Document:

exv10w2

Exhibit 10.2

SEVERANCE AGREEMENT

     This Severance Agreement (“Agreement”) is made as of the ___ day of
___, ___, between Terreno Realty Corporation, a Maryland corporation (the “Company”),
and Michael A. Coke (the “Executive”).

     WHEREAS, the Company desires to employ the Executive and to provide the Executive with certain
severance protection and the Executive desires to be employed by the Company on the terms contained
herein.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties agree as follows:

     1. Term. The term of this Agreement shall extend from the date first written above
(the “Commencement Date”) until the third anniversary of the Commencement Date. The Agreement
shall be automatically extended for an additional one-year period beginning on the third
anniversary of the Commencement Date and each anniversary thereof unless, not less than 90 days
prior to each such date, either party shall have given notice to the other that it does not wish to
extend this Agreement.

     2. Termination. During the term of this Agreement, the Executive’s employment with
the Company may be terminated without any breach of this Agreement under the following
circumstances:

          (a) Death. The Executive’s employment hereunder shall terminate upon his death.

          (b) Disability. The Company may terminate the Executive’s employment if he is
disabled and unable to perform the essential functions of the Executive’s then existing position or
positions under this Agreement with or without reasonable accommodation for a period of 180 days
(which need not be consecutive) in any 12-month period. If any question shall arise as to whether
during any period the Executive is disabled so as to be unable to perform the essential functions
of the Executive’s then existing position or positions with or without reasonable accommodation,
the Executive may, and at the request of the Company shall, submit to the Company a certification
in reasonable detail by a physician selected by the Company to whom the Executive or the
Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how
long such disability is expected to continue, and such certification shall for the purposes of this
Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of
the physician in connection with such certification. If such question shall arise and the
Executive shall fail to submit such certification, the Company’s determination of such issue shall
be binding on the Executive. Nothing in this Section 2(b) shall be construed to waive the
Executive’s rights, if any, under existing law

 

 

including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et
seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

          (c) Termination by Company for Cause. The Company may terminate the Executive’s
employment hereunder for Cause by a vote of the Board at a meeting of the Board called and held for
such purpose. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Executive
constituting a material act of misconduct in connection with the performance of his duties,
including, without limitation, misappropriation of funds or property of the Company or any of its
subsidiaries or affiliates other than the occasional, customary and de minimis use of Company
property for personal purposes; (ii) the commission by the Executive of any felony or a misdemeanor
involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would
reasonably be expected to result in material injury or reputational harm to the Company or any of
its subsidiaries and affiliates if he were retained in his position; (iii) continued
non-performance by the Executive of his duties hereunder (other than by reason of the Executive’s
physical or mental illness, incapacity or disability) which has continued for more than 30 days
following written notice of such non-performance from the Board; (iv) a breach by the Executive of
any of the provisions contained in Section 5 of this Agreement; (v) a material violation by the
Executive of the Company’s written employment policies, or (vi) failure to cooperate with a bona
fide internal investigation or an investigation by regulatory or law enforcement authorities, after
being instructed by the Company to cooperate, or the willful destruction or failure to preserve
documents or other materials known to be relevant to such investigation or the inducement of others
to fail to cooperate or to produce documents or other materials in connection with such
investigation.

          (d) Termination Without Cause. The Company may terminate the Executive’s employment
hereunder at any time without Cause. Any termination by the Company of the Executive’s employment
under this Agreement which does not constitute a termination for Cause under Section 2(c) and does
not result from the death or disability of the Executive under Section 2(a) or (b) shall be deemed
a termination without Cause. A notice by the Company of non-renewal of this Agreement shall not be
construed as a termination without Cause.

          (e) Termination by the Executive. The Executive may terminate his employment
hereunder at any time for any reason, including but not limited to Good Reason. For purposes of
this Agreement, “Good Reason” shall mean that the Executive has complied with the “Good Reason
Process” (hereinafter defined) following the occurrence of any of the following events: (i) a
material diminution in the Executive’s responsibilities, authority or duties; (ii) a material
diminution in the Executive’s Base Salary except for across-the-board salary reductions based on
the Company’s financial performance similarly affecting all or substantially all senior management
employees of the Company; (iii) a material change in the geographic location at which the Executive
provides services to the Company; or (iv) the material breach of this Agreement by the Company.
“Good Reason Process” shall mean that (i) the Executive reasonably determines in good faith that a
“Good Reason” condition has occurred; (ii) the Executive notifies the Company in writing of the
first occurrence of the Good Reason condition within 60 days of the first occurrence of such
condition; (iii) the Executive cooperates in good faith with the Company’s efforts, for a period
not less than 30 days following such notice (the “Cure Period”), to remedy the condition; (iv)
notwithstanding such efforts, the Good Reason

2

 

condition continues to exist; and (v) the Executive terminates his employment within 60 days
after the end of the Cure Period. If the Company cures the Good Reason condition during the Cure
Period, Good Reason shall be deemed not to have occurred.

          (f) Notice of Termination. Except for termination as specified in Section 2(a), any
termination of the Executive’s employment by the Company or any such termination by the Executive
shall be communicated by written Notice of Termination to the other party hereto. For purposes of
this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.

          (g) Date of Termination. “Date of Termination” shall mean: (i) if the Executive’s
employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is
terminated on account of disability under Section 2(b) or by the Company for Cause under
Section 2(c), the date on which Notice of Termination is given; (iii) if the Executive’s employment
is terminated by the Company under Section 2(d), 30 days after the date on which a Notice of
Termination is given; (iv) if the Executive’s employment is terminated by the Executive under
Section 2(e) without Good Reason, 30 days after the date on which a Notice of Termination is given,
and (v) if the Executive’s employment is terminated by the Executive under Section 2(e) with Good
Reason, the date on which a Notice of Termination is given after the end of the Cure Period.
Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the
Company, the Company may unilaterally accelerate the Date of Termination and such acceleration
shall not result in a termination by the Company for purposes of this Agreement.

