**Exhibit 10.6**

 

NATIONALMERCANTILE BANCORPAMENDED 1996 STOCK INCENTIVE PLAN

 

(Amendedas of June 6, 2002)

 

Section1.       PURPOSE

 

The purpose of the 1996Stock Incentive Plan (the “1996 Plan”) of National Mercantile Bancorp, aCalifornia corporation and a registered bank holding company under the BankHolding Company Act of 1956, as amended (the “Company”), is to enable theCompany to attract, retain and motivate its employees and independentcontractors by providing for or increasing the proprietary interests of suchemployees and independent contractors in the Company, and to enable the Companyto attract, retain and motivate its nonemployee directors and further aligntheir interest with those of the shareholders of the Company by providing foror increasing the proprietary interest of such directors in the Company.

 

2.             PERSONS ELIGIBLE

 

Each director, officer,employee or independent contractor of the Company or any of its subsidiaries(each, a “Participant”) shall be eligible to be considered for the grant of anAward (as hereinafter defined) under the 1996 Plan.  Directors who are not employees (“Nonemployee Directors”) mayreceive awards in addition to those described under Section 10 of the 1996Plan.

 

3.             AWARDS

 

(a)           The Committee (as hereinafter defined) responsible foradministration of the 1996 Plan is authorized to enter into any type ofarrangement on behalf of the Company with a Participant that is notinconsistent with the provisions of the 1996 Plan and that, by its terms,involves or might involve the issuance of (i) shares of common stock of theCompany (“Common Shares”) or (ii) Derivative Security (as such term is definedin Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as amended(the “Exchange Act”), as such rule may be amended from time to time) with anexercise or conversion privilege at a price related to the Common Shares orwith a value derived from the value of the Common Shares. The entering into ofany such arrangement is referred to herein as the grant of an “Award.”

 

(b)           Awards are not restricted to any specified form orstructure and may include, without limitation, sales or bonuses of stock,restricted stock, stock options, reload stock options, stock purchase warrants,other rights to acquire stock, securities convertible into or redeemable forstock, stock appreciation rights, phantom stock, dividend equivalents,performance units or performance shares, and an Award may consist of one suchsecurity or benefit, or two or more of them in tandem or in the alternative.

 

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(c)           Awards my be issued, and Common Shares may be issuedpursuant to an Award, for any lawful consideration as determined by theCommittee, including, without limitation, services rendered by the recipient ofsuch Award.

 

(d)           Subject to the provisions of the 1996 Plan, the Committee,in its sole and absolute discretion, shall determine all of the terms andconditions of each Award granted hereunder, which terms and conditions mayinclude, among other things:

 

(i)            a provision permitting the recipientof such Award, including any recipient who is a director or officer of theCompany, to pay the purchase price of the Common Shares or other propertyissuable pursuant to such Award, or such recipient’s tax withholding obligationwith respect to such issuance, in whole or in part, by any one or more of thefollowing:

 

(A)          the delivery of cash;

 

(B)           the delivery of other property deemedacceptable by the Committee;

 

(C)           the delivery of previously ownedshares of capital stock of the Company (including “pyramiding”); or

 

(D)          a reduction in the amount of CommonShares or other property otherwise issuable pursuant to such Award.

 

(ii)           a provision conditioning oraccelerating the receipt of benefits pursuant to such Award, eitherautomatically or in the discretion of the Committee, upon the occurrence ofspecified events, including, without limitation, a change of control of theCompany (as defined by the Committee), an acquisition of a specified percentageof the voting power of the Company, the dissolution or liquidation of theCompany, a sale of substantially all of the property and assets of the Companyor an event of the type described in Section 7 hereof; or

 

(iii)          a provision required in order for suchAward to qualify as an incentive stock option (an “Incentive Stock Option”)under Section 422 of the Internal Revenue Code of 1986, as amended (the“Code”); ***provided,however,*** that no Award issued to any Nonemployee Director or anyindependent contractor of the Company shall qualify as an Incentive StockOption.

 

Section 4.               STOCK SUBJECT TO THE 1996 PLAN

 

(a)           At any time, the aggregate number of Common Shares issuedor issuable pursuant to all Awards (including all Incentive Stock Options)granted under the 1996 Plan shall not exceed 548,510 shares subject toadjustment as provided in Section 7 hereof.

 

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(b)           For purposes of Section 4(a) hereof, the aggregate numberof Common Shares issued or issuable pursuant to Awards granted under the 1996Plan shall at any time be deemed to be equal to the sum of the following:

 

(i)            the number of Common Shares thatwere issued prior to such time pursuant to Awards granted under the 1996 Plan,other than Common Shares that were subsequently reacquired by the Companypursuant to the terms and conditions of such Awards and with respect to whichthe holder thereof received no benefits of ownership such as dividends; plus

 

(ii)           the number of Common Shares that wereotherwise issuable prior to such time pursuant to Awards granted under the 1996Plan, but that were withheld by the Company as payment of the purchase price ofthe Common Shares issued pursuant to such Awards or as payment of therecipient’s tax withholding obligation with respect to such issuance; plus

 

(iii)          the maximum number of Common Sharesthat are or may be issuable at or after such time pursuant to Awards grantedunder the 1996 Plan prior to such time.

