Westfield Financial, Inc. 8-K [wfd-8k_051514.htm]

Exhibit 10.1

 

 

 

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WESTFIELD FINANCIAL, INC.

2014 OMNIBUS INCENTIVE PLAN

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Table of Contents

 

Page

 

1. PURPOSE 1 2. DEFINITIONS 1 3. ADMINISTRATION OF THE PLAN 9   3.1 Committee. 9
  3.1.1 Powers and Authorities. 9   3.1.2 Composition of Committee. 9   3.1.3
Other Committees. 10   3.2 Board. 10   3.3 Terms of Awards. 10   3.3.1 Committee
Authority. 10   3.3.2 Forfeiture; Recoupment. 11   3.4 No Repricing. 12   3.5
Deferral Arrangement. 12   3.6 No Liability. 12   3.7 Registration; Share
Certificates. 12 4. STOCK SUBJECT TO THE PLAN 13   4.1 Number of Shares of Stock
Available for Awards. 13   4.2 Adjustments in Authorized Shares of Stock. 13  
4.3 Share Usage. 13 5. EFFECTIVE DATE; TERM; AMENDMENT AND TERMINATION 14   5.1
Effective Date. 14   5.2 Term. 14   5.3 Amendment and Termination. 14 6. AWARD
ELIGIBILITY AND LIMITATIONS 14   6.1 Eligible Grantees. 14   6.2 Limitation on
Shares of Stock Subject to Awards and Cash Awards. 14   6.3 Stand-Alone,
Additional, Tandem, and Substitute Awards. 15 7. AWARD AGREEMENT 15 8. TERMS AND
CONDITIONS OF OPTIONS 16   8.1 Option Price. 16   8.2 Vesting. 16   8.3 Term. 16
  8.4 Termination of Service. 16   8.5 Limitations on Exercise of Option. 17  
8.6 Method of Exercise. 17   8.7 Rights of Holders of Options. 17   8.8 Delivery
of Stock. 17   8.9 Transferability of Options. 17   8.10 Family Transfers. 18  
8.11 Limitations on Incentive Stock Options. 18   8.12 Notice of Disqualifying
Disposition. 18

 

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9. TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS 18   9.1 Grant of
Restricted Stock or Stock Units. 18   9.2 Restrictions. 19   9.3 Registration;
Restricted Share Certificates. 19   9.4 Rights of Holders of Restricted Stock.
19   9.5 Rights of Holders of Stock Units. 20   9.5.1 Voting and Dividend
Rights. 20   9.5.2 Creditor’s Rights. 20   9.6 Termination of Service. 20   9.7
Purchase of Restricted Stock and Shares of Stock Subject to Stock Units. 20  
9.8 Delivery of Shares of Stock. 21 10. TERMS AND CONDITIONS OF UNRESTRICTED
STOCK AWARDS AND OTHER EQUITY-BASED AWARDS 21   10.1. Unrestricted Stock Awards.
21   10.2. Other Equity-Based Awards. 21 11. FORM OF PAYMENT FOR OPTIONS AND
RESTRICTED STOCK 22   11.1 General Rule. 22   11.2 Surrender of Shares of Stock.
22   11.3 Cashless Exercise. 22   11.4 Other Forms of Payment. 22 12. TERMS AND
CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS 23   12.1. Dividend Equivalent Rights.
23   12.2. Termination of Service. 23 13. TERMS AND CONDITIONS OF
PERFORMANCE-BASED AWARDS 23   13.1 Grant of Performance-Based Awards. 23   13.2
Value of Performance-Based Awards. 24   13.3 Earning of Performance-Based
Awards. 24   13.4 Form and Timing of Payment of Performance-Based Awards. 24  
13.5 Performance Conditions. 24   13.6 Performance-Based Awards Granted to
Designated Covered Employees. 24   13.6.1 Performance Goals Generally. 25  
13.6.2 Timing for Establishing Performance Goals. 25   13.6.3 Payment of Awards;
Other Terms. 25   13.6.4 Performance Measures. 25   13.6.5 Evaluation of
Performance. 27   13.6.6 Adjustment of Performance-Based Compensation. 28  
13.6.7 Committee Discretion. 28   13.7 Status of Awards Under Code Section
162(m). 28 14. PARACHUTE LIMITATIONS 28 15. REQUIREMENTS OF LAW 29   15.1
General. 29   15.2 Rule 16b-3. 30 16. EFFECT OF CHANGES IN CAPITALIZATION 30  
16.1 Changes in Stock. 30

 

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  16.2 Reorganization in Which the Company Is the Surviving Entity Which Does
Not Constitute a Change in Control. 31   16.3 Change in Control in which Awards
are not Assumed. 31   16.4 Change in Control in which Awards are Assumed. 32  
16.5 Adjustments 33   16.6 No Limitations on Company. 33 17. GENERAL PROVISIONS
34   17.1 Disclaimer of Rights. 34   17.2 Nonexclusivity of the Plan. 34   17.3
Withholding Taxes. 34   17.4 Captions. 35   17.5 Construction. 35   17.6 Other
Provisions. 35   17.7 Number and Gender. 35   17.8 Severability. 36   17.9
Governing Law. 36   17.10 Section 409A of the Code. 36

 

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WESTFIELD FINANCIAL, INC.

 

2014 OMNIBUS INCENTIVE PLAN

 

Westfield Financial, Inc. (the “Company”) sets forth herein the terms of its
2014 Omnibus Incentive Plan (the “Plan”), as follows:

 

1.                  PURPOSE

 

The Plan is intended to (a) provide eligible persons with an incentive to
contribute to the success of the Company and to operate and manage the Company’s
business in a manner that will provide for the Company’s long-term growth and
profitability to benefit its stockholders and other important stakeholders,
including its employees and customers, and (b) provide a means of obtaining,
rewarding, and retaining key personnel. To this end, the Plan provides for the
grant of awards of stock options, restricted stock, stock units, unrestricted
stock, dividend equivalent rights, performance shares and other
performance-based awards, other equity-based awards, and cash bonus awards. Any
of these awards may, but need not, be made as performance incentives to reward
the holders of such awards for the achievement of performance goals in
accordance with the terms of the Plan. Stock options granted under the Plan may
be non-qualified stock options or incentive stock options, as provided herein.

 

2.                  DEFINITIONS

 

For purposes of interpreting the Plan documents (including the Plan and Award
Agreements), the following definitions shall apply:

 

2.1 “Affiliate” means any company or other entity that controls, is controlled
by, or is under common control with the Company within the meaning of Rule 405
of Regulation C under the Securities Act, including any Subsidiary. For purposes
of grants of Options, an entity may not be considered an Affiliate unless the
Company holds a “controlling interest” in such entity within the meaning of
Treasury Regulations Section 1.414(c)-2(b)(2)(i); provided, that (a) except as
specified in clause (b) below, an interest of “at least 50 percent” shall be
used instead of an interest of “at least 80 percent” in each case where “at
least 80 percent” appears in Treasury Regulations Section 1.414(c)-2(b)(2)(i)
and (b) where the grant of Options is based upon a legitimate business
criterion, an interest of “at least 20 percent” shall be used instead of an
interest of “at least 80 percent” in each case where “at least 80 percent”
appears in Treasury Regulations Section 1.414(c)-2(b)(2)(i).

 

2.2 “Applicable Laws” means the legal requirements relating to the Plan and the
Awards under (a) applicable provisions of the corporate, securities, tax and
other laws, rules, regulations and government orders of any jurisdiction
applicable to Awards granted to residents therein and (b) the rules of any Stock
Exchange on which the Stock is listed.

 

2.3 “Award” means a grant under the Plan of an Option, Restricted Stock, a Stock
Unit, Unrestricted Stock, a Dividend Equivalent Right, a Performance Share or
other Performance-Based Award, an Other Equity-Based Award, or cash.

 

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2.4 “Award Agreement” means the agreement between the Company and a Grantee that
evidences and sets out the terms and conditions of an Award.

 

2.5 “Award Stock” shall have the meaning set forth in Section 16.3(a)(ii).

 

2.6 “Bank” means Westfield Bank.

 

2.7 “Benefit Arrangement” shall have the meaning set forth in Section 14.

 

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

 

2.9 “Cause” means, as determined by the Committee and unless otherwise provided
in an applicable agreement with the Company, the Bank, or an Affiliate, the
Grantee’s (a) personal dishonesty, (b) incompetence, (c) willful misconduct, (d)
breach of fiduciary duties involving personal profit, (e) intentional failure to
perform stated duties, or (f) willful violation of any law, rule, or regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order. Any determination by the Committee whether an event constituting Cause
shall have occurred shall be final, binding, and conclusive.

 

2.10 “Capital Stock” means, with respect to any Person, any and all shares,
interests, participations, or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Effective Date or issued thereafter, including, without limitation, all common
stock, no par value, of the Company.

 

2.11 “Change in Control” means the occurrence of any of the following:

 

(a)The consummation of a reorganization, merger, or consolidation of the
Company, respectively, with one (1) or more other Persons, other than a
transaction following which:

(1)At least fifty-one percent (51%) of the equity ownership interests of the
entity resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by Persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least fifty-one percent (51%) of the outstanding equity
ownership interests in the Company; and

(2)At least fifty-one percent (51%) of the securities entitled to vote generally
in the election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by Persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least fifty-one percent (51%)
of the securities entitled to vote generally in the election of directors of the
Company;

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(b)The acquisition of all or substantially all of the assets of the Company or
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty-five percent (25%) or more of the outstanding securities
of the Company entitled to vote generally in the election of directors by any
Person or by any Persons acting in concert, or approval by the stockholders of
the Company of any transaction which would result in such an acquisition;

(c)A complete liquidation or dissolution of the Company;

(d)The occurrence of any event if, immediately following such event, at least
fifty percent (50%) of the members of the Board of the Company do not belong to
any of the following groups:

(1)Individuals who were members of the Board of the Company on the Effective
Date; or

(2)Individuals who first became members of the Board of the Company after the
Effective Date either:

(A)Upon election to serve as a member of the Board of the Company by affirmative
vote of three-quarters (3/4) of the members of such Board, or of a nominating
committee thereof, in office at the time of such first election; or

(B)Upon election by the stockholders of the Company to serve as a member of the
Board of the Company, but only if nominated for election by affirmative vote of
three-quarters (3/4) of the members of the Board of the Company, or of a
nominating committee thereof, in office at the time of such first nomination;

provided, however, that such individual's election or nomination did not result
from an actual or threatened election contest or other actual or threatened
solicitation of proxies or consents other than by or on behalf of the Board of
the Company; or

 

(e)Approval by the stockholders of the Company of any agreement, plan, or
arrangement for the consummation of a transaction which, if consummated, would
result in the occurrence of an event described in paragraphs (a), (b), (c), or
(d) above.

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(f)Any event which would be described in paragraphs (a), (b), (c), (d), or (e)
above if the term “Bank” were substituted for the term “Company” therein.

