securities Exchange Act of 1934, as amended.

 

2.2       “Affiliate” means any organization controlling, controlled by or under
common control with the Company.

 

2.3       “Board” means the Board of Directors of the Company.

 

2.4       “Change in Control,” unless otherwise defined in an Equity Award
agreement, means an occurrence of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A issued under the Act.
Without limiting the inclusiveness of the definition in the preceding sentence,
a Change in Control of the Company shall be deemed to have occurred as of the
first day that any one or more of the following conditions is satisfied: (a) any
Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company’s then outstanding securities;
(b) the failure at any time of the Continuing Directors to constitute at least a
majority of the Board; or (c) any of the following occur: (i) any merger or
consolidation of the Company, other than a merger or consolidation in which the
voting securities of the Company immediately prior to the merger or
consolidation continue to represent (either by remaining outstanding or being
converted into securities of the surviving entity) 60% or more of the combined
voting power of the Company or surviving entity immediately after the merger or
consolidation with another entity; (ii) any sale, exchange, lease, mortgage,
pledge, transfer or other disposition (in a single transaction or a series of
related transactions) of assets or earning power aggregating more than 50% of
the assets or earning power of the Company on a consolidated basis; (iii) any
complete liquidation or dissolution of the Company; (iv) any reorganization,
reverse stock split or recapitalization of the Company which would result in a
Change in Control as otherwise defined in this Plan; or (v) any transaction or
series of related transactions having, directly or indirectly, the same effect
as any of the foregoing.

 

   

 

 

 

2.5       “Code” means the Internal Revenue Code of 1986, as amended. Each
reference in this Plan to a section or sections of the Code, unless otherwise
noted, shall be deemed to include a reference to the rules and regulations
issued under such section or sections of the Code.

 

2.6       “Committee” means the Personnel and Benefits Committee of the Board or
such other committee as the Board may designate from time to time. The Committee
shall consist of at least two members of the Board and all of its members shall
be “non-employee directors” as defined in Rule 16b-3 issued under the Act.

 

2.7       “Common Stock” means the Company’s common stock, no par value per
share.

 

2.8       “Company” means ChoiceOne Financial Services, Inc., a Michigan
corporation, and its successors and assigns.

 

2.9       “Continuing Directors” means the individuals who were either (a) first
elected or appointed as a director in connection with the merger of the Company
and County Bank Corp. pursuant to the terms of an Agreement and Plan of Merger
dated as of March 22, 2019 and the First Amendment to Agreement and Plan of
Merger dated as of April 25, 2019, between County Bank Corp. and the Company, or
(b) subsequently appointed as a director, if appointed or nominated by at least
a majority of the Continuing Directors in office at the time of the nomination
or appointment, but specifically excluding any individual whose initial
assumption of office occurs as a result of either an actual or threatened
solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board.

 

2.10       “Director” means a member of the board of directors of the Company or
one of its Subsidiaries who is not a common law employee of the Company or one
of its Subsidiaries.

 

2.11 “Disability” means an inability of a Participant to perform his or her
duties as a Director due to physical or mental disability for a continuous
period of 180 days or longer.

 

2.12 “Equity Award” means the award or grant of a Stock Option, Restricted
Stock, a Restricted Stock Unit, a Stock Award, or another stock-based or
stock-related award, to a Participant pursuant to the Plan.

 

2.13 “Market Value” on any given date means: (a) if the security is listed for
trading on The Nasdaq Stock Market or one or more national securities exchanges,
the last reported sales price on the date in question, or if the security shall
not have been traded on the principal exchange on the applicable date, the last
reported sales price on the first day before that date on which such security
was so traded; (b) if the security is not so listed for trading but is traded in
the over-the-counter market, the fair market value determined by the Committee
in good faith, taking into account such factors as it considers advisable in a
manner consistent with the valuation principles of Section 409A of the Code,
except when the Committee expressly determines not to use Section 409A valuation
principles, which determination shall be final and binding on all parties.
Factors that the Committee may, but need not, consider when determining Market
Value include, without limitation, the prices at which recent sales of Common
Stock have been made, and the most recent reported bid and asked prices of the
Common Stock as reported by the Company's market makers on the applicable date.

 

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2.14 “Participant” means a Director of the Company or one of its Subsidiaries
who is granted an Equity Award under the Plan.

 

2.15 “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2)
of the Act.

 

2.16       “Plan” means the ChoiceOne Financial Services, Inc. Director Equity
Compensation Plan of 2019 as set forth herein, as it may be amended from time to
time.

