HAMILTON BANK

2018 – 2019

Hamilton Bank Incentive Compensation Plan

For Executive Management

HAMILTON BANK

ANNUAL EXECUTIVE

MANAGEMENT

INCENTIVE PLAN

ARTICLE I

•  align the interests of our executive management team with stockholders of the Company;

•  recognize and reward achievement of Bank’s annual business goals;

•  motivate and reward superior performance;

•  attract and retain talent needed to grow the Bank;

•  be competitive with market;

•  encourage teamwork and collaboration among the Bank’s leadership;

•  increase engagement and commitment to the Bank; and

•  ensure appropriate risk balance in plan design and governance policies.

ARTICLE II

Definitions. Whenever used in this Plan, the following words and phrases shall have the meanings specified:

2.1    “Base Salary” means the Participant’s annual rate of base salary paid during each calendar year, excluding bonuses and other forms of variable income, fringe benefits, reimbursements, etc.

2.2    “Bonus Award’ means an annual bonus paid as a cash lump sum under the Plan.

2.3    “Cause” means the willful engagement of activity that is injurious to the Bank, as determined in the sole discretion of the Committee.

2.4    “Committee” means the Compensation Committee of the Bank’s Board of Directors.

2.5    “Disability’ means the definition of “disability” pursuant to the Bank’s long-term disability plan or arrangement, or alternatively, as determined by the Committee.

2.6    “Eligible Employee” means the President, CEO, CFO and EVPs. Participating in this Plan for one Plan Year does not guarantee selection for participation in the Plan for any other Plan Year.

2.7    “Plan Year” means the Bank’s fiscal year, April 1^st to March 31^st.

2.8    “Participant’ means an Eligible Employee as defined in section 2.6 who has been notified by the Committee that he or she has been selected to participate in this Plan for the current Plan Year.

2.9    “Retirement” shall be defined in accordance with the Bank’s policies and practices.

ARTICLE III

(a)     Payment of Bonus Awards in any Plan Year is contingent upon the performance objectives specified by the Committee for any Participant being met by the Bank and/or Participant. The specific performance objectives are determined annually by the Committee and are subject to change by the Committee, but generally include objective performance targets focused on financial performance and asset quality and subjective, discretionary performance targets, such as particular qualitative factors for each Participant, based on his or her duties for the Bank.

(b)     Each performance objective shall specify levels of achievement of goals ranging as follows:

   (i)   Threshold Level. The level for minimum performance deemed worthy of a Bonus Award.

   (ii)   Target Level. The level for typical, expected performance.

   (iii)   Stretch Level. The level for outstanding performance.

(c)     Each objective will be weighted based on priority as a percentage of the total Bonus Award payable to the Participant. The weight of each performance objective attributable to a Participant shall be set forth in his or her Award Agreement.

3.3    Termination of Employment. Unless otherwise determined by the Committee, a Participant who is not employed as of the payout date for his or her Bonus Award shall forfeit the Bonus Award. Notwithstanding the foregoing, in the event of the Participant’s death or Disability at any time during the Plan Year or the Participant’s Retirement on or after January 1^st of the Plan Year, the Participant’s Bonus Award shall be pro-rated such that the percentage of Base Salary that constitutes the Bonus Award for that Plan Year shall be multiplied by a fraction, where the numerator is the number of full calendar months of employment with the Bank during the Plan Year until the Participant’s date of death, Disability or Retirement and the denominator is 12.

In the event a Participant is terminated for Cause, the Participant’s Bonus Award shall be forfeited.

3.4    Time of Payout. No later than two and one half (2 ½) months after the close of the Plan Year (i.e., by the June 15 that immediately follows the end of the Plan Year for which the performance is measured), the Bonus Award will be paid to the Participant in a cash lump sum,

through regular payroll practices, including all applicable tax withholdings. Bonus Awards under the Plan are intended to be exempt from Section 409A of the Internal Revenue Code under the “short term deferral rule” set forth in Treasury Regulations Section 1.409A-1(b)(4).

ARTICLE IV

ARTICLE V

5.1     Binding Effect. This Plan shall be binding on the Participants, the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

5.2     No Guarantee of Employment. This Plan is not an employment policy or contract. It does not give any Participant the right to remain an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Participant. It also does not interfere with the Participant’s right to terminate employment at any time.

5.3     Non-Transferability. Bonus Awards under this Plan cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

5.4     Applicable Law. The Plan and all rights hereunder shall be governed by the laws of the State of Maryland, except to the extent preempted by the laws of the United States of America.

5.5     Entire Agreement. This Plan constitutes the entire agreement between the Bank and each Participant as to the subject matter hereof. No rights are granted to the Participant by virtue of this Plan other than those specifically set forth herein.

(a)   interpreting the provisions of the Plan, including any ambiguity as to the meaning of terms or provisions of the Plan or an Award Agreement;

(b)   determine the persons eligible to participate in the Plan;

(c)   maintaining a record of benefit payments; and

(d)   establishing rules and prescribing any forms necessary or desirable to administer the Plan.

5.7    Clawback. Any Bonus Award received under the Plan shall be subject to potential cancellation, recoupment, rescission, payback, or other action in accordance with the terms of any applicable Company or Bank clawback policy (the “Policy”) or any applicable law, as may be in effect from time to time. The Participant hereby acknowledges and consents to the Company’s or the Bank’s application, implementation, and enforcement of: (a) the Policy and any similar policy established by the Company or the Bank that may apply to the Participant together with all other similarly situated Participants, whether adopted prior to or following the date of the Bonus Award; and (b) any provision of applicable law relating to cancellation, rescission, payback, or recoupment of compensation, and agrees that the Company or the Bank may take such actions as may be necessary to effectuate the Policy, any similar policy, and applicable law, without further consideration or action.

[Signature Page to Follow]

IN WITNESS WHEREOF, the Bank has executed this Plan on the date set forth below.

September 24, 2018	By:	HAMILTON BANK      /s/ Jenny G. Morgan
Date		Jenny G. Morgan

 

HAMILTON BANK ANNUAL INCENTIVE PLAN

AWARD AGREEMENT

 

Name:_____________________________________________________

 

Plan Year:__________________________________________________

 

Plan Year Base Salary:________________________________________

 

Hamilton Bonus Calculation (FY 2019)

1. Incentive Award Opportunity

Each participant shall have a Bonus Award Opportunity for the Plan, expressed as a % of his or her Base Salary based on the following table and based on a graduated scale (example - CEO can earn 10% of base salary based on percentage of net income and classified assets/total loans that falls between target and maximum):

⁽¹⁾   Threshold, Target, and Maximum based on Earnings before taxes, bonuses and provision related to growth in loans (provision related to charge-offs would be included).

2.	Performance Gate Trigger

No Bonus Award shall be paid to any participant under the Plan with respect to the Plan Year, unless the Company achieves 90% or more (.90 x $2,012,900 = $1,811,610) of budgeted net income during the Plan Year before tax, bonus expense and provision related to growth in loans (provision related to charge-offs would be included) is applied.

3.	Performance Measures

Each participant’s Bonus Award shall be determined based upon the following performance measures: