EMPLOYMENT AGREEMENT
 
This Employment Agreement (this “Agreement”) is made effective as of November
17, 2010 (the “Effective Date”), by and among First PacTrust Bancorp, Inc. a
Maryland corporation (“Bancorp”) and Pacific Trust Bank, a federally-chartered
savings bank (“Bank”) (collectively “Employer or “First Pac”), and Richard
Herrin (“Employee”).
 
WITNESSETH:
 
WHEREAS, Employer desires to employ Employee and Employee desires to be employed
by Employer upon the terms and conditions set forth herein;
 
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereby agree as follows:
 
1.           Employment.  Employer hereby agrees to employ Employee as Chief
Administrative Officer, and Employee hereby accepts employment with Employer
upon the terms and conditions herein set forth.
 
2.           Term.  The term of employment under this Agreement shall begin on
December 6, 2010 (the “Commencement Date”) and shall expire on the date that is
three years from the Commencement Date (the “Term End Date”), unless terminated
sooner as hereinafter provided or unless extended as provided in the next
sentence.  Commencing on December 6, 2013, and on each anniversary of such date,
the term of this Agreement shall automatically be extended for one additional
year unless either party notifies the other party at least ninety (90) days
prior to such date or anniversary date that the term of this Agreement will not
be extended.  Reference herein to the term hereunder shall refer to both the
initial term and any extended term hereunder.
 
3.           Duties.  Employee will, during the term hereof:
 
 
(a)
be employed by Employer on a full-time basis with all such authority, duties and
responsibilities as are commensurate with his position as Chief Administrative
Officer and as may be consistent with such position, reporting directly to the
President or Chief Executive Officer of the Bank or Bancorp, as the case may be,
and shall perform such other duties and responsibilities on behalf of Employer
and its affiliates as reasonably may be directed by the Boards of Directors of
Employer; and

 
 
(b)
devote his full business time, energy, and skill to the business of Employer and
to the promotion of Employer’s best interests, except for vacations and absences
made necessary because of illness.

 
4.           Compensation.  During the term of this Agreement, Employer shall
pay Employee:
 
 
(a)
on the Effective Date, a one-time signing bonus in the form of an inducement
grant of 4,200 shares of restricted stock of Bancorp,  which

 

 
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shares shall vest in one-third annual increments commencing on the first
anniversary of the Effective Date.  The terms of such grant shall be subject to
the terms of the final restricted stock agreement evidencing such grant, the
form of which shall be attached hereto as Exhibit A (the “Restricted Stock
Agreement”).  In the event of a conflict between the Restricted Stock Agreement
and this Agreement, the terms of the Restricted Stock Agreement shall control.

 
 
(b)
a base salary at the rate of $250,000 per annum, payable in periodic payments in
accordance with Employer’s practices for other executive, managerial, and
supervisory employees (but not less frequently than monthly), as such practices
may be determined from time to time and subject to customary tax
withholdings.  The Boards of Directors of Employer or the Compensation
Committees of the Boards of Directors of Employer (the “Committees”) will review
such base salary at least annually and, in their discretion, may increase  such
salary.

 
 
(c)
additional or special compensation, such as equity awards, incentive pay or
bonuses, based upon Employee’s performance, as the Boards of Directors of
Employer or the Committees in their discretion, may from time to time determine;
provided, however, that until such time as Employer has repaid in full all funds
received by it under the Troubled Asset Relief Program (“TARP”) of the U.S.
Department of the Treasury (the “U.S. Treasury”), any such compensation shall be
solely to the extent permitted by the requirements and restrictions of Section
111 of the Emergency Economic Stabilization Act of 2008 (“EESA”), as amended by
the American Recovery and Reinvestment Act of 2009 (the “ARRA”), as such
requirements and restrictions are implemented by rules, regulations or other
guidance issued by the U.S. Treasury from time to time, including, but not
limited to, the Interim Final Rule published June 15, 2009 (the “IFR”) (the
provisions of EESA, as amended by ARRA, as implemented by the IFR, together with
such amendments or modifications thereto and any other rules, regulations or
guidance relating thereto as may be published from time to time are referred to
herein, collectively, as the “TARP Requirements”).  Any amounts payable under
this Section 4(c) that constitute “nonqualified deferred compensation” within
the meaning of Section 409A (as defined in Section 14(a) of this Agreement)
shall be subject to such terms or conditions that satisfy the applicable
requirements of Section 409A.

 
All such payments, and any other compensation provided by Employer to Employee,
whether under this Agreement or otherwise, will be subject to such deductions
and clawback (recovery) as may be required to be made pursuant to law,
government regulation, order, stock exchange listing requirement (or any policy
of Employer adopted pursuant to any such law, government regulation, order or
stock exchange listing requirement) or by agreement with, or consent of,
Employee.
 

 
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5.           Options:
 
 
(a)
General. Executive may receive grants of options from Bancorp  from time to time
for his services as an executive at Employer and/or any subsidiary of Employer.
On the Effective Date, Executive shall receive an inducement grant of options
from Bancorp  for the purchase of 65,000 shares of Bancorp’s common stock at an
exercise price per share equal to the closing market price per share of
Bancorp’s common stock on the Effective Date (the “Initial Grant”)  The Initial
Grant shall become vested and exercisable in three annual installments of 21,666
shares, 21,667 shares and 21,667 shares on the first, second and third
anniversaries, respectively, of the Effective Date. The terms of the Initial
Grant, including the foregoing vesting schedule, shall be subject to the terms
of the final option agreement which evidences the Initial Grant, which shall be
attached hereto as Exhibit B (the “Initial Grant Agreement”).  In the event of a
conflict between the Initial Grant Agreement and this Agreement, the terms of
the Initial Grant Agreement shall control.

 
 
(b)
Designation of Beneficiary.  From time to time, by signing a form furnished to
First Pac, Employee may designate any legal or natural person or persons (who
may be designated contingently or successively) to whom to transfer the Initial
Grant if he were to die before he  exercised the Initial Grant. If Employee
fails to designate a beneficiary as provided above, or if the designated
beneficiary dies before Employee or before complete payment, the Initial Grant
shall be transferred to the Employee’s estate.  For purposes of this Agreement,
the term “designated beneficiary” means the person or persons designated by
Employee as his beneficiary in the last effective beneficiary designation form
filed with First Pac, or if Employee has failed to designate a beneficiary, the
Employee’s estate.

 
6.           Automobile and Other Expenses.  During the term of this Agreement,
Employer may: (i) elect to furnish Employee with the use of an automobile of a
make and model mutually agreeable to Employer and Employee; (ii) provide
Employee with an auto allowance of $600.00 per month, with annual increases in
such payment to be determined by the Boards of Directors of Employer or the
Committees to reflect increases in the cost of living or fuel costs; or (iii)
reimburse Employee for business related use of his personal automobile is
accordance with the Employer’s expense policies. Employee shall be reimbursed
for other expenses incurred in connection with Employer’s business in accordance
with Employer’s expense reimbursement policy for senior executives.
 
7.           Benefits.  Employee shall be entitled to participate in such
vacation, life insurance, medical, dental, pension, supplemental disability,
retirement plans and other programs as may be approved from time to time by
Employer for the benefit of its executive employees.
 
8.           Vacation.  Employee shall be entitled to the greater of the accrual
or 1.67 days of vacation for each month of service or such other accruals as
outlined in Employer’s human resource policies.  In the event that the full
vacation for any calendar year is not taken by
 

 
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Employee, no vacation time shall accrue for use in future years, except in
accordance with Employer’s then existing policy for the carry forward of accrued
vacation.
 
9.           Termination.
 
 
(a)
Employee’s employment with Employer shall be terminated (i) by reason of
Employee’s death or (ii) by reason of Employee’s becoming permanently disabled
for purposes of Employer’s long-term disability program.

 
 
(b)
Employer may terminate Employee’s employment hereunder for any reason, with or
without Cause, at any time upon notice to Employee, but any termination by
Employer other than termination for Cause shall not prejudice Employee’s right
to compensation or other benefits under this Agreement.

 
 
(c)
Employee may terminate his employment hereunder without Good Reason at any time
upon forty-five (45) days’ prior written notice to Employer.  In the event of
termination of Employee’s employment pursuant to this Section 9(c), Employer may
elect to waive the period of notice, or any portion thereof, and, if Employer so
elects, Employer will pay Employee his base salary for the period so waived.

 
 
(d)
Employee may terminate his employment for Good Reason within ninety (90) days
following the occurrence of any condition constituting Good Reason (as defined
below), provided that Employee has first provided notice to Employer specifying
in reasonable detail the condition giving rise to the Good Reason, Employee has
provided Employer with a period of thirty (30) days to remedy the condition (and
the notice so specifies), and Employer has failed to remedy the condition within
this thirty (30) day period.

 
 
(e)
Employer and Employee may also terminate Employee’s employment with Employer by
issuing a notice to the other pursuant to Section 2 hereof.

 
 
(f)
If Employee is suspended and/or temporarily prohibited from participating in the
conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1)
of the Federal Deposit Insurance Act (the “FDIA”), 12 U.S.C. § 1818(e)(3) and
(g)(1), Employer’s obligations under this Agreement shall be suspended as of the
date of service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, Employer may in its discretion (i) pay Employee all or
part of the compensation withheld while its obligations under this Agreement
were suspended and (ii) reinstate in whole or in part any of its obligations
which were suspended.

 

 
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(g)
If Employee is removed and/or permanently prohibited from participating in the
conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1)
of the FDIA, 12 U.S.C. § 1818(e)(4) and (g)(1), all obligations of Employer
under this Agreement shall terminate as of the effective date of the order, but
vested rights of the contracting parties shall not be affected.

 
 
(h)
If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all
obligations under this Agreement shall terminate as of the date of default, but
this provision shall not affect any vested rights of the contracting parties.

 
 
(i)
All obligations of Employer under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (1) by the Director of the Office of Thrift
Supervision (the “Director”) or his or her designee, at the time the Federal
Deposit Insurance Corporation enters into an agreement to provide assistance to
or on behalf of the Bank under the authority contained in Section 13(c) of the
FDIA; or (2) by the Director or his or her designee, at the time the Director or
his or her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by any such action.

 
10.           Severance Benefits.
 
 
(a)
In the event of the termination of Employee’s employment, for any reason,
Employee shall be entitled to any Accrued Obligations.  Employee shall have no
right to receive compensation or other benefits for any period after termination
for Cause.

 
 
(b)
In the event that Employer terminates Employee’s employment without Cause or
Employee resigns with Good Reason, subject to Sections 10(e)-(j) and Section 14,
(i) Employee shall be entitled to severance pay equal to eighteen (18) months’
salary at the rate of salary in effect on the date his employment with Employer
terminates, (ii) the Initial Grant, to the extent not theretofore fully vested,
shall become fully vested and immediately exercisable in accordance with its
terms and (iii) in the event the Employee is not theretofore fully vested in the
restricted shares provided under Section 4(a) as a signing bonus, the Employee
shall be entitled to be appointed as an advisor of Employer and shall be
permitted to continue serving in that capacity until all such restricted shares
have vested in full.

 

 
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(c)
Subject to Section 14, any severance pay to be paid pursuant to Section 10(b)
shall be paid in 18 equal monthly installments  commencing on the first business
day coincident with or next following the sixtieth (60th) calendar date
following Employee’s termination of employment.

 
 
(d)
In the event of Employee’s death within 18 months of termination for any reason,
all remaining eligible benefits under this section shall be paid to Employee’s
designated beneficiary as noted in Section 5(b) of this Agreement.