 

2.17       “Restricted Period” means the period of time during which Restricted
Stock, Restricted Stock Units or other stock-based or stock-related awards that
are awarded under the Plan are subject to the risk of forfeiture, restrictions
on transfer and other restrictions or conditions pursuant to Sections 6 or 7.
The Restricted Period may differ among Participants and may have different
expiration dates with respect to shares of Common Stock covered by the same
Equity Award.

 

2.18       “Restricted Stock” means Common Stock awarded to a Participant
pursuant to Section 6 of the Plan while such Common Stock remains subject to the
risk of forfeiture, restrictions on transfer and other restrictions or
conditions pursuant to Section 6.

 

2.19       “Restricted Stock Unit” means an award to a Participant pursuant to
Section 6 of the Plan and described as a “Restricted Stock Unit” in Section 6.

 

2.20 “Retirement” means the voluntary resignation of service as a Director by
the Participant after the Participant has attained 55 years of age and completed
six years of service with the Company or any of its Subsidiaries or as otherwise
may be set forth in the Equity Award agreement or other grant document with
respect to a Participant and a particular Equity Award.

 

2.21 “Stock Award” means an award of Common Stock awarded to a Participant
pursuant to Section 7 of the Plan.

 

2.22 “Stock Option” means the right to purchase Common Stock at a stated price
for a specified period of time. For purposes of the Plan, a Stock Option may
only be a nonqualified stock option.

 

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2.23 “Subsidiary” means any corporation or other entity of which 50% or more of
the outstanding voting stock or voting ownership interest is directly or
indirectly owned or controlled by the Company or by one or more Subsidiaries of
the Company. The term “Subsidiary” includes present and future Subsidiaries of
the Company.

 

2.24 “Termination” or “Cessation” of service shall be considered to occur on the
date on which the Director's term as a director ends whether due to resignation,
removal, or no longer being elected as a director for any reason.

 

 

SECTION 3

 

Administration

 

3.1       Power and Authority. The Committee shall administer the Plan. The
Committee may delegate any, some or all of its record keeping, calculation,
payment and other ministerial or administrative authority and responsibility
from time to time to and among one or more individuals, who may be members of
the Committee or employees, but all actions taken pursuant to delegated
authority and responsibility shall be subject to such review, change and
approval by the Committee as the Committee considers appropriate. Except as
limited in the Plan, the Committee shall have all of the express and implied
powers and duties set forth in the Bylaws of the Company and the Plan, shall
have full power and authority to interpret the provisions of the Plan and Equity
Awards granted under the Plan and shall have full power and authority to
supervise the administration of the Plan and Equity Awards granted under the
Plan and to make all other determinations and do all things considered necessary
or advisable for the administration of the Plan. All determinations,
interpretations and selections made by the Committee regarding the Plan shall be
final and conclusive. The Committee shall hold its meetings at such times and
places as it considers advisable. Action may be taken by a written instrument
signed by all of the members of the Committee and any action so taken shall be
fully as effective as if it had been taken at a meeting duly called and held.
The Committee shall make such rules and regulations for the conduct of its
business as it considers advisable.

 

3.2       Grants or Awards to Participants. In accordance with and subject to
the provisions of the Plan, the Committee shall have the authority to determine
all provisions of Equity Awards as the Committee may consider necessary or
desirable and as are consistent with the terms of the Plan, including, without
limitation, the following: (a) the persons who shall be selected as
Participants; (b) the nature and, subject to the limitations set forth in
Section 4.1 of the Plan, extent of the Equity Awards to be made to each
Participant (including the number of shares of Common Stock to be subject to
each Equity Award, any exercise or purchase price, the manner in which an Equity
Award will vest or become exercisable and the form of payment for the Equity
Award); (c) the time or times when Equity Awards will be granted; (d) the
duration of each Equity Award; and (e) the restrictions and other conditions to
which payment or vesting of Equity Awards may be subject.

