Exhibit
10.7


 


2003
PACIFIC CITY BANK


STOCK
OPTION PLAN,


as amended
by the shareholders in 2006


and
subsequently adopted by Pacific City Financial Corporation


in 2007


 


1.                                      Purpose of the Plan.


 


The purpose of this 2003 Pacific City Bank
Stock Option Plan (the “Plan”) is to advance the interests of the Bank by
providing select Participants with the opportunity to acquire Shares. By
encouraging such stock ownership, the Bank seeks to attract, retain and
motivate the best available personnel for positions of substantial
responsibility and to provide additional incentive to Directors, Employees and
Organizers of the Bank or any Affiliate to promote the success of the business.


 


2.                                      Definitions.


 


As used herein, the following definitions
shall apply:


 


(a)                                 “Affiliate”
shall mean any “parent corporation” or “subsidiary corporation” of the Bank, as
such terms are defined in Section 424(e) and (f), respectively, of
the Code, and any other subsidiary corporations of a parent corporation of the
Bank.


 


(b)                                 “Agreement”
shall mean a written agreement entered into in accordance with Section 5(c).


 


(c)                                  “Award” shall
mean an Option evidenced by a written agreement entered into in accordance with
Section 5(c).


 


(d)                                 “Bank” shall
mean the Pacific City Bank, a California banking corporation.


 


(e)                                  “Board” shall
mean the Board of Directors of the Bank.


 


(f)                                   “Code” shall
mean the Internal Revenue Code, as amended.


 


(g)                                  “Committee”
shall mean the Bank’s Compensation Committee appointed by the Board.


 


(h)                                 “Common Stock”
shall mean the common stock of the Bank.


 


(i)                                     “Continuous
Service” shall mean the absence of any interruption or termination of service
as an Employee or Director of the Bank or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave, military leave
or any other leave of absence approved by the Bank or an Affiliate.  In the event that a Participant is both an
Employee and a Director, the termination of one or the other status shall not
constitute an interruption or termination of Continuous Service.


 


1

















 


(j)                                    “Director”
shall mean any member of the Board, and any member of the board of directors of
any Affiliate that the Board has by resolution designated as being eligible for
participation in this Plan.


 


(k)                                 “Non-Employee
Director” shall mean any member of the Board who is a “non-employee director”
within the meaning of Rule 16b-3.


 


(l)                                     “Effective Date”
shall mean the date specified in Section 13 hereof.


 


(m)                             “Employee”
shall mean any person employed by the Bank or an Affiliate who is deemed an
employee thereof for federal tax purposes.


 


(n)                                 “Exercise Price”
shall mean the price per Share at which an Option may be exercised.


 


(o)                                 “ISO” means an
option to purchase Common Stock which meets the requirements set forth in the
Plan, and which is intended to be and is identified as an “incentive stock
option” within the meaning of Section 422 of the Code.


 


(p)                                 “Market Value”
shall mean the fair market value of the Common Stock, as determined under Section 7(b) hereof.


 


(q)                                 “Non-ISO” means
an option to purchase Common Stock which meets the requirements set forth in
the Plan but which is not intended to be and is not identified as an ISO.


 


(r)                                    “Option” means
an ISO and/or a Non-ISO.


 


(s)                                   “Optioned
Shares” shall mean Shares subject to an Award granted pursuant to this Plan.


 


(t)                                    “Participant”
shall mean any Employee, Director, or Organizer who receives an Award pursuant
to the Plan.   For purposes of this Plan,
the term “Organizer” shall mean any person who contributed money for purposes
of paying pre-opening organizational expenses of the Bank.


 


(u)                                 “Plan” shall
mean this 2003 Pacific City Bank Stock Option Plan.


 


(v)                                 “Rule 16b-3”
shall mean Rule 16b-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.


 


(w)                               “Share” shall
mean one share of Common Stock.


 


2

















 


3.                                      Term of the Plan and Awards.


 


(a)                                 Term of the
Plan. The Plan shall continue in effect for a term of 10  years from the Effective Date, unless
sooner terminated pursuant to Section 15 hereof. No Award shall be granted
under the Plan after the expiration of its term.


