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Exhibit 10.32    
    

 
 

STOCK TRANSFER RESTRICTION AGREEMENT    
    

        This Stock Transfer Restriction Agreement (as amended from time to time pursuant to the terms hereof, this
"Agreement"), is made and entered into as of February 10, 2006, by and among Merrill Corporation, a Minnesota corporation ("Merrill"), and each
of the undersigned individuals who are also officers of Merrill (each an "Officer/Shareholder" and collectively, the
"Officer/Shareholders") of Merrill. 

        A.    Merrill
is in the process of preparing to file with the SEC a registration statement in connection with a proposed initial public offering of Merrill's Common Stock (the
"Merrill IPO"), which transaction Merrill believes to be in the company's best interests. 

        B.    Each
Officer/Shareholder currently owns, or may upon the completion of the Merrill IPO own, shares of Common Stock of Merrill and/or options to purchase shares of Common
Stock of Merrill, and believes that the Merrill IPO would also be in his or her best interest. 

        C.    Merrill
believes that it is necessary for the successful completion of the Merrill IPO that the Officer/Shareholders agree not to sell any of their Shares in the Merrill
IPO and agree to certain additional restrictions on the sale of their Shares after completion of the offering. 

        D.    Certain
of the Shares held by certain of the Officer/Shareholders were acquired pursuant to the terms of the Direct Investment Plan (as defined below) and related
Participation Agreements (as defined below) and were purchased, in part, with the proceeds of Purchase Loans (as defined below) from Merrill, which Purchase Loans (i) are secured by certain of
the Shares and (ii) by their terms must be repaid within 120 days of the completion of the Merrill IPO. 

        E.    Each
of the Officer/Shareholders is a party (or would become a party upon exercise of his or her outstanding stock options) to the Investors' Agreement which provides,
among other things, that each such Officer/Shareholder who is a party to the Investors' Agreement has certain piggyback registration rights in connection with certain public offerings by Merrill,
including the Merrill IPO. 

        F.     Each
of the Officer/Shareholders desires to take certain necessary and appropriate actions in furtherance of the Merrill IPO, including (i) paying any and all
outstanding amounts owed by such Officer/Shareholder to Merrill under any Purchase Loans held by such Officer/Shareholder; (ii) executing an amended and restated Investors' Agreement which,
among other things, provides that piggyback registration rights will be unavailable to the Officer/Shareholder and others in connection with the Merrill IPO; (iii) executing a customary
lock-up agreement with the underwriters in connection with the Merrill IPO; (iv) not requesting the inclusion of any Shares held by the Officer/Shareholder in the IPO Registration
Statement to be filed by Merrill in connection with the Merrill IPO; and (v) executing this Agreement and becoming subject to the Transfer Restrictions and other terms and provisions set forth
herein, and Merrill is willing to pay each of the Officer/Shareholders that currently has an outstanding Purchase Loan a cash bonus in an amount necessary to permit such Officer/Shareholder to pay any
and all amounts owing under such Purchase Loan. 

        Accordingly,
and intending to be legally bound, the parties hereto hereby agree as follows: 

 

        1.    Certain Definitions.    In addition to the capitalized terms otherwise defined herein, the following additional
capitalized terms will have the meanings set forth below, unless the context clearly otherwise requires: 

        (a)   "Beneficially Own," "Beneficial Owner" or
"Beneficial Ownership" with respect to any securities means having voting power or investment power with respect to such securities (as determined
pursuant to Rule 13d-3(a) under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. 

        (b)   "Coinvestment Shareholder" means an Officer/Shareholder who has a Purchase Loan outstanding as of the date of this
Agreement. 

        (c)   "Common Stock" means the class B common stock, par value $0.01 per share, of Merrill, and any capital stock into
which such common stock may be converted or exchanged, including without limitation pursuant to that certain plan of recapitalization contemplated to be completed in connection with the Merrill IPO. 

        (d)   "Direct Investment Plan" means the Merrill Corporation Direct Investment Plan, as amended from time to time, and with
respect to Rick Atterbury, the terms and conditions of any Participation Agreement or other agreement to which he is a party that contain terms and conditions similar to the Direct Investment Plan. 

        (e)   "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        (f)    "Investors' Agreement" means the Investors' Agreement, dated November 23, 1999, by and among Merrill and its
shareholders, as amended, and as further amended from time to time, including without limitation as contemplated to be amended pursuant to Section 3 of this Agreement. 

        (g)   "IPO Registration Statement" means the registration statement intended to be filed by Merrill with the SEC in connection
with the Merrill IPO. 

        (h)   "Participation Agreement" means the participation agreement, as amended, or other agreement between Merrill and each
Officer/Shareholder entered into under the Direct Investment Plan or otherwise pursuant to which the Shares were issued to such Officer/Shareholder. 

        (i)    "Person" means an individual, corporation, partnership, limited liability company, association, trust or other entity or
organization, including a government or political subdivision or an agency or instrumentality thereof. 

        (j)    "Purchase Loan" means a loan made to an Officer/Shareholder pursuant to the Direct Investment Plan to fund the purchase
of Shares pursuant to such plan. 

        (k)   "SEC" means the Securities and Exchange Commission. 

        (l)    "Securities Act" means the Securities Act of 1933, as amended. 

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        (m)  "Shares" means (i) all shares of Common Stock purchased by the Officer/Shareholder pursuant to the Direct
Investment Plan and owned by such Officer/Shareholder as of the date of the effectiveness of the IPO Registration Statement; (ii) all shares of Common Stock otherwise held by the
Officer/Shareholder as of the date of the effectiveness of the IPO Registration Statement; (iii) all shares of Common Stock acquired by the Officer/Shareholder after the date of this Agreement
upon the exercise of options outstanding as of the date of the effectiveness of the IPO Registration Statement; and (iv) all securities issued or exchanged with respect to any such shares upon
any reclassification, recapitalization, reorganization, merger, consolidation, spin-off, stock split, combination, stock or other dividend or any other change in Merrill's capital
structure. For the avoidance of doubt, the term "Shares" does not include any shares of Common Stock acquired by an Officer/Shareholder in the open market or otherwise upon the exercise of options or
other equity incentive awards granted after the date of the effectiveness of the IPO Registration Statement. 

        (n)   "Transfer" means, with respect to any security, any sale, transfer, pledge, grant, hypothecation or other disposition of
such security, whether direct or indirect, whether or not for value, and includes any disposition of the economic or other risks of ownership of Shares, including short sales of securities of Merrill,
option transactions (whether physical or cash settled) with respect to securities of Merrill, use of equity or other derivative financial instruments relating to securities of Merrill and other
hedging arrangements with respect to securities of Merrill. 

        2.    Payment of Bonus; Requirement to Repay Purchase Loans.    

        (a)    Bonus.    Merrill agrees to pay to each Coinvestment Shareholder, subject to applicable income and payroll
withholding taxes as described in Section 2(c), on a date determined by Merrill prior to the initial filing of the IPO Registration Statement with the SEC (the
"Repayment Date"), a one-time cash bonus (the "Bonus") in an amount equal to the sum of
(i) any and all outstanding amounts owing by such Coinvestment Shareholder under the Purchase Loan as of the Repayment Date, including without limitation any and all outstanding principal and
accrued and unpaid interest thereon (the "Loan Repayment Amount"), plus (ii) an additional amount (the "Tax
Gross-Up Amount") to provide the Coinvestment Shareholder with sufficient funds to pay all applicable income taxes on the Loan Repayment Amount and the Tax
Gross-Up Amount, using an estimated tax rate and formula as described in Section 2(c); provided, however, that in order to receive the Bonus the Coinvestment Shareholder must be
employed by Merrill or any subsidiary thereof as of the Repayment Date and must not on the Repayment Date be in breach of the Direct Investment Plan, the Participation Agreement or any other agreement
between Merrill and the Coinvestment Shareholder. If the IPO Registration Statement is not initially filed with the SEC on or before July 1, 2006, then the Coinvestment Shareholder will return
the Bonus, without interest, to Merrill and such Bonus (less any amounts withheld pursuant to Section 2(c)) will deemed to be rescinded and cancelled. 

        (b)    Requirement to Repay Purchase Loans.    Each Coinvestment Shareholder hereby agrees to repay, on the Repayment
Date, the Loan Repayment Amount. If the IPO Registration Statement is not initially filed with the SEC on or before July 1, 2006, then such repayment will be rescinded and cancelled, Merrill
will return the Loan 

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Repayment
Amount to the Coinvestment Shareholder and the Purchase Loan (and any related pledge of the Shares) will be reinstated on the terms in effect immediately prior to such repayment (including
those related to the non-recourse nature of the Purchase Loan). From and after the time that the IPO Registration Statement is initially filed in connection with the IPO, Merrill will have
no right to cancel the repayment of any Purchase Loans pursuant to this Section 2. 

