Document:

Exhibit 10.3

Grant No. ______

AVADEL PHARMACEUTICALS PLC

STOCK OPTION AGREEMENT

UNDER THE 2017 OMNIBUS INCENTIVE COMPENSATION PLAN

 

This Stock Option Agreement (this "Option Agreement") is made and entered into as of the date of grant set forth below (the "Date of Grant") by and between Avadel Pharmaceuticals plc, an Irish public limited company (the "Company"), and the optionee named below (the "Participant"). Capitalized terms not defined herein shall have the meanings ascribed to them in the Avadel Pharmaceuticals plc 2017 Omnibus Incentive Compensation Plan (the "Plan"). Where the context permits, references to the Company shall include any successor to the Company.

Name of Participant: ________________

Number of Shares Subject to Option: ________

Exercise Price Per Share: ______ (which may not be less than the Fair Market Value of a Share on the Date of Grant)

Date of Grant: _______

Expiration Date:                                         11:59 p.m. (EST) on ___________ (the day immediately before the 10th anniversary of the Date of Grant

	Vesting Dates:	Option vests with respect to _____ (__/__) of the Shares subject to the Option (rounded down to the nearest whole Share) on the first, second, third [and fourth] anniversaries of the Date of Grant and with respect to the remaining Shares on the [fourth or fifth] anniversary of the Date of Grant, provided the Participant remains in the continuous employment or service of the Company and/or its Affiliates from the Date of Grant through the applicable vesting date(s).

Classification of Option:  [Non-Qualified Stock Options] [Incentive Stock Options except that (i) Incentive Stock Options can only be granted to an employee of the Company or any Subsidiary Corporation, and (ii) if the aggregate Fair Market Value of the Shares (determined on the Date of Grant) with respect to the Options and any Prior Grants which are exercisable for the first time during the same calendar year would exceed the $100,000 Limit applicable to Incentive Stock Options, the portion of the Options and, if applicable, the Prior Grants, in excess of the $100,000 Limit, shall be treated as Non-Qualified Stock Options.]

1.  Number of Shares.  The Company hereby grants to the Participant an option (the "Option") to purchase the total number of shares of the Company's Ordinary Shares set forth above as the "Number of Shares Subject to Option" (the "Option Shares") at the Exercise Price Per Share set forth above (the "Exercise Price"), subject to all of the terms and conditions of this Option Agreement and the Plan.

 

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2.  Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the Option and this Option Agreement shall be subject to all of the terms and conditions of the Plan. In the event of any conflict between the provisions of this Option Agreement and the provisions of the Plan, the provisions of the Plan shall govern.

3.  Option Term. The term of the Option and of this Option Agreement (the "Option Term") shall commence on the Date of Grant set forth above and, unless previously terminated pursuant to Paragraph 4 hereof, shall terminate upon the Expiration Date set forth above. As of the Expiration Date, all rights of the Participant hereunder shall terminate.

4.  Termination of Affiliation.

(a)     Termination of Affiliation for Cause. Upon the Participant's Termination of Affiliation for Cause, the  outstanding Options, whether or not exercisable as of the date of such Termination of Affiliation shall terminate upon the delivery of notice of the Participant's Termination of Affiliation for Cause.

(b)     Termination of Affiliation on Account of Death. Upon the Participant's Termination of Affiliation on account of death, all of the Participant's unvested outstanding Options as of the Termination of Affiliation shall immediately vest and become exercisable. The Options shall remain exercisable until the earlier of the Expiration Date or one (1) year from and including the date of the Participant's death (and shall thereafter terminate).

(c)     Termination of Affiliation on Account of Disability or Voluntary Retirement with Consent of the Company. If the Participant's Termination of Affiliation occurs on account of voluntarily retirement with the consent of the Company or due to the Participant's Disability, the Participant's unvested outstanding Options as of the date of such Termination of Affiliation shall continue to vest in accordance with the original vesting schedule set forth above. The Options to the extent vested shall remain exercisable until the earlier of the Expiration Date or  one (1) year from and including the later to occur of (i) the date such entire Option becomes exercisable in accordance with the vesting schedule or (ii) the date of Termination of Affiliation (and shall thereafter terminate).

(d)     Termination of Affiliation by the Company without Cause or by the Participant for Good Reason. If the Participant's Termination of Affiliation occurs  by the Company or its Affiliates without Cause or by the Participant for "good reason" (as defined under any employment agreement with the Company or any Affiliate to which the Participant is a party, as modified below, if any), the portion of the outstanding Options that is exercisable as of the date of such termination of service shall remain exercisable until the earlier of the Expiration Date or one (1) year from and including the date of Termination of Affiliation (and shall thereafter terminate). Any portion of outstanding Options that is not exercisable as of the date of such Termination of Affiliation shall terminate upon the date of Termination of Affiliation. For any Participant who is a party to an employment agreement with the Company or a Subsidiary, "good reason" shall also include the Participant's termination of his or her employment within ninety (90) days following the expiration of the employment term of the Participant's employment agreement under circumstances that would have constituted good reason had such termination occurred during the employment term.

 

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(e)     Termination of Affiliation for any Other Reason. Upon the Participant's Termination of Affiliation for any reason other than the reasons enumerated in Subparagraphs (a) through (d) above, the portion of the outstanding Options that are exercisable as of the date of such Termination of Affiliation shall remain exercisable until the earlier of the Expiration Date or sixty (60) days from and including the date of Termination of Affiliation (and shall thereafter terminate). Any portion of the outstanding Options that are not exercisable as of the date of such Termination of Affiliation shall terminate upon the date of Termination of Affiliation.

5.  Vesting; Exercise.

(a)     Except as otherwise provided in Paragraph 4 hereof, the Option shall become exercisable with respect to the number of Option Shares specified in accordance with the Vesting Dates set forth above, except that no single exercise of Options may be for less than 100 Option Shares, unless at the time of the exercise, the maximum number of Option Shares available for purchase under the Options is less than 100 Option Shares, in which event the Options must be exercised, if at all, for all of the remaining Options.  In no event are the Options to be exercised for a fractional Option Share. Once exercisable, the Option shall continue to be exercisable at any time or times prior to the Expiration Date or the time set forth in Paragraph 4 above, subject to the provisions hereof and of the Plan.

(b)     Notwithstanding any other provision hereof, no Option may be exercised after the Expiration Date and no Option may be exercised at a time when such exercise and/or the issuance of Shares pursuant to such exercise would be in breach of Applicable Law or, in the opinion of the Committee, would or may result in the Eligible Person and/or any other parties being obligated under the Irish Takeover Rules to make a general offer to all shareholders of the Company.  Where the exercise of an Option would or might result in the Eligible Person and/or any other parties being obligated under the Irish Takeover Rules to make a general offer to all shareholders of the Company, the Company may agree with the Participant that, as long as the Participant's aggregate shareholdings in the Company, in addition to that of any party with whom the Participant is acting in concert, are equal to or greater than 30%, his Option may be exercised provided that his Option Shares shall have no voting rights at a meeting of the shareholders of the Company.

(c)     To exercise the Options, the Participant shall give written notice to the Company or its designee stating the number of Option Shares for which the Options are being exercised and the intended manner of payment.  The date of this notice shall be the exercise date.  The notice must be accompanied by payment in full of the aggregate Exercise Price, either by cash, check, cash equivalent or wire transfer or such other medium of payment as the Committee may permit.  If the Committee so permits, payment in full or part may also be made (i) by surrendering (actually or by attestation) Shares that the Participant already owns; (ii) by a cashless exercise through a broker; (iii) by means of a "net exercise" procedure with respect to Shares to be acquired upon exercise of the Options or (iv) by such other medium of payment as the Committee in its discretion may authorize each such share (with the Shares to be valued at the Fair Market Value of a Share on the date of exercise).  If the payment is in the form of Shares the Participant already owns, then the certificate or certificates representing those Shares must be duly executed in blank by the Participant or must be accompanied by a stock power duly executed in blank suitable for purposes of transferring those Shares to the Company. Fractional Shares will not be accepted in payment of the exercise price of the Options.  The Company shall not issue the Option Shares until full payment for them has been made.  

