Exhibit 10.1

 

MANHATTAN BANCORP

 

2010 EQUITY  INCENTIVE PLAN
Adopted March 25, 2010

 

Section 1.              Purpose

 

The purpose of the Manhattan Bancorp 2010 Equity Incentive Plan (the “Plan”) is
to (i) encourage selected employees and directors of Manhattan Bancorp (the
“Company”) and its subsidiaries to acquire a proprietary and vested interest in
the growth and performance of the Company; (ii) generate an increased incentive
to contribute to the Company’s future success and prosperity, thus enhancing the
value of the Company for the benefit of shareholders; and (iii) enhance the
ability of the Company and its subsidiaries to attract and retain individuals of
exceptional talent upon whom, in large measure, the sustained progress, growth
and profitability of the Company depend.

 

Section 2.              Definitions

 

For purposes of the Plan, the following terms have the following meanings:

 

(a)                                  “Award” means any award under the Plan,
including any Option, Tandem SAR, Stand-Alone SAR, Restricted Stock Award, or
share of Phantom Stock.

 

(b)                                 “Award Agreement” means, with respect to
each Award, the signed written agreement between the Company and the Participant
setting forth the terms and conditions of the Award.

 

(c)                                  “Code” means the Internal Revenue Code of
1986, as amended from time to time, and any successor statute.

 

(d)                                 “Fair Market Value” means the fair market
value of the Common Stock as determined by the Board of Directors in good faith
in accordance with any reasonable valuation method, consistent with all
applicable requirements under the Code or other applicable laws, and regulations
promulgated thereunder.

 

(e)           “Holder” means the holder of a Restricted Stock Award granted
under Section 7.

 

(f)                                    “Incentive Option” means any Option
intended to be and designated as an “incentive stock option” within the meaning
of Section 422 of the Code.

 

(g)                                 “Issue Date” shall mean the date established
by the Board of Directors on which Certificates representing shares of
Restricted Stock shall be issued by the Company pursuant to the terms of
Section 7(b).

 

(h)           “Nonqualified Stock Option” means any Option that is not an
Incentive Option.

 

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(i)            “Option” means an option granted under Section 6.

 

(j)            “Optionee” means the holder of an Option granted under Section 6.

 

(k)                                  “Participant” means an employee or director
who is selected by the Board of Directors to receive an Award under the Plan.

 

(l)                                     A share of “Phantom Stock” shall mean
the right, granted pursuant to Section 10, to receive in cash the Fair Market
Value of a share of Stock.

 

(m)                               “Restricted Stock” or “Restricted Stock Award”
means an Award of Stock subject to restrictions, as more fully described in
Section 7.

 

(n)                                 “Restriction Period” means the period
determined by the Board of Directors under Section 7(b).

 

(o)                                 “Stand-Alone SAR” shall mean a stock
appreciation right granted pursuant to Section 9, which is not related to any
Option.

 

(p)                                 “Stock” means the Common Stock, no par
value, of the Company, and any successor security.

 

(q)                                 “Tandem SAR” shall mean a stock appreciation
right granted pursuant to Section 8, which is related to an Option.

 

(r)                                    “Terminating Event” means: (i) the
acquisition of more than fifty percent (50%) of the value or voting power of the
Company’s stock or that of its wholly owned subsidiary,  Bank of Manhattan, N.A.
(the “Bank”) by a person (including an entity) or group; (ii) the acquisition in
a period of twelve (12) months or less of at least thirty-five percent (35%) of
the Bank’s or the Company’s stock by a person or group; (iii) the replacement of
a majority of the Bank’s or the Company’s board of directors in a period of
twelve (12) months or less by directors who were not endorsed by a majority of
the current board members; or (iv) the acquisition in a period of twelve (12)
months or less of forty percent (40%) or more of the Company’s assets by an
unrelated entity.

 

(s)                                  “Termination” means, for purposes of the
Plan, with respect to a Participant, that (a) if the Participant is a director
of the Company, he or she has ceased to be, for any reason, a director and
(b) if the Participant is an employee, he or she has ceased to be, for any
reason, employed by the Company or a subsidiary.

 

(t)                                    “Termination for Cause” in the case of an
employee, shall mean termination for malfeasance or gross misfeasance in the
performance of duties, conviction of illegal activity in connection therewith,
any conduct seriously detrimental to the interests of the Company or a
subsidiary corporation, or removal pursuant to the exercise of regulatory
authority by the Board of Governors of the Federal Reserve System (the “FRB”) or
any applicable bank supervisory agency; and, in any event, the determination of
the Board of Directors with respect thereto shall be

 

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final and conclusive.  In the case of a director, Termination for Cause shall
mean removal pursuant to Sections 302 or 304 of the California Corporations Code
or removal pursuant to the exercise of regulatory authority by the FRB or any
applicable bank supervisory agency.

 

(u)                                 “Vesting Date” means, for an Option or a
portion of an Option, the first date on which the Option or such portion may be
exercised by the Optionee and, for shares of Restricted Stock, the date on which
the shares cease to be forfeitable and become freely transferable shares in the
hands of the Participant.