 


(b)                                 Term of Awards.
The term of each Award granted under the Plan shall be established by the
Board, but shall not exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the outstanding Common
Stock at the time an ISO is granted, the term of such ISO shall not exceed five
years.


 


4.                                      Shares Subject to the Plan.


 


Except as otherwise required by the provisions of Section 10
hereof, the aggregate number of Shares deliverable pursuant to all Awards shall
not exceed 636,250 Shares. Until issuance, such Shares will be deemed
authorized but unissued Shares. If any Awards expire, become unexercisable, or
are forfeited for any reason, the Optioned Shares to which they apply shall be
available for the grant of additional Awards under the Plan (unless the Plan
has expired or been terminated).


 


5.                                      Administration of the Plan.


 


(a)                                 Administration.
The Plan shall be administered by the Board which may, from time to time by
resolution duly approved and adopted, delegate all or a portion of the
administration of the Plan to the Committee.


 


(b)                                 Powers. Except
as limited by the express provisions of the Plan or delegated by the Board to
the Committee, the Board shall have sole and complete authority and discretion (i) to
select Participants and grant Awards, (ii) to determine the form and
content of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, (v) to
make other determinations necessary or advisable for the administration of the
Plan. The Committee shall make recommendations to the Board concerning
Participants and may exercise such other power and authority as may be
delegated to it by the Board from time to time.


 


(c)                                  Agreement. Each
Award shall be evidenced by a written agreement containing such provisions,
consistent with this Plan, as may be approved by the Board. Each such Agreement
shall constitute a binding contract between the Bank and the Participant, and
every Participant, upon acceptance of such Agreement, shall be bound by the
terms and restrictions of the Plan and of such Agreement. The terms of each
such Agreement shall be in accordance with the Plan, and shall set forth (i) the
Exercise Price of an Option, (ii) the number of Shares subject to, and the
expiration date of, the Award, (iii) the vesting schedule for Optioned Shares,
(iv) the restrictions, if any, to be placed upon such Award, or upon
Shares which may be issued upon exercise of such Award, and (v) whether
the Option is to be an ISO or a Non-ISO.


 


The Chairman of the Board and such other Directors and officers as
shall be designated by the Board are hereby authorized to execute Agreements on
behalf of the Bank and to cause them to be delivered to the recipients of
Awards.


 


3

















 


(d)                                 Effect of
Decisions. All decisions, determinations and interpretations of the Board shall
be final and conclusive on all persons affected thereby.


 


(e)                                  Indemnification.
In addition to such other rights of indemnification as they may have, the
members of the Board and the Committee shall be indemnified by the Bank in
connection with any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or any Award
granted hereunder, to the full extent provided for under the Bank’s governing instruments
with respect to the indemnification of Directors.


 


6.                                      Grant of Options.


 


(a)                                 General Rule.
Only Employees (as determined by the Board), Directors and Organizers shall be
eligible to receive grants of Options pursuant to the Plan.


 


(b)                                 Special Rules for
ISOs. The aggregate Market Value, as of the date the option is granted, of the
Shares with respect to which ISOs are exercisable for the first time by an
Employee during any calendar year, shall not exceed $100,000. Notwithstanding
the foregoing, the Board may grant Options in excess of the foregoing
limitations, in which case such Options granted in excess of such limitations
shall be Non-ISOs.


 


(c)                                  Delivery of
Information. The Bank shall deliver to each Participant the information and
financial statements provided for in Rule 428(b) of the Securities
and Exchange Commission’s Regulation C and by Section 260.140.46 of the Rules of
the California Corporations Commissioner, at the times required by such rules.


 


7.                                      Exercise Price for Options


 


(a)                                 Limits on Board
Discretion. The Exercise Price as to any particular Option shall not be less
than 100% of the Market Value of the Optioned Shares on the date of grant,
without taking into account any restrictions thereon. In the case of an
Employee who owns Shares representing more than 10% of the Bank’s outstanding
Shares of Common Stock at the time an ISO is granted, the Exercise Price under
the ISO shall not be less than 110% of the Market Value of the Optioned Shares
at the date the ISO is granted.


