Document:

Document

Exhibit 10.2
MEMORANDUM
TO:
FROM:
DATE:

Congratulations on being awarded shared of restricted stock of Hills Bancorporation as part of our incentive compensation program for key employees under our Stock Option and Incentive Plan. This Plan is used to reward you and other key employees for their performance. A complete copy of the Plan is available on the Bank’s Intranet. Amounts of the awards may vary among individuals in the Bank, so it is very important that you keep this confidential.

For your information, this stock is called “restricted stock.” This means it is subject to certain limitations until you have satisfied the requirements for full ownership in the shares and no longer face risk of forfeiting the shares (“vesting”).

We have a number of items enclosed in this packet:

1.    A stock award certificate made out for the 1,500 shares of Hills Bancorporation stock being registered in your name. The shares awarded to you have been issued in book entry in your name, so there is no actual stock certificate for these shares. The book entry shares a special legend which indicates that it is restricted stock.

After three years, these shares will be registered in book entry form with no restrictions. Until the end of the three years, the shares will remain subject to forfeiture if you do not continue your current employment with the Bank. 

2.    The Restricted Stock Agreement describes the terms and conditions on which the shares covered by the stock award are being issued to you. Please note that the shares would be forfeited if at any time during the first three years after the effective date of this stock award, you leave your employment with the Bank, you voluntarily accept a demotion from your current position with the Bank, or are involuntarily terminated by the Bank for “Cause” as that term is defined in the Restricted Stock Agreement. 

3.    A stock power, pre-authorizing Hills Bancorporation to complete the transfer of the restricted shares, including withholding from these shares to cover taxes due when the shares before vested, or, if necessary, the forfeiture of the shares should you not satisfy the requirements for vesting. 

4.    For income tax purposes, you will generally not be considered to own the shares until the shares are no longer subject to a substantial risk of forfeiture – i.e. once you have completed 3 years of employment with the Bank. At the time the shares vest, you will be required to recognize income for income tax purposes, and be subject to payroll tax on this income. The amount of the income to be recognized is equal to the fair market value of the shares, determined at the time they become vested. 

However, the federal tax laws will allow you to instead elect to be taxed on the current fair market value of the restricted shares immediately, even though they are not vested. To do so, you would need to file a so-called “Section 83(b)” election with the IRS within 30 days after the date these shares are issued to you. For your information, the value of the stock, as of the date of this award, is $63.50 per share.

You should sign at least one copy of the Restricted Stock Agreement and return the signed copy to me no later than May 12, 2021. If you have any questions, please feel free to give me a call. As with all of our shareholders, we look forward to the opportunity for stock value to go up in the future years.

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HILLS BANCORPORATION
RESTRICTED STOCK AGREEMENT

WHEREAS the Compensation and Incentive Stock Committee of Hills Bancorporation, an Iowa corporation (“Corporation”) has determined that (the “Key Employee”) a key employee of the Corporation and its subsidiary, Hills Bank and Trust Company (the “Bank”) is deserving of a bonus of common stock of the Corporation in reward for their expected industry, loyalty, and exceptional services to the Bank and the Corporation; and

WHEREAS this agreement is intended to implement the terms and conditions of the Hills Bancorporation 2020 Stock Option and Incentive Plan (the “Plan’) and that the said stock is to be issued to the Key Employee upon such terms and conditions hereinafter mentioned (unless otherwise stated, all capitalized terms herein shall have the same meaning as used in the Plan); and

WHEREAS the Key Employee is desirous of obtaining suck stock upon the terms and conditions pursuant to such Plan and as hereinafter mentioned. 

NOW, THEREFORE, WE AGREE AS FOLLOWS:

1.    Grant of Restricted Shares. The Corporation hereby grants the Key Employee 1,500 shares of common stock of Corporation (the “Restricted Shares”). This stock is equal in value to $63.50 per share for a total of $95,250, and is granted subject to the following terms and conditions. The terms and conditions of this Agreement are in addition to the terms and conditions of the Plan and in no way modify or amend any of its provisions.

In consideration for the grant of these Restricted Shares, the Key Employee agrees to continue providing their services to the Bank and the Corporation until and including the third anniversary of the effective date of the Key Employee’s commencement of employment with the Bank.  

2.    Restrictions on Unvested Restricted Shares.  The Key Employee shall have all rights and privileges of a stockholder of the Corporation with respect to the Restricted Shares, including the right to receive dividends paid with respect to such shares, expect that the following restriction shall apply to the Restricted Shares until such time or times as these restrictions lapse under Section 3 or any other provision of this Agreement:

(a)    the Key Employee shall not be entitled to the unencumbered passion of any of the Restricted Shares until the third anniversary of the effective date of this Agreement;

(b)    the Restricted Shares may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of by the Key Employee, except with the consent of the Corporation; and

(c)    until the third anniversary of the effective date of this Agreement, the Restricted Shares shall remain subject to forfeiture upon termination of the Key Employee’s employment with the Bank or voluntary transfer to another positing with the Bank, to the extent set forth in Section 5 below.

Notwithstanding the preceding sentence, the Restricted Shares shall remain subject to mandatory repurchase to the extent set forth in Section 8 below. 

3.    Vesting. The Restricted Share shall not become fully vested until the Key Employee has continued his employment with the Bank – through the third anniversary of the effective date of this Agreement. For this purpose, the effective date of this Agreement will be April 13, 2021, and the date the Restricted Shares shall become fully vested shall be April 13, 2024 (the “Vesting Date”).

4.    Issuance of Book Entry Stock for Shares. The Corporation shall cause the Restricted Shares to be issued in book entry form. These Restricted Shares will be registered in the name of the Key Employee promptly upon 
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execution of this Agreement. On or before the date of execution of this Agreement, the Key Employee shall deliver to the Corporation one or more stock powers endorsed in bank relating to the Restricted Shares. 

