Document:

ex10-1.htm

SUN BANCORP, INC.

2010 PERFORMANCE EQUITY PLAN

1.           Purpose of the Plan. The Plan shall be known as the Sun Bancorp, Inc. (“Company”) 2010 Performance Equity Plan (the “Plan”).  The purpose of the Plan is to establish an effective link between incentive compensation and performance for the officers and employees of the Company, and to further align the economic interests of such officers and employees with the Company’s stockholders by rewarding actions that result in building long-term shareholder value.  The Plan provides for the granting of Stock Options to selected officers and employees at an Exercise Price which is 110% of the Fair Market Value of the Company Common Stock on the Date of Grant, and the retention of such Awards will be contingent upon the Company achieving targeted financial performance metrics and the continued service of the award recipient.  Awards under the Plan may be in the form of  “Incentive Stock Options,” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and Non-Qualified Stock Options, options that do not so qualify.  The provisions of the Plan relating to Incentive Stock Options shall be interpreted to conform to the requirements of Section 422 of the Code.

2.           Definitions. The following words and phrases when used in this Plan with an initial capital letter, unless the context clearly indicates otherwise, shall have the meaning as set forth below.  Wherever appropriate, the masculine pronoun shall include the feminine pronoun and the singular shall include the plural.

“Award” means the grant by the Committee of an Incentive Stock Option and/or a Non-Qualified Stock Option, or any combination thereof, and the related terms and conditions determined by the Committee and as provided in the Plan.

“Bank” shall mean Sun National Bank, Vineland, New Jersey, or any successor corporation thereto.

“Beneficiary” shall mean 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” shall mean the Board of Directors of the Company, or any successor or parent corporation thereto.

“Change in Control” shall mean:  (i) the sale of all, or substantially all, of the assets of the Company; (ii) the merger or recapitalization of the Company whereby the Company is not the surviving entity; (iii) a change in control of the Company, as otherwise defined or determined by the Federal Reserve Board or regulations promulgated by it; or (iv) the acquisition, directly or indirectly, of the beneficial ownership (within the meaning of that term as it is used in Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of twenty-five percent (25%) or more of the outstanding voting securities of the Company by any person, trust, entity or group.  This limitation shall not apply to the purchase of shares by underwriters in connection with a public offering of Company stock.  The term “person” refers to an

  

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individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder.

“Committee” shall mean the Board or the Stock Option Committee appointed by the Board in accordance with Section 5(a) of the Plan.

“Common Stock” shall mean common stock of the Company, or any successor or parent corporation thereto.

“Company” shall mean Sun Bancorp, Inc., the parent corporation of the Bank, or any successor or Parent thereof.

“Continuous Employment” or “Continuous Status as an Employee” shall mean the absence of any interruption or termination of employment with the Company or any present or future Parent or Subsidiary of the Company.  Employment shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Company or in the case of transfers between payroll locations, of the Company or between the Company, its Parent, its Subsidiaries or a successor.

“Date of Grant” shall mean the date that an Award is made to a Participant or such later date as authorized in accordance with the Plan or by the Committee.

“Director” shall mean a member of the Board of the Company or the Bank, or any successor or parent corporation thereto.

“Disability” shall 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 Non-Qualified Stock Options, 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.

“Effective Date” shall mean the date of approval of the Plan by the shareholders of the Company.

“Employee” shall mean any person employed by the Company or any present or future Parent or Subsidiary of the Company.

“Exercise Price” shall mean the price at which a Participant may purchase a Share pursuant to the terms of an Option.  Upon the grant of an Option, the Exercise Price shall be established in an amount equal to 110% of the Fair Market Value of the Common Stock determined as of the Date of Grant.

“Fair Market Value” shall mean: (i) if the Common Stock is listed on a national securities exchange (including the NASDAQ Stock Market), then the Fair Market Value per Share shall be the closing sale price of a Share on the date in question (or, if such day is not a trading day in the U.S. markets, on the nearest preceding trading day), as reported with respect to the principal market (or the composite of the markets, if more than one) or national quotation system in which such shares are then traded, or if no such closing prices are reported, the mean between the high bid and low asked prices that day on the principal market or national quotation system then in use; and (ii) if the Common Stock is not readily tradable on an established securities market for purposes of Section 409A of the Code, then the Fair Market Value shall be determined by means of a reasonable valuation method that takes into consideration all available information material to the value of the Company and that otherwise satisfies the requirements applicable under Section 409A of the Code and the

  

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regulations thereunder. The Committee shall determine the Fair Market Value in accordance with the above in good faith.

“Incentive Stock Option” or “ISO” shall mean an option to purchase Shares granted by the Committee pursuant to Section 8 hereof which is subject to the limitations and restrictions of Section 8 hereof and is intended to qualify as an incentive stock option under Section 422 of the Code.

“Non-Qualified Stock Option” shall mean an option to purchase Shares granted pursuant to Section 9 hereof, which option is not intended to qualify under Section 422 of the Code.

“Option” shall mean an Incentive Stock Option or Non-Qualified Stock Option granted pursuant to this Plan providing the holder of such Option with the right to purchase Common Stock.

“Optioned Stock” shall mean stock subject to an Option granted pursuant to the Plan.

“Optionee” shall mean any person who receives an Option or Award pursuant to the Plan.

“Parent” shall mean any present or 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 any Employee of the Company or any Parent or Subsidiary of the Company who is selected by the Committee to receive an Award.

“Plan” shall mean the Sun Bancorp, Inc. 2010 Performance Equity Plan.

“Share” shall mean one share of the Common Stock.

“Subsidiary” shall mean any present or future corporation which constitutes a “subsidiary corporation” as defined in Sections 424(f) and (g) of the Code.