 

Section 3.              Administration

 

(a)           General.  This Plan shall be administered by the Board of
Directors of the Company (the “Board of Directors”).  The Board of Directors
may, in its sole discretion, from time to time, delegate such power and
authority over the administration of the Plan as the Board of Directors deems
appropriate to a committee composed of not fewer than three (3) directors of the
Company.  Nothing contained herein shall prevent the Board of Directors from
delegating to such Committee full power and authority over the administration of
the Plan.  As used herein, the term “Board of Directors” shall refer either to
the Board of Directors itself or to a duly authorized committee thereof, as
appropriate.

 

Any action of the Board of Directors with respect to administration of the Plan
shall be taken pursuant to a majority vote of its members; provided, however,
that with respect to action by the Board of Directors in granting an option or
other award to an individual director, such action must be authorized by the
required number of directors without counting the interested director, who shall
abstain as to any vote on his or her option or award.  An interested director
may be counted in determining the presence of a quorum at a meeting of the Board
of Directors where such action will be taken.

 

(b)           Authority.  The Board of Directors shall grant Awards to eligible
Participants.  In particular and without limitation, the Board of Directors,
subject to the terms of the Plan, shall:

 

(i)            select the eligible Participants to whom Awards may be granted;

 

(ii)                                  determine whether and to what extent
Awards are to be granted under the Plan;

 

(iii)                               determine the number of shares to be covered
by each Award granted under the Plan; and

 

(iv)                              determine the terms and conditions of any
Award granted under the Plan based upon factors determined by the Board of
Directors.

 

(c)           Board of Directors Determinations Binding.  Subject to the express
provisions of the Plan, the Board of Directors shall have the authority to
construe and interpret the Plan, any Award and any Award Agreement; to define
the terms used therein; to prescribe, amend, and rescind rules and regulations
relating to administration of the Plan, to determine the duration and purposes
of leaves of absence which may be granted to Participants without constituting a

 

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termination of their employment for purposes of the Plan; and to make all other
determinations necessary or advisable for administration of the Plan.  Any
determination made by the Board of Directors pursuant to the provisions of the
Plan with respect to any Award shall be made in its sole discretion at the time
of the grant of the Award or, unless in contravention of any express term of the
Plan or Award, at any later time.  Determinations of the Board of the Directors
on matters referred to in this section shall be final and conclusive, and shall
be binding on all persons, including the Company and Participants.

 

Section 4.              Stock Subject to Plan

 

(a)           Shares Available for Awards.  The total number of shares of the
Company’s authorized but unissued Stock reserved and available for issuance
pursuant to Awards under this Plan shall be 444,348 subject to adjustment as
provided in Section 4(b).  If any Option terminates or expires without being
exercised in full, or if any shares of Stock subject to a Restricted Stock Award
are forfeited, or if an Award otherwise terminates without a payment being made
to the Participant in the form of Stock, the shares issuable under such Option
or Award shall again be available for issuance in connection with Awards.  Any
Award under this Plan shall be governed by the terms of the Plan and any
applicable Award Agreement.

 

(b)           Adjustments.  In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split or other change in
corporate structure affecting the Stock without receipt of consideration by the
Company, such substitution or adjustments shall be made in the aggregate number
of shares of Stock reserved for issuance under the Plan, in the number and
exercise price of shares subject to outstanding Options, and in the number of
shares subject to other outstanding Awards, as may be determined to be
appropriate by the Board of Directors, in its sole discretion; provided,
however, that no fractional shares of Stock shall be issued under the Plan on
account of any such adjustment.

 

Section 5.              Eligibility

 

Awards may be granted to all employees, officers (whether or not they are also
directors) and non-employee directors of the Company and its subsidiaries. 
However, directors of the Company or a subsidiary corporation who are not also
officers or employees of the Company or a subsidiary corporation are not
eligible to receive Incentive Options under the Plan, but only other types of
Awards.

 

Section 6.              Stock Options

 

(a)           Types.  Any Option granted under the Plan shall be in such form as
the Board of Directors may from time to time approve.  The Board of Directors
shall have the authority to grant to any eligible Participant Incentive Options,
Nonqualified Stock Options or both types of Options.

 

(b)           Incentive Options.  Incentive Options may be granted only to
employees of the Company or a Subsidiary.  Any portion of an Option that is not
designated as, or does not qualify as, an Incentive Option shall constitute a
Nonqualified Stock Option.

 

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(c)           Terms and Conditions.  Options granted under the Plan shall be
subject to the following terms and conditions:

 

(i)            Option Term.  Each Option and all rights or obligations
thereunder shall expire on such date as the Board of Directors may determine,
but not later than ten (10) years from the date such Option is granted, and
shall be subject to earlier termination as provided elsewhere in the Plan.  As
to any Incentive Option granted to an Optionee who, immediately before the
option is granted, owns beneficially more than ten percent (10%) of the
outstanding stock of the Company (whether acquired upon exercise of Options or
otherwise), such option must not be exercisable by its terms after five
(5) years from the date of its grant.

 

(ii)           Grant Date.  The time an Option is granted, sometimes referred to
as the date of grant, shall be the day of the action of the Board of Directors
described in Section 3(a) hereof, provided that Optionees do not have the
ability to further negotiate the terms of their grants, and provided further
that the material terms of the grants are communicated to Optionees within a
relatively short period of time following the Board’s action.  In addition, if
appropriate resolutions of the Board of Directors indicate that an Option is to
be granted as of and on some future date, the time such Option is granted shall
be such future date.  If action by the Board of Directors is taken by the
unanimous written consent of its members, the action of the Board of Directors
shall be deemed to be at the time the last Board member signs the consent,
subject to the same requirements concerning communication with Optionees set
forth in the first sentence of this Section 6(a)(ii).  In addition, if required
by applicable accounting rules, the date of grant will not be deemed to occur
unless any shareholder approvals required for the grant of an option under the
Plan or applicable amendments thereto have been obtained.