     3. Compensation Upon Termination.

          (a) Termination Generally. If the Executive’s employment with the Company is
terminated for any reason, the Company shall pay or provide to the Executive (or to his authorized
representative or estate) any earned but unpaid base salary, incentive compensation earned but not
yet paid, unpaid expense reimbursements, accrued but unused vacation and any vested benefits the
Executive may have under any employee benefit plan of the Company (the “Accrued Benefit”) on or
before the time required by law but in no event more than 30 days after the Executive’s Date of
Termination.

          (b) Termination of Employment by Reason of Death or Disability. If the Executive’s
employment is terminated by the Company under Section 2(a) by reason of death or disability under
Section 2(b), then the Company shall through the Date of Termination, pay the Executive his Accrued
Benefit. In addition,

          (i) subject to the Executive (in case of disability only) signing a general release of
claims in favor of the Company and related persons and entities in a form and manner
satisfactory to the Company (the “Release”) within the 21-day period following the Date of
Termination and the expiration of the seven-day revocation period for the Release, the
Company shall pay the Executive, or his estate, as the case may be, a lump sum amount equal
to his most recent target award under the Company’s long-term incentive compensation
program. Such amount shall be paid on the first payroll date that occurs at least 30 days
after the Date of Termination;

3

 

          (ii) upon the Date of Termination, all time-based restricted stock awards held by the
Executive shall vest and become nonforfeitable.

          (c) Termination by the Company Without Cause or by the Executive with Good Reason. If
the Executive’s employment is terminated by the Company without Cause as provided in Section 2(d),
or the Executive terminates his employment for Good Reason as provided in Section 2(e), then the
Company shall, through the Date of Termination, pay the Executive his Accrued Benefit. In
addition:

          (i) subject to the Executive signing the Release within the 21-day period following the
Date of Termination and the expiration of the seven-day revocation period for the Release,
the Company shall pay the Executive an amount equal to one times the sum of the Executive’s
Base Salary and his most recent target award under the long-term incentive compensation
program (the “Severance Amount”). If such termination occurs within 12 months after a
Change in Control, the Severance Amount shall be two (2) times the sum of the Executive’s
Base Salary and his most recent target award under the Company’s long-term incentive
program. The Severance Amount shall be paid out in a lump sum on the first payroll date
that occurs at least 30 days after the Date of Termination; and

          (ii) upon the Date of Termination, all time-based restricted stock awards held by the
Executive shall vest and become nonforfeitable; and

          (iii) subject to the Executive’s copayment of premium amounts at the active employees’
rate, the Executive may continue to participate in the Company’s group health, dental and
vision program for 18 months; provided, however, that the continuation of health benefits
under this Section shall reduce and count against the Executive’s rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”).

          (d) Additional Limitation.

          (i) Anything in this Agreement to the contrary notwithstanding, in the event that the
amount of any compensation, payment or distribution by the Company to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”) and the applicable regulations
thereunder (the “Severance Payments”), would be subject to the excise tax imposed by
Section 4999 of the Code, the following provisions shall apply:

               (A) If the Severance Payments, reduced by the sum of (1) the Excise Tax and (2)
the total of the Federal, state, and local income and employment taxes payable by
the Executive on the amount of the Severance Payments which are in excess of the
Threshold Amount, are greater than or equal to the Threshold Amount, the Executive
shall be entitled to the full benefits payable under this Agreement.

4

 

               (B) If the Threshold Amount is less than (x) the Severance Payments, but
greater than (y) the Severance Payments reduced by the sum of (1) the Excise Tax and
(2) the total of the Federal, state, and local income and employment taxes on the
amount of the Severance Payments which are in excess of the Threshold Amount, then
the Severance Payments shall be reduced (but not below zero) to the extent necessary
so that the sum of all Severance Payments shall not exceed the Threshold Amount. In
such event, the Severance Payments shall be reduced in the following order: (1)
cash payments not subject to Section 409A of the Code; (2) cash payments subject to
Section 409A of the Code; (3) equity-based payments and acceleration; and (4)
non-cash forms of benefits. To the extent any payment is to be made over time
(e.g., in installments, etc.), then the payments shall be reduced in reverse
chronological order.

               (ii) For the purposes of this Section 3(d), “Threshold Amount” shall mean three times
the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the
regulations promulgated thereunder less one dollar ($1.00); and “Excise Tax” shall mean the
excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by
the Executive with respect to such excise tax.

               (iii) The determination as to which of the alternative provisions of this Section 3(d)
shall apply to the Executive shall be made by a nationally recognized accounting firm
selected by the Company (the “Accounting Firm”), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is reasonably requested by the
Company or the Executive. For purposes of determining which of the alternative provisions
of this Section 3(d) shall apply, the Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation applicable to individuals for the
calendar year in which the determination is to be made, and state and local income taxes at
the highest marginal rates of individual taxation in the state and locality of the
Executive’s residence on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local taxes. Any
determination by the Accounting Firm shall be binding upon the Company and the Executive.

          (e) Definitions. For purposes of this Agreement, the following terms shall have the
following meanings:

“Change in Control” shall mean any of the following:

          (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Act”) (other than the Company, any of its
subsidiaries, or any trustee, fiduciary or other person or entity holding securities under
any employee benefit plan or trust of the Company or any of its subsidiaries), together with
all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of
such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company

5

 

representing 40 percent or more of the combined voting power of the Company’s then
outstanding securities having the right to vote in an election of the Board (“Voting
Securities”) (in such case other than as a result of an acquisition of securities directly
from the Company); or

          (ii) the date a majority of the members of the Board is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a majority of the
members of the Board before the date of the appointment or election; or

          (iii) the consummation of (A) any consolidation or merger of the Company where the
stockholders of the Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more
than 50 percent of the voting shares of the Company issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale or
other transfer (in one transaction or a series of transactions contemplated or arranged by
any party as a single plan) of all or substantially all of the assets of the Company.

     Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the
Company which, by reducing the number of shares of Voting Securities outstanding, increases the
proportionate number of Voting Securities beneficially owned by any person to 40 percent or more of
the combined voting power of all of the then outstanding Voting Securities; provided, however, that
if any person referred to in this sentence shall thereafter become the beneficial owner of any
additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or
similar transaction or as a result of an acquisition of securities directly from the Company) and
immediately thereafter beneficially owns 40 percent or more of the combined voting power of all of
the then outstanding Voting Securities, then a “Change in Control” shall be deemed to have occurred
for purposes of the foregoing clause (i).

     4. Section 409A.

          (a) Anything in this Agreement to the contrary notwithstanding, if at the time of the
Executive’s separation from service within the meaning of Section 409A of the Code, the Company
determines that the Executive is a “specified employee” within the meaning of
Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive
becomes entitled to under this Agreement on account of the Executive’s separation from service
would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant
to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the
Code, such payment shall not be payable and such benefit shall not be provided until the date that
is the earlier of (A) six months and one day after the Executive’s separation from service, or (B)
the Executive’s death. If any such delayed cash payment is otherwise payable on an installment
basis, the first payment shall include a catch-up payment covering amounts that would otherwise
have been paid during the six-month period but for the application of this provision, and the
balance of the installments shall be payable in accordance with their original schedule.

6

 

          (b) To the extent that any payment or benefit described in this Agreement constitutes
“non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such
payment or benefit is payable upon the Executive’s termination of employment, then such payments or
benefits shall be payable only upon the Executive’s “separation from service.” The determination
of whether and when a separation from service has occurred shall be made in accordance with the
presumptions set forth in Treasury Regulation Section 1.409A-1(h).

          (c) The parties intend that this Agreement will be administered in accordance with
Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to
its compliance with Section 409A of the Code, the provision shall be read in such a manner so that
all payments hereunder comply with Section 409A of the Code. The parties agree that this Agreement
may be amended, as reasonably requested by either party, and as may be necessary to fully comply
with Section 409A of the Code and all related rules and regulations in order to preserve the
payments and benefits provided hereunder without additional cost to either party.

          (d) The Company makes no representation or warranty and shall have no liability to the
Executive or any other person if any provisions of this Agreement are determined to constitute
deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or
the conditions of, such Section.

     5. Confidential Information, Nonsolicitation and Cooperation.

          (a) Confidential Information. As used in this Agreement, “Confidential Information”
means information belonging to the Company which is of value to the Company in the course of
conducting its business and the disclosure of which could result in a competitive or other
disadvantage to the Company. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements and other intellectual property;
trade secrets; know-how; designs, processes or formulae; software; market or sales information or
plans; customer lists; and business plans, prospects and opportunities (such as possible
acquisitions or dispositions of businesses or facilities) which have been discussed or considered
by the management of the Company. Confidential Information includes information developed by the
Executive in the course of the Executive’s employment by the Company, as well as other information
to which the Executive may have access in connection with the Executive’s employment. Confidential
Information also includes the confidential information of others with which the Company has a
business relationship. Notwithstanding the foregoing, Confidential Information does not include
information in the public domain, unless due to breach of the Executive’s duties under
Section 5(b).

          (b) Confidentiality. The Executive understands and agrees that the Executive’s
employment creates a relationship of confidence and trust between the Executive and the Company
with respect to all Confidential Information. At all times, both during the Executive’s employment
with the Company and after its termination, the Executive will keep in confidence and trust all
such Confidential Information, and will not use or disclose any such Confidential Information
without the written consent of the Company, except as may be necessary in the ordinary course of
performing the Executive’s duties to the Company.

7

 

          (c) Documents, Records, etc. All documents, records, data, apparatus, equipment and
other physical property, whether or not pertaining to Confidential Information, which are furnished
to the Executive by the Company or are produced by the Executive in connection with the Executive’s
employment will be and remain the sole property of the Company. The Executive will return to the
Company all such materials and property as and when requested by the Company. In any event, the
Executive will return all such materials and property immediately upon termination of the
Executive’s employment for any reason. The Executive will not retain with the Executive any such
material or property or any copies thereof after such termination.

          (d) Nonsolicitation. During the Executive’s employment with the Company and for 12
months thereafter, regardless of the reason for the termination, the Executive (i) will refrain
from directly or indirectly employing, attempting to employ, recruiting or otherwise soliciting,
inducing or influencing any person to leave employment with the Company (other than terminations of
employment of subordinate employees undertaken in the course of the Executive’s employment with the
Company); and (ii) will refrain from soliciting or encouraging any customer or supplier to
terminate or otherwise modify adversely its business relationship with the Company. The Executive
understands that the restrictions set forth in this Section 5(d) are intended to protect the
Company’s interest in its Confidential Information and established employee, customer and supplier
relationships and goodwill, and agrees that such restrictions are reasonable and appropriate for
this purpose.

          (e) Third-Party Agreements and Rights. The Executive hereby confirms that the
Executive is not bound by the terms of any agreement with any previous employer or other party
which restricts in any way the Executive’s use or disclosure of information or the Executive’s
engagement in any business. The Executive represents to the Company that the Executive’s execution
of this Agreement, the Executive’s employment with the Company and the performance of the
Executive’s proposed duties for the Company will not violate any obligations the Executive may have
to any such previous employer or other party. In the Executive’s work for the Company, the
Executive will not disclose or make use of any information in violation of any agreements with or
rights of any such previous employer or other party, and the Executive will not bring to the
premises of the Company any copies or other tangible embodiments of non-public information
belonging to or obtained from any such previous employment or other party.

