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KAISER FEDERAL FINANCIAL GROUP, INC.

2011 EQUITY INCENTIVE PLAN

 
ARTICLE 1 – GENERAL
 

Section 1.1                      Purpose, Effective Date and Term.  The purpose
of this Kaiser Federal Financial Group, Inc. 2011 Equity Incentive Plan (the
“Plan”) is to promote the long-term financial success of Kaiser Federal
Financial Group, Inc., a Maryland corporation (the “Company”), and its
Subsidiaries, including Kaiser Federal Bank (the “Bank”), by providing a means
to attract, retain and reward individuals who contribute to such success and to
further align their interests with those of the Company’s stockholders.  The
“Effective Date” of the Plan is December 22, 2011, the expected date of the
approval of the Plan by the Company’s stockholders.  The Plan shall remain in
effect as long as any Awards are outstanding; provided, however, that no Awards
may be granted under the Plan after the ten-year anniversary of the Effective
Date.
 
Section 1.2                      Administration.  The Plan shall be administered
by the Compensation Committee of the Company’s Board of Directors (the
“Committee”), in accordance with Section 5.1.
 
Section 1.3                      Participation.  Each Employee,
Director                                                                           or
other service provider, including a director emeritus or advisory director, of
the Company or any Subsidiary of the Company who is granted an Award in
accordance with the terms of the Plan shall be a “Participant” in the Plan. 
Awards shall be limited to Employees and Directors of the Company or any
Subsidiary.
 
Section 1.4                      Definitions.  Capitalized terms used in this
Plan are defined in Article 8 and elsewhere in this Plan.
 
ARTICLE 2 - AWARDS
 
                Section 2.1                      General.  Any Award under the
Plan may be granted singularly, in combination with another Award (or Awards),
or in tandem whereby the exercise or vesting of one Award held by a Participant
cancels another Award held by the Participant.  Each Award under the Plan shall
be subject to the terms and conditions of the Plan and such additional terms,
conditions, limitations and restrictions as the Committee shall provide with
respect to such Award and as evidenced in the Award Agreement.  Subject to the
provisions of Section 2.8, an Award may be granted as an alternative to or
replacement of an existing Award under the Plan or any other plan of the Company
or any Subsidiary or as the form of payment for grants or rights earned or due
under any other compensation plan or arrangement of the Company or its
Subsidiaries, including without limitation the plan of any entity acquired by
the Company or any Subsidiary.  The types of Awards that may be granted under
the Plan include:
 
(a)           Stock Options.  A Stock Option means a grant under Section 2.2
that represents the right to purchase shares of Stock at an Exercise Price
established by the Committee.  Any Stock Option may be either an Incentive Stock
Option (an “ISO”) that is intended to satisfy the requirements applicable to an
“Incentive Stock Option” described in Code Section 422(b), or a Non-Qualified
Stock Option (a “Non-Qualified Option”) that is not intended to be an ISO;
provided, however, that no ISOs may be granted: (i) after the ten-year
anniversary of the Effective Date; or (ii)  to a non-Employee.  Unless otherwise
specifically provided by its terms, any Stock Option granted to an Employee
under this Plan shall be an ISO.  Any ISO granted under this Plan that does not
qualify as an ISO for any reason (whether at the time of grant or as the result
of a subsequent event) shall be deemed to be a Non-Qualified Option.  In
addition, any ISO granted under this Plan may be unilaterally modified by the
Committee to disqualify such Stock Option from ISO treatment such that it shall
become a Non-Qualified Option; provided, however, that any such modification
shall be ineffective if it causes the Award to be subject to Code Section 409A
(unless, as modified, the Award complies with Code Section 409A).
 
 
 

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(b)           Restricted Stock.  Restricted Stock means a grant of shares of
Stock under Section 2.3 for no consideration or such minimum consideration as
may be required by applicable law, either alone or in addition to other Awards
granted under the Plan, subject to a vesting schedule or the satisfaction of
market conditions or performance conditions. 
 
(c)           Restricted Stock Units.  A Restricted Stock Unit means a grant
under Section 2.4 denominated in shares of Stock that is similar to a Restricted
Stock Award except no shares of Stock are actually awarded on the date of grant
of a Restricted Stock Unit.  A Restricted Stock Unit is subject to a vesting
schedule or the satisfaction of market conditions or performance conditions and
shall be settled in shares of Stock, provided, however, that in the sole
discretion of the Compensation Committee, determined at the time of settlement,
a Restricted Stock Unit may be settled in cash.
 
Section 2.2                      Stock Options
 
(a)           Grant of Stock Options.  Each Stock Option shall be evidenced by
an Award Agreement that shall: (i) specify the number of Stock Options covered
by the Award; (ii) specify the date of grant of the Stock Option; (iii) specify
the vesting period or conditions to vesting; and (iv) contain such other terms
and conditions not inconsistent with the Plan, including the effect of
termination of a Participant’s employment or Service with the Company as the
Committee may, in its discretion, prescribe.
 
(b)           Terms and Conditions.  A Stock Option shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee. In no event, however, shall a Stock Option expire
later than ten (10) years after the date of its grant (or five (5) years with
respect to ISOs granted to an Employee who is a 10% Stockholder).  The “Exercise
Price” of each Stock Option shall not be less than 100% of the Fair Market Value
of a share of Stock on the date of grant (or, if greater, the par value of a
share of Stock); provided, however, that the Exercise Price of an ISO shall not
be less than 110% of Fair Market Value of a share of Stock on the date of grant
if granted to a 10% Stockholder; provided further, that the Exercise Price may
be higher or lower in the case of Stock Options granted or exchanged in
replacement of existing Awards held by an Employee or Director of, or service
provider to, an acquired entity.  The payment of the Exercise Price of a Stock
Option shall be by cash or, subject to limitations imposed by applicable law, by
such other means as the Committee may from time to time permit,
including:  (i) by tendering, either actually or constructively by attestation,
shares of Stock valued at Fair Market Value as of the day of exercise; (ii) by
irrevocably authorizing a third party, acceptable to the Committee, to sell
shares of Stock (or a sufficient portion of the shares) acquired upon exercise
of the Stock Option and to remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting from
such exercise; (iii) by a net settlement of the Stock Option using a portion of
shares obtained on exercise in payment of the Exercise Price of the Stock
Option;  (iv) by personal, certified or cashiers’ check; (v) by other property
deemed acceptable by the Committee; or (vi) by any combination thereof.  The
total number of shares that may be acquired upon the exercise of a Stock Option
shall be rounded down to the nearest whole share.
 
Section 2.3  Restricted Stock.

(a)           Grant of Restricted Stock.  Each Restricted Stock Award shall be
evidenced by an Award Agreement that shall: (i) specify the number of shares of
Stock covered by the Restricted Stock Award;  (ii) specify the date of grant of
the Restricted Stock Award; (iii) specify the vesting period; and (iv) contain
such other terms and conditions not inconsistent with the Plan, including the
effect of termination of a Participant’s employment or Service with the Company,
as the Committee may, in its discretion, prescribe. All Restricted Stock Awards
(other than those subject to performance-based vesting conditions under Section
2.5 hereof) shall be in the form of issued and outstanding shares of Stock that
shall be either: (x) registered in the name of the Participant and held by the
Company, together with a stock power executed by the Participant in favor of the
Company, pending the vesting or forfeiture of the Restricted Stock; or (y)
registered in the name of, and delivered to, the Participant. In any event, the
certificates evidencing the Restricted Stock Award shall at all times prior to
the applicable vesting date bear the following legend:

 
 

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The Stock evidenced hereby is subject to the terms of an Award Agreement between
Kaiser Federal Financial Group, Inc. and [Name of Participant] dated [Date],
made pursuant to the terms of the Kaiser Federal Financial Group, Inc. 2011
Equity Incentive Plan, copies of which are on file at the executive offices of
Kaiser Federal Financial Group, Inc., and may not be sold, encumbered,
hypothecated or otherwise transferred except in accordance with the terms of
such Plan and Award Agreement,

or such other restrictive legend as the Committee, in its discretion, may
specify.  Performance-based Restricted Stock Awards may or may not be issued and
outstanding, in the discretion of the Committee.  Notwithstanding the foregoing,
the Company may in its sole discretion issue Restricted Stock in any other
approved format (e.g., electronically) in order to facilitate the paperless
transfer of such Awards.  In the event Restricted Stock is not issued in
certificate form, the Company and the transfer agent shall maintain appropriate
bookkeeping entries that evidence Participants’ ownership of such
Awards.  Restricted Stock that is not issued in certificate form shall be
subject to the same terms and conditions of the Plan as certificated shares,
including the restrictions on transferability and the provision of a stock power
executed by the Participant in favor of the Company, until the satisfaction of
the conditions to which the Restricted Stock Award is subject.

(b)           Terms and
Conditions.                                           Each Restricted Stock
Award shall be subject to the following terms and conditions:

(i)           Dividends.   Unless the Committee determines otherwise with
respect to any Restricted Stock Award and specifies such determination in the
relevant Award Agreement, any dividends or distributions declared and paid with
respect to shares of Stock subject to the Restricted Stock Award, other than a
stock dividend consisting of shares of Stock, shall be immediately distributed
to the Participant.  If the Committee determines to delay the distribution of
dividends to a Participant until the vesting of an Award of Restricted Stock,
the Committee shall cause the dividend (and any earnings thereon) to be
distributed to the Participant no later than two and one-half months following
the date on which the Restricted Stock vests.  Any stock dividends declared on
shares of Stock subject to a Restricted Stock Award shall be subject to the same
restrictions and shall vest at the same time as the shares of Restricted Stock
from which said dividends were derived.  Notwithstanding the foregoing, no
dividends shall be paid with respect to any Restricted Stock Awards subject to a
performance-based vesting condition unless and until the Participant vests in
such Restricted Stock Award.  Upon the vesting of a performance-based Restricted
Stock Award under Section 2.5, any dividends declared but not paid during the
vesting period shall be paid within thirty (30) days following the vesting date.

(ii)           Voting Rights. Unless the Committee determines otherwise with
respect to any Restricted Stock Award and specifies such determination in the
relevant Award Agreement, voting rights appurtenant to the shares of Restricted
Stock shall be exercised by the Participant in his or her discretion.

(iii)           Tender Offers and Merger Elections.  Each Participant to whom a
Restricted Stock Award is granted shall have the right to respond, or to direct
the response, with respect to the related shares of Restricted Stock, to any
tender offer, exchange offer, cash/stock merger consideration election or other
offer made to, or elections made by, the holders of shares of Stock. Such a
direction for any such shares of Restricted Stock shall be given by proxy or
ballot (if the Participant is the beneficial owner of the shares of Restricted
Stock for voting purposes) or by completing and filing, with the inspector of
elections, the trustee or such other person who shall be independent of the
Company as the Committee shall designate in the direction (if the Participant is
not such a beneficial owner), a written direction in the form and manner
prescribed by the Committee.  If no such direction is given, then the shares of
Restricted Stock shall not be tendered.

Section 2.4                      Restricted Stock Units.
 
(a)           Grant of Restricted Stock Unit Awards.    Each Restricted Stock
Unit shall be evidenced by an Award Agreement which shall: (i) specify the
number of Restricted Stock Units covered by the Award;  (ii) specify the date of
grant of the Restricted Stock Units; (iii) specify the vesting period or market
conditions or performance conditions that must be satisfied in order to vest in
the Award; and (iv) contain such other terms and conditions not inconsistent
with the Plan, including the effect of termination of a Participant’s employment
or Services with the Company, as the Committee may, in its discretion,
prescribe.
 
 
 

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(b)           Terms and Conditions.    Each Restricted Stock Unit Award shall be
subject to the following terms and conditions:
 
(i)    A Restricted Stock Unit Award shall be similar to Restricted Stock Award
except that no shares of Stock are actually awarded to the recipient on the date
of grant.  Each Restricted Stock Unit Award shall be evidenced by an Award
Agreement that shall specify the Restriction Period, the number of Restricted
Stock Units granted, and such other provisions, including the effect of
termination of a Participant’s employment or Service with the Company, as the
Committee shall determine.  The Committee shall impose such other conditions
and/or restrictions on any Restricted Stock Unit Award granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Restricted Stock Unit,
time-based restrictions and vesting following the attainment of performance
measures set forth in Section 2.5(a) hereof, restrictions under applicable laws
or under the requirements of any stock exchange or market upon which such shares
may be listed, or holding requirements or sale restrictions placed by the
Company upon vesting of such Restricted Stock Units.
 
(ii)           The Committee may, in connection with the grant of Restricted
Stock Units, designate them as “performance based compensation” within the
meaning of Code Section 162(m), in which event it shall condition the vesting
thereof upon the attainment of one or more performance measures set forth in
Section 2.5(a) hereof.  Regardless of whether Restricted Stock Units are subject
to the attainment of one or more performance measures, the Committee may also
condition the vesting thereof upon the continued Service of the
Participant.  The conditions for grant or vesting and the other provisions of
Restricted Stock Units (including without limitation any applicable performance
measures) need not be the same with respect to each recipient. An Award of
Restricted Stock Units shall be settled as and when the Restricted Stock Units
vest or, in the case of Restricted Stock Units subject to performance measures,
after the Committee has certified that the performance goals have been
satisfied.

(iii)           Subject to the provisions of the Plan and the applicable Award
Agreement, during the period, if any, set by the Committee, commencing with the
date of such Restricted Stock Unit Award for which such Participant’s continued
Service is required (the “Restriction Period”), and until the later of (A) the
expiration of the Restriction Period and (B) the date the applicable performance
measures (if any) are satisfied, the Participant shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber Restricted Stock Units.

(iv)           A Participant shall have no voting rights with respect to any
Restricted Stock Units granted hereunder.  No dividends shall be paid on
Restricted Stock Units.

Section 2.5                      Performance-Based Compensation. The vesting of
any Restricted Stock Award or Restricted Stock Unit Award under the Plan that is
intended to be “performance-based compensation” within the meaning of Code
Section 162(m) shall be conditioned on the achievement of one or more objective
performance measures, to the extent required by Code Section 162(m), as may be
determined by the Committee.  At the discretion of the Committee, the vesting of
any Stock Options also may be subject to the achievement of one or more
objective performance measures, although such performance-based vesting is not
necessary to satisfy the requirement of Code Section 162(m) with respect to
Stock Options.  The grant of any Award and the establishment of performance
measures that are intended to be performance-based compensation shall be made
during the period required under Code Section 162(m) and shall comply with all
applicable requirements of Code Section 162(m).
 
 
           (a)           Performance Measures.  Such performance measures may be
based on any one or more of the following:
 
(i) basic earnings per share;
 
(ii) basic cash earnings per share;
 
(iii) diluted earnings per share;
 
(iv) core earnings per share;
 
 
 

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(v) diluted cash earnings per share;
 
(vi) net income or net income before taxes;
 
(vii) cash earnings;
 
(viii) net interest income;
 
(ix) non-interest income;
 
(x) general and administrative expense to average assets ratio;
 
(xi) cash general and administrative expense to average assets ratio;
 
(xii) efficiency ratio;
 
(xiii) cash efficiency ratio;
 
(xiv) return on average assets;
 
(xv) core return on average assets;
 
(xvi) cash return on average assets;
 
(xvii) core return on equity;
 
(xviii) return on average stockholders' equity;
 
(xix) cash return on average stockholders' equity;
 
(xx) return on average tangible stockholders' equity;
 
(xxi) cash return on average tangible stockholders' equity;
 
(xxii) core earnings;
 
(xxiii) operating income;
 
(xxiv) operating efficiency ratio;
 
(xxv) net interest margin;
 
(xxvi) net interest rate margin or net interest rate spread;
 
(xxvii) growth in assets, loans, or deposits;
 
(xxviii) loan production volume;
 
(xxix) net charge offs;
 
(xxx) non-performing loans;
 
(xxxi) classified loans;
 
(xxxii) cash flow;
 
 
 

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(xxxiii) capital preservation (core or risk-based);
 
(xxxiv) interest rate risk exposure net portfolio value;
 
(xxxv) interest rat risk sensitivity;
 
(xxxvi)  strategic business objectives, consisting of one or more objectives
based upon meeting specified cost targets, business expansion goals, and goals
relating to acquisitions or divestitures, or goals relating to capital raising
and capital management;
 
(xxxvii) stock price (including, but not limited to, growth measures and total
shareholder return);
 
(xxxviii) operating expenses as a percentage of average assets;
 
(xxxix) core deposits as a percentage of total deposits;
 
(xl) net charge off percentage;
 
(xli) average percentage past due;
 
(xlii) classified assets to total assets; or
 
(xxviii)  any combination of the foregoing.
 
 
Performance measures may be based on the performance of the Company as a whole
or on any one or more Subsidiaries or business units of the Company or a
Subsidiary and may be measured relative to a peer group, an index or a business
plan and may be considered as absolute measures or changes in measures.  In
establishing any performance measures, the Committee may provide for the
exclusion of the effects of the following items, to the extent identified in the
audited financial statements of the Company, including footnotes, or in the
Management’s Discussion and Analysis section of the Company’s annual report or
in the Compensation Discussion and Analysis Section, if any, of the Company’s
annual proxy statement:  (i) extraordinary, unusual, and/or nonrecurring items
of gain or loss; (ii) gains or losses on the disposition of a business; (iii)
changes in tax or accounting principles, regulations or laws; or (iv) mergers or
acquisitions.  To the extent not specifically excluded, such effects shall be
included in any applicable performance measure.
 
(b)           Adjustments.  Pursuant to this Section 2.5, in certain
circumstances the Committee may adjust performance measures; provided, however,
no adjustment may be made with respect to an Award that is intended to be
performance-based compensation within the meaning of Code Section 162(m), except
to the extent the Committee exercises such negative discretion as is permitted
under applicable law for purposes of an exception under Code Section 162(m).  If
the Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company or the manner in which the Company
or its Subsidiaries conducts its business or other events or circumstances
render current performance measures to be unsuitable, the Committee may modify
such performance measures, in whole or in part, as the Committee deems
appropriate.  If a Participant is promoted, demoted or transferred to a
different business unit during a performance period, the Committee may determine
that the selected performance measures or applicable performance period are no
longer appropriate, in which case, the Committee, in its sole discretion, may:
(i) adjust, change or eliminate the performance measures or change the
applicable performance period; or (ii) cause to be made a cash payment to the
Participant in an amount determined by the Committee.
 
(c)           Treatment on Retirement.  Notwithstanding anything herein to the
contrary, no Restricted Stock Award or Restricted Stock Unit Award that is
intended to be considered performance-based compensation under Code Section
162(m) shall be granted under terms that will permit its accelerated vesting
upon Retirement or other termination of Service (other than death or
Disability).  Notwithstanding anything to the contrary herein, in the sole
discretion of the Committee exercised at the time of grant of an Award under
this Section 2.5, in the event of Retirement of a Participant during the
performance period, the Award Agreement may provide for the vesting of all or a
portion of such Award, so long as the vesting is not accelerated but shall occur
at the end of the performance period, and will be prorated, based on the period
of the Participant’s active employment and the level of achievement of the
performance measures during the period of the Participant’s active employment.
 
 
 

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Section 2.6                      Vesting of Awards.  The Committee shall specify
the vesting schedule or conditions of each Award.  Unless the Committee
specifies a different vesting schedule at the time of grant, Awards under the
Plan shall be granted with a vesting rate not exceeding twenty percent (20%) per
year, with the first installment vesting one year after the date of grant.  If
the right to become vested in an Award under the Plan (including the right to
exercise a Stock Option) is conditioned on the completion of a specified period
of Service with the Company or its Subsidiaries, without achievement of
performance measures or other performance objectives being required as a
condition of vesting, and without it being granted in lieu of, or in exchange
for, other compensation, then the required period of Service for full vesting
shall be determined by the Committee and evidenced in the Award Agreement
(subject to acceleration of vesting, to the extent permitted by the Committee,
including in the event of the Participant’s death, disability, Retirement or
Involuntary Termination of Employment (or Termination of Service for a Director)
following a Change in Control).  Unless otherwise provided by the Committee,
Service as a director emeritus or advisory director, including Service as a
director emeritus or advisory director after Termination of Service as a
Director, shall constitute Service for purposes of vesting.  Unless otherwise
provided by the Committee, with respect to an Employee who is also a Director,
continued Service as a Director following termination of employment shall
constitute Service for purposes of vesting.
 
Section 2.7                      Deferred Compensation.  If any Award would be
considered “deferred compensation” as defined under Code Section 409A (“Deferred
Compensation”), the Committee reserves the absolute right (including the right
to delegate such right) to unilaterally amend the Plan or the Award Agreement,
without the consent of the Participant, to maintain exemption from, or to comply
with, Code Section 409A.  Any amendment by the Committee to the Plan or an Award
Agreement pursuant to this Section shall maintain, to the extent practicable,
the original intent of the applicable provision without violating Code Section
409A.  A Participant’s acceptance of any Award under the Plan constitutes
acknowledgement and consent to such rights of the Committee, without further
consideration or action.  Any discretionary authority retained by the Committee
pursuant to the terms of this Plan or pursuant to an Award Agreement shall not
be applicable to an Award which is determined to constitute Deferred
Compensation, if such discretionary authority would contravene Code Section
409A.
 
Section 2.8                      Prohibition Against Option Repricing.  Except
for adjustments pursuant to Section 3.3, and reductions of the Exercise Price
approved by the Company’s stockholders, neither the Committee nor the Board
shall have the right or authority to make any adjustment or amendment that
reduces or would have the effect of reducing the Exercise Price of a Stock
Option previously granted under the Plan, whether through amendment,
cancellation (including cancellation in exchange for a cash payment in excess of
the Stock Option’s in-the-money value or in exchange for Options or other
Awards) or replacement grants, or other means.
 
Section 2.9.                      Effect of Termination of Service on
Awards. The Committee shall establish the effect of a Termination of Service on
the continuation of rights and benefits available under an Award or the Plan
and, in so doing, may make distinctions based upon, among other things, the
cause of Termination of Service and type of Award.   Unless otherwise specified
by the Committee and set forth in an Award Agreement between the Company and the
Participant or as set forth in an employment agreement entered into by and
between the Company and/or the Bank and an Employee, the following provisions
shall apply to each Award granted under this Plan:
 
(a)           Upon a Participant’s Termination of Service for any reason other
than due to Disability, Retirement, death or termination for Cause, Stock
Options shall be exercisable only as to those shares that were immediately
exercisable by such Participant at the date of termination, and Stock Options
may be exercised only for a period of three (3) months following termination,
and any Restricted Stock Award and Restricted Stock Unit Award that has not
vested as of the date of Termination of Service shall expire and be forfeited.
 
(b)           In the event of a Termination of Service for Cause, all Stock
Options granted to a Participant that have not been exercised and all Restricted
Stock Awards and Restricted Stock Unit Awards granted to a Participant that has
not vested shall expire and be forfeited.
 
 
 

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(c)           Upon Termination of Service for reason of Disability or death, and
if specifically provided by the Committee,  upon Retirement (except in the case
of Awards subject to performance-based vesting conditions under Section 2.5
hereof) all Stock Options shall be exercisable as to all shares subject to an
outstanding Award, whether or not then exercisable, and all Restricted Stock
Awards and Restricted Stock Unit Awards shall vest as to all shares subject to
an outstanding Award, whether or not otherwise immediately vested, at the date
of Termination of Service.  Vested Stock Options may be exercised for a period
of one year following Termination of Service due to death, Disability or
Retirement, provided, however, that no Stock Option shall be eligible for
treatment as an ISO in the event such Stock Option is exercised more than three
months following Termination of Service due to Retirement or one year following
Termination of Service due to Disability and provided, further, in order to
obtain ISO treatment for Stock Options exercised by heirs or devisees of an
optionee, the optionee’s death must have occurred while employed or within three
(3) months of Termination of Service.
 
(d)           Notwithstanding anything herein to the contrary, no Stock Option
shall be exercisable beyond the last day of the original term of such Stock
Option.
 
(e)           Notwithstanding the provisions of this Section 2.9, the effect of
a Change in Control on the vesting/exercisability of Stock Options, Restricted
Stock and Restricted Stock Units is as set forth in Article 4.
 
ARTICLE 3 - SHARES SUBJECT TO PLAN
 
Section 3.1                      Available Shares.  The shares of Stock with
respect to which Awards may be made under the Plan shall be shares currently
authorized but unissued, currently held or, to the extent permitted by
applicable law, subsequently acquired by the Company as treasury shares,
including shares purchased in the open market or in private transactions.
 
Section 3.2                      Share Limitations. 
 
(a)           Share Reserve.  Subject to the following provisions of this
Section 3.2, the maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be equal to Eight
Hundred Ninety-Two Thousand Five Hundred (892,500) shares of Stock, Six Hundred
Thirty-Seven Five Hundred (637,500) shares of Stock of which are eligible to be
delivered pursuant to the exercise of Stock Options (all of which may be granted
as ISOs) and Two Hundred Fifty-Five Thousand (255,000) shares of Stock that may
be issued  under the Plan as Restricted Stock Awards or Restricted Stock Unit
Awards.  The aggregate number of shares available for grant under this Plan and
the number of shares of Stock subject to outstanding awards shall be subject to
adjustment as provided in Section 3.3.
 
(b)           Computation of Shares Available.  For purposes of this Section 3.2
and in connection with the granting of Stock Options,  Restricted Stock or
Restricted Stock Units, the number of shares of Stock available for the granting
of additional Stock Options, Restricted Stock and Restricted Stock Units shall
be reduced by the number of shares of Stock in respect of which the Stock
Options, Restricted Stock or Restricted Stock Units is granted or
denominated.  To the extent any shares of Stock covered by an Award (including
Restricted Stock and Restricted Stock Units) under the Plan are not delivered to
a Participant or beneficiary for any reason, including because the Award is
forfeited or canceled or because a Stock Option is not exercised, then such
shares shall not be deemed to have been delivered for purposes of determining
the maximum number of shares of Stock available for delivery under the Plan.  To
the extent (i) a Stock Option is exercised by using an actual or constructive
exchange of shares of Stock to pay the Exercise Price or (ii) shares of Stock
are withheld to satisfy withholding taxes upon exercise or vesting of an Award
granted hereunder, the number of shares of Stock available shall be reduced by
the gross number of Stock Options exercised rather than by the net number of
shares of Stock issued.
 
(c)           Grants to Employees.  The maximum number of shares of Stock, in
the aggregate, that may be subject to Stock Options granted to any one Employee
pursuant to this Section 3.2 during any calendar year shall not exceed 100,000.
 
Section 3.3                      Corporate Transactions. 
 
 
 

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(a)           General.                       In the event any recapitalization,
forward or reverse stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or exchange of shares of Stock or other securities,
stock dividend or other special and nonrecurring dividend or distribution
(whether in the form of cash, securities or other property), liquidation,
dissolution, or other similar corporate transaction or event, affects the shares
of Stock such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Participants under the Plan and/or under any Award
granted under the Plan, then the Committee shall, in an equitable manner, adjust
any or all of (i) the number and kind of securities deemed to be available
thereafter for grants of Stock Options, Restricted Stock and Restricted Stock
Units in the aggregate to all Participants and individually to any one
Participant, (ii) the number and kind of securities that may be delivered or
deliverable in respect of outstanding Stock Options, Restricted Stock and
Restricted Stock Units, and (iii) the Exercise Price of Stock Options.  In
addition, the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Stock Options, Restricted Stock and
Restricted Stock Units (including, without limitation, cancellation of Stock
Options, Restricted Stock and Restricted Stock Units in exchange for the
in-the-money value, if any, of the vested portion thereof, or substitution or
exchange of Stock Options, Restricted Stock or Restricted Stock Units using
stock of a successor or other entity) in recognition of unusual or nonrecurring
events (including, without limitation, events described in the preceding
sentence) affecting the Company or any parent or Subsidiary or the financial
statements of the Company or any parent or Subsidiary, or in response to changes
in applicable laws, regulations, or accounting principles. Unless otherwise
determined by the Committee, any such adjustment to an Award intended to qualify
as “performance-based compensation” shall conform to the requirements of Code
Section 162(m) and the regulations thereunder then in effect.
 
(b)           Merger in which Company is Not Surviving Entity.  In the event of
any merger, consolidation, or other business reorganization (including, but not
limited to, a Change in Control) in which the Company is not the surviving
entity, unless otherwise determined by the Committee at any time at or after
grant and prior to the consummation of such merger, consolidation or other
business reorganization, any Stock Options granted under the Plan which remain
outstanding shall be converted into Stock Options to purchase voting common
equity securities of the business entity which survives such merger,
consolidation or other business reorganization having substantially the same
terms and conditions as the outstanding Stock Options under this Plan and
reflecting the same economic benefit (as measured by the difference between the
aggregate Exercise Price and the value exchanged for outstanding shares of Stock
in such merger, consolidation or other business reorganization), all as
determined by the Committee prior to the consummation of such merger; provided,
however, that the Committee may, at any time prior to the consummation of such
merger, consolidation or other business reorganization, direct that all, but not
less than all, outstanding Stock Options be canceled as of the effective date of
such merger, consolidation or other business reorganization in exchange for a
cash payment per share of Stock equal to the excess (if any) of the value
exchanged for an outstanding share of Stock in such merger, consolidation or
other business reorganization over the Exercise Price of the Stock Option being
canceled.
 
Section 3.4                      Delivery of Shares.  Delivery of shares of
Stock or other amounts under the Plan shall be subject to the following:
 
(a)           Compliance with Applicable Laws.  Notwithstanding any other
provision of the Plan, the Company shall have no obligation to deliver any
shares of Stock or make any other distribution of benefits under the Plan unless
such delivery or distribution complies with all applicable laws (including, the
requirements of the Securities Act), and the applicable requirements of any
securities exchange or similar entity.
 
(b)           Certificates.  To the extent that the Plan provides for the
issuance of shares of Stock, the issuance may be effected on a non-certificated
basis, to the extent not prohibited by applicable law or the applicable rules of
any stock exchange.
 
ARTICLE 4 - CHANGE IN CONTROL
 
Section 4.1                      Consequence of a Change in Control.  Subject to
the provisions of Section 3.3 (relating to the adjustment of shares), and except
as otherwise provided in the Plan or as determined by the Committee and set
forth in the terms of any Award Agreement or as set forth in an employment
agreement entered into by and between the Company and/or the Bank and an
Employee:
 
 
 

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(a)           At the time of an Involuntary Termination of Employment (or as to
a Director or other service provider, Termination of Service), all Stock Options
then held by the Participant shall become fully exercisable (subject to the
expiration provisions otherwise applicable to the Stock Option).   All Stock
Options may be exercised for a period of one year following the Participant’s
Involuntary Termination of Employment (or as to a Director, Termination of
Service as a Director), provided however that no Stock Option shall be eligible
for treatment as an ISO in the event such Stock Option is exercised more than
three (3) months following Involuntary Termination of Employment following a
Change in Control.
 
(b)           At the time of an Involuntary Termination of Employment (or as to
a Director or other service provider, Termination of Service), following a
Change in Control, all Restricted Stock Awards and Restricted Stock Unit Awards
then held by the Participant shall be fully earned and vested
immediately.  Notwithstanding the above, any Awards the vesting of which are
based on satisfaction of performance-based conditions will be vested as
specified in subsection (c) hereof.
 
(c)           In the event of a Change in Control, any performance measure
attached to an Award under the Plan shall be deemed satisfied as of the date of
the Change in Control.
 
Section 4.2                      Definition of Change in Control.  For purposes
of the Plan, unless otherwise provided in an Award Agreement, a “Change in
Control” of the Bank or the Company shall mean a change in control of a nature
that: (i) would be required to be reported in response to Item 5.01 of the
current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii)
results in a Change in Control of the Bank or the Company within the meaning of
the Home Owners’ Loan Act, as amended, and applicable rules and regulations
promulgated thereunder (collectively, the “HOLA”) as in effect at the time of
the Change in Control; or (iii) without limitation such a Change in Control
shall be deemed to have occurred at such time as (a) any “person” (as the term
is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of Company’s outstanding securities, except for any
securities purchased by the Bank’s employee stock ownership plan or trust; or
(b) individuals who constitute the Board on the date hereof (the “Incumbent
Board”) cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company’s
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (b), considered as though
he or she were a member of the Incumbent Board; or (c) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction in which the Bank or Company is not the
surviving institution occurs or is effected; or (d) a proxy statement soliciting
proxies from stockholders of the Company, by someone other than the current
management of the Company is distributed, seeking stockholder approval of a plan
of reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the plan are exchanged for or converted into
cash or property or securities not issued by the Company; or (e) a tender offer
is made for 25% or more of the voting securities of the Company and the
shareholders owning beneficially or of record 25% or more of the outstanding
securities of the Company have tendered or offered to sell their shares pursuant
to such tender offer and such tendered shares have been accepted by the tender
offeror.
 
              Section 5.1                      Administration. The Plan shall be
administered by the members of the Compensation Committee of the Company who are
Disinterested Board Members.  If the Committee consists of fewer than three
Disinterested Board Members, then the Board shall appoint to the Committee such
additional Disinterested Board Members as shall be necessary to provide for a
Committee consisting of at least three Disinterested Board Members.  Any members
of the Committee who do not qualify as Disinterested Board Members shall abstain
from participating in any discussion to make or administer Awards that are made
to Participants who at the time of consideration for such Award: (i) are persons
subject to the short-swing profit rules of Section 16 of the Exchange Act, or
(ii) are reasonably anticipated to be Covered Employees during the term of the
Award.  The Board (or those members of the Board who are “independent directors”
under the corporate governance statutes or rules of any national securities
exchange on which the Company lists its securities) may, in its discretion, take
any action and exercise any power, privilege or discretion conferred on the
Committee under the Plan with the same force and effect under the Plan as if
done or exercised by the Committee.
 