 

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(d)     As soon as practicable upon the Company's receipt of the Participant's notice of exercise and payment, the Company shall direct the due issuance of the Option Shares so purchased.  For the avoidance of doubt, it is the intent of the Company and the Participant that, whenever the Company's ADSs (and not Ordinary Shares) are registered for public trading on Nasdaq or any other principal trading market for the Company's equity securities, the Ordinary Shares issued upon exercise of this Option will be delivered to the depositary under the Company's ADS program and such depositary will be instructed to issue to the Participant ADSs representing such Ordinary Shares (or, at the Company's election, ADSs held by the Company, in its name, may be transferred on the books of the depositary to the account beneficially owned by the Participant).

(e)     As a further condition precedent to the exercise of the Options in whole or in part, the Participant shall comply with all regulations and the requirements of any regulatory authority having control of, or supervision over, the issuance of the Shares and accordingly shall execute any documents that the Company, in its sole discretion, deems necessary or advisable to effect such compliance.

(f)     In the case of the Participant's death, the Options, to the extent exercisable, may be exercised by the executor or administrator of the Participant's estate or by any person or persons who have acquired the Options directly from the Participant by bequest or inheritance.

6.  Change in Control.

(a)     Subject to Section 6(b) hereof, in the event of a Change in Control (as such term is defined in Section 2.11 of the Plan):

(i)  If the Option is assumed or substituted (within the meaning of the Plan) in connection with such Change in Control, and the Participant incurs a Termination of Affiliation by the Company or its Affiliates without Cause or by the Participant for good reason (as defined under any employment agreement with the Company or any Affiliate to which the Participant is a party, if any, as modified by Section 4(d) hereof) during the 24-month period following such Change in Control, then the Options shall vest and become fully exercisable on the date of such Termination of Affiliation and shall remain exercisable until the earlier of the Expiration Date or one (1) year from and including the date of such Termination of Affiliation (and shall thereafter terminate).

(ii)  if the Option is not assumed or substituted in connection with such Change in Control, then the Options shall immediately vest and become fully exercisable on the occurrence of the Change in Control.

In connection with a Change in Control, the Committee and the Board of Directors of the Company reserve the authority to accelerate vesting and settlement of outstanding awards and to terminate and pay outstanding awards on consummation of the Change in Control as set forth in the Plan.

 

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(b)     The rights provided in Section 6(a) hereof shall be in addition to, and not in lieu of, any rights (including without limitation any rights that would accelerate any unvested stock options or other unvested equity rights upon a Change in Control or similar event) provided in any employment agreement between the Participant and the Company or any of its Affiliates.

7.  Non-Transferability of Options.  The Participant shall not assign or transfer the Options, other than by will or the laws of descent and distribution. During the Participant's lifetime, only the Participant (or, in the event of legal incapacity or incompetency, the Participant's guardian or legal representative) or a transferee receiving such Options pursuant to a QDRO, may exercise the Options. Notwithstanding the foregoing, however, the Participant, with the approval of the Committee, may transfer the Options for no consideration to or for the benefit of the Participant's Permitted Transferees, subject to such limits as the Committee may establish, and the transferee(s) shall remain subject to all the terms and conditions applicable to the Options prior to transfer.  No right or interest of the Participant or any transferee in the Options shall be subject to any lien or any obligation or liability of the Participant or any transferee.

8.  Rights as Shareholder. Neither the Participant nor any executor, administrator, distributee or legatee of the Participant's estate will have any of the rights or privileges of a shareholder of the Company in respect of any of the Option Shares unless and until those Option Shares have been fully paid and the name of the Participant (or of the Participant's personal representative, administrator, distributee or legatee of the Participant's estate) or any permitted transferee, has been entered as the shareholder of record on the Company's books.  No dividend rights or Dividend Equivalents are granted in conjunction with the Options.

9.  Withholding of Taxes.  The Company's obligation to deliver the Option Shares upon exercise of the Options is subject to the Participant's satisfaction of any applicable national (U.S. or other), state and local income and employment tax and withholding requirements in a manner and form satisfactory to the Company.  In accordance with procedures that the Committee may establish, the Committee, to the extent applicable law permits, may allow the Participant to pay any such amounts (but only for the minimum required withholding unless additional withholdings will not result in adverse financial accounting consequences to the Company (i) by surrendering (actual or by attestation) Shares that the Participant already owns; (ii) by a cashless exercise though a broker, (iii) by means of a "net exercise" procedure with respect to Shares to be acquired upon exercise of the Options or (iv) by such other medium of payment as the Committee in its discretion shall authorize.  Any fractional Share amount and any additional withholding not paid by the withholding or surrender of Shares must be paid in cash.

10.  Authority of the Committee. The Committee shall have full authority to interpret and construe the terms of the Plan and this Option Agreement, except as expressly set forth in the Plan. The determination of the Committee as to any such matter of interpretation or construction shall be final, binding and conclusive.

 

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11.  Options Subject to Claw-Back Policies. Notwithstanding any provisions herein to the contrary, all Options granted hereunder and any Shares acquired thereunder shall be subject to the terms of any recoupment policy currently in effect or subsequently adopted by the Board to implement Section 304 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") or Section 10D of the Exchange Act (or with any amendment or modification of such recoupment policy adopted by the Board) to the extent that such Options (whether or not previously exercised or settled) or the value of such Options or any Shares delivered thereunder are required to be returned to the Company pursuant to the terms of such recoupment policy.

12.  Governing Law. This Option Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choices of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

13.  Binding on Successors. The terms of this Option Agreement shall be binding upon the Participant and upon the Participant's heirs, executors, administrators, personal representatives, transferees, assignees and successors in interest, and upon the Company and its successors and assignees, subject to the terms of the Plan.

14.  No Assignment. Notwithstanding anything to the contrary in this Option Agreement, neither this Option Agreement nor any rights granted herein shall be assignable by the Participant.

15.  Necessary Acts. The Participant hereby agrees to perform all acts, and to execute and deliver any documents, that may be reasonably necessary to carry out the provisions of this Option Agreement, including but not limited to all acts and documents related to compliance with federal and/or state securities and/or tax laws and applicable Irish law.

16.  Entire Option Agreement. This Option Agreement and the Plan contain the entire agreement and understanding among the parties as to the subject matter hereof.

17.  Headings. Headings are used solely for the convenience of the parties and shall not be deemed to be a limitation upon or descriptive of the contents of any such Paragraph.

18.  Counterparts. This Option Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

 

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19.  Notices. All notices and other communications under this Option Agreement shall be in writing and shall be given by first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing to the respective parties named below:

		If to the Company:	Avadel Pharmaceuticals plc

c/o Avadel US Holdings, Inc.

16640 Chesterfield Grove Road, Suite 200

Chesterfield, MO 63005

Attention: Phillandas T. Thompson

If to the Participant:           At the address on file with the Company.

Either party hereto may change such party's address for notices by notice duly given pursuant hereto.

20.  Amendment. No amendment or modification hereof shall be valid unless it shall be in writing and signed by all the parties hereto.

21.  Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Option Agreement. The Participant has read and understands the terms and provision thereof, and accepts the Option subject to all the terms and conditions of the Plan and this Option Agreement.

22.  No Compensation for Loss of Rights. The Participant hereby acknowledges that under no circumstances will s/he, on ceasing to be an employee or director of the Company and its Subsidiaries, be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under the Plan that s/he might otherwise have enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or other breach of contract or by way of compensation for loss of office or otherwise howsoever.  By participating in the Plan, a Participant waives all rights to compensation for any loss in relation to the Plan, including: any loss of office or employment; any loss or reduction of any rights or expectations under the Plan in any circumstances or for any reason (including lawful or unlawful termination of the Participant's employment); any exercise of a discretion or a decision taken in relation to an Option or to the Plan, or any failure to exercise a discretion or take a decision; or the operation, suspension, termination or amendment of the Plan.

