Document:

ex1010q123111.htm

Exhibit 10.10

 

AGREEMENT BY AND BETWEEN

 

Riverview Community Bank

 

Camas, Washington

 

and

 

The Comptroller of the Currency

 

Riverview Community Bank, Camas, Washington ("Bank") and the Comptroller of the Currency of the United States of America ("Comptroller")1 wish to protect the interests of the depositors and other customers of the Bank, and, toward that end, wish the Bank to operate safely and soundly and in accordance with all applicable laws, rules and regulations.

The Comptroller has found unsafe or unsound banking practices relating to weak credit administration practices, credit risk management practices, and ineffective management and Board oversight of the Bank’s credit administration process.

In consideration of the above premises, it is agreed, between the Bank, by and through its duly elected and acting Board of Directors ("Board"), and the Comptroller, through his authorized representative, that the Bank shall operate at all times in compliance with the articles of this Agreement.

ARTICLE I

JURISDICTION

(1)           This Agreement shall be construed to be a "written agreement entered into with the agency" within the meaning of 12 U.S.C. § 1818(b)(1).

 

	
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Pursuant to Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010), all functions of the Office of Thrift Supervision ("OTS") related to Federal savings associations were transferred to the Office of the Comptroller of the Currency ("OCC") on July 21, 2011.  See Dodd-Frank Act, § 312(b), 12 U.S.C. § 5412.  Pursuant to § 316(a)(2)(B), of the Dodd-Frank Act, 12 U.S.C. § 414(a)(2)(B), Title III does not abate any action or proceeding commenced by or against the Director of the OTS or the OTS before July 21, 2011, except that ... for any action or proceeding arising out of a function of the OTS or the Director of the OTS transferred to the OCC or the Comptroller of the Currency by this title, the OCC or the Comptroller of the Currency shall be substituted for the OTS or the Director of the OTS, as the case may be, as a party to the action or proceeding on and after the transfer date of July 21, 2011.

  

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(2)           This Agreement shall be construed to be a "written agreement between such depository institution and such agency" within the meaning of 12 U.S.C. § 1818(e)(1) and 12 U.S.C. 1818(i)(2).

(3)           This Agreement shall be construed to be a "formal written agreement" within the meaning of 12 C.F.R. § 163.555.2  See 12 U.S.C. § 1831i.

(4)           This Agreement shall be construed to be a "written agreement" within the meaning of 12 U.S.C. § 1818(u)(1)(A).

(5)           This Agreement shall cause the Bank to not be eligible for "expedited treatment" within the meaning of 12 C.F.R. § 116.5, unless otherwise informed in writing by the Comptroller.

(6)           All reports or plans which the Bank or Board has agreed to submit to the Assistant Deputy Comptroller pursuant to this Agreement shall be forwarded to the:

Assistant Deputy Comptroller

Seattle Field Office

101 Stewart Street, Suite 1010

Seattle, WA 98101-2419

 

ARTICLE II

COMPLIANCE COMMITTEE

(1)           Within fifteen (15) days of the date of this Agreement, the Board shall appoint a Compliance Committee of at least three (3) directors, of which no more than one (1) shall be an employee of the Bank or any of its affiliates (as the term "affiliate" is defined in 12 U.S.C. § 37 lc(b)(1)), or a family member of any such person.  Upon appointment, the names of the members 

	
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Effective July 21, 2011, to facilitate the OCC's enforcement and administration of former OTS rules and to make appropriate changes to those rules to reflect OCC supervision of federal savings associations as of the transfer date, the OCC republished and re-codified in 12 C.F.R. Chapter I all OTS regulations from 12 C.F.R. Chapter V that the OCC has the authority to promulgate and enforce, with appropriate nomenclature and other technical changes.  76 Fed. Reg. 48950 (August 9, 2011).

 

  

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of the Compliance Committee and, in the event of a change of the membership, the name of any new member shall be submitted in writing to the Assistant Deputy Comptroller.  The Compliance Committee shall be responsible for monitoring and coordinating the Bank's adherence to the provisions of this Agreement.

(2)           The Compliance Committee shall meet at least monthly.

(3)           Within thirty (30) days of the date of this Agreement and quarterly thereafter, the Compliance Committee shall submit a written progress report to the Board setting forth in detail:

	
  

	
(a)

	
a description of the action needed to achieve full compliance with each Article of this Agreement;

	
  

	
(b)

	
actions taken to comply with each Article of this Agreement; and

	
  

	
(c)

	
the results and status of those actions.

(4)           The Board shall forward a copy of the Compliance Committee's report, with any additional comments by the Board, to the Assistant Deputy Comptroller within ten (10) days of receiving such report.

(5)           The Board shall ensure that the Bank has processes, personnel, and control systems to ensure implementation of and adherence to the requirements of this Agreement.

ARTICLE III

CAPITAL PLAN

(1)           Effective immediately, the Bank shall only declare dividends or make any other capital distributions when:

	
  

	
(a)

	
the Bank is in compliance with the Bank's Three-Year Plan as described below;

 

 

 

  

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(b)

	
the Bank is in compliance with all applicable laws and regulations relating to the payment of dividends and capital distributions; and

	
  

	
(c)

	
the Bank has received a prior written determination of no supervisory objection from the Assistant Deputy Comptroller.