 
 
(e)
Any severance pay to be paid pursuant to Section 10(b)  is subject to and
conditioned upon Employee signing and delivering (and not revoking) to Employer
a general release and waiver (in a form reasonably acceptable to Employer),
waiving all claims the Employee may have against Employer, its parents,
subsidiaries, successors, assigns, affiliates, and their respective executives,
officers and directors relating to Employee’s employment with Employer.

 
 
(f)
The payment of the severance pay under Section 10(b) is conditioned upon the
Employee’s compliance with the non-solicitation and nondisclosure requirements
set forth in Sections 11 and 12 hereof.

 
 
(g)
Notwithstanding any other provision of this Agreement to the contrary, if
payments under this Agreement, together with any other payments received or to
be received by Employee in connection with a “change in control” (for purposes
of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”))
would cause any amount to be nondeductible for federal income tax purposes
pursuant to Section 280G of the Code, then benefits under this Agreement shall
be reduced (but not less than zero) to the extent necessary so as to maximize
payments to Employee without causing any amount to become
nondeductible.  Employee shall determine the allocation of such reduction among
payments to Employee.

 
(h)
Notwithstanding any other provision of this Agreement to the contrary, any
payments made to Employee pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with 12 U.S.C. § 1828(k) and
any  regulations promulgated thereunder, including  12 C.F.R. Part 359.

 
(i)
Notwithstanding any provision in this Section 10 to the contrary, Employee
understands and agrees that any payments or benefits provided to Employee under
this Section 10 shall be made only to the extent permitted by the TARP
Requirements.

 
(j)
For purposes of this Agreement.

 

 
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(A)
“Accrued Obligations” means (i) any base salary that Employee has earned but not
been paid during or prior to the Employee’s termination of employment, (ii) pay
for any vacation time earned but not used through the date of termination,
subject to Section 8 of this Agreement, (iii) any business expenses that are
reimbursable under Section 6 that were incurred by Employee as of the Employee’s
termination of employment but have not been reimbursed on the date of
termination, subject to the submission of any required substantiation and
documentation, and (iv) any payments or benefits to which Employee or his
beneficiary or estate is entitled under the terms of any applicable employee
benefit plan.

 
 
(B)
Termination for “Cause” shall mean termination of the employment of Employee
because of Employee's personal dishonesty, incompetence, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule, or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of this Agreement. Employee shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Employee a copy of a resolution, duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Boards of
Directors of Employer at a meeting or meetings of the Boards called and held for
such purpose (after reasonable notice to Employee and an opportunity for
Employee, together with Employee's counsel, to be heard before the Boards),
stating that in the good faith opinion of the Boards, Employee has engaged in
conduct described in the preceding sentence and specifying the particulars
thereof in detail.

 
 
(C)
“Good Reason” shall exist if, without Employee’s express written consent,
Employer shall:

 
 
(1)
assign to Employee duties that are materially inconsistent with that of his
position as Chief Administrative Officer of Employer (including status, offices,
title(s) and reporting requirements), authority, duties or responsibilities, or
any other action by Employer which results in a material diminution in such
position, authority, duties or responsibilities;

 
 
(2)
unless required by regulatory authorities, reduce the salary of Employee, or
materially reduce the amount of paid vacations to which he is entitled;

 
 
(3)
materially breach this Agreement; or

 
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(4)
require Employee to relocate his principal business office outside of Southern
California; or assign to Employee duties that would reasonably require such
relocation.

11.           Nonsolicitation.
 
 
(a)
Unless otherwise agreed in writing, during the term of this Agreement, and for a
period of eighteen (18) months following a termination of Employee’s employment
with Employer entitling Employee to severance pay under Section 10(b), Employee
shall not solicit or attempt to solicit any individual or entity who was a
customer of Employer or any of its affiliates during the period of the
Employee’s employment hereunder with the intent or purpose to perform for such
customer the same or similar services which Employer or any of its affiliates
performed for such customer or induce or attempt to induce any individual or
entity who was an employee, agent or independent contractor of Employer or any
of its affiliates during the period of Employee’s employment hereunder to
discontinue providing services to Employer or any of its affiliates.

 
 
(b)
Unless otherwise agreed in writing, during the term of this Agreement, and for a
period of  eighteen (18) months following a termination of Employee’s employment
with Employer entitling Employee to severance pay under Section 10(b), Employee
shall not, and will not assist any other person to (a) hire or solicit for
hiring any employee of Employer or any of its affiliates or seek to persuade any
employee of Employer or any of its affiliates to discontinue employment or (b)
solicit or encourage any independent contractor providing services to Employer
or any of its affiliates to terminate or diminish its relationship with them.

 

12.           Nondisclosure of Confidential Information.  Employee acknowledges
that Employer and its affiliates may disclose confidential information to
Employee during the term of this Agreement to enable him to perform his duties
hereunder.  Employee hereby covenants and agrees that, except as required by
law, regulatory directive or judicial order, he will not, without the prior
written consent of Employer, during the term of this Agreement or at any time
thereafter, disclose or permit to be disclosed to any third party by any method
whatsoever any of the confidential information of Employer or any of its
affiliates.  For purposes of this Agreement, “confidential information” shall
include, but not be limited to, any and all records, notes, memoranda, data,
ideas, processes, methods, techniques, systems, formulas, patents, models,
devices, programs, computer software, writings, research, personnel information,
customer information, financial information of Employer or any of its
affiliates, plans, or any other information of whatever nature in the possession
or control of Employer which has not been published or disclosed to the general
public, or which gives to Employer or any of its affiliates an opportunity to
obtain an advantage over competitors who do not know of or use it.  Employee
further agrees that if his employment hereunder is terminated for any reason, he
will leave with Employer and will not take originals or copies of any and all
records, papers, programs, computer software and documents and all matter of
whatever nature containing secret or confidential information of Employer or any
of its affiliates.
 