 

(iii)          Exercise Price.  The exercise price per share of stock subject to
each Option shall be determined by the Board of Directors but shall not be less
than one hundred percent (100%) of the Fair Market Value of such stock at the
time such Option is granted.  As to any Incentive Option granted to an Optionee
who, immediately before the Option is granted, owns beneficially more than ten
percent (10%) of the outstanding stock of the Company, the purchase price must
be at least one hundred ten percent (110%) of the Fair Market Value of the stock
at the time when such Option is granted.  The purchase price of any shares
purchased shall be paid in full in cash at the time of each such purchase.

 

(iv)          Exercisability.  Each Option shall be exercisable in such
installments, which need not be equal, and upon such conditions as the Board of
Directors shall determine; provided, however, that if an Optionee shall not in
any given installment period purchase all of the shares which such Optionee is
entitled to purchase in such installment period, such Optionee’s right to
purchase any shares not purchased in such installment period shall continue
until the expiration of such Option.  No Option or installment thereof shall be
exercisable except with respect to whole shares, and fractional share interests
shall be disregarded except that they may be accumulated in accordance with the
next preceding sentence.

 

(v)           Limit on Exercisability.  The aggregate fair market value
(determined as of the time the Option is granted) of the stock for which any
officer or employee may be granted Incentive Options which are first exercisable
during any one calendar year (under all Incentive

 

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Stock Option Plans of the Company and its subsidiaries) shall not exceed One
Hundred Thousand Dollars ($100,000).

 

(vi)          Method of Exercise; Payment.  Options may be exercised by ten
(10) days written notice delivered to the Company stating the number of shares
with respect to which the Option is being exercised, together with cash in the
amount of the purchase price for such shares.  No fewer than ten (10) shares may
be purchased at one time unless the number purchased is the total number which
may be purchased under the Option.

 

If the shares of Stock to be issued upon the exercise of the Option have been
registered under a currently effective registration statement filed under the
Securities Act of 1933, as amended (the “Act”), Options may also be exercised by
delivering to the Company (i) an exercise notice instructing the Company to
deliver the certificates for the shares purchased to a designated brokerage firm
which shall sell the stock in the market as soon as the Option is exercised; and
(ii) a copy of irrevocable instructions delivered to the brokerage firm to sell
the shares acquired upon exercise of the Option and to deliver to the Company
from the sale proceeds sufficient cash to pay the exercise price and applicable
withholding taxes arising as a result of the exercise, with the balance of the
sales proceeds, if any, after payment of any broker’s commission, to be credited
to the Optionee’s brokerage account.

 

The Company may require any Optionee, or any person to whom an Option is
transferred under Section 6(c)(x) hereof, as a condition of exercising any such
Option, to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Option for such person’s own
account and not with any present intention of selling or otherwise distributing
the stock.  The requirement of providing written assurances, and any assurances
given pursuant to the requirement, shall be inoperative if (i) the shares to be
issued upon the exercise of the Option have been registered under the Act, or
(ii) a determination is made by counsel for the Company that such written
assurances are not required in the circumstances under the then applicable state
or federal securities laws.

 

(vii)         Compliance With Applicable Laws.  No shares of Common Stock shall
be issued upon exercise of any Option, and an Optionee shall have no right or
claim to such shares, unless and until: (i) payment in full as provided
hereinabove has been received by the Company; (ii) in the opinion of the counsel
for the Company, all applicable requirements of law and of regulatory bodies
having jurisdiction over such issuance and delivery have been fully complied
with; and (iii) if required by federal or state law or regulation, the Optionee
shall have paid to the Company the amount, if any, required to be withheld on
the amount deemed to be compensation to the Optionee as a result of the exercise
of his or her Stock Option, or made other arrangements satisfactory to the
Company, in its sole discretion, to satisfy applicable income tax withholding
requirements.

 

(viii)        Cessation of Employment; Disability.  Except as provided in
Subsections 6(c)(i) above, if an Optionee ceases to be employed by or to serve
as a director of the Company or a subsidiary corporation for any reason other
than death, disability, or cause such Optionee’s Option shall expire thirty (30)
days thereafter, and during such period after such Optionee ceases to be an
employee or director, such Option shall be exercisable only as to those shares
with respect to which installments, if any, had accrued as of the date on which
the

 

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Optionee ceased to be employed by or ceased to serve as a director of the
Company or such subsidiary corporation.  Except as provided in Subsections
6(c)(i) above or 6(c)(ix) below, if an Optionee ceases to be employed by or
ceases to serve as a director of the Company or a subsidiary corporation by
reason of disability (within the meaning of Section 22(e)(3) of the Code), such
Optionee’s Option shall expire not later than one (1) year thereafter, and
during such period after such Optionee ceases to be an employee or director such
Option shall be exercisable only as to those shares with respect to which
installments, if any, had accrued as of the date on which the Optionee ceased to
be employed by or ceased to serve as a director of the Company or such
subsidiary corporation.