(2)           Within ninety (90) days of this Agreement, the Board shall prepare and submit to the Assistant Deputy Comptroller for a prior written determination of no supervisory objection, a written capital plan for the Bank covering at least the next three years (hereafter the "Bank's Three-Year Plan"), complete with specific time frames that incorporate the requirements of this Article and, at a minimum, address or include

	
  

	
(a)

	
specific plans for the maintenance of adequate capital given the risk profile of the Bank and that includes primary and secondary sources and timing to meet current and future needs;

	
  

	
(b)

	
a dividend policy that only permits the declaration of a dividend in accordance with Paragraph (1) of this Article;

	
  

	
(c)

	
projections for capital requirements based upon a detailed analysis of the Bank's assets, liabilities, earnings, fixed assets, and off-balance sheet activities;

	
  

	
(d)

	
the primary source(s), especially those that are not credit sensitive, from which the Bank will strengthen its capital structure to meet the Bank's needs;

	
  

	
(e)

	
contingency plans that identify alternative methods should the primary source(s) under subparagraph (d) not be available;

 

 

 

  

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(f)

	
a financial forecast to include projections for major balance sheet and income statement accounts and desired financial ratios over the next three (3) years that shall address or include consideration of the requirements of this Article; and

	
  

	
(g)

	
systems to monitor the Bank's progress in meeting the plan's goals and objectives.

(3)           Upon receiving a written determination of no supervisory objection from the Assistant Deputy Comptroller, the Board shall immediately implement and thereafter ensure adherence to the Bank's Three-Year Plan.

ARTICLE IV

LOAN DEPARTMENT STAFFING

(1)           The Board shall ensure that the Bank has competent management and staff in place on a full-time basis to carry out the Board's policies, ensure compliance with this Agreement, applicable laws, rules and regulations, and manage the day-to-day operations of the Bank in a safe and sound manner.

(2)           By no later than March 31, 2012, the Bank shall create a credit risk management function that is independent from the loan production function of the Bank.  This shall include, at a minimum:

	
  

	
(a)

	
The identification and retention of separate individuals who have the necessary skills and ability to serve in the capacity of Chief Credit Officer ("CCO") and Chief Lending Officer ("CLO").  The Board shall ensure that these positions and their respective functions are independent from one another.

 

 

 

  

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(b)

	
The individual appointed to the Chief Credit Officer position shall be vested with sufficient executive authority to develop and implement appropriate credit risk management policies, procedures, and systems necessary to correct the Bank's deficiencies in credit underwriting, administration, and monitoring, and reach and maintain compliance with the credit related articles of this Agreement.

 

 

(3)           Within sixty (60) days of the date of this Agreement, the Board shall complete an internal study of the current staffing of the lending areas of the Bank.  The findings and recommendations of the Board shall be set forth in a written report (the "Lending Staff Study").  At a minimum, the Lending Staff Study shall contain:

	
  

	
(a)

	
the identification of present and future management and staffing requirements of the lending areas of the Bank, including the individuals they intend to appoint to the separate positions of CCO and CLO, as required by paragraph (2) of this article;

	
  

	
(b)

	
an evaluation of the knowledge, skills, and abilities of each lending officer, including those involved in lending oversight, and a determination of whether each of these individuals possesses the experience and other qualifications required to perform present and anticipated duties of each respective position;

	
  

	
(c)

	
recommendations as to whether lending management or staffing changes should be made, including the need for additions to, or deletions from, the lending management team;

 

 

  

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(d)

	
a recommended training program to address identified weaknesses in the skills and abilities of the lending management and staff;

	
  

	
(e)

	
an evaluation of current lines of authority, reporting responsibilities and delegation of duties for all lending officers and management, including identification of any overlapping duties or responsibilities; and

	
  

	
(f)

	
recommendations to correct or eliminate any other deficiencies in the supervision or organizational structure of the lending areas of the Bank.

(4)           Copies of the Lending Staff Study shall be forwarded to the Assistant Deputy Comptroller within five (5) days of completion.  The Assistant Deputy Comptroller shall retain the right to determine whether the Lending Staff Study complies with the terms of this Agreement.

(5)           Within ten (10) days following the completion of the Lending Staff Study, the Board shall implement and thereafter ensure that the Bank adheres to, any recommended management or staff changes or training programs.

ARTICLE V

CREDIT UNDERWRITING AND ADMINISTRATION

(1)           Effective as of the date of this Agreement, the Board shall ensure that all lending officers comply with all applicable laws, rules, regulations, Bank policies and procedures, safe and sound banking practices, and fiduciary duties.

(2)           Management must update the Credit Policy to require:

	
  

	
(a)

	
appropriate loan terms and amortization schedules by loan type;

	
  

	
(b)

	
appropriate curtailment and re-margining requirements;

	
  

	
(c)

	
appropriate use of interest reserves;

 

 

  

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(d)

	
expectations for maintaining current collateral valuations for all collateral supporting the loan; and

	
  

	
(e)

	
Analysis of the borrower's global debt service based on a reasonable loan structure; and

	
  

	
(f)

	
a description of the Bank’s loan workout arrangement process.

(3)           Effective as of the date of this Agreement, the Bank may not grant, extend, renew, alter, or restructure any loan or other extension of credit equal to or exceeding two-hundred fifty thousand dollars ($250,000), without:

	
  

	
(a)

	
documenting the specific reason or purpose for the extension of credit;

	
  

	
(b)

	
identifying the expected source of repayment in writing;

	
  

	
(c)

	
structuring the repayment terms to coincide with the expected source of repayment;

	
  

	
(d)

	
obtaining current and satisfactory credit information, including performing and documenting analysis of credit information and a detailed cash flow analysis of all expected repayment sources;

	
  

	
(e)

	
determining and documenting whether the loan complies with the Bank's revised Loan Policy and if it does not comply, providing identification of the exception and ample justification to support waiving the policy provision;

	
  

	
(f)

	
making and documenting the determinations made regarding the customer's ability to repay the credit on the proposed repayment terms;

	
  

	
(g)

	
providing an accurate risk assessment grade and proper accrual status for each credit as further described in Article IX;

 

 

  

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(h)

	
documenting, with adequate supporting material, the value of collateral and properly perfecting the Bank's lien on it where applicable.; and

	
  

	
(i)

	
without obtaining the written approval of the Bank's Loan Committee or Board.

(5)           Within sixty (60) days of this Agreement, the Board shall take the necessary steps to obtain current and satisfactory credit information on all loans lacking such information, including those listed in the ROE, in any subsequent Report of Examination, in any internal or external loan review, or in any listings of loans lacking such information provided to management by the Comptroller's Examiners at the conclusion of an examination.