3.           Shares Subject to the Plan.  Except as otherwise required by the provisions of Section 13 hereof, the aggregate number of Shares with respect to which Awards may be made pursuant to the Plan shall not exceed 2,700,000 Shares.  Such Shares may either be from authorized but unissued shares, treasury shares or shares purchased in the market for Plan purposes. If an Award shall expire, become unexercisable, or be forfeited for any reason prior to its exercise, new Awards may be granted under the Plan with respect to the number of Shares as to which such expiration has occurred.

4.           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 such Award.

 5.           Administration of the Plan.

(a)            Composition of the Committee.  The Plan shall be administered by the Board of Directors of the Company or a Committee which shall consist of not less than two Directors of the Company appointed by the Board and serving at the pleasure of the Board.  All persons designated as members of the Committee shall meet the requirements of: (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, as found at 17 CFR Section 240.16b-3,  and (ii) to the extent deemed appropriate by the Board of Directors or the Committee, 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

  

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requirements of  subparagraphs (i) and/or (ii) shall not disqualify any actions taken by the Committee.  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 shall be deemed the action of the Committee. All decisions, determinations and interpretations of the Committee shall be final and conclusive on all persons affected thereby.

(b)           Powers of the Committee.  The Committee is authorized (but only to the extent not contrary to the express provisions of the Plan or to resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the type, number, form and content of Awards to be issued under the Plan, including establishing or modifying performance measures and other criteria that will determine if such Awards are earned and determining whether such performance measures have been attained, and to make other determinations necessary or advisable for the administration of the Plan, and shall have and may exercise such other power and authority as may be delegated to it by the Board from time to time.  Notwithstanding the foregoing, the Committee shall have the authority to adjust or modify performance measures with respect to Awards, including the authority to determine that Awards shall be earned without regard to whether such performance measures previously established have been satisfied. 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 shall be deemed the action of the Committee.  Prior to the granting of Awards in accordance with the Plan, the Committee will review the composition of the Committee, and in the event that it is determined that any member of such Committee does not satisfy the requirements at Section 5(a) herein as an “outside director,”  then such individual shall recuse himself or herself from such actions to be taken by the Committee at such meeting.  In no event may the Committee revoke outstanding Awards without the consent of the Participant.

The Chairman of the Committee, the President of the Company and such other officers as shall be designated by the Committee are hereby authorized to execute written agreements evidencing Awards on behalf of the Company and to cause them to be delivered to the Participants.  Such agreements shall set forth the Option Exercise Price, the number of shares of Common Stock subject to such Option, the expiration date of such Options, and such other terms and restrictions applicable to such Award as are determined in accordance with the Plan or the actions of the Committee.

(c)           Effect of Committee’s Decision.  All decisions, determinations and interpretations of the Committee shall be final and conclusive on all persons affected thereby.

6.           Eligibility for Awards and Limitations.

(a)           The Committee shall from time to time determine the Participants who shall be granted Awards under the Plan, the number of Awards to be granted to each such Participant, and whether Options granted to each such Participant under the Plan shall be Incentive Stock Options and/or Non-Qualified Stock Options.  In selecting Participants and in determining the Awards to be granted to each such Participant, the Committee may consider the nature of the prior and anticipated future services rendered by each such Participant, each such Participant’s current and potential contribution to the Company and such other factors as the Committee may, in its sole discretion, deem relevant.  Participants who have been granted an Award may, if otherwise eligible, be granted additional Awards.

(b)           The aggregate Fair Market Value (determined as of the date the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by each Employee during any calendar year (under all Incentive Stock Option plans, as defined in Section 422 of the Code, of the Company or any present or future Parent or Subsidiary of the Company) shall not exceed $100,000.  Notwithstanding the prior provisions of this Section 6, the Committee may grant Options in excess of the foregoing limitations, provided said Options shall be clearly and specifically designated as not being Incentive Stock Options.

  

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(c)           During the period that Awards may be made under the Plan, in no event shall Shares subject to Awards granted to any individual Participant exceed more than 25% of the total number of Shares authorized for delivery under the Plan.

7.           Term of the Plan.  The Plan shall continue in effect for a term of ten (10) years from the Effective Date, unless sooner terminated pursuant to Section 18 hereof.  No Award shall be granted under the Plan after ten (10) years from the Effective Date.

8.           Terms and Conditions of Incentive Stock Options.  Incentive Stock Options may be granted only to Employees.  Each Incentive Stock Option granted pursuant to the Plan shall be evidenced by an instrument in such form as the Committee shall from time to time approve.  Each Incentive Stock Option granted pursuant to the Plan shall comply with, and be subject to, the following terms and conditions:

(a)           Option Price.

(i)           The price per Share at which each Incentive Stock Option granted by the Committee under the Plan may be exercised shall not, as to any particular Incentive Stock Option, be less than the 110% Fair Market Value of the Common Stock on the date that such Incentive Stock Option is granted.

 

 

(ii)           In the case of an Employee who owns Common Stock representing more than ten percent (10%) of the outstanding Common Stock at the time the Incentive Stock Option is granted, 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 that the Incentive Stock Option is granted.

(b)           Payment.  Full payment for each Share of Common Stock purchased upon the exercise of any Incentive Stock Option granted under the Plan shall be made at the time of exercise of each such Incentive Stock Option and shall be paid in cash (in United States Dollars), Common Stock or a combination of cash and Common Stock.  Common Stock utilized in full or partial payment of the Exercise Price must have been owned by the party exercising such Option for not less than six months prior to the date of exercise of such Option, and such Common Stock shall be valued at the Fair Market Value at the date of exercise.  The Company shall accept full or partial payment in Common Stock only to the extent permitted by applicable law.  No Shares of Common Stock shall be issued until full payment has been received by the Company, and no Optionee shall have any of the rights of a shareholder of the Company until Shares of Common Stock are issued to the Optionee.