 
 

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Section 5.2                      Powers of Committee.  The administration of the
Plan by the Committee shall be subject to the following:
 
(a)           the Committee will have the authority and discretion to select
from among the Company’s and its Subsidiaries’ Employees, Directors and other
service providers, such as directors emeritus and/or advisory directors, those
persons who shall receive Awards, to determine the time or times of receipt, to
determine the types of Awards and the number of shares covered by the Awards, to
establish the terms, conditions, performance criteria, restrictions (including
without limitation, provisions relating to non-competition, non-solicitation and
confidentiality), and other provisions of such Awards (subject to the
restrictions imposed by Article 6) to cancel or suspend Awards and to reduce,
eliminate or accelerate any restrictions or vesting requirements applicable to
an Award at any time after the grant of the Award.
 
(b)           The Committee will have the authority and discretion to interpret
the Plan, to establish, amend and rescind any rules and regulations relating to
the Plan, and to make all other determinations that may be necessary or
advisable for the administration of the Plan.
 
                (c)           The Committee will have the authority to define
terms not otherwise defined herein.
 
(d)           Any interpretation of the Plan by the Committee and any decision
made by it under the Plan is final and binding on all persons.
 
(e)           In controlling and managing the operation and administration of
the Plan, the Committee shall take action in a manner that conforms to the
charter and bylaws of the Company and applicable corporate law.
 
                Section 5.3                      Delegation by Committee. 
Except to the extent prohibited by applicable law, the applicable rules of a
stock exchange or the Plan, or as necessary to comply with the exemptive
provisions of Rule 16b-3 promulgated under the Exchange Act or Code Section
162(m), the Committee may allocate all or any portion of its responsibilities
and powers to any one or more of its members and may delegate all or any part of
its responsibilities and powers to any person or persons selected by it,
including:  (a) delegating to a committee of one or more members of the Board
who are not “outside directors” within the meaning of Code Section 162(m), the
authority to grant Awards under the Plan to eligible persons who are not persons
with respect to whom the Company wishes to comply with Code Section 162(m);
and/or (b) delegating to a committee of one or more members of the Board who are
not “non-employee directors,” within the meaning of Rule 16b-3, the authority to
grant Awards under the Plan to eligible persons who are not then subject to
Section 16 of the Exchange Act.   The acts of such delegates shall be treated
hereunder as acts of the Committee and such delegates shall report regularly to
the Committee regarding the delegated duties and responsibilities and any Awards
so granted.  Any such allocation or delegation may be revoked by the Committee
at any time.
 
Section 5.4                      Information to be Furnished to Committee.  As
may be permitted by applicable law, the Company and its Subsidiaries shall
furnish the Committee with such data and information as it determines may be
required for it to discharge its duties.  The records of the Company and its
Subsidiaries as to a Participant’s employment, termination of employment, leave
of absence, reemployment and compensation shall be conclusive on all persons
unless determined by the Committee to be manifestly incorrect.  Subject to
applicable law, Participants and other persons entitled to benefits under the
Plan must furnish the Committee such evidence, data or information as the
Committee considers desirable to carry out the terms of the Plan.
 
Section 5.5                      Committee Action.   The Committee shall hold
such meetings, and may make such administrative rules and regulations, as it may
deem proper. A majority of the members of the Committee shall constitute a
quorum, and the action of a majority of the members of the Committee present at
a meeting at which a quorum is present, as well as actions taken pursuant to the
unanimous written consent of all of the members of the Committee without holding
a meeting, shall be deemed to be actions of the Committee. Subject to Section
5.1, all actions of the Committee shall be final and conclusive and shall be
binding upon the Company, Participants and all other interested parties. Any
person dealing with the Committee shall be fully protected in relying upon any
written notice, instruction, direction or other communication signed by a member
of the Committee or by a representative of the Committee authorized to sign the
same in its behalf.
 
 
 

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ARTICLE 6 - AMENDMENT AND TERMINATION
 
Section 6.1                      General.  The Board may, as permitted by law,
at any time, amend or terminate the Plan, and may amend any Award Agreement,
provided that no amendment or termination (except as provided in Section 2.7,
Section 3.3 and Section 6.2) may cause the Award to violate Code Section 409A,
may cause the repricing of a Stock Option or, in the absence of written consent
to the change by the affected Participant (or, if the Participant is not then
living, the affected beneficiary), adversely impair the rights of any
Participant or beneficiary under any Award granted under the Plan prior to the
date such amendment is adopted by the Board; provided, however, that, no
amendment may (a) materially increase the benefits accruing to Participants
under the Plan, (b) materially increase the aggregate number of securities which
may be issued under the Plan, other than pursuant to Section 3.3, or
(c) materially modify the requirements for participation in the Plan, unless the
amendment under (a), (b) or (c) above is approved by the Company’s stockholders.
 
Section 6.2                      Amendment to Conform to Law and Accounting
Changes.  Notwithstanding any provision in this Plan or any Award Agreement to
the contrary, the Committee may amend the Plan or any Award Agreement, to take
effect retroactively or otherwise, as deemed necessary or advisable for the
purpose of (i) conforming the Plan or the Award Agreement to any present or
future law relating to plans of this or similar nature (including, but not
limited to, Code Section 409A), or (ii) avoiding an accounting treatment
resulting from an accounting pronouncement or interpretation thereof issued by
the Securities and Exchange Commission or Financial Accounting Standards Board
subsequent to the adoption of the Plan or the making of the Award affected
thereby, which, in the sole discretion of the Committee, may materially and
adversely affect the financial condition or results of operations of the
Company.  By accepting an Award under this Plan, each Participant agrees and
consents to any amendment made pursuant to this Section 6.2 or Section 2.7 to
any Award granted under the Plan without further consideration or action.
 
ARTICLE 7 - GENERAL TERMS
 
Section 7.1                      No Implied Rights.
 
(a)           No Rights to Specific Assets.  Neither a Participant nor any other
person shall by reason of participation in the Plan acquire any right in or
title to any assets, funds or property of the Company or any Subsidiary
whatsoever, including any specific funds, assets, or other property which the
Company or any Subsidiary, in its sole discretion, may set aside in anticipation
of a liability under the Plan.  A Participant shall have only a contractual
right to the shares of Stock or amounts, if any, payable or distributable under
the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing
contained in the Plan shall constitute a guarantee that the assets of the
Company or any Subsidiary shall be sufficient to pay any benefits to any person.
 
(b)           No Contractual Right to Employment or Future Awards.  The Plan
does not constitute a contract of employment, and selection as a Participant
will not give any participating Employee the right to be retained in the employ
of the Company or any Subsidiary or any right or claim to any benefit under the
Plan, unless such right or claim has specifically accrued under the terms of the
Plan.  No individual shall have the right to be selected to receive an Award
under the Plan, or, having been so selected, to receive a future Award under the
Plan.
 
(c)           No Rights as a Stockholder.  Except as otherwise provided in the
Plan, no Award under the Plan shall confer upon the holder thereof any rights as
a stockholder of the Company prior to the date on which the individual fulfills
all conditions for receipt of such rights.
 
Section 7.2                      Transferability.  Except as otherwise so
provided by the Committee, ISOs under the Plan are not transferable except (i)
as designated by the Participant by will or by the laws of descent and
distribution, (ii) to a trust established by the Participant, if under Code
Section 671 and applicable state law, the Participant is considered the sole
beneficial owner of the Stock Option while held in trust, or (iii) between
spouses incident to a divorce or pursuant to a domestic relations order,
provided, however, in the case of a transfer within the meaning of this Section
7.2(iii), the Stock Option shall not qualify as an ISO as of the day of such
transfer.  The Committee shall have the discretion to permit the transfer of
Stock Options (other than ISOs) under the Plan; provided, however, that such
transfers shall be limited to Immediate Family Members of Participants, trusts
and partnerships established for the primary benefit of such family members or
to charitable organizations, and; provided, further, that such transfers are not
made for consideration to the Participant.
 
 
 

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Awards of Restricted Stock and Restricted Stock Units shall not be transferable
prior to the time that such Awards vest in the Participant.
 