          (f) Litigation and Regulatory Cooperation. During and after the Executive’s
employment, the Executive shall cooperate fully with the Company in the defense or prosecution of
any claims or actions now in existence or which may be brought in the future against or on behalf
of the Company which relate to events or occurrences that transpired while the Executive was
employed by the Company. The Executive’s full cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Company at mutually convenient times.
During and after the Executive’s employment, the Executive also shall cooperate fully with the
Company in connection with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences that transpired
while the Executive was employed by the Company. The Company

8

 

shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection
with the Executive’s performance of obligations pursuant to this Section 5(f).

          (g) Injunction. The Executive agrees that it would be difficult to measure any
damages caused to the Company which might result from any breach by the Executive of the promises
set forth in this Section 5, and that in any event money damages would be an inadequate remedy for
any such breach. Accordingly, subject to Section 6 of this Agreement, the Executive agrees that if
the Executive breaches, or proposes to breach, any portion of this Agreement, the Company shall be
entitled, in addition to all other remedies that it may have, to an injunction or other appropriate
equitable relief to restrain any such breach without showing or proving any actual damage to the
Company.

     6. Arbitration of Disputes. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof or otherwise arising out of the Executive’s employment or the
termination of that employment (including, without limitation, any claims of unlawful employment
discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be
settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such
an agreement, under the auspices of the American Arbitration Association (“AAA”) in San Francisco,
California in accordance with the Employment Dispute Resolution Rules of the AAA, including, but
not limited to, the rules and procedures applicable to the selection of arbitrators. In the event
that any person or entity other than the Executive or the Company may be a party with regard to any
such controversy or claim, such controversy or claim shall be submitted to arbitration subject to
such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. This Section 6 shall be specifically
enforceable. Notwithstanding the foregoing, this Section 6 shall not preclude either party from
pursuing a court action for the sole purpose of obtaining a temporary restraining order or a
preliminary injunction in circumstances in which such relief is appropriate; provided that any
other relief shall be pursued through an arbitration proceeding pursuant to this Section 6.

     7. Consent to Jurisdiction. To the extent that any court action is permitted
consistent with or to enforce Section 6 of this Agreement, the parties hereby consent to the
jurisdiction of the Superior Court of the State of California and the United States District Court
for the District of California. Accordingly, with respect to any such court action, the Executive
(a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and
(c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with
respect to personal jurisdiction or service of process.

     8. Integration. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements between the parties
concerning such subject matter.

     9. Withholding. All payments made by the Company to the Executive under this
Agreement shall be net of any tax or other amounts required to be withheld by the Company under
applicable law.

9

 

     10. Successor to the Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal representatives, executors, administrators, heirs,
distributees, devisees and legatees. In the event of the Executive’s death after his termination
of employment but prior to the completion by the Company of all payments due him under this
Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in
writing to the Company prior to his death (or to his estate, if the Executive fails to make such
designation).

     11. Enforceability. If any portion or provision of this Agreement (including, without
limitation, any portion or provision of any section of this Agreement) shall to any extent be
declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion
and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by
law.

     12. Survival. The provisions of this Agreement shall survive the termination of this
Agreement and/or the termination of the Executive’s employment to the extent necessary to
effectuate the terms contained herein.

     13. Waiver. No waiver of any provision hereof shall be effective unless made in
writing and signed by the waiving party. The failure of any party to require the performance of
any term or obligation of this Agreement, or the waiver by any party of any breach of this
Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.

     14. Notices. Any notices, requests, demands and other communications provided for by
this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally
recognized overnight courier service or by registered or certified mail, postage prepaid, return
receipt requested, to the Executive at the last address the Executive has filed in writing with the
Company or, in the case of the Company, at its main offices, attention of the Board.

     15. Amendment. This Agreement may be amended or modified only by a written instrument
signed by the Executive and by a duly authorized representative of the Company.

     16. Governing Law. This is a California contract and shall be construed under and be
governed in all respects by the laws of the State of California, without giving effect to the
conflict of laws principles of such State. With respect to any disputes concerning federal law,
such disputes shall be determined in accordance with the law as it would be interpreted and applied
by the United States Court of Appeals for the Ninth Circuit.

     17. Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be taken to be an original; but such counterparts
shall together constitute one and the same document.

     18. Successor to Company. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume and agree to perform this Agreement to

10

 

the same extent that the Company would be required to perform it if no succession had taken
place. Failure of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a material breach of this Agreement.

     19. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be
considered as including the feminine gender unless the context clearly indicates otherwise.

     IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year
first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	TERRENO REALTY CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Michael A. Coke	 	 

11exv10w3

Exhibit 10.3

TERRENO REALTY CORPORATION

2010 EQUITY INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

     The name of the plan is the Terreno Realty Corporation 2010 Equity Incentive Plan (the
“Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee
Directors and other key persons (including Consultants and prospective employees) of Terreno Realty
Corporation (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a direct stake in the
Company’s welfare will assure a closer identification of their interests with those of the Company
and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening
their desire to remain with the Company.

     The following terms shall be defined as set forth below:

     “Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

     “Administrator” means either the Board or the compensation committee of the Board or a similar
committee performing the functions of the compensation committee and which is comprised of not less
than two Non-Employee Directors who are independent.

     “Award” or “Awards,” except where referring to a particular category of grant under the Plan,
shall include Restricted Stock Awards, Unrestricted Stock Awards and Performance Share Awards.

     “Award Certificate” means a written or electronic document setting forth the terms and
provisions applicable to an Award granted under the Plan. Each Award Certificate is subject to the
terms and conditions of the Plan.

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

     “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and
related rules, regulations and interpretations.

     “Consultant” means any natural person that provides bona fide services to the Company, and
such services 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.

     “Corporate Transaction” shall mean (i) the sale of all or substantially all of the assets of
the Company on a consolidated basis to an unrelated person or entity, or (ii) a merger,
reorganization, consolidation or other transaction (including, without limitation, a merger or

 

 

reorganization in which the Company is the surviving entity) pursuant to which the holders of
the Company’s outstanding voting power immediately prior to such transaction do not own a majority
of the outstanding voting power of the resulting or successor entity (or its ultimate parent, if
applicable) immediately upon completion of such transaction.