Once the Key Employee has completed three (3) years of employment with the Bank after the effective date of this Agreement, the book entry stock for the Restricted Shares may be exchanged for a stock certificate or certificates for the Restricted Shares or be maintained in book entry. The book entry stock certificates representing the Restricted Shares shall be legended to refer to this Agreement in the following manner: 

“The transferability of the shares of stock represented hereby are subject to the terms and conditions (including restrictions on transfer and possibly forfeiture upon termination of employment or demotion) set forth in a Restricted Stock Agreement entered into between the registered owner and Hills Bancorporation. Copies of such Restricted Stock Agreement are on file in the office of the Secretary of Hills Bancorporation, 131 E. Main Street, P. O. Box 160, Hills, Iowa 52235.

If a paper certificate is requested, the new stock certificate or certificates shall be delivered to the Key Employee promptly after the date on which the Restricted Shares have become vested under this Agreement, but not before the Key Employee has made any tax payment to the Corporation or made other arrangements for any tax withholding which may be required by Section 9.

5.    Forfeiture of Restricted Shares Upon Termination of Employment and Other Events. If the Key Employee’s employment with the Bank terminates or if the Key Employee’s employment status with the Bank changes for any of the following reasons prior to the date the Restricted Shares become vested pursuant to Section 3 of this Agreement, the Key Employee’s Restricted Shares shall be subject to forfeiture or repurchase by the Corporation to the following extent:

(a)    If the Key Employee is involuntarily terminated from employment with the Bank for “Cause” (as defined in Subsection 5(f) below) before the Vesting Date, the Restricted Shares shall be forfeited and shall be cancelled without payment to the Key Employee, immediately as of the date of the Key Employee’s termination.

(b)    If the Key Employee is involuntarily demoted to a position with reduced responsibilities or reduced compensation for “Cause” (as defined in Subsection 5(f)below) before the Vesting Date, the Restricted Shares shall be forfeited and shall be cancelled without payment to the Key Employee, immediately as of the date of the Key Employee’s demotion. 

(c)    If the Key Employee voluntarily resigns or otherwise terminates his employment with the Bank before the Vesting Date other than in connection with the Key Employee’s disability (as described below), the Restricted Shares shall be forfeited and shall be cancelled without payment to the Key Employee, immediately a of the date of the Key Employee’s termination.

(d)    If the Key Employee voluntarily accepts a transfer to a position with reduced responsibilities or reduced compensation before the Vesting Date, other than in connecting with an accommodation for the Key Employee’s disability (as described in Subsection 5(f) below), the Restricted Shares shall be forfeited and shall be cancelled without payment to the Key Employee, immediately as of the effective date of the Key Employee’s transfer. 

(e)    If the termination of the Key Employee’s employment with the Bank before the Vesting Date occurs as a result of the Key Employee’s permanent and total disability, the Restricted Shares shall be treated as vested under Section 3 of this Agreement, and the Key Employee may retain the Restricted Shares or sell the Restricted Shares in the open market, without regard to the transfer restrictions imposed by Sections 3 and 7 of this Agreement. For purposes of this Agreement, the Bank will presume that the Key Employee has a permanent and total disability if the Key Employee has received a Social Security disability award from the Social Security Administration or if the Key Employee has been determined to qualify for disability benefits under a long-term disability insurance program provided by the Bank.
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(f)    For the purpose of this Agreement, the Key Employee shall be considered terminated or demoted for “Cause” if the Bank determines that the Key Employee should be involuntary terminated or demoted for one or more of the following (i) commission of a crime, (ii) dishonest behavior, (iii) gross negligence, or (iv) gross misconduct. 

6.    Effect of Death. Upon the death of the Key Employee before the date the Restricted Shares before vested under Section 3 above, the Restricted Shares Shall be treated as fully vested under Section 3 of this Agreement, and the Key Employee’s beneficiary or other successor in interest may retain the Restricted Shares or sell the Restricted Shares in the open market, without regard to the transfer restrictions imposed by Sections 3 and 7 of this Agreement. 

7.    Restrictions on Transfer of Shares and Right of First Refusal. Except as provided below, the Key Employee may not transfer any portion of the Restricted Shares prior to the time the Restricted Shares become fully vested under Section 3 of this Agreement.

(a)    Transfer Restriction. Prior to the date the Vesting Date, the Restricted Shares may not be transferred, voluntarily or otherwise.

(b)    Right of First Refusal. If the Key Employee desires to sell or otherwise transfer any or all of their shares of stock of the Corporation, the Key Employee shall first offer the same for sale to the Corporation by giving to the Corporation written notice, delivered to the President or Secretary of the Corporation, designating the number of shares of stock desired to be sold or otherwise transferred, the name and residential address of any other intended transferee or transferees, if any, and the price at which the stock is proposed to be sold to such transferee or transferees.

(c)    Acceptance Process. The Board of Directors of the Corporation shall within thirty (30) days after receipt of said offer of sale and determination of fair market value as provided in Section 8 notify the offeror in writing whether it desires to purchase the stock so offered for sale at  the purchase price as hereinafter defined. In the event that the Board of Directors notifies the offeror of its acceptance of the offer for sale, said notification shall specify a date not less than five (5) nor more than fifteen (15) days after the date of such notice as the date on which the stock will be taken up and payment made therefore at the office of the Corporation. Upon the consummation of the purchase and payment of the price therefore and delivery of the cash payment hereinafter provided for, the Secretary of the Corporation shall deliver to the Corporation the shares stock purchased, which shall thereafter be held as Treasury Stock or shall retired, as the Board of Directors shall direct. If the Corporation shall not purchase and pay for all of the shares so offered for sale, it shall be deemed to have rejected said offer, as to any shares not so purchased and paid for.
(d)    Right of First Refusal In Even of Bankruptcy, Insolvency, Levy or Attachment. In the event of bankruptcy or insolvency of the Key Employee or in the event of an levy or attachment of the stock before the date the Restricted Shares become vested under Section 3 above, the Key Employee shall be deemed to have offered the Key Employee’s stock for sale to the Corporation as of the date the Corporation receives notice of such bankruptcy, insolvency, levy or attachment, whereupon the Corporation shall have the first right to purchase said shares of stock in the manner and during the time as proved in the foregoing Sections 7(b) and 7(c). For purposes of this Section, the price shall be determined according to the “purchase price” and “fair market value” process set forth in Section 8.

