As filed with the Securities and Exchange Commission on August 4, 2005
Registration Statement No. 333-______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
HORIZON FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Washington 91-1695422
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Cornwall Avenue, Bellingham, Washington 98225
(Address of principal executive offices) (Zip code)
Horizon Financial Corp. 2005 Incentive Stock Plan
(Full title of the plan)
Richard P. Jacobson John F. Breyer, Jr., Esquire
Vice President and Secretary Breyer & Associates PC
Horizon Financial Corp. 8180 Greensboro Drive
1500 Cornwall Avenue Suite 785
Bellingham, Washington 98225 McLean, Virginia 22102
(360) 733-3050 (703) 883-1100
(Name, address and telephone number of agent for service)
CALCULATION OF REGISTRATION FEE
==============================================================================
Title of Proposed Proposed
securities maximum maximum Amount of
to be Amount to be offering price aggregate registration
registered registered per share offering price fee
- ------------------------------------------------------------------------------
Common stock, $1.00
par value per share 750,000(1) $22.10(2) $16,575,000 $1,951.00
==============================================================================
(1) Together with an indeterminate number of additional shares which may be
necessary to adjust the number of shares reserved for issuance pursuant to
the Horizon Financial Corp. 2005 Incentive Stock Plan as a result of a
stock split, stock dividend or similar adjustment of the outstanding
common stock of the registrant.
(2) Estimated in accordance with Rule 457(h), calculated on the basis of
$22.10 per share, the average of the high and low share prices of the
registrant's common stock on the Nasdaq National Market on August 3, 2005.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I of Form S-8
will be sent or given to participants in the Horizon Financial Corp. 2005
Incentive Stock Plan, as specified by Rule 428(b)(1) promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933.
Such documents are not being filed with the Commission, but constitute
(along with the documents incorporated by reference into this Registration
Statement pursuant to Item 3 of Part II hereof) a prospectus that meets the
requirements of Section 10(a) of the Securities Act of 1933.
I-1
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
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The following documents previously filed by Horizon Financial Corp. (the
"Registrant") with the Commission are hereby incorporated by reference in this
Registration Statement:
(a) the Registrant's Annual Report on Form 10-K for the fiscal year
ended March 31, 2005 (File No. 000-27062) filed pursuant to the
Securities Exchange Act of 1934;
(b) all other reports filed by the Registrant pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 since the
end of the fiscal year covered by the Annual Report on Form 10-K
referred to in Item 3(a) above; and
(c) the description of the Registrant's common stock, par value $1.00
per share, in its Proxy Statement dated June 16, 1995, filed as an
exhibit to the Registrant's Current Report on Form 8-K, filed with
the Commission on October 17, 1995, and all amendments thereto or
reports filed for the purpose of updating such description.
All documents subsequently filed by the Registrant with the Commission
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934, prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed incorporated by reference
into this Registration Statement to be a part hereof from the date of the
filing of such documents. Any statement contained in the documents
incorporated, or deemed to be incorporated, by reference herein shall be
deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.
All information appearing in this Registration Statement is qualified in
its entirety by the detailed information, including financial statements,
appearing in the documents incorporated herein by reference.
Item 4. Description of Securities
- -------
Not Applicable
Item 5. Interests of Named Experts and Counsel
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Not Applicable
Item 6. Indemnification of Directors and Officers
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Article XIV of the Registrant's Articles of Incorporation provides that,
to the fullest extent permitted by the Washington Business Corporation Act
("WBCA"), a director of the Registrant will not be personally liable to the
Registrant or its shareholders for monetary damages for conduct as a director,
except for liability of the director for acts or omissions that involve: (i)
intentional misconduct by the director; (ii) a knowing violation of law by the
director; (iii) conduct violating Section 23B.08.310 of the WBCA; or (iv) any
transaction from which the director will personally receive a benefit in
money, property or services to which the director is not legally entitled.
Article XV of the Registrant's Articles of Incorporation further provides that
the Registrant shall indemnify and advance expenses to, and maintain
indemnification insurance for its directors, officers, agents and employees to
the fullest extent provided by the WBCA, even if such acts may be deemed
optional under the WBCA.
II-1
The WBCA provides for indemnification of directors, officers, employees
and agents in certain circumstances. WBCA Section 23B.08.510 provides that a
corporation may indemnify an individual made a party to a proceeding because
the individual is or was a director against liability incurred in the
proceeding if (a) the director acted in good faith, (b) the director
reasonably believed that the director's conduct was in the best interests of
the corporation, or in certain instances, at least not opposed to its best
interests and (c) in the case of any criminal proceeding, the director had no
reasonable cause to believe the director's conduct was unlawful. However, a
corporation may not indemnify a director under this section (a) in connection
with a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation or (b) in connection with any other
proceeding charging improper personal benefit to the director in which the
director was adjudged liable on the basis that personal benefit was improperly
received by the director. WBCA Section 23B.08.520 provides that unless
limited by the articles of incorporation, a corporation must indemnify a
director who was wholly successful in the defense of any proceeding to which
the director was a party because of being a director of the corporation
against reasonable expenses incurred by the director in connection with the
proceeding. WBCA Section 23B.08.540 provides a mechanism for court-ordered
indemnification.
WBCA Section 23B.08.530 provides that a corporation may pay for or
reimburse the reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding if (a) the
director furnishes a written affirmation of the director's good faith belief
that the director has met the standard of conduct described in WBCA Section
23B.08.510 and (b) the director furnishes a written undertaking to repay the
advance if it is ultimately determined that the director did not meet the
standard of conduct.
WBCA Section 23B.08.570 provides that unless a corporation's articles of
incorporation provide otherwise, (1) an officer of the corporation who is not
a director is entitled to mandatory indemnification under WBCA Section
23B.08.520, and is entitled to apply for court-ordered indemnification under
WBCA Section 23B.08.540, (2) the corporation may indemnify and advance
expenses under WBCA Section 23B.08.510 through 23B.08.560 to an officer,
employee, or agent of the corporation who is not a director to the same extent
as to a director and (3) a corporation may also indemnify and advance expenses
to an officer, employee, or agent who is not a director to the extent,
consistent with law, that may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors or contract.
WBCA Section 23B.08.580 provides that a corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee or agent of the corporation against liability asserted against or
incurred by the individual in that capacity, whether or not the corporation
would have power to indemnify the individual against the same liability under
WBCA Section 23B.08.510 or 23B.08.520.
