Document:

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the 12th day of August, 2016 (the "Start Date"), by and between Carl W. Rausch (the "Executive") and Boston Therapeutics, Inc., a Delaware corporation, currently headquartered at 233 Needham Street, Newton, MA 02464 (the "Company").

W I T N E S S E T H:

WHEREAS, the Company is a pre-clinical and clinical-stage pharmaceutical company focused on the development, outsourced contract manufacture and commercialization of carbohydrate-based therapeutic drugs and dietary supplements designed to address blood sugar management and inflammatory diseases in a safe and efficient manner (the "Business"); and

WHEREAS, the Company desires to employ Executive, and Executive desires to be employed by the Company, on the terms and conditions set forth in the Agreement;

NOW, THEREFORE, in consideration of the foregoing, Executive's employment by the Company as provided herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

	
1.

	
Employment.

(A)  The Company employs Executive, and Executive accepts employment with the Company, as the Company's Chief Executive Officer, upon the terms and conditions set forth in this Agreement. Executive shall report to the Board of Directors. As more fully set forth below, Executive shall (1) devote a significant portion of his working time, attention, and energy, using his best efforts, to perform his duties and provide his services under the Agreement; (2) faithfully and competently serve and further the interests of the Company in every lawful way, giving honest, diligent, loyal, and cooperative service to the Company; (3) discharge all such duties and perform all such services as aforesaid in a timely manner; and (4) comply with all lawful policies which from time to time may be in effect at the Company or that the Company adopts.

(B)  Except for business travel by the Executive that may from time to time be necessary or advisable on behalf of the Company, the Executive will provide his services in a virtual manner and all parties understand that Executive will be located in Hong Kong for a period and Executive will travel to and from the various territories covered by the Company.  Within six months from the date hereof, the Executive will relocate to the United States.

 

2. Conflicts of Interest. Executive represents, warrants and agrees that he is not presently engaged in, nor shall he during the term of his employment with the Company enter into, any employment, consulting or agency relationship or agreement with any third party whose interests would be reasonably expected to conflict with those of the Company. Executive further represents, warrants and agrees that he does not presently, nor shall he, during the term of his employment with the Company, possess any significant interest, directly or indirectly, including through Executive's family or through businesses, organizations, trusts, or other entities owned or controlled by Executive, in any third party whose interests would be reasonably expected to conflict with those of the Company. Executive will not engage in any other employment, consulting, or other business activity in conflict with the Company without the prior written consent of the Board of Directors, but Executive may, with written notice to the Board of Directors, (i) serve on the boards of directors of, or in an advisory capacity to charitable organizations and not-for-profit corporations, (ii) serve on the boards of directors of companies which Executive currently serves on as of the date of this Agreement and (iii) may pursue passive investments, provided that such activities do not unreasonably interfere with Executive's duties and responsibilities to the Company or create an actual or apparent conflict of interest with the Company. Without limiting the generality of the foregoing, Executive also represents, warrants, and agrees that:

(A) he is not subject to any agreement, including any confidentiality, non-competition or non-solicitation agreement, invention assignment agreement, or other restrictive agreement or covenant, whether oral or written, that would in any way restrict or prohibit his ability to enter into and execute the Agreement, perform his duties and responsibilities and provide his services under the Agreement, or abide by policies of the Company;

(B) he has respected and at all times in the future will continue to respect the rights of his previous employers in trade secret and confidential information;

(C) he has left with his previous employers all confidential documents, computer software programs, computer disks, client lists, CD's, DVD's, USB devices, and any other materials that are proprietary to his previous employers, has not taken copies of any such materials, and will not remove or cause to be removed any such materials or copies of any such materials from his previous employers;

(D) prior to leaving the employ of his most recent previous employer, the Executive did not advise any person who is doing business with his most recent previous employer of his decision to leave the employ of such employer or to become employed by the Company;

 

2

(E) the information Executive supplied to the Company in connection with Executive's application for employment with the Company is true and correct; and

(F) without in any way limiting the Executive's duty of loyalty to the Company, so long as the Executive remains employed by the Company, any and all business opportunities in the Business from whatever source that the Executive may receive or otherwise become aware of through any means shall belong to the Company, and unless the Company specifically, after full disclosure by the Executive of each and any such opportunity, waives its right in writing, the Company shall have the sole right to act upon any of such business opportunities as the Company deems advisable.

3. Compensation. Subject to the terms and conditions of the Agreement, as compensation for Executive's services performed pursuant to the Agreement, the Company agrees to pay, or cause to be paid, to Executive, and Executive agrees to accept, the following compensation during the term of Executive's employment with the Company:

	
(A)

	
Sign-on Bonus.  A sign-on bonus of Sixty Thousand and 00/100 Dollars ($60,000.00) to be paid to Executive on the Start Date.

	
(B)

	
Base Salary. A base salary of $224,000.00 (the "Base Salary"), such Base Salary to commence on the Start Date and shall be payable in periodic equal installments in accordance with the normal payroll practices of the Company, but in no event less often than monthly. Upon the Executive relocating to the United States, the Base Salary will be increased to $264,000.00.  On May 31 of every year during the Term, the Base Salary will be increased on an annual basis to benchmark standards for the industry given proper published public company comparisons from referenced biopharma quality industrial compensation surveys such as a Randford survey as well as pursuant to appropriate  cost of living adjustments subject to achievement of certain milestones as agreed between the Board of Directors and the Executive.  The Base Salary will be increased by twenty thousand and 00/100 Dollars per year ($20,000.00) upon the Company successfully listing on a major national stock exchange.  The Executive's Base Salary will be subject to modification during the Executive's employment in accordance with the Company's practices, policies, and procedures but will not be reduced without Executive's mutual agreement.

	
(C)

	
Equity Awards.  Executive shall also be entitled to an issuance of a Stock Option (the "Option") to acquire an aggregate of Six Million (6,000,000) shares of common stock of the Company, exercisable for five (5) years, subject to vesting.  The Option shall be earned and vested in three (3) equal tranches of 2,000,000 upon the Company the Company raising $1,000,000 in financing, the Company raising $5,000,000 in financing and the Company entering into a significant corporate alliance for substantial marketing and selling of the Company's product portfolio.    The initial tranche shall be exercisable at $0.20 per share, the second tranche will be $0.40 per share and the third tranche shall be $0.60 per share, which such vesting is subject to Executive's continued employment as an executive with the Company as of the vesting date.

 

3

	
(D)

	
In addition, as additional consideration for Executive's commitment to the Company, the stock options previously granted to the Executive shall be amended to provide that the stock option granted to the Executive on September 15, 2011 and March 25, 2015 shall be amended to extend the expiration date to the ten (10) year anniversary of the date hereof and such options shall be considered fully vested.

	
(E)

	
Bonuses.  In addition to the Executive's annual Base Salary, during the term of the Executive's employment hereunder, the Executive shall be entitled only to such bonuses or additional compensation as may be granted to the Executive by the Board of Directors, in its sole discretion.

In addition, the Executive will be eligible for annual performance bonuses (the "Milestone Bonus").  The amount of any Milestone Bonus will be up to 100% of annual cash salary based on the achievement of predetermined corporate and individual objectives as defined by the Board on an annual basis, in its absolute discretion.  Objectives must be both reasonable and achievable based on the combined authority of the Executive and available resources of the Company. Each objective shall be assigned a corresponding earned value defined as a percentage of annual cash salary, the total of which shall be 100%. The Bonus may be paid in shares of common stock of the Company or in common stock options of the Company if agreed in writing by the Company and the Executive.  In the event any portion of such bonus is paid in shares of common stock or in stock options, the payment of such shares or options shall be deferred at the Executive's election by crediting such shares to a notional account with the Company and shall be distributed from such account upon the later of (i) the date designated (to the extent consistent with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code")) by the Executive with respect to such bonus or (ii) the earliest to occur of the 30th day after the first anniversary of the date annual are paid in cash or would have been paid to the other members of management of the Company, or the Executive's death, disability or termination of employment.

	
(F)

	
Stock Grants.  The vesting of any unvested shares of common stock, preferred stock or shares underlying stock options held by Executive are subject to the continued employment with the Company by Executive, provided, however, all shares that have not vested shall vest immediately in the event the Executive is terminated by the Company without Cause, the Executive resigns for Good Reason, there is a Change in Control or a Merger Event, any unvested common shares, preferred shares or stock option shares held by Executive shall immediately vest to the Executive.  Change in Control is defined as a transaction (other than an offering of the Company's common stock through a registration statement filed with the Securities and Exchange Commission or through a private placement memorandum) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any of its subsidiaries, an Executive benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act), of securities of the Company possessing fifty percent (50%) or more of the total combined voting power of the Company's securities outstanding immediately after such acquisition.  Notwithstanding the foregoing, a transaction shall not constitute a "Change in Control" if: (i) its sole purpose is to change the state or Country of the Company's incorporation; (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction; (iii) it constitutes the Company's initial public offering of its securities; or (iv) it is a transaction effected primarily for the purpose of financing the Company with cash (as determined by the Board in good faith and without regard to whether such transaction is effectuated by a merger, equity financing or otherwise).  A Merger Event is the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (A) a merger, consolidation, reorganization, or business combination or (B) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or (C) the acquisition of assets or stock of another entity, whereby any "person" or related "group" of "persons" directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act), of securities of the Company possessing fifty percent (50%) or more of the total combined voting power of the Company's securities outstanding immediately after such event.

 

4

	
(G)

	
Other Benefits.  The Executive shall be eligible to participate in such pension, life insurance, health insurance, disability insurance and other benefit plans, if any, which the Company may from time to time make available to similar-level employees.

	
(H)

	
Vacation.    Executive shall be entitled to four (4) weeks of paid vacation during each successive one year period of his employment by the Company, which vacation time shall be taken at such time or times in each such one year period so as not to materially and adversely interfere with the performance of his responsibilities under this Agreement. Executive shall be entitled to carry over any unused vacation time from one year to the next.

4. Business Expenses.  Subject to Executive obtaining prior written approval of expenses and substantiation of authorized expenses in accordance with Company policy and applicable tax laws, during the term of Executive's employment with the Company, the Company will reimburse Executive, or cause Executive to be reimbursed, for the ordinary and necessary business expenses authorized by an employee appointed by the Board of Directors, which shall be reviewed by the Board of Directors on a quarterly basis.

