U.S.
Securities and Exchange Commission
Washington,
D.C.
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _____)
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
|
¨
|
Preliminary
Proxy Statement
|
|
¨
|
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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|
x
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Definitive
Proxy Statement
|
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-12 |
BAY
NATIONAL CORPORATION
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x No
fee
required.
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title
of
each class of securities to which transaction applies:
(2)
Aggregate
number of securities to which transaction applies:
(3) Per
unit
price or other underlying value of transaction computed pursuant to Exchange
Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and
state
how it was determined):
(4)
Proposed
maximum aggregate value of transaction:
(5)
Total
fee
paid:
|
¨
|
Fee
paid previously with preliminary
materials.
|
|
¨
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
|
|
(1)
|
Amount
Previously Paid:
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|
(2)
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Form,
Schedule or Registration Statement
No.:
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|
(3)
|
Filing
Party:
|
| (4) | Date Filed: |
BAY
NATIONAL CORPORATION
April
20,
2007
Dear
Stockholder:
On
behalf
of the Board of Directors, I cordially invite you to attend Bay National
Corporation’s 2007 Annual Meeting of Stockholders on Tuesday, May 22, 2007 at
2:30 p.m., local time, at Bay National Corporation’s office located at 2328 West
Joppa Road, Lutherville, Maryland 21093.
The
notice of meeting and proxy statement on the following pages contain information
about the meeting. In order to ensure your shares are voted at the meeting,
please return the enclosed proxy card at your earliest convenience. Every
stockholder’s vote is important.
Very
truly yours,
/s/
Hugh W. Mohler
Hugh
W.
Mohler
Chairman
and Chief Executive Officer
Bay
National Corporation
2328
West
Joppa Road, Lutherville, Maryland 21093
NOTICE
OF
ANNUAL MEETING
TO
BE
HELD MAY 22, 2007
April
20,
2007
The
Annual Meeting of Stockholders will be held in Bay National Corporation’s office
located at 2328 West Joppa Road, Lutherville, Maryland 21093 to:
| 1. |
Elect
five directors to serve for a three-year term ending at the Annual
Meeting
of Stockholders to be held in 2010 in each case until their successors
are
duly elected and qualified;
|
| 2. |
Ratify
the appointment of Stegman & Company as independent registered public
accountants to audit the financial statements of Bay National Corporation
for 2007;
|
| 3. |
Approve
the 2007 Stock Incentive Plan;
and
|
| 4. |
Act
upon any other matter that may properly come before the meeting or
any
adjournment or postponement
thereof.
|
Only
stockholders of record of Bay National Corporation common stock at the close
of
business on March 27, 2007 are entitled to notice of and to vote at the meeting,
or any adjournment or postponement thereof.
Whether
or not you plan to attend the meeting, please indicate your choices on the
matters to be voted upon, date and sign the enclosed proxy and return it in
the
enclosed postage-paid return envelope. You may revoke your proxy at any time
prior to or at the meeting by written notice to Bay National Corporation, by
executing a proxy bearing a later date, or by attending the meeting and voting
in person.
By
order
of the Board of Directors,
/s/
Mark A. Semanie
Mark
A.
Semanie
Secretary
PROXY
STATEMENT
INTRODUCTION
This
Proxy Statement is furnished on or about April 20, 2007 to stockholders of
Bay
National Corporation in connection with the solicitation of proxies by Bay
National Corporation’s Board of Directors to be used at the annual meeting of
stockholders described in the accompanying notice (the “Annual Meeting”) and at
any adjournments or postponements thereof. The purposes of the Annual Meeting
are set forth in the accompanying notice of annual meeting of stockholders.
This
proxy material is being sent to Bay National Corporation’s stockholders on or
about April 20, 2007. Bay National Corporation’s annual report, including
financial statements for the year ended December 31, 2006, has been mailed
to
all stockholders with this proxy material.
SOLICITATION
AND REVOCATION OF PROXIES
The
enclosed proxy is solicited by the Board of Directors of Bay National
Corporation. The Board of Directors selected Warren F. Boutilier and Hugh L.
Robinson II, or either of them, to act as proxies with full power of
substitution at the Annual Meeting. The proxy is revocable at any time prior
to
or at the Annual Meeting by written notice to Bay National Corporation, by
executing a proxy bearing a later date, or by attending the Annual Meeting
and
voting in person. A written notice of revocation of a proxy should be sent
to
the Secretary, Bay National Corporation, 2328 West Joppa Road, Suite 325,
Lutherville, MD 21093, and will be effective if received by the Secretary prior
to the Annual Meeting. The presence of a stockholder at the Annual Meeting
alone
will not automatically revoke such stockholder’s proxy.
In
addition to solicitation by mail, officers and directors of Bay National
Corporation may solicit proxies personally or by telephone. Bay National
Corporation will not specifically compensate these persons for soliciting such
proxies. Bay National Corporation will bear the cost of soliciting proxies.
These costs may include reasonable out-of-pocket expenses in forwarding proxy
materials to beneficial owners. Bay National Corporation will reimburse brokers
and other persons for their reasonable expenses in forwarding proxy materials
to
customers who are beneficial owners of the common stock of Bay National
Corporation registered in the name of nominees.
OUTSTANDING
SHARES AND VOTING RIGHTS
Stockholders
of record at the close of business on March 27, 2007 (the “Record Date”) are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on that date, there were outstanding and entitled to vote 1,935,369
shares of common stock, $0.01 par value per share, each of which is entitled
to
one vote.
The
presence, in person or by proxy, of stockholders entitled to cast a majority
of
all the votes entitled to be cast at the Annual Meeting will be necessary to
constitute a quorum at the Annual Meeting. Abstentions and broker non-votes
are
counted for purposes of determining the presence or absence of a quorum for
the
transaction of business at the Annual Meeting.
For
the
election of directors, which requires a plurality of the votes cast, only
proxies and ballots indicating votes “FOR” a nominee or “WITHHOLD AUTHORITY” for
a nominee are counted to determine the total number of votes cast, and
abstentions and broker non-votes have no effect on the outcome of the election.
Assuming
a quorum is present; the affirmative vote of a plurality of the shares cast
in
person or represented by proxy at the Annual Meeting is required to elect the
director nominees. In other words, the nominees to receive the greatest number
of votes cast, up to the number of nominees up for election, will be elected.
Withheld votes and broker non-votes will not affect the outcome of the election
of directors.
Bay
National Corporation
1
The
affirmative vote of at least a majority of all votes cast in person or by proxy
at the Annual Meeting and entitled to vote on the matter is necessary to approve
the 2007 Stock Incentive Plan and
ratify the appointment of Stegman & Company as our independent registered
public accountants. An abstention or broker non-vote is not included in
calculating votes cast with respect to these proposals and will have no effect
on the outcome of these proposals.
A
broker
“non-vote” is a proxy received from a broker or nominee indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which
the
broker or nominee does not have discretionary power to vote.
All
proxies will be voted as directed by the stockholder on the proxy form. A proxy,
if executed and not revoked, will be voted in the following manner (unless
it
contains instructions to the contrary, in which event it will be voted in
accordance with such instructions):
FOR
the
nominees for directors named below.
|
FOR
ratification of the appointment of Stegman & Company as independent
public accountants for 2007.
|
|
FOR
approval of the 2007 Stock Incentive
Plan.
|
Proxies
will be voted in the discretion of the holder on such other business as may
properly come before the Annual Meeting or any adjournments or postponements
thereof.
It
is anticipated that Bay National Corporation’s directors and officers will vote
their shares of common stock in favor of the nominees for election to the Board
of Directors listed herein, for the ratification of the appointment of Stegman
and Company and for the approval of the 2007 Stock Incentive
Plan.
Bay
National Corporation
2
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
The
following table sets forth the beneficial ownership of Bay National
Corporation's common stock as of March 27, 2007 by its directors, executive
officers, and all directors and officers as a group and persons believed by
management to beneficially own more than five percent (5%) of the common stock.
The table includes warrants and options beneficially owned by these persons
and
exercisable within 60 days as of March 27, 2007. Unless otherwise noted below,
management believes that each person named in the table has the sole voting
and
sole investment power with respect to each of the shares of common stock
reported as beneficially owned by such person.
|
Name
of Beneficial Owner (13)
|
Number
of Shares
Beneficially
Owned
|
Percentage
of
Class
|
|
Charles
E. Bounds (1)
|
7,880
|
.39%
|
|
Gary
T. Gill
|
5,949
|
.29%
|
|
R.
Michael Gill
|
4,880
|
.24%
|
|
John
R. Lerch (2)
|
45,000
|
2.23%
|
|
Donald
G. McClure, Jr. (3)
|
17,000
|
.84%
|
|
Hugh
W. Mohler (4)
|
94,061
|
4.66%
|
|
Robert
L. Moore (5)
|
9,844
|
.49%
|
|
James
P. O’Conor
|
5,000
|
.25%
|
|
H.
Victor Rieger, Jr. (6)
|
29,000
|
1.44%
|
|
William
B. Rinnier (7)
|
13,500
|
.67%
|
|
Edwin
A. Rommel, III (8)
|
35,500
|
1.76%
|
|
Mark
A. Semanie (9)
|
20,310
|
1.01%
|
|
Henry
H. Stansbury (10)
|
36,800
|
1.82%
|
|
Kenneth
H. Trout (11)
|
60,482
|
3.00%
|
|
Eugene
M. Waldron, Jr. (12)
|
40,000
|
1.98%
|
|
Carl
A.J. Wright
|
14,000
|
.69%
|
|
Richard
C. Springer
|
-
|
-
|
|
Richard
J. Oppitz
|
525
|
.03%
|
|
All
directors and executive officers as a group
(18
persons)
|
459,049
|
22.82%
|
|
NexTier,
Inc. (14)
P.O.
Box 1550
Butler,
Pennsylvania 16003
|
163,624
|
8.11%
|
Bay
National Corporation
3
| (1) |
Includes
3,000 shares issuable upon the exercise of
options.
|
| (2) |
Includes
3,000 shares issuable upon the exercise of options. Includes 9,000
shares
held by LFI partnership, of which Mr. Lerch is a general partner;
4,000
shares held by Mr. Lerch’s spouse, over which he has shared voting and
investment power; and 500 shares held in trust for the benefit of
Mr.
Lerch’s daughter for which Mr. Lerch is
custodian.
|
| (3) |
Includes
3,000 shares issuable upon the exercise of options. Includes 10,000
shares
held in trust for the benefit of Mr. McClure’s children for which Mr.
McClure is a co-trustee and over which he has shared voting and investment
power.
|
| (4) |
Includes
40,261 shares issuable upon the exercise of options. Includes 1,000
shares
held by Mr. Mohler’s spouse, over which he has shared voting and
investment power.
|
| (5) |
Includes
2,250 shares issuable upon the exercise of
options.
|
| (6) |
Includes
3,000 shares issuable upon the exercise of options. Includes 1,000
shares
held by Mr. Rieger’s spouse, over which he has shared voting and
investment power.
|
| (7) |
Includes
3,000 shares issuable upon the exercise of options. Includes 3,000
shares
held by Mr. Rinnier’s spouse, over which he has shared voting and
investment power.
|
| (8) |
Includes
3,000 shares issuable upon the exercise of
options.
|
| (9) |
Includes
18,630 shares issuable upon the exercise of options.
|
| (10) |
Includes
3,000 shares issuable upon the exercise of options. Includes 12,500
shares
held by Mr. Stansbury’s spouse, over which he has shared voting and
investment power.
|
| (11) |
Includes
3,000 shares issuable upon the exercise of options. Includes 55,482
shares
held by Rosemore, Inc. Mr. Trout disclaims beneficial ownership as
to the
shares held by Rosemore, Inc.
|
| (12) |
Includes
3,000 shares issuable upon the exercise of options.
|
| (13) |
All
of the named individuals, other than Mr. Semanie, Mr. Springer and
Mr.
Oppitz are directors of Bay National Corporation. Mr. Mohler is a
director
and executive officer of Bay National
Corporation.
|
| (14) |
This
information is based on a Schedule 13G filed with the Securities
Exchange
Commission by NexTier Incorporated on March 28, 2006 and information
from
the Company’s transfer agent at the close of business on the Record
Date.
|
The
number of shares beneficially owned includes shares of common stock subject
to
options held by the named persons that are exercisable as of, or within 60
days
of, March 27, 2007. Such shares are deemed outstanding for the purpose of
computing the percentage ownership of the person holding the options or
warrants, but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person.
Bay
National Corporation
4
PROPOSAL
1. ELECTION
OF DIRECTORS
The
Board
of Directors currently has fifteen directors, divided into three classes -
Class
A, Class B and Class C. Each class of director serves for a three-year term
and
the term of office of one of the three classes expires each year. The current
Class C directors’ term expires at the Annual Meeting on May 22, 2007. A
director may only be removed by the affirmative vote of at least 80% of the
votes entitled to be cast on the matter and only for cause.
All
of
the members of Bay National Corporation’s Board of Directors, except R. Michael
Gill, have served for at least one three-year term on the Board of Directors
of
Bay National Corporation.
The
Board
of Directors is recommending the election of William B. Rinnier, Edwin A.
Rommel, III, Henry H. Stansbury, Kenneth H. Trout and Eugene M. Waldron, Jr.
as
Class C directors for a term ending at the 2010 Annual Meeting of Stockholders.
All of the nominees are now directors of Bay National Corporation and each
nominee has consented to serve as a director, if elected. The directors whose
terms have not expired will continue to serve as directors until the expiration
of their respective terms.
It
is not
contemplated that any of the nominees will become unavailable to serve, but
if
that should occur before the Annual Meeting, proxies that do not withhold
authority to vote for the nominees listed below will be voted for another
nominee, or nominees, selected by the Board of Directors.
The
proxies solicited hereby, unless directed to the contrary, will be voted
“FOR”
the
election of the five nominees named below as Class C directors with terms
expiring at the 2010 Annual Meeting of Stockholders. In order to be elected,
a
plurality of the shares cast at the Annual Meeting is necessary. Abstentions
and
broker non-votes have no effect on the outcome of the election.
Information
regarding the nominees and the directors, who will continue to serve unexpired
terms, and certain information relating to them, follows.
Nominees
for election to the Board of Directors for a three-year term expiring in
2010.
William
B. Rinnier,
age
65, has
been
a director of Bay National Corporation since August 1999 and a director of
Bay
National Bank since April 2000. Mr. Rinnier is the owner and president of
Rinnier Development Company, a Salisbury, Maryland based real estate development
company, which specializes in the development and sale or management of resort
condominiums, multi-family apartments, and commercial and industrial buildings.
He joined Rinnier Development Company nearly three decades ago after his
honorable discharge from the U.S. Navy.
A
native
of Salisbury, Maryland, Mr. Rinnier earned a degree in aerospace engineering
from the Georgia Institute of Technology and attended the Graduate School of
Business at the University of Virginia. He is a board member of the Greater
Salisbury Committee and is past president of the Salisbury-Wicomico Economic
Development Corporation and the Coastal Board of Realtors.
Edwin
A. Rommel III,
age
57, has
been
a director of Bay National Corporation since June 1999 and a director of Bay
National Bank since April 2000. Mr. Rommel is a certified public accountant
that, since 1974, has been a partner in the Salisbury, Maryland, accounting
firm
of Twilley, Rommel & Stephens, P.A. Mr. Rommel has been certified as a
valuation analyst and accredited in Business Valuation by the American Institute
of Certified Public Accountants.
A
Baltimore native, Mr. Rommel earned his undergraduate degree from Loyola College
of Maryland. Mr. Rommel is an officer of the Eastern Shore Chapter of the
Maryland Association of Certified Public Accountants. He is also a past Chairman
of the Maryland Association of Certified Public Accountants, and is a member
of
the governing board of the American Institute of Certified Public Accountants.
Mr. Rommel is past president of the Salisbury Area Chamber of Commerce and
previously served as a director of the Greater Salisbury Committee and as a
director of the Maryland Association of Certified Public Accountants. Mr. Rommel
is also past president of the St. Francis de Sales Board of Trustees and past
member of the Wicomico County Democratic Central Committee.
Bay
National Corporation
5
Henry
H. Stansbury,
age
67, has
been
a director of Bay National Corporation since June 1999 and a director of Bay
National Bank since April 2000. Since 1975, Mr. Stansbury has been the Chairman
of the Board of Agency Services, Inc., an independently owned premium finance
company. Since 1989, Mr. Stansbury has been the Chairman of the Board of
Directors of Agency Insurance Company of Maryland, Inc., a privately owned
multi-line property/casualty insurance company. Mr. Stansbury is a past
president of the Maryland Association of Premium Finance Companies and is a
past
president of the National Association of Premium Finance Companies.
Mr.
Stansbury is president and trustee of the Maryland Historical Society. He served
as director and chairman of the museum committee for the Lacrosse Hall of Fame
at the Johns Hopkins University and as trustee of the St. Paul's School for
Boys
and The Ward Museum of Wildfowl Art. He is also past president of ReVisions,
Inc., a nonprofit organization that serves the mentally ill. Mr. Stansbury
is a
graduate of Leadership Maryland and a director of Leadership Baltimore County.
He is the author of two books; Lloyd
J. Tyler: Folk Artist and Decoy Maker and
Ira
Hudson and Family, Chincoteague Carvers. He
is
also a contributing writer for Decoy
Magazine.
Mr.
Stansbury is an alumnus of the University of Maryland and holds a master of
business administration degree from George Washington University.
Kenneth
H. Trout,
age
58, has
been
a director of Bay National Corporation since October 1999 and a director of
Bay
National Bank since April 2000. Since January 1999, Mr. Trout has served as
the
president and chief executive officer of Rosemore, Inc., a Baltimore-based
privately held investment company primarily engaged in the business of oil
and
gas exploration and production. He also serves as a director of Rosemore
Holdings, Inc., Rosemore Calvert, Inc., Tema Oil and Gas Company and Gateway
Gathering and Marketing Company, which are all subsidiaries of Rosemore, Inc.
He
is also a director of KCI Technologies, Inc. From 1970 to November 1997, Mr.
Trout was employed by Signet Banking Corporation. During his last five years
of
tenure with Signet, he served as senior executive vice president-commercial
banking and as president and chief executive officer of Signet Bank-Maryland.
Mr. Trout was retired from December 1997 to December 1998.
A
Bridgeton, New Jersey native, Mr. Trout received his undergraduate degree in
economics and business administration from Methodist College in North Carolina.
He is a member of the Board of Trustees of The College of Notre Dame of
Maryland.
Eugene
M. Waldron, Jr.,
age
63, has
been
a director of Bay National Corporation since June 1999 and a director of Bay
National Bank since April 2000. Mr. Waldron is a Chartered Financial Analyst
and
since September 1998 has been a senior vice president in the Washington, D.C.,
office of Capital Guardian Trust Company, an employee-owned firm based in Los
Angeles dedicated to institutional investment management. From March 1994 to
August 1998, Mr. Waldron was employed by Loomis, Sayles & Company, an
investment management firm. Mr. Waldron's more than three decades of investment
experience include employment at CS First Boston Asset Management, Fidelity
Management Trust Company, T. Rowe Price Associates and Ferris, Baker, Watts
& Company.
An
alumnus of Mt. St. Mary's University, Emmitsburg, Maryland, Mr. Waldron earned
his master of business administration degree at the Bernard M. Baruch College
of
the City University of New York. A native of Annapolis, Maryland, he is a member
of the Mt. St. Mary's Board of Trustees and the Mt. St. Mary's Endowment
Committee.
The
Board of Directors recommends that stockholders vote “FOR” the election of all
nominees.
Bay
National Corporation
6
Continuing
Class A Directors - Terms Expiring in 2008.
Charles
E. Bounds,
age
88, has
been
a director of Bay National Corporation since June 1999 and a director of Bay
National Bank since April 2000. Mr. Bounds is a retired executive who served
from 1944 to 1969 as director of purchases and inventory for Symington Wayne
Corporation, an international conglomerate headquartered in Salisbury, Maryland,
which operated businesses in the United States and seven foreign countries.
From
1969 to 1999, he was a vice president-investments for Morgan Stanley Dean
Witter, working in the Salisbury, Maryland office of the investment banking
firm.
A
native
of Salisbury, Maryland, Mr. Bounds is past chairman of the Salvation Army Boys
Club in Salisbury, Maryland, and headed the Salisbury, Maryland Salvation Army
administrative board. He has also chaired fund raising efforts for the Boy
Scouts of America, Delmarva District. Mr. Bounds was an original member of
the
Ward Foundation, which is a Salisbury, Maryland based non-profit organization,
which operates The Ward Museum of Wildfowl Art. Mr. Bounds is an alumnus of
Beacom College.
Gary
T. Gill,
age
54, has
been
a director of Bay National Corporation and Bay National Bank since January
2003.
Mr. Gill is president and chief executive officer of the MacKenzie Companies,
a
Baltimore-based full-service commercial real estate firm comprising Mackenzie
Commercial Real Estate Services, LLC, Mackenzie Management Corporation,
MacKenzie Services Corporation and MacKenzie Contracting Company, LLC. Mr.
Gill
joined MacKenzie in 1977 and has served in his capacity as president since
1985.
Mr. Gill serves also as executive vice president of MacKenzie Properties, Inc.,
the managing partner of over 35 partnerships of income-producing commercial
properties.
A
native
of Towson, Maryland, Mr. Gill received his Bachelor of Arts degree in Business
Administration in 1974 from Towson University. Mr. Gill currently serves on
the
Camden Yards Sports and Entertainment Commission, USLacrosse
Foundation Board, and chairs the Towson University Board of Visitors.
John
R. Lerch,
age
62, has
been
a director of Bay National Corporation since June 1999 and a director of Bay
National Bank since April 2000. Since January 1999, Mr. Lerch has been
self-employed as a private investor trading as the Chesapeake Venture Group.