 
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Employee agrees promptly to reduce to writing and to disclose and assign, and
hereby does assign, to Employer, its subsidiaries, successors, assigns and
nominees, all inventions, discoveries, improvements, copyrightable material,
trademarks, programs, computer software and ideas concerning the same, capable
of use in connection with the business of Employer or any of its affiliates,
which Employee may make or conceive, either solely or jointly with others,
during the period of his employment by Employer, its subsidiaries or successors.
 
Employee agrees, without charge to Employer and at Employer’s expense, that upon
a request by Employer, to execute, acknowledge and deliver to Employer all such
papers, including applications for patents, applications for copyright and
trademark registrations, and assignments thereof, as may be necessary, and at
all times to assist Employer, its parent, subsidiaries, successors, assigns and
nominees in every proper way to patent or register said programs, computer
software, ideas, inventions, discoveries, improvements, copyrightable material
or trademarks in any and all countries and to vest title thereto in Employer,
its parent, subsidiaries, successors, assigns or nominees.
 
Upon a request by Employer, Employee will promptly report to Employer all
discoveries, inventions, or improvements of whatsoever nature conceived or made
by him at any time he was employed by Employer, its parent, subsidiaries or
successors.  All such discoveries, inventions and improvements which are
applicable in any way to Employer’s business shall be the sole and exclusive
property of Employer.
 
The covenants set forth in this Section 12 are made by Employee in consideration
of the employment, or continuing employment of, and the compensation paid to,
Employee during his employment by Employer.  The foregoing covenants will not
prohibit Employee from disclosing confidential or other information to other
employees of Employer or to third parties to the extent that such disclosure is
necessary to the performance of his duties under this Agreement.
 
Any breach of this covenant of nondisclosure will result in the forfeiture by
Employee and all other persons acting for or with Employee in any capacity
whatsoever of any and all rights to severance pay under Section 10 hereof unpaid
at the time of breach and in such event Employer shall have no further
obligation to pay any amounts related thereto.
 
13.           Additional Remedies.  Employee recognizes that his services
hereunder are of a personal, special, unique and extraordinary character and
irreparable injury will result to Employer and to its business and properties in
the event of any breach by Employee of any of the provisions of Sections 11 and
12 of this Agreement or either of them, and that Employee’s continued employment
is predicated on the commitments undertaken by him pursuant to said
Sections.  In the event of any breach of any of Employee’s commitments pursuant
to Sections 11 and 12 or either of them, Employer shall be entitled, in addition
to any other remedies and damages available, to injunctive relief to restrain
the violation of such commitments by Employee or by any person or persons acting
for or with Employee in any capacity whatsoever.
 
14.           Section 409A.
 
 
(a)
Notwithstanding anything to the contrary in this Agreement, if at the time of
Employee’s termination of employment, Employee is a “specified

 

 
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employee,” as defined below, any and all amounts payable under Section 10 on
account of such termination of employment that constitute “nonqualified deferred
compensation” under Section 409A of Code and the regulations and guidance of
general applicability issued thereunder (“Section 409A”) and would (but for this
provision) be payable within six (6) months following the date of termination,
shall instead be paid on the next business day following the expiration of such
six (6) month period or, if earlier, upon Employee’s death, in each case, with
interest from the date on which payment would otherwise have been made,
calculated at the applicable federal rate provided under Section 7872(f)(2)(A)
of the Code.  If Employee receives compensation under Section 10 that can in
part be treated as paid under a “separation pay plan” described in Treasury
Regulation Section 1.409A-1(b)(9) then, to the extent permitted under Section
409A, the compensation shall be treated as first made from the separation pay
plan.

 
 
(b)
For purposes of Section 10 of this Agreement, all references to “termination of
employment” and correlative phrases shall be construed to require a “separation
from service” (as defined in Treasury regulation Section 1.409A-1(h) after
giving effect to the presumptions contained therein), and the term “specified
employee” means an individual determined by Employer to be a specified employee
under Treasury regulation Section 1.409A-1(i) in accordance with the policies of
Employer.

 
 
(c)
Each payment made under this Agreement shall be treated as a separate payment
and the right to a series of installment payments under this Agreement shall be
treated as a right to a series of separate payments.

 
 
(d)
Any amount that Executive is entitled to be reimbursed or to have paid on his
behalf under this Agreement that would constitute nonqualified deferred
compensation subject to Section 409A shall be subject to the following
additional rules: (i) no reimbursement of any such expense shall affect the
Executive’s right to reimbursement of any such expense in any other taxable
year; (ii) reimbursement of the expense shall be made, if at all, promptly, but
not later than the end of the calendar year following the calendar year in which
the expense was incurred; and (iii) the right to reimbursement shall not be
subject to liquidation or exchange for any other benefit.

 
 
(e)
The parties acknowledge and agree that, to the extent applicable, this Agreement
shall be interpreted in accordance with Section 409A and the Treasury
regulations and other interpretive guidance issued thereunder, including without
limitation any such regulations or other guidance that may be issued in the
future.  The parties shall cooperate in good faith and take all steps reasonably
necessary and practicable consistent with the terms of this Agreement to comply
with the requirements of Section 409A

 

 
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in order to avoid income inclusion under Section 409A or the imposition of taxes
thereunder.

 
15.           Global TARP Limitation. In addition to, and not in limitation of,
the last paragraph of Section 4 of this Agreement, and notwithstanding anything
herein to the contrary, until such time as Employer has repaid TARP funds to the
U.S. Treasury in full, all amounts payable hereunder shall be subject to and
limited by the TARP Requirements as in effect from time to time (regardless of
whether the terms hereof specifically refer to TARP or the TARP Requirements),
as and to the extent applicable with respect to Employee. In this regard,
Employee acknowledges and agrees that until such time as Employer has repaid
TARP funds to the U.S. Treasury in full, any bonus, retention or incentive
compensation payment Employee receives (whether paid under this Agreement or
otherwise) will be subject to recovery (clawback) by Employer if the payment was
based on materially inaccurate financial statements or any other materially
inaccurate performance metric or criteria.  Employee hereby voluntarily waives
any claim against Employer or any of its affiliates for any such recovery or for
any other changes to his compensation, bonus, incentive and other benefit plans,
arrangements, policies and agreements (including golden parachute agreements and
tax gross-ups) that are required to comply with the TARP Requirements
(regardless of whether the compensation, benefit or other amount is payable
under this Agreement).  This waiver includes all claims the Employee may have
under the laws of the United States or any state related to the requirements
imposed by the TARP Requirements, including, without limitation, a claim for any
compensation or other payments Employee would otherwise receive.
 