 

(ix)           Termination of Employment for Cause.  If an Optionee’s employment
by or service as a director of the Company or a subsidiary corporation is
terminated for Cause, such Optionee’s Option shall expire immediately; provided,
however, that the Board of Directors may, in its sole discretion, within thirty
(30) days of such termination, waive the expiration of the Option by giving
written notice of such waiver to the Optionee at such Optionee’s last known
address.  In the event of such waiver, the Optionee may exercise the Option only
to such extent, for such time, and upon such terms and conditions as if such
Optionee had ceased to be employed by or ceased to serve as a director of the
Company or such subsidiary corporation upon the date of such termination for a
reason other than Cause, disability, or death.

 

(x)            Death of Optionee.  Except as provided in Subsection
6(c)(i) above, if any Optionee dies while employed by or serving as a director
of the Company or a subsidiary corporation or during the 30-day or one-year
period referred to in Subsection 6(c)(viii) above, such Optionee’s Option shall
expire one (1) year after the date of such death.  After such death but before
such expiration, the persons to whom the Optionee’s rights under the Option
shall have passed by Will or by the applicable laws of descent and distribution
shall have the right to exercise such Option to the extent that installments, if
any, had accrued as of the date of such Optionee’s death.

 

Section 7.              Restricted Stock Awards

 

(a)           General.  Restricted Stock Awards may be issued hereunder to
Participants, for no cash consideration or for such amount as the Board of
Directors in its discretion shall determine, either alone or in addition to
other Awards granted under the Plan. The provisions of Restricted Stock Awards
need not be the same with respect to each recipient.  The Board of Directors may
provide upon grant of a Restricted Stock Award that any shares of Restricted
Stock that may be purchased by the Holder in cash and are subsequently forfeited
by the Holder prior to the Vesting Date therefor shall be reacquired by the
Company at the purchase price originally paid therefor by the Holder, if
applicable.

 

(b)           Issue Date, Vesting Date and Conditions to Vesting.  At the time
of the grant of a Restricted Stock Award, the Board of Directors shall establish
an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with respect to
such shares as well as any vesting conditions.  The Board of Directors may
provide upon grant of a Restricted Stock Award that different numbers or
portions of the shares subject to the Award shall have different Vesting Dates. 
The Board of Directors also may provide that the Vesting Dates will be
accelerated upon the subsequent occurrence of such event (e.g., early retirement
of the Holder) as the Board of

 

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Directors may specify.  The Board of Directors also may establish upon grant of
a Restricted Stock Award that some or all of the shares subject thereto shall be
subject after the Vesting Date to additional restrictions upon transfer or sale,
although not to forfeiture.  The Board may impose such restrictions or
conditions to the vesting of a Restricted Stock Award as it, in its absolute
discretion, deems appropriate.  By way of example and not by way of limitation,
the Board of Directors may require, as a condition to the vesting of a
Restricted Stock Award, that the Participant or the Company achieves such
performance goals as the Board of Directors may specify.

 

(c)           Issuance of Certificates.  Reasonably promptly after the Issue
Date with respect to shares of Restricted Stock, the Company shall cause to be
issued a stock certificate, registered in the name of the Participant to whom
such shares were granted, evidencing such shares; provided, that the Company
shall not cause such a stock certificate to be issued unless it has received a
stock power duly endorsed in blank with respect to such shares.  Each such stock
certificate shall bear the following legend:

 

“The transferability of this certificate and the shares of stock represented
hereby are subject to the restrictions, terms and conditions (including
forfeiture provisions and restrictions against transfer) contained in the
Manhattan Bancorp 2010 Stock Incentive Plan and related Award Agreement, and
such rules, regulations and interpretations as Manhattan Bancorp’s Board of
Directors may adopt.  Copies of the Plan, Award Agreement and rules, regulations
and interpretations, if any, are on file at the principal executive office of
Manhattan Bancorp, 2141 Rosecrans Avenue, Suite 1160, El Segundo, California 
90425.”

 

Such legend shall not be removed until such shares vest pursuant to the terms
hereof.

 

Each certificate issued pursuant to this Section 7(c) together with the stock
powers relating to the shares of Restricted Stock evidenced by such certificate,
shall be held by the Company unless the Board of Directors determines otherwise.

 

(d)           Consequences of Vesting.  Upon the vesting of a share of
Restricted Stock pursuant to the terms of the Plan and the applicable Award
Agreement, the restrictions on transfer described in Section 7(c) shall cease to
apply to such share.  Reasonably promptly after a share of Restricted Stock
vests, the Company shall cause to be delivered to the Participant to whom such
shares were granted, a certificate evidencing such shares, free of the legend
set forth in Section 7(c).  Notwithstanding the foregoing, such share still may
be subject to restrictions on transfer as a result of applicable securities
laws.  If a Restricted Stock Award is partially vested, the Company may continue
to hold the originally issued certificate until fully vested unless the
Participant specifically requests the issuance of a certificate for just the
vested shares.  Reasonably promptly after any such request, the Company shall
cause the certificates to be issued separately for the restricted and
unrestricted shares, and shall deliver the unrestricted certificate to the
Participant.  Notwithstanding the foregoing, such shares shall be subject to
restrictions on transfer as a result of applicable securities laws.