(6)           Within sixty (60) days of this Agreement, the Board shall ensure proper collateral documentation is maintained on all loans and correct each collateral exception listed in the ROE, in any subsequent Report of Examination, in any internal or external loan review, or in any listings of loans lacking such information provided in writing to management by the Comptroller's Examiners at the conclusion of an examination or will be obtained within sixty (60) days of the receipt of any collateral exception.

ARTICLE VI

CREDIT RISK RATINGS AND NONACCRUAL RECOGNITION

(1)           Within sixty (60) days of this Agreement, the Board shall develop, and submit to the Assistant Deputy Comptroller for a prior written determination of no supervisory objection, a program to ensure that the risk associated with the Bank's loans and other assets is properly reflected and accounted for on the Bank's books and records and the Bank does not improperly recognize income.  The Bank's policy and its implementation shall include, at a minimum, provisions requiring that:

 

 

  

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(a)

	
the Board adopts a loan grading system that is consistent with the criteria set forth in applicable regulations and regulatory guidance, including, but not limited to:

	
  

	
(i)

	
12 C.F.R. § 160.160 (Asset Classification);

	
  

	
(ii)

	
OTS' Examination Handbook, Section 260, "Classification of Assets;" or

	
  

	
(iii)

	
any applicable successor regulation or guidance as specified by the Comptroller and is applicable to federal savings banks;

	
  

	
(b)

	
the Bank's loans and other assets are graded based upon current facts and existing/reasonable (considering the loan purpose) repayment terms with a focus upon whether the primary repayment source is threatened by a well-defined weakness and whether the credit relies heavily upon secondary repayment sources, especially illiquid collateral or an unsubstantiated guarantor;

	
  

	
(c)

	
the Bank's loans and other assets are timely placed on nonaccrual by the lending officers in accordance with the instructions for the preparation of the Thrift Financial Reports and, once implemented and applicable, the instructions for Consolidated Reports of Income and Condition (also known as a "Call Report"), and the OTS' Examination Handbook, Section 260, "Classification of Assets;" or any applicable successor regulation or regulatory guidance as specified by the Comptroller and is applicable to federal savings banks;

 

 

 

  

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(d)

	
lending officers conduct periodic, formal reviews for determining the appropriate risk rating and accrual determination;

	
  

	
(e)

	
appropriate analysis and documentation are maintained in the credit files to support the current and previous risk rating or accrual determination for all credit relationships totaling two-hundred fifty thousand dollars ($250,000) or more;

	
  

	
(f)

	
the President, Chief Credit Officer, and all lending officers receive immediate training with respect to the application of Subparagraphs (a) through (e) of this Article;

	
  

	
(g)

	
the lending officers and senior management are assigned responsibility and held accountable (to include, at a minimum, consideration in periodic performance reviews and compensation) for ensuring that the Bank's loans and other assets are appropriately and timely risk rated, charged off and/or placed on nonaccrual; and

	
  

	
(h)

	
independent, external validation of the risk rating process.

(2)           Upon receiving a written determination of no supervisory objection from the Assistant Deputy Comptroller, the Board shall immediately implement and thereafter ensure adherence to the program required by this Article.

ARTICLE VII

PROBLEM LOAN MANAGEMENT

(1)           Effective as of the date of this Agreement, the Board shall take immediate and continuing action to protect its interest in those assets criticized in the ROE, in any subsequent 

 

 

  

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Report of Examination, by internal or external loan review, or in any list provided to management by the Comptroller's Examiners during any examination.

 

(2)           Within ninety (90) days of this Agreement, the Board shall prepare and submit to the Assistant Deputy Comptroller for a prior written determination of no supervisory objection, a written program designed to reduce the Bank's criticized assets (the "Problem Assets Plan").  The Problem Assets Plan shall include or address the following matters:

	
  

	
(a)

	
aggregate reporting of criticized asset levels by type to the Board or a designated committee thereof every month;

	
  

	
(b)

	
specific plans for the reduction of criticized assets by asset type with target reductions by month; and

	
  

	
(c)

	
procedures for the monthly review and preparation of written determinations by the Board or a designated committee thereof regarding the effectiveness of the responsible officer's efforts to eliminate the weaknesses in each criticized credit relationship or Real Estate Owned ("REO") totaling two-hundred fifty thousand dollars ($250,000) or above (including any sold portion).

(3)           The Board's compliance with Paragraph (2) of this Article shall include the development of procedures for the monthly submission and review of problem asset reports for all criticized credit relationships and REO totaling two-hundred fifty thousand dollars ($250,000) or above (including any sold portion), that require, at a minimum, analysis and documentation of the following:

	 	
(a)

	
an identification of the expected sources of repayment;

 

 

  

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(b)

	
the current appraised value of supporting collateral and the position of the Bank's lien on such collateral where applicable, as well as other necessary documentation to support the collateral valuation;

	
  

	
(c)

	
an analysis of current and satisfactory credit information, including cash flow analysis where loans are to be repaid from operations;

	
  

	
(d)

	
the proposed action to eliminate the basis of criticism and the time frame for its accomplishment;

	
  

	
(e)

	
trigger dates for borrower actions or for loan officers to reassess the strategy and enact collection plans;

	
  

	
(f)

	
specific action plans and trigger dates for risk rating changes and documentation of the analysis and reasoning to support the current risk rating;

	
  

	
(g)

	
for criticized relationships of two-hundred fifty thousand dollars ($250,000) or above (including any sold portion) that were made for the purpose of constructing or developing commercial real estate, the reports shall also include:

	
  

	
(i)

	
the initial scheduled maturity date of the loan, number of extensions and/or renewals, and current maturity date;

	
  

	
(ii)

	
project development status;

	
  

	
(iii)

	
a comparison of development costs to the budgeted amount;

	
  

	
(iv)

	
a comparison of sales activity to the original sales projections;

	
  

	
(v)

	
current market conditions and activity;

 

 

  

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(vi)

	
amount and source of initial interest reserve and the amount and source of any subsequent additions to the reserve;

	
  

	
(vii)

	
an assessment of the borrower's global cash flow;

	
  

	
(viii)

	
an assessment of the guarantor's ability to support the project;

	
  

	
(ix)

	
any other significant information relating to the project; and

	
  

	
(h)

	
a determination of whether the loan is impaired and the amount of the impairment, consistent with Accounting Standards Codification 310-10 (formerly known as FASB Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan).