16.           Adjustments to Comply with Final Interagency Guidance on Sound
Incentive Compensation Policies.  Notwithstanding anything herein to the
contrary, the compensation or benefits provided under this Agreement are subject
to modification, as necessary to comply with requirements imposed by Employer’s
Boards of Directors to comply with the “Final Interagency Guidance on Sound
Incentive Compensation Policies” issued on an interagency basis by the Federal
Reserve System, the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation and the Office of Thrift Supervision, effective
June 25, 2010, or any amendment or modification thereto.
 
17.           No Duplication of Employer Obligations.  With respect to any
payments or other compensation to be provided hereunder by Employer, the
provision of such payments or other compensation by the Bank shall be deemed to
reduce, to the same extent, the obligation of Bancorp to provide such payments
or other compensation, and vice versa.
 
18.           Assignment; Benefit.  No party shall have the right to assign this
Agreement or any rights or obligations hereunder without the consent of each of
the other parties; provided, however, that Employer may assign its rights and
obligations hereunder (i) to any entity controlled by, under the control of, or
under common control with, Employer (as long as such entity is no less capable
of fulfilling the obligations of Employer hereunder), or (ii) to any successor
to Employer upon any liquidation, dissolution or winding up of Employer, upon
any merger or consolidation of Employer or upon any sale of all or substantially
all of the assets of Employer (as long as such successor is  capable of
fulfilling the obligations of Employer hereunder).
 

 
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19.           Waiver.  Failure of any party hereto at any time to require
performance by any other party of any provision of this Agreement shall in no
way affect the rights of such first party to require performance of that
provision, and any waiver by any party hereto of any provision of this Agreement
shall not be construed as a waiver of any continuing or succeeding breach of
such provision, a waiver of the provision itself, or a waiver of any rights
under this Agreement.
 
20.           Severability.  If any clause, phrase, provision or portion of this
Agreement or the application thereof to any person or circumstance shall be
invalid or unenforceable under any applicable law, such event shall not affect
or render invalid or unenforceable the remainder of this Agreement and shall not
affect the application of any clause, provision, or portion hereof to other
persons or circumstances.
 
21.           Benefits.  The provisions of this Agreement shall inure to the
benefit of Employer, its successors and assigns, and shall be binding upon
Employer and Employee, its and his heirs, personal representatives and
successors including without limitation Employee’s estate and the executors,
administrators, or trustees of such estate.
 
22.           Relevant Law.  To the extent not governed by the Federal laws of
the United States of America, this Agreement shall be construed and enforced in
accordance with the laws of the State of California.  Any dispute between the
parties hereto not relating to the enforcement of Section 11 or Section 12
hereof shall be settled by arbitration in California in accordance with the then
applicable rules of the American Arbitration Association and judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
 
23.           Notices.  All notices, requests, demands and other communications
in connection with this Agreement shall be made in writing and shall be deemed
to have been given when delivered by hand or two of Employer’s business days
after mailing at any general or branch United States Post Office, by registered
or certified mail postage prepaid, addressed as follows, or to such other
address as shall have been designated in writing by the addressee:
 
 
(a)
If to Employer:

 
Chief Executive Officer
First PacTrust Bancorp, Inc.
610 Bay Boulevard
Chula Vista, California  91910; and

Chief Executive Officer
Pacific Trust Bank
610 Bay Boulevard
Chula Vista, California 91910

 
If to Employee:
 
Richard Herrin
1452 Culver Drive #A-150
Irvine, CA  92604
 

 
12
 
 

 
 
 
24.           Entire Agreement.  This Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements, arrangements,
and communications, whether oral or written, pertaining to the subject matter
hereof, and this Agreement shall not be modified or amended except by written
agreement of Employer and Employee.
 
25.           Captions.  The headings and captions hereof are for convenience
only and shall not affect the construction of this Agreement.
 
26.           Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
constitute but one and the same Agreement, which shall be sufficiently evidenced
for all purposes by any one executed counterpart.
 
27.           Construction.  Employer and the Employee acknowledge that this
Agreement was the result of arms-length negotiations between sophisticated
parties each represented by legal counsel.  Each and every provision of this
Agreement shall be construed as though both parties participated equally in the
drafting of same, and any rule of construction that a document shall be
construed against the drafting party shall not be applicable to this Agreement.
 
28.           Survival.  The obligations contained in this Agreement shall
survive the termination of Employee’s employment with Employer or expiration of
this Agreement as necessary to carry out the intentions of the parties as
described herein.
 
[Signature page follows]

 
13
 
 

 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.
 

 
Employee:
 

 
___________________________________
 

 

 

 
First PacTrust Bancorp, Inc.
 
By:
 

 
___________________________________
 
Its: ________________________________
 

 
Pacific Trust Bank
 
By:
 

 
___________________________________
 
Its: ________________________________
 

 
14
 
 

EXHIBIT A
 

 

 

 

 

 

 
FORM OF RESTRICTED STOCK AGREEMENT
 
 
 
 
 
 
 
 
 
 
 

 
 

 
A-1
 
 

FIRST PACTRUST BANCORP, INC.
RESTRICTED STOCK AGREEMENT

RS No.  ____

Shares of Restricted Stock are hereby awarded on November 17, 2010 by First
PacTrust Bancorp, Inc., a Maryland corporation (the "Corporation"), to Richard
Herrin  (the "Grantee"), in accordance with the following terms and conditions:

1.           Share Award.  Pursuant to Section 4(a) of the Employment Agreement
among the Corporation, Pacific Trust Bank and the Grantee dated as of the date
hereof (the “Employment Agreement”), as an inducement material to the Grantee’s
entering into employment with the Corporation, the Corporation hereby awards to
the Grantee 4,200 shares ("Shares") of common stock of the Corporation ("Common
Stock").

