Attached files
| file | filename |
|---|---|
| EX-31 - EXHIBIT 31 - HILLS BANCORPORATION | exhibit3133120.htm |
| EX-32 - EXHIBIT 32 - HILLS BANCORPORATION | exhibit3233120.htm |
| 10-Q - 10-Q - HILLS BANCORPORATION | hbia202033110q.htm |
Exhibit 10.1
HILLS BANCORPORATION
2020 STOCK OPTION AND INCENTIVE PLAN
ARTICLE 1
General Purpose of Plan; Definitions
1.1 Purposes. The purpose of this Hills Bancorporation 2020 Stock Option and Incentive Plan (the “Plan”) is to advance the interests of the Company through providing select key Employees and Directors of the Company and its Affiliates with the opportunity to acquire Shares. By encouraging such stock ownership, the Company seeks to attract, retain and motivate the best available personnel for positions of substantial responsibility and to provide additional incentive to Directors and key Employees of the Company or any Affiliate to promote the success of the business.
1.2 Certain Definitions. Unless the context otherwise indicates, the following words used herein shall have the following meanings whenever used in this instrument:
(a) | "Affiliate" means any Parent or Subsidiary of the Company or any other corporation, partnership, joint venture or other entity, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Company, as determined by the Board of Directors in its discretion. |
(b) | "Award" means any grant under this Plan of a Stock Option, Stock Appreciation Right, Restricted Share, Restricted Share Unit or Performance Share to any Plan participant. |
(c) | “Bank” means Hills Bank and Trust Company. |
(d) | "Board of Directors" means the Board of Directors of the Company, as constituted from time to time. |
(e) | "Cause" with respect to an employee of the Bank, the Company or any other affiliate of the Company, who has not entered into an employment agreement with the Bank or the Company, or such an affiliate, means and is limited to (a) criminal dishonesty, (b) refusal to perform duties on an exclusive and substantially full-time basis, (c) refusal to act in accordance with any specific substantive instructions given by the Bank, the Company or any affiliate of the Company with respect to performance of duties normally associated with such employee's position, or (d) engaging in conduct which could be materially damaging to the Bank, the Company or any affiliate of the Company without a reasonable good faith belief that such conduct was in the best interest of the Bank, the Company or any affiliate of the Company. With respect to an employee who is employed pursuant to an employment agreement with the Bank, the Company, or such an affiliate, “Cause” shall mean “cause” as defined in the terms of such employment agreement (as it may be amended from time to time). |
(f) | “Change in Control” shall mean shall mean any one of the following events: (i) the acquisition (A) of ownership, holding or power to vote more than 50% of the Company’s voting stock, (B) of the ability to control the election of a majority of the Company’s directors, or (C) of a controlling influence over the management or policies of the Company by any person or by persons acting as a group (within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company (the Continuing Directors) cease for any reason to constitute at least two-thirds thereof, provided that any individual whose election or nomination for election as a member of the Board was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director, provided that such event constitutes a “Change in Ownership,” “Change in Effective Control,” or “Change in Ownership of a Substantial Portion of Assets,” as defined by Treasury Regulation 1.409A-3(i)(5). For purposes of this subparagraph only, the term “person” refers to an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein. |
(g) | "Code" means the Internal Revenue Code of 1986, as amended, and any lawful regulations or guidance promulgated thereunder. Whenever reference is made to a specific Internal Revenue Code section, such reference shall be deemed to be a reference to any successor Internal Revenue Code section or sections with the same or similar purpose. |
(h) | "Committee" means the committee administering this Plan as provided in Section 2.1. |
(i) | "Common Shares" mean the common shares no par value per share, of the Company. |
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(j) | "Company" means Hills Bancorporation, a corporation organized under the laws of the State of Iowa and, except for purposes of determining whether a Change in Control has occurred, any corporation or entity that is a successor to Hills Bancorporation or substantially all of the assets of Hills Bancorporation and that assumes the obligations of Hills Bancorporation under this Plan by operation of law or otherwise. |
(k) | "Date of Grant" means the date on which the Committee grants an Award. |
(l) | "Director" means a member of the Board of Directors. |
(m) | "Disability" means the person (a) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving disability or other income replacement benefits for a period of not less than 3 months under an accident and health plan of the Bank, the Company or an affiliate covering the person, or (b) has been determined to be totally disabled by the United States Social Security Administration. |
(n) | "Eligible Participant" is defined in Article 4. |
(o) | "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any lawful regulations or guidance promulgated thereunder. |
(p) | "Exercise Price" means the purchase price of a Share pursuant to a Stock Option, or the exercise price per Share related to a Stock Appreciation Right. |
(q) | "Fair Market Value" means with respect to a share of Common Stock, the value as determined from time to time by the Committee in good faith, until such time as the Common Stock may be regularly traded on a stock exchange and the volume of such trading is sufficient to create a reasonable market for the Common Stock. The determination of whether a market for the stock has been established shall be in the sole discretion of the Committee for purposes of the Plan. The Committee may, in its discretion, rely upon a valuation report from an independent consultant to the Company engaged for the purpose of determining the fair value of the Common Stock of the Company or such other reasonable valuation method as may be prescribed by the Committee. Notwithstanding the foregoing, as of any date, the “Fair Market Value” of Common Shares shall be determined in a manner consistent with Code Section 409A and the guidance then-existing thereunder. |
(r) | “Family Member” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, and any person sharing the Participant’s household (other than a tenant or employee). |
(s) | "Incentive Stock Option" and "ISO" mean a Stock Option that is identified as such and which is intended to meet the requirements of Section 422 of the Code. |
(t) | "Non-Qualified Stock Option" and "NQSO" mean a Stock Option that: (i) is governed by Section 83 of the Code; and (ii) is not intended to meet the requirements of Section 422 of the Code. |
(u) | "Outside Director" means a nonemployee Director. In addition, at all times during which the Company is subject to the reporting requirements of the Exchange Act, "Outside Director” means a nonemployee Director who meets the definitions of the terms "independent director" set forth in The Nasdaq Stock Market rules, and "non-employee director" set forth in Rule 16b-3, or any successor definitions adopted by The Nasdaq Stock Market and Securities and Exchange Commission, respectively, and similar requirements under any other applicable laws and regulations. |
(v) | "Parent" means any corporation which qualifies as a "parent corporation" of the Company under Section 424(e) of the Code. |
(w) | “Participant” means an Eligible Participant who has been granted an award of Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Share Units or Performance Shares under this Plan. |
(x) | "Performance Shares" is defined in Article 9. |
(y) | "Performance Period" is defined in Section 9.2. |
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(z) | “Permitted Transferees” means (i) a Participant’s Family Member, (ii) one or more trusts in which Family Members have more than fifty percent of the beneficial interest, (iii) a foundation in which the Participant or Family Members control the management of assets; or (iv) any other entity in which the Participants or Family Members own more than fifty percent of the voting interests. |
(aa) | "Plan" means this Hills Bancorporation 2020 Stock Option and Incentive Plan, as amended from time to time. |
(ab) | "Restricted Share Units" is defined in Article 8. |
(ac) | "Restricted Shares" is defined in Article 8. |
(ad) | "Rule 16b-3" means Securities and Exchange Commission Rule 16b-3 under the Securities Exchange Act of 1934, as amended from time to time. |
(ae) | "Share" or "Shares" mean one or more of the Common Shares. |
(af) | "Shareholder" means an individual or entity that owns one or more Shares. |
(ag) | "SOSAR" is defined in Section 7.1(d). |
(ah) | "Stock Appreciation Rights" and "SARs" mean any right to receive the appreciation in Fair Market Value of a specified number of Shares over a specified Exercise Price pursuant to an Award granted under Article 7. |
(ai) | "Stock Option" means any right to purchase a specified number of Shares at a specified price which is granted pursuant to Article 5 and may be an Incentive Stock Option or a Non-Qualified Stock Option. |
(aj) | "Stock Power" means a power of attorney executed by a participant and delivered to the Company which authorizes the Company to transfer ownership of Restricted Shares, Performance Shares or Common Shares from the participant to the Company or a third party. |
(ak) | "Subsidiary" means any corporation which qualifies as a "subsidiary corporation" of the Company under Section 424(f) of the Code. |
(al) | "Vested" means, with respect to a Stock Option, that the time has been reached when the option to purchase Shares first becomes exercisable; and with respect to a Stock Appreciation Right, when the Stock Appreciation Right first becomes exercisable for payment; with respect to Restricted Shares, when the Shares are no longer subject to forfeiture and restrictions on transferability; with respect to Restricted Share Units and Performance Shares, when the units or Performance Shares are no longer subject to forfeiture and are converted to Shares. The words "Vest" and "Vesting" have meanings correlative to the foregoing. |