 


(b)                                 Standards for
Determining Market Value. If the Common Stock is listed on a national
securities exchange (including the NASDAQ National Market or Small Cap System)
on the date at which Market Value if to be determined, then the Market Value
per Share will be the average of the highest and lowest selling price on such
exchange on such date, or if there were no sales on such date, then the average
of the highest bid and lowest asked price. If the Common Stock is traded on the
NASDAQ OTC Bulletin Board, the Market Value per Share shall be the average of
the highest bid and lowest asked price on such date, or, if there is no bid and
asked price on such date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is available, then
the Market Value per Share shall be the fair market value thereof as determined
by the Board, in its sole and absolute discretion.


 


4

















 


8.                                      Exercise of Options.


 


(a)                                 Generally.
Subject to subsection (e) below, any Option granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Agreement granted to a Participant. An
Option may not be exercised for a fractional Share. Except as otherwise
specifically set forth herein, an Option may be exercised only as to the
portion thereof which is vested as of the time of exercise.


 


(b)                                 Procedure for
Exercise. A Participant may exercise an unexpired Option, subject to provisions
relative to its termination and any applicable limitations on its exercise set
forth in the Agreement in which it is contained, only by (1) written
notice of intent to exercise the Option with respect to a specified number of
Shares, and (2) payment to the Bank with delivery of such notice, in cash
(in the form of a certified or cashier’s check) of the amount of the Exercise
Price for the number of Shares with respect to which the Option is then being
exercised. Each such notice shall be delivered, or mailed by prepaid registered
or certified mail, addressed to the Chief Financial Officer of the Bank at the
Bank’s executive offices.


 


(c)                                  Period of
Exercisability. Except to the extent otherwise provided in more restrictive
terms of an Agreement, the vested portion of an Option may be exercised: (i) by
a Participant other than an Employee or Director at any time before it expires;
or (ii) by an Employee or a Director if he or she has either (A) maintained
Continuous Service since the date of the grant of the Option, or (B) is
exercising the Option within 90 days after termination of such Continuous
Service (but not later than the date on which the Option would otherwise
expire), except as follows:


 


(1)                                 If the Employee’s
or Director’s Continuous Service terminates for Just Cause, the Participant’s
rights to exercise any Option shall expire on the date of termination. The term
“Just Cause” shall mean any of the following: (i) material dishonesty with
respect to any aspect of the Bank’s or an Affiliate’s affairs or business), (ii) incompetence
which actually results in substantial harm to the Bank or an Affiliate or which
could reasonably be expected to result in such harm, (iii) willful
misconduct, (iv) breach of fiduciary duty involving personal profit, (v) intentional
failure to perform stated duties, or (vi) willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final court
order.


 


(2)                                 If the Employee’s
or Director’s Continuous Service terminates by reason of his or her death, then
the Option of the deceased Participant shall be exercisable only as to those
Optioned Shares vested at the time of the Participant’s death, and may be
exercised with respect thereto within one year from the date of death (but not
later than the date on which the Option would otherwise expire) by the
Participant’s executor or administrator or the person or persons to whom the
Participant’s rights under such Option shall have passed by will or by laws of
descent and distribution.


 


(3)                                 If the Employee’s
or Director’s Continuous Service terminates by reason of Permanent and Total
Disability (as such term is defined in Section 22(e)(3) of the Code),
then the Option of the disabled Participant shall be exercisable only as to
those Optioned Shares vested at the time of the participant’s Permanent and
Total Disability, and may be exercised within one year from the date of such
Permanent and Total Disability, but not later than the date on which the Option
would otherwise expire.


 


5

















 


(d)                                 Effect of the
Board’s Decisions. The Board’s determination whether a Participant’s Continuous
Service has ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.


 


(e)                                  The vesting
schedule for each Option shall be determined in the sole discretion of the
Committee and shall be set forth in the Agreement. At least 20% of the Shares
subject to each Option shall vest each year from the date the option is
granted; provided, however, that the Committee shall not provide for vesting
any more quickly than a three year period with one-third of the option vesting
in each year. The vesting periods for Options need not be identical. Vesting
shall cease immediately when the Participant ceases for any reason to be an
Employee or Director, as the case may be, of the Bank or an Affiliate. If a
Participant shall not in any given period exercise any part of an Option which
has become exercisable during that period, the Participant’s right to exercise
such part of the Option shall continue until expiration of the Option.