 2.           Restrictions on Transfer and Restricted Period.  During the period
(the "Restricted Period") commencing on the date of this Award Agreement and
terminating on November 17, 2013, Shares with respect to which the Restricted
Period has not lapsed may not be sold, assigned, transferred, pledged, or
otherwise encumbered by the Grantee except, in the event of the death of the
Grantee, by will or the laws of descent and distribution or pursuant to a
"domestic relations order," as defined in Section 414(p)(1)(B) the Internal
Revenue Code of 1986, as amended (the “Code”), or as hereinafter
provided.  Shares with respect to which the Restricted Period has lapsed shall
sometimes be referred to herein as "Vested."

Provided that the Grantee has commenced employment under the Employment
Agreement and does not incur a Termination of Service or termination of
employment prior to the Commencement Date (as defined in the Employment
Agreement), Shares shall become Vested in accordance with the following
schedule:

Date of Vesting
Cumulative Number of Shares Vested
November 17, 2011
1,400
November 17, 2012
2,800
November 17, 2013
4,200

The Compensation Committee of the  Board of Directors of the Corporation (or
such other committee as may be designated by the Board of Directors of the
Corporation)(the “Committee”) shall have the authority, in its discretion, to
accelerate the time at which any or all of the restrictions shall lapse with
respect to any Shares or to remove any or all of such restrictions, whenever the
Committee may determine that such action is appropriate by reason of changes in
applicable tax or other laws, changes in circumstances occurring after the
commencement of the Restricted Period, or any other reason.  As used herein, the
term “Termination of Service” means cessation of service after the Commencement
Date (as defined in the Employment Agreement) for any reason, whether voluntary
or involuntary, so that the affected individual is not a director, advisory
director, employee or advisor of the Corporation or any affiliate of the
Corporation.

 
A-2
 
 

3.           Termination of Service.  Except as provided in Section 8 below, if
the Grantee incurs a Termination of Service for any reason (other than death or
disability), all Shares which are not vested at the time of such Termination of
Service shall upon such Termination of Service be forfeited to the
Corporation.  If the Grantee incurs a Termination of Service by reason of death
or disability, all Shares awarded pursuant to this Award Agreement shall become
Vested at the time of such termination, and the Shares shall not thereafter be
forfeited.  In the event that the employment of Grantee is terminated prior to
the Commencement Date (as defined in the Employment Agreement), all Shares shall
upon such termination be forfeited to the Corporation.

4.           Issuance of the Shares.  Promptly after the date of this Award
Agreement, the Corporation shall recognize the Grantee’s ownership of the Shares
through (i) a crediting of the Shares to a book entry account maintained by the
Corporation (or its transfer agent or other designee) for the benefit of the
Grantee, with appropriate electronic notation of the restrictions on transfer
provided herein, or another similar method, or (ii) the issuance of certificates
representing the Shares in the name of the Grantee, bearing any legend that the
Corporation deems appropriate to reflect the restrictions on transfer provided
herein, to be held in custody by the Corporation or its designee for the benefit
of the Grantee until the Shares represented thereby become Vested.

The Grantee agrees that simultaneously with the execution of this Award
Agreement, the Grantee shall execute the stock powers attached hereto and that
the Grantee shall promptly deliver such stock powers to the Corporation.  The
Grantee further agrees to execute and deliver any and all additional stock
powers and/or other instruments as the Corporation from time to time requests as
it may, in its judgment, deem to be advisable to fulfill the purposes of this
Award Agreement.

5.           Grantee's Rights.  Subject to all limitations provided in this
Award Agreement, the Grantee, as owner of the Shares during the Restricted
Period, shall have all the rights of a stockholder, including, but not limited
to, the right to receive all dividends paid on the Shares and the right to vote
such Shares.

6.           Expiration of Restricted Period.  Upon the lapse or expiration of
the Restricted Period with respect to a portion of the Shares, the Corporation
shall release such Shares to the Grantee (i) by appropriate transfer to an
unrestricted book entry account maintained by the Corporation (or its transfer
agent or other designee) for the benefit of the Grantee (or, if the Grantee is
deceased, to his legal representative) or by other appropriate electronic
notation of the lapse or expiration of the Restricted Period with respect to
such Shares, (ii) by delivering to the Grantee (or, if the Grantee is deceased,
to his legal representative) a certificate issued in respect of such Shares
(without any legend contemplated by Section 4 above), or (iii) by any other
means deemed appropriate by the Corporation.

7.           Adjustments for Changes in Capitalization of the Corporation.  In
the event of any change in the outstanding shares of Common Stock by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
or exchange of shares, merger, consolidation, or any change in the corporate
structure of the Corporation or in the shares of Common Stock, the number and
class of Shares covered by this Award Agreement shall be

 
A-3
 
 

appropriately adjusted by the Committee, whose determination shall be
conclusive.  Any shares of Common Stock or other securities received, as a
result of the foregoing, by the Grantee with respect to Shares subject to the
restrictions contained in Section 2 above shall also be subject to such
restrictions, and any certificate or other instruments representing or
evidencing such shares or securities shall be legended and deposited with the
Corporation in the manner provided in Section 4 above.

