PSM
HOLDINGS, INC.

    


    2002  STOCK  OPTION/STOCK  ISSUANCE  PLAN

    (As
amended September 27, 2010)

    


    
      	
              I.

            	
              GENERAL
      PROVISIONS

            


    

    


    
      	
               
      

            	
              A.

            	
              PURPOSE
      OF THE PLAN

            


    

    


    This 2002
Stock Option/Stock Issuance Plan (the “Plan”) is intended to aid the Corporation
(or any Parent or Subsidiary) in maintaining and developing a management team,
attracting qualified officers and employees capable of assisting in the future
success of the Corporation, and rewarding those individuals who have
contributed, or may contribute in the future, to the success of the Corporation
(or any Parent or Subsidiary).  It is designed to aid the Corporation
(and any Parent or Subsidiary) in retaining the services of executives and
Employees and in attracting new personnel when needed for future operations and
growth and to provide such personnel with an incentive to remain Employees of
the Corporation, to use their best efforts to promote the success of the
Corporation’s business, and to provide them with an opportunity to obtain or
increase a proprietary interest in the Corporation.  It is further
designed to attract and retain the best available personnel for service as
directors of the Corporation (or any Parent or Subsidiary), whether or not such
individuals may otherwise be Employees.  It is also designed to permit
the Corporation to reward those consultants or other independent advisors who
are not Employees but who are perceived by management as having contributed to
the success of the Corporation (or any Parent or Subsidiary) or who are
important to the continued business and operations of the Corporation (or any
Parent or Subsidiary).

    


    Capitalized
terms herein shall have the meanings assigned to such terms in the attached
Appendix.

    


    
      	
               
      

            	
              B.

            	
              STRUCTURE
      OF THE PLAN

            


    

    


    
      	
               
      

            	
              1.

            	
              The
      Plan shall be divided into two (2) separate equity
    programs:

            


    

    


    
      	
               
      

            	
              a.

            	
              the
      Option Grant Program under which eligible persons may, at the discretion
      of the Plan Administrator, be granted options to purchase shares of Common
      Stock, and

            


    

    


    
      	
               
      

            	
              b.

            	
              the
      Stock Issuance Program under which eligible persons may, at the discretion
      of the Plan Administrator, be issued shares of Common Stock directly,
      either through the immediate purchase of such shares or as a bonus for
      services rendered to the Corporation (or any Parent or Subsidiary) or as
      an incentive to perform services for the Corporation (or any Parent or
      Subsidiary).

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              2.

            	
              The
      provisions of Sections I and IV shall apply to both equity programs under
      the Plan and shall accordingly govern the interests of all persons under
      the Plan.

            


    

    


    
      	
               
      

            	
              C.

            	
              ADMINISTRATION
      OF THE PLAN

            


    

    


    
      	
               
      

            	
              1.

            	
              The
      Plan shall be administered by the Board.  However, any or all
      administrative functions otherwise exercisable by the Board may be
      delegated to the Committee.  Members of the Committee shall
      serve for such period of time as the Board may determine and shall be
      subject to removal by the Board at any time.  The Board may also
      at any time terminate the functions of the Committee and reassume all
      powers and authority previously delegated to the
  Committee.

            


    

    


    
      	
               
      

            	
              2.

            	
              The
      Plan Administrator shall have full power and authority (subject to the
      provisions of the Plan) to establish such rules and regulations as it may
      deem appropriate for proper administration of the Plan and to make such
      determinations under, and issue such interpretations of, the Plan and any
      outstanding options thereunder as it may deem necessary or
      advisable.  Decisions of the Plan Administrator shall be final
      and binding on all parties who have an interest in the Plan or any option
      thereunder.

            


    

    


    
      	
               
      

            	
              D.

            	
              ELIGIBILITY

            


    

    


    
      	
               
      

            	
              1.

            	
              The
      Plan Administrator shall have full authority to determine, (i) with
      respect to the option grants under the Option Grant Program, which
      eligible persons are to receive option grants, the time or times when such
      option grants are to be made, the number of shares to be covered by each
      such grant, the status of the granted option as either an Incentive Option
      or a Non-Statutory Option, the time or times at which each option is to
      become exercisable, the vesting schedule (if any) applicable to the option
      shares and the maximum term for which the option is to remain outstanding,
      and (ii) with respect to stock issuances under the Stock Issuance Program,
      which eligible persons are to receive stock issuances, the time or times
      when such issuances are to be made, the number of shares to be issued to
      each Participant, the vesting schedule (if any) applicable to the issued
      shares and the consideration to be paid or given by the Participant for
      such shares.

            


    


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              2.

            	
              The
      Plan Administrator shall have the absolute discretion either to grant
      options in accordance with the Option Grant Program or to effect stock
      issuances in accordance with the Stock Issuance
  Program.

            


    

    


    
      	
               
      

            	
              E.

            	
              STOCK
      SUBJECT TO THE PLAN

            


    

    


    
      	
               
      

            	
              1.