Item 7. Exemption From Registration Claimed
- -------
Not Applicable
Item 8. Exhibits
- -------
The following exhibits are filed with or incorporated by reference into
this Registration Statement on Form S-8:
Exhibit
Number Description of Document
- -------- ----------------------------------------------------------------
4.1 Articles of Incorporation of the Registrant(1)
4.2 Bylaws of the Registrant(1)
4.3 Form of Certificate of Common Stock of the Registrant(2)
5 Opinion of Breyer & Associates PC
23.1 Consent of Moss Adams LLP
23.2 Consent of Breyer & Associates PC (contained in its opinion
filed as Exhibit 5)
II-2
24 Power of attorney (contained in the signature page of the
Registration Statement)
99 Horizon Financial Corp. 2005 Incentive Stock Plan
- -------------
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K,
filed with the Commission on October 13, 1995, and incorporated herein
by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8, filed with the Commission on October 10, 1999, and incorporated
herein by reference.
Item 9. Undertakings
- -------
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933; (ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change in such information in the Registration Statement; provided,
however, that clauses (i) and (ii) do not apply if the information required to
be included in a post-effective amendment by those clauses is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
2. That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officer and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Bellingham, State of Washington, on
August 4, 2005.
HORIZON FINANCIAL CORP.
By: /s/V. Lawrence Evans
----------------------------------
V. Lawrence Evans
Chairman of the Board, Chief
Executive Officer and President
(Duly Authorized Representative)
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby makes, constitutes and appoints V. Lawrence Evans his true and
lawful attorney, with full power to sign for such person and in such person's
name and capacity indicated below, and with full power of substitution any and
all amendments to this Registration Statement, hereby ratifying and confirming
such person's signature as it may be signed by said attorney to any and all
amendments.
By: /s/V. Lawrence Evans By: /s/Robert C. Diehl
---------------------------------- -----------------------------
V. Lawrence Evans Robert C. Diehl
Chairman of the Board, Chief Director
Executive Officer and President
Date: August 4, 2005 Date: August 4, 2005
By: /s/Richard P. Jacobson By: /s/Fred R. Miller
---------------------------------- -----------------------------
Richard P. Jacobson Fred R. Miller
Principal Financial Officer Director
Date: August 4, 2005 Date: August 4, 2005
By: /s/Dennis C. Joines By: /s/James A. Strengholt
---------------------------------- -----------------------------
Dennis C. Joines James A. Strengholt
Executive Vice President and Director Director
Date: August 4, 2005 Date: August 4, 2005
By: /s/Kelli J. Holz By: /s/Robert C. Tauscher
---------------------------------- -----------------------------
Kelli J. Holz Robert C. Tauscher
Principal Accounting Officer Director
Date: August 4, 2005 Date: August 4, 2005
By: /s/Richard R. Haggen By: /s/Gary E. Goodman
---------------------------------- -----------------------------
Richard R. Haggen Gary E. Goodman
Director Director
Date: August 4, 2005 Date: August 4, 2005
II-4
HORIZON FINANCIAL CORP.
EXHIBIT INDEX
Exhibit
Number Description of Document
- -------- -----------------------------------------------------------------
4.1 Articles of Incorporation of the Registrant(1)
4.2 Bylaws of the Registrant(1)
4.3 Form of Certificate of Common Stock of the Registrant(2)
5 Opinion of Breyer & Associates PC
23.1 Consent of Moss Adams LLP
23.2 Consent of Breyer & Associates PC (contained in its opinion filed
as Exhibit 5)
24 Power of attorney (contained in the signature page of the
Registration Statement)
99 Horizon Financial Corp. 2005 Incentive Stock Plan
- ----------
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K,
filed with the Commission on October 17, 1995, and incorporated herein
by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8, filed with the Commission on October 10, 1999, and incorporated
herein by reference.
Exhibit 5
Opinion of Breyer & Associates PC
[Letterhead of Breyer & Associates PC]
August 4, 2005
Board of Directors
Horizon Financial Corp.
1500 Cornwall Avenue
Bellingham, Washington 98225
Ladies and Gentlemen:
We have acted as special counsel to Horizon Financial Corp., a Washington
corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-8 filed with the Securities and Exchange
Commission ("Registration Statement") under the Securities Act of 1933, as
amended, relating to shares of common stock, par value $1.00 per share (the
"Common Stock") of the Company which may be issued pursuant to the terms of
the terms of the Horizon Financial Corp. 2005 Incentive Stock Plan (the
"Plan"), pursuant to the grant of restricted shares or the grant or exercise
of stock options ("Options") or stock appreciation rights ("Rights"), all as
more fully described in the Registration Statement. The Registration
Statement also registers an indeterminate number of additional shares which
may be necessary to adjust the number of shares registered thereby for
issuance as the result of a stock split, stock dividend or similar adjustment
of the number of issued and outstanding shares of Common Stock. You have
requested the opinion of this firm with respect to certain legal aspects of
the proposed offering.
We have reviewed the Registration Statement, the Articles of
Incorporation and Bylaws of the Company, the Plan, a specimen stock
certificate evidencing the Common Stock and such other documents and records
as we have deemed necessary for purposes of this opinion. We are relying upon
the originals, or copies certified or otherwise identified to our
satisfaction, of the corporate records of the Company and such other
instruments, certificates and representations of public officials, officers
and representatives of the Company as we have deemed applicable or relevant as
a basis for the opinions set forth below. In addition, we have assumed,
without independent verification, the genuineness of all signatures and the
authenticity of all documents furnished to us and the conformance in all
respects of copies to originals. Furthermore, we have made such factual
inquiries and reviewed such laws as we determined to be relevant for the
purposes of this opinion.
For purposes of this opinion, we have also assumed that (i) the shares of
Common Stock issuable pursuant to the Plan will continue to be validly
authorized on the dates that the restrictions on the Common Stock lapse; (ii)
the shares of Common Stock issuable pursuant to the exercise of Options or
Rights will continue to be validly authorized on the dates the Common Stock is
issued pursuant to the exercise of the Options or Rights, (iii) on the dates
the Options or Rights are exercised, the Options or Rights will constitute
valid, legal and binding obligations of the Company and will be enforceable as
to the Company in accordance with their terms (subject to applicable
bankruptcy, moratorium, insolvency, reorganization and other laws and legal
principles affecting the enforceability of creditors' rights generally), (iv)
no change occurs in applicable law or the pertinent facts, (v) the Options or
Rights are exercised in accordance with the terms of the Plan and any separate
agreement evidencing the grant of such Options or Rights pursuant to the Plan
and the exercise price due therefor, if any, is paid in accordance with the
terms thereof and (vi) the provisions of "blue sky" and other securities laws
as may be applicable have been complied with to the extent required.