 

5

  5. Term; Termination.

(A) The term ("Term") of the Agreement shall commence on the Start Date and shall continue through the third anniversary of the Start Date. Executive may terminate the Agreement for Good Reason (as defined below) at any time upon 30 days' written notice to Company, provided the Good Reason has not been cured within such period of time.  The Company may terminate its employment of Executive under the Agreement for Cause (as defined below) at any time by written notice to Executive.

(B) As used in the Agreement, the term "Good Reason" shall mean any reduction in his then-current Salary, failure to pay or provide required Salary, the voluntary or involuntary dissolution of Company, the filing of a petition in bankruptcy by Company or upon an assignment for the benefit of creditors of the assets of Company or a material breach of the provisions of the Agreement by the Company.

(C) As used in the Agreement, the term "Cause" shall mean any of the following:

	
(i)

	
the Executive's intentional falsification (actual or attempted) of records or results of the Company; the Executive's theft or embezzlement, or attempted theft or embezzlement, of money or material property of the Company; the Executive's perpetration or attempted perpetration of fraud, or the Executive's participation in a fraud or attempted fraud, on the Company; Executive's violation of the laws and regulations prohibiting insider trading, including but not limited to disclosing material non-public information concerning the Company to any third party who is not an officer or director of the Company; or the Executive's misappropriation, or attempted misappropriation, of any material tangible or intangible assets or property of the Company;

	
(ii)

	
 any act or omission by the Executive that constitutes a breach of the duty of loyalty to the Company, including but not limited to any undisclosed conflict of interest or violation of Section 2 hereof or of any written conflict of interest policy of the Company in effect at the time the conduct occurs;

	
(iii)

	
the Executive's conviction of or plea of no contest to a felony, the Executive's commission of an act of moral turpitude that would be reasonably expected to, or that does, damage the reputation of the Company or materially undermines the Executive's ability to lead the Company as its chief executive officer, or the Executive's sexual or other prohibited harassment of, or prohibited discrimination against, any employee of the Company;

 

6

	
(iv)

	
the Executive's illegal use of controlled substances, or the Executive's abuse of alcohol that adversely affects the Executive's performance for the Company;

	
(v)

	
the Executive's refusal or failure to carry out a lawful directive of the Board of Directors that has been communicated to Executive; or

	
(vi)

	
a material breach by the Executive of any of the provisions of the Agreement.

(D) Payments to Executive Upon Termination of the Agreement.

(i) In the event the Agreement is terminated prior to the expiration of the Term by the Company without Cause or by the Executive with Good Reason, the Company shall pay to Executive the amounts set forth in this Section within ninety (90) days of the effective date of termination: (i) an amount equal to Executive's accrued but unpaid Base Salary and earned but unpaid Bonus prior to the Termination Date; (ii) reimbursement for any reimbursable business expenses incurred in accordance with the Agreement prior to the Termination Date; and (iii) the Executive's  Salary for a period of one (1) year.  Further, any equity bonus shall vest as set forth under Section 3 of the Agreement.

(ii)  In the event the Agreement is terminated prior to the expiration of the Term by the Company for Cause, due to Executive's death or Disability or by the Executive without Good Reason, the Company shall pay to Executive the amounts set forth in this Section: (i) accrued but unpaid Salary and earned but unpaid Bonus prior to the Termination Date; and (ii) reimbursement for any reimbursable business expenses incurred in accordance with the Agreement prior to the Termination Date.

(iii) Upon expiration of the Term if the Agreement shall not be renewed, the Company shall pay to Executive the amounts set forth in this Section: (i) all of Executive's accrued but unpaid Base Salary and earned but unpaid Bonus; and (ii) reimbursement for any reimbursable business expenses incurred in accordance with the Agreement prior to the end of the Term.

The Company's obligations under this Section shall survive termination of the Agreement.

6. Use. By signing the Agreement, Executive grants the Company and its agents the right and license, without further compensation to Executive, to use, publish, display and distribute, as often as desired in connection with the businesses of the Company, Executive's name, biographical information, likeness and any photographs or videos that are taken of Executive during Executive's employment by the Company or any photographs that Executive supplies to the Company. Executive may inspect and approve such uses of Executive's name, biography, likeness and photographs and videos, which inspection and approval shall not be unreasonably withheld, delayed, or conditioned.

	
7.

	
Confidential Information. Executive acknowledges and agrees that:

 

7

(A) during the course of Executive's employment with the Company, Executive will learn about, will develop and help to develop, and will be entrusted in strict confidence with confidential and proprietary information and trade secrets that are owned by the Company and that are not available to the general public or the Company's competitors, including (1) its business operations, finances, balance sheets, financial projections, tax information, accounting systems, value of properties, internal governance, structures, plans (including strategic plans and marketing plans), shareholders, directors, officers, employees, contracts, client characteristics, idiosyncrasies, identities, needs, and credit histories, referral sources, suppliers, development, acquisition, and sale opportunities, employment, personnel, and compensation records and programs, confidential planning and/or policy matters, and/or other matters and materials belonging to or relating to the internal affairs and/or business of the Company, (2) information that the Company is required to keep confidential in accordance with confidentiality obligations to third parties, (3) communications between the Company, its officers, directors, shareholders, members, partners, or employees, on the one hand, and any attorney retained by the Company for any purpose, or any person retained or employed by such attorney for the purpose of assisting such attorney in his or his representation of the Company, on the other hand, and (4) other matters and materials belonging to or relating to the internal affairs and/or business of the Company, including information recorded on any medium that gives it an opportunity to obtain an advantage over its competitors who do not know or use the same or by which the Company derives actual or potential value from such matter or material not generally being known to other persons or entities who might obtain economic value from its use or disclosure (all of the foregoing being hereinafter collectively referred to as the "Confidential Information");

(B) the Company has developed or purchased or will develop or purchase the Confidential Information at substantial expense in a market in which the Company faces intense competitive pressure, and the Company has kept and will keep secret the Confidential Information;

(C) nothing in the Agreement shall be deemed or construed to limit or take away any rights or remedies the Company may have, at any time, under statute, common law or in equity or as to any of the Confidential Information that constitutes a trade secret under applicable law.

8. Confidentiality Covenants. To the extent that Executive developed or had access to Confidential Information before entering into the Agreement, Executive represents and warrants that he has not used for his own benefit or for the benefit of any other person or entity other than the Company, and Executive has not disclosed, directly or indirectly, to any other person or entity, any of the Confidential Information. Unless and until the Confidential Information becomes publicly known through legitimate means or means not involving any act or omission by Executive:

 

8

(A) The Confidential Information is, and at all times shall remain, the sole and exclusive property of the Company;

(B)  except as otherwise permitted by the Agreement, Executive shall use commercially reasonable efforts to guard and protect the Confidential Information from unauthorized disclosure to any other person or entity;

(C) Executive shall not use for Executive's own benefit, or for the benefit of any other person or entity other than the Company, and shall not disclose, directly or indirectly, to any other person or entity, any of the Confidential Information; and

(D) Except in the ordinary course of the Company's businesses, Executive shall not seek or accept any of the Confidential Information from any former, present, or future employee of any of the Company.

9. Intellectual Property Rights.

	
(A)

	
As used in the Agreement, the term "Inventions" means all procedures, systems, formulas, recipes, algorithms, methods, processes, uses, apparatuses, compositions of matter, designs or configurations, computer programs of any kind, discovered, conceived, reduced to practice, developed, made, or produced, or any improvements to them, and shall not be limited to the meaning of "invention" under the United States patent laws. Executive agrees to disclose promptly to the Company any and all Inventions, whether or not patentable and whether or not reduced to practice, conceived, developed, or learned by Executive during the Executive's employment with the Company or during a period of one hundred eighty (180) days after the effective date of termination of Executive's employment with the Company for any reason, either alone or jointly with others, which relate to or result from the actual or anticipated business, work, research, investigations, products, or services of the Company, or which result, to any extent, from use of the premises or property of the Company (each a "Company Invention"). Executive acknowledges and agrees that the Company is the sole owner of any and all property rights in all such Company Inventions, including the right to use, sell, assign, license, or otherwise transfer or exploit the Company Inventions, and the right to make such changes in them and the uses thereof as the Company may from time to time determine. Executive agrees to disclose in writing and to assign, and Executive hereby assigns, to the Company, without further consideration, Executive's entire right, title, and interest (throughout the United States and in all foreign countries) free and clear of all liens and encumbrances, in and to all such Company Inventions, which shall be the sole property of the Company, whether or not patentable. This Section 12 does not apply to any Inventions: (1) for which no equipment, supplies, facility, or Confidential Information of the Company were used; (2) that were developed entirely on Executive's own time; and (3) that do not relate at the time of conception or reduction to practice to the current business of the Company or its actual or demonstrably anticipated research or development, or which do not result from any work performed by Executive for the Company.

 

9

	
(B)

	
 Executive acknowledges and agrees that all materials of the Company, including slides, PowerPoint or Keynote presentations, books, pamphlets, handouts, audience participation materials and other data and information pertaining to the business and clients of the Company, either obtained or developed by Executive on behalf of the Company or furnished by the Company to Executive, or to which Executive may have access, shall remain the sole property of the Company and shall not be used by Executive other than for the purpose of performing under the Agreement, unless  a majority of the Board of Directors (the "Majority Board") provides their prior written consent to the contrary.

	
(C)

	
Unless the Majority Board otherwise agrees in writing, Executive acknowledges and agrees that all writings and other works which are copyrightable or may be copyrighted (including computer programs) which are related to the present or planned businesses of the Company and which are or were prepared by Executive during the Executive's employment with the Company are, to the maximum extent permitted by law, deemed to be works for hire, with the copyright automatically vesting in the Company. To the extent that such writings and works are not works for hire, Executive hereby disclaims and waives any and all common law, statutory, and "moral" rights in such writings and works, and agrees to assign, and hereby does assign, to the Company all of Executive's right, title and interest, including copyright, in such writings and works.

	
(D)

	
Nothing contained in the Agreement grants, or shall be deemed or construed to grant, Executive any right, title, or interest in any trade names, service marks, or trademarks owned by the Company (all such trade names, service marks, and trademarks being hereinafter collectively referred to as the "Marks"). Executive may use the Marks solely for the purpose of performing his duties under the Agreement. Executive agrees that he shall not use or permit the use of any of the Marks in any other manner whatsoever without the prior written consent of the Majority Board.