            	
              The
      stock issuable under the Plan shall be shares of authorized but unissued
      or reacquired Common Stock.  The maximum number of shares of
      Common Stock which may be issued over the term of the Plan shall not
      exceed 3,000,000 shares.

            


    

    


    
      	
               
      

            	
              2.

            	
              Shares
      of Common Stock subject to outstanding options shall be available for
      subsequent issuance under the Plan to the extent (i) the options expire or
      terminate for any reason prior to exercise in full or (ii) the
      options are canceled in accordance with the cancellation-re-grant
      provisions of Section II(E).

            


    

    


    
      	
               
      

            	
              3.

            	
              Should
      any change be made to the Common Stock by reason of any stock split, stock
      dividend, recapitalization, combination of shares, exchange of shares or
      other change affecting the outstanding Common Stock as a class without the
      Corporation’s receipt of consideration, appropriate adjustments shall be
      made to the maximum number and/or class of securities issuable under the
      Plan.  The adjustments determined by the Plan Administrator
      shall be final, binding and
conclusive.

            


    

    


    
      	
              II.

            	
              OPTION GRANT
      PROGRAM

            


    

    


    
      	
               
      

            	
              A.

            	
              TYPES
      OF OPTIONS

            


    

    


    The
Option Grant Program shall be comprised of two types of options as
follows:

    


    
      	
               
      

            	
              1.

            	
              Incentive
      Options which are options intended to qualify under the Code, subject to
      limiting conditions, for favorable tax treatment in respect of the
      recognition of ordinary income, gain, or loss and withholding requirements
      applicable to the exercise of the options and disposition of the shares of
      Common Stock acquired upon exercise of Incentive
  Options.

            


    

    


    
      	
               
      

            	
              2.

            	
              Non-Statutory
      Options which are those options that are not intended to qualify under the
      Code for favorable tax treatment in respect of the recognition of ordinary
      income, gain, or loss and withholding requirements applicable to the
      exercise of options and disposition of shares of Common Stock acquired
      pursuant to the exercise of the Non-Statutory options.  The
      Option grant program intends that the treatment of such transactions in
      respect of Non-Statutory Options will be governed by the taxation rules
      applicable to the transfer of property in connection with the performance
      of services.

            


    


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              B.

            	
              OPTION
      TERMS APPLICABLE TO BOTH INCENTIVE AND NON-STATUTORY
    OPTIONS

            


    

    


    
      	
               
      

            	
              1.

            	
              Option
      Agreements.

            


    

    


    Each
option shall be evidenced by one or more option agreements between the
Corporation and the Optionee.  Option agreements shall designate the
number of shares and the exercise price of the Option to which it pertains, and
shall set forth the vesting schedule of the Option or state that the Option is
vested immediately.  The option agreements shall be in writing, dated
as of the date the option is granted, and shall be executed on behalf of the
Corporation by such officers as the Board shall authorize.  Option
agreements shall be in such form and contain such additional provisions as the
Plan Administrator shall prescribe, but in no event shall they contain
provisions inconsistent with the provisions of this Plan.

    


    
      	
               
      

            	
              2.

            	
              Exercise
      Price.

            


    

    


    
      	
               
      

            	
              a.

            	
              The
      exercise price per share shall be fixed by the Plan Administrator for
      Incentive and Non-Statutory Options as set forth
  below.

            


    

    


    
      	
               
      

            	
              b.

            	
              The
      exercise price shall become immediately due upon exercise of the option
      and shall, subject to the provisions of Section IV(A) and the documents
      evidencing the option, be payable in cash or check made payable to the
      Corporation.  The Plan Administrator, in its discretion, may
      also permit the exercise price to be paid partly in cash and/or as
      follows:

            


    

    


    
      	
               
      

            	
              (1)

            	
              in
      shares of Common Stock valued at Fair Market Value on the Exercise Date,
      or

            


    

    


    
      	
               
      

            	
              (2)

            	
              to
      the extent the option is exercised for vested shares, through a special
      sale and remittance procedure pursuant to which the Optionee shall
      concurrently provide irrevocable written instructions (A) to a
      Corporation-designated brokerage firm to effect the immediate sale of the
      purchased shares and remit to the Corporation, out of the sale proceeds
      available on the settlement date, sufficient funds to cover the aggregate
      exercise price payable for the purchased shares plus all applicable
      Federal, state and local income and employment taxes required to be
      withheld by the Corporation by reason of such exercise, and (B) to the
      Corporation to deliver the certificates for the purchased shares directly
      to such brokerage firm in order to complete the
  sale.

            


    


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              c.

            	
              Except
      to the extent such sale and remittance procedure is utilized, payment of
      the exercise price for the purchased shares must be made on the Exercise
      Date.

            


    

    


    
      	
               
      

            	
              3.

            	
              Exercise
      and Term of Options.

            


    

    


     Each
option shall be exercisable at such time or times, during such period and for
such number of shares as shall be determined by the Plan Administrator and set
forth in the documents evidencing the option grant.  However, no
option shall have a term in excess of ten (10) years measured from the option
grant date.  The terms of Incentive and Non-Qualified Options shall be
fixed by the Plan Administrator within the limits specified below.

