EXHIBIT 10.2
FORM OF INCENTIVE STOCK OPTION AGREEMENT
pursuant to the
BAY NATIONAL CORPORATION
STOCK OPTION PLAN
AGREEMENT, dated this _____ day of _______________, _______, between
Bay National Corporation (the "Company") and _______________________________
(the "Optionee"), relating to the grant by the Company to the Optionee of an
Option to purchase certain shares of stock in the Company, as of
___________________________ (the "Grant Date").
WHEREAS, the Optionee is now in the employ of the Company and the
Company desires to have the Optionee remain in such employ and to afford the
Optionee the opportunity to acquire stock ownership in the Company so that the
Optionee may have a direct proprietary interest in the Company's success; and
WHEREAS, the Company and its Stockholders have approved the Bay
National Corporation Stock Option Plan (the "Plan") pursuant to which the
Company may, from time to time, enter into incentive stock option agreements
with certain of its Eligible Executive Employees, as therein defined;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
mutually covenant and agree as follows:
1. Optionee's Agreement.
The Option Agreement does not constitute a contract of employment
between the Company or Bay National Bank and Optionee, and does not
limit the right of the Company or Bay National Bank to discharge the
Optionee at anytime.
2. Grant of Option.
(a) Subject to the terms and conditions set forth herein, the
Company hereby grants to the Optionee during the period commencing on the Grant
Date and ending on the date specified in Paragraph 5 (the "Option Period") an
Incentive Stock Option to purchase from the Company, at a price of $_____ per
share, up to but not exceeding in the aggregate ________ shares of the Company's
Common Stock, $.01 par value ("Stock"), such number being subject to adjustment
as provided in the Plan.
3. Exercise of Option.
The Options granted in paragraph 2 of this Agreement may be
exercised as follows:
(a) The aggregate number of shares of Stock of the Company
optioned by this Agreement shall be exercisable, in whole or in part, according
to the following schedule, with respect to each installment in the schedule on
and after the Vesting Date applicable to such installment:
------------------------------------------------------------
INSTALLMENT VESTING DATE APPLICABLE TO
INSTALLMENT
------------------------------------------------------------
1/7 of Shares [date]
------------------------------------------------------------
1/7 of Shares [date]
------------------------------------------------------------
1/7 of Shares [date]
------------------------------------------------------------
1/7 of Shares [date]
------------------------------------------------------------
1/7 of Shares [date]
------------------------------------------------------------
1/7 of Shares [date]
------------------------------------------------------------
1/7 of Shares [date]
------------------------------------------------------------
Notwithstanding the foregoing, the Option shall become exercisable with
respect to all of the Shares (to the extent it is not then otherwise
exercisable):
(i) Upon the Optionee's death; or
(ii) upon the Optionee's Retirement Date or Date of
Disability, as defined in the Plan.
Such exercise may be accelerated at the discretion of the Committee or
as provided in Section 8.1(e) of the Plan. To the extent an Option is
exercisable under this Paragraph 3(a), it shall be considered to be a "Vested
Option" for purposes of this Agreement.
(b) No less than fifty (50) shares may be purchased upon any
one exercise of the option granted hereby unless the number of shares purchased
at such time is the total number of shares in respect of which the Option hereby
granted is then exercisable.
(c) In no event shall any Option granted hereby be exercisable
for a fractional share.
2
(d) From time to time, in its discretion, the Committee may
offer the Optionee the right to cancel any Option granted hereunder in exchange
for such consideration as the Committee shall determine.
4. Method of Exercising Option and Payment of Option Price.
(a) The Option hereby granted shall be exercised by the
Optionee by delivering to the Secretary of the Company, from time to time, on
any business day (the "Exercise Date"), written notice specifying the number and
kind of shares the Optionee then desires to purchase (the "Notice"), and cash,
certified check, bank draft or postal express money order to the order of the
Company for an amount in United States Dollars equal to the option price for the
number of shares specified in the Notice (the "Total Option Price"), such
payment to be delivered with the Notice. The Total Option Price shall be
delivered to the Secretary of the Company not later than the end of the first
business day after the Exercise Date. The Optionee may propose payment of the
Option Price pursuant to any of the following methods, acceptance of which shall
be made only with the approval of the Committee, in its sole and absolute
discretion: (i) by the surrender of all or part of the Participant's options to
purchase the Company's Stock (including this Option); (ii) by the tender to the
Company of shares in the Company owned by the Participant and registered in his
or her name having a Fair Market Value equal to the amount due to the Company;
(iii) in other property, rights and credits, deemed acceptable by the Committee,
including the Participant's promissory note; or (iv) by any combination of the
payment methods described in this paragraph 4(a).
(b) Within five (5) business days after the Exercise Date, the
Company shall, subject to the receipt of withholding tax, if any, issue to the
Optionee the number of shares with respect to which such Option shall be so
exercised, and shall deliver to the Optionee a certificate (or certificates)
therefore.