	
(E)

	
Executive further agrees to reasonably cooperate with the Company hereafter in obtaining and enforcing patents, copyrights, trademarks, service marks, and other protections of the Company's rights in and to all Company Inventions, writings and other works. Without limiting the generality of the foregoing, Executive shall, at any time during and after his employment with the Company, at the Company's reasonable request, execute specific assignments in favor of the Company, or its nominee, of Executive's interest in any of the Company Inventions, writings or other works covered by the Agreement, as well as execute all papers, render all reasonable assistance, and perform all lawful acts which the Company reasonably considers necessary or advisable for the preparation, filing, prosecution, issuance, procurement, maintenance or enforcement of patents, trademarks, service marks, copyrights and other protections, and any applications for any of the foregoing, of the United States or any foreign country for any Company Inventions, writings or other works, and for the transfer of any interest Executive may have therein. Executive shall execute any and all papers and documents required to vest title in the Company or its nominees in any Company Inventions, writings, other works, patents, trademarks, service marks, copyrights, applications and interests to which the Company is entitled under the Agreement.

 

10

10. Remedies. Without limiting any of the other rights or remedies available to the Company at law or in equity, Executive agrees that any actual or threatened violation of any of the provisions of Sections 8, 9, or 10 may be immediately restrained or enjoined by any court of competent jurisdiction, and that any temporary restraining order or emergency, preliminary, or final injunctions may be issued in any court of competent jurisdiction without notice and without bond. As used in the Agreement, the term "any court of competent jurisdiction" shall include the state and federal courts sitting, or with jurisdiction over actions arising, in Suffolk County, in the State of Massachusetts the jurisdiction, venue, and convenient forum of which are hereby expressly CONSENTED TO by Executive and the Company, all objections thereto being expressly WAIVED by Executive and the Company. Notwithstanding anything to the contrary contained in the Agreement, the provisions of Sections 2 and 7 through 12of the Agreement shall survive the termination of the term of Executive's employment with the Company for any reason.

11. Independent Covenants. The restrictive covenants and provisions contained in Sections 8, 9 and 10 above shall be construed as agreements which are independent of any other provision of the Agreement or any other understanding or agreement between the parties, and the existence of any claim or cause of action of Executive against the Company, of whatsoever nature, shall not constitute a defense to the enforcement by the Company of the covenants contained in the Agreement. Executive agrees to indemnify and hold the Company harmless from and against any and all claims, demands, actions, losses, liabilities, costs, damages and expenses (including reasonable attorneys' fees and court costs) which the Company suffers, sustains, or incurs as a result of, in connection with or arising out of Executive's material breach of any of the provisions of the Agreement, or the efforts of the Company to enforce the terms of the Agreement, including the restrictive covenants contained in the Agreement.

 

11

12. Maximum Enforcement. It is the desire of the parties that the provisions of Sections 8 through 12 of the Agreement be enforced to the fullest extent permissible under the laws and public policies in each jurisdiction in which enforcement might be sought. Accordingly, without in any way limiting the general applicability of Sections 13(G) and 13(I) of the Agreement, if any particular portion of Sections 9, 10, 11, or 12 of the Agreement shall ever be adjudicated as invalid or unenforceable, or if the application thereof to any party or circumstance shall be adjudicated to be prohibited by or invalid under such laws or public policies, such Section or Sections shall be deemed amended to delete therefrom such portion so adjudicated, such deletion to apply only with respect to the operation of such Sections or Sections in the particular jurisdiction so adjudicating on the parties and under the circumstances as to which so adjudicated and only to the minimum extent so required, and the parties shall be deemed to have substituted for such portion deleted words which give the maximum scope permitted under applicable law to such Section or Sections. In the event of litigation between Executive and the Company, Executive undertakes to and shall, upon request of the Company, stipulate in such litigation to any and all of the representations, warranties, and acknowledgments that Executive has made in the Agreement.

13. Miscellaneous.

	
(A)

	
Each party agrees to cooperate with the other and to execute and deliver all such additional documents and instruments, and to take all such other action, as the other party may reasonably request from time to time to effectuate the provisions and purposes of the Agreement.

	
(B)

	
Whenever the term "include," "including," or "included" is used in the Agreement, it shall mean including without limiting the foregoing. The recitals to the Agreement are, and shall be construed to be, an integral part of the Agreement. Any and all exhibits attached to the Agreement are incorporated by reference and constitute a part of the Agreement as if set forth in the Agreement in their entirety.

	
(C)

	
Except as otherwise provided in the Agreement, all notices, requests, consents, and other communications required or permitted under the Agreement shall be in writing and signed by the party giving notice, and shall be deemed to have been given when hand-delivered by personal delivery, or by Federal Express or similar courier service, or three (3) business days after being deposited in the United States mail, registered or certified mail, with postage prepaid, return receipt requested, addressed as follows:

If to the Company:

 233 Needham Street

Newton, MA 02464

 

  

12

If to the Executive:

__________________

__________________

or to such other address as either party may designate for himself or itself by notice given to the other party from time to time in accordance with the provisions of the Agreement.

	
(D)

	
The Agreement is personal to the Executive, and the Executive may not assign it or his rights under it. The Company may assign the Agreement, including Executive's confidentiality and other obligations under Sections 8, 9 and 10 of the Agreement, along with the Company's rights and remedies contained in Sections 9 through 12 of the Agreement, to any entity controlling, controlled by, or under common control with the Company, or to any entity succeeding to the portion of the business that includes employee's primary job functions, substantially all of the business of the Company, or substantially all of the assets of the Company. Subject to the foregoing, the Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, personal and legal representatives, successors and assigns.

	
(E)

	
No delay on the part of any party in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by any party of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. The waiver of any breach or condition of the Agreement by either party shall not constitute a precedent in the future enforcement of any of the terms and conditions of the Agreement.

	
(F)

	
The headings of Sections and Subsections contained in the Agreement are merely for convenience of reference and shall not affect the interpretation of any of the provisions of the Agreement. The Agreement is deemed to have been drafted jointly by the parties, and any uncertainty or ambiguity shall not be construed for or against either party as an attribution of drafting to either party. Whenever the context so requires, the singular shall include the plural and vice versa. All words and phrases shall be construed as masculine, feminine or neuter gender, according to the context.

	
(G)

	
Whenever possible, each provision of the Agreement shall be construed and interpreted in such a manner as to be effective and valid under applicable law, but if any provision of the Agreement or the application thereof to any party or circumstance shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition without invalidating the remainder of such provision or any other provision of the Agreement or the application of such provision to other parties or circumstances.

 

13

	
(H)

	
All discussions, correspondence, understandings, and agreements heretofore had or made between the parties relating to its subject matter are superseded by and merged into the Agreement, which alone fully and completely expresses the agreement between the parties relating to its subject matter, and the same is entered into with no party relying upon any statement or representation made by or on behalf of any party not embodied in the Agreement, provided, however, that, any previous requirements that Executive not disclose or use information of or concerning the Company that is confidential shall remain in full force and effect. Any modification of the Agreement may be made only by a written agreement signed by both of the parties to the Agreement.

	
(I)

	
The parties acknowledge and agree that the Company is headquartered in Massachusetts. The parties further acknowledge and agree that, to promote uniformity in the interpretation of this and similar agreements, the validity, construction, and enforceability of the Agreement shall be governed in all respects by the internal laws of Massachusetts applicable to agreements made and to be performed entirely within Massachusetts, without regard to the conflicts of laws principles of Massachusetts or any other state.

	
(J)

	

	
(K)

	
All payments to Executive under the Agreement shall be subject to such deductions for applicable withholding taxes, social security, employee benefits, and the like as required or permitted by applicable law. Executive recognizes and agrees that he may be paid under the Agreement and also employed by a payroll entity affiliated with the Company.

	
(L)

	
The Agreement may be executed in any one or more counterparts, each of which shall constitute an original, no other counterpart needing to be produced, and all of which, when taken together, shall constitute but one and the same instrument. For purposes of finalizing the Agreement, the signature of any party on the Agreement, or any amendment hereto, transmitted electronically may be relied upon as if such document were an original document.

	
(M)

	
The parties represent and warrant to each other that they have read the Agreement in its entirety, that they understand the terms of the Agreement and understand that the terms of the Agreement are enforceable, that they have had ample opportunity to negotiate with each other with regard to all of its terms, that they have entered into the Agreement freely and voluntarily, that they intend to and shall be legally bound by the Agreement, and that they have full power, right, authority, and competence to enter into and execute the Agreement.

14

IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first above written.

BOSTON THERAPEUTICS, INC.

By:/s/ Conroy Chi-Heng Cheng

Name: Conroy Chi-Heng Cheng

Title: Interim CEO

/s/ Carl W. Rausch

Carl W. Rausch

 

15MSB FINANCIAL CORP.

2016 EQUITY INCENTIVE PLAN

1. PURPOSE OF PLAN.

The purpose of this MSB Financial Corp. 2016 Equity Incentive Plan is to promote the long-term financial success of MSB Financial Corp., and its Affiliates, by providing an additional tool to attract, retain and reward individuals who contribute to such success, and to further align the interests of the officers, employees and directors who contribute to the long-term success and growth of MSB Financial Corp., and its Affiliates, with the Company's stockholders.

2. DEFINITIONS.

"Affiliate" means any "parent corporation" or "subsidiary corporation" of the Company, as such terms are defined in Sections 424(e) and 424(f) of the Code.  The term Affiliate shall include the Bank.

"Award" means a Restricted Stock Award and/or a Stock Option, as set forth at Section 6 of the Plan.

"Bank" means Millington Bank, and any successors thereto.

"Beneficiary" means the person or persons designated by the Participant to receive any benefits payable under the Plan in the event of such Participant's death.  Such person or persons shall be designated in writing by the Participant and addressed to the Company or the Committee on forms provided for this purpose by the Committee, and delivered to the Company or the Committee. Such Beneficiary designation may be changed from time to time by similar written notice to the Committee.  A Participant's last will and testament or any codicil thereto shall not constitute written designation of a Beneficiary.  In the absence of such written designation, the Beneficiary shall be the Participant's surviving spouse, if any, or if none, the Participant's estate.

"Board of Directors" or "Board" means the board of directors of the Company.

