Document:

Exhibit 4.1

EXHIBIT A: 2014 STOCK INCENTIVE PLAN
NORTHRIM BANCORP, INC.
2014 STOCK INCENTIVE PLAN
I.
GENERAL PROVISIONS 
1.    Purpose.  The purpose of this Plan is to provide additional incentives to selected key employees and officers of Northrim BanCorp, Inc. (the “Company”) and related entities, thereby helping to attract and retain the best available personnel for positions of responsibility with such corporations and otherwise promoting the success of the business activities of such corporations. The incentives will be in the form of options to purchase shares of the Company’s common stock, other awards of the Company’s common stock (whether payable or denominated in common stock), and Stock Appreciation Rights.
2.    Definitions.  As used in this Plan, the following definitions shall apply: 
“Award” shall mean any grant of an Option, Restricted Stock, Restricted Unit, Performance Shares, Performance Units, Stock Appreciation Right, or Dividend Equivalent Right.
“Award Agreement” shall mean a written agreement (which may also be in electronic form) that details the terms and conditions of a particular Award.
“Board” shall mean the Board of Directors of the Company.
“Cause” shall mean, when used in connection with the termination of a Grantee’s employment or other service relationship with the Employer, a termination attributable to the Grantee’s (a) willful refusal to perform his or her obligations to the Employer, following a reasonable notice and cure period, (b) misappropriation of the Employer’s assets or flagrant mistreatment of subordinate employees, (c) commission of a serious criminal act, whether denominated a felony, misdemeanor or otherwise, which is likely to have a detrimental impact on the Employer and its operations, or (d) engaging in activities directly in competition or antithetical to the best interests of the Employer.  To the extent a Grantee is a party to an employment agreement or offer letter of employment with the Employer that defines “cause” or a similar term, then the meaning set forth in that agreement shall also be considered “Cause” for purposes of this Plan.  
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Common Stock” shall mean the Company’s common stock. 
“Committee” shall mean the Committee appointed by the Board in accordance with Section 4(a) of this Part I. 
“Company” shall mean Northrim BanCorp, Inc., a bank holding company headquartered in Anchorage, Alaska. 
“Dividend Equivalent Right” shall mean a right awarded to a Grantee pursuant to Part IV of this Plan to receive payment of an amount equivalent to the dividend that would be paid on a specified number of Shares just as if the Grantee owned the Shares.  Dividend Equivalent Rights may be granted alone or in connection with any other Award other than an Option or Stock Appreciation Right.
“Effective Date” shall mean [DATE], 2014, the date the shareholders of the Company approve this Plan.
“Eligible Participants” shall mean the key employees and officers of the Employer who are eligible to receive Awards under this Plan, in accordance with Section 4(c) of this Part I.
“Employer” shall mean the Company or any Related Entity that now exists or is hereafter organized or acquired by the Company. 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Fair Market Value” means, as of any date, the value of the Common Stock determined as follows: 
(a)    If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or the Nasdaq Small Market of the Nasdaq Stock Market, its Fair Market Value 

shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day on the date of such determination, as reported in The Wall Street Journal or other source as the Committee deems reliable; or 
(b)    If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for such stock on the date of such determination, as reported in The Wall Street Journal or other source as the Committee deems reliable; or 
(c)    In the absence of an established market for the Common Stock, the Fair Market Value shall be determined by the Committee. 
The Company acknowledges that Code Section 409A generally applies to deferred compensation, but provides an exception for stock options and stock appreciation rights with an exercise price no less than the fair market value of the underlying stock as of the time of grant.  To satisfy the applicable exception, “Fair Market Value” under this Plan is intended to satisfy the standards of fair market value for purposes of Code Section 409A.  
“Grant Date” shall mean the date on which the Committee completes the corporate action relating to the grant of an Award and all conditions to the Grant have been satisfied, provided that conditions relating to exercisability, vesting or similar conditions shall not defer the Grant Date.
“Grantee” shall mean an individual or entity who has received an Award under this Plan.
 “Option” shall mean a right to purchase Shares in accordance with the provisions of Part II of this Plan.  No Options under this Plan are intended to qualify as “incentive stock options” as defined in Code Section 422.
“Option Price” shall mean the amount to be paid by a Grantee to exercise an Option.
“Performance Shares” shall mean Shares awarded to a Grantee, where the Grantee’s continued retention of the Shares is subject to the satisfaction of specific performance-based criteria, pursuant to Part III of this Plan.  
“Performance Units” shall mean a right awarded to a Grantee to receive Shares (one Share for each Performance Unit) upon the satisfaction of specified performance-based criteria, pursuant to Part III of this Plan.  At the discretion of the Committee, Performance Units may be paid in cash in an amount equivalent to the Fair Market Value of the Shares otherwise payable to the Grantee, or a combination of cash and Shares.
“Plan” shall mean this Northrim BanCorp, Inc. 2014 Incentive Stock Plan.
“Prior Plans” shall mean the Company’s 2004 Stock Incentive Plan and the Company’s 2010 Stock Incentive Plan.
“Related Entity” shall mean any entity that, directly or indirectly, is in control of, or under control with, the Company.  For this purpose, the term “control” shall have the meanings assigned such term for the purposes of registration of securities on Form S-8 under the Securities Act.
“Restricted Stock” shall mean Shares awarded to a Grantee, where the Grantee’s continued retention of the Shares is subject to various restrictions, such as continued employment for a designated period, etc.
“Restricted Units” shall mean a right awarded to a Grantee to receive Shares (one Share for each Restricted Unit) upon the satisfaction of specified conditions, such as continued employment for a designated period, etc.  At the discretion of the Committee, Restricted Units may be paid in cash in amount equivalent to the Fair Market Value of the Shares otherwise payable to the Grantee, or a combination of cash and Shares.
“Securities Act” shall mean the Securities Act of 1933, as amended.
“Shares” shall mean shares of Common Stock.
“Stock Appreciation Right” shall mean a right awarded to a Grantee pursuant to Part IV of this Plan to receive a cash payment equal to the appreciation (if any) in the Fair Market Value of a Share from the date of grant until the Stock Appreciation Right is exercised.  At the discretion of the Committee, payment may be made by delivering an amount of Shares that have a Fair Market Value equal to the cash otherwise payable to the Grantee, or a combination of cash and Shares.