        (c)    Calculation of Tax Gross-Up Payment; Withholding.    In order to calculate the Tax
Gross-Up Amount, each Coinvestment Shareholder's income tax rate will be deemed to be forty-five percent (45%), irrespective of any Coinvestment Shareholder's actual liability
for income taxes and the amount of the Tax Gross-Up Amount for each Coinvestment Shareholder will be computed as the Loan Repayment Amount divided by .55, less the Loan Repayment Amount.
For example, if the Loan Repayment Amount for a Coinvestment Shareholder was $100,000, then the Tax Gross-Up Amount would be $81,818
(($100,000 ÷ .55) - $100,000). Merrill is hereby authorized to withhold from the Bonus all required income and payroll tax withholding applicable to
the inclusion of such amount in the Coinvestment Shareholder's wages for the taxable period in which the Bonus is received. If the IPO Registration Statement is not initially filed with the SEC on or
before July 1, 2006 and the Bonus and repayment of the Purchase Loan are rescinded and cancelled, then the Coinvestment Shareholder will cooperate with Merrill in recovering and returning to
Merrill any amounts withheld in connection with the Bonus and, if requested by Merrill, will pay to Merrill an amount equal to any such withholding amounts in connection with any portion of the Bonus
not returned to Merrill. 

        3.    Amendment of Investors' Agreement.    The Officer/Shareholder hereby agrees to the terms and conditions of the
amended and restated Investors' Agreement, a copy of which is attached as Exhibit A to this Agreement, and simultaneously with the execution of this Agreement has executed and delivered to
Merrill a counterpart signature page to the amended and restated Investors' Agreement. 

        4.    No Participation in Merrill IPO.    The Officer/Shareholder hereby understands, acknowledges and agrees that
none of the Shares held by the Officer/Shareholder will be included for resale in the IPO Registration Statement and agrees not to request the inclusion of any such Shares in the IPO Registration
Statement. 

        5.    Merrill IPO Lock-Up Agreement.    The Officer/Shareholder hereby agrees to the terms and conditions
of the 180-day lock-up agreement with the underwriters (the "180-Day Lock-Up Agreement") in the Merrill
IPO, a copy of which is attached as Exhibit B to this Agreement, and simultaneously with the execution of this Agreement has executed and delivered to the underwriters a counterpart signature
page to such lock-up agreement. 

        6.    Extended Lock-Up Agreement and Restrictions on Transfer.    In addition to the restrictions pursuant
to the 180-Day Lock-Up Agreement, each Officer/Shareholder hereby agrees not to Transfer any Shares (the "Transfer
Restrictions"), except as permitted by the terms of this Agreement or as otherwise permitted by the Board of Directors of Merrill. 

        (a)    Permitted Transfers to Transferees Agreeing to Restrictions.    Notwithstanding the first sentence of
Section 6 of this Agreement, this Agreement will 

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not
prohibit a Transfer of Shares by an Officer/Shareholder (i) as a bona fide gift, (ii) to any family member, trust or other Person in a transaction that is principally for estate
planning purposes or (iii) to any beneficiary, executor, trust, legal guardian or legal representative upon the death or disability of the Officer/Shareholder; provided that, prior to any such
Transfer pursuant to clauses (i), (ii) or (iii) the transferee must (x) execute a counterpart signature page to this Agreement and (y) agree in writing to hold such Shares
(or interest in such Shares) subject to all of the terms and provisions of this Agreement, including any and all restrictions to which the Officer/Shareholder transferring the Shares is subject. 

        (b)    Non-Registered Sales.    Notwithstanding the first sentence of Section 6 of this Agreement,
this Agreement will not prohibit a transfer of Shares by an Officer/Shareholder if (x) the Transfer Restrictions have terminated pursuant to clause (b)(i) below and (y) the
Shares are sold pursuant to the terms of clause (b)(ii) below: 

          (i)    Termination of Transfer Restrictions.    The Transfer Restrictions will terminate with respect to 25% of the
Shares (on a cumulative basis) held by each Officer/Shareholder on the first four anniversaries of the closing date of the Merrill IPO; provided, however, that if (1) during the 17 days
prior to each of the first, second, third or fourth anniversaries of the closing of the Merrill IPO, (A) Merrill releases earnings results or (B) material news or a material event
relating to Merrill occurs, or (2) at any time, Merrill announces that it will release earnings results during the 16-day periods following each of the first, second, third or
fourth anniversaries of the closing of the Merrill IPO, then in each case the Transfer Restrictions that would otherwise have terminated as of such anniversary will be extended until the expiration of
the 18-day period beginning on the date of the release of the earnings results or the occurrence of material news or a material event relating to Merrill, as the case may be. 

         (ii)    Sales Pursuant to 10b5-1 Plan.    Notwithstanding the termination of any Transfer Restrictions
pursuant to Section 6(b)(i) of this Agreement, each Officer/Shareholder agrees during the term of this Agreement to sell Shares only pursuant to a trading plan established pursuant to
and that meets the requirements of Rule 10b5-1 under the Exchange Act (a "10b5-1 Plan"). A 10b5-1 Plan must
be entered into by the Officer/Shareholder with a trust officer and/or broker selected by the Officer/Shareholder and reasonably satisfactory to Merrill. The terms and conditions of any such
10b5-1 Plan must be reasonably acceptable to Merrill and may only include provisions customarily included in such plans. The Officer/Shareholder will not establish a 10b5-1
Plan at any time he or she is in possession of material non-public information regarding Merrill or Merrill is in a "black out" period for trading purposes under its insider trading
policy. The Officer/Shareholder agrees to cause the trust officer and/or broker administering the 10b5-1 plan to submit a monthly report to Merrill, which will include the number of Shares
sold during the previous calendar month and the number of remaining Shares held by the Officer/Shareholder. 

        (c)    Compliance with Applicable Securities Laws and Insider Trading Policy.    The Officer/Shareholder agrees that
any sale of Shares by the Officer/Shareholder 

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pursuant
to this Agreement or otherwise must be in compliance with all applicable federal and state securities laws, including without limitation the provisions of Rule 144 of the Securities
Act and Section 16 of the Exchange Act, and the terms of any insider trading policy to which the Officer/Shareholder may be subject. Without limiting the generality of the foregoing, the
Officer/Shareholder agrees that he or she will not make any sales of Shares while in possession of material non-public information concerning Merrill. 

        (d)    Share Sales by Former Employees.    The Transfer Restrictions and other provisions of this Section 6
will continue to apply to an Officer/Shareholder after any termination of the employment of such Officer/Shareholder with Merrill and any subsidiary, except that after all of the Transfer Restrictions
lapse pursuant to Section 6(b)(i) sales of Shares by an Officer/Shareholder whose employment with Merrill and all subsidiaries has terminated need not be made pursuant to a
Rule 10b5-1 Plan (but still must be made subject to Section 6(c) above). From and after the lapse of all of the Transfer Restrictions lapse pursuant to
Section 6(b)(i), each Officer/Shareholder agrees to submit a monthly report to Merrill, which will include the number of Shares sold by the Officer/Shareholder during the previous calendar
month and the number of remaining Shares held by the Officer/Shareholder. 

        7.    Representations and Warranties of Officer/Shareholders.    Each Officer/Shareholder hereby represents and
warrants to Merrill as follows: 

        (a)    Ownership.    Except as noted on the appropriate signature page of this Agreement, the Officer/Shareholder is
the record owner and Beneficial Owner of the Shares, free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind, other than in connection with the Purchase
Loan. 

        (b)    Power; Binding Agreement.    The Officer/Shareholder has the legal capacity, power and authority to enter into
and perform all of his or her obligations under this Agreement. This Agreement has been duly and validly executed and delivered by the Officer/Shareholder and constitutes a valid and binding agreement
of the Officer/Shareholder, enforceable against the Officer/Shareholder in accordance with its terms. 

        (c)    No Conflicts.    The execution, delivery and performance of the terms of this Agreement by the
Officer/Shareholder will not (i) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default under, any agreement of any kind to which the
Officer/Shareholder is a party or by which the Officer/Shareholder or the Shares may be bound, (ii) require any consent, authorization or approval of any person or entity or
(iii) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to the Officer/Shareholder or any of the Shares. 