"Cause" or "Termination for Cause" means:  (i)  If the Participant is subject to a written employment agreement (or other similar written agreement) with the Company or an Affiliate that provides a definition of termination for "Cause," then, for purposes of this Plan, the term "Cause" shall have meaning set forth in such agreement, and (ii)  In the absence of such a definition, "Cause" means the personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profits, intentional failure to perform stated duties, willful violation of a material provision of any law, rule or regulation (other than traffic violations and similar offense), or a material violation of a final cease-and-desist order or any other action which results in a substantial financial loss to the Company or its Affiliates.

"Change in Control" shall, for purposes of the Plan, unless otherwise provided in an Award Agreement, be deemed to have occurred upon the earliest to occur of the following:

(a) Merger.  The Company or the Bank merges into or consolidates with another entity, or merges another bank or corporation into the Company or the Bank, and as a result, less than a majority of the 

 

1

 

 

combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation;

(b) Acquisition of Significant Share Ownership. A person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company's or the Bank's Voting Securities; provided, however, this clause (b) shall not apply to beneficial ownership of the Company's or the Bank's voting Shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding Voting Securities;

(c) Change in Board Composition.  During any period of two consecutive years, individuals who constitute the Company's or the Bank's Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company's or the Bank's Board of Directors; provided, however, that for purposes of this clause (c), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or

(d) Sale of Assets.  The Company or the Bank sells to a third party all or substantially all of its assets.

Notwithstanding the foregoing, in the event that an Award constitutes Deferred Compensation (as defined in Section 9.5(d) hereof), and the settlement of, or distribution of benefits under, such Award is to be triggered solely by a Change in Control, then with respect to such Award, a Change in Control shall be defined as required under Code Section 409A, as in effect at the time of such transaction.

"Code" means the Internal Revenue Code of 1986, as amended, and related regulations promulgated thereunder.

"Committee" means the Board of Directors of the Company or the administrative committee appointed by such Board to administer the Plan.

"Common Stock" or "Shares" means shares of common stock, par value $0.01 per share, of the Company.

"Company" means MSB Financial Corp., a Maryland corporation, and any successor entity thereto.

"Director" means a person serving as a member of the Board of Directors of the Company or the Bank from time to time.

"Director Emeritus" means a person serving as a director emeritus, advisory director, consulting director or other similar position as may be appointed by the Board of Directors of the Company or the Bank from time to time.

"Disability" means (a) with respect to Incentive Stock Options, the "permanent and total disability" of the Employee as such term is defined at Section 22(e)(3) of the Code; and (b) with respect to other Awards, a condition of incapacity of a Participant which renders that person unable to engage in the performance of his or her duties 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

 

 

"Effective Date" shall mean the first date of approval of the Plan by the stockholders of the Company.

"Eligible Participant" means an Employee or Director who may receive an Award under the Plan.

"Employee" means any person employed by the Company or an Affiliate. Directors who are also employed by the Company or an Affiliate shall be considered Employees under the Plan.

"Exchange" means any national securities exchange on which the Common Stock may from time-to-time be listed or traded.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exercise Price" means the price at which an individual may purchase a share of Common Stock pursuant to an Option.

"Fair Market Value" on any date, means (i) if the Common Stock is listed on an Exchange, the last reported sale price as of the closing on such Exchange or over such system on such date (and without regard to after-hours trading activity) or, in the absence of reported sales on such date, the last reported sale price on the  preceding date on which sales were reported, or (ii) if the Common Stock is not listed on a securities exchange, "Fair Market Value" shall mean a price determined by the Committee in good faith on the basis of objective criteria, and in accordance with Sections 409A and 422 of the Code, if applicable.

"Incentive Stock Option" means a Stock Option granted under the Plan, that is intended to meet the requirements of Section 422 of the Code.

"Non-Statutory Stock Option" means a Stock Option granted to an individual under the Plan that is not intended to be and is not identified as an Incentive Stock Option, or an Option granted under the Plan that is intended to be and is identified as an Incentive Stock Option, but that does not meet the requirements of Section 422 of the Code.

"Option" or "Stock Option" means an Incentive Stock Option or a Non-Statutory Stock Option, as applicable.

"Outside Director" means a member of the Board of Directors of the Company who is not also an Employee of the Company or an Affiliate.

"Parent" means the Company or any future corporation which would be a "parent corporation" of the Bank or the Company as defined in Sections 424(e) and (g) of the Code.

"Participant" means an individual who is granted an Award pursuant to the terms of the Plan; provide, however, upon the death of a Participant, the term "Participant" shall also refer to a Beneficiary designated in accordance with the Plan.

"Plan" means this MSB Financial Corp. 2016 Equity Incentive Plan.

"Restricted Stock Award" means an Award of Shares granted to a Participant pursuant to Section 6.5 of the Plan.

"Service" means continuous service as an Employee or Outside Director of the Company or an Affiliate, as the case may be, and shall include service as a Director Emeritus.  Service shall not be deemed 

 

3

 

 

interrupted in the case of sick leave, military leave or any other absence approved by the Company or an Affiliate, in the case of transferees between payroll locations or between the Company, an Affilate or a successor entity.

"Termination of Service" means the first day occurring on or after a grant date on which the Participant ceases to be an Employee or Director (including a Director Emeritus) of the Company or any Affiliate, regardless of the reason for such cessation, subject to the following:

(a) The Participant's cessation as an Employee shall not be deemed to occur by reason of the transfer of the Participant between the Company and an Affiliate or between two Affiliates.

(b) The Participant's cessation as an Employee shall not be deemed to occur by reason of the Participant's being on a bona fide leave of absence from the Company or an Affiliate approved by the Company or Affiliate otherwise receiving the Participant's Services, provided such leave of absence does not exceed six months, or if longer, so long as the Employee retains a right to reemployment with the Company or Affiliate under an applicable statute or by contract. For these purposes, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Employee will return to perform Services for the Company or Affiliate. If the period of leave exceeds six months and the Employee does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six-month period. For purposes of this sub-section (b), to the extent applicable, an Employee's leave of absence shall be interpreted by the Committee in a manner consistent with Treasury Regulation Section 1.409A-1(h)(1).

(c) If, as a result of a sale or other transaction, the Affiliate for whom Participant is employed (or to whom the Participant is providing Services) ceases to be an Affiliate, and the Participant is not, following the transaction, an Employee of the Company or an entity that is then an Affiliate, then the occurrence of such transaction shall be treated as the Participant's Termination of Service caused by the Participant being discharged by the entity for whom the Participant is employed or to whom the Participant is providing Services.

(d) Except to the extent Section 409A of the Code may be applicable to an Award, and subject to the foregoing paragraphs of this sub-section, the Committee shall have discretion to determine if a Termination of Service has occurred and the date on which it occurred. In the event that any Award under the Plan constitutes Deferred Compensation (as defined in Section 9.5(d) hereof), the term Termination of Service shall be interpreted by the Committee in a manner consistent with the definition of "Separation from Service" as defined under Section 409A of the Code and under Treasury Regulation Section 1.409A-1(h)(ii). For purposes of this Plan, a "Separation from Service" shall have occurred if the Company, an Affiliate and the Participant reasonably anticipate that no further Services will be performed by the Participant after the date of the Termination of Service (whether as an employee or as an independent contractor) or the level of further Services performed will be less than 50% of the average level of bona fide Services in the 36 months immediately preceding the Termination of Service.

(e) With respect to a Participant who is a Director, cessation as a Director will not be deemed to have occurred if the Participant continues as a Director Emeritus.  With respect to a Participant who is both an Employee and a Director, termination of employment as an Employee shall not constitute a Termination of Service for purposes of the Plan so long as the Participant continues to provide Service as an Outside Director or Director Emeritus.

"Trust" shall mean any grantor trust established by the Company for purposes of administration of the Plan.

 

4

 

 

"Trustee" shall mean the trustee or trustees of any Trust established by the Company for purposes of administration of the Plan.  The Committee shall serve as the Trustee unless or until the Committee shall otherwise appoint a Trustee or successor trustee.

"Voting Securities" shall mean any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.

3. ADMINISTRATION.

		(a)	Committee.  The Plan shall be administered by the Board of Directors of the Company or a Committee appointed by such Board.  The Committee shall consist of two or more disinterested directors of the Company, who shall be appointed by the Board of Directors. A member of the Board of Directors shall be deemed to be disinterested only if he or she satisfies:  (i) such requirements as the Securities and Exchange Commission may establish for non-employee directors administering plans intended to qualify for exemption under Rule 16b-3 (or its successor) of the Exchange Act, and (ii) and to the extent deemed appropriate by the Board of Directors, such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under Section 162(m)(4)(C) of the Code; provided, however, a failure to comply with the requirements of  subparagraphs (i) and (ii) shall not disqualify any actions taken by the Committee.  A disinterested director must be eligible to serve on the Company's Compensation Committee as required by any Exchange on which the Company lists its securities, if applicable.  A majority of the entire Committee shall constitute a quorum and the action of a majority of the members present at any meeting at which a quorum is present, as well as actions taken pursuant to the unanimous written consent of all of the members of the Committee without holding a meeting, shall be deemed to be actions of the Committee.  In no event may the Committee revoke outstanding Awards without the consent of the Participant.  All decisions, determinations and interpretations by the Committee shall be final, binding and conclusive on all persons affected thereby.

		(b)	Authority of Committee.  Subject to paragraph (a) of this Section 3, the Committee shall:

		(i)	select the individuals who are to receive grants of Awards under the Plan;

		(ii)	determine the type, number, vesting requirements, acceleration of vesting and other features and conditions of Awards made under the Plan;

		(iii)	interpret the Plan and Award Agreements (as defined below); and

		(iv)	make all other decisions and determinations that may be required or as the Committee deems necessary or advisable related to the operation of the Plan.

The Committee, in its discretion, shall have the authority to grant Stock Options that satisfy the requirements for deductibility for compensation in excess of $1 million in accordance with Section 162(m) of the Code as well as to grant Stock Options and Restricted Stock Awards that may not satisfy the requirements for deductibility for such compensation in excess of $1 million in accordance with Section 162(m) of the Code.