Based on the foregoing, and subject to the assumptions set forth herein,
we are of the opinion as of the date hereof that the shares of Common Stock to
be issued pursuant to the Plan, upon receipt by the Company of any
consideration required thereby, as applicable, will be legally issued, fully
paid and non-assessable shares of Common Stock.
Board of Directors
Horizon Financial Corp.
August 4, 2005
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-8.
Sincerely,
/s/BREYER & ASSOCIATES PC
BREYER & ASSOCIATES PC
Exhibit 23.1
Consent of Moss Adams, LLP
[Letterhead of Moss Adams LLP]
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Horizon Financial Corp.
Bellingham, Washington
We consent to incorporation by reference in the Registration Statement on Form
S-8 of Horizon Financial Corp., relating to the Horizon Financial Corp. 2005
Incentive Stock Plan, of our report dated May 26, 2005 relating to the
consolidated statement of financial condition of Horizon Financial Corp. as of
March 31, 2005 and 2004, the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three year
period ended March 31, 2005, and our report dated May 26, 2005, with respect
to Horizon Financial Corp. management's assessment of the effectiveness of
internal control over financial reporting and the effectiveness of internal
control over financial reporting, appearing in the Annual Report on Form 10-K
of Horizon Financial Corp. for the year ended March 31, 2005.
/s/Moss Adams LLP
Bellingham, Washington
August 3, 2005
Exhibit 99
Horizon Financial Corp. 2005 Incentive Stock Plan
HORIZON FINANCIAL CORP.
2005 INCENTIVE STOCK PLAN
1. Plan Purpose. The purpose of the Plan is to foster and promote the
long-term success of the Corporation and its shareholders by a means of
attracting and retaining directors, advisory directors, directors emeriti and
employees of the Corporation and its Affiliates and aligning the interests of
Participants, as defined below, with shareholders.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Award" -- means the grant by the Committee of an Incentive Stock Option,
a Non-Qualified Stock Option, Shares of Restricted Stock, a Right, or any
combination thereof, as provided in the Plan.
"Award Agreement" -- means the agreement evidencing the grant of an Award
made under the Plan.
"Board" -- means the board of directors of the Corporation.
"Cause" -- means Termination of Service by reason of personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or gross negligence.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the committee referred to in Section 3 hereof.
"Corporation" -- means Horizon Financial Corp., a Washington corporation,
and any successor thereto.
"Disability" -- means any physical or mental injury or disease of a
permanent nature which renders a Participant incapable of meeting the
requirements of the employment or service performed by such Participant
immediately prior to the commencement of such disability. The determination
of whether a Participant is disabled shall be made by the Board in its sole
and absolute discretion.
"Incentive Stock Option" -- means an option to purchase Shares granted by
the Committee which is intended to qualify as an incentive stock option under
Section 422(b) of the Code. Unless otherwise set forth in the Award
Agreement, any Option which does not qualify as an Incentive Stock Option for
any reason shall be deemed ab initio to be a Non-Qualified Stock Option.
"Market Value" -- means:
(a) If the Shares are traded or quoted on the Nasdaq Stock Market or
other national securities exchange on any date, then the Market Value shall be
the average of the highest and lowest selling price on such exchange on such
date or, if there were no sales on such date, then on the next prior business
day on which there was a sale.
(b) If the Shares are not traded or quoted on the Nasdaq Stock Market or
other national securities exchange, then the Market Value shall be a value
determined by the Board in good faith on such reasonable basis as it deems
appropriate (including but not limited to the valuation method described in
Section 20.2031-2 of the Federal Estate Tax Regulations).
"Non-Qualified Stock Option" -- means an option to purchase Shares
granted by the Committee which does not qualify, for any reason, as an
Incentive Stock Option.
1
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" -- means any director, advisory director, director emeritus
or employee of the Corporation or any Affiliate who is selected by the
Committee to receive an Award.
"Plan" -- means this Horizon Financial Corp. 2005 Incentive Stock Plan.
"Related" -- means (i) in the case of a Right, a Right which is granted
in connection with, and to the extent exercisable, in whole or in part, in
lieu of, an Option or another Right and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right is exercisable, in
whole or in part, in lieu thereof.
"Right" -- means a stock appreciation right with respect to Shares
granted by the Committee pursuant to the Plan.
"Restricted Period" -- means the period of time selected by the Committee
for the purpose of determining when restrictions are in effect under Section 6
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" -- means Shares awarded by the Committee to a
Participant, which are subject to a Restricted Period.
"Section 409A" - means Code Section 409A and any guidance issued
thereunder.
"Shares" -- means the shares of common stock, $1.00 par value, of the
Corporation.
"Termination of Service" -- means cessation of service, for any reason,
whether voluntary or involuntary, so that the affected individual is not
either (i) an employee of the Corporation or any Affiliate for purposes of an
Incentive Stock Option, or (ii) a director (including an advisory director or
director emeritus) or employee of the Corporation or any Affiliate for
purposes of any other Award.
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members of the Board, each of whom (i) shall be an
"outside director," as defined under Section 162(m) of the Code and the
Treasury regulations thereunder, and (ii) shall be a "non-employee director,"
as defined under Rule 16(b) of the Securities Exchange Act of 1934 or any
similar or successor provision. The members of the Committee shall be
appointed by the Board. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion to (i) select Participants and grant Awards;
(ii) determine the number of Shares to be subject to types of Awards
generally, as well as to individual Awards granted under the Plan; (iii)
determine the terms and conditions upon which Awards shall be granted under
the Plan; (iv) prescribe the form and terms of Award Agreements; (v) establish
from time to time regulations for the administration of the Plan; and (vi)
interpret the Plan and make all determinations deemed necessary or advisable
for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
The Plan is intended to provide benefits that are not deferred
compensation within the meaning of Code Section 409A or any guidance issued
thereunder and the Plan shall be administered and interpreted accordingly.
4. Shares Subject to Plan.
----------------------
(a) Options
(i) Subject to adjustment by the operation of Section 7, the
maximum number of Shares with respect to which Awards may be made
under the Plan is 750,000 available for all types of awards.
The Shares with respect to which Awards may be made under the Plan
will be authorized and unissued
2
Shares. Shares which are subject to Related Rights and Related
Options shall be counted only once in determining whether the
maximum number of Shares with respect to which Awards may
be granted under the Plan has been exceeded. An Award shall not be
considered to have been made under the Plan with respect to any
Option which terminates, and new Awards may be granted under
the Plan with respect to the number of Shares as to which such
termination has occurred.
(ii) During any calendar year, no Participant may be granted
Awards under the Plan with respect to more than 100,000 Shares,
subject to adjustment as provided in Section 7.