“Substitute Awards” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Company subsidiary or with which the Company or any Company subsidiary combines.
3.    Shares Subject to the Plan.  
(a)    Total Shares Available.  Subject to adjustment under Section 3(b) below, a total of 350,000 Shares shall be authorized for Awards granted under the Plan, less one Share for every one Share that was subject to an option or stock appreciation right granted under any Prior Plan after December 31, 2013 and prior to the Effective Date and three Shares for every one Share that was subject to an award other than an option or stock appreciation right granted under any Prior Plan after December 31, 2013 and prior to the Effective Date.  Any Shares that are subject to Options or Stock Appreciation Rights shall be counted against this limit as one Share for every one Share granted, and any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as three Shares for every one Share granted.  No awards may be granted under any Prior Plan on or after the Effective Date.  Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.
If (i) any Shares subject to an Award are forfeited, an Award expires or an Award is settled for cash (in whole or in part), or (ii) after December 31, 2013 any Shares subject to an award under any Prior Plan are forfeited, an award under any Prior Plan expires or is settled for cash (in whole or in part), then in each such case the Shares subject to such Award or award under the Prior Plan shall, to the extent of such forfeiture, expiration or cash settlement, be added to the Shares available for Awards under the Plan, as provided below.  In the event that withholding tax liabilities arising from an Award other than an Option or Stock Appreciation Right or, after December 31, 2013, an award other than an option or stock appreciation right under any Prior Plan are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, the Shares so tendered or withheld shall be added to the Shares available for Awards under the Plan as provided below.  Notwithstanding any other Plan provision to the contrary, the following Shares shall not be added to the Shares authorized for grant under this Section: (i) Shares tendered by the Grantee or withheld by the Company in payment of the purchase price of an Option or, after December 31, 2013, an option under any Prior Plan, (ii) Shares tendered by the Grantee or withheld by the Company to satisfy any tax withholding obligation with respect to Options or Stock Appreciation Rights or, after December 31, 2013, options or stock appreciation rights under any Prior Plan, (iii) Shares subject to a Stock Appreciation Right or, after December 31, 2013, a stock appreciation right under any Prior Plan that are not issued in connection with its stock settlement on exercise thereof, and (iv) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options or, after December 31, 2013, options under any Prior Plan.
Any Shares that again become available for Awards under the Plan pursuant to this Section shall be added as (i) one Share for every one Share subject to Options or Stock Appreciation Rights granted under the Plan or options or stock appreciation rights granted under any Prior Plan, and (ii) as three Shares for every one Share subject to Awards other than Options or Stock Appreciation Rights granted under the Plan or awards other than options or stock appreciation rights granted under any Prior Plan.
Substitute Awards shall not reduce the Shares authorized for grant under the Plan or the limitations on grants to a Grantee under Section 3(c), nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above in this Section 3(a).  Additionally, in the event that a company acquired by the Company or any Company subsidiary or with which the Company or any Company subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company prior to such acquisition or combination.  
(b)    Adjustments to Shares Available.  The number of Shares covered by each outstanding Award, the number of Shares available for grant of additional Awards, the Option Price of outstanding Options (and grant or exercise price of outstanding Stock Appreciation Rights), and the limitations in Section 3(c) shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from any merger, reorganization, recapitalization, stock split, reverse stock split, spin-off, or other subdivision or consolidation of Shares, the payment of any dividend or distribution (whether in cash, Shares or other property, other than a regular cash dividend), any other increase or decrease in the number of Shares which is effected without receipt of consideration by the Company, or other change in corporate structure affecting the Shares or value thereof; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt 

of consideration.” Such adjustment shall be made by the Committee (taking into consideration the accounting and tax consequences), whose determination in that respect shall be final, binding and conclusive. 
(c)    Other Plan Limits.  Subject to adjustment under Section 3(b), the following additional maximums are established under this Plan.  No Grantee shall be granted (i) Options or Stock Appreciation Rights during any calendar year covering more than 100,000 Shares, or (ii) Restricted Stock, Restricted Units, Performance Shares or Performance Units during any calendar year that are intended to comply with the performance-based exception under Code Section 162(m) and are denominated in Shares, under which more than 50,000 Shares may be earned for each 12 months in the vesting or performance period.  If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable limitation in this Section.  
(d)    Payment With Shares.  Subject to the overall limitation on the number of Shares that may be delivered under this Plan, the Committee may, in addition to granting Awards, use available Shares as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company, including those of any entity acquired by the Company. 
4.    Plan Administration.  
(a)    The Committee.  This Plan shall be administered by the Compensation Committee of the Board or such other Committee as shall be appointed by the Board.  The Committee shall consist solely of two or more non-employee members of the Board, with the intent that the Committee members satisfy any applicable requirements under the NASDAQ rules, the insider trading requirements of Rule 16b issued under the Exchange Act, or Section 162(m) of the Code.  If the Committee does not exist, or if the Board chooses to directly exercise its powers under this Plan, then the Board may take any action under this Plan that would otherwise be the responsibility of the Committee.  Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause), appoint new members in substitution for existing members, and fill vacancies (however caused). The Committee shall select one of its members as chairman, and shall hold meetings at such times and places as the chairman or a majority of the Committee may determine. 
At least annually, the Committee shall present a written report to the Board indicating the Eligible Participants to whom Awards have been granted since the date of the last such report, and, in each case, the Awards’ Grant Dates, the number of Shares covered by the Awards, and the Option Price or Fair Market Value of the shares awarded. 
To the extent not inconsistent with applicable law, including Section 162(m) of the Code, with respect to Awards intended to comply with the performance-based compensation exception under Section 162(m), or the rules and regulations of the principal U.S. national securities exchange on which the Shares are traded, the Committee may (i) delegate to  a committee of one or more directors of the Company any of the authority of the Committee under the Plan, including the right to grant, cancel or suspend Awards and (ii) authorize one or more executive officers to do one or more of the following with respect to employees who are not directors or executive officers of the Company (A) designate employees to be recipients of Awards, (B) determine the number of Shares subject to such Awards to be received by such employees and (C) cancel or suspend Awards to such employees; provided that (x) any resolution of the Committee authorizing such officer(s) must specify the total number of Shares subject to Awards that such officer(s) may so award and (y) the Committee may not authorize any officer to designate himself or herself as the recipient of an Award.
(b)    Powers of the Committee.  Subject to the provisions and limitations of this Plan, the Committee shall have the authority and discretion: 
(i)to determine the Eligible Participants to whom Awards are to be granted, the times of grant, and the number of Shares covered by each Award;

(ii)to determine the Option Price, subject to the provisions of Subparagraph 2(b) of Part II of this Plan; 

(iii)to determine the types and other terms and conditions of each Award granted under this Plan (which need not be identical), including performance and/or vesting contingencies; 

(iv)to modify or amend the terms of any Award previously granted, or to grant substitute Awards, subject to Part IV; 

(v)to interpret this Plan, and all actions of the Committee in connection with the 

construction, interpretation and administration of the Plan and the Awards shall be final, conclusive, and binding upon all parties; 

(vi)Subject to Part V, Section 2, to correct any defect, supply any omission, or reconcile any inconsistency (a) within this Plan, (b) between this Plan and any related agreement, or (c) between this Plan and any rule or regulation promulgated under this Plan, in the manner and to the extent the Committee deems appropriate to carry out this Plan;  

(vii)to authorize any person or persons to execute and deliver Award Agreements or to take any other actions deemed by the Committee to be necessary or appropriate to effectuate the grant of Awards by the Committee; and

(viii)to make all other determinations and take all other actions that the Committee deems necessary or appropriate to administer this Plan in accordance with its terms and conditions and applicable law. 