    


    
      	
               
      

            	
              4.

            	
              Effect
      of Termination of Service.

            


    

    


    
      	
               
      

            	
              a.

            	
              The
      following provisions shall govern the exercise of any options held by the
      Optionee at the time of cessation of Service or
  death:

            


    

    


    
      	
               
      

            	
              (1)

            	
              Should
      the Optionee cease to remain in Service for Misconduct, then the options
      shall terminate on the date of cessation of the
  Service.

            


    

    


    
      	
               
      

            	
              (2)

            	
              Should
      the Optionee cease to remain in Service for any reason other than
      Misconduct, Disability or death, then the Optionee shall have a period of
      three (3) months following the date of such cessation of Service during
      which to exercise each outstanding option held by such
      Optionee.

            


    

    


    
      	
               
      

            	
              (3)

            	
              Should
      Optionee’s Service terminate by reason of Disability, then the Optionee
      shall have a period of twelve (12) months following the date of such
      cessation of Service during which to exercise each outstanding option held
      by such Optionee.

            


    

    


    
      	
               
      

            	
              (4)

            	
              If
      the Optionee dies while holding an outstanding option, then the personal
      representative of his or her estate or the person or persons to whom the
      option is transferred pursuant to the Optionee’s will or the laws of
      inheritance shall have a twelve (12) month period following the date of
      the Optionee’s death to exercise such
option.

            


    


    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              (5)

            	
              Under
      no circumstances, however, shall any such option be exercisable after the
      specified expiration of the option
term.

            


    

    


    
      	
               
      

            	
              (6)

            	
              During
      the applicable post-Service exercise period, the option may not be
      exercised in the aggregate for more than the number of vested shares for
      which the option is exercisable on the date of the Optionee’s cessation of
      Service.  Upon the expiration of the applicable exercise period
      or (if earlier) upon the expiration of the option term, the option shall
      terminate and cease to be outstanding for any vested shares for which the
      option has not been exercised.  However, the option shall,
      immediately upon the Optionee’s cessation of Service, terminate and cease
      to be outstanding with respect to any and all option shares for which the
      option is not otherwise at the time exercisable or in which the Optionee
      is not otherwise at that time
vested.

            


    

    


    
      	
               
      

            	
              b.

            	
              The
      Plan Administrator shall have the discretion, exercisable either at the
      time an option is granted or at any time while the option remains
      outstanding, to:

            


    

    


    
      	
               
      

            	
              (1)

            	
              extend
      the period of time for which the option is to remain exercisable following
      Optionee’s cessation of Service or death from the limited period otherwise
      in effect for that option to such greater period of time as the Plan
      Administrator shall deem appropriate, but in no event beyond the
      expiration of the option term;
and/or

            


    

    


    
      	
               
      

            	
              (2)

            	
              permit
      the option to be exercised, during the applicable post-Service exercise
      period, not only with respect to the number of vested shares of Common
      Stock for which such option is exercisable at the time of the Optionee’s
      cessation of Service but also with respect to one or more additional
      installments in which the Optionee would have vested under the option had
      the Optionee continued in Service.

            


    

    


    
      	
               
      

            	
              5.

            	
              Shareholder
      Rights.  The holder of an option shall have no
      shareholder rights with respect to the shares subject to the option until
      such person shall have exercised the option, paid the exercise price, and
      become a holder of record of the purchased
  shares.

            


    


    
      
         


      

      
        6

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              6.

            	
              [RESERVED]

            


    

    


    
      	
               
      

            	
              7.

            	
              Limited
      Transferability of Options.  During the lifetime of the
      Optionee, the option shall be exercisable only by the Optionee and shall
      not be assignable or transferable other than by will or by the laws of
      descent and distribution following the Optionee’s
  death.

            


    

    


    
      	
               
      

            	
              8.

            	
              Withholding.  The
      Corporation’s obligation to deliver shares of Common Stock upon the
      exercise of any options granted under the Plan shall be subject to the
      satisfaction of all applicable Federal, state and local income and
      employment tax withholding
requirements.

            


    

    


    
      	
               
      

            	
              C.

            	
              INCENTIVE
      OPTIONS

            


    

    


    The terms
specified below shall be applicable to all Incentive Options.  Except
as modified by the provisions of this Section II(C), all the provisions of the
Plan shall be applicable to Incentive Options.  Options which are
specifically designated as Non-Statutory Options shall not be subject to the
terms of this Section II (C).

    


    
      	
               
      

            	
              1.

            	
              Eligibility.  Incentive
      Options may only be granted to
Employees.

            


    

    


    
      	
               
      

            	
              2.

            	
              Exercise
      Price.  The exercise price per share shall not be less
      than one hundred percent (100%) of the Fair Market Value per share of
      Common Stock on the option grant date.  For options granted to a
      10% Shareholder, the exercise price per share shall not be less than one
      hundred ten percent (110%) of the Fair Market Value per share of Common
      Stock on the option grant date.