ARTICLE 2
Administration
2.1 Authority and Duties of the Committee.
(a) | The Plan shall be administered by a Committee of at least three Directors who are appointed by the Board of Directors. Unless otherwise determined by the Board of Directors, the Compensation Committee of the Board of Directors (or any subcommittee thereof) shall serve as the Committee, and all of the members of the Committee shall be Outside Directors. Notwithstanding the requirement that the Committee consist exclusively of Outside Directors, no action or determination by the Committee or an individual then considered to be an Outside Director shall be deemed void because a member of the Committee or such individual fails to satisfy the requirements for being an Outside Director, except to the extent required by applicable law. |
(b) | The Committee has the power and authority to grant Awards pursuant to the terms of this Plan to Eligible Participants. The Committee may, at any time and from time to time, at the request of a Participant or at the discretion of the Committee, designate that a portion of such Participant's compensation otherwise payable in cash be payable in |
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Common Shares, Restricted Shares, Stock Options, SARs, Restricted Share Units or Performance Shares. The Committee shall have the sole discretion to determine the value of the Common Shares, Restricted Shares, Options, SARs, Restricted Share Units or Performance Shares so payable and the terms and conditions under which such Common Shares or Restricted Shares shall be issued or such Stock Options, SARs, Restricted Share Units or Performance Shares shall be granted.
(c) | The Committee has the sole and exclusive authority, subject to any limitations specifically set forth in this Plan, to: |
(i) | select the Eligible Participants to whom Awards are granted; |
(ii) | determine the types of Awards granted and the timing of such Awards; |
(iii) | determine the number of Shares to be covered by each Award granted hereunder; |
(iv) | determine the other terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder; such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Stock Options or Stock Appreciation Rights may be exercised (which may be based on performance objectives), any Vesting, acceleration or waiver of forfeiture restrictions, any performance criteria applicable to an Award, and any restriction or limitation regarding any Stock Option or Stock Appreciation Right or the Common Shares relating thereto, based in each case on such factors as the Committee, in its sole discretion, shall determine; |
(v) | determine whether any conditions or objectives related to Awards have been met, including but not limited to any determination of whether the performance objectives for Performance Shares or other performance-based awards have been satisfied; |
(vi) | subsequently amend, modify or waive any terms and conditions of Awards, not inconsistent with the terms of this Plan; |
(vii) | adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan as it deems advisable from time to time; |
(viii) | promulgate such administrative forms as it from time to time deems necessary or appropriate for administration of the Plan; |
(ix) | construe, interpret, administer and implement the terms and provisions of this Plan, any Award and any related agreements; |
(x) | correct any defect, supply any omission and reconcile any inconsistency in or between the Plan, any Award and any related agreements; |
(xi) | prescribe any legends to be affixed to certificates representing Shares or other interests granted or issued under the Plan; and |
(xii) | otherwise supervise the administration of this Plan. |
(d) | All decisions made by the Committee pursuant to the provisions of this Plan are final and binding on all persons, including the Company, its shareholders and participants, but may be made by their terms subject to ratification or approval by, the Board of Directors, another committee of the Board of Directors or shareholders. |
(e) | The Company shall furnish the Committee with such clerical and other assistance as is necessary for the performance of the Committee's duties under the Plan. |
2.2 Delegation of Duties. The Committee may delegate ministerial duties to any other person or persons, and it may employ attorneys, consultants, accountants, or other professional advisers for the purposes of plan administration at the expense of the Company. The power to delegate provided for herein does not include the power to grant an Award.
2.3 Limitation of Liability. Members of the Board of Directors, members of the Committee and Company employees who are their designees acting under this Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross or willful misconduct in the performance of their duties hereunder.
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ARTICLE 3
Stock Subject to Plan
3.1 Total Shares Limitation. Subject to the provisions of this Article, the maximum number of shares of Common Stock that may be issued or transferred under this Plan shall not exceed in the aggregate 250,000 Common Shares. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the open-market or in private transactions) and that are being held in treasury, or a combination thereof.
3.2 Awards Not Exercised; Effect of Receipt of Shares. If any outstanding Award or portion thereof, expires, or is terminated, canceled or forfeited, the Shares that would otherwise be issuable or released from restrictions with respect to the unexercised or non-Vested portion of such expired, terminated, canceled or forfeited Award shall be available for subsequent Awards under this Plan. If the Exercise Price of an Award is paid in Shares, or if Shares are withheld by the Company to cover a Participant’s tax obligations with respect to an Award pursuant to Section 15.1 or 15.2 of the Plan, the Shares received by the Company in connection therewith shall not be added to the maximum aggregate number of Shares which may be issued under Section 3.1. Where Stock Appreciation Rights are settled by delivery of Shares, the actual number of Shares delivered to the Participant shall be counted against the maximum aggregate number of Shares which may be issued under Section 3.1.