From 1973 to January 1999, Mr. Lerch was president of Chesapeake Insurance-The
Harris Riggin Agency, an independent insurance agency based in Salisbury,
Maryland. Mr. Lerch began his business career in the securities industry,
serving as a stockbroker at firms in Washington, D.C. and Salisbury, Maryland.
Mr. Lerch is a past director of the Independent Insurance Agents of Maryland.
Mr.
Lerch
is an alumnus of Dickinson College of Carlisle, Pennsylvania. He served as
an
officer in the U.S. Army and holds a Bronze Star from his service in Vietnam.
He
is a director of Barr International, Inc., a regional medium and heavy truck
sales and service organization. He is a past director of Peninsula Bank, a
subsidiary of Baltimore-based Mercantile Bankshares Corporation. He is a past
director and vice-chairman of the Greater Salisbury Committee, past trustee
of
the Peninsula Regional Medical Center in Salisbury, past president of
Salisbury-Wicomico Economic Development Corporation and past president and
campaign chairman of the United Way of the Lower Eastern Shore. He also has
served as a director for the Mid-Delmarva Family YMCA and was a former chairman
and a past trustee for The Ward Foundation.
James
P. O’Conor,
age
78, has
been
a director of Bay National Corporation and Bay National Bank since July 2004.
Mr. O’Conor is the general partner of O’Conor Enterprises, a real estate
investment and consulting company, and he has served in that capacity since
2002. Mr. O’Conor co-founded the Maryland real estate brokerage firm of O’Conor
& Flynn in 1961. In 1984, that firm merged with another large Maryland real
estate brokerage firm, creating O’Conor, Piper & Flynn. Mr. O’Conor served
as its Chairman and CEO. In 1998, O’Conor, Piper & Flynn was sold to NRT,
the largest real estate company in the country. Mr. O’Conor served as Vice
President of NRT until 2003.
Mr.
O’Conor currently serves on the Board of Directors of Saint Joseph’s Hospital,
Towson University, Signal 13 Foundation, Sheppard Pratt Hospital, and is
Chairman of the Jefferson School.
Bay
National Corporation
7
Carl
A.J. Wright,
age 52,
has been a director of Bay National Corporation and Bay National Bank since
March 2003. Mr. Wright is the CEO of Stephen James Associates, an
executive search and staffing firm specializing in accounting, finance, human
resources and banking. He has served in that capacity since January
2006. From 1998 to May 2005, Mr. Wright was a senior vice president of
Spherion (formerly Interim Financial Solutions), an executive search and
staffing firm specializing in finance, human resources and information
systems. From 1980 until 1998, Mr. Wright was President and CEO of A.J.
Burton Group. Mr. Wright served in the auditing and tax departments of Ernst
& Young from 1976 to 1980. Along with his corporate responsibilities, he is
an involved community member and active in professional, civic and political
organizations.
Mr.
Wright is an alumnus of Loyola College and Loyola Blakefield and has served
on
boards and committees of both institutions. He is past president of the
Baltimore Junior Association of Commerce and served on Maryland Governor Robert
Ehrlich’s Strategic and Finance Committees. He was chairman of the Maryland
Stadium Authority from 2003-2006. In addition, Mr. Wright is a new board member
of Catholic Charities and supporter of Maryland Business for Responsive
Government.
Continuing
Class B Directors - Terms Expiring in 2009.
Hugh
W. Mohler,
age 61,
serves as chairman, president, and chief executive officer. He has been a
director of Bay National Corporation since June 1999 and a director of Bay
National Bank since April 2000. Mr. Mohler has 37 years experience in the
financial services industry, holding positions in executive management,
commercial lending and business development. From 1977 to 1999, Mr. Mohler
was
affiliated with Mercantile Bankshares Corporation, which is headquartered in
Baltimore, Maryland, most recently serving as executive vice president with
responsibility for 20 community banks in a three-state area. For 17 years,
from
1977 to 1994, he was president of Mercantile’s Salisbury, Maryland-based
affiliate, Peninsula Bank, the largest financial institution on Maryland’s
Eastern Shore. Earlier, he was a vice president in commercial lending at First
National Bank of Maryland.
A
native
of Baltimore, Mr. Mohler earned his undergraduate degree in economics from
Loyola College of Maryland and his master of business administration degree
from
the University of Baltimore. He is a past president of the board of trustees
of
Associated Catholic Charities, Inc. in the Roman Catholic Archdiocese of
Baltimore. In the past, Mr. Mohler has served as a trustee of Loyola Blakefield,
Goucher College and the Independent College Fund of Maryland. Mr. Mohler is
Chairman of the Board of Sponsors of the Sellinger School of Business at Loyola
College of Maryland and serves on the Board of Governors of The Maryland Club.
In 2004, he was appointed by Governor Robert L. Ehrlich, Jr. to the Maryland
Economic Development Commission. He also serves on the President’s Advisory
Council of Villa Julie College, is a member of the finance committee for the
Maryland Jesuit Province, and is President of the Baltimore Chapter of Legatus
International.
Mr.
Mohler’s prior civic experiences include serving as chairman of the Greater
Salisbury Committee, chairman of the Salisbury School, and chairman of the
Governor’s Lower Shore Economic Task Force. He also served on the boards of
Peninsula Regional Medical Center, Maryland Chamber of Commerce,
Salisbury-Wicomico Economic Development Committee and the Somerset County
Economic Development Committee. Mr. Mohler also served as president of the
Maryland Bankers Association and on several committees of the American Bankers
Association.
R.
Michael Gill,
age 56,
has been a director of Bay National Corporation and Bay National Bank since
March 2006. Mr. Gill is chairman of Curtis Engine, a Baltimore-based locally
owned and operated provider of power solutions equipment and he has served
in
that capacity since January 2006. In 2003, Mr. Gill formed Hoyt Capital, an
investment firm that provides capital and business advising to start-up and
existing enterprises, of which he currently serves as principal. For sixteen
years, beginning in 1984, he served as CEO of AMERICOM, a provider of cellular
products and services. In 2000, AMERICOM was acquired by Solectron, a leader
in
the electronics manufacturing sector.
Mr.
Gill
is an alumnus of Towson University where he received an honorary Doctor of
Humane Letters degree in 1996. In May 2005, he received Towson University’s
Distinguished Alumnus Award. Prior to transferring to Towson University, Mr.
Gill attended Clemson University, which recently named him to its President’s
Advisory Board. He also serves as Executive Chairman of Bluefire
Security Technologies, a developer of security software solutions for
mobile devices, and serves on the board of Corporate Printing Solutions. In
2004, Governor Robert L. Ehrlich, Jr. appointed Mr. Gill to a five-year term
on
the Board of Regents of the University System of Maryland, a public system
of
higher education comprised of 11 degree-granting and two research
institutions.
Bay
National Corporation
8
Donald
G. McClure, Jr.,
age
63, has
been
a director of Bay National Corporation and Bay National Bank since April 2000.
Mr. McClure is a principal in the McClure Group, Inc., a Baltimore-based private
equity investment firm originated in 1979. He is the former Chairman and
Co-Chief Executive of Americom Wireless Services, Inc., which merged with a
Fortune 200 company in 2000. McClure Group, Inc. holdings include operations
based in Texas, Florida, Colorado as well as Maryland.
Mr.
McClure is the immediate past Chairman of the board of trustees of Loyola
Blakefield and serves on several private company boards as well as devoting
substantial time to various civic, charitable and educational organizations
here
and in other states.
Robert
L. Moore,
age
53, has
been
a director of Bay National Corporation since February 2001 and Bay National
Bank
since June 2001. Mr. Moore is a certified public accountant. He
received his CPA designation twenty-eight years ago, and is the owner and
founder of the Salisbury, Maryland accounting firm of Moore & Company,
P.A. His professional concentration is income tax and estate tax planning
and all facets of business consulting.
Mr.
Moore
received his Bachelor of Science degree from the University of Virginia in
1976. Currently, he serves as Chairman of the Trustees of the Wicomico
County Pension System, a board member of Salisbury-Wicomico Economic Development
Corporation, a board member of the Greater Salisbury Committee, a member of
the
Salisbury Area Chamber of Commerce, and member of the Finance Committee of
Trinity United Methodist Church.
Mr.
Moore
is a past president of the Eastern Shore Chapter of the Maryland Association
of
CPAs. In addition, Mr. Moore served on the Board of Directors of the Bank of
Fruitland, Maple Shade Residential Homes, Inc., and the Holly Foundation.
He was also a member of the Executive Committee and Board of Directors of the
Green Hill Yacht & Country Club and a member and officer of the Salisbury
Jaycees.
H.
Victor Rieger, Jr.,
age 69,
has been a director of Bay National Corporation since June 1999 and a director
of Bay National Bank since April 2000. Mr. Rieger retired from Signet Banking
Corporation, successor to Union Trust Company of Maryland, in December 1997
after nearly four decades of service. Mr. Rieger served in numerous capacities
for Signet, including regional executive vice president of international banking
and as part of Signet's Maryland commercial banking group. Mr. Rieger has
extensive experience in commercial relationship banking, credit administration
and loan policy.
An
alumnus of Johns Hopkins University, Mr. Rieger is a graduate of the Stonier
School of Banking at Rutgers University. He is past president and a current
trustee of Family and Children's Services of Central Maryland, past treasurer
and board member of the National Flag Day Foundation and a past vice-president
and director of the Baltimore Junior Association of Commerce. He is a former
member of the loan committee for the Minority Small Business Investment Company
and a past advisory board member of the U.S. Small Business Administration.
Mr.
Rieger also is past president of the Chesapeake Chapter of Robert Morris
Associates.
Other
than Gary T. Gill and R. Michael Gill who are brothers, and Hugh W. Mohler
and
Eugene M. Waldron, Jr. who are first cousins, there are no family relationships
between any director or executive officer and any other director or executive
officer of Bay National Corporation.
The
Board
of Directors has determined that all directors, other than Gary T. Gill and
Hugh
W. Mohler are “independent” as defined under the applicable rules and listing
standards of the NASDAQ Stock Market LLC. Please see “Certain Relationships and
Related Transactions” for a description of the relationships that the Board of
Directors considered in making such independence determinations.
Bay
National Corporation
9
Bay
National Corporation’s charter and bylaws provide that Bay National Corporation
shall have at least three directors, and that the number of directors may be
increased or decreased by the Board of Directors. As of March 27, 2007, the
number of directors has been fixed at fifteen with all positions filled.
Pursuant to Bay National Corporation’s charter and bylaws, the Board of
Directors is divided into three classes, with each class serving a three-year
term, and the term of one class expiring each year. A director may only be
removed by the affirmative vote of at least 80% of the votes entitled to be
cast
on the matter and only for cause. Bay National Corporation's officers are
appointed by the Board of Directors and hold office at the will of the board
or
as otherwise provided in an employment agreement between an officer and Bay
National Bank.
As
Bay
National Corporation is the sole stockholder of Bay National Bank, each director
of Bay National Bank is elected by the Board of Directors of Bay National
Corporation. Directors of Bay National Bank serve for a term of one year and
are
elected each year at Bay National Bank's annual meeting of stockholders. Bay
National Bank's officers are appointed by its Board of Directors and hold office
at the will of the board.
Bay
National Corporation has established advisory boards of directors for its two
locations. These are comprised of professionals and business persons, who
provide advice to Bay National Corporation and Bay National Bank’s Board of
Directors and who promote the interests of Bay National Corporation and Bay
National Bank. An advisory board of directors is not required by any Maryland
or
federal law or regulation and advisory directors are not subject to regulatory
approval or supervision. The advisory directors do not have the power to vote
on
any matter considered by the Board of Directors and they serve at the pleasure
of the board.
Information
Regarding Executive Officers Who Are Not Directors.
There
are
three executive officers of Bay National Corporation and Bay National Bank
that
do not serve on the Board of Directors of Bay National Corporation. Biographical
information concerning these executive officers is set forth below.
Richard
J. Oppitz,
age 60,
serves as Executive Vice President and Chief Credit Officer of Bay National
Bank. He has been in banking since 1971 with extensive experience in all aspects
of commercial banking. He joined Bay National in January 2006, having previously
been with Provident Bank, since March 1993, where he was an Executive Vice
President with responsibilities that included roles as Senior Credit Officer,
Group Head - Commercial Banking, Group - Head Consumer Lending and President
of
Court Square Leasing, a wholly - owned subsidiary of Provident.
A
native
of Maryland, Mr. Oppitz earned a Bachelor of Science in Economics from Loyola
College. He currently serves on the Board of Directors of St. Joseph Medical
Center Foundation, The Babe Ruth Museum and Empower Baltimore Management
Corporation.
Mark
A. Semanie, age
43,
has served as Executive Vice President and Chief Financial Officer, Treasurer
and Secretary of Bay National Corporation and Executive Vice President and
Chief
Financial Officer, Chief Compliance Officer, Treasurer and Secretary of Bay
National Bank since October 2000. Mr. Semanie is a Certified Public Accountant.
Mr. Semanie worked in the insurance industry for over seven years. From July
1996 to October 2000, he served as Executive Vice President and Chief Financial
Officer for Agency Holding Company of Maryland, Inc., parent company of
Baltimore-based Agency Services, Inc., an insurance premium finance company,
and
Agency Insurance Company of Maryland, Inc., a multi-line property/casualty
insurance company. From March 1993 to July 1996, he was associated with
USF&G Corporation where he served in various capacities, including Manager
of SEC and External Reporting. From August 1985 to March 1993, Mr. Semanie
worked in the Boston and Baltimore offices of the international accounting
firm
of KPMG LLP. He last served as a Senior Manager in the Audit practice with
the
firm. His background includes experience in financial planning and reporting,
backroom operations, human resources and regulatory compliance.
A
native
of Connecticut, Mr. Semanie earned a Bachelor of Science degree in accounting
from Bentley College. He currently serves on the Board of Directors of Agency
Insurance Company of Maryland, Inc. and serves as a member of the Board of
Directors and Treasurer of No
More Stolen Childhoods.
He is a
member of the American Institute of Certified Public Accountants, the Maryland
Association of Certified Public Accountants, the American Institute of Chartered
Property Casualty Underwriters, and Financial Executives
International.
Bay
National Corporation
10
Richard
C. Springer, age
47,
has served as Executive Vice President and Senior Banking Officer of the Bank
since June 2006. In this capacity he is responsible for all aspects of the
Bank’s Corporate and Private Banking activities. From December 1997 through May
2006, Mr. Springer served in various senior commercial banking roles for
BB&T and its Baltimore area predecessor, Mason-Dixon Bancshares. In July
1999 he was named Senior Vice President and Area Executive for BB&T’s
Baltimore Area. From May 1993 through November 1997 he was the Vice President
and Regional Manager of Business Banking for Mellon Bank in Rockville, MD.
Mr.
Springer began his banking career as a Management Trainee in June 1981with
Maryland National Bank and through May 1993 established a track record of
achievement and progressively increasing responsibility in the areas of small
business lending, commercial banking, corporate banking, cash management and
commercial real estate finance.
A
graduate of The Leadership Class of 2001 and active in civic affairs, Mr.
Springer is currently a Trustee of the Maryland Science Center serving on its
Executive and Development Committees. He also serves on the Membership Committee
and Board of Governors of The Center Club. He is serving his second term as
President of the West Howard Swim Club. Mr. Springer has served on the Campaign
Cabinet for the United Way of Central Maryland’s 2002 and 2004 campaigns. Active
in youth sports, Mr. Springer coaches basketball and is a Director and Executive
Committee member for Leadership Through Athletics.
Mr.
Springer received a B.A. in Economics and Business Administration with Phi
Beta
Kappa honors from Randolph-Macon College.
BOARD
MEETINGS AND COMMITTEES
Bay
National Corporation’s Board of Directors convenes at regularly-scheduled
meetings nine times per year (usually the fourth Tuesday of each month with
the
exception of February, August and December) and such special meeting as
circumstances may require. The Board of Directors of Bay National Corporation
and Bay National Bank met nine times during 2006. Each director attended at
least 79% of the total number of meetings of the Board of Directors and the
Board committees of Bay National Corporation and Bay National Bank of which
he
or she was a member during 2006.
The
Board
of Directors of Bay National Corporation has standing Audit, Nominating and
Compensation Committees. The Board of Directors of Bay National Bank also has
a
number of standing committees, including the Asset & Liability Committee,
Audit Committee, Capital Committee, Compensation Committee, Executive Committee,
Nominating Committee, Governance Committee, Business Development & Marketing
Committee and Strategic Planning Committee. The members of Bay National
Corporation’s and Bay National Bank’s Audit, Compensation and Nominating
Committees are the same, and these committees typically hold joint
meetings.
Bay
National Corporation’s policy requires that, in the absence of an unavoidable
conflict, all directors are expected to attend the annual meeting of Bay
National Corporation’s stockholders. Nine of the members of the Board of
Directors of Bay National Corporation attended the 2006 annual meeting.
Audit
Committee. Bay
National Corporation’s Audit Committee members are Edwin
A.
Rommel, III,
Chairman, James P. O’Conor, Henry H. Stansbury and Kenneth H. Trout. The Board
of Directors has determined that each of these individuals is “independent,” as
defined under the applicable rules and listing standards of the NASDAQ Stock
Market LLC and the rules and regulations of the Securities and Exchange
Commission. In addition, the Board of Directors has determined that each
committee member is able to read and understand fundamental financial
statements, including Bay National Corporation’s consolidated balance sheet,
income statement and cash flow statement. In addition, the Board of Directors
has determined that Edwin A. Rommel, III is an “audit committee financial
expert” as that term is defined by the rules and regulations of the Securities
and Exchange Commission.
Bay
National Corporation
11
The
Audit
Committee of Bay National Corporation and Bay National Bank held four meetings
in 2006. The Audit Committee’s primary responsibilities are to assist the Board
by monitoring (i) the integrity of Bay National Corporation’s financial
statements; (ii) the independent auditors’ qualifications and independence;
(iii) the performance of Bay National Corporation’s independent auditors and
internal audit firm; (iv) Bay National Corporation’s system of internal
controls; (v) Bay National Corporation’s financial reporting and system of
disclosure controls; and (vi) Bay National Corporation’s compliance with legal
and regulatory requirements.
In
addition, the Audit Committee was appointed to oversee treatment of, and any
necessary investigation concerning, any employee complaints or concerns
regarding Bay National Corporation’s accounting and auditing matters. Pursuant
to procedures adopted by Bay National Corporation, any employee with such
complaints or concerns is encouraged to report them, anonymously if they desire,
to the Chair of the Audit Committee for investigation, and appropriate
corrective action, by the Audit Committee.
The
Audit
Committee has adopted a written charter, a copy of which is available on our
website at www.baynational.com.
Nominating
Committee. Bay
National Corporation’s Nominating Committee members are Carl A.J. Wright,
Chairman, Donald G. McClure, Jr., Robert L. Moore, H. Victor Rieger, Jr. and
Edwin A. Rommel, III. The Board of Directors has determined that each of these
individuals is “independent,” as defined under the applicable rules and listing
standards of the NASDAQ Stock Market LLC. The Nominating Committee has adopted
a
written charter, a copy of which is available on our website at
www.baynational.com.
The
Nominating Committee determines whether the incumbent directors should stand
for
reelection to the Board of Directors and identifies and evaluates candidates
for
membership on the Board of Directors. In the case of a director nominated to
fill a vacancy on the Board of Directors due to an increase in the size of
the
Board of Directors, the Nominating Committee recommends to the Board of
Directors the class of directors in which the director-nominee should serve.
The
Nominating Committee also conducts appropriate inquiries into the backgrounds
and qualifications of possible director candidates and reviews and makes
recommendations regarding the composition and size of the Board of Directors.
The
Nominating Committee also evaluates candidates for nomination to the Board
of
Directors who are recommended by a stockholder. Stockholders who wish to
recommend individuals for consideration by the Nominating Committee to become
nominees for election to the Board may do so by submitting a written
recommendation to the Secretary of Bay National Corporation at 2328 West Joppa
Road, Suite 325, Lutherville, MD 21093. Submissions must include sufficient
biographical information concerning the recommended individual, including age,
five year employment history with employer names and a description of the
employer’s business, whether such individual can read and understand basic
financial statements and board memberships for the Nominating Committee to
consider. A written consent of the individual to stand for election if nominated
and to serve if elected by the stockholders must accompany the submission.
The
Nominating Committee will consider recommendations received by a date not later
than 120 calendar days before the date the Proxy Statement was released to
stockholders in connection with the prior year’s annual meeting for nomination
at that annual meeting. The Nominating Committee will consider nominations
received beyond that date at the annual meeting subsequent to the next annual
meeting.
In
addition to candidates recommended by stockholders, the Nominating Committee
identifies potential candidates through various methods, including but not
limited to, recommendations from existing directors, customers and employees.
In
identifying and evaluating candidates for membership on the Board of Directors,
the Nominating Committee takes into account all factors it considers
appropriate. These factors may include, without limitation:
| · |
Ensuring
that the Board of Directors, as a whole, is diverse and consists
of
individuals with various and relevant career experience, relevant
technical skills, industry knowledge and experience, financial expertise
(including, if determined by the Committee to be appropriate, expertise
that could qualify a director as an “audit committee financial expert,” as
that term is defined by the rules of the Securities and Exchange
Commission), local or community ties;
and
|
| · |
Minimum
individual qualifications, including high moral character, mature
judgment, familiarity with the Company’s business and industry,
independence of thought and an ability to work
collegially.
|
Bay
National Corporation
12
The
selection process for new members on the Board of Directors is as
follows:
| · |
Full
Board of Directors identifies a need to add new Board member with
specific
criteria or to fill a vacancy on the Board.
|
| · |
Chair
of Committee or other designated Committee member initiates search
seeking
input from Board members and Company management, and hiring a search
firm,
if necessary.
|
| · |
Candidate
or slate of candidates that will satisfy specific criteria and/or
otherwise qualify for membership on the Board, based on the factors
described above, are identified and presented to the Committee.
|
| · |
Chairman
of the Board, the Company’s CEO and all or at least one member of the
Committee interviews prospective candidate(s). Chair of Nominating
Committee will keep the full Board of Directors informed of
progress.
|
| · |
Committee
meets to consider and approve final candidate(s) (and conduct additional
interview if deemed necessary) or recommend candidate(s) to the full
Board
of Directors.
|
Compensation
Committee. Bay
National Corporation’s Compensation Committee members are Henry H. Stansbury,
Chairman, Edwin A. Rommel, III and Carl A.J. Wright. The Board of Directors
has
determined that each of these individuals is “independent,” as defined under the
applicable rules and listing standards of the NASDAQ Stock Market LLC. The
Compensation Committee has adopted a written charter, a copy of which is
included in this proxy statement as Appendix A. The Compensation Committee
of
Bay National Corporation and Bay National Bank held two meetings in
2006.
The
Compensation Committee evaluates the performance of the President and Chief
Executive Officer and makes recommendations to the Board of Directors regarding
the President and Chief Executive Officer’s compensation. The Compensation
Committee also reviews the current industry practices regarding compensation
packages provided to executive management and the Board of Directors, including
salary, bonus, stock options and other perquisites. Based on recommendations
from the President and Chief Executive Officer, the Compensation Committee
approves compensation provided to members of executive management, excluding
the
President and Chief Executive Officer. The Compensation Committee also develops
a recommendation for compensation of the President and Chief Executive Officer
and presents the recommendations to the Board of Directors for approval. The
Compensation Committee also evaluates and recommends to the Board of Directors
fees for non-employee board members.
Bay
National Corporation
13
DIRECTOR
COMPENSATION
The
following table sets forth information with respect to the compensation paid
to
our directors during 2006:
DIRECTOR
COMPENSATION
|
Name
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)
|
Option
Awards
(1)
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensa-tion
($)
|
Total
($)
|
|
Charles
E. Bounds
|
7,200
|
-
|
-
|
-
|
-
|
-
|
7,200
|
|
Gary
T. Gill
|
7,200
|
-
|
-
|
-
|
-
|
-
|
7,200
|
|
R.
Michael Gill
|
7,500
|
-
|
-
|
-
|
-
|
-
|
7,500
|
|
John
R. Lerch
|
8,850
|
-
|
-
|
-
|
-
|
-
|
8,850
|
|
Donald
G. McClure, Jr.
|
9,600
|
-
|
2,288
|
-
|
-
|
-
|
11,888
|
|
Hugh
W. Mohler (2)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Robert
L. Moore
|
9,600
|
-
|
2,288
|
-
|
-
|
-
|
11,888
|
|
James
P. O’Conor
|
8,100
|
-
|
-
|
-
|
-
|
-
|
8,100
|
|
H.
Victor Rieger, Jr.
|
39,600
|
-
|
-
|
-
|
-
|
-
|
39,600
|
|
William
B. Rinnier
|
7,900
|
-
|
-
|
-
|
-
|
-
|
7,900
|
|
Edwin
A. Rommel, III
|
9,450
|
-
|
-
|
-
|
-
|
-
|
9,450
|
|
Henry
H. Stansbury
|
9,450
|
-
|
-
|
-
|
-
|
-
|
9,450
|
|
Kenneth
H. Trout
|
8,850
|
-
|
-
|
-
|
-
|
-
|
8,850
|
|
Eugene
M. Waldron, Jr.
|
5,700
|
-
|
-
|
-
|
-
|
-
|
5,700
|
|
Carl
A.J. Wright
|
6,750
|
-
|
-
|
-
|
-
|
-
|
6,750
|
| 1) |
In
November 2001, Bay National Corporation granted each of its then
directors
options to purchase 3,000 shares of its common stock at $7.58 per
share,
the then fair market value. A total of 39,000 options were issued.
The
options vest in four equal installments with the first 25% installment
vesting on the third anniversary of the individual director’s appointment
to Bay National Corporation’s Board of Directors. The remaining 25%
installments vest on the fourth, fifth, and sixth anniversary of
the
individual director’s appointment to the Board of Directors. As of March
27, 2007, options to purchase 12,000 shares had been exercised. Options
to
purchase 27,000 shares were exercisable as of, or within 60 days
of, March
27, 2007. The options expire on November 19,
2009.
|
| 2) |
Mr.
Mohler is our President and Chief Executive Officer and is not compensated
for his services as director.
|
Bay
National Corporation
14
The
following table provides information about our directors’ outstanding option
awards as of December 31, 2006:
OUTSTANDING
OPTION AWARDS AT FISCAL YEAR-END
|
Option
Awards
|
|||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
|
Charles
E. Bounds
|
-
|
-
|
-
|
-
|
-
|
|
Gary
T. Gill
|
-
|
-
|
-
|
-
|
-
|
|
R.
Michael Gill
|
-
|
-
|
-
|
-
|
-
|
|
John
R. Lerch
|
-
|
-
|
-
|
-
|
-
|
|
Donald
G. McClure, Jr.
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
Hugh
W. Mohler
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
Robert
L. Moore
|
2,250
|
750
|
-
|
7.58
|
November
19, 2009
|
|
James
P. O’Conor
|
-
|
-
|
-
|
-
|
-
|
|
H.
Victor Rieger, Jr.
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
William
B. Rinnier
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
Edwin
A. Rommel, III
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
Henry
H. Stansbury
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
Kenneth
H. Trout
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
Eugene
M. Waldron, Jr.
|
3,000
|
-
|
-
|
7.58
|
November
19, 2009
|
|
Carl
A.J. Wright
|
-
|
-
|
-
|
-
|
-
|
The
fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants during the year ended December 31:
|
2002
|
||||||
|
Dividend
yield
|
-
|
|||||
|
Expected
volatility
|
20.00
|
%
|
||||
|
Risk-free
interest rate
|
4.17
|
%
|
||||
|
Expected
lives (in years)
|
8
|
The
expense recognized for vested stock option awards for the year ended December
31, 2006 was based upon a weighted average fair value of $3.05.
Bay
National Corporation
15
Pursuant
to our Director Compensation Policy, Bay National Bank pays directors who are
not officers or employees of Bay National Corporation or Bay National Bank
(e.g., all directors other than Mr. Mohler) (“Qualified Directors”) $300 for
each attended regularly scheduled meeting and each special meeting of the Board
of Directors of Bay National Bank, and $150 for each attended regularly
scheduled meeting and each special meeting of a committee of the Board of
Directors of Bay National Bank. Qualified Directors of Bay National Bank are
also entitled to reimbursement for their reasonable travel costs related to
their attendance at board and committee meetings, and all directors of Bay
National Corporation and Bay National Bank are reimbursed for reasonable
expenses incurred on behalf of Bay National Corporation and Bay National Bank.
In addition, the chair of the Executive Committee and the chair of the Audit
Committee of the Board of Directors of Bay National Bank receive an additional
$100 for each attended regularly scheduled meeting and each special meeting.
The
Director Compensation Policy also provides that the Board of Directors or the
compensation committee of the Board of Directors of Bay National Bank may
authorize discretionary payments to Qualified Directors as a result of
outstanding service by the Qualified Director. Furthermore, the Director
Compensation Policy provides that the policy may be changed from time to time.
During 2006, Bay National Bank accrued $145,750 for these meeting fees and
discretionary payments which were subsequently paid in February
2007.
Included
in the accrued fees was a special payment of $30,000 to Mr. H. Victor Rieger,
Jr., a director of Bay National Corporation and Bay National Bank, in
recognition of Mr. Rieger’s outstanding service as a key member of Bay National
Bank’s Executive Committee. Also included is a special payment of $4,500 per
non-employee director in recognition of each director’s contribution to the
Company’s 2006 operating results. Since 2001, Bay National Bank has made annual
special payments to Mr. Rieger in recognition of his outstanding
service.
During
2006, Bay National Corporation and Bay National Bank did not reimburse any
travel costs or expenses.
Bay
National Corporation does not pay cash remuneration to its directors. It is
expected that unless and until Bay National Corporation becomes actively
involved in additional businesses other than owning all the capital stock of
Bay
National Bank, no separate cash compensation will be paid to the directors
of
Bay National Corporation in addition to that paid to them by Bay National Bank
in their capacities as directors of Bay National Bank. However, Bay National
Corporation may determine in the future that such separate cash compensation
is
appropriate.
Bay
National Corporation
16
EXECUTIVE
COMPENSATION
Summary
Compensation Table The
following table sets forth the compensation paid by Bay National Corporation
and
Bay National Bank to the Chief Executive Officer of Bay National Corporation
and
Bay National Bank and to any other executive officer of Bay National Corporation
and Bay National Bank who received compensation in excess of $100,000 during
2006.
|
Summary
Compensation Table
|
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Hugh
W. Mohler,
President
and Chief Executive Officer (1)
|
2006
|
225,000
|
100,000
|
-
|
28,412
|
-
|
-
|
11,313
|
364,725
|
|
2005
|
200,000
|
75,000
|
-
|
-
|
-
|
-
|
9,662
|
284,662
|
|
|
2004
|
170,308
|
50,000
|
-
|
-
|
-
|
-
|
7,654
|
227,962
|
|
|
Richard
J. Oppitz, Executive Vice President (2)
|
2006
|
140,000
|
56,000
|
-
|
-
|
-
|
-
|
2,544
|
198,544
|
|
2005
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
2004
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
Mark
A. Semanie,
Executive
Vice President and CFO (3)
|
2006
|
180,000
|
72,000
|
-
|
14,205
|
-
|
-
|
9,410
|
275,615
|
|
2005
|
165,000
|
60,000
|
-
|
-
|
-
|
-
|
8,270
|
233,270
|
|
|
2004
|
155,192
|
40,000
|
-
|
-
|
-
|
-
|
7,519
|
202,711
|
|
|
Richard
C. Springer, Executive Vice President (4)
|
2006
|
116,923
|
100,000
|
33,162
|
-
|
-
|
-
|
3,866
|
253,951
|
|
2005
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
2004
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1) Other
compensation includes $10,651, $9,000 and $7,003 of contributions to the
Company’s 401(k) retirement plan for 2006, 2005 and 2004, respectively, and
$662, $662 and $651 of term life insurance premiums paid by the Bank on Mr.
Mohler’s behalf for 2006, 2005 and 2004, respectively.
(2) Other
compensation includes $1,938 of contributions to the Company’s 401(k) retirement
plan and $606 of term life insurance premiums paid by the Bank on Mr. Oppitz’s
behalf.
(3) Other
compensation includes $8,528, $7,388 and $6,651 of contributions to the
Company’s 401(k) retirement plan for 2006, 2005 and 2004, respectively, and
$882, $882 and $868 of term life insurance premiums paid by the Bank on Mr.
Semanie’s behalf for 2006, 2005 and 2004, respectively.
(4) Other
compensation includes $3,462 of contributions to the Company’s 401(k) retirement
plan and $404 of term life insurance premiums paid by the Bank on Mr. Springer’s
behalf.
Bay
National Corporation
17
The
fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants during the year ended December 31:
|
2002
|
||||||
|
Dividend
yield
|
-
|
|||||
|
Expected
volatility
|
20.00
|
%
|
||||
|
Risk-free
interest rate
|
4.17
|
%
|
||||
|
Expected
lives (in years)
|
8
|
EMPLOYMENT
AGREEMENTS
On
June
1, 2006, Bay National Bank (the “Bank”) and Hugh W. Mohler entered into an
Amended and Restated Employment Agreement (the “Restated Agreement”), pursuant
to which Mr. Mohler will continue to serve as President and Chief Executive
Officer of the Bank and the Company.
The
Restated Agreement provides for an initial annual base salary of $225,000.
In
addition, Mr. Mohler is eligible for annual incentive compensation bonuses
as
determined by the Bank’s board of directors and is entitled to participate in
any bonus, incentive and other executive compensation program available to
senior management.
The
Restated Agreement has an initial three-year term that, unless written notice
that the Restated Agreement will not be renewed is provided to Mr. Mohler,
is
renewed for an additional year on the anniversary of its effective date, such
that the remaining term at each such anniversary date will be three years.
The
Restated Agreement provides for earlier termination in certain circumstances.
If
Mr.
Mohler’s employment is terminated by the Bank without Cause or upon Mr. Mohler’s
Permanent Disability, by Mr. Mohler for Good Reason or upon his Permanent
Disability (all as defined in the Restated Agreement), or upon Mr. Mohler’s
death, Mr. Mohler (or his personal representative) will be entitled to receive
an amount equal to his current base salary plus all benefits he is then
receiving for a period equal to the remaining term of the Restated Agreement
plus any incentive compensation already accrued for that year.
If
the
Bank does not renew the Restated Agreement by providing the notice of
nonrenewal, then, assuming a Change of Control (as defined in the Restated
Agreement) has not occurred, Mr. Mohler will be entitled to receive at the
end
of the then-current term of employment an amount equal to 50% of his base salary
for the preceding 12-month period either in a lump sum or in six equal monthly
installments, at his option, as well as continuation of employee benefits
substantially similar to those he is then receiving for a period of six
months.
If,
within 12 months following a Change in Control, the Restated Agreement is
terminated by Mr. Mohler for any reason or by the Bank without Cause, then,
instead of the payments provided for above, Mr. Mohler will be entitled to
(i) a
lump sum payment equal to the sum of (a) 2.99 times his average annual taxable
compensation during the last five years minus the aggregate present value of
any
other payments he receives that are treated as contingent upon the Change in
Control and (b) a pro-rated bonus; (ii) immediate vesting of all stock awards;
(iii) immediate exercisability of any unexercised stock options; and (iv)
continued medical coverage for two years as available to the Bank’s other
employees.
If
any
severance payment or distribution made to Mr. Mohler is determined to be subject
to the limitations of Section 280G of the Internal Revenue Code of 1986, as
amended (the “Code”) (a “Parachute Payment”), Mr. Mohler will be entitled
to a full tax “gross-up” to cover any excise taxes on such amount, unless the
total value of all such payments and benefits (as measured for purposes of
Section 280G) exceeds the taxable threshold by ten percent or less, in which
event the payments and benefits will instead be reduced so as to fall below
the
taxable threshold.
Under
the
Restated Agreement, Mr. Mohler is bound by confidentiality and proprietary
information covenants during his employment and for three years thereafter.
He
is also prohibited, during the period that any payments in connection with
the
termination or non-renewal of the Restated Agreement are being made, from
competing with the Bank, soliciting its customers, and soliciting, recruiting
or
hiring its employees (other than his administrative assistant).
Bay
National Corporation
18
If
the
change of control severance payment were required to be paid in 2007, Mr. Mohler
would receive approximately $645,000.
Bay
National Bank has purchased "key man" life insurance on Mr. Mohler.
On
June
1, 2006, the Bank entered into an employment agreement with Richard C. Springer
to serve as Executive Vice President of the Bank.
The
Agreement provides for (i) an initial annual base salary of $200,000; (ii)
a
potential maximum annual bonus of 60% of base salary as determined by the Board;
(iii) subject to certain vesting requirements and continued employment, a grant
of 12,000 shares of the Company’s common stock; (iv) $30,000 paid to Mr.
Springer on June 1, 2006; and (v) $30,000 payable to Mr. Springer on December
1,
2006 if he is then employed with the Bank pursuant to the Agreement and is
not
then suspended without pay as provided for in the Agreement. Mr. Springer also
is entitled to participate in any bonus, incentive and other executive
compensation program available to senior management.
The
Agreement has an initial three-year term that, unless written notice that the
Agreement will not be renewed is provided to Mr. Springer, is renewed for an
additional year on the anniversary of its effective date, such that the
remaining term at each such anniversary date will be three years. The Agreement
provides for earlier termination in certain circumstances.
If
Mr.
Springer’s employment is terminated by the Bank without Cause or upon Mr.
Springer’s Permanent Disability or by Mr. Springer for Good Reason (all as
defined in the Agreement), Mr. Springer will be entitled to receive an amount
equal to his current base salary plus all benefits he is then receiving for
a
period equal to the remaining term of the Agreement plus any incentive
compensation already accrued for that year. In addition, all of Mr. Springer’s
stock awards and stock options will immediately vest.
If
the
Bank does not renew the Agreement by providing the notice of nonrenewal, then,
assuming a Change in Control has not occurred, Mr. Springer will be entitled
to
receive at the end of the then- current term of employment an amount equal
to
50% of his base salary for the preceding 12-month period either in a lump sum
or
in six equal monthly installments, at his option, as well as continuation of
employee benefits substantially similar to those he is then receiving for a
period of six months.
If
the
Agreement is terminated by the Bank without Cause within 12 months following
a
Change in Control, then, instead of the payments and benefits provided for
above, Mr. Springer will be entitled to (i) a lump sum payment equal to the
sum
of (a) 2.99 times his average annual taxable compensation during the last five
years minus the aggregate present value of any other payments he receives that
are treated as payments contingent on the Change in Control and (b) a pro-rated
bonus; (ii) immediate vesting of all stock awards; (iii) immediate
exercisability of any unexercised stock options; and (iv) continued medical
coverage for two years as available to the Bank’s other employees.
If
any
severance payment or distribution made to Mr. Springer is determined to be
subject to the limitations of Section 280G of the Code (a “Parachute Payment”),
Mr. Springer will be entitled to a full tax “gross-up” to cover any excise
taxes on such amount, unless the total value of all such payments and benefits
(as measured for purposes of Section 280G) exceeds the taxable threshold by
ten
percent or less, in which event the payments and benefits will instead be
reduced so as to fall below the taxable threshold.
Under
the
Agreement, Mr. Springer is bound by confidentiality and proprietary
information covenants during his employment and for three years thereafter.
In
addition, while any payments in connection with the termination or non-renewal
of the Agreement are being made (the payment of which may be waived by Mr.
Springer), Mr. Springer is prohibited from competing with the Bank. He is also
prohibited from soliciting the Bank’s customers and soliciting, recruiting or
hiring its employees (other than his administrative assistant) for one year
after termination of his employment.
Bay
National Corporation
19
Mark
A. Semanie.
Bay
National Bank has agreed to employ Mr. Semanie on an at will basis at a rate
of
pay of $185,000 as of January 1, 2007. Mr. Semanie is also eligible for
incentive bonuses at the discretion of the Compensation Committee of the Board
of Directors, and is entitled to all benefits available to full time employees
of Bay National Bank. Mr. Semanie is not a party to a written agreement with
Bay
National Bank.
Richard
J. Oppitz.
Bay
National Bank has agreed to employ Mr. Oppitz on an at will basis at a rate
of
pay of $154,000 as of January 1, 2007. Mr. Oppitz is also eligible for incentive
bonuses at the discretion of the Compensation Committee of the Board of
Directors, and is entitled to all benefits available to full time employees
of
Bay National Bank. Mr. Oppitz is not a party to a written agreement with Bay
National Bank.
Equity
Compensation to Messrs. Mohler, Semanie and Springer.
The
option awards reflected in the summary compensation table are due to the vesting
of previously-granted stock options. In November 2001, Mr. Mohler was granted
options to purchase 37,261 shares of Bay National Corporation common stock,
and
Mr. Semanie was granted options to purchase 18,630 shares of Bay National
Corporation common stock. The options vest in four equal installments with
the
first 25% installment vesting on the third anniversary of the officer’s date of
employment with Bay National Bank. The remaining 25% installments vest on the
fourth, fifth and sixth anniversary of the individual officer’s date of
employment with Bay National Bank. All of these options to purchase shares
were
exercisable as of, or within 60 days of, March 27, 2007. The options expire
on
November 19, 2009. They are exercisable at $7.58 per share. None have been
exercised.
The
stock
award reflected in the summary compensation table represents the compensation
expense incurred from a grant of 12,000 shares of the Company’s common stock
awarded to Mr. Springer on June 1, 2006. Pursuant to Mr. Springer’s employment
agreement, the stock grant vests as follows: 25% (3,000 shares) on the first
anniversary of the Agreement; 25% (3,000 shares) on the second anniversary
of
the Agreement; 25% (3,000 shares) on the third anniversary of the Agreement;
and
25% (3,000 shares) on the fourth anniversary of the Agreement. The vesting
of
the shares is subject to Mr. Springer being employed under the employment
agreement at each vesting date. Additional shares may be awarded from time
to
time subject to approval of the Board of Directors
Outstanding
Equity Awards at Fiscal Year-End
The
following table provides information about unexercised options, stock awards
that have not vested, and equity incentive plan awards outstanding as of
December 31, 2006 and the market value thereof as follows:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
Option Awards
|
Stock Awards | ||||||||||||||||||
|
Name |
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(1)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#) |
Option
Exercise
Price
($) |
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
(1) |
Market
Value
of
Shares
or Units of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
Of
Unearned
Shares,
Units
Or
Other
Rights
That
Have
Not
Vested
($)
|
||||||||||
|
Hugh
W. Mohler
|
37,261
|
-
|
-
|
$
7.58
|
November
19, 2009
|
-
|
-
|
-
|
-
|
||||||||||
|
Richard
J. Oppitz
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||
|
Mark
A. Semanie
|
18,630
|
-
|
-
|
$
7.58
|
November
19, 2009
|
-
|
-
|
-
|
-
|
||||||||||
|
Richard
C. Springer
|
-
|
-
|
-
|
-
|
-
|
12,000
|
$
230,400
|
-
|
-
|
||||||||||
Bay
National Corporation
20
(1)
The
vesting schedules of the stock and option awards reflected in this table are
discussed above under “Executive Compensation - Employment Agreements - Equity
Compensation to Messrs, Mohler, Semanie and Springer.”
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The
Company’s directors and executive officers, and persons who own more than 10% of
the Company’s Common Stock, are required to file with the Securities and
Exchange Commission initial reports of beneficial ownership and reports of
changes in beneficial ownership of any securities of the Company. To the
Company’s knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports
were
required, all of the Company’s directors, executive officers and beneficial
owners of greater than 10% of the Company’s Common Stock made all required
filings during the fiscal year ended December 31, 2006, except that the
following reports were filed late:
| · |
Robert
Michael Gill: Form 4 reporting the purchase of 3,500 shares on May 9,
2006.
|
| · |
Richard
C. Springer: Form 4 reporting the receipt of 12,000 shares of restricted
stock through a stock grant on June 1, 2006.
|
| · |
Edwin
A. Rommel III: Form 4 reporting the purchase of 1,000 shares on November
2, 2006.
|
| · |
Edwin
A. Rommel III: Form 4 reporting the purchase of 8,500 shares on February
3, 2006.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Lucy
Mohler, the spouse of Hugh W. Mohler, serves as Bay National Corporation’s and
Bay National Bank’s Vice President of Marketing and Investor Relations. E.
Matthew Waldron, III, the son of director Eugene M. Waldron, and C. Bradford
Wright, the son of director Carl A.J. Wright are employees of Bay National
Bank.
None earned aggregate compensation in excess of $120,000 during 2005 or 2006.
Director
John R. Lerch owns a 100% interest in the property being leased for Bay National
Bank's Salisbury, Maryland branch office. Bay National Corporation’s lease
payments totaled $27,500 during 2005 and 2006.
Director
Gary T. Gill is president and chief executive officer of the MacKenzie
Companies, which owns the property being leased for Bay National Bank's
Lutherville, Maryland corporate and branch offices. Bay National Corporation
was
a party to two leases with this landlord dated July 16, 1999. These leases
were amended during February and October 2004 to add additional space and
extended in October 2004 to February 28, 2010. The leases were further
amended in January and March 2005 to add additional space. Bay National
Corporation has the right to extend the leases for one additional five year
term, to February 28, 2015. The various amendments effectively combined
both leases.
As
of
December 31, 2006, Bay National Corporation was leasing 4,067 square feet on
the
first floor of the building, 6,206 square feet on the third floor of the
building, and 1,429 square feet in the basement of the building and was paying
$29,106 in monthly rent, which includes Bay National Corporation’s share of
taxes and building operating costs. Bay National Corporation paid the landlord
$286,406 during 2005 and $350,450 during 2006.
The
leases were originally entered into well in advance of Mr. Gill’s appointment to
the Board of Directors in January 2003. Although Bay National Corporation did
not have an independent third party reevaluate the lease terms in connection
with the renewal, or evaluate the terms of the lease of additional space,
management believes that the terms of the lease are at least as favorable as
could be obtained from an independent third party.
In
addition, Bay National Corporation paid another division of the Mackenzie
Companies for construction work performed to modify some of the leased space
to
meet the Company’s needs. Bay National Corporation paid the contracting company
$100,180 during 2005 and $16,179 during 2006.
Bay
National Corporation
21
Some
of
Bay National Bank’s directors and officers and the business and professional
organizations with which they are associated have banking transactions with
Bay
National Bank in the ordinary course of business. It is Bay National Bank’s
policy that any loans and loan commitments will be made in accordance with
applicable laws and on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with
other persons of comparable credit standing. Loans to directors and officers
must comply with Bay National Bank's lending policies and statutory lending
limits; therefore, directors with a personal interest in any loan application
are excluded from considering any such loan application.
The
officers and directors of Bay National Corporation and Bay National Bank have
loans due to Bay National Bank in the amount of $11,245,284 at December 31,
2006
and $8,059,647 at December 31, 2005. All loans were made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the
time for comparable transactions with unaffiliated third parties and do not
involve more than the normal risk of repayment or present other unfavorable
features.
Bay
National Corporation
22
PROPOSAL
2. RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Board
of Directors has ratified and confirmed the Audit Committee’s selection of
Stegman & Company as Bay National Corporation’s independent public
accountants for 2007, subject to ratification by the stockholders. Stegman
&
Company has served as Bay National Corporation’s independent public accountants
since inception in 1999 and is considered by the Audit Committee and management
to be well qualified. No qualified opinions have been issued during such
engagement.
A
representative of Stegman & Company will be present at the Annual Meeting to
respond to appropriate questions and to make a statement if he or she desires
to
do so.
A
majority of votes cast at the meeting is required for approval of this proposal.
Abstentions and broker non-votes will have no effect on the vote for this
proposal.
The
Board of Directors recommends that stockholders vote “FOR” the ratification of
the appointment of Stegman & Company as independent registered public
accountants for 2007.
AUDIT
COMMITTEE REPORT
The
Audit
Committee has: (1) reviewed and discussed Bay National Corporation’s
audited financial statements with Bay National Corporation’s management and
representatives of Stegman & Company, the independent auditors;
(2) discussed with Stegman & Company all matters required to be
discussed by SAS No. 61, as modified or supplemented; and (3) has
received the written disclosures and the letter from Stegman & Company
required by Independence Standards Board Standard No. 1, as modified or
supplemented and has discussed with Stegman & Company the independence of
Stegman & Company. Based on its review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements
for
the year ended December 31, 2006 be included in Bay National Corporation’s
Annual Report on Form 10-KSB for the last fiscal year.
Edwin
A. Rommel, III, Chairman
James
P. O’Conor
Henry
H. Stansbury
Kenneth
H. Trout
Audit
and Non-Audit Fees.
The
following table presents fees for professional audit services rendered by
Stegman & Company for the audit of Bay National Corporation’s annual
consolidated financial statements for the years ended December 31, 2006 and
December 31, 2005 and fees billed for other services rendered by Stegman &
Company during those periods.
|
Years
Ended December 31
|
|||||||
|
2006
|
2005
|
||||||
|
Audit
Fees (1)
|
$
|
58,131
|
$
|
45,490
|
|||
|
Audit
Related Fees (2)
|
-
|
-
|
|||||
|
Tax
Fees (3)
|
5,400
|
5,550
|
|||||
|
All
Other Fees (4)
|
-
|
-
|
|||||
|
Total
|
$
|
63,531
|
$
|
51,040
|
|||
(1)
Audit
Fees consist of fees billed for professional services rendered for the audit
of
the Company’s consolidated annual financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by Stegman & Company in connection with statutory
and regulatory filings or engagements.
Bay
National Corporation
23
(2)
Audit-Related Fees would normally consist of fees billed for assurance and
related services that are reasonably related to the performance of the audit
or
review of the Company’s consolidated financial statements and are not reported
under “Audit Fees.”
(3)
Tax
Fees consist of fees billed for professional services rendered for federal
and
state tax compliance, tax advice and tax planning.
(4)
All
Other Fees would normally consist of fees for services other than the services
reported above.
Policy
on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent
Auditor.
Before
the accountant is engaged by Bay National Corporation or Bay National Bank
to
render any audit or non-audit services, the engagement is approved by Bay
National Corporation’s Audit Committee.
Bay
National Corporation
24
PROPOSAL
3. PROPOSAL
TO APPROVE A NEW STOCK INCENTIVE PLAN
General
The
Board
of Directors has adopted the Bay National Corporation 2007 Stock Incentive
Plan
(the “Incentive Plan”), which is designed to help attract, retain and motivate
qualified personnel in key positions and qualified directors, and advance the
interests of the Company by providing
directors, officers and selected employees of the Company and the Bank with
the
opportunity to acquire shares of our common stock. By encouraging stock
ownership, the Company also hopes to
provide
additional incentive to directors, officers and selected key employees to
promote the success of the business and generally
to increase the commonality of interests among directors, employees, and other
stockholders.
The
Incentive Plan provides for the grant of incentive stock options intended to
comply with the requirements of Section 422 of the Code (“incentive stock
options”), non-qualified stock options, stock appreciation rights (“SARs”),
restricted or unrestricted stock awards, awards of phantom stock, performance
awards, other stock-based awards, or any combination of the foregoing
(collectively “Awards”). Awards will be available for grant to officers,
employees and directors of the Company and its affiliates, including the Bank,
except that non-employee directors will not be eligible to receive awards of
incentive stock options.
We
currently award incentive stock options and non-qualified stock options under
the Bay National Corporation 2001 Stock Option Plan (the “Stock Option Plan”).
As of March 27, 2007, we had approximately 53,750 shares remaining available
for
future awards under the Stock Option Plan. The Stock Option Plan will terminate
and no further awards will be made pursuant to the Stock Option Plan following
shareholder approval of the Incentive Plan. However, options outstanding under
the Stock Option Plan will remain outstanding and exercisable according to
their
terms.
The
following is a summary of the material terms of the Incentive Plan and is
qualified in its entirety by reference to the Incentive Plan. A copy of the
Incentive Plan and forms of agreements thereunder are attached as
Appendix B to this proxy statement.
Eligibility
All
of
the Company's and its affiliates’ (including the Bank) employees, including
executive officers, non-employee directors, and all other individuals providing
bona fide services to or for the Company or an affiliate, such as consultants
and independent contractors ("Eligible Persons"), are eligible to receive grants
of Awards under the Incentive Plan.
As
of
March 27, 2007, approximately 59 employees (including executive officers) and
14
non-employee Directors were eligible to be selected by the Administrator to
receive Awards under the Incentive Plan.
Administration
The
Incentive Plan is administered by the Board of Directors or a committee
appointed by the board (the “Administrator”). Currently, the Compensation
Committee administers the Incentive Plan. In addition, as permitted by
applicable law, the board may authorize an officer or officers to grant Awards,
other than stock Awards, to other officers and employees of the Company and
its
affiliates, who serves as the Administrator of the Incentive Plan to the extent
authorized. The Administrator has full power and authority, consistent with
the
terms of the Incentive Plan, among other things, to determine the eligible
persons to whom Awards are granted, the types of Awards to be granted, the
number of shares of common stock covered by or used for reference purposes
for
each Award, whether to modify, amend, extend or renew existing Awards, and
the
terms, limitations, restrictions and conditions of all Awards, including the
exercise price of options, whether an option is an incentive stock option or
a
non-qualified stock option, exceptions to nontransferability, any performance
goals applicable to Awards, and provisions relating to vesting and the period
of
exercise or restriction.
Subject
to the provisions of the Incentive Plan, the Administrator may construe and
interpret the Incentive Plan and Awards granted under the Incentive Plan
(including the agreements evidencing such Awards). The Administrator may adopt,
and interpret such rules and regulations relating to the Incentive Plan and
make
all other determinations for the administration of the Incentive Plan. The
determinations of the Administrator on the matters outlined above are binding
and final.
Bay
National Corporation
25
Stock
Subject to the Incentive Plan
The
maximum number of shares of the Company’s common stock that may be issued with
respect to Awards granted under the Incentive Plan is 200,000 plus (i) any
shares of common stock that are available under the Stock Option Plan as of
its
termination date and (ii) shares of common stock subject to options granted
under the Stock Option Plan that expire or terminate without having been fully
exercised. This number of shares of common stock with respect to which Awards
may be issued under the Incentive Plan may be adjusted to reflect any changes
in
the outstanding common stock by reason of any stock dividend, stock split,
reverse stock split, split-up, recapitalization, reclassification,
reorganization, combination or exchange of shares, merger, consolidation,
liquidation or similar event that changes the Company’s capitalization.
If
an
option expires or terminates without having been fully exercised, or if shares
of restricted stock are forfeited, then the unissued shares of common stock
that
had been subject to the Award will be available for the grant of additional
Awards.
Options
Options
granted under the Incentive Plan will either be (i) incentive stock options
or (ii) non-qualified stock options. Incentive stock options may only be
granted to employees of the Company or an eligible affiliate (including the
Bank) on the date of grant. Each option granted under the Incentive Plan will
be
identified either as a non-qualified stock option or an incentive stock option
and will be evidenced by an Agreement that specifies the terms and conditions
of
the option.
The
exercise price of an option granted under the Incentive Plan may not be less
than 100% of the fair market value of the Company’s common stock on the date of
grant. However, in the case of an incentive stock option granted to an employee
who, on the date of grant, is the beneficial owner of at least 10% of the common
stock, the exercise price may not be less than 110% of the fair market value
of
the common stock on the date of grant.
The
period during which an option granted under the Incentive Plan will be
exercisable, as determined by the Administrator, will be set forth in the
agreement evidencing the option Award. However, an incentive stock option may
not be exercisable for more than ten years (five years in the case of an
incentive stock option granted to a 10% stockholder) from its date of grant.
Stock
Appreciation Rights
The
holder of a SAR is entitled to receive the excess of the fair market value
(calculated as of the exercise date) of a specified number of shares of the
Company’s common stock over the base price per share of the SAR, which may not
be less than the fair market value on the date of grant. Payment for SARs may
be
in cash, stock or any combination of cash and stock.
Restricted
and Unrestricted Stock Awards
The
Administrator may grant shares of restricted or unrestricted stock under the
Incentive Plan, subject to terms and conditions in the Incentive Plan.
Shares
of
restricted stock granted under the Incentive Plan will consist of shares of
common stock that are restricted as to transfer, subject to forfeiture, and
subject to such other terms and conditions as determined by the Administrator,
including the achievement of one of more performance goals (as discussed further
below). Generally, if the participant’s employment or service as a director
terminates during the vesting period for any reason, any shares of unvested
restricted stock will be forfeited.
Bay
National Corporation
26
Performance
Awards
The
Administrator may grant performance awards under the Incentive Plan, which
become payable upon the attainment of one or more performance goals established
by the Administrator. Performance awards may be paid by delivery of cash, common
stock or any combination thereof.
Performance
goals established by the Administrator may be based on one or more business
criteria that apply to either an individual or group of individuals, the Company
and/or one or more of its affiliates, including the Bank, and over such period
as the Administrator may designate. Such performance goals can be based on
operating income, earnings or earnings growth, sales, return on assets, equity
or investments, regulatory compliance, satisfactory internal or external audits,
improvement of financial ratings, achievement of balance sheet or income
statement objectives, implementation or completion of one or more projects
or
transactions, or any other objective goals established by the Administrator,
and
may be absolute in their terms or measured against or in relationship to other
companies comparably, similarly or otherwise situated.
Phantom
Stock
A
grant
of phantom stock entitles the holder thereof to receive the market value or
the
appreciation in value of an equivalent number of shares of common stock on
the
settlement date determined by the Administrator. An award of phantom stock
may
be settled in cash, stock or a combination thereof, as set forth in the
agreement evidencing the award of phantom stock. The Administrator will
determine the other terms and conditions of any phantom stock award, which
will
be set forth in the agreement evidencing the Award.
Other
Stock-Based Awards
The
Administrator is also authorized to grant other types of stock-based awards
that
are denominated or payable in, valued in whole or in part by reference to,
or
otherwise based on or related to the Company’s common stock, subject to terms
and conditions in the Incentive Plan.
Transferability
Except
as
otherwise determined by the Administrator and set forth in the agreement
evidencing an Award (and in any case with respect to an incentive stock option
or stock appreciation right granted with respect to an incentive stock option),
no Award granted under the Incentive Plan is transferable other than by will
or
the applicable laws of descent and distribution in the event of the
participant’s death, or pursuant to the terms of a “qualified domestic relations
order” (as defined in Section 414(p) of the Code). Unless
otherwise determined by the Administrator, during the grantee’s lifetime, an
Award may be exercised only by the grantee or, during a period the grantee
is
under a legal disability, by the grantee’s guardian or legal
representative.
Capital
Adjustments
If
the
outstanding common stock of the Company changes as a result of a stock dividend,
stock split, reverse stock split, split-up, recapitalization, reclassification,
reorganization, combination or exchange of shares, merger, consolidation,
liquidation or similar occurrence, then (a) the maximum number of shares of
common stock as to which Awards may be granted under the Incentive Plan and
(b)
the number of shares covered by and the exercise price and other terms of
outstanding Awards will automatically be adjusted to reflect such event, unless
the Board of Directors determines that no adjustment to the maximum number
of
shares issuable under the Incentive Plan will be made.
Bay
National Corporation
27
Termination,
Amendment and Modification
The
Board
of Directors may amend or terminate the Incentive Plan or any portion thereof
at
any time, but no amendment or modification may impair the rights of any grantee
under any outstanding Award without his or her consent. However, after the
Incentive Plan has been approved by the stockholders of the Company, the board
may not amend or modify the Incentive Plan or any portion thereof without the
approval of the Company's stockholders if stockholder approval of the amendment
is required by applicable law, rules or regulations. Furthermore, the
Administrator may not amend or modify any Award if such amendment or
modification would require the approval of the stockholders if the amendment
or
modification were made to the Incentive Plan. In addition, the Administrator
may
not make any modifications, amendments, extensions or renewals of outstanding
Awards without the consent of the affected Award holder if such action would
materially adversely affect any outstanding Award.
Change
of Control
In
the
event of a change in control of the Company (as defined in the Incentive Plan),
holders of options and other Awards that are exercisable or convertible, or
will
be exercisable or convertible on or prior to the effective time of the change
of
control, may exercise or convert such Awards immediately prior to the change
of
control. Otherwise, outstanding Awards will vest and become exercisable upon
a
change of control to the extent provided in the agreement evidencing the Award
and, if no such provisions are made, will terminate upon the change of control,
except to the extent that such Awards are payable only in cash.
Term
of the Incentive Plan
Unless
sooner terminated by the Board, the Incentive Plan will terminate 10 years
from
the date that it is approved by the stockholders, or May 22, 2017. The
termination of the Incentive Plan will not, however, affect the validity of
any
Awards outstanding on the date of termination.
Summary
of Certain Federal Income Tax Consequences
The
following discussion briefly summarizes certain United States federal income
tax
aspects of Awards granted pursuant to the Incentive Plan. State and local tax
consequences may differ.
Incentive
Stock Options. An
option holder will not recognize income on the grant or exercise of an incentive
stock option. However, the difference between the exercise price and the fair
market value of the stock on the date of exercise is an adjustment item for
purposes of the alternative minimum tax. If an option holder does not exercise
an incentive stock option within certain specified periods after termination
of
employment, the option holder will recognize ordinary income on the exercise
of
an incentive stock option in the same manner as on the exercise of a
non-qualified stock option, as described below.
The
general rule is that gain or loss from the sale or exchange of shares of common
stock acquired on the exercise of an incentive stock option will be treated
as
capital gain or loss; provided, however, that if certain holding period
requirements are not satisfied the option holder generally will recognize
ordinary income at the time of the disposition. Gain recognized on the
disposition in excess of the ordinary income resulting therefrom will be capital
gain, and any loss recognized will be a capital loss.
Non-qualified
stock options, stock appreciation rights, awards of phantom stock and
performance awards.
A
grantee generally is not required to recognize income on the grant of a
non-qualified stock option, stock appreciation right, phantom stock award or
performance award. Instead, ordinary income generally is required to be
recognized on the date the non-qualified stock option or stock appreciation
right is exercised, or in the case of an award of phantom stock or a performance
award on the date of payment of such Award in cash or shares of common stock.
In
general, the amount of ordinary income required to be recognized (a) in the
case
of a non-qualified stock option, is an amount equal to the excess, if any,
of
the fair market value of the shares of common stock on the exercise date over
the exercise price, (b) in the case of a stock appreciation right, the amount
of
cash and the fair market value of any shares of common stock received on
exercise, and (c) in the case of an award of phantom stock or a performance
award, the amount of cash and the fair market value of any shares of common
stock received. In all three of these instances, ordinary income also includes
the amount of any taxes withheld upon payment of the Award.
Bay
National Corporation
28
Restricted
Stock. Shares
of restricted stock awarded under the Incentive Plan will be subject to a
substantial risk of forfeiture for the period of time specified in the Award.
Unless a grantee of shares of restricted stock makes an election under
Section 83(b) of the Code as described below, the grantee generally is not
required to recognize ordinary income on the award of restricted stock. Instead,
on the date the substantial risk of forfeiture lapses, the grantee will be
required to recognize ordinary income in an amount equal to the excess, if
any,
of the fair market value of the shares of common stock on such date over the
amount, if any, paid for such shares. If a grantee makes a Section 83(b)
election to recognize ordinary income on the date the shares are awarded, the
amount of ordinary income required to be recognized is an amount equal to the
excess, if any, of the fair market value of the shares on the date of award
over
the amount, if any, paid for such shares. In such case, the grantee will not
be
required to recognize additional ordinary income when the substantial risk
of
forfeiture lapses.
Unrestricted
Stock.
In
general, a grantee is required to recognize ordinary income on the date of
issuance of unrestricted shares of common stock to the grantee equal to the
excess, if any, of the fair market value of such shares on such date over the
amount, if any, paid for such shares.
Gain
or Loss on Sale or Exchange of Common Stock. A
grantee will recognize gain or loss upon the sale or exchange of shares of
common stock granted or awarded under the Incentive Plan. In general, gain
or
loss from the sale or exchange of shares of common stock granted or awarded
under the Incentive Plan will be treated as capital gain or loss, provided
that
the shares are held as capital assets at the time of the sale or exchange.
Whether such capital gain or capital loss is long-term or short-term will depend
upon the period of time the grantee holds the shares once they are acquired.
However, if certain holding period requirements are not satisfied at the time
of
a sale or exchange of shares of common stock acquired upon exercise of an
incentive stock option (a "disqualifying disposition"), a grantee generally
will
be required to recognize ordinary income upon such disposition.
The
capital gain or loss will be equal to the difference between the selling price
and the optionee’s basis in the stock. For options, the basis is generally the
sum of the option price plus the amount of taxable income the optionee reported
upon the exercise of the option.
Deductibility
by Company. The
Company generally is not allowed a deduction in connection with the grant or
exercise of an incentive stock option. However, if a grantee is required to
recognize income as a result of a disqualifying disposition, the Company will
generally be entitled to a deduction equal to the amount of ordinary income
so
recognized. In general, in the case of a non-qualified stock option (including
an incentive stock option that is treated as a non-qualified stock option,
as
described above), a stock appreciation right, a stock award, an award of phantom
stock or a performance award, the Company will be allowed a deduction in an
amount equal to the amount of ordinary income recognized by the grantee,
provided that certain income tax reporting requirements are satisfied.