(b) Rights. A Right shall, upon its exercise, entitle the
Participant to whom such Right was granted to receive a number of Shares or
cash or combination thereof, as the Committee in its discretion shall
determine (unless the provision of cash or a combination of cash and Shares
would cause the Rights to be subject to Section 409A, in which case the
Participant shall only receive Shares), the aggregate value of which (i.e.,
the sum of the amount of cash and/or Market Value of such Shares on date of
exercise) shall equal (as nearly as possible, it being understood that the
Corporation shall not issue any fractional Shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the exercise
price of such Right, multiplied by the number of Shares with respect to which
such Right shall have been exercised. A Right may be Related to an Option or
may be granted independently of any Option as the Committee shall from time to
time in each case determine. In the case of a Related Option, such Related
Option shall cease to be exercisable to the extent of the Shares with respect
to which the Related Right was exercised. Upon the exercise or termination of
a Related Option, any Related Right shall terminate to the extent of the
Shares with respect to which the Related Option was exercised or terminated.
Notwithstanding anything herein to the contrary, no Right, Related Right or
Related Option shall be issued or granted that would cause the Plan or any
benefit issued hereunder to be subject to Section 409A.
(c) Restricted Stock. Subject to adjustment pursuant to Section 7
hereof, the maximum number of Shares with respect to which Restricted Stock
may be granted under the Plan is 400,000.
(d) Notwithstanding the maximum number of Shares available for
award as Options or in the form of Restricted Shares under the Plan, such
Shares may by increased by (i) any Shares surrendered to the Corporation in
payment of the exercise price of Options granted under the Plan; plus (ii) any
Shares of Restricted Stock which are forfeited by the Participant. The Shares
with respect to which Awards may be made under the Plan will be authorized and
unissued Shares. An Award shall not be considered to have been made under
the Plan with respect to any Option which terminates, and new Awards may be
granted under the Plan with respect to the number of Shares as to which such
termination has occurred.
5. Terms and Condition of Option Awards. The Committee is hereby
authorized to grant Options to Participants with the following terms and
conditions and with such additional terms and conditions not inconsistent with
the provisions of the Plan and the requirements of applicable law as the
Committee shall determine, including the granting of Options in tandem with
other Awards under the Plan:
(a) Exercise Price. The exercise price per Share for an Option
shall be determined by the Committee; provided, however, that such exercise
price shall not be less than 100% of the Market Value of a Share on the date
of grant of such Option.
(b) Option Term. The term of each Option shall be fixed by the
Committee, but shall be no greater than ten (10) years for either an Incentive
Stock Option or a Non-Qualified Stock Option.
(c) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and the
method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other Awards or any combination thereof, having a
fair market value on the exercise date equal to the relevant exercise price)
in which, payment of the exercise price with respect thereto may be made or
deemed to have been made. The Committee may, in its discretion, arrange
procedures for the payment of the exercise price with one or more stock
brokerage firms for the purpose of allowing a Participant to make a "cashless
exercise" of an Option.
3
(d) Incentive Stock Options. Incentive Stock Options may be
granted by the Committee only to employees of the Corporation or its
Affiliates.
(e) Termination of Service. Unless otherwise determined by the
Committee and set forth in the Award Agreement evidencing the grant of the
Option, upon Termination of Service of the Participant for any reason other
than for Cause, all Options then currently exercisable shall remain
exercisable for the lesser of (A) three years following such Termination of
Service or (B) until the expiration of the Option by its terms. Upon
Termination of Service for Cause, all Options not previously exercised shall
immediately be forfeited.
6. Terms and Conditions of Restricted Stock Awards. The Committee is
hereby authorized to grant Awards of Restricted Stock to Participants with the
following terms and conditions and with such additional terms and conditions
as the Committee shall determine:
(a) At the time of an Award of Restricted Stock, the Committee
shall establish for each Participant a Restricted Period, during which or at
the expiration of which, as the Committee shall determine and provide in the
Award Agreement, the Shares awarded as Restricted Stock shall no longer be
subject to restriction. Subject to any such other terms and conditions as the
Committee shall provide, Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Participant, except as
hereinafter provided, during the Restricted Period. Except for such
restrictions, and subject to paragraph (c) of this Section 6 and Section 7
hereof, the Participant as owner of such shares shall have all the rights of a
shareholder, including the right to vote the Restricted Stock and the right to
receive dividends with respect to the Restricted Stock.
(b) If a Participant incurs a Termination of Service for any reason
(other than death, disability, or normal retirement after attainment of age
62), all Shares of Restricted Stock awarded to such Participant and which at
the time of such Termination of Service are subject to the restrictions
imposed pursuant to paragraph (a) of this Section 6 shall upon such
Termination of Service be forfeited and returned to the Corporation. If a
Participant incurs a Termination of Service by reason of death, disability or
normal retirement after attainment of age 62, the Restricted Period with
respect to the Participant's Restricted Stock then still subject to
restrictions shall thereupon lapse.
(c) Each certificate representing Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar) legend:
The transferability of this certificate and the Shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) contained in the Horizon Financial Corp.
2005 Incentive Plan. Copies of such Plan are on file in the
office of the Secretary of Horizon Financial Corp., 1500
Cornwall Avenue, Bellingham, Washington 98226.
(d) At the time of any Award, the Participant shall enter into an
Award Agreement with the Corporation in a form specified by the Committee,
agreeing to the terms and conditions of the Award and such other matters as
the Committee, in its sole discretion, shall determine.
(e) Upon the lapse of the Restricted Period, the Corporation shall
redeliver to the Participant (or where the relevant provision of paragraph (b)
of this Section 6 applies in the case of a deceased Participant, to his legal
representative, beneficiary or heir) the certificate(s) and stock power
deposited with it pursuant to paragraph (c) of this Section 6, and the Shares
represented by such certificate(s) shall be free of the restrictions imposed
pursuant to paragraph (a) of this Section 6.
(f) No term or condition of any Restricted Stock shall be included
that would cause the Restricted Stock to be subject to Section 409A. Any such
term or condition shall be void ab initio.
7. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan
by reason of any reorganization, recapitalization, stock split, stock
dividend,
4
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares and exercise price of the Award, if any, as to which
Awards may be granted under the Plan and the number and class of shares and
exercise price of the Award, if any, with respect to which Awards have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Except as otherwise provided herein, any
Award which is adjusted as a result of this Section 7 shall be subject to the
same terms and conditions as the original Award.