8.           Effect of Change in Control.  If a tender offer or exchange offer
for shares of the Corporation (other than such an offer by the Corporation) is
commenced, or if a change in control (as defined below) shall occur, and the
Grantee within twelve months thereafter incurs a Termination of Service for any
reason whatsoever other than Cause (as defined in the Employment Agreement), all
previously unvested Shares shall vest in full upon the happening of such events;
provided, however, that no Shares which have previously been forfeited shall
thereafter become Vested.  As used herein, the term “change in control” means
the occurrence of any of the following three events: (i) any third person,
including a “group” as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, 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 Corporation’s Board of Directors 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 Corporation’s Board of Directors, or (iii) the
stockholders 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

9.           Delivery and Registration of Shares of Common Stock.  The
Corporation's obligation to deliver Shares hereunder shall, if the Committee so
requests, be conditioned upon the receipt of a representation as to the
investment intention of the Grantee, in such form as the Committee shall
determine to be necessary or advisable to comply with the provisions of the
Securities Act of 1933, as amended (the “Securities Act”) or any other federal,
state or local securities legislation. It may be provided that any
representation requirement shall become inoperative upon a 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 hereunder 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.

10.           Grantee Service.  Nothing in this Award Agreement shall limit the
right of the Corporation or any of its Affiliates to terminate the Grantee's
service as a director, advisory director, employee or advisor, or otherwise
impose upon the Corporation or any of its Affiliates any obligation to employ or
accept the services of the Grantee.

11.           Withholding Tax.  Upon the termination of the Restricted Period
with respect to any Shares (or at any such earlier time, if any, that an
election is made by the Grantee under Section 83(b) of the Code, or any
successor thereto), the Corporation may withhold from any payment or
distribution made under the Plan sufficient Shares to cover any applicable

 
A-4
 
 

withholding and employment taxes.  The Corporation shall have the right to
deduct from all dividends paid with respect to Shares the amount of any taxes
which the Corporation is required to withhold with respect to such dividend
payments.

12.           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 Grantee without
the Grantee's (or his legal representative's) written consent.

13.           Grantee Acceptance.  The Grantee shall signify his acceptance of
the terms and conditions of this Award Agreement by signing in the space
provided below, by signing the attached stock powers, and by returning a signed
copy hereof and of the attached stock powers to the Corporation.
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
A-5
 
 

IN WITNESS WHEREOF, the parties hereto have caused this Award Agreement to be
executed as of the date first above written.

   
FIRST PACTRUST BANCORP, INC.
                           
By:
                                       
ACCEPTED:
                                                             
(Street Address)
                             
(City, State & Zip Code)
 

 
A-6
 
 

STOCK POWER

For value received, I hereby sell, assign, and transfer to First PacTrust
Bancorp, Inc.  (the "Corporation") all shares of the capital stock of the
Corporation, standing in my name on the books and records of the aforesaid
Corporation (whether in certificated form or book-entry or similar form), that
are issued to me pursuant to that certain Restricted Stock Agreement, dated
November 17, 2010, to which the Corporation and I are parties (as the same may
from time to time be amended, the “Award Agreement”), and do hereby irrevocably
constitute and appoint the Secretary of the Corporation attorney, with full
power of substitution, to transfer this stock on the books and records of the
aforesaid Corporation.  To the extent the restrictions on transfer of any
portion of such shares under the Award Agreement have lapsed or expired, this
Stock Power shall cease to be of legal effect with respect to that portion of
such shares following their release to me, free of restriction, as provided in
the Award Agreement.

                            _____________________________________________

Dated:

In the presence of:

 
B-1
 
 

STOCK POWER

For value received, I hereby sell, assign, and transfer to First PacTrust
Bancorp, Inc.  (the "Corporation") all shares of the capital stock of the
Corporation, standing in my name on the books and records of the aforesaid
Corporation (whether in certificated form or book-entry or similar form), that
are issued to me pursuant to that certain Restricted Stock Agreement, dated
November 17, 2010, to which the Corporation and I are parties (as the same may
from time to time be amended, the “Award Agreement”), and do hereby irrevocably
constitute and appoint the Secretary of the Corporation attorney, with full
power of substitution, to transfer this stock on the books and records of the
aforesaid Corporation.  To the extent the restrictions on transfer of any
portion of such shares under the Award Agreement have lapsed or expired, this
Stock Power shall cease to be of legal effect with respect to that portion of
such shares following their release to me, free of restriction, as provided in
the Award Agreement.

                               __________________________________________________

Dated:

In the presence of:

 
B-2
 
 

STOCK POWER

For value received, I hereby sell, assign, and transfer to First PacTrust
Bancorp, Inc.  (the "Corporation") all shares of the capital stock of the
Corporation, standing in my name on the books and records of the aforesaid
Corporation (whether in certificated form or book-entry or similar form), that
are issued to me pursuant to that certain Restricted Stock Agreement, dated
November 17, 2010, to which the Corporation and I are parties (as the same may
from time to time be amended, the “Award Agreement”), and do hereby irrevocably
constitute and appoint the Secretary of the Corporation attorney, with full
power of substitution, to transfer this stock on the books and records of the
aforesaid Corporation.  To the extent the restrictions on transfer of any
portion of such shares under the Award Agreement have lapsed or expired, this
Stock Power shall cease to be of legal effect with respect to that portion of
such shares following their release to me, free of restriction, as provided in
the Award Agreement.

                            ________________________________________________

Dated:

In the presence of:

 
B-3
 
 

EXHIBIT B

 

 

 

 

 

 

 

 

 
FORM OF INITIAL GRANT AGREEMENT
 

 

 

 
B-4
 
 

FIRST PACTRUST BANCORP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT-INDUCEMENT GRANT

NQSO NO.  ______

This Option is granted on November 17, 2010 (the "Grant Date"), by First
PacTrust Bancorp, Inc., a Maryland corporation (the "Corporation"), to Richard
Herrin  the "Optionee"), in accordance with the following terms and conditions:

1.  Option Grant and Exercise Period.  Pursuant to Section 5(a) of the
Employment Agreement by and among n the Corporation, Pacific Trust Bank and the
Optionee dated as of the date hereof (the “Employment Agreement”), as an
inducement material to the Optionee’s entering into employment with the
Corporation, the Corporation hereby grants to the Optionee a Non-Qualified Stock
Option ("Option") to purchase an aggregate of 65,000 shares (the "Option
Shares") of the common stock of the Corporation ("Common Stock") at the price
of  $___  per share (the "Exercise Price").