Parachute
Payments. Where
payments to certain persons that are contingent on a change in control exceed
limits specified in Section 280G of the Code, the person generally is liable
for
a 20% federal excise tax on, and the corporation or other entity making the
payment generally is not entitled to any deduction for, a specified portion
of
such payments. Under the Incentive Plan, the Administrator may grant options
and
other Awards for which the vesting is accelerated by a change in control of
the
Company. Such accelerated vesting would be relevant in determining whether
the
excise tax and deduction disallowance rules would be triggered.
Performance-Based
Compensation. Subject
to certain exceptions, Section 162(m) of the Code disallows federal income
tax deductions for compensation paid by a publicly-held corporation to certain
executives to the extent the amount paid to an executive exceeds $1 million
for the taxable year. The Incentive Plan has been designed to allow the grant
of
options, awards of restricted stock and other stock-based awards that qualify
under an exception to the deduction limit of Section 162(m) for
"performance-based compensation."
Bay
National Corporation
29
New
Plan Benefits
If
the
Incentive Plan is approved by stockholders, we anticipate that five
non-executive key employees will each receive an Award of 500 shares of
restricted stock, which will vest upon issuance of the Award. The value of
each
Award would be $9,225 based upon the closing price of a share of our common
stock of $18.45 as reported on the NASDAQ Capital Market on March 27,
2007.
Otherwise,
no benefits or amounts have been granted, awarded or received under the
Incentive Plan. In addition, the Administrator in its sole discretion will
determine the number and types of Awards that will be granted. Thus, it is
not
possible to determine the benefits that will be received by eligible
participants if our stockholders approve the Incentive Plan.
Securities
Authorized For Issuance Under Equity Compensation Plans
The
following table sets forth certain information as of December 31, 2006,
with respect to compensation plans under which equity securities of Bay National
Corporation are authorized for issuance. As such, it does not include the shares
of common stock issuable pursuant to Awards under the Incentive Plan.
|
Equity
Compensation Plan
Information
|
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options and
warrants
(a)
|
Weighted-average
exercise price of outstanding options and warrants
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a)
(c)
|
|||||
|
Equity
compensation plans approved by security holders
|
128,591
|
$
7.68
|
53,750
|
|||||
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|||||
|
Total
|
128,591
|
$
7.68
|
53,750
|
The
Board of Directors recommends that stockholders vote “FOR” the approval of the
2007 Stock Incentive Plan.
Bay
National Corporation
30
SHAREHOLDER
COMMUNICATIONS
Bay
National Corporation has adopted a formal process by which shareholders may
communicate with the Board of Directors. If you would like to communicate with
the Board of Directors, including a committee of the Board of Directors or
individual directors, you can send an email to the Secretary of Bay National
Corporation, msemanie@baynational.com, or write to the following
address:
Bay
National Corporation
Board
of
Directors
c/o
Corporate Secretary
Mark
A.
Semanie
2328
West
Joppa Road, Suite 325
Lutherville,
Maryland 21093
You
may
also choose to communicate directly with the Board of Directors, including
a
committee of the Board of Directors or individual directors, by
contacting:
Henry
H.
Stansbury
Agency
Services, Inc.
Suite
200
939
Elkridge Landing Road
Linthicum,
MD 21090
Hstansbury@asionline.com
The
Corporate Secretary and/or Henry Stansbury will compile all communications
and
will submit them to
the
Board
of Directors, the Committee or the individual Directors on a periodic
basis.
YOU
MAY MAKE YOUR COMMUNICATIONS ANONYMOUSLY AND/OR
CONFIDENTIALLY.
STOCKHOLDER
PROPOSALS FOR THE 2008 ANNUAL MEETING
In
order
to be included in the proxy materials for Bay National Corporation’s 2008 Annual
Meeting, shareholder proposals submitted to Bay National Corporation in
compliance with SEC Rule 14a-8 (which concerns shareholder proposals that are
requested to be included in a company’s proxy statement) must be received in
written form at Bay National Corporation’s executive offices on or before
December 22, 2007. In order to curtail controversy as to compliance with this
requirement, shareholders are urged to submit proposals to the Secretary of
Bay
National Corporation by Certified Mail—Return Receipt Requested.
Pursuant
to the proxy rules under the Securities Exchange Act of 1934, as amended, Bay
National Corporation’s stockholders are notified that the deadline for providing
us with timely notice of any stockholder proposal to be submitted outside of
the
Rule 14a-8 process for consideration at the 2008 Annual Meeting will be March
6,
2008. As to all such matters which we do not have notice on or prior to that
date, discretionary authority to vote on such proposal will be granted to the
persons designated in Bay National Corporation’s proxy related to the 2008
Annual Meeting.
OTHER
BUSINESS
The
management of the Bay National Corporation does not intend to present any other
matters for action at the Annual Meeting, and the Board of Directors has not
been informed that other persons intend to present any matters for action at
the
Annual Meeting. However, if any other matter should properly come before the
Annual Meeting, the persons named in the accompanying form of proxy intend
to
vote thereon, pursuant to the proxy, in accordance with their judgment of the
best interests of Bay National Corporation
Bay
National Corporation
31
ANNUAL
REPORT
The
Bay
National Corporation’s annual report for the year 2006 has been mailed with this
proxy statement. Copies of the report will also be available at the Annual
Meeting on May 22, 2007.
A
copy of Bay National Corporation’s Annual Report to the Securities and Exchange
Commission on Form 10-KSB for the year ended December 31, 2006, including
financial statements and the schedules thereto, will be furnished by management
to any beneficial owner of its securities without charge upon receipt of a
written request from such person. Requests in writing should be directed
to:
Bay
National Corporation
c/o
Corporate Secretary
Mark
A. Semanie
2328
West Joppa Road, Suite 325
Lutherville,
MD 21093
Each
request must set forth a good faith representation that, as of March 27, 2007,
the record date for the Annual Meeting of Stockholders, the person making the
request was a beneficial owner of securities entitled to vote at such meeting.
Bay
National Corporation
32
Appendix
A. COMPENSATION COMMITTEE CHARTER
The
purpose of the Compensation Committee (the “Committee”) of Bay National
Corporation (the “Company”) is to assist the Board of Directors (the “Board”) of
the Company in establishing the compensation of executive officers and
administering management incentive compensation plans.
The
Committee may meet simultaneously as a committee of the Company and any
subsidiary of the Company that does not have its own compensation committee
or
which has its own compensation committee the members of which are the same
as
the members of the Committee, though the committees should hold separate
sessions if necessary to address issues that are relevant to one entity but
not
the other(s) or to consider transactions between the entities or other matters
where the Company and one or more subsidiaries may have different
interests.
The
Committee should consult with counsel, if, in the opinion of the Committee,
any
matter under consideration by the Committee has the potential for any conflict
between the interests of the Company and those of the Company’s subsidiaries in
order to ensure that appropriate procedures are established for addressing
any
such potential conflict and for ensuring compliance with the Company’s policies
regarding any applicable laws, rules and regulations.
ORGANIZATION
AND MEMBERSHIP
This
Charter governs the operations of the Committee. The Board shall annually
appoint Committee members and the chairman of the Committee. The Board may
remove Committee members at any time, with or without cause, by a majority
vote,
and will fill any vacancy on the Committee.
The
Committee shall be comprised of at least three (3) directors, each of whom
is
independent as determined in accordance with all laws, rules, regulations and
listing requirements applicable to the Company. Each member will also be (i)
a
“non-employee director” within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) an
“outside director” for purposes of the regulations promulgated under Section
162(m) of the Internal Revenue Code of 1986, as amended.
MEETINGS
The
Committee will hold regular meetings as may be necessary and such special
meetings as may be called by the chairman of the Committee. A majority of the
Committee members shall constitute a quorum for the transaction of business
and
the act of a majority of the members present at any meeting at which there
is a
quorum shall be the act of the Committee. Meetings may be held telephonically
or
by written consent of all Committee members. The Committee shall otherwise
be
governed by the same rules regarding meetings as are applicable to the
Board.
The
Committee has the authority to delegate any of its responsibilities to
sub-committees comprised solely of Committee members, as the Committee may
deem
appropriate in its sole discretion.
The
Committee shall maintain minutes of its meetings and report on its actions
and
activities at meetings of the Board.
Bay
National Corporation
33
RESPONSIBILITIES
AND DUTIES
To
fulfill its responsibilities and duties, the Compensation Committee
will:
| · |
Review
and approve the compensation of the Company’s Chief Executive Officer and
President and the Chief Financial Officer (collectively the “Executive
Officers”). In determining the amount, form, and terms of such
compensation, the Committee shall consider the Executive Officer’s
performance in light of the Company goals and objectives relevant
to
executive compensation, any performance evaluation conducted by the
Board
or the Committee, competitive market data pertaining to executive
compensation at comparable companies, and such other factors as it
shall
deem relevant, and shall be guided by, and seek to promote, the best
interest of the Company and its
shareholders.
|
| · |
Make
recommendations to the Board regarding compensation arrangements
for
directors.
|
| · |
Recommend
to the Board the creation of any compensation or employee benefit
plan or
program for employees, officers or directors of the
Company.
|
| · |
With
respect to the Executive Officers, approve the establishment and
modification of executive compensation and benefit programs, such
as
ranges, deferred compensation, employment agreements, severance
arrangements, and if appropriate, any special supplemental
benefits.
|
| · |
Administer
the Company’s equity incentive plans and deferred compensation plans (if
any) and perform all duties delegated to the Committee by such
plans.
|
| · |
Have
the sole authority to retain and terminate any compensation consultant
engaged to assist in the evaluation of director or Executive Officer
compensation, and the sole authority to approve such firm’s fees and other
retention terms.
|
| · |
If
required by the Exchange Act, produce the annual committee report
on
executive compensation for inclusion in the Company’s proxy
statement.
|
| · |
Report
regularly to the Board any issues that arise with respect to the
Committee’s responsibilities.
|
| · |
Conduct
an annual review of the Committee’s performance, periodically assess the
adequacy of this Charter and recommend changes to the Board, as
needed.
|
| · |
Perform
any other duties or responsibilities consistent with this Charter,
the
Company’s charter, bylaws and governing law, or as may be delegated to the
Committee by the Board from time to
time.
|
Bay
National Corporation
34
Appendix
B. BAY NATIONAL CORPORATION 2007 STOCK
INCENTIVE PLAN
The
Plan
permits the granting of stock options (including incentive stock options within
the meaning of Code section 422 and non-qualified stock options), stock
appreciation rights, restricted or unrestricted stock awards, phantom stock,
performance awards, other stock-based awards, or any combination of the
foregoing.
2. Definitions.
Under
the Plan, except where the context otherwise indicates, the following
definitions apply:
“Administrator”
means the Board or the committee(s) or officer(s) appointed by the Board that
have authority to administer the Plan as provided in Section 3
hereof.
“Affiliate”
means any entity, whether now or hereafter existing, which controls, is
controlled by, or is under common control with, the Company (including, but
not
limited to, joint ventures, limited liability companies, and partnerships),
including Bay National Bank. For this purpose, “control” shall mean ownership of
50% or more of the total combined voting power or value of all classes of stock
or interests of the entity.
“Award”
means any stock option, stock appreciation right, stock award, phantom stock
award, performance award, or other stock-based award pursuant to the
Plan.
The
“Bank” means Bay National Bank.
“Board”
means the Board of Directors of the Company.
“Change
of Control” means if any of the following occurs
(i)
any
individual, firm, corporation or other entity, or any group (as defined in
Section 13(d)(3) or the Exchange Act becomes, directly or indirectly, the
beneficial owner (as defined in the general rules and regulations of the
Securities and Exchange Commission with respect to Sections 13(d) and 13(g)
of
the Act) of more than 35% of the then outstanding shares of the Company's
capital stock entitled vote generally in the election of directors of the
Company; or
(ii)
the
stockholders of the Company approve a definitive agreement for (i) the merger
or
other business combination of the Company with or into another corporation
pursuant to which the stockholders of the Company do not own, immediately after
the transaction, more than 50% of the voting power of the corporation that
survives and is a publicly owned corporation and not a subsidiary of another
corporation, or (ii) the sale, exchange or other disposition of all or
substantially all of the assets of the Company; or
(iii)
during any period of two years or less, individuals who at the beginning of
such
period constituted the Board cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
stockholders of the Company, of each new director was approved by a vote of
at
least 75% of the directors then still in office who were directors at the
beginning of the period. Notwithstanding the foregoing, a Change of Control
shall not be deemed to have taken place if beneficial ownership is acquired
by,
or a tender exchange offer is commenced by, the Company or any of its
subsidiaries, any profit sharing, employee ownership or other employee benefit
plan of the Company or any subsidiary of any trustee of or fiduciary with
respect to any such plan when acting in such capacity, or any group comprised
solely of such entities.
Bay
National Corporation
35
“Code”
means the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder
“Common
Stock” means the Company’s common stock, par value $0.01 per share.
“Company”
means Bay National Corporation.
“Cause”
has the meaning ascribed to such term or words of similar import in
Participant’s written employment or service contract with the Company or Bank
and, in the absence of such agreement or definition, means Participant’s
(i) conviction of, or plea of guilty or nolo
contendere
to, a
felony or crime involving moral turpitude; (ii) fraud on or
misappropriation of any funds or property of Bank, any affiliate, customer
or
vendor; (iii) personal dishonesty, incompetence, willful misconduct,
willful violation of any law, rule or regulation (other than minor traffic
violations or similar offenses), or breach of fiduciary duty which involves
personal profit; (iv) willful misconduct in connection with Participant’s
duties or willful failure to perform Participant’s responsibilities in the best
interests of the Company or Bank; (v) illegal use or distribution of drugs;
(vi) violation of any Company or Bank rule, regulation, procedure or
policy; or (vii) breach of any provision of any employment, non-disclosure,
non-competition, non-solicitation or other similar agreement executed by
Participant for the benefit of the Company or Bank, all as determined by the
Administrator, which determination will be conclusive.
“Disability”
shall mean the inability to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last
for a
continuous period of not less than twelve months. The Administrator may require
such proof of Disability as the Administrator in its sole discretion deems
appropriate and the Administrator’s good faith determination as to whether
Participant is totally and permanently disabled will be final and binding on
all
parties concerned.
“Employee”
means any person employed by the Company, the Bank, or any affiliate, other
than
in the capacity as director, advisory director or comparable
status.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Fair
Market Value” means, with respect to a share of Common Stock for any purpose on
a particular date: (i) the closing price quoted on the Nasdaq Stock Market
or
other national securities exchange or national securities association that
is
the principal market for the Common Stock, or (ii) if the Common Stock is not
so
listed, the last or closing price on the relevant date quoted on the OTC
Bulletin Board Service or by Pink Sheets LLC or a comparable service as
determined in the Administrator’s sole discretion; or (iii) if the Common
Stock is not listed or quoted by any of the above, the average of the closing
bid and asked prices on the relevant date furnished by a professional market
maker for the Common Stock selected by the Administrator in its sole discretion.
If the Common Stock is listed or quoted as described in clause (i), clause
(ii)
or clause (iii) above, as applicable, but no public trading of the Common Stock
occurs on the relevant date, then Fair Market Value shall be determined as
of
the nearest preceding date on which trading of the Common Stock occurred. For
all purposes under the Plan, the term “relevant date” as used in this definition
means either the date as of which Fair Market Value is to be determined or
the
nearest preceding date on which public trading of the Common Stock occurred,
as
determined in the Administrator’s sole discretion.
“Grant
Agreement” means a written document memorializing the terms and conditions of an
Award granted pursuant to the Plan. Each Grant Agreement shall incorporate
the
terms of the Plan.
“Participants”
shall have the meaning set forth in Section 5.
Bay
National Corporation
36
“Parent”
shall mean a corporation, whether nor or hereafter existing, within the meaning
of the definition of “parent corporation” provided in Code section 424(e), or
any successor thereto.
“Performance
Goals” shall mean performance goals established by the Administrator which may
be based on one or business criteria selected by the Administrator that apply
to
an individual or group of individuals, the Corporation and/or one or more of
its
Affiliates either separately or together, over such performance period as the
Administrator may designate, including, but not limited to, criteria based
on
operating income, earnings or earnings growth, sales, return on assets, equity
or investment, regulatory compliance, satisfactory internal or external audits,
improvement of financial ratings, achievement of balance sheet or income
statement objectives, or any other objective goals established by the
Administrator, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
“Subsidiary”
and “Subsidiaries” shall mean only a corporation or corporations, whether now or
hereafter existing, within the meaning of the definition of “subsidiary
corporation” provided in section 424(f) of the Code, or any successor thereto.
“Ten-Percent
Stockholder” shall mean a Participant who (applying the rules of Code section
424(d)) owns stock possessing more than 10% of the total combined voting power
or value of all classes of stock or interests of the Corporation or a Parent
or
Subsidiary of the Corporation.
3. Administration.
(a) Administration
of the Plan.
The
Plan shall be administered by the Board or a committee that may be appointed
by
the Board from time to time; provided, however, that unless otherwise determined
by the Board, the Administrator shall be composed solely of two or more persons
who are “outside directors” within the meaning of Code section 162(m)(4)(C)(i)
and the regulations promulgated thereunder and “non-employee directors” within
the meaning of Rule 16b-3 promulgated under the Exchange Act. To the extent
allowed by applicable state or federal law, the Board by resolution may
authorize an officer or officers to grant Awards (other than stock Awards)
to
other officers and employees of the Company and its Affiliates, and, to the
extent of such authorization, such officer or officers shall be the
Administrator.
(b) Powers
of the Administrator.
The
Administrator shall have all the powers vested in it by the terms of the Plan,
such powers to include authority, in its sole discretion, to grant Awards under
the Plan, prescribe Grant Agreements evidencing such Awards and establish
programs for granting Awards.
The
Administrator shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to: (i) determine the eligible persons to whom,
and the time or times at which, Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions (not inconsistent with the
Plan)
upon any such Award as the Administrator shall deem appropriate, including,
but
not limited to, whether a stock option shall be an incentive stock option or
a
nonqualified stock option, any exceptions to nontransferability, any Performance
Goals applicable to Awards, any provisions relating to vesting, any
circumstances in which the Awards would terminate, the period during which
Awards may be exercised, and the period during which Awards shall be subject
to
restrictions; (v) modify, amend, extend or renew outstanding Awards, or
accept the surrender of outstanding Awards and substitute new Awards (provided
however, that, except as provided in Section 6 or 7(d) of the Plan, any
modification that would materially adversely affect any outstanding Award shall
not be made without the consent of the holder); (vi) accelerate, extend or
otherwise change the time in which an Award may be exercised or becomes payable
and to waive or accelerate the lapse, in whole or in part, of any restriction
or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award following termination of any grantee’s employment or other relationship
with the Company or an Affiliate; (vii) establish objectives and conditions
(including, without limitation, vesting criteria), if any, for earning Awards
and determining whether such objectives and conditions have been satisfied;
(viii) determine the Fair Market Value of the Common Stock from time to time
in
accordance with the Plan; and (ix) for any purpose, including but not
limited to, qualifying for preferred tax treatment under foreign tax laws or
otherwise complying with the regulatory requirements of local or foreign
jurisdictions, to establish, amend, modify, administer or terminate sub-plans,
and prescribe, amend and rescind rules and regulations relating to such
sub-plans.
Bay
National Corporation
37
The
Administrator shall have full power and authority, in its sole discretion,
to
administer and interpret the Plan, Grant Agreements and all other documents
relevant to the Plan and Awards issued thereunder, and to adopt and interpret
such rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.
(c) Non-Uniform
Determinations.
The
Administrator’s determinations under the Plan (including, without limitation,
determinations of the persons to receive Awards, the form, amount and timing
of
such Awards, the terms and provisions of such Awards and the Grant Agreements
evidencing such Awards) need not be uniform and may be made by the Administrator
selectively among persons who receive, or are eligible to receive, Awards under
the Plan, whether or not such persons are similarly situated.
(d) Limited
Liability.
To the
maximum extent permitted by law, no member of the Administrator shall be liable
for any action taken or decision made in good faith relating to the Plan or
any
Award thereunder.
(e) Indemnification.
To the
maximum extent permitted by law and by the Company’s charter and by-laws, the
members of the Administrator shall be indemnified by the Company in respect
of
all their activities under the Plan.
(f) Reliance
on Reports.
Each
member of the Board shall be fully justified in relying or acting in good faith
upon any report made by the independent public accountants of the Company,
and
upon any other information furnished in connection with this Plan. In no event
shall any person who is or shall have been a member of the Board or the
Administrator be liable for any determination made or other action taken or
any
omission to act in reliance upon any such report or information, or for any
action taken, including the furnishing of information, or failure to act, if
in
good faith.
(g) Effect
of Administrator’s Decision.
All
actions taken and decisions and determinations made by the Administrator on
all
matters relating to the Plan pursuant to the powers vested in it hereunder
shall
be in the Administrator’s sole discretion and shall be conclusive and binding on
all parties concerned, including the Company, its stockholders, any participants
in the Plan and any other employee, consultant, or director of the Company,
and
their respective successors in interest.
4. Shares
Available for the Plan.
The
aggregate number of shares of Common Stock issuable pursuant to all Awards
granted under the Plan shall not exceed 200,000 plus (i) any available
shares of Common Stock under the Prior Plan as of its termination date and
(ii) shares of Common Stock subject to options granted under the Prior Plan
that expire or terminate without having been fully exercised. Notwithstanding
the foregoing (but subject to adjustment as provided in Section 7(f)), in
no event may the number of shares issuable pursuant to the exercise of incentive
stock options granted hereunder exceed 200,000. The aggregate number of shares
of Common Stock available for grant under this Plan and the number of shares
of
Common Stock subject to outstanding Awards shall be subject to adjustment as
provided in Section 7(f).