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

     “Effective Date” means the date on which the Plan is approved by stockholders as set forth in
Section 16.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.

     “Fair Market Value” of the Stock on any given date means the fair market value of the Stock
determined in good faith by the Administrator; provided, however, that if the Stock is admitted to
quotation on the New York Stock Exchange or another national securities exchange, the determination
shall be made by reference to market quotations. If there are no market quotations for such date,
the determination shall be made by reference to the last date preceding such date for which there
are market quotations; provided further, however, that if the date for which Fair Market Value is
determined is the first day when trading prices for the Stock are reported on a national securities
exchange, the Fair Market Value shall be the “Price to the Public” (or equivalent) set forth on the
cover page for the final prospectus relating to the Company’s Initial Public Offering.

     “Initial Public Offering” means the consummation of the first fully underwritten, firm
commitment public offering pursuant to an effective registration statement under the Act covering
the offer and sale by the Company of its equity securities, or such other event as a result of or
following which the Stock shall be publicly held.

     “Non-Employee Director” means a member of the Board who is not also an employee of the Company
or any Subsidiary.

     “Performance-Based Award” means any Restricted Stock Award or Performance Share Award granted
to a Covered Employee that is intended to qualify as “performance-based compensation” under Section
162(m) of the Code and the regulations promulgated thereunder.

     “Performance Criteria” means the criteria that the Administrator selects for purposes of
establishing the Performance Goal or Performance Goals for an individual for a Performance Cycle.
The Performance Criteria (which shall be applicable to the organizational level specified by the
Administrator, including, but not limited to, the Company or a unit, division, group, or Subsidiary
of the Company) that will be used to establish Performance Goals are limited to the following:
total shareholder return, earnings before interest, taxes, depreciation and amortization, net
income (loss) (either before or after interest, taxes, depreciation and/or amortization), changes
in the market price of the Stock, funds from operations or similar measure, operating income
(loss), cash flow (including, but not limited to, operating cash flow and free cash flow), return
on capital, assets, equity, or investment, earnings (loss) per share of Stock, volume and
performance of capital deployment, any of which may be measured either in

2

 

absolute terms or as compared to any incremental increase or as compared to results of a peer
group.

     “Performance Cycle” means one or more periods of time, which may be of varying and overlapping
durations, as the Administrator may select, over which the attainment of one or more Performance
Criteria will be measured for the purpose of determining a grantee’s right to and the payment of a
Restricted Stock Award or Performance Share Award. Each such period shall not be less than 12
months.

     “Performance Goals” means, for a Performance Cycle, the specific goals established in writing
by the Administrator for a Performance Cycle based upon the Performance Criteria.

     “Performance Share Award” means an Award entitling the recipient to acquire shares of Stock
upon the attainment of specified Performance Goals.

     “Restricted Stock Award” means an Award entitling the recipient to acquire, at such purchase
price (which may be zero) as determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of grant.

     “Sale Price” means the value as determined by the Administrator of the consideration payable,
or otherwise to be received by stockholders, per share of Stock pursuant to a Corporate
Transaction.

     “Section 409A” means Section 409A of the Code and the regulations and other guidance
promulgated thereunder.

     “Stock” means the Common Stock, par value $0.01 per share, of the Company, subject to
adjustments pursuant to Section 3.

     “Subsidiary” means any corporation or other entity (other than the Company) in which the
Company has at least a 50 percent interest, either directly or indirectly.

     “Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.

			
	SECTION 2.	 	ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE
AWARDS

     (a) Administration of Plan. The Plan shall be administered by the Administrator,
provided that the amount, timing and terms of the grants of Awards to Non-Employee Directors shall
be determined by the compensation committee or similar committee comprised solely of Non-Employee
Directors.

     (b) Powers of Administrator. The Administrator shall have the power and authority to
grant Awards consistent with the terms of the Plan, including the power and authority:

          (i) to select the individuals to whom Awards may from time to time be granted;

3

 

          (ii) to determine the time or times of grant, and the extent, if any, of Restricted Stock
Awards, Unrestricted Stock Awards and Performance Share Awards, or any combination of the
foregoing, granted to any one or more grantees;

          (iii) to determine the number of shares of Stock to be covered by any Award;

          (iv) to determine and modify from time to time the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions
may differ among individual Awards and grantees, and to approve the forms of Award Certificates;

          (v) to accelerate at any time the vesting of all or any portion of any Award; and

          (vi) at any time to adopt, alter and repeal such rules, guidelines and practices for
administration of the Plan and for its own acts and proceedings as it shall deem advisable; to
interpret the terms and provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the administration of the Plan; to
decide all disputes arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.

     All decisions and interpretations of the Administrator shall be binding on all persons,
including the Company and Plan grantees.

     (c) Award Certificate. Awards under the Plan shall be evidenced by Award Certificates
that set forth the terms, conditions and limitations for each Award which may include, without
limitation, the term of an Award and the provisions applicable in the event employment or service
terminates.

     (d) Indemnification. Neither the Board nor the Administrator, nor any member of
either or any delegate thereof, shall be liable for any act, omission, interpretation, construction
or determination made in good faith in connection with the Plan, and the members of the Board and
the Administrator (and any delegate thereof) shall be entitled in all cases to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent
permitted by law and/or under the Company’s articles or bylaws or any directors’ and officers’
liability insurance coverage which may be in effect from time to time and/or any indemnification
agreement between such individual and the Company.