(e)    Purchase Price. The term “purchase price” or “fair market value” as used in this Agreement shall mean the “fair market value” of the share or shares of stock offered for sale as of the date such offer of sale is received by the Corporation or by the Key Employee as the case may be, determined according to the “purchase price” and “fair market value” process set forth in Section 8. 

(f)    Transfer to Family Member or Trust. Prior to the third anniversary of the Key Employee’s commencement of employment with the Bank, the Restricted Shares may be transferred to a member of the Key Employee’s immediate family or to a trust established for the benefit of members of the Key 
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Employee’s immediate family, but only if the Corporation has provided its express written consent to the proposed transfer. Such consent shall not be provided, and the Restricted Shares may not be transferred, unless the proposed transferee agrees to sign and deliver to the Secretary of the Corporation an Addendum to this Agreement in substantially the following form with appropriate insertions: 

ADDENDUM

“Pursuant to the terms of the Restricted Stock Agreement (“Agreement”) dated _____,2021, by and between Hills Bancorporation, an Iowa corporation, and _____ (the “Key Employee”), the undersigned, in order to induce the Corporation to consent to proposed transfer by the Key Employee of the _____shares of Common Stock of the Corporation previously registered in book entry form in the name of the Key Employee or evidenced by certificate(s) numbered ____ (the “Shares”), does hereby agree to become a party to said Agreement and acknowledges and agrees that he/she/it will receive and hold the Shares subject to all of the restrictions and obligations set forth in the terms of such Agreement, including a risk that the Shares will be forfeited upon termination of the Key Employee’s employment with Hills Bank and Trust, or demotion from employment as a [Title], with the same force and effect as though the undersigned had executed said Agreement. Undersigned acknowledges that he/she/it has read the Agreement and is familiar with and understands its terms and conditions.
Dated this _____day of _____, 20___.” 
______________________________
(Signature of Proposed Transferee)

8.    Right to Repurchase Shares.  In the event that one or more of the following events should occur before the Restricted Shares become fully vested under Section 3 of this Agreement, the Key Employee shall be deemed to have made an offer to sell any Restricted Shares which have not been forfeited under Section 5 above to the Corporation at their current “fair market value” (as this term is defined in below).

(a)    Upon an involuntary transfer of the Key Employee to a position with the Bank with lesser responsibilities or reduced compensation without “Cause” before the vesting Date; or

(b)    Upon the Key Employee’s involuntary termination from employment with the Bank without “Cause” before the Vesting Date.

If the Corporation elects to accept such offer and purchase the Restricted Shares, the Corporation shall provide the Key Employee with written notice of such election promptly and shall complete the purchase of the Restricted Shares within ninety (90) days after the date of the triggering event. The purchase price to be paid by the Corporation when purchasing the Restricted Shares pursuant to this Section 8 of this Agreement, shall be payable in cash and in full on the state of settlement for and delivery of the stock. 

For purposes of Section 8 of this Agreement, the term “purchase price” shall mean the “fair market value” of the common stock, which shall mean the fair market value determined as follows:

(a)    If at the time the “fair market value” is to be determined, the common stock of the Corporation is readily tradable on an established market, the fair market value shall be determined on the basis of the most recent closing price reported for the Stock, or, if there were no trades on such date, the average of the most recent reported bid and asked prices. 

(b)    If at the time the “fair market value’ is to be determined, the common stock of the Corporation is not readily tradable on an established market, the fair market value shall instead be determined on the basis of the stock value reported in the most recent stock appraisal report of the Corporation’s common stock prepared for the Corporation by an independent appraiser. If an independent appraisal has been obtained by the Corporation for other purposes, this independent appraisal shall be used for the purposes of this Agreement as well.

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(c)    If at the time the “fair market value” is to be determined, the Corporation’s common stock is not readily tradable on an established market, and no stock appraisal report has been delivered to the Corporation by an independent appraise within the preceding ninety (90) days, the Key Employee and the Corporation shall first endeavor to agree upon the fair market value of the Stock. If the Key Employee and the Corporation cannot agree upon the fair market value within fourteen (14) days, they shall retain an independent third-party appraiser to determine the value of the Stock. The independent third-party appraiser shall be instructed to determine the value of the Corporation’s common stock without any discount or control premium related to the percentage of ownership in the Corporation represented by the Stock. The Corporation and the Key Employee shall each pay one-half (1/2) of the fee of the independent third-party appraiser.

9.    Taxes and Tax Withholding. Whenever all or any part of the Restricted Shares issues under the terms of this Agreement become vested and are no longer subject to a substantial risk of forfeiture, the Corporation and/or the Bank shall notify the Key Employee of the amount of tax (if any) that must be withheld by the Bank under all applicable federal, state and local tax laws with respect to the vested shares (the “Withholding Tax”). The Key Employee agrees to make arrangements with the Corporation and the Bank with respect to the Withholding Tax due with respect to the vest shares by (a) remitting the required amount to the Corporation in cash, (b) tendering to the Corporation a number of shares of the Corporation’s Common Stock already and previously owned by the Key Employee with a current fair market value equal to such Withholding Tax, (c) tendering to the Corporation a portion of the newly vested shared of Common Stock previously issued to the Key Employee under this Agreement with a current fair market value equal to such Withholding Tax, and authorizing the Corporation to apply such shares to the withholding tax, (d) authorize the deduction of such amounts from the Key Employee’s regular cash compensation, or (e) otherwise satisfy the applicable tax withholding requirement in a manner satisfactory to the Corporation and the Bank.  