3.3 Dilution and Other Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, redesignation, reclassification, merger, consolidation, liquidation, split-up, reverse split, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Committee shall, in such manner as it deems equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, (iii) the limitations set forth above and (iv) the purchase or exercise price or any performance objective with respect to any Award; provided, however, that the number of Shares or other securities covered by any Award or to which such Award relates is always a whole number. Notwithstanding the foregoing, the foregoing adjustments shall be made in compliance with: (i) Sections 422 and 424 of the Code with respect to ISOs; (ii) Treasury Department Regulation Section 1.424-1 (and any successor) with respect to NQSOs, applied as if the NQSOs were ISOs; and (iii) Section 409A of the Code, to the extent necessary to avoid its application or avoid adverse tax consequences thereunder. In applying the provisions of this Section 3.3, the Committee shall lack discretion with respect to any adjustment which is required to prevent enlargement or dilution of rights under any Award and shall promptly make such adjustments as are required to prevent an enlargement or dilution of rights.
ARTICLE 4
Participants
4.1 Eligibility. Directors, Officers and all other key employees of the Bank, the Company or any of its Affiliates (each an "Eligible Participant") who are selected by the Committee in its sole discretion are eligible to participate in this Plan.
4.2 Award Agreements. Awards shall be evidenced by a written agreement in a form prescribed by the Committee (hereinafter "Award Agreement"). Execution of an Award Agreement shall constitute the Participant's irrevocable agreement to, and acceptance of, the terms and conditions of the Award set forth in such agreement and of the terms and conditions of the Plan applicable to such Award. Award Agreements may differ from time to time and from participant to participant.
ARTICLE 5
Stock Option Awards
5.1 Option Grant. Each Stock Option granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by an Award Agreement dated as of the Date of Grant and executed by the Company and by the appropriate Participant.
5.2 Terms and Conditions of Grants. Stock Options granted under this Plan are subject to the following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies with respect to exercisability and/or with respect to the Shares acquired upon exercise as may be provided in the relevant agreement evidencing the Stock Options, so long as such terms and conditions are not inconsistent with the terms of this Plan, as the Committee deems desirable:
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(a) | Exercise Price. Subject to Section 3.3, the Exercise Price shall never be less than 100% of the Fair Market Value of the Shares on the Date of Grant. Except as otherwise provided in Section 3.3, no subsequent amendment of an outstanding Stock Option may reduce the Exercise Price to less than 100% of the Fair Market Value of the Shares on the Date of Grant. Nothing in this Section 5.2(a) shall be construed as limiting the Committee's authority to grant premium price Stock Options which do not become exercisable until the Fair Market Value of the underlying Shares exceeds a specified percentage (e.g., 110%) of the Exercise Price; provided, however, that such percentage will never be less than 100%. |
(b) | Option Term. Any unexercised portion of a Stock Option granted hereunder shall expire at the end of the stated term of the Stock Option. The Committee shall determine the term of each Stock Option at the time of grant, which term shall not exceed 10 years from the Date of Grant. The Committee may extend the term of a Stock Option, in its discretion, but not beyond the date immediately prior to the tenth anniversary of the original Date of Grant. If a definite term is not specified by the Committee at the time of grant, then the term is deemed to be 10 years. Nothing in this Section 5.2(b) shall be construed as limiting the Committee's authority to grant Stock Options with a term shorter than 10 years. |
(c) | Vesting. Stock Options or portions thereof, are exercisable at such time or times as determined by the Committee in its discretion at or after grant. The Committee may provide that a vesting schedule shall be specified in an Award Agreement. If the Committee provides that any Stock Option becomes Vested over a period of time or upon performance events, in full or in installments, the Committee may waive or accelerate such Vesting provisions at any time. Unless otherwise determined by the Committee in connection with the grant and set forth in the Award Agreement, all unvested Stock Options shall immediately vest upon the Death or Disability of the holder. |
(d) | Method of Exercise. Vested portions of any Stock Option may be exercised in whole or in part at any time during the option term by giving written notice of exercise to the Company specifying the number of Shares to be purchased. The notice must be given by or on behalf of a person entitled to exercise the Stock Option, accompanied by payment in full of the Exercise Price, along with any tax withholding pursuant to Article 15. Subject to the approval of the Committee, the Exercise Price may be paid: |
(i) | in cash in any manner satisfactory to the Committee; |
(ii) | by tendering (by either actual delivery of Shares or by attestation) unrestricted Shares owned by the person entitled to exercise the Stock Option having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price applicable to such Stock Option exercise, and, with respect to the exercise of NQSOs, including restricted Shares; |
(iii) | by a combination of cash and unrestricted Shares that are owned on the date of exercise by the person entitled to exercise the Stock Option; and |
(iv) | by any other method permitted by law and affirmatively approved by the Committee which assures full and immediate payment or satisfaction of the Exercise Price, which may, during any periods in which the Common Stock is publicly traded, include a broker-assisted cashless exercise. |
The Committee may withhold its approval for any method of payment for any reason, in its sole discretion, including but not limited to concerns that the proposed method of payment will result in adverse financial accounting treatment for the Company, adverse tax treatment for the Company or a participant or a violation of any law applicable to the Company from time to time, and related regulations and guidance.
If the Exercise Price of an NQSO is paid by tendering Restricted Shares, then the Shares received upon the exercise will contain restrictions that are no less restrictive then the Restricted Shares so tendered.
(e) | Form. Unless the grant of a Stock Option is expressly designated at the time of grant as an ISO, it is deemed to be an NQSO. ISOs are subject to the additional terms and conditions in Article 6. |
(f) | Special Limitations on Stock Option Awards. Unless an Award Agreement approved by the Committee provides otherwise, Stock Options awarded under this Plan are intended to meet the requirements for exclusion from coverage under Code Section 409A and applicable Treasury regulations and all Stock Option Awards shall be construed and administered accordingly. |
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5.3 Termination of Grants Prior to Expiration. Subject to Article 6 with respect to ISOs, if the employment of a Participant with the Bank, the Company or its Affiliates terminates for any reason, all unexercised Stock Options may be exercised only in accordance with rules established by the Committee or as specified in the relevant agreement evidencing the Stock Options. Such rules may provide, as the Committee deems appropriate, for the expiration, continuation (but only to the originally scheduled expiration date), or acceleration of the vesting of all or part of the Stock Options.
ARTICLE 6
Special Rules Applicable to Incentive Stock Options
6.1 Eligibility. Notwithstanding any other provision of this Plan to the contrary, an ISO may only be granted to an Eligible Participant who is a full or part-time employee (including officers) of the Bank, the Company or of an Affiliate which is a Parent or Subsidiary of the Company.