 

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3.3       Amendments or Modifications of Equity Awards. Subject to Section 10,
the Committee shall have the authority to amend or modify the terms of any
outstanding Equity Award in any manner, provided that the amended or modified
terms are not prohibited by the Plan as then in effect and provided such actions
do not cause an Equity Award not already subject to Section 409A of the Code to
become subject to Section 409A of the Code, including, without limitation, the
authority to: (a) modify the number of shares or other terms and conditions of
an Equity Award; provided that any increase in the number of shares of an Equity
Award other than pursuant to Section 4.2 shall be considered to be a new grant
with respect to such additional shares for purposes of Section 409A of the Code
and such new grant shall be made at Market Value on the date of grant; (b)
extend the term of an Equity Award to a date that is no later than the earlier
of the latest date upon which the Equity Award could have expired by its terms
under any circumstances or the 10th anniversary of the date of grant (for
purposes of clarity, as permitted under Section 409A of the Code, if the term of
a Stock Option is extended at a time when the Stock Option exercise price equals
or exceeds the Market Value, it will not be an extension of the term of the
Stock Option, but instead will be treated as a modification of the Stock Option
and a new Stock Option will be treated as having been granted); (c) accelerate
the exercisability or vesting or otherwise terminate, waive or modify any
restrictions relating to an Equity Award; (d) accept the surrender of any
outstanding Equity Award; and (e) to the extent not previously exercised or
vested, authorize the grant of new Equity Awards in substitution for surrendered
Equity Awards; provided, however, that such grant of new Equity Awards shall be
considered to be a new grant for purposes of Section 409A of the Code and shall
be made at Market Value on the date of grant and, provided further, that Equity
Awards issued under the Plan may not be repriced, replaced, regranted through
cancellation or modified without shareholder approval if the effect of such
repricing, replacement, regrant or modification would be to reduce the exercise
price or base price of such Equity Awards to the same Participants.

 

3.4       Indemnification of Committee Members. Neither any member or former
member of the Committee, nor any individual or group to whom authority or
responsibility is or has been delegated, shall be personally responsible or
liable for any act or omission in connection with the performance of powers or
duties or the exercise of discretion or judgment in the administration and
implementation of the Plan. Each person who is or shall have been a member of
the Committee, and any other individual or group exercising delegated authority
or responsibility with respect to the Plan, shall be indemnified and held
harmless by the Company from and against any cost, liability or expense imposed
or incurred in connection with such person’s or the Committee’s taking or
failing to take any action under the Plan or the exercise of discretion or
judgment in the administration and implementation of the Plan. This Section 3.4
shall not be construed as limiting the Company’s or any Subsidiary’s ability to
terminate or otherwise alter the terms and conditions of the employment of an
individual or group exercising delegated authority or responsibility with
respect to the Plan, or to discipline any such person. Each such person shall be
justified in relying on information furnished in connection with the Plan’s
administration by any appropriate person or persons.

 

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SECTION 4

 

Shares Subject to the Plan

 

4.1       Number of Shares. Subject to adjustment as provided in Section 4.2 of
the Plan, the total number of shares available for Equity Awards under the Plan
shall be 100,000 shares of Common Stock; plus shares subject to Equity Awards
that are canceled, surrendered, modified, exchanged for substitute Equity Awards
or that expire or terminate prior to the exercise or vesting of the Equity
Awards in full and shares that are surrendered to the Company in connection with
the exercise or vesting of Equity Awards, whether previously owned or otherwise
subject to such Equity Awards. Such shares shall be authorized and may be
unissued shares, shares issued and repurchased by the Company (including shares
purchased on the open market), and shares issued and otherwise reacquired by the
Company.

 

4.2Adjustments.

 

(a)       Stock Dividends and Distributions. If the number of shares of Common
Stock outstanding changes by reason of a stock dividend, stock split,
recapitalization or other general distribution of Common Stock or other
securities to holders of Common Stock, the number and kind of securities subject
to outstanding Equity Awards and available for issuance under the Plan, together
with applicable exercise prices and base prices, shall be adjusted in such
manner and at such time as shall be equitable under the circumstances. No
fractional shares shall be issued pursuant to the Plan and any fractional shares
resulting from such adjustments shall be eliminated from the respective Equity
Awards.

 

(b)       Other Actions Affecting Common Stock. If there occurs, other than as
described in Section 4.2(a), any merger, business combination, recapitalization,
reclassification, subdivision or combination approved by the Board that would
result in the persons who were shareholders of the Company immediately prior to
the effective time of any such transaction owning or holding, in lieu of or in
addition to shares of Common Stock, other securities, money and/or property (or
the right to receive other securities, money and/or property) immediately after
the effective time of such transaction, then the outstanding Equity Awards
(including exercise prices) and reserves for Equity Awards under the Plan shall
be adjusted in such manner and at such time as shall be equitable under the
circumstances. It is intended that in the event of any such transaction, Equity
Awards under the Plan shall entitle the holder of each Equity Award to receive
(upon exercise in the case of Stock Options), in lieu of or in addition to
shares of Common Stock, any other securities, money and/or property receivable
upon consummation of any such transaction by holders of Common Stock with
respect to each share of Common Stock outstanding immediately prior to the
effective time of such transaction; upon any such adjustment, holders of Equity
Awards under the Plan shall have only the right to receive in lieu of or in
addition to shares of Common Stock such other securities, money and/or other
property as provided by the adjustment.