(4)           Upon receiving a written determination of no supervisory objection from the Assistant Deputy Comptroller, the Board shall immediately implement and thereafter ensure adherence to the program required by this Article.

(5)           A copy of each problem asset report relating to criticized credit relationships and REO totaling two-hundred fifty thousand dollars ($250,000) or above (including any sold portion) prepared during the last month of each quarter end (e.g., March, June, September, December) along with any Board comments regarding the effectiveness of the effort to eliminate the weaknesses in each credit or to dispose of the REO, shall be submitted to the Assistant Deputy Comptroller within thirty (30) days of each calendar quarter end, with the first set of reports due by no later than April 30, 2012.

(6)           Effective as of the date of this Agreement, the Bank may not extend credit, directly or indirectly, including renewals, extensions or capitalization of accrued interest, to a borrower whose loans or other extensions of credit are criticized in the ROE, in any subsequent Report of Examination, in any internal or external loan review, or in any list provided to 

 

  

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management by the Comptroller's Examiners during any examination and whose aggregate loans or other extensions equal or exceed two-hundred fifty thousand dollars ($250,000) (including any sold portion), unless each of the following conditions is met:

	
  

	
(a)

	
the Board or a designated committee thereof finds that the extension of additional credit is necessary to promote the best interests of the Bank and that prior to renewing, extending or capitalizing any additional credit, a majority of the Board or a designated committee thereof approves the credit extension and documents in writing the Bank’s rationale for the renewal.

	
  

	
(b)

	
the Board's formal plan to collect or strengthen the criticized asset will not be compromised.

ARTICLE VIII

EXTERNAL LOAN REVIEW

(1)           Within sixty (60) days of the date of this Agreement, the Board shall employ a qualified consultant to perform semi-annual asset quality reviews of the Bank's loan portfolio.  The scope of the external loan review shall provide for a written report to be filed with the Board after each review and shall use a loan and lease grading system consistent with the guidelines set forth in.  Such reports shall, at a minimum, include comments and conclusions regarding:

	
  

	
(a)

	
the identification, type, rating, and amount of problem loans and leases;

	
  

	
(b)

	
the identification and amount of delinquent and nonaccrual loans;

	
  

	
(c)

	
the identification/status of credit related violations of law or regulation;

	
  

	
(d)

	
loans not in conformance with the Bank's lending policies;

 

 

  

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(e)

	
credit underwriting and documentation exceptions; credit analysis and documentation of such;

	
  

	
(g)

	
accuracy of internal risk ratings;

	
  

	
(h)

	
overall credit administration practices; and

	 	
(i)

	
completeness and effectiveness of problem loan workout plans.

 

(2)           Prior to the appointment or employment of any individual as loan review consultant or entering into any contract with any consultant, the Board shall submit the name and qualifications of the proposed consultant and the proposed scope and terms of employment to the Assistant Deputy Comptroller for a prior written determination of no supervisory objection.  After the OCC has advised the Bank that it does not take supervisory objection to the loan review consultant or the scope of the review, the Board shall immediately engage the loan review consultant pursuant to the proposed terms of the engagement.

(3)           The Board or a designated committee shall review the independent loan review reports and ensure that, if appropriate, immediate, adequate, and continuing remedial action, is taken upon the findings noted in the reports.

(4)           A copy of the reports submitted to the Board, as well as documentation of the action taken by the Bank to collect or strengthen assets identified as problem credits, shall be maintained in the books and records of the Bank.

(5)           The Bank shall not terminate the consultant's asset quality review services without a prior written determination of no supervisory objection from the Assistant Deputy Comptroller.

 

  

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ARTICLE IX

ALLOWANCE FOR LOAN AND LEASE LOSSES

(1)           Within sixty (60) days of this Agreement, the Board shall revise, adopt, implement, and thereafter ensure adherence to written policies and procedures for maintaining an appropriate Allowance for Loan and Lease Losses ("Allowance") in accordance with GAAP.

The Allowance policies and procedures shall be consistent with the guidance set forth in:

	
  

	
(a)

	
the Federal Financial Institutions Examination Council's "Interagency Policy Statement on the Allowance for Loan and Lease Losses" dated December 13, 2006 (OTS CEO Memorandum No. 250);

	
  

	
(b)

	
OTS' Examination Handbook, Section 261, "Adequacy of Valuation Allowances;"

	
  

	
(c)

	
OTS CEO Memorandum No. 304 (ALLL-Observed Thrift Practices Including Sound Practices), dated May 22, 2009; or

	
  

	
(d)

	
any applicable successor regulation and guidance as specified by the Comptroller.

(2)           The Allowance policies and procedures required under paragraph (1) of this Article shall include, at a minimum:

	 	
(a)

	
procedures for determining whether a loan is impaired and measuring the amount of impairment, consistent with Accounting Standards Codification 310-10 (formerly known as FASB Statement of Financial Accounting Standards No, 114, Accounting by Creditors for Impairment of a Loan);

	
  

	
(b)

	
procedures for segmenting the loan portfolio and estimating loss on groups of loans, consistent with Accounting Standards Codification 310-10 and 

 

  

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450-20 (formerly known as FASB Statement of Financial Accounting Standards No. 5, Accounting for Contingencies);procedures for validating the Allowance methodology; and

	
  

	
(c)

	
procedures to ensure that the estimation of credit losses considers the relevant qualitative and environmental factors, with particular focus on the following:

	
  

	
(i)

	
trends in the Bank's internal risk ratings, delinquent and nonaccrual loans;

	
  

	
(ii)

	
results of the Bank's external loan review;

	
  

	
(iii)

	
concentrations of credit in the Bank;

	
  

	
(iv)

	
present and prospective economic conditions; and

	
  

	
(v)

	
applicable experience of the Bank's lending staff.