        (d)    No Encumbrances.    At all times during the term hereof, all of the Shares held of record or Beneficially Owned
by the Officer/Shareholder will be held by the Officer/Shareholder free and clear of all liens, claims, security interests, proxies (except 

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any
proxy granted to Merrill or its designees), voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever. 

        8.    Restrictive Legends.    

        (a)   Each
certificate representing Shares will be endorsed with legends in substantially the following form: 

          (i)  THE
SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN A CERTAIN STOCK TRANSFER RESTRICTION
AGREEMENT BY AND AMONG MERRILL CORPORATION AND CERTAIN OF ITS SHAREHOLDERS, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF MERRILL CORPORATION. 

         (ii)  Any
other legends required by applicable securities laws. 

        (b)   Any
legend endorsed on a certificate pursuant to Section 8(a)(i) will be removed and the Merrill will issue a certificate without such legend to the holder
of such Shares, if the Transfer of the Shares is no longer subject to any restrictions under Section 6 of this Agreement (other than those pursuant to Section 6(c)). 

        9.    Miscellaneous.    

        (a)    Termination Upon Certain Events.    If the IPO Registration Statement is not initially filed by Merrill with
the SEC on or before July 1, 2006, this Agreement will terminate and be of no further force or effect. Notwithstanding any other provision in this Agreement, the Board of Directors of Merrill
has the right in its sole discretion to terminate this Agreement in its entirety at any time without the consent of any Officer/Shareholder party hereto; provided, however, that from and after the
time that the IPO Registration Statement is initially filed, Merrill will have no right to revoke the repayment of the Purchase Loan or otherwise terminate the provisions of Section 2 of this
Agreement. 

        (b)    Legal Restrictions on Transfer.    The restrictions on transfer of Shares by Officer/Shareholders contained in
this Agreement are cumulative and in addition to any restrictions provided by applicable securities or other laws or other agreements restricting the transfer of Shares the Officer/Shareholder may
have entered into. 

        (c)    Amendments, Modifications and Waivers.    No amendment, modification or waiver in respect of this Agreement
will be effective against any party unless it is in writing and signed by Merrill and any Officer/Shareholder who is adversely affected by any such amendment, modification or waiver. 

        (d)    Entire Agreement.    This Agreement constitutes the entire agreement among the parties to this Agreement with
respect to the subject matter of this Agreement (other than the Investors' Agreement) and supersedes all other prior agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof (other than the Investors' Agreement). Notwithstanding any provision of 

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this
Agreement, unless and until the amended and restated Investors' Agreement becomes effective pursuant to Section 4.01 of that agreement each Officer/Shareholder who is a party to the
Investors' Agreement will continue to enjoy the benefits and remain subject to the duties and obligations as a party to the Investors' Agreement, as in effect as of the date hereof, including without
limitation the provisions contained in Article 4 of that agreement prior to its amendment and restatement. 

        (e)    Governing Law.    This Agreement will be governed by and construed in accordance with the laws of the State of
Minnesota, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Each party hereto irrevocably consents that any legal action or proceeding
against it occurring under, relating to or in connection with this Agreement or any other agreement, document or instrument arising out of or executed in connection with this Agreement may be brought
only in a court of the State of Minnesota or in the United States District Court for the District of Minnesota. Each party hereby expressly and irrevocably waives any claim or defense in any action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or forum non conveniens or any similar basis. 

        (f)    Specific Performance; Injunctive Relief.    The Officer/Shareholder acknowledges that Merrill would be
irreparably harmed and that there is no adequate remedy at law for a violation of any of the covenants or agreements of the Officer/Shareholder set forth in this Agreement. Therefore, the
Officer/Shareholder hereby agrees that, in addition to any other remedies that may be available to Merrill, as applicable upon any such violation, Merrill will have the right to enforce such covenants
and agreements by specific performance, injunctive relief or by any other means available to such party at law or in equity without posting any bond or other undertaking. 

        (g)    Assignment and Successors.    This Agreement and all of the provisions hereof will be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations of the parties
hereto may be assigned by any party hereto without prior written consent of the other party hereto except that Merrill, without obtaining the consent of any Officer/Shareholder, will be entitled to
assign this Agreement or all or any of its rights or obligations hereunder to any one or more Affiliates of Merrill or to any entity that succeeds to the business of Merrill substantially as an
entirety. Any assignment in violation of the foregoing will be void and of no effect. 

        (h)    No Third Party Rights.    Nothing in this Agreement, express or implied, is intended to or will confer upon any
person or entity (other than the parties hereto) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 

        (i)    Cooperation.    Each Officer/Shareholder agrees to cooperate fully with Merrill and to execute and deliver such
further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by Merrill to evidence or reflect the transactions contemplated by this
Agreement and to carry out the intent and purpose of this Agreement. The Officer/Shareholder hereby agrees that Merrill may publish and disclose such Officer/Shareholder's identity and ownership of 

8

 

Shares
and the nature of such Officer/Shareholder's commitments, arrangements and understandings under this Agreement as may be required by applicable law or in any filing made by Merrill with the SEC
or any other regulatory entity. 

        (j)    Severability.    If any provision of this Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full
force and effect to the extent not held invalid or unenforceable. 

        (k)    Relationship of Parties.    The terms of this Agreement are not intended to create a separate entity for United
States federal or state income tax purposes or under the laws of any other jurisdiction. Nothing in this Agreement should be read to create any partnership, joint venture or separate entity among the
parties or to create any trust or other fiduciary relationship between them. Without limitation on the foregoing, Merrill will not be deemed to owe any duties of any kind to any Officer/Shareholder
under or on account of this Agreement or the transactions contemplated hereby other than the contractual obligations of Merrill expressly set forth herein. 

        (l)    Notices.    All notices, consents, requests, claims, demands and other communications under this Agreement must
be in writing and will be deemed given if (i) delivered to the appropriate address by hand or overnight courier (providing proof of delivery) or (ii) sent by facsimile or
e-mail with confirmation of transmission by the transmitting equipment confirmed with a copy delivered as provided in clause (i), in each case to the parties at the following
address, facsimile or e-mail address (or at such other address, facsimile or e-mail address for a party as it specifies by like notice): (A) if to the
Officer/Shareholder, to the Officer/Shareholder's address, e-mail address or facsimile shown below the Officer/Shareholder's on the signature pages hereof; and (B) if to Merrill, as
follows: 

Merrill
Corporation

One Merrill Circle

St. Paul, Minnesota 55108

Attention: Steven J. Machov, General Counsel

Fax: (651) 632-4141

E-mail address: steve.machov@merrillcorp.com 

        (m)    Counterparts.    This Agreement may be executed in several counterparts, each of which will be deemed an
original and all of which will constitute one and the same instrument, and will become effective when counterparts have been signed by each of the parties and delivered to the other parties; it being
understood that all parties need not sign the same counterpart. 

        (n)    Headings.    The headings contained in this Agreement are for the convenience of reference only, will not be
deemed to be a part of this Agreement and will not be referred to in connection with the construction or interpretation of this Agreement. 

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        (o)    Additional Officer/Shareholders.    Each Officer who delivers a counterpart signature page to this Agreement to
Merrill agrees that it is a party to and bound by the terms of this Agreement and will be deemed a "Officer/Shareholder" hereunder. 

[Signatures on the Following Pages]

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        IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written. 

	MERRILL CORPORATION	 	 
	

By:	
 	

/s/ JOHN W. CASTRO
	
 	

 
	

Name:	
 	

John W. Castro
	
 	

 
	

Title:	
 	

Chairman of the Board and Chief Executive Officer
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

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OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ RICK R. ATTERBURY
	
 	

 
	

Name:	
 	

Rick R. Atterbury
	
 	

 
	

Title:	
 	

President and Chief Operating Officer
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

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OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ B. MICHAEL JAMES
	
 	

 
	

Name:	
 	

B. Michael James
	
 	

 
	

Title:	
 	

President, Transaction and Compliance Services
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

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OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ ROBERT H. NAZARIAN
	
 	

 
	

Name:	
 	

Robert H. Nazarian
	
 	

 
	

Title:	
 	

Executive Vice President and Chief Financial Officer
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

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OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ DALE S. KOPEL
	
 	

 
	

Name:	
 	

Dale S. Kopel
	
 	

 
	

Title:	
 	

Treasurer
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

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OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ CRAIG P. LEVINSOHN
	
 	

 
	

Name:	
 	

Craig P. Levinsohn
	
 	

 
	

Title:	
 	

Executive Vice President Marketing
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

16

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ STEVEN J. MACHOV
	
 	

 
	

Name:	
 	

Steven J. Machov
	
 	

 
	

Title:	
 	

Executive Vice President, General Counsel and Secretary
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