(c)           Term of Incentive Stock Option.  The term of exercisability of each Incentive Stock Option granted pursuant to the Plan shall be not more than ten (10) years from the date each such Incentive Stock Option is granted, provided that in the case of an Employee who owns stock representing more than ten percent (10%) of the Common Stock outstanding at the time the Incentive Stock Option is granted, the term of exercisability of the Incentive Stock Option shall not exceed five (5) years.

(d)           Exercise Generally.  Except as otherwise provided in Section 10 hereof, no Incentive Stock Option may be exercised unless the Optionee shall have been in the employ of the Company at all times during the period beginning with the Date of Grant of any such Incentive Stock Option and ending on the date three (3) months prior to the date of exercise of any such Incentive Stock Option.  The Committee may impose additional conditions upon the right of an Optionee to exercise any Incentive Stock Option granted hereunder which are not inconsistent with the terms of the Plan or the requirements for qualification as an Incentive Stock Option.  Except as otherwise provided by the terms of the Plan or by action of the Committee, 25% of such Options awarded will be first exercisable following satisfaction of the performance criteria, and 25% of such Options shall be first exercisable annually thereafter for three years.

  

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(e)           Cashless Exercise.  Subject to vesting requirements, if applicable, an Optionee who has held an Incentive Stock Option for at least six months may engage in the “cashless exercise” of the Option.  Upon a cashless exercise, an Optionee gives the Company written notice of the exercise of the Option together with an order to a registered broker-dealer or equivalent third party, to sell part or all of the Optioned Stock and to deliver enough of the proceeds to the Company to pay the Option Exercise Price and any applicable withholding taxes.  If the Optionee does not sell the Optioned Stock through a registered broker-dealer or equivalent third party, the Optionee can give the Company written notice of the exercise of the Option and the third party purchaser of the Optioned Stock shall pay the Option Exercise Price plus any applicable withholding taxes to the Company.  Such Options shall not be deemed exercised until the Company has received full payment of the Exercise Price of such Options.

(f)           Transferability.  An Incentive Stock Option granted pursuant to the Plan shall be exercised during an Optionee’s lifetime only by the Optionee to whom it was granted and shall not be assignable or transferable otherwise than by will or by the laws of descent and distribution.

9.           Terms and Conditions of Non-Qualified Stock Options.  Each Non-Qualified Stock Option granted pursuant to the Plan shall be evidenced by an instrument in such form as the Committee shall from time to time approve.  Each Non-Qualified Stock Option granted pursuant to the Plan shall comply with and be subject to the following terms and conditions.

(a)           Option Price.  The Exercise Price per Share of Common Stock for each Non-Qualified Stock Option granted pursuant to the Plan shall be at such price as the Committee may determine in its sole discretion, but in no event less than the Fair Market Value of such Common Stock on the Date of Grant as determined by the Committee in good faith.

(b)           Payment.  Full payment for each Share of Common Stock purchased upon the exercise of any Non-Qualified Stock Option granted under the Plan shall be made at the time of exercise of each such Non-Qualified Stock Option and shall be paid in cash (in United States Dollars), Common Stock or a combination of cash and Common Stock. Common Stock utilized in full or partial payment of the Exercise Price must have been owned by the party exercising such Option for not less than six months prior to the date of exercise of such Option, and such Common Stock shall be valued at the Fair Market Value at the date of exercise.  The Company shall accept full or partial payment in Common Stock only to the extent permitted by applicable law.  No Shares of Common Stock shall be issued until full payment has been received by the Company and no Optionee shall have any of the rights of a shareholder of the Company until the Shares of Common Stock are issued to the Optionee.

(c)           Term.  The term of exercisability of each Non-Qualified Stock Option granted pursuant to the Plan shall be not more than ten (10) years from the date each such Non-Qualified Stock Option is granted.

(d)           Exercise Generally.  The Committee may impose additional conditions upon the right of any Participant to exercise any Non-Qualified Stock Option granted hereunder which is not inconsistent with the terms of the Plan. Except as otherwise provided by the terms of the Plan or by action of the Committee, 25% of such Options awarded will be first exercisable following satisfaction of the performance criteria, and 25% of such Options shall be first exercisable annually thereafter for three years.

(e)           Cashless Exercise.  Subject to vesting requirements, if applicable, an Optionee who has held a Non-Qualified Stock Option for at least six months may engage in the “cashless exercise” of the Option.  Upon a cashless exercise, an Optionee gives the Company written notice of the exercise of the Option together with an order to a registered broker-dealer or equivalent third party, to sell part or all of the Optioned Stock and to deliver enough of the proceeds to the Company to pay the Option Exercise Price and any applicable withholding taxes.  If the Optionee does not sell the Optioned Stock through a registered broker-dealer or equivalent third party, the Optionee can give the Company written notice of the exercise of the Option and the third party purchaser of the Optioned Stock shall pay the Option Exercise Price plus any applicable

  

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withholding taxes to the Company.  Such Options shall not be deemed exercised until the Company has received full payment of the Exercise Price of such Options.