In no event, however, shall a Change in Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or
any Subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained by any of them.

 

2.12 “Code” means the Internal Revenue Code of 1986, as amended, as now in
effect or as hereafter amended, and any successor thereto. References in the
Plan to any Code section shall be deemed to include, as applicable, regulations
and guidance promulgated under such Code section.

 

2.13 “Committee” means a committee of, and designated from time to time by
resolution of, the Board, which shall be constituted as provided in
Section 3.1.2 and Section 3.1.3 (or, if no Committee has been so designated, the
Board).

 

2.14 “Company” means Westfield Financial, Inc. and its successors.

 

2.15 “Covered Employee” means a Grantee who is a “covered employee” within the
meaning of Code Section 162(m)(3).

 

2.16 “Disability” means, as determined by the Committee and unless otherwise
provided in an applicable agreement with the Company, the Bank, or an Affiliate,
the inability of a Grantee to perform each of the essential duties of such
Grantee’s position by reason of a medically determinable physical or mental
impairment which is potentially permanent in character or which can be expected
to last for a continuous period of not less than twelve (12) months; provided,
that, with respect to rules regarding expiration of an Incentive Stock Option
following termination of a Grantee’s Service, Disability shall mean the
inability of such Grantee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.

 

2.17 “Dividend Equivalent Right” means a right, granted to a Grantee pursuant to
Section 12.1, to receive cash, Stock, other Awards, or other property equal in
value to dividends or other periodic payments paid or made with respect to a
specified number of shares of Stock.

 

2.18 “Effective Date” means May 15, 2014, the date on which the Plan is approved
by the Company’s stockholders.

 

2.19 “Employee” means, as of any date of determination, an employee (including
an officer) of the Company, the Bank, or an Affiliate.

 

2.20 “Exchange Act” means the Securities Exchange Act of 1934, as amended, as
now in effect or as hereafter amended.

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2.21 “Fair Market Value” means the fair market value of a share of Stock for
purposes of the Plan, which shall be determined as of any Grant Date as follows:

 

(a)If on such Grant Date the shares of Stock are listed on a Stock Exchange, or
are publicly traded on another established securities market (a “Securities
Market” ), the Fair Market Value of a share of Stock shall be the closing price
of the Stock as reported on such Stock Exchange or such Securities Market
(provided that, if there is more than one such Stock Exchange or Securities
Market, the Committee shall designate the appropriate Stock Exchange or
Securities Market for purposes of the Fair Market Value determination). If there
is no such reported closing price on such Grant Date, the Fair Market Value of a
share of Stock shall be the closing price of the Stock on the next preceding day
on which any sale of Stock shall have been reported on such Stock Exchange or
such Securities Market.

(b)If on such Grant Date the shares of Stock are not listed on a Stock Exchange
or publicly traded on a Securities Market, the Fair Market Value of a share of
Stock shall be the value of the Stock as determined by the Committee by the
reasonable application of a reasonable valuation method, in a manner consistent
with Code Section 409A.

Notwithstanding this Section 2.20 or Section 17.3, for purposes of determining
taxable income and the amount of the related tax withholding obligation pursuant
to Section 17.3, the Fair Market Value will be determined by the Company using
any reasonable method; provided, further, that for any shares of Stock subject
to an Award that are sold by or on behalf of a Grantee on the same date on which
such shares may first be sold pursuant to the terms of the related Award
Agreement, the Fair Market Value of such shares shall be the sale price of such
shares on such date (or if sales of such shares are effectuated at more than one
sale price, the weighted average sale price of such shares on such date).

 

2.22 “Family Member” means, with respect to any Grantee as of any date of
determination, (a) a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or
sister-in-law, including adoptive relationships, of such Grantee, (b) any person
sharing such Grantee’s household (other than a tenant or employee), (c) a trust
in which any one or more of the persons specified in clauses (a) and (b) above
(and such Grantee) own more than fifty percent (50%) of the beneficial interest,
(d) a foundation in which any one or more of the persons specified in clauses
(a) and (b) above (and such Grantee) control the management of assets, and
(e) any other entity in which one or more of the persons specified in clauses
(a) and (b) above (and such Grantee) own more than fifty percent (50%) of the
voting interests.

 

2.23 “Fully Diluted Basis” means, as of any date of determination, the sum of
(x) the number of shares of Voting Stock outstanding as of such date of
determination plus (y) the number of shares of Voting Stock issuable upon the
exercise, conversion, or exchange of all then-outstanding warrants, options,
convertible Capital Stock or indebtedness, exchangeable Capital Stock or
indebtedness, or other rights exercisable for or convertible or exchangeable
into, directly or indirectly, shares of Voting Stock, whether at the time of
issue or upon the passage of time or upon the occurrence of some future event,
and whether or not in the money as of such date of determination.

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2.24 “Grant Date” means, as determined by the Committee, the latest to occur of
(a) the date as of which the Committee approves the Award, (b) the date on which
the recipient of an Award first becomes eligible to receive an Award under
Section 6 hereof (e.g., in the case of a new hire, the first date on which such
new hire performs any Service), or (c) such subsequent date specified by the
Committee in the corporate action approving the Award.

 

2.25 “Grantee” means a person who receives or holds an Award under the Plan.

 

2.26 “Incentive Stock Option” means an “incentive stock option” within the
meaning of Code Section 422, or the corresponding provision of any subsequently
enacted tax statute, as amended from time to time.

 

2.27 “Non-qualified Stock Option” means an Option that is not an Incentive Stock
Option.

 

2.28 “Option” means an option to purchase one or more shares of Stock pursuant
to the Plan.

 

2.29 “Option Price” means the exercise price for each share of Stock subject to
an Option.

 

2.30 “Other Agreement” shall have the meaning set forth in Section 14.

 

2.31 “Other Equity-Based Award” means an Award representing a right or other
interest that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock, other than an Option,
Restricted Stock, a Stock Unit, Unrestricted Stock, a Dividend Equivalent Right,
or a Performance Share.

 

2.32 “Outside Director” means a member of the Board who is not an Employee.

 

2.33 “Parachute Payment” shall have the meaning set forth in Section 14(a).

 

2.34 “Performance-Based Award” means an Award of Options, Restricted Stock,
Stock Units, Performance Shares, Other Equity-Based Awards, or cash made subject
to the achievement of performance goals (as provided in Section 13) over a
Performance Period specified by the Committee.

 

2.35 “Performance-Based Compensation” means compensation under an Award that is
intended to satisfy the requirements of Code Section 162(m) for “qualified
performance-based compensation” paid to Covered Employees. Notwithstanding the
foregoing, nothing in the Plan shall be construed to mean that an Award which
does not satisfy the requirements for “qualified performance-based compensation”
within the meaning of and pursuant to Code Section 162(m) does not constitute
performance-based compensation for other purposes, including the purposes of
Code Section 409A.

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2.36 “Performance Measures” means measures as specified in Section 13.6.4 on
which the performance goals under Performance-Based Awards are based and which
are approved by the Company’s stockholders pursuant to, and to the extent
required by, the Plan in order to qualify such Performance-Based Awards as
Performance-Based Compensation.

 

2.37 “Performance Period” means the period of time during which the performance
goals under Performance-Based Awards must be met in order to determine the
degree of payout and/or vesting with respect to any such Performance-Based
Awards.

 

2.38 “Performance Shares” means a Performance-Based Award representing a right
or other interest that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Stock, made subject
to the achievement of performance goals (as provided in Section 13) over a
Performance Period of up to ten (10) years.

 

2.39 “Person” means an individual, a corporation, a partnership, a limited
liability company, an association, a trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

 

2.40 “Plan” means the Company’s 2014 Omnibus Incentive Plan, as amended from
time to time.

 

2.41 “Prior Plans” means the Company’s 2007 Stock Option Plan and the Company’s
2007 Recognition and Retention Plan.

 

2.42 “Reporting Person” means a person who is required to file reports under
Section 16(a) of the Exchange Act, or any successor provision.

  

2.43 “Restricted Period” shall have the meaning set forth in Section 9.2.

 

2.44 “Restricted Stock” means shares of Stock awarded to a Grantee pursuant to
Section 10.

 

2.45 “Securities Act” means the Securities Act of 1933, as amended, as now in
effect or as hereafter amended.

 

2.46 “Service” means service qualifying a Grantee as a Service Provider to the
Company, the Bank, or an Affiliate. Unless otherwise provided in the applicable
Award Agreement, a Grantee’s change in position or duties shall not result in
interrupted or terminated Service, so long as such Grantee continues to be a
Service Provider to the Company, the Bank, or an Affiliate. Subject to the
preceding sentence, any determination by the Committee whether a termination of
Service shall have occurred for purposes of the Plan shall be final, binding,
and conclusive. If a Service Provider’s employment or other service relationship
is with an Affiliate and the applicable entity ceases to be an Affiliate, a
termination of Service shall be deemed to have occurred when such entity ceases
to be an Affiliate unless the Service Provider transfers his or her employment
or other service relationship to the Company or any other Affiliate.

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2.47 “Service Provider” means an Employee, officer, or director of the Company,
the Bank, or an Affiliate, or a consultant or adviser (who is a natural person)
to the Company, the Bank, or an Affiliate currently providing services to the
Company, the Bank, or an Affiliate.

 

2.48 “Stock” means the common stock, $0.01 par value, of the Company, or any
security which shares of Stock may be changed into or for which shares of Stock
may be exchanged as provided in Section 16.1.

 

2.49 “Stock Exchange” means the National Association of Securities Dealers
Automated Quotations (NASDAQ) or another established national or regional stock
exchange.

 

2.50 “Stock Unit” means a bookkeeping entry representing the equivalent of one
(1) share of Stock awarded to a Grantee pursuant to Section 9 that (a) is not
subject to vesting or (b) is subject to time-based vesting, but not to
performance-based vesting. A Stock Unit may also be referred to as a restricted
stock unit.

 

2.51 “Subsidiary” means any corporation (other than the Company) or
non-corporate entity with respect to which the Company owns, directly or
indirectly, fifty percent (50%) or more of the total combined voting power of
all classes of stock, membership interests, or other ownership interests of any
class or kind ordinarily having the power to vote for the directors, managers,
or other voting members of the governing body of such corporation or
non-corporate entity. In addition, any other entity may be designated by the
Committee as a Subsidiary; provided, that (a) such entity could be considered as
a subsidiary according to generally accepted accounting principles in the United
States of America, and (b) in the case of an Award of Options, such Award would
be considered to be granted in respect of “service recipient stock” under Code
Section 409A.

 

2.52 “Substitute Award” means an Award granted upon assumption of, or in
substitution for, outstanding awards previously granted under a compensatory
plan by a business entity acquired or to be acquired by the Company, the Bank,
or an Affiliate or with which the Company, the Bank, or an Affiliate has
combined or will combine.