All decisions, determinations, and interpretations of the Committee shall be final and binding upon all persons, including all Grantees and any other holders or persons interested in any Award, unless otherwise expressly determined by a vote of the majority of the entire Board. No member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to this Plan or an Award.
(c)    Eligibility.  Awards may be granted to any Eligible Participant whom the Committee determines, in its discretion, to be a key employee or officer of the Employer.  Granting of Awards pursuant to this Plan shall be entirely discretionary with the Committee, and the adoption of this Plan shall not confer upon any individual a right to receive any Award, unless and until such Awards are granted by the Committee, in its sole discretion.  Neither the adoption of this Plan nor the granting of any Awards shall confer upon any individual any right with respect to continuation of employment, nor shall the same interfere in any way with his or her right (or with the right of the Company or a Related Entity) to terminate his or her employment at any time. 
(d)    Transferability of Awards.   Except as provided below, no Award shall be transferable by a Grantee other than (i) by the Grantee’s last will and testament, (ii) in accordance with the beneficiary designation in the form approved by the Committee and filed by the Grantee with the Committee during the Grantee’s lifetime or (iii) by the applicable laws of descent and distribution.  In particular, except as provided below, during a Grantee’s lifetime only the Grantee, or his or her guardian or legal representative, may exercise Options possessed by the Grantee.  No Shares associated with grants of Restricted Stock, Restricted Units, Performance Shares or Performance Units may be sold, exchanged, transferred, pledged or otherwise disposed of during the corresponding restriction or performance period.    Notwithstanding the foregoing, to the extent and under such terms and conditions as determined by the Committee, a Grantee may assign or transfer an Award without consideration (each transferee thereof, a “Permitted Assignee”) (i) to the Grantee’s spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) to a trust for the benefit of one or more of the Grantee or the persons referred to in clause (i), (iii) to a partnership, limited liability company or corporation in which the Grantee or the persons referred to in clause (i) are the only partners, members or shareholders or (iv) for charitable donations; provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Grantee shall remain bound by the terms and conditions of the Plan.  The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section.
(e)    Tax Withholding.  As described in various provisions of this Plan, the payment of benefits in connection with Awards may impose on the Employer the obligation to withhold taxes.  The Employer may delay payment or transfer of Shares until arrangements have been made to satisfy any tax withholding obligations.  In addition, tax withholding in connection with all Awards under this Plan may be accomplished through the withholding of Shares, provided that the number of Shares withheld shall be limited to the minimum required tax withholding rate for the Grantee (or Permitted Assignee) or such other rate that will not cause an adverse accounting consequence or cost) otherwise deliverable in connection with the Award.
(f)    Settlement of Awards; Deferral of Income.  Except to the extent provided otherwise in the corresponding Award Agreement, the Committee has the discretionary authority to determine that any payment or settlement pursuant to an Award issued under this Plan may be paid or settled in cash or Shares of equivalent value.  To the extent available under non-qualified deferred compensation arrangements maintained by the Employer, the Committee may extend to a Grantee the ability to elect to defer the receipt of cash otherwise payable pursuant to any Awards, except Options and the Stock Appreciation Rights, which deferral elections may serve to delay the recognition of taxable income by the Grantee.  The ability of a Grantee to make a deferral election with respect to an Award shall be controlled by the provisions of the particular Award Agreement, which may 

be modified by the Committee, in its complete discretion, after the initial grant of the Award.
(g)    Termination for Cause.  Except to the extent provided otherwise in the corresponding Award Agreement, to the extent a Grantee’s employment with the Company or a Related Entity is terminated for Cause, the Grantee’s outstanding and still contingent Awards shall immediately become null and void.  Specifically, any outstanding unexercised Options, whether vested or unvested, shall immediately terminate.  Similarly, any grants of Restricted Stock, Restricted Units, Performance Shares, Performance Units, Stock Appreciation Rights or Dividend Equivalent Rights under this Plan, which have not yet been paid to the Grantee, or remain subject to performance or other criteria that the Grantee has not yet fulfilled, shall immediately forfeit and become null and void.
5.    Code Section 409A.  The Company acknowledges that Code Section 409A applies to deferred compensation, including stock options and stock appreciation rights which do not satisfy an exemption from Code Section 409A.  The Company intends for this Plan and the Options and the Stock Appreciation Rights issued hereunder to satisfy an exemption under Code Section 409A, and this Plan and all Award Agreements will be interpreted to that end.  The Company reserves the right to amend this Plan and any Award Agreement as necessary to comply with Code Section 409A or an applicable exemption, including (but not limited to) an amendment that adjusts the Option Price associated with an Option or the exercise price associated with a Stock Appreciation Right, which may be necessary for an Option or Stock Appreciation Right to comply with an exemption available for stock options and stock appreciation rights under the regulations issued pursuant to Code Section 409A. 
6.    Applicable Law.  This Plan shall be governed and construed in accordance with the laws of the State of Alaska.
II.
STOCK OPTIONS 

1.    Eligibility.   Options may be awarded to any Eligible Participant, as determined in the complete discretion of the Committee.
2.    Terms and Conditions of Options.  All Options granted pursuant to this Plan must be authorized by the Committee or its designees and shall be subject to such terms and conditions, not inconsistent with this Plan, as the Committee shall prescribe. The terms and conditions shall be documented in written Award Agreements in such form as the Committee shall from time to time approve.  Unless waived or modified by the Committee, all Options shall be subject to the following terms and conditions: 
(a)    Number of Shares; Annual Limitation.  Each Award Agreement shall state the number of Shares available under the Option. Any number of Options may be granted to a single Grantee at any time and from time to time, subject to Part I, Section 2(c). The Option Price for the Shares available pursuant to the Option shall be such price as is determined by the Committee, but in no event less than the Fair Market Value of the Common Stock as of the Grant Date, except as provided under Section 2(h).  
(b)    Option Price and Consideration. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (i) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (ii) by tendering previously acquired Shares (either actually or by attestation) valued at their then Fair Market Value, (iii) with the consent of the Committee, by delivery of other consideration  having a Fair Market Value on the exercise date equal to the total purchase price, (iv) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (v) through any other method specified in an Award Agreement (including same-day sales through a broker), or (vi) any combination of any of the foregoing.  
(c)    Term of Option.  No Stock Option granted pursuant to this Plan shall in any event be exercisable after the expiration of ten (10) years from the Option’s Grant Date.  Subject to the foregoing and other applicable provisions of this Plan, the term of each Option shall be determined by the Committee in its discretion.  Notwithstanding the foregoing, in the event that on the last business day of the term of an Option (i) the exercise of the Option is prohibited by applicable law or (ii) Shares may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term of the Option shall be extended for a period of 30 days following the end of the legal prohibition, black-out period or lock-up agreement.
(d)    Manner of Exercise; Conditions. An Option shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee.  Shares of Common Stock delivered pursuant to the exercise of an Option shall be subject to such conditions, restrictions and contingencies as the Committee may establish.  The Committee may impose such conditions, restrictions and contingencies with respect to Shares acquired pursuant to the exercise of an Option as the Committee determines to be desirable.  Notwithstanding the foregoing, an Award Agreement may provide that 