5. Termination.
The Option granted hereby shall terminate and be of no force
or effect upon the expiration of ______ years* from date of this Agreement
unless terminated prior to such time as provided below.
If the Optionee ceases employment with the Company, the
Optionee's Option shall terminate or be exercisable as follows:
(a) Termination. In the event of the Optionee's Termination
(as that term is defined in the Plan) as an employee of the Company, the
Optionee's Option, to the extent that it is not a Vested Option (as determined
under Paragraph 3(a) shall be forfeited immediately, and to the extent it is a
Vested Option shall remain exercisable for sixty (60) days after the date of
Termination, or within such shorter period as may be specified by law or the
term of the Option set forth in this Paragraph 5. If the Optionee fails to
exercise a Vested Option exercisable after Termination as to all shares of Stock
within sixty (60) days after the date of Termination (or within such shorter
---------------
* Cannot exceed five (5) years in the case of an individual owning more
than ten (10%) of the total combined voting power of all classes of stock of the
Company determined as of the date first above written; in all other cases,
cannot exceed eight (8) years.
3
period as may be specified by law or the term of the Option set forth in this
Paragraph 5), such Option, to the extent then unexercised, shall expire.
(b) Retirement. In the event of Retirement (as that term is
defined in the Plan) as an employee of the Company, the Optionee may exercise
the Option granted hereby within ninety (90) days of the Optionee's Retirement
Date (as that term is defined in the Plan), or within such shorter period as may
be specified by law or the term of the Option set forth in this Paragraph 5. If
an Optionee fails to exercise an Option as to all shares of Stock within ninety
(90) days after the Participant's Retirement Date (or within such shorter period
as may be specified by law or the term of the Option set forth in this Paragraph
5), such Option, to the extent then unexercised, shall expire.
(c) Disability. Upon the Optionee's separation from employment
due to Disability (as that term is defined in the Plan) the Optionee may
exercise the Option granted hereby within ninety (90) days of the Optionee's
Disability Date (as that term is defined in the Plan), or within such shorter
period as may be specified by law or the term of the Option set forth in this
Paragraph 5. If an Optionee fails to exercise an Option as to all shares of
Stock within ninety (90) days after the Participant's Disability Date (or within
such shorter period as may be specified by law or the term of the Option set
forth in this Paragraph 5), such Option, to the extent then unexercised, shall
expire. This subsection (c) shall apply only to Optionees who are Eligible
Individuals (as defined in the Plan) as of their Disability Date.
(d) Death. If the Optionee dies while in the employment of the
Company or within the period of time after Retirement separation due to
Disability during which the Optionee would have been entitled to exercise the
Option granted hereby, the Optionee's estate, personal representative or
beneficiary (as applicable) shall have the right to exercise the Option granted
hereby within one hundred and eighty (180) days from the date of the Optionee's
death (or within such shorter time as may be provided by law or the term of the
Option as set forth in this Paragraph 5). If a deceased Optionee's estate,
personal representative or beneficiary (as applicable) fails to exercise a
Vested Option as to all shares of Stock within one hundred and eighty (180) days
after the Participant's death (or within such shorter period as may be specified
by law or the term of the Option set forth in this Paragraph 5), such Option, to
the extent then unexercised, shall expire.
Any determination made by the Committee with respect to any
matter referred to in this paragraph 5 shall be final and conclusive on all
persons affected thereby. Employment by the Company shall be deemed to include
employment of the Optionee by, and to continue during any period in which the
Optionee is in the employ of, any subsidiary.
6. Optionee.
Whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provision should logically be construed
to apply to the estate, personal representative or beneficiary to whom this
Option may be transferred by will or by the laws of descent and distribution,
the word "Optionee" shall be deemed to include such person.
4
7. Assignability.
Except by the laws of descent and distribution, no benefit
provided hereunder shall be subject to alienation, assignment or transfer by an
Optionee (or by any person entitled to such benefit pursuant to the terms of the
Plan), nor shall it be subject to attachment or other legal process of whatever
nature, and any attempted alienation, assignment, attachment or transfer shall
be void and of no effect whatsoever and upon any such attempt, the benefit shall
terminate and be of no force or effect. During an Optionee's lifetime, Options
granted to the Optionee shall be exercisable only by the Optionee, or the
Optionee's authorized legal representative. Shares of Stock shall be delivered
only into the hands of the Optionee entitled to receive the same or into the
hands of the Optionee's authorized legal representative. Deposit of any sum in
any financial institution to the credit of any Optionee (or of a person entitled
to such sum pursuant to the terms of the Plan) shall constitute payment into the
hands of that Optionee (or such person). Any transferee authorized under this
Section or legal representative shall be bound by the terms and conditions of
the Plan and the terms and conditions of this Option.
8. Rights as a Stockholder.
The Optionee shall not be deemed for any purpose to be a
stockholder of the Company with respect to the shares represented by this Option
until this Option shall have been exercised, payment and issue has been made as
herein provided, and the Optionee's name has been entered as a stockholder of
record on the books of the Company.