 

(e)           Dividends.  If and to the extent the Board of Directors so
specifies upon grant, the Holder of shares of Restricted Stock shall be entitled
to receive from the Company, after the grant date and until the Vesting Date,
dividends or other distributions with respect to the shares

 

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identical or comparable in financial value to the dividends and other
distributions that would have been received by the Holder had the shares not
been subject to the restrictions on Restricted Stock imposed under the Plan, and
the Holder shall not be required to return any such distributions to the Company
in the event of forfeiture of the Restricted Stock; provided that any such
dividends or distribution payable to the Holder that constitute Stock or other
equity securities of the Company shall be issued in the same manner and subject
to the same restrictions and conditions as apply to the shares of Restricted
Stock as to which such dividends and distributions are paid.  The Board of
Directors in its discretion may require that any dividends paid on shares of
Restricted Stock shall be held in escrow until all restrictions on such shares
have lapsed.

 

(f)            Voting Rights.  If and to the extent the Board of Directors so
specifies upon grant, the Holder of shares of Restricted Stock shall be entitled
to vote or direct the voting of such shares after the grant date and until the
Vesting Date.

 

(g)           Termination.  Except to the extent otherwise provided in the Award
Agreement and pursuant to this section, in the event of a Termination of
employment or directorship during the Restriction Period, all shares still
subject to restriction shall be forfeited by the Participant.  If the recipient
has paid cash for the Award, the stock will be repurchased at the same price
originally paid by the Participant.  In the event that the Company requires such
a return of shares, it also shall have the right to require the return of all
dividends paid on such shares, whether by termination of any escrow arrangement
under which such dividends are held or otherwise, unless otherwise specified in
the applicable Award Agreement.

 

Section 8.              Tandem SARs

 

The Board of Directors may grant in connection with any Option granted hereunder
one or more Tandem SARs relating to a number of shares of Stock less than or
equal to the number of shares of Stock subject to the related Option.  A Tandem
SAR may be granted at the same time as, or, in the case of a Non-Qualified Stock
Option, subsequent to the time that its related Option is granted.

 

(a)           Benefit Upon Exercise.  The exercise of a Tandem SAR with respect
to any number of shares of Stock shall entitle the Participant to a payment, for
each such share, equal to the excess of (i) the Fair Market Value of a share of
Stock on the exercise date over (ii) the option exercise price of the related
Option. Such payment shall be made as soon as practicable after the effective
date of such exercise.  The Board of Directors shall specify at the time of
grant that the value of the SAR shall be paid in cash, in Stock reserved under
the Plan, or a combination of both, or that the Participant can choose the
method of payment at the time of exercise.

 

(b)           Term and Exercise of Tandem SARs.

 

(i)            A Tandem SAR shall be exercisable only if and to the extent that
its related Option is exercisable.

 

(ii)           The exercise of a Tandem SAR with respect to a number of shares
of Stock shall cause the immediate and automatic cancellation of its related

 

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Option with respect to an equal number of shares. The exercise of an Option, or
the cancellation, termination or expiration of an Option (other than pursuant to
this Section 8(b)(ii)), with respect to a number of shares of Stock shall cause
the automatic and immediate cancellation of any related Tandem SARs to the
extent that the number of shares of Stock remaining subject to such Option is
less than the number of shares subject to such Tandem SARs.

 

Tandem SARs shall be cancelled in the order in which they became exercisable.

 

(iii)          A Tandem SAR may be exercised for all or any portion of the
shares as to which it is exercisable; provided, that no partial exercise of a
Tandem SAR shall be for an aggregate exercise price of the related Option of
less than $1,000.  The partial exercise of a Tandem SAR shall not cause the
expiration, termination or cancellation of the remaining portion thereof.

 

(iv)          No Tandem SAR shall be assignable or transferable otherwise than
together with its related Option.

 

(v)           A Tandem SAR shall be exercised by delivering notice to the
Company’s principal office, to the attention of its Secretary (or the
Secretary’s designee), no less than two (2) business days in advance of the
effective date of the proposed exercise. Such notice shall be accompanied by the
applicable Award Agreement, shall specify the number of shares of Stock with
respect to which the Tandem SAR is being exercised and the effective date of the
proposed exercise and shall be signed by the Participant or other person then
having the right to exercise the Option to which the Tandem SAR is related. Such
notice may be withdrawn at any time prior to the close of business on the
business day immediately preceding the effective date of the proposed exercise.

 

(c)           Effect of Termination of Employment.  The provisions set forth in
Section 6(vi) through (viii) with respect to the exercise of Options following
cessation or termination of employment or service as a director shall apply as
well to the exercise of Tandem SARs.

 

Section 9.              Stand-Alone SARs

 

(a)           Exercise Price.  The exercise price per share of a Stand-Alone SAR
shall be determined by the Board of Directors at the time of grant, but shall in
no event be less than the Fair Market Value of a share of Stock on the date of
grant.

 

(b)           Benefit Upon Exercise.  The exercise of a Stand-Alone SAR with
respect to any number of shares of Stock shall entitle the Participant to a
payment, for each such share, equal to the excess of (i) the Fair Market Value
of a share of Stock on the exercise date over (ii) the exercise price of the
Stand-Alone SAR. Such payments shall be made as soon as practicable.  The Board
of Directors shall specify at the time of grant that the value of the SAR shall
be paid in cash, in Stock reserved under the Plan, or a combination of both, or
that the Participant can choose the method of payment at the time of exercise.