if on the last day of the term of an Option the Fair Market Value of one Share exceeds the option price per Share, the Grantee has not exercised the Option (or a tandem Stock Appreciation Right, if applicable) and the Option has not expired, the Option shall be deemed to have been exercised by the Grantee on such day with payment made by withholding Shares otherwise issuable in connection with the exercise of the Option.  In such event, the Company shall deliver to the Grantee the number of Shares for which the Option was deemed exercised, less the number of Shares required to be withheld for the payment of the total purchase price and required withholding taxes; provided, however, any fractional Share shall be settled in cash.
(e)    Conditions Upon Issuance of Shares.  Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto complies with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the Alaska Securities Act or applicable securities statutes of other states, the rules and regulations promulgated under all such statutes, and the requirements of any stock exchange upon which the Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. 
The Company will use its best efforts to obtain from the appropriate regulatory agencies any requisite authorization in order to issue the number of shares of its Common Stock as needed to satisfy the requirements of this Plan.  The Company’s inability to obtain the authority that Company’s counsel deems to be necessary for the lawful issuance of any shares under this Plan, or the unavailability of an exemption from registration for the issuance and sale of any shares under this Plan, shall relieve the Company of any liability with respect to the non-issuance of such shares. 
As a condition to the exercise of an Option, the Company may require the person exercising the Option to represent and warrant at the time of exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute the Shares if, in the opinion of counsel for the Company, such a representation is required by any applicable law. 
(f)    Section 16(b) Compliance; Bifurcation of Plan.  As long as the Company registers any of its equity securities pursuant to Section 12(b) or 12(g) of the Exchange Act, this Plan and the Awards granted under this Plan shall comply in all respects with Rule 16b 3 under the Exchange Act (or any successor rule).  If any Plan provision is later found not to be in compliance with Rule16b 3, the provision shall be deemed null and void, or if possible construed in favor of its meeting the requirements of Rule 16b 3.  Notwithstanding anything in this Plan to the contrary, the Committee, in its absolute discretion, may bifurcate this Plan so as to restrict, limit or condition the use of any provision of this Plan to Grantees who are officers and directors subject to Section 16(b) of the Exchange Act without so restricting, limiting or conditioning other Grantees.  This provision shall not obligate the Company to undertake registration of any of the Awards or shares of Common Stock.    
(g)    Merger, Sale of Assets, etc. Except as otherwise provided in the Award Agreement that evidences an Option, in the event of a merger or other reorganization of the Company with and into any other corporation (other than a reorganization where the ownership of the surviving company is substantially the same as that of the Company), or in the event of a sale of substantially all of the assets of the Company, or in the event of a dissolution or liquidation of the Company, the disposition of all outstanding and unexercised Options shall proceed as determined by the Committee, which determination may include (but shall not be limited to) an elimination of all unvested Options and termination of all vested Options following a reasonable period of time during which Grantees may exercise their vested Options.  Notwithstanding the foregoing, any acceleration of awards in connection with such merger or other transaction described above, shall be contingent on the consummation of the merger or other transaction.
(h)    Substitute Stock Options.  In connection with the acquisition by the Company or any Related Entity, whether by merger, acquisition of stock or assets, or other reorganization transaction, of a business whose employees have been granted stock options, the Committee is authorized to issue, in substitution of any such unexercised stock option, a new Option under this Plan that confers upon the Grantee substantially the same benefits as the old option.
(i)    Tax Compliance.  The Employer, in its sole discretion, may take any actions reasonably believed by it to be required to comply with any local, state, or federal tax laws relating to the reporting or withholding of taxes attributable to the grant or exercise of any option or the disposition of any Shares issued upon exercise of an Option, including, but not limited to, (i) withholding from any Grantee exercising an Option a number of Shares having a Fair Market Value equal to the amount required to be withheld by the Employer under applicable tax laws (up to the minimum required tax withholding rate for the Grantee (or Permitted Assignee) or such other rate that will not cause an adverse accounting consequence or cost), and (ii) withholding from any form of compensation or other amount due a Grantee or holder of Shares issued upon exercise of an Option any amount required to be withheld by the Employer under applicable tax laws. 
(j)    Other Provisions.  Award Agreements executed pursuant to this Plan may contain such other provisions as the Committee shall deem advisable.  The possession of an Option shall not, in and of itself, convey to the Grantee any of the 

rights or attributes of a shareholder, but only the right (subject to certain conditions) to exercise the Option and receive Shares.
III.
OTHER STOCK AWARDS 

1.    Types of Awards.  In addition to Options, other Awards available under this Plan include grants of Restricted Stock, Restricted Units, Performance Shares and Performance Units.  Awards of Restricted Stock, Restricted Units, Performance Shares and Performance Units shall be subject to any vesting and forfeiture provisions set forth in the applicable Award Agreement; provided that the Committee may, in its sole discretion and subject to the limitations imposed under Code Section 162(m) and the regulations thereunder in the case of a Performance Share, Performance Unit, Restricted Stock Award or Restricted Unit Award intended to comply with the performance-based exception under Code Section 162(m), waive the forfeiture period and any other conditions set forth in any Award Agreement under such terms and conditions as the Committee shall deem appropriate.  Each grant of Performance Shares, Performance Units, Restricted Stock or Restricted Units intended to comply with the performance-based exception under Code Section 162(m), shall be subject to the achievement of performance goals designated by the Committee and the corresponding Award Agreement.  The performance goals that may be used by the Committee for such Awards shall consist of goals measuring one or any combination of the following factors:  Revenue; net interest margin; net interest income; non-interest income; net income; pre- or post-tax income; earnings per share; return on equity; return on assets; share price performance; total shareholder return; improvement in or attainment of expense levels; asset growth; loan growth; deposit growth; growth in other components of the Company’s balance sheet; asset quality, and regulatory capital levels.  Performance goals may be measured solely on a corporate, subsidiary or division or business unit basis, or a combination thereof. Further, performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance criteria. The Committee may also exclude charges related to an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles.  Such performance goals (and any exclusions) shall (i) be set by the Committee prior to the earlier of (i) 90 days after the commencement of the applicable performance period and the expiration of 25% of the performance period, and (ii) otherwise comply with the requirements of Section 162(m) of the Code; and the regulations thereunder.    
Notwithstanding any provision of the Plan (other than Section II.2(g)), with respect to any Restricted Stock Award, Restricted Unit Award, Performance Share Award or Performance Unit Award that is intended to comply with the performance-based exception under Code Section 162(m), the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals except in the case of the death or disability of the Grantee or as otherwise determined by the Committee in special circumstances.  The Committee must certify, in writing, the amount of the Award for each Grantee for such performance period before payment of the Award is made.  The Committee shall have the power to impose such other restrictions on Awards subject to this Section as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m) of the Code.
2.    Eligibility.  Awards under this Part III may be granted to any Eligible Participant, as determined by the Committee in its complete discretion. 
3.    Shares Subject to Award.  The Shares subject to Awards under this Part III are as described in Section 3 of Part I of this Plan.
4.    Voting Rights and Dividends.  Grantees who have been awarded grants of Restricted Stock or Performance Shares shall have the right to vote all the received Shares during the restriction or performance period.  Whenever such voting rights are to be exercised, the Company shall provide the Grantee with the same notices and other materials as provided to other shareholders, and the Grantee shall be provided adequate opportunity to review the notices and materials and vote the Shares associated with the grants of Restricted Stock and Performance Shares.  As provided in the applicable Award Agreements, dividends authorized by the Company and paid in connection with Shares held pursuant to grants of Restricted Stock may be (a) paid directly to the Grantees, free of restrictions (except as provided below), (b) paid to the Grantees subject to the same restrictions as the corresponding Shares, or (c) held back by the Employer subject to the satisfaction of the applicable restrictions or performance goals.  Notwithstanding the foregoing, cash dividends, stock and any other property (other than cash) distributed as a dividend or otherwise with respect to any Award of Restricted Stock or Performance Shares that vests based on achievement of performance goals (x) shall either (i) not be paid or credited or (ii) be accumulated, (y) shall be subject to restrictions and risk of forfeiture to the same extent as the Restricted Stock or Performance Shares with respect to which such cash, stock or other property has been distributed and (z) shall be paid at the time such restrictions and risk of forfeiture lapse.