 

Section 5.               DURATION

 

Unless sooner terminatedpursuant to Section 8 below, the 1996 Plan shall terminate on March 28,2006.  No Awards shall be granted underthe 1996 Plan while the 1996 Plan is suspended or after it is terminated.

 

Section 6.               ADMINISTRATION

 

(a)           The 1996 Plan shall be administered by a committee (the “Committee”)of the Board of Directors of the Company (the “Board”) consisting of two ormore directors, each of whom:  (i) is a“disinterested person” (as such term is defined in Rule 16b-3 promulgated underthe Exchange Act, as such Rule may be amended from time to time); and (ii) isan “outside director” within the meaning of Section 162(m) of the Code. Membersof the Committee shall serve at the pleasure of the Board, and the Board mayfrom time to time remove members from or add members to, the Committee.

 

(b)           Subject to the provisions of the 1996 Plan, the Committeeshall be authorized and empowered to do all things necessary or desirable inconnection with the administration of the 1996 Plan, including, withoutlimitation, the following:

 

(i)            adopt, amend and rescind rules andregulations relating to the 1996 Plan;

 

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(ii)           determine which persons areParticipants and to which of such Participants, if any, Awards shall be grantedhereunder;

 

(iii)          grant Awards to Participants anddetermine the terms and conditions thereof, including the number of CommonShares issuable pursuant thereto;

 

(iv)          determine the terms and conditions ofthe Nonemployee Director Options that are automatically granted hereunder, otherthan the terms and conditions specified in Section 10 hereof;

 

(v)           determine whether, and the extent towhich adjustments are required pursuant to Section 7 hereof; and

 

(vi)          interpret and construe the 1996 Planand the terms and conditions of any Award granted hereunder.

 

Section 7.               ADJUSTMENTS

 

If the outstanding shares ofthe class of Company stock then subject to the 1996 Plan are increased,decreased or exchanged for or converted into cash, property or a differentnumber or kind of securities, or if cash, property or securities aredistributed in respect of such outstanding securities, in either case as aresult of a reorganization, merger, consolidation, recapitalization,restructuring, reclassification, dividend (other than a regular cash dividend)or other distribution, stock split, reverse stock split or the like, or ifsubstantially all of the property and assets of the Company are sold, then,unless the terms of such transaction shall provide otherwise, the Committeeshall make appropriate and proportionate adjustments in: (i) the number andtype of shares or other securities or cash or other property that may beacquired pursuant to Awards theretofore granted under the 1996 Plan; and (ii)the maximum number and type of shares or other securities that may be issuedpursuant to Awards thereafter granted under the 1996 Plan.  The determination of the Committee as towhat adjustments shall be made pursuant to this section, and the extentthereof, shall be final and conclusive. No fractional shares of stock shall be issued under the 1996 Plan onaccount of any such adjustment.

 

Section 8.               AMENDMENT AND TERMINATION

 

The Board may suspend orterminate the 1996 Plan at any time; ***provided, however,*** that no such suspension ortermination shall deprive the recipient of any Award theretofore granted underthe 1996 Plan, without the consent of such recipient, of any of his or herrights thereunder or with respect thereto.

 

The Board may amend the 1996Plan at any time and in any manner subject to the following limitations:

 

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(a)           No such amendment shall deprive the recipient of any Awardtheretofore granted under the 1996 Plan, without the consent of such recipient,of any of his or her rights thereunder or with respect thereto;

 

(b)           Except as otherwise provided in Section 7 relating toadjustments upon changes in stock, no such amendment shall be effective unlessapproved by the affirmative vote of the holders of a majority of theoutstanding shares of the Company present, represented and entitled to vote ata shareholders meeting or by the written consent of a majority of theoutstanding shares of the Company where such shareholder approval is requiredby law or pursuant to the Articles of Incorporation or Bylaws of the Company;and

 

(c)           Section 10 hereof shall not be amended more than onceevery six (6) months, other than to comport with changes in the Code, theEmployee Retirement Income Security Act, or the rules and regulationsthereunder.

 

Section 9.               EFFECTIVE DATE

 

The 1996 Plan shall beeffective as of June 18, 1997, the date upon which it was approved by theshareholders of the Company; *provided,however,* that no Common Shares may be issued under this Plan untilit has been approved, director or indirectly, by the affirmative vote of theholders (the “Shareholders”) of a majority of the outstanding shares of theCompany present, or represented, and entitled to vote at a meeting duly held inaccordance with the laws of the State of California.