23.  Severability. All the terms and provisions of this Option Agreement are distinct and severable, and if any term or provision is held unenforceable, illegal or void in whole or in part by any court, regulatory authority or other competent authority it shall to that extent be deemed not to form part of this Option Agreement, and the enforceability, legality and validity of the remainder of this Option Agreement will not be affected; if any invalid, unenforceable or illegal provision would be valid, enforceable or legal if some part of it were deleted, the provision shall apply with whatever modification is necessary to make it valid, enforceable and legal.

 

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24.  Data Protection. The Participant hereby acknowledges and consents to the Company and any Subsidiary, retaining, sharing and exchanging his/her information held in order to administer and operate the Plan (including personal details, data relating to participation, salary, taxation and employment and sensitive personal data, e.g., data relating to physical or mental health, criminal conviction or the alleged commission of offences) (the "Information") and providing the Company's and/or the Subsidiary's agents and/or third parties with the Information for the administration and operation of the Plan and the Participant further accepts that this may involve the Information being sent to future purchasers of the Company or any business in which the Participant works and/or to a country outside the country in which the Participant (including outside the European Economic Area) provides services including to a country which may not have the same level of data protection laws as his/her home country. The Participant acknowledges that s/he has the right to request a list of the names and addresses of any potential recipients of the Information and to review and correct the Information by contacting his/her local human resources representative. The Participant acknowledges that the collection, processing and transfer of the Information is important to Plan administration and that failure to consent to same may prohibit participation in the Plan.

25.  No Special Employment Rights. No provision in this Option Agreement will be deemed to grant to the Participant any right with respect to the Participant's continued employment with, or other engagement by, the Company or any of its Affiliates or interfere in any way with the ability of the Company or any of its Affiliates at any time to terminate the Participant's employment or other engagement or to increase or decrease the Participant's compensation from the rate in existence at the Date of Grant.  The grant of an Option is voluntary and occasional and does not create any contractual or other right to receive future Option grant or to be granted an Option on any particular terms, including the number of shares to which the Option relates, or benefits in lieu of an Option, even if Options have been granted in the past.  Nothing in this Option Agreement or its operation forms part of the terms of employment of a Participant and the rights and obligations arising from a Participant's employment with the Company or any of its Affiliates are separate from, and are not affected by, his participation in the Plan.  The grant of an Option shall in no way affect the Company's right to adjust, reclassify, reorganise or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

26.  Section 409A.  It is intended that the Options be exempt from the requirements applicable to nonqualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (the "Code").  For purposes of this Option Agreement, any action taken with respect to the Options shall be undertaken in a manner that will not negatively affect the status of the Options as exempt from treatment as deferred compensation subject to Section 409A of the Code unless such action otherwise complies with Section 409A of the Code to the extent necessary to avoid noncompliance.  Notwithstanding the foregoing, neither the Company, any Affiliate nor their employees, officers, directors or agents will have any liability to the Participant or any transferee if the Options otherwise fail to be exempt from, or comply with, Section 409A of the Code.

 

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27.  Additional Matters. This Option Agreement is intended to comply with the applicable laws of any country or jurisdiction where Options are granted under the Plan, and all provisions hereof shall be construed in a manner to so comply. The following provisions apply to Participants providing services in the country noted:

 Ireland:

 

Section 4(c) above shall be deleted in its entirety and replaced with the following language:

 

Termination of Service on Account of Disability. If the Participant's Termination of Affiliation occurs due to the Participant's Disability, the Participant's unvested Options as of the date of such Termination of Affiliation shall continue to vest in accordance with the original vesting schedule set forth above. The Options to the extent vested shall remain exercisable until the earlier of the Expiration Date or  one (1) year from and including the later of (i) the date such entire Option becomes exercisable in accordance with the vesting schedule and (ii) the date of Termination of Affiliation (and shall thereafter terminate).

 

Section 13 above shall be amended to delete the words "transferees, assignees" therefrom.

 

Section 14 above shall be deleted in its entirety and replaced with the following language:

 

No Assignment or Transfer. Notwithstanding anything to the contrary in this Option Agreement, neither this Option Agreement nor any rights granted herein shall be assignable by the Participant. Neither this Option Agreement nor any rights granted herein shall be transferable by the Participant in any circumstances, except on the death of the Participant.

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IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of the date set forth above.

	 	
 

AVADEL PHARMACEUTICALS PLC

	 	
 

By:_________________________________

Name:

Title:

	 	
 

 

PARTICIPANT

	 	
 

Signature: ___________________________

 

Print Name: _________________________

 

	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Stock Option Agreement]Exhibit 4.1

 

BANK OF MARIN BANCORP

 

2017 Equity Plan

 

THIS 2017 EQUITY PLAN is hereby adopted by the Board of Directors of Bank of Marin Bancorp, a California corporation (the “Company”) on March 17, 2017, subject to approval by the shareholders of the Company.

 

ARTICLE I

 

PURPOSE AND EFFECTIVE DATE

 

1.1                                           Purpose. The purpose of the Plan is to provide financial incentives for selected Employees, Advisors and Non-Employee Directors, thereby promoting the long-term growth and financial success of the Company by (a) attracting and retaining Employees, Advisors and Non-Employee Directors of outstanding ability, (b) strengthening the Company’s capability to develop, maintain, and direct a competent management team, (c) providing an effective means for selected Employees, Advisors and Non-Employee Directors to acquire and maintain ownership of Company Stock, (d) motivating Employees to achieve long-range Performance Goals and objectives, and (e) providing incentive compensation opportunities competitive with peer financial institution holding companies.

 

1.2                                           Effective Date and Expiration of Plan. The Plan will be effective upon its adoption by the Board and approval by affirmative vote of the Shareholders required under applicable rules and procedures, including those prescribed under Sections 162(m) and 422 of the Code and applicable NASDAQ rules (the “Effective Date”).  Unless earlier terminated by the Board pursuant to Section 12.2, the Plan shall terminate on the tenth anniversary of its Effective Date.  No Award shall be made pursuant to the Plan after its termination date, but Awards made prior to the termination date may extend beyond that date.  Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years after the earlier of (a) the adoption of this Plan by the Board or (b) the Effective Date.

 

ARTICLE II

 

DEFINITIONS

 

The following words and phrases, as used in the Plan, shall have the meanings set forth in this section.  When applying these definitions and any other word, term or phrase used in this Plan, the form of any word, term or phrase will include any and all of its other forms.

 

2.1                                           Advisor means any advisor who renders bona fide services to the Company and/or one or more of the Subsidiaries as an advisory or marketing board member and who is neither an Employee nor a director of the Company or any Subsidiary; provided that the services rendered are not in connection with the offer or sale of securities in a capital-raising transaction and do 

 

 

not directly or indirectly promote or maintain a market for the Company’s securities.

 

2.2                                           Award means, individually or collectively, any Option, SAR, Restricted Stock, Restricted Performance Stock, or unrestricted Company Stock Award.  Any Award or any Company Stock issued pursuant to an Award shall be subject to the anti-hedging and pledging provisions of the Company’s Insider Trading Policy.

 

2.3                                           Award Agreement means the written agreement between the Company and each Participant that sets forth the terms and conditions of each Award.  If there is a conflict between the terms of the Plan and the Award Agreement, the terms of the Plan will govern.

 

2.4                                           Board means the Board of Directors of the Company.

 

2.5                                           Cause with respect to any Participant, means: (a) Gross negligence or gross neglect of duties; or (b) Commission of a felony or of a gross misdemeanor involving moral turpitude in connection with the Participant’s employment or service, as the case may be, with the Company or any of its Subsidiaries; or (c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy, or Subsidiary policy, committed in connection with the Participant’s employment or provision of services, as the case may be; or (d) Issuance of an order for removal of the Participant by any agency which regulates the activities of the Company or any of its Subsidiaries.  Any determination of “Cause” under this Plan shall be made by the Committee in its sole discretion.

 

2.6                                           Code means the Internal Revenue Code of 1986, as amended or superseded after the Effective Date, and any applicable rulings or regulations issued thereunder.

 

2.7                                           Committee means the Compensation Committee of the Board or a subcommittee thereof.