 


9.                                      Substitute Options.


 


Notwithstanding any other provisions of this Plan to the contrary,
where the outstanding shares of another corporation are changed into or
exchanged for shares of Common Stock of the Bank in a merger, consolidation,
reorganization or similar transaction, then, subject to the approval of the
Board, Options may be granted in exchange for unexercised, unexpired stock
options of the other corporation, and the exercise price of the Optioned Shares
subject to any Option so granted may be fixed at a price less than one hundred
percent of the Market Value of the Common Stock at the time such Option is
granted if said Exercise Price has been computed to be not less than the
Exercise Price set forth in the stock option of the other corporation, with
appropriate adjustment to reflect the exchange ratio of the shares of stock of
the other corporation into the shares of Common Stock of the Bank. The number
of shares of the options of the other corporation shall also be adjusted in
accordance with the exchange ratio so that any substituted Option shall reflect
such adjustment.


 


10.                               Effect of Changes in Common Stock Subject to the Plan.


 


(a)                                 Recapitalizations,
Stock Splits and Other Changes to Capital. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Awards (and the Exercise Price thereof), shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the Bank
which results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, stock split, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by the Bank.


 


(b)                                 Transactions in
which the Bank Is Not the Surviving Entity. This Plan shall terminate on the
effective date of any of the following transactions:  (i) the liquidation or dissolution of
the Bank, (ii) a merger or consolidation in which the Bank is not the
surviving entity, (iii) the sale or disposition of all or substantially
all of the Bank’s assets or (iv) a tender offer or acquisition by one
person or a group of persons acting in concert of more than 50% of 


 


6

















 


the Bank’s outstanding Shares (any of the foregoing to be referred to
herein as a “Transaction”). No Awards may be made after the Board of Directors
has approved a Transaction, unless the Transaction is cancelled or terminated
before becoming effective, in which event the Plan shall not terminate, and
Options not exercised while the Transaction was pending shall resume the status
they had prior to the announcement of the Transaction.


 


As soon as possible after the Board of Directors has approved a
Transaction, the Board shall notify each Participant thereof. Notice shall be
deemed given on the date it is personally delivered to the Participant, or on
the third business day after it is mailed, with first-class postage prepaid, to
the Participant’s last known address. Upon the giving of such notice, and
provided that the date of the Transactions is more than three years after the granting
of an Option, any Option shall become exercisable in full as to all remaining
Shares. All Options not sooner exercised shall terminate at the close of
business on the 30th day after such notice is given, unless
provision is made in connection with the Transaction for assumption of
outstanding Options or payment therefor, or substitution for such Options of
new options covering stock of a successor corporation, or of its parent or
subsidiary, with appropriate adjustments as to number and kind of shares and
prices. The Bank shall have no obligation to make any such provision. The
provisions of this subsection (b) shall not apply if the Bank is the
surviving entity in any such Transaction or if the Transaction occurs within
three years of the grant of the Option.


 


(c)                                  Special Rule for
ISOs. Any adjustment made pursuant to subsections (a) or (b) hereof
shall be made in such a manner as not to constitute a modification, within the
meaning of Section 424(h) of the Code, of outstanding ISOs.


 


(d)                                 Conditions and
Restrictions on New, Additional or Different Shares or Securities. If, by
reason of any adjustment made pursuant to this Section 10, a Participant
becomes entitled to new, additional or different shares of stock or securities,
such new, additional or different shares of stock or securities shall thereupon
be subject to all of the conditions and restrictions which were applicable to
the Shares pursuant to the Award before the adjustment was made.


 


(e)                                  Other
Issuances. Except as expressly provided in this Section 10, the issuance
by the Bank or an Affiliate of shares of stock of any class, or of securities
convertible into Shares or securities of another class, for cash, property or
any lawful consideration, either upon direct sale or upon the exercise of
rights or warrants to purchase the same, shall have no effect upon, and no
adjustment shall be made with respect to, the number, class, Exercise Price or
other characteristics of Shares then subject to Awards or reserved for issuance
under the Plan.