(3)           The program shall provide for a process for summarizing and documenting, for the Board's review and approval, the amount to be reported in the Thrift Financial Reports or Call Report, as applicable, for the Allowance.  Any deficiency in the Allowance shall be remedied in the quarter it is discovered, prior to the filing of the Thrift Financial Report or Call Report, as applicable, by additional provisions from earnings.  Written documentation shall be maintained indicating the factors considered and conclusions reached by the Board in determining the adequacy of the Allowance.

ARTICLE XI

CONCENTRATIONS OF CREDIT

(1)           Within ninety (90) days of the date of this Agreement, the Board shall adopt, implement, and thereafter ensure Bank adherence to a written asset diversification program 

 

 

  

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consistent with the "Concentrations of Credit" booklet of the Comptroller's Handbook (December, 2011).  The program shall include, but not necessarily be limited to, the following:

 

	
  

	
(a)

	
a review of current policies, processes and procedures to control and monitor concentrations of credit;

	
  

	
(b)

	
a written analysis of all concentrations of credit that fully assesses inherent credit, liquidity, and interest rate risk;

	
  

	
(c)

	
establishment of safe and sound, formal risk limits for all concentrations of credit based on a percentage of capital; and

	
  

	
(d)

	
an action plan approved by the Board to reduce the risk of any concentration of credit deemed imprudent in the above analysis.

(2)           The Board shall ensure that future concentrations of credit are subjected to the analysis required by paragraph (1)(b), and the limits established by paragraph (1)(c), of this Article and that the analysis demonstrates that the concentration will not subject the Bank to undue credit, liquidity, or interest rate risk.

(3)           The Board shall forward a copy of the written asset diversification program, including the analysis of existing concentrations of credit, and the establishment of formal limits for all existing or future concentrations of credit, to the Assistant Deputy Comptroller for prior determination of no supervisory objection.

ARTICLE XII

CLOSING

(1)           Although the Board has agreed to submit certain programs and reports to the Assistant Deputy Comptroller for review or prior written determination of no supervisory 

 

 

  

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objection, the Board has the ultimate responsibility for proper and sound management of the Bank.

 

(2)           It is expressly and clearly understood that if, at any time, the Comptroller deems it appropriate in fulfilling the responsibilities placed upon him/her by the several laws of the United States of America to undertake any action affecting the Bank, nothing in this Agreement shall in any way inhibit, estop, bar, or otherwise prevent the Comptroller from so doing.

(3)           Any time limitations imposed by this Agreement shall begin to run from the effective date of this Agreement.  Such time requirements may be extended in writing by the Assistant Deputy Comptroller for good cause upon written application by the Board.

(4)           The provisions of this Agreement shall be effective upon execution by the parties hereto and its provisions shall continue in full force and effect unless or until such provisions are amended in writing by mutual consent of the parties to the Agreement or accepted, waived, or terminated in writing by the Comptroller.

(5)           In each instance in this Agreement in which the Board is required to ensure adherence to, and undertake to perform certain obligations of the Bank, it is intended to mean that the Board shall:

	
  

	
(a)

	
authorize and adopt such actions on behalf of the Bank as may be necessary for the Bank to perform its obligations and undertakings under the terms of this Agreement;

	
  

	
(b)

	
require the timely reporting by Bank management of such actions directed by the Board to be taken under the terms of this Agreement;

	
  

	
(c)

	
follow-up on any non-compliance with such actions in a timely and appropriate manner; and

 

 

  

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(d)

	
require corrective action be taken in a timely manner of any non-compliance with such actions.

(6)           This Agreement is intended to be, and shall be construed to be, a supervisory "written agreement entered into with the agency" as contemplated by 12 U.S.C. § 1818(b)(1), and expressly does not form, and may not be construed to form, a contract binding on the Comptroller or the United States.  Notwithstanding the absence of mutuality of obligation, or of consideration, or of a contract, the Comptroller may enforce any of the commitments or obligations herein undertaken by the Bank under his supervisory powers, including 12 U.S.C. § 1818(b)(1), and not as a matter of contract law.  The Bank expressly acknowledges that neither the Bank nor the Comptroller has any intention to enter into a contract.  The Bank also expressly acknowledges that no officer or employee of the Office of the Comptroller of the Currency has statutory or other authority to bind the United States, the U.S. Treasury Department, the Comptroller, or any other federal bank regulatory agency or entity, or any officer or employee of any of those entities to a contract affecting the Comptroller's exercise of his supervisory responsibilities.  The terms of this Agreement, including this paragraph, are not subject to amendment or modification by any extraneous expression, prior agreements or prior arrangements between the parties, whether oral or written.

IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has hereunto set her hand on behalf of the Comptroller.

 

 

 

	/s/Cathy Doperalski                                                  	January 25, 2012                                                 
	Cathy Doperalski   	Date 
	
Assistant Deputy Comptroller

Seattle Field Office 

	 

 

  

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IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting Board of Directors of the Bank, have hereunto set their hands on behalf of the Bank.