Section 7.3                      Designation of Beneficiaries.  A Participant
hereunder may file with the Company a written designation of a beneficiary or
beneficiaries under this Plan and may from time to time revoke or amend any such
designation (“Beneficiary Designation”).  Any designation of beneficiary under
this Plan shall be controlling over any other disposition, testamentary or
otherwise (unless such disposition is pursuant to a domestic relations order);
provided, however, that if the Committee is in doubt as to the entitlement of
any such beneficiary to any Award, the Committee may determine to recognize only
the legal representative of the Participant, in which case the Company, the
Committee and the members thereof shall not be under any further liability to
anyone.
 
Section 7.4                      Non-Exclusivity.  Neither the adoption of this
Plan by the Board nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations on the power
of the Board or the Committee to adopt such other incentive arrangements as
either may deem desirable, including, without limitation, the granting of
Restricted Stock, Restricted Stock Units or Stock Options otherwise than under
the Plan or an arrangement that is or is not intended to qualify under Code
Section 162(m), and such arrangements may be either generally applicable or
applicable only in specific cases.
 
Section 7.5                      Award Agreement.  Each Award granted under the
Plan shall be evidenced by an Award Agreement signed by the Participant.  A copy
of the Award Agreement, in any medium chosen by the Committee, shall be provided
(or made available electronically) to the Participant.
 
Section 7.6                      Form and Time of Elections/Notification Under
Code Section 83(b).  Unless otherwise specified herein, each election required
or permitted to be made by any Participant or other person entitled to benefits
under the Plan, and any permitted modification or revocation thereof, shall be
filed with the Company at such times, in such form, and subject to such
restrictions and limitations, not inconsistent with the terms of the Plan, as
the Committee shall require.  Notwithstanding anything herein to the contrary,
the Committee may, on the date of grant or at a later date, as applicable,
prohibit an individual from making an election under Code Section 83(b).  If the
Committee has not prohibited an individual from making this election, an
individual who makes this election shall notify the Committee of the election
within ten (10) days of filing notice of the election with the Internal Revenue
Service.  This requirement is in addition to any filing and notification
required under the regulations issued under the authority of Code Section 83(b).
 
Section 7.7                      Evidence.  Evidence required of anyone under
the Plan may be by certificate, affidavit, document or other information upon
which the person is acting considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
 
Section 7.8                      Tax Withholding.  Where a Participant is
entitled to receive shares of Stock upon the vesting or exercise of an Award,
the Company shall have the right to require such Participant to pay to the
Company the amount of any tax that the Company is required to withhold with
respect to such vesting or exercise, or, in lieu thereof, to retain, or to sell
without notice, a sufficient number of shares of Stock to cover the minimum
amount required to be withheld. To the extent determined by the Committee and
specified in an Award Agreement, a Participant shall have the right to direct
the Company to satisfy the minimum required federal, state and local tax
withholding by: (i) with respect to a Stock Option, reducing the number of
shares of Stock subject to the Stock Option (without issuance of such shares of
Stock to the Stock Option holder) by a number equal to the quotient of (a) the
total minimum amount of required tax withholding divided by (b) the excess of
the Fair Market Value of a share of Stock on the exercise date over the Exercise
Price per share of Stock; and (ii) with respect to Restricted Stock or
Restricted Stock Units, withholding a number of shares (based on the Fair Market
Value on the vesting date) otherwise vesting that would satisfy the minimum
amount of required tax withholding.  Provided there are no adverse accounting
consequences to the Company (a requirement to have liability classification of
an award under Financial Accounting Standards Board Accounting Standards
Codification (ASC) Topic 718 (formerly, FAS 123R) is an adverse consequence), a
Participant who is not required to have taxes withheld may require the Company
to withhold in accordance with the preceding sentence as if the Award were
subject to minimum tax withholding requirements.
 
 
 

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Section 7.9                      Action by Company or Subsidiary.  Any action
required or permitted to be taken by the Company or any Subsidiary shall be by
resolution of its board of directors, or by action of one or more members of the
Board (including a committee of the Board) who are duly authorized to act for
the Board, or (except to the extent prohibited by applicable law or applicable
rules of any stock exchange) by a duly authorized officer of the Company or such
Subsidiary.
 
Section 7.10                      Successors.  All obligations of the Company
under the Plan shall be binding upon and inure to the benefit of any successor
to the Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation or otherwise, of all or
substantially all of the business, stock, and/or assets of the Company.
 
Section 7.11                      Indemnification.  To the fullest extent
permitted by law and the Company’s governing documents, each person who is or
shall have been a member of the Committee, or of the Board, or an officer of the
Company to whom authority was delegated in accordance with Section 5.3, or an
Employee of the Company, shall be indemnified and held harmless by the Company
against and from any loss (including amounts paid in settlement), cost,
liability or expense (including reasonable attorneys’ fees) that may be imposed
upon or reasonably incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf, unless such loss, cost, liability, or
expense is a result of his or her own willful misconduct or except as expressly
provided by statute or regulation.  The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company’s charter or bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
 
Section 7.12                      No Fractional Shares.  Unless otherwise
permitted by the Committee, no fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award.  The Committee shall determine
whether cash or other property shall be issued or paid in lieu of fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
 
Section 7.13                      Governing Law.  The Plan, all Awards granted
hereunder, and all actions taken in connection herewith shall be governed by and
construed in accordance with the laws of the State of California without
reference to principles of conflict of laws, except as superseded by applicable
federal law.  The federal and state courts located within fifty (50) miles of
the Company’s principal office, shall have exclusive jurisdiction over any
claim, action, complaint or lawsuit brought under the terms of the Plan.  By
accepting any award under this Plan, each Participant, and any other person
claiming any rights under the Plan, agrees to submit himself, and any such legal
action as he or she shall bring under the Plan, to the sole jurisdiction of such
courts for the adjudication and resolution of any such disputes.
 
Section 7.14                      Benefits Under Other Plans.  Except as
otherwise provided by the Committee or as set forth in a Qualified Retirement
Plan, Awards to a Participant (including the grant and the receipt of benefits)
under the Plan shall be disregarded for purposes of determining the
Participant’s benefits under, or contributions to, any Qualified Retirement
Plan, non-qualified plan and any other benefit plans maintained by the
Participant’s employer.  The term “Qualified Retirement Plan” means any plan of
the Company or a Subsidiary that is intended to be qualified under Code Section
401(a).
 
Section 7.15                      Validity.  If any provision of this Plan is
determined to be illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts hereof, but this Plan shall be
construed and enforced as if such illegal or invalid provision has never been
included herein.
 
 
 

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Section 7.16                      Notice.  Unless otherwise provided in an Award
Agreement, all written notices and all other written communications to the
Company provided for in the Plan or in any Award Agreement, shall be delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid (provided that international mail shall be sent via overnight or
two-day delivery), or sent by facsimile, email or prepaid overnight courier to
the Company at its principal executive office.  Such notices, demands, claims
and other communications shall be deemed given:
 
(a)           in the case of delivery by overnight service with guaranteed next
day delivery, the next day or the day designated for delivery;
 
(b)           in the case of certified or registered U.S. mail, five (5) days
after deposit in the U.S. mail; or
 
(c)           in the case of facsimile or email, the date upon which the
transmitting party received confirmation of receipt; provided, however, that in
no event shall any such communications be deemed to be given later than the date
they are actually received, provided they are actually received.
 
In the event a communication is not received, it shall only be deemed received
upon the showing of an original of the applicable receipt, registration or
confirmation from the applicable delivery service.  Communications that are to
be delivered by U.S. mail or by overnight service to the Company shall be
directed to the attention of the Company’s Chief Operating Officer and to the
Corporate Secretary.
 
Section 7.17                      Forfeiture Events.
 
(a)           The Committee may specify in an Award Agreement that the
Participant’s rights, payments, and benefits with respect to an Award shall be
subject to reduction, cancellation, forfeiture or recoupment upon the occurrence
of certain specified events, in addition to any otherwise applicable vesting or
performance conditions of an Award.  Such events include, but are not limited
to, termination of employment for cause, termination of the Participant’s
provisions of Services to the Company or any Subsidiary, violation of material
Company or Subsidiary policies, breach of noncompetition, confidentiality, or
other restrictive covenants that may apply to the Participant, or other conduct
of the Participant that is detrimental to the business or reputation of the
Company or any Subsidiary.
 
(b)           If the Company is required to prepare an accounting restatement
due to the material noncompliance of the Company, as a result of misconduct,
with any financial reporting requirement under the federal securities laws, any
Participant who is subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse the Company the amount of any payment
in settlement of an Award earned or accrued during the twelve (12) month period
following the first public issuance or filing with the SEC (whichever first
occurred) of the financial document embodying such financial reporting
requirement.
 