(f)           Transferability.  Notwithstanding any provisions of the Plan to the contrary, the Committee may, in its sole discretion, permit transferability or assignment of a Non-Qualified Stock Option by a Participant if such transfer or assignment is, in the Committee’s sole determination, for valid estate planning purposes and such transfer or assignment is permitted under the Code.  For purposes of this Section 9(f), a transfer for valid estate planning purposes includes, but is not limited to: (a) a transfer to a revocable inter vivos trust as to which the Participant is both the settlor and trustee, or (b) a transfer for no consideration to: (i) any member of the Participant’s Immediate Family, (ii) any trust solely for the benefit of members of the Participant’s Immediate Family, (iii) any partnership whose only partners are members of the Participant’s Immediate Family, and (iv) any limited liability corporation or corporate entity whose only members or equity owners are members of the Participant’s Immediate Family. For purposes of this Section, “Immediate Family” includes, but is not necessarily limited to, a Participant’s parents, grandparents, spouse, children, grandchildren, siblings (including half bothers and sisters), and individuals who are family members by adoption. Nothing contained in this Section shall be construed to require the Committee to give its approval to any transfer or assignment of any Non-Qualified Stock Option or portion thereof, and approval to transfer or assign any Non-Qualified Stock Option or portion thereof does not mean that such approval will be given with respect to any other Non-Qualified Stock Option or portion thereof. The transferee or assignee of any Non-Qualified Stock Option shall be subject to all of the terms and conditions applicable to such Non-Qualified Stock Option immediately prior to the transfer or assignment and shall be subject to any other conditions proscribed by the Committee with respect to such Non-Qualified Stock Option.

10.           Effect of Termination of Employment, Disability or Death on Incentive Stock Options.

(a)           Termination of Employment.  In the event that any Optionee’s employment with the Company shall terminate for any reason, other than Disability or death, all of any such Optionee’s Incentive Stock Options, and all of any such Optionee’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 Incentive Stock Options, or (ii) the expiration of not more than three (3) months after the date of such termination of employment; or (B) at such later date as is determined by the Committee, in which case such Award shall be deemed a Non-Qualified Stock Option after such three month period has elapsed.  In the event that a Subsidiary ceases to be a Subsidiary of the Company, the employment of all of its employees who are not immediately thereafter employees of the Company shall be deemed to terminate upon the date such Subsidiary so ceases to be a Subsidiary of the Company.

(b)           Disability. Except as may be specified by the Committee at the time of grant of an Option, in the event that any Optionee’s employment with the Company shall terminate as the result of the Disability of such Optionee, such Optionee may exercise any Incentive Stock Options which is then exercisable at any time prior to the earlier of (i) the respective expiration dates of any such Incentive Stock Options or (ii) the date which is one (1) year after the date of such termination of employment as a result of such Disability, but only if, and to the extent that, the Optionee was entitled to exercise any such Incentive Stock Options at the date of such termination of employment.

(c)           Death. Except as may be specified by the Committee at the time of grant of an Option, in the event of the death of an Optionee, any Incentive Stock Options granted to such Optionee which is then exercisable may be exercised by the Beneficiary at any time prior to the earlier of (i) the respective expiration dates of any such Incentive Stock Options or (ii) the date, if any, specified at the time of grant of such Award.  At the discretion of the Committee, upon exercise of such Options the Optionee may receive Shares or cash or a combination thereof.  If cash shall be paid in lieu of Shares, 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.

  

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(d)           Incentive Stock Options Deemed Exercisable.  For purposes of Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any Optionee shall be considered exercisable at the date of termination of employment if any such Incentive Stock Option would have been exercisable at such date of termination of employment without regard to the Disability or death of the Participant.

(e)           Termination of Incentive Stock Options.  Except as may be specified by the Committee, to the extent that any Incentive Stock Option granted under the Plan to any Optionee whose employment with the Company terminates shall not have been exercised within the applicable period set forth in this Section 10, any such Incentive Stock Option, and all rights to purchase or receive Shares of Common Stock pursuant thereto, as the case may be, shall terminate on the last day of the applicable period.

11.           Effect of Termination of Employment, Disability or Death on Non-Qualified Stock Options.  The terms and conditions of Non-Qualified Stock Options relating to the effect of the termination of an Optionee’s employment or service, Disability of an Optionee or his death shall be such terms and conditions as the Committee shall, in its sole discretion, determine at the time of termination of service, or as provided for by the terms of the Agreement at the time of grant of the award.

12.   Performance Conditions Applicable to Awards.  Upon the grant of an Award, the Committee shall establish the performance targets which must be met before such Awards may begin to become first exercisable.  Such performance targets will be expressed as a minimum threshold level and an optimum level, and each level of performance attainment will yield a specified number of Options that constitute such Award at such Exercise Price.  The terms and conditions of such Award for each Participant shall be detailed in an Award Agreement.  Except as otherwise provided herein, if such performance targets are not attained by December 31, 2013, then such Award shall be forfeited.  Once such performance targets are attained, as certified by the Committee, then 25% of the Options represented by such Award shall then be first exercisable, and 25% of such Options shall be first exercisable annually thereafter for three years.   Such performance targets shall consist of Company financial metrics, peer group rankings based upon financial metrics, and such other criteria that may be established by the Committee as of the Date of Grant, except as otherwise modified thereafter by the Committee.

13.           Recapitalization, Merger, Consolidation, Change in Control and Other Transactions.

(a)           Adjustment.  Subject to any required action by the shareholders of the Company, the aggregate number of Shares of Common Stock for which Awards may be granted hereunder, the number of Shares of Common Stock covered by each outstanding Awards, and the Exercise Price per Share of Common Stock of each such Option, shall all be proportionately adjusted for any increase or decrease in the number of issued and outstanding Shares of Common Stock resulting from a subdivision or consolidation of Shares (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise) or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such Shares of Common Stock effected without the receipt or payment of consideration by the Company (other than Shares held by dissenting shareholders).