 

2.53 “Ten Percent Stockholder” means a natural person who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
voting securities of the Company, the Company’s parent (if any), or any of the
Company’s Subsidiaries. In determining stock ownership, the attribution rules of
Code Section 424(d) shall be applied.

 

2.54 “Unrestricted Stock” shall have the meaning set forth in Section 10.1.

 

2.55 “Voting Stock” means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers, or other voting members of the governing body of such Person.

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3.             ADMINISTRATION OF THE PLAN

  

3.1Committee.

3.1.1Powers and Authorities.

 

The Committee shall administer the Plan and shall have such powers and
authorities related to the administration of the Plan as are consistent with the
Company’s certificate of incorporation and bylaws and Applicable Laws. Without
limiting the generality of the foregoing, the Committee shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Award, or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan which the Committee deems to be necessary or appropriate to the
administration of the Plan, any Award, or any Award Agreement. All such actions
and determinations shall be made by (a) the affirmative vote of a majority of
the members of the Committee present at a meeting at which a quorum is present
or (b) the unanimous consent of the members of the Committee executed in writing
in accordance with the Company’s certificate of incorporation and bylaws and
Applicable Laws. Unless otherwise expressly determined by the Board, the
Committee shall have the authority to interpret and construe all provisions of
the Plan, any Award, and any Award Agreement, and any such interpretation or
construction, and any other determination contemplated to be made under the Plan
or any Award Agreement, by the Committee shall be final, binding, and conclusive
whether or not expressly provided for in any provision of the Plan, such Award,
or such Award Agreement.

 

In the event that the Plan, any Award, or any Award Agreement provides for any
action to be taken by the Board or any determination to be made by the Board,
such action may be taken or such determination may be made by the Committee
constituted in accordance with this Section 3.1 if the Board has delegated the
power and authority to do so to such Committee.

 

3.1.2Composition of Committee.

 

The Committee shall be a committee composed of not fewer than two (2) directors
of the Company designated by the Board to administer the Plan. Each member of
the Committee shall be a “Non-Employee Director” within the meaning of
Rule 16b-3 under the Exchange Act, an “outside director” within the meaning of
Code Section 162(m)(4)(C)(i), and for so long as the Stock is listed on the
NASDAQ Stock Market, an “independent director” within the meaning of
Section 5605(a)(2) of the NASDAQ Listing Rules; provided, that any action taken
by the Committee shall be valid and effective whether or not members of the
Committee at the time of such action are later determined not to have satisfied
the requirements for membership set forth in this Section 3.1.2 or otherwise
provided in any charter of the Committee. Without limiting the generality of the
foregoing, the Committee may be the Compensation Committee of the Board or a
subcommittee thereof if the Compensation Committee of the Board or such
subcommittee satisfies the foregoing requirements.

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3.1.3Other Committees.

 

The Board also may appoint one or more committees of the Board, each composed of
one (1) or more directors of the Company who need not be Outside Directors,
which may administer the Plan with respect to Grantees who are not “officers” as
defined in Rule 16a-1(f) under the Exchange Act or directors of the Company, may
grant Awards under the Plan to such Grantees, and may determine all terms of
such Awards, subject to the requirements of Rule 16b-3 under the Exchange Act,
Code Section 162(m), and for so long as the Stock is listed on the NASDAQ Stock
Market, the rules of such Stock Exchange.

 

3.2Board.

 

The Board from time to time may exercise any or all of the powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 and other applicable provisions of the Plan, as the Board
shall determine, consistent with the Company’s certificate of incorporation and
bylaws and Applicable Laws.

 

3.3Terms of Awards.

3.3.1Committee Authority.

 

Subject to the other terms and conditions of the Plan, the Committee shall have
full and final authority to:

 

 (a)designate Grantees;      (b)determine the type or types of Awards to be made
to a Grantee;      (c)determine the number of shares of Stock to be subject to
an Award;     (d)establish the terms and conditions of each Award (including the
Option Price of any Option or the purchase price for Restricted Stock), the
nature and duration of any restriction or condition (or provision for lapse
thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award
or the shares of Stock subject thereto, the treatment of an Award in the event
of a Change in Control (subject to applicable agreements), and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options;
     (e)prescribe the form of each Award Agreement evidencing an Award; and

 

(f)subject to the limitation on repricing in Section 3.4, amend, modify, or
supplement the terms of any outstanding Award, which authority shall include the
authority, in order to effectuate the purposes of the Plan but without amending
the Plan, to make Awards or to modify outstanding Awards made to eligible
natural persons who are foreign nationals or are natural persons who are
employed outside the United States to reflect differences in local law, tax
policy, or custom; provided, that, notwithstanding the foregoing, no amendment,
modification, or supplement of the terms of any outstanding Award shall, without
the consent of the Grantee thereof, impair such Grantee’s rights under such
Award.

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The Committee shall have the right, in its discretion, to make Awards in
substitution or exchange for any award granted under another compensatory plan
of the Company, the Bank, an Affiliate, or any business entity acquired or to be
acquired by the Company, the Bank, or an Affiliate or with which the Company,
the Bank, or an Affiliate has combined or will combine.

 

3.3.2Forfeiture; Recoupment.

 

If any time within one (1) year after the date on which a Grantee exercises an
Option, or receives payment of a Performance-Based Award, or on which Restricted
Stock or Stock Units vest, or on which income is realized by a Grantee in
connection with any other Award (each of which events shall be a “realization
event”), the Board determines in its discretion that the Company has been
materially harmed by the Grantee, whether such harm (a) results in the Grantee’s
termination or deemed termination of employment for Cause or (b) results from
any activity of the Grantee determined by the Board to be in competition with
any activity of the Company, the Bank, or an Affiliate, or otherwise
prejudicial, contrary, or harmful to the interests of the Company, the Bank, or
an Affiliate (including, but not limited to, accepting employment with or
serving as a consultant, adviser, or in any other capacity to an entity that is
in competition with or acting against the interests of the Company, the Bank, or
an Affiliate), then any gain realized by the Grantee from the realization event
shall be paid by the Grantee to the Company upon notice from the Company. Such
gain shall be determined as of the date of the realization event, without regard
to any subsequent change in the Fair Market Value of the Stock. The Company
shall have the right to offset such gain against any amounts otherwise owed to
the Grantee by the Company, the Bank, or an Affiliate (whether as wages,
vacation pay, or pursuant to any benefit plan or other compensatory
arrangement).

 

In addition, the Committee may reserve the right in an Award Agreement to cause
a forfeiture of the gain realized by a Grantee with respect to an Award
thereunder on account of actions taken by, or failed to be taken by, such
Grantee in violation or breach of or in conflict with any (a) employment
agreement, (b) non-competition agreement, (c) agreement prohibiting solicitation
of Employees or clients of the Company, the Bank, or an Affiliate,
(d) confidentiality obligation with respect to the Company, the Bank, or an
Affiliate, (e) Company or Bank policy or procedure, (f) other agreement, or
(g) any other obligation of such Grantee to the Company, the Bank, or an
Affiliate, as and to the extent specified in such Award Agreement. The Committee
may annul an outstanding Award if the Grantee thereof is an Employee of the
Company, the Bank, or an Affiliate and is terminated for Cause as defined in the
Plan or the applicable Award Agreement or for “cause” as defined in any other
agreement between the Company, the Bank, or an Affiliate and such Grantee, as
applicable.

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Any Award granted pursuant to the Plan shall be subject to mandatory repayment
by the Grantee to the Company to the extent the Grantee is, or in the future
becomes, subject to (a) any Company or Bank “clawback” or recoupment policy that
is adopted to comply with the requirements of any Applicable Law, rule,
regulation, or otherwise, or (b) any law, rule, or regulation which imposes
mandatory recoupment, under circumstances set forth in such law, rule, or
regulation.

 

3.4No Repricing.

 

Except in connection with a corporate transaction involving the Company
(including, without limitation, any stock dividend, distribution (whether in the
form of cash, shares of Stock, other securities or other property), stock split,
extraordinary cash dividend, recapitalization, Change in Control,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares of Stock or other securities or similar
transaction), the Company may not, without obtaining stockholder approval:
(a) amend the terms of outstanding Options to reduce the exercise price of such
outstanding Options; (b) cancel outstanding Options in exchange for, or
substitution of, Options with an exercise price that is less than the exercise
price of the original Options; or (c) cancel outstanding Options with an
exercise price above the current stock price in exchange for cash or other
securities.

 

3.5Deferral Arrangement.

 

The Committee may permit or require the deferral of any payment pursuant to any
Award into a deferred compensation arrangement, subject to such rules and
procedures as it may establish, which may include provisions for the payment or
crediting of interest or Dividend Equivalent Rights and, in connection
therewith, provisions for converting such credits into Stock Units and for
restricting deferrals to comply with hardship distribution rules affecting
tax-qualified retirement plans subject to Code Section 401(k)(2)(B)(IV);
provided, that no Dividend Equivalent Rights may be granted in connection with,
or related to, an Award of Options. Any such deferrals shall be made in a manner
that complies with Code Section 409A, including, if applicable, with respect to
when a “separation from service” occurs (as defined under Code Section 409A).

 

3.6No Liability.

 

No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Award
Agreement.

 

3.7Registration; Share Certificates.

 

Notwithstanding any provision of the Plan to the contrary, the ownership of the
shares of Stock issued under the Plan may be evidenced in such a manner as the
Committee, in its sole discretion, deems appropriate, including by book-entry or
direct registration (including transaction advices) or the issuance of one or
more share certificates.

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4.STOCK SUBJECT TO THE PLAN

4.1Number of Shares of Stock Available for Awards.

 

Subject to such additional shares of Stock as shall be available for Awards
under the Plan pursuant to Section 4.2, and subject to adjustment pursuant to
Section 17.1, the maximum number of shares of Stock available for Awards under
the Plan shall be equal to five hundred sixteen thousand (516,000) shares of
Stock. Such shares of Stock may be authorized and unissued shares of Stock or
treasury shares of Stock or any combination of the foregoing, as may be
determined from time to time by the Board or by the Committee. Any of the shares
of Stock available for Awards under the Plan may be used for any type of Award
under the Plan, and any or all of the shares of Stock available for Awards under
the Plan shall be available for Awards pursuant to Incentive Stock Options.

 

4.2Adjustments in Authorized Shares of Stock.

 

In connection with mergers, reorganizations, separations, or other transactions
to which Code Section 424(a) applies, the Committee shall have the right to
cause the Company to assume awards previously granted under a compensatory plan
by another business entity that is a party to such transaction and to substitute
Awards under the Plan for such awards. The number of shares of Stock available
for Awards under the Plan pursuant to Section 4.1 shall be increased by the
number of shares of Stock subject to any such assumed awards and substitute
Awards. Shares available for awards under a shareholder-approved plan of a
business entity that is a party to such transaction (as appropriately adjusted,
if necessary, to reflect such transaction) may be used for Awards under the Plan
and shall not reduce the number of shares of Stock otherwise available for
Awards under the Plan, subject to applicable rules of any Stock Exchange on
which the Stock is listed.