 

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(c)           Term and Exercise of Stand-Alone SARs.

 

(i)            A Stand-Alone SAR shall become cumulatively exercisable as
provided in the applicable Award Agreement.  The Board of Directors shall
determine the vesting schedule and expiration date of each Stand-Alone SAR.

 

(ii)           A Stand-Alone SAR may be exercised for all or any portion of the
shares as to which it is exercisable; provided, that no partial exercise of a
Stand-Alone SAR shall be for an aggregate exercise price of less than $1,000.
 The partial exercise of a Stand-Alone SAR shall not cause the expiration,
termination or cancellation of the remaining portion thereof.

 

(iii)          A Stand-Alone SAR shall be exercised by delivering notice to the
Company’s principal office, to the attention of its Secretary (or the
Secretary’s designee), no less than two (2) business days in advance of the
effective date of the proposed exercise.  Such notice shall be accompanied by
the applicable Plan Agreement, shall specify the number of shares of Stock with
respect to which the Stand-Alone SAR is being exercised, and the effective date
of the proposed exercise, and shall be signed by the Participant.  The
Participant may withdraw such notice at any time prior to the close of business
on the business day immediately preceding the effective date of the proposed
exercise.

 

(d)           Effect of Termination of Employment.  The provisions set forth in
Section 6(vi) through (viii) with respect to the exercise of Options following
cessation or termination of employment or service as a director shall apply as
well to the exercise of Stand-Alone SARs.

 

Section 10.  Phantom Stock

 

(a)           Vesting Date.  At the time of the grant of shares of Phantom
Stock, the Board of Directors shall establish a Vesting Date or Vesting Dates
with respect to such shares.  The Board of Directors may divide such shares into
classes and assign a different Vesting Date for each class. Provided that all
conditions to the vesting of a share of Phantom Stock imposed pursuant to
Section 10(c) are satisfied, and except as provided in Section 10(d), upon the
occurrence of the Vesting Date with respect to a share of Phantom Stock, such
share shall vest.

 

(b)           Benefit Upon Vesting.  Upon the vesting of a share of Phantom
Stock, the Participant shall be entitled to receive in cash, within 30 days of
the date on which such share vests, an amount equal to the sum of (i) the Fair
Market Value of a share of Stock on the date on which such share of Phantom
Stock vests and (ii) the aggregate amount of cash dividends paid with respect to
a share of Stock during the period commencing on the date on which the share of
Phantom Stock was granted and terminating on the date on which such share vests.

 

(c)           Conditions to Vesting.  At the time of the grant of shares of
Phantom Stock, the Board of Directors may impose such restrictions or conditions
to the vesting of such shares as it, in its absolute discretion, deems
appropriate. By way of example and not by way of limitation, the Board of
Directors may require, as a condition to the vesting of any class or classes of
shares

 

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of Phantom Stock, that the Participant or the Company achieves such performance
goals as the Board of Directors may specify.

 

(d)           Effect of Termination of Employment.  Unless the applicable Award
Agreement or the Board of Directors provides otherwise, shares of Phantom Stock
that have not vested, together with any dividends credited on such shares, shall
be forfeited upon the Participant’s termination of employment for any reason.

 

(e)           Compliance with Section 409A.  In the event the Board of Directors
shall grant any shares of Phantom Stock, the Company shall takes such steps as
may be necessary to insure that such award complies with the provisions of
Section 409A of the Code.

 

Section 11.            Terminating Events

 

(a)           Impact of Event.  In the event of a “Terminating Event” as defined
in Section 2(r), any surviving corporation or entity or acquiring corporation or
entity, or affiliate of such corporation or entity, may assume any Options,
Restricted Stock Awards or any other Awards outstanding under the Plan or may
substitute similar awards for those outstanding under the Plan.  In the event
any surviving corporation or entity or acquiring corporation or entity in a
Terminating Event does not assume such Options or Awards or does not substitute
similar Options or other Awards for those outstanding under the Plan, then
(i) the vesting of such Options or other Awards outstanding under the Plan shall
be accelerated and made fully exercisable and all restrictions thereon shall
lapse ten (10) days prior to the closing of the Terminating Event; and (ii) upon
the closing of the Terminating Event, any Options outstanding under the Plan
shall be terminated if not exercised prior to the closing, unless the Board of
Directors in its sole discretion determines prior to the effective date of the
Terminating Event that all outstanding Options and the Plan itself should
continue in full force and effect.  In the case of such a determination by the
Board of Directors, or in the event that any pending Terminating Event does not
occur, the Plan and all outstanding Options and other Awards thereunder shall
continue in force with all original vesting schedules in effect.