 

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SECTION 5

 

Stock Options

 

5.1       Grant. A Participant may be granted one or more Stock Options under
the Plan. All Stock Options granted under this Plan will be non-qualified Stock
Options. No Participant shall have any rights as a shareholder with respect to
any shares of stock subject to Stock Options granted hereunder until such shares
have been issued. For purposes of determining the number of shares available
under the Plan, each Stock Option shall count as the number of shares of Common
Stock subject to the Stock Option. Stock Options shall be subject to such terms
and conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. In addition, the Committee
may vary, among Participants and among Stock Options granted to the same
Participant, any and all of the terms and conditions of the Stock Options
granted under the Plan. The Committee shall have complete discretion in
determining the number of Stock Options granted to each Participant.

 

5.2       Stock Option Agreements. Stock Options shall be evidenced by stock
option agreements, certificates of award, or both, containing the terms and
conditions applicable to such Stock Options. To the extent not covered by a
stock option agreement or certificate of award, the terms and conditions of this
Section 5 shall govern.

 

5.3       Stock Option Exercise Price and Grant Date. The per share Stock Option
exercise price shall be determined by the Committee, but shall be a price that
is equal to or greater than 100% of the Market Value on the date of grant. The
date of grant of a Stock Option shall be the date the Stock Option is authorized
by the Committee or a future date specified by the Committee as the date for
issuing the Stock Option.

 

5.4       Medium and Time of Payment. The exercise price for each share
purchased pursuant to a Stock Option granted under the Plan shall be payable in
cash or, if the Committee consents or provides in the applicable stock option
agreement or grant, in shares of Common Stock or other consideration
substantially equivalent to cash. The time and terms of payment may be amended
with the consent of a Participant before or after exercise of a Stock Option,
provided that such amendment would not cause a Stock Option to become subject to
Section 409A of the Code. Except as limited by the Act, the Sarbanes-Oxley Act
of 2002 or other laws, rules or regulations, the Committee may from time to time
authorize payment of all or a portion of the Stock Option exercise price in the
form of a promissory note or other deferred payment installments according to
such terms as the Committee may approve; provided, however, that such promissory
note or other deferred payment installments shall be with full recourse and
shall bear a market rate of interest. The Board may restrict or suspend the
power of the Committee to permit such loans and may require that adequate
security be provided. The Committee may implement a program for the
broker-assisted cashless exercise of Stock Options.

 

5.5       Limits on Exercisability. Stock Options shall be exercisable for such
periods, not to exceed 10 years and one day from the date of grant, as may be
fixed by the Committee. At the time of exercise of a Stock Option, the holder of
the Stock Option, if requested by the Committee, must represent to the Company
that the shares are being acquired for investment and not with a view to the
distribution thereof. The Committee may in its discretion require a Participant
to continue the Participant’s service with the Company or its Subsidiaries for a
certain length of time prior to a Stock Option becoming exercisable and may
eliminate such delayed vesting provisions.

 

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5.6

Restrictions on Transferability.

 

(a)       General. Unless the Committee otherwise consents or permits (before or
after the stock option grant) or unless the stock option agreement or grant
provides otherwise, Stock Options granted under the Plan may not be sold,
exchanged, transferred, pledged, assigned or otherwise alienated or hypothecated
except by will or the laws of descent and distribution. All provisions of a
Stock Option that are determined with reference to the Participant, including
without limitation those that refer to the Participant’s service with the
Company or its Subsidiaries, shall continue to be determined with reference to
the Participant after any transfer of a Stock Option.

 

(b)       Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to the exercise of a Stock Option under
the Plan as the Committee considers advisable, including, without limitation,
holding periods or further transfer restrictions, forfeiture or “claw-back”
provisions, and restrictions under applicable federal or state securities laws.

 

5.7       Termination of Service. Unless the Committee otherwise consents or
permits (before or after the stock option grant) or unless the stock option
agreement or grant provides otherwise:

 

(a)       General. If a Participant is no longer a Director for any reason other
than the Participant’s Retirement, death, Disability or removal for cause, the
Participant may exercise his or her Stock Options in accordance with their terms
for a period of 3 months after such termination of service, but only to the
extent the Participant was entitled to exercise the Stock Options on the date of
termination.