(b)           Change in Control.  All outstanding Awards shall become immediately earned and exercisable in the event of a Change in Control of the Company. In the event of such a Change in Control, the Committee and the Board of Directors will take one or more of the following actions to be effective as of the date of such Change in Control:

(i)           provide that such Options shall be assumed, or equivalent options shall be substituted, (“Substitute Options”) by the acquiring or succeeding corporation (or an affiliate thereof), provided that: (A) any such Substitute Options exchanged for Incentive Stock Options shall meet the requirements of Section 424(a) of the Code, and (B) the shares of stock issuable upon the exercise of such Substitute Options shall constitute securities registered in accordance with the Securities Act of 1933, as amended, (“1933 Act”) or such securities shall be exempt from such registration in

  

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accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, “Registered Securities”), or in the alternative, if the securities issuable upon the exercise of such Substitute Options shall not constitute Registered Securities, then the Optionee will receive upon the exercise of the Substitute Options a cash payment for each Option surrendered equal to the difference between (1) the Fair Market Value of the consideration to be received for each share of Common Stock in the Change in Control transaction times the number of shares of Common Stock subject to such surrendered Options, and (2) the aggregate Exercise Price of all such surrendered Options, or

(ii)           in the event of a transaction under the terms of which the holders of the Common Stock of the Company will receive upon consummation thereof a cash payment (the “Merger Price”) for each share of Common Stock exchanged in the Change in Control transaction, to make or to provide for a cash payment to the Optionees equal to the difference between (A) the Merger Price times the number of shares of Common Stock subject to such Options held by each Optionee (to the extent then exercisable at prices not in excess of the Merger Price) and (B) the aggregate Exercise Price of all such surrendered Options in exchange for such surrendered Options.

(c)           Extraordinary Corporate Action.  Notwithstanding any provisions of the Plan to the contrary, subject to any required action by the shareholders of the Company, in the event of any Change in Control, recapitalization, merger, consolidation, exchange of Shares, spin-off, reorganization, tender offer, partial or complete liquidation or other extraordinary corporate action or event, the Committee shall, prior or subsequent to such action or event:

(i)           appropriately adjust the number of Shares of Common Stock subject to each Award and Option, the Option Exercise Price per Share of Common Stock, and the consideration to be given or received by the Company upon the exercise of any outstanding Option; and/or

(ii)           cancel any or all previously granted Options, provided that appropriate consideration is paid to the Optionee in connection therewith;

provided, however, that no action shall be taken by the Committee which would cause Incentive Stock Options granted pursuant to the Plan to fail to meet the requirements of Section 422 of the Code without the consent of the Optionee.

(d)           Acceleration.  The Committee shall at all times have the power to accelerate the vesting or exercise date of an Award previously granted under the Plan and based upon its discretion to determine that Awards shall be earned without regard to whether any previously established performance measures or other criteria have been satisfied.

(e)           Excluded Transaction.  To the extent that the Company undertakes a transaction or series of transactions with investors (“Investors”) whereby the Company will raise additional capital through the issuance of various equity instruments, including, but not limited to voting common stock, non-voting common stock, warrants, and convertible preferred stock (“SNBC Stock”) to such Investors and current stockholders (the “Transaction”), and the Company, following approval of such Transaction by the Board of Directors, will seek the approval of its shareholders for the Transaction and related stock issuances before the total shares of voting Common Stock issued in the Transaction equals or exceeds 25% of the total shares of voting Common Stock outstanding before such issuance, then such Transaction shall not be deemed an event or occurrence that is considered a Change in Control in accordance with the Plan.  Further, notwithstanding anything in the Plan to the contrary, such issuance of the SNBC Stock by the Company contemplated by such Transaction shall not be deemed to constitute a Change in Control with respect to any outstanding Awards and any agreements representing such Awards. Further, the Participants will not be accorded any rights or benefits in the administration and interpretation of the Plan

  

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or any stock option agreements with respect to the Awards resulting from the SNBC Stock to be issued in the Transaction.

Except as expressly provided in Sections 13(a) and 13(b), no Participant shall have any rights by reason of the occurrence of any of the events described in this Section 13.

14.           Time of Granting Awards.  The Date of Grant of an Award under the Plan shall, for all purposes, be the date on which the Committee makes the determination of such action or such later date as determined by the Committee at the time of such action.  Notice of the grant of an Award shall be given to each Participant to whom an Award is so made within a reasonable time after such grant in a form determined by the Committee.  Awards under the Performance Plan may be made by the Committee only after the Performance Plan is approved by shareholders. 

15.           Effective Date.  The Plan shall become effective as of the date of approval of the Plan by the shareholders of the Company.

16.           Shareholder Approval. The Plan shall be approved by a majority of the votes cast in person or by proxy with respect to approval of the Plan at a meeting of the shareholders of the Company held within twelve (12) months of the date the Plan is approved by the Board.

17.           Modification of Awards.  At any time and from time to time, the Board may authorize the Committee to direct the execution of an instrument providing for the modification of any outstanding Option, provided no such modification, extension or renewal shall confer on the holder of said Option any right or benefit which could not be conferred on the Optionee by the grant of a new Option at such time, or shall not materially decrease the Optionee’s benefits under the Option without the consent of the holder of the Option, except as otherwise permitted under Section 18 hereof; provided, however, that no such amendment may have the effect of repricing the Exercise Price of Options without shareholder approval of such action.

 

 

18.           Amendment and Termination of the Plan.

(a)           Action by the Board.  The Board may alter, suspend or discontinue the Plan, except that no action of the Board may increase (other than as provided in Section 13 hereof) the maximum number of Shares permitted to be issued under the Plan, materially increase the benefits accruing to Participants under the Plan or materially modify the requirements for eligibility for participation in the Plan unless such action of the Board shall be subject to approval by the shareholders of the Company.  Notwithstanding anything herein to the contrary, in no event shall the Board or the Committee amend the Plan or amend an Award under the Plan which allows the Exercise Price of any Option granted under the Plan to be reduced after the Date of Grant, except as otherwise permitted in accordance with Section 13 of the Plan, without shareholder approval of such action.