 

 

 

	/s/Michael Allen                                                       	January 25, 2012                                                 
	

Michael Allen 

	Date 
	 	 
	 	 
	/s/Gary R. Douglass                                                 	January 25, 2012                                                 
	Gary R. Douglass 	Date 
	 	 
	 	 
	/s/Edward R. Geiger                                                 	January 25, 2012                                                 
	

Edward R. Geiger 

	Date 
	 	 
	 	 
	/s/Gerald L. Nies                                                       	January 25, 2012                                                 
	Gerald L. Nies 	Date 
	 	 
	 	 
	/s/Jerry C. Olson                                                       	January 25, 2012                                                 
	Jerry C. Olson 	Date
	 	 
	 	 
	/s/Patrick  Sheaffer                                                   	January 25, 2012                                                 
	Patrick  Sheaffer 	Date 
	 	 
	 	 
	/s/Bess R. Wills                                                        	January 25, 2012                                                 
	Bess R. Wills 	Date 
	 	 
	 	 
	/s/Ronald Wysaske                                                   	January 25, 2012                                                 
	Ronald Wysaske 	Date 

 

 

 

22form8k013012ex4-1.htm

TUNDRA GOLD CORP.

2012 STOCK OPTION PLAN

ARTICLE 1

PURPOSE OF THE PLAN

This 2012 Stock Option Plan (the “Plan”) is intended to promote the interests of Tundra Gold Corp., a Nevada corporation, by providing eligible persons in the Corporation’s employ or service with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to continue in such employ or service.

ARTICLE 2

DEFINITIONS

2.1           “Board” shall mean the Corporation’s Board of Directors.

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

2.3           “Committee” shall mean those persons appointed by the Board to exercise one or more administrative functions under the Plan.

2.4           “Common Stock” shall mean the Corporation’s common stock.

2.5           “Corporate Transaction” shall mean either of the following stockholder approved transactions to which the Corporation is a party:

(i)           an acquisition of any voting securities of the Corporation by any entity or person, immediately after which such entity or person has beneficial ownership of 51% or more of the then outstanding shares or the combined voting power of the Corporation’s then outstanding voting securities;

(ii)           the individuals who, as of the effective date of this Plan are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least two-thirds of the members of the Board; provided, however, that if the election, or nomination of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board;

(iii)           a merger, consolidation or other business combination with or into another company; or

(iv)           the sale or disposition of all or substantially all of the assets of the Corporation.

  

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2.6           “Corporation” shall mean Tundra Gold Corp., a Nevada corporation, and any successor corporation to all or substantially all of the assets or voting stock of the Corporation which shall by appropriate action adopt the Plan.

2.7           “Disability” shall mean the inability of the Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment and shall be determined by the Plan Administrator on the basis of such medical evidence as the Plan Administrator deems warranted under the circumstances.  Disability shall be deemed to constitute permanent Disability in the event that such Disability is expected to result in death or has lasted or can be expected to last for a continuous period of 12 months or more.

2.8           “Employee” shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

2.9           “Exercise Date” shall mean the date on which the Corporation shall have received written notice of the Option exercise.

2.10           “Fair Market Value” per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

(a)           If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market.  If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(b)           If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange.  If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

(c)           If the Common Stock is at the time neither listed on any Stock Exchange nor traded on the Nasdaq National Market, then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate, consistent with the requirements of Treasury Regulation § 1.422-2(e).

  

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2.11           “Incentive Option” shall mean an Option which satisfies the requirements of Code Section 422.

2.12           “Involuntary Termination” shall mean the termination of the Service of any individual which occurs by reason of:

(a) such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or

(b) such individual’s voluntary resignation following: (i) a change in his or her position with the Corporation which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (ii) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonuses under any corporate-performance based bonus or incentive programs) by more than 15%, or (iii) a relocation of such individual’s place of employment by more than 50 miles; provided and only if such change, reduction or relocation is effected without the
individual’s consent.

2.13           “Misconduct” shall mean the commission of any of the following: (i) any act of fraud or embezzlement by the Optionee or Participant, (ii) any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or (iii) any other intentional misconduct by such person.  The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any
Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary).

	
2.14  

	
“1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

2.15 “Non-Statutory Option” shall mean an Option not intended to satisfy the requirements of Code Section 422.

2.16 “Options” shall mean all Incentive Options and/or Non-Statutory Options granted pursuant to the Plan.

2.17 “Optionee” shall mean any person to whom an Option is granted under the Plan.

2.18 “Parent” shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

2.19 “Plan” shall mean this Tundra Gold Corp. 2012 Stock Option Plan as set forth in this document, and as amended from time to time.

  

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2.20 “Plan Administrator” shall mean either the Board or the Committee acting in its capacity as administrator of the Plan.

2.21 “Service” shall mean the provision of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the Option grant.

2.22 “Stock Exchange” shall mean either the American Stock Exchange, the New York Stock Exchange or the Over the Counter Bulletin Board.

2.23 “Stock Option Agreement” shall mean a written agreement between the Corporation and an Optionee evidencing the terms and conditions of an individual Option grant.  Each Stock Option Agreement shall be subject to the terms and conditions of the Plan.

2.24 “Subsidiary” shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all class of stock in one of the other corporations in such chain.

2.25 “10% Stockholder” shall mean the owner of stock (as determined under Code § 424(d)) possessing more than 10% of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary).

ARTICLE 3

PLAN ADMINISTRATION

3.1           Board.  The Plan shall be administered by the Board.  However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee.  Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time.  The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the
Committee.

3.2           Plan Administrator.  The Plan Administrator shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan, Stock Option Agreements, and/or any outstanding Options thereunder as it may deem necessary or advisable.  Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan or any Stock Option Agreement issued thereunder.

  

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ARTICLE 4

ELIGIBILITY

4.1           Participation.  The persons eligible to participate in the Plan are as follows:

(a)           Employees,

(b)           non-employee members of the Board, and

(c)           consultants, agents and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary).

4.2           Incentive Options May Be Granted Only To Employees.  Incentive Options may be granted only to Employees.  Non-Statutory Options may be granted only to Employees, Board members, agents, consultants, and other independent advisors.  All Options actually granted to Board members, agents, consultants and other independent advisors shall be Non-Statutory Options.