 

(b)       Death. If a Participant dies either while a Director or otherwise
during a time when the Participant could have exercised a Stock Option, the
Stock Options issued to such Participant shall be exercisable in accordance with
their terms by the personal representative of such Participant or other
successor to the interest of the Participant for a period of one year after such
Participant’s death to the extent that the Participant was entitled to exercise
the Stock Options on the date of death or termination, whichever first occurred,
but not beyond the original term of the Stock Options.

 

(c)       Disability. If a Participant ceases to be a Director due to the
Participant’s Disability, he or she may exercise his or her Stock Options in
accordance with their terms for one year after he or she ceases service unless
such Stock Options earlier expire by their terms, but only to the extent that
the Participant was entitled to exercise the Stock Options on the date of such
event and not beyond the original terms of the Stock Options.

 

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(d)       Participant Retirement. If a Participant ceases to a Director due to
Retirement, the Participant may exercise his or her Stock Options in accordance
with their terms for three years after such termination of service unless such
Stock Options earlier expire by their terms, but only to the extent that the
Participant was entitled to exercise the Stock Options on the date of such event
and not beyond the original terms of the Stock Options.

 

(e)       Termination for Cause. If a Participant’s service as a Director is
terminated for cause, the Participant shall have no further right to exercise
any Stock Options previously granted to him or her. The Committee or officers
designated by the Committee shall have absolute discretion to determine whether
a termination is for cause.

 

 

SECTION 6

 

Restricted Stock and Restricted Stock Units

6.1

Grant. Subject to the limitations set forth in Section 4.1 of the Plan,
Restricted Stock and Restricted Stock Units may be granted to Participants under
the Plan. Shares of Restricted Stock are shares of Common Stock the retention,
vesting and/or transferability of which is subject, during specified periods of
time, to such conditions (including continued service as a Director) and terms
as the Committee deems appropriate. Restricted Stock Units are Equity Awards
denominated in units of Common Stock under which the issuance of shares of
Common Stock is subject to such conditions (including continued service as a
Director) and terms as the Committee deems appropriate. For purposes of
determining the number of shares available under the Plan, each Restricted Stock
Unit shall count as the number of shares of Common Stock subject to the
Restricted Stock Unit. Unless determined otherwise by the Committee, each
Restricted Stock Unit shall be equal to one share of Common Stock and shall
entitle a Participant to either shares of Common Stock or an amount of cash
determined with reference to the value of shares of Common Stock. To the extent
determined by the Committee, Restricted Stock and Restricted Stock Units may be
satisfied or settled in cash, in shares of Common Stock or in a combination
thereof. Restricted Stock Units shall be settled no later than the 15th day of
the third month after the Restricted Stock Units vest. Restricted Stock and
Restricted Stock Units granted pursuant to the Plan need not be identical but
shall be consistent with the terms of the Plan. Subject to the requirements of
applicable law, the Committee shall determine the price, if any, at which awards
of Restricted Stock or Restricted Stock Units, or shares of Common Stock
issuable pursuant to Restricted Stock Unit awards, shall be sold or awarded to a
Participant, which may vary from time to time and among Participants.

 

6.2

Restricted Stock Agreements. Awards of Restricted Stock and Restricted Stock
Units shall be evidenced by restricted stock or restricted stock unit agreements
or certificates of award containing such terms and conditions, consistent with
the provisions of the Plan, as the Committee shall from time to time determine.
Unless the restricted stock or restricted stock unit agreement or certificate of
award provides otherwise, awards of Restricted Stock and Restricted Stock Units
shall be subject to the terms and conditions set forth in this Section 6.

 

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6.3

Vesting. The grant, issuance, retention, vesting and settlement of shares of
Restricted Stock and Restricted Stock Units shall occur at such time and in such
installments as determined by the Committee or under criteria established by the
Committee. The Committee shall have the right to make the timing of the grant
and/or issuance of, the ability to retain and the vesting and/or the settlement
of Restricted Stock Units and shares of Restricted Stock subject to continued
service and/or passage of time as deemed appropriate by the Committee.