 

4.3Share Usage.

 

Shares of Stock subject to an Award shall be counted as used as of the Grant
Date. Any shares of Stock that are subject to Awards shall be counted against
the limit set forth in Section 4.1 as one (1) share of Stock for every one (1)
share of Stock subject to an Award. If any shares of Stock covered by an Award
granted under the Plan are not purchased or are forfeited or expire, or if an
Award otherwise terminates without delivery of any shares of Stock subject
thereto or is settled in cash in lieu of shares of Stock, then the number of
shares of Stock counted against the aggregate number of shares of Stock
available under the Plan with respect to such Award shall, to the extent of any
such forfeiture, termination, or expiration, again be available for making
Awards under the Plan in the same amount as such shares of Stock were counted
against the limit set forth in Section 4.1.

 

The number of shares of Stock available for Awards under the Plan shall not be
increased by the number of shares of Stock (i) tendered or withheld or subject
to an Award surrendered in connection with the purchase of shares of Stock upon
exercise of an Option as provided in Section 11.2, (ii) deducted or delivered
from payment of an Award of an Option in connection with the Company’s tax
withholding obligations as provided in Section 17.3, or (iii) purchased by the
Company with proceeds from Option exercises.

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5.                  EFFECTIVE DATE; TERM; AMENDMENT AND TERMINATION

 

5.1Effective Date.

 

The Plan shall become effective as of the Effective Date. Following the
Effective Date, no awards shall be made under the Prior Plans. Notwithstanding
the foregoing, shares of Stock reserved under the Prior Plans to settle awards,
including performance-based awards, which are made under the Prior Plans prior
to the Effective Date may be issued and delivered following the Effective Date
to settle such awards.

 

5.2Term.

 

The Plan shall terminate automatically ten (10) years after the Effective Date
and may be terminated on any earlier date as provided in Section 5.3.

 

5.3Amendment and Termination.

 

The Board may, at any time and from time to time, amend, suspend, or terminate
the Plan as to any shares of Stock as to which Awards have not been made. The
effectiveness of any amendment to the Plan shall be contingent on approval of
such amendment by the Company’s stockholders to the extent provided by the Board
or required by Applicable Laws (including the rules of any Stock Exchange on
which the Stock is then listed); provided, that no amendment shall be made to
the no-repricing provisions of Section 3.4 or the Option pricing provisions of
Section 8.1 without the approval of the Company’s stockholders. No amendment,
suspension, or termination of the Plan shall impair rights or obligations under
any Award theretofore made under the Plan without the consent of the Grantee
thereof.

 

6.                  AWARD ELIGIBILITY AND LIMITATIONS

 

6.1Eligible Grantees.

 

Subject to this Section 6, Awards may be made under the Plan to (i) any Service
Provider, as the Committee shall determine and designate from time to time, and
(ii) any other individual whose participation in the Plan is determined to be in
the best interests of the Company by the Committee.

 

6.2Limitation on Shares of Stock Subject to Awards and Cash Awards.

 

During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act:

 

(a)The maximum number of shares of Stock subject to Options that may be granted
under the Plan in a calendar year to any person eligible for an Award under
Section 6 is one hundred fifty thousand (150,000) shares;

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(b)The maximum number of shares of Stock that may be granted under the Plan
pursuant to Awards that are intended to qualify as performance-based
compensation under Code Section 162(m), other than pursuant to Options, in a
calendar year to any person eligible for an Award under Section 6 is one hundred
fifty thousand (150,000) shares; and

(c)The maximum amount that may be paid as a cash-settled Performance-Based Award
for a Performance Period of twelve (12) months or less to any person eligible
for an Award shall be one million dollars ($1,000,000.00) and the maximum amount
that may be paid as a cash-settled Performance-Based Award for a Performance
Period of greater than twelve (12) months to any person eligible for an Award
shall be one million dollars ($1,000,000.00).

The preceding limitations in this Section 6.2 are subject to adjustment as
provided in Section 16.

 

6.3Stand-Alone, Additional, Tandem, and Substitute Awards.

 

Subject to Section 3.4, Awards granted under the Plan may, in the discretion of
the Committee, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, (a) any other Award, (b) any award granted under
another plan of the Company, the Bank, an Affiliate, or any business entity that
has been a party to a transaction with the Company, the Bank, or an Affiliate,
or (c) any other right of a Grantee to receive payment from the Company, the
Bank, or an Affiliate. Such additional, tandem, substitute, or exchange Awards
may be granted at any time. If an Award is granted in substitution or exchange
for another Award, or for an award granted under another plan of the Company,
the Bank, an Affiliate, or any business entity that has been a party to a
transaction with the Company, the Bank, or an Affiliate, the Committee shall
require the surrender of such other Award or award under such other plan in
consideration for the grant of such substitute or exchange Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash
payments under other plans of the Company or an Affiliate. Notwithstanding
Section 8.1, the Option Price of an Option that is a Substitute Award may be
less than one hundred percent (100%) of the Fair Market Value of a share of
Stock on the original Grant Date; provided, that such Option Price is determined
in accordance with the principles of Code Section 424 for any Incentive Stock
Option and consistent with Code Section 409A for any other Option.

 

7.AWARD AGREEMENT

 

Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, which shall be in such form or forms as the Committee shall from time
to time determine. Award Agreements employed under the Plan from time to time or
at the same time need not contain similar provisions but shall be consistent
with the terms of the Plan. Each Award Agreement evidencing an Award of Options
shall specify whether such Options are intended to be Non-qualified Stock
Options or Incentive Stock Options, and in the absence of such specification,
such Options shall be deemed to constitute Non-qualified Stock Options.

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8.TERMS AND CONDITIONS OF OPTIONS

8.1Option Price.

 

The Option Price of each Option shall be fixed by the Committee and stated in
the Award Agreement evidencing such Option. Except in the case of Substitute
Awards, the Option Price of each Option shall be at least the Fair Market Value
of one (1) share of Stock on the Grant Date; provided, that in the event that a
Grantee is a Ten Percent Stockholder, the Option Price of an Option granted to
such Grantee that is intended to be an Incentive Stock Option shall be not less
than one hundred ten percent (110%) of the Fair Market Value of one (1) share of
Stock on the Grant Date. In no case shall the Option Price of any Option be less
than the par value of a share of Stock.

 

8.2Vesting.

 

Subject to Sections 8.3 and 16.3, each Option granted under the Plan shall
become exercisable at such times and under such conditions as shall be
determined by the Committee and stated in the Award Agreement, in another
agreement with the Grantee, or otherwise in writing; provided, that no Option
shall be granted to persons who are entitled to overtime under applicable state
or federal laws that will vest or become exercisable within a six (6)-month
period starting on the Grant Date.

 

8.3Term.

 

Each Option granted under the Plan shall terminate, and all rights to purchase
shares of Stock thereunder shall cease, upon the expiration of ten (10) years
from the Grant Date of such Option, or under such circumstances and on such date
prior thereto as is set forth in the Plan or as may be fixed by the Committee
and stated in the Award Agreement relating to such Option; provided, that in the
event that the Grantee is a Ten Percent Stockholder, an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five (5) years from its Grant Date; and
provided, further, that, to the extent deemed necessary or appropriate by the
Committee to reflect differences in local law, tax policy, or custom with
respect to any Option granted to a Grantee who is a foreign national or is a
natural person who is employed outside the United States, such Option may
terminate, and all rights to purchase shares of Stock thereunder may cease, upon
the expiration of such period longer than ten (10) years from the Grant Date of
such Option as the Committee shall determine.

 

8.4Termination of Service.

 

Each Award Agreement with respect to the grant of an Option shall set forth the
extent to which the Grantee thereof, if at all, shall have the right to exercise
such Option following termination of such Grantee’s Service. Such provisions
shall be determined in the sole discretion of the Committee, need not be uniform
among all Options issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination of Service.

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8.5Limitations on Exercise of Option.

 

Notwithstanding any other provision of the Plan, in no event may any Option be
exercised, in whole or in part, after the occurrence of an event referred to in
Section 16 which results in the termination of such Option.

 

8.6Method of Exercise.

 

Subject to the terms of Section 10 and Section 17.3, an Option that is
exercisable may be exercised by the Grantee’s delivery to the Company or its
designee or agent of notice of exercise on any business day, at the Company’s
principal office or the office of such designee or agent, on the form specified
by the Company and in accordance with any additional procedures specified by the
Committee. Such notice shall specify the number of shares of Stock with respect
to which such Option is being exercised and shall be accompanied by payment in
full of the Option Price of the shares of Stock for which such Option is being
exercised plus the amount (if any) of federal and/or other taxes which the
Company may, in its judgment, be required to withhold with respect to the
exercise of such Option.

 

8.7Rights of Holders of Options.

 

Unless otherwise stated in the applicable Award Agreement, a Grantee or other
person holding or exercising an Option shall have none of the rights of a
stockholder of the Company (for example, the right to receive cash or dividend
payments or distributions attributable to the shares of Stock subject to such
Option, to direct the voting of the shares of Stock subject to such Option, or
to receive notice of any meeting of the Company’s stockholders) until the shares
of Stock subject thereto are fully paid and issued to such Grantee or other
person. Except as provided in Section 16, no adjustment shall be made for
dividends, distributions, or other rights with respect to any shares of Stock
subject to an Option for which the record date is prior to the date of issuance
of such shares of Stock.

 

8.8Delivery of Stock.

 

Promptly after the exercise of an Option by a Grantee and the payment in full of
the Option Price with respect thereto, such Grantee shall be entitled to receive
such evidence of such Grantee’s ownership of the shares of Stock subject to such
Option as shall be consistent with Section 3.7.

 

8.9Transferability of Options.

 

Except as provided in Section 8.10, during the lifetime of a Grantee of an
Option, only such Grantee (or, in the event of such Grantee’s legal incapacity
or incompetency, such Grantee’s guardian or legal representative) may exercise
such Option. Except as provided in Section 8.10, no Option shall be assignable
or transferable by the Grantee to whom it is granted, other than by will or the
laws of descent and distribution.

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8.10Family Transfers.

 

If authorized in the applicable Award Agreement and by the Committee, in its
sole discretion, a Grantee may transfer, not for value, all or part of an Option
which is not an Incentive Stock Option to any Family Member. For the purpose of
this Section 8.10, a transfer “not for value” is a transfer which is (a) a gift,
(b) a transfer under a domestic relations order in settlement of marital
property rights, or (c) unless Applicable Laws do not permit such transfer, a
transfer to an entity in which more than fifty percent (50%) of the voting
interests are owned by Family Members (and/or the Grantee) in exchange for an
interest in such entity. Following a transfer under this Section 8.10, any such
Option shall continue to be subject to the same terms and conditions as were
applicable immediately prior to such transfer, and the shares of Stock acquired
pursuant to such Option shall be subject to the same restrictions with respect
to transfers of such shares of Stock as would have applied to the Grantee
thereof. Subsequent transfers of transferred Options shall be prohibited except
to Family Members of the original Grantee in accordance with this Section 8.10
or by will or the laws of descent and distribution. The provisions of
Section 8.4 relating to termination of Service shall continue to be applied with
respect to the original Grantee of the Option, following which such Option shall
be exercisable by the transferee only to the extent, and for the periods
specified, in Section 8.4.