IV.
STOCK APPRECIATION AND DIVIDEND EQUIVALENT RIGHTS

1.    Stock Appreciation Rights.  In addition to other Awards available under this Plan, the Committee may grant Stock Appreciation Rights.  Any grant of Stock Appreciation Rights may, but need not be, associated with Shares subject to a specific Option.  If a grant of Stock Appreciation Rights is associated with Shares subject to a specific Option, then, unless otherwise provided in the applicable Award Agreement, the Stock Appreciation Rights shall terminate upon (a) the expiration, termination, forfeiture or cancellation of the Option or (b) the exercise of such Option.  Similarly, if a grant of Stock Appreciation Rights is associated with Shares subject to a specific Option, then, unless otherwise provided in the applicable Award Agreement, the Option associated with the Stock Appreciation Rights shall terminate upon the exercise of the Stock Appreciation Rights.  Each grant of Stock Appreciation Rights shall be evidenced by an Award Agreement that specifies the term, which in no event may exceed ten years from the date of grant.  In addition, each Award Agreement representing a grant of Stock Appreciation Rights will designate the applicable Fair Market Value of a Share as of the Grant Date (provided that, substitute Stock Appreciation Rights Awards may be granted under terms and circumstances similar to those described in Part II, Section 2(h) with respect to Stock Options).  The possession of a Stock Appreciation Right shall not, in and of itself, convey to the Grantee any of the rights or attributes of a shareholder, but only the right (subject to certain conditions) to receive payment in connection with appreciation (if any) of the Shares.
Notwithstanding the foregoing, in the event that on the last business day of the term of a Stock Appreciation Right (i) the exercise of the Stock Appreciation Right is prohibited by applicable law or (ii) Shares may not be purchased or sold by certain employees or directors of the Company due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term of the Stock Appreciation Right shall be extended for a period of 30 days following the end of the legal prohibition, black-out period or lock-up agreement.
2.    Dividend Equivalent Rights.  In addition to other Awards available under this Plan, the Committee may grant Dividend Equivalent Rights.  The grant of Dividend Equivalent Rights may be made as discrete and separate Awards, or in connection with Shares associated with a grant of Restricted Stock, Restricted Units, Performance Shares, or Performance Units.  A Grantee holding Dividend Equivalent Rights will be entitled to payment of an amount equivalent to the dividends that would have been paid on the associated Shares, just as if the Grantee held the Shares on which the Dividend Equivalent Rights were based (less applicable withholding taxes).  As provided in the corresponding Award Agreement, the grant of Dividend Equivalent Rights may be subject to various restrictions, which the Grantee must first satisfy before receiving payment pursuant to the Dividend Equivalent Rights.  Notwithstanding the foregoing, Dividend Equivalent Rights credited in connection with an Award that vests based on the achievement of performance goals shall be subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such Dividend Equivalent Rights have been credited.
3.    Eligibility.  Awards under this Part IV may be granted to any Eligible Participant, as determined by the Committee in its complete discretion.
4.    Shares Subject to Stock Appreciation and Dividend Equivalent Rights.  The Shares subject to Awards under this Part IV are as described in Section 3 of Part I of this Plan.
5.    Exercise of Stock Appreciation Rights.  Upon the exercise of a Stock Appreciation Right, the Grantee shall be entitled to receive a cash payment for each Share covered by the portion of the Stock Appreciation Right being exercised, which payment is equal to the excess of  (a) the Fair Market Value of a Share on the exercise date over (b) the Fair Market Value of a Share as of the date the Stock Appreciation Right was granted, as designated in the corresponding Award Agreement, or such greater amount as designated in the Award Agreement.  All payments in connection with the exercise of Stock Appreciation Rights shall be made as soon as practicable, but in no event later than seven (7) business days after the effective date of the exercise of the Stock Appreciation Right.  Each Stock Appreciation Right may be exercised on such date or dates, and during such period and with respect to a number of Shares, as determined by the Committee and as set forth in the corresponding Award Agreement.  The exercise of a Stock Appreciation Right shall also be subject to such terms and conditions as specified in the corresponding Award Agreement, which conditions may include minimum exercise amounts and the ability to elect a partial exercise.  Unless provided otherwise in the Award Agreement, each Stock Appreciation Right shall be exercised by delivering notice to the Company’s principal office, to the attention of its Secretary, no less than five (5) business days in advance of the effective date of the proposed exercise.  The notice shall be accompanied by the applicable Award Agreement and specify the number of Shares with respect to which the Stock Appreciation Right is being exercised and the effective date of the proposed exercise.
Notwithstanding the foregoing, an Award Agreement may provide that if on the last day of the term of a Stock Appreciation Right the Fair Market Value of one Share exceeds the price per Share, the Grantee has not exercised the Stock Appreciation Right, and the Stock Appreciation Right has not expired, the Stock Appreciation Right shall be deemed to have been exercised by the 

Grantee on such day with payment made by withholding Shares otherwise issuable in connection with the exercise of the Stock Appreciation Right.  In such event, the Company shall deliver to the Grantee the number of Shares for which the Stock Appreciation Right was deemed exercised, less the number of Shares required to be withheld for the payment of the total purchase price and required withholding taxes; provided, however, any fractional Share shall be settled in cash.
V.
ADOPTION, AMENDMENT AND TERMINATION PROVISIONS 

1.    Term of this Plan.  The Plan, as adopted by the Board on [date], shall become effective upon and subject to shareholder approval at the Company’s 2014 shareholder annual meeting (the “2014 Annual Meeting”).  . This Plan shall expire on the tenth (10th) anniversary of the Effective Date, provided that any outstanding Awards at that time will continue for the duration of the Award, in accordance with the terms of this Plan and the applicable Award Agreement.  Upon the Board’s adoption of this Plan and subject to approval of this Plan by the Company’s shareholders at the 2014 Annual Meeting, no new awards shall be granted under the Company’s 2010 Stock Incentive Plan.  For the avoidance of doubt, if this Plan is not approved by the Company’s shareholders at the 2014 Annual Meeting, then the Northrim Bancorp, Inc. 2010 Stock Incentive Plan, as in effect immediately prior to the Board’s adoption of this Plan, shall continue to exist and operate according to all of its terms and conditions.
 2.    Amendment, Early Termination of the Plan, and Modification of Awards.  
(a)    Amendment or Early Termination. The Board may terminate this Plan at any time. The Board may amend this Plan at any time and from time to time in such respects as the Board may deem advisable, except that, without proper approval of shareholders of the Company, no such revision or amendment shall: 
(i)increase the number of shares of Common Stock subject to the Plan other than in connection with an adjustment under Section 3(b) of Part I, 

(ii)increase the parameters of Eligible Participants, or

(iii)make any amendment to this Plan that would require shareholder approval under any applicable law or regulation. 

(b)    Modification and Amendment of Awards; Prohibition on Repricing. Subject to the requirements of the Code and to the terms and conditions and within the limitations of this Plan, the Committee may modify or amend outstanding Options granted under this Plan. The modification or amendment of an outstanding Option shall not, without the consent of the Grantee, impair or diminish any of his or her rights or any of the obligations of the Company under such Option. Except as otherwise provided in this Plan, no outstanding Option shall be terminated without the consent of the Grantee. In addition, neither the Board nor the Committee may, without the approval of the Company’s shareholders, cancel an Option or Stock Appreciation Right in exchange for cash when the exercise or grant price per share exceeds the Fair Market Value of one Share or take any action with respect to an Option or Stock Appreciation Right that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded, including a reduction of the exercise price of an Option or the grant price of a Stock Appreciation Right or the exchange of an Option or Stock Appreciation Right for another Award.  
3.    Shareholder Approval.  Continuance of the Plan shall be subject to proper approval of this Plan by the shareholders of the Company at a duly convened meeting of the shareholders of the Company, which approval must occur within twelve (12) months before or after the date of adoption of the Plan by the Board. 
CERTIFICATE OF ADOPTION
I certify that the foregoing Plan was adopted by the Board of Directors of Northrim BanCorp, Inc. on February 20, 2014 and by the shareholders of Northrim BanCorp, Inc. on May 15, 2014.
                        