4.3           More Than 10% Stockholders.  No person shall be eligible for the grant of an Incentive Option if, at the time of grant, such person is a 10% Stockholder, unless the exercise price of such Option is at least 110% of the Fair Market Value of such stock at the date of grant and the Option is not exercisable after the expiration of five years from the date of grant.

4.4           Authority of Plan Administrator Regarding Grants.  The Plan Administrator shall have full authority to determine, with respect to the grants made under the Plans: (i) which eligible persons are to receive such grants, (ii) the time or times when those grants are to be made, (iii) the number of shares to be covered by each such grant, (iv) the status of the granted Option as either an Incentive Option or a Non-Statutory Option, (v) the time or times when each Option is to
become exercisable, and (vi) the vesting schedule (if any) applicable to the Option shares and the maximum term for which the Option is to remain outstanding.

ARTICLE 5

STOCK SUBJECT TO THE PLAN

5.1           Number of Shares Issued Pursuant to Options.  Subject to the provisions of § 5.3 of the Plan, relating to adjustments upon changes in stock, the maximum number of shares that may be issued subject to the Plan shall be 5,000,000 shares.

  

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5.2           Subsequent Issuance of Common Stock Subject to Outstanding Options.  Shares of Common Stock subject to outstanding Options shall be available for subsequent issuance under the Plan to the extent: (i) the Options expire or terminate for any reason prior to exercise in full, or (ii) the Options are cancelled in accordance with the cancellation/re-grant provisions of Article 9.  Shares issued under the Plan and subsequently repurchased by the Corporation pursuant to the Corporation’s
repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan in the same category (i.e., Incentive Options, Non-statutory Options) and shall accordingly be available for reissuance through one or more subsequent Option grants under the Plan.

5.3           Change Affecting Outstanding Common Stock.  Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made, in order to prevent the dilution or enlargement of benefits thereunder, to: (i) the maximum number and/or class of securities issuable under the
Plan and (ii) the number and/or class of securities and the exercise price per share in effect under each outstanding Option.  The adjustments determined by the Plan Administrator shall be final, binding and conclusive.  In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the Corporation’s preferred stock into shares of Common Stock.

ARTICLE 6

OPTION GRANTS

	
6.1  

	
Exercise Price.

(a) The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions:

(i) The exercise price per share shall not be less than the Fair Market Value per share of Common Stock on the Option grant date.

(b)           The exercise price shall become immediately due upon exercise of the Option and shall, subject to § 10.1 of the Plan and the documents evidencing the Option, be payable in cash or check made payable to the Corporation.  Should the Common Stock be registered under Section 12 of the 1934 Act at the time the Option is exercised, then the exercise price may also be paid as follows:

(i)           in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or

  

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(ii)           to the extent the Option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions (A) to a Corporation designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise, and (B) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

6.2           Exercise and Term of Options.  Each Option shall be exercisable as determined by the Plan Administrator and as set forth in the documents evidencing the Option grant.  However, no Option shall have a term in excess of five years measured from the Option grant date.

6.3           Effect of Termination of Service.

(a)           The following provisions shall govern the exercise of any Options held by the Optionee at the time of cessation of Service or death:

(i)           Should the Optionee cease to remain in Service for any reason other than death, Disability or Misconduct, then the Optionee shall have a period of three (3) months following the date of such cessation of Service during which to exercise each outstanding Option held by such Optionee.

(ii)           Should Optionee’s Service terminate by reason of Disability, then the Optionee shall have a period of 12 months following the date of such cessation of Service during which to exercise each outstanding Option held by such Optionee.

(iii)           If the Optionee dies while holding an outstanding Option, then the personal representative of his or her estate or the person or persons to whom the Option is transferred pursuant to the Optionee’s will or the laws of inheritance shall have a 12 month period following the date of the Optionee’s death to exercise such Option.

  

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(b)           Under no circumstances, however, shall any such Option be exercisable after the specified expiration of the Option term.

(i)           During the applicable post-Service exercise period, the Option may not be exercised in the aggregate for more than the number of vested shares for which the Option is exercisable on the date of the Optionee’s cessation of Service.  Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any vested shares for which the Option has not been exercised.  However, the Option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding with respect to any and all Option
shares for which the Option is not otherwise at the time exercisable or in which the Optionee is not otherwise at that time vested.

(ii)           Should Optionee’s Service be terminated for Misconduct, then all outstanding Options held by the Optionee shall terminate immediately and cease to remain outstanding.

(c)           The Plan Administrator shall have the discretion, exercisable either at the time an Option is granted or at any time while the Option remains outstanding, to:

(i)           extend the period of time for which the Option is to remain exercisable following Optionee’s cessation of Service or death from the limited period otherwise in effect for that Option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the Option term, and/or

(ii)           permit the Option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such Option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under the Option had the Optionee continued in Service.

6.4           Stockholder Rights.  The holder of an Option shall have no stockholder rights with respect to the shares subject to the Option until such person shall have exercised the Option, paid the exercise price and become the record holder of the purchased shares.

6.5           Repurchase of Shares.  Should the Optionee cease Service while holding vested shares, the Corporation shall have the right to repurchase at Fair Market Value, any or all of those vested shares.  The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.

  

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6.6           intentionally omitted

6.7           Limited Transferability of Options.  During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee’s death.

ARTICLE 7

INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive Options.  Except as modified by the provisions of this Article 7, all the provisions of the Plan shall apply to Incentive Options.  Options which are specifically designated as Non-Statutory Options shall not be subject to the terms of this Article 7.

	
7.1  

	
Eligibility.  Incentive Options may only be granted to Employees.

7.2           Exercise Price.  The exercise price per share shall not be less than 100% of the Fair Market Value per share of Common Stock on the Option grant date.  However, if the person to whom the Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than 110% of the Fair Market Value per share of Common Stock on the Option grant date.  Notwithstanding the foregoing, an Incentive Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Incentive
Option is granted pursuant to an assumption or substitution for another Option in a manner satisfying the provisions of Code § 424(a) (involving a corporate reorganization).