 

8.11Limitations on Incentive Stock Options.

 

An Option shall constitute an Incentive Stock Option only (a) if the Grantee of
such Option is an Employee of the Company or any corporate Subsidiary, (b) to
the extent specifically provided in the related Award Agreement, and (c) to the
extent that the aggregate Fair Market Value (determined at the time such Option
is granted) of the shares of Stock with respect to which all Incentive Stock
Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Company, the Bank, and
its Affiliates) does not exceed one hundred thousand dollars ($100,000). Except
to the extent provided in the regulations under Code Section 422, this
limitation shall be applied by taking Options into account in the order in which
they were granted.

 

8.12Notice of Disqualifying Disposition.

 

If any Grantee shall make any disposition of shares of Stock issued pursuant to
the exercise of an Incentive Stock Option under the circumstances provided in
Code Section 421(b) (relating to certain disqualifying dispositions), such
Grantee shall notify the Company of such disposition within ten (10) days
thereof.

 

9.TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS

9.1Grant of Restricted Stock or Stock Units.

 

Awards of Restricted Stock and Stock Units may be made for consideration or for
no consideration, other than the par value of the shares of Stock, which shall
be deemed paid by past Service or, if so provided in the related Award Agreement
or a separate agreement, the promise by the Grantee to perform future Service to
the Company, the Bank, or an Affiliate.

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9.2Restrictions.

 

At the time a grant of Restricted Stock or Stock Units is made, the Committee
may, in its sole discretion, (a) establish a period of time (a “Restricted
Period”) applicable to such Restricted Stock or Stock Units and (b) prescribe
restrictions in addition to or other than the expiration of the Restricted
Period, including the achievement of corporate or individual performance goals,
which may be applicable to all or any portion of such Restricted Stock or Stock
Units as provided in Section 12. Awards of Restricted Stock and Stock Units may
not be sold, transferred, assigned, pledged, or otherwise encumbered or disposed
of during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Committee with respect to such Awards.

 

9.3Registration; Restricted Share Certificates.

 

Pursuant to Section 3.7, to the extent that ownership of Restricted Stock is
evidenced by a book-entry registration or direct registration (including
transaction advices), such registration shall be notated to evidence the
restrictions imposed on such Award of Restricted Stock under the Plan and the
applicable Award Agreement. Subject to Section 3.7 and the immediately following
sentence, the Company may issue, in the name of each Grantee to whom Restricted
Stock has been granted, share certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date of such Restricted Stock. The Committee may
provide in an Award Agreement with respect to an Award of Restricted Stock that
either (a) the Secretary of the Company shall hold such share certificates for
such Grantee’s benefit until such time as such shares of Restricted Stock are
forfeited to the Company or the restrictions applicable thereto lapse and such
Grantee shall deliver a stock power to the Company with respect to each share
certificate, or (b) such share certificates shall be delivered to such Grantee;
provided, that such share certificates shall bear legends that comply with
applicable securities laws and regulations and make appropriate reference to the
restrictions imposed on such Award of Restricted Stock under the Plan and such
Award Agreement.

 

9.4Rights of Holders of Restricted Stock.

 

Unless the Committee otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such shares of Restricted Stock
and the right to receive any dividends declared or paid with respect to such
shares of Restricted Stock. The Committee may provide that any dividends paid on
Restricted Stock must be reinvested in shares of Stock, which may or may not be
subject to the same vesting conditions and restrictions as the vesting
conditions and restrictions applicable to such Restricted Stock. Dividends paid
on Restricted Stock which vests or is earned based upon the achievement of
performance goals shall not vest unless such performance goals for such
Restricted Stock are achieved, and if such performance goals are not achieved,
the Grantee of such Restricted Stock shall promptly forfeit and repay to the
Company such dividend payments. All stock distributions, if any, received by a
Grantee with respect to Restricted Stock as a result of any stock split, stock
dividend, combination of stock, or other similar transaction shall be subject to
the vesting conditions and restrictions applicable to such Restricted Stock.

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9.5Rights of Holders of Stock Units.

9.5.1Voting and Dividend Rights.

 

Holders of Stock Units shall have no rights as stockholders of the Company (for
example, the right to receive cash or dividend payments or distributions
attributable to the shares of Stock subject to such Stock Units, to direct the
voting of the shares of Stock subject to such Stock Units, or to receive notice
of any meeting of the Company’s stockholders). The Committee may provide in an
Award Agreement evidencing a grant of Stock Units that the holder of such Stock
Units shall be entitled to receive, upon the Company’s payment of a cash
dividend on its outstanding shares of Stock, a cash payment for each such Stock
Unit which is equal to the per-share dividend paid on such shares of Stock.
Dividends paid on Stock Units which vest or are earned based upon the
achievement of performance goals shall not vest unless such performance goals
for such Stock Units are achieved, and if such performance goals are not
achieved, the Grantee of such Stock Units shall promptly forfeit and repay to
the Company such dividend payments. Such Award Agreement also may provide that
such cash payment shall be deemed reinvested in additional Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date on
which such cash dividend is paid. Such cash payments paid in connection with
Stock Units which vest or are earned based upon the achievement of performance
goals shall not vest unless such performance goals for such Stock Units are
achieved, and if such performance goals are not achieved, the Grantee of such
Stock Units shall promptly forfeit and repay to the Company such cash payments.

 

9.5.2Creditor’s Rights.

 

A holder of Stock Units shall have no rights other than those of a general
unsecured creditor of the Company. Stock Units represent unfunded and unsecured
obligations of the Company, subject to the terms and conditions of the
applicable Award Agreement.

 

9.6Termination of Service.

 

Unless the Committee otherwise provides in an Award Agreement, in another
agreement with the Grantee, or otherwise in writing after such Award Agreement
is entered into, but prior to termination of Grantee’s Service, upon the
termination of such Grantee’s Service, any Restricted Stock or Stock Units held
by such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited. Upon forfeiture of such Restricted Stock or Stock Units, the Grantee
thereof shall have no further rights with respect thereto, including any right
to vote such Restricted Stock or any right to receive dividends with respect to
such Restricted Stock or Stock Units.

 

9.7Purchase of Restricted Stock and Shares of Stock Subject to Stock Units.

 

The Grantee of an Award of Restricted Stock or vested Stock Units shall be
required, to the extent required by Applicable Laws, to purchase such Restricted
Stock or the shares of Stock subject to such vested Stock Units from the Company
at a purchase price equal to the greater of (x) the aggregate par value of the
shares of Stock represented by such Restricted Stock or such vested Stock Units
or (y) the purchase price, if any, specified in the Award Agreement relating to
such Restricted Stock or such vested Stock Units. Such purchase price shall be
payable in a form provided in Section 10 or, in the sole discretion of the
Committee, in consideration for Service rendered or to be rendered to the
Company, the Bank, or an Affiliate.

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9.8Delivery of Shares of Stock.

 

Upon the expiration or termination of any Restricted Period and the satisfaction
of any other conditions prescribed by the Committee, including, but not limited
to, any delayed delivery period, the restrictions applicable to Restricted Stock
or Stock Units settled in shares of Stock shall lapse, and, unless otherwise
provided in the applicable Award Agreement, a book-entry or direct registration
(including transaction advices) or a share certificate evidencing ownership of
such shares of Stock shall, consistent with Section 3.7, be issued, free of all
such restrictions, to the Grantee thereof or such Grantee’s beneficiary or
estate, as the case may be. Neither the Grantee, nor the Grantee’s beneficiary
or estate, shall have any further rights with regard to a Stock Unit once the
shares of Stock represented by such Stock Unit have been delivered in accordance
with this Section 9.8.

 

10.TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED
AWARDS

 

10.1.        Unrestricted Stock Awards.

 

The Committee may, in its sole discretion, grant (or sell at the par value of a
share of Stock or at such other higher purchase price as shall be determined by
the Committee) an Award to any Grantee pursuant to which such Grantee may
receive shares of Stock free of any restrictions (“Unrestricted Stock”) under
the Plan. Unrestricted Stock Awards may be granted or sold to any Grantee as
provided in the immediately preceding sentence in respect of past Service or, if
so provided in the related Award Agreement or a separate agreement, the promise
by the Grantee to perform future Service, to the Company, the Bank, or an
Affiliate or other valid consideration, or in lieu of, or in addition to, any
cash compensation due to such Grantee.

10.2.        Other Equity-Based Awards.

 

The Committee may, in its sole discretion, grant Awards in the form of Other
Equity-Based Awards, as deemed by the Committee to be consistent with the
purposes of the Plan. Awards granted pursuant to this Section 10.2 may be
granted with vesting, value, and/or payment contingent upon the achievement of
one or more performance goals. The Committee shall determine the terms and
conditions of Other Equity-Based Awards at the Grant Date or thereafter. Any
dividends paid on Other Equity-Based Awards which vest or are earned based upon
the achievement of performance goals shall not vest unless such performance
goals for such Other Equity-Based Awards are achieved, and if such performance
goals are not achieved, the Grantee of such Other Equity-Based Award shall
promptly forfeit and repay to the Company such dividend payments. Unless the
Committee otherwise provides in an Award Agreement, in another agreement with
the Grantee, or otherwise in writing after such Award Agreement is issued, upon
the termination of a Grantee’s Service, any Other Equity-Based Awards held by
such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited. Upon forfeiture of any Other Equity-Based Award, the Grantee thereof
shall have no further rights with respect to such Other Equity-Based Award.

 

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11.FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

11.1General Rule.

 

Payment of the Option Price for the shares of Stock purchased pursuant to the
exercise of an Option or the purchase price, if any, for Restricted Stock shall
be made in cash or in cash equivalents acceptable to the Company.

 

11.2Surrender of Shares of Stock.

 

To the extent that the applicable Award Agreement so provides, payment of the
Option Price for shares of Stock purchased pursuant to the exercise of an Option
or the purchase price, if any, for Restricted Stock may be made all or in part
through the tender or attestation to the Company of shares of Stock, which shall
be valued, for purposes of determining the extent to which such Option Price or
purchase price has been paid thereby, at their Fair Market Value on the date of
such tender or attestation.

 

11.3Cashless Exercise.