(b)           Change in Applicable Law.  Notwithstanding any other provision contained in the Plan, in the event of a change in any federal or state law, rule, regulation or policy which would make the exercise or vesting of all or part of any previously granted Award unlawful or subject the Company to any penalty, the Committee may restrict any such exercise or vesting without the consent of the Participant or other holder thereof in order to comply with any such law, rule or regulation or to avoid any such penalty.

19.           Conditions Upon Issuance of Shares; Limitations on Option Exercise; Cancellation of Award Rights.

(a)           Shares 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,

  

10

  

any applicable state securities laws and the requirements of any stock exchange upon which the Shares may then be listed.

(b)           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 issuable hereunder shall relieve the Company of any liability with respect to the non-issuance or sale of such Shares.

(c)           As a condition to the exercise of an Option or the delivery of Shares, the Company may require the person exercising the Option or to receive such 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.

(d)           Notwithstanding anything herein to the contrary, upon the termination of employment or service of a Participant by the Company or its Subsidiaries for “cause” as determined by the Board of Directors or the Committee, all Awards held by such Participant shall cease to be exercisable as of the date of such termination of employment or service and any Shares that have not yet been delivered to the Participant shall be forfeited.

(e)           Upon the exercise of an Option by an Optionee (or the Optionee’s personal representative), the Committee, in its sole and absolute discretion, may make a cash payment to the Optionee, 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 Optionee or the Company under Section 16(b) of the Securities Exchange Act of 1934, as amended, and regulations promulgated thereunder.

20.           Reservation of Shares.  During the term of the Plan, the Company will reserve and keep available a number of Shares sufficient to satisfy the requirements of the Plan.

21.           Unsecured Obligation.  No Participant under the Plan shall have any interest in any fund or special asset of the Company by reason of the Plan or the grant of any Option under the Plan.  No trust fund shall be created in connection with the Plan or any grant of any Option hereunder and there shall be no required funding of amounts which may become payable to any Participant.

22.           No Employment Rights.  No Employee shall have a right to be selected as a Participant under the Plan.  Neither the Plan nor any action taken by the Committee in administration of the Plan shall be construed as giving any person any rights of employment or retention as an Employee or in any other capacity with the Company, the Bank or other Subsidiaries.

23.           Withholding Tax.  The Company shall have the right to deduct from all amounts to be paid in cash with respect to any Awards any taxes required by law to be withheld with respect to such cash payments.  Where a Participant or other person is entitled to receive Shares pursuant to the exercise of an Option, the Company shall have the right to require the Participant or such other person to pay the Company the amount of any taxes which the Company is required to withhold with respect to such Shares, or, in lieu thereof, to retain, or to sell without notice, a number of such Shares sufficient to cover the amount required to be withheld.

24.           Governing Law.  The Plan shall be governed by and construed in accordance with the laws of the State of New Jersey, except to the extent that federal law shall be deemed to apply.

25.           No Deferral of Compensation Under Section 409A of the Code. All Awards granted under the Plan are designed to not constitute a deferral of compensation for purposes of Section 409A of the Code.

  

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Notwithstanding any other provision in this Plan to the contrary, all of the terms and conditions of any Option granted under this Plan shall be designed to satisfy the exemption for stock options set forth in the regulations issued under Section 409A of the Code. Both this Plan and the terms of all Options granted hereunder shall be interpreted in a manner that requires compliance with all of the requirements of the exemption for stock options set forth in the regulations issued under Section 409A of the Code. No Optionee shall be permitted to defer the recognition of income beyond the exercise date of a Non-Qualified Stock Option or beyond the date that the Common Stock received upon the exercise of an Incentive Stock Option is sold, and no Participant shall be permitted to defer the recognition of income beyond the date that an Award shall be deemed earned in accordance with the Plan.

12ex10-2.htm

2010 PERFORMANCE EQUITY PLAN AWARD AGREEMENT

FOR INCENTIVE STOCK OPTIONS AWARDED

PURSUANT TO THE

SUN BANCORP, INC.

2010 PERFORMANCE EQUITY PLAN

__________________

STOCK OPTIONS for a maximum of ________ shares of Common Stock of Sun Bancorp, Inc. (the “Company”), which Options are intended to qualify as an Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986, as amended, are hereby granted to ______________ (the “Optionee”) at the price determined as provided in, and in all respects subject to the terms, definitions and provisions of the 2010 Performance Equity Plan (the “Plan”) adopted by the Company which is incorporated by reference herein, receipt of which is hereby acknowledged.  Capitalized terms used herein but not otherwise defined herein shall have the meaning given to such terms in the Plan.

 

1.           Option Price.  The Option exercise price is $______ for each Share (based upon the last sale price of $______ on _____________),  being not less than 110% of the Fair Market Value  of the Common Stock on the Date of Grant of this Option (Date of Grant of ____________).

 

2.           Performance Conditions.  Certain Company performance targets described below must be met in order for the Options, or portions thereof, to become earned and first exercisable.  If the performance criteria described below are not attained by the measurement period ending December 31, 2013, the entire award, or portions unearned as of such date, shall be forfeited.

 

The following performance criteria are conditions to the award (in whole or in part)  becoming exercisable as follows:

	
 

Optimum Performance Level

	  	
Maximum Number of Options

(“Optimum Award”)

	  	  	  
	  	  	
_____________

	
 

Target Performance Level

	  	
Maximum Number of Options

(“Target Award”)

	  	  	  
	  	  	
_____________

 

  

  

  

 

Performance Criteria.