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.,
Chula Vista, California time, on the date 10 years after the Grant Date, such
later time and date being hereinafter referred to as the "Expiration Date,"
subject to earlier vesting and earlier expiration in the event of a Termination
of Service or in the event that Optionee’s employment is terminated prior to the
Commencement Date (as defined in the Employment Agreement), as and to the extent
provided in Section 5.

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 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 Option
Shares to be purchased.

Cumulative Number  of
Option Shares Exercisable
Date
21,666
November 17 , 2011
 
43,333
November 17, 2012
 
65,000
November 17, 2013
   

The notice of exercise of this Option shall be in the form prescribed by the
Compensation Committee of the Board of Directors of the Corporation (or such
other committee as may be designated by the Board of Directors of the
Corporation)(the “Committee”) and directed to the address set forth in Section
10 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

 
B-5
 
 

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 of Common Stock 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 shares of Common Stock 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 Shares of Common Stock.  The Corporation's
obligation to deliver shares of Common Stock hereunder shall, if the Committee
so requests, be conditioned upon the receipt of a representation as to the
investment intention of the Optionee, in such form as the Committee shall
determine to be necessary or advisable to comply with the provisions of the
Securities Act of 1933, as amended (the “Securities Act”) or any other federal,
state or local securities legislation. It may be provided that any
representation requirement shall become inoperative upon a registration of the
Option 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 hereunder 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.

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
distribution or pursuant to a beneficiary designation as described below, or
(ii) pursuant to a "domestic relations order," as defined in Section
414(p)(1)(B) of the Internal Revenue Code of 1986, as amended, or (iii) in a
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.  For the purpose of this Section 4, the Optionee's “immediate
family” shall mean the Optionee's spouse, children and grandchildren.

From time to time, by signing a form furnished to the Corporation, the Optionee
may designate any legal or natural person or persons (who may be designated
contingently or successively) to whom to transfer the unexercised portion this
Option if the Optionee were to die prior to the Expiration Date without having
exercised such unexercised portion. If the Optionee fails to designate a
beneficiary as provided above, or if the designated beneficiary dies before the
Optionee or before such unexercised portion is so transferred, such unexercised
portion shall be transferred to the Optionee’s estate.  For purposes of this
Option, the term “designated beneficiary” means the person or persons designated
by Optionee as Optionee’s beneficiary in the last effective beneficiary
designation form filed with the Corporation.

 
B-6
 
 

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 in accordance with this Section 4.

5.  Termination of Service or Death of the Optionee.  Except as provided in this
Section 5, 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.  As used herein, the term
“Termination of Service” means cessation of service after the Commencement Date
(as defined in the Employment Agreement) for any reason, whether voluntary or
involuntary, so that the Optionee is not an employee, a director or an advisory
director of the Corporation or any affiliate of the Corporation.

If the Optionee incurs a Termination of Service for any reason excluding death
and Termination of Service for Cause (as defined in the Employment Agreement),
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 (after giving effect to any acceleration of
vesting as provided in the last paragraph of this Section 5).  If the Optionee
incurs a Termination of Service for Cause, all rights under this Option shall
expire immediately.

In the event of the death of the Optionee prior to the Optionee's Termination of
Service or during the one year period referred to in the immediately preceding
paragraph, the 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 (after giving effect to
any acceleration of vesting as provided in the last paragraph of this Section
5), exercise this Option at any time within the one year period following the
death 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 pursuant to Section 4 the amount by which the
market value per share of Common Stock on the date of exercise of this Option
shall exceed the Exercise Price per Option Share, multiplied by the number of
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.

In the event that Optionee’s employment is terminated by the Corporation without
Cause (as defined in the Employment Agreement) or is terminated as a result of
the Optionee resigning for Good Reason (as defined in the Employment Agreement),
this Option, to the extent not theretofore vested and exercisable, shall become
fully vested and exercisable and shall remain exercisable for the period
specified above in this Section 5.

In the event that Optionee’s employment is terminated prior to the Commencement
Date (as defined in the Employment Agreement), all rights under this Option
shall expire immediately upon such termination.

6.  Adjustments for Changes in Capitalization of the Corporation.  In the event
of any change in the outstanding shares of Common Stock after the Grant Date by
reason of any

 
B-7
 
 

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 of
Common Stock, the number and class of 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
of Common Stock 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 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 of Common Stock over the
Exercise Price, multiplied by the number of 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
more of such kind or kinds of property, all in the discretion of the Committee.

8.  Stockholder Rights Not Granted by This Option.  The Optionee is not entitled
by virtue hereof to any rights of a stockholder of the Corporation or to notice
of meetings of stockholders or to notice of any other proceedings of the
Corporation.

9.  Withholding Tax.  Where the Optionee or another person is entitled to
receive 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 such Option Shares, or in
lieu thereof, to retain, or sell without notice, a sufficient number of such
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.

10.  Notices.  All notices hereunder to the Corporation shall be delivered or
mailed to it addressed to the Secretary of First PacTrust Bancorp, Inc., 610 Bay
Boulevard, Chula Vista, California  91910.  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.

11.  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, or employee, or otherwise impose upon the
Corporation or any of its affiliates any obligation to employ or accept the
services of the Optionee.

 
B-8
 
 

       12.  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.

13.  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 10 above.

 
B-9
 
 

IN WITNESS WHEREOF, the parties hereto have caused this Award Agreement to be
executed as of the date first above written.

   
FIRST PACTRUST BANCORP, INC.
                           
By:
                                       
ACCEPTED:
                                                             
 
                             
 
 

 

 
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