The
Company shall reserve such number of shares for Awards under the Plan, subject
to adjustments as provided in Section 7(f) of the Plan. If any Award, or
portion of an Award, under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares, or if any shares of Common Stock are repurchased by or
surrendered to the Company in connection with any Award (whether or not such
surrendered shares were acquired pursuant to any Award), or if any shares are
withheld by the Company, the shares subject to such Award and the repurchased,
surrendered and withheld shares shall thereafter be available for further Awards
under the Plan; provided,
however,
that to
the extent required by applicable law, any such shares that are surrendered
to
or repurchased or withheld by the Company in connection with any Award or that
are otherwise forfeited after issuance shall not be available for purchase
pursuant to incentive stock options intended to qualify under Code section
422.
Bay
National Corporation
38
5. Participation.
Participation in the Plan shall be open to those employees, officers, and
directors of, and other individuals providing bona fide services to or for,
the
Company, or of any Affiliate of the Company, as may be selected by the
Administrator from time to time. The Administrator may also grant Awards to
individuals in connection with hiring, retention or otherwise, prior to the
date
the individual first performs services for the Company or an Affiliate, provided
that such Awards shall not become vested or exercisable prior to the date the
individual first commences performance of such services.
6. Awards.
The
Administrator, in its sole discretion, shall establish the terms of all Awards
granted under the Plan. All Awards shall be subject to the terms and conditions
provided in the Grant Agreement. Awards may be granted individually or in tandem
with other types of Awards. Each Award shall be evidenced by a Grant Agreement,
and each Award shall be subject to the terms and conditions provided in the
applicable Grant Agreement. The Administrator may permit or require a recipient
of an Award to defer such individual’s receipt of the payment of cash or the
delivery of Common Stock that would otherwise be due to such individual by
virtue of the exercise of, payment of, or lapse or waiver of restrictions
respecting, any Award. If any such deferral is required or permitted, the
Administrator shall, in its sole discretion, establish rules and procedures
for
such deferral.
(a) Stock
Options.
The
Administrator may from time to time grant to eligible Participants Awards of
incentive stock options as that term is defined in Code section 422 or
non-qualified stock options; provided,
however,
that
Awards of incentive stock options shall be limited to employees of the Company
or of any current or hereafter existing “parent corporation” or “subsidiary
corporation,” as defined in Code sections 424(e) and (f), respectively, of the
Company. The exercise price of any option granted under the Plan shall not
be
less than the Fair Market Value of the shares of Common Stock underlying such
option on the date of grant, provided,
however,
that an
incentive stock option granted to an Employee who owns stock representing more
than 10% of the combined voting power of the Company or any Affiliate must
have
an exercise price at least equal to 110% of Fair Market Value as of the date
of
grant. No stock option shall be an incentive stock option unless so designated
by the Administrator at the time of grant or in the Grant Agreement evidencing
such stock option.
(i)
Special
Rules for Incentive Stock Options.
The
aggregate Fair Market Value, as of the date the Option is granted, of the shares
of Common Stock with respect to which incentive stock options are exercisable
for the first time by a Participant during any calendar year (under all
incentive stock option plans, as defined in Section 422 of the Code, of the
Company, or any Parent or Subsidiary), shall not exceed $100,000 or such other
dollar limitation as may be provide in the Code. Notwithstanding the prior
provisions of this Section, the Board may grant Options in excess of the
foregoing limitations, in which case such Options granted in excess of such
limitation shall be Options which are non-qualified stock options.
(b) Stock
Appreciation Rights.
The
Administrator may from time to time grant to eligible participants Awards of
Stock Appreciation Rights (“SAR”). A SAR may be exercised in whole or in part as
provided in the applicable Grant Agreement and entitles the grantee to receive,
subject to the provisions of the Plan and the Grant Agreement, a payment having
an aggregate value equal to the product of (i) the excess of (A) the
Fair Market Value on the exercise date of one share of Common Stock over
(B) the base price per share specified in the Grant Agreement, which shall
not be less than the Fair Market Value of one share of Common Stock as of the
date the SAR is granted, times (ii) the number of shares specified by the
SAR, or portion thereof, which is exercised. Payment by the Company of the
amount receivable upon any exercise of a SAR may be made by the delivery of
Common Stock or cash, or any combination of Common Stock and cash, as specified
in the Grant Agreement or as determined in the sole discretion of the
Administrator. If upon settlement of the exercise of a SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value
of
a share of Common Stock on the exercise date. No fractional shares shall be
used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(c) Stock
Awards.
The
Administrator may from time to time grant restricted or unrestricted Stock
Awards to eligible Participants in such amounts, on such terms and conditions
(which terms and conditions may condition the vesting or payment of Stock Awards
on the achievement of one or more Performance Goals), and for such
consideration, including no consideration or such minimum consideration as
may
be required by law, as it shall determine.
Bay
National Corporation
39
(d) Phantom
Stock.
The
Administrator may from time to time grant Awards to eligible participants
denominated in stock-equivalent units (“Phantom Stock”) in such amounts and on
such terms and conditions as it shall determine, which terms and conditions
may
condition the vesting or payment of Phantom Stock on the achievement of one
or
more Performance Goals. Phantom Stock units granted to a Participant shall
be
credited to a bookkeeping reserve account solely for accounting purposes and
shall not require a segregation of any of the Company’s assets. An Award of
phantom stock may be settled in Common Stock, in cash, or in a combination
of
Common Stock and cash, as specified in the Grant Agreement. Except as otherwise
provided in the applicable Grant Agreement, the grantee shall not have the
rights of a stockholder with respect to any shares of Common Stock represented
by a phantom stock unit solely as a result of the grant of a phantom stock
unit
to the grantee. In granting any such Phantom Stock Awards, the Administrator
shall consider the potential application of Section 409A of the Code, and the
applicable Grant Agreement shall include appropriate disclosure with respect
to
any such potential application.
(e) Performance
Awards.
The
Administrator may, in its sole discretion, grant Performance Awards, which
become payable on account of attainment of one or more Performance Goals
established by the Administrator. Performance awards may be paid by the delivery
of Common Stock or cash, or any combination of Common Stock and cash, as
specified in the Grant Agreement.
(f) Other
Stock-Based Awards.
The
Administrator may from time to time grant other stock-based awards to eligible
Participants in such amounts, on such terms and conditions, and for such
consideration, including no consideration or such minimum consideration as
may
be required by law, as it shall determine. Other stock-based awards may be
denominated in cash, in Common Stock or other securities, in stock-equivalent
units, in stock appreciation units, in securities or debentures convertible
into
Common Stock, or in any combination of the foregoing and may be paid in Common
Stock or other securities, in cash, or in a combination of Common Stock or
other
securities and cash, all as determined in the sole discretion of the
Administrator as set forth in the Grant Agreement. In granting any such Awards,
the Administrator shall consider the potential application of Section 409A
of
the Code, and the applicable Grant Agreement shall include appropriate
disclosure with respect to any such potential application.
7. Miscellaneous.
(a) Investment
Representations.
The
Administrator may require each person acquiring shares of Common Stock pursuant
to Awards hereunder to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to distribution thereof.
The
certificates for such shares may include any legend that the Administrator
deems
appropriate to reflect any restrictions on transfer. All certificates for shares
issued pursuant to the Plan shall be subject to such stock transfer orders
and
other restrictions as the Administrator may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed or interdealer
quotation system upon which the Common Stock is then quoted, and any applicable
federal or state securities laws. The Administrator may place a legend or
legends on any such certificates to make appropriate reference to such
restrictions.
(b) Compliance
with Securities Law.
Each
Award shall be subject to the requirement that if, at any time, counsel to
the
Company shall determine that the listing, registration or qualification of
the
shares subject to such an Award upon any securities exchange or interdealer
quotation system or under any state or federal law, or the consent or approval
of any governmental or regulatory body, or that the disclosure of nonpublic
information or the satisfaction of any other condition is necessary in
connection with the issuance or purchase of shares under such an Award, such
Award may not be exercised, in whole or in part, unless such satisfaction of
such condition shall have been effected on conditions acceptable to the
Administrator. Nothing herein shall be deemed to require the Company to apply
for or to obtain such listing, registration or qualification, or to satisfy
such
condition.
(c) Withholding
of Taxes.
Grantees and holders of Awards shall pay to the Company or its Affiliate, or
make provision satisfactory to the Administrator for payment of, any taxes
required to be withheld in respect of Awards under the Plan no later than the
date of the event creating the tax liability. The Company or its Affiliate
may,
to the extent permitted by law, deduct any such tax obligations from any payment
of any kind otherwise due to the grantee or holder of an Award. In the event
that payment to the Company or its Affiliate of such tax obligations is made
in
shares of Common Stock, such shares shall be valued at Fair Market Value on
the
applicable date for such purposes and shall not exceed in amount the minimum
statutory tax withholding obligation.
Bay
National Corporation
40
(d) Loans.
To the
extent otherwise permitted by law, the Company or its Affiliate may make loans
to grantees to assist grantees in exercising Awards and satisfying any
withholding tax obligations.
(e) Transferability.
Except
as otherwise determined by the Administrator or provided in a Grant agreement,
and in any event in the case of an incentive stock option or a stock
appreciation right granted with respect to an incentive stock option, no Award
granted under the Plan shall be transferable by a grantee otherwise than by
will
or the laws of descent and distribution or pursuant to the terms of a “qualified
domestic relations order” (within the meaning of Section 414(p) of the Code and
the regulations and rulings thereunder). Unless otherwise determined by the
Administrator in accord with the provisions of the immediately preceding
sentence, an Award may be exercised during the lifetime of the grantee, only
by
the grantee or, during the period the grantee is under a legal disability,
by
the grantee’s guardian or legal representative.
(f) Adjustments
for Corporate Transactions and Other Events.
(i) Capital
Adjustments.
In the
event of any change in the outstanding Common Stock by reason of any stock
dividend, stock split, reverse stock split, split up, recapitalization,
reclassification, reorganization, combination or exchange of shares, merger,
consolidation, liquidation or the like, then (A) the maximum number of shares
of
such Common Stock as to which Awards may be granted under the Plan, and
(B) the number of shares covered by and the exercise price and other terms
of outstanding Awards, shall, without further action of the Board, be
appropriately adjusted to reflect such event, unless, with respect to Section
7(f)(i)(A) only, the Board determines, at the time it approves such action
that
no such adjustment shall be made. The Administrator may make adjustments, in
its
sole discretion, to address the treatment of fractional shares and fractional
cents that arise with respect to outstanding Awards as a result of the stock
dividend, stock split or reverse stock split.
(ii) Change
of Control Transactions.
In the
event of any transaction resulting in a Change of Control of the Company, (A)
outstanding stock options and other Awards that are payable in or convertible
into Common Stock under the Plan will terminate upon the effective time of
such
Change of Control unless provision is made in connection with the transaction
for the continuation or assumption of such Awards by, or for the substitution
of
the equivalent awards of, the surviving or successor entity or a parent thereof;
(B) except as provided in the next sentence of this Section 7(f)(ii), all
outstanding stock options and other Awards shall vest and become exercisable
to
the extent provided for in the applicable Grant Agreement, and (C) the holders
of stock options and other Awards under the Plan will be permitted, immediately
before the Change of Control, to exercise or convert all portions of such stock
options or other Awards under the Plan that are then exercisable or convertible
or which become exercisable or convertible upon or prior to the effective time
of the Change of Control. If the acceleration of vesting of an Award or Awards
pursuant to this Section 7(f)(ii) would cause any portion of the Award or
Awards to be treated as a “parachute payment” (as defined in section 280G
of the Code), then except as may be expressly provided in the applicable Grant
Agreement such Award or Awards shall vest only to the extent that such
acceleration of vesting does not cause any portion of the Award or Awards to
be
so treated. In addition, and notwithstanding any provision of any Grant
Agreement, payments in respect of Awards are subject to and conditioned upon
compliance with 12 U.S.C. Section 1828(k) and 12 C.F.R. Part 359, Golden
Parachute and Indemnification Payments.
(g) Substitution
of Awards in Mergers and Acquisitions.
Awards
may be granted under the Plan from time to time in substitution for awards
held
by employees, officers, consultants or directors of entities who become or
are
about to become employees, officers, consultants or directors of the Bank or
an
Affiliate as the result of a merger or consolidation of the employing entity
with the Bank or an Affiliate, or the acquisition by the Bank or an Affiliate
of
the assets or stock of the employing entity. The terms and conditions of any
substitute Awards so granted may vary from the terms and conditions set forth
herein to the extent that the Administrator deems appropriate at the time of
grant to conform the substitute Awards to the provisions of the awards for
which
they are substituted.
Bay
National Corporation
41
(h) Termination,
Amendment and Modification of the Plan.
The
Board may terminate, amend or modify the Plan or any portion thereof at any
time, but no amendment or modification shall be made which would impair the
rights of any grantee under any Award theretofore made, without his or her
consent. Notwithstanding anything to the contrary contained in the Plan, the
Board may not amend or modify the Plan or any portion thereof without
stockholder approval where such approval is required by applicable law or by
the
rules of any securities exchange (e.g. the Nasdaq Stock Market) or quotation
system on which the Common Stock is listed or traded. Furthermore,
notwithstanding anything to the contrary contained in the Plan, the
Administrator may not amend or modify any Award if such amendment or
modification would require the approval of the stockholders if the amendment
or
modification were made to the Plan.
(i) Non-Guarantee
of Employment or Service.
Nothing
in the Plan or in any Grant Agreement thereunder shall confer any right on
an
individual to continue in the service of the Company or shall interfere in
any
way with the right of the Company to terminate such service at any time with
or
without cause or notice and whether or not such termination results in
(i) the failure of any Award to vest; (ii) the forfeiture of any
unvested or vested portion of any Award; and/or (iii) any other adverse
effect on the individual’s interests under the Plan.
(j) No
Trust or Fund Created.
Neither
the Plan nor any Award shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the Company and
a
grantee or any other person. To the extent that any grantee or other person
acquires a right to receive payments from the Company pursuant to an Award,
such
right shall be no greater than the right of any unsecured general creditor
of
the Company.
(k) Governing
Law.
The
validity, construction and effect of the Plan, of Grant Agreements entered
into
pursuant to the Plan, and of any rules, regulations, determinations or decisions
made by the Administrator relating to the Plan or such Grant Agreements, and
the
rights of any and all persons having or claiming to have any interest therein
or
thereunder, shall be determined exclusively in accordance with applicable
federal laws and the laws of the State of Maryland without regard to its
conflict of laws principles. Any suit with respect to the Plan shall be brought
in the federal or state courts in the districts which include the city and
state
in which the principal offices of the Company are located.
(l) Effective
Date; Termination Date.
The
Plan is effective as of the date approved by the Company’s stockholders and
shall continue in effect for a term of ten years, unless earlier terminated
pursuant to Section 7(g) hereof. No Award shall be granted under the Plan after
the close of business on the day immediately preceding the tenth anniversary
of
the effective date of the Plan, or if earlier, the tenth anniversary of the
date
the Plan is approved by the stockholders, and no Award under the Plan shall
have
a term of more than ten (10) years. Subject to other applicable provisions
of
the Plan, all Awards made under the Plan prior to such termination of the Plan
shall remain in effect until such Awards expire or have been satisfied or
terminated in accordance with the Plan and the terms of such Awards; provided,
however, that no Award that contemplates exercise or conversion may be exercised
or converted, and no Award that defers vesting, shall remain outstanding and
unexercised, unconverted or unvested, in each case, for more than ten years
after the date such Award was initially granted.
(m)
Regulatory
Restrictions.
The
Plan and the Company’s obligations under the Plan and any Grant Agreement shall
be subject to all applicable federal and state laws, rules and regulations,
and
to such approvals by any regulatory or governmental agency as may be required.
Without limiting the generality of the foregoing, (i) the Company shall not
be
required to sell or issue any shares of Common Stock pursuant to any Award
if
the sale or issuance of such shares would constitute a violation by the
individual exercising the Award or the Company of any provision of any law
or
regulation of any governmental authority, including without limitation any
federal or state securities laws or regulations, and (ii) the inability of
the
Company to obtain any necessary authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful exercise or payment of any Award hereunder, shall relieve the
Company of any liability in respect of the exercise or payment of such Award
to
the extent such requisite authority shall have been deemed necessary and shall
not have been obtained.
PLAN
APPROVAL:
|
Date
Approved by the Board:
|
April
5, 2007
|
Date
Approved by the Stockholders:
Bay
National Corporation
42
BAY
NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN
SAMPLE
RESTRICTED STOCK AGREEMENT
|
PARTICPANT:
|
[Insert
Name]
|
|
|
|
|
AWARD
NO.
|
[Insert
Award No.]
|
|
DATE
OF GRANT:
|
[Insert
Date]
|
|
NUMBER
OF SHARES:
|
[Insert
Number of Shares]
|
THIS
RESTRICTED STOCK AGREEMENT (this “Agreement”)
is
made effective as of [Insert Date] by and between Bay National Corporation,
a
Maryland corporation (the “Corporation”),
and
the above-listed participant (“Participant”).
1. Certain
Definitions.
In this
Agreement, terms with initial capitals shall have the meanings provided in
the
Plan, except as follows or as otherwise provided in this Agreement:
(a)
“Awarded
Shares”
means
the shares of Common Stock awarded to the Participant pursuant to Section 2
hereof.
(b)
“Date
of Grant”
means
the date set forth as the “Date of Grant” on page 1 of this
Agreement.
(c)
“Plan”
means
the Bay National Corporation 2007 Stock Incentive Plan.
(d)
“Restriction
Period”
shall
mean, with respect to any Awarded Share, the period commencing on the Date
of
Grant of such Awarded Share and ending on the date upon which such Awarded
Share
vests.
2. Grant
of Stock.
Participant shall be granted on the Date of Grant the Awarded Shares, which
shall (i) vest as provided below, (ii) be subject to the restrictions
provided below, and (iii) otherwise be subject to all the terms of this
Agreement and the Plan. The Awarded Shares shall be subject to dilution upon
future Share issuances or other dilutive events. Until such time, if any, as
the
Awarded Shares Revert (as defined in Section 5) or are transferred by
Participant as permitted under this Agreement, and except as otherwise provided
in the Plan or this Agreement, Participant shall have all the rights of a
stockholder of the Corporation (including the right to vote and to receive
dividends) with respect to the Awarded Shares, including the Awarded Shares
held
in escrow. All such rights and privileges shall cease in the event that the
Awarded Shares Revert.
3. Subject
to Plan.
The
Awarded Shares are in all instances subject to the terms and conditions of
the
Plan, the provisions of which are incorporated herein by this reference. In
the
event of any direct conflict between this Agreement and the Plan, the provisions
of the Plan shall control. Participant acknowledges receipt of a copy of the
Plan and hereby accepts the Awarded Shares subject to all of its terms and
conditions.
4. Vesting
Schedule With Respect to Awarded Shares.
Except
as otherwise provided in this Agreement, the Awarded Shares shall vest in
accordance with the schedule attached hereto as Exhibit A, based on
Participant’s continued service with the Corporation and/or any Affiliate
(“Continued Service”).
Bay
National Corporation
43
5.
Reversion
and Cancellation of Unvested Awarded Shares; Restrictions During Restriction
Period.
(a) In
the event of termination of Participant’s Continued Service, any portion of the
Awarded Shares that is not vested on the date Participant ceases to provide
Continued Service shall, automatically and without need of any further action
by
any person or entity, (i) cease to be owned by Participant,
(ii) revert to the Corporation, (iii) be cancelled, and
(iv) return to the status of authorized but unissued stock of Corporation
(collectively, “Revert”)
immediately upon such date. Neither Participant nor any successor, heir, assign,
or personal representative of Participant shall thereafter have any further
rights or interest in such Reverted Awarded Shares.
(b) During
the Restriction Period, the certificates representing the Awarded Shares shall
be held in escrow by the Secretary of the Corporation, and shall bear the
following legends (in addition to any other required legends):
THIS
CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
AND CONDITIONS (INCLUDING THE RISKS OF FORFEITURE AND RESTRICTIONS AGAINST
TRANSFER) CONTAINED IN THE BAY NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN,
AND AN AGREEMENT ENTERED INTO BETWEEN
THE REGISTERED OWNER AND BAY NATIONAL CORPORATION RELEASE FROM SUCH TERMS AND
CONDITIONS SHALL BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SUCH PLAN
AND
AGREEMENT, A COPY OF EACH OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY
OF
BAY NATIONAL CORPORATION
(c) In
the event the Restriction Period shall terminate with respect to particular
Awarded Shares and such Awarded Shares shall not theretofore have Reverted,
the
Corporation shall within 2 ½ months from the end of the calendar year in which
such Restriction Period terminates reissue the certificate representing such
Awarded Shares without the above legend and shall deliver such certificate
to
Participant or his legal representative. Upon any such termination of the
Restriction Period, Participant shall be required to provide the Corporation
with the means to satisfy any federal, state or local income tax withholding
and
payroll tax requirements with respect to such Awarded Shares (“Tax
Liabilities”).
(d) Awarded
Shares, the right to vote Awarded Shares and the right to receive dividends
thereon may not be sold, assigned, transferred, exchanged, pledged, hypothecated
or otherwise encumbered during the Restriction Period with respect to such
Awarded Shares.
6.
No
Restriction On Corporation.
This
Agreement shall not in any way affect the right of the Corporation to make
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or
assets.
7.
Stock
Distributions; Capital Adjustments.
(a) If
the Corporation makes any distribution of stock with respect to the Awarded
Shares by way of a stock dividend or stock split, or pursuant to any
recapitalization, reorganization, consolidation, merger or otherwise, and
Participant receives any additional shares of stock in the Corporation (or
other
shares of stock in another corporation) as a result thereof, such additional
(or
other) shares shall be deemed Awarded Shares hereunder and shall be subject
to
the same restrictions and obligations imposed by this Agreement.