8. Effect of Merger on Options or Rights. In the case of any merger,
consolidation or combination of the Corporation (other than a merger,
consolidation or combination in which the Corporation is the continuing
corporation and which does not result in the outstanding Shares being
converted into or exchanged for different securities, cash or other property,
or any combination thereof), any Participant to whom an Option or Right has
been granted shall have the additional right (subject to the provisions of the
Plan and any limitation applicable to such Option or Right), thereafter and
during the term of each such Option or Right, to receive upon exercise of any
such Option an amount equal to the excess of the fair market value on the date
of such exercise of the securities, cash or other property, or combination
thereof, receivable upon such merger, consolidation or combination in respect
of a Share over the exercise price of such Option or Right, multiplied by the
number of Shares with respect to which such Option shall have been exercised.
Such amount may be payable fully in cash, fully in one or more of the kind or
kinds of property payable in such merger, consolidation or combination, or
partly in cash and partly in one or more of such kind or kinds of property,
all in the discretion of the Committee. The rights provided for in this
Section 8 shall be limited to the extent necessary to avoid having the Plan or
any benefit provided hereunder subject to Section 409A.
9. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 9 shall be deemed a
"change in control": (i) any third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of shares of the Corporation with respect to which 25% or
more of the total number of votes for the election of the Board may be cast,
(ii) as a result of, or in connection with, any cash tender offer, merger or
other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the
Corporation shall cease to constitute a majority of the Board, or (iii) the
shareholders of the Corporation shall approve an agreement providing either
for a transaction in which the Corporation will cease to be an independent
publicly-owned corporation or for a sale or other disposition of all or
substantially all the assets of the Corporation. If a tender offer or
exchange offer for Shares (other than such an offer by the Corporation) is
commenced, or if a change in control shall occur, unless the Committee shall
have otherwise provided in the Award Agreement, all Options and Rights granted
and not fully exercisable shall become exercisable in full upon the happening
of such event. Provided, however, that no Option which has previously been
exercised or otherwise terminated shall become exercisable.
10. Assignments and Transfers. No Incentive Stock Option granted under
the Plan shall be transferable other than by will or the laws of descent and
distribution. Any other Award shall be transferable by will, the laws of
descent and distribution, a "domestic relations order," as defined in Section
414(p)(1)(B) of the Code, or a gift to any member of the Participant's
immediate family or to a trust for the benefit of one or more of such
immediate family members. During the lifetime of an Award recipient, an Award
shall be exercisable only by the Award recipient unless it has been
transferred as permitted hereby, in which case it shall be exercisable only by
such transferee. For the purpose of this Section 10, a Participant's
"immediate family" shall mean the Participant's spouse, children and
grandchildren.
11. Employee Rights Under the Plan. No person shall have a right to be
selected as a Participant nor, having been so selected, to be selected again
as a Participant, and no employee or other person shall have any claim or
right to be granted an Award under the Plan or under any other incentive or
similar plan of the Corporation or any Affiliate. Neither the Plan nor any
action taken thereunder shall be construed as giving any employee any right to
be retained in the employ of the Corporation or any Affiliate.
12. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests,
be conditioned upon the receipt of a representation as to the investment
intention of the Participant to whom such Shares are to be delivered, in such
form as the Committee shall determine to be necessary or advisable to comply
with the provisions of the Securities Act of 1933 or any other federal, state
or local securities legislation. It may be provided that any representation
requirement shall become inoperative upon a
5
registration of the Shares or other action eliminating the necessity of such
representation under such Securities Act or other securities legislation. The
Corporation shall not be required to deliver any Shares under the Plan prior
to (i) the admission of such Shares to listing on any stock exchange on which
Shares may then be listed and (ii) the completion of such registration or
other qualification of such Shares under any state or federal law, rule or
regulation, as the Committee shall determine to be necessary or advisable.
13. Withholding Tax. The Corporation shall have the right to deduct
from all amounts paid in cash with respect to the exercise of a Right under
the Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option as provided for in the Plan, the
Corporation shall have the right to require the Participant or such other
person to pay the Corporation the amount of any taxes which the Corporation is
required to withhold with respect to such Shares, or, in lieu thereof, to
retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld. All withholding decisions pursuant to
this Section 13 shall be at the sole discretion of the Committee or the
Corporation.
14. Amendment or Termination.
------------------------
(a) The Board may amend, alter, suspend, discontinue, or terminate
the Plan without the consent of shareholders or Participants, except that any
such action will be subject to the approval of the Corporation's shareholders
if, when and to the extent such shareholder approval is necessary or required,
for purposes of any applicable federal or state law or regulation or the rules
of any stock exchange or automated quotation system on which the Shares may
then be listed or quoted, or if the Board, in its discretion, determines to
seek such shareholder approval.
(b) The Committee may waive any conditions of, or rights of, the
Corporation or modify or amend the terms of any outstanding Award. The
Committee may not, however, amend, alter, suspend, discontinue or terminate
any outstanding Award without the consent of the Participant or holder
thereof, except as otherwise provided herein.
(c) The Committee shall not, without the further approval of the
shareholders of the Corporation, authorize the amendment of any outstanding
Option to reduce the exercise price of the Option. Furthermore, no Option
shall be canceled and replaced with awards having a lower exercise price
without further approval of the shareholders of the Corporation. This Section
14(c) is not intended to permit (1) the repricing of "underwater" Options, and
(2) the modification of any Option so that it becomes subject to Section 409A,
but this Section 14(c) shall not be construed to prohibit or in any way
restrict the adjustments provided for in Section 7 of this Plan.
(d) No amendment of the Plan or any Award shall be permitted that
would cause the Plan or any benefit provided for hereunder to be subject to
Section 409A.
15. Effective Date and Term of Plan. The Plan shall become effective
upon the later of its adoption by the Board or its approval by the
shareholders of the Corporation. It shall continue in effect for a term of
ten (10) years thereafter unless sooner terminated under Section 14 hereof.
* * * * *
6
HORIZON FINANCIAL CORP.
2005 INCENTIVE STOCK PLAN
INCENTIVE STOCK OPTION AGREEMENT
ISO NO. _____
This Option is granted on ___________, _____ (the "Grant Date"), by
Horizon Financial Corp., a Washington corporation ("Corporation"), to
_______________ (the "Optionee"), in accordance with the following terms and
conditions:
1. Option Grant and Exercise Period. The Corporation hereby grants to
the Optionee an Incentive Stock Option ("Option") to purchase, pursuant to the
Horizon Financial Corp. 2005 Incentive Stock Plan, as the same may be amended
from time to time (the "Plan"), and upon the terms and conditions therein and
hereinafter set forth, an aggregate of ________ shares (the "Option Shares")
of the common stock of the Corporation ("Share" or "Shares") at the price of
$______ per Share (the "Exercise Price"). A copy of the Plan, as currently in
effect, is incorporated herein by reference and is attached to this Award
Agreement.