            


    

    


    
      	
               
      

            	
              3.

            	
              Dollar
      Limitation.  The aggregate Fair Market Value of the
      shares of Common Stock (determined as of the respective date or dates of
      grant) for which one or more options granted to any Employee under the
      Plan (or any other option plan of the Corporation or any Parent or
      Subsidiary) may for the first time become exercisable as Incentive Options
      during any one (1) calendar year shall not exceed the sum of One Hundred
      Thousand Dollars ($100,000).  To the extent the Employee holds
      two (2) or more such options which become exercisable for the first time
      in the same calendar year, the foregoing limitation on the exercisability
      of such options as Incentive Options shall be applied on the basis of the
      order in which such options are
granted.

            


    


    
      
         


      

      
        7

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              4.

            	
              Option
      Term for 10% Shareholder.  If any Employee to whom an
      Incentive Option is granted is a 10% Shareholder, then the option term
      shall not exceed five (5) years measured from the option grant
      date.

            


    

    


    
      	
               
      

            	
              D.

            	
              NON-STATUTORY
      OPTIONS

            


    

    


    The terms
specified below shall be applicable to all Non-Statutory
Options.  Except as modified by the provisions of this Section II(D),
all the provisions of the Plan shall be applicable to Non-Statutory
Options.

    


    
      	
               
      

            	
              1.

            	
              Eligibility.  Non-Statutory
      Options may be granted to the following
persons:

            


    

    


    
      	
               
      

            	
              a.

            	
              Employees,

            


    

    


    
      	
               
      

            	
              b.

            	
              non-employee
      members of the Board or the non-employee members of the board of directors
      of any Parent or Subsidiary, and

            


    

    


    
      	
               
      

            	
              c.

            	
              consultants
      and other independent advisors who provide services to the Corporation (or
      any Parent or Subsidiary), provided that such consultants or advisors are
      natural persons; that they provide bona fide services to the Corporation
      (or the Parent or Subsidiary); and that the services are not in connection
      with the offer or sale of securities in a capital-raising transaction, and
      do not directly or indirectly promote or maintain a market for the
      Corporation’s securities.

            


    

    


    
      	
               
      

            	
              2.

            	
              Exercise
      Price.  The exercise price per share covered by a
      Non-Statutory Option shall not be less than eighty-five percent (85%) of
      the Fair Market Value per share of Common Stock on the option grant
      date.

            


    

    


    
      	
               
      

            	
              E.

            	
              CORPORATE
      TRANSACTION

            


    

    


    
      	
               
      

            	
              1.

            	
              The
      Plan and each option outstanding under the Plan at the time of a Corporate
      Transaction shall terminate and cease to be outstanding, but only after
      each Optionee (or the successor in interest) has been given, for the
      period of ten (10) days ending five (5) days before the effective date of
      the Corporate Transaction (or such longer period as the Board may
      specify), the right to exercise any unexpired option in full or in part,
      as if such option was fully vested and exercisable notwithstanding
      anything to the contrary contained in any option agreement between the
      Corporation and any optionee.  However, the outstanding options
      shall not terminate and cease to be outstanding on such an accelerated
      basis if and to the extent such options are assumed by the successor
      corporation (or parent thereof) in the Corporate
    Transaction.

            


    


    
      
         


      

      
        8

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              2.

            	
              Each
      option which is assumed in connection with a Corporate Transaction shall
      be appropriately adjusted, immediately after such Corporate Transaction,
      to apply to the number and class of securities which would have been
      issuable to the Optionee in consummation of such Corporate Transaction,
      had the option been exercised immediately prior to such Corporate
      Transaction.  Appropriate adjustments shall also be made to (i)
      the number and class of securities available for issuance under the Plan
      following the consummation of such Corporate Transaction and (ii) the
      exercise price payable per share under each outstanding option, provided
      the aggregate exercise price payable for such securities shall remain the
      same.

            


    

    


    
      	
               
      

            	
              3.

            	
              The
      Plan Administrator shall have the discretion, exercisable either at the
      time the option is granted or at any time while the option remains
      outstanding, to provide for the automatic acceleration (in whole or in
      part) of one or more outstanding options upon the occurrence of a
      Corporate Transaction, whether or not those options are to be assumed or
      replaced in the Corporate
Transaction.

            


    

    


    
      	
               
      

            	
              4.

            	
              The
      portion of any Incentive Option accelerated in connection with a Corporate
      Transaction shall remain exercisable as an Incentive Option only to the
      extent the applicable One Hundred Thousand Dollar ($100,000) limitation is
      not exceeded.  To the extent such dollar limitation is exceeded,
      the accelerated portion of such option shall be exercisable as a
      Non-Statutory Option under the Federal tax
laws.

            


    

    


    
      	
               
      

            	
              5.

            	
              Subject
      to Section II(F) below, the grant of options under the Plan shall in no
      way affect the right of the Corporation to adjust, reclassify, reorganize
      or otherwise change its capital or business structure or to merge,
      consolidate, dissolve, liquidate or sell or transfer all or any part of
      its business or assets.