 

To the extent permitted by Applicable Laws and to the extent the Award Agreement
so provides, payment of the Option Price for shares of Stock purchased pursuant
to the exercise of an Option may be made all or in part by delivery (on a form
acceptable to the Committee) of an irrevocable direction to a licensed
securities broker acceptable to the Company to sell shares of Stock and to
deliver all or part of the proceeds of such sale to the Company in payment of
such Option Price and any withholding taxes described in Section 17.3, or, with
the consent of the Company, by issuing the number of shares of Stock equal in
value to the difference between such Option Price and the Fair Market Value of
the shares of Stock subject to the portion of such Option being exercised.

 

11.4Other Forms of Payment.

 

To the extent the Award Agreement so provides and/or unless otherwise specified
in an Award Agreement, payment of the Option Price for shares of Stock purchased
pursuant to exercise of an Option or the purchase price, if any, for Restricted
Stock may be made in any other form that is consistent with Applicable Laws,
including (a) Service by the Grantee thereof to the Company, the Bank, or an
Affiliate and (b) by withholding shares of Stock that would otherwise vest or be
issuable in an amount equal to the Option Price or purchase price and the
required tax withholding amount.

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12.TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

12.1.        Dividend Equivalent Rights.

 

A Dividend Equivalent Right is an Award entitling the recipient thereof to
receive credits based on cash distributions that would have been paid on the
shares of Stock specified in such Dividend Equivalent Right (or other Award to
which such Dividend Equivalent Right relates) if such shares of Stock had been
issued to and held by the recipient of such Dividend Equivalent Right as of the
record date. A Dividend Equivalent Right may be granted hereunder to any
Grantee; provided, that no Dividend Equivalent Rights may be granted in
connection with, or related to, an Award of Options. The terms and conditions of
Dividend Equivalent Rights shall be specified in the Award Agreement therefor.
Dividend equivalents credited to the holder of a Dividend Equivalent Right may
be paid currently (with or without being subject to forfeiture or a repayment
obligation) or may be deemed to be reinvested in additional shares of Stock,
which may thereafter accrue additional Dividend Equivalent Rights (with or
without being subject to forfeiture or a repayment obligation). Any such
reinvestment shall be at the Fair Market Value thereof on the date of such
reinvestment. Dividend Equivalent Rights may be settled in cash or shares of
Stock or a combination thereof, in a single installment or in multiple
installments, all as determined in the sole discretion of the Committee. A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other Award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other Award. A Dividend Equivalent Right granted as a
component of another Award also may contain terms and conditions which are
different from the terms and conditions of such other Award; provided, that,
Dividend Equivalent Rights credited pursuant to a Dividend Equivalent Right
granted as a component of another Award which vests or is earned based upon the
achievement of performance goals shall not vest unless such performance goals
for such underlying Award are achieved, and if such performance goals are not
achieved, the Grantee of such Dividend Equivalent Rights shall promptly forfeit
and repay to the Company payments made in connection with such Dividend
Equivalent Rights.

12.2.        Termination of Service.

 

Unless the Committee otherwise provides in an Award Agreement, in another
agreement with the Grantee, or otherwise in writing after such Award Agreement
is issued, a Grantee’s rights in all Dividend Equivalent Rights shall
automatically terminate upon such Grantee’s termination of Service for any
reason.

 

13.TERMS AND CONDITIONS OF PERFORMANCE-BASED AWARDS

13.1Grant of Performance-Based Awards.

 

Subject to the terms and provisions of the Plan, the Committee, at any time and
from time to time, may grant Performance-Based Awards in such amounts and upon
such terms as the Committee shall determine.

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13.2Value of Performance-Based Awards.

 

Each grant of a Performance-Based Award shall have an actual or target number of
shares of Stock or initial value that is established by the Committee at the
time of grant. The Committee shall set performance goals in its discretion
which, depending on the extent to which they are achieved, shall determine the
value and/or number of shares of Stock subject to a Performance-Based Award that
will be paid out to the Grantee thereof.

 

13.3Earning of Performance-Based Awards.

 

Subject to the terms of the Plan, in particular Section 13.6.3, after the
applicable Performance Period has ended, the Grantee of Performance-Based Awards
shall be entitled to receive a payout on the number of the Performance-Based
Awards or value earned by such Grantee over such Performance Period.

 

13.4Form and Timing of Payment of Performance-Based Awards.

 

Payment of earned Performance-Based Awards shall be made in the manner described
in the applicable Award Agreement as determined by the Committee. Subject to the
terms of the Plan, the Committee, in its sole discretion, may pay earned
Performance-Based Awards in the form of cash or shares of Stock (or a
combination thereof) equal to the value of such earned Performance-Based Awards
and shall pay the Awards that have been earned at the close of the applicable
Performance Period, or as soon as reasonably practicable after the Committee has
determined that the performance goal or goals relating thereto have been
achieved; provided, that, unless specifically provided in the Award Agreement
for such Awards and to the extent necessary to comply with Section 409A of the
Code, such payment shall occur no later than the fifteenth (15th) day of the
third (3rd) month following the end of the calendar year in which such
Performance Period ends. Any shares of Stock paid out under such
Performance-Based Awards may be granted subject to any restrictions deemed
appropriate by the Committee. The determination of the Committee with respect to
the form of payout of such Performance-Based Awards shall be set forth in the
Award Agreement therefor.

 

13.5Performance Conditions.

 

The right of a Grantee to exercise or receive a grant or settlement of any
Performance-Based Award, and the timing thereof, may be subject to such
performance conditions as may be specified by the Committee. The Committee may
use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions. If and to the extent
required under Code Section 162(m), any power or authority relating to an Award
intended to qualify under Code Section 162(m) shall be exercised by the
Committee and not by the Board.

 

13.6Performance-Based Awards Granted to Designated Covered Employees.

 

If and to the extent that the Committee determines that a Performance-Based
Award to be granted to a Grantee should constitute “qualified performance-based
compensation” for purposes of Code Section 162(m), the grant, exercise, and/or
settlement of such Award shall be contingent upon achievement of pre-established
performance goals and other terms set forth in this Section 13.6.

24

 

13.6.1Performance Goals Generally.

 

The performance goals for Performance-Based Awards shall consist of one (1) or
more business criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee consistent with
this Section 13.6. Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m), including the requirement that the
level or levels of performance targeted by the Committee result in the
achievement of performance goals being “substantially uncertain.” The Committee
may determine that such Awards shall be granted, exercised, and/or settled upon
achievement of any single performance goal or of two (2) or more performance
goals. Performance goals may differ for Awards granted to any one Grantee or to
different Grantees.

 

13.6.2Timing for Establishing Performance Goals.

 

Performance goals for any Performance-Based Award shall be established not later
than the earlier of (a) ninety (90) days after the beginning of any Performance
Period applicable to such Award, and (b) the date on which twenty-five percent
(25%) of any Performance Period applicable to such Award has expired, or at such
other date as may be required or permitted for compensation payable to a Covered
Employee to constitute Performance-Based Compensation.

 

13.6.3Payment of Awards; Other Terms.

 

Payment of Performance-Based Awards shall be in cash, shares of Stock, or other
Awards, including an Award that is subject to additional Service-based vesting,
as determined in the sole discretion of the Committee. The Committee may, in its
sole discretion, reduce the amount of a payment otherwise to be made in
connection with such Awards. The Committee shall specify the circumstances in
which such Performance-Based Awards shall be paid or forfeited in the event of
termination of Service by the Grantee prior to the end of a Performance Period
or settlement of such Awards. In the event payment of the Performance-Based
Award is made in the form of another Award subject to Service-based vesting, the
Committee shall specify the circumstances in which the payment Award will be
paid or forfeited in the event of a termination of Service.

 

13.6.4Performance Measures.

 

The performance goals upon which the payment or vesting of a Performance-Based
Award to a Covered Employee that is intended to qualify as Performance-Based
Compensation may be conditioned shall be limited to the following Performance
Measures, with or without adjustment:

 

  (a) net earnings or net income;         (b) operating earnings;

 

25

 

 

  (c) pretax earnings;         (d) earnings per share;         (e) share price,
including growth measures and total stockholder return;         (f) earnings
before interest and taxes;         (g) earnings before interest, taxes,
depreciation and/or amortization;         (h) earnings before interest, taxes,
depreciation and/or amortization, as adjusted to exclude any one or more of the
following:           • stock-based compensation expense;             • income
from discontinued operations;             • gain on cancellation of debt;      
      • debt extinguishment and related costs;             • restructuring,
separation, and/or integration charges and costs;             • reorganization
and/or recapitalization charges and costs;             • impairment charges;    
        • gain or loss related to investments;             • sales and use tax
settlement; and             • gain on non-monetary transactions;           (i)
sales or revenue growth, whether in general, by type of product or service, or
by type of customer;         (j) gross or operating margins;         (k) return
measures, including return on assets, capital, investment, equity, sales, or
revenue;         (l) cash flow, including:           • operating cash flow;    
   

 

 

  • free cash flow, defined as earnings before interest, taxes, depreciation,
and/or amortization (as adjusted to exclude any one or more of the items that
may be excluded pursuant to the Performance Measure specified in clause
(h) above) less capital expenditures;             • levered free cash flow,
defined as free cash flow less interest expense;             • cash flow return
on equity; and             • cash flow return on investment;

 

26

 

 

  (m) productivity ratios;         (n) expense targets;         (o) market
share;         (p) financial ratios as provided in credit agreements of the
Company and its subsidiaries;         (q) working capital targets;         (r)
completion of acquisitions of businesses or companies;         (s) completion of
divestitures and asset sales;         (t) customer satisfaction; or         (u)
any combination of the foregoing business criteria.

 

Performance under any of the foregoing Performance Measures (a) may be used to
measure the performance of (i) the Company, the Bank, Subsidiaries of the
Company and the Bank, and other Affiliates as a whole, (ii) the Company, the
Bank, any Subsidiary, and/or any other Affiliate, or any combination thereof, or
(iii) any one or more business units of the Company, the Bank, any Subsidiary,
and/or any other Affiliate, as the Committee, in its sole discretion, deems
appropriate and (b) may be compared to the performance of one or more other
companies or one or more published or special indices designated or approved by
the Committee for such comparison, as the Committee, in its sole discretion,
deems appropriate. In addition, the Committee, in its sole discretion, may
select performance under the Performance Measure specified in clause (e) above
for comparison to performance under one or more stock market indices designated
or approved by the Committee. The Committee also shall have the authority to
provide for accelerated vesting of any Performance-Based Award based on the
achievement of performance goals pursuant to the Performance Measures specified
in this Section 13.

 

13.6.5Evaluation of Performance.

 

The Committee may provide in any Performance-Based Award that any evaluation of
performance may include or exclude any of the following events that occur during
a Performance Period: (a) asset write-downs; (b) litigation or claims,
judgments, or settlements; (c) the effect of changes in tax laws, accounting
principles, or other laws or provisions affecting reported results; (d) any
reorganization or restructuring events or programs; (e) extraordinary, non-core,
non-operating, or non-recurring items; (f) acquisitions or divestitures;
(g) foreign exchange gains and losses; (h) tax valuation allowance reversals;
(i) impairment expense; and (j) environmental expense. To the extent such
inclusions or exclusions affect Awards to Covered Employees that are intended to
qualify as Performance-Based Compensation, such inclusions or exclusions shall
be prescribed in a form that meets the requirements of Code Section 162(m) for
deductibility.