                        	
	
	/s/Joseph M. Schierhorn

	Joseph M. Schierhorn

	Corporate SecretaryExhibit 10.1

 

SEVERANCE AGREEMENT

 

Jeffrey G. Grody (“Employee”) and Colt’s Manufacturing Company LLC, its successors and assigns (“Colt”) hereby agree as follows:

 

1.                                      Resignation/Last Day of Employment.  Colt acknowledges its receipt and acceptance of Employee’s letter of resignation dated July 3, 2014.  Employee’s last day of active employment with Colt will be July 3, 2014, but will be maintained on Colt’s payroll through the pay period ending July 4, 2014.

 

2.                                      Consideration.

 

(a)                                 In consideration for Employee’s agreement to be bound by the terms of this Severance Agreement, and Employee’s compliance with the promises made herein, Colt agrees to pay Employee a combination of salary and severance pay in lieu of salary at the rate of Employee’s current base salary (“Severance”) through July 3, 2015.  At the request of Colt, through December 31, 2014 (the “Wind Down Period”), Employee will be reasonably available to provide assistance in the transition of his responsibilities to Colt’s new General Counsel and as otherwise requested; provided that the scheduling of such assistance will be mutually agreed upon; and provided, further, that Employee will not be required to provide in excess of ten hours of assistance per week during the Wind Down Period.  For the avoidance of doubt, severance compensation will commence from July 5, 2014, regardless of the last day of employment set forth in Paragraph 1 above.  Following the Wind Down Period, Employee will continue to be paid Severance through July 4, 2015.  During the time following the Wind Down Period, Employee will make himself reasonably available to provide assistance to Colt as described in Paragraph 9 below. Severance will be paid, less required withholdings, in accordance with Colt’s usual schedule for the payment of its employees’ salaries.  The payment of Severance is contingent upon, and will not begin until, Colt receives: (a) this Severance Agreement, dated and signed by Employee; and (b) the document attached hereto as Exhibit A, properly completed and signed by Employee.   Employee’s right to be paid during the Wind Down Period and thereafter as provided in this Paragraph 2, is dependent on Employee’s material compliance with the obligations set forth in this Severance Agreement, including, without limitation, his obligations to provide reasonable assistance to Colt in the transition of his responsibilities to Colt’s new General Counsel, as set forth above, and the obligations to cooperate as set forth in Paragraph 9 below.

 

(b)                                 COBRA Premium Contributions:  Employee’s current coverage under Colt’s Group medical and dental insurance plans shall continue through July 31, 2014. Thereafter, if the Employee elects to continue his participation and/or that of his eligible dependents in the Company’s medical and dental insurance plans pursuant to the federal Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”), then Colt shall pay or reimburse Employee a monthly amount equal to the cost of such continuation coverage, less whatever an active employee would pay for the same coverage under Colt’s group plans until December 31,

 

 

2014, or the date on which Employee becomes eligible for coverage under another employer’s group medical plan, whichever is earlier.  In the event Employee and/or any of his dependents becomes ineligible for COBRA continuation coverage, nothing in this Agreement will require such coverage to continue, or require Colt otherwise to reimburse Employee for the cost of that or any other coverage.

 

(c)                                  Other Benefits:  Employee’s participation in all other benefit plans of Colt shall terminate as of July 31, 2014, unless a benefit plan provides for a particular termination date that may be later than said date, in which event Colt will notify Employee of the date of termination of participation. The foregoing notwithstanding, nothing herein shall be deemed to waive, abridge, or diminish any independent rights that Employee may have to convert group coverage to individual coverage as may be provided under the terms of pertinent plan documents.

 

(d)                                 Expense Reimbursement: Colt agrees to promptly reimburse Employee for ordinary and reasonable business expenses incurred by Employee up until the last day of active employment on July 3, 2014; provided that Employee submits receipts and/or similarly documentation to Colt in timely fashion.

 

3.                                      No Severance Payment Absent Execution of this Severance Agreement.  Employee understands and agrees that he would not receive the consideration specified in Paragraph 2, above, except for his execution of this Severance Agreement and the fulfillment of the promises contained herein.

 

4.                                      Time for Consideration and Advice to Seek Counsel.  Employee was first provided with this Severance Agreement on or before June 23, 2014.  Employee has up to 21 days to consider its terms.  Employee is specifically advised to consult with an attorney of Employee’s choice before signing this Severance Agreement.

 

5.                                      Revocation.  In the event Employee signs this Severance Agreement, he may revoke the Severance Agreement within seven days of signing it, and it will not become effective or enforceable until the seven-day period has expired.  If the last day of the revocation period is a Saturday, Sunday, or legal holiday in Connecticut, then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday.  This Severance Agreement shall not become effective or enforceable until the revocation period has expired, and Colt has received a document in the form attached hereto as Exhibit A, properly completed and signed by Employee.

 

6.                                      Mutual Release of Claims.  Employee knowingly and voluntarily releases and forever discharges Colt, and all of its present and former subsidiaries and affiliates (hereinafter referred to as the “Released Entities”), and the Released Entities’ current and former shareholders, members, directors, officers, employees, consultants, accountants, insurers, agents and attorneys, of and from any and all claims, known and unknown, which Employee has or may have as of the date of execution of this Severance Agreement, except (i) to enforce the terms and

 

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conditions of this Severance Agreement, and (ii) Employee’s claims, if any, and rights as a holder of Common Units of Colt Defense LLC, which claims and rights are not affected by this Agreement.  Listed below are examples of the statutes under which Employee will not bring any claim.  If the law prohibits a waiver of claims under any such statute, Employee hereby acknowledges that he has no valid claim under those statutes.  Subject to the exceptions stated in this Paragraph 6, the claims released or acknowledged not to exist include, but are not limited to, any alleged violation of:

 

·                  Title VII of the Civil Rights Act of 1964;

·                  The Age Discrimination in Employment Act of 1967;

·                  Sections 1981 through 1988 of Title 42 of the United States Code;

·                  The Employee Retirement Income Security Act of 1974 (“ERISA”) (except for any vested benefits under any tax qualified benefit plan);

·                  The Immigration Reform and Control Act;

·                  The Americans with Disabilities Act of 1990;

·                  The Worker Adjustment and Retraining Notification Act;

·                  The Fair Credit Reporting Act;

·                  The Family and Medical Leave Act;

·                  The Equal Pay Act;

·                  The Dodd-Frank Act;

·                  The Connecticut Human Rights and Opportunities Act — Conn. Gen. Stat. §§ 46a-51, et seq.;

·                  The Connecticut Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers Compensation Claim — Conn. Gen. Stat. § 31-290a;

·                  The Connecticut Equal Pay Law — Conn. Gen Stat. §§ 31-58(e), et seq.; §§ 31-75 and 31-76;