6.2 Special ISO Rules.
(a) | Term. No ISO may be exercisable on or after the tenth anniversary of the Date of Grant, and no ISO may be granted under this Plan on or after the tenth anniversary of the effective date of this Plan. |
(b) | Ten Percent Shareholder. No Participant may receive an ISO under this Plan if such Participant, at the time the Award is granted, owns (after application of the rules contained in Section 424(d) of the Code) equity securities possessing more than 10% of the total combined voting power of all classes of equity securities of the Company, its Parent or any Subsidiary, unless (i) the option price for such ISO is at least 110% of the Fair Market Value of the Shares as of the Date of Grant, and (ii) such ISO is not exercisable on or after the fifth anniversary of the Date of Grant. |
(c) | Limitation on Grants. The aggregate Fair Market Value (determined with respect to each ISO at the time of grant) of the Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or any other plan adopted by the Company or its Parent or its Subsidiary) shall not exceed $100,000. Unless otherwise set forth in an Award Agreement, if such aggregate Fair Market Value shall exceed $100,000, such number of ISOs as shall have an aggregate Fair Market Value equal to the amount in excess of $100,000 shall be treated as NQSOs. |
(d) | Non-Transferability. Notwithstanding any other provision herein to the contrary, no ISO granted hereunder (and, if applicable, related Stock Appreciation Right) may be transferred except by will or by the laws of descent and distribution, nor may such ISO (or related Stock Appreciation Right) be exercisable during the Participant's lifetime other than by him (or his guardian or legal representative to the extent permitted by applicable law). |
(e) | Termination of Employment. No ISO may be exercised more than three months following termination of employment for any reason (including retirement) other than death or Disability, nor more than one year following termination of employment for the reason of death or Disability (as defined in Section 422 of the Code). If the Award Agreement for an ISO permits exercise after such date such option will no longer qualify as an ISO and shall thereafter be, and receive the tax treatment applicable to, an NQSO. For this purpose, a termination of employment is cessation of employment such that no employment relationship exists between the Participant and the Bank, the Company, a Parent or a Subsidiary. |
(f) | Fair Market Value. For purposes of any ISO granted hereunder (or, if applicable, related Stock Appreciation Right), the Fair Market Value of Shares shall be determined in the manner required by Section 422 of the Code and any Treasury regulations thereunder. |
6.3 Subject to Code Amendments. The foregoing limitations are designed to comply with the requirements of Section 422 of the Code and shall be automatically amended or modified to comply with amendments or modifications to Section 422 of the Code. Any ISO which fails to comply with Section 422 of the Code is automatically treated as an NQSO appropriately granted under this Plan provided it otherwise meets the Plan's requirements for NQSOs.
ARTICLE 7
Stock Appreciation Rights
7.1 SAR Grant and Agreement. Stock Appreciation Rights (including SOSARs as set forth below) may be granted under this Plan and each SAR granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without
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a meeting, of the Committee and by an Award Agreement dated as of the Date of Grant and executed by the Company and by the appropriate Participant.
(a) | Term. Any unexercised portion of a Stock Appreciation Right granted hereunder shall expire at the end of the stated term of the Stock Appreciation Right. The Committee shall determine the term of each Stock Appreciation Right at the time of grant, which term shall not exceed ten years from the Date of Grant. The Committee may extend the term of a Stock Appreciation Right, in its discretion, but not beyond the date immediately prior to the tenth anniversary of the original Date of Grant. If a definite term is not specified by the Committee at the time of grant, then the term is deemed to be ten years. |
(b) | Vesting. A Stock Appreciation Right is exercisable, in whole or in part, at such time or times as determined by the Committee at or after the time of grant. Unless otherwise determined by the Committee in connection with the grant and set forth in the Award Agreement, all unvested Stock Appreciation Rights shall immediately vest upon the Death or Disability of the Participant. |
(c) | Exercise Price. Subject to Section 3.3, the Exercise Price of a Stock Appreciation Right will never be less than 100% of the Fair Market Value of the related Shares on the Date of Grant. Except as otherwise provided in Section 3.3, no subsequent amendment of an outstanding Stock Appreciation Right may reduce the Exercise Price to less than 100% of the Fair Market Value of the Shares on the Date of Grant. Nothing in this Section 7.1(c) shall be construed as limiting the Committee's authority to grant premium price Stock Appreciation Rights which do not become exercisable until the Fair Market Value of the related Shares exceeds a specified percentage (e.g., 110%) of the Exercise Price; provided, however, that such percentage will never be less than 100%. |
(d) | Method of Exercise. A Stock Appreciation Right may be exercised in whole or in part during the term by giving written notice of exercise to the Company specifying the number of Shares in respect of which the Stock Appreciation Right is being exercised. The notice must be given by or on behalf of a person entitled to exercise the Stock Appreciation Right. Upon the exercise of a Stock Appreciation Right, subject to satisfaction of the tax withholding requirements pursuant to Article 15, the holder of the Stock Appreciation Right is entitled to receive Shares or cash as specified in the original Award Agreement (as set forth below) equal in value to the excess of the Fair Market Value of a Share on the exercise date over the Exercise Price of the SAR multiplied by the number of Stock Appreciation Rights being exercised. At any time the Fair Market Value of a Share on a proposed exercise date does not exceed the Exercise Price of the SAR, the holder of the Stock Appreciation Right shall not be permitted to exercise such right. |
(i) | Stock Appreciation Right designated as a Stock Only Stock Appreciation Right ("SOSAR") in the original Award Agreement. With respect to an Award designated by the Company in the original Award Agreement as a SOSAR, the Participant shall be entitled to receive only Shares of the Company upon exercise. |
(ii) | All Other Stock Appreciation Rights. With respect to all other Awards the holder shall be entitled to the cash or other property set forth in the Award Agreement. |
(e) | Early Termination Prior to Expiration. If the employment of a Participant with the Bank, the Company or its Affiliates terminates for any reason, all unexercised Stock Appreciation Rights may be exercised only in accordance with rules established by the Committee or as specified in the relevant agreement evidencing such Stock Appreciation Rights. Such rules may provide, as the Committee deems appropriate, for the expiration, continuation (but only to the originally scheduled expiration date), or acceleration of the vesting of all or part of such Stock Appreciation Rights. |
7.2 Other Terms and Conditions of SAR Grants. Stock Appreciation Rights are subject to such other terms and conditions, not inconsistent with the provisions of this Plan, as are determined from time to time by the Committee.
7.3 Special Limitations on SAR Awards. Unless an Award Agreement approved by the Committee provides otherwise, Stock Appreciation Rights awarded under this Plan are intended to meet the requirements for the stock rights exemption from coverage under Code Section 409A described in Treasury Regulation Section 1.409A-1(b)(5) and all Stock Appreciation Rights Awards shall be construed and administered accordingly.
ARTICLE 8
Restricted Share and Restricted Share Unit Awards
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8.1 Restricted Share Grants and Agreements. Restricted Share Awards consist of Shares which are issued by the Company to a participant at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value but which are subject to forfeiture and restrictions on their sale or other transfer by the Participant. Each Restricted Share Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by an Award Agreement dated as of the Date of Grant and executed by the Company and by the Participant. The timing of Restricted Share Awards and the number of Shares to be issued are to be determined by the Committee in its discretion. By accepting a grant of Restricted Shares, the Participant consents to any tax withholding as provided in Article 15.