9. The Company's Rights.
The existence of this Option shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or other stocks with
preference ahead of or convertible into, or otherwise affecting the Common Stock
of the Company or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of the Company's assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
10. Recapitalization; Merger and Consolidation.
(a) In the event of any change in the number of issued shares
of Stock resulting from a subdivision or consolidation of shares or other
capital adjustment, or the payment of a stock dividend or other increase or
decrease of such shares, then appropriate adjustments shall be made by the
Committee with respect to outstanding Options and the aggregate number of shares
of Stock which may be awarded pursuant to the Plan. Additions to Options issued
as a result of any such change shall bear the same restrictions and carry the
same terms as the Options to which they relate.
(b) In the event of a change in the Stock which is limited to
a change in the designation thereof to "capital stock" or other similar
designation, or in par value to no par value, without increase or decrease in
the number of issued shares, the shares resulting from any such change shall be
deemed to be Stock within the meaning of this Plan.
5
11. Preemption by Applicable Laws or Regulations.
Anything in this Agreement to the contrary notwithstanding,
if, at any time specified herein for the issuance of shares to the Optionee, any
law, regulation or requirements of any governmental authority having appropriate
jurisdiction shall require either the Company or the Optionee to take any action
prior to or in connection with the shares of Stock then to be issued, sold or
repurchased, the issue, sale or repurchase of such shares of Stock shall be
deferred until such action shall have been taken.
12. Resolution of Disputes.
Any dispute or disagreement which shall arise under, or as a
result of, or pursuant to, this Agreement shall be determined by the Committee
in its absolute and uncontrolled discretion, and any such determination or any
other determination by the Committee under or pursuant to this Agreement and any
interpretation by the Committee of the terms of this Agreement, shall be final,
binding and conclusive on all persons affected thereby.
13. Amendments.
The Board may at any time and from time to time otherwise
alter, amend, suspend or terminate the Plan in whole or in part; provided,
however, that no amendment or termination of the Plan shall affect any Options
granted under the Plan prior to the date of the amendment or termination. The
Committee shall have the right to amend this Agreement at any time, consistent
with the provisions of the Plan, with the consent of the Optionee.
14. Notice.
Any notice which either party hereto may be required or
permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, addressed as follows: to the Company at
its principle executive offices, or at such other address as the Company, by
notice to the Optionee, may designate in writing from time to time; to the
Optionee, at his or her address as shown on the records of the Company, or at
such other address as the Optionee, by notice to the Secretary of the Company,
may designate in writing from time to time.
15. Tax Withholding.
The Company shall have the right to deduct from any payment
hereunder any federal, state, local or employment taxes which it deems are
required by law to be withheld. At the request of the Optionee, or as required
by law, such sums as may be required for the payment of any estimated or accrued
income tax liability may be withheld and paid over to the governmental entity
entitled to receive the same.
6
16. Fractional Shares.
Any fractional shares concerning this Option shall be
eliminated at the time of exercise by rounding down for fractions of less than
one-half (1/2) and rounding up for fractions of equal to or more than one-half
(1/2). No cash settlements shall be made with respect to fractional shares
eliminated by rounding.
17. Governing Law.
All matters relating to this Agreement shall be governed by
the laws of the State of Maryland, without regard to the principles of the
conflict of laws, except to the extent preempted by the laws of the United
States. The Agreement shall be subject to any provision necessary to assure
compliance with federal and state securities laws.
18. Construction.
This Agreement has been entered into in accordance with the
terms of the Plan, and wherever a conflict may arise between the terms of this
Agreement and the terms of the Plan, the terms of the Plan shall control.
19. Qualified Nature of Agreement.
This Agreement is intended to be an agreement concerning a
stock option arrangement which is qualified under section 422 of the Code (as
defined in the Plan), and this Agreement shall be so construed.
20. General.
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of Stock as will be sufficient
to satisfy the requirements herein, shall pay all original issue and transfer
taxes with respect to the issue and transfer of shares pursuant hereto and all
other fees and expenses necessarily incurred by the Company in connection
herewith, and will from time to time use its best efforts to comply with all
laws and regulations which, in the opinion of counsel for the Company shall be
applicable thereto.
21. Regulatory Compliance.
No Stock shall be issued hereunder until the Company has
received all necessary regulatory approvals and has taken all necessary steps to
assure compliance with federal and state securities laws or has determined to
its satisfaction and the satisfaction of its counsel that an exemption from the
requirements of the federal and applicable state securities laws are available.
22. Incorporation of Plan.
This Agreement is entered into under the applicable provisions
of the Plan which is attached hereto and made a part hereof.
7
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and its seal to be affixed hereto, and
the Optionee has hereunto set the Optionee's hand and seal, all on the day and
year first above written.
BAY NATIONAL CORPORATION:
By:_______________________________________(SEAL)
Print Name:________________________________________
Date:______________________________________________
THE OPTIONEE:
____________________________________________(SEAL)
Print Name:______________________________________
Date:_____________________________________________