     (e) Foreign Award Recipients. Notwithstanding any provision of the Plan to the
contrary, in order to comply with the laws in other countries in which the Company and its
Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator,
in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries
shall be covered by the Plan; (ii) determine which individuals outside the United States are
eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to
individuals outside the United States to comply with applicable foreign laws; (iv) establish
subplans and modify terms and procedures, to the extent the Administrator determines such actions
to be necessary or advisable (and such subplans and/or modifications shall be

4

 

attached to this Plan as appendices); provided, however, that no such subplans and/or
modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take
any action, before or after an Award is made, that the Administrator determines to be necessary or
advisable to obtain approval or comply with any local governmental regulatory exemptions or
approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder,
and no Awards shall be granted, that would violate the Exchange Act or any other applicable United
States securities law, the Code, or any other applicable United States governing statute or law.

SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

     (a) Stock Issuable. The maximum number of shares of Stock reserved and available for
issuance under the Plan shall be 767,500 shares, subject to adjustment as provided in this
Section 3. For purposes of this limitation, the shares of Stock underlying any Awards that are
forfeited, canceled or otherwise terminated shall be added back to the shares of Stock available
for issuance under the Plan. Notwithstanding the foregoing, shares tendered or held back upon
settlement of an Award to cover the tax withholding shall not be added to the shares authorized for
grant under the Plan. In the event the Company repurchases shares of Stock on the open market,
such shares shall not be added to the shares of Stock available for issuance under the Plan.
Subject to such overall limitations, shares of Stock may be issued up to such maximum number
pursuant to any type or types of Award. The shares available for issuance under the Plan may be
authorized but unissued shares of Stock or shares of Stock reacquired by the Company.

     (b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any
reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company’s capital stock, the outstanding shares of Stock are
increased or decreased or are exchanged for a different number or kind of shares or other
securities of the Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such shares of Stock or other
securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of
the assets of the Company, the outstanding shares of Stock are converted into or exchanged for
securities of the Company or any successor entity (or a parent or subsidiary thereof), the
Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per
share subject to each outstanding Restricted Stock Award, and (iv) the maximum number of shares
provided in Section 8(d). The adjustment by the Administrator shall be final, binding and
conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such
adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional
shares.

     (c) Mergers and Other Transactions. Except as the Administrator may otherwise specify
with respect to particular Awards in the relevant Award Certificate, in the case of and subject to
the consummation of a Corporate Transaction, the Plan and all outstanding Awards granted hereunder
shall terminate, unless provision is made in connection with the Corporate Transaction in the sole
discretion of the parties thereto for the assumption or continuation of Awards theretofore granted
by the successor entity, or the substitution of such Awards with new

5

 

Awards of the successor entity or parent thereof, with appropriate adjustment as to the number
and kind of shares as such parties shall agree (after taking into account any acceleration
hereunder or pursuant to any Award Certificate).

     (d) Substitute Awards. The Administrator may grant Awards under the Plan in
substitution for stock and stock based awards held by employees, directors or other key persons of
another corporation in connection with the merger or consolidation of the employing corporation
with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the substitute awards be
granted on such terms and conditions as the Administrator considers appropriate in the
circumstances. Any substitute Awards granted under the Plan shall not count against the share
limitation set forth in Section 3(a).

SECTION 4. ELIGIBILITY

     Grantees under the Plan will be such full or part-time officers and other employees,
Non-Employee Directors and key persons (including Consultants and prospective employees) of the
Company and its Subsidiaries as are selected from time to time by the Administrator in its sole
discretion.

SECTION 5. RESTRICTED STOCK AWARDS

     (a) Nature of Restricted Stock Awards. The Administrator shall determine the
restrictions and conditions applicable to each Restricted Stock Award at the time of grant.
Conditions may be based on continuing employment (or other service relationship) and/or achievement
of pre-established performance goals and objectives. The terms and conditions of each such Award
Certificate shall be determined by the Administrator, and such terms and conditions may differ
among individual Awards and grantees.

     (b) Rights as a Stockholder. Upon the grant of the Restricted Stock Award and payment
of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to
the voting of the Restricted Stock, subject to such conditions contained in the Restricted Stock
Award Certificate. Unless the Administrator shall otherwise determine, (i) uncertificated
Restricted Stock shall be accompanied by a notation on the records of the Company or the transfer
agent to the effect that they are subject to forfeiture until such Restricted Stock are vested as
provided in Section 5(d) below, and (ii) certificated Restricted Stock shall remain in the
possession of the Company until such Restricted Stock is vested as provided in Section 5(d) below,
and the grantee shall be required, as a condition of the grant, to deliver to the Company such
instruments of transfer as the Administrator may prescribe.

     (c) Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein or in the Restricted
Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the
Award Certificate or, subject to Section 13 below, in writing after the Award is issued, if a
grantee’s employment (or other service relationship) with the Company and its Subsidiaries
terminates for any reason, any Restricted Stock that has not vested at the time of termination
shall automatically and without any requirement of notice to such grantee from or other action by

6

 

or on behalf of, the Company be deemed to have been reacquired by the Company at its original
purchase price (if any) from such grantee or such grantee’s legal representative simultaneously
with such termination of employment (or other service relationship), and thereafter shall cease to
represent any ownership of the Company by the grantee or rights of the grantee as a stockholder.
Following such deemed reacquisition of unvested Restricted Stock that are represented by physical
certificates, a grantee shall surrender such certificates to the Company upon request without
consideration.

     (d) Vesting of Restricted Stock. The Administrator at the time of grant shall specify
the date or dates and/or the attainment of pre-established performance goals, objectives and other
conditions on which the non-transferability of the Restricted Stock and the Company’s right of
repurchase or forfeiture shall lapse. Notwithstanding the foregoing, in the event that any such
Restricted Stock granted to employees shall have a performance-based goal, the restriction period
with respect to such shares shall not be less than one year, and in the event any such Restricted
Stock granted to employees shall have a time-based restriction, the total restriction period with
respect to such shares shall not be less than three years; provided, however, that Restricted Stock
with a time-based restriction may become vested incrementally over such three-year period.
Subsequent to such date or dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions have lapsed shall no longer
be Restricted Stock and shall be deemed “vested.” Except as may otherwise be provided by the
Administrator either in the Award Certificate or, subject to Section 13 below, in writing after the
Award is issued, a grantee’s rights in any shares of Restricted Stock that have not vested shall
automatically terminate upon the grantee’s termination of employment (or other service
relationship) with the Company and its Subsidiaries and such shares shall be subject to the
provisions of Section 5(c) above.