 

2.8                                           Company means Bank of Marin Bancorp, a California corporation.

 

2.9                                           Company Director means a non-employee member of the Board.

 

2.10                                    Company Stock means the Company’s common stock, without par value.

 

2.11                                    Disability means: (a) with respect to an Incentive Stock Option, “disabled” within the meaning of Section 22(e)(3) of the Code; (b) with respect to any Award subject to Section 409A of the Code, “disabled” as defined under Section 409A of the Code; and (c) with respect to any Award not described in subsections (a) and (b) of this Section 2.11, a long-term disability as defined by the Company’s or Subsidiary’s group disability insurance plan, or any successor plan that is applicable to such Participant at the time of his or her Termination.

 

2.12                                    “DRO” shall mean a valid domestic relations order under applicable state law, acceptable to the Company.

 

 

2.13                                    Effective Date means the date on which the Plan is approved by the Shareholders of the Company, as provided in Section 1.2.

 

2.14                                    Employee means any person who, on any applicable date, is a common law employee of the Company or any Subsidiary.  A worker who is classified as other than a common law employee but who is subsequently reclassified as a common law employee of the Company or any Subsidiary for any reason and on any basis will be treated as a common law employee only from the date that reclassification occurs and will not retroactively be reclassified as an Employee for any purpose of this Plan.

 

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

 

2.16                                    Exercise Price means the amount, if any, that a Participant must pay to exercise an Award.

 

2.17                                    Fair Market Value means, as of any specified date, an amount equal to the reported closing price on the specified date of a share of Company Stock on NASDAQ or any other established stock exchange or quotation system on which the Company Stock is then listed or traded or, if no shares of Company Stock have been traded on such date, the closing price of a share of Company Stock on NASDAQ or such other established stock exchange or quotation system as reported on the first day prior thereto on which shares of Company Stock were so traded. If the preceding sentence does not apply, Fair Market Value shall be determined in good faith by the Committee using other reasonable means.

 

2.18                                    Fiscal Year means the fiscal year of the Company, which is the 52- or 53-week period ending on December 31.

 

2.19                                    Incentive Stock Option means an option within the meaning of Section 422 of the Code and which contains such provisions as are necessary to comply with such section.  Any Option granted hereunder that is intended as an Incentive Stock Option that fails to meet the applicable legal requirements thereof initially or upon amendment shall not be nullified because of such failure and shall be deemed a Nonqualified Stock Option.

 

2.20                                    Non-Employee Director means either a Company Director or a Subsidiary Director who is not also an employee.

 

2.21                                    Nonqualified Stock Option means an option granted under the Plan other than an Incentive Stock Option.

 

2.22                                    Option means either a Nonqualified Stock Option or an Incentive Stock Option to purchase Company Stock.

 

2.23                                    Option Price means the price at which Company Stock may be purchased under an Option.

 

2.24                                    Participant means an Employee, an Advisor or a Non-Employee Director to whom an Award has been made under the Plan.

 

 

2.25                                    Performance Goals means goals established by the Committee pursuant to Section 4.5.

 

2.26                                    Performance Period means a period of time over which performance is measured.

 

2.27                                    Personal Representative means the person or persons who, upon the death, disability, or incompetency of a Participant, shall have acquired, by will or by the laws of descent and distribution or by other legal proceedings, the right to exercise an Option or SAR or the right to any Restricted Stock Award theretofore granted or made to such Participant.

 

2.28                                    Plan means the Bank of Marin Bancorp 2017 Equity Plan.

 

2.29                                    Predecessor Plan means the Company’s 2007 Equity Plan.

 

2.30                                    Restricted Performance Stock means Company Stock subject to Performance Goals.

 

2.31                                    Restricted Stock means Company Stock subject to the terms and conditions provided in Article VI and including Restricted Performance Stock.

 

2.32                                    Restricted Stock Award means an Award granted under Article VI.

 

2.33                                    Restriction Period means a period of time determined under Section 6.2 during which Restricted Stock is subject to the terms and conditions provided in Section 6.3.

 

2.34                                    SAR means a stock appreciation right granted under Section 5.7.

 

2.35                                    Shareholders mean the shareholders of the Company.

 

2.36                                    Subsidiary means a corporation or other entity the majority of the voting stock of which is owned directly or indirectly by the Company including Bank of Marin.

 

2.37                                    Subsidiary Director means a non-employee member of the board or directors of a Subsidiary who is not also a Company Director.

 

2.38                                    Termination means (i) in the case of an Employee, a cessation of the employee-employer relationship between the Employee and the Company or a Subsidiary for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability, retirement, but excluding any such termination where there is a simultaneous commencement or continuation of status as an Advisor or as a Director; (ii) in the case of an Advisor, a cessation of the service relationship between the Advisor and the Company or a Subsidiary for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability, but excluding any such termination where there is a simultaneous commencement or continuation of status as an Employee or as a Director; and (iii) in the case of a Director, a cessation of the Director’s service on the Board for any reason, including, but not by way of limitation, a termination by resignation, death, Disability, retirement or non-reelection to the Board,

 

 

but excluding any such termination where there is a simultaneous commencement or continuation of status as an Employee or as an Advisor.

 

ARTICLE III

 

ADMINISTRATION

 

3.1                               Committee to Administer. The Plan shall be administered by the Committee, in accordance with its Charter, as adopted from time to time by the Board; provided, however, that only the Board has the authority to grant Awards to Company Directors.

 

3.2                               Powers of Committee.

 

(a)         The Committee and the Board shall have full power and authority to interpret and administer the Plan and Award Agreements and to establish and amend rules and regulations for its administration. Any action or decision by the Board or the Committee shall be final, binding and conclusive with respect to the interpretation of the Plan and any Award made under it.

 

(b)                                 Subject to the provisions of the Plan, the Committee or the Board, as the case may be, shall have authority, in its discretion, to determine those Employees, Advisors and Non-Employee Directors who shall receive an Award; the time or times when such Award shall be made; the vesting schedule, if any, for the Award (including establishing Performance Goals); and the type of Award to be granted, the number of shares of Company Stock to be subject to each Option and Restricted Stock Award, and all other terms and conditions of any Award.

 

(c)                                  The Committee or the Board, as the case may be, shall determine and set forth in an Award Agreement (which Award Agreements need not be identical) the terms of each Award, including such terms, restrictions, and provisions as shall be necessary to cause certain Options to qualify as Incentive Stock Options. The Committee or the Board, as the case may be, may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement, in such manner and to the extent the Committee or the Board, as appropriate, shall determine in order to carry out the purposes of the Plan. The Committee or the Board, as the case may be, may, in its discretion, accelerate (i) the date on which any Option or SAR may be exercised or (ii) the date of termination of the restrictions applicable to a Restricted Stock Award, if the Committee or the Board, as appropriate, determines that to do so will be in the best interests of the Company and the Participants in the Plan.

 

3.3                               Reliance on Experts.  In making any determination or in taking or not taking any action under this Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including professional advisors to the Company. No director, officer or agent of the Company shall be liable for any such action or determination taken or made or omitted in good faith.

 

3.4                               Delegation. The Committee may delegate ministerial, non-discretionary

 

 

functions to individuals who are officers or employees of the Company or a Subsidiary.

 

3.5                               Notices; Signature; Delivery.  Whenever a signature, notice or delivery of a document is required or appropriate under the Plan or pursuant to an Award Agreement, signature, notice or delivery may be accomplished by paper or written format, or to the extent authorized by the Committee by electronic means.  In the event the Committee authorizes electronic means for the signature, notice or delivery of a document hereunder, the electronic record or confirmation of that signature, notice or delivery maintained by or on behalf of the Committee shall for purposes of this Plan and any applicable Award Agreement be treated as if it was a written signature or notice and was delivered in the manner provided herein for a written document.

 

ARTICLE IV

 

AWARDS

 

4.1                                           Awards.  Awards under the Plan shall consist of Incentive Stock Options, Nonqualified Stock Options, SARs, Restricted Stock, Restricted Performance Stock and unrestricted Company Stock. All Awards shall be subject to the terms and conditions of the Plan and to such other terms and conditions consistent with the Plan as the Committee or the Board, as the case may be, deems appropriate. Awards under a particular section of the Plan need not be uniform and Awards under two or more sections may be combined in one Award Agreement. Any combination of Awards may be granted at one time and on more than one occasion to the same Employee, Advisor or Non-Employee Director. Awards of Restricted Performance Stock shall be earned solely upon attainment of Performance Goals and the Committee shall have no discretion to increase such Awards.