17

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ JOHN R. STOLLE
	
 	

 
	

Name:	
 	

John R. Stolle
	
 	

 
	

Title:	
 	

Executive Vice President and Chief Technology Officer
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

18

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ BRENDA J. VALE
	
 	

 
	

Name:	
 	

Brenda J. Vale
	
 	

 
	

Title:	
 	

Executive Vice President, Human Resources
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

19

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ PERRY SOLOMON
	
 	

 
	

Name:	
 	

Perry Solomon
	
 	

 
	

Title:	
 	

President, Legal Solutions
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

20

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ KATHLEEN A. LARKIN
	
 	

 
	

Name:	
 	

Kathleen A. Larkin
	
 	

 
	

Title:	
 	

Vice President, Operations, Legal Solutions
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

21

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ ALLEN J. MCNEE
	
 	

 
	

Name:	
 	

Allen J. McNee
	
 	

 
	

Title:	
 	

President, Legal Solutions Sales
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

22

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ MARK A. ROSSI
	
 	

 
	

Name:	
 	

Mark A. Rossi
	
 	

 
	

Title:	
 	

President, Financial Services and Brand Management
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

23

 

	

OFFICER/SHAREHOLDER:	
 	

 
	

MERRILL CORPORATION	
 	

 
	

By:	
 	

/s/ RAYMOND J. GOODWIN
	
 	

 
	

Name:	
 	

Raymond J. Goodwin
	
 	

 
	

Title:	
 	

President, Integrated Operations
	
 	

 
	

Address:	
 	

 
	

	
 	

 
	

	
 	

 
	

	
 	

 
	

 	
 	

 	
 	

 

	

Telephone: (      )       -        
	

Facsimile: (      )       -        
	

E-Mail Address:	
 	

          

	

 	
 	

 

	

Shares Owned Beneficially and of Record:	
 	

          

	

 	
 	

 

	

Ownership Comments:	
 	

          

	

 	
 	

 

[Counterpart Signature Page to Stock Transfer Restriction Agreement]  

24

 
  
 

    Exhibit A    
    

 
 

Amended and Restated Investors' Agreement    
    

25

 
 
 

Exhibit B    
    

 
 

180-Day Lock-Up Agreement    
    

26

QuickLinks

Exhibit 10.32

STOCK TRANSFER RESTRICTION AGREEMENT

Exhibit A

Amended and Restated Investors' Agreement

Exhibit B

180-Day Lock-Up AgreementExhibit 10.1

 

FIRST
COMMUNITY BANCORP 2003 STOCK INCENTIVE PLAN

 

(as amended
and restated February 8, 2006)

 

1.     Purpose of the Plan.  The purpose of this First Community Bancorp
2003 Stock Incentive Plan is to offer certain Employees, Non-Employee Directors,
and Consultants the opportunity to acquire a proprietary interest in the
Company. Through the Plan, the Company and its subsidiaries seek to attract,
motivate, and retain highly competent persons. The success of the Company and
its affiliates are dependent upon the efforts of these persons. The Plan
provides for the grant of options, restricted stock awards, performance stock
awards, and stock appreciation rights. An option granted under the Plan may be
a Non-Statutory Stock Option or an Incentive Stock Option, as determined by the
Administrator. This Plan amends and restates the 2003 Plan.

 

2.     Definitions.  As used herein, the following definitions
shall apply.

 

“2003 Plan” shall mean the
First Community Bancorp 2003 Stock Incentive Plan, originally adopted as of April 18,
2003, and as amended and restated hereby.

 

“Act” shall mean the
Securities Act of 1933, as amended.

 

“Administrator” shall mean
the Board or any one of the Committees.

 

“Affiliate” shall mean any
parent or subsidiary (as defined in Sections 424(e) and (f) of the
Code) of the Company.

 

“APB 25” shall mean Opinion
25 of the Accounting Principles Board, as amended, and any successor thereof.

 

“Award” shall mean an
Option, Stock Award, or a SAR.

 

“Board” shall mean the Board
of Directors of the Company.

 

“Cause” shall have the
meaning given to it under the Participant’s employment agreement with the
Company or Affiliate, or a policy of the Company or an Affiliate. If the
Participant does not have an employment agreement or the employment agreement
does not define this term, or the Company or an Affiliate does not have a
policy that defines this term, then Cause shall include malfeasance or gross
misfeasance in the performance of duties or conviction of illegal activity in
connection therewith or any conduct detrimental to the interests of the Company
or an Affiliate which results in termination of the Participant’s service with
the Company or an Affiliate, as determined by the Administrator.

 

“Change in Control” shall
mean:

 

(i)  the consummation of a plan of dissolution or liquidation
of the Company;

 

(ii)  the individuals who, as of the effective date hereof,
are members of the Board (“Incumbent Board”), cease for any reason to
constitute at least two-thirds of the members of the Board; provided, however,
that if the election, or nomination for election by the Company’s shareholders,
of any new director was approved by a vote of at least

 

 

two-thirds
of the Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided, further, however, that
no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened “election contest” or other actual or threatened solicitation of
proxies or consents by or on behalf of an individual, entity or group (within
the meaning of Section 13(d) or 14(d) of the Exchange Act)(a “Person”)
other than the Board (a “Proxy Contest”) including by reason of any agreement
intended to avoid or settle any election contest or Proxy Contest;

 

(iii)  the
consummation of a plan of reorganization, merger or consolidation involving the
Company, except for a reorganization, merger or consolidation where (A) the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation own directly or indirectly at least 70% of the combined voting
power of the outstanding voting securities of the company resulting from such
reorganization, merger or consolidation (the “Surviving Company”) in
substantially the same proportion as their ownership of voting securities of
the Company immediately prior to such reorganization, merger or consolidation,
and (B) the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for such reorganization,
merger or consolidation constitute at least two-thirds of the members of the
board of directors of the Surviving Company, or of a company beneficially
owning, directly or indirectly, a majority of the voting securities of the
Surviving Company;

 

(iv)  the sale of all or substantially all the assets of the
Company to another person; or

 

(v)  the acquisition by another Person of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of stock representing more than fifty percent (50%) of the voting power of
the Company then outstanding by another Person.

 

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

 

“Committee” shall mean a committee
appointed by the Board in accordance with Section 3 below.

 

“Common Stock” shall mean
the common stock of the Company, no par value.

 

“Company” shall mean First
Community Bancorp, a California corporation.

 

“Consultant” shall mean any
natural person who performs bona fide services for the Company or an Affiliate
as a consultant or advisor, excluding Employees and Non-Employee Directors.

 

“Date of Grant” shall mean
the effective date as of which the Administrator grants an Option to an
Optionee, a Stock Award to a Grantee, or a SAR to an Optionee.

 

“Disability” shall mean
total and permanent disability as defined in Section 22(e)(3) of the
Code.

 

“Employee” shall mean any
individual who is a common-law employee of the Company or an Affiliate.

 

2

 

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

 

“Exercise Price,” in the
case of an Option, shall mean the exercise price of a share of Optioned Stock. “Exercise
Price,” in the case of a SAR, shall be determined by the Administrator but
shall not be less than 100% of the Fair Market Value of a Share on the Date of
Grant of such SAR.

 

“Fair Market Value” shall
mean, as of any date, the value of Common Stock determined as follows:

 

(i)  If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation, the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or
such other source as the Administrator deems reliable;

 

(ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock quoted by such recognized securities dealer on the last market trading
day prior to the day of determination; or

 

(iii)  In the absence of an established market for the Common
Stock, its Fair Market Value shall be determined, in good faith, by the
Administrator.

 

“FASB” shall mean the Financial Accounting Standards
Board.

 

“Granted Stock” shall mean
the shares of Common Stock that were granted pursuant to a Stock Award.

 

“Grantee” shall mean any
person who is granted a Stock Award.

 

“Incentive Stock Option”
shall mean an Option intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code.

 

“Mature Shares” shall mean
Shares that had been held by the Participant for a meaningful period of time
such as six months or such other period of time that is consistent with FASB’s
interpretation of APB 25.

 

“Non-Employee Director”
shall mean a non-employee member of the Board.

 

“Non-Statutory Stock Option”
shall mean an Option not intended to qualify as an Incentive Stock Option.

 

“Notice of Stock Appreciation
Rights Grant” shall mean the notice delivered by the Company to the Optionee
evidencing the grant of an SAR.

 

“Notice of Stock Option
Grant” shall mean the notice delivered by the Company to the Optionee
evidencing the grant of an Option.

 

3

 

“Option” shall mean a stock
option granted pursuant to the Plan.