		(c)	Awards.  Each Award granted under the Plan shall be evidenced by a written agreement (i.e., an "Award Agreement").  Each Award Agreement shall constitute a binding contract between the Company or an Affiliate and the Participant, and every Participant, upon acceptance of an Award Agreement, shall be bound by the terms and restrictions of the Plan and the Award Agreement.  The terms of each Award Agreement shall be set in accordance with the Plan, 

 

 

5

 

 

			but each Award Agreement may also include any additional provisions and restrictions determined by the Committee.  In particular, and at a minimum, the Committee shall set forth in each Award Agreement:

 

		(i)	the type of Award granted;

			(ii) 	the Exercise Price for any Option;

			(iii) 	the number of Shares or rights subject to the Award;

		(iv)	the expiration date of the Award;

		(v)	the manner, time and rate (cumulative or otherwise) of exercise or vesting of the Award; and

		(vi)	the restrictions, if any, placed on the Award, or upon Shares which may be issued upon the exercise or vesting of the Award.

The Chairman of the Committee and/or the President of the Company are hereby authorized to execute Award Agreements on behalf of the Company or an Affiliate and to cause them to be delivered to the Participants granted Awards under the Plan.

		(d)	Six-Month Holding Period.  Subject to vesting requirements, if applicable, except in the event of death or Disability of the Participant or a Change in Control of the Company, a minimum of six months must elapse between the date of the grant of an Award and the date of the sale of the Common Stock received through the exercise of such Option or the vesting of such Award.

4. ELIGIBILITY.

Subject to the terms of the Plan, Employees and Directors, as the Committee shall determine from time to time, shall be eligible to receive Awards in accordance with the Plan.

5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS.

5.1 Shares Available.  Subject to the provisions of Section 7, the Common Stock that may be delivered under this Plan shall be shares of the Company's authorized but unissued Common Stock, shares of Common Stock purchased in the open-market by the Company or any Trust established for purposes of administration of the Plan and any shares of Common Stock held as treasury shares.

5.2 Share Limits.  The maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under this Plan (the "Share Limit") equals 394,099 Shares. The following limits also apply with respect to Awards granted under this Plan:

		(a)	The maximum number of shares of Common Stock that may be delivered pursuant to the exercise of Stock Options granted under this Plan is 281,499 Shares.

		(b)	The maximum number of shares of Common Stock that may be delivered pursuant to Restricted Stock Awards granted under this Plan is 112,600 Shares.

5.3 Awards Settled in Cash, Reissue of Awards and Shares.  To the extent that an Award is settled in cash or a form other than shares of Common Stock, or if shares of Common Stock are withheld from an Award for tax withholding purposes, then the Shares that would have been delivered had there been no such cash or other settlement shall be counted against the Shares available for issuance under this Plan. Shares that are subject to or underlie Awards which expire or for any reason are cancelled or terminated, are forfeited, fail 

 

6

 

 

to vest, or for any other reason are not paid or delivered under this Plan shall again be available for subsequent Awards under this Plan.

5.4 Reservation of Shares; No Fractional Shares; Minimum Issue.  The Company shall at all times reserve a number of shares of Common Stock sufficient to cover the Company's obligations and contingent obligations to deliver Shares with respect to Awards then outstanding under this Plan. No fractional Shares shall be delivered under this Plan. The Committee may pay cash in lieu of any fractional shares in settlements of Awards under this Plan. No fewer than 100 Shares may be purchased on exercise of any Stock Option unless the total number purchased or exercised constitutes the total number at the time available for purchase or exercise by the Participant.

6. AWARDS.

		6.1	Stock Options.

The Committee may, subject to the limitations of this Plan and the availability of shares of Common Stock reserved but not previously awarded under the Plan, grant Stock Options to Employees and Outside Directors, subject to terms and conditions as it may determine, to the extent that such terms and conditions are consistent with the following provisions:

		(i)	Exercise Price.  The Exercise Price of Stock Options shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the date of grant.

		(ii)	Terms of Options.  In no event may an individual exercise an Option, in whole or in part, more than ten (10) years from the date of grant.

		(iii)	Non-Transferability.  Unless otherwise determined by the Committee, an individual may not transfer, assign, hypothecate, or dispose of an Option in any manner, other than by will or the laws of intestate succession.  The Committee may, however, in its sole discretion, permit the transfer or assignment of a Non-Statutory Stock Option, if it determines that the transfer or assignment is for valid estate planning purposes and is permitted under the Code and Rule 16b-3 of the Exchange Act.  For purposes of this Section 6.1, a transfer for valid estate planning purposes includes, but is not limited to, transfers:

		(1)	to a revocable inter vivos trust, as to which an individual is both settlor and trustee;

		(2)	for no consideration to:  (a) any member of the individual's Immediate Family; (b) a trust solely for the benefit of members of the individual's Immediate Family; (c) any partnership whose only partners are members of the individual's Immediate Family; or (d) any limited liability corporation or other corporate entity whose only members or equity owners are members of the individual's Immediate Family.

For purposes of this Section 6.1, "Immediate Family" includes, but is not necessarily limited to, a Participant's parents, grandparents, spouse, children, grandchildren, siblings (including half brothers and sisters), and individuals who are family members by adoption.  Nothing contained in this Section 6.1 

 

7

 

 shall be construed to require the Committee to give its approval to any transfer or assignment of any Non-Statutory Stock Option or portion thereof, and approval to transfer or assign any Non-Statutory Stock Option or portion thereof does not mean that such approval will be given with respect to any other Non-Statutory Stock Option or portion thereof.  The transferee or assignee of any Non-Statutory Stock Option shall be subject to all of the terms and conditions applicable to such Non-Statutory Stock Option immediately prior to the transfer or assignment and shall be subject to any other conditions prescribed by the Committee with respect to such Non-Statutory Stock Option.

 

		(iv)	Special Rules for Incentive Stock Options.  Notwithstanding the foregoing provisions, the following rules shall further apply to grants of Incentive Stock Options:

		(1)	If an Employee owns or is treated as owning, for purposes of Section 422 of the Code, Common Stock representing more than ten percent (10%) of the total combined voting securities of the Company at the time the Committee grants the Incentive Stock Option (a "10% Owner"), the Exercise Price shall not be less than one hundred and ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant.

		(2)	An Incentive Stock Option granted to a 10% Owner shall not be  exercisable more than five (5) years from the date of grant.

		(3)	To the extent the aggregate Fair Market Value of shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Employee during any calendar year, under the Plan or any other stock option plan of the Company, exceeds $100,000, or such higher value as may be permitted under Section 422 of the Code, Incentive Stock Options in excess of the $100,000 limit shall be treated as Non-Statutory Stock Options.  Fair Market Value shall be determined as of the date of grant for each Incentive Stock Option.

		(4)	Each Award Agreement for an Incentive Stock Option shall require the individual to notify the Committee within ten (10) days of any disposition of shares of Common Stock under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions).

		(5)	Incentive Stock Options may only be awarded to an Employee of the Company or its Affiliates.

 

		(v)	Option Awards to Outside Directors.  Subject to the limitations of Section 6.4(a), the Committee may award Non-Statutory Stock Options to purchase shares of Common Stock to each Outside Director of the Company at an Exercise Price equal to the Fair Market Value of the Common Stock on such date of grant.  The Options will be first exercisable at the rate of 20% on the one year anniversary of the date of grant of such Award and 20% annually thereafter during periods of continuing Service as a Director or Director Emeritus.  Upon the death or Disability of the Director or Director Emeritus, such Option shall be deemed immediately 100% 

 

 

 

8

 

 

			exercisable.  In the event of the Director's death, such Options may be exercised by the Beneficiary or the personal representative of his estate or person or persons to whom his rights under such Option shall have passed by will or by the laws of descent and distribution. The Exercise Price per share of such Options granted shall be equal to the Fair Market Value of the Common Stock at the time such Options are granted.  All outstanding Awards shall become immediately exercisable in the event of a Change in Control of the Bank or the Company. Unless otherwise inapplicable, or inconsistent with the provisions of this paragraph, the Options to be granted to Outside Directors hereunder shall be subject to all other provisions of this Plan.

 

6.2 Award Payouts.  Awards may be paid out in the form of cash, Common Stock, or combinations thereof as the Committee shall determine in its sole discretion, and with such restrictions as it may impose.

6.3 Consideration for Stock Options.  The Exercise Price for any Stock Option granted under this Plan may be paid by means of any lawful consideration as determined by the Committee, including, without limitation, one or a combination of the following methods:

		(a)	cash, check payable to the order of the Company, or electronic funds transfer;

	
(b)

	
the delivery of previously owned shares of Common Stock; or

	
(c)

	
subject to such procedures as the Committee may adopt, pursuant to a "cashless exercise" with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of such Stock Option.

In no event shall any Shares newly-issued by the Company be issued for less than the minimum lawful consideration for such Shares or for consideration other than consideration permitted by applicable state law. In the event that the Committee allows a Participant to exercise an Option by delivering shares of Common Stock previously owned by such Participant, any such Shares delivered which were initially acquired by the Participant from the Company (upon exercise of a stock option or otherwise) must have been owned by the Participant for at least six months prior to such date of delivery. Shares of Common Stock used to satisfy the Exercise Price of an Option shall be valued at their Fair Market Value on the date of exercise. The Company will not be obligated to deliver any Shares upon the exercise of a Stock Option unless and until it receives full payment of the Exercise Price and any related withholding obligations under Section 9.5 have been satisfied, or until any other conditions applicable to exercise or purchase have been satisfied. No shares of Common Stock shall be issued until full payment has been received by the Company, and no Participant shall have any of the rights of a stockholder of the Company until shares of Common Stock are issued upon the exercise of such Stock Options. Unless expressly provided otherwise in the applicable Award Agreement, the Committee may at any time within its sole discretion eliminate or limit a Participant's ability to pay the purchase or Exercise Price of any Award by any method other than a cash payment to the Company.

6.4 Limitations on Awards.

		(a)	Stock Option Award Limitations.  In no event shall Shares awarded pursuant to Stock Options granted to Outside Directors in the aggregate under this Plan exceed more than 30% of the total number of Shares authorized for delivery under this Plan with respect to Stock Options as set forth at Section 5.2(a) or exceed more than 5% of such Shares (14,074 Shares) to any individual Outside Director.  In no event shall Shares awarded pursuant to Stock Options granted to any single Employee in the aggregate under the Plan exceed more than 

 

 

9

 

 

			25% of the total number of Shares authorized for delivery under the Plan with respect to Stock Options as set forth at Section 5.2(a), and no single Employee may be awarded more than 25% of the total number of such Shares authorized for delivery under the Plan with respect to Stock Options (70,374 Shares) in any one calendar year.