7.3           Dollar Limitation.  The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more Options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during anyone one calendar year shall not exceed the sum of $100,000.  To the extent the Employee holds two or more such Options which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such Options as Incentive Options shall be applied on the basis of the order in which such Options are granted.

7.4           10% Stockholder.  If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the Option term shall not exceed five years measured from the Option grant date.

  

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ARTICLE 8

CORPORATE TRANSACTION

8.1           Automatic Vesting of Shares Subject to Options.  The shares subject to each Option outstanding under the Plan at the time of a Corporate Transaction shall automatically vest in full so that each such Option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to that Option and may be exercised for any or all of those shares as fully-vested shares of Common Stock.  However, the
shares subject to an outstanding Option shall not vest on such an accelerated basis if and to the extent: (i) such Option is assumed by the successor corporation (or parent thereof) in the Corporate Transaction and any repurchase rights of the Corporation with respect to the unvested Option shares are concurrently to be assigned to such successor corporation (or parent thereof), or (ii) such Option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested Option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those unvested Option shares, or (iii) the acceleration of such Option is subject to other limitations imposed by the Plan Administrator at the time of the Option grant.

8.2           Automatic Termination of Outstanding Repurchase Rights.  In the event of any Corporate Transaction, all outstanding repurchase rights shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction, or (ii) such accelerated vesting is precluded by other limitations imposed
by the Plan Administrator at the time the repurchase right is issued.

8.3           Termination of Outstanding Options Following Corporate Transaction.  Immediately following the consummation of the Corporate Transaction, all outstanding Options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof).

8.4           Adjustment of Options Assumed in Corporate Transaction.  Each Option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction, had the Option been exercised immediately prior to such Corporate Transaction.  Appropriate adjustments shall also be made to: (i) the number
and class of securities available for issuance under the Plan following the consummation of such Corporate Transaction, and (ii) the exercise price payable per share under each outstanding Option, provided the aggregate exercise price payable for such securities shall remain the same.

  

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8.5           Plan Administrator’s Discretion to Automatically Accelerate or Fully Vest Options.  The Plan Administrator shall have the discretion, exercisable either at the time the Option is granted or at any time while the Option remains outstanding, to structure one or more Options so that those Options shall automatically accelerate and vest in full (and any repurchase rights of the Corporation with respect to the unvested shares subject to those Options shall immediately terminate) upon the
occurrence of a Corporate Transaction, whether or not those Options are to be assumed in the Corporate Transaction.

The Plan Administrator shall also have full power and authority, exercisable either at the time the Option is granted or at any time while the Option remains outstanding, to structure such Option so that the shares subject to that Option will automatically vest on an accelerated basis should the Optionee’s Service terminate by reason of an Involuntary Termination within a designated period (not to exceed 18 months) following the effective date of any Corporate Transaction in which the Option is assumed and the repurchase rights applicable to those shares do not otherwise terminate.  Any Option so accelerated shall remain exercisable for the fully-vested Option shares until the expiration or sooner
termination of the Option term.  In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate on an accelerated basis, and the shares subject to those terminated rights shall accordingly vest at that time.

8.6           Impact of $100,000 Limitation.  The portion of any Incentive Option accelerated in connection with a Corporate Transaction shall remain exercisable as an Incentive Option only to the extent the applicable $100,000 limitation is not exceeded.  To the extent such dollar limitation is exceeded, the accelerated portion of such Option shall be exercisable as a Non-Statutory Option under the Federal tax laws.

8.7           No Impact on Corporation’s Rights.  The grant of Options under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

ARTICLE 9

CANCELLATION AND RE-GRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected Option holders, the cancellation of any or all outstanding Options under the Plan and to grant in substitution therefore new Options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new Option grant date.

  

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ARTICLE 10

MISCELLANEOUS

	
10.1  

	
Effective Date and Term of Plan.

(a)           The Plan shall become effective when adopted by the Board.  If the Board determines to obtain shareholder approval of the Plan, such approval must be obtained within 12 months after the date of the Board’s adoption of the Plan. Notwithstanding the foregoing, the Plan Administrator may grant Options and issue shares under the Plan at any time after the effective date of the Plan and before the date fixed herein for termination of the Plan.

(b)           The Plan shall terminate upon the earliest of: (i) the expiration of the 10 year period measured from the date the Plan is adopted by the Board, (ii) the date on which all shares available for issuance under the Plan shall have been issued as vested shares, or (iii) the termination of all outstanding Options in connection with a Corporate Transaction.  All Options and unvested stock issuances outstanding at the time of a termination event under § 10.1(b)(i) of the Plan, shall continue to have full force and effect in accordance with the provisions of the documents evidencing those Options or issuances.

	
10.2  

	
Amendment of the Plan.

(a)           The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects.  However, no such amendment or modification shall adversely affect the rights and obligations with respect to Options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification.  In addition, certain amendments may require stockholder approval pursuant to applicable laws and regulations.

(b)           Options may be granted under the Plan which are in each instance in excess of the number of shares of Common Stock then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan.  If such stockholder approval is not obtained within 12 months after the date the first such excess grants or issuances are made, then: (i) any unexercised Options granted on the basis of such excess shares shall terminate and cease
to be outstanding, and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable short-term Federal rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding.

  

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10.3           Use of Proceeds.  Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.

10.4           Withholding.  The Corporation’s obligation to deliver shares of Common Stock upon the exercise of any Options granted under the Plan or upon the issuance or vesting of any shares issued under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.

10.5           Regulatory Approvals.  The implementation of the Plan, the granting of any Options under the Plan, and the issuance of any shares of Common Stock upon the exercise of any Option shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the Options granted under it, and the shares of Common Stock issued pursuant to it.

10.6           No Employment or Service Rights.  Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person), the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without
cause.

 

 

 

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