            


    

    


    
      	
               
      

            	
              F.

            	
              ADJUSTMENTS

            


    

    


    
      	
               
      

            	
              1.

            	
              If
      the Corporation shall at any time subdivide its outstanding shares of
      Common Stock by recapitalization, reclassification or split-up thereof, or
      if the Corporation shall declare a stock dividend or distribute shares of
      Common Stock to its stockholders, the number of shares of Common Stock
      purchasable upon exercise of the options immediately prior to such
      subdivision shall be proportionately increased in each instance, and if
      the Corporation shall at any time combine the outstanding shares of Common
      Stock by  recapitalization, reclassification or combination
      thereof, the number of shares of Common Stock purchasable upon exercise of
      the options immediately prior to such combination shall be proportionately
      decreased in each instance.  Any adjustment which is the result
      of a stock dividend or distribution shall be effective on the record date
      therefor.

            


    


    
      
         


      

      
        9

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              2.

            	
              Whenever
      the number of shares of Common Stock purchasable upon the exercise of any
      of the options is required to be adjusted as provided in Section II(F)(1)
      above, the exercise price per share shall be adjusted (to the nearest
      cent) in each instance by multiplying such exercise price per share
      immediately prior to such adjustment by a fraction (x) the numerator of
      which shall be the number of shares of Common Stock purchasable upon the
      exercise of the options immediately prior to such adjustment, and (y) the
      denominator of which shall be the number of shares of Common Stock so
      purchasable immediately thereafter.

            


    

    


    
      	
               
      

            	
              3.

            	
              In
      case the Corporation shall, at any time prior to the expiration date of
      the options, and prior to the exercise thereof, offer to the holders of
      its Common Stock any right to subscribe for additional shares of any class
      of the Corporation, then the Corporation shall give written notice thereof
      to the registered holders of the options not less than thirty (30) days
      prior to the date on which the books of the Corporation are
      closed  or a record date fixed for the determination of
      stockholders entitled to such subscription rights.  Such notice
      shall specify the date as to which the books shall be closed or record
      date be fixed with respect to such offer or subscription, and the right of
      the holders to participate in such offer or subscription shall terminate
      if the options shall not be exercised on before the date of such closing
      of the books or such record date.

            


    

    


    
      	
               
      

            	
              4.

            	
              If
      the Corporation shall take any action affecting the shares of its Common
      Stock, other than that action described in this Plan, which, in the
      opinion of the Plan Administrator, would materially affect the rights of
      the holders of the options or the exercise price per share, the number of
      shares of Common Stock purchasable on exercise of the options shall be
      adjusted in each instance and at such time as the Plan Administrator, in
      good faith, may determine to be equitable under the
      circumstances.  The adjustments determined by the Plan
      Administrator shall be final, binding, and
  conclusive.

            


    

    


    
      	
               
      

            	
              5.

            	
              Any
      changes or adjustments in the number of shares of Common Stock purchasable
      upon the exercise of the options or in the exercise price of options, as
      required or authorized by this Section II(F), shall be made with respect
      to all authorized options whether or not they have yet been issued or
      outstanding at the time of the occurrence of the circumstance leading to
      such change or adjustment.

            


    


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              G.

            	
              CANCELLATION
      AND RE-GRANT OF OPTIONS

            


    

    


    The Plan
Administrator shall have the authority to effect, at any time and from time to
time, with the consent of the affected option holders and subject to approval of
the shareholders of the Corporation, the cancellation of any or all outstanding
options under the Plan and to grant in substitution therefor new options
covering the same or different number of shares of Common Stock but with an
exercise price per share based on the Fair Market Value per share of Common
Stock on the new option grant date.  The type and amount of
consideration for the substituted options shall be subject to the approval of
the Plan Administrator.

    


    
      	
              III.

            	
              STOCK ISSUANCE
      PROGRAM

            


    

    


    
      	
               
      

            	
              A.

            	
              STOCK
      ISSUANCE TERMS

            


    

    


    Shares of
Common Stock may be issued under the Stock Issuance Program through direct and
immediate issuances without any intervening option grants.  Each such
stock issuance shall be evidenced by a Stock Issuance Agreement which complies
with the terms specified below.

    


    
      	
               
      

            	
              1.

            	
              Cost
      of Shares.  Grants of shares of Common Stock under the
      Stock Issuance Program shall be made at such cost as the Plan
      Administrator shall determine and may be issued for no monetary
      consideration, subject to applicable state
law.

            


    

    


    
      	
               
      

            	
              2.

            	
              Vesting
      Provisions.

            


    

    


    
      	
               
      

            	
              a.

            	
              Shares
      of Common Stock issued under the Stock Issuance Program may, in the
      discretion of the Plan Administrator, be fully and immediately vested upon
      issuance or may vest in one or more installments over the Participant’s
      period of Service or upon attainment of specified performance
      objectives.

            


    

    


    
      	
               
      

            	
              b.