 

6.4

Termination of Service. Unless the Committee otherwise consents or permits
(before or after the grant of Restricted Stock or Restricted Stock Units) or
unless the restricted stock or restricted stock unit agreement or grant provides
otherwise:

 

(a)       General. If a Participant ceases to be a Director during the
Restricted Period for any reason other than death, Disability, Retirement,
failure to be re-elected as a Director upon being nominated, or termination for
cause, each share of Restricted Stock and Restricted Stock Unit still subject in
full or in part to restrictions at the date of such termination shall
automatically be forfeited and returned to the Company.

 

(b)       Death, Retirement, Disability, or Failure to be Re-elected. In the
event a Participant terminates service as a Director with the Company because of
death, Disability, Retirement, or failing to be re-elected as a Director by the
Company’s shareholders after being nominated to serve as a Director during the
Restricted Period, the restrictions remaining on any or all shares of Restricted
Stock and Restricted Stock Units shall terminate automatically with respect to
that respective number of such shares or Restricted Stock Units (rounded to the
nearest whole number) equal to the respective total number of such shares or
Restricted Stock Units granted to such Participant multiplied by the number of
full months that have elapsed since the date of grant divided by the total
number of full months in the respective Restricted Period. All remaining shares
of Restricted Stock and Restricted Stock Units shall be forfeited and returned
to the Company; provided, that the Committee may, in its sole discretion, waive
the restrictions remaining on any or all such remaining shares of Restricted
Stock and Restricted Stock Units either before or after the Participant’s death,
Disability, Retirement or failure to be re-elected as a Director by the
Company’s shareholders after being nominated to serve as a Director.

 

(c)       Termination for Cause. If a Participant’s service as a Director is
terminated for cause, the Participant shall have no further right to receive any
Restricted Stock or Restricted Stock Units and all Restricted Stock and
Restricted Stock Units still subject to restrictions at the date of such
termination shall automatically be forfeited and returned to the Company. For
purposes of the Plan, the Committee or officers designated by the Committee
shall have absolute discretion to determine whether a termination is for cause.

 

6.5

Restrictions on Transferability.

 

(a)       General. Unless the Committee otherwise consents or permits or unless
the terms of the restricted stock or restricted stock unit agreement or grant
provide otherwise: (i) neither shares of Restricted Stock nor Restricted Stock
Units may be sold, exchanged, transferred, pledged, assigned or otherwise
alienated or hypothecated during the Restricted Period except by will or the
laws of descent and distribution; and (ii) all rights with respect to Restricted
Stock and Restricted Stock Units granted to a Participant under the Plan shall
be exercisable during the Participant’s lifetime only by such Participant or his
or her guardian or legal representative.

 

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(b)       Other Restrictions. The Committee may impose other restrictions on any
shares of Common Stock acquired pursuant to an award of Restricted Stock or
issuable pursuant to Restricted Stock Unit awards under the Plan as the
Committee considers advisable, including, without limitation, holding periods or
further transfer restrictions, forfeiture or “claw-back” provisions, and
restrictions under applicable federal or state securities laws.

 

6.6

Legending of Restricted Stock. In addition to any other legend that may be set
forth on a Participant’s share certificate, any certificates evidencing shares
of Restricted Stock awarded pursuant to the Plan shall bear the following
legend:

 

The shares represented by this certificate were issued subject to certain
restrictions under the ChoiceOne Financial Services, Inc. Director Equity
Compensation Plan of 2019 (the “Plan”). This certificate is held subject to the
terms and conditions contained in a restricted stock agreement that includes a
prohibition against the sale or transfer of the stock represented by this
certificate except in compliance with that agreement and that provides for
forfeiture upon certain events. Copies of the Plan and the restricted stock
agreement are on file in the office of the Secretary of the Company.

 

The Committee may require that certificates representing shares of Restricted
Stock be retained and held in escrow by a designated employee or agent of the
Company or any Subsidiary until any restrictions applicable to shares of
Restricted Stock so retained have been satisfied or lapsed.

 

6.7

Rights as a Shareholder. A Participant shall have all dividend, liquidation and
other rights with respect to Restricted Stock held of record by such Participant
as if the Participant held unrestricted Common Stock; provided, that the
unvested portion of any award of Restricted Stock shall be subject to any
restrictions on transferability or risks of forfeiture imposed pursuant to this
Section 6 and the terms and conditions set forth in the Participant’s restricted
stock agreement. Unless the Committee otherwise determines or unless the terms
of the applicable restricted stock unit agreement or grant provide otherwise, a
Participant shall have all dividend and liquidation rights with respect to
shares of Common Stock subject to awards of Restricted Stock Units held by such
Participant as if the Participant held unrestricted Common Stock. Unless the
Committee determines otherwise or unless the terms of the applicable restricted
stock or restricted stock unit agreement or grant provide otherwise, any noncash
dividends or distributions paid with respect to shares of unvested Restricted
Stock and shares of Common Stock subject to unvested Restricted Stock Units
shall be subject to the same restrictions and vesting schedule as the shares to
which such dividends or distributions relate. Any dividend payment with respect
to Restricted Stock or Restricted Stock Units shall be made no later than the
15th day of the third month following the date the dividends are paid to
shareholders.