 

4.2                                           Eligibility for Awards.  An Award may be made to any Employee or Advisor selected by the Committee. In making this selection and in determining the form and amount of the Award, the Committee may give consideration to the functions and responsibilities of the respective Employee and/or Advisor, his or her present and potential contributions to the success of the Company or any of its Subsidiaries, the value of his or her services to the Company or any of its Subsidiaries, and such other factors deemed relevant by the Committee. Non-Employee Directors are eligible to receive Awards pursuant to Article VII.

 

4.3                                           Shares Available Under the Plan.

 

(a)                                             The Company Stock to be offered under the Plan pursuant to Options, SARs, Restricted Performance Stock and Restricted Stock and unrestricted Company Stock Awards must be authorized but unissued Company Stock not reserved for any other purpose. Subject to adjustment under Section 12.1 or

 

 

12.12, the number of shares of Company Stock that may be issued pursuant to Awards under the Plan (the “Section 4.3 Limit”) shall not exceed, in the aggregate,   118,668 shares.

 

(b)                                             Any shares of Company Stock subject to Restricted Stock or unrestricted Company Stock Awards shall not exceed Fifty Percent (50%) of the total shares available under the Plan and the maximum number of shares of Company Stock that may be issued subject to Incentive Stock Options is 118,668 subject to adjustment under Section 12.1 or 12.12.  The Section 4.3 Limit shall not have counted against it:  (i) the number of shares of Company Stock subject to an Option or any other Award which is equal to the number of shares of Company Stock (A)tendered by a Participant to the Company in payment of the Option Price of such Option or the Exercise Price of such other Award, as applicable, or (B) netted against an Option as provided in Section 5.4(c)(v); (ii) shares of Company Stock subject to an Award which for any reason terminates by expiration, forfeiture, cancellation or otherwise without having been exercised or paid; (iii) shares of Company Stock withheld from any Award to satisfy a Participant’s tax withholding obligations or, if applicable, to pay the Option Price of an Option or the Exercise Price of any other Award; or (iv) if an SAR is settled in whole or in part by the issuance of shares of Company Stock, the number of shares of Company Stock which represents the difference between (A) the number of shares of Company Stock which remain subject to such SAR on the date of such settlement and (B) the number of shares of Company Stock actually issued upon settlement of such SAR; provided, however, that such number of shares of Company Stock shall in no event be greater than the number which is determined by dividing (A) the amount of cash proceeds received by the Company from the Participant upon the exercise of such Option by (B) the Fair Market Value of a share of the Company Stock on the date of exercise of such Option.

 

(c)                                              No awards shall be granted under any Predecessor Plan on and after the date on which the Plan is approved by the Shareholders.

 

4.4                                           Annual Limitation on Awards. The maximum number of shares of Company Stock subject to Restricted Stock awarded to any Employee or Advisor with respect to a Performance Period or Restriction Period may not exceed 20,000 shares of Company Stock for each Fiscal Year included in such Performance Period or Restriction Period.  The maximum number of shares of Company Stock for which Options or SARs may be granted to any Participant in any one Fiscal Year shall not exceed 60,000 subject to adjustment under Section 12.1 or 12.12.

 

4.5                                           General Performance Goals.

 

(a)                                             Performance Goals relating to the payment or vesting of an Award that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code will be comprised of one or more of the following performance criteria as the Committee may deem appropriate:

 

(i)                                                             Earnings per share (actual or targeted growth);

(ii)                                                          Net income after capital costs;

(iii)                                                       Net income (before or after taxes);

(iv)                                                      Return measures (including, but not limited to, return on average assets, risk-adjusted return on capital, or return on 

 

 

average equity);

(v)                                                         Efficiency ratio;

(vi)                                                      Full-time equivalency control;

(vii)                                                   Stock price (including, but not limited to, growth measures and total shareholder return);

(viii)                                                Noninterest income compared to net interest income ratio;

(ix)                                                      Expense targets;

(x)                                                         Operating efficiency;

(xi)                                                      EVA®;

(xii)                                                   Credit quality measures;

(xiii)                                                Customer satisfaction measures;

(xiv)                                               Loan growth;

(xv)                                                  Deposit growth;

(xvi)                                               Net interest margin;

(xvii)                                            Fee income; and

(xviii)                                         Operating expense.

 

(b)                                             For any Awards not intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee may establish Performance Goals based on the performance criteria listed in Section 4.5(a) or other performance criteria as it deems appropriate.

 

(c)                                              Any of the performance criteria listed in Section 4.5(a) may be applied solely with reference to the Company and/or any Subsidiary or relatively between the Company and/or any Subsidiary and one or more unrelated entities.  In addition, different performance criteria may be applied to individual Participants or to groups of Participants and, as specified by the Committee, may be based on results achieved (i) separately by the Company or any Subsidiary, (ii) any combination of the Company and the Subsidiaries or (iii) any combination of business units or divisions of the Company and the Subsidiaries.

 

(d)                                             With respect to each Performance Period, the Committee will establish the Performance Goals in writing no later than the earlier of (i) 90 days after the beginning of the Performance Period or (ii) expiration of 25 percent of the Performance Period.

 

(e)                                              Except as otherwise provided in the Plan or the Award Agreement, as of the end of each Performance Period, the Committee will certify in writing the extent to which a Participant has or has not met the Participant’s Performance Goal.  To the extent permitted under Section 162(m) of the Code, if applicable, the Committee may disregard or offset the effect of any special charges or gains or cumulative effect of a change in accounting in determining the attainment of Performance Goals.

 

(f)                                               To the extent permitted under Section 162(m) of the Code, if applicable, the Committee shall make (i) appropriate adjustments to performance criteria to reflect the effect on any performance criteria of any stock dividend or stock split affecting Company Stock, recapitalization, merger, consolidation, combination, spin-off, distribution of assets to Shareholders, exchange of shares or similar corporate change and (ii) similar adjustments to any portion of performance criteria that is not based on Company Stock but which is affected by an event having an effect similar to those just described.

 

 

ARTICLE V

 

OPTIONS AND STOCK APPRECIATION RIGHTS

 

5.1                                           Award of Options.  The Committee may, from time to time, and on such terms and conditions as the Committee may prescribe, award (a) Incentive Stock Options, subject to Section 5.5, to any eligible Employee of the Company or any parent or subsidiary corporation (as permitted under Sections 422 and 424 of the Code) and (b) Nonqualified Stock Options to any Employee or Advisor.

 

5.2                                           Period of Option.

 

(a)                                             An Option granted under the Plan shall be exercisable only in accordance with the vesting schedule approved by the Committee. The Committee may in its discretion prescribe additional conditions, restrictions or terms on the vesting of an Option, including the full or partial attainment of Performance Goals pursuant to Section 4.5. After the Option vests, the Option may be exercised at any time during the term of the Option, in whole or in installments, as specified in the related Award Agreement.  Subject to Article X and except as provided in Section 5.5, the duration of each Option shall not be more than ten years from the date of grant.

 

(b)                                             Except as provided in Article X, a Participant may not exercise an Option unless such Participant is then, and continually (except for sick leave, military service, or other approved leave of absence) after the grant of the Option has been, an Employee, Advisor, or Non-Employee Director.

 

5.3                                           Award Agreement. Each Option shall be evidenced by an Award Agreement. The Award Agreement shall specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.

 

5.4                                           Option Price, Exercise and Payment.

 

(a)                                             Except as provided in Section 5.5, the Option Price of Company Stock under each Option shall be determined by the Committee but, except in the case of Options granted pursuant to Section 12.12, shall be a price not less than 100 percent of the Fair Market Value of Company Stock at the close of business on the date such Option is granted.