 

“Option Agreement” shall
mean a written agreement that evidences an Option in such form as the
Administrator shall approve from time to time.

 

“Optioned Stock” shall mean
the Common Stock subject to an Option.

 

“Optionee” shall mean any
person who receives an Option or a SAR.

 

“Participant” shall mean an
Optionee or a Grantee.

 

“Performance Stock Award”
shall mean an Award granted pursuant to Section 9 of the Plan.

 

“Plan” shall mean this First
Community Bancorp 2003 Stock Incentive Plan, as amended and restated to date.

 

“Qualified Note” shall mean
a recourse note, with a market rate of interest, that may, at the discretion of
the Administrator, be secured by the Optioned Stock or otherwise.

 

“Restricted Stock Award”
shall mean an Award granted pursuant to Section 8 of the Plan.

 

“Risk of Forfeiture” shall
mean the Grantee’s risk that the Granted Stock may be forfeited and returned to
the Company in accordance with Section 8 or 9 of the Plan.

 

“Rule 16b-3” shall mean
Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3.

 

“SAR” or “Stock Appreciation
Right” shall mean a stock appreciation right granted pursuant to the Plan.

 

“SAR Agreement” shall mean a
written agreement that evidences a SAR in such form as the Administrator shall
approve from time to time.

 

“Service” shall mean the performance of
services for the Company (or any Affiliate) by an Employee, Non-Employee
Director, or Consultant, as determined by the Administrator in its sole
discretion. Service shall not be considered interrupted in the case of: (i) a
change of status (i.e., from
Employee to Consultant, Non-Employee Director to Consultant, or any other
combination); (ii) transfers between locations of the Company or between
the Company and any Affiliate; or (iii) a leave of absence approved by the
Company or an Affiliate. A leave of absence approved by the Company or an
Affiliate shall include sick leave, military leave, or any other personal leave
approved by an authorized representative of the Company or an Affiliate.

 

“Service Provider” shall
mean an Employee, Non-Employee Director, or Consultant.

 

“Share” shall mean a share
of Common Stock.

 

“Stock Award” shall mean a
Restricted Stock Award or a Performance Stock Award.

 

“Stock Award Agreement”
shall mean a written agreement that evidences a Restricted Stock Award or
Performance Stock Award in such form as the Administrator shall approve from
time to time.

 

4

 

“Tax” or “Taxes” shall mean
the federal, state, and local income, employment and excise tax liabilities
incurred by the Participant in connection with his/her Awards.

 

“10% Shareholder” shall mean
the owner of stock (as determined under Section 424(d) of the Code)
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or any Affiliate).

 

“Termination Date” shall
mean the date on which a Participant’s Service terminates, as determined by the
Administrator in its sole discretion.

 

“Vesting Event” shall mean
the earlier of: (i) the occurrence of a Change in Control; (ii) the
termination of a Participant’s Service (other than for Cause) following the
approval by the shareholders of the Company of any matter, plan or transaction
which would constitute a Change in Control; (iii) the death of the
Participant, for all Stock Awards granted with an effective date of November 2,
2005 and afterward.

 

3.     Administration of the Plan.

 

(a)  Except as otherwise provided for below, the Plan shall
be administered by (i) the Board or (ii) a Committee, which Committee
shall be constituted to satisfy applicable laws.

 

(i)  Section 162(m).  To
the extent that the Administrator determines that it is desirable to qualify
Awards as “performance-based compensation” within the meaning of Section 162(m)
of the Code, the Plan shall be administered by a Committee comprised solely of
two or more “outside directors” within the meaning of Section 162(m) of the
Code.

 

(ii)  Rule 16b-3.  To
the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3,
the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.

 

(b)  Powers of the Administrator.  Subject
to the provisions of the Plan and in the case of specific duties delegated by
the Administrator, and subject to the approval of relevant authorities,
including the approval, if required, of any stock exchange or national market
system upon which the Common Stock is then listed, the Administrator shall have
the authority, in its sole discretion:

 

(i)  to determine the Fair Market Value of the Common Stock;

 

(ii)  to select the Service Providers to whom Awards may,
from time to time, be granted under the Plan;

 

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

 

(iv)  to determine the number of Shares that pertain to each
Award;

 

(v)  to approve the terms of the Option
Agreements, Stock Award Agreements, and SAR Agreements;

 

5

 

(vi)  to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award. Such terms and conditions may
include, but are not limited to, the Exercise Price, the status of an Option
(Non-Statutory Stock Option or Incentive Stock Option), the time or times when
Awards may be exercised, any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Award or the Shares
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

 

(vii)  to determine the method of payment of the Exercise
Price;

 

(viii)  to reduce the Exercise Price of any Option to the
then current Fair Market Value if the Fair Market Value of the Optioned Stock
has declined since the Date of Grant of such Option;

 

(ix)  to delegate to others responsibilities to assist in
administering the Plan;

 

(x)  to construe and interpret the terms of the Plan, Option
Agreements, Stock Award Agreements, SAR Agreements and any other documents
related to the Awards;

 

(xi)  to interpret and administer the terms of the Plan to
comply with all Tax rules and regulations; and

 

(xii)  to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time deem advisable.

 

(c)  Effect of
Administrator’s Decision.  All decisions, determinations,
and interpretations of the Administrator shall be final and binding on all
Participants and any other holders of any Awards. The Administrator’s decisions
and determinations under the Plan need not be uniform and may be made
selectively among Participants whether or not such Participants are similarly
situated.

 

(d)  Liability.  No
member of the Committee shall be personally liable by reason of any contract or
other instrument executed by such member or on his/her behalf in his/her
capacity as a member of the Committee for any mistake of judgment made in good
faith, and the Company shall indemnify and hold harmless each member of the
Committee and each other employee, officer or director of the Company to whom
any duty or power relating to the administration or interpretation of the Plan
may be allocated or delegated, against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim) arising
out of any act or omission to act in connection with the Plan unless arising
out of such person’s own fraud or bad faith. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company’s Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power the
Company may have to indemnify them or hold them harmless.

 

6

 

4.     Stock Subject To The Plan.

 

(a)  Basic Limitation.  The
total number of Options, Stock Awards, and SARs that may be awarded under the
Plan may not exceed 2,500,000, subject to the adjustments provided for in Section 11
of the Plan.

 

(b)  Additional Shares.  In the event
that any outstanding Award expires or is canceled or otherwise terminated, the
Shares that pertain to the unexercised Award shall again be available for the
purposes of the Plan. In the event that Shares issued under the Plan are
reacquired by the Company at their original purchase price, such Shares shall
again be available for the purposes of the Plan, except that the aggregate
number of Shares which may be issued upon the exercise of Incentive Stock
Options shall in no event exceed 2,500,000 Shares, subject to the adjustments
provided for in Section 11 of the Plan.

 

5.     Eligibility.  The persons eligible to participate in the Plan shall be limited to
Employees, Non-Employee Directors, and Consultants who have the potential to
impact the long-term success of the Company and/or its Affiliates and who have
been selected by the Administrator to participate in the Plan.

 

6.     Option Terms.  Each Option shall be evidenced by an Option Agreement, in the form
approved by the Administrator and may contain such provisions as the
Administrator deems appropriate; provided, however, that each Option Agreement
shall comply with the terms specified below. No person may be granted (in any
calendar year) Options to purchase more than 250,000 Shares, subject to the
adjustments provided for in Section 11 of the Plan. Each Option Agreement
evidencing an Incentive Stock Option shall, in addition, be subject to Section 7
below.

 

(a)  Exercise Price.

 

(i)  The Exercise Price of an Option shall be determined by
the Administrator but shall not be less than 100% of the Fair Market Value of a
Share on the Date of Grant of such Option.

 

(ii)  Notwithstanding the foregoing, where the outstanding
shares of stock of another corporation are changed into or exchanged for shares
of Common Stock without monetary consideration to that other corporation, 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 each Option so granted may be fixed at a price less
than 100% of the Fair 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 Company.

 

(iii)  The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator and may consist entirely of (A) cash, (B) check,
(C) Mature Shares, (D) Qualified Note, or (e) any combination of
the foregoing methods of payment. The Administrator may also permit Optionees,
either on a selective or aggregate

 

7

 

basis,
to simultaneously exercise Options and sell the shares of Common Stock thereby
acquired, pursuant to a brokerage or similar arrangement, approved in advance
by the Administrator, and use the proceeds from such sale as payment of part or
all of the exercise price of such shares. Notwithstanding the foregoing, a
method of payment may not be used if it causes the Company to: (i) recognize
compensation expense for financial reporting purposes; (ii) violate Section 402
of the Sarbanes-Oxley Act of 2002 or any regulations adopted pursuant thereto;
or (iii) violate Regulation O, promulgated by the Board of Governors
of the Federal Reserve System, as determined by the Administrator in its sole
discretion.