 

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6.8

Voting Rights. Unless otherwise determined by the Committee, Participants
holding shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those shares during the Restricted Period. Participants
shall have no voting rights with respect to shares of Common Stock underlying
Restricted Stock Units unless and until such shares are reflected as issued and
outstanding shares on the Company’s stock ledger.

 

 

SECTION 7

 

Stock-Based Awards

 

7.1

Grant. Subject to the limitations set forth in Section 4.1 of the Plan, in
addition to any Stock Options, Restricted Stock, or Restricted Stock Units that
a Participant may be granted under the Plan, a Participant may be granted one or
more other types of awards based on or related to shares of Common Stock
(including the grant of Stock Awards). Such awards shall be subject to such
terms and conditions, consistent with the other provisions of the Plan, as may
be determined by the Committee in its sole discretion. Notwithstanding the
previous sentence, the shares of stock subject to Stock Awards shall be issued
no later than the 15th day of the third month after the end of the calendar year
in which the award is granted. Such awards shall be expressed in terms of shares
of Common Stock or denominated in units of Common Stock. For purposes of
determining the number of shares available under the Plan, each such unit shall
count as the number of shares of Common Stock to which it relates.

 

7.2

Rights as a Shareholder.

 

(a)       Stock Awards. A Participant shall have all voting, dividend,
liquidation and other rights with respect to shares of Common Stock issued to
the Participant as a Stock Award under this Section 7 upon the Participant
becoming the holder of record of the Common Stock granted pursuant to such Stock
Award; provided, that the Committee may impose such restrictions on the
assignment or transfer of Common Stock awarded pursuant to a Stock Award as it
considers appropriate. Any dividend payment with respect to a Stock Award shall
be made no later than the 15th day of the third month following the date the
dividends are paid to shareholders.

 

(b)       General. With respect to shares of Common Stock subject to awards
granted under the Plan other than Stock Options, Restricted Stock, Restricted
Stock Units and Stock Awards, a Participant shall have such rights as determined
by the Committee and set forth in the respective award agreements; and the
Committee may impose such restrictions on the assignment or transfer of Common
Stock awarded pursuant to such awards as it considers appropriate.

 

 

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SECTION 8

 

Change in Control

 

8.1

Acceleration of Vesting. If a Change in Control of the Company occurs, then,
unless the Committee or the Board otherwise determines and expressly states in
the agreements governing one or more Equity Awards, without action by the
Committee or the Board: (a) all outstanding Stock Options shall become vested
and exercisable in full immediately prior to the effective time of a Change in
Control and shall remain exercisable during the remaining terms thereof,
regardless of whether the Participants to whom such Stock Options have been
granted remain in the service of the Company or any Subsidiary; and (b) all
other outstanding Equity Awards shall become immediately fully vested and
exercisable and nonforfeitable.

 

8.2

Cash Payment for Stock Options. If a Change in Control of the Company occurs,
then the Committee, in its sole discretion and without the consent of any
Participant affected thereby, may determine that some or all Participants
holding outstanding Stock Options shall receive, with respect to and in lieu of
some or all of the shares of Common Stock subject to such Stock Options, as of
the effective date of any such Change in Control of the Company, cash in an
amount equal to the highest price per share actually paid in connection with any
Change in Control of the Company over the exercise price per share of such Stock
Options. Upon a Participant’s receipt of such amount with respect to some or all
of his or her Stock Options, the respective Stock Options shall be cancelled and
may no longer be exercised by such Participant.

 

 

SECTION 9

 

General Provisions

 

9.1

No Rights to Equity Awards. No Participant or other person shall have any claim
to be granted any Equity Award under the Plan and there is no obligation of
uniformity of treatment of Participants or holders or beneficiaries of Equity
Awards under the Plan. The terms and conditions of Equity Awards of the same
type and the determination of the Committee to grant a waiver or modification of
any Equity Award and the terms and conditions thereof need not be the same with
respect to each Participant or the same Participant.