            	
              Any
      new, substituted or additional securities or other property (including
      money paid other than as a regular cash dividend) which the Participant
      may have the right to receive with respect to the Participant’s unvested
      shares of Common Stock by reason of any stock dividend, stock split,
      recapitalization, combination of shares, exchange of shares or other
      change affecting the outstanding Common Stock as a class without the
      Corporation’s receipt of consideration shall be issued subject to (i) the
      same vesting requirements applicable to the Participant’s unvested shares
      of Common Stock and (ii) such escrow arrangements as the Plan
      Administrator shall deem
appropriate.

            


    


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              c.

            	
              Unless
      specified otherwise in the Stock Issuance Agreement, the Participant shall
      have full shareholder rights with respect to any shares of Common Stock
      issued to the Participant under the Stock Issuance Program, whether or not
      the Participant’s interest in those shares is vested, and accordingly, the
      Participant shall have the right to vote such shares and to receive any
      regular cash dividends paid on such
shares.

            


    

    


    
      	
               
      

            	
              d.

            	
              Should
      the Participant cease to remain in Service while holding one or more
      unvested shares of Common Stock issued under the Stock Issuance Program or
      should the performance objectives not be attained with respect to one or
      more such unvested shares of Common Stock, then those shares shall be
      immediately surrendered to the Corporation for cancellation, and the
      Participant shall have no further shareholder rights with respect to those
      shares.  To the extent the surrendered shares were previously
      issued to the Participant for consideration paid in cash or cash
      equivalent (including the Participant’s purchase-money indebtedness), the
      Corporation shall repay to the Participant the cash consideration paid for
      the surrendered shares and shall cancel the unpaid principal balance of
      any outstanding purchase-money note of the Participant attributable to
      such surrendered shares.

            


    

    


    
      	
               
      

            	
              e.

            	
              The
      Plan Administrator may in its discretion waive the surrender and
      cancellation of one or more unvested shares of Common Stock (or other
      assets attributable thereto) which would otherwise occur upon the
      non-completion of the vesting schedule applicable to such
      shares.  Such waiver shall result in the immediate vesting of
      the Participant’s interest in the shares of Common Stock as to which the
      waiver applies.  Such waiver may be effected at any time,
      whether before or after the Participant’s cessation of Service or the
      attainment or non-attainment of the applicable performance
      objectives.

            


    

    


    
      	
               
      

            	
              3.

            	
              Non-transferability.  Shares
      of Common Stock granted under the Stock Issuance program shall not be
      transferable until the shares are
vested.

            


    

    


    
      	
               
      

            	
              B.

            	
              CORPORATE
      TRANSACTION

            


    

    


    
      	
               
      

            	
              1.

            	
              Upon
      the occurrence of a Corporate Transaction all unvested shares not assumed
      by the successor corporation (or parent thereof) shall be immediately
      surrendered to the Corporation for cancellation, and the Participant shall
      have no further shareholder rights with respect to those
      shares.  To the extent the surrendered shares were previously
      issued to the Participant for consideration paid in cash or cash
      equivalent (including the Participant’s purchase-money indebtedness), the
      Corporation shall repay to the Participant the cash consideration paid for
      the surrendered shares and shall cancel the unpaid principal balance of
      any outstanding purchase-money note of the Participant attributable to
      such surrendered shares.

            


    


    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              2.

            	
              The
      Plan Administrator shall have the discretionary authority, exercisable
      either at the time the unvested shares are issued or any time while the
      Corporation’s repurchase rights with respect to those shares remaining
      outstanding, to provide that those rights shall automatically terminate on
      an accelerated basis, and the shares of Common Stock subject to those
      terminated rights shall immediately vest, in the event of a Corporate
      Transaction or in the event that the Participant’s Service should
      subsequently terminate by reason of an Involuntary Termination within a
      period designated by the Plan Administrator following the effective date
      of any Corporate Transaction in which those repurchase rights are assumed
      by the successor corporation (or parent
  thereof).

            


    

    


    
      	
               
      

            	
              C.

            	
              SHARE
      ESCROW/LEGENDS

            


    

    


    Unvested
shares may, in the Plan Administrator’s discretion, be held in escrow by the
Corporation until the Participant’s interest in such shares vests or may be
issued directly to the Participant with restrictive legends on the certificates
evidencing those unvested shares.

    


    
      	
              IV.

            	
              MISCELLANEOUS

            


    

    


    
      	
               
      

            	
              A.

            	
              FINANCING

            


    

    


    The Plan
Administrator may permit any Optionee or Participant to pay the option exercise
price or the purchase price for shares issued to such person under the by
delivering a full-recourse, interest-bearing promissory note payable in one or
more installments and secured by the purchased shares.  In no event
shall the maximum credit available to the Optionee or Participant exceed the sum
of (i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              B.

            	
              EFFECTIVE
      DATE AND TERM OF PLAN

            


    

    


    
      	
               
      

            	
              1.