 

27

 

13.6.6Adjustment of Performance-Based Compensation.

 

The Committee shall have the sole discretion to adjust Awards that are intended
to qualify as Performance-Based Compensation, either on a formula or
discretionary basis, or on any combination thereof, as the Committee determines
consistent with the requirements of Code Section 162(m) for deductibility.

 

13.6.7Committee Discretion.

 

In the event that Applicable Laws change to permit Committee discretion to alter
the governing Performance Measures without obtaining stockholder approval of
such changes, the Committee shall have sole discretion to make such changes
without obtaining stockholder approval; provided, that the exercise of such
discretion shall not be inconsistent with the requirements of Code
Section 162(m). In addition, in the event that the Committee determines that it
is advisable to grant Awards that shall not qualify as Performance-Based
Compensation, the Committee may make such grants without satisfying the
requirements of Code Section 162(m) and base vesting on Performance Measures
other than those set forth in Section 13.6.4.

 

13.7Status of Awards Under Code Section 162(m).

 

It is the intent of the Company that Performance-Based Awards under Section 13.6
granted to persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Code Section 162(m) and the regulations
promulgated thereunder shall, if so designated by the Committee, constitute
“qualified performance-based compensation” within the meaning of Code
Section 162(m). Accordingly, the terms of Section 13.6, including the
definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m). If any provision of
the Plan or any agreement relating to any such Performance-Based Award does not
comply or is inconsistent with the requirements of Code Section 162(m), such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.

 

14.PARACHUTE LIMITATIONS

 

If any Grantee is a “disqualified individual,” as defined in Code
Section 280G(c), then, notwithstanding any other provision of the Plan or of any
other agreement, contract, or understanding heretofore or hereafter entered into
by such Grantee with the Company, the Bank, or an Affiliate, except an
agreement, contract, or understanding that expressly addresses Code Section 280G
or Code Section 4999 (an “Other Agreement”), and notwithstanding any formal or
informal plan or other arrangement for the direct or indirect provision of
compensation to the Grantee (including groups or classes of Grantees or
beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a “Benefit Arrangement”), any right of the Grantee to any exercise,
vesting, payment, or benefit under the Plan shall be reduced or eliminated:

28

 

(a)to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under the Plan, all Other Agreements, and all Benefit Arrangements,
would cause any exercise, vesting, payment, or benefit to the Grantee under the
Plan to be considered a “parachute payment” within the meaning of Code
Section 280G(b)(2) as then in effect (a “Parachute Payment”); and

(b)if, as a result of receiving such Parachute Payment, the aggregate after-tax
amounts received by the Grantee from the Company under the Plan, all Other
Agreements, and all Benefit Arrangements would be less than the maximum
after-tax amount that could be received by the Grantee without causing any such
payment or benefit to be considered a Parachute Payment.

The Company shall accomplish such reduction by first reducing or eliminating any
cash payments (with the payments to be made furthest in the future being reduced
first), then by reducing or eliminating any accelerated vesting of
Performance-Based Awards, then by reducing or eliminating any accelerated
vesting of Options, then by reducing or eliminating any accelerated vesting of
Restricted Stock or Stock Units, then by reducing or eliminating any other
remaining Parachute Payments.

 

15.REQUIREMENTS OF LAW

15.1General.

 

The Company shall not be required to offer, sell, or issue any shares of Stock
under any Award, whether pursuant to the exercise of an Option or otherwise, if
the offer, sale, or issuance of such shares of Stock would constitute a
violation by the Grantee, the Company, the Bank, or an Affiliate, or any other
person, of any provision of Applicable Laws, including any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration, or qualification of any shares
of Stock subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the offering, issuance, sale, or purchase of shares of Stock in
connection with any Award, no shares of Stock may be offered, issued, or sold to
the Grantee or any other person under such Award, whether pursuant to the
exercise of an Option or otherwise, unless such listing, registration, or
qualification shall have been effected or obtained free of any conditions not
acceptable to the Company, and any delay caused thereby shall in no way affect
the date of termination of such Award. Without limiting the generality of the
foregoing, upon the exercise of any Option that may be settled in shares of
Stock or the delivery of any shares of Stock underlying an Award, unless a
registration statement under the Securities Act is in effect with respect to the
shares of Stock subject to such Award, the Company shall not be required to
offer, sell, or issue such shares of Stock unless the Committee shall have
received evidence satisfactory to it that the Grantee or any other person
exercising such Option or accepting delivery of such shares may acquire such
shares of Stock pursuant to an exemption from registration under the Securities
Act. Any determination in this connection by the Committee shall be final,
binding, and conclusive. The Company may register, but shall in no event be
obligated to register, any shares of Stock or other securities issuable pursuant
to the Plan pursuant to the Securities Act. The Company shall not be obligated
to take any affirmative action in order to cause the exercise of an Option or
the issuance of shares of Stock or other securities issuable pursuant to the
Plan or any Award to comply with any Applicable Laws. As to any jurisdiction
that expressly imposes the requirement that an Option that may be settled in
shares of Stock shall not be exercisable until the shares of Stock subject to
such Option are registered under the securities laws thereof or are exempt from
such registration, the exercise of such Option under circumstances in which the
laws of such jurisdiction apply shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.

29

 

15.2Rule 16b-3.

 

During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act, it is the intention of the Company that Awards
pursuant to the Plan and the exercise of Options granted hereunder that would
otherwise be subject to Section 16(b) of the Exchange Act shall qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any
provision of the Plan or action by the Committee does not comply with the
requirements of such Rule 16b-3, such provision or action shall be deemed
inoperative with respect to such Awards to the extent permitted by Applicable
Laws and deemed advisable by the Committee and shall not affect the validity of
the Plan. In the event that such Rule 16b-3 is revised or replaced, the Board
may exercise its discretion to modify the Plan in any respect necessary or
advisable in its judgment to satisfy the requirements of, or to permit the
Company to avail itself of the benefits of, the revised exemption or its
replacement.

 

16.EFFECT OF CHANGES IN CAPITALIZATION

16.1Changes in Stock.

 

If the number of outstanding shares of Stock is increased or decreased or the
shares of Stock are changed into or exchanged for a different number of shares
or kind of Capital Stock or other securities of the Company on account of any
recapitalization, reclassification, stock split, reverse stock split, spin-off,
combination of stock, exchange of stock, stock dividend, or other distribution
payable in Capital Stock, or other increase or decrease in shares of Stock
effected without receipt of consideration by the Company occurring after the
Effective Date, the number and kinds of shares of stock for which grants of
Options and other Awards may be made under the Plan, including the share limits
set forth in Section 6.2, shall be adjusted proportionately and accordingly by
the Committee. In addition, the number and kind of shares of Stock for which
Awards are outstanding shall be adjusted proportionately and accordingly by the
Committee so that the proportionate interest of the Grantee therein immediately
following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options shall
not change the aggregate Option Price payable with respect to shares that are
subject to the unexercised portion of such outstanding Options but shall include
a corresponding proportionate adjustment in the per share Option Price. The
conversion of any convertible securities of the Company shall not be treated as
an increase in shares effected without receipt of consideration. Notwithstanding
the foregoing, in the event of any distribution to the Company’s stockholders of
securities of any other entity or other assets (including an extraordinary
dividend, but excluding a non-extraordinary dividend, declared and paid by the
Company) without receipt of consideration by the Company, the Board, or the
Committee constituted pursuant to Section 3.1.2 shall, in such manner as the
Board or the Committee deems appropriate, adjust (a) the number and kind of
shares of Stock subject to outstanding Awards and/or (b) the aggregate and per
share Option Price of outstanding Options as required to reflect such
distribution.

30

 

16.2Reorganization in Which the Company Is the Surviving Entity Which Does Not
Constitute a Change in Control.

 

Subject to Section 16.3, if the Company shall be the surviving entity in any
reorganization, merger, or consolidation of the Company with one or more other
entities which does not constitute a Change in Control, any Option theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to such Option would
have been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the per share
Option Price so that the aggregate Option Price thereafter shall be the same as
the aggregate Option Price of the shares of Stock remaining subject to the
Option as in effect immediately prior to such reorganization, merger, or
consolidation. Subject to any contrary language in an Award Agreement or in
another agreement with the Grantee, or otherwise set forth in writing, any
restrictions applicable to such Award shall apply, as well to any replacement
shares received by the Grantee as a result of such reorganization, merger, or
consolidation. In the event of any reorganization, merger, or consolidation of
the Company referred to in this Section 16.2, Performance-Based Awards shall be
adjusted (including any adjustment to the Performance Measures applicable to
such Awards deemed appropriate by the Committee) so as to apply to the
securities that a holder of the number of shares of Stock subject to the
Performance-Based Awards would have been entitled to receive immediately
following such reorganization, merger, or consolidation.

 

16.3Change in Control in which Awards are not Assumed.

 

Except as otherwise provided in the applicable Award Agreement, in another
agreement with the Grantee, or as otherwise set forth in writing, upon the
occurrence of a Change in Control in which outstanding Options, Restricted
Stock, Stock Units, Dividend Equivalent Rights, or Other Equity-Based Awards are
not being assumed or continued, the following provisions shall apply to such
Award, to the extent not assumed or continued:

 

(a)in each case with the exception of Performance-Based Awards, all outstanding
Restricted Stock shall be deemed to have vested, all Stock Units shall be deemed
to have vested, and the shares of Stock subject thereto shall be delivered, and
all Dividend Equivalent Rights shall be deemed to have vested, and the shares of
Stock (if any) subject thereto shall be delivered, immediately prior to the
occurrence of such Change in Control, and either or both of the following two
(2) actions shall be taken:

31

 

  

(i)fifteen (15) days prior to the scheduled consummation of such Change in
Control, all Options outstanding hereunder shall become immediately exercisable
and shall remain exercisable for a period of fifteen (15) days, which exercise
shall be effective upon such consummation; or

(ii)the Committee may elect, in its sole discretion, to cancel any outstanding
Awards of Options, Restricted Stock, Stock Units, and/or Dividend Equivalent
Rights and pay or deliver, or cause to be paid or delivered, to the holder
thereof an amount in cash or securities having a value (as determined by the
Committee acting in good faith), in the case of Restricted Stock or Stock Units
and Dividend Equivalent Rights (for shares of Stock subject thereto), equal to
the formula or fixed price per share paid to holders of shares of Stock pursuant
to such Change in Control and, in the case of Options, equal to the product of
the number of shares of Stock subject to such Options (the “Award Stock”)
multiplied by the amount, if any, by which (x) the formula or fixed price per
share paid to holders of shares of Stock pursuant to such transaction exceeds
(y) the Option Price applicable to such Award Stock.