 


11.                               Non-Transferability of Awards.


 


Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a “qualified domestic relations order”
(within the meaning of Section 414(p) of the Code and the regulations
and rulings thereunder). An Award may be exercised only by a Participant, the
Participant’s personal representative, heirs or a permitted transferee.


 


7

















 


12.                               Time of Granting Awards.


 


The date of grant of an Award shall be the date on which the Board
makes the determination to grant such Award.


 


13.                               Effective Date.


 


The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the Shares
eligible to be cast at a meeting duly held in accordance with applicable laws.


 


14.                               Modification of Awards.


 


At any time, and from time to time, the Board may execute an instrument
providing for the modification of any outstanding Award, provided no such
modification shall confer on the holder of said Award any right or benefit
which could not be conferred on him or her by the grant of a new Award at such
time, or impair the Award without the consent of the holder of the Award.


 


15.                               Amendment and Termination of the Plan.


 


The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan.


 


Except for any changes that may be required to be made at the direction
of a bank regulatory agency, shareholder approval must be obtained for any
amendment of the Plan that would change the number of Shares subject to the
Plan (except in accordance with Section 10 above), change the category of
persons eligible to be Participants, or increase the maximum term of the
Options that may be granted under the Plan.


 


No amendment, suspension or termination of the Plan shall, without the
consent of any affected Participant, alter or impair any rights or obligations
under any Award theretofore granted.


 


16.                               Conditions to Issuance of Shares.


 


(a)                                 Compliance with
Securities Laws. Shares of Common Stock shall not be issued with respect to any
Award unless the issuance and delivery of such Shares complies with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the rules and regulations promulgated thereunder, any
applicable state securities laws and regulations, and the requirements of any
stock exchange upon which the Shares may then be listed.


 


(b)                                 Special
Circumstance. The inability of the Bank to obtain approval from any regulatory
body or authority deemed by the Bank’s counsel to be necessary to the lawful
issuance 


 


8

















 


and sale of any Shares hereunder shall relieve the Bank of any
liability arising out of or in connection with its inability to issue or sell
such Shares.


 


(c)                                  Discretion. The
Board shall have the discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or desirable.


 


17.                               Reservation of Shares.


 


The Bank, during the term of the Plan, shall reserve and keep available
a number of authorized and unissued Shares sufficient to satisfy the
requirements of the Plan.


 


18.                               Withholding Tax.


 


The Bank’s obligation to deliver Shares upon exercise of Options shall
be subject to the Participant’s satisfaction of all applicable federal, state
and local income and employment tax withholding obligations. The Board, in its
discretion, may permit the Participant to satisfy the obligation, in whole or
in part, by irrevocably electing to have the Bank withhold Shares, or to
deliver to the Bank Shares the Participant already owns, having a value equal
to the amount required to be withheld. The value of Shares to be with withheld,
or delivered to the Bank, shall be based on the Market Value of the Shares on
the date the amount of tax to be withheld is to be determined. As an
alternative, the Bank may retain, or sell without notice, a number of such
Shares sufficient to cover the amount required to be withheld.


 


19.                               No Employment or Other Rights.


 


In no event shall an Employee’s or Director’s eligibility to
participate or participation in the Plan create or be deemed to create any
legal or equitable right of the Employee, Director, or any other party to
continue service with the Bank or any Affiliate of such corporations.


 


20.                               Governing Law.


 


The Plan shall be governed by and construed in accordance with the laws
of the State of California, except to the extent that federal law shall be
deemed to apply.


 


21.                               FDIC Statement of Policy.


 


In
accordance with the Federal Deposit Insurance Corporation’s (the “FDIC”)
Statement of Policy and notwithstanding anything herein contained to the
contrary, the FDIC shall have the authority to direct the Bank, and the Bank
shall have the authority, to require Participants to exercise or forfeit their
Options if the Bank’s capital falls below the minimum requirements, as determined
by the California Department of Financial Institutions or the FDIC.


 


9