This Option shall be exercisable only during the period (the "Exercise
Period") commencing on the dates set forth in Section 2 below, and ending at
5:00 p.m., Bellingham, Washington time, on the date ten years after the Grant
Date, such later time and date being hereinafter referred to as the
"Expiration Date," subject to earlier expiration in accordance with Section 5
in the event of a Termination of Service. The aggregate Market Value (as
determined on the Grant Date) of the Option Shares with respect to which
Incentive Stock Options are exercisable for the first time by the Optionee in
any calendar year shall not exceed One Hundred Thousand Dollars ($100,000.00).
To the extent that this Option does not qualify as an Incentive Stock Option
for any reason, it shall be deemed ab initio to be a Non-Qualified Stock
Option.
2. Method of Exercise of This Option. This Option may be exercised
during the Exercise Period, with respect to not more than the cumulative
number of the Option Shares set forth below on or after the dates indicated,
by giving written notice to the Corporation as hereinafter provided specifying
the number of the Option Shares to be purchased.
Cumulative Number of
Option Shares Exercisable Date
------------------------- ---------------------------
The notice of exercise of this Option shall be in the form prescribed by the
Committee referred to in Section 3 of the Plan and directed to the address set
forth in Section 12 below. The date of exercise is the date on which such
notice is received by the Corporation. Such notice shall be accompanied by
payment in full of the Exercise Price for the Option Shares to be purchased
upon such exercise. Payment shall be made (i) in cash, which may be in the
form of a check, money order, cashier's check or certified check, payable to
the Corporation, or (ii) by delivering Shares already owned by the Optionee
having a Market Value equal to the Exercise Price, or (iii) a combination of
cash and such Shares. Promptly after such payment, subject to Section 3
below, the Corporation shall issue and deliver to the Optionee or other person
exercising this Option a certificate or certificates representing the Option
Shares so purchased, registered in the name of the Optionee (or such other
person), or, upon request, in the name of the Optionee (or such other person)
and in the name of another in such form of joint ownership as requested by the
Optionee (or such other person) pursuant to applicable state law.
3. Delivery and Registration of the Option Shares. The Corporation's
obligation to deliver the Option Shares hereunder shall, if the Committee so
requests, be conditioned upon the Optionee's compliance with the terms and
provisions of Section 12 of the Plan.
ISO-1
4. Nontransferability of This Option. This Option may not be assigned,
encumbered, transferred, pledged or hypothecated except, in the event of the
death of the Optionee, by will or the applicable laws of descent and
distribution to the extent provided in Section 5 below. This Option is
exercisable during the Optionee's lifetime only by the Optionee or a person
acting with the legal authority of the Optionee. The provisions of this
Option shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto, the successors and assigns of the Corporation and any
person acting with the legal authority of the Optionee or to whom this Option
is transferred by will or by the laws of descent and distribution.
5. Termination of Service or Death of the Optionee. Except as provided
in this Section 5 and Section 9 below, and notwithstanding any other provision
of this Option to the contrary, this Option shall be exercisable only if the
Optionee has not incurred a Termination of Service at the time of such
exercise.
If the Optionee incurs a Termination of Service for any reason excluding
death, Disability and Termination of Service for Cause, then the Optionee may,
but only within the period of three months immediately succeeding such
Termination of Service and in no event after the Expiration Date, exercise
this Option to the extent the Optionee was entitled to exercise this Option on
the date of Termination of Service. If the Optionee incurs a Termination of
Service for Cause, all rights under this Option shall expire immediately upon
the giving to the Optionee of notice of such termination, except as provided
in Section 9 below.
In the event of the death or Disability of the Optionee prior to the
Optionee's Termination of Service or within three months thereafter, the
person or persons to whom the Option has been transferred by will or by the
laws of descent and distribution may, but only to the extent the Optionee was
entitled to exercise this Option on the date of the Optionee's death or
Disability, exercise this Option at any time within one year following the
death or Disability of the Optionee, but in no event after the Expiration
Date.
Following the death of the Optionee, the Committee may, in its sole
discretion, as an alternative means of settlement of this Option, elect to pay
to the person to whom this Option is transferred by will or by the laws of
descent and distribution, the amount by which the Market Value per Share on
the date of exercise of this Option shall exceed the Exercise Price for each
of the Option Shares, multiplied by the number of the Option Shares with
respect to which this Option is properly exercised. Any such settlement of
this Option shall be considered an exercise of this Option for all purposes of
this Option and of the Plan.
6. Notice of Sale. The Optionee or any person to whom the Option
Shares shall have been transferred shall promptly give notice to the
Corporation in the event of the sale or other disposition of the Option Shares
within the later of (i) two years from the Grant Date or (ii) one year from
the date of exercise of this Option. Such notice shall specify the number of
the Option Shares sold or otherwise disposed of and be directed to the address
set forth in Section 12 below.
7. Adjustments for Changes in Capitalization of the Corporation. In
the event of any change in the outstanding Shares by reason of any
recapitalization, stock split, reverse stock split, stock dividend,
reorganization, consolidation, combination or exchange of shares, merger, or
any other change in the corporate structure of the Corporation or in the
Shares, the number and class of the Option Shares covered by this Option and
the Exercise Price shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
8. Effect of Merger or Other Reorganization. In the event of any
merger, consolidation or combination of the Corporation with or into another
corporation (other than a merger, consolidation or combination in which the
Corporation is the continuing corporation and which does not result in the
outstanding Shares being converted into or exchanged for different securities,
cash or other property, or any combination thereof), the Optionee shall have
the right (subject to the provisions of the Plan and the limitations contained
herein), thereafter and during the Exercise Period, to receive upon exercise
of this Option an amount equal to the excess of the Market Value on the date
of such exercise of the securities, cash or other property, or combination
thereof, receivable upon such merger, consolidation or combination in respect
of a Share over the Exercise Price, multiplied by the number of the Option
Shares with respect to which this Option shall have been exercised. Such
amount may be payable fully in cash, fully in one or more of the kind or kinds
of property payable in such merger, consolidation or combination, or partly in
cash and partly in one or
ISO-2
more of such kind or kinds of property, all in the discretion of the
Committee. The exercise of the right provided herein shall result in that
portion of this Option so exercised being disqualified as an incentive stock
option for tax purposes and being deemed a non-qualified stock option for tax
purposes.