 

(b)                                             Subject to Section 12.2, the Committee may not (i) amend an Option to reduce its Option Price, (ii) cancel an Option and regrant an Option with a lower Option Price than the original Option Price of the cancelled Option, or (iii) take any other action (whether in the form of an amendment, cancellation or replacement grant) that has the effect of “repricing” an Option, as defined under applicable NASDAQ rules or the rules of the established stock exchange or quotation system on which the Company Stock  is then listed or traded.

 

(c)                      Vested Options may be exercised from time to time by giving written notice to the Chief Financial Officer of the Company or the Secretary of the Company, or his or her designee, specifying the number of shares to be purchased. The notice of exercise shall be accompanied by payment in full

 

 

of the Option Price at the time of each purchase in any of the following methods: (i) in cash or by electronic funds transfer; (ii) by check payable to the order of the Company; (iii) by notice and third party payment in such manner as may be authorized by the Committee; (iv) by the delivery of Shares already owned by the Participant which have been held for at least six months, provided, however, that the Committee may in its absolute discretion limit the Participant’s ability to exercise an Award by delivering such Shares; or (v) if authorized by the Committee or the Board or specified in the applicable Award Agreement, by reduction in the number of Shares otherwise deliverable upon exercise by that number of Shares which have a then Fair Market Value equal to such purchase price.

 

(d)                                             In the event such Option Price is paid, in whole or in part, with shares of Company Stock, the portion of the Option Price so paid shall be equal to the value, as of the date of exercise of the Option, of such shares. The value of such shares shall be equal to the number of such shares multiplied by the Fair Market Value of such shares on the trading day coincident with the date of exercise of such Option (or the immediately preceding trading day if the date of exercise is not a trading day). The Company shall not issue or transfer Company Stock upon exercise of an Option until the Option Price is fully paid.

 

5.5                                           Limitations on Incentive Stock Options.  Each provision of the Plan and each Award Agreement relating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in Section 422 of the Code, and any provisions of the Award Agreement thereof that cannot be so construed shall be disregarded.  No Incentive Stock Option may be granted to any Employee who, at the time of such grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation (as determined under Sections 422 and 424 of the Code), unless (a) the Option Price for such Incentive Stock Option is at least 110 percent of the Fair Market Value of a share of Company Stock on the date the Incentive Stock Option is granted and (b) such Incentive Stock Option may not be exercised more than five years after it is granted.  Notwithstanding anything in the Plan to the contrary, to the extent required by the Code, the exercise of Incentive Stock Options granted under the Plan shall be subject to the $100,000 calendar year limit as set forth in Section 422 of the Code; provided that, to the extent any grant exceeds such $100,000 calendar year limit, the portion of such granted Option shall be deemed a Nonqualified Stock Option in accordance with Section 422 of the Code.

 

5.6                                           Rights and Privileges. A Participant shall have no rights as a Shareholder with respect to any shares of Company Stock covered by an Option until the issuance of such shares to the Participant.

 

5.7                                           Award of SARs.

 

(a)                                             The Committee may, from time to time, and on such terms and conditions as the Committee may prescribe, award SARs to any Employee and/or Advisor.

 

(b)                                             A SAR shall represent the right to receive payment of an amount equal to (i) the amount by which the Fair Market Value of one share of Company

 

 

Stock on the trading day immediately preceding the date of exercise of the SAR exceeds the Exercise Price multiplied by (ii) the number of shares covered by the SAR.  Payment of the amount to which a Participant is entitled upon the exercise of a SAR shall be made in cash, Company Stock, or partly in cash and partly in Company Stock at the discretion of the Committee.  The shares shall be valued at their Fair Market Value on the date of exercise.

 

(c)                                              SARs awarded under the Plan shall be evidenced by an Award Agreement between the Company and the Participant.

 

(d)                                             The Committee may prescribe conditions and limitations on the exercise of any SAR. SARs may be exercised only when the Fair Market Value of a share of Company Stock exceeds the Exercise Price.

 

(e)                                              A SAR shall be exercisable only by written notice to the Chief Financial Officer of the Company or the Secretary of the Company, or his or her designee.

 

(f)                                               To the extent not previously exercised, all SARs shall automatically be exercised on the last trading day prior to their expiration, so long as the Fair Market Value of a share of Company Stock exceeds the Exercise Price, unless prior to such day the holder instructs the Chief Financial Officer or Corporate Secretary otherwise in writing.

 

(g)                                              Subject to Article X, each SAR shall expire on a date determined by the Committee at the time of grant.

 

ARTICLE VI

 

RESTRICTED STOCK

 

6.1                                           Award of Restricted Stock. The Committee may make a Restricted Stock Award to any Employee and/or Advisor, subject to this Article VI and to such other terms and conditions as the Committee may prescribe.

 

6.2                                           Restriction Period. At the time of making a Restricted Stock Award, the Committee shall establish the Restriction Period applicable to such Award. The Committee may establish different Restriction Periods from time to time and each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee. Restriction Periods, when established for a Restricted Stock Award, shall not be changed except as permitted by Section 6.3.

 

6.3                                           Other Terms and Conditions. Company Stock, when awarded pursuant to a Restricted Stock Award, will be represented in a book entry account in the name of the Participant who receives the Restricted Stock Award. The Participant shall be entitled to receive dividends during the Restriction Period and shall have the right to vote such Restricted Stock and shall have all other Shareholder  rights, with the exception that (i) unless otherwise provided by the Committee, if any dividends are paid in shares of Company Stock, those shares will be subject to the same restrictions as the shares of Restricted Stock with respect to which they were issued, (ii) the Participant will not be entitled to delivery of any stock certificate evidencing the

 

 

Company Stock underlying the Restricted Stock Award during the Restriction Period, (iii) the Company will retain custody of the Restricted Stock during the Restriction Period, and (iv) a breach of a restriction or a breach of the terms and conditions established by the Committee pursuant to the Restricted Stock Award will cause a forfeiture of the Restricted Stock Award. The Committee may, in addition, prescribe additional restrictions, terms, or conditions upon or to the Restricted Stock Award including the attainment of Performance Goals in accordance with Section 4.5.  Unless the Committee otherwise expressly provides, shares of Restricted Stock that are subject to restrictions at the time of termination of employment or are subject to other conditions to vest that have not been satisfied by the time specified in the applicable Award Agreement shall not vest and shall be returned to the Company in such manner and on such terms as the Committee shall therein provide.

 

6.4                                           Restricted Stock Award Agreement. Each Restricted Stock Award shall be evidenced by an Award Agreement.

 

6.5                                           Payment for Restricted Stock. Restricted Stock Awards may be made by the Committee under which the Participant shall not be required to make any payment for the Company Stock or, in the alternative, under which the Participant, as a condition to the Restricted Stock Award, shall pay all (or any lesser amount than all) of the Fair Market Value of the Company Stock, determined as of the date the Restricted Stock Award is made. If the latter, such purchase price shall be paid in cash as provided in the Award Agreement.

 

ARTICLE VII

 

AWARDS FOR NON-EMPLOYEE DIRECTORS

 

7.1                                           Awards to Non-Employee Directors. The Board shall determine all Awards to Company Directors. The Board or the Committee, as the case may be, retains the discretionary authority to make Awards to Non-Employee Directors and any type of Award (other than Incentive Stock Options) may be granted to Non-Employee Directors under this Plan. All such Awards shall be subject to the terms and conditions of the Plan and to such other terms and conditions consistent with the Plan as the Board or the Committee, as the case may be, deems appropriate.

 

7.2                                           No Right to Continuance as a Director. None of the actions of the Company in establishing the Plan, the actions taken by the Company, the Board, or the Committee under the Plan, or the granting of any Award under the Plan shall be deemed (i) to create any obligation on the part of the Board or the board of directors of the applicable Subsidiary to nominate any Non-Employee Director for reelection or (ii) to be evidence of any agreement or understanding, express or implied, that the Non-Employee Director has a right to continue as a Non-Employee Director for any period of time or at any particular rate of compensation.

 

 

ARTICLE VIII

 

UNRESTRICTED COMPANY STOCK AWARDS FOR EMPLOYEES AND/OR
 ADVISORS

 

8.1                                           The Committee may make awards of unrestricted Company Stock to Employees and/or Advisors on such terms and conditions as the Committee may prescribe.