·                  The Connecticut Family and Medical Leave Law — Conn. Gen. Stat. §§ 31-51kk, et seq.;

·                  The Connecticut Drug Testing Law — Conn. Gen. Stat. §§ 31-51t, et seq.;

·                  The Connecticut Whistleblower — Conn. Gen. Stat. §§ 31-51m(a), et seq.;

·                  The Connecticut AIDS Testing and Confidentiality Law — Conn. Gen. Stat. §§ 19a-581, et seq.;

·                  The Connecticut Age Discrimination and Employee Benefits Law — Conn. Gen. Stat. § 38a-543;

·                  The Connecticut Reproductive Hazards Law — Conn. Gen. Stat. §§ 31-40g, et seq.;

·                  The Connecticut Smoking Outside the Workplace Law — Conn. Gen. Stat. § 31-40s;

·                  The Connecticut Electronic Monitoring of Employees Law — Conn. Gen. Stat. § 31-48b, d;

·                  The Connecticut Wage Hour and Wage Payment Laws;

·                  Connecticut OSHA;

·                  Any other federal, state or local law, rule, regulation, or ordinance;

·                  Any public policy, contract, tort, or common law obligation, including, without limitation, any claims under the August 30, 2005 contract between Colt and Employee; or

 

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·                  Any obligation to pay costs, fees, or other expenses, including attorneys’ fees.

 

Nothing herein shall be deemed to diminish, impair, abridge or otherwise affect any benefit in which Employee is vested under any qualified or unqualified retirement, deferred compensation, and/or any other employee welfare benefit plan or program.

 

Colt releases and forever discharges Employee from any and all claims about which it has or reasonably should have knowledge as of the date of the execution of this Agreement.  Colt represents that it currently has no knowledge of any conduct or failure by Employee that would give Colt a viable cause of action against Employee.

 

7.                                      Affirmations.  Employee confirms that he has not filed or caused to be filed and is not a party to any claim, charge, complaint, or action against Colt or any of the other Released Entities, or any of their current and former shareholders, unit holders, directors, officers, employees, accountants, insurers, agents and attorneys, in any forum or form.  Employee further confirms he has no known workplace injuries or occupational diseases.  Employee further confirms he has received all leave (paid or unpaid), compensation, wages, bonuses, commissions, and/or benefits to which Employee may be entitled and that no other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to Employee, except as provided in this Severance Agreement.  The preceding sentence does not address any obligations that Colt Defense LLC may owe to Employee as a holder of Common Units. Employee specifically confirms that he has been paid all monies owed and granted any leave requested under the Family and Medical Leave Act.

 

Employee further affirms that he has not been retaliated against for reporting any allegations of wrongdoing by Colt or its officers, including any allegations of corporate fraud.  Both parties acknowledge that this Severance Agreement does not limit either party’s right, where applicable, to file or participate in an investigative proceeding of any federal, state or local governmental agency.  To the extent permitted by law, Employee agrees that if such an administrative claim is made, he shall not seek or accept any individual monetary relief or other individual remedies.

 

8.                                      Resignation from Positions.  Effective as of July 3, 2014, Employee resigns from all offices, directorships, trusteeships, committee memberships and fiduciary capacities held with, or on behalf of, Colt or any parent, subsidiary or benefit plan of Colt.  These resignations will become irrevocable as set forth in Paragraph 5, above.  Employee will promptly sign and return to Colt any documents requested to confirm such resignations.

 

9.                                      Cooperation. In the event that Colt seeks any lawful assistance from Employee regarding any business or legal matter concerning Colt following the Wind Down Period described in Paragraph 2 above through July 3, 2015, Employee will provide such assistance, not to exceed 10 hours in any week, except by mutual agreement, or 100 hours from the end of the Wind Down Period through July 3, 2015, for no additional compensation from Colt.  Such assistance will take place telephonically, via email or in person at Colt’s headquarters in West Hartford, Connecticut.  If Colt asks Employee to provide assistance elsewhere because the nature

 

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of the assistance requires travel, Colt will reimburse Employee for the reasonable expenses incurred in travel to and from the location where the assistance is provided, consistent with Colt’s policy for employee expense reimbursement.  Scheduling of all assistance by Employee pursuant to this Paragraph 9 shall be as mutually agreed; provided that if Colt faces a deadline, Employee will make reasonable efforts to accommodate Colt’s deadline in a manner consistent with Employee’s conduct while an employee of Colt.

 

10.                               Return of Property.  Employee represents that he has returned, or will by July 7, 2014 return, to Colt all property belonging to Colt in his possession, custody or control that he obtained from Colt or any actual or potential vendor or investor of or in Colt, including, without limitation, electronic equipment, credit cards, keys, files and all documents, whether in paper or electronic form, but excluding incidental items, such as pins, tee shirts, caps, SHOT Show shirt and gifts of nominal value from third parties that Employee kept in his office and similar items of nominal value.  In the event Employee later discovers any additional such property, he will return it within three business days of its discovery.  Employer further acknowledges that this obligation to return property extends to everything he received from any party identified in this paragraph during and as a result of his employment with Colt.  Employee affirms, that he is in possession of all of his property that he had at Colt’s premises and that Colt is not in possession of any of his property.

 

11.                               Confidential Business Information.  Employee agrees that while employed by Colt, he was given access to Colt’s trade secrets and other confidential information and became aware of actual and potential investors in funds managed by Colt’s equity sponsor.  Employee further agrees not to use or disclose any of Colt’s trade secrets or other confidential business information, for so long as the pertinent information or documentation remains confidential.

 

12.                               Post-Employment Restrictions.  During the one-year period immediately following Employee’s last day of employment with Colt, Employee will not, directly or indirectly:

 

A.            Solicit, hire, contract with or otherwise engage any Colt employee, contractor, vendor or third party factory to work for, or provide goods or services to, any other employer or organization.  For the purpose of this provision, “Colt employee, contractor, vendor or third party factory” means any individual who was employed or retained by, or any individual or entity who or that provided goods or services to, Colt within the last twelve months of Employee’s employment by Colt.

 

B.            Participate in, work for, or provide services to any person or entity that is, or is actively planning to be, a “Competitive Business.”  The term “Competitive Business” shall mean any business (however organized or conducted) that competes with a business in which Colt is engaged.  This restriction does not limit Employee’s ability to practice law for any person or entity, in any industry or geographic location.  Instead, it limits Employee’s ability to serve as an executive, or provide comparable

 

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business management services in any other capacity, for any Competitive Business.

 

C.            Act in any capacity for or with any Competitive Business, or for or with any of their agents, if in such capacity Employee would, because of the nature of his role with the such Competitive Business and Employee’s knowledge of Colt’s confidential business information, inevitably use and/or disclose any of Colt’s confidential business information in his work for, or on behalf of, the Competitive Business or its agent.

 

D.            Otherwise interfere with, disrupt or attempt to disrupt relations between Employer and any of its employees, contractors, vendors, third party factories or customers.

 

This Paragraph 12 does not prohibit or restrict Employee from providing the consulting services described in, and in accordance with, Exhibit B (“Permitted Activities”); provided that such services do not pertain to any activity that is or is planned to be competitive to Colt.