In addition, in the event of an accounting restatement, the Committee, in its
sole and exclusive discretion, may require that any Participant reimburse the
Company for all or any part of the amount of any payment in settlement of any
Award granted hereunder.
 
ARTICLE 8 - DEFINED TERMS; CONSTRUCTION
 
Section 8.1                      In addition to the other definitions contained
herein, unless otherwise specifically provided in an Award Agreement, the
following definitions shall apply:
 
(a)           “10% Stockholder” means an individual who, at the time of grant,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company.
 
(b)           “Award” means any Stock Option, Restricted Stock or Restricted
Stock Units or any or all of them, or any other right or interest relating to
stock or cash, granted to a Participant under the Plan.
 
 
 

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(c)           “Award Agreement” means the document (in whatever medium
prescribed by the Committee) which evidences the terms and conditions of an
Award under the Plan.  Such document is referred to as an agreement, regardless
of whether a Participant’s signature is required.
 
(d)           “Board” means the Board of Directors of the Company.
 
(e)           If the Participant is subject to a written employment agreement
(or other similar written agreement) with the Company or a Subsidiary that
provides a definition of termination for “Cause,” then, for purposes of this
Plan, the term “Cause” shall have meaning set forth in such agreement.  In the
absence of such a definition, “Cause” means (i) the conviction of the
Participant of a felony or of any lesser criminal offense involving moral
turpitude; (ii) the willful commission by the Participant of a criminal or other
act that, in the judgment of the Board, will likely cause substantial economic
damage to the Company or any Subsidiary or substantial injury to the business
reputation of the Company or any Subsidiary; (iii) the commission by the
Participant of an act of fraud in the performance of his duties on behalf of the
Company or any Subsidiary; (iv) the continuing willful failure of the
Participant to perform his duties to the Company or any Subsidiary (other than
any such failure resulting from the Participant’s incapacity due to physical or
mental illness) after written notice thereof; or (v) an order of a federal or
state regulatory agency or a court of competent jurisdiction requiring the
termination of the Participant’s Service with the Company.
 
(f)           “Change in Control” has the meaning ascribed to it in Section 4.2.
 
(g)           “Code” means the Internal Revenue Code of 1986, as amended, and
any rules, regulations and guidance promulgated thereunder, as modified from
time to time.
 
(h)           “Code Section 409A” means the provisions of Section 409A of the
Code and any rules, regulations and guidance promulgated thereunder, as modified
from time to time.
 
(i)           “Committee” means the Committee acting under Article 5.
 
(j)           “Covered Employee” has the meaning given the term in Code Section
162(m), and shall also include any other Employee who may become a Covered
Employee before an Award vests, as the Committee may determine in its sole
discretion.
 
(k)           “Director” means a member of the Board of Directors of the Company
or a Subsidiary.
 
(l)           If the Participant is subject to a written employment agreement
(or other similar written agreement) with the Company or a Subsidiary that
provides a definition of “Disability” or “Disabled,” then, for purposes of this
Plan, the terms “Disability” or “Disabled” shall have meaning set forth in such
agreement.  In the absence of such a definition, “Disability” shall be defined
in accordance with the Bank’s long-term disability plan.  To the extent that an
Award hereunder is subject to Code Section 409A, “Disability” or “Disabled”
shall mean that a Participant:  (i) is unable 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 can be expected to last
for a continuous period of not less than twelve (12) months; or (ii) is, by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3) months under an accident and health plan
covering the Company’s Employees.  Except to the extent prohibited under Code
Section 409A, if applicable, the Committee shall have discretion to determine if
a termination due to Disability has occurred.
 
(m)           “Disinterested Board Member” means a member of the Board who: (a)
is not a current Employee of the Company or a Subsidiary; (b) is not a former
employee of the Company who receives compensation for prior Services (other than
benefits under a tax qualified retirement plan) during the taxable year; (c) has
not been an officer of the Company; (d) does not receive remuneration from the
Company or a Subsidiary, either directly or indirectly, in any capacity other
than as a Director except in an amount for which disclosure would not be
required pursuant to Item 404 of SEC Regulation S-K in accordance with the proxy
solicitation rules of the SEC, as amended or any successor provision thereto;
and (e) does not possess an interest in any other transaction, and is not
engaged in a business relationship for which disclosure would be required
pursuant to Item 404(a) of SEC Regulation S-K under the proxy solicitation rules
of the SEC, as amended or any successor provision thereto. The term
Disinterested Board Member shall be interpreted in such manner as shall be
necessary to conform to the requirements of Section 162(m) of the Code, Rule
16b-3 promulgated under the Exchange Act and the corporate governance standards
imposed on compensation committees under the listing requirements imposed by any
national securities exchange on which the Company lists or seeks to list its
securities.
 
 
 

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(n)           “Employee” means any person employed by the Company or any
Subsidiary. Directors who are also employed by the Company or a Subsidiary shall
be considered Employees under the Plan.
 
(o)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time.
 
(p)           “Excluded Transaction” means a plan of reorganization, merger,
consolidation or similar transaction that would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting Securities of
the surviving corporation or any parent thereof) at least 50% of the combined
voting power of the Voting Securities of the entity surviving the plan of
reorganization, merger, consolidation or similar transaction (or the parent of
such surviving entity) immediately after such plan of reorganization, merger,
consolidation or similar transaction.
 
(q)           “Exercise Price” means the price established with respect to a
Stock Option pursuant to Section 2.2.
 
(r)           “Fair Market Value” means, with respect to a share of Stock on a
specified date:
 
(i)  the final reported sales price on the date in question (or if there is no
reported sale on such date, on the last preceding date on which any reported
sale occurred) as reported in the principal consolidated reporting system with
respect to securities listed or admitted to trading on the principal United
States securities exchange on which the shares of Stock are listed or admitted
to trading, as of the close of the market in New York City and without regard to
after-hours trading activity; or
 
(ii)  if the shares of Stock are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a share of Stock on such
date, as of the close of the market in New York City and without regard to
after-hours trading activity, or, if no such quotation is provided, on another
similar system, selected by the Committee, then in use; or
 
(iii)  if (i) and (ii) are not applicable, the Fair Market Value of a share of
Stock as the Committee may determine in good faith and in accordance with Code
Section 422 and the applicable requirements of Code Section 409A and the
regulations promulgated thereunder.  For purposes of the exercise of a Stock
Option, Fair Market Value on such date shall be the date a notice of exercise is
received by the Company, or if not a day on which the market is open, the next
day that it is open.
 
(s)           A termination of employment by an Employee Participant shall be
deemed a termination of employment for “Good Reason” as a result of the
Participant’s resignation from the employ of the Company or any Subsidiary upon
the occurrence of any of the following events:
 
(i)           a material diminution in Participant’s base compensation;
 
(ii)           a material diminution in Participant’s authority duties or
responsibilities;
 
(iii)           a requirement that Participant must report to a corporate
officer or employee instead of reporting directly to the Board;
 
(iv)           a material diminution in the budget over which Participant
retains authority;
 
 
 

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(v)           a change in the geographic location at which Participant must
perform his duties that is more than fifty (50) miles from the location of
Participant’s principal workplace on the date of this Agreement; or
 
(vi)           any other action or inaction that constitutes a material breach
by the Bank of this Agreement.
 
(t)           “Immediate Family Member” means with respect to any Participant:
(a) any of the Participant’s children, stepchildren, grandchildren, parents,
stepparents, grandparents, spouses, former spouses, siblings, nieces, nephews,
mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law
or sisters-in-law, including relationships created by adoption; (b) any natural
person sharing the Participant’s household (other than as a tenant or employee,
directly or indirectly, of the Participant); (c) a trust in which any
combination of the Participant and persons described in section (a) and (b)
above own more than fifty percent (50%) of the beneficial interests; (d) a
foundation in which any combination of the Participant and persons described in
sections (a) and (b) above control management of the assets; or (e) any other
corporation, partnership, limited liability company or other entity in which any
combination of the Participant and persons described in sections (a) and (b)
above control more than fifty percent (50%) of the voting interests.
 