 

Return on Average Assets (“ROA”) for the Company means net income divided by average assets for the Company for each of the fiscal measurement periods consisting of 4 consecutive calendar quarters during the period from the Date of Grant and ending as of December 31, 2013.

 

Return on Average Assets (“ROA”) for the Peer Group Companies means net income divided by average assets for each of the Peer Group Companies for each of the fiscal measurement periods consisting of 4 consecutive calendar quarters during the period from the Date of Grant and ending as of December 31, 2013.

 

Peer Group Companies shall mean the following companies comprising the list of peer group companies during the fiscal measurement periods: National Penn Bancshares, Inc., First Commonwealth Financial Corporation, NBT Bancorp Inc., Community Bank Systems, Inc., S & T Bancorp, Inc., Sandy Spring Bancorp, Inc., Tompkins Financial Corporation, Lakeland Bancorp, Inc., Hudson Valley Holding Corp., Sterling Bancorp/NY, Metro Bancorp, Inc., Univest Corporation of Pennsylvania, Financial Institutions, Inc., Peapack-Gladstone Financial Corporation, Alliance Bancorp, Inc. of Pennsylvania, and Royal Bancshares of Pennsylvania, Inc.

 

Peer Group Ranking (“PG Ranking”) means the ranking of the Company’s ROA for the fiscal measurement period relative to the ROA achieved by each of the other Peer Group Companies for such fiscal measurement period.

 

Earning of Awards.

 

ROA Metric.

 

If ROA is less than 0.80% for a fiscal measurement period, no additional Awards will be earned.

 

If ROA is 0.80%, then 50% of the aggregate Target Award will be earned based upon certification of the financial metrics for that fiscal measurement period.

 

If ROA is 1.05% or greater, then 50% of the aggregate Optimum Award will be earned based upon certification of the financial metrics for that fiscal measurement period.

 

For ROA attainment between 0.80% and 1.05%, then the aggregate Award amount or incremental Award amount will be interpolated on a straight-line basis between the Target Award level and the Optimum Award level.

 

Peer Group Ranking Metric.

 

If the PG Ranking is less than the 50th %tile (the median of Peer Group Companies) for a fiscal measurement period, no additional Awards will be earned.

 

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If PG Ranking is at the 50th %tile (the median of Peer Group Companies), then 50% of the aggregate Target Award will be earned based upon certification of the financial metrics for that fiscal measurement period.

 

If PG Ranking is at the 75th %tile or greater (the top of the third quartile or above of Peer Group Companies), then 50% of the aggregate Optimum Award will be earned based upon certification of the financial metrics for that fiscal measurement period.

 

If PG Ranking is between the 50th %tile and the 75th % tile, then the aggregate Award amount or incremental Award amount will be interpolated on a straight-line basis between the Target Award level and the Optimum Award level.

 

Example of  Award

 

For attainment of performance levels between the Target Performance and the Optimum Performance, the number of Options earned shall be interpolated.  For example: if the Target Performance of an ROA of .80% is achieved and the Target Award is 1,000 options and the Optimum ROA level of 1.05% would yield an Optimum Award of 1,500 options, then an ROA level of .85% represents 5%/25% or a 20% increase above the ROA Target Award at .80% or 1,500 – 1,000 = 500 x 20% = 100 above the Target Award of 1,000 options or an aggregate earned award of 1,100 options.

 

3.           Exercise of Options.  The Options subject to this Award shall be first exercisable in accordance with provisions of the Plan, provided the holder of such Option is an employee of the Company or Sun National Bank (“Bank”) on such date as follows:

 

	
(a)  

	
Schedule of Rights to Exercise.

 

As of the last day of each calendar quarter following the Date of Grant, or as soon as administratively feasible thereafter, the Committee (excluding any members at such time not qualifying as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended), shall review the performance criteria established as of the Date of Grant to determine and to certify if such performance criteria has been met in whole or in part. To the extent that such performance criteria has been satisfied, the applicable portion of such Awards shall become first earned and non-forfeitable and one-fourth of such Award shall be first exercisable as of the date of attainment of such performance criteria and one-fourth of such Award will be first exercisable annually thereafter; provided that the recipient remains an employee of the Company or the Bank on the date of such future vesting events.

3  

  

  

	
Date

	  	
 

Aggregate

Percentage

of

Options

Exercisable

	  	
Maximum Number of 

Options Which

Are First

Exercisable/

Non-forfeitable

(See Notes Below*)

	  	  	  	  	  
	
Upon grant:  __________

	  	
0

	  	
0

	
As of the date the performance targets are first attained on or prior to December 31, 2013:

	  	
25

	  	
_________

	
As of 1 year following attainment of the performance target:

	  	
50

	  	
_________

	
As of 2 years following attainment of the performance target:

	  	
75

	  	
_________

	
As of 3 years following attainment of the performance target:

	  	
100

	  	
_________

*NOTES:

	
A.

	
Such Options granted shall be considered incentive stock options, that being options that qualify as “incentive stock options” (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). If such Options to be awarded in whole, or in part, are to be “ISOs” then, in no event shall the aggregate Fair Market Value (determined as of the Grant Date) of all Shares with respect to which ISOs are first exercisable by the Optionee in any calendar year under any plan of the Company exceed $100,000; and any amount in excess of such ISO limitation shall be deemed not qualifying as ISO options.  Such $100,000 limitation will be verified at the time that such Options are deemed first exercisable.

 

	
B.