The Key Employee acknowledges and agrees that they are aware that they may file an election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code, electing to be taxed immediately on the current value of the Restricted Shares issued under this Agreement, regardless of the fact that the restrictions imposed on the Restricted Shares by the terms of this Agreement would otherwise amount to a “substantial risk of forfeiture” delaying taxation under Section 83 of the Code. The Key Employee will (a) provide a copy of the Section 83 (b) election to the Bank, (b) make arrangements with the Bank and the Corporation with respect to the Withholding Tax due, as if the Restricted Shares had become vested on the effective date, and (c) consistently report the current fair market value of the shares Restricted Stock as of the effective date of the issuance of the shares as $_____per share. 

10.    Miscellaneous. 

(a)    Neither this Agreement nor the Restricted Shares grated hereunder shall confer upon the Key Employee the right to continue employment with the Corporation or the Bank, and this Agreement shall not in any way modify or restrict any rights the Bank may have to terminate the Key Employee’s employment with the Bank.

(b)    The terms of this Agreement may only be amended, modified or waived by a written agreement executed by both of the parties hereto.

(c)    The validity, performance, construction and effect of this Agreement shall be governed by the laws of the State of Iowa, without giving effect to principles of conflict of laws.

In witness whereof this ____day of _____, 2021.

____________________, Key Employee

HILLS BANCORPORATION
Dwight O. Seegmiller, President
85brendan_herronxletterxag

1906 Towne Centre Blvd., Suite 370  •  Annapolis, MD 21401  •  (410) 571 – 9860  •  www.hannonarmstrong.com  January 6, 2021  J. Brendan Herron, Jr.   4819 Ft. Sumner Drive  Bethesda, MD 20816  Re: Strategic Advisor Consulting Services  Dear Brendan,  This letter agreement (“Letter Agreement”) sets forth the agreement between you (“you” or  “Consultant”) and Hannon Armstrong Sustainable Infrastructure Capital, Inc. and Hannon  Armstrong Capital, LLC (together, the “Company”) (jointly, the “Parties”) relating to your  transition from an Executive Vice President and Company employee to a Strategic Advisor under  a non-employee consulting agreement as provided in Section 2 below, which transition will be  effective on April 18, 2021 (“the Transition Date”) on the terms set forth herein.  1. Last Day of Employment, Final Compensation and Waiver of Claims under the Employment Agreement. 1.1. Last Day of Employment.  The Parties agree that your employment with the Company  pursuant to your Employment Agreement dated April 17, 2013 (“Employment Agreement”) will  end effective on the Transition Date.    1.2 Final Compensation under the Employment Agreement and Waiver of Claims.   1.2.1 The Company will continue to pay Consultant pursuant to the terms of Sections 3.1  through 3.4 the Employment Agreement through the Transition Date, in accordance with its  normal payroll practices, and that these payments shall include his 2020 bonus in the amount of  $880,000 with 50% paid in cash and 50% paid in stock using the same calculations as the other  senior executives. The Consultant agrees that this payment represents all amounts he is entitled to  as compensation for his employment through Transition Date.    1.2.2. The Company shall act to remove all restrictions from any unvested restricted stock,  operating partnership units (“OP Units) and Holdco Units awarded under the Equity Incentive  Plan, (as defined in Section 3.5 of the Employment Agreement or, as set forth in the respective  award agreements and identified in Exhibits D and E) upon the Waiver Effective Date (defined  below).  The restricted stock units (“RSUs”), OP Units and HoldCo Units will be converted into  unrestricted stock or OP Units, as applicable, at the maximum level contemplated in the applicable  grant agreements irrespective of any performance requirements.  All shares received under this  paragraph 1.2.2 will be subject to any applicable and customary withholding of taxes at a  minimum, equal to the level required by law. In exchange for the Company’s removal of all  restrictions as provided in this paragraph 1.2.2, the Consultant waives his rights (if any) to further  equity incentive compensation under Section 3.5 of the Employment Agreement.    DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     2  1.2.3. The Consultant represents that his unpaid expenses already and to be incurred  during the Term of his Employment Agreement will not exceed $25,000 and agrees to provide  documentation of those expenses within 10 business days after the Transition Date, at which point  the Company shall reimburse him for those expenses provided that the Consultant will not be  reimbursed for expenses not yet filed which were incurred prior to January 1, 2020.  In exchange  for the Company’s payment of his unpaid expenses as provided in this paragraph 1.2.3, the  Consultant waives his rights (if any) to further expense reimbursements under Section 3.6 of the  Employment Agreement.    1.2.4. In exchange for the Fees provided for in paragraph 3.1 of this Letter Agreement,  Executive waives his rights (if any) to any further compensation of any kind under Section 4 or 5  of the Employment Agreement.    1.2.5. The Parties agree to execute a Waiver and General Release of All Claims, a copy  of which is attached hereto as Exhibit C (“Waiver”) on or after the Transition Date.  The Waiver  shall become effective on the eighth day after the date the Waiver is signed by the Consultant,  provided he has not exercised his right to revoke the Waiver (the “Waiver Effective Date”).  The  Parties agree that if Consultant does not sign the Waiver or exercises his right to revoke the Waiver,  this Letter Agreement will become null and void.    2. Services to be Performed by Consultant.    2.1 Scope of Work.  Consultant will perform the work and provide the strategic advisor  consulting services (“Consulting Services”) set forth on Exhibit A to this Letter Agreement, in  accordance with the terms and conditions hereof.    2.2 Method of Performing Consulting Services.  Consultant will determine the method,  details, and means of performing the Consulting Services to be carried out for Company.  Company  may, however, require Consultant and employees of Consultant, if any, to observe at all times the  security and safety policies of Company.  In addition, Company will be entitled to exercise a broad  general power of supervision over the results of services performed by Consultant for the limited  purpose of ensuring satisfactory performance.  This power of supervision will include the right to  inspect, stop work, make suggestions or recommendations as to the details of the Consulting  Services, and request modifications to the scope of such services.    2.3 Place of Work. Consultant will perform all Consulting Services for Company off-site,  unless as mutually agreed otherwise, in which case Company will provide working space and  facilities, and any other services and materials Consultant may reasonably request in order to  perform the Consulting Services.  The Company shall transfer to the Consultant the computer  equipment and monitor used in his employment and shall continue to provide a Company email  address.    2.4. Rights of Third Parties.  Consultant agrees that (a) to the best of Consultant’s  knowledge, the work product generated by Consultant pursuant to this Letter Agreement will not  infringe on any copyright, patent, trade secret or other intellectual property right of any third party,  (b) Consultant will not knowingly use any equipment, facilities, supplies or other property of any  DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     3  third party which could give rise to any claims of ownership of Consultant’s services hereunder  by such third party, (c) during the period of performance for any project, Consultant will not enter  into any agreement or employment relationship with any other third party to perform services of a  similar or identical nature to the Consulting Services being performed hereunder, and (d)  Consultant will observe and abide by all applicable laws and regulations, including, but not limited  to, those of Company relative to conduct on any premises under Company’s control.    2.5 Compliance Obligations.  (a) Consultant will observe and abide by all applicable laws  and regulations, including, but not limited to, (i) any of the foreign assets control regulations of  the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any  enabling legislation or executive order relating thereto, (ii) Executive Order No. 13,224, 66 Fed.  Reg. 49,079 (2001), issued by the President of the United States (Executive Order Blocking  Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support  Terrorism) or (iii) the anti-money laundering provisions of the Uniting and Strengthening America  by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act)  Act of 2001, Public Law 107 56 (October 26, 2001) amending the Bank Secrecy Act, 31 U.S.C.  Section 5311 et seq., and any other laws relating to terrorism or money laundering.     (b)  Consultant hereby confirms that Consultant has been given a copy of the Company’s Code  of Business Conduct and Ethics and the Statement of Corporate Policy Regarding Equity  Transactions and will strictly abide by the terms set forth therein.    3. Compensation.    3.1 Fees.  For satisfactory performance of the Consulting Services to be performed by  Consultant, Company will pay Consultant the fees set forth on Exhibit B.  Such fees will represent  Company’s entire obligation for services rendered.      3.2 Expenses.  Except as otherwise provided in this Letter Agreement or Exhibit B,  Consultant will be responsible for all costs and expenses incident to the performance of services  for Company, including all costs incurred by Consultant to do business.    4. Term and Termination of Consulting Services.    4.1 Term.  Consultant will perform Consulting Services for one year from the Transition  Date unless that time period is extended by a written agreement signed by both parties  (“Agreement Term”).      4.2 Termination.  Company may, at its sole option, terminate the Consultant’s performance  of Consulting Services with or without cause, at any time by giving Consultant written notice of  termination, which termination will be effective upon the giving of such notice.  