 

(b)  Vesting.  Any
Option granted hereunder shall be exercisable and shall vest at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement, but in the case of an Optionee who is not an officer of the
Company, a Non-Employee Director, or a Consultant, an Option or Shares purchased
thereunder shall vest at a rate of at least 20% per year. An Option may not be
exercised for a fraction of a Share. Notwithstanding anything herein to the
contrary, upon the occurrence of a Vesting Event, all Options that are
outstanding on the date of the Vesting Event shall become exercisable on such
date (whether or not previously vested).

 

(c)  Term of Options.  No Option
shall have a term in excess of 10 years measured from the Date of Grant of
such Option.

 

(d)  Procedure for
Exercise.  An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Administrator in
accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full payment of the applicable Exercise Price for the
Share being exercised has been received by the Administrator. Full payment may,
as authorized by the Administrator, consist of any consideration and method of
payment allowable under Subsection (a)(iii) above. In the event of a
cashless exercise, the broker shall not be deemed to be an agent of the
Administrator.

 

(e)  Effect of Termination
of Service.

 

(i)  Termination of
Service.  Upon termination of an Optionee’s Service, other
than due to death, Disability, or Cause, the Optionee may exercise his/her Option,
but only on or prior to the date that is three months following the Optionee’s
Termination Date, and only to the extent that the Optionee was entitled to
exercise such Option on the Termination Date (but in no event later than the
expiration of the term of such Option, as set forth in the Notice of Stock
Option Grant to the Option Agreement). If, on the Termination Date, the
Optionee is not entitled to exercise the Optionee’s entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination of Service, the Optionee does not exercise his/her Option
within the time specified herein, the Option shall terminate, and the Optioned
Stock shall revert to the Plan.

 

(ii)  Disability of
Optionee.  In the event of termination of an Optionee’s
Service due to his/her Disability, the Optionee may exercise his/her Option,
but only on or prior to the date that is twelve months following the
Termination Date,

 

8

 

and
only to the extent that the Optionee was entitled to exercise such Option on
the Termination Date (but in no event later than the expiration date of the
term of his/her Option, as set forth in the Notice of Stock Option Grant to the
Option Agreement). To the extent the Optionee is not entitled to exercise the
Option on the Termination Date, or if the Optionee does not exercise the Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Optioned Stock shall revert to the Plan.

 

(iii)  Death of Optionee.  In
the event that an Optionee should die while in Service, the Optionee’s Option
may be exercised by the Optionee’s estate or by a person who has acquired the
right to exercise the Option by bequest or inheritance, but only on or prior to
the date that is twelve months following the date of death, and only to the
extent that the Optionee was entitled to exercise the Option at the date of
death (but in no event later than the expiration date of the term of his/her
Option, as set forth in the Notice of Stock Option Grant to the Option
Agreement). If, at the time of death, the Optionee was not entitled to exercise
his/her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If after death, the Optionee’s
estate or a person who acquires the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Optioned Stock shall revert to the Plan.

 

(iv)  Cause.  In
the event of termination of an Optionee’s Service due to Cause, the Optionee’s
Options shall terminate on the Termination Date.

 

(v)  To the extent
that the Company does not violate Section 402 of the Sarbanes-Oxley Act of
2002 or any regulations adopted pursuant thereto or Regulation O,
promulgated by the Board of Governors of the Federal Reserve System (as
determined by the Administrator in its sole discretion), the Administrator
shall have complete discretion, exercisable either at the time an Option or SAR
is granted or at any time while the Option or SAR remains outstanding, to:

 

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

 

(B)  permit the Option or SAR to be exercised, during the
applicable post-Service exercise period, not only with respect to the number of
vested Shares for which such Option or SAR 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 had the Optionee continued
in Service.

 

(f)  Shareholder Rights.  Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any

 

9

 

other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in Section 11
below.

 

(g)  Non-transferability
of Options.  Options 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 and may be exercised, during the
lifetime of the Optionee, only by the Optionee. Notwithstanding the immediately
preceding sentence, the Administrator may permit an Optionee to transfer any
Award which is not an Incentive Stock Option to one or more of the Optionee’s
immediate family members or to trusts established in whole or in part for the
benefit of the Optionee and/or one or more of such immediate family members.
For purposes of the Plan, (i) the term “immediate
family” shall mean the Optionee’s spouse and issue (including
adopted and step children) and (ii) the phrase “immediate family members
or to trusts established in whole or in part for the benefit of the Optionee
and/or one or more of such immediate family members” shall be further limited,
if necessary, so that neither the transfer of an Award other than an Incentive
Stock Option to such immediate family member or trust, nor the ability of a
Optionee to make such a transfer shall have adverse consequences to the Company
or the Optionee by reason of Section 162(m) of the Code.

 

7.     Incentive Stock Options.  The terms specified below shall be applicable
to all Incentive Stock Options, and these terms shall, as to such Incentive
Stock Options, supercede any conflicting terms in Section 6 above. Options
which are specifically designated as Non-Statutory Stock Options when issued
under the Plan shall not be
subject to the terms of this Section.

 

(a)  Eligibility.  Incentive
Stock Options may only be granted to Employees.

 

(b)  Exercise Price.  The
Exercise Price of an Incentive Stock Option shall not be less than 100% of the
Fair Market Value of a Share on the Date of Grant of such Option, except as
otherwise provided for in Subsection (d) below.

 

(c)  Dollar Limitation.  In
the case of an Incentive Stock Option, the aggregate Fair Market Value of the
Optioned Stock (determined as of the Date of Grant of each Option) with respect
to Options granted to any Employee under the Plan (or any other option plan of
the Company or any Affiliate) that may for the first time become exercisable as
Incentive Stock Options during any one calendar year shall not exceed the sum
of $100,000. To the extent the Employee holds two 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 Stock Options
shall be applied on the basis of the order in which such Options are granted.
Any Options in excess of such limitation shall automatically be treated as
Non-Statutory Stock Options.

 

10

 

(d)  10% Shareholder.  If
any Employee to whom an Incentive Stock Option is granted is a 10% Shareholder,
then the Exercise Price shall not be less than 110% of the Fair Market Value of
a Share on the Date of Grant of such Option, and the Option term shall not
exceed five years measured from the Date of Grant of such Option.

 

(e)  Change in Status.  In
the event of an Optionee’s change of status from Employee to Consultant or to
Non-Employee Director, an Incentive Stock Option held by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Non-Statutory Stock Option three months and one day following
such change of status.

 

(f)  Approved Leave of
Absence.  If an Optionee is on an approved leave of
absence, and the Optionee’s reemployment upon expiration of such leave is not
guaranteed by statute or contract, including Company policies, then on the 91st
day of such leave any Incentive Stock Option held by the Optionee shall cease
to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Non-Statutory Stock Option.

 

8.     Restricted Stock Award.  Each Restricted Stock Award shall be
evidenced by a Stock Award Agreement, in the form approved by the Administrator
and may contain such provisions as the Administrator deems appropriate;
provided, however, such Stock Award Agreement shall comply with the terms
specified below.

 

(a)  Risk of Forfeiture.

 

(i)  General Rule.  Shares
issued pursuant to a Restricted Stock Award shall initially be subject to a
Risk of Forfeiture. The Risk of Forfeiture shall be set forth in the Stock
Award Agreement, and shall comply with the terms specified below.

 

(ii)  Lapse of Risk of
Forfeiture.  The Risk of Forfeiture shall lapse as the
Grantee vests in the Granted Stock. The Grantee shall vest in the Granted Stock
at such times and under such conditions as determined by the Administrator and
set forth in the Stock Award Agreement. Notwithstanding the foregoing, upon the
occurrence of a Vesting Event, the Grantee shall become 100% vested in those
shares of Granted Stock that are outstanding on the date of the Vesting Event.

 

(iii)  Forfeiture of
Granted Stock.  Except as otherwise determined by the Administrator
in its discretion, the Granted Stock that is subject to a Risk of Forfeiture
shall automatically be forfeited and immediately returned to the Company on the
Grantee’s Termination Date or the date on which the Administrator determines
that any other conditions to the vesting of the Restricted Stock were not
satisfied during the designated period of time.

 

(b)  Rights as a
Stockholder.  Upon vesting of a Restricted Stock Award,
the Grantee shall have the rights of a stockholder with respect to the voting
of the vested shares of Granted Stock, subject to the conditions contained in
the Stock Award Agreement.