 

Section 10.             NONEMPLOYEE DIRECTOR OPTIONS

 

(a)           Any person elected or appointed to serve as a NonemployeeDirector who has not previously served as a Nonemployee Director of the Companyon or prior to October 1, 1996, shall be granted, on the first business dayfollowing the later of the date of such election or appointment or the date the1996 Plan is approved by the Shareholders, an option to purchase 1,100 CommonShares without the requirement of any further action by the Committee.  On the first business day following the dateof the annual meeting of shareholders of the Company held in 1998, or anyadjournment thereof (the “1998 Meeting”), any person who was a NonemployeeDirector on or after the effective date of the 1996 Plan and who is re-electedto the Board at the 1998 Meeting shall be granted an option to purchase 550Common Shares without the requirement of any further action by theCommittee.  Options that may be grantedto newly-elected Nonemployee Directors or to re-elected Nonemployee Directorsunder this Section 10 shall be referred to collectively as the “NonemployeeDirector Options.”  The date on which aNonemployee Director Option is granted shall be the Date of Grant for suchoption.

 

(b)           If, on any date upon which Nonemployee Director Optionsare to be automatically granted pursuant to this Section 10, the number ofCommon Shares remaining available for options under the 1996 Plan isinsufficient for the grant to each Nonemployee Director entitled thereto of

 

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a Nonemployee Director Option to purchase theentire number of Common Shares specified in this Section 10, then NonemployeeDirector Option to purchase a proportionate amount of such available number ofCommon Shares (rounded to the nearest whole share) shall be granted to eachNonemployee Director entitled thereto on such date.

 

(c)           Each Nonemployee Director Option granted under the 1996Plan shall become fully exercisable one year from the Date of Grant, providedthat in the event that a Change of Control (as defined below) shall occur, suchgranted Nonemployee Director Option shall be immediately exercisable.

 

(d)           Each Nonemployee Director Option granted under the 1996Plan shall expire upon the sixth anniversary of the Date of Grant.

 

(e)           Each Nonemployee Director Option shall have an exerciseprice equal to the aggregate Fair Market Value on the Date of Grant of theCommon Shares subject thereto.

 

(f)            Payment of the exercise price of any Nonemployee DirectorOption granted under the 1996 Plan shall be made in full in cash concurrentlywith the exercise of such option; ***provided however,*** that, in the discretion ofthe Board, the payment of such exercise price may instead be made:

 

(i)            in whole or in part, with CommonShares delivered concurrently with such exercise (such shares to be valued onthe basis of the Fair Market Value of such shares on the date of suchexercise), provided that the Company is not then prohibited from purchasing oracquiring Common Shares; or

 

(ii)           in whole or in part, by the delivery,concurrently with such exercise and in accordance with Section 220.3(e)(4) ofRegulation T promulgated under the Exchange Act, of a property executedexercise notice for such option and irrevocable instructions to a brokerpromptly to deliver to the Company a specified dollar amount of the proceeds ofa sale of or a loan secured by the Common Shares issuable upon exercise of suchoption.

 

(g)           For purposes of this Section 10, the “Fair Market Value”of a Common Share or other security on any date (the “Determination Date”)shall be equal to the average of the high bid and low asked prices per CommonShare or unit of such other security on the business day immediately precedingthe Determination Date in the market where the security is traded, or, if theCommon shares or such other security where not quoted by any such organizationon such immediately preceding business day, as determined by the Board, forpurposes of this Section 10, the term “Change of Control” shall mean theoccurrence of either of the following events: (a) the Company consolidates withor merges with or into any person or conveys, transfers or leases all orsubstantially all of its assets to any person, or any corporation consolidateswith or merges into or with the Company in any event pursuant to a transactionin which the outstanding voting stock or units of the Company is changed intoor exchanged for cash, securities or other property, other than any suchtransaction where the outstanding voting stock or units of the Company is notchanged or

 

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exchanged at all (except to the extentnecessary to reflect a change in the jurisdiction of incorporation ororganization of the Company) or where the outstanding voting stock or units ofthe Company is changed into or exchanged for voting stock or units of thesurviving corporation or organization which is not redeemable, or no “person”or “group” owns immediately after such transaction, directly or indirectly, anamount of outstanding voting stock or units necessary to effect the change ofcontrol of, or influence over, the surviving corporation or organization, asthe case may be, or (b) the Company is liquidated or dissolved or adopts a planof liquidation or dissolution.

 

(h)           Each Nonemployee Director Option shall be nontransferableby the optionee other than by will or the laws of descent and distribution, andshall be exercisable during the optionee’s lifetime only by the optionee or theoptionee’s guardian or legal representative.

 

(i)            Nonemployee Director Options are not intended to qualifyas Incentive Stock Options.

 

(j)            Any options granted to Nonemployee Directors in additionto the automatic options granted under Section 10(a) shall be considered“Nonemployee Director Options” for purposes of this Section 10.

 

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