(u)           “Incumbent Directors” means:
 
(I)           the individuals who, on the date hereof, constitute the Board; and
 
(II)           any new Director whose appointment or election by the Board or
nomination for election by the Company’s stockholders was approved or
recommended: (a) by the vote of at least two-thirds (2/3) of the Whole Board,
with at least two-thirds of the Incumbent Directors then in office voting in
favor of such approval or recommendation; or (b) by a Nominating Committee of
the Board whose members were appointed by the vote of at least two-thirds (2/3)
of the Whole Board, with at least two-thirds of the Incumbent Directors then in
office voting in favor of such appointments.
 
(v)           “Involuntary Termination of Employment” means the Termination of
Service of a Participant by the Company or Subsidiary other than termination for
Cause, or termination of employment by a Participant Employee for Good Reason.
 
(w)           “ISO” has the meaning ascribed to it in Section 2.1(a).
 
(x)            “Non-Qualified Option” means the right to purchase shares of
Stock that is either (i) granted to a Participant who is not an Employee, or
(ii) granted to an Employee and either is not designated by the Committee to be
an ISO or does not satisfy the requirements of Section 422 of the Code.
 
(y)           “Participant” means any individual who has received, and currently
holds, an outstanding Award under the Plan.
 
(z)           “Restricted Stock” has the meaning ascribed to it in Section 2.3. 
 
(aa)           “Restricted Stock Unit Award” and “Restricted Stock Unit” has the
meaning ascribed to them in Section 2.4.
 
(bb)           “Restricted Period” has the meaning ascribed to it in Section
2.4(b)(iii).
 
(cc)            “Retirement” means, unless otherwise specified in an Award
Agreement, retirement from employment as an Employee on or after the attainment
of age 65, or Termination of Service as a Director on or after the attainment of
age 70, provided, however, that unless otherwise specified in an Award
Agreement, an Employee who is also a Director shall not be deemed to have
terminated due to Retirement until both Service as an Employee and Service as a
Director has ceased.  A non-Employee Director will be deemed to have terminated
due to Retirement under the provisions of this Plan only if the non-Employee
Director has terminated Service on the Board(s) of Directors of the Company and
any Subsidiary or affiliate in accordance with applicable Company policy,
following the provision of written notice to such Board(s) of Directors of the
non-Employee Director’s intention to retire.
 
 
 

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(dd)           “SEC” means the United States Securities and Exchange Commission.
 
(ee)           “Securities Act” means the Securities Act of 1933, as amended
from time to time.
 
(ff)           “Service” means service as an Employee, service provider, or
non-employee Director of the Company or a Subsidiary, as the case may be, and
shall include service as a director emeritus or advisory director.
 
(gg)           “Stock” means the common stock of the Company, $0.01 par value
per share.
 
(hh)           “Stock Option” means an ISO or a Non-Qualified Option.
 
(ii)           “Subsidiary” means any corporation, affiliate, bank or other
entity which would be a subsidiary corporation with respect to the Company as
defined in Code Section 424(f) and, other than with respect to an ISO, shall
also mean any partnership or joint venture in which the Company and/or other
Subsidiary owns more than fifty percent (50%) of the capital or profits
interests.
 
(jj)           “Termination of Service” means the first day occurring on or
after a grant date on which the Participant ceases to be an Employee or Director
of, or service provider to, the Company or any Subsidiary, regardless of the
reason for such cessation, subject to the following:
 
(i)           The Participant’s cessation as an Employee or service provider
shall not be deemed to occur by reason of the transfer of the Participant
between the Company and a Subsidiary or between two Subsidiaries.
 
(ii)           The Participant’s cessation as an Employee or service provider
shall not be deemed to occur by reason of the Participant’s being on a bona fide
leave of absence from the Company or a Subsidiary approved by the Company or
Subsidiary otherwise receiving the Participant’s Services, provided such leave
of absence does not exceed six months, or if longer, so long as the Employee
retains a right to reemployment with the Company or Subsidiary under an
applicable statute or by contract.  For these purposes, a leave of absence
constitutes a bona fide leave of absence only if there is a reasonable
expectation that the Employee will return to perform Services for the Company or
Subsidiary.  If the period of leave exceeds six months and the Employee does not
retain a right to reemployment under an applicable statute or by contract, the
employment relationship is deemed to terminate on the first day immediately
following such six month period.  For purposes of this sub-section, to the
extent applicable, an Employee’s leave of absence shall be interpreted by the
Committee in a manner consistent with Treasury Regulation Section
1.409A-1(h)(1).
 
(iii)           If, as a result of a sale or other transaction, the Subsidiary
for whom Participant is employed (or to whom the Participant is providing
Services) ceases to be a Subsidiary, and the Participant is not, following the
transaction, an Employee of the Company or an entity that is then a Subsidiary,
then the occurrence of such transaction shall be treated as the Participant’s
Termination of Service caused by the Participant being discharged by the entity
for whom the Participant is employed or to whom the Participant is providing
Services.
 
(iv)           A service provider whose Services to the Company or a Subsidiary
are governed by a written agreement with the service provider will cease to be a
service provider at the time the term of such written agreement ends (without
renewal); and a service provider whose Services to the Company or a Subsidiary
are not governed by a written agreement with the service provider will cease to
be a service provider on the date that is ninety (90) days after the date the
service provider last provides Services requested by the Company or any
Subsidiary (as determined by the Committee).
 
 
 

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(v)           Except to the extent Section 409A of the Code may be applicable to
an Award, and subject to the foregoing paragraphs of this sub-section, the
Committee shall have discretion to determine if a Termination of Service has
occurred and the date on which it occurred.  In the event that any Award under
the Plan constitutes Deferred Compensation (as defined in Section 2.7 hereof),
the term Termination of Service shall be interpreted by the Committee in a
manner consistent with the definition of “Separation from Service” as defined
under Code Section 409A and under Treasury Regulation Section
1.409A-1(h)(ii).  For purposes of this Plan, a “Separation from Service” shall
have occurred if the Bank and Participant reasonably anticipate that no further
Services will be performed by the Participant after the date of the Termination
of Service (whether as an employee or as an independent contractor) or the level
of further Services performed will be less than 50% of the average level of bona
fide Services in the 36 months immediately preceding the Termination of
Service.  If a Participant is a “Specified Employee,” as defined in Code Section
409A and any payment to be made hereunder shall be determined to be subject to
Code Section 409A, then if required by Code Section 409A, such payment or a
portion of such payment (to the minimum extent possible) shall be delayed and
shall be paid on the first day of the seventh month following Participant’s
Separation from Service.
 
(VI)           With respect to a Participant who is a director, cessation as a
Director will not be deemed to have occurred if the Participant continues as a
director emeritus or advisory director.  With respect to a Participant who is
both an Employee and a Director, termination of employment as an Employee shall
not constitute a Termination of Service for purposes of the Plan so long as the
Participant continues to provide Service as a Director or director emeritus or
advisory director.
 
(kk)           “Voting Securities” means any securities which ordinarily possess
the power to vote in the election of directors without the happening of any
pre-condition or contingency.
 
(ll)           “Whole Board” means the total number of Directors that the
Company would have if there were no vacancies on the Board at the time the
relevant action or matter is presented to the Board for approval.
 
Section 8.2                      In this Plan, unless otherwise stated or the
context otherwise requires, the following uses apply:
 
(a)           actions permitted under this Plan may be taken at any time and
from time to time in the actor’s reasonable discretion;
 
(b)           references to a statute shall refer to the statute and any
successor statute, and to all regulations promulgated under or implementing the
statute or its successor, as in effect at the relevant time;
 
(c)           in computing periods from a specified date to a later specified
date, the words “from” and “commencing on” (and the like) mean “from and
including,” and the words “to,” “until” and “ending on” (and the like) mean “to,
but excluding”;
 
(d)           references to a governmental or quasi-governmental agency,
authority or instrumentality shall also refer to a regulatory body that succeeds
to the functions of the agency, authority or instrumentality;
 
(e)           indications of time of day mean Pacific Time;
 
(f)           “including” means “including, but not limited to”;
 
(g)           all references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to this Plan unless otherwise specified;
 
(h)           all words used in this Plan will be construed to be of such gender
or number as the circumstances and context require;
 
 
 

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(i)           the captions and headings of articles, sections, schedules and
exhibits appearing in or attached to this Plan have been inserted solely for
convenience of reference and shall not be considered a part of this Plan nor
shall any of them affect the meaning or interpretation of this Plan or any of
its provisions;
 
(j)           any reference to a document or set of documents in this Plan, and
the rights and obligations of the parties under any such documents, shall mean
such document or documents as amended from time to time, and any and all
modifications, extensions, renewals, substitutions or replacements thereof; and
 
(k)           all accounting terms not specifically defined herein shall be
construed in accordance with GAAP.

 
 

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