(b)Performance-Based Awards shall be treated as though target performance has
been achieved and will be paid in cash or converted into Unrestricted Stock.
After application of this Section 16.3(b), if any Awards arise from application
of this Section 16, such Awards shall be settled under the applicable provision
of Section 16.3(a).

(c)Other Equity-Based Awards shall be governed by the terms of the applicable
Award Agreement.

 

With respect to the Company’s establishment of an exercise window, (A) any
exercise of an Option during the fifteen (15)-day period referred to above shall
be conditioned upon the consummation of the applicable Change in Control and
shall be effective only immediately before the consummation thereof, and
(B) upon consummation of any Change in Control, the Plan and all outstanding but
unexercised Options shall terminate. The Committee shall send notice of an event
that shall result in such a termination to all natural persons and entities who
hold Options not later than the time at which the Company gives notice thereof
to its stockholders. 

 

16.4Change in Control in which Awards are Assumed.

 

Except as otherwise provided in the applicable Award Agreement, in another
agreement with the Grantee, or as otherwise set forth in writing, upon the
occurrence of a Change in Control in which outstanding Options, Restricted
Stock, Stock Units, Dividend Equivalent Rights, or Other Equity-Based Awards are
being assumed or continued, the following provisions shall apply to such Award,
to the extent assumed or continued:

 

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The Plan and the Options, Restricted Stock, Stock Units, Dividend Equivalent
Rights, and Other Equity-Based Awards granted under the Plan shall continue in
the manner and under the terms so provided in the event of any Change in Control
to the extent that provision is made in writing in connection with such Change
in Control for the assumption or continuation of such Options, Restricted Stock,
Stock Units, Dividend Equivalent Rights, and Other Equity-Based Awards, or for
the substitution for such Options, Restricted Stock, Stock Units, Dividend
Equivalent Rights, and Other Equity-Based Awards of new common stock options,
stock appreciation rights, restricted stock, common stock units, dividend
equivalent rights, and other equity-based awards relating to the stock of a
successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number of shares (disregarding any consideration that is
not common stock) and option and stock appreciation rights exercise prices. In
the event an Award is assumed, continued, or substituted upon the consummation
of any Change in Control and the employment of such Grantee with the Company or
an Affiliate is terminated without Cause within one (1) year following the
consummation of such Change in Control, such Award shall be fully vested and may
be exercised in full, to the extent applicable, beginning on the date of such
termination and for the one (1)-year period immediately following such
termination or for such longer period as the Committee shall determine.

 

16.5Adjustments

 

Adjustments under this Section 16 related to shares of Stock or other securities
of the Company shall be made by the Committee, whose determination in that
respect shall be final, binding, and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share. The Committee may provide in the applicable
Award Agreement at the time of grant, in another agreement with the Grantee, or
otherwise in writing at any time thereafter with the consent of the Grantee, for
different provisions to apply to an Award in place of those provided in
Sections 16.1, 16.2, 16.3, and 16.4. This Section 16 shall not limit the
Committee’s ability to provide for alternative treatment of Awards outstanding
under the Plan in the event of a change in control event involving the Company,
the Bank, or an Affiliate that is not a Change in Control.

 

16.6No Limitations on Company.

 

The making of Awards pursuant to the Plan shall not affect or limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets (including all or any part of the business or assets of
any Subsidiary or other Affiliate) or engage in any other transaction or
activity.

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17.GENERAL PROVISIONS

17.1Disclaimer of Rights.

 

No provision in the Plan or in any Award or Award Agreement shall be construed
to confer upon any individual the right to remain in the employ or Service of
the Company, the Bank, or an Affiliate, or to interfere in any way with any
contractual or other right or authority of the Company, the Bank, or an
Affiliate either to increase or decrease the compensation or other payments to
any natural person or entity at any time, or to terminate any employment or
other relationship between any natural person or entity and the Company, the
Bank, or an Affiliate. In addition, notwithstanding anything contained in the
Plan to the contrary, unless otherwise stated in the applicable Award Agreement,
in another agreement with the Grantee, or otherwise in writing, no Award granted
under the Plan shall be affected by any change of duties or position of the
Grantee thereof, so long as such Grantee continues to provide Service. The
obligation of the Company to pay any benefits pursuant to the Plan shall be
interpreted as a contractual obligation to pay only those amounts provided
herein, in the manner and under the conditions prescribed herein. The Plan and
Awards shall in no way be interpreted to require the Company to transfer any
amounts to a third-party trustee or otherwise hold any amounts in trust or
escrow for payment to any Grantee or beneficiary under the terms of the Plan.

 

17.2Nonexclusivity of the Plan.

 

 Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable.

 

17.3Withholding Taxes.

 

The Company, the Bank, or an Affiliate, as the case may be, shall have the right
to deduct from payments of any kind otherwise due to a Grantee any federal,
state, or local taxes of any kind required by law to be withheld with respect to
the vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to
any other Award. At the time of such vesting, lapse, or exercise, the Grantee
shall pay in cash to the Company, the Bank, or an Affiliate, as the case may be,
any amount that the Company, the Bank, or such Affiliate may reasonably
determine to be necessary to satisfy such withholding obligation; provided, that
if there is a same-day sale of shares of Stock subject to an Award, the Grantee
shall pay such withholding obligation on the day on which such same-day sale is
completed. Subject to the prior approval of the Company, the Bank, or an
Affiliate, which may be withheld by the Company, the Bank, or such Affiliate, as
the case may be, in its sole discretion, the Grantee may elect to satisfy such
withholding obligation, in whole or in part, (a) by causing the Company, the
Bank, or such Affiliate to withhold shares of Stock otherwise issuable to the
Grantee or (b) by delivering to the Company, the Bank, or such Affiliate shares
of Stock already owned by the Grantee. The shares of Stock so withheld or
delivered shall have an aggregate Fair Market Value equal to such withholding
obligation. The Fair Market Value of the shares of Stock used to satisfy such
withholding obligation shall be determined by the Company, the Bank, or such
Affiliate as of the date on which the amount of tax to be withheld is to be
determined. A Grantee who has made an election pursuant to this Section 17.3 may
satisfy such Grantee’s withholding obligation only with shares of Stock that are
not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements. The maximum number of shares of Stock that may be withheld from
any Award to satisfy any federal, state, or local tax withholding requirements
upon the exercise, vesting, or lapse of restrictions applicable to any Award or
payment of shares of Stock pursuant to such Award, as applicable, may not exceed
such number of shares of Stock having a Fair Market Value equal to the minimum
statutory amount required by the Company, the Bank, or the applicable Affiliate
to be withheld and paid to any such federal, state, or local taxing authority
with respect to such exercise, vesting, lapse of restrictions, or payment of
shares of Stock. Notwithstanding Section 2.22 or this Section 17.3, for purposes
of determining taxable income and the amount of the related tax withholding
obligation pursuant to this Section 17.3, for any shares of Stock subject to an
Award that are sold by or on behalf of a Grantee on the same date on which such
shares may first be sold pursuant to the terms of the related Award Agreement,
the Fair Market Value of such shares shall be the sale price of such shares on
such date (or if sales of such shares are effectuated at more than one sale
price, the weighted average sale price of such shares on such date), so long as
such Grantee has provided the Company, or its designee or agent, with advance
written notice of such sale. In such case, the percentage of shares of Stock
withheld shall equal the applicable minimum withholding rate.

 

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17.4Captions.

 

The use of captions in the Plan or any Award Agreement is for convenience of
reference only and shall not affect the meaning of any provision of the Plan or
such Award Agreement.

 

17.5Construction.

 

Unless the context otherwise requires, all references in the Plan to “including”
shall mean “including without limitation.”

 

17.6Other Provisions.

 

Each Award granted under the Plan may contain such other terms and conditions
not inconsistent with the Plan as may be determined by the Committee, in its
sole discretion.

 

17.7Number and Gender.

 

With respect to words used in the Plan, the singular form shall include the
plural form, and the masculine gender shall include the feminine gender, as the
context requires.

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17.8Severability.

If any provision of the Plan or any Award Agreement shall be determined to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.

 

17.9Governing Law.

The validity and construction of the Plan and the instruments evidencing the
Awards hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the Commonwealth of Massachusetts other than any
conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of the Plan and the instruments evidencing the
Awards granted hereunder to the substantive laws of any other jurisdiction.

 

17.10Section 409A of the Code.

The Plan is intended to comply with Code Section 409A to the extent subject
thereto, and, accordingly, to the maximum extent permitted, the Plan will be
interpreted and administered to be in compliance with Code Section 409A. Any
payments described in the Plan that are due within the “short-term deferral
period” as defined in Code Section 409A will not be treated as deferred
compensation unless Applicable Laws require otherwise. Notwithstanding anything
to the contrary in the Plan, to the extent required to avoid accelerated
taxation and tax penalties under Code Section 409A, amounts that would otherwise
be payable and benefits that would otherwise be provided pursuant to the Plan
during the six (6)-month period immediately following the Grantee’s termination
of “separation from service” (as defined for purposes of Code Section 409A) will
instead be paid on the first payroll date after the six (6)-month anniversary of
the Grantee’s separation from service (or the Grantee’s death, if earlier).

Further, notwithstanding anything to the contrary in the Plan, in the case of an
Award that is characterized as deferred compensation under Code Section 409A,
and pursuant to which settlement and delivery of the cash or Common Shares
subject to the Award is triggered based on a Change in Control, in no event will
a Change in Control be deemed to have occurred for purposes of such settlement
and delivery of cash or Stock if the transaction is not also a “change in the
ownership or effective control of” the Company or “a change in the ownership of
a substantial portion of the assets of” the Company as determined under Treasury
Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition
thereunder). If an Award characterized as deferred compensation under Code
Section 409A is not settled and delivered on account of the provision of the
preceding sentence, the settlement and delivery will occur on the next
succeeding settlement and delivery triggering event that is a permissible
triggering event under Code Section 409A. No provision of this paragraph will in
any way affect the determination of a Change in Control for purposes of vesting
in an Award that is characterized as deferred compensation under Code
Section 409A.

Notwithstanding the foregoing, neither the Company, the Bank, any Affiliate nor
the Committee will have any obligation to take any action to prevent the
assessment of any excise tax or penalty on any Grantee under Section 409A of the
Code and neither the Company, the Bank, any Affiliate nor the Committee will
have any liability to any Grantee for such tax or penalty. 

 

*    *    *

 

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To record adoption of the Plan by the Board as of February 26, 2014, and
approval of the Plan by the stockholders on May 15, 2014, the Company has caused
its authorized officer to execute the Plan.

 

  WESTFIELD FINANCIAL, INC.         By: /s/ Gerald P. Ciejka   Name: Gerald P.
Ciejka   Title:  Vice President and General Counsel

 

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