 

13.                               Confidentiality and Non-Disparagement.

 

(a)                                 Employee agrees not to disclose any information regarding the existence or substance of this Severance Agreement, except to Employee’s tax advisor, Employee’s attorney with whom Employee chooses to consult regarding Employee’s consideration of this Severance Agreement, and any post-employment employer, partner or client to the extent reasonably required for bona fide business purposes.  Employee agrees not to say or do anything intended to be, or that would reasonably be viewed as being, disparaging or demeaning Colt, any of the other Released Entities, and any current or former shareholder, unit holder, director, officer, employee, accountant, insurer, agent or attorney of Colt or of any of the other Released Entities.  In the event of Employee’s material breach of any obligation in Paragraphs 10 through13of this Severance Agreement, in addition to any remedies Colt and the other Released Entities and any of their current or former shareholders, unit holders, members, directors, officers, employees, consultants, accountants, insurers, agents or attorneys may have under the law, Colt may, without further obligation to Employee, discontinue any payment to which Employee would otherwise be entitled under this Severance Agreement, and Employee will pay the attorneys’ fees and other expenses incurred by Colt and/or the other Released Entities and/or any current or former shareholder, member, unit holder, member, director, officer, employee, accountant, consultant, insurer, agent or attorney thereof in establishing that breach and in otherwise enforcing the terms of this Severance Agreement.

 

(b)                                 Colt agrees not to disclose any information regarding the existence or substance of this Severance Agreement, except to its legal, financial and accounting advisors, its auditors, as legally required, or as required in connection with any actual or prospective financing relationship or transaction or sale transaction.

 

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Colt agrees that neither it nor any director or officer will say or do anything intended to be, or that would reasonably be viewed as being, disparaging or demeaning to Employee.  In the event of Colt’s failure to pay Severance in accordance with this Agreement after five business days notice to remedy such failure, in addition to any remedies Employee may have under the law, (i) Employee may, without further obligation to Colt, discontinue the provision of transition assistance or other services to Colt and the new General Counsel under Paragraphs 2 and 9, and (ii) the restrictions set forth in Paragraph 12 will cease to operate.  Colt will pay the attorneys’ fees and other expenses incurred by Employee in establishing Employer’s breach and in otherwise enforcing the terms of this Severance Agreement.

 

14.                               Governing Law and Interpretation.  This Severance Agreement shall be governed by, and interpreted in accordance with, the laws of Connecticut without regard to its conflict of laws principles.  In the event of a breach of any provision of this Severance Agreement, either party may institute an action specifically to enforce any term or terms of this Severance Agreement and/or seek any damages for breach.  Should any provision of this Severance Agreement be declared illegal or unenforceable by a court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Severance Agreement in full force and effect.

 

15.                               Nonadmission of Wrongdoing.  Employee and Colt agree that neither this Severance Agreement, nor the furnishing of the consideration hereunder, shall be deemed or construed at any time for any purpose as an admission or evidence of any liability or misconduct of any kind by any person or entity.

 

16.                               Amendment.  This Severance Agreement may not be modified, altered or changed except in writing and signed by both parties wherein specific reference is made to this Severance Agreement.

 

17.                               Indemnification of Employee.  Colt acknowledges and agrees that this Agreement does not impair in any way Employee’s rights to indemnification, under any applicable document or agreement, or by operation of law, as an officer of Colt and its subsidiaries for any matter that arose on or prior to his last day of employment and Colt further agrees that such indemnification rights will survive the execution of this Agreement.  Colt agrees to name Employee as an additional insured on its directors’ and officers’ insurance until June 30, 2019.

 

18.                               Form 8-K/Public Statements.  Colt will cause its parent company to file a Form 8-K in the form annexed as Exhibit C, with respect to Employee’s resignation.

 

19.                               Counsel Fees.  Colt will pay the fees of Employee’s counsel, William Madsen, Esq, for his services in connection with this Agreement, not to exceed $1,500.

 

20.                               Entire Agreement.  This Severance Agreement sets forth the entire agreement between the parties hereto with respect to the subject matter hereof, and fully supersedes any

 

7

 

prior agreements or understandings between the parties with respect to the subject matter hereof, except that Employee shall continue to be bound by the applicable provisions of Colt’s business conduct, confidentiality and related agreements to the extent that by their terms they survive the termination of Employee’s employment.  Employee acknowledges that he has not relied on any representations, promises, or agreements of any kind made to Employee in connection with his decision to accept this Severance Agreement, except for those set forth in this Severance Agreement.

 

EMPLOYEE CONFIRMS THAT HE HAS BEEN GIVEN TWENTY-ONE CALENDAR DAYS TO CONSIDER THIS SEVERANCE AGREEMENT AND BEEN INFORMED THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY BEFORE EXECUTING THIS SEVERANCE AGREEMENT.

 

EMPLOYEE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS SEVERANCE AGREEMENT DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL CONSIDERATION PERIOD.

 

HAVING ELECTED TO EXECUTE THIS SEVERANCE AGREEMENT, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE CONSIDERATION SET FORTH IN PARAGRAPH 2 ABOVE, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS SEVERANCE AGREEMENT INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EMPLOYEE HAS OR MIGHT HAVE AGAINST COLT, ANY OF THE OTHER RELEASED ENTITIES, AND ANY CURRENT OR FORMER SHAREHOLDER, MEMBER, DIRECTOR, OFFICER, EMPLOYEE, CONSULTANT, ACCOUNTANT, INSURER, AGENT OR ATTORNEY THEREOF.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Severance Agreement as of the date set forth below:

 

	
 
    	
 
    
	
JEFFREY   G. GRODY
    	
 
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
COLT’S   MANUFACTURING COMPANY LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Dennis   Veilleux, Chief Executive Officer
    	
 
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    

 

9

 

EXHIBIT A TO SEVERANCE AGREEMENT

 

Mr. Dennis Veilleux

Chief Executive Officer

Colt’s Manufacturing Company LLC

547 New Park Ave.

West Hartford, CT  06110

 

Re:                             Severance Agreement

 

Dear Dennis:

 

I received a Severance Agreement from Colt’s Manufacturing Company LLC on  June 23, 2014.  The Severance Agreement provided that I had at least twenty-one days to consider its terms.  I signed the Severance Agreement on                         .

 

The Severance Agreement also provided me with a seven-day period during which I could revoke my acceptance of the Severance Agreement.  More than seven days have passed since I executed the Severance Agreement.  I have at no time revoked my acceptance or execution of that Severance Agreement, and I hereby reaffirm my acceptance of that Severance Agreement.

 

	
 
    	
Sincerely,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Jeffrey   G. Grody
    

 

 

EXHIBIT B TO SEVERANCE AGREEMENT

 

Structuring teaming, joint-venture, consulting and other collaborative relationships from and after 180 days from the date of this Severance Agreement.

 

Structuring business and legal relationships with third party agents, customers, distributors and other collaborators from and after 180 days from the date of this Severance Agreement.

 

Export compliance advice, including DDTC agreements (TAAs, MLAs, etc.).

 

Protection of trade secrets, other confidential information, patentable inventions.

 

Confidentiality agreement and manuals/training for their use and compliance.

 

Creation and maintenance of a legal and contractual compliance environment.

 

Project management for transactional due diligence (e.g., financing, M&A, investment, etc.).

 

Dispute avoidance, management, mitigation.

 

Business and financial stress management—e.g., financially distressed or difficult vendors, customers, partners.

 

 

EXHIBIT C TO SEVERANCE AGREEMENT

 

[Insert form of 8-K]

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