(b) In
the event of any recapitalization, stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event that affects the Awarded Shares such
that
an adjustment is appropriate in order to prevent dilution or enlargement of
the
rights of Participant, then the Board shall make equitable changes or
adjustments as are necessary or appropriate to prevent the dilution or
enlargement of Participant’s rights relating to the number and kind of Awarded
Shares that may thereafter by issued in connection with the Awarded
Shares.
Bay
National Corporation
44
8. Liability
of Corporation.
(a) The
grant
of the Awarded Shares shall be subject to compliance by the Corporation and
Participant
with all applicable requirements of law relating thereto, including, without
limitation, state and federal securities laws. The Corporation shall not be
obligated to
register, qualify or make any exemption from registration qualification
available with respect to any Awarded Shares under any such
laws.
(b) The
Corporation makes no representation regarding the tax treatment of the Awarded
Shares,
and Participant should consult his or her tax advisor regarding the tax
consequences to Participant of any transaction involving the Awarded Shares.
Participant has been advised of the possibility of making an election under
Code
Section 83(b). If Participant makes an election under Code Section 83(b)
with respect to Awarded Shares, Participant shall provide notice to the
Corporation within 30 days thereof.
9. No
Employment Contract.
Neither
the grant or issuance of Awarded Shares pursuant to this Agreement nor any
term
or provision of this Agreement shall constitute or be evidence of any
understanding, express or implied, on the part of the Company or any Affiliate
to employ the Participant for any period.
10. Governing
Law.
This
Agreement and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Maryland
without giving effect to the principles of conflicts of laws. Any action or
proceeding brought by any party hereto shall be brought only in a state or
federal court of competent jurisdiction located in Maryland and all parties
hereto hereby submit to the in personam jurisdiction of such court for purposes
of any such action or proceeding and irrevocably agree that such court presents
a convenient forum for the resolution of such dispute.
11. Severability
of Provisions.
In the
event that any provision hereof is found invalid or unenforceable pursuant
to
judicial decree or decision, the remainder of this Agreement shall remain valid
and enforceable according to its terms.
12. Notices.
All
notices or other communications pursuant to this Agreement shall be in writing
and shall be deemed duly given if personally delivered or if mailed by certified
mail, return receipt requested, prepaid and addressed to the address of the
party as set forth in this Agreement or such other address as such party shall
have furnished to the other party in writing.
13. Entire
Agreement.
This
Agreement and the Plan embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein and supersede
all prior written or oral communications or agreements all of which are merged
herein. There are no restrictions, promises, warranties, covenants, or
undertakings, other than those expressly set forth or referred to
herein.
14. No
Waiver.
No
waiver of any provision of this Agreement or any rights or obligations of any
party hereunder shall be effective, except pursuant to a written instrument
signed by the party or parties waiving compliance, and any such waiver shall
be
effective only in the specific instance and for the specific purpose stated
in
such writing.
15. Survival.
All
warranties, covenants and agreements of the parties made in this Agreement
shall
survive the issuance and purchase of the Awarded Shares and the delivery to
Participant of the certificate or certificates evidencing the Awarded
Shares.
16. Amendment
and Modification.
This
Agreement may be amended, modified and supplemented only by written agreement
of
all of the parties hereto.
17. Assignment.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns, but except to the extent (if any) expressly provided in this Agreement
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by Participant without the prior written consent of the
Corporation. The Corporation shall assign this Agreement and all of its rights
hereunder in connection with any reorganization, merger, consolidation, sale
or
transfer of substantially all of the Corporation’s assets or sale or transfer of
a controlling interest in the Corporation’s outstanding equity
securities.
Bay
National Corporation
45
18. Withholding.
Participant shall provide the Corporation with the means to satisfy all Tax
Liabilities at the time such Tax Liabilities are imposed on the Corporation,
which may include the surrender of Awarded Shares to the Corporation.
[SIGNATURES
APPEAR ON THE FOLLOWING PAGE.]
Bay
National Corporation
46
IN
WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on
its
behalf by its duly authorized officer and Participant has also executed this
Agreement as of the day and year indicated above.
|
BAY
NATIONAL CORPORATION
|
|
|
By:
|
|
|
Print
Name:
|
|
|
Title:
|
|
|
PARTICIPANT
|
|
Bay
National Corporation
47
BAY
NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN
SAMPLE
NON-QUALIFIED STOCK OPTION GRANT AGREEMENT
This
Stock Option Grant Agreement (the “Agreement”) is entered into on [INSERT DATE],
by and between Bay National Corporation, a Maryland corporation (the
“Corporation”), and [INSERT OPTIONEE NAME] (the “Optionee”), effective as of
[INSERT GRANT DATE] (the “Grant Date”).
In
consideration of the premises, mutual covenants and agreements herein, the
Corporation and the Optionee agree as follows:
1. Grant
of Option.
The
Corporation hereby grants to the Optionee, pursuant to the Bay National
Corporation 2007 Stock Incentive Plan (the “Plan”), a stock option to purchase
from the Corporation, at a price of $[INSERT PRICE] per share (the “Exercise
Price”), up to [INSERT GRANT AMOUNT] shares of Common Stock of the Corporation,
$.01 par value, subject to the provisions of this Agreement and the Plan (the
“Option”). The Option shall expire at 5:00 p.m. Eastern Time on the last
business day preceding the tenth anniversary of the Grant Date (the “Expiration
Date”), unless fully exercised or terminated earlier.
2. Terminology.
Unless
stated otherwise in this Agreement, capitalized terms in this Agreement shall
have the meaning set forth in the Plan.
(a)
Vesting.
Subject
to the terms of the Plan with respect to vesting, the Options granted shall
vest
in whole or in part, in accordance with the schedule attached hereto as Exhibit
A; provided
that
the
Optionee is in the continuous employ of, or in a service relationship with,
the
Corporation from the Grant Date through the applicable date upon which such
Options become vested.
The
extent to which the Options are vested as of a particular vesting date shall
be
rounded down to the nearest whole share. However, vesting is rounded up to
the
nearest whole share on the last vesting date.
(b)
Right
to Exercise.
The
Optionee shall have the right to exercise the Options from and after the date
upon which they vest and on
or
before the Expiration Date or earlier termination of the Options. To
the
extent not exercised, the number of shares as to which the Option is exercisable
shall accumulate and remain exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the Expiration Date or other
termination of the Option. In the event of the Optionee’s termination of
employment, the exercisability is governed by Section 4.
(b) Exercise
Procedure.
Subject
to the conditions set forth in this Agreement, the Option shall be exercised
(to
the extent then exercisable) by delivery of written notice of exercise on any
business day to the Corporate Secretary of the Corporation in such form as
the
Administrator may require from time to time. Such notice shall specify the
number of shares in respect to which the Option is being exercised and shall
be
accompanied by full payment of the Exercise Price for such shares in accordance
with Section 3(d) of this Agreement. The exercise shall be effective upon
receipt by the Corporate Secretary of the Corporation of such written notice
accompanied by the required payment. The Option may be exercised only in
multiples of whole shares and may not be exercised at any one time as to fewer
than one hundred shares (or such lesser number of shares as to which the Option
is then exercisable). No fractional shares shall be issued pursuant to this
Option.
(c) Effect.
The
exercise, in whole or in part, of the Option shall cause a reduction in the
number of shares of Common Stock subject to the Option equal to the number
of
shares of Common Stock with respect to which the Option is
exercised.
(d) Method
of Payment.
In
addition to any other method approved by the Administrator, if any, payment
of
the Exercise Price shall be by any of the following, or a combination thereof,
as determined by the Administrator in its discretion at the time of
exercise:
(i) by
delivery of cash, certified or cashier’s check, or money order or other cash
equivalent acceptable to Administrator in its sole discretion; or
Bay
National Corporation
48
(ii) by
a broker-assisted cashless exercise in accordance with Regulation T of the
Board of Governors of the Federal Reserve System and the following provisions.
Subject to such limitations as the Administrator may determine, at any time
during which the Common Stock is publicly traded on a national securities
exchange or Nasdaq, the Exercise Price shall be deemed to be paid, in whole
or
in part, if the Optionee delivers a properly executed exercise notice, together
with irrevocable instructions: (i) to a brokerage firm approved by the
Corporation to deliver promptly to the Corporation the aggregate amount of
sale
or loan proceeds to pay the Exercise Price and any withholding tax obligations
that may arise in connection with the exercise; and (ii) to the Corporation
to deliver the certificates for such purchased shares directly to such brokerage
firm.
(e) Issuance
of Shares Upon Exercise.
Upon
due exercise of the Option, in whole or in part, in accordance with the terms
of
this Agreement, the Corporation shall issue to the Optionee, the brokerage
firm
specified in the Optionee’s delivery instructions pursuant to a broker-assisted
cashless exercise, or such other person exercising the Option, as the case
may
be, the number of shares of Common Stock so paid for, in the form of fully
paid
and non-assessable stock and shall deliver certificates therefor as soon as
practicable thereafter.
(f) Restrictions
on Exercise and upon Shares Issued upon Exercise.
Notwithstanding any other provision of the Agreement, the Option may not be
exercised at any time that the Corporation does not have in effect a
registration statement under the Securities Act of 1933, as amended, relating
to
the offer of Common Stock to the Optionee under the Plan, unless the Corporation
agrees to permit such exercise. Upon the issuance of any shares of Common Stock
pursuant to the exercise of the Option, the Optionee will, upon the request
of
the Corporation, agree in writing that the Optionee is acquiring such shares
for
investment only and not with a view to resale, and that the Optionee will not
sell, pledge or otherwise dispose of such shares so issued unless (i) the
Corporation is furnished with an opinion of counsel to the effect that
registration of such shares pursuant to the Securities Act of 1933, as amended,
is not required by that Act or by the rules and regulations thereunder;
(ii) the staff of the Securities and Exchange Commission has issued a
“no-action” letter with respect to such disposition; or (iii) such
registration or notification as is, in the opinion of counsel for the
Corporation, required for the lawful disposition of such shares has been filed
by the Corporation and has become effective; provided, however, that the
Corporation is not obligated hereby to file any such registration or
notification. In addition, the Common Stock issued upon the exercise of any
Options shall be subject to repurchase by the Corporation for an amount equal
to
the Exercise Price of such Options upon the occurrence of an event described
in
Section 4(d) of this Agreement. The Corporation may place a legend embodying
such restrictions on the certificates evidencing such shares.
4.
Termination
of Employment or Service.
(a)
Exercise
Period Following Cessation of Employment or Other Service Relationship, In
General.
If
Optionee ceases to be employed by, or in a service relationship with, Bank
for
any reason other than death, Disability, or discharge for Cause, (i) the
unvested Options shall terminate immediately upon such cessation, and
(ii) the vested Options shall remain exercisable during the 30-day period
following such cessation, but in no event after the Expiration Date. Unless
sooner terminated, any unexercised vested Options shall terminate upon the
expiration of such 30-day period.
(b)
Death
of Optionee.
If
Optionee dies prior to the expiration or other termination of the Options,
(i) the unvested Options shall terminate immediately upon Optionee’s death,
and (ii) the vested Options shall remain exercisable during the one-year
period following Optionee’s death, but in no event after the Expiration Date, by
Optionee’s executor, personal representative, or the person(s) to whom the
Options are transferred by will or the laws of descent and distribution. Unless
sooner terminated, any unexercised vested Options shall terminate upon the
expiration of such one-year period.
(c)
Disability
of Optionee.
If
Optionee ceases to be employed by, or in a service relationship with, Bank
as a
result of Optionee’s Disability, (i) the unvested Options shall terminate
immediately upon such cessation, and (ii) the vested Options shall remain
exercisable during the one-year period following such cessation, but in no
event
after the Expiration Date. Unless sooner terminated, any unexercised vested
Options shall terminate upon the expiration of such one-year
period.
Bay
National Corporation
49
(d)
Misconduct.
Notwithstanding anything to the contrary in this Agreement, the Options shall
terminate in their entirety, regardless of whether the Options are vested,
immediately upon Optionee’s discharge of employment or other service
relationship for Cause or upon Optionee’s commission of any of the following
acts during any period following the cessation of Optionee’s employment or other
service relationship during which the Options otherwise would be exercisable:
(i) fraud on or misappropriation of any funds or property of Bank, or
(ii) breach by Optionee of any provision of any employment, non-disclosure,
non-competition, non-solicitation, assignment of inventions, or other similar
agreement executed by Optionee for the benefit of Bank, as determined by the
Administrator, which determination will be conclusive.
5.
Adjustments
and Business Combinations.
(a) Adjustments
for Events Affecting Common Stock.
In the
event of changes in the Common Stock of the Corporation by reason of any stock
dividend, spin-off, split-up, reverse stock split, recapitalization,
reclassification, merger, consolidation, liquidation, business combination
or
exchange of shares and the like, the Administrator shall, in its discretion,
make appropriate substitutions for or adjustments in the number, kind and price
of shares covered by this Option, and shall, in its discretion and without
the
consent of the Optionee, make any other substitutions for or adjustments in
this
Option, including but not limited to reducing the number of shares subject
to
the Option or providing or mandating alternative settlement methods such as
settlement of the Option in cash or in shares of Common Stock or other
securities of the Corporation or of any other entity, or in any other matters
which relate to the Option as the Administrator shall, in its sole discretion,
determine to be necessary or appropriate.
(b) Pooling
of Interests Transaction.
Notwithstanding anything in the Plan or this Agreement to the contrary and
without the consent of the Optionee, the Administrator, in its sole discretion,
may make any modifications to the Option, including but not limited to
cancellation, forfeiture, surrender or other termination of the Option in whole
or in part regardless of the vested status of the Option, in order to facilitate
any business combination that is authorized by the Board to comply with
requirements for treatment as a pooling of interests transaction for accounting
purposes under generally accepted accounting principles.
(c) Adjustments
for Other Events.
The
Administrator is authorized to make, in its discretion and without the consent
of the Optionee, adjustments in the terms and conditions of, and the criteria
included in, the Option in recognition of unusual or nonrecurring events
affecting the Corporation, or the financial statements of the Corporation,
or of
changes in applicable laws, regulations, or accounting principles, whenever
the
Administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Option or the Plan.
(d) Binding
Nature of Adjustments.
Adjustments under this Section 5 will be made by the Administrator, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. No fractional shares will be
issued pursuant to this Option on account of any such adjustments.
(e) Effect
of Change of Control Event.
All
outstanding portions of the Option, if any, shall become fully vested upon
the
occurrence of any Change of Control Event, except to the extent that
provision
is made in connection with the Change
of
Control Event
for the
continuation or assumption of the Option by, or for the substitution of
equivalent options with respect to, the surviving or successor entity or a
parent thereof, and shall be exercisable in accordance with the Plan;
provided, that unless otherwise decided in the sole discretion of the
Administrator, the acceleration of vesting in connection with a Change of
Control Event shall be limited as provided in the Plan.
6.
Non-Guarantee
of Employment.
Nothing
in the Plan or in this Agreement shall confer on an individual any legal or
equitable right against the Corporation or the Administrator, except as
expressly provided in the Plan or this Agreement. Nothing in the Plan or in
this
Agreement shall (a) constitute inducement, consideration, or contract for
employment or service between an individual and the Corporation; (b) confer
any right on an individual to continue in the service of the Corporation; or
(c) shall interfere in any way with the right of the Corporation to
terminate such service at any time with or without cause or notice, or to
increase or decrease compensation for such service.
Bay
National Corporation
50
7. No
Rights as Stockholder.
The
Optionee shall not have any of the rights of a stockholder with respect to
the
shares of Common Stock that may be issued upon the exercise of the Option
(including, without limitation, any rights to receive dividends or noncash
distributions with respect to such shares) until such shares of Common Stock
have been issued to him or her upon the due exercise of the Option. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date such certificate or certificates
are
issued.
8. Nonqualified
Nature of the Option.
The
Options are not
intended
to qualify as incentive stock options within the meaning of Code
section 422, and this Agreement shall be so construed. Optionee
acknowledges that, upon exercise of the Options, Optionee will recognize taxable
income in an amount equal to the excess of the then Fair Market Value of the
Option Shares over the Exercise Price and must comply with the provisions of
Section 9 of this Agreement with respect to any tax withholding obligations
that arise as a result of such exercise.
9. Withholding
of Taxes.
(a) In
General.
At the
time the Option is exercised in whole or in part, or at any time thereafter
as
requested by the Corporation, the Optionee hereby authorizes withholding from
payroll or any other payment of any kind due the Optionee and otherwise agrees
to make adequate provision for foreign, federal, state and local taxes required
by law to be withheld, if any, which arise in connection with the Option. The
Corporation may require the Optionee to make a cash payment to cover any
withholding tax obligation as a condition of exercise of the Option. If the
Optionee does not make such payment when requested, the Corporation may refuse
to issue any stock certificate under the Plan until arrangements satisfactory
to
the Administrator for such payment have been made.
(b) Means
of Payment.
The
Administrator may, in its sole discretion, permit the Optionee to satisfy,
in
whole or in part, any withholding tax obligation which may arise in connection
with the Option by any of the following means or by a combination of such means:
(i) tendering a cash payment, (ii) authorizing the Corporation to deduct
any such tax obligations from any payment of any kind otherwise due to the
Optionee, (iii) authorizing the Corporation to withhold shares of Common
Stock otherwise issuable to the Optionee pursuant to the exercise of this
Option, or (iv) delivering to the Corporation unencumbered shares of Common
Stock already owned by the Optionee.
10. Compliance
with Regulations of the FRB and OCC; Forfeiture.
Subject
to the terms of the Plan, the grant of Options made hereby are subject to the
rules and regulations promulgated by the Federal Reserve Board (“FRB”) and the
Office of the Comptroller of Currency (“OCC”). In accordance with certain
provisions of such regulations, the Options granted hereby must be exercised
or
forfeited in the event the Company or its affiliates, including Bay National
Bank, becomes critically undercapitalized (as defined in 12 C.F.R. § 6.4, or any
successor law or regulation), is subject to FRB or OCC enforcement action,
or
receives a capital directive under 12 C.F.R § 6.21 or any successor law or
regulation.
11. The
Corporation’s Rights.
The
existence of this Option shall not affect in any way the right or power of
the
Corporation or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation’s capital
structure or its business, or any merger or consolidation of the Corporation,
or
any issue of bonds, debentures, preferred or other stocks with preference ahead
of or convertible into, or otherwise affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Corporation, or any sale
or
transfer of all or any part of the Corporation’s assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
12. Optionee.
Whenever the word “Optionee” is used in any provision of this Agreement under
circumstances where the provision should logically be construed, as determined
by the Administrator, to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will, by the laws of
descent and distribution, or pursuant to a qualified domestic relations order
as
defined in Code section 414(p), the word “Optionee” shall be deemed to include
such person.
Bay
National Corporation
51
13. Transferability
of Option.
This
Option is not transferable other than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order as defined in
Code section 414(p), or as otherwise permitted by the Administrator, in its
sole
discretion. During the lifetime of the Optionee, the Option may be exercised
only by the Optionee, by such permitted transferees or, during the period the
Optionee is under a legal disability, by the Optionee’s guardian or legal
representative. Except as provided above, the Option may not be assigned,
transferred, pledged, hypothecated or disposed of in any way (whether by
operation of law or otherwise) and shall not be subject to execution, attachment
or similar process.
14. Notices.
All
notices and other communications made or given pursuant to this Agreement shall
be in writing and shall be sufficiently made or given if hand delivered or
mailed by certified mail, addressed to the Optionee at the address contained
in
the records of the Corporation, or addressed to the Administrator, care of
the
Corporation for the attention of its Corporate Secretary at its principal office
or, if the receiving party consents in advance, transmitted and received via
telecopy or via such other electronic transmission mechanism as may be available
to the parties.
15. Entire
Agreement.
This
Agreement and the Plan contain the entire agreement between the parties with
respect to the Option granted hereunder. Any oral or written agreements,
representations, warranties, written inducements, or other communications made
prior to the execution of this Agreement with respect to the Option granted
hereunder shall be void and ineffective for all purposes.
16. Amendment.
This
Agreement may not be modified, except as provided in the Plan or in a written
document signed by each of the parties hereto.
17. Conformity
with Plan.
This
Agreement is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan, which is incorporated herein by reference.
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the terms of the Plan. In the event of any ambiguity in this
Agreement or any matters as to which this Agreement is silent, the Plan shall
govern. A copy of the Plan is available upon request to the
Administrator.
18. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Maryland, other than the conflict of laws principles
thereof.
19. Headings.
The
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
[Signatures
appear on the following page.]
Bay
National Corporation
52
IN
WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
its
duly authorized officer as of the date first above written.
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BAY
NATIONAL CORPORATION
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By:
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Print
Name:
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Title:
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The
undersigned hereby acknowledges that he/she has carefully read this Agreement
and the prospectus of the Plan and agrees to be bound by all of the provisions
set forth in such documents.
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OPTIONEE:
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DATE:
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Print
Name:
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Bay
National Corporation
53
EXERCISE
FORM
Bay
National Corporation
2328
West
Joppa Road
Lutherville,
Maryland 21093
Gentlemen:
I
hereby exercise the Option granted to me on __________, by Bay National
Corporation (the “Corporation”), subject to all the terms and provisions thereof
and of the Bay National Corporation 2007 Stock Incentive Plan (the “Plan”), and
notify you of my desire to purchase ___ incentive shares and ___ non-qualified
shares of Common Stock of the Corporation at a price of $_______ per
share pursuant to the exercise of said Option.
Payment
Amount: $___________________
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Date:
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Optionee
Signature
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Received
by Bay National Corporation on
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Bay
National Corporation
54
Broker
Information:
Firm
Name
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Contact
Person
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Broker
Address
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City,
State, Zip Code
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Phone
Number
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Broker
Account Number
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Electronic
Transfer Number:
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Bay
National Corporation
55
BAY
NATIONAL CORPORATION 2007 STOCK INCENTIVE PLAN
SAMPLE
QUALIFIED STOCK OPTION GRANT AGREEMENT
This
Stock Option Grant Agreement (the “Agreement”) is entered into on [INSERT DATE],
by and between Bay National Corporation, a Maryland corporation (the
“Corporation”), and [INSERT OPTIONEE NAME] (the “Optionee”), effective as of
[INSERT GRANT DATE] (the “Grant Date”).