 

	
(b)

	
Vesting of Awards.  Except as otherwise provided by the terms of the Plan or by action of the Committee at the time of the grant of an Award, Stock Options will be first earned and exercisable and Restricted Stock Awards will be earned and non-forfeitable at the rate of 20% of such Award on the one year anniversary of the date of grant and 20% annually thereafter during such periods of continued service as an Employee, Director or Director Emeritus.  Award vesting may accelerate in the event of the death or Disability of the Participant or in the event of a Change in Control by action or approval of the Committee.

	
(c)

	
Restricted Stock Award Limitations.  In no event shall Shares subject to Restricted Stock Awards granted to Outside Directors in the aggregate under this Plan exceed more than 30% of the total number of Shares authorized for delivery under this Plan with respect to Restricted Stock Awards as set forth at Section 5.2(b) or exceed more than 5% of such Shares (5,630 Shares) to any individual Outside Director.  In no event shall Shares awarded pursuant to Restricted Stock Awards granted to any single Employee in the aggregate under the Plan exceed more than 25% of the total number of Shares authorized for delivery under the Plan with respect to Restricted Stock Awards as set forth at Section 5.2(b), and no single Employee may be awarded more than 25% of the total number of such Shares authorized for delivery under the Plan with respect to Restricted Stock Awards (28,150 Shares) in any one calendar year.

6.5 Restricted Stock Awards.  The Committee may make grants of Restricted Stock Awards, which shall consist of the grant of some number of shares of Common Stock to an individual upon such terms and conditions as it may determine, to the extent such terms and conditions are consistent with the following provisions:

		(a)	Grants of Stock.  Restricted Stock Awards may only be granted in dominations of whole shares of Common Stock.

		(b)	Non-Transferability.  Except to the extent permitted by the Code, the rules promulgated under Section 16(b) of the Exchange Act or any successor statutes or rules:

		(1)	The recipient of a Restricted Stock Award grant shall not sell, transfer, assign, pledge, or otherwise encumber Shares subject to the grant until such Shares have become earned and non-forfeitable. For purposes of this Section 6.5, the separation of beneficial ownership and legal title through the use of any "swap" transaction is deemed to be a prohibited encumbrance.

	
(2)

	
Unless otherwise determined by the Committee, and except in the event of the Participant's death or pursuant to a qualified domestic relations order, a Restricted Stock Award grant is not transferable and may be earned only by the individual to whom it is granted during his or her lifetime. Upon the death of a Participant, a Restricted Stock Award shall be transferred to the Beneficiary.  The designation of a Beneficiary shall not constitute a transfer.

 

10

 

 

 

	
(3)

	
If the recipient of a Restricted Stock Award is subject to the provisions of Section 16 of the Exchange Act, shares of Common Stock subject to the grant may not, without the written consent of the Committee (which consent may be given in the Award Agreement), be sold or otherwise disposed of within six (6) months following the date of grant.

		(c) 	Distribution of Shares; Issuance of Certificates.  Not later than thirty days following the date that the Restricted Stock Award, or portion thereof, shall be deemed earned and non-forfeitable, the Committee shall distribute the Shares earned in accordance with such Restricted Stock Award, or portion thereof.  The Committee, in its sole discretion, may permit the issuance of shares of Common Stock to be issued pursuant to a Restricted Stock Award prior to the time that such Award shall be deemed earned and non-forfeitable, with such stock certificate evidencing such Shares registered in the name of the Participant to whom the Restricted Stock Award was granted; provided, however, that the Company may not cause a stock certificate to be issued unless it has received a general stock power in favor of the Company duly endorsed in blank with respect to such Shares. Further, each such stock certificate shall bear the following legend:

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE MSB FINANCIAL CORP. 2016 EQUITY INCENTIVE PLAN, AND THE RELATED AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND MSB FINANCIAL CORP. THE PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICE OF THE CORPORATE SECRETARY OF MSB FINANCIAL CORP.

This legend shall not be removed until such Restricted Stock Award, or portion thereof, shall be deemed earned and non-forfeitable by the Participant pursuant to the terms of the Plan and respective Award Agreement. Each certificate issued pursuant to this Section 6.5 shall be held by the Company or its Affiliates, unless the Committee determines otherwise.

		(d)	Treatment of Dividends.  A Restricted Stock Award shall include all dividends and other distributions declared and paid on all shares of Common Stock subject to a Restricted Stock Award from and after the date of grant of such Restricted Stock Award. Such dividends and other distributions shall be distributed to the holder of such Restricted Stock Award in accordance with the procedures approved by the Committee, but in no event later than 30 days following the date that the underlying Shares associated with the Restricted Stock Award shall be deemed earned and non-forfeitable; provided that in the event of the forfeiture of such Restricted Stock Award, all dividend rights associated with such Award prior to the date that such Award shall be deemed earned and non-forfeitable shall be forfeited.  Stock dividends issued with respect to a Restricted Stock Award shall be subject to the same terms and conditions that apply to the Shares represented by such underlying Restricted Stock Award.

 

		(e)	Voting Rights Associated with of Restricted Stock Awards.  Voting rights associated with any Restricted Stock Award shall not be exercised by the Participant until certificates of Common Stock representing such Award have been issued to such Participant, and such Restricted Stock Award shall be deemed earned and non-forefeitable. Any shares of Common Stock held by the Trust prior to issuance to a Participant shall be voted by the Trustee of such 

 

 

11

 

			Trust as directed by the Committee. Any shares of Common Stock held by Company prior to such time that the Awards are earned and non-forfeitable shall be voted by the Committee in accordance with the general stock power held by the Company applicable to such Shares.

 

		(f)	Restricted Stock Awards to Outside Directors.  Subject to the limitations at Section 6.4(c), the Committee may grant a Restricted Stock Award consisting of shares of Common Stock to each Outside Director of the Company; provided however, a Director first serving as such after January 1, 2013 shall not be eligible to receive a Restricted Stock Award.  Such Award shall be earned and non-forfeitable at the rate of one-fifth as of the one-year anniversary of such date of grant and an additional one-fifth following each of the next four successive years during such periods of Service as a Director or Director Emeritus.  Such Award shall be immediately 100% earned and non-forfeitable in the event of the death or Disability of such Director.  Such Award shall be immediately 100% earned and non-forfeitable upon a Change in Control of the Company or the Bank.

7. EFFECT OF TERMINATION OF SERVICE ON AWARDS.

7.1 General.  The Committee shall establish the effect of a Termination of Service on the continuation of rights and benefits available under an Award, and, in so doing, may make distinctions based upon, inter alia, the recipient of such Award, the cause of termination and the type of the Award.  Notwithstanding the foregoing, the terms of Awards shall be consistent with the following, as applicable:

		(a)	Termination of Service.  In the event that any Participant's employment or or Service with the Company shall terminate for any reason, other than Disability or death, all of any such Participant's Stock Options, and all of any such Participant's rights to purchase or receive shares of Common Stock pursuant thereto, shall automatically terminate on (A) the earlier of (i) or (ii):  (i) the respective expiration dates of any such Stock Options, or (ii) the expiration of not more than three (3) months after the date of such termination of Service; or (B) at such later date as is determined by the Committee at the time of the grant of such Award based upon the Participant's continuing status as a Director or Director Emeritus of the Bank or the Company, and further that following a period of three months following termination of Service, such Award shall thereafter be deemed a Non-Statutory Stock Option, if such Option had previously been awarded as an Incentive Stock Option.  Notwithstanding anything herein to the contrary, except as otherwise detailed by the Committee at the time of grant of an Award, upon the termination of employment of a Participant who shall continue Service thereafter as a Director or Director Emeritus, all previously granted Awards shall continue to be earned and non-forfeitable annually in accordance with the schedule detailed at the time of such Award, and all Stock Options shall remain exercisable during such period of service as a Director or Director Emeritus or the expiration date of such Award, if earlier.

		(b)	Disability.  In the event that any Participant's Service with the Company shall terminate as the result of the Disability of such Participant, such Participant may exercise any Stock Options previously granted to the Participant pursuant to the Plan at any time prior to the earlier of (i) the respective expiration dates of any such Stock Options or (ii) the date which is one (1) year after the date of such termination of Service, but only if, and to the extent that, the Participant was entitled to exercise any such Stock Options at the date of such termination of Service.  Notwithstanding anything herein to the contrary, except as otherwise detailed by the Committee at the time of grant of an Award, upon the Disability of a Participant, all previously granted Awards shall become immediately earned and non-forfeitable, and all 

 

 

12

 

 

 

			Stock Options shall remain exercisable for a period of one year following such date of Disability or the expiration date of such Award, if earlier.

 

		(c)	Death.  In the event of the death of a Participant, any Stock Options previously granted to such Participant may be exercised by the Participant's Beneficiary or the person or persons to whom the Participant's rights under any such Stock Options pass by will or by the laws of descent and distribution (including the Participant's estate during the period of administration) at any time prior to the earlier of (i) the respective expiration dates of any such Stock Options or (ii) the date which is two (2) years after the date of death of such Participant, but only if, and to the extent that, the Participant was entitled to exercise any such Stock Options at the date of death.  For purposes of this Section 7.1(c), any Stock Option held by a Participant shall be considered exercisable at the date of his death if the only unsatisfied condition precedent to the exercisability of such Stock Option at the date of death is the passage of a specified period of time.  At the discretion of the Committee, upon exercise of such Options, the Beneficiary may receive Shares or cash or a combination thereof.  If cash shall be paid in lieu of shares of Common Stock, such cash shall be equal to the difference between the Fair Market Value of such Shares and the exercise price of such Options on the exercise date. Notwithstanding anything herein to the contrary, except as otherwise detailed by the Committee at the time of grant of an Award, upon the death of a Participant, all previously granted Awards shall become immediately earned and non-forfeitable, and all Stock Options shall remain exercisable for a period of two years following such date of death or the expiration date of such Award, if earlier.

7.2 Events Not Deemed Terminations of Employment or Termination of Service.  Unless Company policy or the Committee provides otherwise, the employment relationship shall not be considered terminated in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Company or the Committee; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than six months. In the case of any Employee on an approved leave of absence, continued vesting of the Award while on leave may be suspended until the Employee returns to service, unless the Committee otherwise provides or applicable law otherwise requires. In no event shall an Award be exercised after the expiration of the term set forth in the Award Agreement.