If the termination  of the Consultant’s performance of Consulting Services for any reason other than Cause (as  defined in Section 5.1 of the Employment Agreement except that Consultant shall not be required  to devote substantially all of his business time and efforts to the Company), (x) Consultant will be  paid the compensation on the payment dates set forth in Exhibit B and (y) all outstanding RSUs or  OP Units awarded under the Equity Incentive Plan will be converted into unrestricted stock or OP  DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     4  Units, as applicable, at the maximum level contemplated in the applicable grant agreements  irrespective of any performance requirements.  If the termination of the Consultant’s performance  of Consulting Services is by the Company for Cause, Consultant shall not be entitled to any further  compensation from the Company.  Consultant will advise Company of the extent to which  performance has been completed through such date, and collect and deliver to Company whatever  work product then exists in the manner requested by Company.  Consultant may, at his option,  terminate the performance of Consulting Services at any time by giving Company written notice  of termination and forfeit any further compensation payment contemplated after the date of such  notice of termination.    4.3 Return of Materials.  Upon termination of the Consultant’s performance of Consulting  Services for any reason, upon request, the Consultant will promptly return to Company all copies  of any Company data, records, or materials of whatever nature or kind, including, without  limitation, writings, designs, documents, records, data, memoranda, tapes and disks containing  models, documentation and notes, and all materials incorporating any proprietary information of  Company.  Consultant will also furnish to Company all work in progress or portions thereof,  including all incomplete work.    5. Independent Contractor Status.    5.1 Intention of Parties.  It is the intention of the parties that Consultant be an independent  contractor and not an employee, agent, or partner of the Company.  Nothing in this Letter  Agreement will be interpreted or construed as creating or establishing the relationship of employer  and employee between Company and either Consultant or any employee or agent of Consultant.    6. Taxes, etc.    6.1 State and Federal Taxes; Benefits.  Consultant will pay and report federal and state  income tax withholding, social security taxes, and unemployment insurance applicable to himself.   Consultant agrees to defend, indemnify, and hold harmless Company, Company’s shareholders,  directors, officers, employees and agents, from and against any claims, liabilities, or expenses  relating to such tax and insurance matters.  Without limiting the generality of the foregoing,  because Consultant is not an employee of the Company:    • Company will not withhold FICA (Social Security) from Consultant’s payments.    • Company will not make state or federal unemployment insurance contributions on behalf  of Consultant or its personnel, if any.    • Company will not withhold state and federal income tax from payment to Consultant.    • Company will not make disability insurance contributions on behalf of Consultant.    • Company will not obtain workers’ compensation insurance on behalf of Consultant.    DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     5  7. Covenants, Work Product, Warranties and Indemnities.    7.1 Covenants.  Consultant agrees that he remains bound by the Covenant in Section 6 of  the Employment agreement through the Agreement Term.  The Parties agree that “Restricted  Period” as that term is used in Section 6 of the Employment Agreement is hereby extended to April  18, 2023, provided however, if the Consultant presents a strategic opportunity that the Company  chooses not to pursue, the pursuit of such opportunity by the Consultant shall not be considered to  violate Section 6.  Nothing in this Section or in Section 6 of the Employment Agreement shall be  interpreted to limit the Consultant’s ability to: (a) serve nonprofit or governmental organizations  in any role; (b) serve on the Board of Directors of any Company in a nonmanagement role; or (c)  serve as an advisor or consultant (in a nonmanagement role) for customers (or similarly situated  companies), venture capital firms or other investors who invest in companies or in the development  of projects, provided that without written approval from the Company, Consultant will not serve  in a management, advisor or consulting role to an entity who provides debt or equity financing to  sustainable infrastructure projects.     7.2 Ownership of Work Product.  Subject to Section 7.1, all copyrights, patents, trade  secrets, or other intellectual property rights associated with any ideas, concepts, techniques,  inventions, processes, or works of authorship developed or created by Consultant or its personnel,  if any, during the course of performing Company’s work (collectively, the “Work Product”) will  belong exclusively to Company and will, to the extent possible, be considered a “work made for  hire” for Company within the meaning of Title 17 of the United States Code.  Consultant  automatically assigns, and will cause his employees, if any, automatically to assign, at the time of  creation of the Work Product, without any requirement of further consideration, any right, title, or  interest he/she or they may have in such Work Product, including any copyrights or other  intellectual property rights pertaining thereto.  Upon request of Company, Consultant will take  such further actions, and will cause his employees, if any, to take such further actions, including  execution and delivery of instruments of conveyance, as may be appropriate to give full and proper  effect to such assignment.     7.3 Warranties.  Consultant represents and warrants that , (a) Consultant’s performance of  the Consulting Services called for by this Letter Agreement will not violate any applicable law,  rule, or regulation; any contracts with third parties; or any third-party rights in any patent,  trademark, copyright, trade secret, or similar right, and (b) Consultant is aware of no obligations  inconsistent with the terms of this Letter Agreement, or with providing Consulting Services to  Company, including but not limited to any obligations which could interfere with Company’s  ownership rights in any discoveries, improvements or inventions made by Consultant.      7.4 Indemnification.  Each party ( the “Indemnifying Party”) shall protect, indemnify and  hold harmless the other Party and its directors, officers, employees, agents, affiliates and  representatives (each an “Indemnified Party”) against and from third party claims for any and all  cost, expense, damage, liability or loss, including costs and attorney’s fees, for or on account of  injury to, bodily or otherwise, or death of, persons, or for damage to, or destruction of property,  resulting from or attributable to the gross negligence or willful misconduct of the Indemnifying  Party, its directors, officers, employees, agents affiliates or representative, or resulting from,  arising out of, or in any way connected with the performance of, or failure to perform its  DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     6  obligations under this Letter Agreement, excepting only such cost, expense, damage, liability or  loss as may be caused by the gross negligence or willful misconduct of any Indemnified Party.     7.5 Requirements of Indemnity.  If any Indemnified Party intends to seek indemnification  under paragraph 7.4 from any Indemnifying Party with respect to any action or claim, the  Indemnified Party shall give the Indemnifying Party notice of such claim or action upon the receipt  of actual knowledge or information by the Indemnified Party of any possible claim or of the  commencement of such claim or action, which period shall in no event be later than the lessor (i)  fifteen business days prior to the last day of responding to such claim or action or (ii) one half of  the period allowed for responding to such claim or action.  The Indemnifying Party shall have no  liability under this Article for any claim or action for which such notice is not provided, unless the  failure to give such notice does not prejudice the Indemnifying Party.  The Indemnifying Party  shall have the right to assume the defense of any such claim or action, at its sole cost and expense,  with counsel designated by the Indemnifying Party and reasonably satisfactory to the Indemnified  Party: provided, however, that if the defendants in any such action include both the Indemnified  Party and the Indemnifying Party, and the Indemnified Party shall have reasonably concluded that  there may be legal defenses available to it which are different from or additional to those available  to the Indemnifying Party, the Indemnified Party shall have the right to select separate counsel, at  the Indemnified Party’s expense, to assert such legal defenses and to otherwise participate in the  defense of such action on behalf of such Indemnified Party. Should any Indemnified Party be  entitled to indemnification under this paragraph as a result of a claim by a third party, and should  the Indemnifying Party fail to assume the defense of such claim or action, the Indemnified Party  may, at the expense of the Indemnifying Party, contest (or, with the prior consent of the  Indemnifying Party, settle) such claim or action.  Except to the extent expressly provided herein,  no Indemnified Party shall settle any claim or action with respect to which it has sought or intends  to seek indemnification pursuant to this paragraph without the prior written consent of the  Indemnifying Party, which consent shall not be unreasonably withheld or delayed.     7.6 Survival of Indemnity Obligations:  The duty to indemnify hereunder will continue in  full force and effect notwithstanding the expiration or termination of this Letter Agreement, with  respect to any loss, liability, damage or other expense based on facts or conditions which occurred  prior to such termination.     8. General Provisions    8.1 Notices.  Any notices to be given hereunder by either party to the other may be effected  either by personal delivery in writing, email or by mail postage prepaid with return receipt  requested.  Mailed notices shall be addressed to the parties at the addresses appearing in the  introductory paragraph of this Letter Agreement, but each party may change such address by  written notice in accordance with this paragraph.  Notices delivered personally or emailed will be  deemed communicated as of actual receipt. Mailed notices will be deemed communicated as of  four days after deposited with the United States Postal Service.    8.2 Entire Agreement.  This Letter Agreement, the Employment Agreement and the Waiver  contain all the covenants and agreements between the Parties related to the provision of Consulting  Services contemplated herein.  Each party to this Letter Agreement acknowledges that no  DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