SECTION 6. UNRESTRICTED STOCK AWARDS

     Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion,
grant (or sell at par value or such higher purchase price determined by the Administrator) an
Unrestricted Stock Award under the Plan. Unrestricted Stock Awards may be granted in respect of
past services or other valid consideration, or in lieu of cash compensation due to such grantee.

SECTION 7. PERFORMANCE SHARE AWARDS

     (a) Nature of Performance Share Awards. The Administrator may, in its sole
discretion, grant Performance Share Awards independent of, or in connection with, the granting of
any other Award under the Plan. The Administrator shall determine whether and to whom Performance
Share Awards shall be granted, the Performance Goals, the periods during which performance is to be
measured, which may not be less than one year, and such other limitations and conditions as the
Administrator shall determine.

     (b) Rights as a Stockholder. A grantee receiving a Performance Share Award shall have
the rights of a stockholder only as to shares actually received by the grantee under the Plan and
not with respect to shares subject to the Award but not actually received by the grantee. A
grantee shall be entitled to receive shares of Stock under a Performance Share Award only upon

7

 

satisfaction of all conditions specified in the Performance Share Award Certificate (or in a
performance plan adopted by the Administrator).

     (c) Termination. Except as may otherwise be provided by the Administrator either in
the Award agreement or, subject to Section 13 below, in writing after the Award is issued, a
grantee’s rights in all Performance Share Awards shall automatically terminate upon the grantee’s
termination of employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.

SECTION 8. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

     (a) Performance-Based Awards. Any employee providing services to the Company and who
is selected by the Administrator may be granted one or more Performance-Based Awards in the form of
a Restricted Stock Award or Performance Share Awards payable upon the attainment of Performance
Goals that are established by the Administrator and relate to one or more of the Performance
Criteria, in each case on a specified date or dates or over any period or periods determined by the
Administrator. The Administrator shall define in an objective fashion the manner of calculating
the Performance Criteria it selects to use for any Performance Cycle. Depending on the Performance
Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms
of overall Company performance or the performance of a division, business unit, or an individual.
The Administrator, in its discretion, may adjust or modify the calculation of Performance Goals for
such Performance Cycle in order to prevent the dilution or enlargement of the rights of an
individual (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development, (ii) in recognition of, or in anticipation of, any other unusual
or nonrecurring events affecting the Company, or the financial statements of the Company, or (iii)
in response to, or in anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions provided however, that the Administrator may not exercise such
discretion in a manner that would increase the Performance-Based Award granted to a Covered
Employee. Each Performance-Based Award shall comply with the provisions set forth below.

     (b) Grant of Performance-Based Awards. With respect to each Performance-Based Award
granted to a Covered Employee, the Administrator shall select, within the first 90 days of a
Performance Cycle (or, if shorter, within the maximum period allowed under Section 162(m) of the
Code) the Performance Criteria for such grant, and the Performance Goals with respect to each
Performance Criterion (including a threshold level of performance below which no amount will become
payable with respect to such Award). Each Performance-Based Award will specify the amount payable,
or the formula for determining the amount payable, upon achievement of the various applicable
performance targets. The Performance Criteria established by the Administrator may be (but need
not be) different for each Performance Cycle and different Performance Goals may be applicable to
Performance-Based Awards to different Covered Employees.

     (c) Payment of Performance-Based Awards. Following the completion of a Performance
Cycle, the Administrator shall meet to review and certify in writing whether, and to what extent,
the Performance Goals for the Performance Cycle have been achieved and, if so, to also calculate
and certify in writing the amount of the Performance-Based Awards earned for the

8

 

Performance Cycle. The Administrator shall then determine the actual size of each Covered
Employee’s Performance-Based Award, and, in doing so, may reduce or eliminate the amount of the
Performance-Based Award for a Covered Employee if, in its sole judgment, such reduction or
elimination is appropriate.

     (d) Maximum Award Payable. The maximum Performance-Based Award payable to any one
Covered Employee under the Plan for a Performance Cycle is 250,000 shares of Stock (subject to
adjustment as provided in Section 3(b) hereof).

SECTION 9. TRANSFERABILITY OF AWARDS

     (a) Transferability. No Awards other than Unrestricted Stock Awards shall be sold,
assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by
the laws of descent and distribution or pursuant to a domestic relations order. No Awards other
than Unrestricted Stock Awards shall be subject, in whole or in part, to attachment, execution, or
levy of any kind, and any purported transfer in violation hereof shall be null and void.

     (b) Administrator Action. Notwithstanding Section 9(a), the Administrator, in its
discretion, may provide either in the Award Certificate regarding a given Award or by subsequent
written approval that the grantee (who is an employee or director) may transfer his or her Awards
to his or her immediate family members, to trusts for the benefit of such family members, or to
partnerships in which such family members are the only partners, provided that the transferee
agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and
the applicable Award. In no event may an Award be transferred by a grantee for value.

     (c) Family Member. For purposes of Section 9(b), “family member” shall mean a
grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships, any person sharing the grantee’s household
(other than a tenant of the grantee), a trust in which these persons (or the grantee) have more
than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee)
control the management of assets, and any other entity in which these persons (or the grantee) own
more than 50 percent of the voting interests.

     (d) Designation of Beneficiary. Each grantee to whom an Award has been made under the
Plan may designate a beneficiary or beneficiaries to receive any payment under any Award payable on
or after the grantee’s death. Any such designation shall be on a form provided for that purpose by
the Administrator and shall not be effective until received by the Administrator. If no
beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have
predeceased the grantee, the beneficiary shall be the grantee’s estate.