            	
              The
      Plan shall become effective when adopted by the Board, but no option
      granted under the Plan may be exercised, and no shares shall be issued
      under the Plan, until the Plan is approved by the Corporation’s
      shareholders.  If such shareholder approval is not obtained
      within twelve (12) months after the date of the Board’s adoption of the
      Plan, then all options previously granted under the Plan shall terminate
      and cease to be outstanding, and no further options shall be granted and
      no shares shall be issued under the Plan.  Subject to such
      limitation, the Plan Administrator may grant options and issue shares
      under the Plan at any time after the effective date of the Plan and before
      the date fixed herein for termination of the
  Plan.

            


    

    


    
      	
               
      

            	
              2.

            	
              The
      Plan shall terminate upon the earliest of (i) December 31, 2011, (ii) the
      date on which all shares available for issuance under the Plan shall have
      been issued, or (iii) the termination of all outstanding options in
      connection with a Corporate Transaction.  All options and
      unvested stock issuances outstanding at that time under the Plan shall
      continue to have full force and effect in accordance with the provisions
      of the documents evidencing such options or
  issuances.

            


    

    


    
      	
               
      

            	
              C.

            	
              AMENDMENT
      OF THE PLAN

            


    

    


    
      	
               
      

            	
              1.

            	
              The
      Board shall have complete and exclusive power and authority to amend or
      modify the Plan in any or all respects, except as set forth
      herein.  However, no such amendment or modification shall
      adversely affect the rights and obligations with respect to options or
      unvested stock issuances at the time outstanding under the Plan unless the
      Optionee or the Participant consents to such amendment or
      modification.  In addition, the Board shall not amend the Plan,
      without approval of the shareholders of the Corporation, in a manner which
      would:

            


    

    


    
      	
               
      

            	
              a.

            	
              Cause
      Options which are intended to qualify as Incentive Options to fail to
      qualify;

            


    

    
      	
               
      

            	
              b.

            	
              increase
      the number of shares of Common Stock issuable over the term of the
      Plan;

            


    

    
      	
               
      

            	
              c.

            	
              cause
      the Plan to fail to meet the requirements of Rule 16b-3;
  or

            


    

    
      	
               
      

            	
              d.

            	
              violate
      applicable law.

            


    

    


    
      	
               
      

            	
              2.

            	
              Options
      may be granted under the Option Grant Program and shares may be issued
      under the Stock Issuance Program which are in each instance in excess of
      the number of shares of Common Stock then available for issuance under the
      Plan, provided any excess shares actually issued under those programs
      shall be held in escrow until there is obtained shareholder approval of an
      amendment sufficiently increasing the number of shares of Common Stock
      available for issuance under the Plan.  If such shareholder
      approval is not obtained within twelve (12) months after the date the
      first such excess issuances are made, then (i) any unexercised options
      granted on the basis of such excess shares shall terminate and cease to be
      outstanding and (ii) the Corporation shall promptly refund to the
      Optionees and the Participants the exercise or purchase price paid for any
      excess shares issued under the Plan and held in escrow, together with
      interest (at the applicable Short Term Federal Rate) for the period the
      shares were held in escrow, and such shares shall thereupon be
      automatically canceled and cease to be
  outstanding.

            


    


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              D.

            	
              USE
      OF PROCEEDS

            


    

    


    Any cash
proceeds received by the Corporation from the sale of shares of Common Stock
under the Plan shall be used for general corporate purposes.

    


    
      	
               
      

            	
              E.

            	
              WITHHOLDING

            


    

    


    The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
any options or upon the vesting of any shares issued under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.

    


    
      	
               
      

            	
              F.

            	
              REGULATORY
      APPROVALS

            


    

    


    The
implementation of the Plan, the granting of any options under the Plan and the
issuance of any shares of Common Stock (i) upon the exercise of any option or
(ii) under the Stock Issuance Program shall be subject to the Corporation’s
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the shares
of Common Stock issued pursuant to it.

    


    
      	
               
      

            	
              G.

            	
              NO
      EMPLOYMENT OR SERVICE RIGHTS

            


    

    


    Nothing
in the Plan shall confer upon the Optionee or the Participant any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without
cause.

    


    
      	
               
      

            	
              H.

            	
              INDEMNIFICATION

            


    

    


    In
addition to such other rights as they may have as directors or as members of the
Committee, the members of the Plan Administrator shall be indemnified by the
Corporation against the reasonable expenses, including attorneys’ fees, actually
and necessarily incurred in connection with the defense of any action, suit, or
proceeding, and in connection with any appeal therein, to which they or any of
them may be a party by reason of any action or failure to act under or in
connection with this Plan or any option or stock award granted hereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Corporation) or paid by
them in satisfaction of a judgment in any such action, suit, or proceeding,
except in relation to matters as to which it shall be finally adjudged in such
action, suit, or proceeding that such member of the Plan Administrator is liable
for gross negligence or willful misconduct in the performance of his duties;
provided that within 60 days after institution of any such action, suit, or
proceeding (or within 30 days after service upon such member of legal process in
such case, if later) a member of the Plan Administrator shall in writing offer
the Corporation the opportunity, at its own expense, to handle and defend the
same.