7.3 Effect of Change of Affiliate Status.  For purposes of this Plan and any Award, if an entity ceases to be an Affiliate of the Company, a Termination of Service shall be deemed to have occurred with respect to each individual who does not continue as an Employee or Outside Director with another entity within the Company after giving effect to the Affiliate's change in status.

	8.	ADJUSTMENTS IN CAPITAL STRUCTURE; ACCELERATION UPON A CHANGE IN CONTROL.

8.1 Adjustments in Capital Structure.  Upon any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split ("stock split"); any merger, combination, consolidation, or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution with respect to the Common Stock (whether in the form of securities or property); any exchange of Common Stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction affecting the Common Stock; or a sale of all or substantially all the business or assets of the Company in its entirety; then the Committee shall proportionately adjust the Plan and the Awards thereunder in such manner,  to such extent and at such times, as is necessary to preserve the benefits or potential benefits of such Awards, including:

 

13

 

  

		(a)	proportionately adjust any or all of: (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of Awards (including the specific Share Limits, maximums and numbers of Shares set forth elsewhere in this Plan); (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any or all outstanding Awards; (3) the grant, purchase, or Exercise Price of any or all outstanding Awards; (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding Awards; or (5) the performance standards applicable to any outstanding Awards; or

		(b)	make provision for a cash payment or for the assumption, substitution or exchange of any or all outstanding Awards, based upon the distribution or consideration payable to holders of the Common Stock.

8.2 The Committee may adopt such valuation methodologies for outstanding Awards as it deems reasonable in the event of a cash or property settlement and, in the case of Options, may base such settlement solely upon the excess, if any, of the per share amount payable upon or in respect of such event over the Exercise Price or base price of the Award. With respect to any Award of an Incentive Stock Option, the Committee may make an adjustment that causes the Option to cease to qualify as an Incentive Stock Option without the consent of the affected Participant.

8.3 Upon any of the events set forth in Section 8.1, the Committee may take such action prior to such event to the extent that the Committee deems the action necessary to permit the Participant to realize the benefits intended to be conveyed with respect to the Awards in the same manner as is or will be available to stockholders of the Company generally.  In the case of any stock dividend, stock split or reverse stock split, if no action is taken by the Committee, the proportionate adjustments contemplated by Section 8.1(a) above shall nevertheless be made.

8.4 Change in Control Acceleration of Awards.  Unless otherwise determined by the Committee, upon a Change in Control of the Company or the Bank, each Stock Option then outstanding shall immediately become fully earned and exercisable and remain exercisable for its remaining term, and all Restricted Stock Awards then outstanding shall be deemed 100% earned and non-forfeitable and be free of restrictions.

8.5 Acceleration of Vesting.  The Committee shall at all times have the power to accelerate the exercise date of Options and the date that Restricted Stock Awards shall be earned and non-forfeitable with respect to previously granted Awards; provided that such action is not contrary to regulations of the Board of Governors of the Federal Reserve or other appropriate banking regulatory agency then in effect.

9. MISCELLANEOUS PROVISIONS.

9.1 Compliance with Laws.  This Plan, the granting and vesting of Awards under this Plan, the offer, issuance and delivery of shares of Common Stock, the acceptance of payment of money under this Plan or under Awards are subject to compliance with all applicable federal and state laws, rules and regulations (including, but not limited to, state and federal securities laws) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  The person acquiring any securities under this Plan will, if requested by the Company, provide such assurances and representations to the Company as may be deemed necessary or desirable to assure compliance with all applicable legal and accounting requirements.

 

14

 

  

9.2 Claims.  No person shall have any claim or rights to an Award (or additional Awards, as the case may be) under this Plan, subject to any express contractual rights to the contrary (set forth in a document other than this Plan).

9.3 No Employment or Service Contract.  Nothing contained in this Plan (or in any other documents under this Plan or in any Award Agreement) shall confer upon any Participant any right to continue in the employ or other service of the Company, constitute any contract or agreement of employment or other service or affect an Employee's status as an employee-at-will, nor interfere in any way with the right of the Company to change a Participant's compensation or other benefits, or terminate his or her employment or other service, with or without cause.  Nothing in this Section 9.3, however, is intended to adversely affect any express independent right of such Participant under a separate employment or service contract other than an Award Agreement.

9.4 Plan Not Funded.  Awards payable under this Plan shall be payable in shares of Common Stock or from the general assets of the Company. No Participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly provided otherwise) of the Company by reason of any Award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.  Notwithstanding the foregoing, the Company may establish a Trust in accordance with Section 10 with respect to Awards made in accordance with Section 6.5 herein.

9.5 Tax Matters; Tax Withholding.

		(a)	Tax Withholding.  Upon any exercise, vesting, or payment of any Award, the Company shall have the right, within its sole discretion, to:

		(i)	require the Participant (or the Participant's personal representative or Beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Company may be required to withhold with respect to such Award or payment; or

		(ii)	deduct from any amount otherwise payable in cash to the Participant (or the Participant's personal representative or Beneficiary, as the case may be) the minimum amount of any taxes which the Company may be required to withhold with respect to such cash payment, or

		(iii)	in any case where tax withholding is required in connection with the delivery of shares of Common Stock under this Plan, the Committee may, in its sole discretion, pursuant to such rules and subject to such conditions as the Committee may establish, reduce the number of Shares to be delivered to the Participant by the appropriate number of Shares, valued in a consistent manner at their Fair Market Value as necessary to satisfy the minimum applicable withholding obligation.  In no event shall the Shares withheld exceed the minimum whole number of Shares required for tax withholding under applicable law.

 

15

 

 

	
(b)

	
Required Notification of Section 83(b) Election.  In the event a Participant makes an election under Section 83(b) of the Code in connection with an Award, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code or other applicable provision.

	
(c)

	
Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code.  If any Participant shall make any disposition of shares of Common Stock delivered pursuant to the exercise of Incentive Stock Options under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof.

	
(d)

	
Section 409A Matters. If any Award would be considered "non-qualified deferred compensation" within the meaning of Section 409A of the Code ("Deferred Compensation"), the Committee reserves the absolute right (including the right to delegate such right) to unilaterally amend the Plan or the Award Agreement, without the consent of the Participant, to maintain exemption from, or to comply with, Section 409A of the Code.  Any amendment by the Committee to the Plan or an Award Agreement pursuant to this Section shall maintain, to the extent practicable, the original intent of the applicable provision without violating Section 409A of the Code. A Participant's acceptance of any Award under the Plan constitutes acknowledgement and consent to such rights of the Committee, without further consideration or action. Any discretionary authority retained by the Committee pursuant to the terms of this Plan or pursuant to an Award Agreement shall not be applicable to an Award which is determined to constitute Deferred Compensation, if such discretionary authority would contravene Section 409A of the Code. To the extent that any Award is determined to constitute Deferred Compensation (a "409A Award"), the Award shall be subject to such additional rules and requirements as specified by the Committee from time to time in order to comply with Section 409A of the Code. In this regard, if any amount under a 409A Award is payable upon a "separation from service" (within the meaning of Section 409A of the Code) to a Participant who is then considered a "specified employee" (within the meaning of Section 409A of the Code), then no such payment shall be made prior to the date that is the earlier of (i) the first day of the seventh month following the Participant's separation from service, or (ii) the Participant's death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A of the Code. Further, the settlement of any such Award may not be accelerated except to the extent permitted by Section 409A of the Code. To the extent that an Award is deemed to constitute a 409A Award, and the settlement of, or distribution of benefits thereunder of, such Award is to be triggered solely by a Change in Control, then with respect to such Award, a Change in Control shall be defined as required in conformity with the limitations under Section 409A of the Code, as in effect at the time of such Change in Control transaction.

		9.6	Effective Date, Termination and Suspension, Amendments.

		(a)	Effective Date and Termination.  This Plan shall be effective as of the first date of approval of the Plan by the requisite vote of the stockholders of the Company.  ("Approval Date").  Unless earlier terminated by the Board, this Plan shall terminate at the close of business on the day immediately prior to the tenth (10th) anniversary of the Approval Date. After the termination of this Plan either upon such stated expiration date or its earlier termination by the Board, no additional Awards may be granted under this Plan, but previously granted Awards 

 

16

 

 

			(and the authority of the Committee with respect thereto, including the authority to amend such Awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.

 

		(b)	Board and Committee Authorization; No Option Re-Pricing.

 

		(i)	
Amendments; No Re-Pricing.  Subject to applicable laws and regulations, the Board of Directors may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part; provided, however, except as contemplated in accordance with Section 8 of the Plan, and reductions of the Exercise Price approved by the Company's stockholders, neither the Committee nor the Board shall have the authority to make any adjustment or amendment that reduces or would have the effect of reducing the Exercise Price of a Stock Option previously granted under the Plan, whether through amendment, cancellation (including cancellation in exchange for a cash payment in excess of the Stock Option's in-the-money value) or replacement grants, or other means. Further, no amendment may (A) materially increase the benefits accruing to Participants under the Plan, (B) materially increase the aggregate number of securities which may be issued under the Plan, other than pursuant to Section 8, or (C) materially modify the requirements for participation in the Plan, unless the amendment under (A), (B) or (C) above is approved by a vote of the Company's stockholders. No Awards may be granted during any period that the Board of Directors suspends this Plan; and

 

		(ii)	Amendment to Conform to Law and Accounting Changes.  Notwithstanding any provision in this Plan or any Award Agreement to the contrary, the Committee may amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of (A) conforming the Plan or the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A of the Code), or (B) avoiding an accounting treatment resulting from an accounting pronouncement or interpretation thereof issued by the Securities and Exchange Commission or Financial Accounting Standards Board subsequent to the adoption of the Plan or the making of the Award affected thereby, which, in the sole discretion of the Committee, may materially and adversely affect the financial condition or results of operations of the Company. By accepting an Award under this Plan, each Participant agrees and consents to any amendment made pursuant to this Section 9.6(b) or Section 9.5(d) to any Award granted under the Plan without further consideration or action.

 

		(c)	Stockholder Approval. The Plan must be approved by a vote of the majority of the total votes eligible to be cast in person or by proxy by Company stockholders at a meeting of stockholders of the Company.  Thereafter, material amendments to the Plan, if any, shall be approved by a majority of the votes cast by stockholders of the Company at a meeting of stockholders held in the future not earlier than July 17, 2016 or such greater vote as may be required by law or requirements of any Exchange on which the Common Stock may be listed.