 

(b)           Notice to Participants of Terminating Event.  Not less than thirty
(30) days prior to a Terminating Event, the Board of Directors shall notify each
Participant of the pendancy of the Terminating Event.  With respect to Holders
of Restricted Stock or Participants with Stand-Alone SARs or Phantom Stock, the
notice shall simply inform such Participants of the pendancy of the Terminating
Event and of the fact that the restrictions on their Restricted Stock will
lapse, or that they will become entitled to their payments pursuant to their
Stand-Alone SARs or Phantom Stock, on the closing of the Terminating Event.  In
the case of Optionees, the notice shall inform such Optionees that their Options
shall, notwithstanding the provisions of Sections 6(c)(iv) hereof, become
exercisable in full and not only as to those shares with respect to which
installments, if any, have then accrued, subject, however, to earlier expiration
or termination as provided elsewhere in the Plan, and further subject to the
condition that the Terminating Event in fact occurs.  Optionees shall then be
entitled to exercise any Options or portions thereof commencing on the tenth
(10th) day, and ending on the third (3rd) day, prior to the Terminating Event,
or at such other times as may be specified by the Board of Directors in
connection with the Terminating Event.  In the case of Participants with Tandem
SARs, the notice shall inform such Participant of the need to choose between the
exercise of the SAR or the

 

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underlying Option and of the fact that any remaining unexercised portion of the
Option or the Tandem SAR shall lapse if not exercised within the required time
period.

 

Section 12.            Acceleration of Options or other Awards.

 

Notwithstanding the provisions of Sections 6(c)(iv), 7(b), 8(b)(i), 9(c)(i) or
10(a)  hereof or any provision to the contrary contained in any Award Agreement,
the Board of Directors, in its sole discretion, may accelerate the vesting of
all or any Award then outstanding.  The decision by the Board of Directors to
accelerate an Award or to decline to accelerate an Award shall be final.  In the
event of the acceleration of Options or SARs as the result of a decision by the
Board of Directors pursuant to this Section 12, each outstanding Option or SAR
so accelerated shall be exercisable for a period from and after the date of such
acceleration and upon such other terms and conditions as the Board of Directors
may determine in its sole discretion, provided that such terms and conditions
(other than terms and conditions relating solely to the acceleration of
exercisability and the related termination of an Option or SAR) may not
adversely affect the rights of any Participant without the consent of the
Participant so adversely affected.  Any outstanding Option or SAR which has not
been exercised by the holder at the end of such period shall terminate
automatically at that time.

 

Section 13.            General Provisions

 

(a)           Award Grants.  Any Award may be granted either alone or in
addition to other Awards granted under the Plan.  Subject to the terms and
restrictions set forth elsewhere in the Plan, the Board of Directors shall
determine the consideration, if any, payable by the Participant for any Award
and, in addition to those set forth in the Plan, any other terms and conditions
of the Awards.  The Board of Directors may condition the grant or payment of any
Award upon the attainment of specified performance goals or such other factors
or criteria, including vesting based on continued service on the Board or
employment, as the Board of Directors shall determine.  Performance objectives
may vary from Participant to Participant and among groups of Participants and
shall be based upon such Company, subsidiary, group or division factors or
criteria as the Board of Directors may deem appropriate, including, but not
limited to, earnings per share or return on equity.  The other provisions of
Awards also need not be the same with respect to each recipient.  Unless
specified otherwise in the Plan or by the Board of Directors, the date of grant
of an Award shall be the date of action by the Board of Directors to grant the
Award, provided that Participants do not have the ability to further negotiate
the terms of their awards, and provided further than the awards will be
communicated to Participants within a relatively short period of time following
the Board’s action.

 

(b)           Award Agreement.  As soon as practicable after the date of an
Award grant, the Company and the Participant shall enter into a written Award
Agreement identifying the date of grant, and specifying the terms and conditions
of the Award.  Options and SARs are not exercisable until after execution of the
Award Agreement by the Company and the Participant, but a delay in execution of
the Award Agreement shall not affect the validity of the Option or SAR grant.

 

(c)           Certificates; Transfer Restrictions.  All certificates for shares
of Stock or other securities delivered under the Plan shall be subject to such
stock transfer orders, legends and

 

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other restrictions as the Board of Directors may deem advisable under the rules,
regulations and other requirements of the SEC, any market in which the Stock is
then traded and any applicable federal, state or foreign securities law.

 

(d)           Tax Withholding.  Whenever shares of Stock are issued or to be
issued pursuant to Awards, the Company shall have the right to require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state, local or other withholding tax requirements if, when, and to the extent
required by law (whether so required to secure for the Company an otherwise
available tax deduction or otherwise) prior to the delivery of any certificate
or certificates for such shares.  The obligations of the Company under the Plan
shall be conditional on satisfaction of all such withholding obligations and the
Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the Participant.  With the
approval of the Board, which it shall have sole discretion to grant, the
Participant may elect to satisfy an applicable withholding requirement, in whole
or in part, by having the Company withhold from delivery shares of Stock having
a value equal to the amount of tax to be withheld. Such shares shall be valued
at their fair market value on the date as of which the amount of tax to be
withheld is determined.  Fractional share amounts shall be settled in cash.

 

(e)           Notification of Election Under Section 83(b) of the Code.  If any
Participant shall, in connection with the acquisition of shares of Restricted
Stock under the Plan, make the election permitted under Section 83(b) of the
Code (i.e., an election to include in gross income in the year of transfer the
amounts specified in Section 83(b)), such Participant shall notify the Company
of such election within ten days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under the authority of Section 83(b).

 

(f)            Transferability.  No Award shall be assignable or otherwise
transferable by the Participant other than by will or by the laws of descent and
distribution.  During the life of a Participant, an Award shall be exercisable,
and any elections with respect to an Award may be made, only by the Participant
or the Participant’s guardian or legal representative.