    
      
         


      

      
        15

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              I.

            	
              RULE
      16b-3

            


    

    


    With
respect to Participates subject to Rule 16b-3, transactions under the Plan are
intended to comply with all applicable provisions of Rule 16b-3.  To
the extent any provision of the Plan or action by the Plan Administrator fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed  advisable by the Plan Administrator.

    


    
      	
               
      

            	
              J.

            	
              RELATIONSHIP
      TO OTHER PLANS

            


    

    


    Nothing
in this Plan shall prevent the Corporation (or any Parent or Subsidiary) from
adopting or continuing other or additional compensation arrangements, including
without limitation plans providing for the granting of restricted stock awards,
options, cash, or Common Stock performance bonuses.  Grants under the
Plan may form a part of or otherwise be related to such other or additional
compensation arrangements.


    
      
         


      

      
        16

        
          

        

      

      
         


      

    


    APPENDIX

    


    The
following definitions shall be in effect under the Plan:

    


    Board
shall mean the Corporation’s Board of Directors.

    


    Code
shall mean the Internal Revenue Code of 1986, as amended.

    


    Committee
shall mean a committee of two (2) or more non-employee Board members appointed
by the Board to exercise one or more administrative functions under the
Plan.

    


    Common
Stock shall mean the Corporation’s common stock.

    


    Corporate
Transaction shall mean either of the following shareholder approved
transactions to which the Corporation is a party:

    


    (a)           a
merger or consolidation in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, or

    


    (b)           the
sale, transfer or other disposition of all or substantially all of the
Corporation’s assets in complete liquidation or dissolution of the
Corporation.

    


    Corporation
shall mean PSM Holdings, Inc., a Nevada corporation.

    


    Disability
shall mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances.

    


    Employee
shall mean an individual who is in the employ of the Corporation (or any Parent
or Subsidiary), subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of
performance.

    


    Exercise
Date shall mean the date on which the Corporation shall have received
written notice of the option exercise.

    


    Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:


    
      
         


      

      
        A–1

        
          

        

      

      
         


      

    


    (a)           If
the Common Stock is at the time traded on the NASDAQ National Market, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question, as such price is reported by the National Association
of Securities Dealers on the NASDAQ National Market or any successor
system.  If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

    


    (b)           If
the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the
date in question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange.  If there is
no closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.

    


    (c)           If
the Common Stock is at the time neither listed on any Stock Exchange nor traded
on the NASDAQ National Market, then the Fair Market Value shall be determined by
the Plan Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.

    


    Incentive
Option shall mean an option which satisfies the requirements of Code
Section 422.

    


    Involuntary
Termination shall mean the termination of the Service of any individual
which occurs by reason of :

    


    (a)           such
individual’s involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct, or

    


    (b)           such
individual’s voluntary resignation following (A) a change in his or her position
with the Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonuses under any corporate performance
based bonus or incentive programs) by more than fifteen percent (15%), or (c) a
relocation of such individual’s place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected
without the individual’s consent.

    


    The Plan
Administrator shall be entitled to revise the definition of Involuntary
Termination and Misconduct with respect to individual Optionees or Participants
under the Plan.

    


    Misconduct
shall mean the commission of any act of fraud, embezzlement or dishonesty by the
Optionee or Participant, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner.  The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).


    
      
         


      

      
        A–2

        
          

        

      

      
         


      

    


    1934
Act shall mean the Securities Exchange Act of 1934, as
amended.

    


    Non-Statutory
Option shall mean an option not intended to satisfy the requirements of
Code Section 422.

    


    Option
Grant Program shall mean the option grant program in effect under the
Plan.

    


    Optionee
shall mean any person to whom an option is granted under the Plan.

    


    Parent
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

    


    Participant
shall mean any person who is issued shares of Common Stock under the Stock
Issuance Program.

    


    Plan
shall mean the Corporation’s 2002 Stock Option/Stock Issuance Plan, as amended
August 16, 2005, as set forth in this document.

    


    Plan
Administrator shall mean either the Board or the Committee acting in its
capacity as administrator of the Plan.

    


    Rule
16b-3 shall mean Rule 16b-3 promulgated under the 1934 Act by the U.S.
Securities and Exchange Commission, as amended, or any successor rule in effect
from time to time.

    


    Service
shall mean the provision of services to the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a non-employee member of
the board of directors or a consultant or independent advisor, except to the
extent otherwise specifically provided in the documents evidencing the option
grant.

    


    Stock
Exchange shall mean either the American Stock Exchange or the New York
Stock Exchange.

    


    Stock
Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

    


    Stock
Issuance Program shall mean the stock issuance program in effect under
the Plan.


    
      
         


      

      
        A–3

        
          

        

      

      
         


      

    


    Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

    


    10%
Shareholder shall mean the owner of
stock (as determined under Code Section 424(d)) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation (or any Parent or Subsidiary).


    
      
         


      

      
        A–4