 

ARTICLE IX

 

NO TRANSFERABILITY

 

9.1   Awards may be exercised only by the Participant or, if the Participant has died, the Participant’s Beneficiary or, if the Participant has suffered a Disability and the Participant is incapacitated, the Participant’s Personal Representative, if any, or if there is none, (to the extent permitted by applicable law and Rule 16b-3) a third party pursuant to such conditions and procedures as the Committee may establish. Other than upon death or pursuant to a DRO or other exception to transfer restrictions under Rule 16b-3 (except to the extent not permitted in the case of an Incentive Stock Option), no right or benefit under this Plan or any Award shall be transferable by the Participant or shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge (other than to the Company), and any such attempted action shall be void. The Company shall disregard any attempt at transfer, assignment or other alienation prohibited by the preceding sentences and shall pay or deliver such cash or Company Stock in accordance with the provisions of this Plan.  Notwithstanding the foregoing, the Committee, in its discretion, may permit the transfer, solely as gifts during the grantee’s lifetime, of Awards (other than Incentive Stock Options) to members of a grantee’s immediate family or to trusts, family partnerships or similar entities for the benefit of such immediate family members.  For this purpose, immediate family member means the grantee’s spouse, parent, child, stepchild, grandchild and the spouses of such family members.  The terms of an Award Agreement shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs and successors of the grantee.

 

ARTICLE X

 

GENERAL TERMINATION PROVISIONS

 

10.1                                    Termination. Subject to Article XI and unless otherwise specified in the applicable Award Agreement, the following provisions will govern the treatment of a Participant’s outstanding Awards following a Participant’s Termination.

 

(a)                                             Upon the Participant’s Termination, any Awards that are not vested and/or exercisable on the date of such Termination will immediately terminate and be of no further force and effect.

 

 

(b)                                             If the Participant Terminates for any reason other than (i) death, (ii) Disability, or (iii) discharge for Cause, such Participant’s outstanding SARs or Options may be exercised at any time within three months after such Termination, to the extent of the number of shares covered by such Options or SARs which are exercisable at the date of such Termination; except that an Option or SAR shall not be exercisable on any date beyond the expiration date of such Option or SAR.

 

(c)                                              Upon a Termination for Cause, any Options or SARs held by the Participant (whether or not then exercisable) shall expire and any rights thereunder shall terminate immediately.  Any non-vested Restricted Stock Awards of such Participant shall immediately be forfeited and any rights thereunder shall terminate.

 

(d)                                             Upon a Termination due to the Participant’s death, any SARs or Options that are then exercisable may be exercised by the Participant’s Personal Representative at any time before the earlier of (i) one year after the Participant’s death or (ii) the expiration date of the Award.

 

(e)                                              Upon a Termination due to the Participant’s Disability, any SARs or Options that are then exercisable may be exercised by the Participant at any time before the earlier of (i) one year after the date of such Termination or (ii) the expiration date of the Award; provided, however, that an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Code.

 

ARTICLE XI
 CHANGE IN CONTROL OF THE COMPANY

 

11.1                                    Contrary Provisions.  Notwithstanding anything contained in the Plan to the contrary, the provisions of this Article XI shall govern and supersede any inconsistent terms or provisions of the Plan.

 

11.2                                    Definitions

 

(a)                                             Change in Control.  For purposes of this Plan, Change in Control shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company (within the meaning of Section 409A of the Code).

 

(i)                                     Change in Actual Control shall mean the acquisition by any one person, or more than one person acting as a group (as defined in Section 11.2(a) (iv), below) of ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company.  However, if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Actual Control of the Company (or to cause a Change in Effective Control of the Company (within the meaning of Section 11.2(a) (ii)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its

 

 

stock in exchange for property will be treated as an acquisition of stock for purposes of this Section 11.2(a)(i).

 

(ii)                                              Change in Effective Control shall mean:

 

(A)                               The acquisition by any one person, or more than one person acting as a group (as defined in Section 11.2(a)(iv), below), during any 12-month period of ownership of stock of the Company possessing 35 percent or more of the total voting power of the stock of the Company; or

 

(B)                               The replacement of a majority of members of the Board during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election in accordance with Treasury Regulation § 1.409A-1(g)(5)(vi)(A)(2).

 

Notwithstanding the foregoing, if any one person, or more than one person acting as a group, is considered to effectively control the Company (within the meaning of this Section 11.2(a)(ii)), the acquisition of additional control of the Company by the same person or persons is not considered to cause a Change in Control.

 

(iii)                                           Change in the Ownership of the Company’s Assets shall mean the acquisition by any one person, or more than one person acting as a group (as defined in Section 11.2(a) (iv), below), during any 12-month period of assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.

 

Notwithstanding the foregoing, there is no change in control event under this Section 11.2(a) when there is a transfer to an entity that is controlled by the Shareholders immediately after the transfer.

 

(iv)                                          Persons acting as a group. For purposes of this Section 11.2(a), persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

11.3                                    Effect of Change in Control on Certain Awards.

 

(a)                                 If the Company is not to be the surviving corporation following a Change in Control, and the surviving corporation following such Change in Control or the acquiring corporation (such surviving corporation or acquiring

 

 

corporation is hereinafter referred to as the “Acquiror”) will not assume the outstanding Options, SARs, Restricted Stock, or Restricted Performance Stock or does not substitute equivalent equity awards relating to the securities of such Acquiror or its affiliates for such Awards, then no more than 30 days and no fewer than 10 days prior to the scheduled effectiveness of such Change in Control, the Board shall send notice (the “Notice”) to each Participant thereof.  Notice shall be deemed given on the date it is personally delivered to the Participant, or on the third business day after it is mailed, with first-class postage prepaid, to the Participant’s last known address. Upon the giving of such Notice, all such Awards shall become immediately and fully exercisable (or in the case of Restricted Stock, fully vested and all restrictions will immediately lapse). In the case of Restricted Performance Stock, the target payout opportunities under all outstanding Awards of Restricted Performance Stock shall be deemed to have been fully earned based on targeted performance being attained as of the date immediately prior to the effective date of the Change in Control.  In addition, the Board or its designee may, in its sole discretion, provide for a cash payment to be made to each Participant for the outstanding Options, Restricted Stock, Restricted Performance Stock, or SARs upon the consummation of the Change in Control, determined on the basis of the fair market value that would be received in such Change in Control by the holders of the Company’s securities relating to such Awards. Notwithstanding the foregoing, any Option intended to be an Incentive Stock Option under Section 422 of the Code shall be adjusted in a manner to preserve such status.  If after the giving of Notice, any such Award under this Plan which has not been exercised prior to such Change in Control shall terminate upon such Change in Control.

 

(b)                                             If the Company is the surviving corporation following a Change in Control, or the Acquiror assumes the outstanding Options, SARs, Restricted Stock, or Restricted Performance Stock or substitutes equivalent equity awards relating to the securities of such Acquiror or its affiliates for such Awards, then all such Awards or such substitutes therefor shall remain outstanding and be governed by their respective terms and the provisions of the Plan.

 

(c)                                              If (i) a Participant Terminates without Cause within twenty-four (24) months following a Change in Control, and (ii) the Company is the surviving corporation following such Change in Control, or the Acquiror assumes the outstanding Options, SARs, Restricted Stock, or Restricted Performance Stock or substitutes equivalent equity awards relating to the securities of such Acquiror or its affiliates for such Awards, then all outstanding Options, SARs, Restricted Stock, or Restricted Performance Stock shall become immediately and fully exercisable (or in the case of Restricted Stock, fully vested and all restrictions will immediately lapse). In the case of Restricted Performance Stock, the target payout opportunities under all outstanding Awards of Restricted Performance Stock shall be deemed to have been fully earned based on targeted performance being attained.