7  representations, inducements, promises, or agreements, orally or otherwise, have been made by  either party, or anyone acting on behalf of either party, that are not embodied in this Letter  Agreement, the Employment Agreement and the Waiver.  Any modification of this Letter  Agreement will be effective only if it is in writing signed by the party to be charged.  The Letter  Agreement is effective as of the date it is signed by the parties, but as provided in paragraph 1.2.5  it will become null and void if Consultant does not sign the Waiver or exercises his right to revoke  the Waiver.  8.3 Severability.  If any provision in this Letter Agreement is held by a court of competent  jurisdiction to be invalid, void, or unenforceable, the remaining provisions will nevertheless  continue in full force without being impaired or invalidated in any way.  8.4 No Third Party Beneficiaries.  This Letter Agreement is enforceable only by Consultant  and Company.  No employee or agent of Consultant, and no beneficiary thereof, will be a third- party beneficiary under or pursuant to the terms of this Letter Agreement. Nothing in this Letter  Agreement constitutes a promise made for the benefit of any person or entity not a party to this  Letter Agreement.  8.5 Governing Law.  This Letter Agreement shall be governed by and construed in  accordance with the laws of the State of Maryland.  8.6 Successors.  This Letter Agreement shall inure to the benefit of, and be binding upon,  Consultant and Company, their respective personal representatives, if any, and successors and  assigns; provided that Consultant may not assign any rights or delegate or subcontract any duties  under this Letter Agreement, in whole or in part, without the prior written consent of Company.   Any such assignment, delegation or subcontracting without Company’s prior written consent will  be void.  If you agree to the terms of this Letter Agreement, please sign the enclosed duplicate copy and  then return a hard copy to me.    Very truly yours,  Jeffrey W. Eckel  Chairman, President & CEO  Hannon Armstrong Sustainable Infrastructure  Capital, Inc. and Hannon Armstrong Capital, LLC  ACCEPTED AND AGREED:  J. Brendan Herron, Jr.  Date  01/06/2021 DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