 

11

 

(c)  Dividends.  The Stock Award
Agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Granted Stock.

 

(d)  Non-transferability
of Restricted Stock Award.  Except as otherwise provided
for in Section 12 of the Plan, Restricted Stock 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 and may be
exercised, during the lifetime of the Grantee, only by the Grantee.
Notwithstanding the immediately preceding sentence, the Administrator may
permit a Grantee to transfer any Award which is not an Incentive Stock Option
to one or more of the Grantee’s immediate family members or to trusts
established in whole or in part for the benefit of the Grantee and/or one or
more of such immediate family members. For purposes of the Plan, (i) the
term “immediate family” shall
mean the Grantee’s spouse and issue (including adopted and step children) and (ii) the
phrase “immediate family members or to trusts established in whole or in part
for the benefit of the Grantee and/or one or more of such immediate family
members” shall be further limited, if necessary, so that neither the transfer
of an Award other than an Incentive Stock Option to such immediate family
member or trust, nor the ability of a Grantee to make such a transfer shall
have adverse consequences to the Company or the Grantee by reason of Section 162(m)
of the Code.

 

9.     Performance Stock Award.  Each Performance Stock Award shall be
evidenced by a Stock Award Agreement, in the form approved by the
Administrator, and may contain such provisions as the Administrator deems
appropriate; provided, however, such Stock Award Agreement shall comply with
the terms specified below.

 

(a)  Risk of Forfeiture.

 

(i)  General Rule.  Shares
issued pursuant to a Performance Stock Award shall initially be subject to a
Risk of Forfeiture. The Risk of Forfeiture shall be set forth in the Stock
Award Agreement, and shall comply with the terms specified below.

 

(ii)  Lapse of Risk of
Forfeiture.  The Risk of Forfeiture shall lapse as the
Grantee vests in the Granted Stock. The Grantee shall vest in or accelerate
vesting in the Granted Stock, in whole or in part, if certain goals established
by the Administrator are achieved over a designated period of time, but not in any
event more than 10 years.  At
the discretion of the Administrator, the goals may be based upon the attainment
of one or more of the following business criteria (determined either in
absolute terms or relative to the performance of one or more similarly situated
companies or a published index covering the performance of a number of
companies): net income; return
on average assets (“ROA”); cash ROA; cash ROA; return on average equity (“ROE”);
cash ROE; earnings per share (“EPS”); cash EPS; stock price; and efficiency
ratio. 
Performance goals may be established on a Company-wide basis or
with respect to one or more business units or divisions. When establishing
performance goals, the Administrator may exclude any or all “extraordinary
items” as determined under U.S. generally accepted accounting principles
including, without limitation, the

 

12

 

charges or costs associated with restructurings of the Company,
discontinued operations, other unusual or non-recurring items, and the
cumulative effects of accounting changes. The Administrator may also adjust the
performance goals for any performance cycle as it deems equitable in
recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Administrator deems appropriate.  
Notwithstanding the foregoing, upon the occurrence of a Vesting Event,
the Grantee shall become 100% vested in those shares of Granted Stock that are
outstanding on the date of the Vesting Event.

 

(iii)  Forfeiture of
Granted Stock.  The Granted Stock that is subject to a
Risk of Forfeiture shall automatically be forfeited and immediately returned to
the Company on the Grantee’s Termination Date or the date on which the
Administrator determines that any other conditions to the vesting of the
Performance Stock Award, including performance goals, were not satisfied during
the designated period of time.

 

(b)  Rights as a
Stockholder.  Upon vesting of a Performance Stock Award,
the Grantee shall have the rights of a stockholder with respect to the voting
of the vested shares of Granted Stock, subject to the conditions contained in
the Stock Award Agreement.

 

(c)  Dividends.  The
Stock Award Agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid on Granted Stock.

 

(d)  Non-transferability of Performance Stock Award.  Except
as otherwise provided for in Section 12 of the Plan, Performance Stock
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 and may be exercised, during the lifetime of the Grantee, only by
the Grantee. Notwithstanding the immediately preceding sentence, the
Administrator may permit a Grantee to transfer any Award which is not an
Incentive Stock Option to one or more of the Grantee’s immediate family members
or to trusts established in whole or in part for the benefit of the Grantee
and/or one or more of such immediate family members. For purposes of the Plan, (i) the
term “immediate family” shall
mean the Grantee’s spouse and issue (including adopted and step children) and (ii) the
phrase “immediate family members or to trusts established in whole or in part
for the benefit of the Grantee and/or one or more of such immediate family
members” shall be further limited, if necessary, so that neither the transfer
of an Award other than an Incentive Stock Option to such immediate family
member or trust, nor the ability of a Grantee to make such a transfer shall
have adverse consequences to the Company or the Grantee by reason of Section 162(m)
of the Code.

 

10.   Stock Appreciation Rights.  Each SAR shall be evidenced by a SAR
Agreement, in the form approved by the Administrator and may contain such
provisions as the Administrator deems appropriate; provided, however, that each
SAR Agreement shall comply with the terms specified below. No person may be
granted (in any calendar year) SARs that pertain to more than 250,000 Shares,
subject to the adjustments provided for in Section 11 of the Plan.

 

13

 

(a)  Exercise Price.  The
Exercise Price of a SAR shall be determined by the Administrator but shall not
be less than 100% of the Fair Market Value of a Share on the Date of Grant of
such SAR.

 

(b)  Vesting.  Any
SAR granted hereunder shall be exercisable and shall vest at such times and
under such conditions as determined by the Administrator and set forth in the
SAR Agreement. Notwithstanding anything herein to the contrary, upon the
occurrence of a Vesting Event, all SARs that are outstanding on the date of the
Vesting Event shall become exercisable on such date (whether or not previously
vested).

 

(c)  Term of SARs.  No
SAR shall have a term in excess of 10 years measured from the Date of
Grant of such SAR.

 

(d)  Non-transferability
of SARs.  SARs 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 and may be exercised, during the lifetime
of the Optionee, only by the Optionee. Notwithstanding the immediately
preceding sentence, the Administrator may permit an Optionee to transfer any
Award which is not an Incentive Stock Option to one or more of the Optionee’s
immediate family members or to trusts established in whole or in part for the
benefit of the Optionee and/or one or more of such immediate family members.
For purposes of the Plan, (i) the term “immediate
family” shall mean the Optionee’s spouse and issue (including
adopted and step children) and (ii) the phrase “immediate family members
or to trusts established in whole or in part for the benefit of the Optionee
and/or one or more of such immediate family members” shall be further limited,
if necessary, so that neither the transfer of an Award other than an Incentive
Stock Option to such immediate family member or trust, nor the ability of a
Optionee to make such a transfer shall have adverse consequences to the Company
or the Optionee by reason of Section 162(m) of the Code.

 

(e)  Procedure for Exercise.  A SAR
shall be deemed to be exercised when written notice of such exercise has been
given to the Administrator in accordance with the terms of the SAR Agreement by
the person entitled to exercise the SAR. Upon exercise of a SAR, the Optionee
(or any person having the right to exercise the SAR after his or her death)
shall receive an amount equal to the amount by which the Fair Market Value (on
the date of surrender) of a Share exceeds the Exercise Price of such SAR. The
Company shall pay this amount in the form of: (i) Common Stock; (ii) cash;
or (iii) a combination of Common Stock and cash, as determined by the
Administrator.

 

(f)  Effect of Termination
of Service.

 

(i)  Termination of
Service.  Upon termination of an Optionee’s Service, other
than due to death, Disability, or Cause, the Optionee may exercise his/her
SARs, but only on or prior to the date that is three months following the
Optionee’s Termination Date, and only to the extent that the Optionee was
entitled to exercise such SARs on the Termination Date (but in no event later
than the expiration of the term of such SAR, as set forth in the Notice of
Stock Appreciation Rights Grant to the SAR Agreement). If, on the Termination
Date, the Optionee is not entitled to exercise all of the Optionee’s SARs, then
the Shares that pertain to the unexercisable SARs shall revert to the Plan. If,
after termination of Service, the Optionee does not exercise his/her SARs
within the time specified herein, the SARs shall terminate, and the Shares that
pertain to the SARs shall revert to the Plan.

 

14

 

(ii)  Disability of
Optionee.  In the event of termination of an Optionee’s
Service due to his/her Disability, the Optionee may exercise his/her SARs, but
only on or prior to the date that is twelve months following the Termination
Date, and only to the extent that the Optionee was entitled to exercise such
SARs on the Termination Date (but in no event later than the expiration date of
the term of his/her SAR, as set forth in the Notice of Stock Appreciation
Rights Grant to the SAR Agreement). To the extent the Optionee is not entitled
to exercise the SARs on the Termination Date, or if the Optionee does not
exercise the SARs to the extent so entitled within the time specified herein,
the SARs shall terminate, and the Shares that pertain to the SARs shall revert
to the Plan.