9. Effect of Change in Control. If a tender offer or exchange offer
for Shares (other than such an offer by the Corporation) is commenced, or if a
change in control as defined in the Plan shall occur, all Options theretofore
granted and not fully exercisable shall become exercisable in full upon the
happening of such event.
10. Shareholder Rights Not Granted by This Option. The Optionee is not
entitled by virtue hereof to any rights of a shareholder of the Corporation or
to notice of meetings of shareholders or to notice of any other proceedings of
the Corporation.
11. Withholding Tax. Where the Optionee or another person is entitled
to receive the Option Shares pursuant to the exercise of this Option, the
Corporation shall have the right to require the Optionee or such other person
to pay to the Corporation the amount of any taxes which the Corporation or any
of its Affiliates is required to withhold with respect to the Option Shares,
or in lieu thereof, to retain, or sell without notice, a sufficient number of
the Option Shares to cover the amount required to be withheld, or, in lieu of
any of the foregoing, to withhold a sufficient sum from the Optionee's
compensation payable by the Corporation to satisfy the Corporation's tax
withholding requirements.
12. Notices. All notices hereunder to the Corporation shall be
delivered or mailed to it addressed to the Secretary of Horizon Financial
Corp., 1500 Cornwall Avenue, Bellingham, Washington 98225. Any notices
hereunder to the Optionee shall be delivered personally or mailed to the
Optionee's address noted below. Such addresses for the service of notices may
be changed at any time provided written notice of the change is furnished in
advance to the Corporation or to the Optionee, as the case may be.
13. Plan and Plan Interpretations as Controlling. This Option and the
terms and conditions herein set forth are subject in all respects to the terms
and conditions of the Plan, which are controlling. Capitalized terms used
herein which are not defined in this Award Agreement shall have the meaning
ascribed to such terms in the Plan. All determinations and interpretations
made in the discretion of the Committee shall be final and conclusive upon the
Optionee or his legal representatives with regard to any question arising
hereunder or under the Plan.
14. Optionee Service. Nothing in this Option shall limit the right of
the Corporation or any of its Affiliates to terminate the Optionee's service
as an employee, or otherwise impose upon the Corporation or any of its
Affiliates any obligation to employ or accept the services of the Optionee.
15. Amendment. The Committee may waive any conditions of or rights of
the Corporation or modify or amend the terms of this Award Agreement;
provided, however, that the Committee may not amend, alter, suspend,
discontinue or terminate any provision hereof which may adversely affect the
Optionee without the Optionee's (or his legal representative's) written
consent.
16. Optionee Acceptance. The Optionee shall signify his acceptance of
the terms and conditions of this Option by signing in the space provided below
and returning a signed copy hereof to the Corporation at the address set forth
in Section 12 above.
ISO-3
IN WITNESS WHEREOF, the parties hereto have caused this Award Agreement
to be executed as of the date first above written.
HORIZON FINANCIAL CORP.
By:
-------------------------------
Its:
-------------------------------
ACCEPTED:
------------------------------------
(Signature)
------------------------------------
(Street Address)
------------------------------------
(City, State and Zip Code)
ISO-4
HORIZON FINANCIAL CORP.
2005 INCENTIVE STOCK PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
NQSO NO. _____
This Option is granted on ________________, ____ (the "Grant Date"), by
Horizon Financial Corp., a Washington corporation ("Corporation"), to
_________________ (the "Optionee"), in accordance with the following terms and
conditions:
1. Option Grant and Exercise Period. The Corporation hereby grants to
the Optionee a Non-Qualified Option ("Option") to purchase, pursuant to the
Horizon Financial Corp. 2005 Incentive Stock Plan, as the same may be amended
from time to time (the "Plan"), and upon the terms and conditions therein and
hereinafter set forth, an aggregate of _______ shares (the "Option Shares") of
the common stock of the Corporation ("Share" or "Shares") at the price of
$______ per Share (the "Exercise Price"). A copy of the Plan, as currently in
effect, is incorporated herein by reference and is attached to this Award
Agreement.
Except as provided in Sections 7 and 8 below, this Option shall be
exercisable only during the period (the "Exercise Period") commencing on the
dates set forth in Section 2 below, and ending at 5:00 p.m., Bellingham,
Washington time, on the date ten years after the Grant Date, such later time
and date being hereinafter referred to as the "Expiration Date," subject to
earlier expiration in accordance with Section 5 in the event of a Termination
of Service.
2. Method of Exercise of This Option. This Option may be exercised
during the Exercise Period, with respect to not more than the cumulative
number of the Option Shares set forth below on or after the dates indicated,
by giving written notice to the Corporation as hereinafter provided specifying
the number of the Option Shares to be purchased.
Cumulative Number of
Option Shares Exercisable Date
-------------------------- ---------------------------
The notice of exercise of this Option shall be in the form prescribed by the
Committee referred to in Section 3 of the Plan and directed to the address set
forth in Section 11 below. The date of exercise is the date on which such
notice is received by the Corporation. Such notice shall be accompanied by
payment in full of the Exercise Price for the Option Shares to be purchased
upon such exercise. Payment shall be made (i) in cash, which may be in the
form of a check, money order, cashier's check or certified check, payable to
the Corporation, or (ii) by delivering Shares already owned by the Optionee
having a Market Value equal to the Exercise Price, or (iii) a combination of
cash and such Shares. Promptly after such payment, subject to Section 3
below, the Corporation shall issue and deliver to the Optionee or other person
exercising this Option a certificate or certificates representing the Option
Shares so purchased, registered in the name of the Optionee (or such other
person), or, upon request, in the name of the Optionee (or such other person)
and in the name of another in such form of joint ownership as requested by the
Optionee (or such other person) pursuant to applicable state law.
3. Delivery and Registration of the Option Shares. The Corporation's
obligation to deliver the Option Shares hereunder shall, if the Committee so
requests, be conditioned upon the Optionee's compliance with the terms and
provisions of Section 12 of the Plan.
4. Nontransferability of This Option. This Option may not be assigned,
encumbered, transferred, pledged or hypothecated except, (i) in the event of
the death of the Optionee, by will or the applicable laws of descent and
NQSO-1
distribution; (ii) pursuant to a "domestic relations order," as defined in
Section 414(p)(1)(B) of the Code; and (iii) by gift to any member of the
Optionee's immediate family or to a trust for the benefit of one or more of
such immediate family members. During the lifetime of the Optionee, this
Option shall be exercisable only by the Optionee or a person acting with the
legal authority of the Optionee unless it has been transferred as permitted
hereby, in which case it shall be exercisable only by such transferee. The
provisions of this Option shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto, the successors and assigns of the
Corporation and any person acting with the legal authority of the Optionee to
whom this Option is transferred in accordance with this Section 4.