	
Upon termination of service as an employee of the Company and the Bank, absent Disability or death of the Award recipient, such Options then exercisable shall continue to be exercisable and shall cease to be exercisable three months from the date of such complete termination of service; provided that such exercisability will cease upon the Option holder commencing an employment, directorship, advisory or consulting relationship with a financial services enterprise (including but not limited to a savings and loan association, bank, credit union, or insurance company) whereby the Option holder will have a work location within 25 miles of any office of the Company, the Bank, or any subsidiary of such entities existing as of the date of such termination of employment.  Absent Disability or death, all Options not then exercisable on the date of such termination of employment will be forfeited as of such date.

 

	
C.

	
Upon Disability of an Optionee, Options that have previously been earned shall become 100% exercisable and shall remain exercisable for a period not to exceed one year from such date of Disability without regard to continuation of employment.  In the event of Disability of an Optionee, all Options that would otherwise become earned and non-forfeitable as a result of the Company’s attainment of the performance criteria during the 

 

4

  

  

 

 

	
 

	
period of six months following such date of Disability shall become earned and non-forfeitable upon the Company’s attainment of such performance criteria and shall be 100% exercisable for a period not to exceed one year from the date such Options become first earned and exercisable without regard to continuation of employment.

 

	
D.

	
In the event of death of an Optionee, all Options that have previously been earned shall become 100% exercisable and shall remain exercisable for a period not to exceed one year from such date of death of the recipient. In the event of the death of an Optionee, all Options that would otherwise become earned and non-forfeitable as a result of the Company’s attainment of the performance criteria during the period of six months following such date of death shall become earned and non-forfeitable upon the Company’s attainment of such performance criteria and shall be 100% exercisable for a period not to exceed one year from the date such Options become first earned without regard to continuation of employment.

 

	
E.

	
Upon a Change in Control of the Company or the Bank, all Options previously earned shall become 100% exercisable. Upon a Change in Control of the Company or the Bank, all such Options which have not yet become earned shall become immediately earned and 100% exercisable as if the “target level” of performance criteria has been attained without regard to such actual level of performance criteria.

 

	
F.

	
Upon termination of employment for “cause,” all such Options shall cease to be exercisable as of such date of termination of employment.

 

(b)           Method of Exercise.  This Option shall be exercisable by a written notice to the Company which shall:

 

(i)           State the election to exercise the Option, the number of Shares with respect to which it is being exercised, the person in whose name the stock certificate or certificates for such Shares of Common Stock is to be registered, his address and Social Security Number (or if more than one, the names, addresses and Social Security Numbers of such persons);

 

(ii)           Contain such representations and agreements as to the holder’s investment intent with respect to such shares of Common Stock as may be satisfactory to the Company’s counsel;

 

(iii)           Be signed by the person or persons entitled to exercise the Option and, if the Option is being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Option; and

 

(iv)           Be in writing and delivered in person or by certified mail to the Treasurer of the Company.

 

Payment of the purchase price of any Shares with respect to which the Option is being exercised shall be by shares of Company Common Stock, cash or check.  Common Stock utilized in full or partial payment of the exercise price must have been owned by the party 

 

5

  

  

 

exercising such Option for not less than six months prior to the date of exercise of such Option, and such Common Stock shall be valued at the Fair Market Value at the date of exercise.  The Company shall accept full or partial payment in Common Stock only to the extent permitted by applicable law. The certificate or certificates for shares of Common Stock as to which the Option shall be exercised shall be registered directly in the name of the person or persons exercising the Option or held in a brokerage or trust account for the benefit of such person or persons.

 

(c)           Restrictions on Exercise.  This Option may not be exercised if the issuance of the Shares upon such exercise would constitute a violation of any applicable federal or state securities or other law or valid regulation.  As a condition to the Optionee’s exercise of this Option, the Company may require the person exercising this Option to make any representation and warranty to the Company as may be required by any applicable law or regulation.

 

3.           Non-transferability of Option.  This Option may not be transferred in any manner otherwise than by will or the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee.  The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

 

4.           Term of Option.  This Option may not be exercised more than ten (10) years from the Date of Grant of this Option, as set forth below, and may be exercised during such term only in accordance with the Plan and the terms of this Option Award Agreement. Notwithstanding anything herein in to the contrary, to the extent that the Optionee shall be deemed a 10% stockholder in accordance with Sections 422 and 318 of the Code, then with respect to ISOs, the option term shall be only 5 years from the Date of Grant.

 

5.           Adjustments.  Subject to any required action by the stockholders of the Company, the number of Shares of Common Stock covered by this Award and the exercise price per Share shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding Shares of Common Stock of the Company resulting from a subdivision or consolidation of Company Common Stock (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise) or the payment of a stock dividend on the Company Common Stock or any other increase or decrease in the number of such Shares of Company Common Stock effected without the receipt or payment of consideration by the Company (other than Shares held by dissenting stockholders) occurring after the Date of Grant.

 

6.           Related Matters.  Notwithstanding anything herein to the contrary, additional conditions or restrictions related to such Options may be contained in the Plan or the resolutions of the Plan Committee authorizing such grant of Options.

6  

  

  

The foregoing 2010 Performance Equity Plan Award Agreement is executed by the undersigned on behalf of Sun Bancorp, Inc. in accordance with the Compensation Committee Action approved on ____________.

	  	  	
Sun Bancorp, Inc.

	  	  	  
	  	  	  
	  	  	  
	
Date of Grant:

	  	  	
By:

	  
	  	  	  	  	
Thomas X. Geisel

	  	  	  	
President and CEO

	  	  	  	  
	  	  	  	  
	  	  	  	  
	
Attest:

	  	  	  	  
	  	  	  	  	  
	  	  	  	  
	  	  	  	  
	
Award Acknowledged by the undersigned Optionee

	  	  
	  	  	  
	  	  	  
	  	  	  
	
______________________________

	  	  	
Date

7

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