 

(iii)  Death of Optionee.  In
the event that an Optionee should die while in Service, the Optionee’s SARs may
be exercised by the Optionee’s estate or by a person who has acquired the right
to exercise the SARs by bequest or inheritance, but only on or prior to the
date that is twelve months following the date of death, and only to the extent
that the Optionee was entitled to exercise the SARs at the date of death (but
in no event later than the expiration date of the term of his/her SAR, as set
forth in the Notice of Stock Appreciation Rights Grant to the SAR Agreement).
If, at the time of death, the Optionee was not entitled to exercise all of
his/her SARs, the Shares that pertain to the unexercisable SARs shall
immediately revert to the Plan. If after death, the Optionee’s estate or a
person who acquires the right to exercise the SARs by bequest or inheritance
does not exercise the SARs to the extent so entitled within the time specified
herein, the SARs shall terminate, and the Shares that pertain to the SARs shall
revert to the Plan.

 

(iv)  Cause.  In
the event of termination of an Optionee’s Service due to Cause, the Optionee’s
SARs shall terminate on the Termination Date.

 

11.   Adjustments Upon Changes in Capitalization.

 

(a)  Changes in Capitalization.  The
limitations set forth in Sections 4, 6, and 10 of the Plan, the number of
Shares that pertain to each outstanding Award, and the Exercise Price of each
Option and SAR shall be proportionately adjusted for any increase or decrease
in the number of issued and outstanding Shares resulting from a stock split,
reverse stock split, stock dividend, recapitalization, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued and outstanding Shares, effected without the receipt of
consideration by the Company. Such adjustment shall be made by the
Administrator, to the extent possible, so that the adjustment shall not result
in an accounting consequence under APB 25 and FASB Interpretation No. 44,
as amended, and so that the adjustment shall not result in any taxes to the
Company or the Participant. The Administrator’s determination with respect to
the adjustment shall be final, binding, and conclusive.

 

15

 

(b)  Dissolution or
Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.
In such event, the Administrator, in its discretion, may provide for a Participant
to fully vest in his/her Option and SAR, and the Right of Forfeiture to lapse
on his/her Granted Stock. To the extent it has not been previously exercised,
an Award will terminate upon termination or liquidation of the Company.

 

12.   Deferral of Stock Awards and SARs.  The Administrator, in its sole discretion,
may permit a Grantee to defer his/her Stock Awards, and an Optionee to defer
his/her SARs pursuant to the terms and conditions provided for in the First
Community Bancorp Directors Deferred Compensation Plan.

 

13.   Cancellation and Regrant of Awards.  The Administrator shall have the authority to
effect, at any time and from time to time, with the consent of the affected
Optionee, the cancellation of any or all outstanding Options or SARs and to grant
in substitution new Options or SARs covering the same or a different number of
Shares but with an Exercise Price per Share based on the Fair Market Value per
Share on the new Date of Grant of the Option or SAR. The Administrator shall
also have the authority to effect, at any time and from time to time, with the
consent of the affected Grantee, the cancellation of any or all outstanding
Stock Awards and to grant in substitution new Stock Awards covering the same or
a different number of Shares. Notwithstanding the foregoing or anything in this
Plan to the contrary, the Administrator may not take any action which would
constitute a “repricing” of Options or other Awards without recommending that
such repricing be subject to the approval of the Company’s shareholders prior
to effectiveness.   For purposes of Section 4 hereof, Shares
underlying any Award cancelled by the Company in such exchange shall be
available for issuance under the Plan; furthermore, except with respect to a
Participant subject to Section 162(m) of the Code, a grant of any Award to
a Participant pursuant to such exchange shall be disregarded for purposes of
determining whether such Participant has exceeded any limitations hereunder
limiting the amount of any type of Award or aggregate amount of Awards that may
be granted to a Participant (except to the extent the number of Shares
underlying such Awards exceeds the number of Shares underlying the Participant’s
cancelled Awards).

 

14.   Share Escrow/Legends.  Unvested Shares issued under the Plan may, in
the Administrator’s discretion, be held in escrow by the Company 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.

 

15.   Tax Withholding.

 

(a)  For corporate purposes, the Company’s obligation to
deliver Shares upon the exercise of Options, deliver Shares or cash upon the
exercise of SARs, or deliver Shares or remove any restrictive legends upon
vesting of such Shares under the Plan shall be subject to the satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.

 

16

 

(b)  To
the extent permitted under Section 402 of the Sarbanes-Oxley Act of 2002
and the regulations adopted pursuant thereto, the Administrator may, in its
discretion, provide any or all holders of Non-Statutory Stock Options or SARS,
or unvested Shares under the Plan with the right to use previously vested Shares
in satisfaction of all or part of the Taxes incurred by such holders in
connection with the exercise of their Non-Statutory Stock Options or SARs, or
the vesting of their Shares; provided, however, that this form of payment shall
be limited to the withholding amount calculated using the minimum statutory
rates. Such right may be provided to any such holder in either or both of the
following formats:

 

(i)  Stock Withholding:  The
election to have the Company withhold, from the Shares otherwise issuable upon
the exercise of such Non-Statutory Stock Option or SAR, or the vesting of such
Shares, a portion of those Shares with an aggregate Fair Market Value equal to
the Taxes calculated using the minimum statutory withholding rates interpreted
in accordance with APB 25 and FASB Interpretation No. 44.

 

(ii)  Stock Delivery:  The
election to deliver to the Company, at the time the Non-Statutory Stock Option
or SAR is exercised or the Shares vest, one or more Shares previously acquired
by such holder (other than in connection with the Option or SAR exercise, or
Share vesting triggering the Taxes) with an aggregate Fair Market Value equal
to the Taxes calculated using the minimum statutory rates interpreted in
accordance with APB 25 and FASB Interpretation No. 44.

 

16.   Effective Date and Term of the Plan.  The Plan, as an amendment and restatement of
the 2003 Plan, was adopted by the Board on April 21, 2004, and shall
become effective on the date of its approval by the Company’s shareholders.
Unless sooner terminated by the Administrator, the Plan shall continue until April 17,
2010. When the Plan terminates, no Awards shall be granted under the Plan
thereafter. The termination of the Plan shall not affect any Shares previously
issued or any Award previously granted under the Plan.

 

17.   Time of Granting Awards.  The Date of Grant of an Award shall, for all
purposes, be the date on which the Administrator makes the determination to
grant such Award, or such other date as determined by the Administrator;
provided, however, that any Award granted prior to the date on which the Plan
is approved by the Company’s shareholders shall be subject to the shareholder’s
approval of the Plan. Notice of the determination shall be given to each
Service Provider to whom an Award is so granted within a reasonable period of
time after the date of such grant.

 

18.   Amendment and Termination of the Plan.

 

(a)  Amendment and
Termination.  The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuation shall be made which would impair the rights of any Participant
under any grant theretofore made without his/her consent. In addition, to the
extent necessary and desirable to comply with Section 422 of the Code (or
any other applicable law or regulation, including the requirements of any stock
exchange or national market system upon which the Common Stock is then listed),
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.

 

17

 

(b)  Effect of Amendment
and Termination.  Any such amendment or termination of the
Plan shall not affect Awards already granted, and such Awards shall remain in
full force and effect as if this Plan had not been amended or terminated,
unless mutually agreed otherwise between the Participant and the Board, which
agreement must be in writing and signed by the Participant and the Company.

 

19.   Regulatory Approvals.

 

(a)  The implementation of the Plan, the granting of any
Awards and the issuance of any Shares upon the exercise of any granted Awards
shall be subject to the Company’s procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the Awards
granted under it, and the Shares issued pursuant to it.

 

(b)  No
Shares or other assets shall be issued or delivered under the Plan unless and
until there shall have been compliance with all applicable requirements of
federal and state securities laws, including the filing and effectiveness of
the Form S-8 registration statement (if required) for the Shares issuable
under the Plan, and all applicable listing requirements of any stock exchange
(or the Nasdaq National Market, if applicable) on which the Common Stock is
then listed for trading (if any).

 

20.   No Employment/Service Rights.  Nothing in the Plan shall confer upon 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
Company (or any Affiliate employing or retaining such person) or of 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.

 

21.   Governing Law.  This Plan shall be governed by California law, applied without regard
to conflict of laws principles.

 

18

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