    8    Exhibit A    Scope of Work    Consultant will provide the following Consulting Services to the Company and its affiliates  when directed by the CEO:    • Provide continued support and strategic advice regarding the Company’s new  strategic business opportunities, including the current opportunities presently being  pursued;    • Serve on the Energize board of advisors; and     • Other matters from time to time as mutually agreed by CEO and Consultant.                 DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     9  Exhibit B    Consultant’s Fees    Fees for Consulting Services    Company will provide compensation to Consultant, or his company as designated by  Consultant, as follows:    A. Within 10 business days after the effective date of this Agreement    • $1,000,000    • 22,254 OP Units to be vested on a time vest of 1 year    B. During and Beyond the Agreement Term    • $41,666.67 per month during the Agreement Term in accordance with its normal  payroll practices.      • To the extent a strategic project requires the involvement of the consultant beyond  what is contemplated in this agreement, the parties will negotiate in good faith  additional consideration which may be in the form of a success fee.      • Reimbursement of the full cost of Consultant’s health insurance coverage under  COBRA or otherwise for two years after the Transition Date through the  Agreement Term within 30 days of his submission of an invoice to the Company  on an after-tax basis, unless the Consultant obtains coverage through another  employer.    Expenses    Notwithstanding the provisions of paragraph 3.2 of the Letter Agreement, the Company  will pay Consultant for the actual amount of out-of-pocket expenses incurred during the  course of providing the Consulting Services, including, but not limited to food, travel,  lodging, communications, with the prior approval of the Company.  Invoices for such  expenses must include original receipts, to the extent available, supporting incurred costs  and payment will be made within 30 days of submittal.  Any expenses in excess of  $2,500 in the aggregate shall be approved in advance.      DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