8.2 Terms and Conditions of Restricted Share Grants. Restricted Shares granted under this Plan are subject to the following terms and conditions, which, except as otherwise provided herein, need not be the same for each Participant, and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan and any operative employment or other agreement, as the Committee deems desirable:
(a) | Purchase Price. The Committee shall determine the prices, if any, at which Restricted Shares are to be issued to a Participant, which may vary from time to time and from Participant to Participant and which may be below the Fair Market Value of such Restricted Shares at the Date of Grant. |
(b) | Restrictions. All Restricted Shares issued under this Plan will be subject to such restrictions as the Committee may determine, which may include, without limitation, the following: |
(i) | a prohibition against the sale, transfer, pledge or other encumbrance of the Restricted Shares, such prohibition to lapse at such time or times as the Committee determines (whether in installments or otherwise, but subject to the Change in Control provisions in Article 11); |
(ii) | a requirement that the Participant forfeit such Restricted Shares in the event of termination of the Participant's employment with the Bank, the Company or its Affiliates prior to Vesting; |
(iii) | a prohibition against employment or retention of the Participant by any competitor of the Bank, the Company or its Affiliates, or against dissemination by the Participant of any secret or confidential information belonging to the Company or an Affiliate; |
(iv) | any applicable requirements arising under the Securities Act of 1933, as amended, other securities laws, the rules and regulations of any stock exchange or transaction reporting system upon which such Restricted Shares may then be listed or quoted and any state laws, rules and regulations, including "blue sky" laws; |
(v) | such additional restrictions as are required to avoid adverse tax consequences under Code Section 409A; and |
(vi) | delivery of a valid election under Code Section 83(b). |
The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse.
(c) | Performance-Based Restrictions. The Committee may, in its sole discretion, provide restrictions that lapse upon the attainment of specified performance objectives. In such case, the provisions of Sections 9.2 and 9.3 will apply (including, but not limited to, the enumerated performance objectives). If the Award Agreement governing an Award provides that such Award is intended to be performance based compensation, the provisions of Article 9 will also apply. |
(d) | Delivery of Shares. Any Restricted Stock granted under the Plan may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Shares of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. At the end of any time period during which the Restricted Shares are subject to forfeiture and restrictions on transfer, and after any tax withholding, such Shares will be delivered free of all restrictions (except for any pursuant to Article 14) to the Participant or other appropriate person and with the foregoing legend removed from the stock certificate. |
(e) | Forfeiture of Shares. If a Participant who holds Restricted Shares fails to satisfy the restrictions, vesting requirements and other conditions relating to the Restricted Shares prior to the lapse, satisfaction or waiver of such restrictions |
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and conditions, except as may otherwise be determined by the Committee, the Participant shall forfeit the Shares and transfer them back to the Company in exchange for a refund of any consideration paid by the Participant or such other amount which may be specifically set forth in the Award Agreement. A Participant shall execute and deliver to the Company one or more Stock Powers with respect to Restricted Shares granted to such Participant.
(f) | Voting and Other Rights. Except as otherwise required for compliance with the terms of the applicable Restricted Share Agreement, during any period in which Restricted Shares are subject to forfeiture and restrictions on transfer, the Participant holding such Restricted Shares shall have all the rights of a Shareholder with respect to such Shares, including, without limitation, the right to vote such Shares and the right to receive any dividends paid with respect to such Shares. |
8.3 Restricted Share Unit Awards and Agreements. Restricted Share Unit Awards consist of Shares that will be issued to a Participant at a future time or times at no cost, or at a purchase price determined by the Committee which purchase price may be below their Fair Market Value, if continued employment and/or other terms and conditions specified by the Committee are satisfied. Each Restricted Share Unit Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by an Award Agreement dated as of the Date of Grant and executed by the Company and the Participant. The timing of Restricted Share Unit Awards and the number of Restricted Share Units to be awarded are to be determined by the Committee in its sole discretion. By accepting a Restricted Share Unit Award, the Participant agrees to remit to the Company when due any tax withholding as provided in Article 15.
8.4 Terms and Conditions of Restricted Share Unit Awards. Restricted Share Unit Awards are subject to the following terms and conditions, which, except as otherwise provided herein, need not be the same for each Participant, and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan and any operative employment or other agreement, as the Committee deems desirable:
(a) | Purchase Price. The Committee shall determine the prices, if any, at which Shares are to be issued to a Participant after Vesting of Restricted Share Units, which may vary from time to time and among Participants and which may be below the Fair Market Value of Shares at the Date of Grant. |
(b) | Restrictions. All Restricted Share Units awarded under this Plan will be subject to such restrictions as the Committee may determine, which may include, without limitation, the following: |
(i) | a prohibition against the sale, transfer, pledge or other encumbrance of the Restricted Share Unit; |
(ii) | a requirement that the Participant forfeit such Restricted Share Unit in the event of termination of the Participant's employment with the Bank, the Company or its Affiliates prior to Vesting; |
(iii) | a prohibition against employment of the Participant by, or provision of services by the Participant to, any competitor of the Bank, the Company or its Affiliates, or against dissemination by the Participant of any secret or confidential information belonging to the Bank, the Company or an Affiliate; |
(iv) | any applicable requirements arising under the Securities Act of 1933, as amended, other securities laws, the rules and regulations of any stock exchange or transaction reporting system upon which the Common Shares may then be listed or quoted and any state laws, rules and interpretations, including "blue sky" laws; and |
(v) | such additional restrictions as are required to avoid adverse tax consequences under Code Section 409A. |
The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse.
(c) | Performance-Based Restrictions. The Committee may, in its sole discretion, provide restrictions that lapse upon the attainment of specified performance objectives. In such case, the provisions of Sections 9.2 and 9.3 will apply (including, but not limited to, the enumerated performance objectives). If the Award Agreement governing an Award provides that such Award is intended to be performance based compensation, the provisions of Article 9 will also apply. |
(d) | Voting and Other Rights. A Participant holding Restricted Share Units shall not be deemed to be a Shareholder of the Company solely because of such units. Such Participant shall have no rights of a Shareholder with respect to such units; provided, however, that an Award Agreement may provide for payment of an amount of money (or Shares |
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with a Fair Market Value equivalent to such amount) equal to the dividends paid from time to time on the number of Common Shares that would become payable upon vesting of a Restricted Share Unit Award.
(e) | Lapse of Restrictions. If a Participant who holds Restricted Share Units satisfies the restrictions and other conditions relating to the Restricted Share Units prior to the lapse or waiver of such restrictions and conditions, the Restricted Share Units shall be converted to, or replaced with, Shares which are free of all restrictions except for any restrictions pursuant to Article 14. |
(f) | Forfeiture of Restricted Share Units. If a Participant who holds Restricted Share Units fails to satisfy the restrictions, Vesting requirements and other conditions relating to the Restricted Share Units (prior to the lapse, satisfaction or waiver of such restrictions and conditions), except as may otherwise be determined by the Committee, the Participant shall forfeit the Restricted Share Units. |
(g) | Special Limitations on Restricted Share Unit Awards. Unless an Award Agreement approved by the Committee provides otherwise, Restricted Share Units awarded under this Plan are intended to meet the requirements for the short-term deferral exemption from coverage under Code Section 40`9A described in Treasury Regulation Section 1.409A-1(b)(4) and all Restricted Stock Unit Awards shall be construed and administered accordingly. |
8.5 Time Vesting of Restricted Share and Restricted Share Unit Awards. Restricted Shares or Restricted Share Units, or portions thereof, are exercisable at such time or times as determined by the Committee in its discretion at or after grant, subject to the restrictions on time Vesting set forth in this Section. If the Committee provides that any Restricted Shares or Restricted Share Unit Awards become Vested over time (with or without a performance component), the Committee may waive or accelerate such Vesting provisions at any time, subject to the restrictions on time Vesting set forth in this Section. Unless otherwise determined by the Committee in connection with the grant and set forth in the Award Agreement, all unvested Restricted Share and Restricted Share Unit Awards shall immediately Vest with respect to any required time vesting upon the Death or Disability of the holder.