 

(d)                                             If (i) the employment of a Participant with the Company and its Subsidiaries is terminated for Cause within twenty-four (24) months following a Change in Control and (ii) the Company is the surviving corporation following such Change in Control, or the Acquiror assumes the outstanding Options, SARs, Restricted Stock, or Restricted Performance Stock or substitutes equivalent equity awards relating to the securities of such

 

 

Acquiror or its affiliates for such Awards, then any Options or SARs of such Participant shall expire, and any non-vested Restricted Stock or Restricted Performance Stock shall be forfeited, and any rights under such Awards shall terminate immediately.

 

(e)                                              Outstanding Options or SARs which vest in accordance with Section 11.3, may be exercised by the Participant in accordance with Article X; provided, however, that a Participant whose Options or SARs become exercisable in accordance with Section 11.3(c) may exercise such Options or SARs at any time within one year after such Termination, except that an Option or SAR shall not be exercisable on any date beyond the expiration date of such Option or SAR.  In the event of a Participant’s death after such Termination, such Options or SARs may be exercised by the Participant’s Personal Representative at any time before the earlier of (i) one year after the Participant’s death or (ii) the expiration date of the Award; provided, however, that, an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Code.

 

11.4                                    Amendment or Termination.  This Article XI shall not be amended or terminated at any time if any such amendment or termination would adversely affect the rights of any Participant under the Plan.

 

ARTICLE XII

 

MISCELLANEOUS PROVISIONS

 

12.1                                    Adjustments Upon Changes in Stock. In case of any reorganization, recapitalization, reclassification, stock split, stock dividend, distribution, combination of shares, merger, consolidation, rights offering, or any other changes in the corporate structure or shares of the Company, appropriate adjustments may be made by the Committee or the Board, as the case may be, (or if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares and the Option Price per share subject to outstanding Options or which may be issued under outstanding Restricted Stock Awards or pursuant to unrestricted Company Stock Awards. Appropriate adjustments may also be made by the Committee or the Board, as the case may be, in the terms of any Awards under the Plan, subject to Article XI, to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis. Any such adjustments made by the Committee or the Board pursuant to this Section 12.1 shall be conclusive and binding for all purposes under the Plan.

 

12.2                                    Amendment, Suspension, and Termination of Plan.

 

(a)                                             The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that any Awards thereunder shall conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no such amendment shall, without Shareholder approval, (i) except as provided in Section 12.1 or 12.12, increase the number of shares of Company

 

 

Stock which may be issued under the Plan, (ii) expand the types of awards available to Participants under the Plan, (iii) materially expand the class of employees and/or Advisors eligible to participate in the Plan, (iv) materially change the method of determining the Option Price of Options; (v) delete or limit the provision in Section 5.4 prohibiting the repricing of Options; (vi) extend the termination date of the Plan or (vii) be made to the extent that Shareholder approval is required to satisfy applicable law, regulation or any securities stock exchange, market or other quotation system on or through which the Company Stock is listed or traded. No such amendment, suspension, or termination shall materially adversely alter or impair any outstanding Options, SARs or shares of Restricted Stock without the consent of the Participant affected thereby.

 

(b)                                             The Committee may amend or modify any outstanding Options, SARs, or Restricted Stock Awards in any manner to the extent that the Committee would have had the authority under the Plan initially to award such Options, SARs, or Restricted Stock Awards, as so modified or amended, including without limitation, to change the date or dates as of which such Options or SARs may be exercised, or to remove the restrictions on shares of Restricted Stock.

 

(c)                                              Notwithstanding the foregoing, the Plan and any Award Agreements may be amended without any additional consideration to affected Participants to the extent necessary to comply with, or avoid penalties under, Section 409A of the Code, even if those amendments reduce, restrict or eliminate rights granted prior to such amendments.

 

12.3                                    Nonuniform Determinations. The Committee’s (or, if applicable, the Board’s) determinations under the Plan, including without limitation, (a) the determination of the Employees, Advisors and Non-Employee Directors to receive Awards, (b) the form, amount, and timing of any Awards, (c) the terms and provisions of any Awards and (d) the Award Agreements evidencing the same, need not be uniform and may be made by it selectively among Employees, Advisors and/or Non-Employee Directors who receive, or who are eligible to receive, Awards under the Plan, whether or not such Employees, Advisors and/or Non-Employee Directors are similarly situated.

 

12.4                                    General Restriction. Each Award under the Plan shall be subject to the condition that, if at any time the Committee shall determine that (a) the listing, registration, or qualification of the shares of Company Stock subject or related thereto upon NASDAQ or any other established stock exchange, market or quotation system or under any state or federal law, (b) the consent or approval of any government or regulatory body, or (c) an agreement by the Participant with respect thereto, is necessary or desirable, then such Award shall not become exercisable in whole or in part unless such listing, registration, qualification, consent, approval, or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

 

12.5                                    No Right To Employment. None of the actions of the Company in establishing the Plan, the actions taken by the Company, the Board or the Committee under the Plan, or the granting of any Award under the Plan shall be deemed (a) to create any obligation on the part of the Company or any Subsidiary to retain any person in the employ of, or continue the provision of services to, the Company or any Subsidiary, or (b) to be evidence of any

 

 

agreement or understanding, express or implied, that the person has a right to continue as an employee,  or advisor for any period of time or at any particular rate of compensation.

 

12.6                        Governing Law. The provisions of the Plan shall take precedence over any conflicting provision contained in an Award Agreement. All matters relating to the Plan or to Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of California without regard to the principles of conflict of laws.  If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.

 

12.7                                    Trust Arrangement. All benefits under the Plan represent an unsecured promise to pay by the Company. The Plan shall be unfunded and the benefits hereunder shall be paid only from the general assets of the Company resulting in the Participants having no greater rights than the Company’s general creditors; provided, however, nothing herein shall prevent or prohibit the Company from establishing a trust or other arrangement for the purpose of providing for the payment of the benefits payable under the Plan.

 

12.8                                    Indemnification of Board and Committee. Indemnification of the members of the Board and/or the members of the Committee shall be in accordance with the charter documents of the Company, as amended by the Shareholders from time to time, and any agreements issued consistent therewith.

 

12.9                                    No Impact on Benefits.  Awards are not compensation for purposes of calculating a Participant’s rights under any employee benefit plan that does not specifically require the inclusion of Awards in calculating benefits.

 

12.10                             Beneficiary Designation.  Each Participant may name a beneficiary or beneficiaries to receive or exercise any vested Award that is unpaid or unexercised at the Participant’s death.  Unless otherwise provided in the beneficiary designation, each designation will revoke all prior designations made by the same Participant, must be made on a form prescribed by the Committee and will be effective only when filed in writing with the Committee.  If a Participant has not made an effective beneficiary designation, the deceased Participant’s beneficiary will be the Participant’s surviving spouse or, if none, the deceased Participant’s estate.  The identity of a Participant’s designated beneficiary will be based only on the information included in the latest beneficiary designation form completed by the Participant and will not be inferred from any other evidence.

 

12.11                             Tax Withholding.  The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state and local taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan.  With respect to withholding required upon any taxable event arising as a result of an Award granted hereunder, a Participant may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares of Company Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could

 

 

be imposed on the transaction.  All such elections shall be irrevocable, made in writing and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

 

12.12                             Substitute Awards.  Notwithstanding any other provisions of this Plan to the contrary, where the outstanding shares of another corporation are changed into or exchanged for shares of Company Stock in a merger, consolidation, reorganization or similar transaction, then, subject to the approval of the Board, Awards may be granted in exchange for unexercised, unexpired similar equity based awards of the other corporation, and the exercise price of the shares subject to any Option so granted may be fixed at a price less than one hundred percent of the Fair Market Value of the Company Stock at the time such Award is granted if said exercise price or grant price has been determined to be not less than the exercise price or grant price set forth in the stock option of the other corporation, with appropriate adjustment to reflect the exchange ratio of the shares of stock of the other corporation into the shares of Company Stock. The number of shares of the awards of the other corporation shall also be adjusted in accordance with the exchange ratio so that any substituted Award shall reflect such adjustment.  To the extent that substitute Awards are made pursuant to this Section, the Section 4.3 Limit  shall be increased on a one share for one share basis for every share of Company Stock subject to a substitute Award.

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