 

(g)           Adjustment of Awards; Waivers.  The Board of Directors may adjust
the performance goals and measurements applicable to Awards (i) to take into
account changes in law and accounting and tax rules, (ii) to make such
adjustments as the Board of Directors deems necessary or appropriate to reflect
the inclusion or exclusion of the impact of extraordinary or unusual items,
events or circumstances in order to avoid windfalls or hardships, and (iii) to
make such adjustments as the Board of Directors deems necessary or appropriate
to reflect any material changes in business conditions.  In the event of
hardship or other special circumstances of a Participant and otherwise in its
discretion, the Board of Directors may waive in whole or in part any or all
restrictions, conditions, vesting, or forfeiture with respect to any Award
granted to such Participant.

 

(h)           Non-Competition.  The Board of Directors may condition its
discretionary waiver of a forfeiture, the acceleration of vesting at the time of
Termination of a Participant holding any unexercised or unearned Award, the
waiver of restrictions on any Award, or the extension of the expiration period
to a period not longer than that provided by the Plan upon such

 

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Participant’s agreement (and compliance with such agreement) (i) not to engage
in any business or activity competitive with any business or activity conducted
by the Company and (ii) to be available for consultations at the request of the
Company’s management, all on such terms and conditions (including conditions in
addition to (i) and (ii)) as the Board of Directors may determine.

 

(i)            Regulatory Compliance.  Each Award under the Plan shall be
subject to the condition that, if at any time the Board shall determine that
(i) the listing, registration or qualification of the shares of Stock upon any
securities exchange or for trading in any securities market or under any state
or federal law, (ii) the consent or approval of any government or regulatory
body, or (iii) an agreement by the Participant with respect thereto, is
necessary or desirable, then such Award shall not be consummated in whole or in
part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Board.

 

(j)            Rights as Shareholder.  Unless the Plan or the Board of Directors
expressly specifies otherwise, an Optionee shall have no rights as a shareholder
with respect to any shares covered by an Option until the stock certificates
representing the shares are actually delivered to the Optionee.  Except as
specified in Section 4(b), no adjustment shall be made for dividends or other
rights for which the record date is prior to the date the certificates are
delivered.  The rights of Holders shall be as specified in their Award
Agreements, as determined by the Board of Directors in accordance with Section 7
hereof.

 

(k)           Beneficiary Designation.  The Board of Directors, in its
discretion, may establish procedures for a Participant to designate a
beneficiary to whom any amounts payable in the event of the Participant’s death
are to be paid.

 

(l)            Additional Plans.  Nothing contained in the Plan shall prevent
the Company or a subsidiary from adopting other or additional compensation
arrangements for its directors and employees.

 

(m)          No Employment Rights; No Right to Directorship.  Neither the
adoption of this Plan nor the grant of any Award hereunder shall (i) confer upon
any employee any right to continued employment nor shall it interfere in any way
with the right of the Company or a subsidiary to terminate the employment of any
employee at any time; or (ii) confer upon any Participant any right with respect
to continuation of the Participant’s membership on the Board or interfere in any
way with provisions in the Company’s Articles of Incorporation and Bylaws
relating to the election, appointment, terms of office, and removal of members
of the Board.

 

(n)           Governing Law.  The Plan and all Awards shall be governed by and
construed in accordance with the laws of the State of California.

 

(o)           Use of Proceeds.  All cash proceeds to the Company under the Plan
shall constitute general funds of the Company.

 

(p)           Assumption by Successor.  The obligations of the Company under the
Plan and under any outstanding Award may be assumed by any successor
corporation, which for purposes of the Plan shall be included within the meaning
of “Company.”

 

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Section 14.            Amendments and Termination

 

The Board may amend, alter or discontinue the Plan or any Award, but no
amendment, alteration or discontinuance shall be made which would impair the
rights of a Participant under an outstanding Award without the Participant’s
consent.  No amendment, alteration or discontinuance shall require shareholder
approval unless it would:

 

(a)           increase in the total number of shares reserved for issuance
pursuant to Awards under the Plan;

 

(b)           change the minimum option price for Options;

 

(c)           increase the maximum term of Awards provided for herein;

 

(d)           expand the types of awards which may be issued under the Plan; or

 

(e)           permit Awards to be granted to anyone other than a director or an
officer or employee of the Company or a subsidiary corporation.

 

Any amendment or modification requiring shareholder approval shall be deemed
adopted as of the date of the action of the Board of Directors effecting such
amendment or modification and shall be effective immediately, unless otherwise
provided therein, subject to approval thereof within twelve (12) months before
or after the effective date by (i) a majority of the shares of the Company’s
Stock represented and voting in person or by proxy at a duly held shareholders’
meeting or (ii) the written consent of the holders of a majority of the
Company’s outstanding shares of Stock.

 

Section 15.            Effective Date of Plan

 

The Plan shall be deemed adopted as of the date first shown herein and shall be
effective immediately, subject to approval hereof within twelve (12) months of
said date by (i) a majority of the shares of the Company’s Stock represented and
voting in person or by proxy at a duly held shareholders’’ meeting; or (ii) the
written consent of the holders of a majority of the Company’s outstanding shares
of Stock.

 

Section 16.            Term of Plan

 

No Award shall be granted on or after March 25, 2020, but Awards granted prior
to March 25, 2020 may extend beyond that date.

 

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