 

9.2

Self-Employment Taxes. To the extent that amounts paid under the Plan are deemed
to be net earnings from self-employment, each Director shall be responsible for
any taxes payable under federal, state or local law.

 

9.3

Compliance With Laws; Listing and Registration of Shares. All Equity Awards
granted under the Plan (and all issuances of Common Stock or other securities
under the Plan) shall be subject to all applicable laws, rules and regulations,
and to the requirement that if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the grant of such Equity
Award or the issuance or purchase of shares thereunder, such Equity Award may
not be exercised in whole or in part, or the restrictions on such Equity Award
shall not lapse, unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.

 

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9.4

No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall
prevent the Company or any Subsidiary from adopting or continuing in effect
other or additional compensation arrangements, including the grant of Stock
Options and other stock-based and stock-related awards, and such arrangements
may be either generally applicable or applicable only in specific cases.

 

9.5

No Right to Service. The grant of an Equity Award shall not be construed as
giving a Participant the right to be retained in the service of the Company or
any Subsidiary as a Director. A Participant's service as a Director may be
terminated at any time pursuant to the Company's Bylaws, free from any liability
or any claim under the Plan, unless otherwise expressly provided in the Plan or
in any written agreement with the Participant.

 

9.6

No Liability of Company. The Company and any Subsidiary or Affiliate which is in
existence or hereafter comes into existence shall not be liable to a Participant
or any other person as to: (a) the non-issuance or non-sale of Common Stock as
to which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company’s counsel to be necessary to
the lawful issuance and sale of any shares hereunder; (b) any tax consequence to
any Participant or other person due to the receipt, exercise or settlement of
any Equity Award granted hereunder; and (c) any provision of law or legal
restriction that prohibits or restricts the transfer of shares of Common Stock
issued pursuant to any Equity Award.

 

9.7

Suspension of Rights under Equity Awards. The Company, by written notice to a
Participant, may suspend a Participant’s and any transferee’s rights under any
Equity Award for a period not to exceed 60 days while the termination for cause
of that Participant’s service as a Director with the Company and its
Subsidiaries is under consideration.

 

9.8

Governing Law. The validity, construction and effect of the Plan and any rules
and regulations relating to the Plan shall be determined in accordance with the
laws of the State of Michigan and applicable federal law.

 

9.9

Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions of the Plan and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included, unless such
construction would cause the Plan to fail in its essential purposes.

 

9.10

Compliance with 409A. The Plan is intended to provide Equity Awards that are
exempt from Section 409A of the Code as either exempt equity awards under
Treasury Regulation Section 1.409A-1(b)(5) or as exempt short-term deferrals
under Treasury Regulation Section 1.409A-1(b)(4), and is to be interpreted and
operated consistently with those intentions.  To the extent that the Committee
determines that any Equity Award granted hereunder is subject to Section 409A of
the Code, the agreement evidencing such Equity Award shall incorporate the terms
and conditions necessary to avoid the tax consequences specified in Section
409A(a)(1) of the Code. To the extent applicable, the Plan and agreements shall
be interpreted in accordance with Section 409A of the Code.

 

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SECTION 10

 

Termination and Amendment

 

10.1

Board and Committee Actions. The Board may terminate the Plan at any time or may
from time to time amend or alter the Plan or any aspect of it as it considers
proper and in the best interests of the Company; provided, that no such
amendment may be made, without the approval of shareholders of the Company, that
would (i) reduce the exercise price at which Stock Options may be granted below
the price provided for in Section 5.3, (ii) reduce the exercise price of
outstanding Stock Options, or (iii) otherwise amend the Plan in any manner
requiring shareholder approval by law or under the rules or listing requirements
of any national securities exchange on which the Company's Common Stock is
traded, and provided further that the Plan may not be amended in any way that
causes the Plan to fail to comply with or be exempt from Section 409A of the
Code.

 

10.2

No Impairment. Notwithstanding anything to the contrary in Section 10.1, no such
amendment or alteration to the Plan or to any previously granted award agreement
or Equity Award shall be made which would impair the rights of the holder of the
Equity Award, without such holder’s consent; provided, that no such consent
shall be required if the Committee determines in its sole discretion and prior
to the date of any Change of Control that such amendment or alteration is
required or advisable in order for the Company, the Plan or the Equity Award to
satisfy any law or regulation or to meet the requirements of or avoid adverse
financial accounting consequences under any tax or accounting standard, law or
regulation.

 

SECTION 11

 

Effective Date of the Plan

 

The Plan shall take effect December 18, 2019.

 

 

 

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