		(d)	Limitations on Amendments to Plan and Awards.  No amendment, suspension or termination of this Plan or change affecting any outstanding Award shall, without the written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of the Participant or obligations of the Company under any Award granted under this Plan prior to the effective date of such change. Changes, settlements and other actions 

 

 

17

 

  

			contemplated by Section 8 shall not be deemed to constitute changes or amendments for purposes of this Section 9.6.

 

		9.7	Governing Law; Compliance with Regulations; Construction; Severability.

		(a)	Construction.  This Plan, the Awards, all documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with, the laws of the State of Maryland to the extent not preempted by Federal law.

		(b)	Compliance with Regulations.  It is intended that this Plan and the Awards issued hereunder comply with all applicable regulatory requirements, including but not limited to 12 CFR § 239.63(a) as it applies to management stock benefit plans implemented within 12 months following a mutual-to-stock conversion. Notwithstanding anything to the contrary in this Plan or in any Award Agreement, the Plan and the Awards will be administered and interpreted in a manner consistent with all applicable regulatory requirements, including but not limited to those set forth at Section 6.4 and the following:

		(i)	Options and Restricted Stock Awards may not begin to vest earlier than one (1) year after the date of shareholder approve the Plan, and may not vest more rapidly than 20% per year;

		(ii)	accelerated vesting of Options and Restricted Stock Awards will not be permitted except for death, Disability or upon a Change in Control;

		(iii)	executive officers or directors must exercise or forfeit their Options in the event the Company becomes critically undercapitalized, is subject to enforcement action by the Board of Governors of the Federal Reserve System, or receives a capital directive; and

		(iv)	the grant and settlement of Awards under this Plan shall be conditioned upon and subject to compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. 1828(k), and the rules and regulations promulgated thereunder.

		(c)	Severability.  If a court of competent jurisdiction holds any provision of the Plan as invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.

		(d)	Section 16 of Exchange Act.  It is the intent of the Company that the Awards and transactions permitted by Awards be interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the Award, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. Notwithstanding the foregoing, the Company shall have no liability to any Participant for Section 16 consequences of Awards or events affecting Awards if an Award or event does not so qualify.

		(e)	Compliance with Law.  Shares of Common Stock shall not be issued with respect to any Award granted under the Plan unless the issuance and delivery of such Shares shall comply with all relevant provisions of applicable law, including, without limitation, the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, any applicable state securities laws and the requirements of any Exchange upon which the Shares may then be listed.

 

 

18

 

 

		(f)	Necessary Approvals.  The inability of the Company to obtain any necessary authorizations, approvals or letters of non-objection from any regulatory body or authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any shares of Common Stock issuable hereunder shall relieve the Company of any liability with respect to the non-issuance or sale of such Shares.

		(g)	Representations and Warranties of Participants.  As a condition to the exercise of any Option or the delivery of Shares in accordance with an Award, the Company may require the person exercising the Option or receiving delivery of the Shares to make such representations and warranties as may be necessary to assure the availability of an exemption from the registration requirements of federal or state securities law.

		(h)	Termination for Cause.  Notwithstanding anything herein to the contrary, upon the termination of employment or Service of a Participant by the Company or an Affiliate for Cause as determined by the Board of Directors or the Committee, all Awards held by such Participant which have not yet been delivered and deemed earned and non-forfeitable shall be forfeited by such Participant as of the date of such Termination of Service.

		(i)	Cash Payment in Lieu of Delivery of Shares.  Upon the exercise of an Option, the Committee, in its sole and absolute discretion, may make a cash payment to the Participant, in whole or in part, in lieu of the delivery of shares of Common Stock.  Such cash payment to be paid in lieu of delivery of Common Stock shall be equal to the difference between the Fair Market Value of the Common Stock on the date of the Option exercise and the exercise price per share of the Option.  Such cash payment shall be in exchange for the cancellation of such Option.  Such cash payment shall not be made in the event that such transaction would result in liability to the Participant or the Company under Section 16(b) of the Exchange Act and regulations promulgated thereunder, or subject the Participant to additional tax liabilities related to such cash payments pursuant to Section 409A of the Code.  The Committee may, in its sole discretion, determine that upon a Change in Control of the Company each outstanding Stock Option shall be cancelled in exchange for a cash payment equal to the difference between the Fair Market Value of the shares of Common Stock on the date of the Stock Option cancellation and the Exercise Price per share of the Stock Option.

		(j)	Forfeiture of Awards in Certain Circumstances.  In addition to any forfeiture or reimbursement conditions the Committee may impose upon an Award, a Participant may be required to forfeit an Award, or reimburse the Company for the value of a prior Award, by virtue of the requirement of Section 304 of the Sarbanes-Oxley Act of 2002 (or by virtue of any other applicable statutory or regulatory requirement), but only to the extent that such forfeiture or reimbursement is required by such statutory or regulatory provision. In addition, Awards granted in accordance with the Plan shall be subject to any clawback or recoupment policies adopted by the Board from time to time, even if adopted after the date of grant of such Awards.  Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration.

9.8 Captions.  Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.

 

19

 

 

9.9 Non-Exclusivity of Plan.  Nothing in this Plan shall limit or be deemed to limit the authority of the Board of Directors or the Committee to grant Awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.

9.10 Limitation on Liability; Indemnification.  No Director, member of the Committee or the Trustee shall be liable for any determination made in good faith with respect to the Plan, the Trust or any Awards granted.  If a Director, member of the Committee or the Trustee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by any reason of anything done or not done by him or her in such capacity under or with respect to the Plan, the Company shall indemnify such person against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in the best interests of the Company and its Affiliates and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

10. TRUST ARRANGEMENT.

10.1 Activities of Trustee.  The Trustee shall receive, hold, administer, invest and make distributions and disbursements from the Trust in accordance with the provisions of the Plan and the applicable directions, rules, regulations, procedures and policies established by the Committee pursuant to the Plan.

10.2 Management of Trust.  It is the intention of this Plan that the Trustee shall have complete authority and discretion with respect to the management, control and investment of the Trust, and that the Trustee shall invest all assets of the Trust, except those attributable to cash dividends paid with respect to unearned and unawarded Restricted Stock Awards, in Common Stock to the fullest extent practicable, except to the extent that the Trustee determines that the holding of monies in cash or cash equivalents is necessary to meet the obligations of the Trust.  In performing their duties, the Trustee shall have the power to do all things and execute such instruments as may be deemed necessary or proper, including the following powers:

		(a)	To invest up to one hundred percent (100%) of all Trust assets in the Common Stock without regard to any law now or hereafter in force limiting investments for Trustee or other fiduciaries.  The investment authorized herein may constitute the only investment of the Trust, and in making such investment, the Trustee is authorized to purchase Common Stock from the Parent or from any other source, and such Common Stock so purchased may be outstanding, newly issued, or treasury shares.

		(b)	To invest any Trust assets not otherwise invested in accordance with (a) above in such deposit accounts, and certificates of deposit (including those issued by the Bank), obligations of the United States government or its agencies or such other investments as shall be considered the equivalent of cash.

		(c)	To sell, exchange or otherwise dispose of any property at any time held or acquired by the Trust.

		(d)	To cause stocks, bonds or other securities to be registered in the name of a nominee, without the addition of words indicating that such security is an asset of the Trust (but accurate records shall be maintained showing that such security is an asset of the Trust).

		(e)	To hold cash without interest in such amounts as may be in the opinion of the Trustee reasonable for the proper operation of the Plan and Trust.

 

 

20

 

 

 

		(f)	To employ brokers, agents, custodians, consultants and accountants.

		(g)	To hire counsel to render advice with respect to their rights, duties and obligations hereunder, and such other legal services or representation as they may deem desirable.

		(h)	To hold funds and securities representing the amounts to be distributed to a Participant or his Beneficiary as a consequence of a dispute as to the disposition thereof, whether in a segregated account or held in common with other assets.

		(i)	As may be directed by the Committee or the Board from time to time, the Trustee shall pay to the Company any earnings of the Trust attributable to unawarded or forfeited Restricted Stock Awards.

Notwithstanding anything herein contained to the contrary, the Trustee shall not be required to make any inventory, appraisal or settlement or report to any court, or to secure any order of a court for the exercise of any power herein contained, or to maintain bond.

10.3 Records and Accounts.  The Trustee shall maintain accurate and detailed records and accounts of all transactions of the Trust, which shall be available at all reasonable times for inspection by any legally entitled person or entity to the extent required by applicable law, or any other person determined by the Committee.

10.4 Earnings.  All earnings, gains and losses with respect to Trust assets shall be allocated in accordance with a reasonable procedure adopted by the Committee, to bookkeeping accounts for Participants or to the general account of the Trust, depending on the nature and allocation of the assets generating such earnings, gains and losses.  In particular, any earnings on cash dividends received with respect to Restricted Stock Awards shall be allocated to accounts for Participants, except to the extent that such cash dividends are distributed to Participants, if such Shares are the subject of outstanding Restricted Stock Awards, or, otherwise held by the Trust or returned to the Company.

10.5 Expenses.  All costs and expenses incurred in the operation and administration of this Plan, including those incurred by the Trustee, shall be paid by the Company or, if not so paid, then paid from the cash assets of the Trust.

10.6 Indemnification.  Subject to the requirements and limitations of applicable laws and regulations, the Company shall indemnify, defend and hold the Trustee harmless against all claims, expenses and liabilities arising out of or related to the exercise of the Trustee's powers and the discharge of their duties hereunder, unless the same shall be due to their gross negligence or willful misconduct.

10.7 Term of Trust.  The Trust, if established, shall remain in effect until the earlier of (i) termination by the Committee, (ii) the distribution of all assets of the Trust, or (iii) 21 years from the Effective Date.  Termination of the Trust shall not effect any Restricted Stock Award previously granted, and such Restricted Stock Award shall remain valid and in effect until they have been earned and paid, or by their terms expire or are forfeited.

10.8 Tax Status of Trust.  It is intended that the Trust established hereby shall be treated as a grantor trust of the Company under the provisions of Section 671 et seq. of the Code.

21

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00261-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00261-of-00352.parquet"}]]