SECTION 10. TAX WITHHOLDING

     (a) Payment by Grantee. Each grantee shall, no later than the date as of which the
value of an Award or of any Stock or other amounts received thereunder first becomes includable in
the gross income of the grantee for Federal income tax purposes, pay to the

9

 

Company, or make arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld by the Company with
respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee.
The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee
is subject to and conditioned on tax withholding obligations being satisfied by the grantee.

     (b) Payment in Stock. Subject to approval by the Administrator, a grantee may elect
to have the Company’s minimum required tax withholding obligation satisfied, in whole or in part,
by authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a
number of shares with an aggregate Fair Market Value (as of the date the withholding is effected)
that would satisfy the withholding amount due.

SECTION 11. SECTION 409A AWARDS

     To the extent that any Award is determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional
rules and requirements as specified by the Administrator from time to time in order to comply with
Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from
service” (within the meaning of Section 409A) to a grantee who is then considered a “specified
employee” (within the meaning of Section 409A), then no such payment shall be made prior to the
date that is the earlier of (i) six months and one day after the grantee’s separation from service,
or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment
from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A.
Further, the settlement of any such Award may not be accelerated except to the extent permitted by
Section 409A.

SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a termination of
employment:

     (a) a transfer to the employment of the Company from a Subsidiary or from the Company to a
Subsidiary, or from one Subsidiary to another; or

     (b) an approved leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute
or by contract or under the policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.

SECTION 13. AMENDMENTS AND TERMINATION

     The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any
time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any
other lawful purpose, but no such action shall adversely affect rights under any outstanding Award
without the holder’s consent. To the extent required under the rules of any securities exchange or
market system on which the Stock is listed, to the extent determined by

10

 

the Administrator to be required by the Code to ensure that compensation earned under Awards
qualifies as performance-based compensation under Section 162(m) of the Code, Plan amendments shall
be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders.
Nothing in this Section 13 shall limit the Administrator’s authority to take any action permitted
pursuant to Section 3(b) or 3(c).

SECTION 14. STATUS OF PLAN

     With respect to any payments in cash, Stock or other consideration not received by a grantee,
a grantee shall have no rights greater than those of a general creditor of the Company unless the
Administrator shall otherwise expressly determine in connection with any Award or Awards. In its
sole discretion, the Administrator may authorize the creation of trusts or other arrangements to
meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent with the foregoing
sentence.

SECTION 15. GENERAL PROVISIONS

     (a) No Distribution. The Administrator may require each person acquiring Stock
pursuant to an Award to represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof.

     (b) Delivery of Stock Certificates. Stock certificates to grantees under this Plan
shall be deemed delivered for all purposes when the Company or a stock transfer agent of the
Company shall have mailed such certificates in the United States mail, addressed to the grantee, at
the grantee’s last known address on file with the Company. Uncertificated Stock shall be deemed
delivered for all purposes when the Company or a Stock transfer agent of the Company shall have
given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed
to the grantee, at the grantee’s last known address on file with the Company, notice of issuance
and recorded the issuance in its records (which may include electronic “book entry” records).
Notwithstanding anything herein to the contrary, the Company shall not be required to issue or
deliver any certificates evidencing shares of Stock pursuant to the grant of any Award, unless and
until the Administrator has determined, with advice of counsel (to the extent the Administrator
deems such advice necessary or advisable), that the issuance and delivery of such certificates is
in compliance with all applicable laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the shares of Stock are listed, quoted or traded. All
Stock certificates delivered pursuant to the Plan shall be subject to any stop-transfer orders and
other restrictions as the Administrator deems necessary or advisable to comply with federal, state
or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is
listed, quoted or traded. The Administrator may place legends on any Stock certificate to
reference restrictions applicable to the Stock. In addition to the terms and conditions provided
herein, the Administrator may require that an individual make such reasonable covenants,
agreements, and representations as the Administrator, in its discretion, deems necessary or
advisable in order to comply with any such laws, regulations, or requirements. The Administrator
shall have the right to require any individual to comply with any timing or other restrictions with
respect to the settlement of any

11

 

Award, including a window-period limitation, as may be imposed in the discretion of the
Administrator.

     (c) Stockholder Rights. Until Stock is deemed delivered in accordance with Section
15(b), no right to vote or receive dividends or any other rights of a stockholder will exist with
respect to shares of Stock to be issued in connection with an Award, notwithstanding any other
action by the grantee with respect to an Award.

     (d) Other Compensation Arrangements; No Employment Rights. Nothing contained in this
Plan shall prevent the Board from adopting other or additional compensation arrangements, including
trusts, and such arrangements may be either generally applicable or applicable only in specific
cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right
to continued employment with the Company or any Subsidiary.

     (e) Trading Policy Restrictions. Awards under the Plan shall be subject to the
Company’s insider trading policies and procedures, as in effect from time to time.

     (f) Forfeiture of Awards under Sarbanes-Oxley Act. If the Company is required to
prepare an accounting restatement due to the material noncompliance of the Company, as a result of
misconduct, with any financial reporting requirement under the securities laws, then any grantee
who is one of the individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any Award received by such
individual under the Plan during the 12-month period following the first public issuance or filing
with the United States Securities and Exchange Commission, as the case may be, of the financial
document embodying such financial reporting requirement.

SECTION 16. EFFECTIVE DATE OF PLAN

     This Plan shall become effective upon stockholder approval in accordance with applicable state
law, the Company’s bylaws and articles of incorporation, and applicable stock exchange rules or
pursuant to written consent.

SECTION 17. GOVERNING LAW

     This Plan and all Awards and actions taken thereunder shall be governed by, and construed in
accordance with, the laws of the State of Maryland, applied without regard to conflict of law
principles.

DATE APPROVED BY BOARD OF DIRECTORS:

DATE APPROVED BY STOCKHOLDERS:

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00167-of-00352.parquet"}]]