    1    Exhibit C        WAIVER AND GENERAL RELEASE OF ALL CLAIMS    This Waiver and General Release of all Claims (this “Agreement”) is entered into by J.  Brendan Herron, Jr. (the “Executive”) and Hannon Armstrong Sustainable Infrastructure Capital,  Inc., a Maryland corporation (the “Company”), effective as of the eighth day after the date signed  by the Executive provided he has not exercised his revocation right in Section 1(b) below (the  “Effective Date”).  In consideration of the promises set forth in the Employment Agreement between the  Executive and the Company, dated April 17, 2013 (the “Employment Agreement”), and the Letter  Agreement dated January 6, 2021 (the “Letter Agreement”), the Executive and the Company agree  as follows:  1. General Releases and Waivers of Claims.  (a) Executive’s Release of Company.  In consideration of the payments benefits  and vesting of shares provided in the Letter Agreement and after consultation with counsel, the  Executive hereby irrevocably and unconditionally releases and forever discharges the Company  and its past, present and future parent entities, subsidiaries, divisions, affiliates and related business  entities, any of its or their successors and assigns, assets, employee benefit plans or funds, and any  of its or their respective past, present and/or future directors, officers, fiduciaries, agents, trustees,  administrators, managers, supervisors, stockholders, employees and assigns, whether acting on  behalf of the Company or in their individual capacities (collectively, “Company Parties”) from  any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands,  accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without  DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     2  limitation, any Claims under any federal, state, local or foreign law, that the Executive may have,  or in the future may possess, arising out of the Executive’s employment relationship with and  service as an employee, officer or director of the Company, and the termination of such  relationship or service; provided, however, that the Executive does not release, discharge or waive  (A) any rights to payments and benefits provided under the Employment Agreement or the Letter  Agreement except as provided in the Letter Agreement, (B) any right the Executive may have to  enforce the Letter Agreement, this Agreement, the Award Agreements or the Employment  Agreement except as provided in the Letter Agreement, (C) the Executive’s rights under the  Indemnification Agreement and rights to indemnification and advancement of expenses in  accordance with the Company’s certificate of incorporation, bylaws or other corporate governance  document, or any applicable insurance policy, (D) any claims for benefits under any employee  benefit or pension plan of the Company Parties subject to the terms and conditions of such plan  and applicable law including, without limitation, any such claims under the Employee Retirement  Income Security Act of 1974, or (E) any right or claim that the Executive may have to obtain  contributions as permitted by applicable law in an action in which both the Executive on the one  hand or any Company Party on the other hand are held jointly liable.  (b) Executive’s Specific Release of ADEA Claims.  In further consideration of  the payments benefits and vesting of shares provided in the Letter Agreement to the Executive, the  Executive hereby unconditionally release and forever discharge the Company Parties from any and  all Claims that the Executive may have as of the date the Executive signs this Agreement arising  under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable  rules and regulations promulgated thereunder (“ADEA”).  By signing this Agreement, the  Executive hereby acknowledges and confirms the following:  (i) the Executive was advised by the  DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     3  Company in connection with the Executive’s end of employment to consult with an attorney of  the Executive’s choice prior to signing this Agreement and to have such attorney explain to the  Executive the terms of this Agreement, including, without limitation, the terms relating to the  Executive’s release of claims arising under ADEA, and the Executive has been given the  opportunity to do so; (ii) the Executive was given a period of not fewer than 21 days to consider  the terms of this Agreement and to consult with an attorney of the Executive’s choosing with  respect thereto; and (iii) the Executive knowingly and voluntarily accepts the terms of this  Agreement.  The Executive also understands that the Executive has seven days following the date  on which the Executive signs this Agreement within which to revoke the release contained in this  paragraph, by providing the Company a written notice of the Executive’s revocation of the release  and waiver contained in this paragraph.  (c) No Assignment.  The Executive represents and warrants that the Executive  has not assigned any of the Claims being released under this Agreement.  2. Waiver of Relief.  The Executive acknowledges and agrees that by virtue of the  foregoing, the Executive has waived any relief available to him (including without limitation,  monetary damages and equitable relief, and reinstatement) under any of the Claims waived in  paragraph 2.  Therefore the Executive agrees that he will not accept any award or settlement from  any source or proceeding (including but not limited to any proceeding brought by any other person  or by any government agency) with respect to any Claim or right waived in this Agreement.   Nothing in this Agreement shall be construed to prevent the Executive from cooperating with or  participating in an investigation conducted by, any governmental agency, to the extent required or  permitted by law.  DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     4  3. Severability Clause.  In the event any provision or part of this Agreement is found  to be invalid or unenforceable, only that particular provision or part so found, and not the entire  Agreement, will be inoperative.  4. Non-admission.  Nothing contained in this Agreement will be deemed or construed  as an admission of wrongdoing or liability on the part of the Company or any other Company Party  or the Executive.  5. Governing Law.  All matters affecting this Agreement, including the validity  thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the  State of Maryland applicable to contracts executed in and to be performed in that State.  6. Arbitration.  Any dispute or controversy arising under or in connection with this  Agreement shall be resolved in accordance with Section 7.3 of the Employment Agreement.  7. Notices.  All notices or communications hereunder shall be made in accordance  with Section 7.4 of the Employment Agreement.  THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ  THIS AGREEMENT AND THAT HE FULLY KNOWS, UNDERSTANDS AND  APPRECIATES ITS CONTENTS, AND THAT HE HEREBY EXECUTES THE SAME  AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS  PROVIDED FOR HEREIN VOLUNTARILY AND OF HIS OWN FREE WILL.    J. BRENDAN HERRON, JR.             Date:           HANNON ARMSTRONG SUSTAINABLE   INFRASTRUCTURE CAPITAL, INC.    By:      Name:   DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     5    Title:           DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     6  Exhibit D    Unvested Stock Awards Under the Equity Incentive Plan  from which Restrictions will be Removed Under Paragraph 1.2.2           Total shares 13,423  Total OP Units 133,500       DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1 

 

     7  Exhibit E      Withholding Calculator      Hannon Armstrong Sustainable Infrastructure Capital, Inc.     Award vesting withholding computation          Name:   Brendan Herron  Number of shares vesting from Exhibit D:      HASI closing share price on vesting date:   (1)   State of Residence (MD/DC/VA/IL/CA):   MD  Over FICA limit of $142,800 (Y/N):   Y  Over Medicare limit  of $200,000 (Y/N):   Y            Taxable income:   $(1)       Federal withholding:  (2)% $(2)  State withholding:  (2)% $(2)  FICA withholding  (2)% $(2)  Medicare withholding  (2)% $(2)  401K withholding  (2)% $(2)             Total withholdings:   $(2)       Payment of withholdings:    To be paid by check or  withholding of shares at  option of Brendan Herron      (1) Taxable Income = Closing Price at date of vesting multiplied by number of shares  vested (per Exhibit D)  (2) Withholding amounts to be taxable income multiplied by percentage rate to be  determined by Brendan Herron between minimum required and maximum allowed  tax rates.  Total withholding is sum of individual withholdings     DocuSign Envelope ID: 959C3134-1EE8-4E5A-BB04-6CF313A0C7F1

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