ARTICLE 9
Performance Share Awards
9.1 Performance Share Awards and Agreements. A Performance Share Award is a right to receive Shares in the future conditioned upon the attainment of specified performance objectives and such other conditions, restrictions and contingencies as the Committee may determine. Each Performance Share Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by an Award Agreement dated as of the Date of Grant and executed by the Company and by the Participant. The timing of Performance Share Awards and the number of Shares covered by each Award are to be determined by the Committee in its discretion. By accepting a grant of Performance Shares, the Participant agrees to remit to the Company when due any tax withholding as provided in Article 15.
9.2 Performance Objectives. At the time of grant of a Performance Share Award, the Committee will specify the performance objectives which, depending on the extent to which they are met, will determine the number of Shares that will be distributed to the Participant. The Committee will also specify the time period or periods (the "Performance Period") during which the performance objectives must be met. With respect to awards intended to be “performance based compensation,” the Committee may use performance objectives based on one or more financial criteria or other objective performance measures as the Committee may determine to be appropriate, including, but not limited to, one or more of the following: earnings per share, total revenue, net interest income, non-interest income, net income, net income before tax, non-interest expense, efficiency ratio, return on equity, return on assets, economic profit added, loans, deposits, tangible equity, assets, net charge-offs, new market growth, product line developments, and nonperforming assets. The Committee may designate a single goal criterion or multiple goal criteria for performance measurement purposes. Performance measurement may be described in terms of objectives that are related to the performance by the Company, by the Bank, by any Subsidiary, or by any employee or group of employees in connection with services performed by that employee or those employees for the Company, the Bank, a Subsidiary, or one or more subunits of the Company, the Bank or of any Subsidiary. The performance objectives may be made relative to the performance of other companies. The performance objectives and periods need not be the same for each participant or for each Award.
9.3 Adjustment of Performance Objectives. The Committee may modify, amend or otherwise adjust the performance objectives specified for outstanding Performance Share Awards if it determines that an adjustment would be consistent with the objectives of this Plan and taking into account the interests of the affected Participants and the public Shareholders of the Company and such adjustment complies with any applicable legal requirements. The types of events which could cause an adjustment in the performance objectives include, without limitation, accounting changes which substantially affect the determination of performance objectives, changes in applicable laws or regulations which affect the performance objectives, and divisive corporate reorganizations, including spin-offs and other distributions of property or stock.
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9.4 Other Terms and Conditions. Performance Share Awards granted under this Plan are subject to the following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan and any operative employment or other agreement as the Committee deems desirable:
(a) | Delivery of Shares. As soon as practicable after the applicable Performance Period has ended, the Participant will receive a distribution of the number of Shares earned during the Performance Period, depending upon the extent to which the applicable performance objectives were achieved. Such Shares will be registered in the name of the Participant and will be free of all restrictions except for any restrictions pursuant to Article 14. Notwithstanding the forgoing, the distribution of Shares provided for herein shall occur not later than two and one-half months following the end of the calendar year in which the Performance Period has ended. |
(b) | Termination. A Performance Share Award or unearned portion thereof will terminate without the issuance of Shares on the termination date specified at the time of grant or upon the termination of employment of the Participant during the Performance Period. If a Participant's employment with the Bank, the Company or its Affiliates terminates by reason of his or her death, disability or retirement, the Committee in its discretion at or after the time of grant may determine, notwithstanding any Vesting requirements, that the Participant (or the heir, legatee or legal representative of the Participant's estate) will receive a distribution based on a portion of the Participant's then-outstanding Performance Share Awards in an amount which is not more than the number of shares which would have been earned by the participant if 100% of the performance objectives for the current Performance Period had been achieved prorated based on the ratio of the number of months of active employment in the Performance Period to the total number of months in the Performance Period. |
(c) | Voting and Other Rights. Awards of Performance Shares do not provide the Participant with voting rights or rights to dividends prior to the Participant becoming the holder of record of Shares issued pursuant to an Award; provided, however, that an Award Agreement may provide for payment of an amount of money (or Shares with a Fair Market Value equivalent to such amount) equal to the dividends paid from time to time on the number of Common Shares that would become payable upon vesting of a Performance Share Award. Prior to the issuance of Shares, Performance Share Awards may not be sold, transferred, pledged, assigned or otherwise encumbered. |
9.5 Special Limitations on Performance Share Awards. Unless an Award Agreement approved by the Committee provides otherwise, Performance Shares awarded under this Plan are intended to meet the requirements for the short-term deferral exemption from coverage under Code Section 409A described in Treasury Regulation Section 1.409A-1(b)(4) and all Performance Share Awards shall be construed and administered accordingly.
ARTICLE 10
Transfers and Leaves of Absence
10.1 Transfer of Participant. For purposes of this Plan, the transfer of a Participant among the Bank, the Company and other Affiliates of the Company is deemed not to be a termination of employment.
10.2 Effect of Leaves of Absence. For purposes of this Plan, the following leaves of absence are deemed not to be a termination of employment:
(a) | a leave of absence, approved in writing by the Bank or the Company, for military service, sickness or any other purpose approved by the Bank or the Company, if the period of such leave does not exceed 90 days; |
(b) | a leave of absence in excess of 90 days, approved in writing by the Bank or the Company, but only if the employee's right to reemployment is guaranteed either by a statute or by contract, and provided that, in the case of any such leave of absence, the employee returns to work within 30 days after the end of such leave; and |
(c) | any other absence determined by the Committee in its discretion not to constitute a termination of employment. |
ARTICLE 11
Effect of Change in Control
11.1 Change in Control Defined. "Change in Control" shall have the meaning set forth in Article 1 of this Plan.
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11.2 Effect of Change in Control. Unless otherwise determined by the Committee in connection with the grant and expressly set forth in the Award Agreement, if following a Change in Control, less than 50 percent of the voting stock of the surviving corporation is held by persons who were Shareholders of the Company immediately prior to the closing of the Change in Control (whether such surviving corporation is the Company or another entity):
(a) | all Stock Options or SARs, notwithstanding any limitations set forth in the Plan shall become fully Vested and immediately exercisable; |
(b) | all Restricted Shares, notwithstanding any limitations set forth in the Plan shall become fully Vested; and |
(c) | all Restricted Share Units and Performance Shares, notwithstanding any limitations set forth in the Plan, shall become fully Vested. |
If at least 50 percent of the voting stock of the Company or other surviving corporation is held by persons who were Shareholders of the Company immediately prior to the closing of the Change in Control, then all such Awards or such substitutes therefore shall remain outstanding and be governed by their respective terms and Vesting shall not be accelerated.