5. Termination of Service or Death or Disability of the Optionee.
Except as provided in this Section 5 and in Section 8 below, and
notwithstanding any other provision of this Option to the contrary, this
Option shall be exercisable only if the Optionee has not incurred a
Termination of Service at the time of such exercise.
If the Optionee incurs a Termination of Service for any reason excluding
death, Disability and Termination of Service for Cause, then the Optionee may,
but only within the period of one year immediately succeeding such Termination
of Service and in no event after the Expiration Date, exercise this Option to
the extent the Optionee was entitled to exercise this Option on the date of
Termination of Service. If the Optionee incurs a Termination of Service for
Cause, all rights under this Option shall expire immediately upon the giving
to the Optionee of notice of such termination, except as provided in Section 8
below.
In the event of the death or Disability of the Optionee prior to the
Optionee's Termination of Service or within three months thereafter, the
Optionee or person or persons to whom the Option has been transferred pursuant
to Section 4 may, but only to the extent the Optionee was entitled to exercise
this Option on the date of the Optionee's death or Disability, exercise this
Option at any time within two years following the death or Disability of the
Optionee, but in no event after the Expiration Date.
Cause shall mean termination of the employment of the Optionee with
either the Corporation or any Affiliate, as the case may be, because of the
Optionee's dishonesty, incompetence, willful misconduct, breach of a fiduciary
duty involving personal profit, intentional failure to perform stated duties,
or willful violation of any law, rule, or regulation (excluding violations
which do not have a material adverse affect on the Corporation or its
Affiliates) or final cease-and-desist order. No act or failure to act by the
Optionee shall be considered willful unless the Optionee acted or failed to
act with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Corporation.
Following the death of the Optionee, the Committee may, in its sole
discretion, as an alternative means of settlement of this Option, elect to pay
to the person to whom this Option is transferred pursuant to Section 4 the
amount by which the Market Value per Share on the date of exercise of this
Option shall exceed the Exercise Price for each of the Option Shares,
multiplied by the number of the Option Shares with respect to which this
Option is properly exercised. Any such settlement of this Option shall be
considered an exercise of this Option for all purposes of this Option and of
the Plan.
6. Adjustments for Changes in Capitalization of the Corporation. In
the event of any change in the outstanding Shares by reason of any
recapitalization, stock split, reverse stock split, stock dividend,
reorganization, consolidation, combination or exchange of shares, merger, or
any other change in the corporate structure of the Corporation or in the
Shares, the number and class of the Option Shares covered by this Option and
the Exercise Price shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
7. Effect of Merger or Other Reorganization. In the event of any
merger, consolidation or combination of the Corporation with or into another
corporation (other than a merger, consolidation or combination in which the
Corporation is the continuing corporation and which does not result in the
outstanding Shares being converted into or exchanged for different securities,
cash or other property, or any combination thereof), the Optionee shall have
the right (subject to the provisions of the Plan and the limitations contained
herein), thereafter and during the Exercise Period, to receive upon exercise
of this Option an amount equal to the excess of the Market Value on the date
of such exercise of the securities, cash or other property, or combination
thereof, receivable upon such merger, consolidation or combination in respect
of a Share over the Exercise Price, multiplied by the number of the Option
Shares with respect
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to which this Option shall have been exercised. Such amount may be payable
fully in cash, fully in one or more of the kind or kinds of property payable
in such merger, consolidation or combination, or partly in cash and partly in
one or more of such kind or kinds of property, all in the discretion of the
Committee.
8. Effect of Change in Control. If a tender offer or exchange offer for
Shares (other than such an offer by the Corporation) is commenced, or if a
change in control as defined in the Plan shall occur, all Options theretofore
granted and not fully exercisable shall become exercisable in full upon the
happening of such event.
9. Shareholder Rights Not Granted by This Option. The Optionee is not
entitled by virtue hereof to any rights of a shareholder of the Corporation or
to notice of meetings of shareholders or to notice of any other proceedings of
the Corporation.
10. Withholding Tax. Where the Optionee or another person is entitled
to receive the Option Shares pursuant to the exercise of this Option, the
Corporation shall have the right to require the Optionee or such other person
to pay to the Corporation the amount of any taxes which the Corporation or any
of its Affiliates is required to withhold with respect to the Option Shares,
or in lieu thereof, to retain, or sell without notice, a sufficient number of
the Option Shares to cover the amount required to be withheld, or, in lieu of
any of the foregoing, to withhold a sufficient sum from the Optionee's
compensation payable by the Corporation to satisfy the Corporation's tax
withholding requirements.
11. Notices. All notices hereunder to the Corporation shall be
delivered or mailed to it addressed to the Secretary of Horizon Financial
Corp., 1500 Cornwall Avenue, Bellingham, Washington 98225. Any notices
hereunder to the Optionee shall be delivered personally or mailed to the
Optionee's address noted below. Such addresses for the service of notices may
be changed at any time provided written notice of the change is furnished in
advance to the Corporation or to the Optionee, as the case may be.
12. Plan and Plan Interpretations as Controlling. This Option and the
terms and conditions herein set forth are subject in all respects to the terms
and conditions of the Plan, which are controlling. Capitalized terms used
herein which are not defined in this Award Agreement shall have the meaning
ascribed to such terms in the Plan. All determinations and interpretations
made in the discretion of the Committee shall be final and conclusive upon the
Optionee or his legal representatives with regard to any question arising
hereunder or under the Plan.
13. Optionee Service. Nothing in this Option shall limit the right of
the Corporation or any of its Affiliates to terminate the Optionee's service
as a director, advisory director, director emeritus or employee, or otherwise
impose upon the Corporation or any of its Affiliates any obligation to employ
or accept the services of the Optionee.
14. Amendment. The Committee may waive any conditions of or rights of
the Corporation or modify or amend the terms of this Award Agreement;
provided, however, that the Committee may not amend, alter, suspend,
discontinue or terminate any provision hereof which may adversely affect the
Optionee without the Optionee's (or his legal representative's) written
consent.
15. Optionee Acceptance. The Optionee shall signify his acceptance of
the terms and conditions of this Option by signing in the space provided below
and returning a signed copy hereof to the Corporation at the address set forth
in Section 11 above.
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IN WITNESS WHEREOF, the parties hereto have caused this Award Agreement
to be executed as of the date
first above written.
HORIZON FINANCIAL CORP.
By:
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Its:
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ACCEPTED:
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(Signature)
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(Street Address)
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(City, State and Zip Code)
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