In
consideration of the premises, mutual covenants and agreements herein, the
Corporation and the Optionee agree as follows:
1. Grant
of Option.
The
Corporation hereby grants to the Optionee, pursuant to the Bay National
Corporation 2007 Stock Incentive Plan (the “Plan”), a stock option to purchase
from the Corporation, at a price of $[INSERT PRICE] per share (the “Exercise
Price”), up to [INSERT GRANT AMOUNT] shares of Common Stock of the Corporation,
$.01 par value, subject to the provisions of this Agreement and the Plan (the
“Options”). The Options shall expire at 5:00 p.m. Eastern Time on the last
business day preceding the tenth anniversary of the Grant Date (the “Expiration
Date”), unless fully exercised or terminated earlier.
2. Terminology.
Unless
stated otherwise in this Agreement, capitalized terms in this Agreement shall
have the meaning set forth in the Plan.
3. Exercise
of Option.
(a)
Vesting.
Subject
to the terms of the Plan with respect to vesting, the Options granted shall
vest
in accordance with the schedule attached as Exhibit A to this Agreement,
provided
that
the
Optionee is in the continuous employ of, or in a service relationship with,
the
Corporation from the Grant Date through the applicable date upon which such
Options become vested.
The
extent to which the Options are vested as of a particular vesting date shall
be
rounded down to the nearest whole share. However, vesting is rounded up to
the
nearest whole share on the last vesting date.
(b)
Right
to Exercise.
The
Optionee shall have the right to exercise the Options, whether or not vested,
in
whole or in part at any time prior to the Expiration Dare or earlier termination
of the Options in accordance with the Plan and this Agreement; provided, that
to
the extent, if any, that the aggregate Fair Market Value of the Common Stock
subject to the Options as of the Grant Date, plus the aggregate fair market
value (determined as of the date of grant) of all other stock with respect
to
which incentive stock options granted to the Optionee prior to the Grant Date
under all plans of the Corporation and its parent and subsidiary corporations
first become exercisable during any calendar year exceeds $100,000 (the “Annual
Limitation”), then except as otherwise provided in this Agreement the Options
shall be exercisable during that year only to the extent, if any, that their
exercisability does not cause the Annual Limitation to be exceeded. Any Options
that are not exercisable due to the proviso in the preceding sentence shall
be
exercisable during the next calendar year, subject again to the application
of
that proviso. To the extent not exercised, the number of shares as to which
the
Option is exercisable shall accumulate and remain exercisable, in whole or
in
part, at any time after becoming exercisable, but not later than the Expiration
Date or other termination of the Option. In the event of the Optionee’s
termination of employment, the exercisability is governed by
Section 4.
(c) Exercise
Procedure.
Subject
to the conditions set forth in this Agreement, the Option shall be exercised
(to
the extent then exercisable) by delivery of written notice of exercise on any
business day to the Corporate Secretary of the Corporation in such form as
the
Administrator may require from time to time. Such notice shall specify the
number of shares in respect to which the Option is being exercised and shall
be
accompanied by full payment of the Exercise Price for such shares in accordance
with Section 3(e) of this Agreement. The exercise shall be effective upon
receipt by the Corporate Secretary of the Corporation of such written notice
accompanied by the required payment. The Option may be exercised only in
multiples of whole shares and may not be exercised at any one time as to fewer
than one hundred shares (or such lesser number of shares as to which the Option
is then exercisable). No fractional shares shall be issued pursuant to this
Option.
(d) Effect.
The
exercise, in whole or in part, of the Option shall cause a reduction in the
number of shares of Common Stock subject to the Option equal to the number
of
shares of Common Stock with respect to which the Option is
exercised.
Bay
National Corporation
56
(e) Method
of Payment.
In
addition to any other method approved by the Administrator, if any, payment
of
the Exercise Price shall be by any of the following, or a combination thereof,
as determined by the Administrator in its discretion at the time of
exercise:
(i)
by
delivery of cash, certified or cashier’s check, or money order or other cash
equivalent acceptable to Administrator in its sole discretion; or
(ii)
by a
broker-assisted cashless exercise in accordance with Regulation T of the
Board of Governors of the Federal Reserve System and the following provisions.
Subject to such limitations as the Administrator may determine, at any time
during which the Common Stock is publicly traded on a national securities
exchange or Nasdaq, the Exercise Price shall be deemed to be paid, in whole
or
in part, if the Optionee delivers a properly executed exercise notice, together
with irrevocable instructions: (i) to a brokerage firm approved by the
Corporation to deliver promptly to the Corporation the aggregate amount of
sale
or loan proceeds to pay the Exercise Price and any withholding tax obligations
that may arise in connection with the exercise; and (ii) to the Corporation
to deliver the certificates for such purchased shares directly to such brokerage
firm.
(f) Issuance
of Shares Upon Exercise.
Upon
due exercise of the Option, in whole or in part, in accordance with the terms
of
this Agreement, the Corporation shall issue to the Optionee, the brokerage
firm
specified in the Optionee’s delivery instructions pursuant to a broker-assisted
cashless exercise, or such other person exercising the Option, as the case
may
be, the number of shares of Common Stock so paid for, in the form of fully
paid
and non-assessable stock and shall deliver certificates therefor as soon as
practicable thereafter.
(g) Restrictions
on Exercise and upon Shares Issued upon Exercise.
Notwithstanding any other provision of the Agreement, the Option may not be
exercised at any time that the Corporation does not have in effect a
registration statement under the Securities Act of 1933, as amended, relating
to
the offer of Common Stock to the Optionee under the Plan, unless the Corporation
agrees to permit such exercise. Upon the issuance of any shares of Common Stock
pursuant to the exercise of the Option, the Optionee will, upon the request
of
the Corporation, agree in writing that the Optionee is acquiring such shares
for
investment only and not with a view to resale, and that the Optionee will not
sell, pledge or otherwise dispose of such shares so issued unless (i) the
Corporation is furnished with an opinion of counsel to the effect that
registration of such shares pursuant to the Securities Act of 1933, as amended,
is not required by that Act or by the rules and regulations thereunder;
(ii) the staff of the Securities and Exchange Commission has issued a
“no-action” letter with respect to such disposition; or (iii) such
registration or notification as is, in the opinion of counsel for the
Corporation, required for the lawful disposition of such shares has been filed
by the Corporation and has become effective; provided, however, that the
Corporation is not obligated hereby to file any such registration or
notification. In addition, the Common Stock issued upon the exercise of any
Options shall be subject to repurchase by the Corporation for an amount equal
to
the Exercise Price of such Options (i) upon the occurrence of an event described
in Section 4(d) of this Agreement, or (ii) if the Options were not vested when
they were exercised, upon the occurrence of any event that would have resulted
in the termination of those Options under the Plan and this Agreement if those
Options had not been exercised. The Corporation may place a legend embodying
such restrictions on the certificates evidencing such shares.
| 4. |
Termination
of Employment or Service.
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(a)
Exercise
Period Following Cessation of Employment or Other Service Relationship, In
General.
If
Optionee ceases to be employed by, or in a service relationship with, Bank
for
any reason other than death, Disability, or discharge for Cause, (i) the
unvested Options shall terminate immediately upon such cessation, and
(ii) the vested Options shall remain exercisable during the 30-day period
following such cessation, but in no event after the Expiration Date. Unless
sooner terminated, any unexercised vested Options shall terminate upon the
expiration of such 30-day period.
Bay
National Corporation
57
(b)
Death
of Optionee.
If
Optionee dies prior to the expiration or other termination of the Options,
(i) the unvested Options shall terminate immediately upon Optionee’s death,
and (ii) the vested Options shall remain exercisable during the one-year
period following Optionee’s death, but in no event after the Expiration Date, by
Optionee’s executor, personal representative, or the person(s) to whom the
Options are transferred by will or the laws of descent and distribution. Unless
sooner terminated, any unexercised vested Options shall terminate upon the
expiration of such one-year period.
(c)
Disability
of Optionee.
If
Optionee ceases to be employed by, or in a service relationship with, Bank
as a
result of Optionee’s Disability, (i) the unvested Options shall terminate
immediately upon such cessation, and (ii) the vested Options shall remain
exercisable during the one-year period following such cessation, but in no
event
after the Expiration Date. Unless sooner terminated, any unexercised vested
Options shall terminate upon the expiration of such one-year
period.
(d)
Misconduct.
Notwithstanding anything to the contrary in this Agreement, the Options shall
terminate in their entirety, regardless of whether the Options are vested,
immediately upon Optionee’s discharge of employment or other service
relationship for Cause or upon Optionee’s commission of any of the following
acts during any period following the cessation of Optionee’s employment or other
service relationship during which the Options otherwise would be exercisable:
(i) fraud on or misappropriation of any funds or property of Bank, or
(ii) breach by Optionee of any provision of any employment, non-disclosure,
non-competition, non-solicitation, assignment of inventions, or other similar
agreement executed by Optionee for the benefit of Bank, as determined by the
Administrator, which determination will be conclusive.
5.
Adjustments
and Business Combinations.
(a) Adjustments
for Events Affecting Common Stock.
In the
event of changes in the Common Stock of the Corporation by reason of any stock
dividend, spin-off, split-up, reverse stock split, recapitalization,
reclassification, merger, consolidation, liquidation, business combination
or
exchange of shares and the like, the Administrator shall, in its discretion,
make appropriate substitutions for or adjustments in the number, kind and price
of shares covered by this Option, and shall, in its discretion and without
the
consent of the Optionee, make any other substitutions for or adjustments in
this
Option, including but not limited to reducing the number of shares subject
to
the Option or providing or mandating alternative settlement methods such as
settlement of the Option in cash or in shares of Common Stock or other
securities of the Corporation or of any other entity, or in any other matters
which relate to the Option as the Administrator shall, in its sole discretion,
determine to be necessary or appropriate.
(b) Pooling
of Interests Transaction.
Notwithstanding anything in the Plan or this Agreement to the contrary and
without the consent of the Optionee, the Administrator, in its sole discretion,
may make any modifications to the Option, including but not limited to
cancellation, forfeiture, surrender or other termination of the Option in whole
or in part regardless of the vested status of the Option, in order to facilitate
any business combination that is authorized by the Board to comply with
requirements for treatment as a pooling of interests transaction for accounting
purposes under generally accepted accounting principles.
(c) Adjustments
for Other Events.
The
Administrator is authorized to make, in its discretion and without the consent
of the Optionee, adjustments in the terms and conditions of, and the criteria
included in, the Option in recognition of unusual or nonrecurring events
affecting the Corporation, or the financial statements of the Corporation,
or of
changes in applicable laws, regulations, or accounting principles, whenever
the
Administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Option or the Plan.
(d) Binding
Nature of Adjustments.
Adjustments under this Section 5 will be made by the Administrator, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive. No fractional shares will be
issued pursuant to this Option on account of any such adjustments.
Bay
National Corporation
58
(e) Effect
of Change of Control Event.
All
outstanding portions of the Option, if any, shall become fully vested upon
the
occurrence of any Change of Control Event, except to the extent that
provision
is made in connection with the Change
of
Control Event
for the
continuation or assumption of the Option by, or for the substitution of
equivalent options with respect to, the surviving or successor entity or a
parent thereof, and shall be exercisable in accordance with the Plan;
provided, that unless otherwise decided in the sole discretion of the
Administrator, the acceleration of vesting in connection with a Change of
Control Event shall be limited as provided in the Plan.
6. Non-Guarantee
of Employment.
Nothing
in the Plan or in this Agreement shall confer on an individual any legal or
equitable right against the Corporation or the Administrator, except as
expressly provided in the Plan or this Agreement. Nothing in the Plan or in
this
Agreement shall (a) constitute inducement, consideration, or contract for
employment or service between an individual and the Corporation; (b) confer
any right on an individual to continue in the service of the Corporation; or
(c) shall interfere in any way with the right of the Corporation to
terminate such service at any time with or without cause or notice, or to
increase or decrease compensation for such service.
7. No
Rights as Stockholder.
The
Optionee shall not have any of the rights of a stockholder with respect to
the
shares of Common Stock that may be issued upon the exercise of the Option
(including, without limitation, any rights to receive dividends or noncash
distributions with respect to such shares) until such shares of Common Stock
have been issued to him or her upon the due exercise of the Option. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date such certificate or certificates
are
issued.
8. Incentive/Nonqualified
Nature of the Option.
The
Options are intended to qualify as an incentive stock option within the meaning
of Section 422A of the Code to the extent set forth herein, and this
Agreement shall be so construed; provided,
however,
to the
extent that the aggregate Fair Market Value as of the date of this grant, of
the
shares into which the Option becomes exercisable for the first time by the
Optionee during any calendar year exceeds $100,000, the portion of the Option
which is in excess of the $100,000 limitation will be treated as a nonqualified
stock option.
9. Withholding
of Taxes.
(a) In
General.
At the
time the Option is exercised in whole or in part, or at any time thereafter
as
requested by the Corporation, the Optionee hereby authorizes withholding from
payroll or any other payment of any kind due the Optionee and otherwise agrees
to make adequate provision for foreign, federal, state and local taxes required
by law to be withheld, if any, which arise in connection with the Option
(including, without limitation, upon a disqualifying disposition with the
meaning of Code section 421(b)). The Corporation may require the Optionee to
make a cash payment to cover any withholding tax obligation as a condition
of
exercise of the Option. If the Optionee does not make such payment when
requested, the Corporation may refuse to issue any stock certificate under
the
Plan until arrangements satisfactory to the Administrator for such payment
have
been made.
(b) Means
of Payment.
The
Administrator may, in its sole discretion, permit the Optionee to satisfy,
in
whole or in part, any withholding tax obligation which may arise in connection
with the Option by any of the following means or by a combination of such means:
(i) tendering a cash payment, (ii) authorizing the Corporation to deduct
any such tax obligations from any payment of any kind otherwise due to the
Optionee, (iii) authorizing the Corporation to withhold shares of Common
Stock otherwise issuable to the Optionee pursuant to the exercise of this
Option, or (iv) delivering to the Corporation unencumbered shares of Common
Stock already owned by the Optionee.
(c) Disposition
of Shares.
The
acceptance of shares of Common Stock upon exercise of this Option shall
constitute an agreement by the Optionee (i) to notify the Corporation if
any of such shares are disposed of by the Optionee within two years from the
Grant Date or within one year from the date the shares were issued to the
Optionee pursuant to the exercise of the Option, and (ii) if required by
law, to remit to the Corporation, at the time of any such disposition, an amount
sufficient to satisfy the Corporation’s withholding tax obligations with respect
to such disposition, whether or not, as to both (i) and (ii), the Optionee
is employed by or has any other relationship with the Corporation at the time
of
such disposition.
Bay
National Corporation
59
10. Compliance
with Regulations of the FRB and OCC; Forfeiture.
Subject
to the terms of the Plan, the grant of Options made hereby are subject to the
rules and regulations promulgated by the Federal Reserve Board (“FRB”) and the
Office of the Comptroller of Currency (“OCC”). In accordance with certain
provisions of such regulations, the Options granted hereby must be exercised
or
forfeited in the event the Company or its affiliates, including Bay National
Bank, becomes critically undercapitalized (as defined in 12 C.F.R. § 6.4, or any
successor law or regulation), is subject to FRB or OCC enforcement action,
or
receives a capital directive under 12 C.F.R § 6.21 or any successor law or
regulation.
11. The
Corporation’s Rights.
The
existence of this Option shall not affect in any way the right or power of
the
Corporation or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation’s capital
structure or its business, or any merger or consolidation of the Corporation,
or
any issue of bonds, debentures, preferred or other stocks with preference ahead
of or convertible into, or otherwise affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Corporation, or any sale
or
transfer of all or any part of the Corporation’s assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
12. Optionee.
Whenever the word “Optionee” is used in any provision of this Agreement under
circumstances where the provision should logically be construed, as determined
by the Administrator, to apply to the estate, personal representative or
beneficiary to whom this Option may be transferred by will, by the laws of
descent and distribution, or pursuant to a qualified domestic relations order
as
defined in Code section 414(p), the word “Optionee” shall be deemed to include
such person.
13. Transferability
of Option.
This
Option is not transferable other than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order as defined in
Code section 414(p), or as otherwise permitted by the Administrator, in its
sole
discretion. During the lifetime of the Optionee, the Option may be exercised
only by the Optionee, by such permitted transferees or, during the period the
Optionee is under a legal disability, by the Optionee’s guardian or legal
representative. Except as provided above, the Option may not be assigned,
transferred, pledged, hypothecated or disposed of in any way (whether by
operation of law or otherwise) and shall not be subject to execution, attachment
or similar process.
14. Notices.
All
notices and other communications made or given pursuant to this Agreement shall
be in writing and shall be sufficiently made or given if hand delivered or
mailed by certified mail, addressed to the Optionee at the address contained
in
the records of the Corporation, or addressed to the Administrator, care of
the
Corporation for the attention of its Corporate Secretary at its principal office
or, if the receiving party consents in advance, transmitted and received via
telecopy or via such other electronic transmission mechanism as may be available
to the parties.
15. Entire
Agreement.
This
Agreement and the Plan contain the entire agreement between the parties with
respect to the Option granted hereunder. Any oral or written agreements,
representations, warranties, written inducements, or other communications made
prior to the execution of this Agreement with respect to the Option granted
hereunder shall be void and ineffective for all purposes.
16. Amendment.
This
Agreement may not be modified, except as provided in the Plan or in a written
document signed by each of the parties hereto.
17. Conformity
with Plan.
This
Agreement is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan, which is incorporated herein by reference.
Inconsistencies between this Agreement and the Plan shall be resolved in
accordance with the terms of the Plan. In the event of any ambiguity in this
Agreement or any matters as to which this Agreement is silent, the Plan shall
govern. A copy of the Plan is available upon request to the
Administrator.
18. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Maryland, other than the conflict of laws principles
thereof.
19. Headings.
The
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
[Signatures
appear on the following page.]
Bay
National Corporation
60
IN
WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
its
duly authorized officer as of the date first above written.
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BAY
NATIONAL CORPORATION
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By:
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Print
Name:
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Title:
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The
undersigned hereby acknowledges that he/she has carefully read this Agreement
and the Plan and agrees to be bound by all of the provisions set forth in such
documents.
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OPTIONEE:
|
||||
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DATE:
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||||
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Print
Name:
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Bay
National Corporation
61
EXERCISE
FORM
Bay
National Corporation
2328
West
Joppa Road
Lutherville,
Maryland 21093
Gentlemen:
I
hereby exercise, to the extent indicated below, the Option granted to me on
__________, by Bay National Corporation (the “Corporation”), subject to all the
terms and provisions thereof and of the Bay National Corporation 2007 Stock
Incentive Plan (the “Plan”), and notify you of my desire to purchase ___
incentive shares and ___ non-qualified shares of Common Stock of the Corporation
at a price of $__________ per share pursuant to the exercise of said
Option.
Payment
Amount: $____________________
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Date:
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Optionee
Signature
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Received
by Bay National Corporation on
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Bay
National Corporation
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Broker
Information:
Firm
Name
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Contact
Person
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Broker
Address
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City,
State, Zip Code
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Phone
Number
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Broker
Account Number
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Electronic
Transfer Number:
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Bay
National Corporation
63
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REVOCABLE
PROXY
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X
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PLEASE
MARK VOTES
AS
IN THIS EXAMPLE
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BAY
NATIONAL CORPORATION
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With-
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For
All
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For
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hold
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Except
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REVOCABLE
PROXY FOR
ANNUAL
MEETING OF SHAREHOLDERS
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1.
Elect five Directors:
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TUESDAY,
MAY 22, 2007
SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
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William
B. Rinnier; Edwin A. Rommel; Henry H. Stansbury;
Kenneth
H. Trout; and Eugene M. Waldron, Jr.
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The
undersigned hereby appoints Warren F. Boutilier and Hugh L. Robinson
II,
and each of them, to vote all of the shares of Bay National Corporation
standing in the undersigned's name at the Annual Meeting of Shareholders,
to be held at 2328 West Joppa Road, Lutherville, Maryland, 21093,
on
Tuesday, May 22, 2007 at 2:30 p.m., local time. The undersigned hereby
revokes any and all proxies heretofore given with respect to such
meeting.
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TO
WITHHOLD AUTHORITY FOR ANY OF THE ABOVE NAMED NOMINEES, PRINT THE
NOMINEE'S NAME ON THE LINE BELOW:
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For
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Against
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Abstain
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2.
Ratify the appointment of Stegman & Company as independent registered
public
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accountants
to audit the financial statements of Bay National Corporation for
2006.
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For
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Against
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Abstain
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3.
Approve the 2007 Stock Incentive Plan
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THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
EACH
OF THE LISTED PROPOSALS.
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This
proxy will be voted as specified above. If no choice is specified,
the
proxy will be voted “FOR” Management's nominees to the Board of Directors
and “FOR” the other proposals. If any other business is presented at the
Annual Meeting, this revocable proxy will be voted in the discretion
of
the proxies.
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Please
be sure to sign and date this Proxy in the box below.
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Date
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Shareholder
sign above
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Co-holder
(if any) sign above
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Bay
National Corporation
64
Detach
above card, sign, date and mail in postage paid envelope
provided.
BAY
NATIONAL CORPORATION
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(Please
sign exactly as your name appears. When signing as an executor,
administrator, guardian, trustee or attorney, please give your title
as
such.
If
signer is a corporation, please sign the full corporate name and
then an
authorized officer should sign his name and print his name and title
below
his signature. If the shares are held in joint name, all joint owners
should sign.)
PLEASE
DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE.
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IF
YOUR
ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW
AND
RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
Bay
National Corporation
65