In addition, in connection with a Change in Control the Committee shall have the right, in its sole discretion, to:
(d) | cancel any or all outstanding Stock Options, SARs, Restricted Share Units and Performance Shares in exchange for the kind and amount of shares of the surviving or new corporation, cash, securities, evidences of indebtedness, other property or any combination thereof receivable in respect of one Share upon consummation of the transaction in question (the "Acquisition Consideration") that the holder of the Stock Option, SAR, Restricted Share Unit or Performance Share would have received had the Stock Option, SAR, Restricted Share Unit or Performance Share been exercised or converted into Shares, as applicable, prior to such transaction, less the applicable exercise or purchase price therefor; |
(e) | cause the holders of any or all Stock Options, SARs, Restricted Share Units and Performance Shares to have the right thereafter and during the term of the Stock Option, SAR, Restricted Share Unit or Performance Share to receive upon exercise thereof the Acquisition Consideration receivable upon the consummation of such transaction by a holder of the number of Common Shares which might have been obtained upon exercise or conversion of all or any portion thereof, less the applicable exercise or purchase price therefor, or to convert such Stock Option, SAR, Restricted Share Unit or Performance Share into a stock option, appreciation right, restricted share unit or performance share relating to the surviving or new corporation in the transaction; or |
(f) | take such other action as it deems appropriate to preserve the value of the Award to the Participant, including the cancellation of such Award and the payment of the value of the Acquisition Consideration attributable to the Award, net of payments due from the holder thereof upon exercise if any, in cash. |
The Committee may provide for any of the foregoing in an Award Agreement governing an Award in advance, may provide for any of the foregoing in connection with a Change in Control, or do both. Alternatively, the Committee shall also have the right to require any purchaser of the Company's assets or stock, as the case may be, to take any of the actions set forth in the preceding sentence.
The manner of application and interpretation of the foregoing provisions of this Section 11.2 shall be determined by the Committee in its sole and absolute discretion.
11.3 Code Section 409A. If the Committee determines than an Award is not exempt from the requirements of Section 409A of the Code, then, notwithstanding the other provisions of this Article 10, the Committee may provide in the Award Agreement for such changes to the definition of Change in Control from the definition set forth in this Plan, and for such changes to the rights of the parties upon a Change in Control, as the Committee may deem necessary in order for such Award to comply with Code Section 409A.
ARTICLE 12
Transferability of Awards
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12.1 Awards Are Non-Transferable. Except as provided in Sections 12.2 and 12.3, Awards are non-transferable and any attempts to assign, pledge, hypothecate or otherwise alienate or encumber (whether by operation of law or otherwise) any Award shall be null and void.
12.2 Inter-Vivos Exercise of Awards. During a Participant's lifetime, Awards are exercisable only by the Participant or, as permitted by applicable law and notwithstanding Section 12.1 to the contrary, the Participant's guardian or other legal representative.
12.3 Limited Transferability of Certain Awards. Notwithstanding Section 12.1 to the contrary, Awards may be transferred by will and by the laws of descent and distribution. Moreover, the Committee, in its discretion, may allow at or after the time of grant the transferability of Awards which are Vested, provided that the permitted transfer is made (a) if the Award is an Incentive Stock Option, the transfer is consistent with Section 422 of the Code; (b) to the Company (for example in the case of forfeiture of Restricted Shares), an Affiliate or a person acting as the agent of the foregoing or which is otherwise determined by the Committee to be in the interests of the Company; or (c) by the Participant for no consideration to Family Members or other Permitted Transferees (as defined in this Plan). No transfer may be made to the extent that transferability would cause Form S-8 or any successor form thereto not to be available to register Shares related to an Award. The Committee in its discretion may impose additional terms and conditions upon transferability.
ARTICLE 13
Amendment and Discontinuation
13.1 Amendment or Discontinuation of this Plan. The Board of Directors may amend, alter, or discontinue this Plan at any time, provided that no amendment, alteration, or discontinuance may be made:
(a) | which would materially and adversely affect the rights of a Participant under any Award granted prior to the date such action is adopted by the Board of Directors without the Participant's written consent thereto; and |
(b) | without Shareholder approval, if Shareholder approval is required under applicable laws, regulations or exchange requirements (including Section 422 of the Code with respect to ISOs. |
Notwithstanding the foregoing, this Plan may be amended without Participants' consent to: (i) comply with any law; (ii) preserve any intended favorable tax effects for the Company, the Plan or Participants; or (iii) avoid any unintended unfavorable tax effects for the Company, the Plan or Participants.
13.2 Amendment of Grants. The Committee may amend, prospectively or retroactively, the terms of any outstanding Award, provided that no such amendment may be inconsistent with the terms of this Plan (specifically including the prohibition on granting Stock Options or SARs with an Exercise Price less than 100% of the Fair Market Value of the Common Shares on the Date of Grant) or would materially and adversely affect the rights of the Participant holding the grant without his or her written consent.
ARTICLE 14
Issuance of Shares and Share Certificates
14.1 Issuance of Shares. The Company will issue or cause to be issued Shares as soon as practicable upon exercise or conversion of an Award that is payable in Shares. No certificates for Shares will be issued until full payment has been made, to the extent payment is required. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Shares, notwithstanding the exercise or conversion of the Award payable in shares.
14.2 Delivery of Share Certificates. The Company is not required to issue or deliver any certificates for Shares issuable with respect to Awards under this Plan prior to the fulfillment of all of the following conditions:
(a) | payment in full for the Shares and for any tax withholding (see Article 15); |
(b) | completion of any registration or other qualification of such Shares under any Federal or state laws or under the rulings or regulations of the Securities and Exchange Commission or any other regulating body which the Committee in its discretion deems necessary or advisable; |
(c) | admission of such Shares to listing on any stock exchange on which the Shares are listed; |
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(d) | in the event the Shares are not registered under the Securities Act of 1933, qualification as a private placement under said Act or qualification for another applicable exemption from registration under the Securities Act of 1933; |
(e) | obtaining of any approval or other clearance from any Federal or state governmental agency which the Committee in its discretion determines to be necessary or advisable; and |
(f) | the Committee is fully satisfied that the issuance and delivery of Shares under this Plan is in compliance with applicable Federal, state or local law, rule, regulation or ordinance or any rule or regulation of any other regulating body, for which the Committee may seek approval of counsel for the Company. |
14.3 Applicable Restrictions on Shares. Shares issued with respect to awards may be subject to such stock transfer orders and other restrictions as the Committee may determine necessary or advisable under any applicable Federal or state securities law rules, regulations and other requirements, the rules, regulations and other requirements of any stock exchange upon which the Shares are then listed, and any other applicable Federal or state law and will include any restrictive legends on stock certificates that the Committee may deem appropriate to include.
14.4 Book Entry. In lieu of the issuance of stock certificates evidencing Shares, the Company may use a "book entry" system in which a computerized or manual entry is made in the records of the Company to evidence the issuance of such Shares. Such Company records are, absent manifest error, binding on all parties.
ARTICLE 15
Satisfaction of Tax Liabilities
15.1 In General. The Company or the Bank shall withhold any taxes which the Committee determines the Company or the Bank is required by law or required by the terms of this Plan to withhold in connection with any payments incident to this Plan. The Participant or other recipient shall provide the Committee with such additional information or documentation as may be necessary for the Company and the Bank to discharge their obligations under this Section. The Company may withhold: (a) cash, (b) subject to any limitations under Rule 16b-3, Common Shares to be issued, or (c) any combination thereof, in an amount equal to the amount which the Committee determines is necessary to satisfy the obligations of the Company, the Bank, a Subsidiary or a Parent to withhold federal, state and local income taxes or other amounts incurred by reason of the grant, vesting or exercise of an Award, its disposition, or the disposition of the underlying Common Shares. Alternatively, the Company may require the holder to pay to the Company or the Bank such amounts, in cash, promptly upon demand.
15.2 Withholding from Share Distributions. With respect to a distribution in Shares pursuant to a Restricted Share, Restricted Share Unit or Performance Share Award under the Plan, the Committee may cause the Company to sell the number of such Shares with a value (net proceeds of such sale) equal to (or exceed by not more than that actual sale price of a single Share) the Company's required tax withholding relating to such distribution. The Committee may withhold the proceeds of such sale for purposes of satisfying such tax withholding obligation.
15.3 Section 83(b) Election. The Committee may, where applicable, provide in an Award Agreement the right of the Participant to make an election pursuant to Section 83(b) of the Code, or comparable provisions of any state tax law, to include in the Participant's gross income the fair market value as of the Award as of the Date of Grant. The Participant may make such an election only if, prior to making any such election, the Participant (a) notifies the Company of the Participant's intention to make such election in accordance with any notice requirements set forth in the Award Agreement, and (b) pays to the Company an amount sufficient to satisfy any taxes or other amounts required by any governmental authority to be withheld or paid over to such authority for the Participant's account, or otherwise makes arrangements satisfactory to the Company for the payment of such amounts through withholding or otherwise.
15.4 Section 83(i) Elections Not Available. The shares of Common Stock issued pursuant to Stock Options or Restricted Share Units granted under this Plan are not intended to be qualified stock for purposes of Section 83(i) of the Code, and Participants may not make elections under Section 83(i) of the Code with respect to such shares. The Company will not create any escrow arrangements consistent with the requirements set forth in Section II.B.2 of IRS Notice 2018-97 in connection with the issuance of shares of Common Stock to participants under this Plan.
ARTICLE 16
General Provisions
16.1 No Implied Rights to Awards. No potential participant has any claim or right to be granted an Award under this Plan, and there is no obligation of uniformity of treatment of participants under this Plan.
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16.2 No Implied Rights to Employment. Neither this Plan nor any Award thereunder shall be construed as giving any individual any right to continued employment with the Bank, the Company or any Affiliate. The Plan does not constitute a contract of employment, and the Bank, the Company and each Affiliate expressly reserve the right at any time to terminate employees free from liability, or any claim, under this Plan, except as may be specifically provided in this Plan or in an Award Agreement.
16.3 Other Compensation Plans. Nothing contained in this Plan prevents the Board of Directors from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.
16.4 Rule 16b-3 Compliance. The Plan is intended to comply with all applicable conditions of Securities and Exchange Commission Rule 16b-3. All transactions involving any Participant subject to Section 16(a) of the Exchange Act shall be subject to the conditions set forth in Rule 16b-3, regardless of whether such conditions are expressly set forth in this Plan. Any provision of this Plan that is contrary to Rule 16b-3 does not apply to such Participants.
16.5 Successors. All obligations of the Company with respect to Awards granted under this Plan are binding on any successor to the Company, whether as a result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of the Company.
16.6 Severability. In the event any provision of this Plan, or the application thereof to any person or circumstances, is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, or other applications, and this Plan is to be construed and enforced as if the illegal or invalid provision had not been included.
16.7 Governing Law. To the extent not preempted by Federal law, this Plan and all Award Agreements pursuant thereto are construed in accordance with and governed by the laws of the State of Iowa. This Plan is not intended to be governed by the Employee Retirement Income Security Act and shall be so construed and administered.
16.8 Legal Requirements. No Awards shall be granted and the Company shall have no obligation to make any payment under the Plan, whether in Shares, cash, or a combination thereof, unless such payment is, without further action by the Committee, in compliance with all applicable Federal and state laws and regulations, including, without limitation, the Code and Federal and state securities laws.
16.9 Forfeiture by Employees in Connection with Termination for Cause. Notwithstanding any other provision of this Plan, subject to the provisions of the Award Agreement to which such Award relates, upon the termination of employment of a Participant for Cause, such Participant shall forfeit all benefits associated with any Award as provided for herein. Pursuant to this provision, a Participant shall forfeit all unexercised Options whether or not previously vested, all unexercised SARs whether or not previously vested and all Restricted Shares, Restricted Share Units and Performance Shares for which the delivery of Shares has not yet occurred.
16.10 Awards Subject to Clawback Policy. Notwithstanding any other provision of this Plan to the contrary, all Awards granted under this Plan shall be subject to the Company’s Policy on Recoupment of Executive Incentive Compensation, and each Award Agreement for such a grant under this Plan shall provide that the Participant will be obligated to repay to the Company, all amounts received with respect to awards granted to the Participant under this Plan, to the extent such a repayment is required by the terms of the Company’s Policy, as such Policy may be amended from time to time.
16.11 Section 409A of the Code. The Plan is intended, and shall be interpreted, to provide compensation that is exempt from the requirements of Section 409A pursuant to the “stock rights” exemption provided by Treasury Regulation Section 1.409A-1(b)(5) or the “short-term deferral” exemption provided by Treasury Regulation Section 1.409A-1(b)(4). The Company does not warrant that the Plan will comply with Section 409A of the Code with respect to any Award to any Participant or with respect to any payment. In no event shall the Company, the Bank, any Subsidiary or any director, officer, or employee of the Company, the Bank or any member of the Committee be liable for any additional tax, interest, or penalty incurred by a Participant as a result of the Plan’s failure to satisfy the requirements of an exemption from Section 409A of the Code, or as a result of the Plan’s failure to satisfy any other requirements of applicable tax laws.
ARTICLE 17
Effective Date and Term
17.1 Effective Date. The effective date of this Hills Bancorporation 2020 Stock Option and Incentive Plan is the date on which the Shareholders of the Company approve it at a duly held shareholders' meeting.
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17.2 Termination Date. This Plan will continue in effect until midnight on the day before the tenth anniversary of the effective date specified in Section 17.1; provided, however, that Awards granted on or before that date may extend beyond that date.
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